M.S. Ramachandra Rao, J.1. This Appeal is filed by the appellants under Section 13(1A) of the Commercial Courts Act, 2015 challenging the order dt.07.07.2020 in I.A.No.6 of 2020 in ICOM AOA No.5 of 2019 of a learned Single Judge of this Court sitting in Commercial Division.The brief facts leading to the filing of this Appeal are as under:2. The appellants had obtained a Final Award dt.04.10.2019 against the respondents from the Arbitral Tribunal and under the terms of the said Final Award, the respondents were directed to pay an amount of Rs.679.40 crores along with interest and costs to the appellants jointly and severally.3. The respondents challenged the said Final Award under Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) vide ICOM AOA Nos.7 and 8 of 2019 which are pending before this Court. There is no stay on the enforcement of the Award though respondents 1 to 6 have filed an Application seeking stay of the enforcement of the Award.4. It is also stated by the appellants that they had initiated execution proceedings before the City Civil Court, Hyderabad for execution of the said Award, but they could not be taken up for hearing due to COVID- 19 pandemic and the resultant limited operation of Courts.ICOM AOA No.5 of 2019 5. The appellants filed ICOM AOA No.5 of 2019 under Section 9 of the Act for interim relief to protect their interests under the Award till the Award is enforced in accordance with Section 34 of the Act contending that the financial position of the respondents was precarious, that it was fast depleting and that the respondents have a tendency of obstructing enforcement of the appellants’ rights.The undertaking dt.13.11.2019 given by the respondents 6. On 13.11.2019, when ICOM AOA No.5 of 2019 was heard by the learned Single Judge, the respondents gave an undertaking not to alienate any of their assets till the next date of hearing. Thereafter, the matter was posted to 18.11.2019, but it was listed on 25.11.2019 and this Court directed that the order dt.13.11.2019 would stand continued till 03.02.2020.The first modification dt.5.12.2019 7. Thereafter, the matter was listed on 05.12.2019 and the learned Single Judge of this Court modified the order passed on 13.11.2019 to the effect that the respondents shall not alienate any of the assets of the company till the next date of hearing except in the “ordinary course of business”.The next interim order dt.31.12.2019 8. Thereafter, the matter was listed on 31.12.2019 before the learned Single Judge who passed the following order:“It is clarified that the order dt.13.11.2019 has not been varied by the order dt.05.12.2019 except to the extent of permitting the company to deal with the assets of the company in the usual course of business. List the matter on 17.02.2020.”9. On 17.02.2020, the interim order granted on 31.12.2019 was extended until further orders.I.A.No.6 of 2020 10. This prompted the appellants to file I.A.No.6 of 2020 on 11.06.2020 before the learned Single Judge to modify the order dt.31.12.2019 made in ICOM AOA No.5 of 2019 by deleting the words “except to the extent of permitting the company to deal with the assets of the company in the usual course of business”; and to direct the respondents not to deal with the assets held by them either directly or indirectly.The plea of the appellants in I.A.No.6 of 2020 11. It was contended in the said Application by the appellants that the 1st respondent had misused the liberty granted by this Court by selling its lucrative direct and indirect shareholdings in Navayuga Dhola Infra Projects Limited (Dhola) and Navayuga Dibang Infra Projects Private Limited (Dibang) to Sekura Roads Limited (Sekura) for approximately USD 140 million (INR 1,057 crores), in willful disobedience of the orders of this Court; that the respondents have insufficient unencumbered liquid assets to satisfy the Award and the financial position of the respondents is exacerbated by the sale of Dhola and Dibang; and that the appellants apprehend, in view of the 1st respondent’s contumacious conduct, that the respondents would take additional steps towards alienating their other valuable direct / indirect assets without the knowledge of the appellants or this Court if the prayer sought in this Application is not granted.12. They contended that the road projects managed in Dhola and Dibang, the entities of the 1st respondent, are in the operation phase and sale of these projects prior to the expiry of their concession period as per the newspaper reports dt.08.06.2020 did not fall within “the ordinary course of business” of the 1st respondent; and that sale of a large portion of assets of the 1st respondent cannot fall within the meaning of the words “usual course of business”. According to them, this sale is in willful disobedience of the order passed by this Court on 31.12.2019 in ICOM AOA No.5 of 2019.13. It was also contended that respondents 2 to 5 were attempting to sell their lucrative direct / indirect shareholdings in Krishnapatnam Port Company Limited, a company engaged in the operations and management of Krishnapatnam Port located in the State of Andhra Pradesh, to M/s. Adani Ports and SEZ Limited.14. It was further contended in the said Application that the 1st respondent had created charges over its assets which exceeded the value of its assets by approximately INR 3,000 crores; that the 1st respondent had created charges of a value which was in excess of its liabilities which demonstrated that the 1st respondent had created charges over its assets for loans taken by group companies, which may not have the financial capacity to repay the said loans; that the 1st respondent and the Navayuga group had faced severe financial setbacks recently, such as, cancellation of contracts worth several thousand crores; and that Krishnapatnam Infratech Limited, a subsidiary of the 1st respondent, had allegedly indulged in fraudulent conduct, which in turn led to the Government of Andhra Pradesh seeking a probe in the affairs of the Navayuga group.15. It was alleged that there is a little or no information available in the public domain regarding the financials and operations of the respondents who are individuals, unlisted companies and a Hindu Undivided Family and the updated financial statements of the respondents for the financial year 2018-19 are not available in the online portal of the Ministry of Corporate Affairs, Union of India, which indicates that the respondents did not submit their financial statements till date.16. The appellants therefore contended that in view of the above conduct of the respondents leading to weakening of the financial position of the respondents and the tendency of the respondents to alienate their assets directly or indirectly to obstruct the enforcement of the Award in violation of the judicial orders, it is necessary to modify the order dt.31.12.2019 passed in ICOM AOA No.5 of 2019 so that the remaining unencumbered assets would be available to satisfy the Award in the event the challenge to the Arbitral Award fails.The stand of the respondents in IA.No.6 of 2020 17. Before the learned Single Judge, the respondents contended that the words “usual course of action” and “ordinary course of action” have been considered in the order dt.02.07.2015 in Arb.O.P.No.2848 of 2014 by the 25th Additional Chief Judge, City Civil Court, Hyderabad.18. They stated that the appellants filed another O.P. under Section 9 of the Act vide Arb.O.P.No.867 of 2016 to restrain the respondents from alienating / transferring the properties and for other reliefs. The Court below granted status quo orders.19. Thereafter, the 1st appellant preferred an appeal vide C.M.A.No.621 of 2016 and the same was allowed by a Division Bench of this Court vide order dt.27.01.2017 by specifically holding that the finding in Order dt.02.07.2015 in Arb.O.P.No.2848 of 2014 attained finality. Therefore, the second Application under Section 9 of the Act filed by the appellants vide Arb.O.P.No.867 of 2016 is not maintainable. The SLP filed by the appellants challenging the order dt.27.01.2017 in C.M.A.No.621 of 2016 was dismissed.20. After hearing the parties at length and on considering all the aspects, more particularly, the order dt.02.07.2015 in Arb.O.P.No.2848 of 2014 and the order dt.27.01.2017 in C.M.A.No.621 of 2016, this Court passed the order dt.31.12.2019.21.The Applications under Section 34 of the Act vide ICOM AOA Nos.7 and 8 of 2019 are pending before this Court and the Award dt.04.10.2019 is under challenge. The main Application filed under Section 9 of the Act vide ICOM AOA No.5 of 2019 is also pending consideration before this Court.The impugned order of the learned Single Judge 22.The learned Single Judge heard the submissions of the Senior Counsel for the respective parties and gave a prima facie finding that the appellants had succeeded in the arbitral proceedings and secured the Award on 04.10.2019 in their favour; that the appellants had succeeded in getting interim measures under Section 9 of the Act restraining the 1st respondent from alienating / selling / transferring its direct and indirect interests in all or any of the properties without the consent of the appellants on 02.07.2015 in Arb.O.P.No.2848 of 2014 before the initiation of the proceedings and that the said order was subsisting till the passing of the Final Award dt.04.10.2019 by the Arbitral Tribunal; that the appellants are in a better footing having now secured the Arbitral Award also on 04.10.2019 and thus they have prima facie case and balance of convenience in their favour.23. The learned Single Judge therefore concluded that the appellants are entitled to interim measures to protect their interests and claim in the Award dt.04.10.2019 during the pendency of the Applications under Section 34 of the Act and also ICOM AOA No.5 of 2019.24. Having said so, the learned Single Judge referred to the Award of the Arbitral Tribunal, wherein at paragraphs 381 to 385 there is a reference to the fair market value of the shares of the 1st respondent as on 31.12.2015 to be INR 5,777.4 crores as per the valuation report filed before the Arbitral Tribunal.25. He noted that the Arbitral Tribunal had awarded Rs.679.04 crores being the value of 11.7% shares of the 1st respondent company; and therefore if a direction is given to the respondents to furnish security of additional 11.7% of its unencumbered shares, apart from the 11.7% of the shares of the 1st respondent to which the appellants have lien pursuant to the Final Award dt.04.10.2019, to the satisfaction of the High Court, it would meet the ends of justice.26. The learned Single Judge therefore granted one month time from 07.07.2020 to the respondents to furnish the said security and in the meantime directed the respondents not to deal with their assets directly or indirectly. The learned Single Judge also stated that in the event of failure of the respondents to furnish the security as directed by him, they are prohibited from dealing with their assets directly or indirectly till the disposal of the Application under Section 9 of the Act, i.e., ICOM AOA No.5 of 2019.27. Challenging the said order, this Appeal is filed.Contentions of Counsel for the appellants in this appeal 28. It is the contention of Sri S.Niranjan Reddy, learned Senior Counsel appearing for the appellants that the learned Single Judge, having held that the interests of the appellants ought to be protected since they have an Arbitral Award in their favour pending challenge to the said Award, erred in holding that a security of mere 11.7% shares would be sufficient to satisfy the Award and that the learned Single Judge ought to have ascertained the current value of the shares of the 1st respondent which ought to have been done before such a direction was given.29. It is further contended that the impugned order did not also specify the mode or manner in which the security is to be created.30. According to him, the learned Judge only referred to the valuation of the 1st respondent’s shares as on 31.12.2015, but the fair market value of the shares of the 1st respondent had deteriorated substantially in recent times on account of alienation of significant assets and also termination of lucrative contracts granted to the 1st respondent by the State of Andhra Pradesh.31. He contended that the respondents failed to submit a contemporaneous valuation of the 1st respondent shares even though ICOM AOA No.5 of 2019 had been pending since 05.11.2019 and they had filed a reply to the same on 18.12.2019.32. It is further alleged that the order of the learned Single Judge as regards furnishing of security in the form of shares would not protect the appellants’ interests, since according to the appellants the said shares are not marketable.33. It is contended that NECL ( 1st respondent) has created charges of approximately INR 11,770 crores till date, even though its assets are approximately INR 8,800 crores and therefore NECL has created charges in excess of the value of its assets. NECL has created charges in excess of its liabilities (approximately INR 6,200 crores) which demonstrated that NECL has created charges over its assets for loans taken by group companies, which may not have the financial capacity to repay the said loans; that the 1st respondent has lost control over / alienated approximately 50% of the SPVs or the underlying assets of the SPVs, which were owned by it since 2015 (Godavari Toll Bridge Pvt. Ltd., Navayuga Dichpally Tollway Pvt. Ltd., Navayuga Devanahalli Tollway Pvt. Ltd., Navayuga Dhola Infra Projects Pvt. Ltd., and Navayuga Dibang Infra Projects Pvt. Ltd.) and therefore there is a significant depreciation in the 1st respondent’s asset base; that NECL has provided unconditional corporate guarantees to repay the liabilities of its group companies as it has furnished a corporate guarantee for payment of loans of INR 634.85 crores taken by its subsidiary, Navayuga Infra Projects Pvt. Ltd., which had a meagre revenue of INR 7.85 crores in the financial year 2017-18; that NECL has suffered several financial setbacks in the previous financial year, such as (i) termination of a contract worth approximately INR 3,000 crores granted to it by the Andhra Pradesh Government for construction of the Polavaram Irrigation Project; (ii) termination of the contract of over INR 3,000 crores granted to the Navayuga Machilipatnam Port Limited with the 1st respondent as the lead promoter; and (iii) termination of a contract worth over INR 3,000 crores granted to it by the Andhra Pradesh Government for construction of the Polavaram Hydel Project.34. According to him, a large portion of the 1st respondent’s assets are shareholdings in group companies. The value of the security granted in the impugned order can be reduced by alienation of / creation of encumbrances over the 1st respondent’s underlying assets, which includes shares in group companies. The respondents are likely to take steps to devalue the shares of the 1st respondent to render nugatory the already inadequate security granted in favour of the appellants, especially in view of the respondents’ past contumacious conduct.35. He further contended that the 1st respondent is a public unlisted company and therefore its shares are not easily marketable. This problem of marketability is further exacerbated by the fact that the security granted in favour of the appellants is a minority shareholding and it is unlikely that the same can be sold given the prevalent market practice. It is stated that the protection granted in favour of the appellants in the impugned order is illusionary since the value of the security is not sufficient to satisfy the Award and the shares of the 1st respondent are not marketable.36. It is further contended that the appellant companies were incorporated in Mauritius and any creation of security over the 1st respondent shares would be regulated by the Foreign Exchange Management Act, 1999 and under the Indian Law, creation of security cover is not permitted over the 1st respondent’s shares in favour of the appellants without the express approval of the Reserve Bank of India and that the latter may even refuse to grant such approval for creation of security over the shares of an Indian company in favour of a person not resident in India.The contentions of the Counsel for respondents 37. Sri S.Ravi, learned Senior Counsel appearing for the 1st and 6th respondents, and Sri K.S.Murthy, learned Counsel for respondents 2 to 5 refuted the said contentions.38. They contended that a total ban on alienation of the assets of respondents 1 and 6 would cripple the said Companies which could not be the intention of even the appellants. They denied that there was any illegality committed by respondents in alienating Dhola and Dibang assets in the course of business.39. In fact, according to the counsel for the respondents, their value was Rs.1,057 crores and the buyer had acquired long term debts of the said entities and only Rs.176 crores had been received by the 1st respondent from the buyer.The consideration by the Court 40. The learned single judge has held in the impugned order that all the requirements for grant of interim relief were in favor of the appellants. This finding has not been challenged by the respondents.41. So the short question for consideration in the appeal is:“whether the safeguard directed by the learned single Judge is adequate to protect the interests of the appellants pending disposal of the Sec.34 applications filed by the respondents challenging the Arbitral award in favor of the appellants?”42.We may state that the respondents have not produced the current/contemporaneous valuation of the shares of the 1st respondent to sustain the order passed by the learned Single Judge and to show that the contemporaneous fair market value of 11.7% unencumbered shares of the 1st respondent would satisfy the value of the Arbitral Award.43. They did not deny that financial statement relating to the 1st respondent for the financial year 2018-19 has not been filed before the Registrar of Companies. In any event, no such statement has been produced before this Court to satisfy this Court that the valuation of the 11.7% shares of the 1st respondent would be sufficient to satisfy the Award.44. Even otherwise, it is not known when the applications filed under Sec.34 of the Act by the respondents would be decided. It is possible that there could be serious fluctuation of share value of the 1st respondent and that the share value might become low in future as well. In fact it is the plea of the appellants that the shares are not even marketable.45. We agree with the contention of the counsel for the appellants that the learned Single Judge ought to have satisfied himself about the current market value of the shares of the 1st respondent before directing that 11.7% unencumbered shares of the 1st respondent would be sufficient to satisfy the Arbitral Award.46. We are also of the opinion that prima facie the conduct of the respondents in alienating the Dhola and Dibang assets under the guise of the interim order permitting t
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hem to deal with the assets in the usual course of business is not bona fide, and if really there was a need to sell those assets, they ought to have obtained permission from this Court for such a sale.47. The other events relating to the proposed sale of interest in Krishnapatnam Port Company Limited by the respondents to M/s. Adani Ports and SEZ Limited are placed before this Court in the form of additional material papers and the same also have not been denied by the respondents.48. Also, according to the appellants, certain setbacks have been suffered by the 1st respondent company, whereunder certain contracts of high value were recently cancelled by the State of Andhra Pradesh weakening the financial position of the respondents.49. The counsel for the respondents did not dispute that if the challenge under Section 34 of the Act to the Arbitral Award passed on 04.10.2019 were to fail, the appellants would get amounts in excess of Rs.800 crores.50. When such substantial amounts would be payable by the respondents to the appellants, it is necessary that the interests of the appellants are sufficiently safeguarded to ensure that they would be in a position to execute the Award in the event the O.Ps. under Section 34 of the Act are decided in their favour.51. Having regard to this background, we are of the opinion that the learned Single Judge who satisfied himself about the prima facie case and balance of convenience in favour of the appellants, ought to have allowed I.A.No.6 of 2020 in toto.52. Therefore, this Appeal is allowed; order dt.07.07.2020 in I.A.No.6 of 2020 in ICOM AOA No.5 of 2019 is modified and the said I.A. is allowed; consequently the order dt.31.12.2019 made in ICOM AOA No.5 of 2019 is modified by deleting the words “except to the extent of permitting the company to deal with the assets of the company in the usual course of business”; and the respondents are directed not to deal with the assets held by them either directly or indirectly till the final disposal of ICOM AOA No.5 of 2019.53. Pending miscellaneous petitions, if any, in this Appeal shall stand closed. No order as to costs.