Case Title:
M/s Daiichi Sankyo Company Ltd. vs Oscar Investments Limited and Ors.
Date of Order:
September 22, 2022
Bench:
Hon’ble Justice U.U Lalit
Hon’ble Justice Indira Banerjee
Hon’ble Justice K.M Joseph
Parties:
Petitioner- M/s Daiichi Sankyo Company Ltd
Respondents- Oscar Investments Limited and Ors
SUBJECT
A Foreign Arbitral Award was leveled against twenty respondents to be given to Daiichi Sankyo Company Ltd. An apprehension was raised by the petitioner-company that the respondents were clandestinely acting towards making their assets out of the reach of Daiichi company. On analysing this matter the Court went into analysing assurances and submissions made by the respondents and found inconsistencies in information disclosed. Violations of court orders were also found. Thus, this Court sentenced Malvinder Singh and Shivinder Singh for six months imprisonment and Rs. 5000 fine to be paid.
IMPORTANT PROVISIONS
- Section 2 (b), Contempt of Courts Act,1971- This Section defines civil contempt of court as wilful disobedience to any judgment, decree, direction, order, writ or other processes of a court or wilful breach of an undertaking given to a court.
OVERVIEW
- The petitioner had initiated action for a Foreign Arbitral Award, at Singapore, against the twenty respondents, which directed them to jointly pay a sum of around Rs. 2562 crores along with pre-award interest and post-award interest of 4.44% and 5.33% rates respectively. All challenges raised against the Award were dismissed both in Singapore and in India. As a result of an objection raised by respondents in the Delhi High Court, two respondents were declared as dismissed as they were minors.
- Daiichi Private Ltd. Expressed its apprehensions regarding the actions of the respondents with the objective of moving their assets out of the reach of Daiichi.It was accused that the shares of the company Fortis Healthcare Limited held by Fortis Healthcare Private Limited were being sold by the respondents. They submitted an undertaking regarding this, which was recorded by the High Court. The value of shares were disclosed to the Court, and it was assured that they would not be hampered in any manner.
- In this Special Leave Petition, the order passed by the High Court based on this undertaking is challenged, as no appropriate process was put forward by the High Court regarding securing the assets of respondents. Not only that, this undertaking was the fifth assurance given by the respondents. Previously they had submitted four other assurances before the Delhi High Court, which are as follows:
- First Assurance: On an apprehension being expressed by the petitioner that the respondents might fritter away their assets from the reach of the company, Daiichi, it was assured by the respondents by means of a letter sent by the senior counsel to the petitioners, that their interests would be protected as far as the total sum under the Arbitral Award was concerned. This assurance was requested not to be recorded in the Court as it would affect the value of shares that the respondents hold in the share market.
- Second Assurance: The Court had asked the respondents to disclose the value of immovable assets and properties they hold and also of those that have been alienated and encumbered to third parties. This was because reports had appeared in several media that the respondents were disposing of their stakes in subsidiary companies, in a clandestine manner. Therefore, based on a petition filed by the petitioner, this order was passed and respondents sought two weeks time to furnish these information in an affidavit.
- Third Assurance: As the respondents did not provide with the required information as assured in the second assurance, the Court, by an order dated 6.3.17 clarified that the respondents were to disclose information regarding all unencumbered, moveable and immoveable assets and not merely investments, loans, and advances. The respondents agreed to provide with such information within one week, in this third assurance.
- Fourth Assurance:In this assurance information demanded by the Court were filed by respondent companies like OIL, RHC,who held major shares in FHL through the subsidiary company FHHPL. Following this, a notice was sent to their shareholders by FHL, which proposed increasing foreign investment in their shares. The petitioner approached the Court to restrict the company from doing so. Thus the Court issued an order restraining the respondent company from making any changes in their shareholding in any manner.
- While dealing with this SLP, this Court had noted that the main contention of the petitioners was that no order of restraint was passed despite the respondents violating the terms of undertakings filed by them. A contempt petition was also filed by the petitioners, accusing the respondents of violating these terms. The Court disposed of this contempt petition as no such case was made out. The SLP was also to come up into consideration on 23.11.17 and therefore there was no reason to delve into its details at that stage. The interim order of this Court was to be held until the High Court decides on it.
- The transfer of FHL shares by Indiabulls Ventures Ltd. to IHFL was alleged to be in contempt of previous court orders. On analysing whether these shares were pledged previously, it was found that they were pledged in the disclosure dated 21.8.17. IHFL’s stand that they were not pledged was found to be wrong, and its excuse that the company was unaware of the court orders was also proved to be wrong as a mail was sent to the company by RHC informing about this. It was despite this information that the transfer of shares were continued by IHFL.
- On analysing a chart in which the shares of FHL were disclosed to the Bombay Stock Exchange, it was found that both sets of respondents in the cases in this Court and the Delhi High Court, had violated court orders.There were inconsistencies in the shareholdings of these companies, which were listed down by the Court in this judgement. The interim order issued by this Court was found to have been violated by the respondent companies, and the Court found the excuses put forward by them to be unacceptable and lame. The directors of IHFL and IVL were found guilty of contempt.
- Considering the actions of Malvinder Singh and Shivinder Singh, they were also found to have violated the Court orders and assurances submitted, several times. It was found that they had no intentions of complying with the Court orders, despite the Court having shown leniency by not filing contempt cases against them in a petition filed by Daiichi company. They had already planned to dilute their shares in FHL and deprive the petitioner of the amounts due to the company.
- The Court analysed the definitions of ‘contempt of court’. No person or institution no matter how powerful can be permitted to misuse the process of the Court. Contempt of court can be committed in various ways. Civil contempt is wilful disobedience of any judgment, decree, direction, or order, or wilful breach of an undertaking given to the Court, while criminal contempt includes anything which scandalizes or tends to scandalize or tends to lower the authority of the Court. It also means any act which prejudices or interferes or tends to interfere with the due course of judicial proceedings. In this case,the respondent companies have not only undermined the authority of the Court, an international arbitral award has been avoided by the respondents by misuse of the legal process. However, the Court took a lenient view and treated it as a case of civil contempt, though it can be considered as criminal contempt.
- Malvinder Singh and Shivinder Singh along with other respondents, on having deposited Rs. 1793 crores, as demanded by the Court, were purged of this contempt petition. However, the Court on finding that the respondent companies had entered into financial transactions with seventeen banks, sent notice to them to disclose these information. On analysing information, it was revealed that several shares of FHL had been pledged with these banks, and that most shares put under the head of unencumbered shares, were actually encumbered shares. It was also found that the banks had provided with repeated loan facilities by which Rs. 350 crores was siphoned away.
- On the basis of Court order demanding documents of clarification regarding these information, the noticee-banks furnished such information, which went into more than 200 volumes. The outline of these submissions was that various loans provided were on the basis of shares pledged as collateral security in favour of the banks, who could sell these shares in the open market if the value of security was diminished. The dates regarding all arbitral and executive proceedings taken towards this were provided.
ISSUESRAISED
- Whether Malvinder Singh and Shivinder Singh and companies under them had acted towards making their assets out of reach of the Daiichi Company and whether such acts were in contravention to assurances made by them before the court, and would it amount to contempt?
- Whether the sale of shares by the noticee banks were purely of commercial nature or were they deliberate attempts to go against court orders?
- Whether the transactions entered into with or by IHH/NTK were bonafide?
ARGUMENTS ADVANCED BY THE PETITIONER
- The respondents implemented a well-planned scheme to evade the Foreign Award they had to pay the petitioner company. They did this by diluting their shares and thus impeding the execution of the Award.
- Though the submissions before the Court show that there were various properties such as charge on immovable properties, personal undertakings, and other securities pledged as security before the noticee bank, only the shares held by FHL and FHHPL were proceeded against.
- The dilution of controlling interest in FHL is doubtful and questionable. Acquisition of the same by respondent companies, IHH and NTK shows that the controlling interest now comes under RHC, which does not have authority for the same, except a trust established.
- The Court was requested to appoint Forensic Auditors to find the truth behind actions of the respondents.
- In the submissions Daiichi company made in response to the Court enquiry on the roles of judgement debtors, in the previous contempt judgement passed by this Court, the company had explained how these companies, namely MMS and SMS misled the court. These companies in their affidavit had provided with wrong information regarding actions of the noticee banks. They were also accused of misrepresentations of unencumbered shares and so on. The banks were also said to have had committed contemptuous acts hand in hand with the judgement debtors. On the Court order seeking explanations as to these submissions, few banks had replied. By categorising the banks and proposing certain relief with respect to wrongful pledges made by these banks, the petitioner requested for Forensic Auditors be appointed to look into the matter.
- In a special plea raised, the petitioner also submitted that respondent companies had committed tort of conspiracy and theory of attribution. That is, they had already planned a scheme to evade the Arbitral Award and that the Singh brothers were to be held responsible for the acts committed by companies managed and controlled by them.
- Submissions were also made by Daiichi company, in response to the written submissions of respondents explaining how all submissions made by them were bona fide.
- The petitioner also requested the court to make further directions using its contempt jurisdiction as the sanctity and validity of undertakings submitted before this Court and the Delhi High Court were at stake.
ARGUMENTS ADVANCED BY THE RESPONDENT
- On behalf of Malvinder Mohan Singh, it was submitted that the transactions in question were entered into in the normal course of business and that there was no attempt on part of the contemnors to put the assets beyond the reach and control of Daiichi. All actions of the banks and financial institutions were pursuant to the transactions they had entered into even before the assurances/undertakings were submitted at the High Court and this Court.
- In an attempt to purge himself of contempt, it was also submitted by him that certain properties held by his relations and companies under the control of his group could still be proceeded against. The details of such properties were given in written submissions.
- Shivendra Mohan Singh submitted that he was not involved in the management of the company and also in negotiations or talks in respect of any of the transactions entered into, which were under question. It was his brother Malvinder Singh, who was responsible for all said transactions.
- According to the records, a bulk of the shareholding held by FHHPL in FHL was pledged with YES Bank Ltd. (YBL) and Axis Bank Ltd (ABL). In several submissions it was advanced that these transactions were entered into well before the assurances were submitted before the Court. It was also submitted that all allegations of YBL acting alongwith the judgement debtors in order to infringe the rights of the petitioner were not true as there were several recovery proceedings of YBL pending against the debtors. Similar submissions were also made on behalf of ABL.
- The allegationsagainst IHH/NTK were denied as the transfer of shares under questions were a subscription of fresh shares. The purpose of such a transfer was also clarified through several submissions. Written submissions regarding these events were set out. Thus the allegations that the submissions were not bona fide were also denied.
JUDGEMENT ANALYSIS
- On being given a chance to purge themselves out of contempt, as the respondents have failed to satisfy the amount awarded in favour of Daiichi company, it was held that they were to be held for contempt.
- In view of the enormity of their actions, the maximum sentence of six months imprisonment was awarded to them. A fine of Rs. 5000 was also imposed. In case of failure to pay this amount, they shall undergo two months more of imprisonment.
- Regarding the role of notice banks, the Court was unable to come to a conclusion as to whether there were any antecedents that enabled them to keep attaching shares and keep on converting them from encumbered to unencumbered shares. This demanded further analysis on documents and accounts to ascertain the necessity of the shares being sold.
- As the notice banks were not parties in the initial court proceedings and they have defended that all actions carried out by them were of commercial nature, actions empowered by the contempt jurisdiction of this Court cannot be taken. However, the appointment of Forensic Auditors as suggested by the petitioners could be undertaken. It would help the Court to arrive at an appropriate conclusion. Therefore, no actions were to be taken against the notice banks as of now, however the executing court or any other competent authority shall undertake a forensic audit. A direction in this manner was issued to the High Court.
- The amount of around Rs. 1793 crores deposited by the respondents in the registry shall be moved to the High Court along with any interest accrued on it. Alongwith this, certain shares lying with the banks, all properties offered by Malvinder Singh and Shivinder Singh in order to purge themselves of contempt, shall also be transmitted to the High Court.
CONCLUSION
Thus, the petition was disposed of. The case pending before the High Court shall duly be decided upon. The issue of Arbitral Award shall also be decided upon by the High Court and it shall be open to passing such orders and directions the Court thinks necessary. All pending proceedings before the concerned courts, including the First Information Reports and proceedings before NCLT shall be taken to logical conclusion in accordance with law. The Registry shall send copies of all volumes, submissions and pleadings filed by the parties in the instant matters to the executing court for facility and record.
Click here to download the original copy of the judgement
Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE
