Bmw India Private Limited vs Libra Automotives Private Limited & Ors.

,,,,,,

Sanjeev Narula, J",,,,,,

The present petitions under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Actâ€) have been filed",,,,,,

seeking interim measures to secure the payment of the outstanding amounts alleged to be due and payable by the Respondents jointly and/or severally,,,,,,

to the Petitioners. The reliefs sought in both the petitions are against common Respondents. Furthermore, the transaction between the parties under",,,,,,

the agreements is inter related and interconnected and gives rise to similar contentions on facts and identical question of law. Thus, both these petitions",,,,,,

are being decided by a common judgment.,,,,,,

BMW India Pvt. Ltd. [Petitioner in OMP (I)(Comm) 25 of 2019, hereinafter referred to as “Petitioner No. 1â€] is engaged in the business of",,,,,,

manufacturing, importing, assembling, wholesaling cars to its authorized dealers in India on Principal to Principal basis. BMW India financial services",,,,,,

Pvt. Ltd. [Petitioner in OMP (I)(Comm.) 9 of 2019, hereinafter referred to as “Petitioner No. 2â€] is licensed as a Non-Banking Financial",,,,,,

Corporation under Reserve Bank of India Act, 1934.",,,,,,

Libra Automotives Pvt. Ltd. (hereinafter referred to as “Respondent No. 1â€) is the erstwhile dealer of Petitioner No. 1. Mr. Manreet Singh,,,,,,

Libra (hereinafter referred to as “Respondent No. 2â€) and Mrs. Parveen Kaur (hereinafter referred to as “Respondent No. 3â€) are the,,,,,,

promoters of Respondent No. 1. They have been impleaded as co-respondents in the capacity of guarantors of Respondent No. 1.,,,,,,

Petitioner No. 1 appointed Respondent No. 1 as its interim dealer on 19th May 2016 and subsequently as a permanent dealer w.e.f from 16th June,,,,,,

2017. In this regard a Dealer Agreement (hereinafter referred to as “DAâ€) was executed on 16th June 2017, which expired on 31st December",,,,,,

2017. Thereafter, a fresh DA was executed, effective from 1st January 2018 for a period of one year, which also expired by efflux of time on 31st",,,,,,

December 2018. There is no renewal since then. Additionally, a Deferred Payment Facility Agreement (hereinafter referred to as “DPAâ€) was",,,,,,

executed on 21st June 2016 between Respondent No. 1 and Petitioner No. 1, which was co-terminus with the Dealer Agreement. The alleged dues",,,,,,

under the DA and DPA are subject matter of OMP (I)(Comm) 25 of 2019. Respondent No. 1 also entered into two separate financial assistance,,,,,,

agreements namely, Floor plan Financing Agreement dated 21st June 2016 (""Floor plan Agreement"") and Spare Parts Financing Agreement dated",,,,,,

11th July 2016, (""Spare Parts Agreement"") with Petitioner No. 2 (collectively referred to as ""Financial Assistance Agreements""). The alleged liability",,,,,,

under the said agreements is the subject matter of OMP (I)(Comm) 9 of 2019.,,,,,,

Respondent No. 1 used to purchase vehicles under the DA and was liable to pay the invoiced amounts. The terms of DPA permitted Petitioner No.,,,,,,

1 to defer the payment for the vehicles during the agreed credit period. Petitioner No. 1 extended the time for making the payment of vehicles, subject",,,,,,

to a restriction that if the vehicles were sold before the expiry of the credit period, Respondent No. 1 would immediately transfer the sale proceeds.",,,,,,

Failure to do so within the stipulated timeline was considered as a default and rendered Respondent No. 1 liable for Sold Out Trust penalty. (“SOT,,,,,,

penaltyâ€). To secure this financing facility, Petitioner No. 1 had a charge on vehicles against which payment was not made by Respondent No. 1.",,,,,,

The sanction of the Deferred Payment Facility was further subject to the condition that Respondent No. 1 shall provide collateral/security to secure,,,,,,

the payment of outstanding amount and also create a First and Exclusive Charge on its stock, book debts and other current assets of the Respondent",,,,,,

No. 1 (both present and future) in favour of Petitioner No. 1. The amount sanctioned was further secured by way of Deed of Hypothecation and,,,,,,

Personal Guarantees of Respondent No. 2 and 3 who are promoters of Respondent No. 1. Additionally, the liability under DPA was also secured by a",,,,,,

Bank Guarantee (BG) for an amount of INR 7 crore provided by Respondent No. 1, jointly in favour of Petitioner Nos. 1 and 2.",,,,,,

The “Financial Assistance Agreements†were entered to facilitate Respondent No. 1 in purchasing BMW vehicles and BMW spare parts. In a,,,,,,

situation where, Respondent No. 1 was not able to repay the invoiced amounts within the credit period under the DPA, Petitioner No. 2 was",,,,,,

authorized to make payments for and on behalf of Respondent No. 1 towards the outstanding invoices raised by Petitioner No. 1, in accordance with",,,,,,

the terms of the Floor plan Agreement. All such disbursements made to Petitioner No. 1 were deemed disbursements to Respondent No. 1 as per,,,,,,

Clause 4.6 of the Floorplan Agreement. Respondent No. 1 was required to repay the disbursed amount under the Floorplan Financing Agreement to,,,,,,

Petitioner No. 2 in accordance with Clause 10 of Schedule I therein. Similarly, under the Spare Parts Agreement, Petitioner No. 2 was authorized to",,,,,,

make payments to Petitioner No. 1 for and on behalf of Respondent No. 1 towards the outstanding invoices for BMW spare parts. All such,,,,,,

disbursements made to Petitioner No. 1 were deemed disbursements to Respondent No. 1, who was then required to repay the said dues within 60",,,,,,

days of the date of payment.,,,,,,

Respondent No. 1 also executed Deed of Hypothecation dated 21st June 2016, that was subsequently revised by Deed of Hypothecation dated 11th",,,,,,

July 2016 and 18th August 2017 under the terms of Floor plan Financing Agreement and Spare Parts Financing Agreement respectively. The deed,,,,,,

inter-alia hypothecated by way of first charge in favour of Petitioner No. 2, the BMW products belonging to Respondent No. 1 and those that may be",,,,,,

purchased by Respondent No. 1 during the subsistence of the deed. Pursuant to the Floor plan Agreement, a Commercial Finance Business update",,,,,,

was issued by the Petitioner No. 2 on 30th August 2017, whereby Respondent No. 1 was required to deposit the sale proceeds within 2 business days",,,,,,

of sale. In case, the sale proceeds were not deposited within the said timeline, such instance was to be termed as Sold Out of Trust (""SOT""). In such a",,,,,,

event, Respondent No. 1 was liable to pay the SOT penalty as stipulated in Clause 11 of Schedule 1 of the Floor plan Agreement.",,,,,,

Facts leading to the present dispute in OMP (I)(Comm) 25 of 2019:,,,,,,

This Petition has been filed to secure the outstanding amount of INR 6,50,49,420 (Rupees Six Crores Fifty Lakhs Forty Nine Thousand and Four",,,,,,

Hundred Twenty only, as on 31 December, 2018) alleged to be due and payable by the Respondent Nos. 1 to 3 jointly and/or severally to Petitioner",,,,,,

No. 1 under DPA and respective Personal Guarantees issued by Respondent Nos. 2 and 3.,,,,,,

The case of Petitioner No. 1, as stated in the petition, is that Respondent No. 1 failed to adhere to the terms of the DPA and committed several",,,,,,

defaults. On 29th August 2017, a caution notice was issued to Respondent No. 1 requesting it to abstain from committing defaults. There was no",,,,,,

response to the said notice and the defaults continued. In addition to the above, Respondent No. 1 also committed several defaults under the DA for",,,,,,

which Petitioner No. 1 issued notices/warning letters on 30th January 2018, 9th July 2018 and 21st August 2018. On 22nd August 2018, Petitioner No.",,,,,,

1 suspended the DPA and called upon Respondent No. 1 to make the payment of INR 3,78,85,827 (Rupees Three Crores Seventy-Eight Lakhs Eighty",,,,,,

Five Thousand Eight Hundred and Twenty Seven Only) and clear the interest overdue of INR 6,47,800 (Rupees Six Lakhs Forty Seven Thousand and",,,,,,

Eight Hundred). Several reminders were also issued, but Respondent No. 1 failed to comply and instead gave false promises and assurances.",,,,,,

Respondent No. 1 also indulged in serious customer related delinquencies, by inter-alia (i) not registering the car of its customers inspite of taking",,,,,,

money from them; (ii) not refunding booking amount (for cancelled booking); (iii) inordinately delaying handing over of Cars. As of today, more than",,,,,,

32 customer complaints have been raised which were remedied by Petitioner No. 1 at its own cost. Petitioner No. 1 has incurred substantial amount,,,,,,

of loss owing to the illegal and mala-fide conduct of the Respondent. As on date, the DA and consequently the DPA have expired and there remains",,,,,,

no contractual relationship between the parties. However, Respondent No. 1 has neither cleared the outstanding amount nor has it complied with the",,,,,,

post closure activities. On 24th December 2018, Petitioner No. 1 issued public notice declaring that the DA of Respondent will expire on 31st",,,,,,

December 2018.,,,,,,

It is also alleged that Respondent No. 1 is in breach of Section 92 of the Companies Act, 2013 and also does not have the requisite number of",,,,,,

Directors on board. Petitioner No. 1 is under the apprehension that Respondent No. 1 would become defunct in the near future and Petitioner No.1,,,,,,

would not be able to recover its dues. It is stated that Respondent No. 1 is a chronic and habitual defaulter, its liabilities are growing and the same",,,,,,

exceeds INR 20 (twenty) crores as is evident from the credit information report of Respondent No. 1. Petitioner No. 1 apprehends that Respondent,,,,,,

No. 1 will not be in a position to honour the award that may be made against it in the arbitration proceedings and hence it should be directed to furnish,,,,,,

a security or a Bank Guarantee to secure the outstanding amount.,,,,,,

Facts leading to the present dispute in OMP (I)(Comm) 9 of 2019:,,,,,,

This Petition has been filed to secure the outstanding amount of INR 6,07,57,493 (Rupees Six Crores Seven Lakhs Fifty Seven Thousand Four",,,,,,

Hundred Ninety Three) (as on 31 December, 2018) allegedly payable by Respondent No. 1 to Petitioner No. 2 under the Financial Assistance",,,,,,

Agreements executed between the parties.,,,,,,

The case of Petitioner No. 2 as stated in the Petition is that Respondent No. 1 failed to adhere to the terms of the Financial Assistance,,,,,,

Agreements and committed several defaults under both the Agreements. On 23 November 2016, a show cause notice highlighting the defaults under",,,,,,

the Floor Plan Financing Agreement and Deed of Hypothecation was issued to the Respondent No. 1. The defaults inter-alia included the SOT,,,,,,

instances discovered during the stock audits. On 30th July, 2018, Respondent No. 1 was called upon to pay the outstanding amount under Clause 10 of",,,,,,

Schedule 1 of the Floor Plan Financing Agreement and the Credit facility under the Floor plan facility agreement was suspended. Respondent did not,,,,,,

respond to this communication. A meeting took place on 8th August 2018, wherein various issues including instances of SOT were discussed at length,",,,,,,

and an email dated 9th August 2018, recording minutes of the meeting was sent to Petitioner No. 1. In response thereto, Respondent No. 1 vide an",,,,,,

email dated 15th August 2018 admitted the various SOT instances. A meeting was also organised by Petitioner No. 2 on 12th October 2018 where,,,,,,

Respondent No. 1admitted to the Defaults and agreed to make an on-account interim payment of INR 10,00,00,000 (Rupees 10 Crores Only) by 31st",,,,,,

October 2018 and the remaining amount by 15th November 2018. In view of the continuing defaults, Petitioner No. 2 was constrained to exercise",,,,,,

remedial action and encashed the Bank Guarantee for an amount of INR 7,00,00,000 (Rupees Seven Crores) by letter dated 2nd November 2018.",,,,,,

Having failed to pay the remaining outstanding dues, a final notice dated 13th November 2018 was issued by Petitioner No. 2 calling upon Respondent",,,,,,

No. 1 to pay the remaining outstanding dues of INR 5,84,14,466 (Rupees Five Crore Eighty Four Lakhs Fourteen Thousand Four Hundred Sixty Six)",,,,,,

by 15th November 2018. Respondent No. 1 did not reply to the said notice and till date it has not paid the remaining outstanding dues.,,,,,,

It is also alleged that, despite admitting the default, Respondent No. 1 has failed to clear the outstanding dues. As on date, Respondent No. 1 is in",,,,,,

possession of 8 cars against which amounts are due under the Floor plan Financing Agreement. In this regard, it is submitted that even though one key",,,,,,

of these cars is with the Petitioner No. 2, Respondent No. 1 has sold one out of 8 cars without informing Petitioner No. 2.",,,,,,

On the surmise of the facts narrated above, Petitioners claim that they have a strong prima facie case on merits and that the balance of",,,,,,

convenience leans in their favour. There is a real likelihood that an award will be passed in favour of the Petitioners and such award will be rendered,,,,,,

infructuous in case the admitted amount is not secured by a collateral in the form of a Bank Guarantee.,,,,,,

Case of the Respondents:,,,,,,

Learned counsel for the Respondents contends that the present petitions are not maintainable as Petitioners have failed to disclose or even plead,,,,,,

the essential grounds for seeking the reliefs that are in the nature of attachment before judgment. Learned counsel submits that a prayer to secure the,,,,,,

purported outstanding amount of INR 6,50,49,420 and 6,07,57,493 by way of a bank guarantee or other means, is totally untenable in law. Respondent",,,,,,

No. l had furnished a security by way of a bank guarantee to the tune of INR 7 Crores, jointly in favour of the Petitioners. The said guarantee has",,,,,,

already been illegally encashed by Petitioner No. 2. The present petition is nothing but an arm-twisting tactic against the Respondents and a mala fide,,,,,,

attempt to obtain further security over and above the contractually agreed sum. Granting the reliefs as sought would amount to re-writing the contract,,,,,,

between the parties. He further submits that Respondent No. l has never admitted to the claims made by Petitioners and the reliance placed upon the,,,,,,

email dated 16th October 2018, is misplaced. The purported admission of debt in the meeting dated 12th October 2018, was subject to certain",,,,,,

condition. The parties had agreed to settle their past disputes and proceed forward towards new business opportunities. The meeting cannot be,,,,,,

considered as an admission of debt as Petitioners terminated the agreements contrary to the assurance given. Further, Petitioners were already",,,,,,

secured to the extent of INR 7 crores vide the bank guarantee that has already been encashed on 2nd November 2018 by Petitioner No. 2.,,,,,,

Petitioners have malafidely preferred these petitions by concealing several material facts in an attempt to re-write the contract by seeking,,,,,,

additional security over and above the contractual security. The two groups of companies are indulging in forum shopping and attempting to mislead,,,,,,

this Hon'ble Court into passing interim orders against the Respondents. He submits that since the nature of relief claimed under the present petition is,,,,,,

akin to reliefs claimed under Order 38 Rule 5, CPC 1908, Petitioners are required to establish the crystallization/certification of debt due to them and",,,,,,

also validate with cogent material the apprehension that the Respondents are attempting to remove or dispose of the assets with the intention of,,,,,,

defeating the decree/award that may be passed. Respondent No. 1 is infact not attempting to defeat any future award and in absence of any material,,,,,,

to the contrary, the petitions are not maintainable. Reliefs claimed are not based on any real facts and exhibit mala fide intention on the part of the",,,,,,

Petitioner. The proceedings are a misuse of the process of law and the same merit dismissal.,,,,,,

On behalf of Respondent Nos. 2 and 3 specifically, he argued that Petitioner No. 1 cannot, at this stage, make any claim against them in their",,,,,,

purported capacity of guarantors. He contends that, it is trite law, that for any liability to be imposed upon the Guarantors, there has to be a default of",,,,,,

repayment of an ascertained liability amount by the principal debtor i.e. Respondent No. 1. In the present case, the alleged liability of Respondent No.",,,,,,

1 will be determined only once the arbitration is concluded. Hence, the question of imposing any liability on the guarantors, if at all, will arise only if",,,,,,

Respondent No. 1 is unable to clear its liability under the future award, and not otherwise. The extent or quantum of such liability cannot be",,,,,,

ascertained at this stage. As such, the current assets of Respondent Nos. 2 and 3 including their properties, bank balances etc, or any change thereto,",,,,,,

have no bearing whatsoever for the purposes of the present proceedings. Nevertheless, Respondent Nos. 2 and 3 have in good faith, placed on record",,,,,,

details of their personal assets as directed by this Honâ€​ble Court.,,,,,,

Analysis and Findings:,,,,,,

The Court has given due consideration to the submissions advanced by the learned counsels for the parties. The scope of the petitions is limited in,,,,,,

view of the nature of the reliefs sought therein, which reads as under:-",,,,,,

OMP(I)(Comm) 25 of 2019:,,,,,,

S.No.,"Changes/Discrepancies/other changes

in the Affidavit.","Filed on 18 February 2019

(Assets as on 30.09.2018)","Served on 29 March 2019

(Assets as on 30.09.2018

and 18.02.2019",,,

1.,Para 6 â€" Annual Income,Consolidated loss of 1.9 Crores,"Consolidated loss of 2.2

Crores",,,

2.,"Para 8 â€" Assets in possession of

Respondent",,,,,

,(a) Bank Accounts,Account Balance not disclosed,"Â · Balance as on

30.09.2018 - INR

26,01,636.72 on

18.02.2019- INR

4,48,364.72 · Balance in

inventory account not

disclosed.",,,

,"(b) Stocks and Shares Motor Vehicles

Spare Parts and accessories","3.93 Crores

1.17 Crores","2.54 Crores (This includes

vehicles mortgaged to

ICICI Bank worth IN

1.4 Crores)

70 Lakhs",,,

,"(e) Other Property Vehicles (under

Showroom)

Immovable Property (under

Showroom)","2.61 Crores

(Not Disclosed)","(Not Disclosed)

1.43 Crores",,,

,"(f) Other Securities Fixed Deposit with

YES Bank

Rent Security","4.5 Crores

1.36 Crores","1 Crores

80 Lakhs",,,

3.,Debts due to Libra,To be ascertained,To be ascertained,,,

,Total,13.57 crores (approx.),6.47 crores (approx.),,,

S.No,"Allegations

raised on

05.04.2019","Response

provided by

Respondent

Company on

5.04.2019 &

vide Additional

Affidavit dated

11.04.2019","Allegations

raised on I

Response

15.04.2019","Response

provided by

Respondent

Company on

15.04.2019 and

vide Affidavit

dated

04.05.2019","Allegations

raised on I

Response

16.05.2019",Response

1.,"Account

balances of

Inventory

Accounts-not

disclosed","Inventory

accounts are

not deposit

accounts and

are in the

nature of a

credit facility.

The said

accounts

therefore do

not have any

“balanceâ€​.","Respondent

Company

has not

provided

any

agreement

for the

inventory

funding

accounts","Agreements for

inventory

funding along

with available

bank statement

are placed on

record","Charge

created in

favour of

HDFC Ban

over

properties

hypothecated

to the

Petitioner","Details of

first charges

over assets

kof the

Responden t

is available

on the

website of

Ministry of

Corporate

Affairs. YES

Bank has

issued NOCs

towards first

charge of

Petitioner

and BMW

SF. There is

no other

charge

registered on

the assets of

Respondent.

Without

prejudice,

such charges

are created

b y similarly

placed

dealers as a

general

practice (and

are known to

BMW

Group).

2.,"D e t a i l s of

Motor Vehicles

and Spare

Parts-not

disclosed","Details of cars

and spare

parts are

within the

knowledge of

both parties

being

exclusively

sourced from

BMW","Details of

cars

available

with

Respondent

Company

have not

been

provided","Details of cars

available with

Respondent

Company have

placed on

record.",None,None

3.,"Hypothecation

over stock,

book debt and

machinery in

favour of BMW

SF-not

disclosed","First Charge of

the Petitioner

is registered in

record of the

Respondent

Company",None,None,None,"Details of the

charges are

available at

the MCA

website.

4.,"Vehicle worth

INR 140 Lac

(allegedly

hypothecated to

BWW SF

shown to be

mortgaged to

ICICI Ban

Ltd. â€" details

not provided.","Vehicle

shypothecate d

to ICICI i

registered in

)Respondentâ€​s

name. It was

imposed on

kResponden t in

terms of a

promotion al

scheme

launched by

BMW.","Loan

Agreement

swith ICIC

not

provided.","Copy of loan

agreement and

Ithe scheme

under which the

car was

provided are

p l a c e d on

record.","Charge could

not have

been in

favour of

ICICI Bank.","T he vehicle

in question,

being a

promotional

stock, was

not financed

by BMW SF

and

therefore,

Respondent

was

constraine d

to finance

the same

through

ICICI Bank.

5.,"D e t a i l s of

“debts due

to the

Respondentâ€​

â€" mentioned

as “to be

ascertainedâ€​","Details could

not be

ascertained

due to want of

reconciliati on

of accounts

a n d shortage

of staff.",None,None,None,None

6.,"Segregation of

properties as

leased or

swelfowned-not

provided","Affidavit of

assets doies

not include

leased

properties.

Details ot

outgoing rent

a n d security

deposits

disclosed.",None,"Lease

deeds/agreemen

ts placed on

record.",None,None

7.,"D e t a i l s of

property at

Sukhdev Vihar

â€" not

disclosed","Property at

Sukhdev Vihar

was bought

after

30.09.2018 and

could not be

disclosed in the

first affidavit

as that was

upto

30.09.2018. In

fact, the said

property was

voluntary

disclosed

before the

Honâ€​ble

Court by the

Respondent

Company.","Purchase of

property

amounts to

siphoning of

funds.","Siphoning of

funds could

have been

alleged if the

promoters

would have

diverted the

funds of the

Company to

purchase

personal

properties.

I n the present

case, the asset

has been

purchased in the

name of the

Company. The

same does not

amount to

siphoning.",None,None

8.,"Mentioning

property at

Sukhdev Vihar

as under the

head of

„showroomâ€​

is false.","I t was

acknowled ged

by the Counsel

of the

Respondent

Company to be

inadvertent ly

mentioned as

under the head

„showromâ€​

â€" the value

mentioned in

t h e affidavit

was same as

orally disclosed

before the

Court.",None,None,None,None

9.,"Value of assets

has drastically

reduced

(between

30.09.2018 to

18.02.2019) in

the following

manner; while

outstanding

towards BMW

has increased

â€" thereby

raising suspicion

of siphoning:","It is a matter of record that October 2018 onwards, the Petitioner had

curtailed its supplies to the Respondent Company. The sales had also

declined steeply as the Petitioner Group had retained keys of the

vehicles. Additionally, since the showroom of the Respondent Company

had been sealed, the consequent losses and depletion was a natural

consequence. The Respondent Company also has counter claims

against the BMW Group for its malpractices which caused huge losses

to the Respondent Company.

All the above factors, inter alia, coupled with the illegal encashment of

the Respondent Companyâ€​s Bank Guarantee led to the recurring

losses to the Respondent Company.",,,,

,"Reduction in

value of

motorvehicle

and spare parts","The utilization

of sale

proceeds of

the motor

vehicle and

spare parts has

b e e n duly

explained in

Affidavit dated

11.04.201 9

filed in OMP

(I) COMM

of 2019. The

money has

been used

majorly in

meeting

operational

requirements

of Respondent

Company

There is no

siphoning off.

The payments

are duly

recorded.","Supporting

documents

of alleged

expenditure

made from

sale of

vehicles and

spare parts

â€" not

provided

9","Ledger entries

documentin g

expenditure post

October 2018

placed on

record",None,None

1.,"The Respondent No. 2 has

mortgaged all his properties

held as on 18 February 2019

to one of his own company

Libra Finance Limited

wherein he holds shares

worth INR 10,97,900 and

has taken loan against the

same. It is highly possible

that the entire loan taken

against the said properties

have been internally

siphoned off by the

Respondent No. 2. One

such transaction is evident

from above table, wherein

between 30 September 2018

and 18 February 2019, the

Respondent No. 2 has given

a loan of an amount of INR

50 Lakh to his own company

Libra Four Wheel.","T h e properties

mentioned at first

three entries in para

8 (d) of the Affidavit

o f Assets were

mortgaged to Libra

Finance Private

Limited in the year

2010. The relevant

bank account entries

reflecting the receipt

of loan amount on

11.06.2010 and

14.06.2010 have

been placed on

record before this

Honâ€ble Court.

Thus, the desperate

allegation of malafide

intention of the

Petitioner to render a

future award futile

(totally

uncontemplable at

the time of creation

of mortgage), falls on

its face. The loan to

Libra Four Whee

further strengthens

the Respondent No.

2â€s argument that

he has sold his

personal assets to

support his

companies.","None

l",None,,

2.,"On 22 January 2019, i.e. ,

post filing of the Section 9

petition by BMW Financial

Services OMP (I) Comm

of 2019 (listed on 17 January

2019), the Respondent No. 1

sold his Property located at

_ house No. 122, Tagore

Park, New Delhi, to Iqba

Singh Jakhar for an amount

of INR 3,10,50,693. The

balance in all the accounts

of the Respondent No. 2 as

on 18 February 2019, i.e. 27

days after the sale, is still

only INR 4,83,737 (where

has this money gone?) As

on 30 September 2018, this

property was within the

possession of the

Respondent No.2, however,

the Respondent lied on oath

and has neither disclosed

this property or this

transaction in its affidavit

dated 18 February 2019.","T h e property

mentioned at fourth

entry in para 8 (d) of

9the Affidavit of

Assets had been

transferred as per

the registered sale

deed dated

l22.01.2019.

The proceeds of the

sale were, however,

received by the

Respondent No. 2 in

the month of October

2018 and most of the

said amount was

immediately

used/invested to pay

off liabilities of the

Respondent No. 2â€​s

companies to banks

and other companies.

The sale deed and

the details of the

utilization of the sale

proceeds have been

placed on record

before this Honâ€ble

Court.

Note: The Affidavit

filed by the

Respondent No. 2 on

18.02.2019 was

updated till that date

(and not as on

30.09.2019). Only

the affidavit of the

Respondent No. 1

was as on

30.09.2019. Hence, it

is obvious that once

sold the property (or

the transaction ) was

not an asset of the

Respondent No. 2 to

be mentioned in the

said affidavit.

Subsequently, when

the Respondent No.

2 was directed to file

an affidavit of assets

as on 30.09.2018 and

as on 18.09.2019, the

property and the

transaction was duly

disclosed in the

Affidavit dated

3.05.2019. Hence,

contrary to the

misconceived

allegation, the

Respondent No. 2

has neither lied on

oath nor failed to

disclose the asset or

the transaction.",None,None,,

3.,"On 14 February 2019, i.e. 4

days before filing the

affidavit in the present

petition, the Respondent No.

2 gifted his 1/3 share

undivided share in property

No. 121, Tagore park, New

Delhi, to his son Dilsher

Singh under the guardianship

of his wife Parveen Kaur.

This transaction also was

not disclosed in the affidavit

dated 18 February 2019 or

during the hearing held on 8

February 2019.","T h e property

mentioned at fifth

entry in para. 8 (d) of

the Affidavit of

Assets was gifted to

the minor son of the

Respondent No. 2

pursuant to a

mediation award in

Ct. Case No. 1942 of

2019 before Patiala

House Courts, New

Delhi. The mediation

award has been duly

placed before this

Honâ€​ble Court","T h e Mediation

Award filed by the

Respondent No. 2 is

a false document.

Respondent No. 2

has agreed to

transfer properties

already mortgaged to

some other entity.","The 1/3rd share of

property No. 121,

Tagore Park, New

Delhi has been filed

under the aegis of a

court recognized

mediation order (and

again not with an

intention to render any

arbitral award futile).

It is also clarified that

the other properties

mentioned in the

mediation order are

also intended to be

figted as per the terms

of the mediation order

which could not be

done only because of

the existing

mortgage/encumbrance

on those properties.

The Respondent No. 1

so far has also not

been able to pay the

agreed maintenance to

his wife under the

Order as the

Respondents are giving

priority to the salaries

of their staff which are

pending.",,

4.,"T h e net worth of the

Respondent No. 2 as on

30.019.2015 was INR 105

Crores (approx.), whereas

the net worth of the

Respondent No. 2 as per the

affidavit submitted on 18

February 2019 and 29

March 2019 is less than INR

2 Crores (approx)","N o document has

been produced

before this Honâ€ble

Court to support this

contention. In any

event, this contention

is irrelevant for the

purposes of the

present proceedings

as the Respondent

No.2 is admittedly

under financial

stress, as claimed in

the Petition.",None.,None.,,

order. The Court after considering several judgments on this issue, has observed as under:-",,,,,,

“25. Interestingly, in a previous decision, Firm Ashok Traders & Anr v Gurumukh Das Saluja & Ors (2004) SCC 155, the Supreme Court observed",,,,,,

that:,,,,,,

“13. ..The Relief sought for in an application under Section 9 of the A&C Act is neither in a suit nor a right arising from a contract. The right,,,,,,

arising from the partnership deed or conferred by the Partnership Act is being enforced in the Arbitral Tribunal; the court under Section 9 is only,,,,,,

formulating interim measures so as to protect the right under adjudication before the Arbitral Tribunal from being frustrated.....â€​,,,,,,

Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the",,,,,,

weight to be given to the materials on record, a fact dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in",,,,,,

fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be",,,,,,

principled, premised on some known guidelines - therefore, the analogy of Orders 38 and 39. Equally, the court should not find itself unduly bound by",,,,,,

the text of those provisions rather it is to follow the underlying principles. In this regard, the observations of Lord Hoffman in Films Rover International",,,,,,

Ltd. v. Cannon Film Sales Ltd.(1986) 3 All ER 772 are fitting:,,,,,,

“But I think it is important in this area to distinguish between fundamental principles and what are sometimes described as FAO(OS)(COMM),,,,,,

61/16 & connected cases Page 21 of 25 'guidelines', i.e. useful generalisations about the way to deal with the normal run of cases falling within a",,,,,,

particular category. The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a",,,,,,

risk that the court may make the 'wrong' decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would",,,,,,

fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is",,,,,,

therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong' in the sense,,,,,,

I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.â€​,,,,,,

It was observed later, in the same judgment that:",,,,,,

“The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the,,,,,,

grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe,,,,,,

the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and",,,,,,

therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory",,,,,,

injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the,,,,,,

plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction.â€​â€​",,,,,,

Similarly, in the case of Huawei Technologies Company Ltd. Vs. Sterlite Technologies Ltd., (2016) SCC Online Del 604, this Court held as under:-",,,,,,

“As far as finding arrived by the Division Bench in C.V. Rao case [2014 SCC OnLine Del 4441 : (2015) 218 DLT 200] is concerned, this Court",,,,,,

totally agrees that the said relief can only be granted in the exceptional cases when there is adequate material on record leading to a definite,,,,,,

conclusion that the respondent is likely to render the entire arbitration proceeding infructuous if the award is passed against them.,,,,,,

I agree that the discretion should be exercised in those exceptional cases when there is adequate material on record leading to a definite conclusion,,,,,,

that the respondent is likely to render the entire arbitration proceedings infructuous or there is an admitted liability.â€​,,,,,,

A careful analysis of the judgment in Ajay Singh (supra), reveals that in the said case, the Division Bench has held that Section 9 of the Act grants",,,,,,

wide powers to the Court in fashioning an appropriate interim order. It has also been held that Court should not find itself unduly bound by the text of,,,,,,

those provisions and should rather follow the underlying principles. Essentially, the Division Bench has held that the discretion should be exercised",,,,,,

appropriately while granting an interim order and such discretion must be based on well recognized principles governing the grant of interim injunctions,,,,,,

and other orders of interim protection. Even in Huawei Technologies (supra), the Court has recognized that all the requisite conditions of Order 38",,,,,,

Rule 5, CPC are required to be satisfied for considering the prayer of securing the amount and the Court should exercise its discretion very carefully.",,,,,,

It was also held that where it appears that there are exceptional circumstances, it has ample power to secure the amount, if it is just and convenient.",,,,,,

However, the aforenoted judgments do not seem to suggest that while exercising power under Section 9 the necessary conditions and ingredients",,,,,,

under Order 38 Rule 5 CPC, are not required to be insisted upon. The judgments relied upon by the Petitioner only stress that the power should be",,,,,,

principled and premised on some known guidelines and hence the analogy of Order 38 and 39, CPC is certainly applicable. At this stage, the",,,,,,

judgments relied upon by the learned counsel for the Respondents also need to be mentioned. Respondents have relied upon C.V. Rao & Ors v.,,,,,,

Strategic Port Investment, (2015) 218 DLT 200, Lanco Infratech Ltd. v. HCC Ltd. (2016) 234 DLT 175, Intertoll ICS Cecons O&M v. NHAI, ILR",,,,,,

(2013) II Delhi 1018, Raman Tech v. Solanki Traders, 2008 (2) SCC 302 and Kopastin Holding Ltd. v. Uday Bahadur & Ors, MANU/DE/2867/2018.",,,,,,

Besides the aforenoted judgments, there are several other judgments that deal with this issue. In Nimbus Communication Ltd. v. Board of Control",,,,,,

for Cricket in India, 2012 SCC OnLine Bom 287, the Bombay High Court held as under:-",,,,,,

“The judgment of the Supreme Court in Adhunik Steels has noted the earlier decision in Arvind Constructions which holds that since section 9 is a,,,,,,

power which is conferred under a special statute, but which is exercisable by an ordinary Court without laying down a special condition for the",,,,,,

exercise of the power or a special procedure, the general rules of procedure of the Court would apply. Consequently, where an injunction is sought",,,,,,

under section 9 the power of the Court to grant that injunction cannot be exercised independent of the principles which have been laid down to govern,,,,,,

the grant of interim injunctions particularly in the context of the Specific Relief Act, 1963. The Court, consequently would be obligated to consider as",,,,,,

to whether there exists a prima facie case, the balance of convenience and irreparable injury in deciding whether it would be just and convenient to",,,,,,

grant an order of injunction. Section 9, specifically provides in sub-clause (d) of clause (ii) for the grant of an interim injunction or the appointment of a",,,,,,

receiver. As regards sub-clause (b) of clause (ii) the interim measure of protection is to secure the amount in dispute in the arbitration. The underlying,,,,,,

object of Order 38 Rule 5 is to confer upon the Court an enabling power to require a defendant to provide security of an extent and value as may be,,,,,,

sufficient to satisfy the decree that may be passed in favour of the plaintiff. The exercise of the power to order that security should be furnished is,",,,,,,

however, preconditioned by the requirement of the satisfaction of the Court that the defendant is about to alienate the property or remove it beyond",,,,,,

the limits of the Court with an intent to obstruct or delay execution of the decree that may be passed against him. In view of the decisions of the,,,,,,

Supreme Court both in Arvind Constructions and Adhunik Steels, it would not be possible to subscribe to the position that the power to grant an interim",,,,,,

measure of protection under section 9(ii)(b) is completely independent of the provisions of the Code of Civil Procedure 1908 or that the exercise of,,,,,,

that power is untrammelled by the Code. The basic principle which emerges from both the judgments of the Supreme Court is that though the,,,,,,

Arbitration and Conciliation Act, 1996 is a special statute, section 9 does not either attach a special condition for the exercise of the power nor does it",,,,,,

embody a special form of procedure for the exercise of the power by the Court. The second aspect of the provision which has been noted by the,,,,,,

Supreme Court is the concluding part of section 9 under which it has been specified that the Court shall have the same power for making orders as it,,,,,,

Total Stock,36,"166,613,102",,,,

SOT,19,,,,,

Stock with Keys,11,,,,,

Facility,Units,Amount,,,,

Curtailment (excluding SOT),8,"11,798,508",,,,

SOT,19,"82,731,722",,,,

Spare Parts (BMW SF),,"4,41 4,154",,,,

Spare Parts (BMW India),,"3,635,047",,,,

Interest (BMW India) (including

GST)",,"1,977,647",,,,

Interest (BMW SF),,"2,750,9 10",,,,

Total,,"107,307 ,988",,,,

Libra committed that the 10 cr. funding will be received from another bank by the end of the month and the same will be used to clear all SOTs and,,,,,,

outstanding nearing NPA stage.,,,,,,

The payments will be done to NSC and SF by October 31, 2018.",,,,,,

Further, outstanding over and above INR 10 cr. will be cleared by November 15, 2018.",,,,,,

Libra expressed that key management process of stock cars by SF should continue as it helps them in operations and control of stock.,,,,,,

The above payment plan was acknowledged by SF. The restoration of financing facility will be discussed based on Libra successfully meeting these,,,,,,

commitments by October 31, 2018.",,,,,,

Libra acknowledged that if it fails to fulfill its commitments by that date incompleteness, SF reserves the right to take appropriate remedial",,,,,,

measures as per the contractual arrangements with Libra.,,,,,,

It was agreed that the resolution plan for remaining open points as per the agenda will be provided by Libra in the first week of November 2018.,,,,,,

Libra requested for wholesale of 10 cars upto October 31, 2018, to help operations during festive season. NSC and SF will consider the request",,,,,,

and revert on the decision.,,,,,,

It has since been decided by SF that considering the overall overdue situation and other breaches under the existing financing facilities, it will not in",,,,,,

a position extend further credit to Libra.,,,,,,

BMW India (NSC):,,,,,,

I. Mr. Manreet Libra confirmed that they had committed to clear the outstanding by September 17, 2018 but have failed to do so due to other banks",,,,,,

becoming strict in providing further loans. Libra is trying to repay NSC and SF by further taking loans from other banks.,,,,,,

Mr. Libra confirmed that all the outstanding pertaining to NSC and SF will be cleared by October 31, 2018. Further, all outstanding over and above",,,,,,

that to NSC and SF will be cleared by November 15, 2018.",,,,,,

Libra requested for wholesale of 10 cars (total wholesale amount upto 5cr.) upto October 31 , 2018, to help operations during festive season.",,,,,,

Considering DPA has been suspended for Libra and SF is not in a position to extend further credit to Libra- any further possibility to be explored by,,,,,,

NSC.,,,,,,

It was informed in the meeting that the Libra's showroom is likely to de-sealed and resume operations by first week of January 2019. However,",,,,,,

further clarity will be obtained on next court hearing which is scheduled in first week of December 2018.,,,,,,

Since unavailability of sales facility as per BMW standards is in clear violation of Dealership Agreement, BMW India reiterated that Libra should",,,,,,

be ready with backup plan once all financial related topics are resolved and financing facility from SF is restored.,,,,,,

It was agreed that once financing facility and normal wholesale operation is restored, Libra will be required to comply with all other contractual non-",,,,,,

compliance and breaches including Retail Standards for Sales and After sales, submission on financials etc and the confirmation of the same will be",,,,,,

shared with NSC in writing.,,,,,,

It was highlighted that customer complaints against Libra have been growing and need to be addressed at DP level also now, depending on the",,,,,,

complaint, since Business Head is already involved in these. Libra agreed to address all existing complaints and put measures in place to prevent",,,,,,

further increase in complaints.,,,,,,

Libra acknowledged all other contractual breaches for NSC and SF and agreed to respond to all topics by first week of November.,,,,,,

The above was accepted by NSC and SF. The restoration of financing facility will be decided based on Libra successfully meeting these,,,,,,

commitments by October 31, 2018.",,,,,,

If Libra fails to fulfill its commitments by October 31, 2018, BMW India reserves the right to take appropriate remedial measures as per the",,,,,,

contractual arrangements with Libra.,,,,,,

Libra Action points :,,,,,,

Libra discussed the way forward for business recovery with other banks and offered owned property as a collateral.,,,,,,

One of the bank has in-principle assured 10 crore CC funding. Libra has assured that this money will be rotated and repaid to the bank within 1.5,,,,,,

years to prevent much additional interest burden on Libra's financials.,,,,,,

Mr. Libra confirmed that key management by BMW India should continue to support in business operations and overall control of stock.,,,,,,

It was agreed that after complying with all financials related topics, Libra will do the following by November 30, 2018:",,,,,,

Libra will scout for alternate sites for showroom and an appropriate site will be selected with approval from BMW India Libra will confirm to,,,,,,

BMW India that same site is available for start of work for setting up the new showroom on-site.,,,,,,

Confirm availability of sufficient customer parking for workshop.,,,,,,

Timeline for start of setting up of new showroom:,,,,,,

In case the court does not pass judgement to de-seal by 6 January 2019, immediate start to setting up of new showroom.",,,,,,

If there is sufficient reason to believe that the court will not rule in favour of de-sealing in the hearing in first week of December, immediate start of",,,,,,

setting up of new showroom.â€​,,,,,,

Whether this constitutes an admission of debt or not, is a question that is not required to be decided in the present petition. Having said that, even if",,,,,,

Respondent No. 1 is in default that does not necessarily mean that the court should direct furnishing of a bank guarantee to secure the alleged,,,,,,

admitted amount. The Court also has to be satisfied that Respondents are attempting to remove/dispose off/alienate their assets to defeat any future,,,,,,

award that may be passed in favour of the Petitioners. It needs to be reinforced that the law requires that even if the Petitioner has a prima facie case,,,,,,

in its favour, the same itself would not be sufficient to entitle it to seek an interim measure or protection in the nature of direction to furnish security of",,,,,,

the disputed amount. Petitioner should also establish that the Respondents are intending to defeat the rights of the Petitioners to enforce the arbitral,,,,,,

award that may be passed in their favour. The aspect of balance of convenience is also to be weighed upon. It is necessary for the Court to satisfy,,,,,,

itself that the assets which are subject matter of arbitration are about to be alienated or removed beyond the limits of the Court with an intent to,,,,,,

obstruct or delay the execution of awards. Petitioner has alleged that there is admission of debt and has placed reliance on a letter dated 15th October,,,,,,

2018 wherein it has claimed that an amount of INR 6.47 crores is outstanding as on 12th October 2018. This was followed by the email dated 16th,,,,,,

October 2018, the extract whereof has been reproduced above. A perusal of the email indicates that apparently there was an understanding between",,,,,,

the parties that Respondent No. 1 would be allowed to continue its operations. Respondent No. 1 contends that pursuant to the aforesaid discussion,",,,,,,

Petitioner provided cars worth Rs. 5 crores and out of the 8 cars so provided, Respondent No. 1 sold one car on 1st November 2018, the sale",,,,,,

proceeds whereof have been received by Petitioner No. 1. Six cars thereafter have been returned to Petitioner No. 1, leaving one car with",,,,,,

Respondent No. 1. Prima facie the understanding recorded in the email indicates that Petitioners were to continue to support the Respondents in its,,,,,,

business operations. Petitioners did not insist for additional BG and accepted Respondent owned property as a collateral. Be that as it may,",,,,,,

concededly, Petitioner Nos. 1 and 2 thereafter encashed the Bank Guarantee worth Rs. 7 crores on 2nd November 2018. The amount alleged to be",,,,,,

due as mentioned in the email recording the discussion of the meeting dated 12th October 2018 is INR 10.73 crores. Against the said amount,",,,,,,

Petitioner has recovered INR 7 crores. Petitioners assert that its further outstanding is around 12 Crores (Rs. 6,50,49,420 + Rs. 6,07,57,493).",,,,,,

Respondents submit that the aforesaid figure is grossly inflated and is not on the basis of any admitted document but self serving letters issued by the,,,,,,

Petitioners and therefore the claim is neither crystallized nor admitted by Respondent No. 1. In view of the disputed facts, at this stage where law",,,,,,

requires the exercise of the power under Order 38 Rule 5, CPC to be done in extraordinary circumstances, directing Respondent No. 1 to furnish a",,,,,,

BG would amount to converting an unsecured debt into a secured one. The Petitioner admittedly had a Bank Guarantee of INR 7 crores and not more,,,,,,

and it exposed itself allegedly for a larger amount. The Court cannot, at this stage, in view of the hotly contested inter se claims, determine the possible",,,,,,

extent of the claim that is likely to be awarded by exercising jurisdiction under Section 9 of the Act. Directing the provision of a security by way of a,,,,,,

Bank Guarantee in relation to a speculative claim in the facts of the present case is certainly not within the scope of Section 9 of the Act. Without,,,,,,

there being any certification about the amounts due, there cannot be said to be an admitted liability of Respondent No. 1. There is no material before",,,,,,

the Court, which can convincingly prove that the apprehension of the Petitioner is correct. Having perused the affidavits placed on record, it prima",,,,,,

facie appears that Respondents have justified the statements made in their affidavits and explained the discrepancies pointed out by the Petitioner. The,,,,,,

Court cannot on the basis of the material placed on record come to the conclusion that Respondents have liquidated their assets or siphoned off the,,,,,,

sale proceeds of such assets with the intent to frustrate the future award. Further, in Raman Tech and Process Engg. Co. v. Solanki Traders, (2008) 2",,,,,,

SCC 302 the Supreme Court has held that merely having a zest or valid claim or a prima facie case, will not entitle the Plaintiff to an order of",,,,,,

attachment before judgment, unless it has also established that the Defendant is attempting to remove or dispose of his assets with the intention of",,,,,,

defeating the decree that may be passed. The relevant portion of the said judgment reads as under:,,,,,,

“4. The object of supplemental proceedings (applications for arrest or attachment before judgment, grant of temporary injunctions and appointment",,,,,,

of receivers) is to prevent the ends of justice being defeated. The object of Order 38 Rule 5, CPC in particular, is to prevent any defendant from",,,,,,

defeating the realisation of the decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove from the",,,,,,

jurisdiction of the court, his movables. The scheme of Order 38 and the use of the words “to obstruct or delay the execution of any decree that",,,,,,

may be passed against him†in Rule 5 make it clear that before exercising the power under the said Rule, the court should be satisfied that there is a",,,,,,

reasonable chance of a decree being passed in the suit against the defendant. This would mean that the court should be satisfied that the plaintiff has a,,,,,,

prima facie case. If the averments in the plaint and the documents produced in support of it, do not satisfy the court about the existence of a prima",,,,,,

facie case, the court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under",,,,,,

Order 38 Rule 5 CPC. It is well settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of",,,,,,

attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of",,,,,,

defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an",,,,,,

attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.â€​",,,,,,

In view of the facts and circumstances discussed herein above and considering the nature of claims of the Petitioners, the Court does not find any",,,,,,

ground to grant the relief of directing Respondent No. 1 to furnish the BG to secure the amount that is alleged to be due towards Petitioner Nos. 1 and,,,,,,

2.,,,,,,

B. Whether the Petition is maintainable against Respondent Nos. 2 and 3?,,,,,,

Respondent Nos. 2 and 3 have alleged that the deeds of guarantee signed by them for the purpose of guaranteeing the DPA have since expired,,,,,,

with efflux of time. It is also alleged that the DA was never extended beyond 15th June 2017. Respondent Nos. 2 and 3 never executed fresh deeds,,,,,,

of guarantee for DA dated 16th June 2017 and 28th May 2018. The Deeds of Guarantee have never been invoked by Petitioners and hence no relief,,,,,,

can be granted against them in the present petition. Respondent Nos. 2 and 3 also seriously dispute that there is an arbitration agreement between,,,,,,

them and Petitioner No. 1. It is contended that the deeds of guarantee contain a separate Dispute Resolution Clause that does not contain any,,,,,,

reference to arbitration. The Arbitration Agreement contained in the DPA is only between Petitioner No.1 and Respondent No. 1 to settle the disputes,,,,,,

arising therefrom. Petitioner Nos. 1 and 2 have no right to invoke the same for adjudication of a dispute under the Deeds of Guarantee and they,,,,,,

cannot seek an appointment of an Arbitrator. Reliance in support of the above contention has been placed on M.R. Engineers & Contractors Pvt. Ltd,,,,,,

v. SomDatt Builders Ltd. 2009 (7) SCC 696, U Can Fly Limited v. AVA SPA Holidays (I) Pvt. Ltd and Ors. 2017 (161) DRJ 617 and STCI Finance",,,,,,

Limited v. Sukhmani Technologies Pvt. Ltd and Ors, 235 (2016) DLT 150. the Apex Court in the cases of State of Gujarat v. Renusagar Power Co.",,,,,,

[(1988) 4 SCC 59], and Vodafone International Holdings B.V. v. Union of India, [MANU/SC/0051/2012 : (2012) 6 SCC 613].",,,,,,

The Supreme Court in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 64,1 observed that in a given set of",,,,,,

circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings and it would be futile to argue that in no case",,,,,,

a non-signatory to arbitral agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal so validly constituted. However, in doing",,,,,,

so, the Court has to be mindful of the nature of relief that is sought against such party with whom there is no arbitration agreement. The Supreme",,,,,,

Court in Chloro Control (supra), further observed that a non-signatory or third party could be subjected to arbitration without their prior consent, but",,,,,,

this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the,,,,,,

arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction",,,,,,

should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the",,,,,,

supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court",,,,,,

would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court,,,,,,

answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed. In OMP (I)",,,,,,

(COMM) 25/2019, Respondent Nos. 2 and 3 have been impleaded in the capacity of guarantors. The petition is devoid of the necessary pleadings to",,,,,,

show that there is an apprehension that Respondent Nos. 2 and 3 may remove, dispose of/alienate their assets to defeat any future award that may be",,,,,,

passed in favour of the Petitioners. Thus the Petitioner has failed to present a case that would entitle him to the extraordinary relief in the nature of,,,,,,

attachment before judgment. Besides there is no arbitration agreement between the Petitioners and Respondent Nos. 2 and 3 under the deed of,,,,,,

guarantees. The Arbitration Agreement contained in the DPA is only between Petitioner No. 1 and Respondent No. 1 for adjudication of the disputes,,,,,,

and differences arising therefrom. The question whether the disputes under the deeds of guarantee can be agitated in an arbitration proceedings, is not",,,,,,

the subject matter of the present petitions and the Court refrains from adjudicating the said question. However, looking at the nature of relief sought in",,,,,,

the present petition and in absence of an arbitration agreement the petition cannot be allowed against Respondents Nos. 2 and 3, because the petition",,,,,,

lacks the necessary ingredients for the Petitioners to be entitled to such a relief.,,,,,,

I therefore, decline to direct the Respondents to furnish a Bank Guarantee or security for the alleged claim amount. However, it is made clear that",,,,,,

the undertaking given by Respondent Nos. 2 and 3, as recorded in the order dated 18th February 2019 will continue to remain in force. Respondents",,,,,,

shall not change the status of the un-encumbered flat bearing No. 55, Sukhdev Vihar (third floor), New Delhi. Respondents shall also not sale/dispose",,,,,,

of/transfer or create any third party interest over the BMW products and BMW cars in its custody, over which the Petitioners will continue to have",,,,,,

the first charge in terms of the hypothecation deeds and the deeds of guarantee, till constitution of the arbitral tribunal.",,,,,,

The Arbitral Tribunal, as and when constituted, would be at liberty to consider the application of the parties under section 17 of the Act, if so filed,",,,,,,

without being influenced by anything stated hereinabove. In view of the foregoing discussion, the present petitions along with the pending applications",,,,,,

are disposed of in the above terms, with no order as to costs.",,,,,,