Cruz City 1 Mauritius Holdings v Unitech Ltd

JurisdictionEngland & Wales
JudgeThe Honourable Mr Justice Males,Mr Justice Males
Judgment Date02 October 2014
Neutral Citation[2014] EWHC 3131 (Comm)
Docket NumberCase No: 2014 FOLIO 432
CourtQueen's Bench Division (Commercial Court)
Date02 October 2014
Between:
Cruz City 1 Mauritius Holdings
Claimant
and
(1) Unitech Limited
(2) Burley Holdings Limited
(3) Arsanovia Limited
(4) Unitech Residential Resorts Limited
(5) Nectrus Limited
(6) Nuwell Limited
(7) Technosolid Limited
(8) Unitech Overseas Limited
Defendants

[2014] EWHC 3131 (Comm)

Before:

The Honourable Mr Justice Males

Case No: 2014 FOLIO 432

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Alain Choo Choy QC & Miss Nehali Shah (instructed by White & Case LLP) for the Claimant

Mr John Brisby QC, Mr Alastair Tomson & Dr Michael d'Arcy (instructed by Stephenson Harwood LLP) for the Defendants

Hearing dates: 3 rd– 5 th September 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Honourable Mr Justice Males Mr Justice Males

Introduction and summary

1

This is an application by the claimant ("Cruz City") under section 37 of the Senior Courts Act 1981 for the appointment of receivers by way of equitable execution over certain assets of the first defendant ("Unitech") and the second defendant ("Burley"). The application is the latest step in Cruz City's attempt to enforce a London arbitration award which it has obtained against the defendants for almost US $300 million. With interest the sum now due approaches and may even exceed US $350 million. Unitech for its part has made clear by words and conduct that it will do whatever it can to avoid having to meet its liabilities.

2

Unitech has very substantial assets, well in excess of the sums awarded against it. The present application is concerned with its shareholdings in four companies: Unitech Residential Resorts Limited ("URRL"), an Indian company; Unitech Overseas Limited ("UOL"), an Isle of Man company; and Nuwell Limited ("Nuwell") and Technosolid Limited ("Technosolid"), two Cypriot companies.

3

The defendants resist the appointment of receivers over these assets. They say that there is no good reason why Cruz City should not seek to enforce its arbitral award against them in the various jurisdictions where they have assets, as it has begun to do. Thus Cruz City has already:

a) commenced proceedings for enforcement of the awards in India, including an application to the Delhi High Court for the appointment of a receiver over all the assets of Unitech, including its shareholdings in URRL, UOL, Nuwell and Technosolid; however, it appears that a first instance decision on the enforcement of a foreign award can take at least 2–3 years in India, while an appeal could take in excess of a further 4–5 years to be decided; the evidence is that until a decision on enforcement is made, there is no possibility of appointment of a receiver by the Indian court;

b) obtained a final charging order in the Isle of Man over Unitech's shareholding in UOL, as well as a freezing order against Unitech and Burley;

c) begun enforcement proceedings in Cyprus; and

d) obtained an interim worldwide freezing order in Mauritius.

4

The defendants say that the appointment of a receiver by way of equitable execution – especially over the foreign assets of a foreign company – is a remedy of last resort which should only be available when no other form of execution is possible or practicable, which is not the case here. There is an obvious irony in the defendants' position. On this application they say that appointment of receivers by the English court is unnecessary because Cruz City can enforce the awards abroad. But in the foreign proceedings where Cruz City is attempting to do so, they are fighting tooth and nail to resist enforcement. If the defendants' arguments abroad have the validity which they claim in those jurisdictions, either to resist altogether or even to slow down the process of enforcement, there is obvious utility in the appointment by this court of receivers over the defendants' assets. If the defendants are right in their various arguments abroad, this may be the only way in which the award can be successfully enforced.

5

In addition, and more specifically, the defendants say that the proposed order is objectionable for another reason. That is because it seeks to side-step the problem that an English court's order for the appointment of receivers over assets located in foreign jurisdictions may not be recognised or given effect in the jurisdictions concerned, by including ancillary orders requiring Unitech and Burley not to impede or interfere with the receivers' functions and powers and, if so required, to appoint the receivers as Unitech's agents in respect of the four shareholdings concerned and to procure that URRL authorise the receivers to act as Unitech's representative for the purpose of exercising URRL's rights in connection with Nectrus Limited ("Nectrus"), a Cypriot company. They say that these provisions of the order are designed to prevent the defendants from raising arguments resisting enforcement in foreign jurisdictions (although it is probably more accurate to say that they would have the effect of rendering such arguments academic).

6

The defendants say that it would be unjust to make these ancillary orders which will have the effect of either depriving them of arguments which they can deploy abroad with a view to resisting enforcement of the award or putting them in contempt of court. In other words (mine, rather than those of Mr John Brisby QC who represented the defendants), if this court decides that it is just and convenient for receivers to be appointed, the defendants should be permitted to do whatever they can to frustrate whatever order the court may make. That may be the defendants' idea of justice, but it is not mine. In a case where this court has personal jurisdiction over the defendants (which is not disputed) and where there is no evidence that the order would require the defendants to do anything unlawful under any foreign law to which they are subject, there can be no valid objection to the inclusion of ancillary provisions designed to ensure the efficacy of an order for the appointment of receivers.

7

By the conclusion of the hearing I had reached the firm conclusion that receivers should be appointed and therefore made the order sought by Cruz City. I now give my reasons for that conclusion.

Background

8

Cruz City, a Mauritian company, is a special purpose vehicle which was established to be an investment vehicle for a property investment venture with Unitech and an Indian property developer which specialises in slum clearance.

9

Unitech is one of India's largest real estate investment and development companies. Its shares are publicly listed on the National Stock Exchange of India and the Bombay Stock Exchange Limited. Its balance sheet, as contained in its audited accounts for the year ended 31 March 2013 and published in August 2013, showed a surplus of approximately US $1.6 billion. The consolidated balance sheet of the entire Unitech Group as at the same date showed a surplus of approximately US $1.8 billion.

10

Burley is a Mauritian company which is a wholly owned subsidiary of Unitech. It is a special purpose vehicle which was incorporated for the purposes of a Keepwell Agreement, dated 6 June 2008, entered into between Cruz City, Unitech and Burley in the context of a joint venture in another Mauritian company, Kerrush Investments Limited ("Kerrush"). Burley's only asset is a contractual claim against Unitech under the Keepwell Agreement to require Unitech to put it in funds to meet various defined obligations.

11

Kerrush is the joint venture company through which Cruz City was to invest in a joint venture project for the clearance and subsequent development of slums in Mumbai (the "Santacruz Project"). The parties' investment in Kerrush was governed by a Shareholders Agreement dated 6 June 2008 between Kerrush, Cruz City and Arsanovia Ltd ("Arsanovia"), a wholly owned indirect subsidiary of Unitech.

12

The parties' dispute arose from Cruz City's exercise of a put option provided for in the Kerrush Shareholders Agreement, which entitled Cruz City to require Burley and Arsanovia, jointly and severally, to purchase its 50% interest in Kerrush if certain conditions for the start of the construction of the Santacruz Project had not been fulfilled within a specified time. Unitech was required to put Burley in funds to meet its liability under the put option.

13

The project was delayed and by a notice dated 13 September 2010 Cruz City exercised the put option, requiring Burley and Arsanovia jointly and severally to acquire its 50% shareholding in Kerrush. The Unitech companies denied that they were liable to perform the put option, arguing that Arsanovia had validly served a buy-out notice on 14 July 2010 on Cruz City, exercising rights to buy-out Cruz City's shareholding in Kerrush. The reason why it mattered whether Cruz City's interest in Kerrush was to be acquired by Arsanovia or Burley pursuant to the put option or pursuant to the buy-out right was that the consideration payable to Cruz City would be significantly more under the calculation mechanism applicable to the put option.

The arbitrations

14

The agreements between the parties provided for arbitration in London under the rules of the London Court of International Arbitration. In January 2011 Cruz City commenced two sets of LCIA arbitration proceedings seeking to enforce the put option and associated obligations: the "first arbitration" was against Arsanovia and Burley under the Kerrush Shareholders Agreement. The "second arbitration" was against Unitech and Burley under the Keepwell Agreement. These were followed by a "third arbitration" commenced in February 2011 by Arsanovia against Cruz City seeking to...

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