Case Note & Summary
Two arbitration petitions were filed under Section 9 of the Arbitration and Conciliation Act, 1996 by Tata Capital Financial Services Limited and L&T Finance Limited against M/s Deccan Chronicle Holdings Limited and its guarantor Mr T. Venkatram Reddy. The petitions were heard together as they raised common maintainability issues. In the first petition, Tata Capital had sanctioned a Rs.100 crore working capital term loan to the respondent company, which was disbursed in April 2011. Following a credit rating downgrade in July 2012, the lender invoked material adverse effect clauses and recalled the loan, demanding immediate repayment. The respondent failed to comply with demand letters and a notice invoking arbitration. Tata Capital filed the petition on 24 August 2012 seeking appointment of a Court Receiver, injunction restraining alienation of properties, and a direction to secure the claim of over Rs.101 crore. The court initially passed an ad-interim order on 4 September 2012 directing the respondent not to dispose of specified assets and to disclose assets on oath. Further ad-interim orders on 6 November 2012 directed status quo on investments and reiterated disclosure obligations, noting the inadequacy of securities. In the second petition, L&T Finance had advanced Rs.25 crore to the respondent company in May 2011, secured by a registered mortgage. After default, the lender exercised a call option in May 2012, demanding full repayment. The respondent did not comply with subsequent notices, leading to the filing of a Section 9 petition seeking similar interim relief. Both petitions were opposed by the respondents on maintainability grounds. The court had passed interim directions but the final common judgment was delivered on 21 February 2013, determining the maintainability of the petitions and the scope of interim measures. The full reasoning and final order are not provided in the available text.
Issue of Consideration
ARBITRATION PETITION NO.1321 OF 2012
Case Details
2013 LawText (BOM) (02) 50
ARBITRATION PETITION NO.1321 OF 2012 and ARBITRATION PETITION NO.1095 OF 2012
Virag Tulzapurkar, Ashok Paranjape, Leena Desai, Girish Thakur for petitioner in ARBP1321/12; Shakuntala Joshi, Anand Poojari for petitioner in ARBP1095/12; Gaurav Joshi, Vivek Deo, Samsher Garud, Aagsti Vibhule for respondents
Tata Capital Financial Services Limited (in ARBP1321/2012) and L&T Finance Limited (in ARBP1095/2012)
M/s Deccan Chronicle Holdings Limited and Mr T. Venkatram Reddy
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Nature of Litigation
Arbitration petitions under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures to secure outstanding loan amounts and to prevent alienation of assets.
Remedy Sought
Appointment of Court Receiver, injunction against disposal of properties, direction to secure claims, and disclosure of assets on oath.
Filing Reason
Respondent No.1 defaulted on loan facilities; credit rating downgrade triggered recall of loans; after demands and notice invoking arbitration, petitioners approached court for urgent interim protection.
Previous Decisions
On 4 September 2012, ad-interim orders were passed restraining alienation of properties and withdrawal of funds; on 6 November 2012 further directions for status quo and disclosure were issued; respondents did not fully comply.
Judgment Excerpts
By these petitions filed under Section 9 of the Arbitration & Conciliation Act, 1996 ... petitioner seeks appointment of Court Receiver in respect of various properties described in the petition, for injunction and for an order and direction against the respondents to secure, in favour of the petitioner, its claim with interest.
By an ad interim order dated 4th September 2012 passed by S.J.Kathawalla,J., this Court observed that it was prima facie satisfied that an amount of Rs.101 crores is due and payable by the respondents to the petitioner towards outstanding loan amount.
though the securities in favour of the petitioner were inadequate, with a view to protect such huge claims, this Court directed the respondents to maintain status quo in respect of investment in other entities as reflected in the Net Worth Certificate at page 98 of the petition.
Procedural History
2012-02-24: High Court sanctioned scheme of arrangement for Tata Capital. 2011-04-13: Tata Capital sanctioned Rs.100 crore loan to respondent 1; documents executed and amount disbursed. 2012-07-12: Petitioner issued notice of credit downgrade and called upon respondent to cure material adverse effect and pay outstanding dues within 7 days. 2012-08-03: Petitioner demanded immediate repayment as default not cured. 2012-08-17: Advocate notice issued invoking arbitration and demanding Rs.100.86 crore with additional interest. 2012-08-24: ARBP1321/12 filed. 2012-08-22: Respondent's reply received (received 31 August 2012) expressing intent to resolve. 2012-09-04: Ad-interim order passed restraining disposal of properties and directing disclosure. 2012-11-06: Further ad-interim order directing status quo on investments and reiterating disclosure. Matter adjourned to 21 November 2012 for final disposal. In ARBP1095/12, L&T Finance advanced Rs.25 crore on 13 May 2011, default occurred, call option exercised on 24 May 2012, demands made, and petition filed. Both petitions heard together, judgment reserved on 6 February 2013 and delivered on 21 February 2013.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 9
