The year 2020 has witnessed a series of amalgamations, mergers, and acquisitions. Though the M&A activities declined, it has been a busy year for NCLT, NCLAT as well as the Supreme Court of India. M&As in India dived by 36% to $82 billion in the Fiscal year 2020. However, there have been certain landmark cases that are very significant in the industry of corporate affairs. Let’s have an overview of the same.
Amazon Vs Future Retail
The Future Retail group represented by Advocate Harish Salve demanded an interim injunction preventing Amazon from writing to Indian statutory authorities objecting to FRL’s proposed asset sale to Reliance Group. A single Justice Mukta Gupta bench at Delhi High Court declined to offer any interim relief on the request of FRL to order Amazon not to write to legislative authorities informing them of an Emergency Arbitrator award based in Singapore.
An injunction was awarded on the agreement by the Emergency Arbitrator earlier on Amazon’s challenge to the contract before an Emergency Arbitrator named under the Singapore International Arbitral Tribunal Rules. Future Retail argued before the Delhi High Court that Amazon had written to regulatory authorities, including India’s Competition Commission, SEBI, etc., claiming that the Emergency Arbitrator’s order is ‘binding’ and was thus attempting to prevent the Future-Reliance agreement from being accepted. The court gave a green signal for RIL transaction in Future Group and said that the validity of the same will be decided by the statuary authorities.
The court said that the award of Singapore Emergency Arbitrator was valid though it was not quorum judice. Further, Future Retail argued that they did not consider the award as binding in the first place then, hence, the question of challenging it is needless. Furthermore, FRL submitted that Amazon was “content” with the Future Coupons Pvt Ltd arrangement as it had a call option in the agreement, which Future Retail claimed would allow Amazon to join the multi-brand retail sector if the Government of India approved FDI in the sector at some point.
The primary case of FRL was that Amazon was not a party to its own shareholder deal, and Amazon was not its shareholder-it was merely an FCPL shareholder, so it could not dispute the right of FRL to enter into a contract with Reliance, as FCPL being an Indian entity, money coming from FCPL into FRL would. Gopal Subramanium, representing Amazon, argued that the Emergency Arbitrator had already dealt with most, if not all, of the claims raised by FRL, FCPL, and Reliance. He also claimed that Amazon had not disputed or intended to disobey any Indian FDI policy in the least not at all be regarded as FDI.
He further pointed out that Amazon has a 49 percent stake in FCPL, which has 9.82 percent shares in FRL because of which Amazon’s stake in FRL is half successful and will not surpass the 10 percent cap levied in the multi-brand retail sector by India’s FDI policy. He also argued that, under the general umbrella of the Biyanis, all FCPL and FRL shareholder deals had already been brought to the attention of the CCI.
Tata Sons Vs Cyrus Mistry
In the dispute between Tata Group’s holding firm, Tata Sons Limited, and Shapoorji Pallonji Groups’ Cyrus Mistry, the Supreme Court began final hearings on 17th December 2020. A National Corporate Law Appellate Tribunal order that ordered the reinstatement of Cyrus Mistry as the Chairman of Tata Sons Limited was challenged by both Tata Sons and Mistry on December 18, 2019.
As of January 10, 2020, the Supreme Court had the NCLAT order retained. In its December 2019 judgment, the NCLAT held that it was unconstitutional to suspend Cyrus Mistry as chairman in the proceedings of the Tata Sons Board meeting held on October 24, 2016.
It also instructed that Ratan Tata should not take, beforehand, any decision which involves a majority decision of the Board of Directors of Tata Sons or a consensus of the members of the Annual General Meeting.
The bench was headed by CJI S.A Bobde. Advocate Shyam Divan argued that whatever was happening was against the Companies Act under which should not act independently. Divan contended that Section 166, 118(10), 149 of the Companies Act was breached. When CJI Bobde asked whether Cyrus was MD or not, Salve replied that there was no explicit Contract stating that, and it was only through the operation of law that he became MD.
Salve argued that once he was removed from Executive Chairman, he ceased to be MD, and when Mr. Tata offered him to continue on board, he walked off, which was counter-argued by saying that he didn’t walk off, he was removed. Hearings were concluded and a week was given for submitting the written notes. The hearing was reserved.
Hasmukh Nanalal Shah v. Shri Parag K Sheth
In Hasmukh Nanalal Shah v. Shri Parag K Sheth, It was held by NCLAT that on 5 July 2019, the immediate appeal filed against the order of liquidation adopted by the Adjudicating Authority was desperately time-barred. Within thirty days, the appeal may be preferred, and the Appellate Tribunal is allowed to condone the delay assigned by the Appellant for a fair cause, but not exceeding fifteen days.
The only reason for the reversal of the order under appeal is that, after passing the liquidation order, the financial creditor approved the appellant’s request for compensation, which would not be the ground for setting aside the liquidation proceedings.
It was further explained that, in terms of Section 230 of the Companies Act, a settlement could be obtained during the liquidation process by creating an arrangement/system for settlement. Justice Bansi Lal Bhat (Acting Chairperson), Justice Jarat Kumar Jain [Member (Judicial)], and V.P. Singh [Member (Technical)] decided the case.
Jaypee Infratech Case
Because of insolvency proceedings against Jaypee Infratech, the investment of around 32,000 home purchasers was trapped. In NCLT, Allahabad, IDBI Bank filed a petition for insolvency against Jaypee Infratech. According to an Economic Times article, Jaypee Infratech, a member of the debt-ridden Jaypee party, has defaulted on a Rs 526.11 crore outstanding loan to IDBI. The homebuyers were agitated and wanted their money back primarily.
The order of NCLT came as a relief. Via a public notice, the National Company Law Tribunal (NCLT) instructed homebuyers, workers and those falling under other categories of creditors in Jaypee Group projects to file their claims with the Interim Resolution Professional on or before 24 August (IPR). A green signal was given to NBCC for the acquisition. However, the process was getting delayed hence, the Supreme Court bench headed by Justice AM Khanwilker transferred the case to itself to prevent the further delay of NBCC’s ( National Building Construction Corporation) resolution plan and provide the homebuyers their homes at the earliest.
ArcelorMittal USA LLC v. Essar Steel Ltd., ICC Case No. 22187/RD/MK
This case was an arbitration case and was concluded in Minneapolis. The claimant’s country of origin is the United States, and the Respondent’s origin is Mauritius. AMUSA demands a worldwide freezing injunction and ancillary disclosure orders against the Defendant.
The freezing order is sought in favour of AMUSA’s demand for damages over US$1.5 billion for losses claimed to have been induced by an illegal scheme between the Defendants to frustrate compliance of liabilities under a 10-year contract for the supply of iron ore (‘the PSA’) concluded between AMUSA and three Essar Group companies. The court contended that AMUSA had not highlighted a well arguable case.
The relief sought will be a serious blow for VTB, who is the main leader and third party of Essar Steel against whom no contentions have been advanced. Giving more justifiable reasons, the court dismissed the relief sought by AMUSA and ended by saying that the case may be of some other relief sought.