M/s. Urban Infrastructure Trustees Limited vs M/s. Ozone Propex Private Limited

LIST OF DOCUMENTS

"...43. For the reasons aforesaid, we pass the following:

ORDER

i] Writ Appeal is allowed in part. ii] Order of the learned Single Judge passed in W.P. No. 41710/2019 dated 25.09.2019 impugned, insofar as remanding the matter to NCLT remains undisturbed. iii] NCLT is directed to consider the Petition filed under Section 7 of the IB Code along with application under Section 8 of the Act, 1996 in terms of Indus Biotech Private Limited and shall take appropriate decision in accordance with law in an expeditious manner. iv] Writ Petition stands dismissed. v] In view of disposal of the main matters, all the pending I.As are consigned to file. vi] No order as to costs."

"27.

The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5 (21) means a claim in respect of provision of goods or services.

28.

When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor – it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.”

(a)

To sign, file and issue notices in the name of the Company, applications, written statements, affidavit, petitions, appeals and submit necessary applications;

(b)

To lead and adduce evidence, sign and produce any documents;

(c)

To appoint any advocates, solicitors and legal advisors and to sign, execute, deliver, file all necessary plaints, vakalatnamas, warrants to act, Petitions, appeals, applications, defences, written statements, declarations, affidavit and other documents, papers and writings;

(d)

To take such acts, deeds and things as may be required from time to time for giving effect to the above matters.

RESOLVED FURTHER THAT this resolution shall remain effective until otherwise rescinded by another resolution of the Board of Directors of the Company."

"...29. Therefore, to sum up the procedure, it is clarified that in any proceedings which is pending before the adjudicating authority under section 7 of the IB Code, if such petition is admitted upon the adjudicating authority recording the satisfaction with regard to the default and the debt being due from the corporate debtor, any application under Section 8 of the 1996 Act made thereafter will not be maintainable. In a situation where the Petition under Section 7 of IB Code is yet to be admitted and, in such proceedings, if an application under Section 8 of the 1996 Act is filed, the adjudicating authority is duty-bound to first decide the application under Section 7 of the IB Code by recording a satisfaction with regard to there being default or not, even if the Application under Section 8 of the 1996 Act is kept along for consideration. In such event, the natural consequence of the consideration made therein on Section 7 of IB Code application would befall on the application under Section 8 of the 1996 Act."

"...25. The points that arise for our consideration in the Writ Appeal are:

(1)

Whether the application filed under Section 8 of the Act, 1996 deserves to be adjudicated upon by the Adjudicating Authority - NCLT prior to adjudication of the proceedings under Section 7 of the IB Code?

(2)

Whether the learned Single Judge was justified in entertaining the Writ Petition dehorse the alternative and efficacious remedy available under the provisions of IB Code and the Act, 1996?

(3)

Whether the learned single Judge was justified in quashing the order of NCLT exercising the powers of writ jurisdiction and remitting the matter to NCLT for deciding the matter afresh constructing the order of NCLT as cryptic and passed cavalier manner?

26.

The points that arise for our consideration in W.P No. 3415/2020 are:

(1)

Whether Writ Petitioner filed by the Ozone Propex Private Limited., against the orders of NCLAT and NCLT is maintainable?

(2)

Whether the orders impugned passed by NCLAT and NCLT are justifiable in the facts and circumstances of the case? xx xx xx

32.

Considering the dictum laid down in Innoventive Industries Limited., and the other judgment holding the field, the Hon'ble Apex Court in Indus Biotech Private Limited, has summarized the legal principles at paragraphs 26 to 29 and the same is quoted hereunder:

"26.

The underlying principle, therefore, from all the above noted decisions is that the reference to the triggering of a petition under Section 7 of the IB Code to consider the same as a proceedings in rem, it is necessary that the Adjudicating Authority ought to have applied its mind, recorded a finding of default and admitted the petition. On admission, third party right is created in all the creditors of the corporate Debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petition for consideration of the Corporate Insolvency Resolution Process is the relevant stage which would decide the status and the nature of the pendency of the proceedings and the mere filing cannot be taken as the triggering of the insolvency process.

27.

As noted, the issue which is posed for our consideration is arising in a petition filed under Section 7 of IB Code, before it is admitted and therefore not yet an action in rem. In such application, the course to be adopted by the Adjudicating Authority if an application under Section 8 of the Act, 1996 is filed seeking reference to arbitration is what requires consideration. The position of law that the IB Code shall override all other laws as provided under Section 238 of the IB Code needs no elaboration. In that view, notwithstanding the fact that the alleged corporate debtor filed an application under Section 8 of the Act, 1996, the independent consideration of the same dehors the application filed under Section 7 of IB Code, and materials produced therewith will not arise. The Adjudicating Authority is duty bound to advert to the material available before him as made available along with the application under Section 7 of the IB Code by the financial creditor to indicate default along with the version of the corporate debtor. This is for the reason that, keeping in perspective the scope of the proceedings under the IB Code and there being a timeline for the consideration to be made by the Adjudicating Authority, the process cannot be defeated by a Corporate Debtor by raising moonshine defence only to delay the process. In that view, even if an application under Section 8 of the Act, 1996 is filed, the Adjudicating Authority has a duty to advert to contentions put forth on the application filed under Section 7 of IB Code, examine the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not. While doing so the contention put forth by the Corporate Debtor shall also be noted to determine as to whether there is substance in the defence and to arrive at the conclusion whether there is default. If the irresistible conclusion by the Adjudicating Authority is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties indisputably contains an arbitration clause.

28.

That apart if the conclusion is that there is default and the debt is payable, due to which the Adjudicating Authority proceeds to pass the order as contemplated under sub. section 5(a) of Section 7 of IB Code to admit the application, the proceedings would then get itself transformed into a proceeding in rem having erga omnes effect due to which the question of arbitrability of the so-called interse dispute sought to be put forth would not arise. On the other hand, on such consideration made by the Adjudicating Authority if the satisfaction recorded is that there is no default committed by the company, the petition would stand rejected as provided under sub-section 5(b) to Section 7 of IB Code, which would leave the field open for the parties to secure appointment of the Arbitral Tribunal in an appropriate proceedings as contemplated in law and the need for the NCLT to pass any orders on such application under Section 8 of Act, 1996 would not arise.

29.

Therefore, to sum up the procedure, it is clarified that in any proceeding which is pending before the Adjudicating Authority under Section 7 of IB Code, if such petition is admitted upon the Adjudicating Authority recording the satisfaction with regard to the default and the debt being due from the corporate debtor, any application under Section 8 of the Act, 1996 made thereafter will not be maintainable. In a situation where the petition under Section 7 of IB Code is yet to be admitted and, in such proceedings, if an application under Section 8 of the Act, 1996 is filed, the Adjudicating Authority is duty bound to first decide the application under Section 7 of the IB Code by recording a satisfaction with regard to there being default or not, even if the application under Section 8 of Act, 1996 is kept along for consideration. In such event, the natural consequence of the consideration made therein on Section 7 of IB Code application would befall on the application under Section 8 of the Act, 1996."

33.

Learned Senior Counsel Sri.K.G.Raghavan appearing for the Urban Infrastructure Trustees Ltd, has placed much emphasis on this decision to contend that the proceedings under Section 7 of IB Code has to be decided first or in other words, application fled under Section 8 of the Act, 1996 cannot be adjudicated independently by NCLT. On the other hand, learned Senior Counsel Sri.S.S.Naganand submits that this judgment is in favour of Ozone Propex Put. Ltd.,

34.

In order to analyze the arguments advanced by the learned Senior Counsel appearing for both sides, marshalling of facts of the Indus Biotech Private Ltd., is necessary. An Arbitration Petition was filled by Indus Biotech Private Ltd., under Section 11(3) read with Sections 11(4)(a) and 11(12)(a) of the Act, 1996 before the Hon'ble Apex Court seeking for appointment of an Arbitrator to adjudicate upon the disputes that had arisen between the parties therein, the same being an International Arbitration. The respondents 1 to 4 therein had converted their respective preference shares invested in Indus Biotech Private Ltd., into equity shares. In that process, a dispute was stated to have arisen with regard to calculation and conversion formula to be applied in converting the preference shares of the respondent Nos. 1 to 4, into equity shares. The petitioner company - Indus Biotech Private Ltd., contended that the said dispute has to be resolved through arbitration by the Arbitral Tribunal whereas the respondent Nos. 1 to 4 therein contended that as the debt had not been paid by the company, it has given a cause of action for them to invoke the jurisdiction of the adjudicating authority, NCLT by initiating the Corporate Insolvency Resolution Process provided under IB Code. In the petition filed under Section 7 of IB Code before the NCLT, Indus Biotech Private Ltd., had filed a miscellaneous application under Section 8 of the Act 1996 seeking a direction to refer the parties to arbitration which was allowed by the NCLT, Mumbai Bench - IV. As a consequence, the petition under Section 7 of the IB Code was dismissed. Being aggrieved by the said order, the respondent No.2 therein had preferred the SLP. Both these matters were connected and heard together. The Hon'ble Apex Court has observed that in the normal course against the order of NCLT, an appeal would have been preferred to the NCLAT as provided under Section 61 of IB Code. The contention that there is no remedy of appeal against an order disposing of an application filed under the Act, 1996 and an order under Section 61 of IB Code, has been rejected. The Hon'ble Apex Court taking note of the special circumstances where the order was passed by the NCLT while considering the petition under Section 7 of IB Code, in the backdrop of Indus Biotech Private Ltd., seeking for the resolution of dispute through arbitration and the arbitration petition to that effect was already pending before the Hon'ble Apex Court as on the date of the order passed by the NCLT, has examined the scope of Section 7 of IB Code. It has been reiterated that in order to trigger an application under Section 7, existence of four factors are necessary, i.e., (i) there should be a debt; (ii) default should have occurred (iii) debt should be due to "financial creditor" [(iv) such default which has occurred should be by a corporate debtor; on such application being filed with the compliance required under Sub-Sections (1) to (3) of Section 7 of IB Code, a duty is cast on the adjudicating authority to ascertain the existence of a default if shown from the records or on the basis of other evidence furnished by a financial creditor, as contemplated under Sub-section (4) of Section 7 of IB Code.

35.

Further, the scope of application filed under Section 8 of the Act, 1996 before NCLT during the pendency of the petition under Section 7 of IB Code has been extensively discussed in paragraphs 26 to 29 of the said judgment. In our considered view, the underlying principles laid down by the Hon'ble Apex Court in the said paragraphs 26 to 29 are squarely applicable to the facts of the present case. In the light of the said judgment, even if an application under Section 8 of the Act, 1996 is filed, the adjudicating authority has to advert to contentions put forth on the application filed under Section 7 of IB Code, examine the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not after considering the defence put forth by the corporate debtor, even if the application under Section 8 of the Act 1996 is kept along for consideration. In our considered opinion, these legal principles cannot be held to be applicable only in the said factual matrix of the case as contended by the learned Senior Counsel Sri.S.S.Naganand. Though the Hon'ble Apex Court has considered the application filed by the Indus Biotech Private Ltd., under Section 11(3) read with Sections 11(4) (a) and 11(12)(a) of the Act, 1996 which was pending prior to passing of the order by NCLT impugned in SLP and appointed the Arbitral Tribunal, but the underlying principles laid down by the Hon'ble Apex Court in paragraphs 26 to 29 being the ratio decidendi, the same is binding on this Court as well as the NCLT/NCLAT.

36.

Thus, it would be appropriate for the NCLT to consider the petition under Section 7 of IB Code along with the application under Section 8 of the Act, 1996, as observed by the Hon'ble Apex Court, the natural consequence of the consideration made therein on Section 7 of IB Code Application would befall on the application under Section 8 of the Act, 1996. xxxxx

43.

For the reasons aforesaid, we pass the following:

ORDER

i] Writ Appeal is allowed in part. ii] Order of the learned Single Judge passed in W.P. No. 41710/2019 dated 25.09.2019 impugned, insofar as remanding the matter to NCLT remains undisturbed. iii] NCLT is directed to consider the Petition filed under Section 7 of the IB Code along with application under Section 8 of the Act, 1996 in terms of Indus Biotech Private Limited and shall take appropriate decision in accordance with law in an expeditious manner. iv] Writ Petition stands dismissed. v] In view of disposal of the main matters, all the pending I.As are consigned to file. vi] No order as to costs."

"while strict determination of intent or mens rea may not always be possible by the NCLT and NCLAT in summary proceedings, it is possible to draw the inference from the facts at hand."

G.3.3. Collusive transactions

48.

The above discussion shows that money advanced as debt should be in the receipt of the borrower. The borrower is obligated to return the money or its equivalent along with the consideration for a time value of money, which is the compensation or price payable for the period of time for which the money is lent. A transaction which is sham or collusive would only create an illusion that money has been disbursed to a borrower with the object of receiving consideration in the form of time value of money, when in fact the parties have entered into the transaction with a different or an ulterior motive. In other words, the real agreement between the parties is something other than advancing a financial debt. A useful elaboration of "sham transactions" can be found in the opinion of Diplock, L.J. in *Snook v. London & West Riding Investments Ltd.*14: (QB p. 802)

"As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create." (emphasis supplied)

49.

Diplock, L.J. also stated: (Snook case14, QB p. 802)

"But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure15 and Stoneleigh Finance Ltd. v. Phillips16), that for acts or documents to be a "sham", with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived." (emphasis supplied)

50.

This Court in Prem Chand Tandon v. Krishna Chand Kapoor17 had to determine whether a usufructuary mortgage was a sham transaction entered into by the respondent there ("the borrower") to avoid payment to creditors. This Court examined the real nature of the transaction to hold that the parties

"9.

As regards the consideration for the usufructuary mortgage the promissory notes were never produced. It is true that there was some evidence that Smt Dhanta Devi [lender] had received certain insurance monies on the death of her husband but the aggregate of those amounts did not exceed, Rs 13,000. Even if she was possessed of some jewellery and other funds it is difficult to believe that she would have advanced such a substantial amount of Rs 25,000 to the respondent [borrower] by means of two promissory notes on 10-12-1919 and on 17-3-1920. It would further appear and some stress has been laid on this aspect by Jagat Narain, J., in his judgment that the financial position of the respondent at the time the usufructuary mortgage deed was executed was fairly good considering the various articles like diamonds and the car which he had purchased apart from the shares. The house at Ajmer and the Ville Parle land had been mortgaged with possession for Rs 25,000 for a period of 60 years. It was difficult to believe that the respondent would have entered into such a transaction in view of his financial position in the year 1921. It was equally not likely that a person dealing in shares who would require ready money would lock up his assets like the property in dispute in a transaction which was such that the mortgage could not be redeemed before the expiry of the period of sixty years. The mortgage, therefore, was executed only with an ulterior purpose, it being wholly fictitious." (emphasis supplied)

51.

The IBC has made provisions for identifying, annulling or disregarding "avoidable transactions" which distressed companies may have undertaken to hamper recovery of creditors in the event of the initiation of CIRP. Such avoidable transactions include:

(i)

preferential transactions under Section 43 IBC;

(ii)

undervalued transactions under Section 45(2) IBC;

(iii)

transactions defrauding creditors under Section 49 IBC; and

(iv)

extortionate transactions under Section 50 IBC.

The IBC recognises that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors.

104.

Hence, while the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a "related party" before the corporate debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors.

105.

In the present case, there is a finding that AAA and Spade were related parties within the meaning of Section 5(24) at the time when the alleged financial debt on the basis of which they assert a claim to be a part of the CoC was created. This was due to the long-standing relationship between Mr Arun Anand and Mr Anil Nanda, and their respective corporations. Admittedly, such a relationship still existed even in 2017, since Mr Anil Nanda's JIPL held shareholding in Mr Arun Anand's Spade. Further, we have also concluded that the transactions between Spade and AAA on one hand, and the corporate debtor on the other hand, which gave rise to their alleged financial debts were collusive in nature. Therefore, it is evident that there existed a deeply entangled relationship between Spade, AAA and corporate debtor, when the alleged financial debt arose. While their status as related parties may no longer stand, we are inclined to agree with Mr Kaul that this was due to commercial contrivances through which these entities seek to now enter the CoC. The pervasive influence of Mr Anil Nanda (the promoter/Director of the corporate debtor) over these entities is clear, and allowing them in the CoC would definitely affect the other independent financial creditors.

J. Conclusion

106.

In conclusion, we hold that:

106.1.

The decision of the NCLAT, inasmuch as it referred to Spade and AAA as financial creditors, is set aside. Due to the collusive nature of their transactions alleged to be a financial debt under Section 5(8), Spade and AAA cannot be labelled as financial creditors under Section 5(7).

106.2.

The decision of the NCLAT, inasmuch as it referred to Spade and AAA as related parties of the corporate debtor under Section 5(24), is affirmed.

106.3.

The decision of the NCLAT, inasmuch as it excluded Spade and AAA from the CoC in accordance with the first proviso of Section 21(2), is affirmed but for the reasons mentioned above.

107.

The appeals are accordingly disposed of. Pending application(s), if any, stand disposed of.

Memorandum of Understanding dated 29.12.2006

"...WHEREAS Ozone Propex is a company promoted by the Promoters, which carries on the business of development of properties either directly or in joint ventures, with operations in Bangalore, Chennai and Goa AND WEHEREAS Urban Infrastructure Trustees Ltd. as trustee of the Urban Infrastructure Venture Capital Fund and of the Urban Infrastructure Opportunities Fund, a scheme thereof, being in the nature of a venture capital fund, established for the purpose of carrying on the business of making investments inter alia in real estate ventures in India

AND WHEREAS Ozone Propex and the Promoters has proposed to Investor for its investment in Equity Shares or Equity linked instrument of Ozone Propex and Investor has expressed its interest in the said proposal subject to the approval of Investment Committee of Investor.

AND WHEREAS on the basis of representations, the parties hereto have decided to reduce the terms of understanding in writing arrived at between the parties.

NOW THIS MEMORANDUM OF UNDERSTANDING WITNESSETH AS UNDER:

1.

Purpose: Pursuant to this MOU and subject to the terms as agreed hereunder Investor either itself or through any other entity/person shall invest Rs.1040 million by way of subscription and/or acquisition of equity shares and/or equity linked instrument of Ozone Propex on mutually agreed terms and conditions between the parties.

2.

Change in shareholding of Ozone Propex: Pursuant to aforesaid subscription and/or acquisition of equity shares of Ozone Propex by Investor, the shareholding pattern of Ozone Propex shall be:

Sr. No.		Existing Shareholding % in Ozone Propex	Post Shareholding % in Ozone Propex
1.	Sh. Vasudevan	51.00%	45.00
2.	Sh. C.P Bothra	49.00%	5.00%
3.	Investor	--	50.00%

3.

Responsibilities of the Parties. That the Parties hereto have agreed that the proposed transaction shall be subject to the parties undertaking the following for the transaction:

(1)

The Investor shall undertake and be responsible to organize funds and financing through UIOF for all future real estate development projects that Ozone Propex may undertake, either directly or through a subsidiary or in joint ventures, at an interest rate not exceeding 12% per annum. The parties may revise such cap from time to time through mutual consent.

(2)

Promoters shall undertake and be responsible for design, construction planning and marketing of real estate projects and shall control and solely be responsible for day to day management of the Ozone Propex and its subsidiary company and for the implementation of projects in accordance with the Vision Statement to agreed between the investor and promoters including all aspects relating to design, planning, development, construction and marketing of all projects that Ozone Propex undertakes. (3) In the event any new project for development is available to or under consideration by the Promoters, then the Promoters shall, first submit such proposal to the Board of Directors of the Ozone Propex for implementation through Ozone Propex. If the Board of Directors of the company reject such project, then the Promoters may independently undertake such project.

(4)

The investor shall ensure that the holding of the promoters in all projects that may be undertaken, either directly or through a subsidiary or in joint ventures, is not less than 50% at any time unless otherwise agreed by the Promoters.

(5)

Unless otherwise agreed between the parties it is agreed that in no event shall the shareholding percentage of the Promoters be reduced below 50% in Ozone Propex.

(6)

The parties shall be entitled to appoint Directors equally on the Board of Ozone Propex.

4.

Execution of Definitive Agreement: That the Parties hereto have decided in enter into formal definitive agreements to give effect to the understanding reached between the parties vide this MOU. Based on the terms agreed hereunder, the parties shall enter into the share subscription agreement, shareholders agreements, share transfer agreement and any other incidental agreement relating thereto. The definitive agreements will describe in detail the rights, responsibilities exit mechanism for the Investor and obligation of the parties.

This MOU is subject to the execution of binding definitive agreement (s) between the Parties. This MOU shall be effective from the date of execution of this MOU and shall remain enforceable until the execution of definitive agreement (s) or upto 31.07.20078 whichever is earlier.

5.

Arbitration: All disputes and differences that may arise between the parties hereto in regard to or touching these present, the carrying out of the terms and conditions hereunder and/or the interpretation thereof in any way whatsoever or as to the construction, meaning, validity or effects of this MOU or any clause, matter or thing herein contained or the rights and liabilities of the parties hereunder, or any breach hereof, which cannot be settled by friendly negotiation, shall be referred to the arbitration. The arbitration shall be governed by the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment in force for the time being. Such arbitration shall be conducted at Bangalore. The enforcement of the award may be entered in any court of competent jurisdiction."

xxxx

Share Subscription Agreements Dated 12.01.2007

"...E. Pursuant to an understanding as recorded in the letter dated 2nd March 2006 signed by the company and Dharti Investment and Holdings Limited and certain others, the Company has agreed to issue, inter-alia to Dharti Investment and Holdings Limited 85,28,649 equity shares of the face value of Rs.10/- per share at a premium of Rs.17.18 per equity share.

F. Dharti Investment and Holdings Limited have paid to the company a sum of Rs.23,18,00,000/- towards the subscription price of the said equity shares.

G. Dharti Investment and Holdings Limited has, subsequently, assigned its rights to acquire the said shares in the Company to the Investor and the Company has acknowledged the assignment and agreed to issue and allot equity shares to the Investor in terms of the understanding recorded in the said letter dated March 2, 2006.

II In terms of the said letter dated March 2, 2006, the parties have now agreed to entered into this Agreement.

1.

In order to meet additional fund requirements of the Company, the Investor has agreed to also subscribe to Debentures under a separate Debenture Subscription Agreement as under:

Sl.	Name of the Holder	No. of Shares	% Shareholding
1.	First Promoter	3,33,17,934	75.64%
2.	Second Promoter	22,02,066	5.00%
3.	Investor	85,28,649	19.36%
	Total	4,40,48,649	100.00%

2.

On the Completion Date and subject to the terms and conditions as set out in this Agreement the Investor shall subscribe to and the Company shall issue and allot to the Investor the Equity Shares as set out hereinafter.

xxxxxx

"Transaction Documents" mean:

(a)

This Agreement;

(b)

the Ozone Propex Shareholders Agreements and

(c)

the Debenture Subscription Agreements dated as of the date hereof entered into between the Company and the Investor for the issuance of redeemable optionally convertible debentures of the Company.

xxxxx

2.2 Subscription by the Investor:

The Company agrees to issue and allot to the Investor, and the Investor agrees to subscribe to, accept and receive on the Completion Date, the number of Equity Shares (the Investor Subscription Shares) for the aggregate consideration (the Investor Subscription Amount) as set forth below:

Sl.	Name of the Holder	No. of Shares	% Shareholding
1.	First Promoter	3,33,17,934	75.64%
2.	Second Promoter	22,02,066	5.00%
3.	Investor	85,28,649	19.36%
	Total	4,40,48,649	100.00%

xxxxx

2.6 Shareholding on the Completion Date:

Upon completion of the subscription to the Investor Subscription Shares as contemplated in Clause 2.5, the Shareholding structure of the Company shall be as under:

Sl.	Name of the Holder	No. of Shares	% Shareholding
1.	First Promoter	3,33,17,934	75.64%
2.	Second Promoter	22,02,066	5.00%
3.	Investor	85,28,649	19.36%
	Total	4,40,48,649	100.00%

xxxxx

6. GOVERNING LAW AND ARBITRATION

6.1

The provision of this Agreement shall be governed by and construed in accordance with India law.

6.2

Any dispute arising under or out of or in connection with or in relation to this Agreement or any alleged breach hereof shall be determined and settled by arbitration pursuant to the Arbitration and Conciliation Act, 1996. Any such dispute shall be determined by a panel of three (3) arbitrators (Arbitrators) of which the Investor shall appoint one arbitrator and the company and the Promoters jointly shall appoint one arbitrator and the Arbitrators so selected shall appoint the third Arbitrator (the Arbitration Board). Any Award rendered upon such arbitration shall be Bangalore. Appeals (if any) in relation to such awards shall i.e. to the competent courts in Bangalore."

xxxxx

Shareholders Agreement dated 12.01.2007

...WHEREAS:

A. The Parties have executed the Ozone Propex Share Subscription Agreement ("the Ozone Propex SS") by which the Investor has agreed to subscribe to 85,28,649 Equity shares of the Company ("Investor Subscription Shares") on the Completion Date (as defined in Clause 2.2 of the Ozone Propex SSA), on the terms and conditions contained in the Ozone Propex SSA.

B. With effect from the Completion Date, the Parties wish to regulate their relationship in relation to the ownership and management of the company and record hereinafter the terms of their agreement for the governance, management and control of the Company.

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4.FUNDING OF THE COMPANY

4.1 Equity Capital; Other Securities

(a)

So long as the parties hold shares in the proportion set out in Clause 3.2 above and except to the extent contemplated by the Transaction Documents, the company will not issue any shares or other securities of the company without the approval of the Investor by exercise of its Affirmative Vote rights in accordance with and subject to the provisions of Clause 6.3.

(b)

ON the occurrence of the completion Date:

(i)

The company shall allot and issue the Investor Subscription shares to the Investor

(ii)

The Investor shall provide additional funding for the Business of the company by subscription to 6,67,80,000 redeemable optionally convertible debentures of Rs.10 each (the Debentures") to be issued by the Company in accordance with the Debenture Subscription Agreement and

(iii)

The cost in relation to the issue of the Debentures to be issued by the Company shall be borne by the Company.

4.2 Obligation to contribute additional funds; New business

(a)

Except as otherwise contemplated in the Transaction Documents, no Shareholder will required to contribute additional funds, extend credit, or otherwise make any financial accommodation in relation to the company without the express written consent of that shareholder.

(b)

The Promoters and the Investor agree and acknowledge that the company shall be engaged solely in the Business unless otherwise approved by the Board by the Affirmative Vote of the Investor.

4.3 Obligation to provide business opportunities to Company:

(1)

The Promoters shall ensure that all future business opportunities for real estate development are first offered by the Promoters to the Investor to the Investor for joint development through the Company. The Investor shall be provided with all relevant details in relation to the said opportunity including, location of the development, title, price/valuation of the land/project, terms of payment etc. and such other information as may be requested by the Investor. In the event that the Investor proposes to invest in such opportunity, the Promoters and the Investor shall jointly undertake such opportunity, the Promoters may independently or with any other person undertake such opportunity on the same terms and conditions on which such opportunity was made available to the Investor.

4.4 Obligation of the Investor

The Investor shall undertake and be responsible to organize funds and financing for all future real estate development projects that ozone Propex may undertake, either directly or through a subsidiary or in joint ventures, at the prevalent market interest rate. It is clarified that in case of funds and finance is being organized by the Investors from its own resources, at an interest rate of 12% p.a.

5. BOARD OF DIRECTORS OF THE COMPANY

5.1 Total number of Directors:

From and after the Completion Date, the Board shall comprise of 4 Directors with each of the Promoters and the Investors being entitled to equal representation on the Board of Directors as set out in this Clause.

5.2. Number of Directors that may be appointed by Promoters:

The Promoters shall have the right to collectively appoint 2 Directors on the Board.

5.3. Nominees of the Investors:

(a)

The Investor shall, till such time that its equity shareholding percentage in the Company does not fall below (8%) of the paid-up equity capital of the Company, have the right to appoint/nominate 2 non-retiring Directors on the Board of the Company.

(b)

The Investor entitled to appoint/nominate a Director in accordance with the terms hereof, shall also be entitled to require the removal or substitution of such Director so appointed/nominate by it.

(c)

If the equity shareholding of the Investor falls below (8%) of the paid up equity capital of the Company, then the Investor must take all steps necessary to ensure that the Director/s appointed by them resign from the Board.

(d)

In addition to the above, the Investor shall also be entitled to appoint/nominate one (1) non-retiring director on the board of (i) every subsidiary or joint venture of the Company, which is partly or wholly engaged in the Business; and (ii) every company established to carry on the Business in full or part; and the Company shall use its voting power in such other company in favour of the same.

(e)

The Investor Directors shall not be required to hold any qualification shares and shall not be liable to retire by rotation.

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5.12 Quorum not present

(a)

If a quorum is not present within 1 (one) hour from the time specified for a meeting of the Board, the meeting will be adjourned to a date and time 7 (seven) days after the original date and time of the meeting and at the same place as the original meeting by written notice to all Directors.

(b)

Clause 5.11 will apply to such an adjourned meeting as well. If a quorum is not present within 1 (one) hour of the time specified for the adjourned meeting, the Directors present shall form the quorum for such meeting subject to the presence of minimum two Directors, provided that if no Investor Director is present none of the matters, if any, reserved for Affirmative Vote pursuant to Clause 6.3 shall be considered at such meeting.

6. DECISION MAKING

6.1 Powers of the Board

Except otherwise specified in this Agreement, or the Act, the Board will have full power to direct the activities of the Company.

6.2 Voting generally

(a)

Subject to clause 6.3, all decisions of the Shareholders shall be made pursuant to resolutions passed in accordance with the requirements of the Act.

(b)

Subject to Clause6.3, all decisions of the Board, shall be made pursuant to resolutions passed in accordance with the requirements of the Act.

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11.

Hence, the grievance of the Appellant does not fall under the provision of 'Insolvency and Bankruptcy Code, 2016'. Accordingly, the Appeal is devoid of merits and the same is hereby dismissed. However, the Appellant is at liberty to approach an appropriate forum for seeking necessary relief(s) for redressal of grievances, of course, in accordance with law. Interim orders, if any, were issued, stands vacated. Pending IA(s), if any, stands closed. There shall be no order as to costs."

I.A No. 229 of 2019