Delhi High Court Allows Daiichi Sankyo To Withdraw Rs. 20.5 Crores, Imposes A Cost Of 10 Lakh On IHFL For Abuse Of Process Of Court In 4000 Crore Foreign Arbitral Award Case

The Delhi High Court on Monday allowed Daiichi Sankyo to withdraw over Rs. 20.5 crores lying with the Registrar General of the High Court, which was transmitted pursuant to the Supreme Court’s 2022 order in the contempt proceedings initiated against the directors of Indiabulls Housing Finance Limited (IHFL) and Indiabulls Ventures Limited (IVL) for flouting the Supreme Court’s restraint orders in relation to the shareholding of Fortis Healthcare Holdings Private Limited (FHHPL) in Fortis Healthcare Limited (FHL).The contempt proceedings had arisen out of the application filed by Daiichi in the execution petition pertaining to a 2016 foreign arbitral award passed in its favour in the arbitral proceedings initiated against the respondents, including the former promoters of FHL- Malvinder and Shivinder Mohan Singh. The award debtors were jointly and severally held liable to pay to Daiichi a sum aggregating to more than Rs. 4000 crores.Dismissing the objections raised by IHFL in Daiichi’s plea seeking release of the amount, the bench of Justice Yashwant Varma remarked that IHFL had proceeded to undertake a sale of the pledged shares despite having been duly apprised of the restraint that operated, and in violation of the sequestration orders which had been passed by the Supreme Court.The bench expressed surprise as to how IHFL, after having purged itself of the contempt by depositing the amount, could have felt emboldened to seek a reopening of issues which were conclusively settled by the Supreme Court. The court thus imposed a cost of Rs. 10 lakhs on IHFL for sheer abuse of the process of the court.Earlier, Daiichi, in its application filed before the Delhi High Court in 2017, had alleged that the award debtors were seeking to dissipate the assets to defeat the enforcement of the Arbitral Award. It was alleged by Daiichi that shares of FHL were being sold and encumbered by the award debtors. The parties had given various undertakings/ assurances to the High Court, including to the effect that the shareholding of FHHPL in FHL shall not be changed. In the contempt petition filed before the Supreme Court, Daiichi had alleged that the judgment debtors were acting in violation of the undertakings given before the High Court. The Apex Court in 2017 had directed status quo with regard to the shareholding of FHHPL in FHL.During the pendency of the contempt proceedings before the Apex Court and in the backdrop of sale of 12,25,000 shares of FHL, pledged by FHHPL to IHFL, the Supreme Court had held the directors of IHFL and IVL guilty of committing contempt of the court. The top court had given them the opportunity to purge themselves of the contempt by depositing the share value of the said 12,25,000 shares. The amount, which was deposited by the contemnors, was later remitted to the Registrar General of the High Court with the observation that the said amount would be available to the High Court for the purpose of execution of the foreign Arbitral Award.Opposing Daiichi’s plea seeking release of the amount deposited with the Registrar General in its favour, IHFL argued that pledge of the FHL shares were in connection with the legitimate loans granted by IHFL to various entities. It argued that Daiichi, unlike IHFL, was not a secured creditor and thus, it could not claim any right which may be construed as being superior to IHFL over the monies held in deposit. It further contended that deposit of the amount garnered from sale of the pledged shares to purge the contempt, did not mean that IHFL had lost its right to assert its claim over the said money. It further claimed that the High Court must necessarily examine the claim of IHFL on merits, including its right and interest in the shares of FHL.Additionally, Fortis Hospitals Limited (FHsL) also laid a claim upon the money held in deposit of the court, by virtue of the directions issued by SEBI in its favour in the investigations conducted by the latter into the affairs of Malvinder Mohan Singh, Shivinder Mohan Singh, and the various corporate entities controlled by them.The court reckoned that in course of that enquiry, SEBI had passed an interim order in 2018 in terms of which, FHL and FHsL were directed to take steps to recover an amount of Rs. 403 crores from the noticees, including Malvinder and Shivinder Mohan Singh. Pursuant to the said direction, FHsL had filed a civil suit before the Delhi High Court against the former promoters of FHL and the relevant promoter-controlled entities for recovery of the siphoned amounts, which was still pending. FHsL had alleged in the said suit that over Rs. 397 crores was diverted from FHsL to the benefit of the erstwhile promoters’ related entities.However, the bench held that said claim of FHsL, based on the directions issued by SEBI, was yet to crystallise into a binding verdict or an authoritative pronouncement based upon an adjudication undertaken by the court.Further, even the suit filed by FHsL sought no relief against ...

Delhi High Court Allows Daiichi Sankyo To Withdraw Rs. 20.5 Crores, Imposes A Cost Of 10 Lakh On IHFL For Abuse Of Process Of Court In 4000 Crore Foreign Arbitral Award Case

Parina Katyal

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