Bombay High Court
Piramal Capital and Housing Finance LimitedversusAtria Brindavan Power Private Limited
- Decided
- Disposal
- DISPOSED OFF
- Bench
- N JAMADAR
Holding
The Court partially allowed the interim application, granting injunctions restraining defendants 1‑6 and 12‑26 from dealing with the securities and ordering disclosure of documents, while rejecting the remaining prayers.
Summary
The plaintiffs, Piramal Capital and Housing Finance Ltd (as assignee) and an asset reconstruction company, sued Atria Brindavan Power Private Ltd and related entities for recovery of Rs.4.64 crore, declaration that share transfers were illegal, and compensation. They alleged that Atria defaulted on debenture payments and that its subsidiaries, notably WPA Clean Energy, illegally transferred shares of Betul Wind Farms to Bammco, breaching the Non‑Disposal Undertaking (NDU) and the debenture security documents. The defendants raised jurisdictional objections, argued that the suit was barred by Section 10 of the CPC and the Commercial Courts Act, and claimed the plaintiffs had repudiated the contract by not subscribing to all tranches. The Court examined the contractual terms, the existence of an event of default, and the applicability of pre‑institution mediation provisions. It held that the plaintiffs had a prima facie case of breach of security covenants and a real risk of further erosion of securities, but that the prayers for deposit of the entire debt and attachment were akin to final relief and could not be granted. The Court therefore partially allowed the interim application, granting injunctions restraining defendants 1‑6 and 12‑26 from dealing with the securities and ordering them to disclose relevant documents, while rejecting all other prayers.
Issues considered
- Whether the Bombay High Court has jurisdiction to entertain the interim application despite the exclusive jurisdiction clause in the Debenture Trust Deed.
- Whether the suit is barred by Section 10 of the Code of Civil Procedure, 1908 on the ground of res‑subjudice with the earlier Commercial suit.
- Whether the plaintiffs have a prima facie case of breach of the Non‑Disposal Undertaking and other security covenants.
- Whether the plaintiffs are required to undergo pre‑institution mediation under Section 12A of the Commercial Courts Act before seeking urgent interim relief.
- Whether the prayers for deposit of the entire outstanding amount and attachment before judgment amount to final relief and should be denied.
Legislation cited
- Code of Civil Procedure, 1908 — s. 10, Order VII Rule 11
- Commercial Courts Act, 2015 — s. 12A
- Companies Act, 1956
- Companies Act, 2013 — s. 430, 438, 56, 59
- Depositories Act, 1996
- Insolvency and Bankruptcy Code, 2016 — s. 7
- SEBI Circular dated 14 June 2017
Subjects
- debentures
- security documents
- non‑disposal undertaking
- default
- interim injunction
- jurisdiction
- commercial suit
- attachment before judgment
- pre‑institution mediation
- Section 12A
- Companies Act
- Insolvency and Bankruptcy Code
- Corporate securities
Judgment
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION NO. 1389 OF 2025
IN
COMMERCIAL SUIT NO. 113 OF 2024
Piramal Capital and Housing Finance Ltd and ..Applicants
Anr
In the matter between
Piramal Capital and Housing Finance Ltd and ..Plaintiffs
Anr
Versus
Atria Brindavan Power Private Limited and Ors …Defendants
Mr. Venkatesh Dhond, Senior Advocate, with Mr. Shyam Kapadia, Mr.
Vishnu Sriram, Ms. Srishti Kapoor, Ms. Rashika Bajpai, Ms.
Aishwarya Singh and Ms. Kavya Arora, i/b Khaitan and Co, for
the Applicant in IA/1389/2025 and for Original Plaintiff in
COMS/113/2024.
Mr. Ravi Kadam, Senior Advocate, with Mr. Rohan Kadam, Mr.
Abhishek Adke and Mr. Sagar Vichare, i/b Mr. Abhishek Adke,
for Defendant Nos. 1 to 4.
Mr. Zal Andhyarujina, Senior Advocate, with Ms. Revati Desai, Ms.
Priya Dangat and Mr. Rupesh Geete, for Defendant Nos. 5, 12
to 26.
Mr. Aadil Parsurampuria, with Mr. Atman Mehta, Mr. Vipul Patel and
Mr. Rachit Bharwada, i/b Haresh Mehta and Co, for Defendant
No.6.
ARUN
RAMCHANDRA
SANKPAL
Mr. Ashish Kamat, Senior Advocate, with Mr. Pratik Kothari, Mr.
Digitally signed by
ARUN
Nishant Chotani and Ms. Sneha Nagaraj, i/b Mr. Pratik
RAMCHANDRA
SANKPAL
Date: 2026.02.13
Kothari, for Defendant No.7.
19:16:41 +0530
Mr. Gaurav Joshi, Senior Advocate, with Mr. Mayur Khandeparkar, Mr.
Feroze Patel, Mr. Tejas Agarwal, Ms. Anushka Singh and Ms.
Vidhi Porwal, i/b IC Legal, for Defendant No. 8.
Mr. Sharan Jagtiani, Senior Advocate, with Mr. Munaf Virjee, Mr.
Pranav Shetty, Mr. Akshay Doctor, Mr. Sumeet Nankani, Mr.
Rushabh Parekh and Ms. Tirtha Mukherjee, i/b AMR Law, for
Defendant No.11.
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CORAM: N. J. JAMADAR, J.
RESERVED ON : 14th AUGUST 2025
PRONOUNCED ON : 12 FEBRUARY 2026
ORDER:
1. This Commercial Suit is instituted for recovery of an amount of
Rs.4,64,67,41,242/- along with interest, and a declaration that the
transfer of shares of Defendant No. 5 in Defendant No.6-company to
Defendant No. 7 and all the documents executed in connection
therewith are illegal, null and void, and to set aside the said transfer and
also for compensation for the loss caused to the Plaintiffs by virtue of the
said transfer.
2. The material averments in the Plaint, relevant for the
determination of the Application for interim relief, can be summarized as
under:
2.1 Plaintiff No.1 is an unlisted public company incorporated under
the Companies Act, 1956. Plaintiff No. 2 is an Asset Reconstruction
Company. Plaintiff No.2 is the assignee of Plaintiff No.1.
2.2 Defendant No.1-(“Atria”) is a private limited company. Defendant
No.1 is, inter alia, engaged in the business of generating power through
renewable energy sources. Defendant Nos. 2 and 3 (“Raju Brothers”)
are promoters and directors of Atria (D1) . Defendant No. 4 is a private
(family) trust and also a promoter of Atria (D1). Raju Brothers are
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trustees of Defendant No.4-Trust. Defendant Nos. 5 and 6 are the
subsidiary companies of Atria (D1). Likewise, Defendant Nos. 12 to 26
are also the subsidiary companies of Atria (D1).
2.3 Atria (D1) had issued, on a private placement basis, 90,000
debentures of face value of Rs.1 Lakh each, aggregating to Rs.900
crores by way of a Debenture Trust Deed (Atria DTD) dated 5 th
December 2016, executed by and between Defendant Nos. 1 to 4 and
Axis Trustee Services Limited (D9), the Debenture Trustee. Under the
said Atria DTD, the issue of debentures was divided into six tranches
aggregating to a principal amount of Rs. 750 Crores with an optional
tranche aggregating to Rs.150 Crores.
2.4 Plaintiff No.1 during the period 2016 and 2017 subscribed to
24,250 debentures by advancing an aggregate sum of Rs.242.50 crores,
i.e. first tranche of Rs.152.50 Crores on 20 th December 2016, the second
tranche of Rs.35 Crores; on 7th July 2017, and the third tranche of part
subscription amounting to Rs. 55 Crores on 18th December 2017.
2.5 Defendant No.1 was required to make payment of
coupon/interest amount to the debenture holders on the dates and rates
stipulated under Clause 25 of Atria DTD.
2.6 The principal/redemption amount was required to be
paid/redeemed by Atria (D1) as on the dates stipulated under Clause
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23, i.e., 20% on 19th December 2022, and the balance 80% on 19 th
December 2023.
2.7 Under Clause 12 of Atria DTD, Defendant Nos. 1 to 4, inter alia,
agreed to create, and were required to perfect the security interest on
the security created in favour of the debenture Trustee for the benefit of
debenture holders. The securities included, inter alia, creation and
perfection of pledge over 100% of the issued and fully paid up share
capital of the issuer and creation and perfection of pledge over all the
unencumbered securities in the subsidiaries whose securities were not
pledged to Senior Project Lenders of such subsidiaries, as particularized
in part A of Schedule XXIII.
2.8 As a part of the security basket, Defendant Nos. 1 to 4 have
executed a Non-Disposal Undertaking (NDU) and a Power of Attorney
(PoA) in respect of all the unencumbered securities held by the issuer
and/or the promoter, directly or indirectly, in subsidiaries whose
securities were pledged to senior project lenders of such subsidiaries, as
particularized in Part B of Schedule XXIII and execution of the NDU and
PoA in respect of unencumbered securities held by the issuer in
securities whose securities were pledged to Senior Project Lenders of
such subsidiaries.
2.9 In furtherance of the security package, on 7 th December 2016, a
Non-Disposal Agreement was executed by and between Atria (D1), WPA
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Clean Energy Private Limited (D5) and Betul Wind Farms Private
Limited (D6) and BGSE Financial Limited (D10), the DP Agent, under
the NDU, in relation to WPA’s (D5) unencumbered equity shares in Betul
(D6).
2.10 Under the terms of NDU, WPA (D5) expressly undertook that it
will not sale, transfer assign, dispose of, pledge, mortgage, hypothecate,
charge or otherwise encumber the assets in any manner whatsoever,
without prior consent of the security trustee. Under Clause 33 of the
Atria DTD, Defendant Nos. 1 to 4 also agreed and undertook that they
will not, and ensure that the “subsidiaries” shall not be permitted to
make, any change in the shareholding of their subsidiaries, issue any
debentures or create any security over their assets or shares, without
the prior written consent of the debenture holders.
2.11 It is the claim of the Plaintiff that, on 19 th December 2023, the
final settlement date, Atria (D1) was liable to pay a sum of
Rs.408,86,72,718/- comprising of the principal outstanding of Rs. 194
Crores, and interest, as agreed. Atria (D1), however, committed default
in the discharge of its payment obligation. Thus an event of default
occurred. Plaintiff No.1 reported the event of default on National E-
Governance Services Limited (NESL).
2.12 In the meanwhile, pursuant to Clause 34.1.3 of Atria DTD,
Plaintiff No.1 entered into a Deed of Assignment with Plaintiff No.2, on
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13th February 2024, and thereby assigned the debentures exposure
along with right, title and interest in favour of Plaintiff No.2. Despite
having committed default, Defendant Nos. 1 to 4, the Plaintiffs assert,
instituted a frivolous Suit, being Commercial OS No. 298 of 2024,
against the Plaintiffs, Baboon Investments Holding B.V. (D11), another
debenture holder under Atria DTD, and Axis Trustee (D9), at
Bengaluru.
2.13 In the said Suit, the Commercial Court passed an order
restraining the Plaintiffs as well as Baboon Investments (D11) from
acting and exercising the rights under the Deed of Assignment and Atria
DTD. Eventually, by an order dated 9th May 2024, the Karnataka High
Court clarified that the said order dated 25th April 2024 passed by the
Commercial Court would not come in the way of the Plaintiffs in
initiating joint action against Atria (D1).
2.14 Thereupon, the Plaintiffs filed a joint Application under Section 7
of the Insolvency and Bankruptcy Code, 2016 (“IBC Code”) against
Atria (D1) before the NCLT, Bengaluru, for default in discharge of
financial debt.
2.15 It is claim of the Plaintiffs that towards the end of July 2024,
upon perusal of the documents filed by Betul (D6), before the Ministry
of Corporate Affairs, the Plaintiffs found that Betul (D6) has issued
several non-convertible debentures aggregating to Rs. 210 Crores under
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a Debenture Trust Deed dated 27th March 2024 executed between Betul
(D6) and Vistra (D8) (“Betul DTD). It further transpired that, WPA
Clean Energy’s (D5) 50.01% shareholdings in Betul (D6) was held by
Bammco Private Limited (D7). WPA Clean Energy (D5), Plaintiffs aver,
surreptitiously, illegally and unauthorizedly transferred its entire
shareholding in Betul (D6) in favour of Bammco (D7). The Plaintiffs
claim Bammco (D7) purchased the said shares despite notice of
encumbrances of the Plaintiffs over the said shares.
2.16 Betul (D6) has further jeopardized the security of the Plaintiffs by
issuing secured Non-Convertible debentures (NCDs) aggregating to Rs.
210 Crores under Betul DTD, without obtaining the consent of Axis
Trustee (D9), the debenture trustee under Atria DTD. Hence the Suit for
diverse reliefs.
2.17 By the instant Application, the Plaintiffs are seeking interim
reliefs asserting that Defendant Nos. 1 to 4, in breach of their
obligations under Atria DTD and related documents, have taken active
steps to jeopardize the securities created in favour of the Applicants.
Defendant Nos. 1 to 4 and subsidiaries of Defendant No.1, i.e.
Defendant Nos. 5, 6 and 12 to 26 are surreptitiously attempting to
alienate their assets with a view to make unlawful gain and profit
and/or delay the Plaintiffs from realising their dues, and are also
eroding the value of the securities created in favour of the Plaintiffs.
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Thus, in the context of the breach of contractual obligations and illegal
actions, the Plaintiffs apprehend that there is a substantial risk that
Defendant Nos. 1 to 4 may not honour any judgment or decree
rendered in favour of the Plaintiffs and/or securities furnished may not
turn out to be sufficient to discharge the debt.
2.18 Therefore, the Plaintiffs are seeking interim relief to direct the
Defendant Nos. 1 to 4 to jointly and severally deposit the outstanding
amount of Rs. 4,64,67,41,242/- in this Court, permit the Plaintiffs to
withdraw the said amount to be deposited and, in the alternative, direct
Defendant Nos. 1 to 4 to furnish solvent securities.
2.19 Asserting that the Plaintiffs have a genuine apprehension that
Defendant Nos. 1 to 6 and 12 and 26 would continue to deal and/or
part with securities created in favour of the Plaintiffs under Atria DTD,
the Plaintiffs have prayed for an interim injunction to restrain
Defendant No.1 to 6 and 12 to 26 from dealing with, alienating or
creating any right, title or interest of any nature in respect of the
securities created in favour of the Plaintiffs. Defendant Nos. 7 and 8 are
also sought to be restrained from dealing with 38,82,882 shares in Betul
(D6), allegedly illegally transferred by WPA Clean Energy (D5) in
favour of Bammco (D7), and to direct WPA Clean Energy (D5) to
deposit the entire purchase consideration received upon transfer of
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those shares in Court. In addition, disclosures are sought from
Defendant Nos. 1 to 7 and 12 to 26.
3. Affidavits in Reply have been filed by the Defendants.
3.1 In the Affidavit in Reply on behalf of Defendant Nos. 1, 2 and 4,
the tenability of the suit is assailed on the ground that this Court has no
jurisdiction to entertain, try and decide the suit, as no part of the cause
of action has allegedly arisen within local limits of jurisdiction of this
Court. The registered office of the Defendant-companies is in
Bengaluru. The transactions in question were executed in Bengaluru
and the endeavor of the Plaintiffs to draw support from Clause 72 of
Atria DTD to invoke the jurisdiction of Mumbai Courts is stated to be
misplaced as Defendant Nos. 5, 6 to 12 to 26 are not bound by Atria
DTD, being non-signatories thereto.
3.2 The instant Suit is also stated to be barred by the provisions
contained in Section 10 of the Code of Civil Procedure, 1908 (“the
Code”). The Defendants contend, the subject matter of the suit
revolving around the alleged default in payment and transfer of
securities under Atria DTD, is directly and substantially in issue in a
previously instituted suit, i.e., Commercial OS No. 298 of 2024, before
the Commercial Court at Bengaluru. The Plaintiffs have, in fact,
resorted to multiple proceedings to agitate the same cause, with intent
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to harass the Defendants. Reference is made to the Petition under
Section 7 of the IBC before the NCLT, Bengaluru.
3.3 The Defendants also contend that the interdict contained in
Section12A of the Commercial Courts Act, 2015 comes into play. With a
view to avoid mandatory pre-institution mediation, the Plaintiffs have
concocted a false case of urgency. It is contended that the alleged
information regarding transfer of shares was obtained in the month of
July 2024 and, yet, the suit came to be instituted on 27 th August 2024.
The said claim of knowledge about the transaction in the month of July
2024 is belied by the fact that Form PAS-3 dated 30 th March 2024 was
publicly available on the website of Ministry of Corporate Affairs since
March 2024.Thus, the suit which has been instituted in breach of the
mandate contained in Section 12A of the Commercial Courts Act under
the pretext of urgency cannot be entertained, and, therefore, the Plaint
is required to be rejected under the provisions of Order VII Rule 11 of
the Code.
3.4 The Defendants contend, the suit suffers from the vice of
suppressio veri and suggestio falsi. The Plaintiffs have not approached
the Court with clean hands and have made positive false statements. On
this ground alone, the Interim Application ought to be rejected.
3.5 On the merits of the matter, the Defendants contended that
Plaintiff No.1 and Baboon (D11) are guilty of repudiatory breaches of
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Atria DTD. The debenture holders failed to perform their most
fundamental obligation under the Atria DTD, i.e., to subscribe to all the
tranches under Atria DTD. Plaintiff No.1 subscribed to the I, II and a
part of the third tranche only. The failure of Plaintiff No.1 to subscribe
to all the tranches, defeated the very purpose of issue of debentures.
The Defendants found themselves in precarious situation on account of
repudiatory breaches committed by Plaintiff No.1 and Defendant No.11,
though the debenture holders enjoyed the cover of security created in
terms of Atria DTD, far in excess of the funds advanced by the
debenture holders.
3.6 On account of the repudiatory breaches by failing to subscribe to
all the tranches, the Defendants contend, they stand released from
obligations under the Atria DTD. In addition, the unilateral assignment
of its rights under Atria DTD by Plaintiff No.1 to Plaintiff No.2, in
breach of the terms of Atria DTD, has further compounded the situation.
3.7 In view of the repudiatory breaches and unlawful assignment, the
Defendants contend the securities furnished by the Defendants stand
fully released and the Defendants, as pledgers stand wholly discharged
and, therefore, there is no prima facie case in favour of the Plaintiffs.
3.8 It is further contended that, the Plaintiffs have deliberately not
disclosed the payments made by the Defendant No.1. The Defendants
have serviced an amount of Rs.393,47,44,809/- and, yet, by suppressing
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such substantial repayment, the Plaintiffs are seeking reliefs in the
nature of attachment before judgment. According to the Defendants, the
Plaintiffs have miserably failed to make out a strong prima case and the
acts which demonstrate that the Defendants, with intent to obstruct or
delay the execution of decree, have dealt with the property. Thus, at this
stage, a direction for deposit of the alleged outstanding amount or
furnishing security in lieu thereof, being clearly in the nature of
attachment before judgment, cannot be entertained.
3.9 In any event, the reliefs sought in the Interim Application partake
the character of the final reliefs claimed in the suit. Therefore, the grant
of interim reliefs, at this stage, would, in effect, amount to final
adjudication of the Plaintiffs claim for final relief.
3.10 The Defendants contend the Plaintiffs claim of breach of the NDU
is wholly unsustainable. In accordance with Clause 6.1.5 and 33.1.5 of
Atria DTD, WPA Clean Energy (D5) and United Sustainable Energy
India Private Limited (“USEIPL”) have been permitted to swap their
respective shareholdings in the Betul (D6) and Kukru Wind Power
Private Limited (D14). Under the terms of Atria DTD, the Defendants
were entitled to pay any amount towards settlement of payment with
USEIPL, not exceeding Rs.100 Crores, in the event of any valuation
difference between the shares of Betul (D6) and Kukru Wind Power
(D14), to effect the flip in shareholding in terms of WPA SPV
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Investment Agreements. Thus to honour the pre-existing contractual
obligation, which is recorded in Atria DTD and in terms of Atria DTD,
WPA Clean Energy (D5) and USEIPL proceeded to swap their respective
shareholding in Betul (D6) and Kukru Wind Power (D14).
Consequently, Bammco (D7) a nominee of USEIPL has acquired the
shareholding of WPA Clean Energy (D5) in Betul (D6). Resultantly,
Betul (D6) is no longer a subsidiary of Atria (D1).
3.11 The Defendants alleged that Plaintiff No.1 has exhibited extreme
bad faith and adopted coercive tactics despite having committed
repudiatory breaches. The failure on the part of the debenture holders
to fully subscribe to the debentures starved Atria’s (D1) projects of
funds, impacted cashflow and business operations. Yet, Plaintiff No.1
unilaterally demanded an increase in Internal Rate of Return (IRR)
from from 16% to 18% in breach of the express terms of Atria DTD. The
debenture holders also exerted pressure on the Defendants for
premature payments. The debenture holders thus with mala fide design
tried to create “self-serving events of default” to wriggle out of their
own subscription obligations. Yet, Atria (D1) has discharged its payment
obligation and the Plaintiffs continued to enjoy the benefit of security
cover far in excess of their actual advance.
3.12 The Defendants claim, Plaintiff No. 1 and Baboon (D11) are
already secured far in excess of the debentures held by the debenture
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holders. The assets base of Atria (D1) is substantially sound and, thus,
the apprehension on the part of the Plaintiffs that either the Plaintiff
would not be in a position to have the fruits of the decree or there is
likelihood of depletion of the secured assets is expressed with a view to
show a cause of action which does not exist. Therefore, the balance of
convenience tilts in favour of the Defendants. As the debenture holders
are adequately secured they would not suffer any irreparable loss. Thus,
the Application deserves to be rejected.
4. Defendant No.3 has adopted the Affidavit in Reply filed on behalf
of Defendant Nos. 1, 2 and 4.
5. WPA Clean Energy (D5) has also adopted and affirmed the
contentions in the Affidavit in Reply filed on behalf of Defendant Nos. 1,
2 and 4. In addition, it is claimed that since WPA Clean Energy (D5) is
not a party to the Atria DTD, there is no cause of action against WPA
Clean Energy (D5).
5.1 This Court has no jurisdiction as WPA Clean Energy’s (D5)
registered office is not within the jurisdiction of this Court nor the
transaction impugned in the suit has taken place within the jurisdiction
of this Court.
5.2 With regard to the swapping of the shareholding, WPA Clean
Energy (D5) claims that the swapping of shares between WPA Clean
Energy (D5) and USEIPL was not violation of Atria DTD. In contrast,
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Atria DTD expressly refers to such Agreements. It is contended that, the
covenants in Atria DTD will have precedence over the provisions in
NDU.
5.3 Lastly, it is contended that Plaintiff No.1 enjoys the securities
meant for securing a debt of Rs.900 Crores, through the value of
investment by Plaintiff No.1 is only to the tune of Rs.242.50 Crores. The
securities created by the Defendants are thus far in excess of the current
holding of debentures by the debenture holders.
6. Bammco (D7) has also resisted the Application. The territorial
jurisdiction of this Court to entertain the Suit qua Defendant No. 7 is
questioned. Defendant Nos. 5, 6 and 7 are all based in Bengaluru. The
entirety of cause of action is alleged to have arisen outside this Court’s
limits, and thus this Court lacks territorial jurisdiction. Secondly, it is
contended that, the transactions in question have been completed in
compliance with applicable laws and governing Agreements. The
Plaintiffs have thus no legal right to challenge the validity of the share
transfer to Bammco (D7) or subsequent encumbrances in favour of
Vistra (D8). At any rate, NDU, dated 7 th December 2016 contains only a
personal covenant against WPA Clean Energy (D5). Thus, it would give
rise to a claim for damages against WPA Clean Energy (D5) and not
against Bammco (D7).
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7. Vistra (D8) has also resisted the prayers in the Application. In
addition to the grounds of interim reliefs being in the nature of final
relief, the delay and laches, in the context of bar under Section 12A of
the Commercial Courts Act, sufficiency of existing securities and legal
and valid pledge of the shares held by Bammco (D7), Vistra (D8)
contends that Vistra (D8) is a third party entirely unconnected,
unrelated and unconcerned with the inter se disputes between the
Plaintiff and Defendant Nos. 1 to 4. There is no privity of contract
between WPA Clean Energy (D5) and Vistra (D8) who is a bona fide
pledgee and had no knowledge of the purported NDU. Moreover, the
depository participant, BGSE Financials Limited (D10), never raised any
objection to treating the WPA (D5) shareholding in Betual (D6) as
unencumbered.
7.1 Vistra (D8) contends that due to the failure on the part of the
Plaintiffs to comply with the SEBI’s circular dated 14 th June 2017, the
Plaintiffs action is unsustainable. The Plaintiffs, according to Vistra
(D8), through their agent, acquiesced to the transaction.
7.2 Lastly, according to Vistra (D8), at best the Plaintiffs exclusive
remedy is a claim for damages against WPA Clean Energy (D5). The
nature of NDU which contains only a promise for future security,
coupled with a subsequent sale to a third party and the bona fide pledge
to Vistra (D8) preclude any relief against the pledged shares.
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8. Atria Wind Private Limited (D12) has also contested the
Application. All the contentions raised on behalf of Defendant Nos. 1 to
4 have been adopted. In addition, it is contended the swapping of
shares is not in violation of Atria DTD since the latter gives express
notice of swapping of shares. In any event, Plaintiff No.1 who has
subscribed to 2450 debentures for a total sum of Rs.242.50 Crores is
adequately secured as the securities crated by the Defendants are far in
excess of the current debenture holdings. The Plaintiffs have failed to
plead and prima facie demonstrate that existing securities are
insufficient. Thus, no interim relief can be granted.
9. Atria Solar Private Limited (D21) and Atria Hydel (KRS) Private
Limited (D26) have also contested the Application on the grounds
similar to those raised by the co-Defendants.
10. Affidavits in Rejoinder have been filed on behalf of the Plaintiffs
controverting the contentions on behalf of the Defendants in the
aforesaid Affidavits in Reply. Further Affidavits followed.
SUBMISSIONS:
11. Mr. Dhond, the learned Senior Advocate for the Plaintiffs
submitted that, this is an open and shut case of flagrant violation of
contractual obligations. On the one hand, Defendant Nos. 1 to 4 have
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committed default in payment towards the coupon/interest amount and
redemption of debentures. On the other hand, the Defendants have
surreptitiously diluted the security of the Plaintiffs by transferring the
shareholding of WPA (D5) in Betul (D6) in favour of Bammco (D7), in
clear breach of NDU. Yet, in order to further delay and defeat the claim
of the Plaintiffs and Defendant No.11, a co-debenture holder, the
Defendants have raised all sorts of technical defences. In the face of a
clear case of breach of contractual obligations and erosion of the value
of security of the Plaintiffs, all the parameters for grant of interim reliefs
stand fulfilled. Lest, the Plaintiffs would be left in the lurch with no
prospect of realisation of the outstanding dues, even if, eventually, a
decree is passed in the suit. Therefore, it is necessary to grant
comprehensive interim reliefs to protect the interest of the Plaintiffs.
12. Mr. Dhond submitted that, none of the grounds sought to be
raised to oppose the interim reliefs merit countenance. The defence of
repudiatory breach on account of the alleged non-subscription to all
tranches of debentures, was raised only after the default on the part of
the Defendants to discharge the debt when it fell due. Not only the
Defendant Nos. 1 to 4 never raised any dispute about non-subscription
to all the tranches of debentures but, by their positive acts, affirmed
their contractual obligations even in respect of the exposure of Plaintiff
No.1. Defendant No.1 continued to make payment of interest and a
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portion of principal amount, acknowledged the debt under the DTD in
its Financial Statements, including for Financial Year 2022-2023, and
expressly admitted, vide letter dated 24 th November 2022, that it would
pay the redemption amount of 80% of debentures, when it fell due on
31st December 2023.
13. The technical objections to the maintainability of the suit under
Section 10 of the Code and Section 12A of the Commercial Courts Act,
as well as on the ground of territorial and subject matter jurisdiction,
according to Mr. Dhond, have been raised to sidestep the pivotal issues
that arise for determination.
14. Mr. Dhond would urge that, in the facts of the case, the bar under
Section 10 of the Code has no application at all as the issues that arise
for determination in the Bengaluru suit are substantially and materially
different from the issues that crop-up for the consideration in the
instant suit. At any rate, Mr. Dhond would submit that, bar of Section
10 need not preclude the Court from considering the prayer for interim
prayer as what Section 10 precludes is the trial of the subsequent suit
and not grant of interim reliefs to meet exigencies of the situation.
Reliance was placed by Mr. Dhond on the judgment of this Court in the
case of Sennaji Kapuechand Vs Pannaji Devichand1.
15. The objection that the suit does not contemplate urgent interim
relief and, therefore, the Plaintiff must have resorted to mandatory pre-
1 1921 SCC OnLine Bom 113.
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institution mediation, under Section 12A of the Commercial Courts Act;
is far from the hard facts of the case. Incontrovertibly, WPA (D5)
transferred its shareholding in Betul (D6) in favour of Bammco (D7) in
clear breach of contractual obligations, and Defendant Nos. 1 to 4 have
committed default in the discharge of debt even though the date of
redemption has passed by. In such situation, it cannot be urged that the
suit does not contemplate an urgent interim relief. Such a construction
would defeat the legislative object contained in Section 12A of the
Commercial Courts Act which dispenses with pre-institution mediation
where the suit contemplates an urgent interim relief. A strong reliance
was placed by Mr. Dhond on the guiding principles enunciated in
Yamini Manohar Vs T.K.D. Keerthi.2
16. According to Mr. Dhond, the objection to the jurisdiction of this
Court, both on the count of territorial and subject matter jurisdiction, is
also completely misconceived. As the Plaintiff is seeking enforcement of
the obligations of the Defendants under DTD; Clause (72) of which
confers exclusive jurisdiction on the Courts at Mumbai, the objection to
the jurisdiction of this Court is completely unsustainable even qua the
subsidiaries of Defendant No.1.
17. Mr. Dhond would urge, under the terms of the DTD, ‘Debenture
Documents’ include all security documents which, in turn, include the
undertaking and every Agreement for pledge of securities executed by
2 (2024) 5 SCC 815.
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Defendant No. 5 and Defendant Nos.12 to 26. In any event, since this
Court has granted leave under Clause XII of the Letters Patent and the
said leave continues, the objection to the jurisdiction of this Court
cannot be now entertained.
18. Bar of subject matter jurisdiction, according to Mr. Dhond, is
equally unfounded. The matter is not confined to rectification of
register of members only. In contrast, the instant suit is a comprehensive
suit involving multiple parties and multiple causes of action qua the
Defendants, and wide ranging reliefs have been sought qua each of the
Defendants. Thus, NCLT which is a creature of a statute is not
empowered to determine the issues that crop-up for consideration and
grant the comprehensive reliefs sought by the Plaintiff. It was urged that
it is well-recognized that an inference of exclusion of the civil court’s
jurisdiction cannot be readily drawn.
19. Mr. Dhond took the Court through the documents to demonstrate
that both Bammco (D7) and Vistra (D8) had adequate notice of the
obligations of WPA (D5) under DTD and NDU and have, yet, entered
into the transactions. In view of the constructive, if not direct, notice to
Bammco (D7) and Vistra (D8), those Defendants cannot be permitted to
raise the defence of bona fide purchaser/pledgee without notice.
20. The contention that the Plaintiffs are sufficiently secured and,
therefore, no interim relief can be granted, is based on an erroneous
SSP/ARS 21/68
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impression. The said contention is in teeth of the contractual obligation
to ensure that the security cover at all times is two times (2x) of the
value of outstanding debt. An effort was made by Mr. Dhond to draw
home the point that the securities on the own showing of Defendant
Nos. 1 to 4 are in the range of 919 to 1399 Crores, even before the
impugned transfer of the shareholding by WPA (D5), which is far below
twice the fair market value cover of the total outstanding debt, required
to be maintained under the DTD.
21. Mr. Dhond submitted, the endeavour on the part of the
Defendants to wriggle out of the situation by referring to the extent of
the securities would amount to calling upon the Court to rewrite the
contract under the guise of balance of convenience. At any rate, the
obligation not to dispose of or deal with the pledged securities, without
prior written consent of the debenture holders, is not conditioned by the
value of security.
22. A very strong reliance was placed by Mr. Dhond on a judgment of
the Supreme Court in the case of Rajasthan State Industrial
Development and Investment Corporation and Anr Vs Diamond and
Gem Development Corporation Limited and Anr.3
23. Lastly, Mr. Dhond would submit that, the resistance sought to be
put-forth by the Defendants on the ground that the reliefs sought by the
Plaintiffs in the interim application are in the nature of final reliefs and,
3 (2013) 5 SCC 470.
SSP/ARS 22/68
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therefore, cannot be granted at an interim stage, is also devoid of
substance.
24. Since a very strong priam facie case is made out and there is
imminent possibility of further breach of contractual obligations and
erosion of the value of the security, the reliefs sought by the Plaintiffs
deserve to be granted at an interim stage as there is substantial risk that
the Defendants may not honour any judgment or decree rendered in
favour of the Plaintiffs. It was submitted the Court is not denuded of the
power to grant such reliefs in the exigencies of the situation. To this
end, Mr. Dhond placed reliance on the judgments of the Supreme Court
in the cases of Deoraj Vs State of Maharashtra and Ors4 and Nimbus
Communications Ltd Vs Board of Control For Cricket in India5
25. Mr. Jagtiani, learned Senior Advocate for Baboon (D11)
supported the submissions on behalf of the Plaintiffs. It was urged that
Baboon (D11) is also a subscriber of Debentures issued by Atria (D1)
and has subscribed to 24,250 Debentures, like the Plaintiff No.1 under
DTD. Baboon (D11) is, thus, identically circumstanced. Mr. Jagtiani
would urge that, the security interest primarily comprised of pledge,
and NDU over shareholding of Atria (D1) in its subsidiaries for the
benefit of both the debenture holders i.e. Plaintiff Nos.1 and 11. Thus,
Baboon (D11) is vitally interested in the cause espoused by the Plaintiff
4 (2004) 4 SCC 697.
5 2013 (1) MhLJ 39.
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No.1 and supported the grant of interim reliefs in the Interim
Application which pertained to common security interest. It was
submitted that, Baboon (D11) specifically supported the grant of
interim reliefs in terms of prayer clauses (c) to (h) of the Application.
26. Mr. Jagtiani would urge, Atria (D1) has committed default in
discharge of the obligation under DTD towards Baboon (D11) as well.
Defence of repudiatory breach sought to be putforth on behalf of
Defendant Nos.1 to 4 is a creature of an after-thought and wholly
misconceived.
27. In any event, right to recover / enforce security for debentures
subscribed will not in any manner be circumscribed by non-subscription
of the subsequent tranches, for which no notice was issued. Breach of
contract by one party, it is trite, does not automatically terminate the
obligations under the contract, submitted Mr. Jagtiani. Reliance was
placed on the judgment in the case of State of Kerala V/s. Cochin
Chemical Refineries Ltd.6
28. Under the terms of the NDU, Mr. Jagtiani would urge, there was
no unilateral right to swap NDU shares without the consent of the
debenture holders. Agreement for Swap does not imply that the
potential swap shares could not have been encumbered. Only consent
granted in terms of clause 6.15, on which Defendants placed reliance,
was to utilize upto 100 Crores of the debenture subscription amount
6 AIR 1968 SC 1361
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towards the settlement of payment with USEIPL. Despite permissibility
under the clause 6.1.5 of Atria DTD, no portion of debenture
subscription amount has, in fact, been utilized for the said purpose.
The endeavour on the part of the Defendants to construe clause 6.1.5 in
a manner which enables dilution of security interest or dispenses with
prior written consent of the debenture holders / trustees, is completely
misconceived.
29. Refuting the contention of Bammco (D7) and Vistra (D8) that
they are bonafide purchaser and pledgee, respectively, Mr. Jagtiani
would urge that Defendant Nos.7 and 8 had adequate notice of
encumbrances. Firstly, Defendant No.5 created a charge in form CHG-9
dated 7 December 2016. The said charge continues even today, as no
document satisfying charge has been filed by Defendant No.5. Secondly,
Audited Financial Statements of Defendant No.5, for the year ending 31
March 2023, note that the non-disposal undertaking has been provided
by Defendant No.5 in respect of the said shares. Third, the term sheet
annexed to Betul DTD also makes it clear that Vistra (D8) was well
aware that the said share holding belonged to WPA (D5) prior to the
subscription of the debenture under Betul DTD.
30. Mr. Jagtiani placed a strong reliance on the judgment of the
Supreme Court in the case of Videocon Properties Ltd. V/s. Dr.
Bhalchandra Laboratories and Ors.7 to lend support to the submission
7 (2004) 3 SCC 711
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that the buyer is entitled to enforce a charge created under Section 55
6(b) of the Transfer of Property Act, 1882 against the property and, for
that purpose, trace the property even in the hands of third party and
even when the property is converted into another form by proceeding
against the substituted security.
31. Mr. Ravi Kadam, the learned Senior Advocate for the Defendant
Nos. 1 to 4 stoutly opposed the prayers for the interim relief. In a case
of the present nature, where Plaintiffs action and conduct suffer from
the vice of extreme bad faith, no equitable relief can be granted in
favour of the Plaintiff especially when the grant of interim relief would
amount to a decree without trial, was the thrust of the submission of
Mr. Kadam.
32. Elaborating the aforesaid submission, Mr. Kadam would urge
that, the plaintiff had deliberately suppressed the fact that, a substantial
payment of Rs. 393 Crores was made by the Defendant No. 1 towards
coupon amount and 20% debentures redemption. In contrast, the
Plaintiff No. 1 had subscribed to only 2425 debentures in the sum of Rs.
242.5 Crores, against the promise to subscribe Rs. 900 Crores. Since,
the issue proceeds were to be utilized for the purpose of infusion of
equity into various projects, the failure on the part of the Plaintiff No. 1
to subscribe to the debentures fully, jeopardised the business of
commissioning and operating energy power plants, leading to the strain
SSP/ARS 26/68
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on working capital and seriously impacted revenue. In these
circumstances, according to Mr. Kadam, serious triable issues as to the
breach of obligations under DTD, arise for determination and can only
be adjudicated at the trial.
33. Mr. Kadam further submitted that, despite not subscribing to the
debentures to the tune of Rs. 900 Crores, as agreed, the Plaintiff No. 1
continued to enjoy the security cover for the said amount, with an
exposure of Rs. 242.5 Crores only. As the Plaintiff No. 1 is fully secured
by the pledge of shares of over Rs. 1,000/- Crores, no case is made out
to even seek the interim relief, of the nature sought by the plaintiffs,
much less, grant those reliefs. Mr. Kadam assiduously submitted that, in
the absence of a pleaded case that, the securities already created in
favour of the plaintiff are insufficient to discharge the debt, under no
circumstances, interim relief can be granted.
34. Mounting a serious criticism against the nature of the interim
relief, Mr. Kadam would urge, the grant of interim prayers (a) and (b),
namely, a direction for deposit of the alleged outstanding sum of Rs.
464.67 Crores, with permission for withdrawal of the said amount,
would amount to passing a decree to the fullest, without a trial. It was
submitted that, it is rudimentary principle of law that, at an interim
stage reliefs in the nature of final reliefs cannot be granted. Reliance
SSP/ARS 27/68
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was placed on the decision of the Supreme Court in the case of State of
U.P. and Ors Vs Ram Sukhi Devi8.
35. Mr. Kadam would submit, the reliance on the decision in the case
of Deoraj Vs State of Maharashtra and Ors 9 from which support was
sought to be drawn on behalf of the plaintiffs, is inapposite. If the ratio
therein is correctly construed, the said judgment advances the cause of
the defendants rather than the plaintiffs. In any event, no extraordinary
and exceptional case is made out by the plaintiffs to seek reliefs in
prayer clause (a) and (b) at an interim stage, urged Mr. Kadam.
36. Mr. Kadam would further submit that, prayer clause (c) is
essentially in the nature of an order of attachment before judgment. On
the one hand, the pleadings in support of the prayer clause (c) are
demonstrably incorrect. On the other hand, no case has been made out
to satisfy the stringent conditions for attachment before judgment. To
this end, Mr. Kadam placed reliance on the judgment of the Supreme
Court in the case of Raman Tech and Process Engg Co and Anr Vs
Solanki Traders10 wherein, inter alia, the summary of propositions
enunciated in the case of Premraj Mundra Vs. Md Maneck Gazi and
Ors11 was approved.
8 (2005) 9 SCC 733.
9 (2004) 4 SCC 697.
10 (2008) 2 SCC 302.
11 1951 SCC OnLine Cal 20.
SSP/ARS 28/68
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37. Mr. Kadam submitted that, the substratum of the plaintiff’s case,
premised on the alleged violation of NDU by flipping 50.01%
shareholding held by WPA Clean Energy (D5) in Betul (D6) in favour of
the Bammco (D7) in lieu of 50.01% shareholding of USEIPL in Kukru
Wind Power (D14) is completely flawed. The said transaction was
clearly contemplated by the terms of the DTD and also had the
imprimatur of Plaintiff No. 1 and Defendant No. 11. Mr. Kadam would
urge that, the prior agreements were expressly recognized, and the
transactions pursuant thereto approved, under the DTD. At any rate the
stipulations in the DTD override the terms of the NDU. Thus, none of
the prayers in the interim application deserve any countenance.
38. Mr. Zal Andhyarujina, learned Senior Advocate for Defendant
Nos.5 and 12 to 26 supplemented the submissions of Defendant Nos.1
to 4 on the core of the controversy. It was submitted that, though
Defendant Nos.5 and 12 to 26 are the subsidiaries of Defendant No.1,
yet, they are not parties to the DTD. Consequently, there is no privity of
contract between Plaintiff No.1 and Defendant Nos.5 and 12 to 16.
Resultantly, the Plaintiffs have no cause of action against Defendant
Nos.5 and 12 to 26. Nor this Court has jurisdiction qua the subsidiaries
of Defendant No.1. Neither the Defendants subsidiaries have their
registered office within the jurisdictional limits of this Court, nor the
SSP/ARS 29/68
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transaction sought to be impugned has taken place within the
jurisdiction of this Court.
39. Mr. Andhyarujijna reiterated that the flip of shareholding was
expressly authorized and within the complete knowledge of the Plaintiff
No.1. It was further urged that the shares of Betul (D6) and Kukru
(D14) never formed part of the pledged security, but were only secured
by way of NDU.
40. Mr. Andhyarujina would submit, NDU was, in fact, executed to
give effect to the terms of the DTD, and, not otherwise, as was sought to
be urged on behalf of the Plaintiffs. Therefore, the Plaintiffs cannot be
permitted to urge that, on account of the transfer of the shares of the
subsidiaries, there is alleged depletion of the security and erosion in the
value of the shares pledged under DTD. Lastly, it was urged that the
apprehensions on the part of the Plaintiffs are, at best, speculative and
unfounded, and, thus, no interim relief can be granted on the basis of
such unfounded apprehension of invasion of the alleged rights of the
Plaintiffs.
41. Mr. Tamboly, learned Counsel for Betul (D6), while supporting
the submissions on behalf of Defendant Nos.1 to 5 and 12 to 26,
submitted that the Defendant No.6 has already transferred the shares,
and, thus, no relief can be granted against Defendant No.6. Mr.
Tamboly emphasised that, Defendant No.6 is not a party to any of the
SSP/ARS 30/68
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transactional documents, and, thus, the Plaintiffs have no cause of
action qua Defendant No.6, and, this Court would, thus, have no
jurisdiction qua Defendant No.6.
42. Mr. Ashish Kamat, learned Senior Advocate for Bammco Pvt. Ltd.
(D7), supported the submissions on behalf of Defendant Nos.5 and 12
to 26 on the point that the NDU, by itself, does not create any security.
No further action to create security interest in pursuance of NDU was
taken. Nor any charge or lien over the subject shares of the
subsidiaries, especially Betul (D6), can be said to have been created
pursuant to NDU.
43. Mr. Kamat would also urge that, this court has no territorial
jurisdiction over Defendant No.7. In addition, in view of the provisions
contained in Section 438 of the Companies Act, 2013, read with
Sections 56 and 59, this court has no subject matter jurisdiction also. In
fact, reliefs claimed in the suit in the context of the transfer of the
shares of Betul (D6) in favour of Bammco Pvt. Ltd. (D7) are barred by
the provisions contained in Section 430 of the Companies Act, 2013.
Before entertaining the prayer for interim reliefs, the Plaintiffs would be
required to surmount the impediment of jurisdictional challenges.
Therefore, this Court ought to prima facie decide the jurisdiction before
entertaining the prayer for interim reliefs. To this end, Mr. Kamat placed
SSP/ARS 31/68
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reliance on the judgment of the Supreme Court in the case of Asma
Lateef and Anr. V/s. Shabbir Ahmad and Ors.12
44. Amplifying this challenge on jurisdiction, Mr. Kamat would urge
that the challenge to transfer in the books of Betul (D6) can only be by
way of an application for rectification of register of members under
Section 59 of the Companies Act, 2013. WPA (D5) has transferred its
shareholding in Betul (D6) to Bammco (D7) in exercise of the power
under Sections 56 of the Companies Act, 2013. The legality of or
authority for transfer of the said shares, consequently, falls within the
jurisdiction of the National Company Law Tribunal under Section 59 of
the Act, 2013. Therefore, the reliefs claimed under prayers clauses (c)
and (d) of the Interim Application are barred by Section 430 of the
Companies Act, 2013. Consequently, no injunction in furtherance of the
prayer clauses (c) and (d) of the Interim Application can be granted.
45. To bolster up these submissions, Mr. Kamat placed reliance on the
judgments in the cases of SAS Hospitality Pvt. Ltd. and Anr. V/s. Surya
Constructions Pvt. Ltd. and Ors.13, Shashi Prakash Khemka (dead)
through legal representatives and Anr. V/s. NEPC Micon and Ors. 14 and
Chalasani Udaya Shankar and Ors. V/s. Lexus Technologies Pvt. Ltd.
and Ors.15.
12 (2024) 4 SCC 696
13 2018 SCC Online Del 11909
14 (2019) 18 SCC 569
15 (2024) 10 SCC 303
SSP/ARS 32/68
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46. Mr. Kamat would further urge that the NDU, at the highest, is a
personal covenant and does not give any rights to the Plaintiffs over the
suit shares. For breach of such a personal covenant, damages are
adequate and appropriate remedy. Thus, if the remedy is quantifiable in
damages, there can be no irreparable loss to the Plaintiffs, and,
consequently, no interim relief can be granted qua the subject shares.
47. Mr. Kamat would urge that, the instant suit was incompetent for
having instituted without exhausting mandatory pre-institution
mediation under Section 12A Commercial Courts Act, 2015, as it does
not contemplate ‘urgent interim relief’. It was submitted that the plaint
contains vague assertions in regard to interim relief and is completely
silent on the necessity of ‘urgent’ interim relief, as contemplated by
Section 12A of the Commercial Courts Act, 2015. Mr. Kamat would
urge that the Plaintiffs have made an undisguised attempt to create an
artificial urgency only to bypass and circumvent the statutory and
mandatory provisions contained in Section 12A of the Act, 2015. Thus,
on this count, plaint is liable to be rejected, submitted Mr. Kamat.
48. Lastly, banking upon the judgment of the Supreme Court in the
case of Cotton Corporation of India Limited V/s. United Industrial Bank
Ltd. and Ors.16, Mr. Kamat submitted with a degree of vehemence that,
no interim relief can be granted against Defendant No.7 as no final
16 (1983) 4 SCC 625
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relief can be granted against Defendant No.7, in view of the aforesaid
insuperable impediments.
49. Mr. Gaurav Joshi, the learned Senior Advocate for Vistra (D8), at
the outset, submitted that, since no final relief has been sought against
Vistra (D8), only interim relief cannot be granted. Mr. Joshi mounted a
multi-pronged attack to the prayers qua Vistra (D8). Maintainability of
the suit, in general, and the interim relief, in particular, was assailed on
the grounds of lack of territorial jurisdiction, bar under Section 430 of
the Companies Act, 2013 and the absence of final relief qua Vistra (D8)
and delay and laches on the part of the Plaintiffs.
50. On the merits of the matter, Mr. Joshi would urge, Vistra (D8) is a
bonafide pledgee and a third party who has no concern with the
transaction between Plaintiffs and Defendant Nos.1 to 4. Defendant
No.8 is a bonafide pledgee for value, in whose favour the pledge of the
shares of Bammco (D7) in Betul (D6) has been created. In the absence
of any privity of contract between the Plaintiffs and Vistra (D8), no
interim relief can be granted against Vistra (D8).
51. Mr. Joshi would further urge that, the claim of the Plaintiffs
premised on the NDU does not merit consideration on account of the
non-compliance with the provisions contained in the Depositories Act,
1996, NSDL Bye-Laws and the terms of the NDU, and, thus, the
SSP/ARS 34/68
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purported obligations under NDU do not bind the third parties like
Vistra (D8).
52. Laying emphasis on clause 3.1(m) of NDU, Mr. Joshi would urge
that, NDU required creation of a debit freeze on the DP account in
accordance with the Rule 12.7.1 of NSDL Business Rules 2015. Yet, the
Plaintiffs failed to create such debit freeze. Failure on the part of the
Plaintiffs to adopt proper safeguards for creation of record of purported
NDU, at an appropriate stage, was at the own peril of the Plaintiffs.
Non-compliance of the provisions of the SEBI Circular dated 14 June
2017 by failure to register the NDU in consonance with the stipulation
thereunder, was also pressed into service. Having failed to initiate the
protective measures in accordance with the provisions of NSDL Bye-
Laws and the terms of the NDU, the Plaintiffs have disentitled
themselves from claiming any interim reliefs.
53. Mr. Joshi next urged with tenacity that, the shares being fungible
in nature, third party rights cannot be affected. It was, therefore, not
incumbent upon the third parties, including Vistra (D8), to carry out
title search or due diligence. Reliance was placed by Mr. Joshi on the
judgment in the case of PTC India Financial Services Ltd. V/s.
Venkateswarlu Kari and Anr.17 to demonstrate fungible nature of
securities and the consequences that entail the transfer of securities
without pledge having been notified in the manner prescribed under the
17 (2022) 9 SCC 704
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Depositories Act, 1996. Thus, even if the case of the Plaintiffs is taken
at par, the mere fact that WPA (D5) sold the shares allegedly in breach
of NDU, would not ifso facto invalidate the pledge of those shares by
Bammco (D7) in favour of Vistra (D8).
CONSIDERATION:
54. At the outset, I deem it appropriate to deal with the preliminary
objections to the tenability of the suit and the prayers for interim relief.
Bar under Section 12A of the Commercial Courts Act, 2015 :
55. The tenability of the suit was assailed on the ground that, it does
not contemplate urgent interim reliefs. The Plaintiffs case for “urgent
interim reliefs” was refuted on the ground of purported delay and
laches in approaching the Court, without exhausting mandatory pre-
institution mediation under Section 12A of the Act, 2015. Since the
transaction was reported through PAS 3 with the MCA in March 2024,
the claim of the Plaintiffs that the Plaintiffs learnt about the same in
July 2024, was stated to be incorrect.
56. With the pronouncement of the Supreme Court in the case Patil
Automation Pvt. Ltd. V/s. Rakheja Engineers Pvt. Ltd .18, there can be no
duality of opinion that the pre-stitution mediation envisaged by Section
12-A of the Act, 2015 is mandatory. In a commercial suit, the Court is
enjoined to examine whether the institution of the suit without
resorting to pre-institution mediation was justifiable on the touchstone
18 (2022) 10 SCC 1
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of contemplation of a urgent interim relief. The only outlet to claim
exemption from the peremptory pre-institution mediation is, the
contemplation of an urgent interim relief in such suit.
57. Thus, when confronted with the question, as to whether the
plaint is liable to be rejected for not exploring pre-institution mediation,
the approach to be adopted by the Court would be one of striking a
balance. At the one end of the spectrum is, the necessity to adopt an
approach which does not defeat the object of mandatory pre-institution
mediation. At the other end of the spectrum is, the compulsion to not
shut doors on a party which requires an urgent interim relief in a
commercial suit. A too rigid construction of the expression,
“contemplates an urgent interim relief”, would deprive a party of the
hearing, at the threshold, where urgent interim relief is necessary to
protect its interest.
58. In the case of Yamini Manohar (Supra), the Supreme Court
expounded the import of the expression, “a suit which does not
contemplate any urgent interim relief”, from the point of view of the
party; whose contemplation matters, the test to be applied to judge the
existence of contemplation of urgent interim relief and the possibility of
urgent interim relief being prayed for to circumvent the mandate of pre-
instituion mediation. The observations of the Supreme Court in
paragraphs 10 to 12 read as under:
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“10. We are of the opinion that when a plaint is filed under
the CC Act, with a prayer for an urgent interim relief, the
commercial court should examine the nature and the subject
matter of the suit, the cause of action, and the prayer for
interim relief. The prayer for urgent interim relief should not be
a disguise or mask to wriggle out of and get over Section 12-A
of the CC Act. The facts and circumstances of the case have to
be considered holistically from the standpoint of the plaintiff.
Non-grant of interim relief at the ad-interim stage, when the
plaint is taken up for registration/admission and examination,
will not justify dismissal of the commercial suit under Order
VII, Rule 11 of the Code; at times, interim relief is granted after
issuance of notice. Nor can the suit be dismissed under Order
VII, Rule 11 of the Code, because the interim relief, post the
arguments, is denied on merits and on examination of the three
principles, namely, (i) prima facie case, (ii) irreparable harm
and injury, and (iii) balance of convenience. The fact that the
court issued notice and/or granted interim stay may indicate
that the court is inclined to entertain the plaint.
11. Having stated so, it is difficult to agree with the
proposition that the plaintiff has the absolute choice and right
to paralyze Section 12-A of the CC Act by making a prayer for
urgent interim relief. Camouflage and guise to bypass the
statutory mandate of pre-litigation mediation should be
checked when deception and falsity is apparent or established.
The proposition that the commercial courts do have a role,
albeit a limited one, should be accepted, otherwise it would be
up to the plaintiff alone to decide whether to resort to the
procedure under Section 12-A of the CC Act. An “absolute and
unfettered right” approach is not justified if the pre-institution
mediation under Section 12-A of the CC Act is mandatory, as
held by this Court in Patil Automation Pvt. Ltd. (supra).
12. The words “contemplate any urgent interim relief” in
Section 12-A(1) of the CC Act, with reference to the suit,
should be read as conferring power on the court to be satisfied.
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They suggest that the suit must “contemplate”, which means
the plaint, documents and facts should show and indicate the
need for an urgent interim relief. This is the precise and
limited exercise that the commercial courts will undertake, the
contours of which have been explained in the earlier
paragraph(s). This will be sufficient to keep in check and
ensure that the legislative object/intent behind the enactment
of Section 12-A of the CC Act is not defeated.”
(emphasis supplied)
59. In the case of Dhanbad Fuels Private Limited vs. Union of India
and another19, after adverting to the aforesaid pronouncement in the
case of Yamini Manohar (supra), the Supreme Court enunciated that the
test under Section 12A is not whether the prayer for urgent interim
relief actually comes to be allowed or not, but whether on examination
of the nature and the subject-matter of the suit and the cause of action,
the prayer for urgent interim relief by the plaintiff could be said to be
contemplable when the matter is seen from the standpoint of the
plaintiff. However, what also be kept in mind by the Court is that the
urgent interim relief must not be merely on unfounded cause of action
by the plaintiff to bypass the mandatory requirement of Section 12A of
the Act, 2015.
60. On the aforesaid touchstone, if the facts of the case at hand are
evaluated, the element of urgency cannot be said to be diluted by the
passage of time, as was sought to be canvassed on behalf of Defendant
Nos.1 to 4 and 7. The time lag between the knowledge of the
19 2025 SCC OnLIne SC 1129.
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impugned transaction (July 2024) and the institution of the suit in the
month of August 2024, does not seem to be such as to erode the case of
urgency. The element of urgency is required to be appreciated in the
light of the apprehension entertained by the Plaintiffs in regard to the
further depletion of the assets and the fundamental security of the
Plaintiffs. Therefore, reliance placed by Mr. Kamat on the judgment of
the Madras High Court in the case of K. Varathan V/s. Prakash Babu
Nakundhi Reddy20 is inapposite in the facts of the case at hand. Thus,
the submissions on behalf of the Defendants that the plaint is liable to
be rejected for not resorting to pre-institution mediation under Section
12-A of the Act, 2015, do not merit acceptance.
Bar under Section 10 of the Code of Civil Procedure, 1908 :
61. The principle of res-subjudice was next pressed into service on
account of the pendency of Commercial OS Suit No.298 of 2024
instituted by Defendant Nos.1 to 4 against the Plaintiffs, Baboon (D11)
and Axis Trustee (D9) in the Court at Benguluru. It is trite, to attract
the provisions contained in Section 10 of the Code, 1908, so as to
operate as a bar to the subsequent suit, the true tests is, whether the
decree passed in the previous suit would operate as res-judicata in the
subsequent suit. The essential elements for the applicability of the
principle of res-judicata were expounded by the Supreme Court in the
20 C.S. (Comm. Div.) No.202 of 2022 dated 13 Oct. 2022
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case of National Institute of Mental Health & Neuro Sciences V/s. C.
Parameshwara21, as under :
“8…...The object of Section 10 is to prevent courts of
concurrent jurisdiction from simultaneously trying two
parallel suits in respect of the same matter in issue. The
fundamental test to attract section 10 is, whether on
final decision being reached in the previous suit, such
decision would operate as res judicata in the subsequent
suit. Section 10 applies only in cases where the whole
of the subject-matter in both the suits is identical. The
key words “directly and substantially in issue” are used
in contradistinction to the words “incidentally or
collaterally in issue”. Therefore, Section 10 would apply
only if there is identity of the matter in issue in both the
suits, meaning thereby, that the whole of the subject-
matter in both the proceedings is identical.”
(emphasis supplied)
62. In the case at hand, prima facie, this Court is of the view that the
scope of the instant suit is significantly wide and materially different
from the issues that directly and substantially arise for adjudication in
OS Suit No.298 of 2024. In the said suit, Defendant Nos.1 to 4 are
primarily seeking declaration that the Deed of Assignment executed by
the Plaintiff No.1 in favour of Plaintiff No.2 is null and void and a
permanent injunction to restrain the Plaintiffs from exercising their
rights under the said Deed of Assignment and the DTD.
21 (2005) 2 SCC 256
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63. In the case at hand, in addition to enforcing the rights under
DTD, the Plaintiffs are seeking reliefs in relation to alleged transfer of
the securities in breach of the contractual obligations and are also
seeking declarations and consequential reliefs against the transferees.
The whole of the subject matter in both the suits does not appear to be
identical. The Court also cannot loose sight of the fact that, under
clause 72 of Atria DTD, the parties thereto have chosen to subject
themselves to the jurisdiction of the Courts at Mumbai, exclusively.
64. At any rate, the stage of the proceedings before this Court is of
critical salience. What Section 10 of the Code precludes is, the trial in
the subsequent suit. The interdict contained in Section 10 strictly does
not preclude the Court of a competent jurisdiction, in which the
subsequent is instituted, from entertaining an application for interim
relief.
65. In the case of Sennaji Kapuechand Vs Pannaji Devichand (supra),
on which reliance was placed by Mr. Dhond, a Division Bench of this
Court rejected a submission that, since the proceedings in the suit were
stayed under Section 10 of the Code, owing to the pendency of the
previous suit, no interlocutory order can be made in the subsequent
suit. It was in terms observed that, what is provided under Section 10 is
that no Court shall proceed with the trial of any suit in which the matter
in issue is also directly and substantially in issue in a previously
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instituted suit between the same parties. That does not prevent the
Court from making interlocutory orders, such as orders for a receiver, or
an injunction, (as sought in this case), an order for attachment before
judgment, as was sought in that case.
66. In the light of the aforesaid position in law, the resistance on
behalf of the Defendants premised on the pendency of Commercial OS
Suit No.298 of 2024 before the Court at Benguluru for consideration of
the prayer for grant of interim relief in the instant suit, cannot be
acceded to.
Territorial jurisdiction :
67. As elaborate submissions were canvassed on behalf of the
Defendants, especially Defendant Nos.5 to 8 and 14 to 26 that this
Court lacks jurisdiction qua those Defendants, as neither the registered
offices of those Defendants are situated within the local limits of the
jurisdiction of this Court, nor the alleged offending transactions have
taken place within the limits of the jurisdiction of this Court, it may be
appropriate to briefly deal with this challenge as an impediment to the
prayers in the Interim Application.
68. As noted above, there is no controversy over the execution, as
such, of DTD and NDU. Those instruments were executed within the
limits of this Court. Clause 72 of the DTD, inter alia, provides that the
parties agreed that the Courts and Tribunals in Mumbai, Maharashtra,
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shall have exclusive jurisdiction to settle any dispute which may arise
out of or in connection with the debenture documents and that
accordingly, any suit, action or proceedings arising out of or in
connection with the debenture documents may be brought in such
Courts or Tribunals and the issuer shall ensure that the subsidiaries
irrevocably submit to and accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of those courts
or tribunals. Clause 72.2 contains a waiver of any objection in regard to
the jurisdiction.
69. So far as Defendant Nos.1 to 4, no objection as to the jurisdiction
of this Court can possibly be raised. Moreover, the disputes between
Plaintiff No.1 and Defendant Nos. 1 to 4 and the subsidiaries of
Defendant No.1 inexorably flow from DTD and NDU; which also
contains an exclusive jurisdiction clause. In view of the aforesaid
covenant in DTD, prima facie, this Court will have jurisdiction to
entertain, try and decide all the disputes in relation to DTD and
Debenture documents, which included security documents, in exclusion
to other Courts, not only in relation to the dispute between Plaintiff
No.1 and Defendant Nos.1 to 4, but even the subsidiaries of Atria (D1).
In any event, the Plaintiffs have obtained Leave under Clause XII of the
Letters Patent under an order dated 26 August 2024. Therefore, the
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objection to the territorial jurisdiction of this Court need not detain the
Court any further, at this stage.
Bar under Section 430 of the Companies Act, 2013 :
70. The dispute as to the transfer of the securities and the consequent
prayers to restrain Bammco (D7) and Vistra (D8) from dealing with the
shares of Betul (D6) falls within the exclusive jurisdiction of the NCLT
and the Civil Court’s jurisdiction was expressly barred under Section
430 of the Companies Act, 2013, was the next ground urged on behalf
of the Defendants.
71. On a careful perusal of the averments in the plaint and the
material on record, this Court finds it difficult to sustain the aforesaid
challenge. The issue of transfer of shares does not arise in the abstract
or as a matter of initial allotment of or refusal to transfer the shares by
a corporate entity. The dispute has its genesis in the breach of
contractual obligations and the right to transfer the shares in the face of
the securities created thereunder, and non-disposal undertaking. The
instant suit is, thus, a comprehensive suit for the recovery of the debt
and the enforcement of the securities, and not merely a dispute as to
the transfer and transmission of the shares in breach of the statutory
provisions, rules and bye-laws of the company.
72. Reliance placed by Mr. Kamat on the judgment in the case of SAS
Hospitality Pvt. Ltd. and Anr. V/s. Surya Constructions Pvt. Ltd. and
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Ors. (supra), is of no assistance to the Defendants. The dispute in that
case arose out of allotment of shares by a corporate entity. Shashi
Prakash Khemka (dead) through legal representatives and Anr. V/s.
NEPC Micon and Ors. (supra) was in relation to the dispute of
rectification of the register of members, upon transfer of shares, under
Section 111A of the Companies Act, 1956. Even the decision in the case
of Chalasani Udaya Shankar and Ors. V/s. Lexus Technologies Pvt. Ltd.
and Ors. (supra), squarely addressed a situation covered by Section 59
of the Companies Act, 2013.
73. To put it in other words, the reliefs sought in respect of the shares
of Betul (D6), which the Plaintiffs claim have been illegally transferred,
in prayer clauses (e) and (f) of the Application, draw support and
sustenance from the alleged rights of the Plaintiffs under DTD and the
documents executed in pursuance thereof. Determination of legality and
validity of such transfer of securities would fall within the plenary and
expansive jurisdiction of the Civil Court. Thus, the challenge to the
tenability of the prayers in the Interim Application on the count of bar
under Section 430 of the Act, 2013, also appears to be devoid of
substance.
74. Reverting to the contentious issues, few uncontroverted facts
deserve to be noted.
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75. The relations inter se Defendant Nos 1 to 4, and Defendant No.1,
on the one part part, Defendant Nos. 5, 6 and 12 to 26, on the other
part, the later being the subsidiaries of Defendant No.1, at least at the
time of the execution of transactional documents and alleged event of
default, is not much in dispute. The jural relationship between
Defendant No.1 and Plaintiff No.1 as the issuer and subscriber to the
debentures is also not in contest. Nor the execution of DTD dated 5 th
December 2016 and NDU dated 7th December 2016, as such, is put in
contest. The subscription of 24,250 number of debentures by Plaintiff
No.1, over a period of time, aggregating to Rs. 242.50 Crores is
uncontroverted. The fact that 80% debentures were not redeemed on
the date of redemption is incontestable, though the parties are at issue
over the consequences that ensue the non-redemption of the
debentures.
76. It also emerges from the record that, by and large, there is not
much controversy over Betul (D-6) having issued secured controvertible
debentures aggregating to Rs.210 Crores under the Betul DTD dated
27th March 2024 executed between Betul (D6) and Vistra (D8). The
transfers of its 50.01% shareholding in Betul (D6) by WPA (D5) in
favour of Bammco (D7) is also admitted.
77. The core controversy between the parties revolves around the
question whether an event of default has occurred on account of failure
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to make redemption payment and outstanding coupon/interest amount
and the aforesaid transfer of shareholding by WPA (D5) and issue of
debentures by Betul (D6) under Betul DTD in contravention of the
contractual obligations, and what consequences entail.
78. To appreciate the aforesaid controversy, a reference to the
material terms of Atria DTD, the pivot around which the Plaintiffs case
revolves, becomes necessary. They read as under:
5. SUBSCRIPTION
5.1 Based on the Representations & Warranties,
covenants, undertakings and indemnities provided by the
issuer and the Promoters, contained herein and in the
other Debenture Documents and subject to the fulfillment
of the Condition Precedent relevant to each Tranche,
and/of the corresponding subsequent Tranche conditions
precedent relevant to each Tranche and the relevant
conditions subsequent, Debenture Holders shall subscribe
to the Debentures in Tranches by making payment of the
corresponding Subscription Amount for each Tranche as
set out in Schedule IV. The Tranche 1 Subscription Amount
shall, subject to the fulfillment of the condition precedent,
be paid to subscribe to Tranche 1 on the closing date. The
subscription amount for each subsequent Tranche shall
subject to the fulfillment of the Conditions Precedent
relevant to such Tranche, Subsequent Tranche Conditions
Precedent and the relevant conditions subsequent be paid
by the Debenture Holders to the issuer for subscription to
each such Tranche within the period set out in Clause
8.12.
6. APPLICATION OF SUBSCRIPTION AMOUNT.
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6.1 The Subscription Amount shall be utilized by the
Issuer only for the purpose of:
… … ...
6.1.5 any settlement of payments with USEIPL of an
amount not exceeding Rs. 100,00,00,000/- (Rupees One
hundred crores). In the event of any valuation different
between the shares of Kukru Wind Power Private Limited
and Betul Wind Farms Limited to effect the flip in the
shareholding in terms of the WPA SPV Investment
Agreements; and/or
12.1 SECURITY :
12.1.2 The Debenture Secured Obligations, in respect of
the Debentures and the performance by the Issuer of its
obligations in relation thereto, shall be secured by creation
and perfection of the Security Interest on the Security in
favour of the Debenture Trustee for the benefit of the
Debenture Holders, in the following manner:
(a) Creation and perfection of Security Interest on
all the properties, more particularly described in Schedule
XVIII (Details of Hypothecated Properties) of this Deed in
the manner described therein;
(b) Creation and perfection of pledge over 100%
(one hundred per cent) of the issued and fully paid up
share capital of the Issuer on a Fully Diluted Basis and
100% (one hundred per cent) of the compulsorily
convertible debentures and/or any other security
instrument issued by the Issuer, present or future;
(c) Creation and perfection of pledge over all the
unencumbered securities held in the Issuer and/or the
Promoters, directly or indirectly, on a Fully Diluted Basis,
in AWPL, WPA, Solar HoldCo and the Subsidiaries whose
securities are not pledged to senior project lenders of such
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Subsidiaries, details of which as on date are not set out in
Part A of Schedule XXIII. Provided that, the pledge so
created on securities of a Subsidiary shall be released by
the Debenture Trustee (acting under written instructions
of the Debenture Holders) within 7 (seven) Business Days
of a request being received from the Issuer to do so, along
with documents evidencing: (I) the requirement by the
project lenders, of pledge to be created over the securities
of such Subsidiary to finance any of such Subsidiary’s
Projects; and/or (ii) that the same is a condition for
investment in the relevant Subsidiary by the Green
Investment bank;
(d) Execution of a power of attorney in connection
with the pledges specified in (b) and (c) above;
(e) Execution of the non-disposal undertaking and
power of attorney in a form and manner satisfactory to the
Debenture Trustee, over all the unencumbered securities
held by the Issuer and/or the Promoters, directly or
indirectly, on a Fully Diluted Basis, in Subsidiaries whose
securities are pledged to senior project lenders of such
subsidiaries, details of which as on date are set out in Part
B of Schedule XXIII;
(f) Execution of a power of attorney by the Issuer, in
favour of and as required by the Debenture Trustee, to
enable the Debenture Trustee to undertake all necessary
actions to exercise its rights under the Debenture
Documents including but not limited to those required to
be taken upon occurrence of an Event of Default specified
in Clause 34 of this Deed; and
(g) Execution of all documents, deeds, undertakings,
power(s) of attorney, etc. required by the Debenture
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Trustee, or entered into or executed by the Issuer or any
other Person for creating and perfecting the Security.
32.1.4 CREATION AND PERFECTION OF SECURITY:
The Issuer and the Promoters shall ensure that the
Security is created and perfected under the Debenture
Documents, to the satisfaction of the Debenture Trustee,
within the timelines prescribed hereunder or other
Debenture Documents.
32.1.5 FMV COVER:
The Issuer shall maintain a Fair Market Value of at least 2
(two) times the outstanding Debenture Secured
Obligations (“FMV Cover”). The Parties agree that the
mechanism and parameters for calculation for Fair Market
Value of various Projects have been set out in Schedule
XXI. The Fair Market Value of the Issuer shall be
determined on an annual basis or as may be required by
the Debenture Trustee, and the Issuer shall provide all
necessary assistance in relation to such determination.
33 NEGATIVE COVENANTS :
33.1 Subject to Clause 33.3 below, until the
Debenture Final Settlement Date, the Promoters (to the
extent as expressely provided in this Clause 33) shall not
and the Issuer shall not and shall ensure that the
Subsidiaries shall not, at any time, without the prior
written consent of the Debenture Holders:
… … ...
33.1.5 redeem, repurchase or buy-back any shares or
preference shares issued by the Issuer or any Subsidiaries
except as required for the purposes hereinbelow:
(c) the repurchase by WPACEPL of securities held by
USEIPL in terms of the WPASPV Investment Agreements;
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“Securities Documents” shall mean all documents entered
into or executed by the Issuer, each of the Subsidiaries and
the Promoters for creating and perfecting the Security, in
form and substance acceptable to the Debenture Trustee,
including:
(i) this Deed;
(ii) Securities Pledge Agreements and the powers of
attorney in connection therewith;
(iii) Non-disposal undertakings and the powers of
attorney in connection therewith, in respect of securities of
such Subsidiaries, as specified in Clause 12.1.1(e);
(iv) Power of Attorney;
(v) all documents, deeds, undertakings, power(s) of
attorney, etc. required by the Debenture Trustee, or
entered into or executed by the Issuer or any other Person
for creating and perfecting the Security;
(vi) any other document including any deeds of
assignment, guarantee or powers of attorney, designated
as such by the Debenture Trustee; and
(vii) any amendments to the documents mentioned
above.
“WPA SPV Investment Agreements” means collectively:
(i)Shareholders Agreement dated 4 September 2014
executed amongst United Telecom Limited, WPACEPL and
Betul Wind Farms Limited;
… … ...
“WPACEPL” means WPA Clean Energy Private Limited.
79. Under the Non Disposal Agreement (NDU) dated 7 th December
2016, inter alia WPA (D5), the NDU provider, irrevocably and
unconditionally agreed, undertook and confirmed that, during the terms
of DTD, it shall not sale, transfer, assign, dispose of, pledge, mortgage,
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hypothecate, charge or otherwise encumber the assets in any manner
whatsoever without the prior written consent of the debenture trustees.
In the Schedule III appended to the said NDU, titled “ The details of
NDU securities”, WPA (D5) provided non-disposal undertaking in regard
to 20,81,031 (26.59%) shares held in Betul (D6) and 11,62,791 (24%)
shares held in Kukru Wind Power (D14).
80. In the backdrop of the aforesaid broad nature of the contractual
obligations, at the threshold, it is necessary to keep in view the
approach to be adopted by the Court in the construction of commercial
contracts, especially when the corporate entities, like the parties to the
instant suit, enter into elaborate contractual obligations. Ordinarily, the
terms of the contract are required to be construed in conformity with
the express words employed by the parties and by giving the natural
meaning to the words used by the parties. It is impermissible for the
Court to make a new contract or re-write the contract, which the parties
themselves did not choose to make.
81. In the case of Rajasthan State Industrial Development (Supra),
on which reliance was placed by both Mr. Dhond and Mr. Jagtiani, the
Supreme Court exposited the principle of interpretation of the terms of
the contract, as under:
“23. A party cannot claim anything more than what is
covered by the terms of contract, for the reason that
contract is a transaction between the two parties and has
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been entered into with open eyes and understanding the
nature of contract. Thus, contract being a creature of an
agreement between two or more parties, has to be
interpreted giving literal meanings unless, there is some
ambiguity therein. The contract is to be interpreted
giving the actual meaning to the words contained in the
contract and it is not permissible for the court to make a
new contract, however is reasonable, if the parties have
not made it themselves. It is to be interpreted in such a
way that its terms may not be varied. The contract has
to be interpreted without giving any outside aid. The
terms of the contract have to be construed strictly
without altering the nature of the contract, as it may
affect the interest of either of the parties adversely.
(Vide: United India Insurance Co Ltd Vs Harchand Raj
Chandan Lal (AIR 2004) 8 SCC 644 and Polymat India
(P) Ltd Vs National Insurance Co Ltd (2005) 9 SCC
174.”
(emphasis supplied)
82. Keeping the aforesaid principle in view, the issues that crop-up
for consideration are required to be determined.
REPUDIATARY BREACH BY THE SUBSCRIBER-PLAINTIFF NO.1:
83. Incontrovertibly, Plaintiff No.1 subscribed to 24,250 debentures
aggregating to a sum of Rs.242.50 Crores only. A strenuous effort was
made on behalf the Defendants, especially by Mr. Kadam, to draw home
the point that the failure of Plaintiff No.1 to subscribe to the issue fully,
jeopardised the commercial interest of Atria (D1) and defeated the very
purpose of Atria DTD. Therefore, on account of the repuadiatory breach
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on the part of Plaintiff No.1, the Defendants stood discharged of their
contractual obligations, submitted Mr. Kadam.
84. The aforesaid contention is required to be appreciated in the light
of the terms of the contract, attendant circumstances and the conduct of
the parties. Under Clause 5.1 (extracted above), the subscription for the
subsequent tranches was subject to fulfillment of the conditions
precedent and conditions subsequent. Clause 7 provided for condition
precedent. Under Clause 8.12, upon fulfillment of conditions precedent,
the issuer was to deliver the debenture trustees a compliance certificate
and subscription notice in the Form prescribed in Schedule XIII thereto.
Clause 8.12 further provides that in respect of any subsequent tranche,
upon fulfillment of all the relevant conditions precedent, conditions
subsequent and subsequent tranche conditions precedent, the issuer
shall issue the compliance certificate and subscription notice, and if the
debenture trustee is satisfied with the same, the debenture holders shall
pay the subscription amount for such subsequent tranche. The form of
compliance certificate and subscription notice inter alia contains a
request to the debenture holders to subscribe to the debentures by
paying the specified subscription amount.
85. If the aforesaid clauses are read in juxtaposition with each other
under the scheme of DTD, it becomes evident that under the scheme of
DTD, the subscription to subsequent tranches, on the pre-determined
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dates, was not automatic but subject to compliance of the conditions,
and satisfaction of the debenture trustees about due compliance and a
requisition to the subscriber by way of notice to subscribe. It does not
appear that, after a part of the third tranche was subscribed, Atria (D1)
called upon the subscribers to subscribe to the debentures by following
the mechanism provided under DTD. It is imperative to note that part of
the third tranche was subscribed on 7th July 2017. Prima facie it does
not appear to be the case of Defendant No.1 that Defendant No.1 has
thereafter ever raised a requisition for subscription or made any
grievance in regard to non-subscription to the rest of the tranches. The
dispute regarding the non-subscription prima facie seems to have been
raised only after the period of redemption and date of final settlement
passed by.
86. In contrast, the conduct of Atria (D1) in making the payment of
coupon amount/interest and even in acknowledging the liability to
discharge the debt on the date of settlement militated against the
contention on behalf of Defendant Nos. 1 to 4 that the contract was
treated to be repudiated. In the letter dated 24 th November 2022,
(Exhibit “B” to the Affidavit in Rejoinder on behalf of Plaintiff No.1)
Atria (D1) acknowledged in clear and explicit terms that it would
complete redemption of 20% of the debentures on or before 6 th
Anniversary of closing date, and assured to redeem the balance 80%
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debentures on 31st December 2023, in accordance with DTD. This
admission implies that upto that point, in the least, Atria (D1) had not
raised any grievance regarding the non-subscription to the balance
debentures.
87. In the backdrop of the aforesaid facts, reliance placed by Mr.
Jagtiani on a three Judge Bench judgment of the Supreme Court in the
case of State of Kerala (Supra) appears to be well-founded. In the said
case, the Supreme Court enunciated that breach of the contract by one
party does not automatically terminate the obligation under the
contract: the injured party has the option either to treat the contract as
still in existence, or to regard himself as discharged. If he accepts the
discharge of the contract by the other party, the contract is at an end. If
he does not accept the discharge, he may insist on performance.
88. On the basis of aforesaid positive acts and admissions on the part
of Atria (D1) an inference prima facie becomes inescapable that Atria
(D1) did not repudiate the contract and continued to perform the same.
It is, therefore, not open for Atria (D1) to now turn around and contend
that there was repudiatary breach of contract on the part of Plaintiff
No.1 in failing to subscribe to balance debentures.
EVENT OF DEFAULT:
89. The Plaintiff No.1 alleges that there were two events of default.
First, the failure on the part of Atria (D1) to make redemption payment
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of 80% of the debentures. Under the terms of DTD 80% of the
debentures were to be redeemed by 19 th December 2023 or by 31st
December 2023; as acknowledged by Atria (D1), above. It is not the
case that Atria (D1) redeemed the 80% of the debentures, as agreed.
Under Clause 34.1, failure by the issuer to redeem the debentures on
any redemption due dates constitutes an event of default. To this extent,
it is prima facie incontrovertible that the failure on the part of Atria
(D1) to make the redemption payment to redeem 80% of the
debentures on the final settlement date constituted an event of default.
90. Under Clause 34.2 of Atria DTD, non performance of the
obligations under any debenture documents and non-compliance with
negative covenants under Clause 33 also constitutes an event of default.
The Plaintiffs alleged the transfer of 50.01% of the shareholding of WPA
(D5) in Betul (D6) to Bammco (D7) and the subsequent issue of
debentures by Betul (D6) under Betul DTD were in breach of the
negative covenants contained in Clause 33.1.5 of the DTD, and thereby
the second event of default triggered in.
91. As noted above, the aforesaid case of the Plaintiffs was refuted by
the Defendants on the ground that under Clause 6.1.5 and 33.1.5 (c),
the swapping of the shareholdings of WPA (D5) in Betul (D6) and
Kukru Wind Power (D14) was authorised and to the knowledge of the
Plaintiff. Elaborate submissions were canvassed on the pre-existing
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contractual obligations of WPA (D5), which were, according to the
Defendants, explicitly saved and expressly permitted by the terms of
DTD.
92. One of the securities under Clause 12.1.1 (e) of DTD was
execution of NDU over all the unencumbered securities held by the
issuer and/or the promoters, in subsidiaries whose securities were
pledged to Senior Project Lenders of such subsidiaries, as particularised
in Schedule XXIII. Inter alia under Clause (x) of Schedule XXIII,
20,81,031/- (26.59%) unencumbered shares of Betul (D6) were shown
as unencumbered securities to be pledged to the debenture holders.
93. Under Clause 6.1.5, extracted above, the subscription amount
was permitted to be utilised by the Atria (D1) for the purpose of any
settlement of payments with USEIPL” of an amount not exceeding
Rs.100 Crores to effect the flip in the shareholdings in the terms of
WPA SPV Investment Agreements, in the event of any valuation
difference between the shares of Kukru (D14) and Betual (D6).
94. Under Clause 33.1.5 until the debentures final settlement date,
the promoters and the issuer agreed not to and ensure that the
subsidiaries of Atria (D1) will not, without the prior written consent of
the debenture holders (P1 and D11), redeem, repurchase or buy-back
any shares or preference shares issued by issuer or any subsidiaries
except:
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………
c) the re-purchase by WPACEPL of securities held by USEIPL in
terms of WPA SPV Investment Agreements;
95. What was, thus, saved from the requirement of prior written
consent to deal with the shares or preference shares issued by the issuer
or any subsidiaries was, the re-purchase of WPA (D5) securities held by
USEIPL in terms of WPA SPV Investment Agreements. WPA SPV
Investment Agreements were defined under Clause 1 of Schedule II
(definitions and interpretation) to mean a host of instruments including
shareholders Agreement dated 4th September 2024 executed amongst
United Telecom Limited, WPA (D5) and Betul (D6).
96. A conjoint reading of the aforesaid clauses, in my considered
view, albeit prima facie, does not lead to an inference that the transfer
of the shareholding of WPA (D5) in Betul (D6) was out of the purview
of the negative covenant. The permission for utilisation of the issue
proceeds in the event of difference in valuation of the shares of Kukru
Wind Power (D14)and Betul (D6), to effect the flip in the shareholding
in terms of the WPA SPV Investment Agreements, may not support the
contentions on behalf of the Defendant that WPA (D5) was free to
transfer its shareholding in Betul (D6) without the written consent of
the debenture holders.
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97. The non-disposal agreement is a part of the security specifically
provided under clause 12. The parties have specifically carved out
unencumbered securities in contradistinction to the securities already
created by the issuer or subsidiaries in favour of the principal lenders.
All those unencumbered securities were specifically included in
Schedule XXIII. These terms of the contract are, therefore, required to
be given effect to. Thus, it would be for the Defendant Nos.1 to 6 to
establish that the transaction entered into by the WPA (D5) with
Bamkoo (D7) in relation to the shares of Betul (D6) fell within the
exception contained in clause 33.1.5(c). At this stage, prima facie, the
impugned transactions do not appear to be covered by the exclusionary
clause. The Court is, thus, inclined to hold that the event of default on
account of the non-compliance of the negative covenant in the context
of the dealing with the unencumbered securities, without the consent of
debenture holders, is prima facie, made out.
What should be the appropriate interim relief :
98. The suit is essentially for recovery of debt and enforcement of the
securities in relation thereto. The prayers in prayer clauses (a) and (b),
undoubtedly, partake the character of final reliefs, as the Plaintiffs seek
order of deposit of the total outstanding amount, with a permission for
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withdrawal of the said amount, subject to outcome of the suit. Under
prayer clause (c), the Plaintiffs seek directions to Defendant Nos.1 to 4
to furnish the solvent security. The said prayer is akin to a prayer for
attachment before judgment. The resistance to the prayers (a) to (c)
was conceivably premised on inappositeness of grant of final relief at
the interim stage.
99. In the case of State of U.P. and Ors Vs Ram Sukhi Devi (supra),
the Supreme Court emphasised that the final relief should not be
granted at an interim stage and deprecated the practice of granting
interim orders which practically give the principal relief sought in the
Petition for no better reason than that of a prima facie case having been
made out.
100. Mr. Dhond attempted to salvage the position by banking upon the
judgment in the case of Deoraj Vs State of Maharashtra and Ors (supra).
Reliance was placed on the following observations :
“12. Situations emerge where the granting of an
interim relief would tantamount to granting the final
relief itself. And then there may be converse cases where
withholding of an interim relief would tantamount to
dismissal of main petition itself; for, by the time the
main matter comes up for hearing there would be
nothing left to be allowed as relief to the petitioner
though all the findings may be in his favour. In such
cases the availability of a very strong prima facie case
___ of a standard much higher than just prima facie
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case, the considerations of balance of convenience and
irreparable injury forcefully tilting the balance of case
totally in favour of the applicant may persuade the Court
to grant an interim relief though it amounts to granting
the final relief itself. Of course, such would be rare and
exceptional cases. The Court would grant such an
interim relief only if satisfied that withholding of it
would prick the conscience of the Court and do violence
to the sense of justice, resulting in injustice being
perpetuated throughout the hearing, and at the end the
Court would not be able to vindicate the cause of justice.
Obviously such would be rare cases accompanied by
compelling circumstances, where the injury complained
of is immediate and pressing and would cause extreme
hardship. The conduct of the parties shall also have to
be seen and the Court may put the parties on such terms
as may be prudent.”
101. I am afraid, Deoraj (supra) assists the cause of the submission
sought to be canvassed on behalf of the Plaintiffs. Deoraj (supra) arose
out of an election dispute, where the matters of moment assume
immense significance. The case at hand essentially presents a money
claim. The element of neither compelling circumstance nor extreme
hardship, can be pressed into service. Therefore, the prayer for a
direction to deposit the entire outstanding amount, at the threshold,
cannot be countenanced as it would amount to virtually passing a
decree. Resultantly, the reliefs in terms of prayer clauses (a) and (b) are
completely out of question.
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102. The prayer to furnish solvent security (clause c), deserves to be
appreciated in the light of the security cover which the Plaintiff No.1
enjoys. Under clause 12.1 of DTD, shares have been pledged in favour
of the debenture trustees for the benefit of the debenture holders. It
was the contention of the Defendants that the said security was created
in contemplation of infusion of Rs.900 Crores and the Plaintiff No.1
enjoyed the whole security without subscribing to the debentures fully.
103. An attempt was made to join the issue by asserting that the
Defendant Nos.1 to 4 were under obligation to maintain fair market
value of at least twice the outstanding debenture secured obligation.
The purported existing security, according to the Plaintiffs, falls below
the FMV cover. The value of the security, evaluated by the PWC at the
instance of Defendants, was in the range of Rs.919 to 1339 Crores.
104. It was further urged on behalf of the Plaintiffs that the security
cover stood further depleted with the transfer of shares of Betul (D6)
by WPA (D5) in favour of Bammco (D7), by Rs.150 to 172 Crores. Thus,
Defendant Nos.1 to 4 have failed to maintain the FMV cover in
accordance with the terms of the DTD as the said security is collectively
for Plaintiff No.1 and Defendant No.11.
105. At this juncture, this Court may not delve into the niceties of
valuation of the security cover. Prima facie, Plaintiff No.1 is adequately
covered by security, the value of which appears almost double the
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outstanding dues under the DTD. The Court also cannot loose sight of
the fact that the Defendant No.1 has made significant payment towards
the coupon amount and redemption of 20% debentures.
106. In the totality of the circumstances, Mr. Kadam was justified in
canvassing a submission that, no case for grant of reliefs in the nature of
attachment before judgment was made out. Reliance on the decision of
the Supreme Court in the case of Raman Tech and Process Engg Co and
Anr Vs Solanki Traders (supra), wherein the principles governing the
grant of relief in the nature of attachment before judgment, have been
enunciated, appears well founded. The aforesaid reasoning governs
the prayer clause (g) qua Defendant No.5 under which the Plaintiffs
seek deposit of the entire purchase consideration in respect of the
transfer of shares of Betul (D6) in favour of Bammco (D7).
107. Indeed, this Court has recorded a prima facie finding that the
Defendant No.1 and its subsidiaries have dealt with the securities,
created in favour of Plaintiff No.1, in breach of contractual obligations.
The apprehension on the part of the Plaintiffs that there would be
further erosion in the value of securities, if the Defendant No.1 and its
subsidiaries enter into transactions in regard to those securities, cannot
be said to be unfounded.
108. The Defendant No.1 and its subsidiaries are refuting the
contractual covenants, and contend that NDU constitutes, at best, a
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personal undertaking and not security. Such a stand of the Defendants
gives heft to the submissions on behalf of the Plaintiffs that, unless
restrained, the Defendant No.1 and its subsidiaries may further enter
into transactions in relation to those securities and thereby infringe the
rights of the Plaintiffs. Thus, interim injunction in terms of prayer
clauses (d) and (h) qua Defendant Nos.1 to 6 and 12 to 26 appears
necessary to protect the interest of the Plaintiffs.
109. Balance of convenience lies in favour of the Plaintiffs as the
securities created under clause 12 of DTD and the documents executed
in furtherance thereof, enumerated in Exhibit J to the plaint, were to
perfect the said security. In the absence of such restraint, the Plaintiffs
would suffer an irreparable loss.
110. Reliefs qua Bammco (D7) and Vistra (D8), sought in prayer
clauses (e) and (f), in the light of the material on record, do not appear
to be, prima facie, sustainable. The elements of absence of privity of
contract, the transactions entered into by Bammco (D7) and Vistra
(D8), being in the nature of bonafide transactions, without notice of the
Plaintiff No.1 claim, the likelihood of prejudice to third parties in view
of the fungible nature of the securities and the inaction on the part of
the Plaintiffs, especially BGSE Financials Ltd. (D10) – DP of Plaintiff
No.1, dissuades the Court from granting any interim relief qua Bammco
(D7) and Vistra (D8).
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111. Furthermore, this Court is of the considered view that, in view of
the existing security cover and the restraint against Defendant Nos.1 to
6 and 12 to 26, from further dealing with those securities, the interest
of the Plaintiffs would be adequately secured.
112. The upshot of aforesaid consideration is that the Interim
Application deserves to be partly allowed qua Defendant Nos.1 to 6 and
12 to 26 only, in terms of prayer clauses (d) and (h). Rest of the prayers
deserve to be rejected.
113. Hence, the following order:
:ORDER:
(i) Interim Application stands partly allowed.
(ii) There shall be interim reliefs against Defendant
Nos.1 to 6 and 12 to 26 only, in terms of prayer
clauses (d) and (h), which read as under :
“(d) restrain Respondent Nos. 1 to 6 and 12 to
26, and their members, agents, employees
and/or servants, by an order and injunction of
this Hon’ble Court from in any manner dealing
with, disposing of, alienating, encumbering or
creating any right, title or interest of any nature
in respect of the securities created in favour of
the debenture trustee, i.e., the Applicants, under
the DTD or any shareholding in subsidiaries/step
down subsidiaries in terms of Clause 12 of DTD
as set out in Exhibit J of the Plaint;
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(h) direct Respondent Nos. 1 to 7 and 12 to 26
to disclose on oath any and all documents
pertaining to the Impugned Transaction and/or
any other transaction undertaken by Respondent
Nos. 1 to 6, and 12 to 26 with respect to the
securities offered under the DTD, more
specifically set out at Exhibit J, including but not
limited to the share purchase agreement,
relevant authorisations, regulatory filings and all
associated documents.”
(iii) Respondent Nos.1 to 6 and 12 to 26 shall file
affidavits of disclosures in terms of prayer clause
(h), reproduced above, within a period of four
weeks from today.
(iv) Rest of the prayers stand rejected.
(v) Costs in cause.
[N. J. JAMADAR, J.]
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