Delhi High Court dismisses GVK Airport plea to restrain Bid Services from selling stake in Mumbai Airport

The Delhi High Court has dismissed a petition by GVK Airport Holdings Limited seeking to restrain Bid Services Division (Mauritius) Limited from offering or selling its shareholding in Mumbai International Airport Limited to any person other than the Petitioner (GVK).

The judgment was passed by a Single Judge Bench of Justice Sanjeev Narula in a plea by GVK Airport Holdings Limited.

The petitioner, GVK Airport Holdings and the respondent, Bid Services Division, along with ACSA Global Ltd and the Airports Authority of India (AAI) are the shareholders of Mumbai International Airport Limited (MIAL) in terms of a Shareholders Agreement (SHA) dated April 4, 2006.

As per Clause 3.7.1 of the SHA, the petitioner had a right of first refusal (ROFR) in respect of the shares of Respondent, if the same were desired to be sold. Pursuant to the ROFR Clause, the respondent offered its entire shareholding of 16,20,00,000 shares i.e. 13.5% stake in the MIAL for sale to the petitioner for an aggregate consideration of not less than Rs 1248,75,00,000.

It was the petitioner’s stance that the offer was accepted resulting in a binding agreement between the parties for the sale of shares. Yet, the shares were subsequently offered to the AAI by the respondent.

Following disputes with respect to the sale of shares and ROFR which spanned over three months and included a series of communication between the parties, the petitioner invoked the arbitration clause of the SHA by way of a notice dated April 25, 2019.

The petitioner also invoked Section 9 of the Arbitration Act seeking to restrain the respondent from selling the shares to third parties until the arbitration is disposed of.

The petitioner argued that the scope of powers of the Court under section 9, at the stage of grant of injunction as interim relief, was limited and that it should only focus on not rendering the arbitration proceedings infructuous.

It was contended that plea merely sought preservation of the subject matter of the arbitration i.e. the shares, till the arbitral tribunal is constituted. Once the arbitration proceedings were set in motion, the parties could invoke Section 17 to seek appropriate reliefs including modification or variation of the orders passed under Section 9 of the Act, it was added.

The petitioner further argued that at this stage, the test of specific performance and the attending attributes for grant of interim order need not be applied as it was not seeking specific performance of any affirmative agreement.

Instead, the injunction pertained to the enforcement of a negative agreement i.e. not to create third party rights or offer to sell the subject shares to any other party within the meaning of Section 42 of the Specific Relief Act.

The petitioner also stated the requirement of having available funds for establishing that petitioner was “ready and willing” was not applicable in the present case.

Stressing that there was a concluded contract between the petitioner and respondent for the transfer of the shares, the petitioner further claimed that the respondent had delayed completion of the transaction by not performing its reciprocal obligations while the petitioner had always been ready and willing to perform its part of the obligations.

The petitioner, therefore, concluded that the balance of convenience lied in favour of the petitioner and irreparable injury would be caused to it if the respondent was not restrained from offering its shares to a third party.,

The respondent, on the other hand, argued that the balance of convenience did not lie in favour of the petitioner as the transfer of the shares to AAI would not happen instantaneously. It was contended that the Petitioner’s ROFR had lapsed since the transaction was not completed within the period stipulated in the agreement. The Respondent also argued that the petitioner could not evade the burden of establishing its financial capacity to complete the transaction.

After hearing the parties, the Court observed that the Court while exercising its power under Section 9 of the Act for grant of interim measures could decide the petition de hors the context of the arbitration proceedings.

“Sub Section (3) of section 9 of the Act read along with amended Section 17 of the Act cannot be construed to mean that the Court’s jurisdiction under Sub Section (1) of Section 9 is reduced or curbed. From the reading of the amended Section 9 and/or Section 17 it cannot be interpreted that the Court while deciding the petition under Section 9 of the Act should apply a different standard, only because the arbitral tribunal is now empowered to pass orders of interim nature that are enforceable as an order of the Court.”

It thus stated that the scope of Section 9 could not be limited only to the extent of preservation of the subject matter.

Preservation of the “subject matter” may be necessary, however, that cannot be granted on the asking of a party, it said.

The Court also rejected the petitioner’s contention that the rigours of the grant of interim relief in a case relating to specific performance would not apply while dealing with petitions under Section 9.

“..the Court is of the considered opinion that a party applying under Section 9 of the Act, has to establish the well-known attributes that are necessary for grant of the equitable relief of injunction. The general rules that govern the Court while considering the grant of interim injunction, are equally applicable while dealing with a petition under Section 9 of the Act.”

It added that the threshold of prima facie case had to be rigidly applied and should be shown to exist in favour of the petitioner.

It consequently held that the petitioner could not be relieved of its burden to establish prerequisite obligation to show readiness and willingness to perform its obligations for obtaining the relief of specific performance.

After analyzing the petitioner’s conduct, the Court concluded that it had failed to discharge this obligation.

It observed,

“..Petitioner (GVK Airport Holdings Limited) did not show any genuine inclination to complete the transaction.. In chamber hearing, a general discussion took place regarding the manner in which the Petitioner proposed to make a payment for the shares, but the same was not acceptable to Respondent No. 1. Be that as it may, the Petitioner has chosen not to place on record any material to show its financial means and capacity to complete the transaction.. There is undeniably no genuine exhibition of readiness which could show that the Petitioner is serious in completing the transaction. There is not even an iota of evidence before the Court to substantiate the plea of readiness..

The facts as they have been unfolded, come across to the Court to show that the Petitioner has merely inflated the expectation of its readiness. Perhaps, the Petitioner is still struggling to get the ready funds. This is the blatant truth of the matter. Petitioner may be extremely ambitious to purchase the shares, but the enormity of the transaction amount requires the Court to be satisfied that the Petitioner has sufficient funds.”

The Court also added that prima facie there appeared to be no consensus on certain key terms of the agreement and it was thus doubtful that the contract stood concluded.

In view of these circumstances, the Court held that the balance of convenience did not lie in favour of the Petitioner.

“..granting an injunction can lead to a situation where the value of the property/subject matter would be altered. On the other hand even if the shares are not freely tradeable, the Petitioner would still have the remedy in the form of the damages and it is not that the Petitioner would be rendered remediless. More importantly, its conduct disentitles it to inequitable relief of injunction as it has not exhibited that it possesses adequate financial capacity to complete the acquisition of the shares.”, it said.

While dismissing the petition, the Court clarified that its opinion was merely a prima facie view and would not be binding on the Arbitral Tribunal.

“.. contentions of the parties and merits of the claims and/or counterclaims shall be examined uninfluenced by the observations made in this judgment. “, it said.

GVK Airport Holdings Limited was represented by Senior Advocate Rajiv Nayar with Advocates Kartik Nayar, Sarthak Malhotra and Rishab Kumar.

NCDRC directs Unitech to refund over Rs 53 lakh to 2 home buyers

New Delhi : The National Consumer Disputes Redressal Commission has asked real estate giant Unitech to refund over Rs 53 lakh to two home buyers for failing to hand over the possession of an apartment.

The apex consumer commission asked the company to refund within three months Rs 53,73,561 and give a compensation of simple interest at 10 per cent per annum to Gurgaon residents Abhishek and Mani Agarwal for a delay of over seven years in handing over the possession of the apartment.

“Refund the entire principal amount of Rs 53,73,561 to the complainants along with compensation in the form of simple interest at 10 per cent per annum with effect from the date of each payment till the date of full refund,” Presiding Member of the Commission Justice V K Jain said.

The Commission also asked the firm to pay Rs 25,000 as litigation cost to the home buyers.

The Agarwals had booked a residential apartment with Unitech Reliable Projects Limited in a project namely ‘Capella’ in Uniworld City, which was to be developed in Greater Noida.

According to the allotment letter, the apartment was to be delivered to them by November 30, 2011.

However, their allotment was shifted to another project, namely, ‘Unitech Verve’, the possession of which was to be delivered within 15 months, that is, June 29, 2012.

Though the real estate giant assured the home buyers of the possession of the apartment, the Agarwals failed to get their house even after a lapse of more than seven years after which they filed a complaint.

Adani Group Submits Non-Binding Bid For Jaypee Infratech

New Delhi : Business conglomerate Adani Group has made an unsolicited and non-binding bid to acquire Jaypee Infratech Ltd. and is ready to infuse up to Rs 1,700 crore to expedite the construction of stuck housing projects of the debt-laden realty firm and deliver flats to home buyers, sources said.

Adani has promised to infuse another Rs 1,000 crore in two equal tranches of Rs 500 crore each to settle claims of workmen as well as secured and unsecured financial creditors, besides meeting cost for insolvency proceedings.

It will also transfer 1,000 acre land to bankers to swap debt with assets. Adani group had participated in the first round of insolvency process but did not bid in the current round within the fixed timeframe.

However, the group later expressed interest to bid for Jaypee Infratech, the subsidiary of Jaypee group’s flagship firm Jaiprakash Associates Ltd.

Now, Adani Infrastructure and Developers Pvt. Ltd. has submitted an “unsolicited” and “non-binding” resolution plan to Jaypee Infratech’s Interim Resolution Professional Anuj Jain, sources said.

The IRP has called a meeting of the committee of creditors on Thursday for further discussion on the resolution plan submitted by state-owned NBCC (India) Ltd.

The consideration of Adani’s bid is not on the agenda of the CoC meet, sources said, but added that lenders and homebuyers could decide to take up discussion on the offer during the meeting.

In its bid, Adani group has offered to “infuse an amount of up to Rs 1,700 crore for the purpose of expediting the construction of the real estate projects of the company and delivery of the possession of the same to the home buyers”.

On penalty/interest for possession delay, Adani has offered to pay 25 percent of such amount to buyers, as mutually agreed, in respect of penalties/ interest payable to home buyers as accrued on Aug. 9, 2017, the date when Jaypee Infratech went bankrupt.

If the Supreme Court and National Company Law Tribunal permit, the amount of Rs 750 crore deposited by Jaiprakash Associates Ltd. for protection of home buyers could also be utilised for payment of balance penalties/interest, Adani said in its offer.

However, Adani said that its proposals are subject to confirmatory due diligence review by the company. After the due diligence, it will specify timelines for the delivery of possession as well as seek reliefs and waivers.

In August 2017, Jaypee Infratech went into insolvency process after the National Company Law Tribunal admitted an application by an IDBI Bank-led consortium seeking revival of the realty firm.

Delhi HC issues notice to Flipkart and Amazon over proxy sellers

New Delhi: The Delhi High Court has issued notices to e-commerce giants Flipkart and Amazon for violating FDI norms after a PIL filed by NGO Telecom Watchdog. The PIL alleged that both have been openly violating FDI norms for marketplace model of e-commerce and circumventing them by routing hot-selling products at much cheaper rates through proxy “Controlled Sellers” or “Name Lenders” and pushing out small sellers and brick-and-mortar retailers.

A bench of Acting Chief Justice Gita Mittal and Justice C Hari Shankar issued notices to the Centre, Amazon and Flipkart seeking their response by November 11 to the plea which has sought legal proceedings against the two under the Foreign Exchange Management Act (FEMA), reports ET. According to Press Note 3 of 2016, which regulates FDI in e-commerce, entities like Amazon and Flipkart are not to exercise ownership over the stock, nor directly or indirectly influence the price of goods and services sold on their marketplace.

For uninitiated, Press note 3 says that 100 per cent FDI is only allowed under automatic route, only if the companies are engaged in B2B sales, but is not applicable to B2C transactions. As per the guidelines, e-commerce firms can function as a marketplace to connect buyers and sellers, and not influence prices. However, exchange offers, EMI costs, and bank offers are funded completely or substantially by Amazon and Flipkart and constitute a clear influence on price in violation of FDI norms, the PIL added.

Besides, both parties involve various intermediaries/support entities in the chain to divide discounts/losses which deserts smaller sellers to participate in the fast-growing e-commerce sector. Giving an example of Cloudtail, the largest seller on Amazon, the PIL alleged that it buys goods in bulk from many manufacturers and sell them on the online platform of Amazon Seller.

This is not the first time when both e-commerce behemoths come under FDI scanner. In April, this year, Indian Cellular Association (ICA) and Retailers Association of India (RIA) had raised the issue of FDI rules violations by the online marketplace platforms. At that time, they approached  Commerce Minister Suresh Prabhu and complained that these marketplace models have been operating against the spirit of the policy.