In a significant legal development, the Delhi High Court has delivered a landmark judgment in the ongoing dispute between DLF Ltd. and PNB Housing Finance Ltd. Stay tuned as the court proceedings shed light on the intricacies of the case and the implications for the involved parties, DLF Ltd. and PNB Housing Finance Ltd.
Facts
- DLF Ltd. is in a dispute with PNB Housing Finance Ltd. over a Share Pledge Agreement (SPA) related to a loan for JHL.
- Default on loan payments by JHL led to PNBHFL recalling the loan and declaring the account as an NPA.
- DLF Ltd. and Chinsha Property filed Section 9 petitions due to breaches by PNBHFL in assigning the loan to Omkara.
- Control of JHL is at the center of the disputes, with transfers of significant shares to Twenty-Five South Realty Limited.
- The initial shareholders in JHL were DLF Ltd. (37.5%), Chinsha (37.5%), and Hubtown Limited (25%).
- An MoU was signed in 2004 between DLF Ltd., JHL, Hubtown Ltd., and Chinsha regarding the Tulsivadi Project.
- The SPA was executed in 2017 between PNBHFL, JHL, DLF Ltd., Hubtown, and Chinsha for a loan of Rs.800 crores.
- Certain disputes from the Shareholders Agreement are pending before Justice Indu Malhotra (Retd.), the Sole Arbitrator.
- Assignment of the NPA account to Omkara was done by PNBHFL on 19 August, 2023.
- DLF Ltd. expressed interest in buying out JHL’s shareholding, but the offer was neither accepted nor rejected formally.
- It would be appropriate if pledged shares sold to a third party by Omkara are kept in suspended animation.
- JHL should be directed not to recognize further sale, if any, undertaken by Omkara transferees.
Arguments
- Mr. Raval confirms that Twenty Five South will continue to hold 75% equity stake in JHL until the Section 9 petitions are disposed of by the Single Judge.
- Respondent nos. 6 and 7 agree not to deal with/alienate/create third party rights in Joyous Housing Limited shares or convertible debentures held by them.
- Mr. Nayar requests the petitions under section 9 of the A&C Act to be placed before the Arbitrator as applications under section 17.
- Extension of the orders made by the Division Bench is requested by Mr. Nayar during the pendency of the applications under section 17.
- Counsels for PNB Housing Finance Ltd. and Twenty-Five South Realty Ltd. inform the court about filing processes with the Arbitral Tribunal.
- The petitions are disposed to be placed as applications under section 17 before the Arbitrator for decision.
- The orders dated 19.01.2024 by the court will continue until varied, modified, or set aside by the Arbitrator.
- An application is filed seeking clarification on previous orders to continue all interim orders and statements until a decision by the Arbitrator.
- Notice is issued, and respondents seek time to file replies opposing the prayer.
- Mr. Amit Sibal states his client Oaktree is not a party to the agreements with DLF, indicating no privity of contract.
- Fresh examination by the Single Judge is requested due to lack of opportunity for the appellants to file replies to the Section 9 petitions.
- Hubtown confirms holding 25% shares in JHL, while Twenty Five South still holds 75% equity stake in JHL as confirmed by Mr. Raval.
- Concerns raised by DLF Ltd.’s Senior Counsel about NCD conversion into equity shares upon default by JHL leading to dilution of shareholding.
- The impugned judgment was criticized for being passed without giving the appellants a chance to file replies to the Section 9 petitions.
- DLF Ltd. and Chinsha Property seek similar directions as issued for Hubtown
- PNBHFL argues that DLF Ltd. has no standing to raise issues regarding JHL’s shareholding
- DLF and Chinsha Property are granted liberty to move the learned Single Judge for securing their interests regarding Hubtown
- Interest payments are also due as per the agreement between Oaktree and JHL
- JHL’s senior advocate confirms current shareholding pattern with 75% by Twenty Five South and 25% by Hubtown
- No directions can be issued regarding Hubtown since they are not in appeal
Analysis
- The appeals were disposed of with specified directions including setting aside the impugned judgment and rehearing the Section 9 petitions.
- Twenty Five South was directed to retain 75% equity stake in JHL until the disposal of the Section 9 petitions.
- The shareholding pattern was to remain unaltered for the next six months as per the optionally-convertible debentures.
- DLF and Chinsha Property were allowed liberty to protect their interest in Hubtown through appropriate applications.
- The court did not enter into the merits of the petitions and directed the Single Judge to reconsider based on specific points.
- The court emphasized on maintaining status quo in terms of equity stakes and suspension of certain share sales.
- Parties who are also Respondents in the arbitral proceedings should be impleaded in the petition.
- Ensuring all parties have the opportunity to be heard before final orders are passed.
Decision
- The arbitration clause designates Delhi as the place of arbitration.
- The Delhi High Court would have supervisory jurisdiction over the arbitration proceedings.
- The petition is maintainable before the Delhi High Court as it is the seat of arbitration.
- A reference under the SPA is pending before the Delhi High Court.
- The proceeding of the Arbitration Tribunal shall be conducted in English language.
- Each party shall bear the cost of representing its case before the Arbitrator.
- Costs and charges of the Arbitrator are to be shared equally unless otherwise provided for in the award.
Case Title: DLF LIMITED Vs. TWENTY FIVE DOWNTOWN REALTY LIMITED & ORS. (2024:DHC:3845)
Case Number: O.M.P.(I) (COMM.)-137/2024
