Del HC dismisses appeal filed by Indiabulls Housing Finance in Zee Entertainment – Sony Pictures Scheme of Arrangement

Delhi High Court: Suresh Kumar Kait, J., addressed an appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 against the interim order passed by Arbitrator was preferred.

Factual Background

Vide the Interim order, an application filed by the appellant under the provisions of Section 17 of the Arbitration and Conciliation Act, 1996 to restrain respondent 9 (Zee Entertainment Enterprises Ltd) from going ahead with its Scheme of Arrangement with Sony Pictures Networks India Pvt. Limited and Bangla Entertainment Private Limited was rejected.

An appeal was instituted based upon four agreements executed between the appellant and respondents 1,3,4 and 5 along with respondent 2 as co-borrower for the loan amount of Rs 726,00,000.

As per the Loan Agreement, it was obligatory upon the Borrowing Respondents to create security in favour of appellant/lender to its satisfaction and in complete contradiction and defiance of terms of Loan Agreement, the borrowing respondents failed to create adequate security.

Analysis and Decision

As per Clause 20 of the Declaration and Acknowledgment, on return of the title deed, the mortgage stood released and appellant issued a “No objection for release of the title deeds” to respondents 1 to 8 in respect of the title deeds of the property situated in Hyderabad over the original title deeds in terms of Declaration and Acknowledgement for a consideration of Rs 225 crores.

Thus, the declaration and acknowledgement got terminated and respondent 9 had no further or other obligation towards the appellant.

Therefore, respondent 9, who was not a party or signatory to the loan agreements, is not bound by the terms of the loan agreement.

Bench stated that the involvement of respondent 9 as obligator was only to the extent that it was a mortgagor of its Hyderabad property which was offered by the borrowers as security cover.

Once, upon receipt of Rs. 225 crores by appellant in terms of NOC dated 01.06.2020, title deeds of property of respondent no.9 have been released, the mortgage does not subsist anymore.

In view of the above facts and circumstances, High Court opined that there was no illegality and perversity in the impugned order. [Indiabulls Housing Finance Ltd. v. GNEX Projects (P) Ltd., 2022 SCC OnLine Del 753, decided on 14-3-2022]


Advocates before the Court:

For the Appellant:

Mr. Vineet Malhotra, Ms. Sonali Jaitley Bakhshi, Mr. Jaiyesh Bakhshi, Ms. Rini Badoni, Ms. Sanjana Bakshi, Mr. Chirag Sharma, Mr. Daman Popli, Mr. Siddharth Dey, Mr.Amreen Qureshi & Mr. Vishal Gohri, Advocates

For the Respondents:

Mr. Arvind Nayar, Senior Advocate with Ms. Ritwika Nanda, Ms. Petal Chandhok & Ms. Akshita Salampuria, Advocates for all respondents 1 to 17 (except respondent No. 9)

Mr. Parag P. Tripathi, Senior Advocate with Ms. Ritwika Nanda, Ms. Petal Chandhok, Ms. Akshita Salampuria & Ms. Mishika Bajpai, Advocates for respondent No. 9.

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