Case: Neelkanth Devansh Developers Private Limited Vs. Urban Infrastructure Venture Capital Limited

2. Few facts as are necessary to decide the aforesaid appeals are as under:At the outset, it may be noted that the facts in the aforesaid three appeals are substantially similar and that only the amounts in each appeal differs. The learned Single Judge, in the impugned order, has referred to the facts in Company Petition No. 31 of 2013, which is appeal No. 102 of 2015.3. The respondents/original petitioners case as disclosed in the company petitions broadly is as under :According to the respondents/original petitioners, the appellant companies were incorporated under the Companies Act, 1956 as Private Companies Ltd. by shares on 1st March, 2007, and that the main objects for which the said Companies were incorporated, were set out in the Memorandum of Association, in particular clauses (1) and (2) thereof. It is further stated that the said Companies were indebted to the respondents/original petitioners for various amounts i.e. Rs.and Rs.together with interest at the rate of 15% per annum from the period mentioned in the company petitions. According to the respondents/petitioners, at the request of the said appellant companies, short term loans by way of inter corporate deposits (ICDs) of Rs.and Rs.were granted to the said companies. The respondents/petitioners have relied on the demand promissory note dated 31st March, 2010 executed by the appellant companies, towards the grant and repayment of the loan and the Board resolution accepting the proposal of the said ICDs. According to the respondents/petitioners, the terms on which the short term loan by way of ICDs have been granted, have beenin the ICD agreement, executed between the appellant companies and them. It is stated that the agreement requires the appellant companies to pay the entire principal amount of the short term loan in one instalment before the stipulated date mentioned therein, and also provides for interest at the rate of 15% per annum and delayed rate of interest of 18% per annum. According to them, as the appellant companies failed and neglected to pay the aforesaid amounts and interest despite several requests, the respondents/petitioners vide letter dated 14th March, 2012, recorded the appellant companies default and called upon the appellant companies to pay the aforesaid principal amounts along with interest. Since the Appellants did not pay the amount, the respondents herein sent a statutory notice to the appellant companies at their registered offices and called upon the appellant companies to pay the respondents/petitioners the aforesaid amounts along with interest within three weeks, failing which, they would initiate winding up proceedings against the appellant companies.The appellant companies replied to the said statutory notice but the said reply was not satisfactory and that, the repayment of the short term loan and payment of the accrued interest was wrongly disputed by them. A reply was sent by the respondents/petitioners to the reply sent by the appellant companies to the statutory notice. The respondents/petitioners in the said letter contended that the appellant companies were trying to confuse the matter with a view to avoid their liability, by referring to unconnected and unrelated transactions. The Respondents filed three Company Petitions.4. The appellants case, in brief, is as under :According to the appellants, Neelkanth Soham Developers Private Limited (Neelkanth Soham)appellant in Appeal No. 102 of 2015; Neelkanth Kalindi Realtors Private Limited (Neelkanth Kalindi)appellant in Appeal No. 109 of 2015; and Neelkanth Devansh Developers Private Limited (Neelkanth Devansh)appellant in Appeal No. 100 of 2015 are, companies of the Neelkanth Group. The said Neelkanth Group is stated to comprise of certain companies and entities, engaged in particular, in real estate development all over India. The said Neelkanth Group is stated to be controlled by Mohan V. Patel and his family.5. On the other hand, the Urban Infrastructure Venture Capital Limited (UIVCL), one of the several companies and entities, is described by the appellants as the Urban Group. We may note here, that the said description of the Urban Group is not accepted by the respondents. The said Urban Group is stated to be controlled by Anand J. Jain and his associates. Since the appellants have used the terms Urban Group and Neelkanth Group to propound their case and to show that the respondent company is part of the Urban Group, the same terms are being used in the present Judgment. As noted earlier, the reference to Urban Group are not accepted by the respondents and hence using the said terms in the Judgment will not, in any way, indicate that we have accepted the contention of the appellants with regard to the same.6. According to the appellants, UIVCL was incorporated in the year 2005 and was providing estate management and financial advisory services. In March, 2006, the UIVCL was appointed as an Investment Manager to the Urban Infrastructure Opportunities Fund (UIOF). UIOF was a Scheme, which was established by the Urban Infrastructure Venture Capital Fund (UIVCF), a domestic venture capital fund and UIOF was to raise money for deployment in different real estate projects. In February, 2007, UIVCL was also appointed investment adviser to the investment manager of another fund, the Urban Infrastructure Real Estate Fund (UIREF), which was a foreign private equity firm.7. On 31st January, 2006, an Indenture of Trust was executed between UIVCL and Urban Infrastructure Trustee Limited (UITL). According to the appellants, fromthere were extensive financial dealings and commonality of business interests between one or more entities of the Urban Group and entities in the Neelkanth Group. According to the appellants, the Urban Group had agreed to invest in the Neelkanth Groups special purpose vehicles by subscribing to equity shares/debentures. Accordingly, the Urban Group is stated to have nominated UIVCL as a lead company with Parag Parekh as its representative, while the Neelkanth Group was represented by Mohan Patel. According to the appellants, it is not in dispute that in 2007, a supplemental agreement was drawn up, and that the said document was never formally executed. Although the appellants have relied upon the supplemental agreement of 2007, the validity of the said document is denied by the respondentsUIVCL.8. Appellants have further stated that infour deposit agreements were executed between the entities of the said two groups i.e. Neelkanth Group and Urban Group. The Urban Group company named Dharti Investments and Holdings Limited, advanced a loan of Rs. 20.75 crores to NMIPL. In February, 2007, a furtherdeposit (`ICD) of Rs. 50 crores was placed by Dharti with NMIPL and between September, 2007 and November, 2007, Rs. 84 crores were placed on ICDs with NMIPL by one Vinamra Universal Traders Private Limited (`Vinamra), another Urban Group entity. The ICDs placed by Dharti were completely repaid by NMIPL. Out of the amount of Rs. 84 crores, NMIPL repaid Vinamra Rs. 20 crores in February, 2007 and the balance amount of Rs. 60 crores which was due to Vinamra was repaid in February/March, 2010. In February and March, 2010,placed two ICDs of Rs. 36 crores44 crores (totalling to Rs. 59.44 crores) with NMIPL.9. The fact that in March, 2010, NMIPL had an ICD of Rs. 59.44 crores from UIVCL, is not disputed. However, the appellants and the respondents have given different interpretation to the events and circumstances that have led to giving of these ICDs. The appellants contention is that the investments of theUrban Group were being recycled through various joint ventures or Neelkanth Group companies to suit the Urban Group. Whereas, the Urban Group contended that the ICDs were completely independent and had nothing to do with the share subscription commitments or realty investments. According to the respondents, the ICDs were unrelated to any investments made by the Urban Groups domestic and foreign funds and that thedeposit agreements (`ICDAs) were stand alone documents, having no nexus between the deposits and the investments of the two funds. The respondents have contended that with the execution of the ICDA, a promissory note in the same amount was also executed by each of the three appellant companies; and that each ICDA is stated to be only between the company in question and UIVCL; and the amount is described as a loan, which was repayable on 7th April, 2011 at an interest rate of 15% per annum, payable quarterly.10. No doubt, there is somerelationship between the various entities in the Neelkanth Group, NMIPL is the lead or flagship company of the Neelkanth Group, having three subsidiaries; Neelkanth Somnath Private Limited (Neelkanth Somnath); Neelkanth Ricelands Private Limited (Neelkanth Ricelands); and Nilayami Realtors Private Limited (Nilayami Realtors). Therelationship is of some relevance because around the same time, when the respondents were asked to place the ICDs with three respondent companies, the Neelkanth Group restructured its internal holdings of the group companies i.e. NMIPLs investment in Neelkanth Somnath was transferred to Neelkanth Devansh; its investment in Neelkanth Ricelands was transferred to Neelkanth Kalindi; its investment in Nilayami Realtors was transferred to Neelkanth Soham. It is thus evident, that Neelkanth Devansh held the majority equity in Neelkanth Soham and Neelkanth Devansh was entirely held by the Neelkanth Group and so on. It may be noted that NMIPL had repaid the entire ICD of Rs. 59.44 crores to UIVCL, after which, UIVCL placed the three ICDs in question with Neelkanth Devansh (Rs.19.80 crores); Neelkanth Kalindi (Rs. 24.80 crores); and Neelkanth Soham (Rs. 14.34 crores). It may also be noted that corresponding to each of these three ICDs in the three appellant companies, separate ICDAs were executed and that these ICDAs deposits stated the principal amounts and their due dates. It may also be noted that these are the only contractual documents between UIVCL and the aforesaid companies i.e. Neelkanth Soham, Neelkanth Devansh and Neelkanth Kalindi and that there is no supplemental agreement between these parties nor is there any joint venture.11. The disputes between Mohan Patel, the Neelkanth Group and the Urban Group in relation to the investments made by the UIOF (the domestic fund) in NUDPL, Neelkanth Somnath, Neelkanth Ricelands, and Nilayami Realtors; and investments made by UIREF (the foreign fund) in Neelkanth Ricelands and Nilayami Realtors were going on simultaneously. However, according to the appellants, these disputes were related to the ICDAs, whereas, according to the respondents, the disputes were completely independent and unrelated in any way to the ICDAs.12. The learned Single Judge by the impugned order held that the defence of the Appellants herein/original Respondents was neither bonafide nor substantial and came to the conclusion that the Company was under an obligation to pay its debts and orderedHe, however, gave a further opportunity to the Appellants to pay the amount due within fourteen weeks, failing which directed admission of Company Petitions.

Court's reasoning:
15. In our view, the contention of the Appellants that in view of the order of the Apex Court dated 25/08/2015 and the procedural order passed by the learned Single Arbitrator, ICD is a subject matter of arbitration is without any substance for the following reasons.In view of the said chronology of events in respect of arbitration application file under Section 11, it can be seen that the Respondents herein were not impleaded as party to the arbitration application and had not accepted that there was arbitration agreement between the Appellants herein and the Respondents and further had not accepted that the claim of the original Petitioners that the winding up Petition was required to be adjudicated upon by the Arbitrator. No decision was given by the Apex Court in the said application since it was withdrawn and, therefore, it cannot be said that the Apex Court had given any ruling on the basis of the judgment in Chloro Controls (India) Pvt. Ltd. vs. Severn Trent Water Purification Incorporated and Others (2013) 1 SCC 641  ). The contention of Mr. Dwarkadas, the learned Senior Counsel appearing on behalf of the Appellants therefore cannot be accepted. The question No.(i) is therefore answered in the negative.Taking into consideration the documents on which reliance was placed by both sides, we are of the view that the learned Single Judge has correctly held that ICDs do not form part of the larger transaction of investment or that ICD are payable only out of profits earned by the joint venture business. ICDs, in our view, are independent transactions, not governed by the supplemental agreement.In our view, the learned Single Judge has rightly not accepted the contention of the Appellants that ICDs form an integral part of web of transactions between the two groups. The Inter Corporate Deposits by the Respondents/original Petitioners are independent transactions unrelated to five Subscription/Share Holders Agreements and one Shareholder Agreement which were executed on 24/08/2007 and 18/10/2008 though in these Shareholders Agreements there is a reference to parties, which, in turn, includes the definition of the term Affiliate. It is obvious that the term Affiliate is a defined term in relevant Shareholders Agreement and it cannot be read in isolation and, secondly, it has to be noted that Shareholders Agreement is not signed by the original Petitioners. In our view, therefore, there is no material on record to indicate that the ICDs were part of the larger web of transactions between the parties. Thirdly, the supplemental agreement is admittedly not executed. The agreement itself shows that it is only a draft for approval. There is no material on record to show that Respondents/original Petitioners were accepted as part of the Urban Group or as part of dispute resolution process. No reliance therefore can ever be placed on the supplemental agreement since it was not executed and signed by the Respondents/original Petitioners. The mediation proceedings before the Mediator do not make any reference to theboth these cases, the learned Single Judges of this Court came to the conclusion that the contention of the Company that they were part of the complex web of interconnected transactions could not be accepted and defence could not be set up that would have an effect of allowing them to lead evidence in variance of the terms of the written contract.29. In the present case also, ICDs were distinct written agreements which indicated that it was a loan simpliciter which was given by the Respondents/original Petitioners to the Appellants and there was no other written material/agreement/contract to show that it was supposed to be part of the arrangement which was specifically averred by the Appellants in theirIt is well settled that if there is a written contract, reliance will have to be placed on the written contract and no oral evidence could be led which is in variance of the written contract.30. At no point of time, the contention of the Appellants that this was a part of the larger transaction was accepted by the Respondents/original Petitioners and was promptly denied after reply to the show cause notice was given by the Appellants, alleging the said fact. The fact, that supplemental agreement which contained all these clauses of there being a web of transactions which was delivered by the Appellants to the Respondents was, in fact, not signed, which fact indicates that from the beginning understanding between the parties was that the ICDs were to be treated as separate and distinct transaction. Moreover, if the contention of the Appellants was to be accepted then there was no need to enter into new ICDs. The flow chart and the correspondence between the parties does not establish the case of the Appellants.31. We therefore confirm the finding of the learned Single Judge and are of the view that defence of the Appellants is neither bonafide nor substantial defence. We are of the view that finding given by the learned Single Judge on this issue is neither perverse nor unreasonable and, therefore, we do not propose to interfere with the said finding while exercising our appellate jurisdiction under Clause 15 of the Letters Patent Act. In our view, there was no suppression of fact by the Respondents/original Petitioners since the ICDs were separate and independent agreements. There was no occasion the Respondents/original Petitioners to mention the facts which, according to the Appellants, were allegedly suppressed. The question No.(ii) is therefore answered in the negative.The said submission of the Appellants is without any substance. The learned Single Judge in his order has clearly observed that he is not deciding the case on merits but having held that the defence of the Company is sham and bogus has given an opportunity to the Company to pay the amount, failing which the Company Petition would stand admitted. The learned Single Judge therefore has not passed any decree in favour of the Respondents/original Petitioners. It is now well settled that such an order could be passed by the Company Court directing the Company to make payment of money to the petitioning creditor. This Court in Enarai Finance Ltd. (2002(1) ALL MR 443)and also in Videocon Industries Ltd. vs. Itesa Sanpaolo S.P.A in Appeal (L) No.29 of 2014 in Company Petition No.528 of 2012 has also upheld the similar order passed by the Company Judge. The question No.(iii) is therefore answered in the negative.This Court therefore while exercising its appellate jurisdiction under Clause 15 of the Letters Patent Act is not expected to interfere with the order passed by the learned Single Judge, unless it comes to the conclusion that the finding is perverse or is based on material which is not part of the record. As mentioned hereinabove we are of the view that finding of the learned Single Judge is neither perverse nor is based on the material which is not there on record. The question No.(iv) is therefore answered in the negative.