Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund

905-906-COMAPL-31223-2022+.doc

Shephali

REPORTABLE

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL APPELLATE DIVISION
COMMERCIAL APPEAL (L) NO. 31212 OF 2022
IN
INTERIM APPLICATION (L) NO. 18775 OF 2022
IN
COMMERCIAL SUIT NO. 164 OF 2022
WITH
INTERIM APPLICATION (L) NO. 31218 OF 2022

Future Corporate Resources

Pvt Ltd,
A company incorporated under the
Companies Act 1956, and having its
registered office at Knowledge House,
SHEPHALI
SANJAY
MORMARE
Shyam Nagar, Jogeshwari Link Road,
Digitally signed by
SHEPHALI
Jogeshwari (East), Mumbai - 60 …Appellant
SANJAY
MORMARE
Date: 2022.10.17
10:11:09 +0530

~ versus ~

1. Edelweiss Special
Opportunities Fund,
A category II Alternate Investment
Fund, registered with SEBI and acting
through its investment manager/trustee
having its office at Edelweiss House, off
CST Road, Kalina, Mumbai 400 098.

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2. Edel Land Ltd. (formerly

known as ECAP),
A company incorporated under the
Companies Act, 1956 and having its
registered office at Tower-3, Wing B,
Kohinoor city Mall, Kohinoor City,
Kirol Road, Kurla West,
Mumbai 400 070 and a corporate office
at Edelweiss House, Off CST Road,
Kalina, Mumbai 400 098. …Respondents

A PPEARANCES
for the appellant Mr Navroz Seervai, Senior
Advocate, with Gaurav
Joshi, Senior Advocate, with
Nirman Sharma, Ansh
Karnawat, Petrushka Dasgupta,
Mridul Yadav & Dhruti
Chheda, i/b ALMT Legal.
for respondents Mr Viraag Tulzapurkar, Senior
Advocate, with Dr Birendra
Saraf, Senior Advocate, with
Ranjeev Carvalho, Dhruva
Gandhi, Sachin Chandarana &
Akshay Dhayalkar, i/b Manilal
Kher Ambalal & Co.
Present in Court Mr SK Dhekale, Court Receiver,
with Ajay Malvankar, Section
Officer.

WITH
COMMERCIAL APPEAL (L) NO. 31221 OF 2022
IN

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INTERIM APPLICATION (L) NO. 18696 OF 2022

IN
COMMERCIAL SUIT NO. 207 OF 2022
WITH
INTERIM APPLICATION (L) NO. 31223 OF 2022

Ojas Tradelease And Mall

Management Pvt Ltd,
A company incorporated under the
Companies Act 1956 and having its
registered office at Knowledge House,
Shyam Nagar, Jogeshwari Vikhroli Link
Road, Jogeshwari (East), Mumbai - 80 …Appellant

~ versus ~

1. IDBI Trusteeship Services

Ltd,
A company incorporated under the
Companies Act 1956 and having its
registered office at Asian Building,
Ground Floor, 17 R. Kamani Marg,
Ballard Estate, Mumbai 400 001
2. Central Bank of India,
A banking company incorporated under
the Banking Regulation Act 1949,
having its registered office at
Chandramukhi, Nariman Point,
Mumbai 400 021 and Corporate Office
branch at 1st Floor, MMO Building,
Fort, Mumbai 400 023. …Respondents

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A PPEARANCES
for the appellant Mr Ashish Kamat, with Nirman
Sharma, Ansh Karnawat,
Petrushka Dasgupta, Mridul
Yadav & Dhruti Chheda, i/b
ALMT Legal.
for respondents Dr Birendra Saraf, Senior
Advocate, with Jehaan Mehta,
Suniil Tilokchandani, Nipa
Ghosh, i/b Manilal Kher
Ambalal & Co.
Present in Court Mr SK Dhekale, Court Receiver,
with Ajay Malvankar, Section
Officer.

CORAM : G.S.Patel &

Gauri Godse JJ
DATED : 13th October 2022

ORAL JUDGMENT (Per GS Patel J):-

1. On 12th September 2022, a learned Single Judge of this

Court passed an ad-interim order on two Interim Applications in
two separate but interconnected Commercial Suits. The order is
undoubtedly an ad-interim one. It says so explicitly and directs the
Interim Applications to be placed for final disposal as per their turn.
The Defendants in the Suit are in appeal against that ad-interim
order.

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2. Commercial Suit No. 164 of 2022 is filed by Edelweiss Special

Opportunities Fund (“Edelweiss”) and by one Edel Land Limited,
previously known as Ecap Equities Limited (“Ecap”) against
Future Corporate Resources Private Limited (“FCRPL”). These
two Plaintiffs filed Interim Application (L) No. 18775 of 2022. This
is the Edelweiss Suit and the Edelweiss Interim Application.
Commercial Suit No. 207 of 2022 is filed by IDBI Trusteeship
Services Limited (“IDBI”) against Ojas Tradelease & Mall
Management Private Limited (“Ojas”). The 2nd Defendant is the
Central Bank of India, with which we are not concerned. In this,
IDBI filed Interim Application (L) No. 18696 of 2022. This is the
IDBI Suit and the IDBI Interim Application.

3. The combined order has two sections, with a separate

discussion and operative order in each Interim Application. In the
IDBI Interim Application, the operative ad-interim order is to be
found in paragraph 13 at pages 28 to 31 in the Appeal paper-book:
“13. Considering the aforesaid discussion, the following
order is passed in Interim Application (L) No. 18696 of
2022 in Commercial Suit No. 207 of 2022:-
(i) Pending the hearing and final disposal of Interim
Application (L) No. 18696 of 2022, the Court Receiver,
High Court, Bombay is appointed as the Receiver of the
mortgaged property more particularly described in
Schedule-I to the Indenture of Mortgage dated 7th May
2020 (Exhibit-F-1 to the Plaint). Considering that the
mortgaged property is a Mall at Ahmedabad, the Court
Receiver shall take possession thereof but not dispossess
any party who is found in occupation of any
shops/tenements therein by virtue of any license agreement
and/or a lease executed in their favour. Any such occupants

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of the shops/tenements in Mall, shall, from the period

October 2022 onwards, pay their respective license fees /
rent / compensation directly to the Court Receiver. These
occupants shall also furnish their respective Leave and
License Agreements / Leases to the Court Receiver, when
called upon to do so. If any of the occupants want to
surrender their respective shop/tenement, they shall do so
only to the Court Receiver. If any shops/tenements are
found vacant or closed, the Court Receiver shall take
physical possession of the same and put his seal thereon.
For this purpose, the Court Receiver is entitled to break
open any locks to ensure that physical possession of the said
vacant / closed shop/s or tenement/s is with the Court
Receiver. It is made clear that pending the hearing and final
disposal of the Interim Application, the Court Receiver
shall not sell the mortgaged property except with the
consent of IDBI Trustee, OJAS and Central Bank of
India.
(ii) In addition to the appointment of the Court
Receiver, pending the hearing and final disposal of Interim
Application (L) No. 18696 of 2022, there shall also be an
order and injunction restraining Defendant No. 1 (OJAS),
its servants, agents, officers, assignees and/or any person/s
claiming through and/or under them, from directly or
indirectly selling, transferring, alienating, encumbering,
giving on leave and license, partying with possession,
and/or creating any third-party rights, title and/or interest
in the mortgaged property, or any part thereof, more
particularly described in Schedule-I to the Indenture of
Mortgage dated 7th May 2020 (Exhibit-F-1 to the Plaint).”

4. The operative ad-interim order on the Edelweiss Interim

Application is in paragraphs 18 to 20 at pages 34 and 35. Those
paragraphs read thus:

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“18. In these circumstances, there shall be ad-interim

relief against FCRPL in terms of prayer clause (b) which
reads thus:
“b. Pending the hearing and final disposal of
the Suit, order and direct the Defendant to
disclose on oath all the assets and/or properties
acquired by it, till date, together with complete
particulars, including the location, valuation of
each and every asset and/or property, whether
movable or not (including shareholding in any
company in which it is a shareholder or any
beneficial interest in any manner whatsoever), as
also the details of all such assets, monies, bank
deposits, investments and accounts held by the
Defendant singly or jointly (with any other person
or entity), the details of all transactions entered
into by this Defendant, including assets and cash
transfers in the last three years and amounts
received by the Defendant pursuant to the Exit
Demand Notice dated 8th September, 2020 and
to produce bank statements for all of their bank
accounts and income tax returns for the last three
years;”
19. The disclosures as contemplated above shall be made
by FCRPL within a period of four weeks from today.
20. In addition to this, as and by way of ad-interim relief,
FCRPL is restrained by order and injunction, whether by
itself or acting through its servants, agents, representatives
and/or any other person acting for and/or on its behalf,
from creating any third party rights and/or interests
whatsoever, whether by way of sale, lease, license, mortgage
or any other encumbrance, over and/or in respect of any of
its assets and effects, whether movable or immovable,
except in the ordinary course of business.”

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5. FCRPL, the Defendant in the Edelweiss Suit, and Ojas, the

1st Defendant in the IDBI Suit, have come up in appeal. Mr Seervai
appears for FCRPL, while Mr Kamat represents for Ojas. Mr
Tulzapurkar appears for Edelweiss, and Dr Saraf for IDBI. We have
heard them all.

6. We will need to briefly trace the transactional history in the

matter. The transactions in the Edelweiss case are the genesis; IDBI
and Ojas were later entrants. On 26th November 2018, there was a
Shareholders’ Agreement (“SHA”) between Edelweiss and Ecap
on the one hand and Kishor Biyani (“Biyani”) and a company then
known as Suhani Trading and Investment Consultants Private
Limited, later FCRPL, on the other. The arrangement between
Edelweiss and Ecap on the one hand and Biyani and
Suhani/FCRPL, was that the two Edelweiss companies would
acquire a substantial amount of equity shares of Future Retail
Limited (“FRETAIL”) in the open market, i.e., from the stock
exchanges. FRETAIL’s stock is quoted and traded. From any
perspective, this was clearly an investment arrangement: the two
Edelweiss companies were not lenders to Biyani or FCRPL. We
have been taken through some portions of the SHA. We do not
propose to examine to quote these at length but will summarise our
understanding of the salient provisions. That the Edelweiss
companies purchased FRETAIL shares from the open market is
undisputed. The SHA has a defined timeline. Since Edelweiss and
Ecap were investors, two things were contemplated. One was the
preservation within a defined margin of the value of the investment.
The second was an exit from equity ownership for Edelweiss after a
specified period. To explain: Edelweiss and Ecap bought FRETAIL

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shares at a known price from the Stock Market. The investment was
substantial. The SHA contemplated that the share price of
FRETAIL would not drop — or would not be allowed to drop — by
more than 40%. If the stock exchange trading/quoted price of
FRETAIL shares fell below 40%, then there occurred what was
called a Trigger Event. This had defined consequences. An
important definition in the SHA is the concept of a Shortfall
Amount. But this itself has components. One component is the Exit
Amount, also separately defined. There is a complicated formula
(pages 105 to 106), but essentially the Exit Amount provides for
what is roughly a 15.75% IRR or Internal Rate of Return. The
Shortfall Amount is the difference between the Exit Amount and the
amount realised by Edelweiss and Ecap by the sale of what were
called Investor Securities, separately defined as the FRETAIL
shares that Edelweiss and Ecap purchased on the closing date.
Clause 5.1 contemplates a sale by Edelweiss and Ecap. A Trigger
Event was defined to have the meaning attributed to it in Clause 11
of the SHA. Clause 4 of the SHA contained a specific covenant to
pay. Clause 4.1 said that Biyani and FCRPL, jointly, severally,
irrevocably and unconditionally, as separate and independent
obligations agreed to pay to the investors the Exit Demand as
specified in that clause. Clause 3 had a put option, which was to
operate on or after the specified put option date or at any time after
a Trigger Event occurred. There was a corresponding call option in
Clause 2. Clause 4.1 is central to one of the arguments that Mr
Seervai makes. We will return to this later.

7. The closing date was 29th November 2018. The buy-in

amount by Edelweiss and Ecap was Rs.299,93,42,306/- at Rs.526.79

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per share. Edelweiss acquired 40,43,272 FRETAIL equity shares,

and Ecap took 16,50,350 FRETAIL equity shares, thus making a
total of 56,93,587 FRETAIL shares between the two.

8. This was the situation in November 2018. On 28th February

2020, a little over a year later, FRETAIL’s trading price dropped to
Rs.303.55 per share. This was, or is said to have been, 40.3% lower
then the price at which Edelweiss and Ecap bought the shares, i.e.,
Rs.526.79 per share. According to Edelweiss and Ecap, this
automatically resulted in an occurrence of the Trigger Event in
terms of Clause 11.7.9 of the SHA. On 2nd March 2020,
FRETAIL’s stock price changed to Rs.305.80, a marginal rise, but
this was still said to be greater than 40% margin contemplated by the
SHA and was therefore said also to be the occurrence of a Trigger
Event. On 3rd March 2020 Edelweiss and Ecap wrote to Biyani and
FCRPL that a Trigger Event had occurred and that the rights arose
in their favour. A copy of this communication is at page 163. In this,
Edelweiss and Ecap said that they now had the right to exercise the
put option as also the right to sell the securities to any person on the
exchange.

9. On 7th May 2020, an unconditional Deed of Guarantee came

to be executed by Ojas, one of the sister concerns or part of the
Biyani/Future group to secure FCRPL’s obligations under the SHA,
including the obligation to pay the shortfall amount. This guarantee
was periodically upgraded from its original Rs.162 crores to Rs.240
crores and finally to Rs.350 crores. No part of the claim in either
Suit is founded on this guarantee.

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10. In addition to this guarantee, Ojas executed an Indenture of

Mortgage with IDBI creating a first ranking pari passu charge over a
property admeasuring 1,33,500 sq ft on the ground, first and second
floors of Wing C of a commercial shopping mall called ‘Acropolis’ in
Ahmedabad. The mortgage document is undisputed. The amount
said to be secured by the mortgage is Rs.300 crores.

11. On 8th September 2020, Edelweiss and Ecap separately wrote

to FCRPL and to Biyani mentioning the Trigger Event, the previous
letter of 3rd March 2020 and said that they had sold certain shares
of the Investor Securities and made some recoveries. Edelweiss said
it had sold 40,34,177 FRETAIL shares and realised
Rs.42,25,46,978/-. Ecap said it had sold 15,21,874 FRETAIL shares
realising Rs.16,58,58,076/-. Both said that the realizations were
lower than the Exit Demand and there was, therefore, now a
Shortfall Amount due under the SHA.

12. This is the basis on which Edelweiss demanded from FCRPL

and Biyani immediate payment of an amount Rs.191,34,73,934/- by
10th September 2020. For its part, Ecap demanded payment of
Rs.70,87,83,529/- by the same date.

13. One day later, on 9th September 2020 both Edelweiss and
Ecap ‘amended’ their Exit Demands for the Shortfall Amount.
Edelweiss now said that the amount due was Rs.233,60,20,912/-.
Ecap’s demand was now Rs.87,46,41,605/-. While Edelweiss and
Ecap say that there was no reply, we find there that there is actually
no clear explanation why or how this change was computed and why

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there was an error in the first place. The amendment letter does not
explain. It only provides reworked figures.

14. But this was not the only sale. On 15th October 2018, i.e.,
before the date of the SHA, FCRPL had executed a Pledge
Agreement of FRETAIL shares in favour of Edelweiss and Ecap.
This was later amended on 22nd November 2018. The initial pledge
of FRETAIL’s shares was in favour of Edelweiss and Ecap. The
amendment created the pledge in favour of the security trustee,
IDBI, which came to be appointed as security trustee under a
separate Security Trustee Agreement also of 15th October 2018.
This too was amended on 22nd November 2018 and there was a
Deed of Accession on 29th November 2018.

15. This is relevant because on 8th September 2020, on

instructions from Edelweiss and Ecap, IDBI issued a notice under
Section 176 of the Indian Contract Act calling upon FCRPL and
Biyani to pay an aggregate amount of Rs.262,22,57,463/-. This is the
aggregate of the so-called uncorrected amounts first demanded by
Edelweiss and Ecap. Predictably, on 9th September 2020, there was
a ‘corrigendum notice’ by which the Shortfall Amount was now
raised to Rs.321,06,62,517/- (adopting the revised or amended
demand from Edelweiss and Ecap).

16. On 15th September 2020, the Deed of Guarantee received its

first amendment.

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17. On 25th January 2021, IDBI issued another notice under

Section 176 demanding payment of the Shortfall Amount and saying
that in default IDBI would proceed to sell the pledged FRETAIL
shares.

18. According to all the Plaintiffs, there was then some composite
scheme of arrangement proposed before the NCLT for a merger and
transfer of the businesses of some 20 companies in the Future
Group — including Ojas — to some entities in the Reliance group.

19. By June 2021, the stock market price of FRETAIL shares was
still falling.

20. On 2nd June 2021, Ojas’s guarantee was amended as second

time, now to Rs.350 crores.

21. On 4th June 2021, IDBI on behalf of Edelweiss and Ecap

issued a demand certificate under the Deed of Guarantee calling on
Ojas to pay Rs.350 crores within three days.

22. In the meantime, that is through the rest of 2021 and for
about the first quarter of 2022, and for a month beyond, nothing
happened. Nobody brought suit. The scheme for compromise was
before the NCLT. That scheme finally failed on 25th April 2022. It
was only two or three months later, in June 2022, that these Suits
were filed. There were the usual preliminary skirmishes with the
Plaintiff seeking urgent ad-interim reliefs. There was one order of
10th August 2022 framed as an injunction restraining the disposal of

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asserts except in the ordinary and usual course of business without

prior leave of the court.

23. These Interim Applications were then heard at some length

and resulted in the impugned ad-interim order of 12th September
2022.

24. Mr Seervai, launching a blistering attack on the impugned

order, makes four points in the FCRPL appeal. The first is that
entire Edelweiss/Ecap Suit is either a claim on an indemnity or one
for liquidated damages under, respectively, Clauses 4.1 and 4.2 of
the SHA. No such injunction or order of disclosure is possible in the
pursuit of such a claim. The second submission is that the
impugned order incorrectly bypasses the mandatory provisions of
Section 12A of the Commercial Courts Act. The third argument is
that the Edelweiss Interim Application proceeds on the basis of an
entitlement to an attachment before judgment. None of the well-
settled parameters justifying an attachment before judgment are to
be found in either the Plaint or the Interim Application. As a fallback
position, there are submissions and prayers framed ostensibly under
Order 39 of Code of Civil Procedure 1908 (“CPC”) but without
acknowledging that Order 39 Rule 1(b) of the CPC is nothing but
the other face of Order 38 Rule 5 of the CPC. The same
considerations must apply to both. He submits that if no case is
made out for the grant of an order of attachment before judgment,
then it is never possible to grant an injunction under Order 39 Rule
1(b) of CPC. It is no answer to the failure of an attachment of
judgment application to say that all that is being granted is an

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injunction. The fourth point he makes is that in fashioning the

interim order, the learned Single Judge appears to have said that
even under the Commercial Courts Act, a chartered High Court has
a wider and more plenary jurisdiction beyond the provisions of the
CPC; and, specifically, beyond the provisions of Order 38, Order 39,
Order 40 XL even Section 151 of the CPC.

25. As to the first point, the argument proceeds on the footing

that the claim is not for an ascertained amount. It is not, Mr Seervai
says, a debt. Emphasis is laid on the wording of Clauses 4.1 and 4.2
of the SHA. We find these at pages 118 and 119 and they read thus:
“4. COVENANT TO PAY
4.1 The Promoters, jointly and severally, irrevocably and
unconditionally, and as a separate and independent
obligation and without prejudice to the other provisions
contained herein, hereby agree to pay to the Investors on a
full indemnity basis, forthwith upon demand by the
Investors (“Exit Demand”):
(i) in case of occurrence of a Trigger Event or upon the
whole or any part of Clause 2 (Call Option) and Clause 3
(Put Option) (including the right to exercise the Put Option
or Call Option or any actions or obligations consequent
thereto) being or becoming void, voidable, unenforceable or
ineffective for any reason whatsoever, an amount equivalent
to the Exit Amount; and
(ii) an amount equivalent to the Shortfall Amount in
case of a Shortfall Event,
irrespective of whether any of the Trigger Event or
Shortfall Event as aforesaid or any related fact or
circumstance thereto was known or ought to have been
known to the Investors or any of their officers, employees,

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agents or advisors. For the avoidance of doubt, in the event

there is a shortfall Event, it is clarified that if the Promoters
pay an amount equivalent to the Shortfall Amount, they will
not be required to pay any further amounts under this
Clause 4.1 (Covenant to Pay) to the Investors.
4.2 The Promoters agree that the amounts payable to the
Investors pursuant to this Clause 4 (Covenant to Pay), shall
be payable without any demur or delay and in the event
that any payment required to be made under this Clause
is adjudged or classified as ‘liquidated damages’, the
Promoters agree that such amounts payable hereunder
are reasonable and shall be deemed to be a crystallized
amount and are a genuine pre-estimate of damages that
would be caused to the Investors in case of occurrence of
an event specified in this Clause 4 (Covenant to Pay), and
the same is not penal in nature.”
(Emphasis added)

26. Mr Seervai’s submissions on this point do not commend

themselves; certainly not at the ad-interim stage. Clause 4.1 does
not create convert to damages a contractual obligation to pay a debt,
one that can be exactly ascertained by applying the various formulae
we find in the SHA, merely because it uses the words ‘on a full
indemnity basis’. This is not an indemnity clause at all; it only
means that the full amount is to be paid and cannot be questioned.
There is a separate indemnity Clause 12 that we find at page 134,
which reads thus:
“12. INDEMNITY
12.1 The Promoters shall jointly and severally at all times
indemnify the Investors and its officers, directors, and
employees against any and all liabilities and expenses

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incurred by them in the execution of the powers under this

Agreement from and against any and all direct losses,
whether suffered or incurred by any of them which arise out
of, or result from, or are connected with any breach by any
of the Promoters of their representations, covenants,
agreements or obligations contained in this Agreement or
any violation of Applicable Law or terms of any
authorization unless such losses result from the Investors’
fraud, misconduct, willful default or gross negligence.
12.2 The indemnification rights granted to the Investors
under this Clause 12 (Indemnity) are independent of, and in
addition to, such other rights and remedies that the
Investors may have at law or in equity or otherwise,
including the right to recover, the right to seek specific
performance, rescission, restitution, a restraining order or
injunctive relief.”

27. No claim is made in either Suit for an indemnity under Clause

12. Prima facie — and that is all we will do at this stage — the
expression ‘on a full indemnity basis’ does not mean do more than
clarify that the entirety of the claim is covered by the covenant to
pay. There is no other way to read this because otherwise there
would be a conflict between Clause 4.1 and Clause 12; or Clause 12
would be rendered entirely otiose.

28. The submission that the claim is in the nature of liquidated

damages is equally ill-founded. Clause 4.2 extracted above is like a
safety valve. It protects against a possible defence, precisely of the
kind that Mr Seervai makes, that this is a claim in liquidated
damages. Clause 4.2 says the demand is in fact nothing of the kind
and even if it is claimed to be, it will satisfy the necessary tests;

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under no circumstances will it be a penalty. Clause 4.2 therefore

anticipates a possible objection. That is all there is to it.

29. Commercial contracts must be read in a way that makes

commercial common sense; as any reasonable and prudent
commercial party would. Mr Seervai’s argument is contrary to this
long-settled principle. In effect, his submission amounts to saying
this: “Biyani and FCRPL agreed that Edelweiss and Ecap would
make an investment in FRETAIL. We agreed on a SHA that has a
put option, a call option and a provision by which, and within a
defined time, Edelweiss and Ecap could recoup their investment
with an agreed return. We also agreed on the conditions that would
cause a Trigger Event and the consequences of the Trigger Event.
We anticipated that there may be a Shortfall, a difference between
the Exit Demand and the sale price of the Investor Securities plus
the Pledged Securities. We gave a guarantee and mortgage to cover
the possible debt. But when that claim for the Shortfall is made, we
now say there is no debt, that the claim sounds in damages or
liquidated damages or both, and that Edelweiss, Ecap and IDBI
must now wait decades to recover the debt we covenanted to pay.”
That formulation cannot possibly succeed; and most emphatically
not at the ad-interim stage. If accepted, it would utterly demolish
the covenant to pay, and do considerable violence to the plain
meaning and unambiguous intent of the contract, i.e., the SHA.

30. We do not think there is much substance to Mr Seervai’s

suggestion that Edelweiss, Ecap and IDBI purposely sold the shares
at a depressed valuation. That would make no commercial sense

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whatsoever because it would mean Edelweiss, Ecap and IDBI

preferred instead to bank on the inherent unpredictability of a
litigation in the Commercial Division. It seems to us appropriate to
proceed on the basis that all three sold the shares at the best possible
price they could after their entitlement to that sale under the SHA
had accrued.

31. On the submission about the similarity between the

conditions of Order 38 Rule 5 and Order 39 Rule 1(b) of the CPC,
Mr Seervai wants an authoritative pronouncement. At this ad-
interim stage, we decline to take up the gauntlet or to give Mr
Seervai the satisfaction he demands. We only note the argument and
leave the rest for another day. He juxtaposes the requirements of
Order 38 Rule 5 — “the defendant, with intent to obstruct or delay
the execution of any decree that may be passed against him, is about
to dispose of the whole or any part of his property, or is about to
remove the whole or any part of his property from the local limits of
the jurisdiction of the Court” — with one of the considerations
under Order 39 Rule 1(b): “that the defendant threatens, or intends,
to remove or dispose of his property with a view to defrauding his
creditors.” Both, he says, conceive of an identical situation.
Therefore, if you cannot grant one, you cannot grant the other.

32. Mr Seervai takes us to portions of the Plaint. There is, he

submits, not a single material particular in the Edelweiss Suit to
show that FCRPL or Biyani are about to dispose of the whole or any
part of the property or to remove it from the jurisdiction of this
Court with intent to obstruct or delay the execution of any decree,

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an eventuality that is quite some distance away in any case, or that

Mr Seervai’s clients ‘threatened or intend to remove or dispose of’
property with the view to defrauding their creditors. The fact that
there are arrangements with other creditors or there was a scheme
of arrangement before the NCLT is not in itself sufficient reason.
The falling share market price of FRETAIL shares may have
consequences under the SHA but that, Mr Seervai submits, is a far
cry from providing good and sound justification for the kind of
sweeping order that has been made. He points out that while prayer
(e) for an attachment before judgment is not granted, prayer (g) in
the Plaint, which is the other side of the coin, has in fact been
granted. Mr Seervai’s submission is that the effect of this injunction
is, first, to elevate Edelweiss and Ecap from their position as
unsecured creditors to secured creditors and, second, to prevent
FCRPL and Biyani from settling or compromising with other
secured creditors. It is settled law, he submits, that an unsecured
creditor can never obtain such an injunction.

33. Mr Seervai relies on the decision of a Division Bench of the

Calcutta High Court in Sunil Kakrania & Ors v Saltee Infrastructure
Ltd & Anr.1 The reliance here is on the findings of the Supreme
Court in Raman Tech & Process Engineering Co & Anr v Solanki
Traders2 to the effect that Order 38 Rule 5 of CPC is indeed a drastic
and extraordinary power. It is no answer, Mr Seervai says, to say
that because there is an inherent power under Section 151 of CPC,
therefore the considerations of Order 38 Rule 5 and Order 39 Rule
1(b) of CPC have no application. The words of those provisions are

1 2009 SCC OnLine Cal 1638 : AIR 2009 Calcutta 260.

2 (2008) 2 SCC 302.

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clear. If no case is made out for the grant of such relief, then absent a
specific finding justifying the relief, such an injunction cannot be
granted under Section 151of CPC. The Sunil Kakrania case
referenced, necessarily, the Supreme Court decisions in Manohar
Lal Chopra v Rai Bahabdur Rao Raja Seth Hiralal 3 and the reference
in that in turn on Padam Sen v State of Uttar Pradesh.4

34. Sunil Kakrania was a money suit, and immovable property

was claimed to be ‘the property in dispute in the suit’ because the
amount claimed was supposedly payable for construction — very
much like a contractor saying that because he had put up some
construction, he had an estate in the construction itself as security
for his unpaid bill. What the Division Bench held was that there was
no case for an injunction under clauses (a), (b) or (c) of Order 39,
Rule 1, or even Order 39, Rule 2. Yet, if he could make out a
sufficient case and meet the necessary conditions, the plaintiff
contractor could apply under Order 38, Rule 5 — and even those
conditions were not actually met in the case before the Division
Bench. A mere vague allegation that the defendant was impecunious
or that a decree would be ineffective was insufficient. The Division
Bench seems to have held that a court cannot invoke Section 151 of
the CPC to restrain a defendant from transferring or alienating his
own property (a reference to Padam Sen), over which the plaintiff
has no rights, nor can a plaintiff claim pre-decretal attachment of
this property. It is clear why Mr Seervai emphasizes this decision.
He places the present case on precisely the same footing as the case
of the plaintiff in Sunil Kakrania.

3 1962 Supp (1) SCR 450 : AIR 1962 SC 527.

4 (1961) 1 SCR 884 : AIR 1961 SC 218.

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35. When this was presented to the learned Single Judge, the
finding returned in the impugned order was that a chartered High
Court has, in its Letters Patent, a wider remit. In paragraph 16 of the
impugned order, reliance came to be placed on the Division Bench
judgment of this Court in La-Fin Financial Services Pvt Ltd v IL&FS
Financial Services Ltd.5 That decision was in an appeal against the
grant of an injunction on a Notice of Motion. A similar argument
regarding attachment before judgment was noted as having been
canvassed in paragraph 19 of La-Fin. It was also captured again in
paragraphs 38 and 39, where again the injunction was sought to be
equated to an order of attachment before judgment. The argument
was rejected in paragraph 40 inter alia relying on Manohar Lal
Chopra. The relevant portions were quoted. Then there was a
reference to a decision of this Court in Triangle Drilling Limited v
Jagson International Limited & Anr.6 The decision of the Division
Bench in Triangle Drilling was that it was well settled that chartered
High Courts had powers to grant an injunction and that these are
not confined by statutory provisions. We quote paragraph 43 of La-
Fin, with its internal quotation:
43. We must mention here that the decision of the
Supreme Court in Manohar Lal Chopra’s case, has been
relied upon by another Division Bench of this Court in the
case of Triangle Drilling Ltd v Jagson International Ltd. In
the facts of this case (Triangle Drilling), a suit was filed by
the Appellants against the 1st Respondent for recovery of
hire charges in respect of two jack-up rigs. A Notice of
Motion was filed seeking interim relief inter alia restraining

5 2015 SCC OnLine Bom 4794.

6 Appeal No. 704 of 1992 in Notice of Motion 2042 of 1992 in Suit No.
2678 of 1992, decided on 15th October 1992.

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Respondent No. 1 from receiving payment under a contract

with Respondent No. 2 until the amount in the suit was
paid to the Appellants and/or deposited in the Court and/or
secured by a bank guarantee. This Notice of Motion was
substantially decided on the ground that the power of the
Court was circumscribed by the provisions of Order 38 Rule
5 and Order 39 of CPC and that on the facts and
circumstances of the case, reliefs asked for were not capable
of being granted. It was in these circumstances that the
Appeal was filed before the Division Bench. The short
question therefore before the Division Bench was whether
the prohibitory reliefs sought by the Appellants were not
covered by the relevant provisions of the CPC, 1908 and
therefore incapable of being granted, even if there was no
merit in the defence. In that context, the Division Bench
held that it is well settled that at least with respect to
Chartered High Courts, the High Court’s power to
grant a temporary injunction was not confined to the
statutory provisions alone. Relying upon the Supreme
Court decision in Manohar Lal Chopra’s case, the Division
Bench took the view that the learned single Judge had erred
in law that he had no power or jurisdiction to grant the
prohibitory reliefs claimed, even assuming that there was no
substance in the defence raised by Respondent No. 1. The
relevant portion of this judgment is reproduced hereunder:-
“The short question, therefore, is whether
the main basis of the order of the learned
Single Judge, namely, that the prohibitory
reliefs sought by the Appellants are not
covered by the relevant provisions of the Code
of Civil Procedure and that, therefore, they
were not capable of being granted, even if
there was no merit in the plea in defence, is
well founded in law. We may assume, without
granting, that the prohibitory reliefs are not

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covered by the relevant provisions of the

Code. However, the well settled legal
position with respect to Chartered High
Courts is that the powers of those High
Courts to grant an injunction are not
confined to the statutory provisions alone.
The Calcutta High Court has held that the
powers of that High Court to grant a
temporary injunction were not confined to
the terms of Order XXXIX Rules 1 and 2 of
the Code and that the Chartered High
Courts have inherent power under the
general equity jurisdiction to grant an
injunction independently of the provisions
of the code and also that such power can be
exercised by a Single Judge sitting on the
Original Side of the High Court (See
Nakasioara Jute Mills v. Nirmal Kumar (1941)
1 Calcutta 373). Our Court has also taken the
same view. (See Muchand v. Gill and Co.
(1920) (44 Bombay 283).
In Manohar Lal Chopra v. Rai Bahadur Rao
Raja Seth Hiralal, AIR 1962 SC 527, the
question which fell for consideration was
whether having regard to the language of
clause (c) of section 94 of the Civil Procedure
Code, interim injunction can be issued only if
a provision for their issue is made in order
XXXIX Rules 1 and 2. The submission on
behalf of the appellant in that case was that
clause (c) of section 94 provides that the
Court may, if it is so prescribed, grant a
temporary injunction in order to prevent the
ends of justice from being defeated and that
the word ‘prescribed’, according to section 2

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of the Code means ‘prescribed by Rules’ and

that Rules 1 and 2 of Order XXXIX lay down
precisely the circumstances in which a
temporary injunction may be issued. The
majority decision rejected this submission
and held that Courts have inherent
jurisdiction to issue temporary injunction
in circumstances which are not covered by
the provisions of Order XXXIX of the
Code. The reasons set out in support of this
view are as follows:
“It is well settled that the
provisions of the Code are not
exhaustive, for the simple reason
that the Legislature is incapable
of contemplating all the possible
circumstances which may arise I
future litigation and
consequently for providing the
procedure for them. The effect
of the expression ‘if it is so
prescribed’ is only this that
when the rules prescribed the
circumstances in which the
temporary injunction can be
issued, ordinarily the Court is
not to use its inherent powers to
make the necessary order in the
interests of justice, but is merely
to see whether the
circumstances of the case bring
it within the prescribed rule. If
the provisions of section 94
were not there in the Code, the
Court could still issue

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temporary injunctions, but it

could do that in the exercise of
its inherent jurisdiction. No
party has a right to insist on the
Court’s exercising the
jurisdiction and the Court
exercises its inherent
jurisdiction only when it
considers absolutely necessary
for the ends of justice to do so.
It is in the incidence of the
exercise of the power of the
Court to issue temporary
injunction that the provisions of
section 94 of the Code have
their effect and not in taking
away the right of the Court to
exercise its inherent power.
There is nothing in Order
XXXIX rules 1 and 2, which
provides specifically that a
temporary injunction is not to be
issued in cases which are not
mentioned in those rules. The
rules only provide that in
circumstances mentioned in
them the Court may grant a
temporary injunction.”
Referring to section 151 of the Code, it was
observed:
“The section itself says that
nothing in the Code shall be
deemed to limit or otherwise
affect the inherent power of the

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Court to make orders necessary

for the ends of justice. In the
face of a clear statement, it is
not possible to hold that the
provisions of the Code control
the inherent power by limiting
it or otherwise affecting it.
The inherent power has not
been conferred upon the
Court, it is a power inherent in
the Court by virtue of its duty
to do justice between the
parties before it.
Further, when the Code itself
recognizes the existence of the
inherent power of the Court,
there is no question of
implying any powers outside
the limits of the code.”
In the minority judgment of Shah J., the
power of Chartered High Courts exercising
ordinary original jurisdiction to exercise
inherent jurisdiction to issue an injunction
was expressly recognised. His Lordship
observed:
“Power to issue an injunction is
restricted by Section 94 and O.
39 and it is not open to the
Civil Court which is not a
Chartered High Court to
exercise that power ignoring the
restrictions imposed thereby in
purported exercise of its
inherent jurisdiction”

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(Underlining supplied).
For the foregoing reasons, in our opinion the
learned Single Judge, with respect, erred in
law in taking the view that he had no power or
jurisdiction to taking the view that he had no
power or jurisdiction to grant the prohibitory
reliefs claimed, even assuming that there was
no substance in the defence raised by the First
Respondent. (emphasis supplied)
(Emphasis added, follows the original)

36. La-Fin and the Triangle Drilling are both decisions of benches
of coordinate strength. Each of them separately and both together
bind us. It is not shown to us that these decisions were rendered per
incuriam or are no longer good law. We are simply asked to prefer
the view of the Calcutta High Court Division Bench in Sunil
Kakrania. We cannot. No principle of binding precedent permits
this.

37. While on the subject, we may only note Section 94 of the

CPC.
“94. Supplemental proceedings.—In order to prevent the
ends of justice from being defeated the Court may, if it is so
prescribed,—
(a) issue a warrant to arrest the defendant and bring him
before the Court to show cause why he should not give
security for his appearance, and if he fails to comply with
any order for security commit him to the civil prison;
(b) direct the defendant to furnish security to produce
any property belonging to him and to place the same at the
disposal of the Court or order the attachment of any

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property;
(c) grant a temporary injunction and in case of
disobedience commit the person guilty thereof to the civil
prison and order that his property be attached and sold;
(d) appoint a receiver of any property and enforce the
performance of his duties by attaching and selling his
property;
(e) make such other interlocutory orders as may appear
to the Court to be just and convenient.”

38. An order under Order 38 Rule 5 is always a greater relief —

and therefore to be exercised with even more circumspection —
than the lesser relief of an injunction under Order 39. We are not
shown any authority from 1908 that exactly equates Order 38 Rule 5
and Order 39 Rule 1(b). The fact that these are separately and
distinctly positioned in the CPC may itself provide a clue. We leave
it at that.

39. Then Mr Seervai submits that the learned single Judge

wrongly invoked the ‘wider powers’ of a chartered High Court, a
distinction that, he submits, is obliterated by the Commercial
Courts Act, 2015 (“CCA”). It cannot be, he submits, that a
chartered High Court has wider powers under the CCA than one
that is not. There is no substance to this argument either. The CCA
specifically acknowledges the existence and special provisions of the
Letters Patent for some High Courts. True, Section 16 of the CCA
gives primacy to the CPC. But what the argument misses is that
even the CPC recognizes the existence of chartered High Courts
and makes significant exceptions for them — including, importantly,

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in matters of jurisdiction. The CPC has always yielded to the Letters

Patent, and except where it says so specifically (for example, in
Section 13), the CCA does not eradicate the Letters Patent.

40. For these reasons, we do not think there is sufficient

substance to Mr Seervai’s submissions on the powers — inherent or
otherwise — of the court, at least at this ad-interim stage.

41. We take up next Mr Seervai’s argument regarding Section

12A of the CCA. Mr Seervai’s submission is that Section 12A is
mandatory. It was introduced by amendment. It reads thus:
“12A. Pre-Institution Mediation and Settlement—
(1) A suit, which does not contemplate any urgent
interim relief under this Act, shall not be instituted
unless the plaintiff exhausts the remedy of pre-
institution mediation in accordance with such manner
and procedure as may be prescribed by rules made by
the Central Government.
(2) The Central Government may, by notification,
authorise the Authorities constituted under the Legal
Services Authorities Act, 1987 (39 of 1987), for the
purposes of pre-institution mediation.
(3) Notwithstanding anything contained in the Legal
Services Authorities Act, 1987 (39 of 1987), the Authority
authorised by the Central Government under sub-section
(2) shall complete the process of mediation within a period
of three months from the date of application made by the
plaintiff under sub-section (1):
Provided that the period of mediation may be
extended for a further period of two months with the
consent of the parties:

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Provided further that, the period during which the

parties remained occupied with the pre-institution
mediation, such period shall not be computed for the
purpose of limitation under the Limitation Act, 1963 (36 of
1963).
(4) If the parties to the commercial dispute arrive at a
settlement, the same shall be reduced into writing and shall
be signed by the parties to the dispute and the mediator.
(5) The settlement arrived at under this section shall
have the same status and effect as if it is an arbitral award on
agreed terms under sub-section (4) of section 30 of the
Arbitration and Conciliation Act, 1996 (26 of 1996).”
(Emphasis added)

42. No plaintiff, he submits, can merely by filing an Interim

Application for interim relief get out of the mandatory requirement
of Section 12A. We do not think Mr Seervai’s submission on this is
well taken. The CCA was meant to expedite the disposal of
commercial disputes. Section 12A was meant to accelerate that
disposal by providing a disposal mechanism that did not involve
Courts. Section 12A does not permit a plaintiff to bypass its
provisions by merely filing an interim application. The words
“which does not contemplate” does not mean “in the opinion of the
plaintiff”. A plaintiff may in a commercial cause may contemplate
very many things and may want even more. That is immaterial. In a
given Commercial Suit if there is no application for interim relief, or
there can be none, then undoubtedly Section 12A must apply. But
can Section 12A be bypassed by a plaintiff simply by filing an
application for interim relief? The answer is clearly no. Equally,
Section 12A is not meant to be weaponised by a defendant to

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prevent a Court from passing an order where the Court believes an

order is justified and necessary. Accepting Mr Seervai’s argument
might, we believe, lead us to down this perilous path. If a Court
believes that on a plaintiff’s Interim Application there is a
justification for an interim order, then Section 12A cannot be used to
say that the Court is powerless to make that interim order. That
would in fact be even in the teeth of Section 16 of the CCA and the
emphasis on the operation of the provisions of the CPC. It would
amount to ousting the court’s discretionary and equitable
jurisdiction at an interlocutory stage. Nothing in Section 12A
remotely tends to this interpretation.

43. We must pause to consider the situation as it stood in April

2022 when the scheme of compromise had failed before the NCLT.
Edelweiss and Ecap had sold in open market all (or some) of the
equity shares that they purchased at the beginning of the
transaction. At their instance, IDBI had also sold pledged securities.
These open market stock exchange sales are not denied. As far as
Edelweiss and Ecap were concerned, the pledged security had been
realised and they had exited the SHA (wholly or in part) by
exercising their exit option of ‘sale by investors’ under the SHA.
The Edelweiss Suit is for the remainder. But for the Ojas mortgage,
Edelweiss and Ecap would have been unsecured creditors.

44. That mortgage is a crucial circumstance for our purposes. It

means that, apart from the stock market realisations that Edelweiss,
Ecap and IDBI made, there was security for the balance — a valid and
subsisting mortgage of parts of the Acropolis Mall. The security cover

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was Rs.300 crores. It is in this context that we must access what is it

that the Plaint say in support of the claim for interim injunctions.

45. We have been taken through various paragraphs of the Plaint.

We see no purpose in reproducing these at lengths since we are
dealing with an ad-interim order, and it is not our intention to
prejudice the final hearing of these Interim Applications. But other
than saying that the Future group is in financial trouble, that share
prices are falling, and that there is indebtedness, there is nothing at
all before the Court to warrant an extreme or wide-ranging
injunction in favour of Edelweiss or Ecap. Matters might have stood
differently if the sales proposed by Edelweiss, Ecap or IDBI (as
pledgee) had been thwarted or attempted to be stopped. Nobody has
obstructed those sales. In fact, there have been realisations.

46. What these Appeals turn on is not so much these nice

questions of law but whether on the facts of the case and on the
material before the Court such a wide ad-interim order could have
been made in the Edelweiss Interim Application. This is to our
minds the only determinative aspect. and that is the question of
delay on the part of the Plaintiffs, combined with an extremely
disturbing inaccuracy or incompleteness in making the claim.

47. To put it in perspective: the Plaintiffs claim there is a debt,

and that it is unpaid. They also claim that there is a mortgage or
security covering that unpaid debt. We would have expected that,
between the two plaints, we would have a clear picture of what
portion of the debt is left uncovered by the security (the mortgage).

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Had this been shown, then perhaps even the mere fact of the
Defendants being in financial doldrums might have been enough to
warrant wider or deeper orders of injunction or disclosure. But if
this differentiation — between the unpaid debt and the security
cover — is not demonstrated, then at least at the ad-interim prima
facie stage it is difficult to see how there can be said to be a case
made out for a wide or more stringent order.

48. When a Plaintiff comes to Court with a case such as this, the
one thing that every Court not only expects — is entitled to insist on
— is absolute certainty as to the amount claimed. This does not
mean that we accept Mr Seervai’s argument that the debt is in the
nature of liquidated damages or an indemnity. The Plaintiffs in both
Suits claim that there is an amount of Rs.401 crores that is due.
Particulars of claim in the Edelweiss Suit are at Exhibit “S” at page
261. We reproduce that table (overleaf ).

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“EXHIBIT – S
PARTICULARS OF CLAIM

ESOF Ecap Total

Total Investor 40,43,272 16,50,315 56,93,587
Securities
Total Investment 2,13,00,29,325 86,93,12,981 2,99,93,42,306
Amount
Investor Securities 40,34,177 16,46,602 56,80,779
sold (Sep-20)
Investment 2,12,52,38,003 86,73,57,137 2,99,25,95,140
Amount of Investor
Securities sold
Realization from 68,90,03,708 27,56,06,623 96,46,10,331
sale of Investor
Securities and
Pledged Securities
Realization from 42,25,46,978 16,68,59,626 58,94,06,604
Investor Securities
sold
Realization from 26,64,56,729 10,87,46,998 37,52,03,727
collateral shares
(Apr-Jun-20)

Shortfall Amount 2,76,90,62,196 1,13,75,63,796 3,90,66,25,991

on the sold Investor
Securities accrued
at 15.75% IRR as on
10th June 2022

Charges as per 8,17,60,732 3,06,12,456 11,23,73,188

Delayed Payment
Rate on the
Shortfall amount as
per Exit Demand
Notice
Total Dues 2,85,08,22,927 1,16,81,76,252 4,01,89,99,179

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49. We do not understand this. Unsurprisingly, nor do the

Defendants. Why is there a mismatch between ‘Total Investment
Amount’ and ‘Investment Amount of Investor Securities sold’?
This can only mean that Edelweiss and Ecap still have some unsold
FRETAIL shares. This is clear from the difference between ‘Total
Investor Securities’ and ‘Investor Securities sold (Sep-20)’. What is
the explanation for this? What is the value of these unsold
FRETAIL shares? Is that value accounted anywhere? Why should it
not be? It would stand to reason, given the SHA, that the value of
these unsold shares should be credited somewhere — but where and
at what per-share price would be the question, especially if, as the
Plaintiffs all say, FRETAIL share prices have been in free fall since
2020. Should that credit be of the date of the suit, the date of the
demand, the date of the sale of the other shares, or the highest value
after the date of occurrence of the Trigger Event? For Edelweiss,
‘Realization from sale of Investor Securities and Pledged Securities’
should be the exact total of ‘Realization from Investor Securities
sold’ and ‘Realization from collateral shares (Apr-Jun-20)’. Plainly,
it is not.

50. In the course of arguments, we were told that this table of

particulars of claim contains errors and needs explanation, at least in
the first column of the descriptors. There are items in these
columns that are impossible to reconcile. More importantly, it is
impossible here to reconcile the figures from the correspondence of
8th/9th September 2020 and the documents annexed to that
correspondence. No such tracing is done in the plaint. More
interestingly, though both plaints claim the same amount, the

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tabulation in the IDBI Suit at Exhibit “J” at page 36 is entirely

different.

51. There is one other element in the particulars of claim that is

completely unexplained. The sale of shares is supposed to have
happened somewhere between June and September 2020. But these
particulars of claim in the Edelweiss Suit include charges for
‘delayed payment’ from September 2020 all the way to today. It is
impossible to expect that a Plaintiff can legitimately delay coming to
Court and then claim interest for the period of its own delay. Even
the shortfall amount is computed as of June 2022, not September
2020. This means that the IRR — like the delayed payment charges
— has been computed for another two years from the time the debt
was due. Notably, in their demand letters, Edelweiss and Ecap
demanded immediate payment.

52. None of this seems to have been brought to the attention of

the learned Single Judge. We have little doubt that had this been
pointed out with accuracy, the learned Single Judge would have
taken a different view. We say this because in at least two places, the
impugned order proceeds on the footing that the claim for Rs.
401.89 crores is virtually an undisputed debt. At this stage, we
cannot say this for certain today. If we remove the delayed payment
amount, the claim falls. If we deduct the IRR claim for two years,
and have it computed as of September 2020, it falls further. There
was already a corrigendum to the first demand. A reconciliation
between the first demand, the corrigendum and the particulars of
claim was undoubtedly necessary. It is missing.

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53. This takes us to very old principle well known to common law
jurisdiction: delay defeats equity. There may be a class of cases where
delay may be excused or overlooked or even treated as acquiescence,
and, in a given case, mere delay will not prevent a court from
passing an order if the circumstances are sufficiently strong to so
demand. But in a case such as this, we see no explanation at all
anywhere in the Plaint for the delay between September 2020 until
June 2022. That is a period of nearly two years. We are only told
that in this time, the Plaintiffs were securing ever increasing
guarantees (although there is no claim on guarantees) and that they
had also obtained thereafter a mortgage of the Acropolis Mall. But
that is surely a factor that must taken into account against the
Plaintiffs. As we noted, if, after the sale, there is security then the
claim presented to a Court for an injunction must be restricted to
that portion that is left unsecured or is beyond the provided security.
Nobody today knows what that amount is. It is surely for the
Plaintiffs to tell us what amount is left unsecured, and which is likely
threatened by some form of dissipation or loss. Of this, we have
nothing.

54. The delay between September 2020 (and September 2020 is

perhaps generous to the Plaintiffs) and the date of the Suit is one
thing, but there is also a preceding delay that in unexplained
entirely. That is the delay between end-February/early-March 2020
and September 2020. According to the Plaintiffs, the Trigger Event
occurred on 28th February 2020 and then again on 2nd March
2020. That would have entitled Edelweiss and Ecap to immediate
action under the SHA. The pledge was already in existence. Perhaps
the pledgee may have had to delay slightly on account of having to

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give a notice under Section 176 of the Contract Act, but there is a
deafening silence between early March 2020 and September 2020.
This cannot simply be papered over by saying that the Plaintiffs
were hopeful of a resolution or that they were trying to get
themselves included in the proposed CIRP process or that they were
taking guarantees or obtaining a mortgage or were in negotiations.
This law is well settled, that Courts will not indulge or benefit
parties who have slept over their rights.

55. There is clearly an attempt to separate the two Suits for the
purposes of relief. In the Edelweiss Suit and Interim Application,
wide injunctions are sought along with disclosure, but there is no
attempt to explain how much of the Edelweiss claim lies outside the
security created by the mortgage. The two are not distinct
transactions. They are joined at the hip. For the mortgage is meant
to cover nothing but the Edelweiss/Ecap debt. There must,
therefore, be an accurate delineation, with utmost precision,
discernible at once, of the exact debt payable under the SHA to
Edelweiss and Ecap, and then a demonstration of how it is not
adequately protected by the mortgage in the IDBI Suit. The attempt
to segregate the two is not a reasonably possible approach. Both had
to be seen as running together, and the claim in the IDBI Suit had to
be seen only as covering the debt in the Edelweiss Suit. There is no
separate debt due to IDBI from Ojas, which is the mortgagor but not
the entity that incurred the debt.

56. Our Division Bench often stands accused of being of more

than somewhat tiresome in our almost slavish adherence — we say

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‘steadfast fidelity’ — to the Wander Ltd & Anr v Antox India P Ltd 7
principle: that the appeals court should not readily interfere with an
interlocutory order unless it is shown to be perverse, arbitrary,
capricious, contrary to law or not a reasonably possible view. We
have applied it repeatedly, as indeed we believe we must, because
that is settled law of 32 years. But we have always been careful to say
that where we find that order that is challenged in appeal before us is
not a reasonably possible view, then intervention is called for. We
hesitate to use phrases such as ‘arbitrary’, ‘capricious’ or ‘perverse’
— the Supreme Court itself has repeatedly cautioned against using
such strong language. We do not use those in relation to this order
either. But we do believe that, had the two factors of delay and
imprecision in computing the claim been brought to the notice of
the learned Single Judge, there would have been two consequences.
First, in the Edelweiss Interim Application, there could have been
no question of an order of disclosure because such an order of
disclosure can only be a step in aid of some other relief that is
properly granted. Second, there could not also have been an
injunction of the kind set out in paragraph 20. That injunction is so
wide that it would have the effect of completely halting all business
by FCRPL. This could only be done after, as we have noted, there
was a precise assessment of what portion of the claim was left
uncovered by the mortgage. If the mortgage is sufficient to cover the

7 1990 (Supp) SCC 727. In past orders, we have also referenced Mohd
Mehtab Khan v Khushnuma Ibrahim Khan, (2013) 9 SCC 221; Monsanto
Technology LLC v Nuziveedu Seeds Ltd, (2019) 3 SCC 381; and Shyam Sel &
Power Ltd & Anr v Shyam Steel Industries Ltd, 2022 SCC OnLine SC 313. We
applied the principle inter alia in World Crest Advisors LLP v Catalyst Trusteeship
Ltd & Ors, 2022 SCC OnLine Bom 1409; Pradip R Kamdar & Anr v Rajiv
Sanghvi & Ors, 2022 SCC OnLine Bom 3147 and in Dipesh Mehta & Ors v
Gerard Shirley & Ors, 2022 SCC OnLine Bom 3453.

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remaining debt, as properly computed or justifiably explained, and

had this been pointed out to the learned single Judge, then we have
no doubt that he would have not made such an order in the
Edelweiss Interim Application — at least not without a much
stronger additional prima facie case of asset dissipation by Biyani
and FCRPL. Therefore, Edelweiss would have had to demonstrate
all three factors: a good explanation for the delay, that a sizeable
portion of the debt was left unsecured, and cogent material to show
dissipation of assets. This is not a question of whether the impugned
order is possible or not possible. Our approach is that the learned
single Judge was regrettably not shown the countervailing material
to fashion an appropriately proportionate order at the ad-interim
stage.

57. To put it differently, we intervene, and we believe justifiably,

because in our view, the operative portion of the impugned order is
disproportionate to the cause made out. It was much wider than
could reasonably have been granted on the facts and circumstances
of the case. As we noted earlier, had Edelweiss, Ecap and IDBI been
stymied from making any realisations at all, then a full spectrum
order may certainly have been called for. That not being the case,
there being this unsatisfactorily explained or even unexplained delay
on the part of the Plaintiffs, and there being too a crucial discord and
imprecision in quantifying the debt left unsecured, we believe that
the interim order ought to have been more narrowly tailored than it
was. The differential between the mortgage security cover and the
claimed debt is both crucial and determinative at this ad-interim
stage.

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58. For these reasons, we vacate the ad-interim order in the

Edelweiss Interim Application.

59. The mortgage is of part of the premises in the Acropolis Mall

(the ground, first and second floors of C-Wing). We are told by Mr
Tulzapurkar and Dr Saraf that portions are occupied by associated
entities of the Future group. But what of it? There is no law that
says that the owner of a mall must necessarily truck only with third
parties and outsiders. In a regular mortgage action for foreclosure,
the appointment of a Receiver may be viewed as a matter of course,
and there may be an associated injunction. but the wording of that
order of Receivership and injunction must be carefully calibrated
and attenuated so that it does not exceed more than what is
legitimately permissible in law. The Receiver stands appointed and
has taken symbolic possession of the mortgaged property, that is
ground, first and second floors of the Acropolis Mall. But we see no
reason for the Receiver to take physical possession of any part of the
shops nor to do anything other than stand symbolically appointed.
The entirety of the ground, first and second floors of the Mall will
continue to be in custodia legis.

60. As to the injunction, as currently phrased, it stops without the

permission of the Receiver or this Court, any and every business in
the Mall. Correctly viewed, all income would flow only to the Court
Receiver. Even routine expenses would have to be separately
detailed and provisioned, which they are not. This form of a wide
injunction was also, in our view, excessive in the narrow facts of this
case. An injunction restraining Ojas from disposing of, parting with

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possession, alienating or further encumbering the mortgaged

property is more than sufficient. None can have an objection to this.
We do not see how the purpose of the Plaintiff is achieved by
bringing the entire operation of the Mall to a halt and by choking all
revenue streams.

61. Consequently, it is this limited order that will continue to

operate until final disposal of both Motions. The impugned order is
modified in terms above.

62. The Appeals are disposed in these terms.

63. We now have a request from Edelweiss and Ecap to continue

the interim order of 12th September 2022 for such time as this
Court thinks fit. There is not a single apprehension expressed in the
Edelweiss Suit that either Biyani or FCRPL have done anything to
dispose of their unsecured assets to defeat the claims of Edelweiss
and Ecap. In fact, there have been realisations. We have noted this.
The shortfall claim is not precisely ascertained, though it could have
been. In these circumstances, we see no question of extending the
stay in the Edelweiss Appeal.

64. Should there be any changed circumstances, liberty to all

parties to apply to the learned single Judge.

65. Though these are Commercial Appeals, and an order of costs

would have been the norm under the amendments to the CPC
effected by the CCA, given that we have only partly modified one

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order and allowed the appeal for the other, we make no order of
costs. Liberty to both sides to canvas their claims for courts at the
final hearing of the Interim Applications.

(Gauri Godse, J) (G. S. Patel, J)

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