No Relief For Adani Properties As Bombay HC Refuses To Restrain Bidvest From Selling Stake In Mumbai International Airport [Read Order]
The Bombay High Court on Thursday refused to restrain Bidvest from selling 13.5% stake in the Mumbai International Airport Ltd (MIAL) to other shareholders and declined any relief to Adani Properties Pvt Ltd which claimed to have a share purchase agreement (SPA) with Bidvest.
Justice AK Menon was hearing Adani's application and notice of motion in a commercial suit seeking specific performance of the said purchase agreement with Bidvest.
Airports Authority of India (AAI) entered into an Operation Management and Development Agreement (OMDA) in favour of MIAL, whereunder MIAL was appointed for operating, maintaining, developing and otherwise managing the Mumbai Airport. In pursuance of the OMDA, a Shareholders' Agreement (SHA) dated April 4, 2006 was entered upon between AAI, Bidvest, GVK and ACSA.
As per the agreement, AAI has 26% holding, ACSA has 10%, Bidvest has 27% and GVK has the majority holding of 37%. Now, Bidvest was desirous of transferring their shareholding comprising of 16,20,00,000 equity shares, representing 13.5% of their holding in the paid-up equity share capital of MIAL. On January 26, 2019, Bidvest issued notice to GVK and ACSA, with a copy to AAI, informing them that it was ready to transfer the Sale Shares for a consideration of Rs.1248.75 crores i.e. at a price of Rs.77.083 per share.
On February 22, 2019, GVK exercised its option to purchase the Sale Shares. Consequently, on March 4, 2019, Bidvest wrote a letter to GVK stating that the offer notice was not defective, however it enclosed a draft Share Purchase Agreement and set a date 30 days thereafter for completing the sale by Bidvest and purchase of the Sale Shares by GVK.
On March 5, 2019, Bidvest entered into a Share Purchase Agreement (SPA) with the plaintiffs, under which the plaintiffs were entitled to acquire the Sale Shares for a consideration equivalent to that offered to GVK, ACSA and AAI. This was subject to -
(i) GVK, ACSA and AAI not exercising their respective rights to acquire the Sale Shares pursuant to the ROFR;
(ii) that the ROFR stood waived and;
(iii) if despite exercising the ROFR, the shareholder concerned had not completed the purchase within the time specified in the SHA and AOA of MIAL.
GVK filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 against Bidvest and ACSA and AAI. In that application, GVK sought a temporary injunction restraining Bidvest from selling its shareholding to any person other than GVK. That petition was dismissed, but in an appeal from the said order, Delhi High Court permitted GVK and other parties to file an application under Section 17 of the Arbitration and Conciliation Act before the Arbitral Tribunal to seek relief with a request to the tribunal to decide the application as expeditiously as possible.
Arbitral Tribunal passed an order on September 15, 2019, under Section 17 of the Arbitration and Conciliation Act, whereby GVK was directed to deposit the purchase price of the Sale Shares being Rs.1248 cr in an Escrow Account in SBI on or before October 31, 2019.
Senior Advocate Daraius Khambata appeared on behalf of the plaintiff Adani, Senior Advocate Ravi Kadam for GVK and Senior Advocate Janak Dwarkadas for Bidvest.
Khambata submitted that shares of Bidvest were not purchased before the expiration of 30-day period effective from April 4, therefore GVK lost its rights to acquire the shares. He then relied upon an affidavit dated October 1, 2019, in which Adani Properties have declared in an undertaking that the promoters have earmarked equity shares held by it in companies, the market value of which is Rs.4,178 crores (approx.).
Bidvest is fully secured and the undertaking of the promoters would ensure that the equity shares of those entities are kept unencumbered and will ensure that the plaintiffs can complete the purchase of the Sale Shares and pay the purchase price, Khambata said.
Whereas, GVK's counsel Ravi Kadam argued that plaintiffs are seeking to enforce rights as if they are already the shareholders of MIAL, which they are not and therefore it would amount to a different cause of action being introduced and the nature of the suit would stand altered from a suit for specific performance to a suit for enforcement of shareholders' rights based on the principle of trust.
Although, the long stop date (deadline for execution of the agreement) was extended by Bidvest earlier, upon query Janak Dwarkadas informed the bench that there will no further extension from the last set date, ie, November 7, 2019.
Aafter hearing submissions advanced on behalf of all parties, Court observed-
"Today I will be justified in proceeding on the basis that the interim order of the arbitral tribunal operates and binds GVK and Bidvest. The plaintiffs then cannot claim entitlement to immediate performance of their SPA. In fact, the plaintiffs' SPA is premised on the fact that it is subject to probability of the ROFR exercised by GVK being taken to its logical end by Bidvest transferring the Sale Shares. The arbitral tribunal's order, in fact, recognizes the fact that a "third party", being the plaintiffs in this case, is scheduled to make payment for the Sale Shares on or before 30th September 2019 and that even if the payments were to be made or if the price was deposited, GVK is restrained from transferring the Sale Shares till 24th November 2019. The plaintiffs have neither paid nor deposited the price. That surely is not a satisfactory demonstration of a party's willingness to perform the offer to purchase the Sale Shares."
Finally, rejecting ad-interim relief to the plaintiffs, Court said-
"The plaintiffs seek to act as if they are entitled to act as parties to the MIAL SHA. They are not shareholders and as on date the plaintiffs cannot seek an order in terms of prayer clause (c) of the interim application. The respondents are independent legal entities, who are stated to be controlling GVK, but that cannot justify the plaintiffs' attempt to prevent them from exercising rights under their organizational documents and corporate structures."