1.
The First Defendant (“Dr Mallya”) applies:
i)
to set aside the order of Picken J dated 24 November 2017 (“the
Registration Order”) registering a judgment of the Bangalore Debt
Recovery Tribunal (“the DRT”) in favour of the Claimants against
Dr Mallya (“the DRT Judgment”) under the Foreign Judgments
(Reciprocal Enforcement) Act 1933 (“the 1933 Act”), or to suspend
enforcement of the Registration Order; and
ii)
to set aside a worldwide freezing order granted by Picken J on 24
November 2017 and continued by Moulder J on 8 December 2017 (“the WFO”).
2.
By way of elaboration of (i) above, Dr Mallya seeks in the alternative:
i)
the setting aside of the Registration Order;
ii)
a stay of enforcement in England of the DRT Judgment; or
iii)
that his application to set aside the Registration Order be adjourned
for a sufficient period to enable his extant appeal in India against the DRT
Judgment, or his related challenge brought in the High Court of Bombay, to be
disposed of.
3.
There is a degree of overlap in the issues raised by Dr Mallya’s two
applications, but for the reasons considered later in this judgment he contends
that the WFO should be discharged whether or not the Registration Order is set
aside.
4.
Dr Mallya is a well-known Indian businessman and former member of the Parliament
of India, now living in the UK pursuant to indefinite leave to remain which he
has possessed since 1992.
5.
Dr Mallya has for many years had a wide range of business interests
including the United Breweries Group and the Force India Formula One team. In
addition to his commercial interests, from 2002 to 2008 and 2010 to 2016 Dr
Mallya was elected to represent the State of Karnataka in India’s Council of
States (the upper house of the Parliament of India), frequently visiting India
in order to fulfil his parliamentary duties. He has received a number of
honours and awards.
6.
In 2003, Dr Mallya launched Kingfisher Airlines Limited (“KFAL”)
which grew rapidly. Within its first three years of operating, KFAL’s market
share had grown to 25%. The 2008 global financial crisis impacted the Indian
airline industry and KFAL’s financial position became precarious. The First
Claimant, State Bank of India (“SBI”), provided loan finance to
KFAL from 2009.
7.
The Claimants are state-owned Indian banks (apart from the Thirteenth
Claimant, which is an asset restructuring company that purchased debt owed to
other Indian banks). In an attempt to secure KFAL’s future, the Claimants
combined together to negotiate a Master Debt Recast Agreement dated 21 December
2010 (“MDRA”) which subsumed within its terms all of KFAL’s
outstanding loan obligations. KFAL’s obligations under the MDRA were secured
by, among other things, a personal guarantee from Dr Mallya of the same date (“the
Personal Guarantee”) and a guarantee from United Breweries (Holdings)
Limited (“UBHL”). Dr Mallya does not accept that he is bound by
the Personal Guarantee.
8.
KFAL fared badly, and SBI declared it a non-performing asset in 2012.
Also in 2012, the Civil Aviation Authority suspended KFAL’s operating licence
and winding up proceedings were commenced by some of its creditors.
9.
On 26 March 2013 Dr Mallya, UBHL and Kingfisher Finvest (India) Ltd (“KFin”)
commenced proceedings in the Bombay High Court challenging, among other things,
the validity of the Personal Guarantee on the basis of alleged non-compliance
with Indian banking rules and coercion. That claim remains to be determined
and is further considered below. On 2 April 2013 the Claimants called in their
loans under the MDRA. On the same date, applications by UBHL, KFin and Dr
Mallya in the Bombay High Court for interim relief were refused, and the court
ordered the determination as a preliminary of the question “whether this
Court has jurisdiction to try and entertain the present suit”.
10.
On 26 June 2013 the Claimants commenced proceedings in the DRT against
KFAL, UBHL, Dr Mallya and others. As set out in more detail below, due to
delays in the ordinary court system in India the DRT was established in 1993 as
the body with exclusive jurisdiction to hear claims by banks or other financial
institutions for the recovery of debts exceeding Rs 1 million (1 million Indian
rupees, equivalent to about £10,000).
11.
Dr Mallya and others on 16 July 2013 made an application in the DRT
contesting its jurisdiction on the basis that the Claimants had already commenced
proceedings in the Karnataka High Court and that Dr Mallya and others had
already brought proceedings in the Bombay High Court. The DRT dismissed this
challenge on 12 November 2013 and Dr Mallya initiated an appeal to the Debt
Recovery Appeal Tribunal (“DRAT”).
12.
Two years later, on 17 July 2015 Dr Mallya applied to withdraw the
application for interim relief in the Bombay High Court, seeking at the same
time to overturn the court’s decision to determine the question of jurisdiction
as a preliminary issue (which would, it appears, mean the question of
jurisdiction would have to be dealt with at the final hearing on the merits).
Those applications have not yet been disposed of.
13.
On 19 January 2017 the DRT issued the DRT Judgment. Dr Mallya’s appeal
to the DRAT from the DRT’s November 2013 dismissal of Dr Mallya’s jurisdiction
challenge was dismissed on 16 March 2017. On 10 April 2017 the DRT issued an
amended Recovery Certificate providing for recovery under the statutory
procedure discussed below of sums due under the DRT Judgment. On 27 July 2017
the Presiding Officer of the DRT issued a letter under seal regarding the DRT’s
jurisdiction which is also discussed further below.
14.
On 4 October 2017, 212 days out of time, Dr Mallya and UBHL lodged
appeals with the DRAT from the DRT Judgment along with applications to condone
delay. The appeal documents contained errors which the DRAT required to be
corrected. It appears those errors were not corrected and on 2 January 2018
the appeal of Dr Mallya was dismissed for non-compliance and non-attendance by
counsel at the hearing.
15.
A DRT Order of Attachment was made on 19 January 2018 in respect of
shares in United Breweries Ltd said to be worth £385.9 million.
16.
On 1 February 2018 the DRAT dismissed UBHL’s appeal from the DRT
Judgment stating that “no good ground is made out for extension of time”.
Dr Mallya makes the point that this was in fact not a substantive ruling on
UBHL’s application to condone delay, and in any event that his circumstances
are different from those of UBHL.
17.
On 5 March 2018 Dr Mallya issued applications to restore his appeal and
for condonation of the delay in issuing that restoration application, it having
been filed 27 days beyond the 30-day period allowed for such an application.
18.
On 28 March 2018 the DRAT made an interim order directing Dr Mallya to
deposit Rs. 3,101 crores (being 50% of the principal included within the DRT
Judgment sum) with the DRAT before 25 April 2018 as a pre-condition to the DRAT
considering his applications to restore the appeal and for condonation of the
delay in filing the appeal. A crore is Rs. 10 million. Dr Mallya on 13 April
2018 issued an application in the Karnataka High Court challenging the DRAT’s
order.
19.
In parallel with these civil proceedings, Dr Mallya is the subject of
criminal proceedings in India arising out of loan arrangements with the Fifth
Claimant, which have led the Indian Government to request his extradition from
England. He is contesting those extradition proceedings on the basis that the
criminal charges are without substance and are politically motivated.
20.
The Registration Order was made under the 1933 Act as amended by the Civil
Jurisdiction and Judgments Act 1982. The 1933 Act applies to India by virtue
of the Reciprocal Enforcement of Judgments (India) Order 1958 (the “1958
Order in Council”).
21.
Section 1(1) and (3) and of the 1933 Act provide that:
“1(1) If, in the case of any foreign
country, Her Majesty is satisfied that, in the event of the benefits conferred
by this Part of this Act being extended to, or to any particular class of,
judgments given in the courts of that country or in any particular class of those
courts, substantial reciprocity of treatment will be assured as regards the
enforcement in that country of similar judgments given in similar courts of the
United Kingdom, She may by order in Council direct
(a) that this Part of this Act shall extend to that country;
(b) that such courts of that country as are specified in the
Order shall be recognised courts of that country for the purposes of this Part
of this Act; and
(c) that judgments of any such recognised court, or such
judgments of any class so specified, shall, if within subsection (2) of this
section, be judgments to which this Part of this Act applies.”
“1(3) For the purposes of this section, a judgment shall
be deemed to be final and conclusive notwithstanding that an appeal may be
pending against it, or that it may still be subject to appeal, in the courts of
the country of the original court.”
22.
Section 2(1) and (2) include the following provisions:
“2(1) A person, being a judgment creditor under a judgment
to which this Part of this Act applies, may apply to the High Court at any time
within six years after the date of the judgment, or, where there have been
proceedings by way of appeal against the judgment, after the date of the last
judgment given in those proceedings, to have the judgment registered in the
High Court, and on any such application the court shall, subject to proof of
the prescribed matters and to the other provisions of this Act, order the
judgment to be registered:
Provided that a judgment shall not be registered if at the
date of the application—
(a) it has been wholly satisfied; or
(b) it could not be enforced by execution in the country of
the original court.”
“2(2) Subject to the provisions of this Act with respect
to the setting aside of registration –
(a) a registered judgment shall,
for the purposes of execution, be of the same force and effect;…
as if the judgment had been a judgment originally given in
the registering court and entered on the date of registration
Provided that execution shall not issue on the judgment so
long as, under this Part of this Act and the Rules of Court made thereunder, it
is competent for any party to make an application to have the registration of
the judgment set aside, or, where such an application is made, until after the
application has been finally determined.”
23.
Section 11(1) provides, inter alia, that “court” for these
purposes includes a tribunal. “Judgment” is defined as “a judgment
or order given or made by a court in any civil proceedings, or a judgment or
order given or made by a court in any criminal proceedings for the payment of a
sum of money in respect of compensation or damages to an injured party”.
24.
Paragraph 4 of the 1958 Order in Council states:
“4. The following Courts of the said territories shall be
deemed Superior Courts of the said territories for the purposes of Part 1 of
the said Act [the 1933 Act], that is to say:-
(a) The Supreme Court.
(b) All High Courts and
Judicial Commissioners’ Courts.
(c) All District Courts.
(d) All other Courts whose
civil jurisdiction is subject to no pecuniary limit provided that the Judgment
sought to be registered under the said Act is sealed with a seal showing that
the jurisdiction of the Courts is subject to no pecuniary limit.”
25.
Sections 4 and 5 of the 1933 Act provide mandatory and discretionary
grounds under which a registration order may be set aside:
“4(1) On an application in that behalf duly made by any
party against whom a registered judgment may be enforced, the registration of
the judgment—
(a) shall be set aside if the registering court is satisfied—
(i) that the judgment is not
a judgment to which this Part of this Act applies or was registered in
contravention of the foregoing provisions of this Act;
…
(vi) that the rights under the
judgment are not vested in the person by whom the application for registration
was made; …”
“5(1) If, on an application to set aside the
registration of a judgment, the applicant satisfies the registering court
either that an appeal is pending, or that he is entitled and intends to appeal,
against the judgment, the court, if it thinks fit, may, on such terms as it may
think just, either set aside the registration or adjourn the application to set
aside the registration until after the expiration of such period as appears to
the court to be reasonably sufficient to enable the applicant to take the
necessary steps to have the appeal disposed of by the competent tribunal.”
26.
Dr Mallya seeks:
i)
the setting aside of the Registration Order on the grounds that
a)
the DRT Judgment does not qualify (and is not capable of qualifying) as
a judgment of a “Superior Court” within the meaning prescribed by Section
4 of the 1958 Order in Council; and/or
b)
the DRT Judgment can be enforced only in the manner prescribed by the
Debt Recovery Tribunal Regulations 2015 (the “DRT Regulations”),
and so is not permitted to be enforced in England and the Registration Order
ought not to have been made; or
ii)
as a matter of discretion under section 5 of the 1933 Act, the setting
aside of the Registration Order on the grounds that:
a)
Dr Mallya’s appeal in the DRAT is pending against the DRT Judgment;
and/or
b)
Dr Mallya’s pending and prior claim in the Bombay High Court will, if
successful, as a matter of Indian law override and supersede the DRT Judgment;
or
iii)
a stay of enforcement of the DRT Judgment in England (i) pending the
determination of Dr Mallya’s appeal against the DRT Judgment and/or the
determination of his challenge in the Bombay High Court, or (ii) on the basis
that the DRT Regulations do not permit enforcement of the DRT Judgment in
England; or
iv)
(at the very least) an adjournment of Dr Mallya’s application under
section 5 of the 1933 Act until after the expiration of such period as appears
to the court to be reasonably sufficient to enable Dr Mallya to take the
necessary steps to have his appeal (and Bombay High Court challenge) disposed
of in India. During the pendency of such an adjournment, no enforcement steps
would be permissible: see CPR 74.9(1)(b). Given the significant amount of time
it will take for those processes to conclude in India (which is common ground),
Dr Mallya takes a pragmatic approach that such an adjournment may need to be
granted in stages with a reporting mechanism built into the order so that the
English court may be kept informed of developments.
27.
I consider issues (i) above together in section (1) below and issues
(ii)-(iv) in section (2) below.
(1)
Whether
the DRT Judgment can properly be registered under the 1933 Act
28.
DRTs were created by the Indian Parliament pursuant to the Recovery of
Debts due to Banks and Financial Institutions Act 1993, which was amended in
2016 and renamed the Recovery of Debts and Bankruptcy Act 1993 (“the RDB
Act”).
29.
According to the evidence of the Claimants’ expert Justice Singhvi, a
former judge of the Supreme Court of India, in the late 1980s the Indian
banking system was in crisis, with many bad debts and hampered by a chronically
overburdened legal system. The RDB Act was enacted to enable speedier
adjudication of the claims of banks and financial institutions. Its effect is
that a bank seeking to recover a debt of more than Rs.1 million must do
so through the DRT. The RDB Act ousted the jurisdiction of all courts (with
the exception of the Indian Supreme Court, and High Court in certain
circumstances which are inapplicable here) to hear a claim for a debt by a bank
above Rs.1 million (section 18) and provided for the automatic transfer of any
qualifying claim before the civil courts to the relevant DRT upon its
establishment (section 31). Section 22(1) of the RDB Act provides that:
“The [DRT] and the [DRAT] shall not be bound [by] the
procedure laid down by the Code of Civil Procedure, 1908 …, but shall be guided
by the principles of natural justice and, subject to the other provisions of
this Act and of any rules, the [DRT] and the [DRAT] shall have powers to
regulate their own procedure including the places at which they shall have
their sittings.”
30.
Justice Singhvi refers to a decision of the Division Bench of the Bombay
High Court in Harshadrai O. Modi v Bank of India (2002) 4 Maharashtra
Law Journal 492 in which the court held that it could execute a judgment which
the respondent bank had obtained in the Queen’s Bench Division of the High
Court of England and Wales. The court stated at § 6 of its judgment that:
“… section 22 of the RDB Act … came up for consideration by
the Apex Court [the Supreme Court of India] in the case of I.C.I.C.I. vs.
Grapco Industries Ltd. and ors. reported in AIR 1999 SC 1975 wherein
paragraph 11 the Apex Court has clearly observed that section 22 does not mean
that the [DRT] will not have jurisdiction to exercise the powers of a Court as
contained in the Code of Civil Procedure, rather, the [DRT] can travel beyond
the Code of Civil Procedure. …”
31.
When the DRT makes a final order, the Presiding Officer of the DRT is
required to issue a certificate of recovery (“Recovery Certificate”)
to the Recovery Officer for the amount specified in the certificate. Enforcement
within all but two (Jammu and Kashmir) of the states within India is undertaken
by the Recovery Officer.
32.
There appears to be no previous case law about the recognition of final
orders of the DRT under the 1933 Act, and the parties have not been able to
find examples of previous attempts, whether successful or unsuccessful, to
register such orders here.
33.
The arguments advanced on behalf of Dr Mallya, in his skeleton and oral
submissions, under this heading may conveniently be listed as follows:
i)
that the DRT’s Final Order could not be “enforced by execution in the
country of the original court” i.e. in India within section 2(1)(b) of the
1933 Act: only the Recovery Certificate can be so enforced but the rights in
the Recovery Certificate are vested in the Recovery Officer not the Claimants and
so “the rights under the judgment are not vested in the person by whom the
application for registration was made” for the purposes of section
4(1)(vi);
ii)
the DRT Judgment is not enforceable outside India and so should not be
the subject of registration under the 1933 Act;
iii)
the DRT was not a “Superior Court” within § 4 of the 1958 Order in
Council because the DRT Judgment was not “sealed with a seal showing that
the jurisdiction of the Courts is subject to no pecuniary limit”; and
iv)
there is no statutory mechanism under which the DRT can issue a judgment
that is so sealed or under which the Presiding Officer had the power to issue
his letter under seal of 27 July 2017 confirming the DRT’s unlimited pecuniary
jurisdiction.
34.
The RDB Act provides in section 19(20) that:
“The tribunal may, after giving the applicant and the
defendant an opportunity of being heard … pass interim or final order as it
deems fit which may include order for payment of interest from the date on
which payment of the amount is found due ...”
35.
The DRT’s final order is a “judgment” as defined in section 11 of
the 1933 Act because it is an order made by a tribunal in civil proceedings.
36.
Section 19(22) of the RDB Act provides that the DRT Presiding Officer “shall
issue a certificate of recovery along with the final order, under sub-section
(20), for payment of debt within interest under his signature to the Recovery
Officer for recovery of the amount of debt specified in the certificate”. The
modes of recovery available to the Recovery Officer are specified in section 25
and include attachment and sale of movable or immovable property, taking
possession of property that is subject to a security interest, arrest and
detention in prison and appointment of a receiver.
37.
Recovery by the Recovery Officer pursuant to a Recovery Certificate is
the only means by which a DRT final order can be enforced. A DRT claimant does
not, and cannot, enforce the final order him/herself at all. Thus the Recovery
Certificate procedure provides, as counsel for Dr Mallya put it, “a
compulsory, exclusive and bespoke procedure for enforcement of debts” which
is a specific form of statutory execution outwith the ordinary court process
for execution.
38.
One specific illustration of this is that a successful claimant can
petition to wind up an Indian company only because specific provision is made
in that regard in section 19(22A) of the RDB Act (“Any Recovery Certificate
issued by the Presiding Officer shall be deemed to be a decree or order of the
Court for the purposes of initiation of winding up proceedings against a
company registered under the Indian Companies Act …”).
39.
This point was reflected, Dr Mallya said, in the fact that as recorded
in the DRT Presiding Officer’s letter of 27 July 2017, it was the Recovery
Certificate which the Claimants’ Indian lawyers said they wished to register in
England. The letter stated:
“… the Consortium of Bankers led by State Bank of India have
expressed their intention to register the said Debt Recovery Certificate with
the Hon’ble Queen’s Bench Division, the Royal Courts of Justice, London, United
Kingdom for the purposes of enforcement of the Debt Recovery Certificate in
United Kingdom as against the respondents and their assets, if any, in the
United Kingdom”
40.
It is pertinent to note, though, that the letter went on to say:
“For the said purposes, State Bank of India has filed an
affidavit praying for sealing of the Final Order and the amended Debt
Recovery Certificate in terms of the provisions of the Foreign Judgments
(Reciprocal Enforcement) Act 1933 and The Reciprocal Enforcement of Judgments
(India) Order, 1958 as applicable in United Kingdom.” (my emphasis)
Further, the
actual application to register in this court relates to both the DRT Judgment
dated 19 January 2017 and the Amended Recovery Certificate dated 10 April 2017.
41.
The first limb of Dr Mallya’s submission under this heading is that only
the Recovery Certificate and not the DRT Judgment itself can be “enforced by
execution” in India within section 2(1)(b) of the 1933 Act.
42.
The difficulty with this argument is that on the footing that the
Recovery Certificate is itself a form of execution of DRT final orders, such
orders can by that means be “enforced by execution” in India. Thus the
DRT Judgment in the present case stated, in the portion headed “Order”
at the end of the judgment:
“Present OA [Original Application] stands allowed as prayed
for with costs in following manner
a) Defendants No. 1 to 4 jointly and severally shall pay a
sum of Rs. 6203,35,03,879=42 … with further interest at the rate of 11.50% p.a
with yearly rests from the date of the application till the date of complete
realization.
…
c) In the event of failure of defendants to pay the said OA
amount, the applicant bank is at liberty to sell the hypothecate/mortgaged
movables/immovables properties described in schedules of the main petition
according to law as sought by the applicant bank in the OA.
d) The Applicant Banks are also at liberty to proceed
against the person and properties of the defendants 1 to 4 in execution
proceedings;
e) Applicant Bank shall file latest Memo of calculation of OA
amount together with interest, costs etc., ... to enable the office to prepare
Recovery Certificate for the amount to be paid by the Defendants 1 to 4 to the
Applicant Banks
f) Office is directed to issue Recovery Certificate as sought
by the Applicant Banks in the OA and do the needful as required under law
forthwith.” (my emphasis)
43.
It thus appears that the DRT itself treated the Recovery Certificate
process as a means of execution of its own judgment. The expert witness who
gave evidence on Indian law on behalf of Dr Mallya, retired High Court judge
Justice Pana Chand Jain, referred to it as the only method of “execution”
available in respect of a DRT order, and as being a “separate
execution/enforcing mechanism” from those used by the ordinary courts.
44.
The question then becomes whether the fact that a DRT order can be enforced
in India only through this separate and exclusive execution process provided
for under the RDB Act, as opposed to the standard process used for court
judgments, means that a DRT order should be regarded as incapable of being “enforced
by execution” in India within section 2(1)(b) of the 1933 Act. I see no
reason why it should be so regarded. The Recovery Certificate is in substance a
form of execution for the enforcement of DRT orders. The fact that it is
distinct from the ordinary process of execution does not take it outside the
scope of section 2(1)(b) of the 1933 Act. On the contrary, it would be
perverse if the fact that the Indian legislature has provided for a special court-led
process for the effective execution of DRT judgments meant that they could not
be recognised in the UK.
45.
The second limb of Dr Mallya’s submission – on which he would also need
to succeed – is that if and to the extent that the Recovery Certificate itself
is enforceable by execution in India, it falls outside the 1933 Act regime
because the rights in a Recovery Certificate are vested in the Recovery Officer
and not in the successful claimant on whose behalf the Officer is seeking to
recover the debt. The Recovery Certificate grants powers to the Recovery
Officer to enforce the certificate for the benefit of the claimant. However,
the rights conferred by the Certificate are the rights to receive the sums
stated in it, and those rights are vested in the claimant: the Recovery Officer
is merely acting as a collection or enforcement agent on the claimant’s
behalf.
46.
For both of these reasons, Dr Mallya’s contentions under this heading
fail.
47.
Justice Jain explains that:
i)
the RDB Act does not confer extra-territorial jurisdiction on the DRT or
its Recovery Officer: its jurisdictional scope is limited to only certain parts
of India, and it has not been imbued with a procedure enabling its judgments to
enjoy reciprocal enforcement outside India;
ii)
even within India, section 19(23) of the RDB Act requires that when a
Recovery Certificate is issued by a DRT in one region and the asset to be
seized is situated beyond its territorial jurisdiction, then the DRT has to
send copies of its certificate to that jurisdiction so that enforcement can
take place there: a requirement that does not apply to a judgment of the
District Court; and
iii)
when the DRT was set up in 1993 it was designed to be a streamlined
judicial process offering summary adjudication of disputes. That the DRT and
the District Courts are different in nature and cannot be treated as equivalent
is well established.
48.
Justice Jain’s opinion is that, unlike the position with an order of the
Indian High Court, there is no legal basis to seek to enforce a judgment of the
DRT outside India (or even in those parts of India to which the RDB Act does
not apply such as the states of Jammu and Kashmir) because:-
i)
the DRT when it gives a judgment issues a Recovery Certificate, and DRT
Regulations 33 to 38 (in Chapter IX) prescribe the methods of execution by the
Recovery Officer, which do not include enforcement in a reciprocal
jurisdiction;
ii)
by contrast, section 44A of the Code of Civil Procedure (“CPC”)
in India provides for the execution in reciprocating territories (of which the
UK is one) of judgments of the Indian civil courts. The DRT is not bound by
the CPC (see s.22(1) of the RDB Act) and instead is governed by the rules and
regulations passed under the RDB Act; and
iii)
the Central Government is empowered under section 36 of the RDB Act to
make rules/regulations to carry out the provisions of the RDB Act. As things
stand, DRT regulations 33-38 are the only such rules governing methods of execution.
If a different or additional method (such as enforcement in a reciprocal
jurisdiction) is to be prescribed, it is for the Central Government to do so
under section 36.
49.
Therefore, Dr Mallya argues, enforcement in England of the DRT Judgment
is impermissible and so the Registration Order, being the precursor to such
enforcement, is impermissible and ought to be set aside. Alternatively, this
is a reason to stay enforcement permanently, since to permit enforcement in
England would be contrary to the RDB Act and DRT Regulations which regulate the
DRT Judgment.
50.
The Claimants argue that this is not a point that the English court
should seek to determine: it is for the Indian courts to decide whether, as a
matter of Indian law, DRT judgments are unenforceable outside India. If the
point were a good one (which the Claimants do not accept) the correct course of
action would have been for Dr Mallya to apply for the equivalent of an
anti-suit injunction in India to restrain the Claimants from seeking to enforce
the DRT Judgment abroad.
51.
In any event, the Claimants say that the correct analysis is that,
whilst the Recovery Officer has no jurisdiction to enforce outside of India, or
in the two Indian states of Jammu and Kashmir, enforcement of a judgment of the
DRT by a foreign court is permissible:
i)
If the Indian Parliament had intended to prohibit enforcement overseas,
the relevant statute would have specifically excluded it (as it does with the
territorial restriction regarding the states of Jammu and Kashmir).
ii)
Section 22(1) of the RDB Act, quoted above, frees the DRT and DRAT from
having to comply with the procedural rules of the CPC (the only fetter being
that the DRT and DRAT observe the principles of natural justice), but does not exclude
the right of enforcement of DRT judgments in reciprocating territories. Section
45 of the CPC provides that:
“45. Execution of decrees outside India
So much of the foregoing sections of this Part as empowers a
Court to send a decree for execution to another Court shall be construed as
empowering a Court in any State to send a decree for execution to any Court
established by the authority of the Central Government [outside India] to which
the State Government has by notification in the Official Gazette declared this
section to apply.”
iii)
Although the DRT and DRAT are not civil courts, the jurisdiction of the
DRT is akin to that of an Indian civil court: see the decision of the Division
Bench of the Bombay High Court in Harshadrai O. Modi v Bank of India, to
which I refer above, where an order for judgment of the English Queen’s Bench
Division was enforced by the DRT tribunal.
iv)
A claim by a bank or financial institution in excess of Rs.1 million
resulting in a judgment of the Indian civil court would have fallen within para
4(b) and/or 4(c) of the 1958 Order in Council immediately before the
establishment of the DRTs. It cannot have been the intention of the Indian
Parliament to assist banks in recovering debts through the implementation of an
efficient (and mandatory) new procedure, but to remove their ability to enforce
judgments outside India which have been obtained using that procedure. That
would mean that individuals or corporations could simply move their assets out
of India to frustrate enforcement.
52.
The Claimants refer also to the statement by their expert on Indian law,
Justice Singhvi, that “In my view there can be no manner of doubt that the
orders passed by the Courts and Tribunal in India including the DRT can be
executed / enforced in England and Wales and vice-versa”.
53.
Moreover, the Claimants say, by clause 22(iii) of the Personal Guarantee
Dr Mallya agreed that the Claimants could bring proceedings to enforce a
judgment of a tribunal at Bengaluru against Dr Mallya in the courts of any
other jurisdiction outside India. Thus, the Claimants say, he contracted out
of any alleged Indian domestic law limitations on foreign enforcement of the
DRT Judgment.
54.
In my view none of the provisions relied on by Dr Mallya establishes any
prohibition under Indian law on a successful DRT claimant seeking the
recognition and enforcement abroad of a DRT order.
55.
Further, the scope of the powers given to Recovery Officers to enforce
DRT orders, and any question about the territorial or extraterritorial extent
of their powers, is irrelevant to the question of recognition under the 1933
Act. The 1933 Act gives effect to a scheme for the international recognition
and enforcement that is entirely independent of whatever enforcement powers and
processes may exist under the domestic laws and procedures of the participating
nations. There is no requirement under the 1933 Act to demonstrate that the
foreign judgment sought to be enforced can be enforced extraterritorially by
claimants or court officials in the judgment’s country of origin. The only
requirements are that the foreign judgment satisfy the requirements set out in
the 1933 Act itself and the implementing statutory instruments, including the
requirement (which I have found to be satisfied) that the judgment be capable
of enforcement in the state of origin.
56.
It is common ground that as a matter of law the DRT has unlimited
pecuniary jurisdiction, save for a lower limit which is not relevant in this
context. The question is, however, whether the requirements of paragraph 4(d)
of the 1958 Order in Council were complied with in the present case.
57.
The DRT Judgment was sealed on every page with the court seal, which is
in the form prescribed by central government and simply states the name of the
tribunal.
58.
Paragraph 18(iv) of the DRT Judgment stated:
“… under Section 17 of Chapter 3 of Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 (RDDB & FI Act), this Tribunal
is vested with exclusive jurisdiction, powers and authority to entertain and
decide applications from the Banks for recovery of debts due to such banks. In
fact, under Section 18 of the same chapter, the jurisdiction, power and
authority of all other Courts except the Supreme Court and High Court under
Article 226 and 32 [which relate to constitutional issues], are barred in
relation to recovery of debts due to banks. …”
59.
On 27 July 2017, at the request of the Claimants, the Presiding Officer
of the DRT, who had also issued the DRT Judgment itself, provided a letter in a
form (drafted by the Claimants) which it is necessary to quote in full:
“A Consortium of Bankers led by State Bank of India, a
statutory corporation had filed an Original Application under OA 766/2013
interalia seeking adjudication of Debt and issuance of Debt Recovery
Certificate against M/s Kingfisher Airlines Ltd., a Public Limited Company, M/s
United Breweries Holdings Ltd., a Public Limited Company, Dr. Vijay Mallya son
of late Sri Vittal Mallya and M/s Kingfisher Finvest (India) Ltd., This Debt
Recovery Tribunal constituted and established under the Recovery of Debts due
to Banks and Financial Institutions Act 1993 (now known as the Recovery of
Debts and Bankruptcy Act, 1993) hereinafter called the Act, after adjudication
of the claim had passed a Final Order dated 19.01.2017 and used an amended Debt
Recovery Certificate dated 10.04.2017 under No.11395 as against the said
respondents and their assets for a sum of Rs.6203,35,03,879.42/- (Rupees Six Thousand
Two Hundred and Three crores Thirty five Lakhs Three Thousand Eight Hundred and
Seventy Nine and Paise Forty Two Only) with interest and costs as stated
therein.
Presently, the Consortium of Bankers led by State Bank of
India have expressed their intention to register the said Debt Recovery
Certificate with the Hon’ble Queen’s Bench Division, the Royal Courts of
Justice, London, United Kingdom for the purposes of enforcement of the Debt
Recovery Certificate in United Kingdom as against the respondents and their
assets, if any, in the United Kingdom. For the said purposes, State Bank of
India has filed an affidavit praying for sealing of the Final Order and the
amended Debt Recovery Certificate in terms of the provisions of the Foreign
Judgments (Reciprocal Enforcement) Act 1933 and The Reciprocal Enforcement of
Judgments (India) Order, 1958 as applicable in United Kingdom.
This Debt Recovery Tribunal after considering the said
request made by way of affidavit, hereby confirms by way of sealing as required
under UK Act, that this Debt Recovery Tribunal constituted and established
under the Recovery of Debts due to Banks and Financial Institutions Act 1993
(now known as the Recovery of Debts and Bankruptcy Act, 1993) has been vested
under Section 1(4) of the aforesaid Act, with no upper limit on the pecuniary
jurisdiction but with lower limit of Rs.10 lacs on pecuniary jurisdiction.
This Tribunal has exclusive jurisdiction to entertain applications filed by the
banks and financial institutions for recovery of debt due to them for any amount
above Rs.10,000,000/- (Rupees Ten lakhs), adjudicate and issue Recovery
Certificate.
Yours truly,
[signature]
(K. Srinivasan)
Presiding Officer
Debt Recovery Tribunal
Bengaluru”
Each page of the
letter was sealed with the seal of the DRT.
60.
Paragraph 4 of the 1958 Order in Council applies the 1933 Act to the
Indian courts specified in subparagraphs (a) to (c) together with:
“(d) All other Courts whose civil jurisdiction is subject to
no pecuniary limit provided that the Judgment sought to be registered under the
said Act is sealed with a seal showing that the jurisdiction of the Courts is
subject to no pecuniary limit”
61.
The parties agreed that it is appropriate to give the 1933 Act and the
1958 Order in Council a purposive interpretation to the extent compatible with
established principles. Those principles are that in interpreting a statute
the aim is to establish objectively the intention of the legislature. The
primary tool for that task is the text of the legislation. Prima facie,
the meaning of that text is to be taken to be that which corresponds to the
plain or literal meaning conveyed by the words used given their ordinary
meaning as words and the grammar of the provision being construed. However,
any provision, word or phrase is not to be construed in isolation but in the
context of the surrounding provisions, words or phrases and in the light of any
discernible legislative purpose where it is clear that the legislation has been
enacted to remedy a particular mischief. These principles can be derived from
the following authorities:
i)
R (Quintavalle) v Secretary of State for Health [2003] UKHL 13 §§
6-10 and 21;
ii)
R v Z (AG for Northern Ireland's Reference) [2005] UKHL 35 §§
16-17;
iii)
Bennion, Statutory Interpretation (6th ed., 2013), Sections 9.1,
9.6-9.8, 10.1, and 11.1-11.2.
62.
However, the parties disagreed as to how those principles are to be
applied in the present case. The Claimants emphasised that the purpose of the
1958 Order in Council is to extend the reciprocal enforcement of judgments in
England and India under the 1933 Act. Dr Mallya made the point that under the
CPR and its predecessors, registration under the 1933 Act is normally effected
by masters on a without notice basis under CPR 74.3, subject to a right for the
judgment debtor to apply within a limited time to set the registration aside.
The master must therefore be able to see from the face of the judgment sought
to be registered that the relevant court or tribunal has unlimited pecuniary
jurisdiction. In any event, the legislation should not be construed so as to
nullify an express statutory requirement.
63.
Viewing the matter first at this very general level, whilst it may well
be the case (the parties did not have the relevant materials to hand) that the
Rules of the Supreme Court in 1958 provided, as the rules do now, for the first
stage of 1933 Act recognition to be dealt with ex parte by a master,
that feature is not necessarily inherent in either the 1933 Act or the 1958
Order in Council: and it is questionable whether the prevailing rules of court
at the time or now provide a real guide to the correct manner of interpretation
of the legislation.
64.
More broadly, the general aim of the legislation is of course the mutual
recognition of judgments of the courts of reciprocating nations, and
considerations of comity would suggest that it would be wrong to take an unduly
narrow or technical approach to its interpretation.
65.
Specifically in relation to paragraph 4, Dr Mallya submits that in order
to make the position clear to the master at the without notice stage, it is
necessary either for the seal itself to show, in the sense of itself stating
expressly, that the jurisdiction of the tribunal is not subject to pecuniary
limit; or for this to be apparent from a combination of the terms of the order
and a seal: meaning, in practice, a recitation in the order as to the
jurisdiction of the tribunal, which is then subject to sealing.
66.
In the present case, the unlimited jurisdiction of the DRT was in my
judgment apparent from two matters, either of which was sufficient to satisfy
the requirements of paragraph 4(d).
67.
First, it was at least clearly implicit in the statement in
paragraph 18(iv) of the DRT Judgment quoted above – that the tribunal was vested
with exclusive jurisdiction, powers and authority to entertain and
decide applications by banks for recovery of debts due to them, to the
exclusion of the powers of the ordinary courts – that it had unlimited
pecuniary jurisdiction in respect of such claims. It could hardly be supposed
that debts higher than a certain amount could not be recovered at all, whether
in the DRT or in the ordinary courts. The only rational reading of this
statement is that the DRT has unlimited pecuniary jurisdiction in respect of such
claims. The page of the DRT’s judgment containing this statement (like every
other page) was stamped with the tribunal’s seal, thus in my view satisfying
the requirements of paragraph 4(d) of the 1958 Order in Council.
68.
Secondly, the Presiding Officer’s letter of 27 July 2017 recorded
that SBI had “filed an affidavit praying for sealing of the Final Order
and the amended Debt Recovery Certificate in terms of the provisions of the
[1933 Act] and the [1958 Order in Council] as applicable in the United Kingdom”
(my emphasis) and went on to state that the DRT “hereby confirms by way
of sealing as required under UK Act” that the DRT has been vested under the
RDB Act with no upper limit on its pecuniary jurisdiction and had exclusive
jurisdiction to entertain applications by banks and financial institutions to
recover debts due to them for any amount above Rs 1 million. The letter itself
was stamped on each page with the same seal as the DRT Judgment.
69.
In these circumstances it is logical to view the Presiding Officer as
having issued the letter as an adjunct to the DRT Judgment and the amended
Recovery Certificate, thereby bringing about the sealing “of” those
documents in accordance with the UK legislation which had been drawn to his
attention. The DRT Judgment and (if necessary) the Recovery Certificate are
thus to be read in conjunction with the Presiding Officer’s letter when
considering the application of paragraph 4(d) of the 1958 Order in Council; and
on that basis also they satisfied paragraph 4(d).
70.
For these two independent reasons, I consider that the DRT Judgment falls
within paragraph 4 and qualifies for recognition and enforcement pursuant to
the 1933 Act.
71.
Justice Jain provided evidence that the DRT (notwithstanding the
Government’s power to make rules for the conduct of the DRT) does not have a
procedure available to it to render its judgments compliant with paragraph 4(d)
of the 1958 Order in Council because neither the RDB Act, nor the DRT Rules or
DRT Regulations specified by the Central Government of India provide for the
DRT to certify its own judgments or orders in the manner prescribed by
paragraph 4(d) of the 1958 Order in Council. The Presiding Officer’s signing
of the 27 July 2017 letter in the form requested by the Claimants was an
administrative act that he had no power to perform.
72.
Justice Singhvi expresses the opposite view, noting that Section 19(25)
of the RDB Act provides that the DRT “may make such orders and give such
directions as may be necessary or expedient to give effect to its orders or to
prevent abuse of its process or to secure the ends of justice”. Justice
Jain responds that:-
i)
section 19(25) governs the DRT’s judicial powers and not its
administrative powers. It is Section 36 (and the Rules and Regulations made
under it) that prescribe the DRT’s administrative powers, and those do not
provide a mechanism for compliance with the 1958 Order in Council; and
ii)
the Presiding Officer’s letter of 27 July 2017 was not an order or a
direction, and certainly not an exercise of a judicial power. Had it been such,
the Claimants’ petition for this relief would have been notified to Dr Mallya
and an opportunity afforded to him to be heard in accordance with ordinary
principles of natural justice.
73.
The Claimants suggest that this is a question of Indian law which the
English court need not determine. If the point were a good one, the correct
course of action would have been for Dr Mallya to apply for an order from the
Indian courts setting aside the ruling contained in the letter of 27 July 2017
and/or declaring that the action of the Presiding Officer in affixing the seal
of the DRT to that letter was ultra vires. In any event, the Claimants
say:
i)
On its proper construction the letter of 27 July 2017 is a ruling or
direction that the jurisdiction of the DRT is subject to no upper pecuniary
limit, and is clearly something which the Presiding Officer was permitted to
issue and affix with the seal of the DRT.
ii)
Justice Singhvi states that he knows of no reason why the Presiding
Officer could not confirm that there was no such limit and attach the seal of
the DRT to that confirmation.
iii)
Justice Jain’s argument is over-technical and illogical. The Claimants
repeat the points which I summarise in § 51 above.
74.
I agree with the Claimants that as a general proposition it is not
appropriate, or under the 1933 Act and 1958 Order in Council necessary, for the
English court to inquire into the vires of judges of the foreign court
whose judgment is sought to be recognised. It is possible to conceive of an
extreme case where a purported act was plainly without any possible authority and
where a different approach might be taken, but the present case does not seem
to me to fall in that category.
75.
In any event, on the basis that (as I indicate under subheading (c)
above) the Presiding Officer’s letter should be regarded as an adjunct to the
DRT Judgment, it appears to me to have been an order or direction which he was
empowered to give pursuant to Section 19(25) of the RDB Act.
76.
Moreover, even if the Presiding Officer’s letter might be regarded as an
administrative act, rules 22.1 to 22.3 of the Debts Recovery Tribunal
(Procedure) Rules 1993 states that:
“(1) The Registrar shall have the custody of the records of
the Tribunal and shall exercise such other functions as are assigned to him
under these rules or by the Presiding Officer by a separate order in writing.
(2) The official seal shall be kept in the custody of the
Registrar.
(3) Subject to any general or special direction by the
Presiding Officer, the seal of the Tribunal shall not be affixed to any other
order, summons or other process save under the authority in writing from the
registrar.”
The opening
words of rule 22.3 imply that the Presiding Officer has the power to give a
special direction for the use of the court seal. On that basis it seems to me
that the issue of the letter of 27 July 2017 was within his powers. More
generally, I have seen no reason to take the view that the Presiding Officer is
unable to conduct administrative (as opposed to judicial) functions without the
need for explicit statutory authorisation for each and every such act.
77.
For all these reasons, I am unable to accept Dr Mallya’s contentions
that the DRT or its Presiding Officer lacked the power or means to make its
judgments capable of enforcement under the 1933 Act/1958 Order in Council or to
issue the letter of 27 July 2017.
78.
As appears from the chronology in section (B) above, the current
position (as at the time of the hearing before me) in relation to Dr Mallya’s
proposed appeal to the DRAT is that:
i)
Dr Mallya and UBHL lodged appeals 212 days out of time in October 2017, along
with applications to condone delay and for waiver of the pre-condition to
deposit with the DRAT a portion of the sums awarded by the DRT Judgment. The
appeal documents contained errors which the DRAT required to be corrected but
which it appears were not corrected.
ii)
On 2 January 2018 the appeal of Dr Mallya was dismissed.
iii)
On 5 March 2018 Dr Mallya issued applications to restore the appeal and
for condonation of the delay in issuing that restoration application, 27 days after
the 30-day period to the making of such an application.
iv)
On 28 March 2018 the DRAT made an interim order directing Dr Mallya to
deposit Rs.3,101 crores with the DRAT before 25 April 2018 as a pre-condition
to the DRAT considering his applications to restore the appeal and for
condonation of the delay in filing the appeal. That sum has not been
deposited.
v)
On 13 April 2018 Dr Mallya issued an application in the Karnataka High
Court challenging the DRAT’s order. That application has not yet been disposed
of.
79.
It is common ground that if the DRAT were to allow an appeal to proceed,
it would be likely to take 18 months to conclude. The DRAT’s decision would be
amenable to review by the High Court of India, a process which would be likely
according to Justice Jain to take 1-2 years. The unsuccessful party could seek
permission to appeal to the Supreme Court of India, which (if permission were
granted) would take 3-5 years to be heard and disposed of.
80.
Further, Dr Mallya’s position as made clear in oral argument is that
registration or enforcement of the DRT Judgment in England and Wales should in
any event await the outcome of the Bombay High Court proceedings, because that
court’s order would override any decision of the DRAT.
81.
The position in relation to Dr Mallya’s application to the Bombay High
Court is that:
i)
On 26 March 2013 Dr Mallya, UBHL and KFin commenced proceedings in the
Bombay High Court challenging, among other things, the validity of the Personal
Guarantee.
ii)
The court ordered the determination as a preliminary of the question “whether
this Court has jurisdiction to try and entertain the present suit”.
iii)
On 17 July 2015 Dr Mallya applied to withdraw the application for
interim relief in the Bombay High Court, seeking at the same time to reverse
the court’s decision to determine the question of jurisdiction as a preliminary
issue. That application remains pending.
iv)
Dr Mallya’s evidence is that his claim in the Bombay High Court would,
if successful, as a matter of Indian law override and supersede the DRT
Judgment.
82.
It is common ground that if the Bombay court were to assume
jurisdiction, it is likely that Dr Mallya’s claim there would take 7 years to
be determined, excluding any appeal to the Supreme Court of India.
83.
Section 5 of the 1933 Act permits the court to set aside the
registration or adjourn the application to set aside the registration:
“If, on an application to set aside the registration of a
judgment, the applicant satisfies the registering court either that an appeal
is pending, or that he is entitled and intends to appeal, against the judgment ...”
84.
The first question arising is whether Dr Mallya’s proposed appeal to the
DRAT or his existing claim in the Bombay High Court engages this provision.
85.
At present there is no appeal pending in the DRAT and Dr Mallya is well
out of time for bringing an appeal. He nonetheless says he is “entitled”
to appeal within the meaning of section 5.
86.
The Inner House of the Court of Session in Scotland had to consider a
similar issue in Gillian Walton [2012] CSIH 53, where an inept (invalid)
application had been filed for permission to appeal out of time from the
judgment sought to be registered. After quoting section 5, Lord Carloway said:
“2 … It is clear from the terms of that subsection that the
court only has power to set aside the registration of a judgment or to adjourn
the application to set it aside in two specified situations. The first is where
the applicant seeking such a remedy satisfies the court that an appeal is
pending. As at the date of the hearing before Lady Smith it appears that the
reclaimer had submitted a form, which subsequently proved to be inept, seeking
leave to appeal at a time when he accepted that he was out of time to do so. In
these circumstances we are not persuaded that at the date of the hearing before
the Lord Ordinary an appeal was pending. We consider that the circumstances
in which an appeal can be described as pending are limited to the following
situations: firstly, where an applicant has lodged a timeous appeal and that
appeal has not been determined or, secondly, where the court has allowed an
appeal to be received late and the appeal is awaiting determination. It does
not include the circumstances of the present case where an inept application
had been made for leave to appeal. Nor does it cover a situation where a valid
application has been made for leave to appeal late but that application has not
been determined. Until such an application has been granted no appeal is
pending. The second situation to which section 5(1) applies is where the
applicant is entitled to appeal and intends to do so. The applicant must
satisfy the registering court about both of these requirements before the court
may consider whether to exercise its discretion in his favour. Although the
reclaimer advised the Lord Ordinary that he intended to appeal if granted
leave, it cannot be said that he was entitled to appeal for similar reasons
to those outlined above in respect of pending appeals. For the foregoing
reasons we are satisfied that the Lord Ordinary did not err when she concluded
that the discretionary power under section 5 was not available to her.
3 Even if section 5 had been applicable in this case the
reclaimer would not have succeeded. The fact that an appeal is pending does not
preclude the registration of a judgment, (section 1(3) of the 1933 Act).Section
5 merely provides the court with a discretion not to register the judgment or
to delay its registration where such an appeal is pending or where the
appellant is entitled and intends to appeal. In the present case the reclaimer
was aware of the proceedings. He took part in them. Initially he was
represented by solicitors but dispensed with their services. He accepts that he
was advised to obtain alternative representation and that judgment might pass
against him if he failed to do so. In the action at his instance he was aware
of the court order ordaining him to find caution and failed to do so. He was
aware of the consequences of such failure. Moreover in 2010 he made
representations about the expenses of the action at the instance of the
petitioner indicating that he was well aware of the first judgment against him
in that action and of the possibility of further judgments relating to
expenses. He failed to appeal against the judgments within the time limit for
such appeals and he has not yet been granted leave to appeal. He took no action
to seek leave to appeal late until more than one year had elapsed after
judgment had been pronounced against him and only then after the petition for
registration of the judgments was served upon him. The reclaimer's stated fear
that any payment made by him after registration of the judgment may be
difficult to recover from the petitioner is ill founded. If he is granted leave
to appeal and the court in New South Wales suspends the judgments pending determination
of the appeal, the reclaimer will be able to seek suspension of any diligence
undertaken following upon registration of the judgments. Moreover, if the
judgments are satisfied by the reclaimer making payment to the petitioner and
the reclaimer succeeds in a subsequent appeal, he could seek repayment from the
petitioner and, if necessary, seek redress in the court of New South Wales. In
that regard he is in no different position from anyone else against whom there
is a final foreign judgment and who successfully appeals against that judgment.
Section 1(3) of the 1933 Act deems a judgment to be final and conclusive
“notwithstanding that an appeal may be pending against it, or that it may still
be subject to appeal, in the courts of the country of the original court”. Had
we been required to do so, we would not have exercised our discretion under
section 5 in favour of the reclaimer.” (my emphasis)
87.
Walton is not binding on this court. Moreover, as Dr Mallya
points out, the court’s observations on the position where a valid application
for permission to appeal has been lodged, and as to when a person is “entitled”
to appeal, are both obiter. However, I consider them, with respect, to
be correct. An appeal cannot be regarded as “pending”, as a matter of
ordinary language, in circumstances where no valid and timely appeal has been
lodged. Nor in my view can a person be regarded for the purposes of section 5
as “entitled” to appeal in circumstances where the time for appealing
has expired without an appeal having been filed or an application for
permission to appeal having been granted. Were it otherwise, a respondent to
an application to register a judgment could claim to be entitled to appeal
however long had elapsed since the relevant appellate deadline.
88.
For those reasons, I do not consider that the court has the powers set
out in section 5 in relation to Dr Mallya’s proposed appeal to the DRAT.
89.
Further, Dr Mallya’s claim in the Bombay High Court is not an appeal
from the DRT Judgment, and I do not consider it can be brought within section 5
on the basis that if successful it would have the effect of superseding the DRT
Judgment. Section 5 refers specifically to an “appeal … against the
judgment” rather than to a separate action which, if successful, would
allegedly have a supervening effect on the judgment.
90.
Nevertheless, I go on to consider the circumstances more generally,
including the apparent prospects of success of the proposed DRAT appeal and the
Bombay High Court claim, (a) in case I am wrong in any of the conclusions set
out above and (b) in view of Dr Mallya’s request that the court grant a stay in
the exercise of its case management powers.
91.
As to the applicable standard, the Claimants say that even if section 5
applied, a foreign judgment should be treated in the same way as an English
judgment. Execution should not be stayed except where there are such special
reasons as would give rise to the staying of an English judgment. They cite
for this proposition Ferdinand Wagner v Laubscher Bros. & Co. [1970]
2 QB 313 at 317D-G, 319A-D and 319H-320F, and SA Consortium General Textiles
v Sun and Sand Agencies Ltd. [1978] QB 279 at 298A-C, 306B-307C, 309D-E. Though,
as Dr Mallya points out, the facts in those cases were very different from those
of the present case, the Court of Appeal in Ferdinand Wagner made the
following statements of general application:
“I am afraid that I cannot agree with the judge's approach to
this matter. He seemed to have regarded it as if there was a summons under R.S.C.,
Ord. 14 in which the question is whether there is an arguable point. But I
think this procedure to enforce a foreign judgment is quite different from Ord.
14. Here is a German judgment which is equivalent to an English judgment. If
the plaintiffs had obtained an English judgment, we should not, for one moment,
grant a stay simply because the defendants had brought a cross-claim in another
action against the plaintiffs. So here we should not stay execution in this
German judgment simply because Laubscher's have brought a cross-action in
England against Wagner.” (p317 D-E per Lord Denning MR)
“For those reasons I agree entirely that this appeal should
be allowed and would only add a few words on a matter of general principle.
Section 2 (2) of the Foreign Judgments (Reciprocal Enforcement) Act, 1933 ,
makes it plain that judgments of any foreign court to which the Act has been
applied by Order in Council when registered rank exactly the same as a judgment
of a court in this country. Accordingly whilst, of course, R.S.C., Ord. 47, r.
1 may in certain circumstances be relied on when it is sought to obtain a stay
on a foreign judgment in the same way as it might in certain circumstances be
relied upon when a stay is sought of a judgment of one of the courts of this
country, that can only successfully be done when there are "special
circumstances which render it inexpedient to enforce the judgment or
order." For my part I too, with all respect to the approach of the judge
in chambers, consider the tests to be applied when an application is made under
R.S.C., Ord. 47, r. 1 are quite different from those applicable to Ord. 14
proceedings. In the present case there are no special circumstances whatsoever
that would render it inexpedient to enforce the German judgment and many that
tend the other way.” (p319A-C per Sachs LJ)
92.
A stay of an English judgment is at least in practice the exception
rather than the rule. As summarised in White Book (Vol 1), note 52.16.3, in Leicester
Circuits Ltd v Coates Brothers plc [2002] EWCA Civ 474 §§ 12 and 13, the
Court of Appeal stated that, while the general rule is that a stay of judgment
will not be granted, (1) the court has an unfettered discretion, (2) no
authority can lay down rules for its exercise, (3) the proper approach is to
make the order which best accords with the interests of justice, (4) the court
has to balance the alternatives to decide which is less likely to cause
injustice, and (5) where the justice of letting the general rule take effect is
in doubt, the answer may well depend on the perceived strength of the appeal.
The Court added that it is relevant that the appellant may be unable to recover
from the respondent the sum awarded in the event of judgment being set aside on
appeal. In Department for Environment, Food and Rural Affairs v Downs
[2009] EWCA Civ 257 §§ 8 and 9, a single Lord Justice explained that “solid
grounds” have to be put forward by the party seeking a stay. Those reasons
are normally of some form of irremediable harm if no stay is granted because,
for example, the appellant will be deported to a country where they allege they
will suffer persecution or torture, or because a threatened strike will occur
or because some other form of damage will be done which is irremediable; but it
is unusual to grant a stay to prevent the kind of temporary inconvenience that
any appellant is bound to face because they have to live, at least temporarily,
with the consequences of an unfavourable judgment which they wish to challenge
in the Court of Appeal.
93.
Justice Jain expresses the view that Dr Mallya’s appeal is likely to
succeed, highlighting five particular points as sufficiently strong, and that
each of the three bases of the Bombay claim is strong. He also states that Dr
Mallya’s Writ Petition in the High Court of Karnataka, to challenge the DRAT’s interim
order of 28 March 2018 requiring a pre-deposit as a condition of advancing the
appeal, has good prospects of success on the basis that the DRAT erred on
fundamental grounds.
94.
The Claimants point out that there would appear to be no realistic
prospect of Dr Mallya depositing Rs.3,101 crores with the DRAT himself,
although he states that he has procured UBHL to file applications for
permission to sell shares and assets that have been attached. There is a dispute
between the experts as to whether or not the pre-condition of a deposit of at
least 25% of the DRT Judgment can be waived in its entirety. Even if the
deposit sum were lodged or waived, the Claimants say Dr Mallya’s application
for condonation of the delay is extremely unlikely to succeed, since there was
no good reason for the 212-day delay in Dr Mallya filing his appeal and the
DRAT in its order of 28 March 2018 said: “… Appeal was kept under objections
for more than a period of one year without any rhyme and reason… Possibility of
delaying tactics cannot be ruled out”. Justice Singhvi’s view is that the
DRAT will not exercise its discretion under s.20(3) to condone Dr Mallya’s
delay in filing his appeal.
95.
The grounds Dr Mallya has put forward for condonation of the substantial
lateness of his proposed appeal largely relate to other matters which are said
to have occupied his time, and alleged difficulties in communicating with his
lawyers in India by reason of his current inability to leave the UK due to the
extradition proceedings. These do not appear convincing, and based on the
evidence as a whole, Dr Mallya’s chances of being permitted to pursue an appeal
to the DRAT so long out of time appear to be slim.
96.
As to the underlying merits of the proposed DRAT appeal and Bombay claim,
the experts disagree. On the question of coercion, Justice Jain asserts that
Dr Mallya has a more than arguable case. However, that view appears to be
based essentially on Dr Mallya’s own assertions to that effect. Dr Mallya
criticises the DRT for having failed to approach this issue with an open mind,
citing various passages from the DRT Judgment which he says show (for example)
an excessive focus on the fact that public money was involved. However, the
DRT noted that in addition to the lack of any direct documentary support for
the allegation of coercion (Judgment §§ 19(i), (ii), (iv)), there was evidence
of a series of meetings between the banks and the defendants in none of which
UBHL or Dr Mallya is recorded as having raised any objection about their
respective guarantees (Judgment §§ 19(i) and (vi)). There was no evidence
before me that Dr Mallya had alleged coercion at any time between his signing
of the guarantee in December 2010 and the issue of his claim in the Bombay High
Court in March 2013. Further, Dr Mallya had at the time he signed the Personal
Guarantee already given significant previous guarantees which were released in
return for the Personal Guarantee.
97.
Justice Jain states that the taking of the Personal Guarantee was
contrary to two circulars issued by the Reserve Bank of India which he says
impose binding duties on banks (though that point is disputed). The first of
these, the RBI Master Circular on Guarantees and Co-acceptances § 2.2.9(C),
states inter alia that “banks should be guided by the following broad
considerations”, one of which is that “Where personal guarantees of
directors are warranted, they should bear reasonable proportion to the
estimated worth of the person. …”. Even assuming that guideline to be
binding on the bank, there is no clear evidence before me to suggest a
likelihood that it was breached.
98.
Secondly, Justice Jain referred to paragraph 14.2.2(v) of the RBI’s
Master Circular “Prudential Norms on Income Recognition, Asset Classification
and Provisioning Pertaining to Advances”, which he said “unequivocally
stated that no personal guarantees should be required from promoters (like Dr
Mallya) when the unit (like KFA) was affected by external factors pertaining to
the economy and industry”. However, it appears from the text of the
Circular that Justice Jain considerably overstates the matter. Section 14 of
the Circular provides for special regulatory treatment for asset classification,
subject to compliance with certain conditions, one of which is that “Personal
guarantee is offered by the promoter except when the unit is affected by
external factors pertaining to the economy and industry”. Thus, on the
face of the document, far from unequivocally stating that no personal guarantees
should be required from promoters in such circumstances, it merely provides
that no such guarantee is necessary in order to obtain a particular
asset classification benefit.
99.
In these circumstances, I am not persuaded that Dr Mallya’s proposed
appeal to the DRAT, even if allowed to proceed, has apparent merit.
100.
As to Dr Mallya’s claim in the Bombay High Court:
i)
Dr Mallya brought proceedings in Bombay on the basis of the location of
the defendants’ registered offices. However, the Personal Guarantee contains
an exclusive jurisdiction clause which provides that jurisdiction lies with “the
courts and tribunals in Bengaluru” (Bangalore). The DRT has ruled that Dr
Mallya volunteered to submit to the jurisdiction of the courts and tribunals in
Bangalore. Justice Singhvi’s evidence is that that finding will be final and
binding on the plaintiffs to the suit before the Bombay High Court.
ii)
In any event, in order to circumvent the jurisdiction clause Dr Mallya
would have to persuade the Bombay court that his allegations about the validity
of the Personal Guarantee also impugn the jurisdiction clause, i.e. that under
Indian law it is not severable.
iii)
Dr Mallya had the opportunity to dispute the validity of the Personal Guarantee
and did so, on certain grounds, before the DRT. Evidence on the issue was
advanced by the Claimants and Dr Mallya, and the Claimants’ two witnesses were
cross-examined. The DRT held that the Personal Guarantee is valid.
iv)
That finding would appear to give rise to a res judicata on the issue
as between Dr Mallya and the Claimants to which the Bombay High Court would give
effect.
v)
Justice Jain expresses the view that no res judicata could arise
because the DRT and DRAT have no jurisdiction to grant declaratory relief,
whereas that is the nature of the relief Dr Mallya seeks in the Bombay High
Court. Justice Jain quotes from the decision of the Supreme Court of India in Srimati
Raj Lakshmi Dasi v Banamali Sen [1953] SCR 154 where the Court said:
“In order successfully to establish a plea of res judicata or
estoppel by record it is necessary to show that in a previous case a court,
having jurisdiction to try the question, came to a decision necessarily and
substantially involving the determination of the matter in issue in the later
case.”
Applying this
test, and with respect to Justice Jain, I find it difficult to accept that the
DRT’s lack of power to award the remedy of declaratory relief means that the
DRT lacks jurisdiction “to try the question”. I find much more
compelling Justice Singhvi’s view that a decision of the DRT (unless reversed
on appeal by the DRAT) does operate as a res judicata in other
proceedings between the parties on the same substantive issue.
vi)
In so far as Dr Mallya relies in the Bombay claim on his allegations of
coercion and/or breach of RBI circulars, I am for the reasons given earlier not
persuaded that those allegations have apparent merit.
101.
Viewing the matter in the round, the balance in my judgment is clearly in
favour of allowing the Registration Order to stand and enforcement to take
place.
i)
The starting point is that the Claimants have a judgment which they are
entitled to enforce.
ii)
Dr Mallya did not file a timely appeal: he had the right to appeal from
the DRT Judgment within 30 days but did not do so. Instead he attempted to appeal
212 days out of time, but even then did not submit a valid application.
iii)
The prospects of Dr Mallya being allowed to appeal out of time to the
DRT appear slim.
iv)
Dr Mallya’s claim in the High Court of Bombay has to overcome a substantive
objection that the court lacks jurisdiction by reason of an exclusive
jurisdiction agreement.
v)
There appears to be a good argument that the Bombay court would in any
event be bound by the DRT’s findings as res judicata.
vi)
In any event, the evidence and arguments presented to this court do not
suggest that Dr Mallya has good prospects on the merits in relation to either
his proposed appeal or his application to the court in Bombay.
vii)
There is no reason to believe Dr Mallya would suffer irremediable harm
if the Registration Order or its enforcement were not set aside or stayed. The
Claimants are state owned banks and are likely, if required, to be readily able
to reimburse Dr Mallya any sums ordered.
viii)
Conversely, any of the forms of relief Dr Mallya seeks would be likely
to cause prejudice to the Claimants. The proceedings he wishes to pursue would
be likely to last a minimum of 18 months, and on the basis that Dr Mallya
wishes in any event to pursue his claim in the Bombay court would take many
years.
ix)
In the meantime, the Claimants are likely to be out of their money. In
addition, there is a risk of the value of Dr Mallya’s assets deteriorating,
and/or being subject to claims by other creditors, and a risk of Dr Mallya
being declared bankrupt.
x)
I do not accept the further point made on behalf of Dr Mallya that since
ownership of some of Dr Mallya’s alleged assets is likely to be in dispute, it
would not be sensible to use time and resources on those issues until the
outcome of Dr Mallya’s appeal is known. On the footing that for the reasons
given above the Claimants are prima facie entitled to enforce their
judgment, it would not be right to require them to await on costs/resources
grounds the outcome of (a) an appeal which at present is out of time and not currently
extant or (b) a claim in Bombay which is prima facie in breach of an
exclusive jurisdiction clause and subject to a res judicata objection, and
(in both cases) whose merits are doubtful.
xi)
Similarly, it would not be just to require the Claimants to wait (as Dr
Mallya submitted) on the basis that (a) assets of UBHL, which is jointly and
severally liable with Dr Mallya, have been attached at the instance of the DRT
Recovery Officer and are said to be worth £385 million, or (b) Dr Mallya has
applied for the release of other assets currently under attachment at the instance
of government authorities in India. Whilst it is possible that value will
eventually be realised from such assets for the benefit of the Claimants, the
timing and value involved are uncertain, and in any event that possibility is
in my view not a factor, or a factor of any real significance, against allowing
the Claimants to take the benefit of the judgment they have obtained.
102.
In all these circumstances, it would not be just either to set aside the
Registration Order (even if, contrary to my earlier conclusions, the court has
power to do so), to stay enforcement or to adjourn Dr Mallya’s application.
Further, I have also concluded earlier that the DRT regulations do not preclude
the enforcement of the DRT Judgment in England and Wales under the 1933 Act and
decline to order a stay on that ground also.
103.
In addition to his argument that the Registration Order should be set
aside, Dr Mallya advances three grounds which he says justify the WFO being set
aside:
i)
No risk of dissipation of assets
ii)
Delay
iii)
Material non-disclosure
104.
An applicant for a freezing order has to show “solid evidence”
that there is a real risk that any judgment will go unsatisfied (Ninemia
Maritime Corp v Trave Schiffahrtsgesellschaft (The Niedersachsen) [1983] 2
Lloyd’s Rep 600, 606-607 per Mustill J).
105.
Relevant factors include the nature of the assets to be frozen, the
nature and standing of the defendant’s business, the length of time the
defendant has been in business, the defendant’s domicile or residence, the
machinery for enforcement in the country of the defendant’s business, the
defendant’s credit record, any intention expressed by the defendant about future
dealings with his assets, connections between a defendant and other companies
which have defaulted on arbitration awards or judgments, and the defendant’s
behaviour in respect of the claims (see Gee, “Commercial Injunctions” (6th
ed), § 12-033 and cases cited).
106.
The purpose of a freezing order is to prevent a defendant taking action
“designed to ensure” that an existing or future judgment is rendered
less effective than would otherwise be the case, including any conduct which
would have that effect (whether or not so intended: see R v Home Secretary
ex p. Muboyayi [1992] QB 244, 257H, per Lord Donaldson MR, explaining that
his phrase “designed to ensure” in Derby & Co Ltd v Weldon (Nos 3
and 4) [1990] Ch 65, 76E did not mean ‘intended’ but rather ‘having the
consequence that’).
107.
The Claimants refer to the note at White Book volume 2 § 15-69, which
sets the position out at some length but from which the following propositions
can be derived:
i)
The purpose of a freezing order is to ensure that the court’s judgment
is not rendered valueless “by an unjustifiable disposal of assets” (Ketchum
International Plc v Group Public Relations Holdings Ltd [1997] 1 W.L.R. 4, CA).
ii)
What has to be shown is that there is, without an injunction, “a real
risk that a judgment or award in favour of the claimants would go unsatisfied”
(Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft m.b.h und Co
K.G. [1983] 1 W.L.R. 1412, CA).
However, the order is not designed to prevent perfectly normal dispositions,
such as the payment of ordinary trading debts, even though their effect may be
that any ultimate judgment goes partly or wholly unsatisfied. The conduct in
question must be unjustifiable (Mobil Cerro Negro Ltd v Petroleos de
Venezuela SA [2008] 1 Lloyd’s Rep. 684 (Walker J) at paras 36 and 41)
iii)
The claimant should depose to objective facts from which it may be
inferred that the defendant is likely to move assets or dissipate them;
unsupported statements or expressions of fear have little weight (O’Regan v
Iambic Productions (1989) 139 N.L.J.
1378 (Sir Peter Pain).)
iv)
It is a fundamental principle that a freezing order is not granted for
the purpose of providing security for the claim.
v)
In summary, a claimant will demonstrate a sufficient “risk of
dissipation” if it can show that (1) there is a real risk that a judgment
or award will go unsatisfied, in the sense of a real risk that, unless
restrained by injunction, the defendant will dissipate or dispose of his assets
other than in the ordinary course of business, or (2) that unless the defendant
is restrained, assets are likely to be dealt with in such a way as to make
enforcement of any award or judgment more difficult, unless those dealings can
be justified for normal and proper business purposes (Congentra AG v
Sixteen Thirteen Marine SA [2008] EWHC 1615 (Comm); [2008] 2 Lloyd’s Rep. 602 (Flaux J.) at para.49).
vi)
Great care should be taken in the presentation of the evidence to the
court so that the court can see whether there is a real risk of dissipation of
assets. Where the respondent is alleged to have been dishonest, the court
should scrutinise with care whether what is alleged in this respect in itself
really justifies the inference that he is likely to dissipate assets unless
restrained (Thane Investments Ltd v Tomlinson [2003] EWCA Civ 1272, 29 July 2003, CA, unrep.).
vii)
Where dishonesty is alleged, it is sometimes possible to infer a risk of
dissipation from the fact of the dishonesty (Metropolitan Housing Trust v
Taylor [2015] EWHC 2897 (Ch), unrep., Warren J § 18).
viii)
If the defendant’s assets are held in a complex, opaque and offshore
structure, that is not of itself sufficient to infer a risk of dissipation, but
it is capable of being regarded as contributing to the risk if there is other
material on which to infer such a risk (Holyoake v Candy [2016] EWHC 970 (Ch); [2016] 3 WLR 357
(Nugee J) at para.27).
108.
The Claimants add that where there is a criminal restraint order against
a respondent in respect of all his assets, but this does not protect the
applicant, Mareva relief may still be appropriate: Faya Ltd v Butt
[2010] EWHC 3461 (Ch) at paras 23-25.
109.
Dr Mallya refers to the further summary provided by Males J in National
Bank Trust v. Yurov [2016] EWHC 1913 (Comm) §§ 69-70:
“As has been said many times, the purpose of a freezing order
is not to provide the claimant with security but to restrain a defendant from
evading justice by disposing of assets otherwise than in the ordinary course of
business in a way which will have the effect of making itself judgment proof.
It is that concept which is referred to by the label “risk of dissipation” …
Based on these authorities [Thane Investments v. Tomlinson
[2003] EWCA Civ 1272 at [21][28]; TTMI v ASM Shipping [2006] 1 Lloyd’s Rep 401
at [24]-[27]; and Congentra v. Sixteen Thirteen Marine [2008] 2 Lloyd’s Rep 602
at [49]], the defendants advance seven propositions which the bank does not
dispute and which I accept. They were as follows:-
(a) The claimant
must demonstrate a real risk that a judgment against the defendant may not be
satisfied as a result of unjustified dealing with a defendant’s assets.
(b) That risk can only be
demonstrated with solid evidence; mere inference or generalised assertion is
not sufficient.
(c) It is not enough
to rely solely on allegations that a defendant has been dishonest; rather it is
necessary to scrutinise the evidence to see whether the dishonesty in question
does justify a conclusion that assets are likely to be dissipated.
(d) The relevant inquiry
is whether there is a current risk of dissipation; past events may be
evidentially relevant, but only if they serve to demonstrate a current risk of
dissipation of the assets now held.
(e) The nature,
location and liquidity of the defendant’s assets are important considerations.
(f) Whether or to
what extent the assets are already secured or incapable of being dealt with is
also relevant.
(g) So too is the
defendant’s behaviour in response to the claim or anticipated claim.”
110.
At least for the purposes of the present case, I do not consider (and
the parties did not submit) that there is any material divergence between these
formulations of the applicable principles.
111.
The Claimants rely on the same factors as they relied on before Picken J
at the without notice stage to show that there was a risk of dissipation:
i)
the fact that the DRT Judgment has not been met, nor have any sums been
paid voluntarily,
ii)
the findings of contempt by the Indian Supreme Court,
iii)
the timing of Dr Mallya’s move to England,
iv)
the criminal proceedings against Dr Mallya, and
v)
the complex ownership structure of Dr Mallya’s assets.
112.
The Claimants submitted to Picken J, and continue to submit, that
although there have been some modest recoveries in India, the total sum
outstanding is Rs.98.5bn and Dr Mallya has made no attempt to meet the judgment
debt against him. Judgment was delivered on 19 January 2017 for Rs. 62,033,503,879.42
(over Rs.6,203 crores) and by 22 November 2017 the sum outstanding, with
interest since 2013, had risen to Rs. 98,530,512,249.42 (over Rs.9,853 crores).
113.
Dr Mallya says that is an unfair characterisation, because he has made
several attempts to settle the claims during the DRT proceedings, and several
attempts to pay off the judgment debt. He has not buried his head in the sand,
but has repeatedly sought to engage with the Claimants, including with an offer
made up of assets said to be worth 89% of the judgment debt. Moreover, in the
past few weeks he has on two occasions procured UBHL to apply to the courts in
India to allocate assets and funds subject to attachments towards settlement
with the Claimants.
114.
The Claimants point out that the offers made before the DRT Judgment
were at significant discounts to the sums claimed by the Claimants and were not
in cash. On 29 March 2016 Dr Mallya, KFAL, UBHL and KFin made an offer on a “strictly
without prejudice” basis. This followed shortly after other events
discussed below, including a transaction in late February 2016 in which Dr
Mallya received US$40 million from Diageo as part of a commercial settlement
which was immediately transferred to trusts for Dr Mallya’s children, and Dr
Mallya’s departure from India to settle in England. The offer was to settle
the then liability of Rs.6,571 crores for Rs.4,000 crores partly in cash and
partly in shares in United Spirits Ltd which would be sold. Some of the cash
was deposited with the Karnataka High Court and some with Airbus. SBI rejected
the offer on 4 April 2016, giving detailed reasons, including concerns about
double counting and that parts of the value offered were dependent on the
outcome of litigation and other contingencies. In addition, SBI made the point
that none of the offerors had disclosed details of their assets on oath.
115.
A revised offer was made on 6 April 2016 of Rs.4,400 crores (to be paid
in instalments, pledges of shares and sums held in court) plus an assignment of
the proceeds of a claim by UBHL for Rs.2,200 crores in the Bangalore court. Dr
Mallya disclosed a statement of his assets and liabilities, in India only, as
at 31 March 2010 and 31 March 2011 and promised to do so as at 31 March 2016.
116.
On 7 April 2016 the Supreme Court of India made an order for Dr Mallya
to disclose both his Indian and his international assets, and for it to be “indicated
… what is the amount he is prepared to deposit before this Court so as to show
his bonafide for meaningful resolution”.
117.
On 21 April 2016 Dr Mallya provided a statement of his assets and
liabilities in India as at 31 March 2016, and a statement of his assets abroad
given to the court in a sealed envelope. He also submitted on affidavit
details of sums which could be deposited with the Supreme Court.
118.
The Supreme Court on 26 April 2016 noted that Dr Mallya had in an
affidavit indicated that Rs. 1,591 crores could be deposited from sales of
shares and a refund from Airbus Industries, and a further Rs.1,329 crores from
appropriation from court deposits. It said Dr Mallya had disclosed personal
assets to the extent of approximately Rs.20 billion, mostly under attachment by
the Income Tax Department. The court noted a submission by Dr Mallya “that
the personal guarantee executed by [Dr Mallya] with the banks do not cover his
assets abroad” but was critical of Dr Mallya not having disclosed his
overseas assets to the banks:
“… in the order dated 7.4.2016 this court had directed [Dr
Mallya] to disclose the assets in an affidavit. The only purpose for
disclosing the assets was to have a fair idea for the petitioners to go for a
meaningful settlement on the proposals made by [Dr Mallya]. There is no petition
before us for clarification or modification of order dated 07.04.2016. In the
above circumstances, we do not find any tenable objection in disclosing these
assets to the petitioners.”
The court also
commented:
“We are distressed to note that [Dr Mallya] has not responded
to our Order dated 7th April, 2016 in the letter and spirit of the
said Order. He was to show us his bonafides by showing the color of money in
the form of a substantial deposit towards dues in the region of 18,000 crores
to arrive at a meaningful settlement. It appears there is no bonafides in his
offer for settlement. Apparently, statements made by counsel on his behalf were
made only as a ploy to gain time”.
119.
It is fair to point out that the court’s order of 7 April 2016 as quoted
above was not for Dr Mallya actually to make a deposit but to provide an
indication of what could be deposited.
120.
The court directed its Registry to disclose the sealed statement of
assets to the petitioners, which was apparently done on 29 April 2016.
121.
On 10 May and 2 June 2016 Dr Mallya made “without prejudice” offers
to continue settlement discussions. SBI responded on 10 June 2016 requesting “any
alternative concrete proposal for settlement”. The correspondence does not
appear to have proceeded any further at this stage.
122.
Dr Mallya says settlement then became very problematic because of provisional
attachment orders issued by the Director of Enforcement, a government official,
on 11 June 2016 and 3 September 2016 under section 5(1) of the Prevention of Money
Laundering Act 2002 in respect of properties owned by UBHL, Dr Mallya and
related entities.
123.
Nonetheless, Dr Mallya says that in April 2017 after the DRT Judgment:
“In an appeal challenging the winding up of UB(H)L, and in
part settlement of the DRT Judgment:
I caused UB(H)L to apply to the Karnataka High Court on 12
April 2017 for permission to deposit its shareholding in United Spirits Limited
and United Breweries Limited (or their value) and other assets with the Court
valuing Rs 2,593 crores … That is a value of about £320.3m as at April 2017
and c. £287.2m as at the date of this statement. This was subject to the
Enforcement Directorate lifting their attachments over those shares;
specifically the Second [Provisional Attachment Order] …”
but that the
Enforcement Directorate refused to consent to the proposal.
124.
The Claimants make the points that:
i)
This was not an offer by Dr Mallya to pay his own indebtedness, but an
attempt to transfer UBHL’s shareholding in United Spirits Ltd. and United
Breweries Ltd. to the Karnataka High Court as part of UBHL’s challenge to the
winding-up order made against it. It was in any event prevented by the
Enforcement Directorate.
ii)
It was not represented at the time as an offer by Dr Mallya to settle,
although he now says it was.
iii)
Even if it had been an offer, it would have been at a significant
discount to the DRT Judgment debt.
iv)
The context of UBHL’s application was a petition by BNP Paribas to wind
the company up, a fact which itself illustrates the point that other creditors
also lay claim to the assets.
125.
In his second witness statement, Dr Mallya refers to the fact that, much
more recently, on 8 March 2018 a memorandum was filed giving a summary of the
market value of assets attached/recovered by the Enforcement Directorate and the
DRT and available to the court as at 6 March 2018, stating an aggregate value
of Rs.12,203 crores i.e. about £1.3 billion at today’s exchange rates. The
summary includes shares/assets in India owed by Dr Mallya and companies owned
and/or controlled by his family. That memorandum does not, however, represent
an offer to the Claimants. It has not been verified by the Claimants, and by
far the largest sums listed reflect assets attached by the Enforcement
Directorate as opposed to the DRT. Assets attached by the Enforcement
Directorate, in particular, cannot be equated to assets offered to or available
to the Claimants.
126.
It is also relevant to note in this context that Dr Mallya’s current
position is that he is liable under the Personal Guarantee, if at all, only to
the extent of his assets in India. That contention was made on his behalf
before the Supreme Court of India at the hearing on 26 April 2016, though it
does not appear to have been advanced either as a defence before the DRT or in
Dr Mallya’s proposed appeal to the DRAT. The argument is supported by Justice
Jain on the basis of (a) the RBI Master Circular referred to earlier stating
that directors’ personal guarantees should bear a reasonable proportion to the guarantor’s
estimated worth and (b) Dr Mallya’s statements that minutes of the Claimants’
consortia meetings have regularly scheduled lists of Dr Mallya’s “Net Means”
showing only Indian assets. However, there is no indication of any kind in the
Personal Guarantee that it is limited in this way, and Justice Singhvi regards
the contention as untenable. Based on the materials before this court, Dr
Mallya’s contention does indeed appear to be untenable, and indeed appears to
be a wholly unmeritorious attempt to avoid liability.
127.
On 9 May 2017, in Dr Mallya’s absence but after hearing submissions from
senior counsel on his behalf, the Supreme Court of India concluded “we find
that [Dr Mallya] is guilty of having committed contempt of court on both the
counts”, namely that:
i)
“He is guilty of disobeying the Orders passed by this Court in not
disclosing full particulars of the assets as was directed by this Court.”
ii)
“He is guilty of violating the express Orders of Restraint passed by the
High Court of Karnataka in the same Cause from which the present proceedings
have arisen.”
128.
The background to these findings is in outline as follows.
129.
On 3 September 2013 the High Court of Karnataka made an “interim
order of injunction against the respondents No.1 to 3 from transferring,
alienating, disposing or creating third party rights in respect of movable as
well as immovable properties belonging to them until further orders in these
petitions”. Dr Mallya was respondent no. 3. The order was continued on 13
November 2013.
130.
In February 2016 Dr Mallya was anticipating a receipt of US$40 million
from Diageo pursuant to an agreement bringing to an end their existing
agreement relating to Dr Mallya’s position at United Spirits Limited. Diageo,
which was a major shareholder in the company, agreed to pay Dr Mallya over a
5-year period a total of US$75 million in consideration of, among other things,
Dr Mallya resigning his position as Chairman and non-executive director and his
agreement to a five-year global non-compete undertaking. Diageo also agreed to
release Dr Mallya from certain indemnity obligations. It appears that the
first US$40 million was due to be paid to Dr Mallya immediately.
131.
This transaction was publicly announced by a press release issued on the
evening (Indian time) of 25 February 2016. The US$40 million was paid earlier
the same day into an account which Dr Mallya had opened in December 2015 with
the Edmond de Rothschild (Suisse) SA bank. On 24 February, the day before the
payment and the announcement, Dr Mallya instructed the bank that the US$40
million should following its receipt be remitted to three accounts in the name of
trusts whose beneficiaries were Dr Mallya’s children. Those remittances were
made on 26 and 29 February, leaving the account with a zero balance by 31 March
2016.
132.
As noted earlier, the Supreme Court of India on 7 April 2016 ordered Dr
Mallya to disclose all his Indian and international assets as at 31 March 2016.
133.
The proceedings in which the High Court of Karnataka had made the
interim injunction came before the Supreme Court, which concluded that Dr
Mallya had acted in contempt of the restraint order. Counsel for Dr Mallya
submitted that the US$40 million received from Diageo was received after the
date of the High Court’s 2013 orders, and that the orders did not cover or
include any moneys which the respondents might receive in the future. The
Supreme Court rejected that argument, stating in its judgment dated 9 May 2017 that:
“On plain reading of the Orders, in our view, whether the
properties were in the hands of the concerned respondents on the date when the
orders of restraint were passed by the High Court or had come into their hands
or under their control at a later point in time, regardless of such
qualification all properties whether movable or immovable were governed by the
orders of restraint. There is no ambiguity of any sort and the Orders of
restraint are quite clear. Consequently, funds amounting to US$ 40 million
which came to be under the control of and in the hands of Respondent No.3 [Dr
Mallya] were completely covered and governed by said orders of restraint.
…
The explanation that the funds now stand transferred in
favour of the trusts over which Respondent No.3 has no control at all, in fact
aggravates the extent of violation. It is clear that the funds which were in
the control of Respondent No.3 have now been sought to be put beyond the reach
of processes of court, which is reflective of the intent.”
134.
The Supreme Court also considered that Dr Mallya had been in breach of
its own disclosure order, starting inter alia that “The least that
was expected of Respondent No.3 was to disclose relevant facts pertaining to
receipt and disbursement of US$ 40 million.”
135.
Having reached the conclusions indicated above, the Supreme Court noted
that under its rules of procedure:
“… Respondent No.3 was obliged and duty bound to appear in
person in response to the notice issued by this Court in Contempt Petition.
Instead, he chose to file application seeking recall of the orders issuing
notice. Having considered the matter, we see no reason to recall that order …
Respondent No.3 is therefore duty bound to appear in person in the present
contempt proceedings.
Since Respondent No.3 has not filed any reply to the Contempt
Petition nor did he appear in person, though we have found him guilty of having
committed contempt of court, we deem it necessary to give him one more
opportunity and also hear him on the proposed punishment. We therefore adjourn
matter to 10.07.2017 for hearing Respondent No.3 in person on matters in issue
including one regarding the proposed punishment to be awarded to him for
contempt of court. … Respondent No.3 may keep his affidavit ready to be tendered
on the same day by stating mitigating circumstances, if any and any other
submissions he chooses to advance.”
136.
As to these matters Dr Mallya now makes the point, first, that the
Supreme Court’s findings of contempt against him were provisional findings only.
That point is disputed between the experts.
137.
Read in context, the Supreme Court’s reference to giving Dr Mallya “one
more opportunity” referred in my view to a further opportunity to fulfil
his duty to appear in person before the court. The Court had already made its
findings as to the substance. Dr Mallya had been represented by senior counsel
at the hearing on 26 April 2017 and filed affidavit evidence. The Supreme
Court stated twice, in the passages quoted above, that it had found Dr Mallya
guilty of contempt of court. In any event, Dr Mallya did not avail himself of
the further opportunity to appear in person before the court. It may also be
noted that Dr Mallya’s review petition refers to the Supreme Court’s order of 9
May 2017 as a “final common judgment and order”. In these circumstances
the Supreme Court’s findings should in my view be regarded as final as at 9 May
2017 or, in any event, following Dr Mallya’s failure to appear at the further
hearing directed.
138.
In any event, even if these were merely provisional findings, they were
reached after consideration of the evidence and submissions, and carry
significant weight in the context of this court’s consideration of the freezing
order issues.
139.
Secondly, Dr Mallya criticises the Supreme Court’s findings of
contempt on their merits. As to the finding of breach of the High Court’s
interim injunction, Dr Mallya reiterates his understanding that those orders
did not apply to after-acquired assets. Counsel for Dr Mallya made the point
that the Claimants obtained the interim injunction in the High Court of Karnataka
after failing to obtain a restraint order from the DRT under its own
jurisdiction under section 19 of the RBD Act. That section provides among
other things for the disclosure of assets “owned by the defendants” and
for the DRT to issue directions “to restrain the defendant from dealing with
or disposing of such assets and properties disclosed …”. That power must
therefore be, Dr Mallya submits, limited to assets currently owned by the
defendant. The order of the High Court, which made reference to the
proceedings before the DRT, should be read in the same light. The High Court’s
order is at least ambiguous in that respect and it was unfair of the Supreme
Court to find otherwise. Further, Dr Mallya submits that it was logical for
the US$40 million received from Diageo to be transferred to his children
because the non-compete covenant in substance prevented them from trading in
India using the Mallya name.
140.
There is no indication in the Supreme Court’s judgment that the subtle argument
Dr Mallya now advances, in support of the view that the High Court’s order was
limited to current assets, was argued before the Supreme Court. It appears to
me, with respect, that the Supreme Court was correct in stating that the High
Court’s interim restraint order was in clear terms and contained no ambiguity.
The correct course would have been for Dr Mallya to seek the consent of the
Claimants or the High Court to the proposed transfer of US$40 million.
141.
Even if one were to assume in Dr Mallya’s favour that (a) the Karnataka
High Court’s order was ambiguous, (b) Dr Mallya genuinely believed it to permit
the transfer of the US$ 40 million, and (c) he was arguably not in contempt of
court, the pre-arranged transfer of a significant sum of money away from Dr
Mallya’s control, before the public announcement, and at a time when the
Claimants were pursuing legal action to recover substantial amounts from Dr
Mallya under his Personal Guarantee, was a plain and unjustifiable dissipation
of assets of which this court should take account when considering the current
applications.
142.
I do not accept Dr Mallya’s submission that his having disclosed the
money as part of his children’s assets negates any possible inference of an
intention to dissipate. The money is in no way separately identified in or
identifiable in the very generally stated lists of Dr Mallya’s children’s
assets (which do not list any cash balances approaching the size of the sums
transferred to the three trusts: if the sums were included under the rubric of
“investments” that is not apparent on the face of the document); and by
the time of the disclosure Dr Mallya had already parted with control over it.
143.
Dr Mallya also criticises the Supreme Court’s finding of breach of its
own disclosure order, on the ground that as at 31 March 2016, the date as at
which he had been ordered to disclose assets, the Rothschild account had a nil
balance and was thus not an asset. However, that was in substance a submission
made to but rejected by the Supreme Court of India. Counsel for Dr Mallya before
the Supreme Court of India submitted that he “was not asked or called upon
to disclose all transactions but to disclose the status as it obtained on
31.03.2016 and as such the disclosure by [Dr Mallya] was consistent with the
tenor of the order passed by this Court”. The Supreme Court evidently
considered the non-disclosure of the account itself to be in breach of its
order, noting that “… no details of any bank account with overseas banks
were given by Respondent No.3 … The violation by Respondent No.3 regarding
non-disclosure becomes more pronounced because it is this very account held in
Edmund De Rothschild Bank that was utilized to transmit funds to the tune of
US$ 40 Million”. This court should in my view be very slow to differ from
the findings of the supreme court of a friendly state as to the interpretation
of its own orders. Moreover, as the Claimants point out, the Supreme Court of
India will have been able to form a view based on the full evidence and
submissions on the matter, of which this court does not have the benefit.
144.
Dr Mallya also makes the point that he filed a review petition
challenging the Supreme Court’s findings of contempt. The Review Petition was
lodged on 9 June 2017. Justice Jain states that he considers Dr Mallya’s
grounds for review to be excellent. The Claimants make the point, however,
that the Review Petition contained defects as a result of which it has not yet
been registered or listed for a hearing, and thus cannot be regarded as
extant. Further, Justice Singhvi, who was a judge of the Supreme Court of
India from 2007 to 2013, estimates that 99% of review petitions are dismissed
summarily, though he cites no official records or other source to support that
statement. In all the circumstances, and whether or not the review petition is
technically still extant, it does not of itself in my view shed any significant
light on the question of risk of dissipation that this court needs to consider.
145.
In addition to the findings of the Supreme Court of India, on 20 October
2016 the Karnataka High Court held that there was a prima facie case of
contempt against Dr Mallya for having created a pledge over shares in UBHL in
breach of an oral undertaking given by Dr Mallya to the Court on 26 July 2013.
The Court set the matter down for a trial. Dr Mallya applied to set aside that
order, but that application was dismissed on 2 December 2016. The matter appears
not to have progressed in Dr Mallya’s absence.
146.
The Claimants additionally allege (following disclosure provided by Dr
Mallya pursuant to the provisions of the WFO) that Dr Mallya has disposed of
other assets worth approximately £400,000 which prima facie appear to
constitute breaches of the Karnataka court’s order and/or orders made in
similar terms by the DRT, namely (1) the sword of Tipu Sultan, (2) a Maybach 62
car and (3) a Maybach 57 car. In oral submissions the Claimants focussed on
the first of these.
147.
The sword of Tipu Sultan is an item of historic importance which Dr
Mallya bought at an auction in 2003 for the equivalent of £188,400 and states
that he gave away in 2016 as his family members considered that it was bringing
him bad luck. Dr Mallya declined to state in correspondence to whom the sword
was given. Dr Mallya was unable to put forward any basis for contending that
the disposal was not in breach of the Karnataka High Court’s interim
injunction, and accepted that it occurred after the Supreme Court had made
clear that the injunction covered subsequently acquired assets. However, he
stated that in the context of a claim for £1 billion it was not significant and
could not be regarded as emblematic of a greater failure. It does, though,
appear to me to have been in clear breach of the Karnataka court’s order.
148.
The Claimants also said Dr Mallya appeared also to have failed to
disclose various cars in breach of the Supreme Court’s disclosure order of 7
April 2016, and that his purchase of a Ferrari 246 GTS with an estimated value of
£480,000 also raised various questions. As to the Ferrari, following the grant
of the WFO the Claimants were asked to consent to monthly hire purchase
payments of £10,968 for the car. The hire purchase agreement, dated 12 August
2016, is in the name of a Mr Alexander Powell and records payment of a deposit
of £135,000. In response to enquiries Dr Mallya disclosed a copy of an
agreement between him and Mr Powell also dated 12 August 2016, and explained
that he had paid the deposit of £135,000 which “may … have been made from an
account in Dubai that has since been closed”. In his second witness
statement Dr Mallya said “The Dubai account is with Standard Chartered; the
money held in it was disclosed under the Indian Asset Disclosure Order. The
account is no longer operative because it was suspended in or around Q3 2016.”
149.
The list of overseas assets which Dr Mallya disclosed to the court in
India does not list any cash assets, though it includes an entry for US$ 5.25m
of “Investments + Cash equivalents”. No specific bank accounts are
identified.
150.
Dr Mallya makes the point that he disclosed the Ferrari as one of his
assets pursuant to the WFO, and obtained hire purchase credit through Mr Powell
because he could not get credit himself.
151.
It may be the case that the payment of the deposit on the Ferrari was in
breach of the Karnataka High Court’s interim injunction. However, this point
was not the subject of any detailed argument before me and, overall, I do not
consider that the matters relating to the Ferrari carry matters any further on
this application.
152.
Finally, the Claimants say there are numerous other assets which have
been linked to Dr Mallya in various sources on the internet, but which he
denies that he owns. These comprise three yachts, numerous cars and the Mabula
Game Reserve in South Africa. The registered/asserted owners are offshore
companies and/or trusts. Since these matters are unverified, I do not consider
I can take account of them.
153.
The Claimants’ evidence before Picken J was that “Dr Mallya left
India on or about 2 March 2016, purportedly for the purposes of spending more
time with his family. However, this coincided with applications made by the
Applicants on 2 March 2016 in the DRT Proceedings to, among other things, take
control of Dr Mallya’s passport as they believed that he was intending to move
to London to dispose of certain assets and frustrate their enforcement action”.
154.
Dr Mallya responds that:
i)
he has lived in England since 1992 where he has, and continues to have,
indefinite leave to remain;
ii)
he has been a non-resident Indian since 1988;
iii)
his family ties to England are considerable, with his mother and step
siblings all living here;
iv)
since 1988, his trips to India have been visits for business and (from
2002 to 2016) to fulfil his parliamentary duties at the Council of States,
which sits for only 153 days a year;
v)
on 2 March 2016 he travelled from India (where he had been in parliament
on 1 March 2016) to the UK on his way to Switzerland. This was to attend a
long-scheduled meeting of the World Motor Sports Council on which he has sat
for 7½ years. Having done so, he returned to England on 4 March 2016; and
vi)
the Claimants’ mistaken belief that Dr Mallya was planning to settle in
London was the trigger for their applications to take his passport, and not the
other way round.
155.
However, the evidence indicates that prior to March 2016 Dr Mallya travelled
fairly regularly between India and England for business and political reasons.
Most of his business interests were in or closely connected with India, most notably
United Breweries Group and Kingfisher Airlines. The Claimants say Dr Mallya
represented India on the World Motor Sports Council and owns or owned an Indian
Premier League cricket team.
156.
As already noted, Dr Mallya was a member of the Council of States
between 2002 and 2016 and he says he regularly attended Parliament. The
Claimants add that Dr Mallya was in fact Karnataka’s representative when he
left India at the beginning of March 2016, resigning only on 4 May 2016.
Whilst Dr Mallya has indefinite leave to stay in the UK, he is said to be a non-resident
taxpayer.
157.
In contrast with this extensive previous travel to India, Dr Mallya left
India on 2 March 2016, shortly after the US$40 million transaction referred to
under heading (b) above, and has never returned. He is now fighting
extradition proceedings brought by the Indian government, which seeks his
return to face criminal charges relating to alleged financial misconduct. In
all these circumstances, and even taking account of the fact that Dr Mallya is
contesting the alleged grounds for extradition, there are grounds for regarding
Dr Mallya as a fugitive from justice.
158.
Dr Mallya is the subject of criminal proceedings in India, which he
strenuously denies for the detailed reasons set out in his defence to India’s
extradition request. Dr Mallya says he is a person of present good character
and standing, and it is not open to the Claimants to seek to draw adverse
inferences against Dr Mallya based on untested and untried allegations,
particularly where the Fifth Claimant (who is said to be a victim or interested
party) did not, and does not, positively assert that Dr Mallya’s conduct
impugned in those criminal proceedings was dishonest. Moreover, he says the
case of conspiracy levelled against him makes no sense in circumstances where
he undertook a personal guarantee liability for the whole amount of the
relevant loans.
159.
Following the third principle identified in Yurov, Dr Mallya
submits, it is not enough to rely solely on allegations of dishonesty; rather
it is necessary to scrutinise the evidence to see whether the dishonesty in
question does justify a conclusion that assets are likely to be dissipated.
160.
The Claimants say the fact that independent criminal prosecuting
authorities in India have concluded that there is sufficient evidence to level
charges of dishonesty against Dr Mallya, and that they are pursuing extradition
proceedings in this country, are relevant matters for the court to take into
account. They make the following further points:
i)
Dr Mallya faces serious criminal charges.
ii)
The charges are brought not by the Claimants but by the Central Bureau
of Investigation.
iii)
They follow detailed investigations by the Indian police.
iv)
The initial charges followed a consideration of at least 477 documents.
v)
They also identified 76 witnesses.
vi)
The charges also followed investigations by the Directorate of
Enforcement which independently concluded that Provisional Attachment Orders
should be made against various assets on the basis that they had been involved
in money laundering.
vii)
Provisional Attachment Order 11/2016 was issued on 11 June 2016 and
confirmed on 1 December 2016. The confirmation decision was a 201 page
analysis and decision which followed a 9-day hearing at which Dr Mallya and the
other defendants were all represented by counsel. Its conclusions included
that:
“Thus, the acts of Shri Vijay Mallya, UBHL and others
indicate that a criminal conspiracy was hatched for obtaining/sanctioning of
bank loan to M/s KAL [Kingfisher Airlines Ltd] in gross violations of
established/prescribed procedures and M/s KAL had no intent for repayment of
loan ab initio.
Further, the money trail analysis revealed that out of the
total loan of Rs 860.92 crore, sanctioned and disbursed by IDBI, Rs. 423 has
been remitted out of India. The said payments were shown to be made towards
aircraft rental leasing and maintenance, servicing & spare parts. There
are huge variations in the payments especially in the leasing payments even for
the same class and type of Aircrafts for the same time period. Despite
repeated reminders, M/s KAL has failed to submit supporting documents such as
lease agreements etc. to substantiate that the payments are bonafide.
Therefore, it establishes that not only the said bank loan was obtained in
questionable manner, it also establishes siphoning of the said loan abroad in a
calculated and pre designed manner.
During the course of investigation, it was observed that M/s
KAL was declared wilful defaulter by IDBI bank …
The proceeds of crime thus generated has been routed and
transferred abroad. Investigations … further revealed that Shri Vijay Mallya
has held a number of movable and immovable properties in India as well as
outside India through his various companies established by him through his
office personnel and which were directly or indirectly controlled by him. It
may be recalled that Shri Vijay Mallya has tendered his personal guarantee and
M/S UBHL has tendered corporate guarantee and as such, they are involved in the
offence of money laundering.
…
During the course of investigation, it was revealed that Shri
Vijay Mallya was the Chairman of M/s KAL at the material time and was
instrumental in taking the material decisions pertaining to the affairs of the
said Company, including obtaining of loans from various banks. Numerous
opportunities were given to Shri Vijay Mallya, to appear in person to present
his case before the Investigating Authority, by way of issuance of Summons.
However, he failed to respond to the Summons and didn’t appear in person before
the Investigating Authority. Accordingly, a letter was issued to the Regional
Passport Office, N. Delhi for revocation of his passport, the request which was
considered and accordingly, his passport was revoked by the Ministry of
External Affairs, Government of India, …”
viii)
The confirmation decision records that the defendants had filed replies,
and “were also given liberty to file written submission/arguments/synopsis
which have been done by the concerned Defendants. The different Counsels
appeared on behalf of the Defendants and argued the matter at length.” The
decision concluded in relation to money laundering that:
“There is overwhelming evidence regarding generation of
proceeds of crime by commission of the scheduled offences. There is sufficient
evidence of such proceeds of crime having been utilized by the Defendants.”
161.
The findings set out in the decision confirming the provisional
attachment order could not accurately be described as mere allegations or (as
Dr Mallya submitted) as ‘untested and untried’. They have been made by
an adjudicating authority after a lengthy and detailed consideration of
evidence and submissions. The adjudicating authority did not have to reach a
finding of guilt, but it did have to show “that there was ‘substantially
probable cause’ to form opinion that the property under attachment is proceeds
of crime”. It is appropriate to take its findings into account as part of
this court’s consideration of the issue of risk of dissipation.
162.
It is common ground that Dr Mallya holds his assets through a network of
complex ownership structures. He also says that significant assets which the Claimants
have identified are owned by other members of his family (including three
properties in England of which he says he has the regular use and the
super-yacht “Force India”).
163.
However, Dr Mallya makes the points that:
i)
His business and financial affairs are simply a reflection of his (and
his highly successful late father’s) long-standing business life, and not
evidence of an attempt (least of all a recent attempt) to put assets beyond
reach as the Claimants suggested. Dr Mallya is the son of the late Vittal
Mallya, who founded the United Breweries Group of companies. He died in 1983,
and Dr Mallya took over the running of the Group.
ii)
He has given asset disclosure in India and now in England (pursuant to
the WFO). He has also been asked numerous questions by the Claimants’
solicitors in correspondence about his assets, which he has answered,
notwithstanding his application to discharge the WFO.
iii)
It is common ground that if a defendant’s assets are held in complex
opaque and offshore structures that is not itself enough to give rise to an
inference of a risk of dissipation, but may be capable of contributing to the
risk if there is other material pointing to that risk (see Holyoake v. Candy
[2017] 3 WLR 1131 § 59 per Gloster LJ), which is not the case here.
164.
The Claimants refer to the complex arrangements in relation to the three
properties mentioned above and allege that Dr Mallya has been less than
forthcoming in providing details when pressed. Their evidence indicates that:
i)
A property in Cornwall Terrace is owned by a BVI company, Rose Capital
Ventures (“RVC”). RVC is owned by Gladco Properties Inc., which
is in turn owned by Continental Administration Services Limited (“CASL”)
as trustee of the Sileta Trust, a Mallya family trust.
ii)
Ladywalk and Bramble Lodge in Hertfordshire are owned by Ladywalk LLP,
an English limited liability partnership. It is said that the members of
Ladywalk LLP are CASL (99.9%) and Mr Andrea Vallabh (0.1%) which he holds as
nominee for CASL. CASL in turn holds that 0.1% membership interest as trustee
of the Sileta Trust. CASL holds 49.95% of the membership interest as trustee of
the Welwyn Property Trust, and 49.95% of the membership interest as trustee of
the Tewin Property Trust. The finance for the purchase of the properties was
provided by Ladywalk Investments Limited (“LIL”), a BVI company.
LIL is wholly owned by Sileta Holdings Limited (“SHL”). SHL is in
turn wholly owned by CASL as trustee of the Sileta Trust.
165.
The Claimants make the point that in an affidavit of 21 December 2017 Dr
Mallya stated that he has no interest in any of the three properties. However,
in repossession proceedings before the Central London County Court brought by
UBS AG and fixed charge receivers appointed by UBS AG, Dr Mallya had asserted
that:
i)
one of the Hertfordshire properties (Ladywalk or Bramble Lodge) was “his”
property; and
ii)
he had a right to occupation of Cornwall Terrace on the basis of an
irrevocable licence from RCV and a right to enforce the fact that RCV holds the
property on trust for him, his mother and his son. Dr Mallya says that his
right to occupy “arises under a contractual licence, a proprietary estoppel
or a constructive trust”, and there are no documents in relation to the
trust because it is a constructive trust.
166.
The documents in the Central London County Court case indicate that Dr
Mallya has claimed the right to live in the properties by reason of a licence,
estoppel or constructive trust as indicated above, but does not appear to have
claimed any greater interest in them than that. In these circumstances, I do
not conclude there was any inconsistency, or any clear inconsistency, between
Dr Mallya’s statements on this particular matter.
167.
More generally, however, in accordance with the statement from Holyoake
v. Candy quoted above, the complexity of Dr Mallya’s corporate structures
is a matter to be considered in the context of other matters said to indicate
risk of dissipation.
168.
Before reaching an overall conclusion about risk of dissipation, I first
consider the question of delay because of its potential impact on the question
of dissipation.
169.
In Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) Flaux J gave a summary of the relevant principles which was approved by
the Court of Appeal in JSC Mezhdunarodny Promyshlenniy Bank v Pugachev (No.
3) [2015] EWCA Civ 906:
“(1) The mere fact of delay in bringing an application for a
freezing injunction or that it has first been heard inter partes, does not,
without more, mean there is no risk of dissipation. If the court is satisfied
on other evidence that there is a risk of dissipation, the court should grant
the order, despite the delay, even if only limited assets are ultimately frozen
by it;
(2) The rationale for a freezing injunction is the risk that
a judgment will remain unsatisfied or be difficult to enforce by virtue of
dissipation or disposal of assets……In that context, the order for disclosure of
assets normally made as an adjunct to a freezing injunction is an important
aspect of the relief sought, in determining whether assets have been
dissipated, and, if so, what has become of them, aiding subsequent enforcement
of any judgment;
(3) Even if delay in bringing the application demonstrates
that the claimant does not consider there is a risk of dissipation, that is
only one factor to be weighed in the balance in considering whether or not to
grant the injunction sought.”
170.
Delay is a discretionary factor which can be relevant to the overall
assessment of (a) the credibility and weight of the applicant’s evidence, (b)
whether during the delay the respondent has dissipated assets, and (c) whether
the delay has caused any prejudice to the respondent. Delay is not a bar to
seeking relief, but is one factor to be weighed in the balance. See Ras Al
Khaimah Investment Authority & Ors v Bestfort Development LLP & Ors
[2017] EWCA Civ 1014 § 55 per Longmore LJ and Gee, Commercial
Injunctions, §§ 2-022 to 2-044.
171.
The Claimants have said there was no material delay, because the risk of
dissipation by reason of which they sought the WFO would be triggered by the
registration of the DRT Judgment itself. It would arise upon Dr Mallya finding
out about the Claimants’ attempts to enforce in England.
172.
Dr Mallya counters that:-
i)
The Claimants could have sought (but did not) pre-judgment freezing
relief in support of the DRT proceedings, which they launched in June 2013,
under Section 25 of the Civil Jurisdiction and Judgments Act 1982.
ii)
The Claimants obtained an asset restraint order against Dr Mallya in
India in support of their DRT proceedings as long ago as 3 September 2013,
which they said extended to Dr Mallya’s non-Indian assets and which they
obtained on the basis of there being a risk of dissipation of those non-Indian
assets (including English assets) in September 2013.
iii)
The Claimants could have sought post-judgment freezing relief (again
under section 25) when the DRT Judgment was handed down in January 2017.
iv)
The Claimants obtained a fresh asset restraint order in India as part of
the DRT Judgment, which again the Claimants contend froze Dr Mallya’s
non-Indian assets.
v)
The Claimants could have applied promptly for freezing relief either
after the amended Recovery Certificate was granted on 10 April 2017 or after
the letter dated 27 July 2017 addressed to the QBD purporting to satisfy the
1958 Order in Council. The four months’ delay after July 2017 was said by the
Claimants to be to allow the 13 claimant banks all to consent to the making of
the application, but that is hardly the degree of urgency to be expected when
seeking interim relief.
173.
Moreover, Dr Mallya says the Claimants’ own evidence shows they believed
Dr Mallya was planning to dissipate assets in England at the latest in March
2016, 18 months before the Claimants came before the English court:
i)
The Claimants (mistakenly, he says) “believed that [Dr Mallya] was
intending to move to London to dispose of certain assets and frustrate their
enforcement action” in March 2016 (according to Mr Gair’s affidavit on
behalf of the Claimants).
ii)
In support of interim applications in the DRT made on 2 March 2016, the
Claimants asserted “that [Dr Mallya] has decided to settle in London,
obviously with an intention to defeat the process of this Honourable Tribunal.
If [Dr Mallya] is allowed to do so, it will become difficult for the
[Claimants] to recover the entire amount due to them” and that “it is
apprehended that [Dr Mallya] may alienate their assets in favour of 3rd
parties with a view to defeat the [Claimants’] claims”.
174.
Dr Mallya says the delay is substantial and shows a lack of genuine
belief that there is now a risk of dissipation. More generally, Dr
Mallya makes the point that apart from the Tipu Sword, the Claimants have no evidence
of any actual dissipation of assets (or, if the US$40 million transaction was -
contrary to Dr Mallya’s submissions - a dissipation, since early 2016).
175.
The Claimants accept that they sought and obtained asset restraint orders
in India against Dr Mallya on 3 September 2013 and 13 November 2013 that were
not limited to Dr Mallya’s Indian assets. Their evidence before me is that
they did not apply in England prior to the DRT Judgment because they did not
realise this court had jurisdiction to grant such an order: “they believed
that, until a final order of the DRT was made and registered in England, there
was no jurisdictional basis for seeking a freezing injunction from the English
Courts”.
176.
Dr Mallya points out that section 25 of the Civil Jurisdiction and
Judgments Act 1982 gives the court exactly that jurisdiction, and says the
Claimants cannot rely on bad legal advice or a failure to take advice to explain
away their substantial delay. I do not accept that submission. Dr Mallya does
not suggest that the evidence of the Claimants’ mistaken understanding is
untrue. On the basis that the Claimants did have such an understanding, the
question is whether it either (a) undermines their case of risk of dissipation
or (b) means that as a matter of the court’s overall discretion no relief
should be granted. As to (a), a failure to act based on a belief that no
jurisdiction exists cannot logically undermine the case for risk of
dissipation; as to (b), this is a matter to be weighed in the balance along
with all other factors relevant to the exercise of the discretion.
177.
The Claimants also accept that in January 2017 when the DRT Judgment was
handed down, they sought and were granted fresh restraint orders in India
against Dr Mallya as part of the DRT Judgment. As to the subsequent delay, in
particular following the issue in July 2017 of the Presiding Officer’s letter,
the Claimants’ evidence is that this occurred because of the need for the First
Claimant to obtain consent from the other 12 Claimants to proceed with the
application for the WFO, particularly in light of the need to give a cross
undertaking in damages, and this delay was drawn to the attention of and
considered by Picken J at the without notice hearing. The Claimants add that Dr
Mallya cannot (and does not) say he has suffered any prejudice even if the
application should have been brought on sooner by the Claimants.
178.
The Claimants make the further point that the fact that asset restraint
orders were sought and granted in India evidenced a real concern that Dr Mallya
would seek to dissipate his assets; and that Dr Mallya’s conduct since then has
done nothing to allay those concerns.
179.
I am satisfied that the Claimants have provided sufficient explanations for
what might otherwise be regarded as a delay in applying for the WFO. In
circumstances where they had obtained restraint orders in India, had not
appreciated that an application could be made in England until the DRT Judgment
was obtained and could be registered, and applied as soon after that as they
could obtain the necessary instructions (including as to the undertaking in
damages), I do not consider that any delay undermines their case on risk of
dissipation or otherwise constitutes a ground on which the WFO granted by
Picken J should be set aside.
180.
Viewing the matter in the round, I have come to the conclusion that the
Claimants have shown solid evidence of a real risk of dissipation of assets
that justifies the grant and continuation of the WFO. The particular points I
would highlight from the matters considered above are that:
i)
Whilst in early 2016 Dr Mallya made some attempts to settle the matter,
those offers were on bases which the Claimants had reasonable grounds for
considering unsatisfactory. More recently, he has taken the position that he
has no liability under the Personal Guarantee on grounds which the DRT has
rejected, as well as on the apparently entirely unmeritorious basis that it
extended only to assets in India.
ii)
His lengthy delays in seeking to appeal long out of time from the DRT
Judgment, and his attempt to rely on the proceedings in the Bombay High Court
(likely to last of the order of seven years and brought in apparent breach of
an exclusive jurisdiction clause) as a basis for declining to satisfy the DRT
Judgment, are suggestive of a wish to avoid/delay as long as possible the
satisfaction of his obligations.
iii)
The Supreme Court of India has concluded that Dr Mallya was in contempt
of court on two counts, one relating to dissipation of assets in breach of an
order of the High Court of Karnataka and one relating to failure to make
disclosure required by a previous order of the Supreme Court.
iv)
Dr Mallya’s payment away in February 2016 of the US$40 million received
from Diageo was a carefully pre-arranged transfer of a significant sum of money
away from Dr Mallya’s control, before the public announcement of the relevant
transaction, and at a time when the Claimants were pursuing legal action to
recover substantial amounts from Dr Mallya under his Personal Guarantee. It was
a plain and unjustifiable dissipation of assets.
v)
On 20 October 2016 the Karnataka High Court held that there was a prima
facie case of contempt against Dr Mallya for having created a pledge over
shares in UBHL in breach of an oral undertaking given by Dr Mallya to the Court
on 26 July 2013. This matter carries somewhat less weight as it was a prima
facie case only and is disputed by Dr Mallya.
vi)
Dr Mallya’s departure from India, to where he has never since returned,
and his resistance to India’s application to extradite him to face trial on
serious criminal charges, provide some grounds for regarding him as a fugitive
from justice.
vii)
An adjudicating authority, after lengthy and detailed consideration of
evidence and submissions, has concluded that Dr Mallya has been involved in a
criminal conspiracy involving money laundering and has on that basis confirmed
a provisional attachment of assets of companies with whom he has been closely
involved.
viii)
The above factors taken together evidence a risk of dissipation of
assets, and in those circumstances it is reasonable also to take into account
the complexity of the structures used by Dr Mallya for the holding of assets,
which would be likely to facilitate any dissipation of assets.
181.
Although I take due account of Dr Mallya’s point that Claimants cannot show
further actual dissipations of assets since 2016 (the year of the Diageo
transaction and the disposal of the sword of Tipu Sultan), in my judgment that
point is significantly outweighed by the combination of the factors highlighted
above. These provide solid grounds to conclude that there is a risk of
dissipation of assets sufficient to merit granting the Claimants the continued protection
of the WFO.
182.
Finally, Dr Mallya says the WFO should be set aside on the grounds of
material non-disclosure by the Claimants when they obtained it without notice
before Picken J in November 2017.
183.
An applicant for without notice relief must disclose to the court all
matters that are material to the application. The test of materiality is an
objective one. All matters which are relevant to the ‘weighing operation’ that
the Court has to make in deciding whether or not to grant the order must be
disclosed: see Gee, Commercial Injunctions, para 9-003, White Book, vol.
1, note 25.1.25.4.
184.
This requirement of full and frank disclosure has been described as a “heavy
duty of candour and care”: Brink’s Mat v. Elcombe [1988] 1 WLR 1350,
1359C, per Slade LJ. It is the quid pro quo for an applicant inviting
the court to proceed in the absence of another party. Scrutton LJ observed
that the duty was “of the greatest importance to maintain”: R v.
Kensington Income Commissioners, ex p de Polignac [1917] 1 KB 486, 514.
185.
Where there has been a failure by an applicant to give full and frank
disclosure, the general rule is that the injunction obtained must be
discharged: Brink’s Mat per Balcombe LJ at 1358C (with whom Slade LJ
agreed); and Millhouse Capital UK Ltd v. Sibir Energy plc [2010] BCC 475
§§ 102(1) and 103, per Christopher Clarke J, who added at § 104:
“The obligation of full disclosure, an obligation owed to
the court itself, exists in order to secure the integrity of the court’s
process and to protect the interests of those potentially affected by whatever
order the court is invited to make. The court’s ability to set its order
aside, and to refuse to renew it, is the sanction by which that obligation is
enforced and others are deterred from breaking it. Such is the importance of
the duty that, in the event of any substantial breach, the court strongly
inclines towards setting its order aside and not renewing it, so as to deprive
the defaulting party of any advantage that the order may have given him. This
is particularly so in the case of freezing and seizure orders”.
186.
The court in Millhouse Capital recognised that if there has been
culpable non-disclosure, the court nonetheless has a complete discretion and
should also consider the prejudice that will occur if the injunction is not
renewed. Christopher Clarke J said at § 106:
“The stronger the case for the order sought and the less
serious or culpable the non-disclosure, the more likely it is that the court
may be persuaded to continue or re-grant the order originally obtained. In
complicated cases it may be just to allow some margin of error. It is often
easier to spot what should have been disclosed in retrospect, and after
argument from those alleging non-disclosure, than it was at the time when the
question of disclosure first arose.”
See also Congentra
AG v Sixteen Thirteen Marine [2008] 2 Lloyd's Rep 602 § 64.
187.
The purpose of this rule is to act “as a deterrent to ensure that
persons who make ex parte applications realise that they have this duty of
disclosure and of the consequences … if they fail in that duty”: Brink’s
Mat, at 1358D. As Bingham J commented in Siporex Trade SA v. Comdel
Commodities Ltd [1986] 2 Lloyd’s Rep 428, 437:
“If the duty of full and frank disclosure is not observed the
Court may discharge the injunction even if after full enquiry the view is taken
that the order made was just and convenient and would probably have been made
even if there had been full disclosure.”
188.
Dr Mallya makes the following main points in this regard:
i)
The Claimants should have drawn Picken J’s attention to the fact that
they sought and obtained asset restraint orders in India in 2013, which they
considered extended to assets outside India, and on the basis of there being a
risk of dissipation of those non-Indian assets (including English assets).
ii)
The Judge should have been told that in March 2016 the Claimants applied
to the DRT for various relief against Dr Mallya including removal of his
passport, his arrest and to garnish the Diageo money.
iii)
It should have been drawn to the Judge’s attention that the Claimants
had in fact applied for a fresh asset restraint order in India in 2017 which
was granted as part of the DRT Judgment, which again the Claimants considered froze
Dr Mallya’s non-Indian assets. Although the full DRT Judgment was exhibited to
the Claimants’ affidavit evidence, Picken J was specifically directed only “to
glance” at the DRT Judgment, and confirmed at the start of the hearing that
he had only “peeped/glanced” at it. The DRT Judgment was exhibited to
the evidence in support of the Registration Order, not to the affidavit in
support of the WFO, and the Judge was not taken to the passages of the DRT Judgment
that dealt with the Claimants’ interim applications for asset restraining
relief and the order granting that relief against Dr Mallya.
iv)
As a result, the Claimants’ explanation of their delay in the context of
the risk of dissipation omitted highly material considerations and gave a
misleading impression of what had been going on. In particular, the court was
asked (urgently and without any notice being given to Dr Mallya) to grant a
freezing order over English assets which were (on the Claimants’ case) already
subject to an asset restraining order made by the DRT.
v)
The Claimants were not candid in their explanation of the delay in
applying for a WFO.
vi)
The Claimants failed to disclose that Dr Mallya’s Indian assets valued
at 56% of the DRT Judgment debt, and the Indian assets of UBHL valued at 89%,
have already been attached, secured or seized, and that those steps have been
taken for (at least) the potential benefit of the Claimants.
vii)
The Claimants failed to disclose to the court Dr Mallya’s contention
that the value of the Personal Guarantee (if valid at all) is limited in law to
the value of his Indian assets from time to time. Dr Mallya’s position was
well known to the Claimants since April 2016 because he set it out in his
affidavit to the Supreme Court of India.
viii)
Despite making much of Dr Mallya’s purported failure “to volunteer
payments to discharge his liabilities”, the Claimants failed to disclose to
the court his settlement offers and other attempts to discharge his debts to
the Claimants.
189.
The first group of points focusses on the restraint orders which the
Claimants had themselves already obtained in India and their delay in applying
for a WFO. The restraint order made by the Karnataka court in September 2013
was, however, specifically referred to in Mr Gair’s affidavit in support of the
WFO application. Reference was also made to the 2016 application at least so
far as concerns Dr Mallya’s passport (see § 153 above). The 2017 DRT Judgment was exhibited to the Claimants’ witness statement in support of their
registration application, though not their affidavit in support of the WFO; the
latter indicated, however, that the Claimants relied on the former as part of
the evidence for the WFO application. The more significant point is that Picken
J was not taken to those passages of the DRT Judgment that related to the application
for and granting of restraint orders in India.
190.
As a general matter I consider that the court ought, when being asked to
grant a freezing order on a without notice basis, be specifically directed to
any pre-existing attachment orders granted by a foreign court, particularly
when they extend to assets overseas. It would have been preferable here for
the DRT’s 2017 attachment orders not merely to have been exhibited but also to
have been drawn to Picken J’s attention. Having said that, in the present case
I see force in the Claimants’ point that this matter was in context not
material and would have been unlikely to assist Dr Mallya. The court already
knew about the 2013 interim injunction order and the 2016 application to the
DRT. The making of restraint orders by the DRT in 2017 evidences its
conclusion that there was a risk of dissipation in the absence of such an order.
As at November 2017 Dr Mallya was in England and resisting extradition to
India. Unless and until he returns to India there is little that the Indian courts
can do to enforce the DRT’s restraint orders in respect of property outside of
India. In all the circumstances, I do not conclude that there was a material
non-disclosure, and in any event do not consider any non-disclosure
sufficiently culpable to merit the discharge of the existing WFO.
191.
As regards the assets caught by the Provisional Attachment Orders made
by government bodies in India, the Claimants’ evidence before Picken J disclosed
that there had been media reports of court orders attaching bank accounts held by
Dr Mallya and his associates. At the hearing before Picken J counsel for the
Claimants referred to Dr Mallya’s disclosure of assets in the Indian
proceedings ‘most of which he said was under attachment’. The
Claimants’ evidence is that at the time of the application for the WFO, they did
not know what had been attached and were only generally aware of attachments
from newspaper reports.
192.
The attached assets, whose real value has yet to be determined, may
be made available to creditors of Dr Mallya in due course under sections 8(5),
8(7) and 8(8) of the Prevention of Money Laundering Act 2002, although this is
not automatic. Section 8(8) refers to persons “who may have suffered a quantifiable
loss as a result of the offence of money laundering”, and as the Claimants
say, it seems inconceivable that a defendant’s assets could be distributed to
others before the defendant had been found guilty of the alleged crime (and I
accordingly prefer the evidence of Justice Singhvi to that of Justice Jain on
that point). The creditors who receive any such benefits will not be limited
to the Claimants and so the assets are likely to have to be shared. That will occur
only if and when the criminal case against Dr Mallya concludes with a guilty
verdict. The evidence indicates that a trial will not occur in Dr Mallya’s
absence. Even if Dr Mallya is extradited to India, Justice Singhvi states that
the assets are unlikely to be made available to the Claimants for many years. In
these circumstances, I do not consider there to have been any material
non-disclosure.
193.
On the question of delay, it is not entirely clear from the evidence
whether by the time of their application to Picken J the Claimants appreciated
their previous mistake about the English court’s jurisdiction. One would hope
that by that stage they did. If so, then it is arguable that they should have
explained this point clearly, as it was relevant to the lack of any prior
application and indeed may have been a better reason than the point that a new
risk of dissipation arose as a result of the registration of the DRT Judgment.
However, on the footing that the mistake had been a genuine one (which was not
disputed before me), I do not consider that reference to it before Picken J was
necessary or could have led to a different outcome. The fact that there had
not been an earlier application to the English court was in itself obvious. Reference
to the mistake about jurisdiction would not have undermined, and might have
strengthened, the case on risk of dissipation by providing an explanation as to
why the risk of dissipation had not led to an earlier application. In all the
circumstances, I do not consider there to have been a material non-disclosure
in this regard, nor in any event one sufficiently culpable to merit the
discharge of the existing WFO.
194.
As to Dr Mallya’s contention that the value of the Personal Guarantee is
limited to his Indian assets, that is an argument which he presumably could
have advanced before the DRT. The DRT has given a judgment against Dr Mallya
on the Personal Guarantee, which judgment is not limited to Dr Mallya’s Indian
assets. The Claimants’ evidence is that they were aware only that a
submission that the Personal Guarantee was so limited was made by Dr Mallya at
the hearing before the Indian Supreme Court on 26 April 2016. However, no such
contention is apparent from either Dr Mallya’s Notice of Motion in the Bombay
High Court or his appeal to the DRAT. As I have already noted, the contention
appears to have no coherent basis or merit. The Guarantee is expressed in
unlimited terms. There was no material non-disclosure.
195.
Finally, in the light of matters set out in section (D)(1)(a) above, I
do not consider that Dr Mallya’s without prejudice offers in 2016 or UBHL’s
application in April 2017 were matters that the Claimants were required to draw
to the attention of Picken J, or which undermined their statement that Dr
Mallya had not to date paid anything voluntarily.
196.
As a result, I do not consider it appropriate to discharge the WFO on
the grounds of material non-disclosure.
197.
For the reasons set out above:
i)
the Registration Order was properly made;
ii)
it is not appropriate to set aside the Registration Order, to stay
enforcement or to adjourn the application to set the Registration Order aside;
iii)
the Claimants have established a good case for the continuation of the
WFO, and there are no grounds on which it would be just to set it aside.
198.
I therefore dismiss Dr Mallya’s applications.
199.
For completeness, I record that the Claimants accepted that it may be appropriate
in due course to revise the terms of the WFO to take account of any recoveries
received pursuant to the recent Order of Attachment referred to in § 15 above.
200.
I am grateful to counsel on both sides for their cogent and thoughtful
submissions.
