Daiichi Sankyo Company, Limited vs Malvinder Mohan Singh & Ors.

As early as in 1872, the High Court of Judicature at Fort William in Bengal in General Manager of the Raj Durbhanga v. Maharajah Coomar Ramaput Sing, (1871-72) 14 Moo IA 605: 20 ER 912, has observed that ―the difficulties of a litigant in India begin when he has obtained a Decree‖. Even in 1925, after quoting the aforesaid Judgment, the Privy Council in Kuer Jang Bahadur v. Bank of Upper India Limited, AIR 1925 Oudh 448 (PC) has observed as under:-

It is tragic to note that even after such strong observations by the Indian Courts throughout the years, nothing has changed even today. Generations pass but decrees are not executed as the Judgment Debtor has several arrows up in his quiver to defeat the rights of a Decree Holder and a Decree Holder is unable to reap the fruits of the decree even after winning two to three legal battles. The present case is also an example where a Foreign Award was passed on 29.04.2016 which has yet not been executed even after the Award has been upheld right up to the Apex Court. It is settled law that procedure is meant to advance the cause of justice and not to retard it. The Courts must be careful to ensure that the decrees are executed not only for the satisfaction of the Decree Holder, but to also hold the majesty of the Courts and administration of justice. The Apex Court in Marshall Sons & Co. (I) Ltd. v. Sahi Oretrans (P) Ltd. (1999) 2 SCC 325, has observed that ―it is true that proceedings are dragged for a long time on one count or the other and, on occasion, become highly technical accompanied by unending prolixity at every stage providing a legal trap to the unwary. Because of the delay, unscrupulous parties to the proceedings take undue advantage and a person who is in wrongful possession draws delight in delay in disposal of the cases by taking undue advantage of procedural complications. It is also a known fact that after obtaining a decree for possession of immovable property, its execution takes a long time.‖

The disputes between the Decree Holder and the Judgment Debtors was referred to arbitration and an Award dated 29.04.2016 was passed in Singapore. Under the said Award, the Judgment Debtors were directed to pay Rs. 2,562 crore with pre-Award interest @ 4.44% and post-Award interest @ 5.33%. It is the case of the Decree Holder that as on date, approximately a sum of Rs. 5,300/- crore is due and payable by the Judgment Debtors under the said decree.

Pending the challenge to the Award under the Arbitration & Conciliation Act, 1996, the Decree Holders initiated proceedings for execution of the Award which is the subject matter of the present enforcement proceedings.

It is pertinent to mention that the challenge to the Award was rejected by a learned Single Judge of this Court vide Order dated 31.01.2018 which was affirmed by the Apex Court vide Order dated 16.02.2018 in SLP (C) 4276/2018. The Applications filed by the Decree Holder in the present execution proceedings are described as under:

a. EX. APPL.(OS) 3763/2022 has been filed by the Decree Holder seeking appointment of Forensic Auditor in respect of 17 banks and financial institutions in terms of the directions passed by the Apex Court in its Judgment dated 22.09.2022 passed in SLP(C) No.20417/2017, Contempt Petition (C) No.2120/2018 and Suo Motu Contempt Petition being SMC(C) 4/2019.

b. EX. APPL.(OS) 3764/2022 has been filed by the Decree Holder seeking appointment of Forensic Auditor in terms of the directions passed by the Apex Court in its Judgment dated 22.09.2022 passed in SLP(C) No.20417/2017, Contempt Petition (C) No.2120/2018 and SMC(C) 4/2019.

c. EX.APPL.(OS) 1615/2025 has been filed by the Decree Holder under Order XIII Rule 1 of the CPC for bringing on record certain additional documents to demonstrate as to how the Judgment Debtors have taken steps to fritter away the amounts available with them with the aid and abetment of others on the date when the decree was passed to defeat the decree.

While reviewing these applications, the Court will decide if a forensic audit is needed to expose how the Judgment Debtors dissipated their assets in direct defiance of the undertakings and the Stay Orders of the Apex Court, and to lay down a framework in accordance with law to get the money back from anyone who tried to block the decree from being enforced.

Material on record discloses that JD No. 1 and JD No. 6 held several entities who ultimately have substantial controlling interest in an entity called as Fortis Healthcare Limited (hereinafter referred to as ‗FHL‘), through another entity known as Fortis Healthcare Holding Private Limited (hereinafter referred to as ‗FHHPL‘), an entity which is wholly owned by JD No. 1 and JD No. 6, whether directly in their own capacities or indirectly through their other affiliated entities.

The chart depicting the shareholding of JD No. 1 and 6 in the downstream entities completely controller by them have been succinctly described in a tabular form by the Apex Court in Vinay Prakash Singh v. Sameer Gehlaut & Ors., (2021) 16 SCC 319. The said table is reproduced hereunder:-

It is pertinent to mention that on the date when the chart was prepared, i.e., 31.03.2017, which is within one year of the date of passing of the Award, 71.7% shareholding of FHHPL in FHL has come down to 52% shareholding, meaning thereby that the Judgment Debtors had already started dissipating their shares in FHL right from the date of the passing of the Award.

In the execution proceedings which were filed immediately after the passing of the Award when the Decree Holder expressed apprehension that the Judgment Debtors would fritter away their assets and would make the Award unenforceable. The Decree Holder filed IA No. 6558 of 2016 in the execution proceedings praying that the Judgment Debtors be restrained from alienating or encumbering their assets in order to preserve the decretal amount. Counsels appearing for the Judgment Debtors assured this Court that the interest of the Decree Holder would be protected. It is evident from a Letter dated 24.05.2016 sent by the learned Counsel for the Decree Holder to the learned Counsel for the Judgment Debtor. The letter which has been quoted in several proceedings reads as under:-

(emphasis supplied)

The assurance was given to the effect that the interest of the Judgment Debtors under the Award would be protected and there will be no fait accompli. The assurance was not recorded by the Court because the Counsel for the Judgment Debtors stated that any order from the Court would affect the interest of the Judgment Debtors in the share market as some of the companies held by the Judgment Debtors are publicly listed having shares listed in the stock market. This undertaking by the Senior Counsel for the Judgment Debtors was the first assurance.

When it was found that the asset base of the Judgment Debtors in FHL and other assets were being reduced despite the afore mentioned assurance, the Decree Holder filed I.A. No. 618 of 2017 for an order directing the Judgment Debtors to secure the awarded amount by depositing the same with the Registry of this Court or by providing adequate security or bank guarantee or by other means and also for an order directing attachment of the movable and immovable assets and properties of the Judgment Debtors and other properties in which the Judgment Debtors have beneficial interest to the extent of the awarded amount. The application came up for hearing on 23.01.2017. The relevant portion of the Order dated 23.01.2017 reads as under:-

(emphasis supplied)

This Order dated 23.01.2017 is construed by this Court to be the Second Assurance tendered by the Judgment Debtors in furtherance of the Letter dated 24.05.2016.

In compliance of the Order dated 23.01.2017, an affidavit of assets was filed by the Judgment Debtors disclosing their asset base. The relevant portion of the Affidavit dated 08.02.2017 filed by the Judgment Debtors read as under:-

(emphasis supplied)

The Judgment Debtors through this affidavit clearly provided another undertaking to not sell any of the unencumbered investments held by them by way of shares. This Court construes the said undertaking as the third assurance.

The affidavit of assets filed by the Judgment Debtors on 08.02.2017 did not provide the requisite details as directed by the Court vide Order dated 23.01.2017. Hence, this Court vide Order dated 06.03.2017 directed the Counsels for the Judgment Debtors to file fresh affidavits of assets reflecting information relating to all the unencumbered assets, both movable and immovable, and not merely investments and loans.

Another assurance, being the fourth assurance, was given by the Judgment Debtors on 06.03.2017 that they had no intentions to sell any of the unencumbered assets. The Order dated 06.03.2017 is reproduced hereunder:

In pursuance to the said Order, certificates and affidavits disclosing the value of unencumbered assets, investments etc. were filed before this Court. Certificates had been filed by Oscar Investments Limited being JD No.14 and RHC Holding Private Limited being JD No.19, disclosing the value of unencumbered assets and investments.

The said certificates and affidavits dated 14.03.2017 disclosed the assets of JD No. 14 and 19 as on 28.02.2017. As per the affidavit, JD No. 14 had unencumbered value of a value of 1953.70 crores having fair value of Rs. 1204.78 crores. The fair value of unencumbered investments of JD No. 14 including related/group entities was valued at Rs.854.64 crores and as far as JD No. 19 is concerned, the book value of unencumbered assets was shown as Rs. 6,346.69 crores having the fair value of Rs.3579.26 crores and the value of unencumbered investments was shown as Rs.3246.76 crores. By way of these affidavits, a picture was projected before this Court that the asset base of the companies was strong enough to cover the entire decretal amount. In retrospect, in the opinion of this Court, this was only a method to prevent this Court from passing any order directing the Judgment Debtors to deposit the decretal amount or from ordering attachment of their assets. Had the Court intervened at that stage by directing a deposit or attachment, the present labyrinth of execution proceedings and the persistent frustration of the decree could well have been avoided.

The Judgment Debtors had maintained a stance that their asset base lies in several companies, a few of them even listed in the stock exchange. One of such listed companies was FHL held by the holding company FHHPL. FHL is a public listed company in which JD No. 14 and 19 held a controlling stake of around 52% up till March, 2017, through FHHPL. On 25.05.2017, FHL issued notice to its shareholders proposing that the shareholding of foreign shareholders in the company would be increased.

Right after, the Decree Holder approached this Court by filing IA No. 7142 of 2017 to stop OIL/JD No. 14 and RHC/JD No. 19 from diluting their 100% stake in FHHPL or indirectly transferring FHHPL‘s shares in FHL, demanding they maintain a 52% holding. Simultaneously, BSE disclosures showed that FHHPL‘s actual stake in FHL had already fallen to 45.7%. The unencumbered shareholding of the shares held by the Judgment Debtors in FHL which was actually the backbone of the assets held by the Judgment Debtors was slowly coming down.

On 19.06.2017, another assurance was given portraying a picture before this Court that the decretal amount is secure and the Judgment Debtors will not take any steps to defeat the decree by changing the status of unencumbered assets. The relevant portion of the Order dated 19.06.2017 reads as under:-

Despite of these assurances, the shareholding of JD No. 1 and 6 in FHL through their wholly owned subsidiaries, i.e., FHHPL was depleting. Further, a newspaper report had been published on 20.06.2017, i.e., a day after the fifth assurance was tendered to this Court, that a Malaysian based company called as IHH Healthcare Bhd. through Northern TK Venture Pte. Ltd. (‗NTK‘) was set to acquire 26% stake in FHL. As such, a contempt petition was filed before this Court alleging that the Order dated 06.03.2017 and 19.06.2017 was being violated.

The controversy surrounding the IHH–NTK transaction concerns the acquisition of the controlling stake in FHL by IHH Healthcare Berhad during the pendency of proceedings before the Apex Court relating to the enforcement of the Award against the Judgment Debtors. It was alleged that the transaction resulted in a substantial dilution of the shareholding of JD No. 1 and 6, and involved an infusion of approximately Rs. 4,000 crores into FHL. The sale consideration was thereafter proposed to be utilised by FHL for the acquisition of healthcare assets from RHT Health Trust, Singapore. The Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, made an observation that the board members of RHT Health Trust, at that time, consisted of family members of JD No. 1 and 6.

The matter was taken up by this Court on 21.06.2017 wherein the Counsel for the JD No. 14 and 19 again provided an undertaking to this Court. The Order dated 21.06.2017 reflects the sixth assurance tendered to this Court. The relevant portion of the Order dated 21.06.2017 reads as under:-

The Order dated 21.06.2017 was challenged by filing SLP(C) 20417/2017 before the Apex Court. Taking note of the continuous fall in the shareholding of FHHPL in FHL, the Apex Court on 11.08.2017 passed an order directing that status quo be maintained with regard to the shareholding of FHHPL in FHL. The Order dated 11.08.2017 reads as under:-

Pursuant to the said Order, FHL made a disclosure on 11.08.2017 before the Stock Exchange which establishes that FHL had knowledge of the execution proceedings. The relevant portion of the disclosure is reproduced hereunder:-

The Apex Court vide its Order dated 31.08.2017 clarified that the Order dated 11.08.2017 was passed in regards to both encumbered and unencumbered shares of FHL held by FHHPL, by passing the following order:-

The slow dissipation of FHHPL shareholding in FHL has been noted by the Apex Court in Vinay Prakash Singh v. Sameer Gehlaut & Ors., (2021) 16 SCC 319. The relevant portion of the said Judgment reads as under:-

A perusal of the said chart is tell-tale. There is nothing on record to show what is the business of FHHPL. FHHPL has only pledged shares of FHL held by it to secure the debts taken by the downstream companies of JD No. 1 and JD No. 6. The business of the downstream companies is also not known. Loans were taken by the downstream entities for which shares of FHL were pledged by FHHPL. The purpose of the underlying transaction between the companies and the banks for which the shares were pledged has not been made known to this Court or to the Apex Court. This Court is, however, conscious of one undisputed fact that on the date the decree was passed, FHHPL held approximately 71.7% of the shareholding in FHL. By September 2016, this holding had already diminished to 52%. At that stage, FHHPL held 32,50,91,529 shares in FHL, comprising 27,21,59,955 encumbered shares and 5,29,31,574 unencumbered shares. The value of the unencumbered shares alone, even after the First Assurance had been furnished to this Court, was more than adequate to secure the decretal amount. Yet, despite such substantial security being available, the position today is startling; FHHPL no longer holds even one percent shareholding in FHL. The complete dissipation of what was once a controlling stake, in the absence of any satisfactory explanation, raises serious concerns that cannot be ignored by this Court.

Multiple representations have been tendered before this Court. The entirety of the share capital in FHHPL is beneficially held by JD No. 1 and 6, through their affiliate corporate entities, granting them absolute control over the functions of FHHPL. Furthermore, undertakings through sworn affidavits have been submitted by JD No. 14 and JD No. 19. Legally, these undertakings are exclusively attributable to JD No. 1 and 6, by virtue of their absolute 100% shareholding and control over both JD No. 14 and JD No. 19 which in turn held 100% shareholding in FHHPL.

The Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641 has produced a table to demonstrate the loans taken by the downstream entities of JD No. 1 and 6. A bare perusal of the table demonstrates that several loans were taken by these downstream entities against the shares of FHL held by FHHPL even after the assurances of JD No. 1 and 6. The said table is reproduced hereunder:-

The list of dates shows that on one hand assurances were being given to this Court by the JD No.1 & 6, and on the other hand the shares were also being encumbered against loans taken by downstream companies of the said JDs. It has not been tendered to this Court as to what exactly is the nature of business of these downstream companies, or why such loans were taken. The list of dates reflects that the shares of FHL held by JD No. 1 and 6 through their various subsidiaries, were being reduced contrary to the assurances given to this Court. This is also evident from Paragraph 27 of the Apex Court‘s Judgment in Vinay Prakash Singh (supra). The chart shows that 5,29,31,574 unencumbered shares were brought down to 26,31,777 shares even after the status quo orders passed by the Apex Court.

This Court is firmly of the view that it refrained from issuing attachment orders against the Judgment Debtors solely in reliance upon the assurances of the Learned Senior Counsels of JDs that FHHPL's unencumbered shares would be preserved to satisfy the decree. Had it not been the case, this Court would have definitely passed attachment orders directing the Judgment Debtors to deposit the money. This Court has, therefore, been taken for a complete ride. The Judgment Debtors have successfully pulled the wool over the eyes of this Court by engaging in a calculated and systematic dissipation of assets over a period of time, as is unequivocally borne out from the chart reproduced hereinabove.

It came to the knowledge of the Apex Court that even after the imposition of status quo order, unencumbered shares of FHL held by FHHPL had been dealt with by the Judgment Debtors and certain financial institutions. The Apex Court observing that these transactions were in direct contravention of the status quo order, initiated contempt proceedings against them.

The Apex Court in Vinay Prakash Singh (supra) has commented on the conduct of the Judgment Debtors and the various violations. The relevant portion of the said Judgment reads as under:-

We afford an opportunity to Contemnors 1 to 8 to purge themselves of the contempt by depositing the value of 12,25,000 shares as on 31-8-2017 in the BSE within eight weeks from today. In case the said contemnors purge themselves of the contempt, we may take a lenient view while imposing sentence.

We shall now consider whether MMS, SMS have violated this Court's orders both in their individual capacity and as Directors of OIL and RHC. We are dropping contempt proceedings against Contemnors 11, 14 and 15 because nothing has been placed on record to show that they were actively concerned with the running of the two companies.

We have given detailed facts of the shareholding of Fhhpl in FHL during the period of quarter ending September 2016 to December 2018 hereinabove. As far as these contemnors are concerned, the first assurance given by them to the High Court of Delhi was on 24-5-2016 when they assured the High Court of Delhi that any dealings made by them would not affect the rights of the petitioners. As on 30-9-2016, Fhhpl held 32,50,91,529 shares in FHL out of which 27,21,59,955 shares were encumbered shares and 5,29,31,574 shares were unencumbered shares. For various reasons, the total number of shares fell to 22,22,11,701 in quarter ending June 2017 and the number of encumbered shares became 18,38,96,484 and the unencumbered shares dropped by about 1.5 crore shares to 3,83,15,217. Even after giving an assurance on 21-6-2017 to the High Court of Delhi, unencumbered shares were encumbered or transferred as is apparent from the above table.

The petitioner came to this Court when the order dated 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] was passed and clarified by order dated 31-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1974] . During this period also the total shareholding of Fhhpl in FHL fell from 22,22,11,701 to 17,80,26,597 by 4,41,85,104 shares. MMS and SMS have not furnished any explanation as to how this happened. The contemnors were the best persons to disclose how this happened. They have not done so. The only explanation we have before us is about the pledge of 30,59,260 shares on 14-8-2018. It is difficult to ignore this huge drop in shareholding but even if we were to ignore this, we do not understand how in March 2018, the shareholding fell to 34,20,451 and finally in December 2018 to 11,53,091. The undertaking given to the High Court of Delhi was that the shareholding as on 19-6-2017 and 21-6-2017 would be maintained. On 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] , this Court injuncted the respondents from changing the shareholding. On 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] , this Court passed the order of status quo referred to above. Despite that specific order, on 14-8-2017 a pledge was created. This was a violation of the orders of this Court. RHC and OIL filed applications before this Court on 21-8-2017 praying for modification of the order and for a direction that the order dated 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] may be limited to the shares other than those which already stood pledged to banks and financial institutions. Though separate applications have been filed, Para 25 of both the applications are identical and has been quoted hereinabove.

These applications were filed on affidavit and it has held out to this Court that if the order dated 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] is limited to unencumbered shares it would have no impact on the availability of funds to protect the interest of the petitioner. On the basis of this statement, the order dated 31-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1974] was passed and this Court took a lenient view on the matter and disposed of the contempt without taking any action.

Unfortunately, the actions of these contemnors clearly show that these statements were made without the least intention of complying with them. These contemnors had already prepared a well thought out scheme of diluting their shareholdings directly or indirectly in FHL to defeat the rights of the petitioner.

The explanations provided are not worth consideration. According to SMS he was not even taking part in the administration of these companies and had gone into religious service. This is belied from the fact that he has been attending most of the meetings of the Board of Directors. The next defence taken by both the contemnors is that they lost control over the companies because the encumbered shares were sold. As pointed out above it is not only the encumbered shares but also the unencumbered shares which have been transferred. In December 2017, the unencumbered shares of Fhhpl in FHL were 26,31,777 and in December 2018 there were only 6,01,607 unencumbered shares. This shows beyond any manner of doubt that there has been wilful violation of the orders of this Court. It is apparent that the contemnors knowingly and willingly lost control of FHL.

A litigant should always be truthful and honest in court. One who seeks equity must not hide any relevant material. In the present case, the petitioner has violated the undertakings given to the Delhi High Court as also the orders of this Court. The Delhi High Court will deal with the issue insofar as the undertakings made before it are concerned. We have no doubt in our mind that Contemnors 9 and 10 have also wilfully and contumaciously disobeyed the orders of this Court. What has happened during the period when this matter has been pending in this Court is that the shareholdings of Fhhpl, which is wholly owned by OIL and RHC which in turn are controlled by SMS and MMS, have virtually vanished in FHL. Fhhpl owns no shares in FHL now. It may be true that IHH Healthcare Bhd. (Malaysian Company) through its actually owned subsidiary Northern TK Venture Pte Ltd. is now the majority stakeholder but that is due to allotment of preferential shares. In addition to the preferential shares allotted to them, the shares which were owned by MMS and SMS through their holdings in Fhhpl in FHL have vanished into thin air and the only conclusion which we can draw is that this was a well thought out plan to deprive the petitioner from the amounts due to it.

No person or institution howsoever powerful, can be permitted to misuse the process of the court. Contempt of court can be committed in various ways. Civil contempt is defined under the Contempt of Courts Act, 1971 under Section 2(b) to mean wilful disobedience of any judgment, decree, direction, order of the Court, of wilful breach of an undertaking given to the Court. Criminal contempt has been defined under Section 2(c) to include anything which scandalises or tends to scandalise or lower or tends to lower the authority of the court. Criminal contempt also means any act which prejudices or interferes or tends to interfere with the due course of judicial proceedings.

(emphasis supplied)

JD No. 1 and 6 were provided with an opportunity to purge themselves of the contempt by making a deposit of Rupees 1170.95 crores before the Apex Court within eight weeks from the date of Judgment dated 15.11.2019.

The contempt proceedings were thereafter finally dealt with by the Apex Court on 22.09.2022 in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, wherein the Apex Court has come to the conclusion that the Judgment Debtors kept dissipating the unencumbered shares despite various undertakings which depleted the asset base to satisfy the decretal amount. The banks and financial institutions also filed various affidavits to show that they had not violated the undertaking given to this Court and the Apex Court. The Apex Court thereafter summarised the questions that arose for consideration. The JD No. 1 and 6 were given a chance to purge themselves of contempt, however, on failure to do so, they were sent to six months of imprisonment. The relevant portion of the Judgment passed by the Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, reads as under:-

The Apex Court after sentencing the Judgment Debtors, directed as under:-

In pursuance to these directions and since all the records have been transmitted to this Court, the applications for such forensic audits is also before this Court for consideration.

EX. APPL.(OS) 3764/2022 has been filed by the Decree Holder seeking appointment of Forensic Auditor in terms of the directions passed by the Apex Court in its Judgment dated 22.09.2022 passed in SLP(C) No.20417/2017, Contempt Petition (C) No.2120/2018 and SMC(C) 4/2019.

EX.APPL.(OS) 1615/2025 has been filed by the Decree Holder under Order XIII Rule 1 of the CPC for bringing on record certain additional documents to demonstrate as to how the Judgment Debtors have taken steps to fritter away the amounts available with them on the date when the decree was passed to defeat the decree.

EX. APPL.(OS) 3763/2022 has been filed by the Decree Holder seeking appointment of Forensic Auditor in respect of 17 banks and financial institutions.

The principal attack of the Decree Holder is on the complicity and connivance of FHL in its erstwhile avatar, that is, when JD No. 1 and 6 were at the saddle and at the helm of affairs of FHL. It is the case of the Decree Holder that the Apex Court in the aforesaid two Judgments, i.e., Vinay Prakash Singh v. Sameer Gehlaut & Ors., (2021) 16 SCC 319 and Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, has held that JD No. 1 and 6 have wilfully and contumaciously violated the undertakings given to this Court and acted in contravention to the Orders of the Apex Court.

It is stated by the Learned Senior Counsel for the Decree Holder that the present execution proceedings instituted by the Decree Holder has been pending for almost a decade. Notably, when the Decree Holder initiated the present proceedings in 2016, the Judgment Debtors had a significant net worth which was much more than the decretal amount. The decretal sum due to the Decree Holder was a principal sum of Rs. 2,562 crores, with further additional pre-award interest (4.44%) and post-award interest (5.33%), aggregating to more than Rs. 5200 crores as on date. However, even though 9 years have passed, the Decree Holder has only been able to recover approximately Rs. 250 crores; and in a stunning and extremely frustrating turn of events, the entire net worth of the Judgment Debtors has vanished into thin air in contemptuous disregard of undertakings proffered to this Court.

He states that the major bulk of the net worth of the Judgment Debtors were the unencumbered shares indirectly owned by the Judgment Debtors in two listed entities, namely FHL and M/s. Religare Enterprises Limited (―REL‖). It is stated that in September 2016, the Judgment Debtors, and more specifically JD No. 14 and JD No. 19, owned the controlling stake in FHL, through their wholly owned subsidiary, FHHPL. The Apex Court noted in Vinay Prakash Singh (supra) between September 2016 and December 2018, the shareholding of the Judgment Debtors in FHL (specifically the unencumbered shares) declined from 5.29 crore shares to 6.01 lakh odd shares. He states that this reduction in shareholding has been characterized by the Apex Court in paragraph 44 of the Vinay Prakash Singh (supra) as having ―vanished into thin air‖.

The Learned Senior Counsel states that it is precisely this disappearance of nearly 5.29 crore unencumbered FHL shares, which otherwise would have been capable of substantially satisfying the decree under execution, that forms the premise of the present applications of the Decree Holder seeking forensic audit. He states that these shares were ostensibly made available to the Decree Holder and were the subject matter of six express undertakings made to this Court. It is the case of the Decree Holder that pursuant to the undertakings, these 5.29 crore unencumbered FHL shares were sequestered in favour of the Decree Holder, were custodia legis, and the dissipation of these shares with the active abetment of FHL represents an act seeped in contempt.

The Learned Senior Counsel argues that the six undertakings given to this Court constituted as an unfractured thread which also acted as injunction orders against the Judgment Debtors to not alienate the shareholding in FHL held by them through FHHPL.

He states that this Court by its Judgment dated 24 April 2023 in E.A. 3651/2022 has made observations on the violation of the orders by the Judgment Debtors by stating as under:-

It is stated that FHL was fully aware of the fact that the Singh Brothers, who were indirectly holding the controlling equity of FHL, had suffered a decree for recovery of an amount, aggregating to over Rs. 5200 crores (including interest) as on date. The Learned Senior Counsel states that it is noteworthy that the Judgment Debtor No. 1 was the Managing Director and Chairman, while his brother, Judgment Debtor No. 6, was the Director and Vice- Chairman of FHL till February 2018. Therefore, FHL had knowledge of all the undertakings given to this Court by its directors.

He states that FHL is a company which is listed on both the National Stock Exchange (‗NSE‘) and the Bombay Stock Exchange (‗BSE‘). The underlying premise of listing a company on the stock exchange is to make available its shares to the investing public for the purpose of sale and purchase. To ensure that fairness and transparency are maintained in the securities markets, the main function of the regulator, i.e., the Securities and Exchange Board of India (―SEBI‖), is to maintain information parity so as to ensure that each member of the investing public has access to the same information as the other. An action premised on knowledge which is secretive would give an unfair advantage to the possessor of such knowledge as against other members of the investing public; and thus, any such action would be to the detriment of others.

He states that since FHL is a listed company, timely disclosures by listed entities to the stock exchanges and the requirement to ensure that those persons who are designated as the promoters of a company act in a manner which is not unfair to or in detriment of the investing public becomes mandatory. SEBI Prohibition of Insider Trading Regulations, 2015 (―PIT Regulations‖), SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (―SAST Regulations‖) are the subordinate legislations to regulate best practices by a listed company and their promoters.

The PIT Regulations mandate that all listed entities must have a policy to prevent insider trading. The PIT Regulations require the board of directors of every listed company to ensure that the chief executive officer or managing director formulates a code of conduct with the approval of the board to regulate, monitor and report trading of securities by its designated persons and immediate relatives of designated persons. It is submitted that Regulation 9(4)(iii) of the PIT Regulations provides that all promoters of listed companies are covered under the scope of the term ‗designated persons‘ and are bound by the code of conduct formulated for that company. It is submitted that the purpose of formulating such policy is to achieve compliance with, and adopt the minimum standards set out in, the PIT Regulations, without diluting the provisions of these regulations in any manner. FHL has formulated a code of conduct for prevention of insider trading of FHL shares, i.e., the FHL Policy in accordance with Regulation 8 of the PIT Regulations, which has been effective since 15 May 2015, and was last reviewed on 10 November 2023. The PIT Regulations further require that the listed company formulating a code of conduct must identify and designate a compliance officer to administer the code of conduct and other requirements under these regulations. It is stated that FHL has appointed the Company Secretary of FHL as the Compliance Officer.

He states that in the present case, notably, as per Clause 6 of Schedule B of the PIT Regulations read with paragraph 3.2.5 of the FHL Policy, any transfer or trading of securities by designated persons, including promoters, requires prior approval from the company. In other words, Judgment Debtors could not have sold/transferred/pledged/alienated FHL shares owned by them, without obtaining express pre-clearance from FHL, the company in which they held shares. It is submitted that the policy laid down by FHL has not been followed and FHL.

Learned Senior Counsel further submits that the Code of Conduct framed by FHL under the PIT Regulations establishes a structured mechanism for monitoring trades undertaken by designated persons. It was submitted that the Company Secretary, or such other person as may be designated by the Board of Directors, functions as the Compliance Officer and is entrusted with the responsibility of supervising the implementation of the Code, granting pre-clearance for trades, maintaining records of such approvals and reporting compliance to the Board of Directors on a quarterly basis. According to the learned Senior Counsel, where the aggregate value of the proposed trades by a designated employee exceeded Rs. 10,00,000 in a calendar quarter, the designated employee was required to obtain prior approval from the Compliance Officer before executing the transaction. Upon receipt of an application for pre-clearance, the Compliance Officer was required to examine the request and communicate approval or rejection within one trading day. If approval was granted, the designated employee was required to execute the trade within seven trading days, failing which a fresh pre-clearance was necessary. It was further submitted that, irrespective of whether the approved trade was executed or not, the designated employee was obligated to furnish the prescribed disclosures regarding execution, non-execution and the extent of holdings in the securities of FHL within seven trading days in the prescribed format. Thus, according to the learned Senior Counsel, the Code of Conduct contemplated a comprehensive compliance framework requiring prior scrutiny of trades, post-trade reporting and continuous oversight by the Compliance Officer, who was, in turn, accountable to the Board of Directors.

He states that the afore-mentioned sequence of steps demonstrates that the only way in which the Judgment Debtors could have been able to dissipate the 5.29 crore unencumbered shares was with the abetment, complicity and collusion of FHL. The Decree Holder after reviewing each public disclosure has prepared a table, giving a set of about 139 transactions wherein pledges have been created by FHHPL post the assurances given to the Court. This demonstrates that shares which were unencumbered on the date when the assurances were given, were later on encumbered by FHHPL, which is the alter ego of JD No.1 and 6, and these unencumbered shares have been transacted without following the policy as prepared by FHL in consonance with the regulatory regime made by SEBI. He states that these transactions could not have been permitted by the compliance officer in view of the undertakings of JD No.1 and 6. On one hand the Judgment Debtors were giving assurances to this Court and whereas on the other hand they were transacting shares in violation of the undertakings.

Learned Senior Counsel for the Decree Holder further submitted that the sale, pledge, invocation of pledge and other dealings in the promoter shareholding of FHL are not matters of speculation but are borne out from statutory disclosures mandated under the SEBI regulatory framework and the depository mechanism. According to the learned Senior Counsel, these disclosures emanate from four independent statutory and regulatory sources, each of which captures different facets of the transactions undertaken by the Judgment Debtors through FHHPL.

First, reliance was placed on Regulation 29(2) of the SAST Regulations, which mandates every promoter or member of the promoter group to disclose any change in its shareholding amounting to two per cent or more of the total shareholding or voting rights. It was submitted that every creation of pledge, invocation of pledge, creation of top-up security or sale of shares crossing the prescribed threshold was disclosed by FHHPL to FHL and the stock exchanges in accordance with the said Regulations. These disclosures, commonly referred to as the SAST Disclosures, were thereafter published by FHL on BSE and NSE. Learned Senior Counsel submitted that the Decree Holder has collated all such disclosures evidencing the progressive reduction in the promoter shareholding.

Second, reliance was placed on Regulation 7(2)(b) of the PIT Regulations, which obligates a listed company to disclose to the stock exchanges every transaction undertaken by its promoters where the value of such transaction exceeds ₹10 lakhs. It was submitted that, in compliance with the PIT Regulations, FHL itself issued disclosures to the stock exchanges recording transactions undertaken by the promoter entities, including the creation and invocation of pledges as well as the sale of shares. These disclosures, referred to as the PIT Disclosures, were published by FHL under its scrip on the BSE and NSE. Learned Senior Counsel submitted that, since the monetary threshold under the PIT Regulations is considerably lower than the threshold prescribed under the SAST Regulations, the PIT Disclosures capture a substantially larger number of transactions than the SAST Disclosures.

Third, reliance was placed on Regulation 31(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‗LODR Regulations‘), which requires every listed company to disclose its shareholding pattern on a quarterly basis. According to the learned Senior Counsel, these disclosures, regularly published by FHL, reflect the changing promoter shareholding, constitute the very disclosures referred to by the Apex Court in paragraph 27 of its judgment in Vinay Prakash Singh (supra).

Lastly, learned Senior Counsel submitted that, independent of the aforesaid statutory disclosures, the depository framework itself provides a continuous source of information regarding changes in beneficial ownership. Reliance was placed on Clause 12.4.4 of the NSDL Business Rules and Clause 6.22 of the CDSL Operating Instructions, under which the National Securities Depository Limited (‗NSDL‘) and the Central Depository Services (India) Limited (‗CDSL‘) furnish Beneficial Position (BENPOS) statements to listed companies. It was submitted that these BENPOS statements periodically inform the issuer company of changes in the holdings of its shareholders, thereby enabling reconciliation of the Register of Members with the records maintained by the depositories. According to the learned Senior Counsel, these records constitute an additional and independent source for tracing the movement of the promoter shareholding during the relevant period.

The Learned Senior Counsel states that in order to ascertain the conduct of JD No. 1 and 6, the Decree Holder has analysed the SAST disclosures; the PIT disclosures and correlated the same to paragraph 27 of the 2019 Apex Court Judgment in Vinay Prakash Singh (supra).

He states that the JD No. 1 and 6 had a total of 32,50,91,529 shares in FHL through FHHPL in September 2016. This entire 32.5 crore shareholding has vanished. These shares can be further divided into encumbered shares and unencumbered shares. The encumbered shares were sold by the Financial Institutions and the unencumbered shares were sold by JD No. 1 and 6. He states that out of 32.5 Crore total shares of FHL held by FHHPL; the banks have sold around 18 crore by invoking pledges and the JD No. 1 and 6 have sold around 14 crore shares.

He states that there are different and specific disclosures for the creation of a pledge of shares, for sale by the Bank, and for sale by the JDs through FHHPL which can be reviewed and ascertained after document perusal to identity the exact nature of transaction.

He states that JD No. 1 and 6 sold some 14 crore unencumbered shares. Of those 14 crore unencumbered shares sold, some 3.25 crore unencumbered shares correspond to the Apex Court identified number of missing unencumbered 3.26 crore shares. The following table was provided by the Decree Holder in their written note tendered to this Court:

Table A: References to the 11 Transactions mentioned in DH: A1

He states that as per the PIT disclosures JD No. 1 and 6 have sold a total of 13.99 Crore unencumbered shares since the first assurance. As per the SAST disclosures JD No. 1 and 6 have sold a total of 6.92 Crore unencumbered shares since the first assurance. He states that this 6.92 Crore shares is a part of/ included within the 13.99 crore unencumbered shares. The Learned Senior Counsel for the Decree Holder then asserts that JD No. 1 and 6 have brazenly violated all assurances tendered to this Court and sold their unencumbered shares in FHL held through FHHPL with connivance of FHL being the directors of FHL.

The Learned Senior Counsel states that a forensic audit would be necessary to uncover the transactions undertaken by the JDs in connivance with FHL. It is also stated by the learned Senior Counsel for the Decree Holder that these audits would be necessary to enable the executing court to make good the amounts from FHL.

The Learned Senior Counsel for the Decree Holder draws the attention of this Court to various judicial pronouncements to contend that a third party who might not be bound by an order of injunction, cannot aid and abet thwarting of an injunction and such a conduct will be considered as interference in the administration of justice. He places reliance on Seaward v Paterson (1895-99) All ER 1127; Sita Ram vs. Balbir 2017 (2) SCC 456; Central Depository Services (India) Private Limited v. Rajendra Yeshwant Shah and Ors, 2025 SCC OnLine Bom 2872.

He states that while an injunction is inherently a remedy in personam, the Court possesses a historically well-settled contempt jurisdiction against third parties who, despite not being original parties, possess knowledge of the injunction and wilfully aid and abet its violation.

He states that FHL was aware of the orders of this Court as the Judgment Debtors were Chairman and Vice-Chairman of FHL holding controlling stake in the company. Despite holding knowledge of the assurances and the status quo orders, FHL aided and abetted the JDs in dissipating their shareholding.

He states that it is now a settled proposition of law that an undertaking given by a party is equivalent to an order of injunction. Learned Senior Counsel places reliance on the judgment of the Apex Court in Noorali Babul Thanewala vs. K.M.M. Shetty and Ors. (1990) 1 SCC 259 wherein the Apex Court held that a breach of an undertaking by a party is tantamount to a breach of injunction. He states that this position has been reiterated in Balwantbhai Somabhai Bhandari v. Hiralal Somabhai Contractor, 2023 SCC OnLine SC 1139.

He states that it is further a well settled principle of law that an order of injunction in an application for execution is equivalent to an order of attachment as has been held by the High Court of Calcutta in Madvai Ahluwalia vs. Vimal Kumar Gupta and Ors. 2012 SCC OnLine Cal 2193, wherein the Court observed that ―therefore, an order of injunction in an execution application is an order of attachment.‖

He states that Section 64 of the Code of Civil Procedure, 1908 (‗CPC‘) mandates that any private alienation of such an attached property is void with the exception for a private transfer which was made pursuant to a contract entered into and registered prior to the attachment.

He states that the shares of FHL held by JD No. 1 and 6 through FHHPL were the subject matter of undertakings given to this Court. That being the case, the shares stood injuncted for the benefit of the Decree Holder. An injunction in an execution proceeding is equivalent to an attachment and in this case, the undertaking/injunction was in execution proceedings. Therefore, pursuant to the six undertakings, the shares were not only injuncted but also attached in favour of the Decree Holder. He thus states that Section 64 of the CPC would come into effect and any private alienation would be void unless the said alienation was protected by Section 64(2) of the CPC.

In the present case, the sequestered shares are today held by many retail investors who have purchased shares from the stock exchange following the contemptuous acts of the Judgment Debtors who were in turn aided and abetted by FHL. The forensic audit could, therefore, establish the role played by FHL in aiding and assisting the Judgment Debtors to consciously violate the undertakings offered to this Court, based on which the Court can then issue consequential directions such as disgorgement, in terms of the observations made by the Apex Court in Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd. (2023) 7 SCC 641.

The Learned Senior Counsel for the Decree Holder states that the CPC, is a handmaid to substantive justice. The High Court of Allahabad, through Justice Mahmood, in Narsingh Das vs. Mangal Dubey reported as ILR (1883) 5 All 163 observed that:

He states that the said principle has been reiterated by the Full Bench of the Allahabad High Court in Raj Narain Saxena vs. Bhim Sen, AIR 1966 All 84 and by the Apex Court in Rajendra Prasad Gupta vs. Prakash Chandra Mishra, (2011) 2 SCC. He states that the CPC is an ongoing statute which should be interpreted purposively to give effect to the original legislative intention.

He argues that the Apex Court has consistently reiterated that the purpose of execution proceedings is to enable the Decree Holder to obtain the fruits of his decree and even if there is any ambiguity, any interpretation which assists the Decree Holder should be accepted. Reference is drawn to Deep Chand vs. Mohan Lal, (2000) 6 SCC 259.

The Learned Senior Counsel states that considering these fundamental principles, the Decree Holder submits that this Court possesses the power and jurisdiction under the CPC to ensure restitution to the Decree Holder from FHL. The power of this Court to order such restitution from FHL can be traced to Order XXXIX Rule 2A, Section 51(e), and Section 144 read with Section 151 of the CPC. Alternatively, it is submitted that in these unique facts and circumstances this Court can array FHL as a Judgment Debtor to the present execution proceedings in terms of Section 145 of the CPC.

He states this Court, exercising powers under Order XXXIX Rule 2A read with Section 151 of the CPC, possesses the inherent jurisdiction to preserve its majesty and mandate the restoration of the status quo ante, a legal position affirmed in Century Flour Mills vs. S. Suppiah AIR 1975 Mad 270, Sujit Pal vs. Prabir Kumar Sen AIR 1986 Cal 220, Vidya Charan Shukla vs. Tamil Nadu Olympic Association 1991 SCC OnLine Mad 3, Satyabrata Biswas and Ors vs. Kalyan Kumar Kisku (1994) 2 SCC 266.

It is stated by the Learned Senior Counsel for the Decree Holder that while the Court has the power to restore the exact status quo ante, the 5.29 crore unencumbered FHL shares are now held by unsuspecting members of the general public; therefore, to protect these innocent third parties, the Court should instead facilitate restitution by directing FHL to remit the current market value of the said 5.29 crore shares.

He states that the inherent equitable power of restitution aims to achieve complete justice at the end of litigation, wherein Section 144 of the CPC serves as an illustration rather than a limitation of the Court's authority, as established in Gangadhar vs. Raghubar Dayal 1974 SCC OnLine AII 148, Kavita Trehan vs. Balsara Hygeine Products Limited (1994) 5 SCC 380, and South Eastern Coalfields Ltd. vs. State of Madhya Pradesh and Ors. (2003) 8 SCC 648.

He states that applying the threefold test of restitution outlined in DTC vs. M/s. International Avenues 2009 SCC OnLine Del 1794, the present matter falls squarely within the third component requiring compensation or reparation for loss caused to another. FHL is obligated to compensate the Decree Holder because it actively conspired with the Judgment Debtors to dissipate the unencumbered shares in violation of six assurances and court orders, thereby causing substantive loss to the Decree Holder and offending the majesty of this Court.

It is stated by the Learned Senior Counsel for the Decree Holder that Section 51(e) of the CPC vests this Court with an extraordinary residuary jurisdiction to enforce a decree in any manner deemed fit, ensuring that judicial orders are effectively executed rather than passed in vain, a power recognized and utilized in State of Haryana vs. State of Punjab (2004) 12 SCC 673 and Narayan Dutt Tiwari vs. Rohit Shekher (2012) 12 SCC 554.

It is stated by the Learned Senior Counsel for the Decree Holder that this Court ought to exercise its residuary and inherent powers to direct FHL to restitute the present market value of the 5.29 crore dissipated shares, which is the only equitable mechanism to uphold the Court's majesty and satisfy a substantial portion of the decretal sum.

It is stated by the Learned Senior Counsel for the Decree Holder that, in the alternative, FHL ought to be impleaded as a Judgment Debtor pursuant to Section 145 of the CPC, which permits a third party who has furnished a guarantee or acted as a surety to be added to a decree.

He states that JD No. 1 and JD No. 6, functioning as directors, promoters, and controlling shareholders of FHL until February 2018, repeatedly tendered assurances to the Court based on their managerial control and underlying shareholding value in FHL, even citing potential market impacts on FHL's clients.

A preliminary objection has been raised by Mr. Rajiv Nayar, learned Senior Counsel for FHL, stating that the Decree Holder has taken a volte face. Inasmuch as in the entire execution proceedings and in the proceedings before the Apex Court, there has been no allegation against FHL, the entire case of the Decree Holder was that Judgment Debtor No. 1 and 6 had sold shares of FHL through FHHPL. Alternatively, the banks, in furtherance of the arrangements entered into between them and the Judgment Debtors had sold the unencumbered shares as a top-up. Meaning thereby, since the value of the shares pledged had gone below the value mentioned in the arrangements, the Judgment Debtors had to pledge in further shares to cover up the margins. These shares had been sold by the banks, for which FHL is not responsible. It is stated that this volte face cannot be permitted to be advanced in the absence of an affidavit by a competent person on behalf of the Decree Holder and this argument cannot be permitted to be raised only on the basis of certain notes.

It is submitted that in the absence of any allegation of any kind in the affidavits filed by the Decree Holder, allegations against FHL cannot be permitted to be levelled only by filing some application. It is further contended that neither FHL nor FHHPL was a Judgment Debtor. He states that the shares owned by FHHPL were never attached. He further states that they could not have been the part of any undertakings, as the Judgment Debtors could not have given any undertaking on behalf of the FHHPL which was a separate legal entity. He further asserts that undertakings were given by the Counsels for the Judgment Debtors without there being any specific inclusion of the shares of FHHPL in FHL. The assurances were only in relation to the personal assets of the Judgment Debtors and not of FHHPL which is not a Judgment Debtor.

He states that the issue of unencumbered or encumbered shares is between the Decree Holder and the Judgment Debtors. He states that all the court assurances were personal undertakings by the Judgment Debtors regarding their own assets inter alia their shares in FHL. Neither FHL nor FHHPL gave any assurance or undertaking to this Court and was not bound by any restraint orders.

He states that on account of the fact that all parties understood that FHL had no role in the matter relating to dissipation of shareholding, FHL was not made a party to any legal proceedings at the time when the assurances were given or when the purported injunction orders were passed. The Decree Holder never impleaded FHL in the execution proceedings; on the contrary, FHL impleaded itself on April 5, 2018, and only in respect of specific applications, at the instance of the Decree Holder attempting to seek orders against FHL without making FHL a party to the proceedings.

The Learned Senior Counsel states that there was no operative injunction over FHHPL shares of FHL before the status quo order of the Apex Court of 11.08.2017. On 11.08.2017, the Apex Court first directed status quo over FHHPL‘s shares in FHL and this order was subsequently clarified and explained. On 31.08.2017, the Court clarified that the order covered both encumbered and unencumbered shares. A further clarification issued on 15.02.2018 which allowed banks to sell the shares encumbered prior to 11.08.2017. In fact, the prevailing view at the time, as admitted by the Decree Holder itself and the banks, was that no injunction existed on FHHPL's shares in FHL prior to 11.08.2017.

The Learned Senior Counsel states that the Decree Holder itself filed an SLP (C) No. 20417 of 2017 before the Apex Court seeking an injunction in relation to FHHPL shares in FHL having been aggrieved by the Order of High Court not granting an injunction. It is only thereafter that the first injunction order of 11.08.2017 came to be passed. Since the Decree Holder was not granted orders for specific share attachment under CPC Order 21, Rule 46, therefore, the shares remained freely transferable till such date.

He states that by 11.08.2017, promoter holdings had already fallen materially. Public shareholding stood at about 64%. The majority of the unencumbered shares as pointed out by the Decree Holder had already been sold by then. He states that FHL had no involvement in those sales.

The Learned Senior Counsel states that FHL was not involved in any manner in the movement of these shares. It is the case of FHL that it is a listed company. Accordingly, the factum of FHL being majorly owned by JD No. 1 and 6 through FHHPL at that time was irrelevant given that under applicable law, a listed company has no role in share transfers as the shares of any listed company are freely transferable.

It is stated by the Learned Senior Counsel that the Apex Court in Daiichi Sankyo Company Limited (supra) restricted the enquiry in relation to the dissipation of FHHPL‘s shares only to the banks and financial institutions. FHL was, rightly so, nowhere sought to be covered in relation to the dissipation of FHL shares held by FHHPL.

Attention of this Court has been drawn to the affidavits filed by JD No. 14 and JD No. 19 to substantiate the contentions that there is no specific reference given to the shares of FHL held by FHHPL or that any undertakings given by FHHPL or FHL, which were not the parties to the case when the assurances were given and therefore the volte face at this stage blaming FHL for dissipation of shares, that too, sans an affidavit, is unacceptable.

He states that FHL is a listed company with numerous shareholders and is a separate legal entity distinct from its shareholders and its promoters. At all relevant times, FHL was an independent entity, distinct from FHHPL. Consequently, FHL's assets belongs to FHL itself, not to its shareholders like FHHPL. Similarly, FHL had no right or control over FHHPL‘s assets, that is, the shares held by FHHPL in FHL. He states that the well-settled legal principle of separate corporate existence cannot be ignored. Learned Senior Counsel contends that the Decree Holder has misled this Court by basing its arguments on a fundamentally wrong legal interpretation and as a public listed company, FHL could not have restrained the transfer of FHHPL‘s shares because dematerialized shares are freely transferable. The Learned Senior Counsel places reliance on the Judgment of the Apex Court in Reliance Natural Resources Limited v. Reliance Industries Limited, (2010) 7 SCC 1, wherein the Apex Court has observed as under:-

[…]

[…]

The Learned Senior Counsel furthers places reliance on the Apex Court judgment in Bacha F. Guzdar v CIT, AIR 1955 SC 74, where it was held that a shareholder‘s interest in a company is limited to their shareholding and does not extend to the assets of the company. The relevant portion is reproduced as follows:

The Learned Senior Counsel for FHL argues that FHL and FHHPL are separate legal entities, and so, FHL cannot be bound by assurances from JD No. 1 and 6, and cannot be treated as the same entity as the said JDs to scapegoat FHL by dragging it into this matter. Stating that FHL is the Judgment Debtors would threaten decades of settled jurisprudence protecting separate corporate personality, shareholders, and creditors. Further, on 31.01.2018 and 27.02.2018, FHL had also made disclosures to the Stock Exchange to the effect that FHL was not involved in or impacted by the outcome of the proceedings initiated by the Decree Holder against JD No. 1 and 6. He further states that the proceedings did not have any direct impact on FHL or its operations. He adds that the Decree Holder was aware of these disclosures and took no steps to dispute them.

The Learned Senior Counsel for FHL states that FHL is a public company. Under Section 58(2) of the Companies Act, 2013, the securities of a public company are explicitly declared to be freely transferable, depriving FHL of any power to restrict the transfer of shares owned by FHHPL.

It is stated that under the Depositories Act, 1996 (specifically Sections 7(1), 9, 10(1), and 11), share transfers occur electronically via book-entry. The depository serves as the registered owner for effecting transfers, while the actual owner (FHHPL) acts as the beneficial owner. He states that the listed company merely receives post-facto intimation of completed transfers and inherently lacks the power to refuse registration.

It is stated that per the NSDL Business Rules (Rules 12.2 and 12.3), both market and off-market transfers are executed exclusively at the depository level. The Depository Participant (‗DP‘) processes these transfers based solely on the authorization and instructions of the beneficial owner. Hence, as a listed company, FHL was neither required nor able to be involved in the transfer process executed between the beneficial owner, the DP, and the Depository.

The Learned Senior Counsel states that SEBI and the depositories govern the centralized mechanism for freezing demat accounts. According to the SEBI Master Circulars on Depositories dated December 15, 2016, and updated on December 3, 2024, only the DP or the Depository has the statutory right to freeze or unfreeze accounts upon receiving instructions from a court, regulator, or statutory authority. It is stated that under this statutory framework, the listed issuer company plays absolutely no role. Consequently, FHL possessed no legal authority or operational mechanism to freeze FHHPL‘s demat account or halt the transfer of its shares.

The Learned Senior Counsel for FHL argues that the SEBI framework described above does not mention the listed company whose shares are in question. Furthermore, it imposes no obligation on the listed company to take any action in this regard. It is therefore clear that FHL had neither the power nor the legal ability to restrain FHHPL from trading in its demat securities. Aware of the judgment debtors' assurances, the Decree Holder should have obtained appropriate injunctive orders and communicated the same to the Depositories or the DP to freeze the relevant accounts using the mechanism available at that time. Instead of following the applicable legal framework, and ignoring its own failure to do so, the Decree Holder now attempts to hold FHL liable.

The Learned Senior Counsel states that the disclosures cited by Decree Holder were made by FHHPL post-transfer, to comply with its obligations under the SAST Regulations, and FHL was only copied on them. He states that contrary to Decree Holder‘s baseless assertions, stock exchange bye-laws do not mandate that only a listed entity can file disclosures, and such disclosures were in fact filed by FHHPL, and not FHL.

It is the contention of the FHL that the law before April 2019 did not require promoter entities to obtain preclearance for trades as pleaded by the Decree Holder. He states that during the relevant period (2016–2018), Regulation 9 of the PIT Regulations required all listed entities to formulate a Code of Conduct. Paragraph 3 of Schedule B specified that this Code of Conduct applied to employees and connected persons designated by the company based on their role and function. Regulation 9 stated as follows:

Further, Paragraph 3 of Schedule B of the Insider Trading Regulations provides:

The submission of FHL is that the requirement to seek pre-clearance for trades was applicable only to such employees and connected persons as designated by the listed company based on their functional role. FHL‘s Code of Conduct, as applicable then, only required directors, senior management and specified employees to seek pre-clearance for trades, and not its promoter entities. The definition of ‗designated employees‘ as applicable at the relevant point in time is reproduced below:

The Learned Senior Counsel argues that at the relevant point, FHHPL was only a promoter entity, and thereby, was not required to obtain pre-clearance from the Compliance Officer for trades. It is submitted that that the law was amended only in April 2019 to specifically include ‗promoter entities‘ within the scope of designated persons who mandatorily require pre-clearance of trades from compliance officer. He emphasises to note that the trades in question are from 2017- 2018 which is well before the law was amended. It is submitted that the amendment to the scope of ‗designated persons‘ under the PIT Regulations was explained through the below mentioned excerpts from the ‗Report of Committee on Fair Market Conduct‘ dated August 08, 2018, issued by SEBI:

Attention of this Court is drawn to Regulation 9(4)(iii) of the amended Insider Trading Regulations states that as follows:

He states that FHL‘s Code of Conduct was revised only after the PIT Regulations were amended. This revision brought promoter entities under the definition of ‗designated persons‘ who required pre-clearance for trades from the Compliance Officer. The definition of ‗designated persons‘ under the FHL Code of Conduct (revised in 2019) was as follows:

He asserts that FHHPL was not a ‗designated person‘ under the law and the FHL Code of Conduct during the relevant period (2017-2018). Therefore, the transaction of FHHPL did not require approval from FHL‘s Compliance Officer.

He states that the Decree Holder‘s reliance on the definition of ‗connected person‘ is misplaced. Even if FHHPL was a connected person (since connected person includes a holding company or associate company or subsidiary company), Paragraph 6, Schedule B of the PIT Regulations only requires ‗designated persons‘ to obtain pre-clearance for trades.

He states that the Decree Holder‘s reliance on FHHPL being an ‗insider‘, and consequently being subject to a mandatory pre-clearance, is misplaced. He states that the Decree Holder incorrectly assumed that once an entity is classified as an ‗insider‘ under the PIT Regulations, all obligations, including pre-clearance, apply conflating two distinct concepts. Under Regulation 2(1)(g) of the PIT Regulations, ―insider‖ is a broad category that includes connected persons and those in possession of Unpublished Price Sensitive Information (―UPSI‖). However, the requirement to seek pre-clearance applies only to designated persons, a narrower and specifically identified sub-set under the Regulations. Therefore, even if FHHPL was an insider by virtue of being a connected person, this did not, by itself, impose a statutory pre-clearance obligation which was only applicable on the promoters at the relevant time.

He states that without prejudice that even if FHHPL had sought pre-clearance, the Compliance Officer‘s role under the law did not extend to assessing the legality of FHHPL‘s transactions.

He states under the PIT Regulations, pre-clearance is intended only to ensure designated persons do not trade while possessing UPSI. Consequently, the remit of the compliance officer under the PIT Regulations is to review whether a person possesses UPSI or not. UPSI means any information relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities. The assurances which were captured in court orders were in the public domain and do not amount to UPSI. This is clear from Schedule B of the Insider Trading Regulations which is reproduced as follows:

The Learned Senior Counsel contends that it is a settled legal position that any alleged lapses by the Compliance Officer under the PIT Regulations are not automatically construed as lapses by the listed entity. He further states that any alleged violations of securities laws by FHL or its Compliance Officer are within the exclusive jurisdiction of SEBI, and any penalties in relation thereto can only be imposed by SEBI in accordance with the applicable securities law.

He states that the Compliance officer cannot be held liable in case the relevant designated employee does not seek a pre-clearance, and the Company cannot be held liable for lapses on the part of the compliance officer.

The Learned Senior Counsel states that the allegations made by the Decree Holder regarding violations of SAST Regulations is unsustainable. The disclosures were made post-facto, meaning FHL had no prior knowledge of the trades. In any event, FHL‘s knowledge is irrelevant since it could not have prevented the transfers which were executed through the depository.

Reliance is placed on Regulation 29 of the SAST Regulations which provides as follows:

The Learned Senior Counsel for FHL states that it is in compliance with these obligations set out above that FHHPL made the disclosures relied upon by the Decree Holder, on a post-facto basis.

He states that these disclosures were available in the public domain for the last 7-8 years. The Decree Holder, while being fully aware of such disclosures, took no action to pursue the freezing demat account of FHHPL through the relevant channels. It cannot now seek to shift the burden upon FHL, which has no role or control over trade of its demat securities. The Decree Holder was well aware that FHL had no role in such transfers, and accordingly, never approached FHL in respect of the trades and did not even implead FHL as a party in the proceedings.

He states that under the SAST Regulations, details of encumbrances are provided by the promoter itself. In terms of Regulation 31 of the Regulations, as existing during the relevant period of 2016-18, the promoters of a listed company were required to make disclosures regarding creation, invocation or release of any encumbrance over their shareholding in the listed company. These disclosures were to be made within 7 working days, by the promoters, to the company as well as the stock exchanges, simultaneously on a post-facto basis.

He states that in terms of Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‗LODR Regulations‘), a listed company is required to disclose its shareholding pattern on a quarterly basis, in the format prescribed by SEBI. The format inter alia includes details regarding any pledge or encumbrances created on the shareholding by the promoters. The information provided by the listed company under the quarterly shareholding pattern, in relation to details of encumbrances of promoters, is based solely on the disclosures made by the promoters to the company under Regulation 31 of the SAST Regulations.

He states that since the requirement under the SAST Regulations for making disclosures regarding creation, invocation or release of any encumbrance is solely on the promoters at all times, and the company is only made aware of this encumbrance on a post-facto basis, it is unequivocally established that the information on encumbered versus unencumbered shares contained in the periodic shareholding pattern of the company is solely based on the disclosures received by the listed company from their promoters.

Relying on the BSE Listing Centre User Manual, the Learned Senior Counsel for FHL submits that the obligation to make disclosures regarding sale/pledge of shareholding under Regulations 29 and 31 of the SAST Regulations is solely on the promoter. The listed entity, just like the Decree Holder, and the world at large, only received such disclosures from FHHPL, being the promoter, on a post-facto basis.

Secondly, BSE through its circulars dated November 30, 2015 and March 11, 2016, has expressly clarified the following:

[Emphasis in the original]

He states that from the aforesaid circulars issued by BSE, it is clear that the listed entity (i.e., FHL) was neither authorized nor mandated to make disclosures in respect of trades made by of its erstwhile promoter (i.e., FHHPL). On the contrary, BSE itself has explicitly recognized that individuals/entities other than the listed entity are also mandated to make certain disclosures/filings under applicable SEBI laws, and in this context, BSE has provided a mechanism through which such disclosures/filings may be made by them (i.e., that filings by non-listed persons/entities, such as FHHPL, must be made via the designated BSE email ID). Accordingly, the allegations raised by the Decree Holder regarding FHL being responsible for the disclosures made by FHHPL are completely fallacious under applicable laws as well as from a factual perspective.

He also states that these disclosures by FHHPL to FHL are post facto intimation to the target company (FHL) after FHHPL has transacted with its shares and to that extent FHL has no control in the dissipation of FHHPL‘s shareholding in FHL.

Mr. Harish Salve, learned Senior Counsel appearing for FHL, while adopting the submissions advanced by Mr. Rajiv Nayar, learned Senior Counsel, further submits that the present execution proceedings cannot be converted into a forum for fastening an independent liability upon a third party. It is contended that the jurisdiction of the Executing Court is confined to enforcement of the decree against the judgment debtors and their assets and does not extend to adjudicating fresh causes of action against entities who are strangers to the decree. According to the learned Senior Counsel, allegations of conspiracy, collusion, aiding and abetting or negligence constitute independent causes of action which can only be adjudicated in appropriate substantive proceedings and cannot be determined in execution.

It is further submitted that the entire edifice of the Decree Holder's case proceeds on an erroneous assumption that the assets of a company are synonymous with the assets of its shareholders. Learned Senior Counsel argues that under the Companies Act, a company is a distinct juristic person and its directors owe fiduciary duties exclusively to the company and all its shareholders. Reliance was placed on Section 166 of the Companies Act, 2013 to contend that directors are statutorily obligated to act in the best interests of the company and cannot lawfully deploy corporate assets to satisfy the personal liabilities of promoters or shareholders. He therefore submits that FHL could neither have diverted nor preserved its assets for securing the decree passed against the Judgment Debtors.

Learned Senior Counsel further contends that the reliance placed by the Decree Holder on Order XXXIX Rule 2A of the CPC is wholly misconceived. He states that proceedings under Order XXXIX Rule 2A are confined to enforcement of injunctions granted during the pendency of suits and have no application to execution proceedings of the present nature. Similarly, he states that an alleged breach of an undertaking furnished before a Court is enforceable only through contempt jurisdiction and cannot be employed as a basis to impose substantive monetary liability upon a third party who neither furnished such undertaking nor was bound thereby.

Learned Senior Counsel further argues that the allegation of conspiracy is legally unsustainable. He states that the Decree Holder seeks to attribute the acts and intentions of the JD No. 1 and 6 to FHL on the footing that they constituted the directing mind and will of the company while simultaneously alleging that the company conspired with the very same individuals. According to the learned Senior Counsel, these two propositions are mutually destructive in law and cannot coexist. It is contended that once the acts of the promoters are sought to be attributed to the company, the question of a conspiracy between the company and those very individuals does not arise.

Learned Senior Counsel also submits that no duty of care was owed by FHL to the Decree Holder so as to find a claim in negligence. Reliance was placed on the decisions in Customs and Excise Commissioners v. Barclays Bank Plc. (2004) 122 Comp Cas 647 and JSC BTA Bank v. Khrapunov [2018] UKSC 19, to contend that freezing order jurisprudence does not impose a positive obligation upon third parties to police or prevent transactions involving the assets of judgment debtors unless such duty is expressly created by law or by a binding court order. It is therefore submitted that no liability can be fastened upon FHL for alleged failure to prevent transactions undertaken by its shareholders.

Learned Senior Counsel for JD No. 1 commences the arguments by establishing the historical financial realities that pre-date any judicial intervention. It is submitted that the allegations of wilful asset dissipation raised by the Decree Holder are fundamentally diverse from the facts of the case.

Learned Senior Counsel for JD No.1 states that as early as 2016, long before the Apex Court passed any restrictive interim orders, a valid binding and irrevocable Agreement to Pledge (ATP) dated 30.03.2016 and 27.07.2016 was executed in favour of Yes Bank Limited. It is argued that this pre-existing contractual obligation created a crystallized, overriding legal encumbrance on the shares. The learned Senior Counsel emphasizes that any subsequent action taken by the Lender under this ATP were purely involuntary on the part of JD No.1 and cannot legally be construed as a wilful alienation of encumbered assets.

Learned Senior Counsel for JD No.1 states that the Promoter acted with absolute bonafide intent and immediate diligence at the time when the injunction orders were passed. Upon the passing of the said status quo order, JD No.1 did not act unilaterally but actively sought formal, professional, legal counsel from their corporate advisors to strictly comprehend the scope and ambit of the Court‘s order. Learned Senior Counsel submits that based on this legal advice, the order was reasonably understood to apply exclusively to altering the status of disclosed unencumbered assets held directly within the primary upstream holding companies, JD No. 14 and 19. It was never understood to impose a sweeping embargo on downstream subsidiaries like FHL.

Learned Senior Counsel contends that JD No.1‘s conduct was explicitly guided by this Court‘s subsequent Order dated 21.06.2017. It is argued that this specific order established a ‗value preservation regime‘ which JD No.1 interpreted in good faith to mean that asset modifications, debt paring measures and restructuring operations were legally permissible, provided that the overall net asset value originally disclosed to the Court was not diminished. Learned Senior Counsel states that all corporate manoeuvres executed during this window were measures targeted solely at preventing systematic corporate insolvency and saving the entities from liquidation without any intent of any contempt to evade the decree.

In regards to the share reductions, the learned Senior Counsel for JD No.1 strongly refutes the Decree Holder‘s characterisation of the events of July, 2017. It is submitted that the downward trend in shareholding was not a Promoter driven exercise but an involuntary liquidation done by third party financial institutions during a severe market crash. Learned Senior Counsel points out that on 20.07.2017, Yes Bank Limited unilaterally perfected its security interests under the ATP, absorbing 2,98,15,406 shares. It is stated that the single automated action constitutes approximately 91% of the total unencumbered reduction flagged by the Courts which occurred completely without the control of JD No.1.

Learned Senior Counsel states that during this exact period, Lakshmi Vilas Bank unilaterally invoked and liquidated 54,00,000 shares to recover outstanding credit facilities extended to Ranchem Private Limited completely independent of voluntary sale by JD No.1.

Learned Senior Counsel for JD No.1 states that the financial ruckus continued into August, 2017. He states that the Decree Holder has failed to discharge his burden of proving these shares were unencumbered. It is the case of JD No.1 that these were involuntary disposals executed by financial intermediaries to protect their own exposure amidst plunging stock values. It is submitted that financial intermediaries liquidated 1,35,09,330 shares directly on the market. Edelweiss disposed of 86,00,000 shares to clear overdue ECL Finance obligations, while Birla Sun Life Asset Management sold 49,09,330 shares.

Learned Senior Counsel further notes that other institutional lenders such as Indiabulls Housing Finance and IL&FS Securities on behalf of HDFC liquidated 1.03 crore and 10,00,000 shares respectively in a similar fashion due to aggressive value plunging in the stock market. JD No.1 throughout this time was entirely powerless to intervene or halt these institutional sell offs. Learned Counsel for JD No.1 submits that on 08.02.2018, JD No. 1 and his Co-Promoter JD No. 6 formally resigned from the Board of Directors of FHL. It is argued that this total resignation was executed in good faith to insulate FHL from the Promoters‘ personal litigation.

Learned Senior Counsel stresses that from this date, JD No.1 ceased to hold any administrative, managerial or executive authority within FHL. Consequently, it is argued that JD No.1 cannot be held legally morally or equitably accountable for the corporate transaction that took place late in 2018, i.e., after their resignation. This includes the controlling stake acquisition by IHH Healthcare (Malaysia) and the transfer of assets to RHT Health Trust (Singapore). It is submitted that these deals were negotiated and finalized under a completely new and independent management. Learned Senior Counsel highlights that by the time these transactions were concluded, the combined Promoter holding via intermediate entities had dwindled down to 0.66%, rendering it impossible for JD No. 1 to possess the voting power or corporate control required to either facilitate or halt these transactions.

Learned Senior Counsel for JD No.1 then raises a fundamental constitutional objection based on the judicial record. He points out that this chronological narrative or share reductions, pledge top-ups or alleged breaches of interim orders have already been scrutinized by the Apex Court in its Judgment dated 15.11.2019 and 22.09.2022. It is submitted that the Apex Court has already inflicted the maximum statutory penalty permitted under the law sentencing JD No.1 of six months of civil imprisonment and a fine of Rs.5,000/-.

Learned Senior Counsel states that JD No.1 was continuously incarcerated for over 3.5 years spanning from 11.10.2019 to 08.06.2023 and has fully served the maximum contempt sentence imposed upon him. It is argued that parallel punitive execution and contempt proceedings before this Court on the exact same factual base constitutes a violation of the Fundamental Rights against double jeopardy guaranteed under Article 20(2) of the Constitution of India. He states that the State‘s coercive power cannot be utilized to repeatedly prosecute and punish an individual for an identical cause of action.

Learned Senior Counsel for JD No.1 finally submits that the ongoing execution application, i.e., EX.APPL.(OS) 3763/2022 and EX.APPL.(OS) 3764/2022, has lost its foundational basis. It is the case of JD No. 1 that during recent hearings, the Decree Holder has explicitly stated that it is not pressing its primary prayers specifically the appointment of forensic auditor. Learned Senior Counsel for JD No.1 argues that by abandoning the primary reliefs, the Decree Holder has destroyed the very substratum of this inquiry rendering it an academic exercise. He states that JD No.1‘s Directorship stand long vacated by operation of law and the primary holding companies (JD No. 14 and 19) are entirely non-operational and facing insolvency. Due to his prolonged incarceration and the complete stripping of corporate infrastructure, JD No.1 has zero access to servers, physical files or transactional data bases.

He finally concludes by stating that JD No. 1 has no objection to the forensic audit. He prays that this Court may summon the primary transaction logs, pledge registers and ledger entries directly from the noticee banks and financial institutions. As the actual custodians of the evidence, only these institutions can provide the conclusive documentary proof required to validate JD No.1‘s defence which is that the asset liquidation was entirely lender driven, involuntary and triggered by a market crash rather than by contumacious design of JD No.1 as alleged by the Decree Holder.

Learned Senior Counsel appearing for JD No. 6 submits, at the outset, that JD No. 6 had no role in the affairs or management of FHL. It is contended that, by the time the impugned transactions took place, JD No. 6 had ceased to function as a director and had devoted himself to religious pursuits.

The Learned Senior Counsel supports the primary defence advanced by JD No.1 regarding the historical lender driven nature of the share reduction. It is submitted that the massive depth in unencumbered shareholding was not an illicit, voluntary market sale by the Promoters but rather an involuntary, automated pledge of security by Yes Bank Limited under pre-existing contracts. Learned Senior Counsel for JD No. 6 aligns with JD No.1 in asserting that FHHPL executed valid Agreement to Pledge with Yes Bank Limited long before any injunctions were passed, specifically on 30.03.2016 to secure 2,65,02,852 shares and on 27.07.2016 to secure a further 91,00,000 shares. Supporting JD No.1‘s case regarding July, 2017 liquidations, it is submitted that YBL unilaterally exercised its contractual rights to perfect the pledge on 20.07.2017 converting 2,98,15,406 ‗agreed to be pledged‘ shares into an actual crystallized pledge completely outside the volition of the JDs. Further aligning with JD No.1‘s stand that the Apex Court has already scrutinized these facts, the learned Senior Counsel for JD No. 6 points out that Paragraph 26 of the Apex Court‘s Order dated 22.09.2022 explicitly confirms and accepts the explanation provided by YBL regarding the mechanics and validity of these two ATPs.

The learned Senior Counsel for JD No. 6 further asserts specific mathematical submissions to address the exact scope of the present inquiry. It is stated that the current execution proceedings as strictly bound by the queries set up by the Apex Court in Paragraph 27 of its Judgment dated 15.11.2019 in Vinay Prakash Singh (supra). The Apex Court had noted a specific gap of 3,56,83,440 shares in the unencumbered bucket held by FHHPL between the quarters ending June, 2017 and September, 2017 and the present inquiry is strictly to determine the reason for this precise reduction.

It is the case of JD No. 6 that the two YBL pledge crystallization which is 58,31,000 shares pledged on 27.01.2016 and 2,98,15,406 shares pledged on 20.07.2017. Addressing the disclosures made to the Court, the learned Senior Counsel states that the assurances given on 06.03.2017 were explicitly made subject to objections to be taken at a later date during the enforcement stage. It is argued that at the time of these disclosures, the 3.56 crore shares were legally and correctly reflected in the unencumbered bucket.

Relying on the Clauses of the ATP dated 31.03.2016, learned Senior Counsel submits that a mere ‗agreement to pledge‘ does not create a perfected pledge or a present encumbrance. The lender‘s right over the shares emanates only upon the actual creation and perfection of the pledge, meaning there was no legal obligation on the Promoters to declare such shares as ‗encumbered‘ prior to YBL perfecting them.

Learned Senior Counsel to prove its case relies on admissions by both the Decree Holder and YBL, asserting that the parties are ad idem regarding the dates of pledge creation. It is stated that the Decree Holder in its own application in EA 819/2010, Paragraph 43, explicitly tabulated the creation dates of these exact pledges as 27.12.2016 and 28.07.2017. Further, an affidavit filed by YBL dated 14.10.2020 confirms that the subject pledges were created upon the occurrence of pre-specified default events under agreements dating back to 2014. It is stated that at the time of execution of these initial pledge agreements, no Court had imposed any restraint on dealing with the shares.

Finally, the learned Senior Counsel for JD No. 6 relies on the productive ambit of the Apex Court‘s order dated 15.02.2018. This Order clearly stated that any shares encumbered prior to status quo order of 11.08.2017 could be lawfully sold by banks and financial institutions, and that the restraint would not apply retroactively to such transactions. It is submitted that because YBL pledged its shares on 20.07.2017 prior to the Order dated 11.08.2017 passed by the Apex Court, the resulting 3.56 crore shares gap is legally insulated entirely lender driven and cannot constitute any violation of court orders by JD No.6.

The categorical stand of the Judgment Debtor No.1 and 6 is that the shares which had been released is that when the value of the shares came below the prescribed limit under the Agreement to Pledge entered into by FHHPL and the banks on the basis of the pre-executed agreements, the banks perfected their pledge on the unencumbered shares as encumbered and has sold the shares. It was also stated that certain shares which were released were sold on the basis of pre-existing power of attorneys executed by FHHPL to satisfy the loans.

The contention of the Axis Bank is that it entered into facility agreements with certain companies controlled by JD No.1 and 6 between November, 2010 and May, 2017 and to secure these facilities, around 2.58 crore shares of FHL were pledged by FHHPL in favour of Axis Bank Limited between 28.03.2014 and 19.05.2017.

On the date when the status quo orders were passed by the Apex Court, i.e., on 11.08.2017 and 31.08.2017, FHHPL pledged 1,83,75,000 shares of FHL in favour of Axis Bank Limited and, therefore, each share remained encumbered until 15.02.2018, when the Apex Court vide Order dated 15.02.2018 modified the status quo order thereby restraining the sale of unencumbered shares only. Subsequent to the said order, the pledges on these encumbered shares were invoked and the same were sold by the Axis Bank. Learned Senior Counsel for the Axis Bank categorically states that no unencumbered shares were converted to encumbered.

Mr. Ritin Rai, learned Senior Counsel for Yes Bank, submits that the transaction dated 20.07.2017 was specifically regarding the encumbered shares only. It is further stated that the said transaction records that since there have been multiple defaults by the companies owned by JD No. 1 and 6, therefore, the Bank exercised its right to perfect the pledge under the Agreement to Pledge dated 30.03.2016. It is further submitted that the contention of JD No.1 and 6 that unencumbered shares became encumbered is fallacious and no unencumbered shares were converted into encumbered shares by the bank. It is further submitted that Yes Bank did not create any new pledge after the Order dated 11.08.2017 passed by the Apex Court and also no shares were sold after the Order dated 15.02.2018 passed by the Apex Court.

He states that vide Agreement to Pledge dated 30.03.2016, certain loan facilities were granted to three entities controlled by JD No.1 and 6 whereby credit facility of Rs. 100 crores were extended to Ligare Aviation Limited, credit facility of Rs.350 crores (approx.) were extended to Ligare Voyages Limited and further a credit facility of Rs. 200 crores were extended to Healthfore Technologies Limited. To secure the said facilities, FHHPL pledged specified shares of FHL in favor of Yes Bank Limited.

It is further contended that since specified shares were pledged, there was no question of having any top up arrangement. He therefore states that the contentions raised by JD No. 1 and 6 are completely fallacious as these pledged shares were already in the bracket of encumbered shares and no fresh encumbrances were created by virtue of any top-up.

It is contended that YBL maintained a commercial lending relationship with companies owned and controlled by Malvinder Mohan Singh (MMS) and Shivinder Mohan Singh (SMS) since 2009. Between August 2013 and May 2017, YBL extended loans and lines of credit totaling approximately Rs. 1,830 Crore through several facility agreements. To secure these facilities. several pledge agreements, including agreements to pledge (ATPs), in relation to FHHPL shares held by Fortis Healthcare Holdings Private Limited (FHHPL) were executed in favor of YBL from 2014 onwards.

He states that of the total 8,97,81,906 FHL shares encumbered in favor of YBL, 5,41,35,500 shares were encumbered prior to March 2016 and are not in dispute. The remaining 3,56,46,406 shares were encumbered vide ATPs dated 30 March 2016 and 27 July 2016. Despite invoking the pledges, YBL was required to institute recovery proceedings to recover their dues demonstrating that the security taken was insufficient to discharge the outstanding liabilities.

He further states that the ATPs dated 30 March 2016 and 27 July 2016 themselves created an encumbrance over the FHL shares in favour of YBL from the dates of their execution, not merely from the dates when pledges were formally recorded with NSDL. The ATPs contained non-disposal undertakings imposing restrictions upon free and marketable title to the shares.

The Counsel for YBL supports his case by demonstrating that the term ‗encumbrance‘ has been defined under Chapter V, Regulation 28(3) of the SAST Regulations. The relevant extract is reproduced as follows:

Notably, even prior to the Second Amendment, Non-Disposal Undertakings constituted ―encumbrances‖ requiring disclosure under the SAST regulations. This is evident from SEBI Circular CIR/CFD/POLICYCELL/3/2015 dated 05 August 2015 which prescribes the disclosure format under Regulation 31 and expressly identified ―non-disposal undertaking‖ as a category of encumbrance. Similarly, SEBI Circular bearing CIR/MRD/DP/5612017 dated 14 June 2017 reiterated that the SAST Regulations require promoters to disclose details of their encumbered shares, including shares subject to non-disposal undertakings, which fall within the scope of ―encumbrances‖ for the purposes of such disclosure obligations.

YBL's case is that the ATPs created an ―encumbrance‖, a term designedly broader than a pledge over the FHL shares from the dates of execution. YBL places reliance upon Articles 5(c), 5(d), 5(c), 5(f), 5(n), 5(s), 5(ee), 5(gg), 5(ii), and 5(jj) of the ATPs. Accordingly, the Judgment Debtors were obligated to disclose the encumbrances created over FHL shares to this Court at the outset.

Post September 2016, the Judgment Debtors were required to disclose their encumbered assets to this Court. Their failure to disclose that they were barred from dealing with the FHL shares under the ATPs cannot make YBL liable for any unilateral undertaking given by them in breach of the ATPs.

YBL did not create any fresh encumbrance or pledge over FHL shares after 11 August 2017, the date of the first status quo order passed by the Apex Court. The encumbrance over 8,97,81,906 FHL shares existed prior to the said order. YBL invoked and sold the pledged shares only pursuant to the order dated 15 February 2018 passed by the Apex Court, which permitted banks to enforce pledges created prior to 11 August 2017.

The Apex Court in its judgment dated 22 September 2022 did not direct a mandatory forensic audit into the banks. YBL has placed all material facts on record before the Apex Court including loans extended, creation of pledges, defaults, invocation and sale of shares and has complied with all directions issued. Apart from FHL shares, YBL enforced its rights over all other secured assets, including fixed deposits, immovable properties, shares of other companies, and monetization of aircraft. No security was left unenforced once the loans were recalled, demonstrating that YBL acted as a bonafide secured creditor.

Attention of this Court has also been drawn to the Frequently Asked Question (FAQs) on SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The relevant FAQ, which was deleted on 03.09.2019, prior to its omission read as under:-

It is stated that this question has been deleted pursuant to the amendment in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

It is submitted that there is no basis for forensic investigation/audit against Yes Bank Limited as the Decree Holder itself has acknowledged that the Bank did not create any encumbrances subsequent to the Order dated 11.08.2017 passed by the Apex Court and has also narrowed down its request qua forensic audit to only three banks excluding Yes Bank Limited. It is further stated that there is no material evidence to show that forensic audit is required against Yes Bank Limited who is also not a Judgment Debtor in the present proceedings.

It is further stated that the Decree Holder in its hearing note dated 13.04.2026 has stated that the documents produced by 12 Banks and financial institutions show that no loan, pledge or encumbrance in any form whatsoever including top-ups was created after the Order dated 11.08.2017.

Similar contentions have been raised by Lakshmi Vilas Bank wherein it has categorically stated that there was no conversion of unencumbered shares to encumbered shares on the basis of top up.

ADVOCATE ON BEHALF OF INDIA BULLS HOUSING FINANCE LIMITED

Similar averments have been made by Indiabulls Housing Finance Limited. It is stated that only the shares which had been specifically pledged or were encumbered shares, have alone been sold.

Attention of this Court has been drawn to various clauses of the loan agreement to contend that shares/securities which were pledged were kept in separate Demat Account No.12393088 maintained at depository participant M/s Indiabulls Ventures Limited (now known as Indiabulls Limited) were encumbered shares.

It is stated that 2,27,10,980 shares of FHL were pledged vide pledge agreements dated 03.12.2016 and 28.04.2017. It is stated that 30,59,260 shares were encumbered by pledge which was created on 14.08.2017 over shares held in lien and 21,29,760 shares were sold by using the Power of Attorney. It is stated that no other shares other than the shares which were specifically held in the demat account have been sold and requisite information has been made in the depositories. It is stated that the Apex Court vide Order dated 15.11.2019 held Indiabulls Housing Finance Limited for contempt and directed to deposit an amount of Rs.17.93 crore which were deposited by Indiabulls Limited, therefore, nothing else survives against the bank.

Learned Senior Counsel for the ECL Finance Limited submits that the Agreement for Pledge shows an intention to create pledge which provides a contractual right in favour of the pledgee and an obligation to create a pledge on behalf of the Pledgor. Under such agreement, the pledgor undertakes to create a pledge over the specific shares identified therein, while the pledgee acquires the corresponding right to have such pledge created as security for the relevant loan facility or transaction. The agreement also governs the rights and obligations of the parties, including the events of default, notice requirements for invocation, mode of sale, release of pledged shares, margin/top-up obligations and other enforcement-related terms.

He states that in case of dematerialized shares, the agreement by itself does not complete the creation of a pledge. The pledge is created and recognized in law only when the procedure prescribed under the Depositories Act, 1996, the applicable SEBI Regulations and the bye-laws/business rules of NSDL/CDSL is followed, including marking/recording of the pledge in the depository system.

He states that the process of creation of 'pledge' which amounts to an 'encumbrance' over such demat shares, has to be done as per the depository mechanism.

The Learned Counsel explains that under Section 12 of the Depositories Act, 1996, read with the applicable SEBI Regulations and the bye-laws/rules of NSDL and CDSL, a pledge is created and marked in the depository records of the pledgor through its Depository Participant (DP), pursuant to the agreement for pledge, such entry constitutes evidence of creation of pledge over the concerned shares. Such pledge creates a legal 'encumbrance' over the pledged shares, inasmuch as the pledgor cannot freely deal with, transfer or dispose of the pledged/marked shares unless the pledge is released by the pledgee. Accordingly, all such marked and pledged shares fall within the category of "encumbered shares".

He further states that Regulation 58 of the SEBI (Depositories and Participants) Regulations 1996, lays down the manner of creating a pledge. This regulation stands replaced by Regulation 79 of SEBI (Depositories and Participants) Regulations 2018.

He states that Regulation 31 of the SEBI (Substantial Acquisition of shares and Debentures) Regulations, 2011, had made it mandatory for the promoters and their PACs to make all disclosures to the stock exchange, relating to any 'encumbrances' created by them on their securities (prior to amendment, w.e.f. 01.04.2022).

He states that Regulation 28(3) of the above SAST Regulations, gives a wide and inclusive definition of 'encumbrance as, "it shall include pledge, lien, or any such transaction, by whatever name called."

It is submitted that the creation and maintenance of the pledge over the shares of FHL was governed by the respective Pledge Agreements, which obligated the pledgor to create and maintain the pledge in favour of ECL as security for the loan facilities. The agreements further required the pledgor to maintain the stipulated security cover of 1.75x, 1.70x or 2x, as applicable, in terms of Clause 2.8 read with Schedule I. Consequently, where the security cover fell below the prescribed threshold, the pledgor was contractually obliged to provide additional shares by way of top-up security, while pledged shares were released upon restoration of the requisite margin or repayment of the underlying facilities.

It is further submitted that the pledge over the dematerialised shares was created in accordance with the prescribed statutory and depository framework, thereby resulting in a valid and legally enforceable encumbrance in favour of ECL. It is contended that all such pledges were created prior to the Apex Court's status quo order dated 11.08.2017, and that the subsequent invocation and sale of the pledged shares were undertaken only after the clarification issued by the Apex Court vide order dated 15.02.2018.

It is specifically stated that ECL has not sold or released any share directly or indirectly as stated by the Judgment Debtor and more particularly JD No.1.

After drawing the attention of this Court to Section 12 of the Depositories Act, 1996, Regulation 79 of SEBI (Depositories and Participants) Regulations 2018 and other provisions, it is contended that the term ‗encumbrance‘ in law is much wider and inclusive in nature and denotes any legal burden, restriction, claim, lien, pledge, security interest or limitation created over property, which restricts the owner‘s free and marketable title or unfettered right to deal with such property.

It is contended that even as per the Decree Holder the banks including ECL have sold shares forming part of the encumbered share category and no unencumbered shares have been sold, pledged or invoked by the ECL subsequent to the status quo Order dated 11.08.2017 passed by the Apex Court. Reliance has been placed on the Judgment passed by the Apex Court in PTC India Financial Services Limited v. Venkateswarlu Kari & Anr., 2022 SCC OnLine SC 608 and the Judgment passed by a Coordinate Bench of High Court of Bombay in Jry Investments Private Limited v. Deccan Leafine Services Limited &Ors., 2003 SCC OnLineBom 1134.

Learned Senior Counsel Jayant Mehta for the Credit Suisse Finance (India) Private Limited states that the credit facilities extended to RHC Holding Private Limited (JD No. 19) and ANR Securities Private Limited (JD No. 18), were closed on 15.03.2017 and 22.03.2017 respectively. He states that the facilities stood closed in March, 2017 which is well before the status quo Orders dated 11.08.2017 and 31.08.2017 passed by the Apex Court. Hence, there was no contravention of status quo order by the bank.

Heard the learned Counsels for all the Parties.

As noted earlier, the Award was passed on 29.04.2016 and has been upheld till the Apex Court. There has been no stay in the execution of the Award and the proceedings for execution commenced in the year 2016 itself. Since then, almost a decade has elapsed and the execution proceedings are still pending.

At the time when the Award was passed, the Judgment Debtors had substantial assets to satisfy the decretal amount. The principal sum awarded under the Award was roughly about Rs. 2,500 Crores. As of now, according to the Judgment Debtors, there are hardly any assets left to fulfil the decree, meaning thereby, the amount available for satisfying the decree has been dissipated consistently, leading to the present application, which is one for conduct of a forensic audit to unearth as to how the assets of the Judgment Debtors have consistently being eroded despite repeated undertakings and Stay Orders. The forensic audit would help in unearthing as to how, and who all have aided and abetted, the constant erosion of the assets of the Judgment Debtors, and in what manner the assets have been eroded, and how the orders of the Court have been flouted. In these peculiar situations, the Courts cannot be mere silent spectator and throw out their hands in vain and say nothing can be done. This would actually be the death knell for any judicial system in maintaining the rule of law. The conduct of the forensic audit is not an exercise in futility. The forensic audit will pin point the exact manner by which this Court was deceived, the dramatis personae who aided and abetted in evasion of Court Orders by misleading the Court, so that the Court can take steps by fixing liability on the perpetrators of dissipation of shares to ensure that the majesty of law is upheld.

As noted by the Apex Court in its judgment dated 15.11.2019 in Vinay Prakash Singh (supra), in September 2016, the total shares held by the Judgment Debtors in FHL were 32,50,91,529 comprising of 27,21,59,955 encumbered shares and 5,29,31,574 unencumbered shares. The first of the assurances was given to this Court in May, 2016, that the Decree Holder‘s interest would be protected to the extent of the total sum awarded under the Arbitral Award and that there will be no fait accompli. Despite consistent assurances which were given to this Court thereafter, the unencumbered shares which were sufficient to protect the rights of the Decree Holder have come down from 5,29,31,574 in September, 2016 to 6,01,607 in December, 2018. Around 5.23 Crore unencumbered shares of the Judgment Debtors have been sold contrary to the assurances given to this Court.

The Judgment Debtors No. 1 and 6 control all the Judgment Debtors. Judgment Debtors No. 1 and 6, through other Judgment Debtors, have held 100% interest in FHHPL, the company which held over 70% shares of FHL. FHL was thus fully in the control of Judgment Debtors No. 1 and 6, either through themselves or through their other Judgment Debtor entities at the time of the first assurance. About six assurances have been given to this Court by various Judgment Debtors. It is to be noted that Judgment Debtor No. 1 and Judgment Debtor No. 6 were also the Managing Directors and Directors of the FHL.

One of the primary contentions on behalf of FHL was that there was no stay or injunction of any kind over the shares held by FHHPL, and shares of FHL were freely transferable as provided under Section 58(2) of the Companies Act, 2013. This argument need not detain the court at all. Section 58(2) of the Companies Act, 2013, is reproduced below:

A bare perusal of the provision, and the proviso itself shows that if a Contract is made for the transfer of certain securities, the freely tradeable nature of the shares would go away. Certainly, an assurance or undertaking to a Constitutional Court of this Country must be kept on a higher pedestal than a contract between the parties, and would alter the status of the shares to be ones which ought not to be transferred.

In this scenario, this Court reminds itself of the observations made by the Apex Court in State of U.P. v. Renusagar Power Co., (1988) 4 SCC 59, where the Apex Court has observed ―It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding‖.

The Apex Court in ArcelorMittal India Private Limited v. Satish Kumar Gupta, (2019) 2 SCC 1 explicitly held that where statutory frameworks are designed to regulate or restrict the actions of persons in management, the corporate facade must be disregarded to unearth the 'real individuals' orchestrating the entity's affairs. The veil of incorporation cannot be permitted to serve as a convenient shield for shadow controllers or promoters seeking to evade statutory prohibitions through complex webs of holding structures. Rather, courts are duty-bound to look beyond the surface of the corporate entity to ascertain the actual persons in the 'driving seat' who exercise proactive, de facto control over the enterprise. The relevant portion is reproduced hereunder:

FHL contends that it is an independent juristic entity, that it derived no benefit from the sale of the shares, and that it was wholly unaware of the actions of Judgment Debtors No. 1 and 6, who, at the relevant time, exercised complete control over the promoter holding structure and indirectly held more than 70% of the shareholding in FHL. This submission, however, cannot be accepted at this stage. The very purpose of piercing the corporate veil is to ascertain whether the corporate personality was merely a legal facade concealing the acts of those who were, in reality, directing and controlling the affairs of the company. If FHL functioned as the alter ego or instrumentality of Judgment Debtors No. 1 and 6, its plea of complete ignorance cannot be accepted at face value without first undertaking a factual enquiry. The question is not whether FHL has, at this stage, been complicit in the impugned transactions, but whether the corporate structure was utilised to facilitate the systematic dissipation of the promoter shareholding which constituted one of the principal assets available for satisfaction of the Award. The unencumbered promoter shareholding, which was capable of being proceeded against in execution, stood progressively alienated through a series of transactions undertaken during the subsistence of judicial assurances. Whether those transactions were independent commercial dealings or formed part of a coordinated exercise to defeat the execution of the Award is precisely the issue that necessitates a forensic audit. To permit the plea of separate corporate personality to foreclose such an enquiry would be to allow the corporate form itself to become an instrument for frustrating the administration of justice.

At this juncture, it is necessary to discuss the relevant SEBI regulations which applies to listed entities to put a check on listed companies and its promoters dealing with the shares of such companies.

Regulations 8, 9(4) and 9(4)(iii) of the PIT Regulations, mandates the Board of Directors of every company whose securities are listed on a stock exchange to formulate and publish on its website, a code of practice and procedure for fair disclosure of unpublished price sensitive information that the company should follow in order to adhere to the principles which have been set out in Schedule A to the Regulations. Regulations 8, 9(4), 9(4)(iii) are being reproduced as under:-

Material on record discloses that there were analogous provisions mentioned in the old PIT Regulations which were applicable at the time of transactions that led to dissipation of shares. The relevant provisions are reproduced hereunder:

In compliance of these Regulations, FHL has brought out a policy/code of conduct. The code of conduct as brought out by the FHL shows that the objective of the code of conduct is to outline the prohibitions relating to insider trading and the procedure to be followed when dealing with the company‘s security/unpublished price sensitive information which has to be followed to ensure compliance to regulatory norms. The said code applicable at the time of transactions, effective from 15^th May, 2015, defines a ‗Connected Person‘ in the ‗Definitions‘ clause (d) which is reproduced to read as under:-

(emphasis supplied)

The Judgment Debtors No.1 and 6 at the relevant time when the assurances were given till February, 2018 were Connected Persons being the Chairman and Vice-Chairman, and also the Managing Director and Director of FHL respectively.

Clause (e) of the ‗Definitions‘ defines ‗Designated Employees‘ to reads as under:-

(emphasis supplied)

Clause (f) of the ‗Definitions‘ defines ‗Director(s)‘ to read as under:-

Clause (i) of the ‗Definitions‘ defines ‗Insider‘ which is being reproduced and reads as under:-

(emphasis supplied)

A perusal of the above-mentioned regulations would establish that the then directors of FHL, JD No.1 and 6, were Connected Persons, and therefore, Insiders as per the Code of Conduct applicable at that time.

Clause (k), (p) and (r) of the ‗Definitions‘ clause is being reproduced to read as under:-

xxx

xxx

Chapter 2 of the Code of Conduct, more specifically Regulation 2.1.2 provided the Compliance Officer of FHL a duty to report changes in designated persons, details of trading plans received, pre-clearance given, or any violations of the regulations. The relevant extract is provided hereunder:

(emphasis supplied)

Regulation 3.1 and 3.2 of the Code of Conduct specifies that all Designated Employees would conduct all their dealings in securities of the Company in a valid Trading Window subject to pre-clearance by the Compliance Officer of the Company. As per the Code of Conduct at the relevant time, the Compliance Officer had the power to restrict the trades by Designated Employees and also an obligation to maintain a list of securities which were not allowed to be traded. The relevant extract of the Regulations is reproduced hereunder:

(emphasis supplied)

The Decree Holder has emphasized that JD No. 1 and 6, being the directors of FHL, had to get their trades pre-cleared by the Compliance Officer before the execution of any transaction. On the other hand, FHL contends that JD No. 1 and 6 fall outside these definitions because the shares were technically held by FHHPL, making FHHPL the statutory promoter entity. According to FHL, at the time the shares were sold, they were held exclusively by this promoter entity rather than the Judgment Debtors personally. FHL further argues that promoter entities did not fall within the ambit of Designated Employees at the time of these transactions, rendering the regulations inapplicable to the sale. This contention though very attractive does not merit acceptance keeping in mind the shareholding and control of JD No.1, JD No.6 and other Judgment Debtors in FHHPL.

Moreover, the contention of FHL overlooks the wider statutory conception of a "Promoter" under the SEBI regulatory framework. Regulation 2(1)(oo) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, defines a "promoter" to include, inter alia, any person who is in control of the issuer, whether such control is exercised directly or indirectly. The said Regulation reads as under:-

The definition of ‗promoter‘ stipulated in SEBI ICDR Regulations, 2009 which were applicable from the first assurance is as follows:-

The regulatory framework, therefore, recognises not merely the immediate shareholder or promoter entity but also the natural persons who ultimately exercise control over the issuer company through intermediate corporate vehicles. It is an admitted position that FHHPL was wholly controlled by Judgment Debtors Nos. 1 and 6 through their downstream entities and functioned merely as the promoter holding entity of FHL. Consequently, Judgment Debtors Nos. 1 and 6 continued to remain within the ambit of the promoter framework recognised under the SEBI regulations notwithstanding that the shares stood registered in the name of FHHPL.

The expression ‗control‘ is defined in Section 2(27) of the Companies Act, 2013. The relevant extract is reproduced hereunder:

The use of the word ‗shall include‘ indicates that this definition is only illustrative and not exhaustive. The meaning of ‗Control‘ is not limited to these expressions alone, rather they are indicators of what constitutes Control. The indications of what includes control, has been broadly divided into two categories. The first part refers to de jure control, which includes the right to appoint a majority of the Directors of the company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly, can positively influence, in any manner, management or policy decisions, they could be said to be in control of the company. A management decision is a decision to be taken as to how the corporate body is to be run in its day-to-day affairs. A policy decision would constitute a decision that would be beyond running day-to-day affairs i.e. long term decisions. So long as management or policy decisions can be, or are in fact, taken by virtue of shareholding, management rights, shareholder agreements, voting agreements, or otherwise, control can be said to exist.

It is a matter of record that FHHPL is entirely owned by JD No. 1 and 6 through their network of intermediary entities. Consequently, piercing the corporate veil of these intertwined entities reveals that JD No. 1 and 6 are the true controlling minds behind all the Judgment Debtors. Accordingly, the mere interposition of FHHPL as the registered promoter entity cannot be relied upon to contend that trades by FHHPL stood outside the regulatory framework governing Designated Persons. The legal principles laid down by the Apex Court in Renusagar Power Co. (supra) apply squarely to the facts of this case. Furthermore, because JD No. 1 and 6 served as Directors of FHL, they fall squarely within the statutory definition of Designated Persons and are strictly bound by the four corners of the regulations.

The PIT Regulations, particularly Clause 6 of Schedule B of the PIT Regulations read with paragraph 3.2.5 of the FHL Policy mandates that any transfer or trading of securities by Designated Persons which includes the JD No. 1 and 6 could not have happened without obtaining express pre-clearance from FHL i.e., the company in which they held shares.

Learned Senior Counsel for the Decree Holder has argued that the FHL Policy lays down the requirements and procedure to be followed by Designated Persons to receive the prior approval of FHL before trading in securities which would include ‗creation of pledge‘, ‗invocation of pledge‘ and ‗revocation of pledge‘ of shares. It is stated that the Compliance Officer is responsible for pre-clearance and has to report to the Board and provide reports on the pre-clearances. The pre-clearance is required where one transaction or a series of transactions exceeds Rs. 10,00,000/- cumulatively in any calendar quarter. The Designated Employees have to submit to the Compliance Officer an application under Form-II and that application has to be disposed of by the Compliance Officer whereafter, the Compliance Officer proceeds to issue pre-clearance order under Form-II agreeing or rejecting the request of the Designated Employees. Only after the clearance of the Compliance Officer, the Designated Persons can execute the transaction. On the other hand, Ld. Senior Counsels for FHL have stated that FHHPL was not a designated employee and therefore, was not required to undergo any of these steps, on the date of the transactions.

The aforesaid contention is attractive and warrants consideration. FHHPL was not strictly a designated employee under the Code of Conduct of FHL and there may have been no obligation to seek pre trade clearance, insofar as FHHPL shares in FHL were concerned, as on the date on which these transactions took place. But this by itself would not mean that FHL was not complicit in these transactions, or involved in the dissipation of the assets of the Judgment Debtors, and part of the ploy to defeat the interests of Decree Holder, while at the same insulting the majesty of this Court. This is exacerbated by the fact that JD 1 and JD 6 were in control of FHL, and all downstream entities. JD1 and JD 6 therefore not only controlled FHHPL but also FHL. JD1 and JD 6, were simultaneously instructing their counsels to give assurances to the Court and also dissipating the assets which were the subject matter of the assurances, through FHHPL. The Court therefore cannot throw up its hand and refrain itself from unveiling the fraud perpetuated on the Court, for which a forensic audit is necessary. The undertakings by the JDs and their downstream entities cannot be construed to be limited to their own personal shares in FHL, but must also include shares held by FHHPL. This is because FHHPL is obviously the alter ego of JD 1 and JD 6 and the shares of FHL were held by FHHPL. FHHPL was also the primary asset base of JD 1 and JD6, for which assurances were given to the Court. If these were to be excluded, the assurances would also have no value.

If the mandated steps had actually not been taken, it would render FHL complicit in the dissipation of 5.29 crores of unencumbered shares. Furthermore, this context defines the assurances given by JD 1 and JD 6, who fall squarely within the definition of designated persons. At the relevant point in time, these Designated Persons violated the Orders, and it has to be seen as to whether FHL has aided and abetted its Directors/Designated Persons to trade in the shares without the approval of FHL. If the answer is yes, then FHL has aided and abetted the JDs in dissipating the shareholdings of the company, which constituted the very assets of the JDs meant for satisfying the decree. As a listed company, FHL was duty bound and strictly obliged to follow the regulations. If FHL takes the stand that it is independent of the Board of Directors and is therefore not responsible, such an argument does not merit acceptance. The JDs were essentially the company itself, acting as the majority shareholders and holding the position of Managing Director and Director, which precludes the company from hiding behind a corporate veil. The Company cannot simply throw off its hands and evade liability by claiming that it is an independent juristic person.

In order to ascertain the exact role and complicity of the Compliance Officer, or other officer(s) of FHL in the sale of FHL shares of JD No. 1 and 6 held by them through FHHPL, a forensic audit is warranted.

It has specifically been pleaded by FHL that the company, being a separate entity from the JDs, did not have any knowledge of the assurances given by these JDs. This argument does not merit acceptance. JD No. 1 and JD No. 6 served as the Managing Director and Director of the company, and were also its majority stakeholders, and therefore, the heart, soul and brain and the decision makers of FHL. Their personal knowledge is directly attributable to the knowledge of the company. In the opinion of this Court, the facade and charade of distinct bodies has been played for evading the execution proceedings. It is extremely convenient for FHL to fake ignorance and raise the defence of being a separate legal entity, but it is precisely important to quell such frauds from taking place by applying the doctrine of lifting the corporate veil at the very first instance.

Apart from the fact that PIT Regulations and FHL‘s Code of Conduct which may have been violated, attention has also been drawn to LODR Regulations. Regulation 30 and Schedule-III of the LODR Regulations as applicable at the time of first status quo order, reads as under:

(emphasis supplied)

The aforesaid Regulation requires disclosures to be made by a listed company. The disclosures are broadly classified into two categories: those disclosures which must compulsorily be made, and other disclosures that are to be made in the event they are material to the operations of the company. Regulation 30 has to be read in tandem with Schedule III of the PIT Regulations, which provides for a variety of situations in which disclosures have to be made by the company to the stock exchange. A bare cursory glance over Schedule III indicates several instances that would have required the company to actively make disclosures to the stock exchange about the change in shareholdings of JD No. 1 and JD No. 6 through their various holding companies. If the company has made disclosures they were obviously fully aware of the transactions that took place. This Court takes judicial notice of the fact that the present dispute is one of the most high profile foreign arbitrations that has come to India, and the same has been reported publicly in a variety of known and genuine newspapers in India. For a company of the standing of FHL, especially when its promoters are the main Judgment Debtors in the litigation, to say that they were fully unaware of the transactions in spite of public reporting, and in spite of the fact that they have given all the disclosures, makes it fully clear that they are only trying to mislead the Court by taking advantage of claiming to be a separate juristic entity.

Assertion of the Decree Holder primarily is that unencumbered shares of FHL held by JD No. 1 and 6 through FHHPL have been sold and many of the sales have not been properly disclosed under PIT Regulations and SAST Regulations on some pretext. The same has been vehemently opposed by FHL. Several instances have been shown by the Decree Holder that there have been several off-market transactions of the shares of FHL in connivance with FHL. However, this is a disputed question of fact.

The Apex Court has observed that about 3.25 crores unencumbered shares have gone missing and have been sold after the 11.08.2017 status quo Order. The assertion of Judgment Debtors that almost all the shares have been sold by the banks in furtherance of the Pledge Agreement is disputed by the Decree Holder. It is stated by the Decree Holder that there are no proper disclosures of sale of shares. Instances have been shown by the Decree Holder where a large number of shares have been sold in off-market transactions which could not have been pledged. A table has been shown and handed over by the Decree Holder showing the date of transactions, nature of transactions, number of shares disposed of and the disclosures made/not made under various regulations which is being reproduced as under:

The case of the Decree Holder that these were all sales of unencumbered shares executed after the assurances were given to this Court by the Judgment Debtors finds acceptance at this juncture.

Learned Senior Counsels appearing for the FHL and the Judgment Debtors have vehemently opposed the handing-over of charts and notes which are fact centric across the bar without affidavits. However, it is the definite stand of the learned Senior Counsel for the Decree Holder that the Decree Holder stands by every chart and facts stated in the notes and states that the authorized representative of the Decree Holder will take responsibility of all the documents/notes/charts handed-over in Court as his own statement. The Court has, therefore, accepted these documents. It is made clear that if the documents/statements/notes/charts, which have been handed-over in Court, are found to be false, Mr. Vinay Prakash Singh, the authorized representative of the Decree Holder, will have to face the consequences. The entire arguments in this Court have gone on the charts/documents/notes, which have been handed-over in Court. The factual assertions made in those charts/notes have been accepted only on the assurance given by the learned Senior Counsel for the Decree Holder and the authorized representative of the Decree Holder that he stands by every document/chart/note handed-over in Court.

At this juncture, it is necessary to refer to the explanation given by JD No. 1 and 6 regarding sale of these unencumbered shares which according to them was a result of top-up by the banks. Emphasis has been laid on the above Serial Nos. 5 and 6 of the table which comprises bulk of unencumbered shares. According to the Judgment Debtors, the entry at Serial Nos. 5 and 6 mentioned above are instances of disposal of unencumbered shares. According to Judgment Debtor No.1, 54,00,000 shares mentioned at Serial No. 5 were pledged in favour of Lakshmi Vilas Bank and were invoked on 18.07.2017 and 19.07.2017. He further asserts that there are letters from Lakshmi Vilas Bank for the sale of such shares. Similarly, according to Judgment Debtor No.1, the transaction mentioned at Serial No. 6 for 1,31,50,000 shares have been disposed of at the behest of financial institutions of two lenders i.e., Edelweiss and Birla Sun Mutual Fund. According to Judgment Debtor No.1, out of 1,35,09,330 shares, 86,00,000 shares were disposed of by Edelweiss and 49,09,330 shares were disposed of by Birla Sun Mutual Fund.

Further, during the course of hearing, JD No. 1 has attempted to demonstrate from contemporaneous disclosures and records that the lion‘s share of the reduction of Apex Court identified figure of 3.26 Crores is on account of fresh pledge creation on 20.07.2017 by Yes Bank Limited on 2,98,15,406 unencumbered shares. It is the contention of the Judgment Debtors that these transactions by themselves materially undermine the Decree Holder‘s assertion that the entire reduction pertained to allegedly unencumbered shares disposed of through the alleged 11 transactions.

It is stated by the Judgment Debtors that the assertions made by the Decree Holder are wholly misconceived, speculative and based on conjectures rather than verified facts and are contrary to the contemporaneous records.

On the contrary, the banks have contradicted the statements by stating that they have respected the Orders of the status quo as the shares involved in perfecting the pledges through their pledge agreements were already encumbered shares and no unencumbered shares have been further encumbered.

This Court is of the opinion that rather than this Court entering into a sale by sale analysis and examining its disclosures, an expert would be in a better position to unearth these transactions. They would also be able to identify the complicity by FHL or violation of SEBI Regulations by the companies and Judgment Debtors, and banks which will attract its own penal consequences. Though much time has been spent by both sides, where one side has alleged a brazen violation concerning the sale of unencumbered shares that violated the undertakings given to this Court by JD No. 1 and 6 in connivance with FHL, while FHL is trying to defend those transactions, it will not be proper or possible for this Court to make a detailed analysis of the transactions. Due to conflicting stances of the Decree Holder, the banks, and the Judgement Debtors, this Court is inclined to take assistance of a Forensic Auditor to unearth these disputed assertions.

A perusal of the facts reveals that 3,83,15,217 unencumbered shares were reduced to 26,31,777 unencumbered shares from June 2017 to September 2017, following the Status Quo Order passed by the Apex Court. Although it is the assertion of the Decree Holder that these shares were not sold as top ups, an assertion which is also supported by the banks, the same has been vehemently denied by the Judgment Debtors. It is necessary to unearth this dissipation of over three crore shares, which were at that time sufficient to pay off the decree. For this purpose, it is necessary to conduct forensic audits into the accounts of the concerned banks, to ascertain whether shares have been sold by utilising unencumbered shares or not and the accounts of FHL to ascertain the complicity of FHL. It is also necessary to scrutinize the accounts of FHHPL, which held all the shares on behalf of JD No. 1 and 6 regarding compliances of the SEBI regulations. This scrutiny is crucial since the common links among all the Judgment Debtors, FHHPL, and FHL are JD No. 1 and 6, who were controlling the entire web of companies that ultimately held more than 70 percent of the shares of FHL. JD No. 1 and 6 retired in March 2018, by which time the shares of FHHPL in FHL were reduced to 27,31,367, dwindling the 70 percent shareholding to less than 1 percent in the wake of solemn assurances given to this Court.

Further, in face of the contrary stance of the Banks and the Judgment Debtors regarding the status of encumbrance over the shareholding of FHHPL in FHL, it is necessary to direct a Forensic Audit to find out the real quantum of shares that were encumbered. Such exercise will assist in determining whether the JD No. 1 and 6 actually ever held 5.26 Crore unencumbered shares, or was that submission only a deceit, to pull wool over the eyes of this Court in order to evade the Decree.

The Apex Court in Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., (2023) 7 SCC 641 has desired the conduct of forensic audit for a factual analysis of the situation. The relevant portion reads as under:

It is necessary to bear in mind the distinction between directing a forensic audit and adjudicating civil liability. A direction for forensic audit is purely investigative in nature and is intended to facilitate the discovery and reconstruction of facts which may not otherwise be available on the existing record. Such a direction neither enlarges the scope of the decree nor results in the fastening of liability upon the entity whose affairs are directed to be examined. The opinion of the Auditor is expert evidence in terms of Section 39 of Bharatiya Sakshya Adhiniyam, 2023, which will enable the executing court to take appropriate steps to undo the wrongs committed, if any, by persons who have aided and abetted and indulged in violating assurances given to Court.

The Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited (2023) 7 SCC 641 while dealing with allegations relating to the dissipation of the assets of the Judgment Debtors, directed a forensic audit into the role of the banks notwithstanding the fact that the banks were neither judgment debtors nor parties to the execution proceedings. The Apex Court consciously deferred the adjudication of their respective rights and liabilities until after the forensic audit was conducted, observing that the factual position is required to be ascertained before any legal consequences could be considered. The same analogy applies to FHL as well. Merely because FHL was not a party to the arbitral proceedings or the execution proceedings cannot preclude this Court from directing a forensic audit where the material on record discloses a prima facie nexus between FHL in its erstwhile Avatar and the downstream companies, including FHHPL, which held 70% of the shares in FHL. As in the case of the banks, the present direction is intended only to facilitate a comprehensive factual enquiry, leaving all questions concerning liability and the legal consequences arising therefrom to be decided at a subsequent stage after the audit report is received.

In the opinion of this Court, it is precisely to avoid dishonesty of this nature that the doctrine of piercing the corporate veil was introduced for the first time by the Englishmen. A mere corporate facade cannot be the basis to defeat legitimate rights or commit a fraudulent activity or wrong. The Courts must always step in and pierce the corporate veil to identify the actual wrongdoers and hold them accountable.

Judgment Debtors No. 1 and 6, through other Judgment Debtors, have 100 percent shareholdings of FHHPL, which in turn had a 70 percent shareholding of FHL. Since, Judgment Debtors No. 1 and 6, were in control and ownership of FHL at the time when assurances were given to this Court, the company cannot simply raise its hand and state that the individuals, who were responsible for controlling the company, did not inform the company, and therefore the Company did not have knowledge of the assurances. This stance of the Company is rather hard to swallow since the underlying reason for recording the assurances itself, was purportedly to preserve the market value of FHL. This Court did not attach the shares, or pass any orders because of the value of the shares of FHL would have been adversely affected. It is to be borne in mind that the underlying assets of JD No. 1 and 6 were actually the shares of FHL held by the Judgment Debtors themselves and through FHHPL as all other companies did not have any value of their own. Till now this Court has not been informed about the businesses of any of the Judgment Debtor‘s downstream companies. The very same argument now raised by FHL that ordering a forensic audit will adversely affect FHL cannot be accepted. FHL cannot create an artificial distinction between its old Avatar and new Avatar. Only the management has changed, but the company remains the same. This Court takes judicial notice of the fact that at the time when the new management took over FHL they would be aware of the high profile litigation and its likely adverse impact on the value of FHL at a later point of time. In any case it is settled that the change of management of the company does not affect its rights and liabilities, and liabilities incurred by the old management are inherited by the new management.

The purport of the forensic audit will also aid the Court in understanding businesses of the downstream companies, and whether FHL should be permitted to take the argument of ignorance regarding assurances tendered by its top management. The fact that the company is now under a new management is no answer that the earlier management did all the mischief and that FHL under the new management cannot be held accountable for the wrongdoings of FHL when it was under the old management. When the new management took over, it would have necessarily done its homework before taking over the company and all its liabilities, if any.

It is the case of the financial institutions that they have dealt only with those shares which were already encumbered in their favour under the respective loan and pledge agreements. According to them, any sale or invocation undertaken by them was confined to the security created in their favour in accordance with the contractual arrangements between the parties, and no independent dealing with unencumbered shares has taken place.

On the other hand, the case put forth by the Judgment Debtors is that, owing to the decline in the market value of the pledged shares, additional shares came to be provided to the lenders under the contractual top-up mechanism forming part of the financing documents. According to the Judgment Debtors, the transfer or pledge of such additional shares was a consequence of the operation of the pre-existing contractual obligations and not an independent transaction dehors the loan agreements.

The Decree Holder disputes the aforesaid stand and contends that the top-up mechanism resulted in the depletion of the unencumbered asset base, contrary to the assurances recorded before this Court and the subsequent orders passed by the Apex Court. In view of these rival stands, this Court is of the opinion that the issue cannot be determined merely on the basis of the pleadings and documents presently relied upon by the parties. A forensic audit would assist the Court in tracing the movement of the shares, examining the operation of the pledge and top-up arrangements, and ascertaining whether only the encumbered shares were dealt with or whether unencumbered shares also came to be transferred or encumbered during the relevant period. Such an exercise would facilitate a proper adjudication of the controversy arising in the present proceedings.

Even if the Court accepts the argument that FHL was in fact a third party to the present execution proceedings, even such third party is bound by the orders of the Court in case such third party assisted in aiding and abetting the Judgement Debtors in flouting Court Orders.

The Apex Court in Sita Ram v. Balbir, 2017 (2) SCC 456, has held as under:-

(emphasis supplied)

The Apex Court in Israr Ahmad Khan v. Amarnath Prasad, 2026 SCC OnLine SC 322 has observed as under:

(emphasis supplied)

As stated earlier, the Court cannot throw up its hands in despair and state that even if its Orders have been flouted, it cannot remedy the wrong other than by punishing the wrongdoers with imprisonment. If such a situation were to take place, the Courts would lose their standing, and the common man would not believe in the efficacy of the justice system. The present case concerns the execution of a foreign award, and India cannot be made to look like a country where Courts of law can be taken for a ride by clever judgment debtors relying upon complex corporate structures and feigning ignorance, especially when they were fully aware of making calculated decisions to defeat the interests of the Decree Holder.

Either way, though these cases are of contempt and not in execution, the complicity of FHL would be a relevant factor for this Court to decide to proceed for contempt against FHL. Though The Apex Court in Pallav Sheth v. Custodian & Ors., (2001) 7 SCC 549 has held that contempt cannot be initiated beyond the period of one year yet the said Judgment states that the said period of one year can begin after the contempt is unearthed. Section 17 of the Limitation Act states that the period of limitation of fraud and deceit begins only after the fraud is found. The Company, its office bearers including the Compliance Officer, and any other person, can be proceeded against in Contempt when this Court finally discovers such fraud or deceit.

If the Court finds that any third party aided or facilitated the violation of its Orders, the mere passage of time since the commission of such contempt would not denude the Court of its jurisdiction. The Court retains the authority to initiate and impose appropriate punishment for contempt notwithstanding that the contumacious conduct occurred some time ago. The Apex Court in Pallav Sheth (supra), has held as under:-

(emphasis supplied)

The transactions relating to the sale of the controlling stake in FHL to IHH Healthcare Berhad also assumes relevance in the present proceedings. During the pendency of the proceedings before the Apex Court, an Order dated 14.12.2018 came to be passed directing that status quo with regard to the sale of the controlling stake in FHL to Malaysian IHH Healthcare Berhad be maintained. The order was passed with a view of preserving the existing position while the issues arising in the matter were under consideration.

Thereafter, the Apex Court noticed that it had been stated before it that the transaction had already been completed. The Court observed that it was necessary to ascertain when the sale had taken place and the stage at which the controlling stake in FHL had been transferred to IHH Healthcare Berhad. The Apex Court also took note of the application filed by FHL stating that the transaction had been completed on 13.11.2018 and seeking modification of the order dated 14.12.2018 insofar as it related to the sale of the controlling stake.

The Apex Court further took note of the submissions that FHL proposed to transfer approximately Rs. 4,000 crores, stated to have been received pursuant to the transaction, to RHT Health Trust, Singapore. It was also noticed that the acquisition of assets from RHT had been completed while the matter was pending before the Apex Court. In view of these developments, the Apex Court considered it appropriate to direct that the issue relating to the alleged violation of the Order dated 14.12.2018 be examined in separate contempt proceedings and issued notice accordingly.

The aforesaid sequence of events indicates that the implementation of the IHH-NTK transaction, the transfer of the sale consideration and the movement of the underlying assets formed the subject matter of consideration before the Apex Court. In the opinion of this Court, these aspects require a detailed examination of the relevant transactions and records. A forensic audit would assist this Court in tracing the movement of the shares and funds, examining the chronology of the transactions, and addressing the rival contentions of the parties on the basis of a comprehensive factual record. The observation of the Apex Court in Daiichi Sankyo Co. Ltd. vs. Oscar Investments Limited (2023) 7 SCC 641, on this aspect reads as under:-

xxx

In view of these observations, this Court deems it appropriate to include this aspect as well in the scope of the forensic audit.

The doctrine of reverse corporate veil piercing is founded on the principle that the separate juristic personality of a company cannot be permitted to become an instrument for defeating the administration of justice or frustrating the enforcement of judicial orders. While the doctrine of separate corporate personality remains the general rule, Courts have, in appropriate cases, looked beyond the corporate structure where it is found that the company has been employed as a facade or conduit for shielding assets or placing them beyond the reach of creditors. The object of the doctrine is not to disregard the independent existence of the company in every case, but to ensure that the corporate form is not misused to defeat legitimate rights or obstruct the due process of law.

The principle of reverse corporate veil piercing assumes significance in execution proceedings where the issue is not merely whether an individual has utilised a company for personal benefit, but whether the company itself has become the repository or vehicle of assets which, in substance, continue to be under the control of those against whom the decree is sought to be enforced. In such circumstances, the doctrine enables the Court, upon a proper factual foundation being established, to examine whether the assets held by the company ought to be treated as available for satisfaction of the decree, notwithstanding the separate corporate personality of the entity.

The application of the doctrine, however, is necessarily fact-specific and constitutes an exception to the general principle of corporate separateness. Before such a course can be adopted, the Court must be satisfied, on the basis of cogent material, that the corporate structure has been employed to defeat the rights of the Decree Holder or to evade compliance with judicial orders. It is for this reason that a detailed forensic examination assumes importance in the present case. The audit would assist the Court in tracing the movement of assets, identifying the entities and individuals responsible for the impugned transactions, and determining whether the factual circumstances justify an examination of the applicability of the doctrine of reverse corporate veil piercing.

The outcome of such an exercise would also have a bearing on the legal consequences that may ultimately follow. If it is found that the corporate structure was employed as a device to progressively dissipate the assets which had been represented before the Courts as available for satisfaction of the Award, or to obscure the movement of those assets through interconnected entities, this Court may be required to examine whether the facts justify lifting or piercing the corporate veil. In an appropriate case, where the facts disclose that the company itself was utilised as an instrumentality through which individuals orchestrated such transactions, the principles underlying reverse corporate veil piercing may also require consideration, so as to determine whether the company can be held answerable for the consequences of those acts.

The necessity of a forensic audit arises from the larger pattern of transactions brought to the notice of this Court. The case of the Decree Holder is not confined to any single transaction but pertains to the gradual depletion of the shareholding and other assets which had repeatedly been represented before this Court as remaining available towards satisfaction of the Award. The record discloses that over a period of time, the shareholding held through various entities underwent substantial changes by reason of invocation of pledges, creation of additional security, operation of the contractual top-up mechanism, sale of pledged shares, the IHH-NTK transaction, on market and off market transactions by the Judgment Debtors. Whether these transactions constitute independent commercial dealings undertaken in accordance with pre-existing contractual arrangements, as contended by the concerned parties, or whether they collectively resulted in the dissipation of the asset base available for enforcement, is an issue which cannot be determined on the basis of the pleadings alone.

A forensic audit would, therefore, serve the limited but essential purpose of reconstructing the chronology of the relevant transactions and tracing the movement of the shares and the corresponding funds. Such an exercise would enable the Court to identify the nature of the transactions undertaken, the sequence in which they occurred, the approvals obtained therefor, and the entities and individuals involved in the decision-making process. The audit would also assist in examining whether the diminution of the shareholding was the result of the legitimate enforcement of pre-existing security interests or whether unencumbered assets progressively came to be alienated, as alleged by the Decree Holder.

Equally, the audit would assist the Court in determining the role, if any, played by the directors, officers and key managerial personnel of the companies concerned in the implementation of these transactions. The question whether any particular transaction was approved, facilitated or carried into effect with knowledge of the undertakings recorded before this Court and the orders passed from time to time is necessarily a factual enquiry. Such determination would require examination of board resolutions, committee approvals, correspondence, banking records, demat statements, pledge documentation and other contemporaneous corporate records, which cannot effectively be undertaken without a forensic examination. In cases involving allegations of fraud, concealment or diversion of assets, the factual foundation must precede the legal conclusion.

The purpose of the forensic audit is to provide the Court with an objective reconstruction of the continuous movement of shares and funds, identify the persons and entities involved at each stage of the transactions, and furnish the factual basis upon which the Court may determine, if necessary, the liability of the directors and officers concerned.

The jurisdiction of the executing Court cannot be rendered ineffective merely because the transactions in question have been undertaken through a series of corporate entities or under the guise of commercial arrangements. Where it is alleged that the asset base, which was repeatedly represented before the Court as being available for satisfaction of the decree, has undergone continuous diminution through successive transactions, the Court is under a duty to satisfy itself that its orders and the undertakings recorded before it have not been rendered otiose.

Equally, where the material placed before the Court discloses a prima facie case that the movement of assets has occurred over a period of time through multiple entities, involving successive encumbrances, invocation of pledges, transfers of shares and movement of funds, the Court would be failing in its duty if it were to decline a proper factual examination of such transactions. The process of execution is intended to secure to the Decree Holder the fruits of the decree, and the Court must ensure that the enforcement process is not frustrated by the complexity of the corporate structure or the multiplicity of transactions. It is for this reason that the Court is required to adopt such measures as are necessary to ascertain the true nature and effect of the transactions brought to its notice.

This Court also cannot lose sight of the larger institutional implications of permitting such transactions to pass without scrutiny. An order directing maintenance of status quo is intended to preserve the subject matter of the litigation and bind every person having notice thereof. If, despite such orders, lenders were permitted to obtain fresh securities, insist upon top-up pledges, or enhance their security interests by accepting additional encumbrances over protected assets, the efficacy of judicial orders would stand seriously undermined. Acceptance of such a proposition would create a dangerous precedent whereby parties, acting through private contractual arrangements, could effectively neutralise or dilute the operation of judicial injunctions. The sanctity of orders passed by Constitutional Courts cannot be made subordinate to contractual mechanisms devised between private parties. Consequently, if the forensic audit reveals that fresh encumbrances or top-up transactions were effected after the status quo orders of the Apex Court, the legality of such transactions would necessarily require close judicial scrutiny and cannot be presumed to be insulated merely because they arose under pre-existing contractual arrangements.

Should the forensic audit reveal that any bank or financial institution, despite being aware of the subsisting judicial orders, knowingly participated in, facilitated or acted in furtherance of transactions having the effect of violating or circumventing those orders, this Court would not be powerless to examine the legal consequences flowing therefrom. The Court, in exercise of its jurisdiction to protect the sanctity of judicial proceedings and to ensure the effective enforcement of its decree, would be competent to determine the liability, if any, of such institutions in accordance with law, and to pass such consequential directions as may be warranted, including directions intended to neutralise the effect of transactions undertaken in breach of binding judicial orders. The purpose of the forensic audit is, therefore, not merely evidentiary; it is to furnish this Court with a complete and independent factual foundation. This shall form the basis upon which appropriate judicial relief, against all persons found to have participated in frustrating the execution of the decree, will be determined.

Another aspect which is to be seen in the forensic audit would be the amounts taken on loan by the downstream entities of the Judgment Debtors after the first assurance or even after the Award was passed and the purpose of loan taken by these downstream entities. There is nothing on record to show the nature of business conducted by these entities and therefore it is necessary to understand why these loans were taken and if there is no reason at all for these loans to be taken and these loans were taken for personal necessities of the persons in the control of these downstream entities of the Judgment Debtors, i.e., JD No.1, JD No.6 and their family members, then these transactions would be to defeat the decree. This Court has observed that for the loans taken by the downstream entities of the Judgment Debtors, shares of FHL held by FHHPL were kept as security. This Court needs to ascertain whether these loans were part of a legitimate transaction for the genuine business or were they part of the fraud to dissipate the shareholding of FHHPL in FHL to defeat the decree.

It is relevant to mention that the application of the Decree Holder is for an audit in respect of all 17 Banks involved in the transaction. During the course of oral arguments, they restricted this prayer to only 3 Banks. After the hearing, a written note was circulated on behalf of the Decree Holder, stating that they do not wish for any forensic audit of any Bank, and are only keen on an audit of FHL and the Judgement Debtors. This Court, however, keeping in mind the observations of the Apex Court in Vinay Prakash Singh vs. Sameer Gehlaut (2021) 16 SCC 319 and Daiichi Sankyo Co. Ltd. vs. Oscar Investments Limited (2023) 7 SCC 641, and the arguments advanced herein, finds it fit for a forensic audit to be ordered in respect of all banks and financial institutions involved in defeating the value of assurances to this Court. Needless to say, the Decree Holder‘s personal volte face, is immaterial to this consideration. This Court would have had the power to order for forensic audit, with or without the application, and their change or softening in stance towards these banks and financial institutions, does not take away from the fact that, these organisations may have knowingly assisted in the flouting of the orders of this Court, as well as the Apex Court.

In the opinion of this Court, directing a forensic audit in the present case would be consistent with the aforesaid objective. Hence, all the three applications being EX.APPL.(OS) 3764/2022, EX.APPL.(OS) 1615/2025, EX.APPL.(OS) 3763/2022 are allowed.

In view of the above, S Ramanand Aiyar & Co., Chartered Accountants, 708 Surya Kiran Building, 19 Kasturba Gandhi Marg, New Delhi, Delhi - 110001, is appointed as the Forensic Auditor to conduct the forensic audit. The purpose of the forensic audit is to identify and re-construct the entire chain of events so as to enable the court to identify the persons and the companies involved in the dissipation of shares.

The Forensic Auditor appointed by this Court would, therefore, be required to:

Examine and reconstruct the complete evolution of the shareholding of FHHPL in FHL after 24.05.2016 (date of first assurance), including the reduction in its shareholding over time, the movement of encumbered and unencumbered shares, creation of fresh pledges, invocation of existing pledges, operation of contractual top-up mechanisms, transfer of shares pursuant thereto, release of securities, sale of pledged shares, and all consequential transactions affecting the shareholding pattern.

Prepare a comprehensive transaction-wise chronology of all dealings in FHL shares by FHHPL and other Judgment Debtors from the date of the first undertaking furnished before this Court till the present, specifying, inter alia, the date of each transaction, the number of shares involved, the nature of the transaction, the transferor and transferee, the approving authority, the consideration (if any), the underlying documents, and the judicial orders subsisting on the relevant date.

Examine whether any pledge, fresh encumbrance, top-up, invocation, release, transfer or sale of FHL shares held by FHHPL and other Judgment Debtors was undertaken after the orders were passed by this Court and the Apex Court, including but not limited to the Orders dated 11.08.2017, 31.08.2017, 15.02.2018, 23.02.2018 and 14.12.2018, and identify all such transactions together with the relevant records.

Examine the role of FHL, its officers, directors, key managerial personnel, Company Secretary, Compliance Officer, Registrar and Transfer Agent, depositories and any other intermediary involved in processing, approving, recording or giving effect to the aforesaid transactions, including the statutory filings, corporate approvals and regulatory compliances pertaining thereto.

Examine the role of banks, and identify the loan facilities secured by FHL shares, the creation and variation of security, maintenance of security margins, operation of contractual top-up obligations, invocation and sale of pledged shares, release of security, and the outstanding liability corresponding to each transaction.

Prepare a comparative bank-wise statement setting out, inter alia, the date of each facility, value of the facility, shares pledged, fresh securities created, top-up transfers, invocation, sale, release of securities, outstanding exposure and the judicial orders subsisting on the date of each transaction.

Examine the complete trail of the consideration received from the transfer or sale of FHL shares and trace the destination and utilisation of such funds.

Examine the complete transaction relating to the acquisition of the controlling stake in FHL by IHH Healthcare Berhad through Northern TK Venture Pte. Ltd., including the approvals obtained, regulatory filings made, the flow of consideration, the role of the concerned parties and intermediaries, and all consequential transactions affecting the shareholding of FHHPL in FHL.

Identify every company, partnership, trust or other entity, directly or indirectly owned, controlled or beneficially held by the Judgment Debtors, which received the benefit of loans secured by FHL shares, and examine the purpose for which such borrowings were availed and utilised after the decree.

Examine the books of account, bank statements, demat statements, board and committee minutes, shareholder‘s resolutions, statutory registers, internal correspondence, emails, legal opinions, compliance memoranda, depository instructions, Registrar and Transfer Agent records, SEBI and stock exchange filings, and such other records as may be necessary to determine the knowledge of the concerned persons regarding the undertakings furnished before this Court and the orders passed by this Court and the Apex Court at the time of each transaction.

Identify all persons who proposed, negotiated, approved, authorised, implemented, facilitated, certified or recorded each of the aforesaid transactions, together with the nature and extent of their respective involvement.

Preserve, wherever necessary, electronic records, metadata, depository instructions and digital communications relied upon during the audit, and annex to the report the relevant transaction matrices, chronological charts, fund-flow statements and shareholding evolution charts forming the basis of the Auditor's conclusions.

The concerned downstream entities owned by JD No. 1 & JD No. 6, the banks from which the loans were taken by any of the Judgment Debtors, and FHL, shall assist the Forensic Auditor in arriving at the complete picture of the dissipation of shares by providing requisite requisitions.

The Forensic Auditor will issue a list of requisitions within four weeks from the date of this Order to all the concerned entities. The concerned entities will furnish the details, information, documents to the Forensic Auditor within two weeks from the date of receipt of the requisition list. Needless to state that if, at a later point of time, the Forensic Auditor requires any additional requisitions from the concerned entities, the Forensic Auditor will raise a requisition and the concerned entities will be obliged to furnish such information within two weeks of receipt of such requisition.

The Institute of Chartered Accountants of India (ICAI) has brought out the scale of fees for professional assignments done by the Chartered Accountants. The fees for Audit and Other Assignments has been given as follows:-

The aforementioned chart is of the year 2020. Keeping in mind the rate of inflation, the fees of the Auditor is fixed in the following manner:-

The Auditor is requested to complete the exercise within a period of six months from the date of the receipt of this Order.

The fees of the Auditor for the period of six months shall be borne by the Decree Holder.

Failure to make or fulfil the requisition raised by the Forensic Auditor will be viewed as contempt of the Orders of this Court and appropriate action shall be taken against the defaulters in accordance with law.

In case the Auditor requires any information from the statutory authorities, depositories or any other bodies carrying out public function, then such bodies are expected to supply the Auditor with any and all information that the Auditor will require relating to the present case.

All the applications being EX.APPL.(OS) 3764/2022, EX.APPL.(OS) 1615/2025, EX.APPL.(OS) 3763/2022 are disposed of and the same are allowed.

EX.APPL.(OS) 1164/2020, EX.APPL.(OS) 1365/2021, EX.APPL.(OS) 3650/2022, EX.APPL.(OS) 3850/2022, EX.APPL.(OS) 244/2024, EX.APPL.(OS) 839/2025, EX.APPL.(OS) 1036/2025, EX.APPL.(OS) 1211/2025, EX.APPL.(OS) 1212/2025, EX.APPL.(OS) 1545/2025, EX.APPL.(OS) 1873/2025, EX.APPL.(OS) 1877/2025, EX.APPL.(OS) 54/2026, EX.APPL.(OS) 55/2026, EX.APPL.(OS) 56/2026, I.A. 5552/2019, I.A. 5553/2019

List on 01.04.2027.