MANMOHAN SINGH,J. - (1.) PRIOR to the present appeal, the appellant filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ,,the Act) for interim protection, being OMP No.865/2012. The case set up in the said OMP against the respondent was that the respondent was generating such huge sums of money so as to divert several crores of rupees to its subsidiary companies, in such a short span of time. The appellant apprehends that the respondent is selling, disposing off and/or encumbering its assets. A sum of Rs. 21.05 Crores is sought to be diverted to another company which is under the same management, control and ownership, but is at the same time a distinct legal entity on account of the principle of separate corporate personality. As the proposed transferee of funds is not a party to the arbitral proceedings and will not be subject to any award passed by the Arbitral Tribunal, the proposed transfer will operate to the irreparable prejudice of the petitioner. The transfer of the entire healthcare business of the respondent company, admittedly valued at Rs. 21.05 crores, to an unnamed, wholly owned subsidiary coupled with a simultaneous investment of Rs. 21.05 crores in the same subsidiary in order to defeat the interests of bonafide creditors; by moving monies and assets to subsidiary companies, in such manner that the real character of the said monies and assets is lost. It was alleged at the time of filing the petition that the appellant has a huge claim of Rs. 172,52,57,158/- against the respondent as on 31st August, 2012. 1.1 In OMP No.865/2012 filed by the appellant under Section 9 of the Act the Court issued an ex-parte interim order, dated 12th September, 2012, restraining the respondent from dealing with its healthcare business which was confirmed by an order dated 4th December, 2012 during the pendency of the arbitration proceedings by clarifying that the order may be modified by the learned Arbitrator if the respondent is able to demonstrate that the entire liability owned to the petitioner has been fully discharged. In appeal by its order dated 14th January, 2013, the Division Bench 1.2 modified the order dated 4th December, 2012 and held, ,,it is for the Arbitral Tribunal to consider as to whether the claim of the respondent herein before the Arbitral Tribunal or any lesser amount is liable to be secured in an appropriate manner as also the manner of securing the said amount. 1.4 In the Special Leave to Appeal (Civil) Nos.4502-4504/2013, filed by the respondent by an order dated 8th February, 2013, the Supreme Court was pleased to further modify the orders dated 4th December, 2012 and 14th January, 2013 and made it clear that the Arbitral Tribunal shall consider the application for vacation of interim order that may be made by the petitioner, independently and uninfluenced by any of the observations made by the Single Judge.
(2.) IN the impugned order it has been recorded that in pursuance of order of Supreme Court, respondent No.2 (respondent herein) before the Arbitral Tribunal filed an application under Order XXXIX Rule 4 read with Section 151 CPC and Section 19 of the Act, inter alia, pleading that respondent No.2 is engaged in the diverse business and is intending to set up focused management on specific business divisions so as to nurture and develop each such business division with a dedicated management team and to enable investors to bring in funds as well access to modern technology required to survive and compete effectively in the industry. The respondent No.2 is intending to do and to place its ,,healthcare business in a subsidiary company that would have only this one business to manage with dedicated management and operations team which will enable the investor to bring in funds against which they would be issued shares. If the said business remains as business division in the books of respondent No.2 company then the investors would have to be allotted and issued shares of the respondent No.2 company which would mean that the said investors would be entitled to profits or would suffer losses of all businesses run by respondent No.2. Whereas for limited business of ,,healthcare investor would be included in that business and they will have no direct right on respondent No.2s business. Respondent No.2 shall remain a substantial shareholder of the subsidiary entities in which the ,,healthcare business is intended to be placed. It was also alleged in the application which was recorded in the order that the current book value of the assets of ,,healthcare business in the books of respondent No.2 is less than Rs.20 crores but on capitalization of ,,healthcare business in subsidiary the book value of assets of healthcare will increase. The placement of the ,,healthcare business in a subsidiary is only a legal corporate mechanism to enable focused management and investment limited only to the specific business division and is not either on facts or in law, a sale or a disposal of the business division. The ,,healthcare business shall continue to be operated in the name and with the trademark of respondent No.2. If this procedure is not allowed to be conducted by respondent No.2 and restrained continues from developing its ,,healthcare business respondent No.2 would have to incur monthly cost of approximately Rs.75 to 80 lac towards funding the business, which it will find difficult to do without fresh investments and focused attention. The growth of ,,healthcare business would not only be adversely affected but will also lead to financial losses to respondent No.2. For the said reasons, respondent No.2 prayed in the application that in order to enable and allow growth of ,,healthcare business, restrained order against ,,healthcare business and other businesses may be vacated. Further action of the respondent No.2 does not amount to diversion of assets nor it violates clause 6 of the agreement dated 27th December, 2002 entered with the claimant. Learned Tribunal recorded the case set by respondent No.2 in the application on merit. The details are given below : "that placing businesses of the respondent No.2 with its subsidiary is not covered in any of the conditions stipulated in clause 6 of the agreement. Furthermore allegation of the claimant that respondent No.2/applicant herein defaulted in repayment of its due since 2002-03 is incorrect. In fact respondent would prove that entire payment has been made. Claimant deliberately did not present the cheques issued by the respondent, therefore has no right to claim interest. Even otherwise claimant did not bother to take any step to secure the amount in dispute since 2004. No ground has been set up in its application seeking restraining order against respondent No.2. In fact respondent No.2/applicant has been taken by surprise by order passed restraining it from running its business through subsidiary. Claimant has not been able to make out nor demonstrated that respondent No.2 is intending to remove its fixed assets with a view to defraud its creditors. Respondent No.2 in fact has paid more than Rs.3300 crores towards settlement of its debts.
(3.) THE application was contested by the appellant on the grounds that from the annual account statement produced by respondent No.2, it shows that respondent No.2 has been defaulting and selling its fixed assets. It is running in loss and is in poor financial position. It is allowed to divert its fixed assets through a subsidiary, claimant will be left with nothing to recover if ultimately award is passed in favour of the claimant. The High Court passed the restraining order because the respondent No.2 consistently had been defaulting and selling its fixed assets. If the stay is vacated, respondent No.2 will divert the fixed asset that will deprive the appellant its right to recover.;