Delhi High CourtPacific Convergence Corpn. Ltd. vs Data Access (India) Ltd. on 17 January, 2013Author:S. MuralidharBench:S. Muralidhar*     IN THE HIGH COURT OF DELHI AT NEW DELHI
23-26
+             CO.PET. 292 of 2004
          PACIFIC CONVERGENCE CORPN. LTD.       ..... Petitioner
                       Through: Ms. Chandni Goel, Advocate

                              versus

          DATA ACCESS (INDIA) LTD.                   ..... Respondent
                        Through: Mr. H. Karthik Seshadiri, Advocate
                                  for K.C. Palanisamy, Cheran Holdings
                                  Pvt. Ltd. & K.C. Palanisamy
                                  Associate Holdings Pvt. Ltd.
                                  Mr. Dhruv Wahi, Ms. Shalini Rawat,
                                  Mr. Ashish Singh, Mr. Brijesh
                                  Choudhary, Advocates for Cheran
                                  Ent. (P) Ltd.
                                  Mr. Y.P. Narula, Sr. Advocate with
                                  Mr. Aniruddha Choudhury &
                                  Mr. Abhay Narula, Advocates
                                  Mr. Puneet Gupta and Mr. Sanjeev
                                  Sabharwal, Senior Standing Counsel
                                  for IT Department

                                        WITH

+                             CCP (CO.) 31 of 2005

          CANARA BANK                                                   ..... Petitioner
                                        Through:            Mr. Y.P. Narula, Sr. Advocate with
                                                            Mr. Aniruddha Choudhury & Mr.
                                                            Abhay Narula, Advocates
                              Versus

          NEENA ANAND & ORS.                                        ..... Respondents
                      Through:                              Mr. Kanwal Chaudhary, Advocate for
                                                            OL
                                                            Mr. Amol Sharma, Advocate for
                                                            Respondent No.7
CP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007          Page 1 of 20
                                                             Mr. Dhruv Wahi, Ms. Shalini Rawat,
                                                            Mr. Ashish Singh, Mr. Brijesh
                                                            Choudhary, Advocates for Cheran
                                                            Entsr. (P) Ltd.
                                                            Mr. H. Karthik Seshadiri, Advocate
                                                            for K.C. Palanisamy, Cheran
                                                            Holdings Pvt. Ltd. & K.C.
                                                            Palanisamy Associate Holdings Pvt.
                                                            Ltd.

                              WITH
                    CCP (CO.) 16 of 2007
          SIDDHARTHA RAY                                                      ..... Petitioner
                      Through:                              Mr. Anish Dayal & Mr. Siddharth
                                                            Vaid, Advocates

                              versus

          SPORTING PASTIME INDIA LTD. & ORS.       ..... Respondents
                       Through: Mr. V. Lakshmi Narayanan, Advocate
                                 for SPIL
                                 Mr. Dhruv Wahi, Ms. Shalini Rawat,
                                 Mr. Ashish Singh, Mr. Brijesh
                                 Choudhary, Advocates for Cheran
                                 Ent. (P) Ltd.

                                        AND

                              CCP (CO.) 22 of 2011
          K.C. PALANISAMY                                                ..... Petitioner
                        Through:                            Mr. H. Karthik Seshadiri, Advocate
                                                            for K.C. Palanisamy, Cheran
                                                            Holdings Pvt. Ltd. & K.C.
                                                            Palanisamy Associate Holdings Pvt.
                                                            Ltd.
                              versus

          RAMASWAMY ATHAPPAN & ORS.                                           ..... Respondents
CP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007               Page 2 of 20
           CORAM: JUSTICE S. MURALIDHAR

                                          ORDER%                                         17.01.20131. Although there are a large number of applications pending consideration,
this order covers a specific issue concerning the implementation of previous
judgments and orders of the Court vis-a-vis the liability of Sporting Pastime
India Ltd. ('SPIL').2. The facts relevant to the issue are that CP No.292 of 2004 was filed by
Pacific Convergence Corporation Ltd. ('PCCL') underSections 433(e)and434of the Companies Act, 1956 ('Act') seeking the winding up of Data
Access (India) Ltd. ('DAIL') on the ground that DAIL was unable to pay its
debts. DAIL admitted to the liability arising from the availing of a loan of $
10 million in its draft red herring prospectus and the other documents. DAIL
stated that Cheran Holdings Pvt. Ltd. ('CHPL'), one of the shareholders of
DAIL, had filed a Scheme of Arrangement ('Scheme') in CA No.537 of
2005. It is further disclosed that CHPL and KCP Associates Holdings Pvt.
Ltd. ('KCPH') had purchased shares of DAIL from the Promoter, Mr.
Siddhartha Ray and his group companies through a series of shareholders'
agreements. It was pointed out that at the request of the 'new investors', M/s
Odyssey America Reinsurance Corporation ('Odyssey Re') agreed to lend
money to DAIL on certain conditions. One of the subsidiaries of DAIL,
Pacific Net Invest BV, Netherlands had incorporated a wholly owned
subsidiary in the USA, Data Access America Inc. ('DAA'). DAA had, in
turn, incorporated a wholly owned subsidiary in the U.K. by the name of
Data Access Telecom Ltd. ('DATL').CP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 3 of 203. The Court passed a detailed judgment in CP No. 292 of 2004 on 18th
November 2005 which, inter alia, dealt with CA No.537 of 2005 filed by
CHPL underSections 391and394of the Act propounding a Scheme for
restructuring of the debts of DAIL. The Scheme was opposed, inter alia, by
the secured creditors including Canara Bank and IDFC. The Court noted that
DAIL had admitted, in CA No.1 of 2005 that its debts were to an extent of
Rs. 446.5 crores. This included the claim of the Income Tax Department ('IT
Department') to the extent of Rs. 18 crores, of which DAIL admitted Rs. 5
crores. DAIL also admitted to a debt of Rs. 90 crores owing to the secured
creditors as against Rs. 120 crores claimed by them. In view of the strong
opposition by the secured creditors to the said Scheme, the Court rejected
CA No.537 of 2005. The Court expressed a prima facie view that DAIL was
not in a position to meet its existing liabilities and that "there are bleak
chances of the company's revival which has no business activity at present
and thus it has lost its substratum as well." C.P. No. 292 of 2004 was
accordingly admitted. The Official Liquidator ('OL') who had, by an order
dated 26th October 2004, been appointed as the Provisional Liquidator
('PL'), was directed to immediately take possession of all the assets and
records of DAIL and file his report.4. In its judgment dated 18th November 2005 the Court dealt with several
applications, in particular CA No.1409 of 2004 filed by Canara Bank which
was the lead Bank. The case of Canara Bank was that DAIL owed it about
Rs. 92 crores. Rs. 17 crores was owed to one of the consortium banks, i.e.,
Syndicate Bank. DAIL had, with the permission of Canara Bank opened an
account with ABN Amro Bank ('ABN Amro') for the limited purpose of
receiving the aforementioned money from DAA. A sum of $ 17 millionCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 4 of 20(which approximately was Rs. 78.45 crores) was received by DAIL from
DAA on 19th August 2004. On that day itself from the said account in ABN
Amro Rs.78.45 crore was transferred by DAIL to CHPL. Immediately
thereafter CHPL transferred Rs. 18.05 crores to KCPH, approximately
Rs.35.30 crores to Cheran Enterprises Pvt. Ltd. ('CEPL') and Rs. 25 crores
to SPIL. On 20th August 2004, KCPH transferred Rs. 18.03 crores to the
Syndicate Bank.5. Canara Bank filed CA No.1582 of 2004 in which this Court passed an
order on 17th December 2004 directing that the balances to the above extent
be maintained in the respective accounts of CEPL, SPIL and KCPH.6. DAIL filed CA No.35 of 2005, seeking vacation of the order dated 17th
December 2004. DAIL contended that $ 17 million was not received from
DAA but as a loan from Odyssey Re subject to two conditions, i.e., (a)
rollover of all loans and bank guarantees with the Canara Bank and
Syndicate Bank for 12 months and (b) reinstatement of all points of
interconnect with Bharat Sanchar Nigam Limited ('BSNL') and extension by
BSNL of all outstanding dues. DAIL further contended that Hamblin Watsa
Investment Counsel ('Hamblin'), who were the investment advisors of
Odyssey Re, had addressed a letter dated 12th August 2004 to DAA about the
said loan. CEPL, which was a joint venture between ORE Holdings Ltd.,
Mauritius, which was a subsidiary of Odyssey Re, also sent a letter to the
same effect to Canara Bank on 12th August 2004 stating that the loan had
been given subject to certain conditions. It was stated that the sum of $ 17
million was transferred to CHPL as directed by Hamblin and since the
conditions for the loan had not been fulfilled, Odyssey Re had a right toCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 5 of 20recall it. Therefore, Canara Bank had no right over the said money. There
were also allegations made by CHPL and KCPH against Mr. Siddhartha Ray
accusing him of siphoning off the funds of DAIL.7. As far as CEPL was concerned, it sought to explain that it had remitted a
sum of Rs. 35 crores to CHPL on 1st July 2004 for acquiring the equity in
CHPL. However, due to the subsequent decision of the Board of Directors
('BoDs') of CEPL it was decided not to purchase the said equity.
Consequently CEPL asked for a refund of the said sum. CEPL accordingly
filed CA No.287 of 2005 seeking vacation of the stay vis-à-vis its account.
Hamblin filed CA No.677 of 2005 seeking vacation of the said order by
putting forth the same explanation that the amount of $ 17 million was by
way of a loan from Odyssey Re to DAA.8. The case of SPIL, which filed CA No.288 of 2005, again seeking the
vacation of the order dated 17th December 2004, was that it had been
originally a company held by Kasturi & Sons Ltd. ('KSL') and incorporated
for the promotion and development of a large parcel of land of around 400
acres near Chennai for the purposes of a country club-cum-golf course. SPIL
availed of the loan of Rs. 25 crore from Dhanalakshmi Bank and
Development Credit Bank, for which KSL stood as guarantor. On 19th July
2004, KSL sold 90% shares in SPIL to Cheran Properties Ltd. ('CPL') which
was a 100% subsidiary of CEPL. It is stated that CHPL made an investment
of Rs. 25 crores in SPIL. It may be recalled that CEPL held 100% shares of
CHPL. It may also be noted at this stage that the allotment by SPIL of shares
to CHPL has since been cancelled by the Company Law Board ('CLB') by
an order dated 9th October 2006. The CLB took note of the judgment datedCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 6 of 2018th November 2005 passed by this Court in CP No.292 of 2004.9. Reverting to the judgment dated 18th November 2005, the case of SPIL
that the sum of Rs. 25 crore was transferred to it by CHPL on 19th August
2004 by way of investment was not believed by this Court. The Court noted
that Canara Bank had received copies of the letters addressed by Mr.
Siddhartha Ray as Chairman of DAIL to the Enforcement Directorate and
the Revenue authorities stating that the new management, i.e., Mr. K.C.
Palanisamy and others had fraudulently transferred funds of DAIL to their
own companies. The declaration filed with the Reserve Bank of India
('RBI') on 19th August 2004 by ABN Amro stated that the inward remittance
of $17 million was received on the account of DAIL against "outstanding
bills of services rendered." The Court also noted the contention of Canara
Bank that the sum of Rs. 78.45 crores (i.e. $17 million) was held by DAIL
"in trust and such a trust money is not be intermingled with other funds" of
DAIL and "has to be given a separate treatment." In the circumstances, the
Court dismissed the applications and made absolute the interim order dated
17th December 2004 "to protect the interests of the secured creditors." The
Court accepted the case of Canara Bank and held that the transactions
involving some of the Respondents were "not without suspicion and cannot
be accepted at the face value."10. In para 72 of the judgment dated 18th November 2005, the following
directions were issued by this Court:"72. Interim order dated 17th December, 2004 is accordingly
          confirmed. Consequence would be that the amount which has been
          transferred from ABN Amro Account No.1014374 of the company
          to CHPL and other companies shall be remitted back by thoseCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 7 of 20parties to the account of the company maintained with ABN Amro
          Bank. Needful in this respect shall be done within two weeks.
          After receiving this amount the ABN Amro Bank shall remit this
          amount to Canara bank. It is because of the admitted liability of the
          bank and charge of the bank over this money. Furthermore, in case
          it is found ultimately that the money is to be refunded to Odyssey
          Re etc., appropriate orders can be passed directing Canara Bank to
          refund the amount and the bank has sufficient means to carry out
          such directions. Appropriate orders shall be passed in the company
          petition as to how this amount is to be dealt with depending on the
          nature of the final orders passed in the company petition."11. Against the judgment dated 18th November 2005, appeals were filed by
CHPL, KCPH and SPIL. The Division Bench ('DB') of this Court dismissed
the appeals by judgment dated 20th November 2009. Before the DB SPIL
questioned the direction issued to it. SPIL pointed out that KCPH had
transferred Rs. 18.03 crores to Syndicate Bank and that the IT Department
had, on 23rd February 2005 and 19th August 2005, appropriated
Rs.17,40,29,511               and       Rs.7,59,70,489              respectively.   However,     these
submissions did not find favour with the DB. By its judgment dated 20th
November 2009, the DB dismissed the appeals thus affirming the order dated
18th November 2005. The DB held that the Inward Remittance Certificate
filed by ABN Amro with RBI on 19th August 2004 was indicative of the
nature of transaction which was not consistent with the case set up by the
Appellants that it was a loan advanced by Odyssey Re.12. Meanwhile CEPL filed writ petitions [WP (C) 32444-32450 of 2006] in
the Madras High Court praying inter alia for a writ of certiorari to quash an
order dated 23rd September 2005 issued by the Additional Commissioner of
Income Tax ('Addl. CIT') and certain other orders of the Assistant CIT,
confirming the demand against CEPL and praying for the release of the sumsCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007              Page 8 of 20attached together with interest. SPIL filed WP(C) 13820 of 2007 against the
Asst. CIT and CIT, Coimbatore [Respondent Nos.1 and 2] and the State
Bank of India ('SBI'), Adyar Branch, Chennai [Respondent No.3] seeking
stay of the order dated 19th February 2007 passed by CIT, Coimbatore and
praying that the attached money should be released only to SPIL and no one
else. A prayer was also made that the sum of Rs. 17,40,29,511 already
recovered by IT Department should be asked to be refunded together with
interest.13. In SPIL's writ petition, a learned Single Judge of the Madras High Court
passed an interim order on 9th May 2007 in terms of which the IT
Department and the SBI were restrained from releasing the aforementioned
amounts, i.e., Rs. 17,40,29,511 and Rs. 7,59,70,489 along with accrued
interest to any other person than SPIL pending disposal of the writ petitions.
Aggrieved by the said interim order, Canara Bank filed SLP (Civil)
No.10960 of 2008 in the Supreme Court of India. While directing notice to
issue in the petition, the Supreme Court passed an interim order to the effect
that the amounts will not be released to any one by the IT Department and
the SBI. However, ultimately, on 14th December 2009, the SLP was
dismissed with a request to the High Court of Madras to expeditiously hear
and dispose of the pending writ petition, preferably within six months
thereafter.14. Reverting to the proceedings in this Court, there was an obligation on
KCPH, CEPL, CHPL and SPIL to comply with the directions issued in the
judgment dated 18th November 2005 and bring back the sum of Rs. 78.5
crores. On 22nd September 2006 the Court issued a further direction on theCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 9 of 20applications, CA Nos.1142 of 2006 and 1145 of 2006, filed by Mr.
Siddhartha Ray that "if Income Tax Authorities issue refund of Rs. 25 crores
to M/s Sporting Pastime India Ltd., the same along with interest will be
deposited in Canara Bank as per directions given in the order dated
18.11.2005." On 26th September 2006, another direction was issued in CA
1156 of 2006 filed by Mr. Siddharth Ray in relation to CHPL and CEPL
directing that "if the Income-Tax Department releases payment of Rs.
32,43,31,290/- to M/s CG Holdings Private Limited, the same after deposit
will not be withdrawn and the said company will maintain the minimum
balance of the amount received from the Income-Tax Department." The said
order was, however, made subject to orders of the Madras High Court in the
writ petitions by CEPL.15. On 21st January 2011, a detailed judgment was passed by this Court in
the applications filed by CEPL (CA 1459 of 2006 and 1061 of 2010), Canara
Bank (CA 221 of 2007 and CA 688 of 2010), Odyssey Re (CA 989 of 2007).
It also dealt with the contempt petitions filed by Canara Bank and Syndicate
Bank for non-compliance with the judgment dated 18th November 2005.16. In the said judgment, the Court also noted that there was litigation
pending in the CLB at the instance of both Mr. K.C. Palanisamy as well as
O.R.E. Holdings Pvt. Ltd. alleging oppression and mismanagement in the
affairs of CEPL. It was noticed that the interim order passed by the CLB did
not affect the order dated 18th November 2005 passed by the Company Court
which had been upheld by the DB. The Court also noted that differences
had cropped up between Mr. Nandakumar Athappan, who held 45%, 45%
and 10% shares respectively in CEPL, O.R.E. Holdings and CG HoldingsCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 10 of 20Pvt. Ltd. ('CGHPL'), and Mr. K.C. Palanisamy. After noticing the complex
pattern of holding of shares of one company in the other, the Court
concluded that "prima facie, it does appear that all the companies were fully
aware        and       conscious          of     the      transfer        of   the   money     in   ABN
Amro Bank and the claim of Canara Bank." Notice was also taken of the
proceedings pending in the Madras High Court at the instance of CEPL.17. The Court in its detailed order dated 21st January 2011 issued the
following directions:"36....(1) All bank accounts and deposits of CEPL, CHPL, SPIL and
        KCPAHPL are hereby attached. No payments will be made from the
        said bank accounts except with the permission of the Company
        Court. The aforemtioned companies are also restrained from selling,
        disposing of or creating third party interest in respect of movable and
        immovable assets.(2) Managing Director/principal officer of CEPL, CHPL, SPIL and
        KCPAHPL will file affidavits in the Court within fifteen days
        furnishing the following details:(a) Account numbers and details of the banks including details of
        fixed deposits and other deposits.(b) Details of movable and immovable assets including shares.(c) Names and addresses of the directors.(37) CEPL, Mr. K.C. Palanisamy and CHPL will file copy of this
        order before the Madras High Court. Copy of this order will be also
        brought to the notice and filed with the Company Law Board by the
        parties appearing before the Company Law Board.(38) Mr. Nandkumar Athappan will be present in the Court on the
        next date of hearing.(39) The aforesaid attachment orders and restrain order shall be
        withdrawn on deposit of Rs. 78,45,50,000/- with the Canara Bank inCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007                  Page 11 of 20terms of the order dated 18th November, 2005. The said amount must
        be deposited immediately in terms of the said order and latest by or
        before 31st March, 2011. The attachment orders in respect of the
        bank accounts and fixed deposits or other deposits will not come in
        the way of depositing payments. In case deposit is not made by 31st
        March, 2011, the parties concerned will be liable to pay interest @
        15% per annum with effect from the date of passing of this order.The question of payment of interest for past period is for the time
        being left open."18. Against the above judgment dated 21st January 2011, CEPL filed
Company Appeal Nos. 16 and 17 of 2011 before the DB. An interim order
was passed in the said appeals by the DB on 27th April 2011 noting the
statement made on behalf of Canara Bank that "no precipitative action would
be taken by the bank in so far as the appellant is concerned." SPIL did not
file an appeal. CEPL's appeals are pending consideration before the DB. In
the meanwhile, an application has also been filed in the DB being CM
No.19443 of 2011 purportedly by CEPL itself by Mr. K.C. Palanisamy,
stating that the Co. Appeals 16-17 of 2011 had been filed by Mr.
Ramaswamy Athappan and Mr. Chandran Rathinaswamy without proper
authorisation and without consent of Mr. K.C. Palanisamy, who was the
Managing Director ('MD') of CEPL. Mr. K.C. Palanisamy has also filed
CCP(Co.) 22 of 2011 in this Court stating that in the above application, the
DB had issued notice and further that the present BoDs of CEPL had decided
to comply with the order dated 21st January 2011 to show their bonafides to
the Court.19. The other development that requires to be noticed is that, on 3rd January
2013, a learned Single Judge of the Madras High Court allowed the writ
petitions filed by CEPL in which Canara Bank was impleaded as a partyCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 12 of 20Respondent by an order dated 16th September 2010. Some of CEPL's writ
petitions were disposed of as having become infructuous on account of
subsequent developments, including allowing of appeals filed by CGHPL,
the 6th Respondent in those writ petitions against the assessment order. It was
held by the learned Single Judge in the judgment dated 3rd January 2013 that
the attachment order issued by the IT Department was on the mistaken
assumption that CGHPL was the holding company of CEPL and that a
certain sum was issued from CEPL to CGHPL. Since it was specifically
stated on affidavit that CGHPL was not the holding company of CEPL and
CEPL did not owe any money to either the Directors or the shareholders, the
attachment by the IT Department was held to be invalid. However, in para
32 of the judgment, the Madras High Court made it clear that the said order
was "subject to the order dated 21.01.2011 passed by the Delhi High Court
in Company Petition No.292/2004 & Company Application Nos.1459/2006,
221/2007, 688/2010, 1061/2010 and 989/2007 in Company Petition No.292
of 2004 and CCP(CO) Nos.31/2005 and 16/2007 and also the order dated
13.08.2008 passed by the Company Law Board, Additional Principal Bench,
Chennai, in C.P. Nos.65 of 2005 and 76 of 2005."20. Back in this Court SPIL filed CA 603 of 2011 through an interim
Receiver Mr. Kuppuswamy seeking recall of the judgment dated 21st January
2011. The said application was dismissed by order dated 13th May 2011,
leaving it open to SPIL to move the Company Court in case there was
compliance and payment was made in terms of the order dated 21st January
2011. Co. Appeal 45 of 2011 filed against the said order was dismissed by
the DB as withdrawn on 9th May 2012. Consequently, the order dated 21st
January 2011 became final as regards SPIL.CP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 13 of 2021. In CA 1142 and 1145 of 2006 filed by Mr. Siddhartha Ray, notice was
directed to issue to the Addl. CIT, Coimbatore by this Court on 13th April
2012, requiring him to file a status report with regard to the amount attached
in the account of SPIL. Thereafter, on 13th July 2012, a further order was
passed noting the oral submission of learned counsel for the IT Department
that Rs. 25 crores relating to SPIL was lying with the IT Department. The IT
Department was then directed by the Court to deposit the aforesaid amount
with the OL.22. Subsequent to the above order, a further application, being CA No.1540
of 2012, was filed by Canara Bank seeking direction to the IT Department
for deposit of the said sum together with interest. Notice was issued on the
said application on 21st August 2012.23. On 11th September 2012, the IT Department filed an affidavit dated 31st
August 2012 of Mr. S. Tamil Selvam, ACIT, Coimbatore, which reads as
under:"1. I state that I am in-charge and in control of M/s. Sporting
           Pastime India Ltd., Coimbatore being its Assessing Officer and
           conversant with the facts of the case and competent to swear the
           present affidavit.2. I state and submit that an amount of Rs. 25 crores was
           provisionally attached undersection 281 Bof the Income Tax Act,
           1961 and after assessment a sum of Rs. 17,40,29,511/- was
           appropriated towards the demand arising out of the said assessment
           order. However, the balance amount of Rs. 7,59,70,489/- was never
           appropriated by the Income Tax Department. The later amount
           which was not appropriated towards demand stood discharged as
           provisional attachment under section 281 B was not extended afterCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 14 of 20statutory period of 2 years.3. That before any amount could be refunded order dated
           09/05/2007 of Hon'ble Madras High Court was received stating and
           injuncting the Department not to release the same to any party but
           only to M/s. Sporting Pastime India Ltd. The same was followed by
           another order sent to the Department by the Hon'ble Supreme Court
           vide SLP No.10960/2008 dated 7.04.2008 injuncting Income Tax
           Department for releasing that amount to 'any party.' The order of
           stay of the Hon'ble Supreme Court reads as under:-"Meanwhile respondent no.2 and 3 will not release the amount to
           any party."4. That admittedly Department does not have any lien on the said
           amounts and in any case no demand is subsisting payable or due
           from M/s. Sporting Pastime India Ltd.5. That Department is ready and willing to comply with the order of
           this Hon'ble Court dated 22.09.2006 but for the injunction issued by
           the Hon'ble Court of Madras.6. That on further independent verification from Hon'ble Supreme
           Court it transpires that the said petitions filed before the Hon'ble
           Supreme Court stands dismissed vide order dated 14.12.2009. In the
           said order Hon'ble Supreme Court had directed, while dismissing
           the SLP, that they were not going to interfere in the said order of
           Hon'ble Madras High Court being 'interim order' and had directed
           the Hon'ble Madras High Court to "expeditiously hear and dispose
           of the pending writ petition preferably within six months from
           today."7. No further communication is available on record as to what has
           transpired after the said order of Hon'ble Supreme Court with
           remand to Madras High Court to pass a final order within six
           months. However, from the internet verification it is discerned that
           the said petition before the Hon'ble Madras High Court is still
           shown as pending.8. That in any case, it is submitted that the Department is still readyCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 15 of 20and willing to comply with the order of this Hon'ble Court but is
           handicapped by the proceedings that are taking place before
           Hon'ble Madras High Court. The earlier order of injuncting the
           Income Tax Department to refund the amount only to M/s. Sporting
           Pastime India Limited is in vogue. Otherwise, the Department had
           no lien and is willing to deposit/pay the said amount according to
           the direction of this Hon'ble Court."24. On 4th January 2013, this Court directed that the main petition and the
applications be set down for hearing on day-to-day basis from 15th January
2013 onwards. SPIL has filed an affidavit dated 11th January 2013, wherein,
inter alia, it is mentioned that its movable assets constitute a fixed deposit
with the SBI, Adayar Branch, Chennai in the sum of Rs. 11.60 crores.25. This Court heard the matter on 15th, 16th and 17th January 2013. The
Court heard the submissions of Mr. Y.P. Narula, learned Senior counsel
appearing for Canara Bank, Mr. Anish Dayal on behalf of Mr. Siddhartha
Ray, Mr. H. Karthik Seshadiri on behalf of CHPL, KCPAH and Mr. K.C.
Palanisamy, Mr. V. Lakshminarayanan on behalf of SPIL, Mr. Sanjiv
Sabharwal, learned Senior Standing Counsel for IT Department, Mr. Kanwal
Chaudhary, Advocate on behalf of OL and Mr. Dhruv Wahi, Advocate on
behalf of CEPL.26. As noted earlier, the Court by this order proposes to deal only with the
limited aspect of the directions that are required to be issued to SPIL for
compliance with the earlier judgments dated 18th November 2005 and 21st
January 2011, both of which have become final as far as SPIL is concerned.
The submissions made on behalf of learned counsel for the parties on the
other issues will be dealt with in the subsequent orders.CP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 16 of 2027. The above narration of facts reveals the following factual position:(i) The judgment dated 18th November 2005 passed by the Company
          Judge in CP 292 of 2004 has become final with the dismissal by the
          DB of Co. Appeal Nos.3-5 of 2006 filed by CHPL, KCPH and SPIL
          respectively on 20th November 2009.(ii) Writ Petition Nos.13820-21 of 2007 filed by SPIL in the Madras
          High Court are pending. With the dismissal on 14th December 2009
          of SLP (C) No. 10960 of 2008 filed by Canara Bank, the interim
          order dated 9th May 2007 passed in those writ petitions to the effect
          that with the release by the IT Department of Rs. 7,59,70,489
          [forming subject matter of WP(C) No. 13820 of 2007] and Rs.17,40,29,511 [forming subject matter of WP(C) No.13821 of 2007]
          along with interest accrued thereon will not be made to any person
          other than SPIL continues.(iii) There is no restraint on SPIL by any Court in complying with
          the directions issued by this Court in the judgments dated 18th
          November 2005 and 21st January 2011.(iv) The IT Department has made it clear that it is prepared to
          comply with the directions of this Court dated 22nd September 2006
          "but for the injunction issued by the Hon'ble High Court of
          Madras." In other words, it expresses its inability to directly deposit
          the money with Canara Bank.28. The analysis of the above facts reveals that SPIL has an interim
injunction in its favour by virtue of the order dated 9th May 2007 passed byCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 17 of 20the Madras High Court in its two writ petitions as aforementioned to the
effect that the monies in question will be released by the IT Department only
to SPIL and no one else. The IT Department has expressed its readiness to
do so consistent with the orders of the Madras High Court, since, in any
event, the order dated 9th May 2007 subsists.29. As regards the sum of Rs. 7,59,70,489, it remains in the account
No.10792703325 of SPIL with the SBI, Adayar Branch, Chennai by way of
a fixed deposit ('FD') the value of which, as on the date of the filing of
affidavit dated 11th January 2013 by SPIL in this Court, is Rs. 11.60 crores.
CA No.659 of 2008 was been filed by Canara Bank in this Court against
SPIL and SBI, Chennai in relation to the aforementioned sum, in which
notice was directed to issue by the Court on 24th July 2008 itself.30. Therefore, as regards the sum of Rs. 7,59,70,489 which, at present,
has grown, together with interest, to Rs. 11.60 crores this Court directs the
SBI, Adayar Branch, Chennai to close the said FD and transfer the proceeds
to account No.10792703325 of SPIL forthwith. SPIL will immediately
thereafter ask SBI to transfer the said amount by RTGS to the account of
Canara Bank, Green Park Extn. Branch, New Delhi forthwith. SBI is
directed not to allow the said amount to be appropriated for any other reason
by any other party. The above directions should be complied with not later
than 24th January 2013. A report of compliance in this regard be filed by SBI
in this Court before the next date.31. As regards the other component of Rs. 17,40,29,511, it is stated by Mr.
Sabharwal, that although an appeal has been filed by the IT DepartmentCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 18 of 20before the Income Tax Appellate Tribunal ('ITAT') against the cancellation
of the demand, there is no interim order passed by ITAT. He submits that as
long as an undertaking is filed by Canara Bank in terms of order dated 22nd
September 2006 already passed by this Court that it will refund the amount
that is subsequently found to be payable to the IT Department, there will be
no difficulty for the IT Department to pass orders and refund the said amount
together with interest in terms ofSection 244of the Income Tax Act, 1961
('IT Act'). Mr. Narula states that Canara Bank will give such an undertaking.
It is stated by Mr. Lakshminarayanan, learned counsel for SPIL, that any
order passed in this regard should be subject to the orders that will ultimately
be passed in relation to the income tax liability, if any, of SPIL.32. As already noticed, this Court had, on 22nd September 2006, already
required the IT Department to refund the sum to SPIL and further ordered
that the sum should be deposited with Canara Bank in terms of the judgment
dated 18th November 2005. Since the Madras High Court has, by order dated
9th May 2007, directed that the release of the said amount should be only to
SPIL and to no one else, this Court directs the IT Department to deposit in
the account of SPIL with SBI Branch the sum of Rs. 17,40,29,511 together
with interest calculated in terms ofSection 244of the IT Act within a period
of three weeks from today. This is subject to the orders that may be passed in
the appeal preferred by the IT Department and any further orders that may be
passed by any other higher judicial forum. Immediately upon the amount
being deposited in its account, SPIL will instruct SBI to transmit by RTGS
the amount deposited to the account of Canara Bank, Green Park Extn., New
Delhi. The above order is subject further to Canara Bank filing an affidavit
in this Court, within two weeks, stating that depending on the orders passedCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007   Page 19 of 20by the ITAT or any higher judicial fora and any further order passed by this
Court, Canara Bank will refund the said amount or any part thereof together
with whatever interest as may be directed by this Court. This order is without
prejudice to the rights and contentions of SPIL as regards its liability as may
be determined by ITAT or by any other judicial forum.33. For reporting compliance and further hearing, list these matters on 12th
February 2013 at 2.15 pm.




                                                                              S. MURALIDHAR, J
JANUARY 17, 2013
tpCP 292 of 2004, CCP(Co) 31 of 2005, CCP(Co) 16 of 2007 & CCP(Co) 22 of 2007             Page 20 of 20