Malhotra v Malhotra & Anor [2012] EWHC 3020 (Comm)

Case No 2012 Folio 463[2012] EWHC 3020 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Date 30/10/2012
Winchester Combined Court High Street
Winchester SO23 9EL
Before
MR JUSTICE WALKER
Between
RAKESH MALHOTRAClaimantRAJIV MALHOTRADefendants
Mr Neil Calver QC instructed by Akin Gump Strauss Hauer & Feld LLP for ClaimantMs Elizabeth Weaver instructed by Fladgate LLP for DefendantHearing Hearing date: 15 June 2012
Judgment

A. Introduction

[1]In this arbitration claim the claimant, Mr Rakesh Malhotra (“Rakesh”), asks the court to continue an anti-suit injunction granted by Gloster J on 26 March 2012 (“the without notice injunction”). It was granted without notice against two defendants. The first defendant is Rakesh’s father, Mr Rajinder Kumar Malhotra (“Mr Malhotra senior”). The second defendant is Rakesh’s brother, Mr Rajiv Malhotra (“Rajiv”). The wife of Mr Malhotra senior, and mother of Rakesh (her oldest son) and Rajiv (her youngest son), is Mrs Veena Malhotra (“Mrs Malhotra senior”).[2]Each of Mr Malhotra senior, Rakesh and Rajiv was a party to two linked agreements concerning the Supermax group. Prior to the completion of the two linked agreements, the Supermax group was a family-owned group of companies founded by Mr Malhotra senior in 1949. Its business (“the Supermax group business”) was and is manufacturing and selling razor blades and related products. In due course Rakesh and Rajiv became involved in the business, Rakesh on the sales side and Rajiv on the manufacturing side.[3]The group companies were held through a Cayman company, Super-Max Offshore Holdings (“SMOH”) which was owned by Super-Max Mauritius (“SMM”).[4]Mr Malhotra senior was the effective owner, and continues to be the effective owner, of a number of Indian companies which - until the two linked agreements took effect - either manufactured products for the Supermax group business or owned land or intellectual property rights used by the Supermax group in its businesses. The companies in question did not, and do not, form part of the Supermax group as they were and are neither directly nor indirectly owned by SMOH.. Mr Malhotra senior was and is the majority shareholder of these companies either directly or through intermediate holding companies. Neither Mr Malhotra senior, nor Rakesh nor Rajiv, has ever been a director of any of these companies.[5]In 2008 the Supermax group was looking to restructure and obtain private equity finance. One of the objects of the proposed restructuring was to allow Mr Malhotra senior and Rajiv to exit from day to day involvement in the affairs of the Supermax group, while Rakesh was to remain involved in and take over control of the business. In October 2008 Rakesh on behalf of the Supermax group engaged a corporate finance advisor, Allegro Capital Advisors Private Limited (“Allegro”) for assistance. Allegro identified Actis Emerging Markets 3 LP (“Actis EM”) as a provider of private equity finance. This led to the first of the two agreements, a Subscription and Shareholders’ Deed, which was entered into on 4 November 2010 (“the SSD”). It was amended and supplemented by the second of the two agreements, a Supplemental Deed to the SSD, which was entered into on 4 March 2011 (“the SD”). I shall refer to the two agreements together as “the revised transaction.” Their overall effect was to bring about a restructuring so that SMOH and another company, Tigaksha Metallics Private Limited (“TMPL”), became the holding companies of the group. Actis EM’s investment was made by a Mauritius company, Actis Consumer Grooming Products Limited (“Actis”), which agreed to subscribe for shares in SMOH and TMPL. The other shares in SMOH and TMPL were held by SMM.[6]The revised transaction made provision for what it called “Restructuring Acquisitions”. They were to take place through “RA Agreements”. Among them were arrangements under which certain of the Indian companies mentioned earlier would sell or transfer assets and businesses to a new company to be established in the group structure called Super Max Personal Care Private Limited (“SPCPL”). These Indian companies included Transauto & Mechaids Private Limited (“Transauto”), which is owned as to 1 share by Mrs Malhtotra senior and as to the remaining shares by Mr Malhotra senior, and four of its subsidiaries (“the Transauto main subsidiaries”). I shall refer to these 5 companies as “the Transauto main companies.” The Transauto main subsidiaries are:(1) Vidyut Metallics Private Limited (“VMPL”);(2) RCC (Sales) Private Limited (“RCC”);(3) Unique Properties and Securities Private Limited (“Unique”); and(4) Supermax International Private Limited (“SIPL”).[7]A part of the funds subscribed by Actis was paid to the Transauto main companies as consideration for these sales and transfers.[8]The revised transaction was completed on 24 March 2011. The sale and transfers of many of the assets took place on that day. Others occurred over subsequent weeks and months. The Supermax group business was continued, with Rakesh in control under the restructured arrangements. Initially both production and administration appear to have proceeded relatively smoothly. However, following events which I describe below, in February 2012 five sets of proceedings were commenced before the Company Law Boards of Mumbai and Chennai (“the Indian proceedings”). Four of them were brought by minority shareholders of the Transauto main subsidiaries; the fifth was brought by the shareholders in Transauto itself. All were brought under an Indian statute, the Companies Act 1956 (“the Companies Act”). Each took the form of a petition which sought relief for alleged mismanagement of the affairs of the relevant company. The respondents to each petition include the relevant company, the directors of the relevant company, and certain individuals who are bank signatories for those companies, among them Rakesh.[9]The broad effect of the without notice injunction is to stop Mr Malhotra senior and Rajiv from:(1) commencing or continuing any proceedings in India or elsewhere in respect of any dispute arising from or connected with the revised transaction; and in particular(2) prosecuting or continuing the Indian proceedings; and(3) holding an extraordinary general meeting of the members of Transauto for the purpose of passing a resolution to replace the directors of Transauto.[10]The jurisdictional basis for seeking an injunction here is that the SSD is governed by English Law. The basis on which the without notice injunction was claimed was that the revised transaction includes an arbitration agreement (clause 43.2 of the SSD) providing for arbitration in Geneva under the auspices of the London Court of International Arbitration. It is alleged by Rakesh that the disputes in the Indian proceedings are within the scope of the arbitration agreement as “arising from or connected with” the SSD and SD.[11]Mr Malhotra senior and Rajiv oppose the continuation of the injunction on the grounds (in summary) that:(1) the court cannot be satisfied to the required “high degree of probability” that Rakesh is entitled to restrain the Indian proceedings because the disputes in the Indian proceedings are not, or not clearly, within the scope of the arbitration clause;(2) the continuation of the without notice injunction would not be in the interests of justice because it would prevent all the disputes between all the parties to the Indian proceedings being resolved since: (a) the Transauto subsidiaries and their directors and the other individual respondents (apart from Rakesh) are not parties to the SSD and the arbitration clause; (b) relief claimed in the Indian proceedings would not be available in an arbitration; (c) the court should not intervene in the internal regulation and management of foreign companies.[12]I have been greatly assisted by the legal teams on both sides. Mr Neil Calver QC, instructed by Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”), appeared on behalf of Rakesh. Ms Elizabeth Weaver, instructed by Fladgate LLP (“Fladgate”), appeared on behalf of Mr Malhotra senior and Rajiv. Each prepared a detailed skeleton argument prior to the hearing and made full oral submissions at the hearing. After the hearing each side lodged written submissions on a number of matters. At the hearing Ms Weaver had stated that there had been mistakes in the formulation of the claims in the Indian proceedings, and that her clients would undertake to remedy those mistakes. I asked that the precise undertakings should be set out in writing. Also at the hearing I asked Mr Calver to prepare draft points of claim in an arbitration, so that I could have an understanding of what Rakesh’s case would be if he were to seek to have resolved by arbitration the disputes which he says fall within the arbitration agreement. My timetable for these matters included provision for comments by each side on the material which had been provided by the other. In the event, however, the parties did not keep to that timetable, and raised additional matters on which they lodged additional submissions and evidence. I deal with the material lodged after the hearing in section G below.[13]For reasons which I explain below, I have concluded that Rakesh’s claim for an injunction does not succeed, and the without notice injunction must be discharged. The structure of this judgment is as follows: A. Introduction 1 B: Rakesh’s case in outline 14 C: Features of the revised transaction 17 C1. Parties, and the role of the MP Representative 18 C2: Ability of Actis to increase its shareholding 24 C3. Working capital and provision for deficiency 26 C4. The arbitration clause 28 D. History of events 36 E. Analysis of the Indian proceedings 50 F. The oral submissions 63 F1. Relevant legal principles 64 F1.1 Statutory powers for an anti-suit injunction 65 F1.2 Principles when breach of arbitration agreement is alleged 68 F1.3 The threshold requirement 75 F1.4 The good reason requirement 77 F2. The Indian disputes 79 F2.1 Undertaking to amend the petitions 79 F2.2 Rakesh’s submissions about the Indian proceedings 79 F2.3 Mr Malhotra senior/Rajiv’s case on the Indian proceedings 81 F 2.4 Rakesh’s reply on the Indian proceedings 85 F3. The threshold and good reason requirements 87 F4. A partial injunction? 124 G. Events after the hearing 127 G1. The undertaking to amend the petitions 128 G2. Rakesh’s draft points of claim in an arbitration 134 G3. The exchanges on 5, 11 and 13 July 2012 135 G3. The exchanges on 17 and 24 July 2012 140 G5. The end of term, Fladgate’s application, and my ruling 149 G10. The response to paragraph 10 of my ruling 150 H. Analysis of issues in these proceedings 153 H1. Claimed attack on the RA Agreements 157 H2. Threshold: alleged inter-sponsor agreement generally 157 H3. Threshold: absence of express agreement 164 H4. Weaknesses in the alleged inferences 168 H5. Threshold: reliance on clauses 18.10 and 41.1 173 H6. Matters which do not need to be determined 176 H 6.1 The dressing up argument 177 H6.2 The good reason requirement 180 H7 Rakesh’s analysis of the Unique petition 182 H8 Rakesh’s points distinguishing Stonehouse v Jones 183 J. Conclusion 184 Annex: Extracts from the evidence A/1 Rakesh’s first witness statement A/2 Mr Bhansali’s first witness statement A/4 Rajiv’s first witness statement A/5 Rakesh’s second witness statement A/6 Mr Bhansali’s second witness statement A/8

B: Rakesh’s case in outline

[14]At the forefront of his oral opening on behalf of Rakesh, Mr Calver stressed that the SSD contemplated that the intended operating companies under the restructuring would enter into agreements with the Transauto group in order to ensure that there would be new arrangements giving sufficient working capital to the restructured business. The Indian proceedings sought to undo the arrangements that had been made for working capital, with catastrophic consequences for SPCPL. A key feature in that regard was that after completion of the relevant RA Agreements the Transauto companies would, each having received its portion of the funds paid by Actis, cease to carry on business. Rakesh said that he, Mr Malhotra senior and Rajiv had made an agreement that Rakesh would have control over those accounts, which he could use to provide working capital for the restructured business. I shall call this agreement “the alleged inter-sponsor agreement.” It was said that documentary evidence of the agreement could be found in board resolutions of each Transauto main subsidiary, passed at a time when Mr Malhotra senior was in full control of those companies, giving Rakesh authority to open the accounts and operate them, and in account opening forms with Citibank which were countersigned by Rajiv. The existence of the agreement was, submitted Mr Calver, effectively acknowledged by Rajiv who said that his father permitted Rakesh to control the accounts at a time when he had trust and confidence in him. Moreover Rakesh had been entitled under an authority given in clause 41 of the SSD, appointing him the “MP Representative”, to take the steps he had taken on behalf of Mr Malhotra senior and Rajiv.[15]As to entitlement to stop the Indian proceedings, those proceedings asserted that Rakesh had procured mismanagement of the Transauto companies. Whether he and the other respondents to the Indian proceedings had a defence depended on what was required and permitted by the revised transaction, and resolution of a dispute intimately connected with it, namely whether Rakesh’s allegations about the alleged inter-sponsor agreement were correct.[16]Accordingly, submitted Mr Calver, the bringing of the proceedings was contrary to the arbitration clause. What was in truth a dispute between the three family members who were party to the revised transaction had been dressed up as a dispute between Mr Malhotra senior and those responsible for management of the Transauto companies. Mr Calver submitted that at the hearing before Gloster J, she had rightly described Rakesh’s case as being that there was a dispute under the deed as to what control was given to Rakesh by the deed. It followed, submitted Mr Calver, that the dispute was caught by the arbitration provisions.

C: Features of the revised transaction

[17]The SSD was complex. The revised transaction was made more complex by amendments made, and supplementary provisions introduced, under the SD. Below I describe some of the features of the revised transaction.

C1. Parties, and the role of the MP Representative

[18]At the outset the SSD listed those who were parties to it. In this list it identified Mr Malhotra senior as the 6th party, Rakesh as the 7th and Rajiv as the 8th. The list set out short forms for Mr Malhotra senior (“RKM”), Rakesh (“RM”), and Rajiv (“RJM”), adding that Mr Malhotra senior, Rakesh and Rajiv were referred to as the “Sponsors”. Mr Malhotra senior, Rakesh and Rajiv were likewise the 6th, 7th and 8th parties to the SD.[19]The 5th party to both these agreements was SMM. In order to respect the confidentiality of the agreements, I shall refer to the 4th party to both agreements as Z. Clause 1 of the SSD defined “Malhotra Parties” to mean the Sponsors, Z and SMM, and “Malhotra Party” to mean any of them.[20]Clause 41.1 of the SSD comprised two sentences. The effect of the first sentence was that Mr Malhotra senior, Rajiv, Z and SMM irrevocably appointed Rakesh: … as their representative (the "MP Representative") to act for and on behalf of each of the Malhotra Parties for all purposes under the [SSD] … or to generally take any and all other actions or to do any and all other things provided in or contemplated by the [SSD] to be performed by any such Malhotra party.[21]The second sentence entitled Actis “at its sole discretion to have regard only to, and to rely absolutely upon and act in accordance with the instructions of the MP Representative…”.[22]Clauses 9.2 and 9.4 of the SD provided that clause 41 itself, and the reference in it to the SSD, were extended to apply to the revised transaction.[23]I deal in section H with the rival contentions as to the extent of clause 41.

C2: Ability of Actis to increase its shareholding

[24]Mr Calver’s skeleton argument explained that the SSD ensured a guaranteed return to Actis. The subscription for shares in both SMOH and TMPL was subject to the SuperMax group achieving a minimum target in consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) in the first twelve months of operations, subject to a maximum net debt at that time of US$ 45 million (defined in clause 1 as the “Adjusted Actis Percentage”). The SSD provided by clauses 7.2,8.1 and8.2 that should the audited first year accounts for “the Group” (i.e. SMOH, TMPL and their subsidiaries) show that these targets were not achieved, then certain shares owned by SMM in SMOH would be cancelled, and Actis would be entitled to execute a call option on certain of SMM’s TMPL shares in such amount as would increase Actis’s percentage ownership interest in the SuperMax group by a percentage amount calculated by a mathematical equation taking into account the lower EBITDA and higher net debt (see Clause 8.2 of the SSD).[25]It follows, as Ms Weaver accepts, that if these financial targets were not met, Actis would increase its ownership interest in the SuperMax group to the indirect detriment of each of the Sponsors (including Mr Malhotra senior and Rajiv). Ms Weaver also accepts that this was known to both Mr Malhotra senior and Rajiv.

C3. Working capital and provision for deficiency

[26]As noted above, Rakesh says that funds paid to the Transauto companies were to be at his disposal for working capital of the business. Ms Weaver rightly points out that the Transauto companies are not parties to the SSD, that the SSD does not contain any express obligations or restrictions on them in relation to the payments received, that the SSD does not impose any express obligation on Mr Malhotra senior or Rajiv as to how these payments are to be used once they have reached the Transauto companies, and that no provision in the SSD expressly requires the Transauto companies to provide any loan or other financial support to the Supermax Group.[27]However the SSD does impose obligations in the event of a cash shortfall during the 15 months following completion. Under clause 18.10 of the SSD, following notification of the shortfall and on the request of Actis, the Sponsors (including Mr Malhotra senior and Rajiv) must provide or procure the provision of loans meeting certain requirements so as to ensure that, during the twelve month period following discovery of the cash shortfall, there are sufficient cash resources.

C4. The arbitration clause

[28]The parties agreed in clause 43.2 of the SSD, incorporated into the SD by clause 9.4 of the SD, that certain disputes “shall be referred to and finally resolved by arbitration …”. What were these disputes? They are described in clause 43.2 as: … any dispute arising from or connected with this Deed, including a dispute regarding the existence, validity or termination of this Deed or the consequences of its nullity[29]Mr Calver submitted that the court should be guided by three authorities when construing these words. The first authority is the decision of Mustill J in A&B v C&D [1982] 1 Lloyds Rep 166 that such wording is to be construed broadly. It will, for example, catch both contractual and tortious claims and it is also sufficient to catch disputes arising under another contract related to the contract containing the arbitration clause.[30]The second is the decision of the Court of Appeal in Ashville Investments Limited v. Elmer Contractors Limited [1989] QB 488 in respect of the words “in connection with”. Bingham LJ said at p. 509: I do not find this language either vague or ambiguous. Any dispute or difference unconnected with the parties’ contractual relationship is not subject to the arbitration agreements. Any other dispute or difference is.[31]The third is Premium Nafta Products v Fili Shipping, also known as Fiona Trust v Privalov [2007] UKHL 40. Lord Hoffmann stated at para 13: In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction. As Longmore LJ remarked, at para 17:
“if any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so.”
[32]Ms Weaver did not dispute that the court should take the broad approach described in these three cases. For the most part her submissions on this aspect sought to show that even adopting such a broad approach the disputes in the Indian proceedings did not fall within clause 43.2. I summarise those submissions in section F below.[33]There was, however, a question raised by Ms Weaver as to which relationships between the parties fell within clause 43.2. She advanced a contention that the arbitration agreement is intended to cover disputes arising from the Actis–Supermax relationship and does not extend to disputes between the Malhotra Parties. The argument was said to be reinforced by specific provisions of the SSD: in particular clauses 16.3 and 16.4 of the SSD giving Actis alone rights of action in relation to claims against the Malhotra Parties by Supermax Group companies and certain breaches by the Malhotra Parties. Reliance was also placed upon recital (D) of the SSD: This Deed sets out the terms on which, among other things, Actis will subscribe for shares in SMOH and TMPL and on which the Group will be governed on an ongoing basis.[34]It seems to me to be clear – at least in the sense that there is a high degree of probability – that clause 43.2 was not intended to be limited in the way suggested by Ms Weaver. Mr Calver submitted that the SSD, no doubt as amended and supplemented by the SD, was the governing relationship between the Malhotra Parties. I accept that the SSD, both in its original form and as amended and supplemented by the SD, created contractual relationships between the Malhotra Parties. Recital (D) was explicitly stated not to be exhaustive. Clauses 16.3 and 16.4 are concerned to ensure that Actis will have a cause of action in certain specific circumstances. Nothing in those clauses suggests that there is a general limitation in clause 43.2 of the kind advanced by Ms Weaver. Most importantly, the suggested limitation would run directly counter to what was said by Lord Hoffmann in the passage cited above. If there were a dispute between the Malhotra Parties arising from or connected with the SSD, then there is an obvious risk that it may overlap with a dispute or disputes “arising from the Actis–Supermax relationship”. The parties, as rational businessmen, are likely to have intended both types of dispute to be decided by the same tribunal. There is nothing in the language of the SSD, either in clause 43.2 or elsewhere, to make it clear that disputes between the Malhotra Parties were intended to be excluded from arbitration.[35]I add, although it is not necessary to my conclusion, that an important feature of arbitration is its confidentiality. Mr Calver submitted that the parties wanted anything connected with the revised transaction to be determined in one confidential arbitration. Ms Weaver did not dispute that confidentiality was an important feature of arbitration under clause 43.2. In that regard, I observe that a dispute between the Malhotra Parties would be highly likely to involve family members. Ms Weaver accepts that as parties to the SSD they entered into an agreement which, as regards any dispute with Actis arising from or connected with the revised transaction, gave them the benefit of the privacy associated with arbitration. They could in my view reasonably have been expected to have wished to secure the same benefit as regards any dispute among themselves arising from or connected with the revised transaction.

D. History of events

[36]Section A above describes the initial work done by Allegro from 2008 onwards leading to the conclusion of the SSD on 4 November 2010. Rakesh’s first statement in these proceedings notes that under the SSD the Sponsors had to ensure that assets were available to meet their obligations and states that: Accordingly, the Sponsors agreed on the Subscription Fund Flow … to fund the various companies which were affiliated with [Mr Malhotra senior and Rajiv] … … … The funds were deposited into interest-bearing mutual funds [in newly opened bank accounts with Citibank] so as to maintain liquidity in case they were needed to satisfy the Malhotra Parties’ obligations under the SSD … The Sponsors agreed that I be given signatory rights over the Citibank accounts …[37]It is common ground that prior to completion Mr Malhotra senior had complete control over the Transauto main companies and monitored their affairs. During this period the board of each of the Transauto main companies passed a resolution describing Rakesh as an official of the company and authorising Rakesh singly or Rakesh and Rajiv jointly(1) to “open a current bank account in the name of and on behalf of the Company with Citibank N.A.”,(2) to “operate the bank account on behalf of the Company”,(3) among other things, to execute and deliver any bills, promissory notes, agreements, declarations, letters, indemnities and other writings whatsoever in connection with the said bank account, and(4) “to do all other acts, deeds, and things in the name of and on behalf of the Company in connection with the said bank account.”[38]Also during this period the Transauto main companies entered into RA Agreements with SPCPL and the Citibank accounts were opened – each of them giving Rakesh the power of sole signatory on behalf of the relevant company – in readiness to receive the funds under the SSD.[39]Moreover during the period prior to completion, when Mr Malhotra senior had complete control over the Transauto main companies and monitored their affairs, steps were taken towards substituting SPCPL as the beneficiary of working capital facilities provided by banks to the Transauto main companies. Thus on 29 January 2011 Punjab National Bank advised VMPL of an approval in this regard which was conditional upon receipt of personal guarantees from each of Mr Malhotra senior, Rajiv, Rakesh and Mrs Malhotra senior.[40]In February 2011 it was recognised that revisions would be needed to the SSD in a number of respects. One was that certain of the RA agreements could not be effective at the time of completion, and alternative arrangements were needed. Another was that advance preference shares had been issued and allotted to Actis on 24 February 2011 pursuant to a request by SMOH, SMM and Rakesh for advance subscription dated 22 February 2011. Accordingly the SD was concluded on 4 March 2011. Under the SD’s revised funds flow it remained the position that substantial sums were to be paid to VMPL, RCC, Unique and SIPL.[41]There were further developments as regards transfer of working capital facilities in February 2011. On 21 February 2011 Oriental Bank of Commerce advised VMPL of approval of transfer of working capital facilities to SPCPL, subject to a guarantee by Mr Malhotra senior. A week later, however, on 28 February 2011, Punjab National Bank advised that a guarantee from Rakesh would suffice and it waived the requirement for guarantees from Mr Malhotra senior, Rajiv, and Mrs Malhotra senior.[42]Completion of the revised transaction took place on 24 March 2011. It is common ground that from that time onwards Rakesh was in effective control of the Supermax business, and that Mr Malhotra senior and Rajiv ceased to have such control.[43]In accordance with the revised funds flow the relevant sums were paid into the Citibank accounts in April and May 2011. On 9 May 2011, in order to support a credit facililty to SPCPL, guarantees were entered into between(a) VMPL, RCC and a bank consortium and(b) Unique, a company called Emerald Investment Private Ltd (“Emerald,” which was another subsidiary of Transauto), and a bank consortium.[44]Rakesh states that following completion production was increased, thereby avoiding the danger that Actis would be able to insist on an increased shareholding. Rakesh’s evidence is that this resulted in a working capital shortfall. He states that on behalf of SMOH he gave notice of this both to Actis and to himself as MP Representative, and that Actis then made the request contemplated by clause 18.10.2 of the SSD. In order to fulfil the obligations of the Sponsors under that clause he made arrangements which came to fruition on 25 January 2012. On that day HDFC Bank afforded SPCPL a loan supported by securities purchased by the Transauto main companies using the monies held in the Citibank accounts.[45]According to Rakesh it was in January 2012 that the relationship with his father broke down. This was said to have been manifested in various ways, among them conduct by Mr Malhotra senior as follows:(1) allegedly attempting to interfere in the running of the SuperMax Business and to persuade the employees of SPCPL to strike;(2) requesting, on 19 January 2012, Citibank and other lending banks to freeze the bank accounts of each of the Transauto main companies, something which Rakesh says would unwind the security given by them to enable working capital to be made available to SPCPL; Rakesh adds that the requests were refused, but if they had been granted this would have caused the Supermax group business to collapse;(3) allegedly seeking to set up another razor manufacturing company, Superlative Excellence, in competition with SPCPL, in breach of the terms of the SSD (see e.g. clause 14.2);(4) bringing each of the petitions in the Indian proceedings in February 2012, “dressing up the dispute with [Rakesh] in each of the Indian Complaints as purportedly being simply a dispute with the directors of the Affiliated Companies, unconnected with the SSD”;(5) harassment “by requesting police raids on the officers of the Transauto main companies and making threats against directors of SPCPL and VMPL”;(6) taking steps on 20 March 2012 to begin to remove the directors of Transauto;(7) through a company called ATU, making damaging and libelous statements on 23 March 2012 to third parties to the effect that Rakesh had received and utilised funds paid by Actis under the SSD for his own purposes;(8) when seeking to discharge the injunction in the present case, making assertions unrelated to, and not mentioned in, the Indian proceedings: (a) an allegation that certain employees of the Indian companies were transferred to work for another company owned by Mr and Mrs Malhotra senior called VRM, but at Rakesh’s instigation left to join SPCPL, taking documents, files and office equipment, and deleting data from computers and disconnecting email access which Rajiv and Mr Malhotra senior had been using, leaving them without any secretarial or office support or assistance; (b) an allegation that on 3 April 2012 VMPL’s office was raided by the Indian Central Bureau of Investigation who were investigating an allegation of corruption against one of the directors; (c) an allegation that SIPL had failed to manage litigation with tenants at a property, Malhotra House in Mumbai owned by SIPL.[46]In February 2012 the Indian proceedings were begun. On 3 February 2012 in Mumbai four of the petitions (“the Mumbai petitions”) were issued. They concerned Transauto, Unique, VMPL and SIPL. On 9 February 2012, at a stage when the petitions had not been served on the respondents, the Company Law Board, Mumbai Bench, heard applications by the petitioners, made without notice to the respondents, for interim relief. It appears from the Bench’s “Attendance-cum-order Sheet” that the respondents had learnt from the Board’s website of the applications, and counsel for the respondents attended on 9 February. Counsel for the petitioners declined to provide the respondents with copies of the petitions, saying in effect that the respondents might defeat the purposes of the petitions if they were served. Having heard both counsel the Bench permitted the applications to proceed without service of the petitions. On the applications the Bench heard counsel for the petitioners only, and made an order which included the following: i) The Respondents shall not utilize, invest or deal in any manner the funds, monies and securities of the company (including bank account) except for the purpose of making statutory payments that may be required to be made to any government authorities and salaries of the employees in the ordinary course of business until further orders. ii) The Respondents shall not dispose of, transfer, encumber or create any charge on the assets of the company including the immovable properties until further orders. …[47]On 11 February 2012 in Chennai the fifth petition (“the RCC petition”) was issued. It concerned RCC. The Company Law Board, Chennai Bench, declined an application by the petitioners for interim relief.[48]The Transauto petition sought the removal of the board of directors of Transauto. In addition, Mr and Mrs Malhotra senior served notices on the board of directors calling upon Transauto to convene an extraordinary general meeting for the purpose of removing the directors and appointing replacements. There was no reply to those notices. On 20 March 2012 Mr and Mrs Malhotra senior wrote to the directors stating that in reliance on provisions of the Companies Act they had convened the extraordinary general meeting themselves, and as shareholders had signed consents for short notice. Rakesh has asserted that the purpose is to install directors who will procure the revocation of securities given by VMPL, RCC and Emerald for the running of the Supermax gropu business, with potentially catastrophic results.[49]On 26 March 2012 Gloster J granted the without notice injunction.

E. Analysis of the Indian proceedings

[50]Each petition is brought against the relevant Transauto main company as first respondent. The next group of respondents comprises the members of the board of directors of the company. In all save the Transauto and Unique petitions (as explained below) those shareholders who are not petitioners form the next group of respondents. The final group of respondents are those with delegated powers over the company’s bank accounts (including Rakesh; in the case of VMPL Rakesh is also included in his capacity as holder of a single share in the company). In each petition the relevant company is said to be one amongst the group of companies effectively owned by Mr Malhotra senior, described as the “R K Malhotra Group.”[51]The Transauto petition is CP-11 of 2012 before Mumbai Company Law Board. The petitioners are Mr and Mrs Malhotra, in their capacity as holders of one hundred percent of the shares in Transauto. In that regard Mrs Malhotra senior holds 1 share and Mr Malhotra senior holds the remainder. The second, third and fourth respondents are Messrs Shaikh, Chaudhari and Thakkar, who are the directors of Transauto. The petitioners comprise the entirety of the shareholders, and accordingly there are no other shareholders named as respondents. The fifth, sixth and seventh respondents, joined in their capacity as holders of delegated authority to operate company bank accounts, are Mr P.B. Vyas, Mr Amit Bhansali, and Rakesh.[52]The Unique petition is CP-12 of 2012 before Mumbai Company Law Board. The petitioner is Sapphire Properties Private Limited (“Sapphire”) in its capacity as one out of a total of two members of the company. The petition explains that it holds one share in the company, and thus is the owner of 0.01 percent of the share capital. Sapphire is owned as to 14,999 shares by Mr Malhotra senior and as to one share by Rajiv. Rajiv is not a petitioner; the petition explains that he is not a respondent as he supports the petition. The remaining shareholder, Transauto, holds 99.9 percent of the share capital of Unique and is the fourth respondent. The second and third respondents are Messrs T. N. Rao and J. B. Goyal, who are the directors of Unique. The fifth and sixth respondents, joined in their capacity as holders of delegated authority to operate company bank accounts, are Mr Amit Bhansali and Rakesh.[53]The VMPL petition is CP-13 of 2012 before Mumbai Company Law Board. The petitioner is Mr Malhotra senior in his capacity as owner of 47.3 per cent of the shares of the company. The remaining shares are held as to 53 percent by Transauto and 0.01 percent by Rakesh. They are the fourth and sixth respondents respectively. The second and third respondents are Messrs Vyas and Chaudhari, who are the directors of VMPL. The fifth, seventh and eighth respondents, joined in their capacity as holders of delegated authority to operate company bank accounts, are Messrs Amit Bhansali, Abhishek Kumar, and Jaanvi Tekchandari. Rakesh (who, as noted above, is the sixth respondent) is also joined in his capacity as a holder of delegated authority to operate company bank accounts.[54]The SIPL petition is CP-14 of 2012 before Mumbai Company Law Board. The petitioner is RSM Properties Private Limited (“RSM”) in its capacity as one out of a total of two members of the company. It is the owner of 0.1 percent of the share capital of the company. RSM itself is owned as to 14,999 shares by Mr Malhotra senior and as to 1 share by Rajiv. The holder of 99.9 percent of the shares in SIPL is Transauto, which is named as the fourth respondent. The second and third respondents are Messrs Nayak and Tone, who are the directors of SIPL. Rakesh is the sixth respondent, joined in his capacity as holder of delegated authority to operate company bank accounts. Also joined in their capacity as holders of delegated authority to operate company bank accounts are Mr Amit Bhansali (fifth respondent) and Messrs Vyas, Shaikh and Raj (seventh, eighth and ninth respondents).[55]The RCC petition is CP-14 of 2012 before Chennai Company Law Board. The petition is brought by Mr Malhotra senior, Mrs Kunika Rajiv Malhotra (“Mrs KR Malhotra”) who is Rajiv’s wife, and Rajiv, in their capacity as three out of a total of four members of the company. Mr Malhotra senior, as the owner of 9,006 shares, holds 8.04 percent of RCC’s share capital. Mrs Kunika Rajiv Malhotra and Rajiv each hold one share, amounting to less than 0.001 percent of the share capital. The remaining shares, comprising 91.96 percent of the share capital are owned by Transauto, which is named as sixth respondent. The second, third, fourth and fifth respondents are Messrs Somalraju, Tripathi, Chaudhari and Thakkar, who are the directors of RCC. Rakesh is the eighth respondent, joined in his capacity as holder of delegated authority to operate company bank accounts. Also joined in their capacity as holders of delegated authority to operate company bank accounts are Mr Amit Bhansali (seventh respondent) and Messrs Vyas, Kumar and Tekchandani (ninth, tenth and eleventh respondents).[56]In the following paragraphs I give a description of the Indian proceedings which is largely derived from Ms Weaver’s skeleton argument. I shall turn in section F2.2 to describe Mr Calver’s comments on the Indian proceedings by reference to the Unique petition.[57]The petitions allege oppression and acts of mismanagement by the directors acting under the influence of Rakesh. The petitioners assert in each case that they have lost confidence in the directors. The remedies claimed can be summarised as follows:(1) orders for the calling and holding of an extraordinary general meeting of the company to consider the removal of the current directors and the appointment of new directors;(2) orders under sections 397-402 of the Companies Act (which allow shareholders to seek remedies for conduct which is prejudicial to the interests of the company) to bring an end to the acts of mismanagement;(3) orders for the provision of information and disclosure by the directors of the company;(4) orders for compensation in respect of losses suffered by the company;(5) orders for the setting aside, termination or modification of any dealings with the company’s assets after 18 March 2011.[58]The only claim made against Rakesh in any of the petitions is for an interim injunction restraining him from dealing with or disposing of any assets of the companies and for delivery up of the books and records of the companies.[59]The petitions all sought interim orders(a) for the reconstitution of the board of directors and(b) to maintain the status quo by preserving the company’s books and records and preventing any dispositions of the companies’ assets. Interim orders (containing the detailed provisions set out in section D above) have been granted in the Mumbai petitions preventing any disposal of those companies’ assets except by way of statutory payments to government authorities and salaries in the normal course of business. The Transauto main companies do not currently carry on any business. The application for an interim order in the Chennai petition was refused.[60]Reasons for the petitions are advanced by Rajiv in his evidence. In short, Rajiv asserts that Mr Malhotra senior and the other shareholders have lost confidence in the directors of the Transauto main companies and believe that the directors have been mismanaging the affairs and assets of those companies. The mismanagement alleged includes entering into transactions which are not for the benefit of the companies but for the benefit of the Supermax group:(1) the guarantees given by VMPL, RCC, Emerald and Unique in May 2011 to a consortium of banks in support of borrowing by SPCPL;(2) the payments made to Allegro.[61]However the issues and the remedies claimed go wider and include:(1) the shareholders’ control over the companies through its power to change the composition of the board of directors;(2) access to the books and records by the shareholders;(3) whether the directors have conducted the affairs of the companies in accordance with their duties in dealing with income tax liabilities, in raising loans at high rates of interest, and in pledging assets in favour of other Transauto main companies.[62]I am satisfied that each of the matters identified by Ms Weaver is raised on the face of one or more of the petitions.

F. The oral submissions

[63]Below I summarise the main matters, in so far as not already covered above, dealt with in submissions at the hearing. F1. Relevant legal principles F1.1 Statutory powers for an anti-suit injunction

F1. Relevant legal principles

[64]It is common ground that this court has jurisdiction to grant the injunction sought under section 37 of the Senior Courts Act 1981. At the hearing Mr Calver submitted that the primary basis of jurisdiction lay in sections 2(3) and 44(1) and (2) of the Arbitration Act 1996. This was disputed by Ms Weaver. Neither side suggests that in the present case an additional or even primary basis of jurisdiction under the 1996 Act would make any difference to the outcome. Both under the 1981 Act and under the 1996 Act the fundamental test for the grant of anti-suit injunction is whether it is in the interests of justice. In those circumstances I think it preferable to say nothing further about Mr Calver’s submission on the 1996 Act and Ms Weaver’s response.

F1.2 Principles when breach of arbitration agreement is alleged

[65]The case advanced for Rakesh at the hearing rested on the proposition that the Indian proceedings constituted a breach by Mr Malhotra senior and Rakesh of their contractual obligation to refer to arbitration any dispute falling within clause 43.2 of the SSD. The principles applicable in a case of this kind were considered by the Court of Appeal in Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd's Rep. 87. At p. 96 Millett LJ summarised them as follows: I … add a few observations of my own on the approach which the Courts should adopt when asked to exercise its undoubted jurisdiction to restrain a party from taking or continuing proceedings in a foreign Court in breach of an agreement to refer the dispute to arbitration. In my judgment, the time has come to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution. There have been many statements of great authority warning of the danger of giving an appearance of undue interference with the proceedings of a foreign Court. Such sensitivity to the feelings of a foreign Court has much to commend it where the injunction is sought on the ground of forum non conveniens or on the general ground that the foreign proceedings are vexatious or oppressive but where no breach of contract is involved. In the former case, great care may be needed to avoid casting doubt on the fairness or adequacy of the procedures of the foreign Court. In the latter case, the question whether proceedings are vexatious or oppressive is primarily a matter for the Court before which they are pending. But in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them. … We should, it was submitted, be careful not to usurp the function of the Italian Court except as a last resort, by which was meant, presumably, except in the event that the Italian Court mistakenly accepted jurisdiction, and possibly not even then. That submission involves the proposition that the defendant should be allowed, not only to break its contract by bringing proceedings in Italy, but to break it still further by opposing the plaintiff’s application to the Italian Court to stay those proceedings, and all on the ground that it can safely be left to the Italian Court to grant the plaintiff’s application. I find that proposition unattractive. It is also somewhat lacking in logic, for if an injunction is granted, it is not granted for fear that the foreign Court may wrongly assume jurisdiction despite the plaintiffs, but on the surer ground that the defendant promised not to put the plaintiff to the expense and trouble of applying to that Court at all. Moreover, if there should be any reluctance to grant an injunction out of sensitivity to the feelings of a foreign Court, far less offence is likely to be caused if an injunction is granted before that Court has assumed jurisdiction than afterwards, while to refrain from granting it at any stage would deprive the plaintiff of its contractual rights altogether. In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign Court in breach of an arbitration agreement governed by English law, the English Court need feel no diffidence in granting the injunction, provided that it is sought promptly and before the foreign proceedings are too far advanced. I see no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause as in Continental Bank N.A. v. AeakosCompania Naviera S.A., [1994] 1 W.L.R. 588. The justification for the grant of the injunction in either case is that without it the plaintiff will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.[66]Millett LJ’s observations in the last sentence cited above have consistently been followed. Thus when Donohue v Armco [2002] 1 Lloyds Rep. 425 reached the House of Lords it was said by Lord Scott at p. 440: It is accepted that a contractual exclusive jurisdiction clause ought to be enforced as between the parties to the contract unless there are strong reasons not to do so. Prima facie parties should be held to their contractual bargain: see … The Angelic Grace.[67]Submissions at the hearing focused on two aspects of Millett LJ’s observations. The first concerned the premise for those observations:
“the clear and simple ground that the defendant has promised not to bring [the foreign proceedings]”
. How clear must it be that the foreign proceedings do indeed fall within the promise? I shall call this “the threshold requirement”. The second concerned the position if the court is satisfied, with the necessary degree of clarity, that the threshold requirement is met. What discretionary factors may constitute “good reason” (Millett LJ) or “strong reasons” (Lord Scott) such as would warrant a refusal to grant an injunction? I shall call this “the good reason requirement”.

F1.3 The threshold requirement

[68]In her skeleton argument Ms Weaver submitted: The court is only justified in restraining foreign proceedings if the applicant shows to a high degree of probability that its case that it has a contractual entitlement to arbitrate the disputes or to litigate in a different forum is right (or that the foreign proceedings were vexatious or oppressive).[69]In support of this proposition Ms Weaver cited two authorities. The first was a decision of Christopher Clarke J sitting in the Commercial Court: Transfield Shipping Inc v Chiping Xinfa Huayu Alumina Co Ltd [2009] EWHC 3629 (Comm). It was a case where the parties had negotiated terms for carriage of a series of cargos of bauxite from India to China. There was a dispute between the parties as to whether a binding contract had been made. The London defendant (“Chiping”) had issued proceedings in the Qingdao Maritime Court asking it to adjudicate on whether there was a contract between the parties.[70]Christopher Clarke J observed that if the parties entered into the contract on which the London claimant (“Transfield”) relied, the commencement and continuance of proceedings in the Qingdao Maritime Court was a breach of the arbitration agreement contained in it. Transfield suggested that where there is a dispute as to whether or not there is a contract at all containing an arbitration agreement, it may be sufficient for the parties seeking anti-suit relief to demonstrate a good arguable case as to the existence of the agreement. Christopher Clarke J rejected this suggestion. His reasoning on the relevant point is at paras 51 to 58: 51 The only basis upon which the court could in this case make an anti-suit injunction is on the grounds that there is, probably is, or arguably is between the parties an agreement which binds them to have their disputes decided in London arbitration. That begs the question as to whether at the interlocutory stage what has to be shown is an arguable case, a strongly arguable case, a case with a high probability of success or a case described by some other adjective or description. 52 In my judgment, the appropriate test is whether or not the applicant has shown on the material adduced at the interlocutory hearing a high degree of probability that there was such an agreement. It is one thing to enforce a clear agreement to arbitrate or one which on an interlocutory basis can be seen to be highly likely to be established. It is another to restrain a party from litigating in a foreign country where the position is less clear than that. The effect of any such order is likely to be final in the sense that if granted until after an arbitral hearing, it will preclude the enjoined party from contending that there was no such agreement otherwise than before the arbitral tribunal and, if the tribunal rules that there was such an agreement, from disputing its existence. 53 Mr O'Sullivan submitted correctly that it is only where the English court can point with confidence to a contractual promise not to litigate elsewhere that it can be justified in interfering with a party's right to bring its claim in such other place as might accept jurisdiction. There is decided authority to that effect. 54 In American International Specialty Lines Insurance Co v Abbott Laboratories [2004] Lloyd's Insurance and Reinsurance Reports 815, Cresswell J added certain propositions to those set out in the speech of Lord Bingham in Donohue v Armco [2001] UKHL 64 in the following terms:
“6 There is no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause. The justification for the grant of the injunction in both cases is that without it the claimant will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy (see The Angelic Grace, [1995] 1 Lloyds Rep 87 at 96, Millett LJ.) 7 It would be inappropriate to grant an interlocutory injunction to restrain foreign proceedings at a time when it is no more than arguable that they were brought in breach of contract, because it could not be said that such proceedings were vexatious or oppressive (see Clarke LJ in National Westminster Bank v Utrecht-America Finance Company [2001] 3 All ER (Comm) 7). 8 On an application to restrain foreign proceedings brought in (alleged) breach of an arbitration agreement alleged to be governed by English law, the applicant must show to a high degree of probability that its case is right and that it is entitled as of right to restrain the foreign proceedings (see Colman J in Bankers Trust Co v PT Mayora Indah (20 January 1999, unreported ) and Cresswell J in Bankers Trust Co v PT Jakarta International Hotels and Development [1999] All ER (Comm) 785 ).” 55 In Midgulf International Ltd v Groupe Chimique Tunisien [2009] 2 Lloyd's Rep 411 , Teare J said: “This is a case where an anti-suit injunction is sought at the interlocutory stage of proceedings. However, if the injunction is granted its effect is likely to be final because it will end the Tunisian proceedings and enable the arbitration proceedings to be completed. In such circumstances this court has required the applicant for an anti-suit injunction to establish ‘a high degree of probability' that its case against the respondent is right and that it is indeed entitled as of right to restrain the respondent from taking proceedings abroad.” 56 Teare J then held that Midgulf's “strongly arguable” case was not sufficient because it ultimately depended on evidence about the content of certain telephone conversations. He said: “The court is not therefore able to reach the conclusion that Midgulf has established ‘a high degree of probability' that its case against GCT, that the July contract included a London arbitration clause, is right and that it is therefore entitled as of right to restrain GCT from taking proceedings in Tunisia. I accept that Midgulf has a strongly arguable case to that effect but that is not sufficient in the present context for the reasons stated in Bankers Trust v Jakarta and American International Speciality Lines Insurance v Abbott Laboratories. That would suggest that the anti-suit injunction granted ex parte on notice by Burton J must be refused.” 57 Teare J held, however, that on the particular facts of that case there was doubt as to whether the Tunisian court would decide the question as to whether the relevant contract contained a London arbitration clause. The reason the Tunisian was not prepared to decide that question, in a judgment it had given on GTC's application for a declaration that there was no arbitration agreement between the parties, is not entirely clear but appears to have been either on the basis that the arbitral tribunal itself must decide the question or as a result of a provision of the Tunisian Constitution that the court not decide that question in a declaratory action. In those rather unusual circumstances, Teare J held that the appropriate course on case management grounds was to order a speedy trial of the issues as to the terms on which the July contract was agreed and to continue the anti-suit injunction until then. 58 In Youell v Kara Mara Shipping Co Ltd [2000] 2 Lloyd's Rep 102, Aikens J (as he then was) adopted the good arguable case test, but the matter appears not to have been the subject of any specific argument. 59 I accept that Transfield has a good arguable case that there is a binding charter party agreement containing a London arbitration clause, but I am not persuaded that there is a high probability of it establishing that that is so. “6 There is no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause. The justification for the grant of the injunction in both cases is that without it the claimant will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy (see The Angelic Grace, [1995] 1 Lloyds Rep 87 at 96, Millett LJ.) 7 It would be inappropriate to grant an interlocutory injunction to restrain foreign proceedings at a time when it is no more than arguable that they were brought in breach of contract, because it could not be said that such proceedings were vexatious or oppressive (see Clarke LJ in National Westminster Bank v Utrecht-America Finance Company [2001] 3 All ER (Comm) 7). 8 On an application to restrain foreign proceedings brought in (alleged) breach of an arbitration agreement alleged to be governed by English law, the applicant must show to a high degree of probability that its case is right and that it is entitled as of right to restrain the foreign proceedings (see Colman J in Bankers Trust Co v PT Mayora Indah (20 January 1999, unreported ) and Cresswell J in Bankers Trust Co v PT Jakarta International Hotels and Development [1999] All ER (Comm) 785 ).” “This is a case where an anti-suit injunction is sought at the interlocutory stage of proceedings. However, if the injunction is granted its effect is likely to be final because it will end the Tunisian proceedings and enable the arbitration proceedings to be completed. In such circumstances this court has required the applicant for an anti-suit injunction to establish ‘a high degree of probability' that its case against the respondent is right and that it is indeed entitled as of right to restrain the respondent from taking proceedings abroad.” “The court is not therefore able to reach the conclusion that Midgulf has established ‘a high degree of probability' that its case against GCT, that the July contract included a London arbitration clause, is right and that it is therefore entitled as of right to restrain GCT from taking proceedings in Tunisia. I accept that Midgulf has a strongly arguable case to that effect but that is not sufficient in the present context for the reasons stated in Bankers Trust v Jakarta and American International Speciality Lines Insurance v Abbott Laboratories. That would suggest that the anti-suit injunction granted ex parte on notice by Burton J must be refused.”
[71]For this and other reasons Transfield’s application for an injunction was refused.[72]The second authority cited by Ms Weaver was Stonehouse v Jones [2012] EWHC 1089, a decision of Newey J sitting in the Chancery Division of the High Court. It concerned an alleged breach of an exclusive jurisdiction clause rather than an arbitration clause, but it is common ground in the present case that the relevant principles are the same. Mr Stanley Hanson, on behalf of the Hanson Family Trust (“the Trust”), had invested in a UK company (“the Company”). The investments included shares in the Company. After his death the London defendants, who were at that time the trustees of the Hanson Family Trust, issued proceedings in California asserting that the investments in the Company were made in response to sales pitches in California from Mr Stonehouse and Mr Koss. They were said to have made untrue representations and failed to disclose material facts. The London claimant (“Mr Stonehouse”) said that as shareholders both he and the Trust were party to a Shareholders and Subscription Agreement (“the SSA”) containing in clause 23 an exclusive jurisdiction agreement as follows:23.1 This Agreement and any disputes or claims arising out of or in connection with its subject matter are governed by and construed in accordance with the laws of England.23.2 The parties irrevocably agree that the courts of England have exclusive jurisdiction to settle any dispute or claim that arises out of or in connection with this Agreement.[73]Newey J refused to grant the injunction sought by Mr Stonehouse. In his judgment he said at paragraphs 10, 22 and 23: 10 Where an interim anti-suit injunction is sought on the strength of an exclusive jurisdiction clause, the applicant must show more than merely that there is a serious issue to be tried as to whether the relevant clause is applicable. He must demonstrate at least that there is a “high degree of probability” that that is the case (see Raphael, “The Anti-Suit Injunction”, at paragraphs 7.09, 13.31 and 13.32). … 22 The interpretation of a contract involves looking at the meaning which it would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract (see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 , at 912 to 913). Despite its use of the broad words “in connection with”, it is far from clear to me that a reasonable person would understand clause 23.2 of the SSA to apply to the claims brought in the Californian proceedings. As I have said, none of those claims is founded on or makes any reference to the SSA; the SSA simply does not feature in the Amended Complaint. There is, moreover, no suggestion that the SSA could provide Mr Stonehouse with any defence on the merits to the Trustees' claims. Further, aside from clause 11 (dealing with the subscription for shares of two of the original parties), the SSA is essentially concerned with relations between shareholders, and Mr Stonehouse is a party to it in that capacity. The Trustees, however, make no complaint about the exercise by Mr Stonehouse of his powers as a shareholder, and their claims against him do not appear to depend on his having been a shareholder. 23 In the all the circumstances, I have not been persuaded that there is the requisite “high degree of probability” of clause 23.2 applying to the claims made in the Californian proceedings. To the contrary, I rather doubt (though I do not need to decide) whether the clause extends to the Trustees' claims.[74]In oral submissions Mr Calver adopted the test identified in Transfield. He urged that there was a high degree of probability, indeed he said it was certain, that the petitions in India fell within clause 43.2. Similarly as to Stonehouse v Jones, Mr Calver did not dispute the test adopted by Newey J. As noted in section F3 below, however, he identified 8 reasons why, on the facts in the present case, I should not reach the same conclusion as that which was reached by Newey J on the facts in that case.

F1.4 The good reason requirement

[75]Ms Weaver submitted that, in a case where an arbitration clause is relied upon, important considerations in the exercise of the discretion include:(1) whether the grant of the injunction will unjustly deprive the defendant of advantages in the foreign forum;(2) whether the grant of the injunction will enable all disputes between all parties to take place in the same forum;(3) whether there are arbitration proceedings on foot or in prospect.[76]Mr Calver did not dispute that these were all relevant considerations. He contended, as summarised in section F3 below, that on the facts of the present case these considerations did not give rise to a good reason for refusing to grant the injunction. F2. The Indian disputes F2.1 Undertaking to amend the petitions

F2. The Indian disputes

[77]As noted in section E above, the relief sought in the Indian proceedings included orders for the setting aside, termination or modification of any dealings with the relevant company’s assets after 18 March 2011. Mr Calver in his oral submissions stressed that this would undo the transfers from the Transauto main companies to the new operating companies, transfers which formed part of the RA Agreements required by the revised transaction. In her oral submissions Ms Weaver stated on instructions that the date of 18 March 2011 was a mistake. The intention had been to refer to the period when the restructuring agreements had all been effected. There was no intention to undermine the transfers of property under those agreements – the petitions had been aimed at what had been done subsequently.[78]As noted in section G1 below, after the hearing Mr Malhotra senior and Rajiv gave undertakings which were said to remedy the position in relation to the date of 18 March 2011.

F2.2 Rakesh’s submissions about the Indian proceedings

[79]This part of Mr Calver’s oral submissions was prefaced with an observation based on the fact that the petitions, as noted by Ms Weaver in her skeleton argument, alleged oppression and acts of mismanagement by the directors acting under the influence of Rakesh. This, submitted Mr Calver, gave the lie to Ms Weaver’s contention that the Indian proceedings merely concerned internal matters of foreign companies.[80]In section E above I gave a description of the Indian proceedings which was largely derived from Ms Weaver’s skeleton argument. In his oral analysis of the Indian proceedings Mr Calver took the Unique petition (No. CP-12 of 2012 before the Mumbai Company Law Board) by way of example:(1) It was brought by Sapphire, a company which was owned by Mr Malhotra senior, and which was the holder of a single share in Unique.(2) The third respondent, Mr Goyal, was one of the two directors of Unique. He had been appointed as recently as 1 September 2011.(3) Paragraph 4 of the petition recorded that Unique had delegated authority for operating bank and securities accounts to Mr Bhansali (the fifth respondent) and Rakesh (the sixth respondent). It added that Sapphire believed Mr Bhansali to be acting under the influence of Rakesh.(4) Paragraph 8 asserted that in the past the directors of Unique “used to consult and act as per the advice of [Mr Malhotra senior] in respect of all important business and financial matters.” It added that even though he was not a part of the Board, he had “effectively participated in and monitored the affairs of the Company with all information relating to the Company being available to him.” [I add here that from paragraph 8 onwards the petition on occasion uses the term “petitioner” in a way which clearly means Mr Malhotra senior rather than Sapphire, and on other occasions uses it in a way which might encompass either of them. Where it is clear that the reference is to Mr Malhotra senior I have used his name. References below to Sapphire generally derive from references in the petition to “the petitioner”, and it is possible that some of them may have been intended to refer to Mr Malhotra senior.](5) There was, submitted Mr Calver, an important admission in paragraph 8. It acknowledged that at the time that Unique guaranteed the loans to SPCPL, and the relevant Citibank account was opened, Mr Malhotra senior was consulted in respect of all important business and financial matters.(6) Paragraph 9 recorded that the business of the R K Malhotra Group had been transferred to SPCPL. This was said to have come into effect on or about 18 March 2011, at which time the second and third respondents resigned as employees of the R K Malhotra Group and were “absorbed by SPCPL either as employees or as consultants.” The last sentence of paragraph 9 said that they were allowed to continue as directors of Unique “in the bona fide belief that having worked with R K Malhotra Group for the last several years, the interests of the Company and the Petitioners would be safe in the hands of Respondents 2 and 3.”(7) Mr Calver noted that paragraph 9 did not refer to the SSD, and that what was stated in relation to Mr Goyal was inconsistent with him having become a director of Unique only on 1 September 2011.(8) Paragraph 10 drew attention to the role of Rakesh as “in charge and management of SPCPL.”(9) Paragraphs 11 and 12 a sale of land by Unique – which Mr Calver observed was in fact one of the Restructuring Acquisitions – with the net proceeds invested in mutual funds through Citibank. Sapphire was said to be “not aware of the accretions on the Company’s investments in mutual funds. Paragraph 13 said that Unique was not currently carrying on business, but was asset rich – as well as the investments noted earlier, it was the owner of several immovable properties. Paragraph 14 asserted that the directors had turned hostile to Sapphire and denied it access to statutory registers and minute books; that Mr Malhotra senior was no longer consulted about deployment of Unique’s funds, and was not informed of decisions by the directors in respect of the funds and generally with regard to Unique’s affairs, and that this caused concerns to Sapphire. These paragraphs, submitted Mr Calver, ignored that the funds transfer was contemplated by the SSD, that Unique would be dormant but asset rich pursuant to the revised funds flow, and that Mr Malhotra senior relinquished all roles under SSD, and agreed that the funds at Citibank would be used without reference to him.(10) Paragraph 15 involved two main assertions. Mr Calver dealt first with an assertion that Unique’s investments in mutual funds and other securities had been pledged to Citicorp to secure borrowings by other companies. However, submitted Mr Calver, the chronology showed that Mr Malhotra senior fully understood what was happening and would happen.(11) The other assertion in paragraph 15 concerned tax. Unique’s tax return for 2010/11 showed that it had overpaid income tax, in an amount which when refunded would earn interest of only 6% per annum, “which indicates gross financial mismanagement”. This point, submitted Mr Calver, had been demonstrated to be spurious. In particular, Rakesh’s second statement explained that what had happened was that each relevant company chose to delay its claim for refunds in relation to costs incurred in the restructuring. This was done for good reason, as penalties for an un-allowed offset could reach 300%. The delay was to give such time as was needed for the Indian tax authorities to review the matter. There had, Mr Calver noted, been no answer to this in the reply evidence submitted on behalf of Mr Malhotra senior and Rajiv. The tax allegation, submitted Mr Calver, had been stuck in to try to mask the fact that the real complaint was about Rakesh using the funds in the Citibank accounts for the very purpose that the parties agreed they should be used for.(12) Paragraphs 16 and 17 recorded the request to Citibank dated 19 January 2012 and Citibank’s response. Mr Calver noted that the letter of 19 January 2012 demonstrated awareness by Mr Malhotra senior that Rakesh had the power to sign as sole signatory on the Citibank account.(13) Paragraph 18 said that Sapphire “understands that divers amounts have been paid to [Allegro] by various group companies … far in excess of the amounts that may have been realistically due to Allegro …”. Mr Calver countered that Allegro’s role and the basis on which its fee would be calculated were well known not only to Rakesh but also to each of Mr Malhotra senior and Rajiv, because they were intimately involved in the restructuring. They had been fully aware that Allegro’s fees would be paid from the fund flow monies.(14) Paragraph 19 asserted that Sapphire was “shocked to learn” from an email sent by a SPCPL employee on 23 January 2012 that Unique was made a guarantor in respect of credit facilities to SPCPL. This was said to be a breach of fiduciary duty by the directors and to have jeopardised Unique’s assets. Mr Calver relied on the correspondence with the banks in February 2011 in this regard. That correspondence, he submitted, demonstrated the falsity of the assertion of lack of knowledge prior to 23 January 2012. In any event, this was plainly a dispute connected with the SSD.(15) Paragraphs 20 to 23 complained that the directors were acting under the direction of Rakesh. There had been an instruction by him to a Unique employee that further communications with Mr Malhotra senior or Rajiv would be considered as a “disciplinary breach”. The present directors were said to have made deliberate efforts to cover Unique’s finances and affairs in a shroud of secrecy. This “sudden change” was attributed to the influence of Rakesh “whose relations with his father … have turned highly acrimonious.” It was said that the directors had engaged in mismanagement detrimental to Unique and its ultimate shareholder Mr Malhotra senior, that Sapphire had lost confidence in the directors, and feared that they might cause serious and irreparable harm to Sapphire, that the position was oppressive so as to leave no option but to seek removal of the current directors, and that the petition was needed in order to put an end to acts of oppression and mismanagement. This, submitted Mr Calver, was all a complaint about the fact that Rakesh was the sole signatory on the Citibank accounts.(16) Paragraph 24 sought an urgent extraordinary general meeting to remove the directors and replace them with Sapphire’s nominees. Paragraph 25 complained that the directors had moved Unique’s books of account, statutory registers, and other records so that they were out of the registered office and under their absolute control. Sapphire apprehended that they might siphon funds and tamper with Unique’s books and records. Paragraph 26 added that, unknown to Sapphire, the directors may have created liabilities or encumbrances, or siphoned funds. It asserted that Sapphire was entitled to disclosure of all payments, encumbrances and liabilities since March 2011, to require the directors to make good losses, to have prejudicial contracts and liabilities set aside, terminated or modified. In paragraph 27 interim relief was sought.(17) Paragraphs 24 to 27 were said by Mr Calver to be very significant, as they were what founded the application for relief in India. They demonstrated first that the Indian proceedings sought to set aside and terminate the restructuring agreements, and second that there was nothing speculative about Rakesh’s conclusion that the aim of the Indian proceedings was to deprive SPCPL of its credit facility and to deprive it of the use of other assets. This was sought to be achieved by restraining the directors and signatories from operating the Citibank account, from dealing with the monies and securities, from creating any liabilities over the account, and from giving any loans, despite that fact that this is precisely what it was agreed that Rakesh should do.

F2.3 Mr Malhotra senior/Rajiv’s case on the Indian proceedings

[81]Ms Weaver submitted that the court was being asked to restrain proceedings between shareholders on the one hand and the relevant company and its directors on the other. The orders sought would leave the companies under the control of directors in whom the shareholders had no confidence. This was a family dispute, and an increasingly bitter one, as witness the allegations and counter-allegations concerning raids on the companies by the Indian police. The family dispute was being fought through the Indian companies. There was no connection with the SSD, save that this dispute had arisen following the restructuring carried out under it. The dispute was not arbitral, and therefore the court had no basis on which to grant the injunction.[82]After explaining the heads of relief in the Indian proceedings (see section E above) Ms Weaver commented that if the companies had entered into legally binding obligations with third parties, for which good consideration had been given, those transactions will not be able to be set aside.[83]Ms Weaver dealt specifically with Rakesh’s answer to the Indian proceedings that the matters complained of were known by shareholders. If so that could be said in the Indian proceedings. Moreover it could be argued in India without reference to the SSD.[84]At a later stage in her submissions Ms Weaver turned to parts of the petitions concerned with criticisms of the directors in relation to tax affairs of the companies and mismanagement of property unconnected with the Supermax group business. Rajiv had produced copies of penalty orders sent to VMPL and RCC by the Indian tax authorities. Attempts by Mr Malhotra senior to have these matters dealt with had received no response. A raid by the Indian Central Bureau of Investigation on the office of VMPL was thought to have concerned an allegation of corruption against one of the directors. SIPL owned a property, Malhotra House in Mumbai where there was ongoing litigation with the tenants.

F 2.4 Rakesh’s reply on the Indian proceedings

[85]Mr Calver began his oral submissions in reply by dealing with matters specifically going to the threshold requirement and the good reason requirement. They are dealt with below, but I note here a submission by Mr Calver that “minor points about not being able to see the books from time to time and tax, and so on…” should be left aside. His contention was that once the ability of Rakesh to use the Citibank accounts was arbitrated, points of this kind would fall away.[86]Turning to what Ms Weaver had said about the date of 18 March 2011 being a mistake, Mr Calver described as “complete nonsense” the suggestion that it was never the intention of the complaint in India to attack the restructuring agreements. This was shown by paragraphs 24 to 27 of the Unique petition (dealing with the apprehensions of the petitioners and the relief sought). Thus the dispute was about both the properties transferred and the guarantees on the assets.

F3. The threshold and good reason requirements

[87]The submissions on whether Rakesh’s case satisfied the threshold requirement, and those on whether there was nevertheless good reason for not granting an injunction, overlapped with each other and with the submissions described in section F2 above. Below I summarise the main points to the extent that they have not already been dealt with.[88]The key points advanced in Mr Calver’s opening oral submissions in this regard included those identified in section B above. He stressed that the Indian proceedings sought to undo arrangements that had been made for working capital for the restructured business. Also in his opening submissions Mr Calver advanced the contentions on the threshold requirement identified in section F1 above. The complaints by Rakesh about the Indian proceedings met the threshold requirement, it was submitted, because those proceedings were in truth a dispute between the three family members who were party to the revised transaction.[89]Turning to Stonehouse v Jones, Mr Calver noted that none of the Californian claims in that case was founded on the relevant agreement, nor was there any suggestion that the Californian claims could be defended on the merits. By contrast, in the present case:(1) The complaint in India is mismanagement of assets in the Citibank accounts by allowing them to be used to guarantee loans to the new business.(2) Those loans are authorised by clause 18.10 of the SSD, and Mr Malhotra senior knew of them.(3) Clauses 18.10 and 41 allow Rakesh alone to procure those loans for the benefit of the new business.(4) The assets of Unique consist of monies paid into its Citibank account as a result of the conclusion of the restructuring agreements made under the SSD. Those are its only assets.(5) Prior to that payment in to the Citibank account, Unique’s directors with Mr Malhotra senior’s knowledge, passed a resolution authorising Rakesh to have complete control over the Citibank account.(6) They did this because they all intended the monies paid into the Citibank accounts to be used for the purposes of SPCPL, in particular to provide security to enable loans to be made to the new business for provision of operating capital. That was why the consortium of banks transferred the loans to SPCPL with Mr Malhotra senior’s knowledge.(7) The funds were paid into Unique’s Citibank account, and the guarantees were given by Unique, with the approval of all parties at the time.(8) In this regard Rakesh is not relying merely on disputed oral agreements. The documentary evidence pointed only one way. The whole point of Citibank accounts was to provide monies to be used by Rakesh in support of the new business. Mr Calver added that this was confirmed by the acknowledgement in Rajiv’s evidence noted in section B above.[90]Mr Calver then turned to points made by Ms Weaver in paragraphs 17 and 18 of her skeleton argument. These paragraphs need to be read with paragraph 16: 16. It is repeatedly asserted … that [Mr Malhotra senior and Rajiv] agreed that the funds received by the [Transauto main companies] would be used to meet the Sponsors’ obligations under the SSD to inject working capital so as to meet the financial target under clause 8 and that SSD envisaged that the funds would be used in that way. 17. However:(a) Despite these assertions being expressly challenged in Rajiv’s evidence, neither [Rakesh] nor Mr Bhansali have provided any detailed evidence of the alleged agreement by [Mr Malhotra senior and Rajiv] as to the use of funds belonging to the [Transauto main companies].(b) There is no provision in the SSD relating to the use of the funds paid to the [Transauto main companies] or requiring the [Transauto main companies] to provide any loan or other financial support to the Supermax Group.(c) The assertion that the Sponsors were obliged by the terms of the SSD to inject working capital in order to prevent Actis’s shareholding being increased is incorrect.(d) Clause 18.10 of the SSD … does not impose any such obligation. (i) Clause 18.10 is not linked to the achievement of the financial target or even to first year earnings. It has a different purpose: it comes into operation only if the Group has insufficient cash to run its day to day operations in the ordinary course of business in the first 15 months of operation. (ii) In any event, any obligation on [Mr Malhotra senior and Rajiv] under clause 18.10 would only arise if SMOH had notified the relevant parties (including [Mr Malhotra senior and Rajiv]) that a cash shortfall had arisen and Actis had made a request for the Sponsors to provide US$ cash loans. C does not allege that these conditions were ever met. 18. The fact that [Rakesh] was appointed a sole signatory on the bank accounts into which the [Transauto main companies] paid the funds received does not support the existence of the alleged agreement that the funds would be available to support the Supermax Group. First there is a dispute as to the circumstances in which [Rakesh] became a sole signatory. Secondly, [Rakesh] became a signatory at a time when Mr Malhotra senior still reposed trust and confidence in him and relied on him to deal with his personal financial affairs including his interests in the Indian companies … . There is nothing surprising that he should be given signatory power over the accounts into which the funds were paid for the purpose of investing them. It does not follow that the funds received by the [Transauto main companies] were put at the disposal of the Supermax Group, especially since [Mr Malhotra senior and Rajiv] were to have no further involvement in the affairs of the Group. The Board Resolutions do not record any agreement or understanding to that effect. There are no documents recording or evidencing the alleged agreement in the evidence on behalf of [Rakesh]. (a) Despite these assertions being expressly challenged in Rajiv’s evidence, neither [Rakesh] nor Mr Bhansali have provided any detailed evidence of the alleged agreement by [Mr Malhotra senior and Rajiv] as to the use of funds belonging to the [Transauto main companies]. (b) There is no provision in the SSD relating to the use of the funds paid to the [Transauto main companies] or requiring the [Transauto main companies] to provide any loan or other financial support to the Supermax Group. (c) The assertion that the Sponsors were obliged by the terms of the SSD to inject working capital in order to prevent Actis’s shareholding being increased is incorrect. (d) Clause 18.10 of the SSD … does not impose any such obligation. (i) Clause 18.10 is not linked to the achievement of the financial target or even to first year earnings. It has a different purpose: it comes into operation only if the Group has insufficient cash to run its day to day operations in the ordinary course of business in the first 15 months of operation. (ii) In any event, any obligation on [Mr Malhotra senior and Rajiv] under clause 18.10 would only arise if SMOH had notified the relevant parties (including [Mr Malhotra senior and Rajiv]) that a cash shortfall had arisen and Actis had made a request for the Sponsors to provide US$ cash loans. C does not allege that these conditions were ever met.[91]Mr Calver’s answer to paragraph 17(a) was that it was perfectly obvious what the parties agreed in relation to the use of the funds when one looked at the chronology and what happened. As to paragraph 17(b) he acknowledged that there was no provision in the SSD relating to the use of the funds. However what happened flowed from clause 18.10: the board resolutions, the account openings, Rakesh being made sole signatory, and entering into the guarantees with Mr Malhotra senior’s approval. On paragraph 17(c) the point was that clause 18.10 required the injection of working capital if the financial targets of the business were to be met.[92]Turning to paragraph 17(d), on point(i) Mr Calver relied on the evidence of Rakesh and Mr Bharucha explaining that it was indeed the case here that the group had insufficient cash to run its day to day operations in the ordinary course of business in the first 15 months of operation. On point(ii) he relied on Rakesh’s third witness statement demonstrating that the relevant conditions had been met.[93]In reply to paragraph 18 Mr Calver denied that there was any genuine dispute about the circumstances in which Rakesh became sole signatory on the Citibank accounts. He submitted that Mr Malhotra senior and Rajiv were “entirely untruthful about this evidence, as one can see from the contemporaneous documents … they have to say that … [Rakesh] fraudulently completed … four bank signatory forms, that his brother signed each of those forms as well somehow as a result of [Rakesh’s] fraud, and that then [Rakesh] was allowed to draw funds on those accounts despite this fraud. That is totally preposterous, but actually it is completely contradicted by the evidence … [there was] a board resolution in each case of 23 December … at a time when the father states himself that he had complete control … .”[94]Moreover, submitted Mr Calver, the signatory power was extremely wide. He added that the chronology demonstrated that the funds were for the use of the group. In that regard he relied upon the guarantees being entered into as soon as the funds were in the Citibank accounts and at a time when, by reason of the correspondence with the consortium of banks, he knew of and consented to what was being done.[95]On the question whether there was good reason not to grant an injunction, he was concerned to counter any suggestion that the Indian proceedings had reached a stage where it would be undesirable to stop them. In that regard he noted that to date the Company Law Board had granted interim orders without hearing Rakesh, and had not made any order purporting to unwind any dealings thus far.[96]As to arbitration proceedings, Mr Calver had submitted to Gloster J that arbitration proceedings ought to be brought by Mr Malhotra senior and Rajiv. As he had explained to Gloster J, Rakesh was willing to undertake to commence arbitration proceedings in relation to these disputes if the court considered that he should give such an undertaking.[97]Finally in relation to “good reason” Mr Calver sought to respond to a point made in Ms Weaver’s skeleton argument concerning the dangers which Rakesh feared would arise if the existing directors of the Transauto main companies were replaced by new directors nominated by Mr Malhotra senior. Ms Weaver had observed that new directors would owe duties to act in the best interests of the companies, which would include complying with the terms of existing binding obligations. Mr Calver submitted in answer that it was clear from the Indian proceedings, particularly in paragraphs 24 to 27 of the Unique petition, that new directors were highly likely to decide that it would be in the interests of the company to bring current arrangements to an end, thereby leading to the collapse of SPCPL.[98]In her oral submissions Ms Weaver identified three planks by which Mr Calver sought to tie the Indian proceedings to the SSD. The first of the three planks was the complaint that the Indian proceedings sought to undo transfers of property for which the SSD made express provision. Ms Weaver’s answer to that complaint is described in section F2.1 above.[99]The second plank was founded on the claim that there was an agreement that assets of the relevant companies would be available to support the SuperMax group. The third plank identified by Ms Weaver was an assertion by Rakesh that all matters in dispute were either expressly provided for or contemplated by the SSD. The submissions on these two planks overlapped, and I shall deal with them together.[100]Ms Weaver’s first main point on these two planks was that the revised transaction contained no provision that assets of the relevant companies would be available to support the SuperMax group. Ms Weaver added:(1) The absence of express provision is striking, and contrasts with the detailed provisions concerning, among other things, transfer of businesses, leases of properties, and transfer of intellectual property rights.(2) There are provisions which deal expressly with the payment of funds to the relevant companies, see in particular the revised flow funds steps.(3) There is express provision for the continuation of guarantees given by the Malhotra Parties, in particular clause 14.13 of the SSD.(4) If – which is disputed – it were envisaged (as suggested in evidence for Rakesh) that no other funds would be available because of Indian exchange control regulations, it was very surprising that there was no provision to deal with this. The reason, however, was that what should happen to the funds was not agreed as part of the restructuring and was not agreed under the SSD.[101]Ms Weaver noted that Rakesh had suggested that there was no other reason to have set out in the revised transaction specific arrangements for payment to the relevant companies. The answer to this was that by making such specific arrangements the revised transaction ensured that good consideration was given for the transfers made by the relevant companies to the new operating companies.[102]Ms Weaver added that the relevant companies were not parties to the revised transaction. The revised transaction did not contain any obligations or restrictions on the relevant companies. The revised transaction imposed no express obligations on Mr Malhotra senior or Rajiv as to how payments are to be used once they have reached the relevant companies. It was not right, submitted Ms Weaver, to rely on clause 18.10 as establishing any agreement that funds of the relevant companies would be held available and put at the sole disposition of Rakesh to use for the business, both immediately after the restructuring and for future working capital requirements. It imposed a much more limited obligation. Her clients were aware not only of clause 18.10 but also of the provisions enabling Actis to increase its shareholding, but (contrary to what seemed to be suggested in evidence submitted on behalf of Rakesh) there was no necessary link between the two. As to the procedure under clause 18.10 described in Rakesh’s third statement, her clients had not been told of him doing any of these things. That was because Rakesh did not arrange loans in the Sponsors’ names, but went straight to the boards of the Indian companies and got them to pledge their assets in support of loans. Moreover clause 18.10 – not least because of the time limits that it contained – did not support Rakesh’s assertion that the funds were to be available to be called on by the SuperMax group whenever Rakesh thought appropriate.[103]As to Rakesh being sole signatory on the Citibank accounts, while Ms Weaver noted Rajiv’s evidence about the Citibank account opening forms, her focus was on seeking to limit the inferences that could be drawn from Rakesh’s “sole signatory” status. Rakesh himself acknowledged that the Citibank accounts had been created specifically to receive and invest proceeds from the restructuring envisaged by the SSD. Rakesh’s sole signatory status was consistent with Rajiv’s evidence that his father permitted Rakesh to control the accounts at a time when he had trust and confidence in him. Rakesh himself gave an example of another occasion when Mr Malhotra senior placed trust in Rakesh to act as signatory on an account holding his (Mr Malhotra senior’s) money. (This was an account at Wells Fargo in Los Angeles: Rakesh said that he could not use funds in it as security for his cross-undertaking as the funds were sourced from dividend distributions of companies owned by Mr Malhotra senior.)[104]Summarising the position, Ms Weaver said that the alleged agreement or understanding was denied, but even if it were established it was a separate family agreement which neither arose under the SSD nor was connected with it, and concerned what would happen after the restructuring had been completed. There was nothing in the timing point: the opening of accounts in readiness to receive and invest large sums of money was nothing surprising. An agreement between father and son about assets of Indian companies held in India, even on the widest interpretation of the arbitration provision, did not fall within its scope.[105]In the course of argument I observed that paragraph 45 of Rajiv’s statement said that he and his father only learnt of the relevant companies’ guarantees from the email of 23 January 2012, and that neither he nor his father gave personal guarantees. This did not, however, deal with knowledge of the banks’ requests for personal guarantees. Ms Weaver accepted that it did not do so. But Rakesh’s assertions about knowledge in that regard was said to support the assertion that the companies’ guarantees were agreed and not objected to. If so, that could and should be litigated in the Indian proceedings. They were assertions about knowledge subsequent to the SSD, and subsequent to the completion of the restructuring, and did not bring the family dispute into the scope of the arbitration clause.[106]An additional point was made by Ms Weaver in support of the assertion that the dispute did not concern the SSD. This was that (in addition to the Transauto main subsidiaries) Emerald was one of the companies owned by Mr Malhotra senior through Transauto which had been caused by Rakesh to mortgage its assets. Yet it was not a recipient of funds under the revised transaction. Ms Weaver acknowledged that there was no petition in India concerning Emerald.[107]More generally in her oral submissions Ms Weaver advanced the contention noted earlier that Rakesh’s reliance upon clause 41 was not arguable to the standard that would justify an anti-suit injunction. If clause 41 were as wide as is now suggested, then it would not have been necessary for the SSD to give to Rakesh all the explicit controls which it sets out in some detail in relation to both the group and the shareholding companies. In support of her argument that a dispute about the scope of clause 41 did not need to be referred to arbitration, Ms Weaver suggested that it simply did not work to suggest that disputes in the Indian proceedings and acts done in those proceedings could be tied back into the arbitration clause. This was particularly clear as regards that part of the without notice injunction which restrained the calling of the extraordinary general meeting. Rakesh accepted in paragraph 4.20 of his witness statement that the shareholders are ordinarily entitled to requisition such meetings and to remove the directors by ordinary resolution. Rakesh claims to be entitled to the injunction because otherwise the board is likely to be changed and transactions which were allegedly authorised could be undone. The problem with that was that it is always open to shareholders to change the board of directors for whatever reason or for none, and the new board could review the transactions that the company had entered into to see if they were in the best interests of the company. The authority given by the board resolutions in relating to the opening of the Citibank accounts, for example, was not expressed to be irrevocable. It followed that in order to justify this aspect of the injunction Rakesh had to say that he had irrevocable authority to deal with the assets of the Indian companies in such a way that the shareholders were bound. Clause 41.1 was not an agreement between shareholders, and only dealt with matters provided for or contemplated by the SSD. The management of the Indian companies was something far outside the contemplation of the SSD. If directors had engaged in some entirely separate conduct which made them unsuitable to be directors, Mr Malhotra senior would be entitled to change the board, and the new board entitled to review the transactions. If they sought to undo transactions which were properly binding on the company, then that could be restrained by anyone who was affected – by litigation in India against the Indian companies and the directors if appropriate. If the concern is that the new directors will simply be puppets of Mr Malhotra senior and disregard their fiduciary obligations to the companies or their legal obligations to third parties, then SPCPL could take proceedings in India – but that had nothing to do with arbitration under the SSD.[108]Ms Weaver added that if the injunction were granted the position would be entirely unsatisfactory. The one thing that was not in dispute was that there has been an irretrievable breakdown in the relationship, not only between Mr Malhotra senior and Rakesh, but between Mr Malhotra senior and the directors of the companies. That has resulted in a deadlock, with each side blaming the other. This court was not called on to decide the rights and wrongs of the handling of tax matters and the other concerns as to things not being done. What they demonstrated was that management was in a state of paralysis, the shareholders had lost confidence in the directors, the directors were complaining, whether justifiably or not, that they were being harassed. It would be highly unsatisfactory if the shareholders could not take steps open to them as a matter of company law to resolve that situation by replacing the directors. Matters such as the tax penalty notices and the litigation concerning management of property needed to resolved, and the forum for resolving those issues were the company law boards in India.[109]Ms Weaver submitted that an arbitration could not resolve issues about the control and management of Indian companies. It would be unsatisfactory for the position in India to be frozen pending an arbitration. Even if there were an arbitration, there would still need to be proceedings in India. Accordingly India was the forum where all matters could be sorted out.[110]As regards the injunction against holding an extraordinary general meeting, Mr Calver submitted in reply that what was relevant was the basis upon which it was sought to remove the directors. The reason for seeking to remove them was that they had acted on Rakesh’s instructions to use the monies in the Citibank accounts and the assets in the Citibank accounts. Mr Malhotra senior had not suggested the directors should be removed for some reason unrelated to the SSD.[111]As to the contention that even if there is an arbitration there will still be a need to be proceedings in India, Mr Calver said that Rakesh would encourage a speedy arbitration of the dispute. This court in that way could order that the real dispute between the parties be resolved in the forum that they agreed to resolve it in.[112]Mr Calver stressed the reliance that Rakesh had placed in his witness statements upon clause 18.10 of the SSD. Ms Weaver had argued that there was an entitlement to be told about the notification to the Malhotra Parties and about the provision or procuring the provision of loans. That ignored clause 41. Mr Calver submitted that there was no obligation on Rakesh to inform Mr Malhotra senior and Rajiv of what had been done by him in their name. The scheme was that they would play no further part in the running of the business. Mr Malhotra senior had given Rakesh complete control over the Citibank accounts. The extension of the guarantee over funds in the Citibank account was part and parcel of Rakesh running the business. It followed that there was no obligation on Rakesh to provide information as to what he had done.[113]On the question of obligation to account, I pointed out that in the ordinary course if A gives to B the authority to receive notices on behalf of A or to do things on behalf of A, that normally carries with it some obligation, at least on enquiry and probably without, that B must tell A what B is doing, so that A knows what is being done in A’s name. Mr Calver’s answer was in broad terms that clause 41.1, when read in the context of the transaction as a whole and the desire of Mr Malhotra senior and Rajiv to cease to be involved in the business, ousted this normal obligation.[114]As to compliance with the requirements of clause 18.10 Mr Calver submitted that the evidence established such compliance. Any dispute as to such compliance was plainly a dispute under the SSD.[115]Mr Calver turned to Ms Weaver’s reliance upon evidence on behalf of her clients that there was no agreement to use monies paid into the Citibank accounts for the purposes of the operating companies. Rakesh’s second witness statement referred to “the understanding that I would have these funds available to satisfy the Malhotra Parties’ obligations under the SSD”. It was in that context that Rakesh had said that the Citibank accounts were created to receive and invest the proceeds from the restructuring. It would be to use those proceeds, as invested in the Citibank accounts, for the purposes of the restructured business.[116]I asked Mr Calver whether I was right to understand Rakesh as saying that: To the extent that I did not do that [use money invested in the Citibank accounts for the purposes of the restructured business], I regarded these as my father’s assets and that is why I put the interest in the Wells Fargo and regarded the interest in Wells Fargo as not mine to make use of.[117]Mr Calver confirmed that my understanding was correct. The critical thing was the scope of Rakesh’s authority over the Citibank accounts, and it was extremely wide. Mr Malhotra senior’s knowledge of the initial guarantees given by the companies to the consortium of banks demonstrated that he knew that the purpose of the monies in the Citibank account was for use to secure SPCPL’s borrowings.[118]As to Emerald, Mr Calver’s answer was that it was an original guarantor under the facility which in due course was transferred to SPCPL.[119]In reply to a question from me as to what relief would be sought from arbitrators under the arbitration agreement, Mr Calver said that points of claim would cover what was raised in the Indian proceedings. Mr Calver added that the claim to remove the directors plainly arose out of or was connected with the SSD because Mr Malhotra senior knew that the guarantees were being transferred to SPCPL, that the money had been transferred into the Citibank accounts, and that Rakesh was given an extremely wide remit over funds in those accounts. These matters followed completely, not just chronologically, but in terms of what the parties were doing, under the SSD. They were at least connected with, and indeed many arose under, the SSD because they were tied to clause 18.10 of the SSD.[120]I indicated concern as to how it was that this court could prevent a shareholder in India from suing a director in India over what the director did in relation to assets of the company in India. Mr Calver replied that a claim against the companies for matters unrelated to the deed could not justify a grant of relief by the English court. The dispute, however, that was being litigated in India was a dispute between Rakesh on the one hand and Mr Malhotra senior and Rajiv on the other, arising under the arbitration agreement.[121]When pressed as to whether he said that Mr Malhotra senior owed an obligation to Rakesh not to say to directors of the associated companies, “you have done the wrong thing in allowing the assets to be used in this way”, Mr Calver replied that he put it slightly differently. What was sought in India was to get around the agreement to arbitrate, by an application to remove the directors based upon the very dispute that arose under the deed, so that once the directors had been removed the transactions could be unwound. The companies as well as the directors were added to the Indian proceedings as another way to get around arbitrating the dispute. Complaints about not being able to see the books from time to time, tax and so on were connected with the SSD for reasons developed in his skeleton argument – essentially, as I understand it, because Rakesh had been given control over such matters.[122]In any event, submitted Mr Calver, the gravamen of the dispute was use of the Citibank account. Mr Malhotra senior and Rajiv pretended that they never agreed to it, never knew about it, and all of that was untrue. It was often the case with anti-suit injunctions that a party would try and get around an exclusive jurisdiction clause or arbitration clause by commencing proceedings abroad and utilising wholly owned companies and the like. In response to an assertion that the entities used were not actually a party to the agreement, and therefore the arbitration clause did not bite, the court had to look at what was actually going on and really assess whether this was a dispute arising out of the arbitration agreement or not.[123]The suggestion by Ms Weaver that the Indian complaints could be argued there without any reference to the SSD was, submitted Mr Calver, “completely baffling”. There had to be a full understanding of how clause 18.10, clauses 7.2 and 8.2, clause 41, and the funds flow steps and how it worked. The board resolution for the opening of the Citibank account was in such wide terms that it could have had no intention other than to give Rakesh complete control over the funds that would be paid into that account, and that could only be because all were agreeing that Rakesh would have access to those funds for the benefit of the new business.

F4. A partial injunction?

[124]At the conclusion of Ms Weaver’s submissions I raised with her what might be a hypothetical question. If a particular part of the SSD had a meaning which would lead to many of the matters of complaint in the petitions becoming groundless, might the court make an order that if Mr Malhotra senior and Rajiv wish to have them resolved, they must be resolved in the arbitration, but not interfering with their ability to conduct the Indian proceedings in any other way?[125]Ms Weaver accepted that this might be hypothetically possible, but queried whether it was practically possible. If in practical terms there was a particular transaction between the company and a third party governed by an arbitration clause, such a course might be possible. That would be directed to the validity of the transaction, as opposed to the management of control of the company. In theory such a line could be drawn, but the court’s approach was so tied to the circumstances of the particular case that it was not possible to give an answer. Questions as to control of the company could only be resolved in India.[126]Mr Calver in reply submitted that it would be possible to decide that there was a discrete aspect of the Indian proceedings that was not properly characterised as a dispute arising from or connected with the revised transaction, and that therefore there was no power to restrain that discrete aspect of the Indian proceedings by injunction. However Rakesh’s primary case was that the allegations about taking instructions from him and siphoning away monies from the Citibank accounts underpinned each of the allegations in the Indian proceedings.

G. Events after the hearing

[127]In section A above I record the two items which I directed to be provided after the hearing: the undertakings which Ms Weaver had described and the draft arbitration points of claim which Mr Calver had referred to. There was a short and structured timetable for exchange of comments on each item. As appears below, neither side was content to let matters rest there.

G1. The undertaking to amend the petitions

[128]By letter addressed to Akin Gump dated 20 June 2012 Fladgate undertook that their clients would seek to amend (by taking all necessary steps) specified paragraphs in the petitions. The paragraphs in question were those which asked the Board to set aside, terminate or modify dealings by the company in question (including agreements, payments, and transfers of assets or properties) “as may have been effected after 18 March 2011”. In their place the amended paragraphs would refer to such dealings as may have been effected “after the completion of the Restructuring Agreements [as defined in, and in accordance with, the revised transaction], adding: For the avoidance of doubt, the Petitioners do not seek to set aside, terminate or modify any of the Restructuring Agreements …[129]It was obvious from this letter that Fladgate’s clients did not offer any undertaking additional to that which had been promised at the hearing.[130]Under cover of a letter to Fladgate dated 27 June 2012 Akin Gump submitted a note on the undertakings. The note complained of the narrow scope of the undertaking, but ignored the fact that what had been promised was an undertaking of narrow scope (see section F1 above). Thus in paragraph 2 the note listed four main areas of dispute between the parties which did not include any complaint that the Indian petitions sought to undo the Restructuring Agreements. It then complained in paragraph 3 that the undertakings did not address these four areas. There was no express recognition anywhere in the note that the purpose of the promised undertakings had nothing to do with the four areas listed in paragraph 1. Their purpose was to make clear that the dispute between the parties did not include any attempt to undo the Restructuring Agreements.[131]As to whether the undertakings achieved their purpose, among a host of other complaints in paragraph 3 of the note it was asserted that the petitioners would continue to be able to seek to undo any transfer or other dealing with assets or properties “as may have been effected after 18 March 2011 at [Rakesh’s] request and /or direction.” There were then identified things that were done at Rakesh’s request and/or direction, and thus are said to remain at risk of being undone despite the undertakings. Those things did not include the carrying out of the Restructuring Agreements. There is thus no contention in the Note that the undertakings fail to achieve what was promised by Ms Weaver at the hearing. In these circumstances I conclude that the undertakings given by Fladgate remove any real risk that the petitions will lead to anything which would undo the RA Agreements.[132]In effect, what Akin Gump did in their note was to re-argue their clients’ case on matters other than those relevant to the undertakings. There was no recognition that this went beyond what had been permitted by my order at the hearing.[133]Fladgate by letter dated 5 July 2012 indicated that they had no comments on Rakesh’s response to the undertakings. They added a sentence reiterating an aspect of their client’s case. For good measure they then referred to a decision of the Indian Supreme Court said to show that the right to call an Extraordinary General Meeting was “unassailable”. On the part of Fladgate, too, there was no recognition that what they had done went beyond what had been permitted by my order at the hearing.

G2. Rakesh’s draft points of claim in an arbitration

[134]Also under cover of the letter to Fladgate dated 27 June 2012 Akin Gump submitted draft points of claim which would set out Rakesh’s case in arbitration proceedings if he were to institute them. Fladgate requested an extension of time in which to comment upon the draft points of claim. In the event their letter of 5 July 2012 stated that their clients did not wish to make any observations on the draft points of claim.

G3. The exchanges on 5, 11 and 13 July 2012

[135]In a letter to Akin Gump dated 11 July 2012 Fladgate inquired when a response to their single page letter of 5 July 2012 was likely to be received. They added that their clients were keen to give the court sufficient time to consider and deliver judgment before the end of term. I observe that this objective was unlikely to be assisted by their reliance in their letter of 5 July 2012 upon a decision not previously cited.[136]The next development was a written submission on behalf of Rakesh dated 13 July 2012. The written submission was settled by Mr Calver and ran to more than 7 pages. It explained that Indian legal advice had been obtained on the Supreme Court decision cited in Fladgate’s letter of 5 July 2012. In case the court thought it relevant, the decision in question did not show that the right to call an Extraordinary General Meeting was “unassailable”. A decision of the Madras High Court, along with an extract from a textbook, were cited in this regard.[137]The submission of 13 July 2012 criticised Fladgate’s clients for unexplained delay, and it made adverse comment on Fladgate’s clients’ refusal to mediate and failure to respond to the draft points of claim.[138]It also made adverse comment on Fladgate’s failure to answer points made in Rakesh’s note responding to the undertakings. However, for the reasons that I identify in section G1 above, there was nothing in the note which required an answer.[139]Finally the submission of 13 July 2012 relied on an as yet unreported Court of Appeal decision, Joint Stock Assets Management v BNP Paribas (Judgment 24 May 2012) which, it was said, “fully supports” Rakesh’s application for an anti-suit injunction.

G3. The exchanges on 17 and 24 July 2012

[140]Mr Calver’s submission of 13 July 2012 was answered by a written submission dated 17 July 2012 settled by Ms Weaver. She rightly observed, among other things, that her clients were not required by my order to draft a defence to the points of claim.[141]As to Indian law concerning the ability to call an extraordinary general meeting, Ms Weaver said that the Indian Supreme Court case supported the point in her skeleton argument that as majority shareholder Mr Malhotra senior had an unfettered right to remove the directors which he was entitled to exercise without reason. The Madras High Court case was concerned with a separate point concerning the validity of a requisition for an extraordinary general meeting.[142]Turning to Joint Stock Assets Management v BNP Paribas, Ms Weaver submitted that the issue in the foreign suit in that case was the very issue which was the subject of the arbitration. That was not true of the present case, which more closely resembled Star Reefers Pool Inc v JFC Group Ltd [2012] EWCA Civ 14.[143]On behalf of Rakesh, Mr Calver settled a response dated 24 July 2012. It complained that while it would have been reasonable for there to be some short submissions on Joint Stock Assets Management v BNP Paribas, it was not reasonable or fair to make a further round of wide-ranging submissions in the document dated 17 July 2012. Paragraph 5 of the response of 24 July 2012 proceeded on the premise that my order at the hearing envisaged a rebuttal of the draft points of claim. That premise was mistaken: my order envisaged only that there would be such comment on the draft points of claim as Fladgate’s clients saw fit.[144]At paragraph 6 the response of 24 July 2012 identified issues which were said to be defined in the draft points of claim. The first two such issues were these:(1) Was there an oral agreement/common understanding between the parties which formed an integral part of the restructuring under the SSD, as alleged in paragraph 12;(2) Was each of the steps taken in paragraphs 13-20 taken pursuant to (a) the terms of the SSD and/or (b) the oral agreement/common understanding.[145]They were followed by a third sub-paragraph which set out conclusions rather than issues: (3) If so (as [Rakesh] alleges), then:(a) these are issues which should be resolved by way of the agreed LCIA arbitration process and(b) the Company directors are entitled to act in the manner of which complaint is made in India (paragraphs 24 and 25(1)-(13) [of the draft points of claim]);(c) [Rakesh] is entitled to the relief sought in paragraph 27(1)-(11) [of the draft points of claim] and [Mr Malhotra senior and Rajiv] must be restrained from proceeding in India by themselves and their companies which they control.[146]Turning to Joint Stock Assets Management v BNP Paribas, Mr Calver submitted that there were two distinct issues:(1) The first issue is whether the disputes in the Indian Proceedings arise from or are at least connected with the SSD and which the Respondents (and their controlled companies) are therefore obliged to arbitrate and not litigate in India. The answer to that question is dealt with above. The Respondents (and their controlled companies) are wrongfully seeking to litigate such dispute in India and they have not been able to put up a defence to this dispute in response to the Claimant’s Points of Claim in the intended arbitration.(2) The second issue is whether, as in BNP Paribas, the Respondents are acting unconscionably by using companies in their common ownership and control to bring proceedings in India with a view to avoiding their contractual obligation to arbitrate these disputes, and instead are pretending that these are merely internal disputes about corporate governance (whereas the Respondents’ obvious intention is to get around the arbitration clause by seeking to have the directors removed and then seeking to unravel the contracts entered into by those directors in accordance with the instructions given to them by the Claimant under the terms of the SSD and the connected oral agreement/understanding). BNP Paribas establishes that in such circumstances the court has jurisdiction to grant the anti-suit injunction against not just the parties to the arbitration agreement (the Respondents) but also against the collusive non-parties (i.e. the Respondents’ companies). This case is a fortiori to BNP Paribas, because the Respondents are even parties to the impugned foreign proceedings (unlike Mr. Deripaska).[147]Mr Calver added: 9. In short, there would be no Indian Proceedings at all were there not a dispute between the Respondents and the Claimant arising under or connected with the SSD. 10. Contrary to the Defendants’ throw-away remark, it is plainly not a legitimate juridical advantage at all for the Respondent to litigate in India disputes which arise from and are connected with the SSD and which they specifically agreed would be referred to arbitration; and crucially the Defendants have not put in any substantive response to suggest to the contrary, despite being afforded a full opportunity by the Court to do so.[148]Finally in the response of 24 July 2012 Mr Calver sought to answer the points made by Ms Weaver on the Indian cases.

G5. The end of term, Fladgate’s application, and my ruling

[149]As the end of term approached it became clear that I would not be able to deliver judgment before going on leave. My clerk advised the parties of this. This led to an application by Fladgate. The application, the submissions on it, and the outcome, are all described in my ruling dated 1 August 2012: 1. On 24 July 2012 my clerk advised that while I had hoped to have completed my draft judgment in this case before going on leave on Thursday 26 July, that had not been possible, in part owing to post judgment material from the parties arriving later than had been planned. She added that I would be working on the draft judgment while on leave. It would be circulated on Tuesday 18 September and hand down would be on Friday 21 September. 2. This advice led to Fladgate LLP’s emailed letter of 25 July 2012, the claimant’s response emailed on 27 July 2012, and Fladgate LLP’s emailed letter of 30 July 2012. It is clear from this material that the defendants assert two concerns arising from the continuation, during the further period of some 7 weeks before the draft judgment will be ready, of the injunction granted by Mrs Justice Gloster on 26 March 2012. The first is that the value of the claimant’s cross-undertaking will be reduced by any dissipation or diminution in his assets during this period. The second is that it is not possible for the defendants to administer the Indian companies owned by the first defendant whilst the injunction remains in place. Below I identify the key points in relation to each concern. As will be seen, it is not necessary for me to express any view on many of the points of detail, and I do not think it desirable to do so. 3. As regards the cross-undertaking, there has been an issue as to whether the claimant should provide security. He had said that he had very limited free assets. The defendants pointed out that he had a Wells Fargo bank account. He replied that the bank account was held jointly with the first defendant, and that he regarded the money in the bank account as the first defendant’s. A copy bank statement from that account has now been produced by Fladgate LLP showing that on 6 June 2012 it was closed and the previous balance of $1.019m was transferred from the Wells Fargo account to a new account. The claimant’s response says at paragraph 16 that the defendants “are fully aware that … the monies in the Wells Fargo account have been moved for the benefit of the [first defendant] to a much higher interest bearing account.” Fladgate LLP’s letter of 30 July 2012 does not controvert this assertion, merely pointing out that the first defendant is not a signatory to the new Wells Fargo account. I infer that the defendants did indeed know of the move to a new account prior to Fladgate LLP’s letter of 25 July 2012, although precisely when they became aware of this is not clear. 4. Overall there appears to be no change in the claimant’s practical ability to deal with the funds held by Wells Fargo – on the previous account he had power as a joint signatory to move funds, and on the new account he continues to have power to move funds. The difference appears to be that the first defendant no longer has the ability to do the same – an ability which he never sought to exercise during the period that the funds were in the original account. An offer was made as regards the original account that it could be used to provide security if the first defendant wished, and has been repeated as regards the new account. It has not been taken up. 5. I draw attention to two features of the way that this matter has been presented to the court. The first is that at the hearing on 15 June 2012 the claimant, and the defendants either then or later, knew that the funds had been moved from the original Wells Fargo account. Yet the court was not told this on 15 June 2012, nor were any steps taken to inform the court later. The second is that the defendants apparently caused Fladgate LLP to raise this matter with the court in the letter of 24 July 2012 without revealing what each of defendants knew about the transfer of funds and when they had known about it. 6. In these circumstances the material before me does not warrant any further action by the court as regards security for the cross-undertaking. However it does give rise to a need for both the claimant and the defendants to consider whether the court has been kept informed of matters relevant to the issues that I must decide. I say more about this below. 7. The second concern is that it is not possible for the defendants to administer the Indian companies owned by the first defendant whilst the injunction remains in place. The claimant identifies matters which are said to indicate that the urgency of resolving this is not as great as the defendants have suggested. I consider that these matters should be treated for present purposes as showing no more than acceptance of my proposed timetable under which I hoped to be able to give judgment before the end of term. 8. In my view the fact that the injunction is continuing makes it important that judgment should be given as soon as possible. It is for that reason that, as explained in my clerk’s email, I shall be working on the draft judgment while on leave. Regrettably it is not the only judgment that I shall be working on while on leave: a number of urgent matters arose in the period before I went on leave, with the result that work has had to be pushed back. I am confident that – in the absence of any further unexpected development in the present case – I shall be able to circulate the draft judgment on 18 September 2012 as planned. 9. Fladgate LLP’s letter of 30 July 2012 seeks to explain that they had envisaged that I should give a ruling as to the result of the hearing on 15 June 2012, to be followed by reasons later. I cannot do this, for although I have been able to do some work on the draft judgment I have not reached any conclusion. Nor will I reach a conclusion until I have analysed all the material, including the material that was supplied in the period before I went on leave. 10. Thus I conclude that the concerns raised by Fladgate LLP should not lead me, as at present advised, to take any action other than to continue to work on the draft judgment in the manner indicated in my clerk’s email of 24 July 2012. The sole respect where a change of plan may be needed concerns the point identified at paragraph 6 above. If either side considers that for the purposes of my draft judgment it is necessary to supply me with corrected or up to date information then a witness statement in that regard, made personally by the relevant party, must be filed with the court and served on the other side as soon as possible. I stress that I am not inviting the parties to re-argue the application. It is only if some matter of real importance calls for correction or updating that this course should be taken.

G10. The response to paragraph 10 of my ruling

[150]In a witness statement dated 31 August 2012 Mr Malhotra senior sought to answer my concern that steps had not been taken to inform the court of what had happened on the Wells Fargo account. That concern was not in itself something which called for further evidence: my ruling stressed that further evidence should be filed only if some matter of real importance called for correction or updating. However Mr Malhotra senior’s witness statement additionally sought to deploy what had been said by Rakesh in relation to the Wells Fargo account in support of arguments that I should reach three conclusions: that the cross-undertaking should be fortified, that the court should be cautious in approaching Rakesh’s evidence, and that Rakesh had failed to give complete and accurate evidence as to his financial position.[151]In this circumstances it seemed to me that these serious allegations should not be allowed to stand without affording Rakesh an opportunity to respond. This in turn meant that the date for handing down judgment would have to be put back. In that regard Mr Malhotra senior had needed more than four weeks in order to file his evidence on 31 August 2012, and could not in my view complain if Rakesh were afforded three weeks in order to answer it.[152]I have carefully considered the subsequent evidence and submissions. In the light of all the material placed before me I conclude that any inaccuracy on the part of Rakesh in what was said before and at the hearing is not so serious as to warrant any of the conclusions urged by Mr Malhotra senior.

H. Analysis of issues in these proceedings

[153]In accordance with the principles identified in section F1 above the first main topic that I must consider is whether the threshold requirement is met: is there a high degree of probability that the bringing and continuing of the Indian petitions is contrary to the agreement to arbitrate in clause 43.1? If I conclude that the threshold requirement is met, then I must go on to consider the second main topic: is there a good reason not to grant the injunction sought?[154]Analysis of the threshold requirement is made more complex in the present case by the need for Rakesh to overcome the hurdle that the Indian petitions seek only limited relief against Rakesh, and the substantial relief that they seek is generally sought against others. Rakesh sought at the hearing to overcome that hurdle by saying that the claims against others were no more than “dressed-up” versions of claims which were in truth against him. I shall refer to this as “the dressing-up argument”. It seems to me convenient to start with a base question whether the Indian claims have been shown to the requisite standard to involve the determination of something which, if the Indian claim were brought against Rakesh by Mr Malhotra senior or Rajiv, would fall within clause 43.2. It is only if the base question is answered in Rakesh’s favour that the dressing-up argument can get off the ground.[155]On the base question I start with Mr Calver’s claim that the Indian petitions contravened clause 43.2 because they sought to undo the RA Agreements. Next, I deal with his claim that they contravened clause 43.2 because they attacked the alleged inter-sponsor agreement. In that regard I begin by examining generally how this fits in to the threshold requirement, and go on to consider what is said to have been expressly agreed, and Rakesh’s case that inferences may be drawn as to an agreement or “understanding”. I then turn to the claim that the petitions seek to undo things done by Rakesh under clauses 18.10 and 41.1.[156]For reasons which I explain below, I have concluded that Rakesh is unsuccessful on the base question, with the result that the dressing up argument (including the BNP Paribas case relied on by Rakesh in the written submission of 13 July 2012 and subsequently) and the good reason requirement do not need to be considered. Accordingly I deal with them only briefly.

H1. Claimed attack on the RA Agreements

[157]Mr Calver’s oral opening submissions in this regard understandably placed great reliance on the date of 18 March 2011 specified in the revised petitions. Dealings after that date would include the carrying into effect of the RA Agreements, and any attempt to undo them would be contrary to the revised transaction. Mr Calver relied on paragraphs 24 to 27 in the Unique petition as demonstrating that it was always the intention to attack the restructuring agreements. It is true that paragraph 26 referred to an entitlement to have disclosure “with effect from March 2011”. Paragraph 26 then goes on to assert entitlement in certain circumstances to have contracts and liabilities set aside, terminated or modified, with no express limitation as to date. However when one looks at the Unique petition, and indeed the other petitions, as a whole it seems to be clear that the substantive complaints in the petitions concern dealings other than completion of the RA Agreements. This supports Ms Weaver’s assertion that a mistake was made when identifying the date of 18 March 2011 as the point from which transactions should be undone. I conclude on the material before me that this assertion is likely to be correct.[158]In any event, for the reasons given in section G1 above, I conclude that the undertakings given by Fladgate remove any real risk that the petitions will lead to anything which would undo the RA Agreements.

H2. Threshold: alleged inter-sponsor agreement generally

[159]Rakesh’s first witness statement said that “the Sponsors” had “agreed” certain things. By the time that the draft arbitration points of claim came to be prepared an additional or alternative way of putting the matter had emerged, namely that there was a common understanding. The draft points of claim referred to the parties involved as being “the parties to the SSD” rather than “the Sponsors.” With some interpolations in italics by me, the way it is put in paragraph 12 of the draft points of claim is as follows: 12. As described above, the parties to the SSD understood that because SPCPL which would take over the running of the Business as a new company, it would require the necessary working capital. Accordingly, as an integral part of the restructuring under the SSD, it was orally agreed between the parties to the SSD just prior to the conclusion of the SSD and/or it was their common understanding upon which they conducted themselves and upon which RM [i.e Rakesh] relied (as set out below) – such that the Respondents are estopped from denying such common understanding – (“the oral agreement/common understanding”) that:(a) [i] approximately 45% of the Funds Flow Monies, or US$23,775,744.44, would be deposited into new, separate interest-bearing accounts held in the names of the relevant Affiliated Companies [the term “Affiliated Companies” is defined in paragraph 2 to mean the Transauto main companies and Emerald], and that [ii] such funds would be used, at RM’s behest, for the benefit of the Group, and in particular SPCPL, in the day to day running of the Business; and/or(b) the aforesaid monies could therefore be used [i] for the payment of any professional fees by the Group and [ii] by way of security to enable the provision of bank lending to SPCPL under clause 18.10; and/or(c) the Affiliated Companies’ other assets were to be put at the disposal of the Group in the manner set out in the Transaction Documents; and/or(d) the security/collateral given by the Affiliated Companies (by way of guarantee) to a consortium of banks so as to secure working capital facilities from those banks for the Affiliated Companies would be extended by them to SPCPL so as to enable SPCPL to avail itself of the same working capital facilities (since it would now be running the Business).[160]For convenience I have identified as “[i]” and “[ii]” two distinct assertions in sub-paragraphs (a) and (b). What is said in sub-paragraphs (a)[i] and (c) was agreed by the Sponsors (and other parties to the SSD) initially in the SSD, and was modified by the SD. As so modified, it is common ground that it was carried into effect, and (as noted in section G1 above) the undertakings given by Fladgate will ensure that this is not put at risk in the Indian proceedings. Accordingly I refer below to “the disputed agreement/understanding” as meaning the matters set out at sub-paragraphs (a)[ii], (b) and (d).[161]Applying this analysis to Rakesh’s case as set out in paragraph 6 of the response of 24 July 2012, the first of the two issues in the draft points of claim becomes: (1) Was there [the disputed agreement/understanding] between the parties which formed an integral part of the restructuring under the SSD, as alleged in paragraph 12 [(a)[ii], (b) and (d)];[162]The Indian claims to which Rakesh objects do not on the face of the claim make any express reference to the SSD or SD. In so far as Rakesh’s case is that the claim is answered by the disputed agreement/understanding, and therefore should be arbitrated, in accordance with the principles discussed in section F1.3 above Mr Calver did not contest that he must show a high degree of probability that the disputed agreement/understanding existed and the claim in question fell within it.[163]The disputed agreement/understanding, and allegations about its extent, are strongly contested. Both Mr Malhotra senior and Rajiv denied Rakesh’s assertions about the alleged inter-sponsor agreement. Their case is that in accordance with the family relationship then existing Rakesh was given sole signatory powers over the Citibank accounts because the father trusted the son to manage the father’s assets. As to the evidence which is said to demonstrate either that there was such an agreement, or at least that there was such an understanding, they say that it is consistent with the family relationship that they describe.

H3. Threshold: absence of express agreement

[164]Ms Weaver noted that while there were repeated assertions that Mr Malhotra senior and Rajiv had agreed certain things, those assertions had been challenged in Rajiv’s evidence, and no detailed evidence of the alleged agreement had been provided in reply.[165]A bland assertion that something was agreed is not enough to show a high degree of probability that it was. What would ordinarily be expected would be assertions, supported by evidence, about(1) whether the agreement was express or implied;(2) to the extent that it was express whether it was oral or in writing; and(3) to the extent that oral statements are relied upon, (a) by whom, (b) to whom, (c) when, (d) where, (e) in whose presence and (f) the gist of the words used.[166]The draft arbitration points of claim make no assertions of any of these things. In the annex to this judgment will be found extracts from evidence relevant to this and other points. The only occasion when anything approaching proper particularisation of an express agreement appears in evidence is in the last sentence of paragraph 4.7 of Rakesh’s second statement. The sentence in question contains a particularised oral statement limited to who would have signatory powers, and of what type, over “the current accounts” of the Transauto main subsidiaries : 4.7 … Indeed, I remember very clearly that we were all in the room together when [Mr Malhotra senior] told me and [Rajiv] specifically and we agreed that I would be a sole signatory on the current accounts of the Affiliated Companies [a term defined in paragraph 1.12 of Rakesh’s first witness statement to mean the Transauto main subsidiaries], and I would also be a joint signatory with [Rajiv].[167]Even if I were to conclude that there is a high degree of probability that this oral statement was made, this would of itself come nowhere near establishing that the disputed agreement/understanding existed, let alone that any particular claim concerned something which fell within it.

H4. Weaknesses in the alleged inferences

[168]My analysis in section H3 above leads to the conclusion that in so far as Rakesh says that a particular claim in India is answered by the disputed agreement/understanding, and therefore should be arbitrated, he has not shown to a high degree of probability that there is any express oral agreement to that effect. It follows that Rakesh’s case for an injunction in relation to such claims will only be made good if inferences he derives from documents or events are so strong as to show to a high degree of probability that an implied agreement or understanding existed on relevant matters.[169]It is convenient to take first the matters identified at paragraph 12(a)[ii], (b)[i], and (b)[ii] of the draft arbitration points of claim. Paragraph 12 makes clear – by using the word “therefore” – that (b)[i], and (b)[ii] are simply examples of what falls within the alleged agreement/understanding at (a)[ii]. Thus we are concerned with an ability on the part of Rakesh to use funds in the accounts “for the benefit of the Group, and in particular SPCPL, in the day to day running of the Business”, examples of which are said to be using funds in the accounts “for the payment of any professional fees by the Group” and using funds “by way of security to enable the provision of bank lending to SPCPL under clause 18.10”.[170]I deal at the outset with Mr Calver’s submission that Mr Malhotra senior and Rajiv were “entirely untruthful” about the account opening forms. In my view this mis-reads Rajiv’s evidence. He explains what he says he was told, and that he signed relevant forms in blank. His account is that he was told of a change in what had been proposed. This appears to have been overlooked when asserting that he was being untruthful.[171]Mr Calver’s general assertion was that it was perfectly obvious what the parties agreed in relation to the use of the funds when one looked at the chronology and what happened. However, as to the main matters relied on by Mr Calver in this regard:(1) “The signatory power was extremely wide.” This seems to me perfectly consistent with evidence that at the time Mr Malhotra trusted Rakesh to manage the family’s financial affairs. Rakesh himself explains that he was given the powers of a sole signatory over the Wells Fargo account. Moreover, as Ms Weaver pointed out, Rakesh acknowledged that the Citibank accounts had been created specifically to receive and invest proceeds from the restructuring envisaged by the SSD. Thus even on his own case, insofar as he was not using the funds for SPCPL, he was under a duty to manage them for his father in the same way that he managed the Wells Fargo account.(2) “The guarantees were entered into (in May 2011) as soon as the funds were in the Citibank accounts.” That is consistent with Rakesh making use of his influence over the directors from the time that the revised transaction was completed. However an inference can be drawn in this regard against Mr Malhotra senior and Rajiv only if Rakesh can establish to the required standard that they were aware in May 2011 of the guarantees being given: see below.(3) “There was no other reason to have set out in the revised transaction specific arrangements for payment to the relevant companies.” The answer to this was given by Ms Weaver: by making such specific arrangements the revised transaction ensured that good consideration was given for the transfers made by the relevant companies to the new operating companies.[172]The remaining aspect of the disputed agreement/understanding is identified at paragraph 12(d) of the draft arbitration points of claim: an agreement or understanding that “the security/collateral given by [the Transauto main companies and Emerald] (by way of guarantee) to a consortium of banks so as to secure working capital facilities from those banks for the Affiliated Companies would be extended by them to SPCPL so as to enable SPCPL to avail itself of the same working capital facilities (since it would now be running the Business)”. In this regard Rakesh asserted, but has not shown on the material before the court, that Mr Malhotra senior gave a personal guarantee. Even if he had done so, however, this would not show that he was aware of the giving of guarantees by the Transauto main subsidiaries. The correspondence produced by Rakesh concerns transfer of the working capital facilities needed prior to completion by those subsidiaries to SPCL which would need them after completion. The guarantees by the subsidiaries were given after completion. In these circumstances it does not seem to me that the case for an inference of knowledge on the part of Mr Malhotra senior is made out to the requisite standard.

H5. Threshold: reliance on clauses 18.10 and 41.1

[173]Here, too, the Indian claims to which Rakesh objects do not on the face of the claim make any express reference to the SSD or SD. In so far as Rakesh’s case is that the claim is answered by an entitlement to rely on clauses 18.10 and 41.1, and therefore should be arbitrated, in accordance with the principles discussed in section F1.3 above Mr Calver did not contest that he must show a high degree of probability that either or both of clause 18.10 or clause 41.1 are engaged and either alone or together justify the conduct which the relevant claim calls into question.[174]Mr Calver in argument sought to rely upon these clauses in various respects. Two of his points discussed in section F3 appear to me to be fundamental to his argument. Below I summarise them in quotation marks before commenting on them:(1) “While there was no express provision in the SSD relating to the use of the funds, what happened flowed from clause 18.10: the board resolutions, the account openings, Rakesh being made sole signatory, and entering into the guarantees with Mr Malhotra senior’s approval. Clause 18.10 required the injection of working capital if the financial targets of the business were to be met.” It seems to me, however, that approval of the guarantees is not established to the requisite standard (see above). More generally the matters described do not involve the operation of clause 18.10 itself: at most they can be said to be making arrangements to seek to ensure that clause 18.10 will not come into play. As Ms Weaver points out, clause 18.10 does not establish any agreement that funds of the relevant companies would be held available and put at the sole disposition of Rakesh to use for the business, both immediately after the restructuring and for future working capital requirements.(2) “[Ms Weaver’s arguments …] ignored clause 41. … there was no obligation on Rakesh to inform Mr Malhotra senior and Rajiv of what had been done by him in their name. The scheme was that they would play no further part in the running of the business. Mr Malhotra senior had given Rakesh complete control over the Citibank accounts. The extension of the guarantee over funds in the Citibank account was part and parcel of Rakesh running the business. It followed that there was no obligation on Rakesh to provide information as to what he had done.” This submission seems to me to give clause 41.1 a meaning which it cannot conceivably bear. The purpose of clause 41.1 is to make Rakesh the MP Representative. That must be for the purposes of dealings between the Malhotra Parties on the one hand and the remaining parties on the other. Mr Calver relies upon the desire of Mr Malhotra senior and Rajiv to give up involvement in the business. A desire to give up involvement in the business doe not, as a matter of commercial common sense, indicate that there is a desire to give a blank cheque to Rakesh, without reference to Mr Malhotra senior in relation to companies owned by Mr Malhotra senior, to give instructions going beyond his powers of a sole signatory over the Citibank accounts and involving those companies in the business. No doubt if Rakesh were able to make arrangements using his own resources for the loan required by clause 18.10 he would be entitled under clause 41 to say to Actis and Actis would be entitled to say to the Malhotra Parties that this was proper performance of that clause. It is a completely different thing to say that Rakesh was in effect given a power of attorney by clause 41 to dispose of Mr Malhotra senior’s assets. The grant of a wide power of that kind would require something much more formal. The notion that clause 41 was intended to do this become even more outlandish when it is suggested that the power under clause 41 would carry with it an ability for Rakesh to take action without telling Mr Malhotra senior anything about what he had done.[175]Ms Weaver submits that Rakesh’s authority under clause 41.1 is limited in two ways(a) to taking actions and doing things provided for in or contemplated by the SSD (as extended) and(b) to taking action and doing things to be performed by a Malhotra Party. I do not understand Mr Calver to dispute either of these points. I agree with Ms Weaver that it is impossible to construe the actions alleged in the Indian petitions in relation to the management of the relevant companies as actions “provided for in or contemplated by” the revised transaction.

H6. Matters which do not need to be determined

[176]For the reasons given in sections H1 to H5 above I conclude that the threshold requirement is not met as regards the base question whether the Indian claims have been shown to a high degree of probability to involve the determination of something which, if the Indian claims had all been brought against Rakesh by Mr Malhotra senior or Rajiv, falls within clause 43.2. It follows that I do not need to determine issues arising in relation to the dressing up argument (including the BNP Paribas case relied on by Rakesh in the written submission of 13 July 2012 and subsequently) and the good reason requirement. Accordingly I deal with them below only briefly.

H 6.1 The dressing up argument

[177]In my view Rakesh’s dressing up argument, as advanced at the hearing, involved real difficulty. The first point to note is that the argument which succeeded in the BNP Paribas case was not the argument advanced at the hearing. In the BNP Paribas case both Blair J and the Court of Appeal held, in effect, that the litigation in Russia was vexatious and oppressive because it was a blatant attempt to circumvent the arbitration clause. By contrast at the hearing in the present case Mr Calver relied on principles applicable in cases where the foreign litigation was a breach (as opposed to a circumvention) of an arbitration clause.[178]It seems to me that as a matter of principle the dressing up argument could only succeed if the test identified in the BNP Paribas case were met. Unless the claims against the other respondents in India were vexatious or oppressive, the Indian petitioners would in my view be fully entitled to say that as between them and the relevant respondent there was no agreement to arbitrate.[179]I do not consider that the claims against the other respondents in India were vexatious or oppressive. The evidence that the directors were acting under the influence of Rakesh was strong. Particularly alarming in that regard was the refusal of the directors to provide the shareholders with information about what the company was doing, thus preventing the shareholders from even querying whether a transaction proposed by Rakesh was one which they were obliged to acquiesce in. Even taking at face value Rakesh’s evidence as to the bitterness of the family dispute, and accepting for present purposes that the Indian petitions formed part of a concerted attack on his ability to keep the business afloat, it seems to me that it would be wrong to condemn as illegitimate a claim designed to enable the shareholders to regain control of the companies they owned. As Ms Weaver pointed out, the appropriate place to make such a claim was before the Company Law Board, and in so far as the company had entered into transactions which the shareholders were not entitled to complain about the Company Law Board is a judicial body with jurisdiction to determine whether that is the case.

H6.2 The good reason requirement

[180]For similar reasons I would have concluded that even if the threshold requirement were met, for example as regards the claims made in the petitions agaist Rakesh personally, the facts of the present case provide good reason for not granting an injunction. In reaching this conclusion I do not need to resolve any question as to ability to call an extraordinary general meeting under Indian Company Law. My essential reasoning is that the dispute between the petitioners and the directors has resulted in a deadlock which, as Ms Weaver forcefully submits, needs to be resolved – whatever the rights or wrongs. The Company Law Board is the appropriate judicial tribunal in which to resolve it. To the extent that the questions which arise overlap with disputes between the Sponsors arising from or connected with the revised transaction, the entirety of the overlapping disputes can be determined by the Company Law Board. There is no suggestion of any dispute with Actis which would need to be resolved by arbitration even if other disputes were determined in India. Mr Calver repeatedly asserted that if the disputes between the Sponsors were determined by arbitration then that would effectively resolve the Indian petitions one way or the other. I confess that I have not understood how that is so. If, for example, the arbitration found against Rakesh, that would merely mean that one line of defence to the petitions (i.e. consent by the shareholders to the transactions complained of) would become impossible, or at least very difficult, to run. It would not determine the outcome of other issues before the Company Law Board. The tax questions raised in the petition similarly seem to me to be questions which will not be resolved by the proposed arbitration. Mr Calver urged that they could simply be dismissed as spurious. Rakesh’s reply evidence was that the directors had attempted to deal with tax matters, but had been prevented from doing so by Mr Malhotra senior and his agents, and that in fact Mr Goyal had been appearing at hearings on these matters and defending the tax claims. These assertions do not provide me with a sufficiently strong basis for saying that the tax claims can be dismissed out of hand. The same is true of the property mismanagement allegations.[181]I do not rule out the possibility that this court might grant an injunction restraining Mr Malhotra senior and Rajiv from raising certain issues only in the Indian petitions. As it seems to me, however, in the ordinary course it would be for the Company Law Board to reach a decision as a matter of case management on what issues it would determine and when. Such a decision would be case-specific and highly fact-sensitive. In the absence of particularly strong reason justifying this court in doing so, it seems to me that it would be inappropriate for this court to do so when exercising its own jurisdiction for the purpose of enforcing an English law agreement to arbitrate.

H7 Rakesh’s analysis of the Unique petition

[182]For completeness I record here some comments on Rakesh’s analysis of the Unique petition. For this purpose I take the numbered sub-paragraphs in section F2.2 above, either in groups or alone, and set out my comments after a dash (–):(1) It was brought by Sapphire, a company which was owned by Mr Malhotra senior, and which was the holder of a single share in Unique.(2) The third respondent, Mr Goyal, was one of the two directors of Unique. He had been appointed as recently as 1 September 2011.(3) Paragraph 4 of the petition recorded that Unique had delegated authority for operating bank and securities accounts to Mr Bhansali (the fifth respondent) and Rakesh (the sixth respondent). It added that Sapphire believed Mr Bhansali to be acting under the influence of Rakesh.(4) Paragraph 8 asserted that in the past the directors of Unique “used to consult and act as per the advice of [Mr Malhotra senior] in respect of all important business and financial matters.” It added that even though he was not a part of the Board, he had “effectively participated in and monitored the affairs of the Company with all information relating to the Company being available to him.” – not in dispute.(5) “There was, …, an important admission in paragraph 8. It acknowledged that at the time that Unique guaranteed the loans to SPCPL, and the relevant Citibank account was opened, Mr Malhotra senior was consulted in respect of all important business and financial matters.” – correct as regards arrangements for the Citibank account prior to completion of the revised transaction, but Rakesh has not shown to the requisite standard that the giving of the guarantee in May 2011 after completion was known to Mr Malhotra senior.(6) Paragraph 9 recorded that the business of the R K Malhotra Group had been transferred to SPCPL. This was said to have come into effect on or about 18 March 2011, at which time the second and third respondents resigned as employees of the R K Malhotra Group and were “absorbed by SPCPL either as employees or as consultants.” The last sentence of paragraph 9 said that they were allowed to continue as directors of Unique “in the bona fide belief that having worked with R K Malhotra Group for the last several years, the interests of the Company and the Petitioners would be safe in the hands of Respondents 2 and 3.”(7) … paragraph 9 did not refer to the SSD, and … what was stated in relation to Mr Goyal was inconsistent with him having become a director of Unique only on 1 September 2011.” – there may be an error here, but it is difficult to see that it is significant.(8) Paragraph 10 drew attention to the role of Rakesh as “in charge and management of SPCPL.”(9) Paragraphs 11 and 12, a sale of land by Unique with the net proceeds invested in mutual funds through Citibank. Sapphire was said to be “not aware of the accretions on the Company’s investments in mutual funds. Paragraph 13 said that Unique was not currently carrying on business, but was asset rich – as well as the investments noted earlier, it was the owner of several immovable properties. Paragraph 14 asserted that the directors had turned hostile to Sapphire and denied it access to statutory registers and minute books; that Mr Malhotra senior was no longer consulted about deployment of Unique’s funds, and was not informed of decisions by the directors in respect of the funds and generally with regard to Unique’s affairs, and that this caused concerns to Sapphire. These paragraphs, …, ignored that the funds transfer was contemplated by the SSD, that Unique would be dormant but asset rich pursuant to the revised funds flow, and that Mr Malhotra senior relinquished all roles under SSD, and agreed that the funds at Citibank would be used without reference to him.” – see below.(10) “Paragraph 15 involved an assertion that Unique’s investments in mutual funds and other securities had been pledged to Citicorp to secure borrowings by other companies. However, … the chronology showed that Mr Malhotra senior fully understood what was happening and would happen.” – for reasons given earlier in this judgment, the chronology does not demonstrate this to the required standard.(11) “The other assertion in paragraph 15 concerned tax. Unique’s tax return for 2010/11 showed that it had overpaid income tax, in an amount which when refunded would earn interest of only 6% per annum, “which indicates gross financial mismanagement”. This point, …, had been demonstrated to be spurious. … The tax allegation, … , had been stuck in to try to mask the fact that the real complaint was about Rakesh using the funds in the Citibank accounts for the very purpose that the parties agreed they should be used for.” – the court is not in a position to dismiss the tax allegations out of hand.(12) Paragraphs 16 and 17 recorded the request to Citibank dated 19 January 2012 and Citibank’s response. … the letter of 19 January 2012 demonstrated awareness by Mr Malhotra senior that Rakesh had the power to sign as sole signatory on the Citibank account. – not in dispute.(13) Paragraph 18 said that Sapphire “understands that divers amounts have been paid to [Allegro] by various group companies … far in excess of the amounts that may have been realistically due to Allegro …”. … Allegro’s role and the basis on which its fee would be calculated were well known not only to Rakesh but also to each of Mr Malhotra senior and Rajiv, because they were intimately involved in the restructuring. They had been fully aware that Allegro’s fees would be paid from the fund flow monies.” – none of these assertions demonstrates to the required standard that this dispute falls within the arbitration clause.(14) Paragraph 19 asserted that Sapphire was “shocked to learn” from an email sent by a SPCPL employee on 23 January 2012 that Unique was made a guarantor in respect of credit facilities to SPCPL. … correspondence with the banks in February 2011 … demonstrated the falsity of the assertion of lack of knowledge prior to 23 January 2012. In any event, this was plainly a dispute connected with the SSD” – for reasons given earlier in this judgment, neither of these assertions is demonstrated to the required standard.(15) “Paragraphs 20 to 23 complained that the directors were acting under the direction of Rakesh. There had been an instruction by him to a Unique employee that further communications with Mr Malhotra senior or Rajiv would be considered as a “disciplinary breach”. The present directors were said to have made deliberate efforts to cover Unique’s finances and affairs in a shroud of secrecy. This “sudden change” was attributed to the influence of Rakesh “whose relations with his father … have turned highly acrimonious.” It was said that the directors had engaged in mismanagement detrimental to Unique and its ultimate shareholder Mr Malhotra senior, that Sapphire had lost confidence in the directors, and feared that they might cause serious and irreparable harm to Sapphire, that the position was oppressive so as to leave no option but to seek removal of the current directors, and that the petition was needed in order to put an end to acts of oppression and mismanagement. This, …, was all a complaint about the fact that Rakesh was the sole signatory on the Citibank accounts.” – the conclusion in the last sentence is not demonstrated to the required standard.(16) “Paragraph 24 sought an urgent extraordinary general meeting to remove the directors and replace them with Sapphire’s nominees. Paragraph 25 complained that the directors had moved Unique’s books of account, statutory registers, and other records so that they were out of the registered office and under their absolute control. Sapphire apprehended that they might siphon funds and tamper with Unique’s books and records. Paragraph 26 added that, unknown to Sapphire, the directors may have created liabilities or encumbrances, or siphoned funds. It asserted that Sapphire was entitled to disclosure of all payments, encumbrances and liabilities since March 2011, to require the directors to make good losses, to have prejudicial contracts and liabilities set aside, terminated or modified. In paragraph 27 interim relief was sought;” and(17) Paragraphs 24 to 27 were … very significant, as they were what founded the application for relief in India. They demonstrated first that the Indian proceedings sought to set aside and terminate the restructuring agreements, and second that there was nothing speculative about Rakesh’s conclusion that the aim of the Indian proceedings was to deprive SPCPL of its credit facility and to deprive it of the use of other assets. This was sought to be achieved by restraining the directors and signatories from operating the Citibank account, from dealing with the monies and securities, from creating any liabilities over the account, and from giving any loans, despite that fact that this is precisely what it was agreed that Rakesh should do.” – for reasons given earlier, the crucial assertions here are in dispute, and are not demonstrated to the required standard.

H8 Rakesh’s points distinguishing Stonehouse v Jones

[183]Also for completeness I record here some comments on matters relied on by Rakesh in order to distinguish Stonehouse v Jones. Mr Calver asserted that none of the Californian claims in that case was founded on the relevant agreement: that seems to be equally true of the Indian claims in the present case. Mr Calver added that there was no suggestion that the Californian claims could be defended on the merits. To my mind that had little if any relevance to the decision. As to the matters identified by Mr Calver in his eight specific points of distinction, I deal with them in the same way as in the preceding section:(1) “The complaint in India is mismanagement of assets in the Citibank accounts by allowing them to be used to guarantee loans to the new business” – this is one of the complaints (as to which see below); it and the other complaints are legitimate matters for shareholders to raise in company law proceedings.(2) “Those loans are authorised by clause 18.10 of the SSD, and Mr Malhotra senior knew of them” – the loans are not complained of: the complaint in question concerns the guarantees by the companies.(3) “Clauses 18.10 and 41 allow Rakesh alone to procure those loans for the benefit of the new business” – they do not, however, enable the court to be satisfied to a high degree of probability that disputes between shareholders and directors about the giving of guarantees fall within clause 43.2.(4) “The assets of Unique consist of monies paid into its Citibank account as a result of the conclusion of the restructuring agreements made under the SSD; those are its only assets” – it does not follow that how the directors dealt with those assets falls within the arbitration clause in the SSD.(5) “Prior to that payment in to the Citibank account, Unique’s directors with Mr Malhotra senior’s knowledge, passed a resolution authorising Rakesh to have complete control over the Citibank account”;(6) “They did this because they all intended the monies paid in to the Citibank accounts to be used for the purposes of SPCPL, in particular to provide security to enable loans to be made to the new business for provision of operating capital. That was why the consortium of banks transferred the loans to SPCPL with Mr Malhotra senior’s knowledge” and(7) “The funds were paid into Unique’s Citibank account, and the guarantees were given by Unique, with the approval of all parties at the time” – these allegations do not show to a high degree of probability that the disputed agreement/understanding existed; see(8) below. (8) “In this regard Rakesh is not relying merely on disputed oral agreements. The documentary evidence pointed only one way. The whole point of Citibank accounts was to provide monies to be used by Rakesh in support of the new business … this was confirmed by the acknowledgement in Rajiv’s evidence …” – For the reasons given earlier in this judgment the evidence relied upon does not point only one way.

J. Conclusion

[184]For the reasons given above I conclude that, having regard (among other things) to the undertakings referred to in paragraph 128 above, Rakesh’s application should be refused. It follows that the without notice injunction must be discharged. Annex: Extracts from the evidence A/ 1. The extracts below are not exhaustive. They have been assembled for convenience only. Rakesh’s first witness statement 185. A/ 2. Rakesh’s first witness statement included the following: 1.4… RKM [i.e. Mr Malhotra senior] and RJM [i.e. Rajiv] were fully aware from the outset of the important features of the proposed deal with Actis London from the terms of the LOI and the term sheet, which contained crucial financial targets which the business had to reach to ensure that Actis was not entitled to an increased stake in the SuperMax group business. Therefore RKM and RJM were fully aware from the outset that it was necessary to ensure that the relevant corporate entities within the group had sufficient funding to enable the financial targets to be met. … 1.8 The SSD and the other transaction documents ensured a guaranteed return to Actis. …if [relevant] targets were not met, Actis would increase its ownership interest in the SuperMax group to the […] the indirect detriment of the Sponsors. Once again, RKM and RJM were therefore fully aware of this critical fact. 1.9 Importantly, and as RKM and RJM were therefore fully aware, Clause 18 of the SSD requires each of the Sponsors to ensure that each company in the SuperMax group has sufficient cash to carry out its day to day activities… [Clause 18.10 was then set out.] 1.10… It made sense, … that to enable the Sponsors to comply with [relevant] obligations, and to take any other actions under the SSD, the Malhotra Parties irrevocably appointed me as their sole reprewentative to act for all purposes under the SSD. In this capacity, I was authorised by each of the Malhotra Parties to take all actions contemplated by the SSD on their behalf, including under Clause 18.10. To this end, Clause 41.1 provided: [Clause 41.1 was then set out.] 1.11 In the circumstances, the Sponsors (and I in particular, as the MP Representative) had to ensure that there were sufficient assets available which could be used to fulfil the various obligations of the Malhotra Parties under the SSD. Accordingly, the Sponsors agreed on the Subscription Fund Flow at the time when the SSD was completed (see Clause 6.8 of the SSD at page 31, Clause 11.5 at page 36 of Tab 2 and the Revised Funds Flow Steps at Annex A of the Supplemental Deed …) that the monies received in payment for Actis’ …[subscription]… in the SuperMax group, would be used, in part, to fund the various companies which were affiliated with RKM and RJM, particularly as these companies had entered into various agreements with SPCPL, the newly incorporated Indian entity, as part of the restructuring needed for the Actis Investment. RKM and RJM were, therefore, fully aware of this from the outset. The flow of these funds thus was applied in accordance with the contractually agreed Subscription Fund Flow… 1.12 Accordingly, as expressly envisaged under the SSD and as was known to RKM and RJM, …[a specific sum]… was paid to VMPL, RCC, Unique and SIPL (“Affiliated Companies”), of which …[ a proportion]… was deposited into newly opened bank accounts with Citibank. The funds were deposited into interest-bearing mutual funds so as to maintain liquidity in case they were needed to satisfy the Malhotra Parties’ obligations under the SSD. As I was irrevocably appointed by the Malhotra Parties pursuant to Clause 41.1 to undertake any act contemplated by the SSD, the Sponsors agreed that I be given signatory rights over the Citibank accounts despite the fact that I owned no shareholding interest in any of the Affiliated Companies (other than one share in VMPL), directly or indirectly. Again, therefore, RKM and RJM were fully aware of this from the outset, agreed to it and facilitated it. It was agreed that I should be the single signatory on the following accounts:(a) SIPL’s current bank account with Citibank, as authorised by the SIPL Board Resolution dated 23 December 2010. This bank account was opened on 17 January 2011. A copy of the relevant extracts from the SIPL resolution and the bank opening forms appointing me as a signatory are at Tabs 6 and 7 respectively.(b) VMPL’s current account with Citibank, as authorised by the VMPL Board Resolution dated 23 December 2010. This bank account was opened on 17 January 2011. A copy of the relevant extracts form this resolution and the bank opening forms appointing me as a signatory are at Tabs 8 and 9 respectively.(c) RCC current account with Citibank, as authorised by the RCC Board Resolution dated 23 December 2010. This bank account was opened on 17 January 2011. A copy of the relevant extracts from this resolution and the bank opening forms appointing me as a signatory are at Tabs 10 and 11 respectively.(d) Unique’s current bank account with Citibank as authorised by the Unique Board Resolution dated 23 December 2010. This bank account was opened on 2 February 2011. A copy of the relevant extracts from this resolution and the bank opening forms appointing me as a signatory are at Tabs 12 and 13 respectively. 1.13 In relation to the SIPL, VMPL and RCC accounts, the bank account opening forms also name RJM (the Second Respondent) as a “First Joint Applicant”. Likewise, in relation to the Unique account, RJM was named as a “Second Signatory” on the bank account opening forms. The Board resolutions clarify that RJM was named as a joint signatory on these accounts, together with me, whilst I was also appointed as a single signatory. RJM’s signatures confirming his identity and appointment alongside my appointment can be seen on all four bank account opening forms and was fully known to (and indeed facilitated by) RKM and, obviously, RJM. 1.14 The above resolutions of the Boards of Directors of each of the Affiliated Companies were passed after the execution of the SSD and other transaction documents, and prior to performance of the various requirements under the SSD in order to facilitate completion. Further, in order to maintain continuity, the Sponsors decided to retain the same directors for each of the companies. [Clause 18.10 was then set out.] [Clause 41.1 was then set out.] 186. A/ 3. Rakesh’s first witness statement added: 4.3 So far as the specific matters raised in the Indian Proceedings are concerned, I should make the following further observations. 4.4 Pursuant to Clause 41.1, I had the irrevocable authority of the Malhotra Parties, including RKM and RJM, to take any action under the SSD on their behalf and to do any and all things provided n or contemplated by the SSD. Furthermore, the SSD expressly contemplates the need for additional working capital by companies within the SuperMax group (as set out in detail in 1.8 to 1.9 above). It specifically obligates the Sponsors to loan or to procure loans to any company in the SuperMax group if such was needed to allow the company to carry out their day to day activities, as set out in Clause 18.10. As detailed above, SPCPL had such need as of autumn 2011, when it found itself already at the limit of its existing letter of credit facility, and unable to pay its suppliers or to secure an additional facility on its own balance sheet. Accordingly, SPCPL negotiated an agreement with HDFC, which agreement was expressly approved by the Board of Directors of SPCPL. 4.5 This new credit facility was conditioned upon the corporate guarantees and pledges of collateral which could only be provided by the Affiliated Companies as they had themselves been funded from the Actis Investment specifically for this purpose. As such, it was entirely appropriate and expressly contemplated by Clause 41.1 of the SSD that I would approach the Boards of the Affiliated Companies and request that they guarantee the credit facility and pledge assets to secure it, which is precisely what happened. I should add that I was expressly excluded by Clause 14.6 of the SSD from receiving any profit from the Actis Investment. 4.6 As mentioned in 1.12 above, pursuant to the restructuring under the SSD, and in order to allow me to carry out my obligations as the Malhotra Parties’ representative under Clause 41.1 of the SSD, I was named a single signatory in relation to the accounts specifically mentioned in the Indian Proceedings, … 4.7 As noted in 1.13 above, despite providing affidavits in support of each of the Indian Proceedings, RJM (the Second Respondent and one of the Indian petitioners) was also named as a signatory to the accounts listed above. RJM’s signature appears on the bank account opening forms, alongside my appointment as a single signatory on the bank accounts. … 4.8 This illustrates that my appointment was made with the sign-off and consent of RJM, who also has a shareholding (1 share) in Sapphire, RSM and RCC. RKM was fully aware of this. 4.9 In addition to the Sponsor’s obligation to inject additional working capital into SuperMax group companies as needed, my authority as representative of the Malhotra Parties included taking action to protect the Malhotra Parties’ interests under the SSD. These interests were substantial. As detailed above, the SSD contained express terms by which the Malhotra Parties could be compelled to disgorge a portion of their share ownership if certain financial targets were not met. Further, the Affiliated Companies received certain funds specifically to be used for the purposes of discharging the Malhotra family’s responsibilities under the SSD (as set out in 1.11 above). It was thus specifically contemplated by the SSD that I might need to take action to ensure that the financial targets were satisfied and the Malhotra Parties’ interests protected. It was thus entirely just and proper for me to approach the directors of the Affiliated Companies and request that they guarantee the credit facility needed by SPCPL and pledge assets to secure it. 4.10 Similarly, the payment of professional fees to Allegro was agreed in advance, in 2008, as part of the restructuring in relation to the SSD, as Allegro was charged with finding an investor for the SuperMax group (as evident from the Allegro’s engagement letter dated 27 October 2008 at Tab 1), which it duly did in the shape of Actis. The terms of the engagement letters – and Allegro’s fee structure – were known and explicitly agreed to by RKM himself. Any request by me to the Affiliated Companies to pay the invoices for Allegro’s fees was entirely legitimate and plainly within the terms of Clause 41.1 of the SSD. Indeed, non-payment of these fees could obviously have resulted in claims brought against the SuperMax group under the Allegro engagement letters. … 4.12 Each of the petitions in the Indian Proceedings expressly state that the Indian petitioners’ relationship with the Board of Directors was previously a good one, and that the Board of Directors “used to consult and act as per the advice of [RKM] in respect of all important business and financial matters”, and RKM was “always kept informed of the affairs of the Company”, meaning that he “effectively participated in and monitored the affairs of the Company withal the information relating to the Company being made available” to him. It is then stated in each case that this relationship broke down in “the recent past”. Accordingly, prior to the “recent past”, which I know to have started in mid-January 2012, when my relationship with RKM broke down, RKM was aware of and indeed dictated and/or approved all of the concerned companies’ dealings and transactions. 4.13 Accordingly, at the time of (i) my appointment as a signatory to the bank accounts of the Affiliated Companies, (ii) payment of Allegro’s fees, (iii) grant of the guarantees by VMPL, RCC, Unique and Emerald (as set out in 2.1 above) and (iv) all of the other transactions which took place prior to the “recent past” of January 2012, RKM had both a good relationship with the Board of Directors and full knowledge of the Board’s business, and accordingly each of these transactions took place with his knowledge and consent. 4.14 Finally, the NOCs granted by the Bank Consortium (referred to in paragraph 2.1 above) required, expressly or by reference, the personal guarantees of RKM and RJM in order to grant the credit facility to SPCPL. Thus, it is unconscionable for RKM to now try and avoid or bring into question in India (i) security by way of the Affiliated Companies’ guarantees of which RKM was at all times fully aware and which was made pursuant to the SSD Clause 41.1 and (ii) the payment of Allegro’s professional fees which were agreed originally in 2008 with RKM’s full knowledge and consent. 4.15 Each of the petitions in the Indian Proceedings also alleges that the Affiliate Companies’ and Trasauto’s records were not made available to RKM upon his request. There is a very good (and legitimate) reason for this. As noted in 2.6 above, RKM had started illegitimately interfering with the ordinary business of SPCPL, and with my appointment under Clause 41.1 of the SSD, attempting to incite labour strikes and issuing threats to the directors and employees of SPCPL, thereby threatening to prevent the Affiliated Companies, Transauto, myself and, by extension, the Malhotra Parties themselves from carrying out their obligations under the SSD. In these circumstances it was entirely appropriate and indeed necessary for me, acting under the authority of Clause 41.1 of the SSD, to ask the directors of the Affiliated Companies and Transauto to prevent RKM’s access to the relevant companies’ books. Mr Bhansali’s first witness statement 187. A/ 4. Also lodged in support of the application for the without notice injunction was a witness statement of Amit Bhansali. Mr Bhansali explained that he had been appointed chief financial officer for the Supermax group of companies in July 2009, and a director of SPCPL on 11 April 2011. At paragraph 1.4 of his statement he said this: 1.4 It was agreed that the funds which were used to pay the Affiliated Companies for these businesses, land leases and IP rights were to be deposited into newly opened accounts of each, which accounts would be placed at the disposal of RM to be used, if required, to support the SuperMax group operations. In this regard, RM was authorised by the relevant Boards of Directors to be the signatory on the accounts along with RJM. This is evident from opening paperwork at the bank as the RM and RJM are also joint signing authorities on the bank account opening forms (see Tabs 7, 9, 11 and 13). As RM and RJM were often travelling outside of India, in June 2011 I was added as a signatory to the bank accounts of the Affiliated Companies in order to be able to operate the accounts in their absence. All of this was done with the full knowledge and consent of RKM and RJM under the terms of the Subscription and Shareholders’ Deed which they entered into on 4 November 2010 (the “SSD”). Rajiv’s first witness statement 188. A/ 5. In response to the without notice injunction a witness statement was made by Rajiv. This included the following: 9. Before the breakdown in our relationship, in keeping with Hindu family culture, Rakesh as the eldest son of the family held an important and trusted position. He had an important role in running the Supermax business. My father trusted him implicitly to deal with financial matters, both for the Supermax group and for my father’s personal finances and assets (including his interests in the RKM Companies) which are separate from the Supermax business. … 18. The Acquisition Payments were mainly invested in mutual funds and other securities held with Citibank. In the case of RCC, about Rs. 11 crores were invested with Citibank and the balance was put on a fixed deposit with Andhra Bank. 19. These investments were made by the various boards of the Transferring RKM Companies [i.e. the Transauto main subsidiaries] at the request of Rakesh. At the time that the Acquisition Payments were received and the accounts with Citibank were opened, the relationship between Rakesh and my father and me was still good and my father, who trusted Rakesh, was content for him to make the arrangements in conjunction with the various boards of directors for the investment of the Acquisition Payments. 20. Our intention was that after the restructuring, my father and I would pursue other business opportunities, probably engineering related, through the RKM Companies. In addition to its shareholdings in the Transferring RKM Companies, Transauto owns two valuable properties:a. land and industrial premises at AB/14B, Nandanvan Co-operative Industrial Estate, Thane, Indiab. premises at Plot No A-292, Road No 16, Lane 2, Wagle Industrial Estate, Thane, Indiac. Vidyut [i.e. VMPL], Unique and SIPL also own substantial real estate. My father plans to develop these properties in due course. 21. When the business of the Transferring RKM Companies were transferred into the Supermax group, the employees also transferred to work for the group and became employees of SPCPL. That included the directors of the RKM Companies. However because the directors of the RKM Companies were long-standing and trusted directors employees of their respective companies, my father was content for them to remain as directors. 22. Several of the employees of the Transferring RKM Companies were then transferred to work for a company called VRM which is owned by our father and mother which was to manage assets owned by the RKM Companies. However the retirement and other benefits of these employees were still being contolled by SPCPL. Rakesh was able to exploit that situation to get the employees to leave VRM and move back to SPCPL. They left in a great rush, taking documents and files including bank records and office equipment with them. These employees also deleted data from computers and disconnected the email access which my father and I had been using. They also took the books and records for the RKM Companies with them. That left my father and me without any secretarial or office support or assistance. 23. The result is that the directors of the RKM Companies and the other individual respondents who are signatories on the RKM Companies’ bank accounts are now all either employed by SPCPL or other group companies or have positions as consultants. Unfortunately, as I will explain there has been a complete breakdown in the relationship between my father and me with the directors of the RKM Companies and Rakesh. It is that breakdown in relationships (due to mismanagement and breaches of duty by the directors) which has resulted in the Indian Proceedings. 24. As I have said, before the restructuring, the Transferring RKM Companies provided goods and services to the Supermax group or held land or other assets for the benefit of the group. Although my father and other members of the family were the shareholders (directly and indirectly), we were not directors of any of the RKM Companies. However, it was the custom and practice of the directors of the various boards of the RKM Companies to consult with and take advice from my father in relation to all major business decisions. Although he was not a director, he was given access to all the books, records and accounts of the company. He was kept informed of everything that was going at the RKM Companies and the other companies. 25. However since the restructuring took place and the employees of the RKM Companies transferred to work for the group, the situation has changed. The directors of the RKM Companies do not keep my father informed of what is happening or the decisions which they are taking and have denied him access to the books and records. In addition, as set out in the petitions in the Indian Proceedings, my father is concerned about various transactions which the directors of the Transferring RKM Companies have entered into. The basic reason for concern is that the transactions do not appear to be for the benefit of the Transferring RKM Company concerned but rather for the benefit of the Supermax Group or other RKM Companies. My father and I believe that now that the directors of the RKM Companies are all working for the Supermax group, they are under the influence of Rakesh and acting at his behest rather than in the interests of the RKM Companies as separate companies outside the Supermax group. We believe that Rakesh is using his influence over them as employees with the Supermax group as a means of getting them to act as he directs. … 29. These issues arise between the shareholders and directors of Indian companies and concern the internal management of those companies. The remedies claimed are against the directors of Transauto and the Transferring RKM Companies, none of whom are parties to the SSD. We wish to pursue our remedies against the directors as soon as we can. 30. The only claim made against Rakesh is for an interim injunction retraining him, along with the directors and other signatories on the companies’ bank accounts, from dealing with the company’s assets and books and records. 31. My father and I do consider that these matters do not have anything to do with the rights and obligations under the SSD and are not within the arbitration agreement in the SSD. That is why the arbitration agreement is not mentioned in the Indian Proceedings. … 37. In paragraph 1.9 of his witness statement, Rakesh refers to clause 18 of the SSD. My father and I, of course, agree that we were aware of and accepted this obligation. However, I want to emphasise that the obligation under clause 18 is imposed on the Sponsors ie Rakesh, my father and myself and no-one else. Clause 18 sets out a procedure to be followed if there is a cash shortfall ie notification by the holding company to the management, the Malhotra Parties and the holding company directors and a request by Actis to the Sponsors. 38. We also accept that under the terms of the SSD that Rakesh would be the full time chairman of the Supermax Group and would have control over and the voting rights in the companies and entities which held the 70.83% of the shares not acquired by Actis and Rakesh had rights to appoint a certain number of members of the Advisory Board which was to be the principal governing body of the group and a certain number of directors of the holding company and the subsidiaries. These provisions are all entirely consistent with the fact that after the restructuring, my father and I were not going to play any part in the Group business and that the restructuring provided an exit for us by which the Transferring RKM Companies would receive substantial payments for the transfer of their business and assets. In contrast, Rakesh did not receive any of the proceeds of any of the transactions under the restructuring. 39. It is completely wrong for Rakesh to say in paragraph 1.10 that he was authorised by me and my father to take all actions contemplated by the SSD on our behalf including under clause 18.10. I never agreed that Rakesh would have the sort of authority that would enable him to raise loans in my name or on my behalf and pay them over to the Supermax group. My father has confirmed to me that he never made such an agreement or gave that authority to Rakesh. 40. Rakesh relies on clause 41.1 as giving him some general authority to act on behalf of my father and me and in particular authorising him to deal with and procure the RKM Transferring Companies to enter into transactions by which they paid away or charged their assets for the benefit of the Supermax group. I have been told that the meaning and effect of clause 41.1 is not something to be dealt with in evidence. However, as part of the background, I want to say that there was no discussion between Rakesh, me and my father about appointing him to act for us generally or about clause 41.1. 41. It is correct that sums were paid to Vidyut, RCC, Unique and SIPL as set out in paragraph 1.11(a) to (d) (“the Acquisition Funds”). The dollar amounts referred to are the same as the rupee amounts in paragraph 17 above. I do not understand what Rakesh means when he says in paragraph 1.11 that the Sponsors had to agree that there were sufficient funds available to fulfil the various obligations of the Malhotra Parties and therefore agreed on the Subscription Fund Flow and Revised Fund Flow. The payment of the Acquisition Funds was provided for by the SSD as one of the elements of the restructuring. If he is saying that the Acquisition Funds were earmarked or ring-fenced to meet any obligations arising under clause 18.10 (which is what he seems to be asserting in paragraph 1.12) then I disagree. 42. The SSD does not address the issue of what is to happen to the Acquisition Funds after they were paid to the Transferring RKM Companies. There is no provision for them to be retained or otherwise made available to meet any obligation under clause 18.10 or any other provision of the SSD. I did not make any agreement or arrangement with Rakesh as to how any obligation under clause 18.10 would be met if it arose. My father tells me that he did not have any such agreement with Rakesh. He has also confirmed that he did not agree with Rakesh that the Acquisition Funds received by the Transferring RKM Companies would be kept available to meet any obligation under clause 18.10. 43. It is not correct that my father and I agreed that Rakesh should be the single signatory on the Citibank accounts. What happened was this. Before the breakdown of the relationship, it was our family practice that my father, my mother, Rakesh and me would be each be sole signatories on bank accounts holding family money as we trusted each other. As I have said my father left to Rakesh to make the arrangements in relation to the Acquisition Funds and assumed that he would follow the usual practice. I was asked by the directors of the RKM Companies to give specimen signatures for the bank account opening forms and gave me the bank account opening forms to sign in blank. Seeing the words “First Applicant” “Joint Applicant”, I asked what was intended about signatories. The directors told me that given the very large amounts involved, they thought that Rakesh and I should be joint signatories. I therefore signed the form in blank. It was not until later that my father and I discovered that the forms had been completed to make Rakesh the only sole signatory on these accounts with me only a joint signatory. I believe that I found out shortly before we wrote the letters to Citibank and Andhra Bank on 19 January 2012 asking them to freeze the accounts (which is exhibited by Rakesh as Annexure 4 to CP 14 of 2012 at tab 26 to his witness statement). I was told by Mr Goyal, a tax consultant for our family, who learnt it from Mr Kakade, one of the employees who deserted VRM as I have mentioned. 44. In paragraph 1.16, Rakesh refers to the arbitration clause in the SSD. My father and I accept that there is an arbitration agreement which binds us in relation to disputes arising from or connected with the SSD and the Supplemental Deed. We have never threatened to start proceedings in breach of the arbitration agreement. As Rakesh says we recognise the advantage of confidentiality which comes with arbitration. However we never agreed that the arbitration clause would prevent us from exercising our rights as shareholders in relation to the RKM Companies and their affairs. 45. Contrary to what Rakesh says, my father and I were not aware of the guarantees entered into by Vidyut, RCC, Emerald and Unique (referred to in paragraph 2.1 of his witness statement) at the time that they were given. Rakesh tries to make the point that since my father used to be consulted by the directors before the breakdown in the relationship he must have known what was going on. That is not correct. First, as I have said my father was mostly outside India between June 2010 and August 2011. He was given some information from time to time but did not know that he was not being given the full picture. We were not consulted about or informed of the guarantees. We only learnt of the guarantees from the email dated 23 January 2012 exhibited to the Company Petitions relating to those companies (a copy is at tab 24 page 95 of “RM1”). Rakesh claims that we were aware of the guarantees because they were subject to No Objection Certificates. Those Certificates have not been exhibited and I do not understand how they evidence the fact that we were aware of the guarantees. My father has confirmed that he did not give any personal guarantee to support lending to SPCPL. I did not give a guarantee. We were also not told about the Allegro invoice dated 1 June 2011. Rakesh’s second witness statement 189. A/ 6. Rakesh made a second witness statement in reply to what had been said by Rajiv. He noted that Rajiv had referred to a belief that the directors of relevant companies were under the influence of Rakesh, and continued: 1.3 As I set out in my first witness statement, this so-called “influence” over the boards of the Affiliated Companies consists of nothing more than me exercising the authority which the Respondents have specifically granted to me pursuant to the express provisions of Clause 41.1 of the SSD to take any and all acts provided in or contemplated by the SSD to be performed by any Malhotra Party (as defined in the SSD and which includes the Respondents), and granted to me by related (and agreed) board resolutions (for, example, the 23 December 2010 board resolutions which name me as a single signatory on the current accounts of the Affiliated Companies, at Tabs 6, 8, 10 and 12 of RM1). It was specifically agreed by my father and brother that the funds which were transferred to the Affiliated Companies upon the sale of their businesses under the restructuring would be used to satisfy the Sponsors’ obligations under the SSD. There could be no other reason why the funds should have been deposited into newly opened accounts of each of the Affiliated Companies over which I was made a sole signatory, pursuant to specific board resolutions of each of the Affiliated Companies and with my father’s consent. Thus, the essence of the dispute and the real complaint in the Indian Proceedings is whether the grant of authority given to me in the SSD extends to the acts I have taken in relation to the Affiliated Companies. 190. A/ 7. Later in his second statement Rakesh said, among other things: 4.6 There are numerous documents which show that my father was actively involved in the SSD negotiations. … … Any suggestion that the Respondents and my father in particular were not fully involved in the negotiations concerning the SSD or that they were not aware of the terms of the SSD is simply incorrect. 4.7 It is equally false to suggest that each of the Malhotra Parties did not discuss (a) the use of the proceeds paid to the companies at issue in the Indian Proceedings to support our obligations under the SSD once it was executed on 4 November 2010, or (b) that I was to be named sole signatory on the company accounts precisely so as to allow me to fulfil our obligations under the SSD. RKM, RJM and I discussed and agreed both the use of the current accounts of the Affiliated Companies for this very purpose and that I would therefore be sole signatory on them. We all understood that the SSD obligated us to do several things before completion of the transaction and thereafter. We needed to restructure the group so that all of the business operations were within the one structure, and then we needed to ensure that SuperMax could satisfy its financial targets or else the share capital of Actis would be increased thereby diluting the other shareholders’ stake. Indeed, I remember very clearly that we were all in the room together when RKM told me and RJM specifically and we agreed that I would be a sole signatory on the current accounts of the Affiliated Companies, and I would also be a joint signatory with RJM. 4.8 After this agreement was reached, I was accordingly authorised by the board of these companies to be a sole signatory of the bank accounts by all of the boards of the Affiliated Companies, copies of which are at Tabs 6, 8, 10 and 12 of RM1, this being at a time when Respondents admit the boards acted pursuant to the instructions of RKM. These resolutions were passed with the full knowledge and consent of Respondents, as a direct result of the execution of the SSD, and with the understanding that I would have these funds available to satisfy Malhotra Parties’ obligations under the SSD. Otherwise, there was no reason why almost immediately after execution of the SSD I should be authorised by company board resolutions to have sole signatory rights over these accounts. Bear in mind that I was made sole signatory immediately after execution of the SSD, but prior to completion of the corporate structuring needed to complete the transaction and for any funds to be paid into these accounts. The creation of these accounts was done specifically to receive and invest proceeds from the restructuring envisioned by the SSD. 4.9 I note that the Respondents fail entirely to acknowledge the companies’ boards’ resolutions in their reply, and instead make the very serious and unfounded allegation that I acted without their knowledge in becoming the sole signatory on the accounts despite the fact that RJM co-signed the account opening forms acknowledging that I am to be the sole signatory on them. To seek to explain away this inconvenient fact, he falsely alleges that he signed the forms in blank and that I filled them in subsequently without his knowledge (see RJM’s witness statement, at paragraph 43). This is wholly false as RJM knows. The falsity can easily be demonstrated: if this were true, without the board resolutions authorising me to so act, I could easily have been removed as sole signatory. It would have been impossible for me to remain sole signatory without this board approval. But I never was, because it was agreed by RJM and RKM that I should indeed be sole signatory on these accounts for the purposes of the SSD. 4.10 Further, although the Affiliated Companies are not parties to the SSD, the SSD envisages important roles for them in support of SPCPL after completion of the restructuring, such as: (a) the leasing or sale of property owned by the Affiliated Companies to SPCPL which are discussed above together with others like the lease of RCC’s property to SPCPL, (b) the leasing of certain equipment; (c) a job work arrangement between SPCPL by which VMPL was to carry out certain job handling activities for SPCPL at VMPL Plant 2 property. As VMPL was litigating on the title deed of the land in relation to Plant 2, which forbade subletting or disposal of the property, these premises could not be conveyed or sublet to SPCPL. Therefore to retain these premises and allow SPCPL to have the benefit of the same, VMPL were assigned as job workers to get around this issue; and (d) a secondment arrangement between SPCPL and VMPL in respect of the secondment of certain SPCPL employees to VMPL at Plant 2 to work under the job work arrangement as set out in (c) above, also in order to allow SPCPL’s full enjoyment of Plant 2 whilst VMPL resolved the legal issues relating to it. 4.11 Many of these arrangements are specifically referred to in the SSD within the definition of Restructuring Transactions and in the Supplemental SSD at Clause 2.2.10 at pages 6 and 7 of Tab 3 of RM1. 4.12 Moreover, neither Respondent complained about this irrevocable power when it was given to me, but only later after they became angry at me for excluding them from the SuperMax business and not agreeing to join them in setting up a competing business. In paragraph 45 of RJM’s witness statement, it is suggested that the Respondents did not know about the guarantees granted by the Affiliated Companies when they were made. In my first witness statement, I had pointed out that the Respondents surely knew about them at the time, as this was done in a period of time when RKM has said that the directors of the Affiliated Companies always kept him informed of their acts. Now, when faced with this obvious contradiction, RJM states that RKM never knew whether his directors gave him the full picture between June 2010 and August 2010. 4.13 in the same paragraph 45 of his statement, RJM also questions my statement that the Respondents knew of the guarantees because they were subject to No Objection Certificates which were not appended to my first statement. I have appended these certificates here at Tab 14 of RM2. By way of background, as explained in paragraph 2.1 of Amit Bhansali’s first witness statement, the facility granted to SPCPL by the Bank Consortium was not a new facility, but a transfer of the facilities which had already been granted by the Bank Consortium to VMPL and RCC, since SPCPL was taking over the entire businesses of VMPL and RCC, so that VMPL and RCC no longer needed the facilities once their businesses were sold to SPCPL. The No Objection Certificates (“NOC”) from the Bank Consortium in relation to this, therefore, addressed both the permission for the business sale to SPCPL by VMPL and RCC, and the transfer of the existing facilities provided by Punjab National Bank (“PNB”) and Oriental Bank of Commerce (“OBC”) to VMPL, and Andhra Bank to RCC. 4.14 The terms and the size of the facility (including securities) remained the same both pre and post the sale to SPCPL. Emerald and Unique were the guarantors of the original facility utilised (or “availed by”) VMPL, which is dated 10 March 2010 and entitled Twelfth Supplemental Working Capital Agreement (“Original VMPL Facility”) (see paragraph (d) at page 7 of Tab 15 of RM2) (as is evidenced by page 4 of the Deed of Guarantee given by Unique to Emerald, at Tab 17 of TM1). Emerald and Unique were therefore also asked to be the guarantors for the transferred facility to SPCPL. The terms of the Original VMPL Facility were at all material times fully known to RKM and RJM, as it falls under the definition of “Restructuring” within the SSD (being included as a document “set out in the Restructuring Disclosure Data Disc” in sub-paragraph (e) of the definition, see page 19 of Tab 2 of RM1). 4.15 The Bank Consortium also wanted guarantees from the owners of the properties offered as collateral (i.e. VMPL and RCC as the owners of the plant and machinery leased to SPCPL as part of the overall restructuring and the sale of their businesses to SPCPL). The desire for these personal guarantees from RKM, RJM, myself and Veena Malhotra, who is RKM’s wife and my and RJM’s mother is reflected in the NOCs (see Tab 14 of RM2). I assume that the Bank Consortium no doubt sent the request for personal guarantees to RKM, RJM and my mother as they did with my own. Mr Bhansali’s second witness statement 191. A/ 8. Mr Bhansali also prepared a second witness statement. It included the following: 1.2 So far as the allegations set out in paragraph 67 of RJM’s witness statement are concerned, it was always understood by everyone concerned that the funds which were used to pay the Affiliated Companies for the sale of their businesses, land leases and other agreements contemplated under the restructuring (which funds were deposotied into newly opened accounts of each of the Affiliated Companies and for which accounts RM was made a sole signatory, pursuant to both the authorisation by the board resolutions of the directors of each of the Affiliated Companies and indeed by RKM himself), would be used to satisfy the Sponsors’ obligations under the SSD (i.e. RKM, RJM and RM). The point is simply this: There was no other reason for RM to be a sole signatory to those newly opened accounts other than to be able to direct that the proceeds received from the investment should be used as required under the restructuring pursuant to RM’s role as the MP Representative under the SSD. Indeed, I not that this is even confirmed in paragraph 19 of RJM’s witness statement itself in which he says: At the time that the Acquisition Payments were received and the accounts with Citibank were opened, the relationship between Rakesh and my father and me was still good and my father, who trusted Rakesh, was content for him to make the arrangements in conjunction with the various boards of directors for the investment of the Acquisition Payments. 1.3 Indeed, RKM was more than merely content with this; he actively agreed to and encouraged it. It is only now that his relationship with RM has broken down that he wrongly seeks to renege on this agreement and unravel these arrangements. At the time that the Acquisition Payments were received and the accounts with Citibank were opened, the relationship between Rakesh and my father and me was still good and my father, who trusted Rakesh, was content for him to make the arrangements in conjunction with the various boards of directors for the investment of the Acquisition Payments.

Cited in 3 later judgments