1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. NOTICE OF MOTION NO.1691 OF 2008 in SUIT NO. 1452 OF 2008 Milan Commercial Pvt.Ltd. .... Plaintiff vs 1 Asian Healthcare Services Limited 2 Konkan Unnati Mitra Mandal (KUMM), 3 Shristi Infrastructure Development Corporation Limited, 4 Opulent Venture Capital Trust, 5 I C Sancheti 6 Sheo Shankar Chaturvedi 7 Rajesh Lihala 8 Ram Naraqyan Yadav 9 Abdul Rehman Antulay 10 Sami Khatib 11 Dr.Jayant Rao Patil 12 Ayjaz Ahtesham Sayed, 13 Mushtaq Antulay 14 Navid Antulay, 15 Kamalakar Vichare 16 Hariprasad Kanoria 17 Hemant Kanoria 18 Sanjeev Kanoria 19 Durga Prasad Vyas, 20 Sukharanjan Dasgupta, 21 Bisnu Kumar Goenka, 22 Manipal Education & Medical Group India Private Limited, 23 Horizon Infrastructure Limited ... Defendants Mr.S.H. Doctor, Sr.Counsel with Mr.Siddharth Mitra, Mr.Zal Andhyarujina, Ms.Rupa Mitra and Ms.Nandini Khaitan, Mr.Chakrapani Misra, Mr.Devesh Juvekar, Mr.Vishal Maheshwari and Mr.Ameya Gokhale, Advocates i/b. M/s.Khaitan & Co. for the plaintiff. Mr.Harish Pandya i/b. Mr.Aditya Khanna for defendant no.1. 2 Mr.Rahul Chitnis i/b. Mr.Mustafa Banatwala for defendants 3, 4, 5 to 8, 16 to 21. Mr.Fredum Divetre, Sr.Counsel with Mr.Akshay Patil, Mr.Vikram Trivedi, Mr.Rohan Cama, Mr.Faisal Sayyed and Ms.S. Dadachanji i/b. M/s.Manilal Kher Ambalal & Co. for defendants 2, 9 to 15. Mr.Narendra Walawalkar, Sr. Counsel and Mr.Gaurav Joshi with Ms.Anisha Shroff i/b. M/s.A.T. Agarwal for defendant no.22. Mr. E. P. Bharucha, Sr. Counsel i/b. M/s.Vimadalal & Co. for defendant no.23. CORAM: ANOOP V. MOHTA, J. DATE : 16th November, 2009 ORAL JUDGMENT: 1 This Notice of Motion dated 30.04.2008 is taken out by the plaintiff in a pending Suit for declaration & specific performance & various interim reliefs/injunction. 2 It is necessary to note the basic prayers of the Suit, covering prayers for interim reliefs also, which are as under: (a) that this Hon’ble Court be pleased to pass an order of declaration that the Defendant No.1 is lawfully entitled to remain in possession of the said land mentioned in paragraph 14 hereof and to develop and construct the said hospital on the said land and to use the said land for the purpose of building a super specialty hospital. (b) that this Hon’ble Court be pleased to pass an order of Declaration that the purported letter of termination dated February 1, 2008 addressed by the Defendant No.2 to Defendant Nos. 3 & 4 is wrongful, illegal and not binding on the Defendant No.1 Company and its shareholders including the plaintiff. 3 (c) that this Hon’ble Court be pleased to pass an order of Specific performance of the agreement dated April 23, 2007 (Ex. `H’ hereto) in favour of the Defendant No.1 by other Defendants and all ancillary orders and directions for the implementation thereof. (C 1) that this Hon’ble Court be pleased to order & restrain the Defendant Nos. 2, 9 to 15 by themselves, their servants, agents or assigns or otherwise whatsoever from disturbing or interfacing with the possession of the Defendant No.1 of the said land situated at Worli, Mumbai and from in any manner interfering with the right of the Defendant No.1 from using the said land. (c-5) that this Hon’ble Court be pleased to order and declare (i) that the said Memorandum of Understanding dated 14 April 2008 (Exhibit “Z1”) hereto) is not a valid Agreement and creates no rights whatsoever in favour of the Defendant No.2, 22 and 23 and is null and void and is void ab-initio; (ii) that the said Memorandum of Understanding dated 14 April, 2008 (exhibit Z1) hereto) does not in any manner whatsoever create any right or interest of whatsoever nature in favour of Defendant Nos. 2, 9 to 15 and/or Defendant Nos. 22 and/or Defendant No.23 in or over the suit land or any part thereof; and (iii) that the said Memorandum of Understanding dated 4 14th April, 2008 (Exhibit Z hereto) is liable to be delivered up and cancelled and the Defendant Nos.2, 9 to 15, Defendant Nos.22 and 23 are jointly and severally liable to deliver the said Memorandum of Understanding dated 14th April, 2008 to the office of the Prothonotary and Senior Master, High Court, Bombay for the purposes of cancellation. (c-6) that this Hon’ble Court be pleased to order and direct that the said Memorandum of Understanding dated 14th April, 2008 (Exhibit- “Z1” hereto) be forthwith delivered up and cancelled and by the Defendants No.2, 33 and 23 to the Prothonotary & Senior Master, High Court, Bombay for the purposes of cancellation and that the Prothonotary & Senior Master do cancel and destroy the same. (c-7) that this Hon’ble Court be pleased to pass an order of injunction restraining Defendant Nos. 2, 9 to 15, 22 and 23 jointly and/or severally by themselves, their servants, agents and assigns or otherwise whatsoever from in any manner creating any further third party rights and/or encumbrances of whatsoever nature by whatsoever named called pursuant to and/or in furtherance of and/or in implementation of the said Memorandum of Understanding dated 14 April 2008 (Exhibit - “Z1” hereto) and/or from acting in accordance with and/or in furtherance of the said Memorandum of Understanding dated 14 April 2008, or from in any manner implementing the terms of the said Memorandum of 5 Understanding.” (c-8) that this Hon’ble Court be pleased to pass an order of injunction restraining Defendant Nos. 2, 9 to 15, 22 and 23 jointly and/or severally by themselves, their servants, agents and assigns or otherwise whatsoever from in any manner creating any further and/or any other third party rights and/or encumbrances of whatsoever nature by way of any transaction, document, understanding, deed, assignment etc. in or over or in respect of the said suit land and/or in or over or in respect of the said MOU dated 14th April 2008 and/or any other document and/or agreement in respect of the said suit land.” (d) that pending the hearing and final disposal of the Suit this Hon’ble Court be pleased to pass an order of injunction restraining the Defendants nos. 2 and 9 to 15 by themselves, their servants, agents or assigns or otherwise whosoever from disturbing or interfering with the possession of the Defendant No.1 of the said land situated at plots nos. 73A, 74, 74A and 74B, admeasuring 7000.91 sq.mts. at Worli, Scheme No.52, Mumbai, Maharashtra, and from in any manner interfering with the right of the Defendant No.1 from using the said land for the purpose of setting up a hospital. (e) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order of injunction restraining 6 the Defendant Nos. 2 and 9 to 15 from themselves, their servants, agents or assigns or otherwise whosoever from from in any manner negotiating, disposing of, alienating, transferring, encumbering or creating any right, title or interest in favour of any third party in respect of the said land situated at plots nos. 73A, 74, 74A and 74B, admeasuring 7000.91 sq. mts. At Worli, Scheme No.52, Mumbai, Maharashtra. (e-3) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order of injunction restraining Defendant Nos. 2, 9 to 15, 22 and 23 jointly and/or severally by themselves, their servants, agents or assigns or otherwise whatsoever from in any manner creating any further third party rights and/or encumbrances of whatsoever nature by whatsoever named called pursuant to and/or in furtherance of and/or in implementation of the saide Memorandum of Understanding dated 14 April 2008 (Exhibit - “Z1” hereto) and/or from acting in accordance with or in furtherance of the said Memorandum of Understanding dated 14 April 2008 (Exhibit “Z1” hereto) or from in any manner implementing the terms of the said Memorandum of Understanding.” (e-4) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order directing the defendant 7 Nos.2, 9 to 15, 22 and 23 jointly and/or severally to deposit the original Memorandum of Understanding dated 14 April 2008 (Exhibit - “Z1” hereto) with the Ld. Prothonotary & Senior Master, High Court, Bombay.” (e-5) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order directing the Defendants No. 2, 9 to 15, 22 and 23 jointly and/or severally by themselves, their servants, agents and assigns or otherwise whatsoever from in any manner creating any further and/or any other third rights and/or encumbrances of whatsoever nature by way of any transaction, document, understanding, deed, assignment etc.” (f) that pending the hearing and final disposal of the Suit, this Hon’ble Court be pleased to pass an order for appointment of a special officer or a chairman over and in respect of the affairs of the Defendant No.1 Company for the purpose of holding the board meetings and general meetings for implementation of the hospital project. (g) that pending the hearing and final disposal of the Suit, this Hon’ble Court be pleased to formulate a Scheme for the management and administration of the Defendant No.1. 8 (h) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to appoint Court Receiver, High Court, Bombay or some other fit and proper person be appointed Receiver of the land situated at plots nos. 73A, 74, 74A and 74B, admeasuring 7000.91 sq.mts. At Worli, Scheme No.52, Mumbai, Maharashtra, with all powers under Order XI, Rule 1 of the Code of Civil Procedure, 1908. ( i ) ad-interim reliefs in terms of prayers clause (d), (e), (f), (g) and (h) above. (j) for the cost of this suit; (k) for such other and other relief as this Hon’ble Court may deem fit and proper in the circumstances of the case.” 3 The basic details of the parties are as under: The plaintiff/MCPL is a shareholder of defendant No.1 and holds 21,50,000 shares which is about 10.21% of the issued share capital of defendant no.1. Defendant No.1/Asian Health Care Services Ltd. (AHCSL) is a company formed pursuant to an agreement between defendants 2 to 4 whereby it was agreed that a joint venture company would be formed for carrying on the business of health-care by building a hospital. Defendant no.2/Konkan Unnati Mitra 9 Mandal (KUMM) is a public charitable trust under the Bombay Public Trusts Act, 1950 and a society registered under the Societies Registration Act, 1860. Defendant No.3/Shristi Infrastructure Development Corporation Ltd. (SIDCL) is a company and holds 21,50,000 shares in Defendant no.1. Defendant No. 4/Opulent Venture Capital Trust (OVCT) is a venture capital trust under the Indian Trust Act, 1882, and holds 62,50,000 shares of Defendant No.1. Defendant Nos. 5 to 8 are trustees of Defendant No.4. Defendant No.9 is the President of Defendant No.2 and Chairman of Defendant No.1. Defendants Nos. 10 to 14 are directors of Defendant No.1 nominated by Defendant No.2. Defendant No.15 is the Secretary of Defendant No.2. Defendants Nos. 16 to 21 are directors nominated by Defendants Nos. 3 and 4. Defendant No.22/Manipal Education & Medical Group India Private Ltd. (MEMG) & Defendant no.23/Horizon Infrastructure Limited (HIL) are third parties who have signed agreement with Defendant No.2. 4 The basic dates/events are as under: On 28.04.1981 the Government of Maharashtra granted to Defendant No.2 a lease of land admeasuring 7000.91 sq.mts., being Plots Nos. 73A, 74, 74A and 74B at Worli in Mumbai for 99 years (said land). A Lease deed was executed on 8th September, 2000, which was amended subsequently for the purpose of setting up a campus for cultural, social and educational activities. Clause 2(t) and 2(u) interalia provide that the Lessees shall not assign or part with possession or transfer or underlet the leased premises or the Lessees’ 10 interest therein in any manner without the prior/previous consent in writing of the State of Maharashtra. The Lease Deed was executed on behalf of Defendant No.2-Public Trust by 4 Trustees duly authorized by Trust Resolution dated 23 August 2000. 5 The Lease Deed was modified on 09.01.2001, 09.03.2001 and 18.05.2001. By the modification new clause 8 has been added, to enable the Lessee to develop the land to its full potential and especially in regard to the Lessee’s Constitution; the Lessee shall be at liberty to enter into joint ventures, collaborations and other arrangements (with or without equity participation) with any persons and/or parties of its choice and accordingly the Lessee shall not be bound and liable to obtain any further or other consents or permissions of the Lessor for the same ....”; the Lessee could construct a hospital and/or medical college on the said land. 6 On 03.02.2004, Defendants Nos. 2 to 4 entered into a Joint Venture Agreement (JVA) to participate in the shareholding and management of a joint venture company for the purposes of carrying on the business of healthcare by building a hospital. It was agreed that the group consisting of defendant nos. 3 and 4 (“Group A”) would be given 50% share in the JV Company and defendant no.2 (“Group B”/”Defendant 2 Group”) would be allotted 50% shares for use of its said land to construct the hospital by JV Company. Each group will be equally represented on the Board of JV Co. i.e. Defendant no.1. 7 On 13.05.2004, defendant no.1-company was incorporated. Articles of 11 Association of Defendant no.1 – clause 1 (bb) states that “land” means the said Leased land as mentioned in the JVA and that defendant no.2 has offered “use of Land” to the company for development and running of a hospital as per JVA. Clause 4 provides for share capital to each Group 50%-50%. To defendant no.2, the 50% shares are “for use of land for hospital”. The plaintiff admits that defendant no.2 Trust was entitled to issuance of 50% shares in defendant no.1 company for offering the use of the land for hospital. 8 On 6.09.2004, the Charity Commissioner granted permission under Section 36 of the Bombay Public Trusts Act, allowing defendant no.2 to develop the Trust property in collaboration with defendants 3 and 4 as per the JV A. 9 On 10.09.2004, in the meeting of the Board of Directors of defendant no. 1 it was resolved to allot and issue 50% shares to each of Group A and 50% to Group B and accordingly shares were issued and allotted. In 2004, an account was opened in the name of defendant no.1 with the ICICI Banks Rasoi Court Branch at Kolkata to the knowledge of the Nominee Directors of defendant no.2. The opening of the account was discussed at a meeting of the board of defendant no.1 on 2nd June, 2004. The account was operated by defendants 16 and 17 to the knowledge of all directors. 10 On 15.10.2005, the shareholders of defendant no.1 approved the accounts of defendant no.1 at the Annual General Body Meeting for the year 2004-2005. 12 11 On 23.12.2005, defendant no.1 had applied to HUDCO, a GOI body (Government of India), for loan assistance of Rs.7000 lakhs which was sanctioned subject to conditions set out in the sanction letter. 12 28.08.2006, the annual accounts and balance-sheets of defendant no.1 for the year 2005-2006 were approved by the Board of Directors. The said land is treated as an asset of defendant no.1 in the said Balance Sheet which was signed by defendant no.9. 13 On 11.11.2006, as alleged, defendant no.2 was in negotiation with the Trustees of the Hinduja Foundation for the constructions of a hospital. 14 On 28.11.2006, there was an addendum to the JVA (dated 03.02.04) which re-confirmed that the land provided by defendant no.2 was of high value and should be regarded as defendant no.2’s contribution to the project. It provided for completion of project within stipulated period of time and required defendant no.3 to bring in quasi capital of Rs. 50 crores. Completion of project within stipulated period of time was a new condition which sought to be imposed as the same was not there in JVA. Defendant no.2 group though seeks to justify termination of JVA on the ground that project was not completed in the fixed time frame as per the addendum of Nov/Dec 2006 they are also disputing the validity of this very addendum. 15 On 09.02.2007, Minutes of the Meeting of the Board of Directors at which 13 various decisions including award of construction contract was discussed. 16 On 07.03.2007, Singhania & Co. on behalf of the Hinduja Trust addressed a letter to defendant no.9 on the project to develop the hospital. On 03.04.07, Minutes of defendant no.1 at which various decisions taken regarding bank account etc. These MoM were confirmed at the next meeting on 16th July, 2008. 17 On 23.04.2007, defendant nos. 1 to 3 entered into an agreement which provided, inter alia, that the construction and development of the hospital would be undertaken by defendant no.1 and that the said land is to be assigned in favour of defendant no.1. The plaintiff is seeking specific performance of this Agreement. Defendant no.2’s group is disputing the validity of this agreement on the ground that defendant no.1 had no authority to execute this agreement on their behalf. 18 As alleged on 02.05.2007, defendant no.1 acted upon the agreement and placed orders on Chorus, U.K. For the supply of approximately 2123 MT of steel value dat US $ 21,73,192. On 07.05.2007, defendant no.9 addressed a letter to Mrs.Chanda Kochar, Deputy Managing Director of the ICICI Bank, asking that instructions should be issued that no cheque issued by defendant no.1 is honoured unless both groups have signed the same. On 16.05.2007 the ICICI Bank addressed a letter to defendant no.1 informing it that no cheque, unless it was signed by both groups would be honoured. On 16.05.2007 the ICICI Bank also confirmed the above position to defendant no.9. On 16.05.2007 and 21.05.2007 14 defendant no.1 informed the ICICI Bank that the cheques should be honoured or else defendant no.1 would suffer. On 25.05.2007 the Registrar of Companies addressed a letter to defendant no.1 that defendant no.3 was operating the ICICI Bank account to the exclusion of defendant no.2. On 28.05.2007, defendant no. 1 replied to the said letter. On 29.05.2007, the Registrar, under Section 234 of the Companies Act called upon defendant no.1 to furnish bank accounts. On 31.05.2007, defendant no.1 replied to the letter that the queries did not come within Section 234 of the Companies Act. Defendant No.1 instituted Writ Petition No.1335/2007 in this Hon’ble Court for the quashing of the above letters. 19 On 11.06.2007, defendant no.1 informed defendant no.9 of the financial details. On 14.06.2007, defendant no.1 informed the ICICI Bank that the cheques should be honoured or else defendant no.1 would suffer. 20 On 09.08.2007, the writ petition was disposed of and the Registrar of Companies was directed to provide a gist of the complaint. On 23.08.2007, the Registrar forwarded the gist as directed by the Order in the Writ Petition. On 20.09.2007 the Registrar of Companies caused an inspection of the books of accounts under Section 209A. On 18.10.2007 defendant no.1 replied to the above letter. On 02.11.2007, the Registrar of Companies called upon the Company Secretary to furnish the Power of Attorney authorizing him to affirm the Writ Petition. On 07.11.2007, defendant no.1 addressed a reply to the Registrar. On 16.11.2007, the Registrar of Companies called upon defendant no.1 to furnish the Minutes of the Meeting at which the Power of Attorney was authorized. On 15 28.11.2007, the Advocates of defendant no.1 addressed a reply to the above letter. 21 On 21.01.2008, the Registrar of Companies issued several show-cause notices to defendant no.1. On 29.01.2008, the Registrar of Companies issued another notice that a complaint had been received under Section 234 of the Companies Act wherein it was denied that any authority had been granted. 22 On 18.06.2007, the Executive Secretary of defendant no.2 informed defendant no.1 that the Police Commissioner had addressed a letter that incomplete construction work posed an imminent danger to the neighbouring buildings. The Group B as alleged by filing motivated false and frivolous complaints and instigating the authorities created several hurdles in the smooth functioning the defendant no.1 and in completion of the project. On 26.06.2007, defendant no.1 replied to the above letter. 23 On 01.02.2008, defendant no.2 purported to terminate the agreement dated 1st February, 2004. On 14.02.2008, defendant no.3 replied to the above Notice of Termination. On 25.02.2008, defendant no.2 responded to the above letter from defendant no.3. 24 On 04.04.2008, defendant no.2 addressed a letter to Government of Maharashtra and forwarded premium. On 05.04.2008, defendant no.2 addressed a letter to Municipal Corporation of Greater Mumbai regarding the 16 payment of premium for additional FSI. On 14.04.2008 a Memorandum of Understanding (MOU) between defendant no.2 and defendants nos. 22 and 23 as alleged signed to construct Hospital on the land which is the subject matter of the present suit. Group A has by this time as alleged, invested Rs.9,17,52,334/- into the project. 25 After termination of above agreement, KUMM has entered into a MOU dated 14.04.2008 with MEMG (defendant no.2) and HIL (defendant no.23) to develop, construct, operate and manage the scheduled property by setting up a new Joint Venture Company to be called “Manipal KUMM Health Services Private Limited”. On 28/04/2008 the plaintiff has filed the Suit and the Notice of Motion. 26 On 05.05.2008, the Advocates for defendants Nos. 2, 9 to 15 handed over and disclosed the MOU. On 12.05.2008, defendant no.11 sought to explain why he signed the agreement. On 16.05.2008, a notice from the Registrar of companies was received. 27 Notice of Motion No.1691/08 in the Suit was heard and on 5th May, 2008 this Court has passed the following order: “1 Mr.Pandya waives service for defendant no.1. Mr.Iyer waives service for defendant nos. 2, 5 and 9 to 15 and Mr.Chitnis waives service for defendant nos. 3 to 8 and 16 to 21. 2 Heard for some time. After some hearing, the 17 defendant nos. 2 and 9 to 15 through their counsel made the following statements. i )The defendant nos. 2 and 9 to 15 have not entered into any agreement with Hindujas ii )The defendant no.2 has entered into an agreement with Manipal Education and Medical Group of India Pvt.Ltd. And Horizon Infrastructure Ltd. iii) The defendant nos. 2 and 9 to 15 would maintain the status quo till the next date. 3 In view of this, no ad-interim relief is necessary at this stage. 4 At this stage Mr.Seervai states that since the names of the third parties have been disclosed plaintiffs may be granted leave to amend to join the parties. Leave to that extent is granted. Amendment shall be carried out within two weeks and the plaintiffs shall serve the added defendants within three weeks hereof and file affidavit of service. 5 The parties shall file affidavits in reply and rejoinder, if any, on or before the next date. The defendants are directed to serve on the plaintiffs copies of their affidavits in reply on or before 2nd June 2008. Plaintiff shall serve on the defendants rejoinder, if any, on or before 9th June 2008. List the motion for final hearing on 16th June 2008 at the bottom of ad-interim board.” 18 28 The matter was thereafter adjourned from time to time, but it appears that there was no continuation of the order thereafter. The basic parties have filed reply, rejoinder, sur-rejoinder, additional affidavits, except the Company (defendant no.1). 29 As urgency is shown, therefore, by consent of the parties, the matter was listed and heard for finally on 26.08.2009/4.9.2009 and lastly closed for orders on 7.10.2009. 30 As noted, on 3.2.2004 “KUMM” entered into JVA with SIDCL and OVCT and thereby formed the Company “AHCSL” (defendant no.1). The title of the land of KUMM was never transferred upon anyone except for development/improvement as agreed. The project, however, could not be completed for various reasons including the stability of the finance. Time period was fixed and insisted to complete the project by February, 2009, but in vain.