Eraaya Lifespaces Limited v Elara Capital Plc & Ors [2025] EWHC 1506 (Comm)

[2025] EWHC 1506 (Comm)

Case No CL-2025-000062

Date Wednesday 18 June 2025

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

KING’S BENCH DIVISION

COMMERCIAL COURT

Venue Rolls Building, Fetter Lane

London

EC4A 1NL

Before

MRS JUSTICE COCKERILL DBE

ERAAYA LIFESPACES LIMITED

Claimant/Applicant/Cross-Applicant

Between

ELARA CAPITAL PLC

Defendant/First Respondent/Cross-Respondent

Between

MULTITUDE GROWTH FUNDS LIMITED

(a company incorporated under the laws of Mauritius)

Between

BULL VALUE INCORPORATED VCC SUB-FUND

(a company incorporated under the laws of Mauritius)

Between

SELVI CAPITAL PLC

(a company incorporated under the laws of the Cayman Islands)

Proposed Defendants/Second to Fourth Respondents/Cross-Applicants

Harish Salve KC, Peter Head, Marlena Valles and Viksit Arora (instructed by Gresham Legal) for Claimant

Matthew Parker KC (instructed by CND Parker) for First Respondent

Robert Anderson KC, Carmine Conte and Tom Watret (instructed by Hogan Lovells) for Second to Fourth Respondents

Hearing Hearing date: 30 April, 1 May 2025

APPROVED JUDGMENT

This judgment was handed down remotely by the judge and circulated to the parties’ representatives by email.  The date and time for hand-down is deemed to be Wednesday 18 June 2025 at 10:00am

Introduction

[1]This judgment arises from the expedited hearing of: 1) The application of the Claimant (“Eraaya”) for an interim mandatory injunction requiring the Defendant (“Elara”) to send a confirmation email to a settlement agent, Glas Specialist Services Ltd (“GLAS”), which would compel GLAS to transfer to Eraaya the remaining $40m of a bond issuance, which the Bondholders paid to GLAS and to which they assert proprietary rights (the “Injunction Application”); 2) The Bondholders’ application for joinder to the proceedings (Joinder Application); 3) The Bondholders’ and Elara’s applications for a declaration that they have not breached the collateral use restrictions in CPRs 31.22(1) and 32.12(1) (“Declaration Applications”), alternatively for retrospective permission (“Permission Applications”).

[2]The background in summary is this. Eraaya wanted to buy a company, Ebix, but lacked the funds to do so. It arranged the issue of certain bonds designed to provide it with the wherewithal for the transaction (the “Bond”). Eraaya says that its agent Elara is in breach of an obligation to pay over the proceeds of sale of the second tranche of those Bonds to Eraaya (thereby impeding it from completing the purchase and taking control of Ebix). It seeks a final mandatory injunction requiring it to do so.

[3]Elara (as First Respondent) and the Bondholders (who also participate as Respondents by direction of the Court) say that Eraaya has failed to comply with its obligations under the Bonds. They say that the Bondholders invested in the Bonds on the basis of representations and understandings that they would have an interest in Ebix via a pledge of shares and that while not providing any such pledge Eraaya had already drawn down $80m of the proceeds for its own benefit and, by its Injunction Application, now seeks release of the balance of $40m in order to pay it away to a related entity. The Facts Background

The Facts

[4]Eraaya is an Indian company carrying on business in the software and e-commerce sectors. It is listed on the BSE and appears to be controlled by a Mr Vikas Garg and his family. Elara is an English plc which carries on business in investment banking, asset management and financial advisory services.

[5]The Bondholders are investment funds called Multitude Growth Funds Ltd (“MGF”), Bull Value Incorporated VCC Sub-Fund (“Bull Value”), and Selvi Capital PLC (“Selvi”).

[6]In around May 2024, Eraaya resolved to acquire (as part of a consortium) Ebix Inc., a Delaware-based software and e-commerce company undergoing Chapter 11 bankruptcy proceedings in the United States. This acquisition was a pivotal step in Eraaya’s strategic ambitions.

[7]Ebix is described on its website as "a leading international supplier of on-demand infrastructure exchanges to the insurance, financial, and healthcare industries. In the Insurance sector, the Company's main focus is to develop and deploy a wide variety of insurance and reinsurance exchanges on an on-demand basis, while also, providing Software-as-a-Service ("SaaS") enterprise solutions in the area of CRM, front-end & back-end systems, outsourced administrative and risk compliance."

[8]In mid June 2024 a Plan Support Agreement was entered into between Ebix and a consortium of Eraaya, a company called Vikas Lifecare Limited (“VLL”), Vitasta Software India Private Limited (“VSI”) and one or more of their designees. VLL is also an Indian public company listed on the BSE. It appears on the evidence before me to be minority owned by Mr Garg, one of the main shareholders in Eraaya. VSI appears to have been controlled by a Mr Raina, who was a member of Eraaya’s board until September 2024.

[9]The bid underpinning that agreement was declared the winning bid at the auction process for Ebix on 24 June 2024. An amended version of the Plan Support Agreement was approved by the US Bankruptcy Court on 2 August 2024. By this time Eraaya was to be the major stakeholder with minority stakeholders (2.42%) being Melanie Lane Partners Series Fund, LP, Melanie Lane Series One and Watch Hill Capital LLC (“Melanie Lane and Watch Hill”) who provided finance in the amount of US$13 million.

Engagement of Elara

[10]For the purposes of raising funds for the acquisition, Eraaya proposed to issue foreign currency (US$) convertible bonds. Accordingly, on 5 July 2024, Eraaya entered into an engagement letter with Elara (“the Engagement Letter”) by which Elara was appointed as Eraaya’s financial advisor in connection with a proposed fund raise of up to US$100 million in the form of equity/equity-linked issuances, debt instruments or any other financial instrument.

[11]The express terms of the Engagement Letter included the following (in summary): 1) Elara would work on the Transaction “on an exclusive ‘best efforts’ basis” (paragraph 1.1(a)); 2) Elara would “assist and advise [Eraaya] through all phases of the [T]ransaction. Services to be provided will include without limitation:(i) assistance with preparation of offering documents (if required) which shall contain such information as [Elara and Eraaya] may mutually determine to be required […];

(ii) assistance with the distribution of materials to investors following approval by [Eraaya];

(iii) evaluating indications of interest;

(iv) assisting [Eraaya] and its counsel in drafting definitive documents” (paragraph 1.1(b)).

The Bridging Loans

[12]In addition Eraaya secured bridging finance, comprising: 1) A loan of US$12.5m from a Bermudan company, Oyster Bay Fund Limited (“Oyster Bay”) dated 30 July 2024. The management shares in Oyster Bay are held by Elara and the fund is managed by a subsidiary of Elara, Elara Capital Mauritius Limited. 2) A loan of US$34.83m from VLL, made pursuant to an agreement dated 16 August 2024 (“the VLL Loan”). It appears that this to some extent reflected a commitment arising out of VLL having provided funds up front for a deposit to bid for Ebix. That agreement: a) Was on terms that Eraaya pay interest at 4% per month (i.e. 48% per annum), repaying the loan by 31 January 2025 and that until full repayment (with interest) “no third-party rights are created over fifty-one percent (51%) of the total issued share capital of Ebix International Holdings Limited.” b) Recorded that:“The First Party is acquiring 100% of the Company, however due to certain circumstances beyond the control of [Eraaya] Melanie Lane Partners Series Fund and Watch Hill Capital LLC shall be allotted 2.42% equity in the Company and the balance equity shall be allotted to the First Party." c) Provided that in the event that the loan was not repaid by 31 January 2025, VLL could convert the loan into 51% equity in Ebix. To do that VLL would need to issue a written notice to Eraaya within 3 days of the due date (i.e. by 3 February 2025). After that there would be 180 days to effect that transfer, during which time it would have an option to instead accept repayment if satisfied Eraaya had the money.

The First Settlement Agency Agreement

[13]A settlement agent was appointed in relation to the bonds, namely GLAS (an English company which provides debt administration services). In this regard, on 22 August 2024, Eraaya entered into a Settlement Agency Agreement with GLAS (“the First Settlement Agency Agreement”). This provided in particular (under clause 3.4) that:

“Once all the trades have settled, the Settlement Agent [i.e. Glas] will make all Issue Fees & Expenses payments as per Issuer’s [i.e. Eraaya’s] irrevocable instructions under Schedule 3 of this Agreement and transfer the remaining Purchase Monies to the Issuer’s Payment Account.”

The Offering Circular

[14]The terms and conditions (T&Cs) of the Bonds are set out in the Offering Circular and the Global Certificate. On 23 August 2024, Eraaya issued an Offering Circular in respect of bonds of up to US$120 million (to be issued in two tranches of US$60 million each). This Offering Circular clarified in the opening paragraph of its text that the proceeds were designated for the acquisition of Ebix and stipulated that “the performance of all the obligations of the Issuer under the Bonds will be secured by pledge of 100% equity shares of EBIX Inc. part funded through the Issue Proceeds (the “Collateral”).”

[15]Other terms of the Offering Circular made it clear that the pledge should be put in place within 90 days of the Issue Date of 23 August 2024 (i.e. by 21 November). In addition, if the value of the pledged shares was less than the amount outstanding on the Bonds a Shortfall Amount was to be paid to the Security Agent.

[16]Other relevant provisions of the Offering Circular were that: 1) The Bonds would bear interest of 9.5% per annum from the Issue Date; 2) “The fund requirement and deployment mentioned in the Objects of the Issue have not been appraised by any bank or financial institution. The fund requirement and deployment are based on internal management estimates and has not been appraised by any bank or financial institution. The management will have significant flexibility in applying the proceeds received by us from the Issue”; 3) “The aggregate net proceeds received by the Company from the offer will be used towards the acquisition of 100% Equity of EBIX Inc. Pending the use of the net proceeds from the offering for the purposes described above, the Company intends to invest the net proceeds in the instruments as permitted by applicable laws or regulations issued by RBI and the Govt. of India”; 4) “The net proceeds from the issue of the Bonds are estimated to be approximately US$58.8 million after deducting the issue expenses of the offering. The aggregate net proceeds received by the Company from the offer will be used towards the acquisition of 100% Equity of EBIX Inc. Pending the use of the net proceeds from the offering for the purposes described above, the Company intends to invest the net proceeds in the instruments as permitted by applicable laws or regulations issued by RBI and the Govt. of India.”

[17]As regards collateral it was inter alia provided that: 1) “The Bonds constitute direct, general and unconditional obligations of the Issuer and the performance of all the obligations of the Issuer under the Bonds are or, as the case may be will be secured by, inter alia, a fixed charge (by way of pledge) over the “Collateral”. The charge created on the Collateral will be created in favour of the Security Agent under the Collateral Documents for the benefit of the Bondholders.” 2) “The obligations of the Issuer with respect to the Bonds and the performance of all the obligations of the Issuer under the Bonds will be secured by way fixed charge on the Collateral, and will consist of the following: ~ 100% Pledge of Equity Shares of EBIX Inc. The Issuer shall ensure that the market value of the Collateral is not less than the amount outstanding on the Bonds, provided further if the market value of the Collateral is less than the amount outstanding on the Bonds, then the Issuer shall be liable to pay to the Security Agent, the Shortfall Amount. In the event of sale of the Collateral by the Security Agent and after realization of the sale proceeds of the Collateral, if there is any shortfall in the amounts payable to the Bondholders, the same shall be paid by the Issuer to the Security Agent forthwith upon receipt of notice of the same. Collateral Documents For the purpose of creating the Collateral, the following documents are proposed to be executed in favour of the Security Agent, acting for the benefit of the Bondholder within 90 days from the Issue Date of the Bonds. Deed of Pledge by the Issuer A deed of Pledge will be executed by the Issuer for the purpose of securing for the benefit of the Bondholders. In compliance with the ECB Guidelines, the Issuer will obtain necessary permission from its authorised dealer to create security interest on the Collateral in favour of the Security Agent to secure the obligations of the Issuer in respect of the Bonds.” 3) “To the extent that any of the Collateral Documents required in connection with the creation, perfection and registration of the fixed charge over the Collateral have not been executed and delivered on or prior to the Issue Date, or the Issuer has not procured the registration of such security interests on or prior to the Issue Date (in each case, to the extent required by the Collateral Documents), the Issuer shall(i) ensure that all such actions are completed as soon as reasonably practicable, and in no event later than 90 days following the Issue Date and

(ii) deliver, or cause to be a delivered, to the Security Agent, a certificate signed by two authorised signatories of the Issuer confirming that all such actions have been completed …” 4) Under “Events of Default” it was provided that “Failure of any Collateral Document to provide security: except as expressly permitted by the applicable Collateral Documents, any Collateral Document at any time for any reason shall cease to be in full force and effect in all material respects, or shall cease to give […] the rights, powers, privileges and priority purported to be created thereby, and such failure continues unremedied for 14 consecutive days after the earlier of (i) the Issuer obtaining knowledge thereof or (ii) the Bondholders giving written notice thereof to the Issuer”

[18]In addition: 1) The Bonds carried with them a right to convert into shares at any time during the “Conversion Period” which covered most of the period of the Bonds; 2) Eraaya was required to “ensure” its Board was made up of seven directors, four of whom were to be nominated by the Bondholders and to “take and procure the taking of all corporate action required” to effect this; 3) Eraaya was required to “obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses [… as are necessary to(i) enter into, and perform its obligations under, the Notes and the Collateral Documents and (iii) ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of the Notes and the Collateral Documents,

(ii) (II) preserve and maintain good and valid title to the Collateral, free and clear of any Liens; and (Ill) comply with all laws, regulations including the FEMA ODI Regulations and compliant with all filing requirements thereto in relation to the Bonds.”

[19]In the Risks section one risk identified was:

“The fund requirement and deployment mentioned in the Objects of the Issue have not been appraised by any bank or financial institution. The fund requirement and deployment are based on internal management estimates and has not been appraised by any bank or financial institution. The management will have significant flexibility in applying the proceeds received by us from the Issue.”

[20]The risks associated with the need to create the security interests were flagged in a section entitled “Risks Relating to the Bonds and Shares” thus:

“The failure of the Issuer to properly create and register the security interests in the Collateral securing the Bonds could result in an event of default under the Bonds, and could impair the ability of the holders of the Bonds to seek repayment The Issuer will be obligated to create and register the Collateral, or to take all commercially reasonable steps to create and register the Collateral securing the Bonds. Until the Collateral Documents are entered into the Bonds will be unsecured. If the Issuer fails to take commercially reasonable steps to or fails to create and register the applicable Collateral in the form and manner prescribed, an Event of Default will occur and Security Agent could enforce the security over the Collateral. In such circumstances, the Issuer may not have sufficient resources to repay the Bonds, in full or at all.”

The First Bond Issue

[21]On 21 August, Oyster Bay, which ultimately subscribed for much of the first tranche of the Bonds, entered into a Subscription Agreement with Eraaya. It summarised the provisions as to the collateral secured by way of pledge. It also provided that:

“The Issuer shall use the proceeds of the offering of the Bonds (“Proceeds”) towards the acquisition of 100% equity of EBIX Inc and other eligible purposes, subject to receipt of all applicable approvals and consents. …Use of Proceeds: In the event that the Issuer intends to use the Proceeds for use other than what is stated in the Terms and Conditions, it will require prior written consent of the Bondholder.”

[22]On 23 August 2024, Eraaya issued US$60 million of bonds (“the First Bond Issue”).

[23]On the same day, Mr Joseph Mammen of Elara, having received notification from GLAS that funds had landed in their account, sent a “Securities Distribution Notice”. This was a document in a form prescribed by the Offering Circular, and signed by Eraaya’s directors, identifying exactly where to send the money, the relevant ISIN codes and the counterparty emails. In this case it was to be sent to an Elara account (US$40m) and two others (US$11m and US$9M).

[24]On 29 August 2024, GLAS paid the net proceeds (equivalent to approximately US$59,459,700, allowing for the deduction by GLAS of “Issue Fees & Expenses”) accordingly.

[25]On 30 August 2024, the sale of Ebix completed and Ebix exited from Chapter 11 bankruptcy. Eraaya did not acquire 100% of Ebix, but only 97.58%, with the remainder being acquired by Melanie Lane and Watch Hill.

The Second Bond Issue

[26]By late September 2024, Eraaya (in order to repay the bridging finance that had been required to complete the purchase of Ebix) explored the issuance of the second tranche of bonds, notifying Elara of its intention. However, the evidence suggests that investor apprehensions surfaced, owing to Eraaya's delays in fulfilling obligations specified in the Offering Circular, particularly the creation of a pledge over the shares in Ebix . This was not obliged to be completed yet; as Eraaya pointed out Eraaya could not grant a pledge over shares in Ebix until it owned Ebix. However by this point Eraaya did own Ebix (or at least 97.58% of it) and had done so for some weeks – and yet not even a first draft agreement had emerged.

[27]There is evidence before the Court indicating that one potential investor, Selvi, raised these concerns with Elara. Elara was not able to put Selvi’s concerns at rest. On the contrary: 1) Mr Mammen (of Elara) told Mr Gautam Krishna (of Selvi) that the Collateral had not yet been put in place; 2) Mr Krishna told Mr Mammen that he required assurances that the Collateral would be put in place before any funds invested in the Second Allotment would be released to Eraaya. Specifically, Mr Krishna told Mr Mammen that “Selvi was interested in investing in the Bonds but that it would only do so on condition that GLAS would not be able to pay Selvi’s purchase money to [Eraaya] until the pledge over the shares in Ebix had been put in place”; 3) Mr Mammen also told Mr Krishna that there was a possibility that US$20m of the proceeds from the Second Allotment would need to be released to Eraaya to repay a loan from an entity called Oyster Bay (the terms of which loan Mr Krishna was not aware). Mr Krishna told Mr Mammen that Selvi was content for this to happen, on condition that the remaining US$40m would not be released to Eraaya until the Collateral was in place. Mr Mammen also informed other potential investors MGF and Bull Value about the existence of a loan from Oyster Bay; 4) In order to address the Bondholders’ concerns, Mr Mammen suggested to Mr Pankaj Gupta, Eraaya’s representative, the possibility of putting in place an escrow arrangement. Following those discussions, Eraaya and Elara instead “agreed” to provide “protection for [the] bondholders” by amending the First Settlement Agency Agreement.

[28]In this connection, Elara procured that a revised draft Settlement Agency Agreement with GLAS was sent to Eraaya. Eraaya executed this agreement dated 1 October 2024 (“the Second Settlement Agency Agreement”). This was largely in the same terms as the First Settlement Agency Agreement. However clause 3.4 was amended (new text highlighted for ease of reference in bold):

“Once all the trades have settled, on receiving confirmation from Elara Capital PLC by email the Settlement Agent will make Issue Fees & Expenses payments if any as per Issuer’s irrevocable instructions under Schedule 3 of this Agreement and subsequently on receiving confirmation from Elara Capital PLC by email transfer the remaining Purchase Monies to the Issuer’s Payment account in one or more tranches.”

[29]Thus, clause 3.4 was amended to introduce a requirement for a “confirmation” from Elara, which was not present in the First Settlement Agency Agreement. In addition to the extent that the history of the negotiations is admissible and relevant (see further below) the evidence presently available suggests that that change “was inserted to provide a simpler alternative to a conventional escrow arrangement”.

[30]On 3 October 2024, Eraaya issued a further US$ 60 million of bonds (“the Second Bond Issue”). The Bondholders hold the following amounts of the Bonds issued in the Second Bond Issue:(1) Selvi owns $46.9m;

(2) MGF owns $5m; and

(3) Bull Value owns $4m.

[31]On 4 October 2024, the first draft of the Pledge Agreement was sent by Eraaya’s lawyers to GLAS’s lawyers. The draft agreement was for a pledge: 1) To be effective immediately upon execution (i.e. whether or not the proceeds of the Bonds had been disbursed by GLAS); 2) Over “all of the issued and outstanding stock owned by the Obligor in the Pledged Company” (i.e., reflecting the actuality, not over 100% of the shares).

The Dispute Emerges

[32]In early October 2024, Mr Mammen sought the Bondholders’ consent for the release of $20m to repay the loan to Oyster Bay. The Bondholders provided that consent and the current evidence is that they did so on condition that:(1) the full $20m would be used solely to repay the loan from Oyster Bay; and (in the case of Selvi)

(2) the Unutilised Proceeds would not be released until the Collateral was in place.

[33]Thereafter on 23 October 2024, Elara sent Eraaya two draft fund transfer instructions for the transfer of the proceeds of the Second Bond Issue. One of these was for US$ 20 million (which was an instruction to pay Eraaya at an account held by it with Yes Bank in India). Eraaya signed the first payment instruction on the same day (23 October 2024) and returned it to Elara. GLAS then released US$ 20 million to Eraaya. It appears that the US$ 20m was not used in its entirety to pay off the Oyster Bay loan; only US$ 12.5m of the US$20m was used to repay Oyster Bay. What happened to the rest of the money is not currently clear, though it appears from an email from VLL exhibited to Mr McDonald’s evidence that US$ 2m may have been remitted to VLL on 31 October 2024.

[34]The second payment instruction was for US$ 40 million (which was an instruction to pay an entity called Pershing Securities Ltd (“Pershing”) at an account held by it with Citibank USA). Eraaya amended this so as to provide for payment to its Yes Bank account in India (i.e. the account to which the US$ 20 million and the net proceeds of the First Bond Issue had already been paid).

[35]On 31 October 2024, Ms Vasudha Aggarwal on behalf of Eraaya requested that the Unutilised Proceeds be released. On 5 November 2024, Mr Mammen replied stating: “as discussed with the principals the remaining funds are to be remitted post completion of the security pledge and other conditions precedent to the Offering”.

[36]On 6 November 2024 Eraaya wrote to Elara in the following terms:

“Whereas we have received the remittance of US$ 20 Million on Date 30/10/2024, we are yet to receive an update on the remittance of the US$ 40 Million. We are under tremendous pressure from the regulatory authorities and the AD Bank in respect to the schedule and statutory filings in regard to the pending transaction, kindly advise the schedule of the remittance of the US$ 40 Million…”

[37]On the same date Elara responded, claiming that it was withholding its confirmation for these reasons:

“[t]here are still certain conditions pertaining to the Offering which are pending, mainly the execution of documents for the creation of the security pledge. As per terms of the Settlement Agreement dated 01 October 2024. Elara Capital PLC will confirm in writing once we are able to transfer the funds on completion of the conditions. Kindly refer to Clause 3.4 of the attached Settlement Agreement executed by Eraaya […] We request GLAS to kindly retain the funds in the mean time.”

We request GLAS to kindly retain the funds in the mean time.”

[38]There are also at around this time Whatsapp messages and calls with Mr Gupta, referring to Clause 3.4 of the Second Settlement Agency Agreement.

[39]Ms Aggarwal on behalf of Eraaya sent an email to Mr Mammen (among others) on 4 December 2024 stating that, owing to litigation initiated in India, it would not be possible for Eraaya to grant a pledge over Ebix’s shares until the “final outcome of aforesaid litigations”. (It is not clear whether this reflects the commencement of the “Status Quo” proceedings mentioned below).

[40]On 12 December 2024 the (eleventh) draft of the Pledge Agreement was circulated. For the first time it introduced an Effective Date provision whereby the pledge was not to be effective until the entire purchase moneys, in other words the US$42 million had been transferred or credited to Eraaya. GLA’s response to this draft (sent to Linklaters on 27 December) noted:

“We note that there have been quite a number of substantive changes to both the STA and US Pledge Agreement. Our understanding is that the bonds were already issued. Please be reminded that the terms and conditions of any issued bonds cannot be changed without Bondholders' consent and therefore please ensure that the latest proposed changes are permitted under, and are consistent with, the terms and conditions of the Bonds.”

[41]On 19 December 2025, MGF wrote to Elara in its capacity as Eraaya’s financial advisor in relation to the Issuance:(1) setting out Eraaya’s alleged breaches of the T&Cs (failure to execute pledge, representation as to equity ownership, board structure);

(2) alleging that the proceeds of the Bonds had been improperly utilised for purposes other than those specified in the Offering Circular;

(3) stating that any further release of funds without the Bondholders’ consent would be in breach of Elara’s fiduciary duties; and

(4) noting that it may take legal action to protect its interests. That letter was not sent to Eraaya. Eraaya relies on this heavily saying that it had no idea until after it issued the Injunction Application that any of the Bondholders’ alleged claims even existed.

[42]On 17 January 2025, negotiations between Eraaya and GLAS concerning the pledge terms ended without resolution. In particular GLAS conveyed Elara’s clear refusal to accept the Effective Date provision. There seem to have been no further communications on the draft Pledge Agreement.

[43]Accordingly, based on the evidence at this hearing, while it is certainly strictly accurate to say that the Bondholder’s detailed arguments were not explained to Eraaya before these proceedings, the history of the re-negotiation of Clause 3.4 and (separately) the discussions over the release of funds and the pledge had made it quite clear that the Bondholders (the “principals” to whom Elara had referred) considered themselves entitled to a pledge before the Unutilised Funds were released.

[44]On 13 February 2025, the National Company Law Tribunal (NCLT) in New Delhi made an order in proceedings that 104 minority shareholders led by a Mr Sunil Aggarwal brought against Eraaya (“the Status Quo Order”). It provides: “The Respondent Nos. 1 to 14 [which includes Eraaya] to maintain Status Quo with regard to all transactions in regard to the Offering Circular dated 23.08.2024, till the pendency of the present petition”.

[45]It appears that one issue in that case relates to Board Constitution: 1) Some correspondence on the litigation notes an issue as being “the Offering Circular gives powers to the bondholders to control majority of the Board of the Company which is against the Indian law since the Board constitution is a prerogative of the shareholders.” 2) The Status Quo Order also provides:

“Direct the Respondent Nos. I to I 4 to maintain Status Quo with regard to the composition of the Board of Directors of the Respondent No. I company, as on date, till the pendency of the present petition.”

[46]Eraaya has tried and failed to have the Status Quo Order varied. It appears that the Status Quo Order is still in force.

[47]Eraaya did not pay the 9.5% coupon on the Bonds when it fell due on 23 February 2025. Instead, Eraaya issued a notice which asserts a right to defer payment of accrued interest on the Bonds until they mature on 25 August 2031.

The Claim and the Listing of this Hearing

[48]On 14 February 2025 Eraaya issued but did not serve the Claim Form. The relief sought in the Claim Form was damages for breach of the Engagement Letter, and for negligence and an injunction requiring Elara to provide the confirmation purportedly required for the release of the Unutilised Funds.

[49]On the same day Eraaya filed a statement on the BSE website in respect of the proceeds of the Second Tranche, which stated that "Out of total 60 Million US$, receipt of US$ 40 Million less Issue Expenses is pending".

[50]On 11 March 2025 Hogan Lovells for the Bondholders wrote to Elara’s lawyers indicating that the Bondholders considered that they had a proprietary claim to any proceeds GLAS is holding insofar as they represent the traceable proceeds of the Bondholders’ contribution towards the Second Bond Issue and asking that Elara provide certain undertakings “to ensure that our clients' proprietary interests in those monies are protected pending the resolution of a potential dispute between our clients, on the one hand, and Eraaya on the other, in respect of the Bonds.”

[51]That letter also: 1) Sought “some further information regarding the proceedings that we understand to have been issued against your client by Eraaya in the English High Court on 14 February 2025, with reference CL-2025-000062, and which we understand may be related to the issues described above (the “Eraaya Claim”).” 2) Made crystal clear that Elara should not confirm to GLAS that it could release the Unutilised Proceeds.

[52]On 12 March 2025, Eraaya issued the Injunction Application. Immediately thereafter it served the Claim Form and the Injunction Application on Elara. It indicated that it intended to seek expedition of the Injunction Application to a hearing on 28 March 2025. The Application notice gave a time estimate of half a day.

[53]On 14 March 2025 Elara’s solicitors sent the entire package of materials on to Hogan Lovells (the “Documents”). It is this communication which lies at the heart of the Collateral Use arguments. The Documents were not provided with any indication or qualification that they were subject to collateral use restrictions. They were sent under cover of a letter which indicated that Elara found itself caught “in the middle of a dispute in which it has no direct interest. On the one hand, the Issuer has sued it, contending that it is required to give the clause 3.4 confirmation and claiming damages resulting from its not having done so; on the other hand, your clients contend that the confirmation should not be given.” It also suggested that the Bondholders should apply to be joined to the proceedings.

[54]On the same day Elara also wrote to Eraaya. Early in that letter Elara indicated that it was its view that “given the very obvious interest of the Majority Bondholders in the present proceedings, including in particular your client’s application for an interim mandatory injunction, they ought to have been made parties to the claim. Please explain why they have not been made parties to the proceedings.” The letter went on to say that it was “extraordinary” that Eraaya was attempting to have the Injunction Application heard on an expedited basis without joining the Bondholders. The Bondholders were copied into this letter and Eraaya were invited to join them into the communication loop. Elara also highlighted: 1) The inadequacy of the time estimate for the hearing by reference to the notice from the judges in charge of the Commercial Court and London Circuit Commercial Court dated 28 September 2020. 2) The need for any application for expedition to comply with section F.3.2 of the Commercial Court Guide.

[55]At about the same time as Elara wrote to Eraaya, Eraaya applied to the Court for expedition. The Commercial Court Guide sets out at D2.2 and J1.3 the Court’s approach to expedition. Expedition will be granted in cases of sufficient urgency and importance, and the Guide makes clear that the Court will have regard to “the nature and degree of urgency, and the importance of the case, the state of the list, the procedural history (including the pre-action history), and especially (unless the application is agreed by all parties) the question whether the expedited trial proposed by the applicant will be fair to each respondent.” It does not explicitly say that applicants should make full and frank disclosure in relation to the relevant factors. It has probably been taken for granted that this falls within paragraph A1.10 of the Guide which records the expectation of a high degree of co-operation and realism from the legal representatives of the parties.

[56]The basis of the application advanced by Eraaya’s solicitors was: 1) The urgency requirement was met: a) It was necessary to avoid serious and irreparable harm being suffered by it in the form of imminent risk of regulatory action in the new financial year and a “closing window to avoid the loss of control” of Ebix UK. b) “No dispute has been raised by any party to the effect that the Claimant is not the owner of the US$ 40,000,000 that is stuck with the settlement agent and which the injunction sought in the Application would release to the Claimant. The FCCB’s have been issued. It is therefore purely a question of timing as to when those funds are received”; 2) The case was substantial and important. It was stated that the non-payment of the US$ 40m had created an “immediate and clear financial burden”. The risk of loss of control and foreign currency regulation sanctions was reiterated; 3) The listing of the hearing on 28 March would preserve the balance of fairness and enable Elara to prepare and file evidence.

[57]There are a number of concerning features of Eraaya’s letter. The first is that it estimated the hearing time for the application as being 2.5 hours. Given the complexity of this matter it is hard to see how that estimate was ever thought to be realistic. The second is that the letter and the witness statement which was referred to failed to make any reference to the facts that: 1) The dispute had been ongoing since early November (raising serious issues about delay and the real need for expedition); 2) Eraaya had (on any analysis) breached terms of the Bonds; 3) One ground for expedition was based on a risk of a takeover of Ebix UK by VLL, and the Court was not told that VLL was under the same ownership as Eraaya – a factor which might be thought to be relevant to the risk of loss of control. 4) Finally, the statements that “No dispute has been raised by any party to the effect that the Claimant is not the owner of the US$ 40m [….] It is therefore purely a question of timing as to when those funds are received” was a considerable oversimplification. In fact, it was quite clear from correspondence dating back some time that the Bondholders did dispute more than the question of timing. Even though the proprietary arguments had not been advanced to Eraaya, it was clear that the Bondholders did in substance deny Eraaya’s right to the proceeds unless and until a pledge was put in place.

[58]Overall, those matters were ones which were significant in the context of the question of expedition. Had a full and frank presentation of the expedition factors been made it appears highly unlikely that expedition would have been granted.

[59]At this point there also emerged the issue about collateral use. On Monday, 17 March 2025, Eraaya responded to Elara, copying Hogan Lovells, asking Hogan Lovells to confirm if they had received the Documents, to which CPRs 31.22 and 32.12 applied. Elara responded the same day, explaining that it was considered that providing the Documents to the Bondholders was “for the purpose of the proceedings”, and stating that it appeared that Eraaya was attempting “to engineer a situation in which the Bondholders[…] are effectively shut out from opposing the application for an injunction.”.

[60]On Tuesday, 18 March 2025, the Bondholders wrote to:(1) Eraaya, asking for their consent for the Bondholders to be joined to the proceedings and for the Bondholders to be served with the Injunction Application;

(2) Elara, asking for their consent to joinder (which was provided); and

(3) Commercial Court Listing, indicating their intention to intervene in the proceedings and to seek Eraaya’s consent to be joined.

[61]Eraaya’s response did not address the Bondholders’ proposals, but instead alleged that Elara, the Bondholders and their legal representatives were all in breach of CPR 31.22 and 32.12 and that use of the Documents constituted “clear collateral use”.

[62]On 19 March 2025, the Bondholders issued the Joinder Application. On the same day, Elara wrote to the Court taking issue with the proposed expedition sought (though not opposing some limited expedition) and highlighting: 1) The inadequate hearing length – indicating that with the joinder issues 1.5 days was a more sensible estimate; 2) Eraaya’s delay in making the application; 3) The vagueness of the proposed regulatory risk.

[63]Thereafter, protracted correspondence between the parties and with Commercial Court Listing followed. It does not make edifying reading. Despite repeated reminders from the court that such correspondence must be kept brief and to the point it was lengthy and often discursive. It runs, in the hearing bundle, to nearly 60 pages. The attention of the Judge in Charge was repeatedly required. It is overall not at all in the spirit of paragraph A1.10 of the Guide.

[64]At this point, Eraaya maintained that the Injunction Application should be determined on an expedited basis without reference to the Joinder Application; alternatively, that the Joinder Application should be struck out as an abuse of process. An extremely firm line was taken on collateral use: Eraaya implicitly threatened contempt proceedings against the Bondholders and its legal representatives, for example stating that Eraaya would “seek subsequent orders in respect of the misused material and information, as against the applicants for joinder and their lawyers”, that the Bondholders and their legal representatives would “bear the consequences”, and Eraaya would “seek appropriate orders in due course”. Eraaya repeatedly refused to confirm in correspondence that it would not bring such proceedings. Eraaya also suggested that the Bondholders’ legal representatives are debarred from participating in these proceedings.

[65]On 25 March, Henshaw J indicated that the proposed expedited hearing was unworkable. While agreeing to a degree of expedition to a 2 day hearing shortly after Easter he noted “It is unclear why the Claimants sought an expedited hearing on 14 days' notice in circumstances where the claim form was issued a month previously and, it appears, the potential issue has existed since October 2024.” Succinct responses were requested.

[66]Once Henshaw J indicated that he was minded to direct that the Bondholders be permitted to participate in the Injunction Application, Eraaya granted the Bondholders prospective permission to use the Documents for the purposes of responding to the Injunction Application. Eraaya however continued to refuse the Bondholders permission to use the Documents for the Joinder Application.

[67]The Bondholders in turn took issue with the proposed joined up hearing suggesting that joinder needed to be considered first. Eraaya indicated (over the course of a distinctly non-succinct letter of 7 pages) that it was concerned that the manner of listing “does not waive or excuse breaches of the collateral use restrictions” and contended for the reverse order.

[68]On 31 March Henshaw J responded again, highlighting concerns with the way in which Eraaya had attempted to have the hearing listed. In particular he stated:

“Requests for expedition involve allocating the resources of the court for the benefit of one party in preference to the needs of other parties. It is incumbent on a party seeking expedition to do so on proper grounds, ensuring the court has all the relevant information, and to take a co-operative approach to the management of the case. Certainly in some respects, it does not appear to me that the Claimant has lived up to these expectations:- 1 The Claimants on 14 March 2025 sought an expedited hearing on 14 days' notice in circumstances where the claim form had been issued a month previously and, it appears, the underlying issue had existed since October 2024. 2 The Claimants provided a 2.5 hour time estimate, which was obviously unrealistic for a contested application that would in substance dispose of a claim for payment of approximately US$40 million. 3 The court was not told that there was a further group of potential parties, the bondholders, who might reasonably be expected to claim an interest in the proceedings and the claimants' application […] […]the expedition application has taken up an excessive amount of the time of the Judge in Charge and the court's listing team. If this approach continues, the court may simply refuse expedition altogether and direct that the applications be listed, in such order as it considers appropriate, in the ordinary course.”

[69]On 7 April 2025, after a further barrage of correspondence, Henshaw J indicated that the procedural difficulties caused by Eraaya’s collateral use objection might be resolved by the issue “being determined on the papers in the very near future”; alternatively, at this hearing, which “might in practice resolve the joinder issue as a whole”. Eraaya objected to the issue being determined on the papers.

[70]Ultimately Henshaw J directed that (among other things) the Bondholders be made Respondents and served with the Injunction Application forthwith, and that the Joinder and Declaration Applications be dealt with at the outset of this hearing, subject to the Judge hearing the applications.

[71]Consequently this matter came before me for a two day expedited hearing against a background of a very contentious and to some extent intemperate approach. That approach was also manifest in the witness evidence served, with all parties larding their witness statements with argument and adjectives. Injunction Application The Law

Injunction Application

[72]There was no real difference between the parties on the applicable principles of law, although there was a predictable difference in emphasis.

[73]Although some of the older authorities suggest that distinct principles apply to the grant of mandatory relief, the more recent cases favour the view that the underlying principles for the grant of interim prohibitory and mandatory injunctions are the same, as explained by Lord Hoffmann in National Commercial Bank Jamaica Ltd v Olint Corporation Ltd

[2009] 1 WLR 1405

(PC) [19]. “In both cases, the underlying principle is the same, namely, that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.”

[74]However, as Gee on Commercial Injunctions (7th edn) notes, at 2-041:

“What one can say is that mandatory injunctions are in their nature liable to be more intrusive, result in greater risk in contempt proceedings, result in greater waste of time and money if they are “wrong” and have to be undone, and are more likely to affect the status quo.”

[75]Accordingly the irremediable prejudice test itself drives a conclusion that informs the earlier dicta, namely that: 1) A court is “far more reluctant” to grant mandatory injunction than it would be to grant a comparable prohibitory injunction; 2) The court must feel “a high degree of assurance” that at the trial it will appear that the injunction was rightly granted: Shepherd Homes Ltd v Sandham

[1971] Ch 340

(Ch) 351; 3) A court will only grant a mandatory injunction if the case is “unusually strong and clear”, even if it is sought to enforce a contractual obligation.

The Parties’ Submissions

[76]Eraaya submitted that: 1) Elara had a contractual obligation under the Engagement Letter and that included providing the confirmation required under clause 3.4 of the Second Settlement Agency Agreement, and is (at the very least) strongly arguably in breach of that obligation by failing to provide that confirmation; 2) The balance of convenience favours the granting of the injunction, in particular because the prejudice to Eraaya if it loses majority control of Ebix UK is irremediable. Some reliance was also placed on potential regulatory enforcement proceedings if the funds are not repatriated to India.

[77]Both Elara and the Bondholders submitted that there was a good argument that Elara was not bound to provide the confirmation until the required security was in place, that the agreement to release US$ 20m of the proceeds was neither here nor there and that damages would not be an adequate remedy for them if Eraaya is not ultimately successful.

The Merits of Eraaya’s claim: analysis

[78]The first question to ask is the “serious issue to be tried” question. That question can be simply answered. There plainly is a serious issue to be tried.

[79]However, some further consideration of the merits is appropriate because what is being sought is a mandatory injunction; and one which is, if not final, in practical terms fairly proximate to being final. On one analysis one might indeed say that Eraaya is seeking a final decree of specific performance; as Burrows notes in “Remedies for Torts, Breach of Contract and Equitable Wrongs” (4th edn 2019) 465-466 the role of specific performance is the enforcement of a positive contractual promise. Certainly, what is being sought comprises all of the relief in paragraph (1) of the prayer to the Particulars of Claim. And while, strictly speaking, any decision made in Eraaya’s favour on this point could be found to be wrong at a later stage, in practical terms if this relief is granted the genie is out of the bottle and is not going back in. This was a point which was frankly accepted on behalf of Eraaya by Mr Salve KC, who described the relief being sought as “extraordinary”.

[80]Thus, while technically the threshold jurisdictional test remains one of “serious issue to be tried”, the merits will have to come into the equation at a later stage when considering the balance of convenience and the question of where the lesser risk of irremediable harm lies.

[81]It is perhaps with this point in mind that Eraaya at times placed its submissions on the basis that this was such a clear case that there was no defence. This would of course be the test to be met (by reference to summary judgment standards) if final relief had explicitly been sought. This was also the approach inherent in the submission that this is not the ordinary sort of interim injunction application where the American Cyanamid guidelines apply but rather a case where it would be a “misuse of the process of the court to withhold from the claimants an interim remedy” (by reference to inter alia Manchester Corp v Connolly

[1970] Ch 420

, CA).

[82]If one asks whether that summary judgment test is met, the answer is simple. It is not met by a very comfortable distance. Even if one poses the test historically applied to interim mandatory relief and asks if the Court feels a “high degree of assurance” that Eraaya will establish at trial that the injunction was properly granted and that its case is “unusually strong and clear” or a “clear case” where relief should be granted, the answer is again no.

[83]The preliminary assessment on the basis of the material available to the Court on this application suggests that the merits of the claim, while plainly arguable, are some way short of strong. I would unhesitatingly say that on the material before me it is Elara’s case which appears at this early stage to be stronger. The facts which feed into this conclusion are as follows.

[84]Eraaya’s application and underlying claim is not well defined and on some levels is conceptually confused. Eraaya focusses almost entirely on Clause 3.4 of the Second Settlement Agency Agreement as the basis for saying that Elara is bound to give the confirmation required under that clause for GLAS to release the Unutilised Proceeds. It says that this is the clear meaning of the clause. But, even putting aside the questions which do arise as to that proposition, that is simply the wrong starting point - because Elara is not a party to the Second Settlement Agency Agreement. Whatever Clause 3.4 should be taken as saying, Elara has no obligations under Clause 3.4 that Eraaya can enforce.

[85]The correct first point to consider is what Elara’s relationship with and obligations to Eraaya were. On the basis of the material currently in play Eraaya’s only apparent contract with Elara is that under the Engagement Letter. But that is a letter which on its face only appoints Elara as a financial adviser. The terms of the letter impose duties consistent with that: to “assist and advise” Eraaya on an “exclusive best efforts basis”. The defined duties (“(i) assistance with preparation of offering documents (if required) which shall contain such information as [Elara and Eraaya] may mutually determine to be required […]; (ii) assistance with the distribution of materials to investors following approval by [Eraaya]; (iii) evaluating indications of interest; (iv) assisting [Eraaya] and its counsel in drafting definitive documents”) are likewise of a piece with an essentially advisory role.

[86]The means by which they somehow become obligations which incorporate a specifically enforceable obligation that requires Elara to provide a confirmation (of whatever sort) under Clause 3.4 is not readily discernible. This is the more so, given that on any analysis the later form of Clause 3.4 did not exist at the time the Engagement Letter was entered into (see further below).

[87]It may well be that Elara’s relationship with Eraaya was not entirely defined by that Engagement Letter, and that at some subsequent point (possibly around the time that version 2 of Clause 3.4 was drafted), Elara entered into a relationship with Eraaya which imposed further responsibilities on it. There are some indicia of this. Eraaya pointed to documents in which Elara allowed itself to be identified in regulatory documents as “Lead Manager/Arranger”, as well as to the correspondence surrounding the suggested instructions, in which Elara itself proffered an instruction which identified a company called Pershing, and a specific account with Pershing (not in Eraaya’s name) as the destination for funds. But this did not add up to evidence of a further or varied relationship; and it formed no part of Eraaya’s pleaded case, which rested solely on the Engagement Letter.

[88]Nor does the fact that Elara gave an instruction in the context of the First Bond Issue (on 23 August) assist, because this instruction was of a different nature to the confirmation required by Clause 3.4; it was the notification of contact details which could easily be seen as falling within the financial advisor/documents drafter role envisaged by the terms of the Engagement Letter.

[89]Further there was plainly some scope for Elara to be acting in some respects for investors, which would add an extra complication to decoding what was going on. The Pershing exchange refers to “discussions with principals”. The Bondholders pointed to Clause 3.3 of the Engagement Letter, which:(1) draws Eraaya’s attention to the fact that Elara may have conflicting interests or duties in connection with a transaction;

(2) permits Elara to assist and advise other parties to the transaction; and

(3) states that, in the relevant circumstances, “[Elara] will act in the best interests of the source of finance”. While this formed no part of Elara’s own case at this stage in response to the injunction application there is plainly scope for the relevant circumstances, which apparently involved Elara in the process of the genesis of Clause 3.4 of the Second Settlement Agency Agreement to involve a situation falling within the scope of Clause 3.3 of the Engagement Letter, whereby it was trusted by one or more investors to exercise its unfettered discretion under that clause to provide the confirmation in accordance with the condition it is said that Eraaya agreed with Selvi.

[90]The second strand is Clause 3.4 itself. As already noted, Eraaya would like to rely almost exclusively on this clause, and what it sees as the objective construction of that clause. As already noted, that is not really an apt approach when it is not a contractual term which binds Elara. So, for the purposes of the merits the question of the correct construction of the clause is one which does not arise. But the mere fact of the two versions of Clause 3.4 asks questions which Eraaya does not answer. The most important one is: why is this clause redrafted between the First and Second Bond Issues? That it is redrafted is clearly the case. Elara and the Bondholders offer a detailed account as to why that happened which is consistent with their case. Eraaya refuses to engage, saying that such material is not admissible in the process of objective construction of Clause 3.4. Technically that may be right. But in circumstances where Clause 3.4 presents as an anomaly, and the basis upon which Elara is to be considered to be obliged to act under it is obscure, a strong case for Eraaya would have provided some account which could reconcile these points.

[91]Thus, even standing alone and without considering the proprietary issues, I would conclude that Eraaya’s case against Elara is confused and far from strong. The Proprietary Issues Overview and relevance

The Proprietary Issues

[92]At the heart of the claim is an assertion by Eraaya that once the subscribers to the second Bond Issue paid money over to GLAS that money was that of Eraaya, and it had a right to direct the money to be paid to it (and to dispose of it as it wished). This underpins its approach to the listing of this application on the basis that there was no contest as to the right to the funds. This case counters the case of the Bondholders, who explicitly now claim that the money remained under some form of trust in their favour.

[93]The background to this case is the detail which Eraaya suggests is inadmissible to construe Clause 3.4: the account of the discussions between the Bondholders and Elara prior to the Bondholders’ investment. That evidence is outlined above. At this stage it is not challenged by Eraaya.

[94]Whether that account is correct is not a matter for this hearing. However at the same time as providing a narrative relevant to intentions on the proprietary front, it also provides one explanation which makes sense of the change to the drafting of Clause 3.4. In essence there is evidence (albeit Eraaya contends that the overall account is “untrue”) that prospective bondholders were concerned about the lack of any apparent progress towards providing the pledge which was part of the deal and that Clause 3.4 was arrived at as an alternative to a formal escrow process.

[95]For present purposes however the Court needs to proceed on the basis that that account is arguable. The question is whether it gives rise to any arguable proprietary claim on the part of the Bondholders. This is relevant for obvious reasons to joinder, but it also has an impact on balance of convenience issues, because if there is no arguable proprietary claim by the Bondholders, that may have an impact on the potential future harms involved.

The Issues

[96]The Bondholders have put forward their case on three bases: express trust, Quistclose trust and bare trust post rescission. The Bondholders’ case is that all or most of the Unutilised Proceeds are held on trust for their benefit (or at least for the benefit of Selvi). There are three possible trusts:(1) an express trust by which GLAS holds the Unutilised Proceeds for the Bondholders as beneficial owners, subject to a power to pay the funds to Eraaya upon Elara’s confirmation;

(2) a Quistclose trust either (i) by which GLAS holds the Unutilised Proceeds for the Bondholders as beneficial owners, subject to a power to pay the funds to Eraaya upon Elara’s confirmation or (ii) by which GLAS holds the Unutilised Proceeds for the Bondholders as beneficial owners, subject to a power to apply them exclusively “towards the acquisition of 100% Equity of Ebix Inc”, or otherwise to apply the funds in accordance with the Bondholders’ consent; and

(3) a bare constructive trust that will arise following rescission but will take effect retrospectively, such that GLAS will be deemed to hold the Unutilised Proceeds for the Bondholders as beneficial owners as from the date that the Bondholders paid over those monies.

[97]The principles were not contentious, save as to details which can sensibly be addressed as part of the analysis.

[98]The starting point however may be said to be this: if one asks whether the parties’ intentions (as ascertained from the terms of the arrangement and overall circumstances of the case) were that the Unutilised Proceeds were to be at GLAS’ free disposal, it follows from the arguability of the account given in the evidence that it is also arguable that they did not. There is a case that all of Selvi, Elara and Eraaya understood that the Unutilised Proceeds were not to be at GLAS’ free disposal.

[99]This point was not really disputed. However, for Eraaya Mr Head conducted a thorough and very clear-sighted forensic review of the constituent parts of the proposed trust case, designed to establish that any trust case would inevitably fall down at some point in the analysis.

Express Trust

[100]On express trust the issue between the parties was whether the three certainties were arguably present. In particular Eraaya submitted that: 1) There is no certainty of intention in that there was no evidence of an instruction to GLAS to hold the monies on trust for Selvi and that the role of the alleged trustee is being completely ignored. It was also submitted that the argument that GLAS necessarily holds the monies on trust for someone is defective because it depends on Twinsectra which relates to the very different situation of money in a solicitors’ client account; 2) There is no certainty of objects (i.e. beneficiaries) – by reference to the ambiguity in the “at least Selvi” case; 3) There is no certainty of subject matter because logically the trust cannot attach to the whole US$40m; 4) Such a trust was contrary to the wording in the Offering Circular (“Until the Collateral Documents are entered into the Bonds will be unsecured”) which plainly contemplated the Bonds being unsecured until the Pledge was entered into.

[101]So far as certainty of intention is concerned, the relevant enquiry is whether the parties intended (as ascertained from the terms of the arrangement and overall circumstances of the case) the Unutilised Proceeds to be at GLAS’s free disposal. What GLAS knew is neither here nor there. So long as it is arguable that at least Selvi and Elara (and also Eraaya) understood that the Unutilised Proceeds were not to be at GLAS’s free disposal, but would only be released to Eraaya once the Collateral was in place, certainty of intention is sufficiently arguable.

[102]As I have already indicated on the facts that proposition is arguable. There is evidence to support an argument that: 1) Selvi expressly told Elara that it would only transfer funds to GLAS “on condition that GLAS would not be able to pay Selvi’s purchase money to [Eraaya] until the pledge over the shares in Ebix had been put in place”. Elara was acting as Eraaya’s agent in those discussions with Selvi, as Eraaya itself asserts, and Elara agreed to those conditions. 2) Elara subsequently took steps to implement that bargain by initially proposing an escrow arrangement to Eraaya and subsequently, with Eraya’s agreement, inserting clause 3.4 into the draft Second Settlement Agency Agreement.

[103]While Mr Head contended that there had to be words by which it was communicated to GLAS that it was going to be holding the moneys on trust, I am not persuaded that that is necessarily right; if GLAS was not to act without Elara’s say so, it was possible for the funds to be held on trust without matters ever being explicit to GLAS. Indeed GLAS’s likely difficulty with the instruction given its own agreement with Eraaya may have been some reason for approaching the matter in the way it was done (if the Elara/Bondholder narrative proves to be correct).

[104]On the other certainties, while the case as formulated in the skeleton was capable of being criticised as failing this test, the Bondholders were clear orally: the object is all of the Bondholders. That point may not succeed, but it is arguable. Similarly it is arguable that the trust attaches to the whole of the US$40m less any fees. The submissions as to the lack of detailed foundation for this in the evidence are noted; but this is not a trial or even a mini-trial.

[105]As to the Offering Circular wording this has to be looked at in context. Eraaya’s argument that the “Risk Factors” in the Circular envisage a scenario in which the Collateral is not granted and the Bonds are left unsecured involves picking out one piece of a lengthy and complex wording and ignoring all the other bits of wording which lay out a structure of acquisition (before which there could be no security), followed within a distinct time frame by a pledge. The scenario described does not contemplate a situation in which Ebix had already been acquired with money to spare with the result that the Unutilised Proceeds could not be used for the purpose for which they were paid.

[106]Another strand of the potential argument for a trust is the mirror image. Eraaya’s own Particulars of Claim do not assert a proprietary right to the Unutilised Proceeds. Eraaya has not brought any proprietary claim against GLAS, who hold the money. It is certainly well arguable that GLAS, as Settlement Agent, holds the Unutilised Proceeds on trust for someone. The logic of Eraaya’s own case is that, unless and until Elara gives the confirmation, GLAS continues to hold the Unutilised Proceeds on trust for either Eraaya or the Bondholders – and if not Eraaya, logically it is the Bondholders.

Quistclose

[107]For this argument it is worth briefly revisiting the leading authority of Twinsectra v Yardley

[2002] UKHL 12

;

[2002] 2 AC 164

(HL) [13], [81], [100]:

“the Quistclose trust is a simple commercial arrangement akin (as Professor Bridge observes) to a retention of title clause (though with a different object) which enables the borrower to have recourse to the lender's money for a particular purpose without entrenching on the lender's property rights more than necessary to enable the purpose to be achieved. The money remains the property of the lender unless and until it is applied in accordance with his directions, and insofar as it is not so applied it must be returned to him…. …[I] hold the Quistclose trust to be an entirely orthodox example of the kind of default trust known as a resulting trust. The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money, and in so far as he does not it is held on a resulting trust for the lender from the outset.”

[108]As regards the Quistclose trust case Eraaya submitted that there was no hint of this supposed deal with GLAS anywhere in the Second Settlement Agency Agreement – no suggestion that GLAS holds monies on trust for anyone, including any of the Bondholders. It also submits that the wording in the Offering Circular both as to the pledge and suggesting a degree of flexibility in use cuts against this. It further points to the Use of Proceeds section which goes on to state:

“pending the use of the net proceeds from the offering for the purposes described above, [Eraaya] intends to invest the net proceeds in the instruments as permitted by applicable laws or regulations issued by [the Reserve Bank of India (RBI)] and the Govt. of India”

. Eraaya submits that this is “wholly inconsistent” with the Unutilised Proceeds being held on trust, because it shows Eraaya was entitled to use the money for its own purposes.

[109]Again, I am persuaded that the contrary is arguable. The passages on which Eraaya relies have to be read together with the passages which emphasise repeatedly the overall purpose of fund gathering:

“the aggregate net proceeds received by [Eraaya] from the offer will be used towards the acquisition of 100% Equity of Ebix”

. The Unutilised Proceeds were therefore to be used for that specified purpose and were not to be at Eraaya’s free disposal. It is very strongly arguable that repaying the (related party, and apparently uncommercial) VLL Loan at a time when Eraaya had already acquired Ebix (albeit only 97.58%, rather than 100%, of its shares), would not be use of the Unutilised Proceeds “towards the acquisition of 100% Equity of Ebix” as contemplated by the Offering Circular.

[110]The pledge/flexibility/investment passages upon which Eraaya relied are at least arguably best read as a recognition that purchase might not be immediate and that the proceeds could be invested until such time as they are used for “the acquisition of 100% Equity of Ebix”. Mr Mammen provided some evidence that Eraaya and Elara initially envisaged there would be an interval between issuance and completion of the Ebix transaction, during which interval the proceeds would need to be deposited with an Indian bank or in short term treasuries. Further as to the pledge the evidence as to the redrafting of Clause 3.4 does give rise to an argument that for the Second Bond Issue prospective investors were not satisfied that the obligation to pledge was enough, without further protection.

[111]This is also consistent with the Subscription Agreement entered into by Oyster Bay in connection with the First Bond Issue. Clause 5.1 of that agreement provides that Eraaya shall use the proceeds “towards the acquisition of 100% Equity of [Ebix] and other eligible purposes”. Other “eligible purposes” are to be determined in accordance with clause 7.5 (titled “Use of Proceeds”), which provides: “In the event that the Issuer intends to use the Proceeds for use other than what is stated in the [T&Cs], it will require prior written consent of the Bondholder”.

[112]Thus it is possible that GLAS holds the Unutilised Proceeds on trust for the benefit of the Bondholders, subject to a power to apply them finally exclusively “towards the acquisition of 100% Equity of [Ebix]” and in the interim “in the instruments as permitted by applicable laws or regulations issued by [the Reserve Bank of India (RBI)] and the Govt. of India.” - or as otherwise authorised by the Bondholders. The situation which arose – a surplus after purchase - is not explicitly dealt with by the Offering Circular. The reality is that Quistclose trusts arise precisely to fill such gaps.

[113]As for the suggestion that the purpose posited could not work because GLAS was never going to be a purchaser of shares in Ebix, Eraaya submitted that if one transposed the Lewin definition of Quistclose trusts “A Quistclose trust is one whereby A pays or transfers money or property to B so that B holds the money or property in trust for A subject to a power for B to apply the money or property for a stated purpose. Hence A’s beneficial interest in the money or property will remain unless and until the money or property is applied in accordance with that power…”: (Lewin on Trusts) 20th ed. 9-046 into this situation it would read thus:

“A Quistclose trust may arise where the Bondholders transfer money ... to GLAS so that GLAS holds the monies on trust for the Bondholders but subject to a power for GLAS to apply the money or property for a stated purpose”

. This, it is said, would require GLAS to be the purchaser, which was never due to happen.

[114]This is cleverly put, but ignores the fact that the Lewin definition is not comprehensive or exclusive. This was a case where a degree of elaboration of the structure was imposed by the interposition of the Settlement Agency Agreement and GLAS – and the new Clause 3.4. The latter would, if Elara/Bondholders are right, be the safeguard and means of directing the funds into the stated purpose.

Bare Trust

[115]In the light of the conclusions as to express trust and Quistclose trust, this argument becomes fairly insignificant.

[116]The starting point here is the Bondholders’ claims in misrepresentation. They contend that in the Offering Circular, Eraaya made a number of material representations:(1) a representation that Eraaya intended to execute a pledge over 100% of the shares in Ebix in favour of the bondholders by 21 November 2024 (being 90 days after the Issue Date);

(2) a representation that it was lawful for Eraaya to create a pledge over the Ebix shares in favour of the bondholders;

(3) a representation that Eraaya intended to ensure that it would put in place a Board of the relevant composition, being of no more than seven directors, four of whom were bondholder appointees including one executive director with operational oversight over the business (“Board Composition”), and would “take and procure the taking of all corporate action required” to do so; and/or

(4) a representation that Eraaya was able to put into effect the Board Composition lawfully, alternatively without requiring shareholder approval.

[117]It was not in issue that there is an argument available to the Bondholders that any such representations were false given that:

[118]The Offering Circular was dated 23 August 2024, but the VLL Loan dated 16 August 2024 stated that Eraaya was “acquiring 100% of [Ebix but] … Melanie Lane Partners Series Fund and Watch Hill Capital LLC shall be allotted 2.42% equity in [Ebix] and the balance equity shall be allotted to [Eraaya].” Therefore, there is an appearance that Eraaya knew that it would not acquire 100% of the shares of Ebix and, thus, would not be able to grant a pledge over 100% of its shares by 21 November 2024; 1) Since 23 August 2024, Eraaya has taken no steps to put in place the Board Composition (such as by writing to the Bondholders to request that they nominate their directors). On the contrary, it has taken steps which have made it more difficult to put in place the Board Composition (e.g. by increasing the number of Eraaya’s directors from 6 to 10 directors, none of whom is one of the Bondholders’ nominees); 2) There are obvious issues as to Eraaya’s ability to comply with any representation as to Board Composition. This is spoken to in Eraaya’s evidence where it asserts that there are issues concerning “the nature and statutory requirements of [Board] nominations in India”, and that directors of Indian companies are “appointed and removed by votes of the shareholders”. Those assertions appear to find an echo in the Status Quo Order materials; 3) The Bondholders’ case is that while they currently hold a mere equity in relation to all or part of the Unutilised Proceeds , in due course, the Bondholders may elect to rescind the relevant contracts, which will result in a bare trust arising retrospectively from the date of payment.

[119]Eraaya submitted that the proprietary claim arising cannot exist until there is an election by reference to the judgment of Potter LJ in the Court of Appeal judgment in Twinsectra [1999] 1 Lloyd’s Rep Bank 438 , 461:

“whatever the legal distinctions between “theft” and “fraud” in other areas of the law, the distinction of importance here is that between non- consensual transfers and transfers pursuant to contracts which are voidable for misrepresentation. In the latter case, the transferor may elect whether to avoid or affirm the transaction and, until he elects to avoid it, there is no constructive (resulting) trust;…”

[120]That is true, and consequently there is now no bare trust. But that possibility plainly exists. One option open to the Bondholders is to seek specific performance of various of Eraaya’s obligations under the relevant contracts. Another is potentially to opt for rescission, alternatively damages in lieu (at their election), in respect of various misrepresentations.

[121]Although the point is contingent, the effects, were that contingency to arise, would be serious. If the Bondholders elect to rescind the relevant contracts in equity for misrepresentation, the equitable title to all or most of the Unutilised Proceeds would re-vest in the Bondholders, such that:(1) GLAS will be treated as having held the relevant funds on a bare constructive trust for the Bondholders “from the outset”, being the dates that each of the Bondholders paid their share of the Unutilised Proceeds and

(2) the Bondholders will obtain an equitable proprietary interest enabling them to trace and to bring a proprietary claim to vindicate their rights to their assets. If the bare trust arises retrospectively from the date(s) of payment, but the Court had already ordered Elara to give the confirmation and GLAS has paid away the Unutilised Proceeds to VLL, then the Bondholders cannot sue Eraaya or VLL for knowing receipt, despite their having notice of the Bondholders’ current “mere equity”, as the Bondholders can have no “retrospective” claim against: (1) GLAS for breach of trust; or (2) Eraaya or VLL for knowing receipt. Balance of convenience Damages not an adequate remedy: Bondholders and Elara

Balance of convenience

[122]It was submitted that damages are not an adequate remedy for the Bondholders (and also Elara). The underpinning for this is largely Eraaya’s financial position. There appears to be little doubt that Eraaya is not well resourced. It frankly admits that it is “unable to repay the VLL Loan”, which is in the sum of US$34.83m plus interest (i.e. not much less than the quantum of the Unutilised Proceeds). It also positively asserts that the VLL loan was the only one it was able to get – and if so, its terms reflect a considerable lack of confidence in Eraaya as a going concern.

[123]The proceeds themselves are obviously not (substantially) destined to be held as an asset of the company. One of the reasons for the relief being sought is Eraaya’s desire (and it would say, obligation) to pay a considerable portion of the Unutilised Proceeds to VLL.

[124]It follows that the evidence is clear that Eraaya could not pay any damages award made against it. Eraaya’s principal asset is Ebix’s shares, but those shares should be subject to the Collateral so cannot be used to pay any damages award. Further the value of the shares depends on the value of Ebix.

[125]It follows that even if there is no proprietary claim by the Bondholders so long as there is a potential claim for damages that has some impact on balance of convenience as well as on joinder.

[126]But certainly if the Bondholders succeed at trial in establishing that they have a proprietary right to the Unutilised Proceeds, either by an existing trust (express or Quistclose) or a retrospective trust arising upon rescission, they will be forced to seek damages from Eraaya because they will very likely be unable to recover their equitable property. VLL is an Indian-based company with seemingly no ties to the jurisdiction, and so recovering the Unutilised Proceeds from VLL would present considerable difficulties.

[127]It follows that there is a very real case that the Bondholders (and Elara) would suffer serious and irremediable prejudice if the Court wrongly grants the relief sought.

Damages not an adequate remedy: Eraaya’s case

[128]Part of the prejudice on which Eraaya relies is plainly capable of being adequately compensated in damages. That is the cost of borrowing in relation to the US$ 40m. As to the remaining prejudice, which is said not to be so compensable Eraaya makes two points. The first is that if the VLL Loan is not repaid, it may lose majority control of its (indirect) subsidiary, Ebix UK. However there is some reason to doubt this approach, and (despite its centrality to the application for expedition) it was not pursued with any degree of fervour orally.

[129]The reason for this is that on the face of it this risk has already eventuated. The January date has come and gone. VLL has apparently served the requisite notice. Clause 2(d) of the VLL Loan provides that if Eraaya approaches VLL to accept repayment of the outstanding principal and interest by 2 August 2025, VLL “may” accept that repayment and forego its rights to acquire 51% of Ebix UK. However, VLL is not obliged to do so. It follows that whether Eraaya loses control of Ebix UK is now outside Eraaya’s control. So on its face the grant of the injunction sought cannot be said to have an effect on this. The position is not expanded upon by Eraaya – there is no evidence from VLL directly or indirectly saying that the grant of the injunction would result in VLL not exercising its right. This is particularly striking given that there is an apparent overlap between those in control of Eraaya and those in control of VLL.

[130]There is also an issue as to whether the VLL Loan is invalid, providing Eraaya with a defence to any obligations under the VLL Loan. The Bondholders’ evidence explains that Mr Garg (or the Garg family) exercises effective control over both Eraaya and VLL, on the basis that they are the “Promoters” or “Promoter Group” for each company under Indian law. Eraaya does not challenge that evidence. That is said to have a consequence. Mr Menon explains that, as a result of that connection and other connections identified in the evidence, the VLL Loan was a related party transaction and in the absence of approvals (which were not obtained) it was void (at Eraaya’s instance). While Justice Patnaik (opining for Eraaya) does dispute this point it is entirely fair to say that the VLL Loan is (at least) arguably voidable as a related party transaction. This means that at least arguably it is open to Eraaya to avoid the VLL Loan; at which point this alleged prejudice would fall away.

[131]The net result of these two aspects means that this ground of irremediable prejudice cannot be given much weight.

[132]The second point relied on by Eraaya is the contention that if the injunction is not granted Eraaya faces a real risk of regulatory enforcement proceedings. This was the other limb of the application for expedition. Again this aspect of the case was taken very lightly by the Eraaya team in oral submissions. This reflected the fact that the evidence base for it was slight at best. McDonald 1 exhibited:(i) an email chain between individuals at VLL and individuals at ICICI Bank, which does not mention Eraaya; and

(ii) emails with Yes Bank, from November and December 2024. Eraaya’s own evidence is that it does not know whether ICICI or Yes Bank has referred matters to the Royal Bank of India for regulatory investigation. Certainly the “imminent” consequences adverted to in correspondence with the Court have shown no sign at all of materialising.

[133]That is perhaps unsurprising given that the parties’ expert evidence is consistent with the view that the risk of regulatory enforcement against Eraaya is low in circumstances where it is engaged in Court proceedings with a view to obtaining payment of the Unutilised Proceeds.

[134]Mr Menon’s evidence for the Bondholders is that Eraaya will not face regulatory enforcement action if the relevant transaction has been stayed by the Status Quo Order, or there are ongoing Court proceedings concerning payment of the Unutilised Proceeds.

[135]Mr Patnaik’s evidence is not entirely inconsistent with this. He states that Eraaya is required to “take all reasonable steps to realize and repatriate” the Unutilised Proceeds to India; these being the words of the relevant regulation. Mr Menon’s view is that bringing Court proceedings to seek to obtain the release of the Unutilised Proceeds constitutes taking “reasonable steps to realize and repatriate” the Unutilised Proceeds, such that Eraaya is not in breach of the Indian legislation. It therefore seems unlikely that Mr Patnaik’s warning that such a breach may carry a “very drastic penalty” would eventuate in this case.

[136]Finally, the contingent regulatory risk that Mr Patnaik has identified is a fine. Fines are eminently compensable in damages.

[137]It follows from the above that even before one proceeds to the “other discretionary factors” the combined factors on balance of convenience tip decisively away from the grant of this admittedly extraordinary mandatory injunctive relief. The application for an injunction must therefore fail.

Other Discretionary factors and conclusion

[138]For completeness only, Elara and the Bondholders rely also on a number of other factors as going to the discretion. The first is the question of “clean hands”. It is argued that Eraaya failed to disclose the following material matters:(1) that it was in breach of key provisions of the Bonds;

(2) that VLL is under common control;

(3) that the VLL Loan was not disclosed in the Offering Circular and is on uncommercial terms; and

(4) the risk that may eventuate in respect of the shares in Ebix UK is already outside Eraaya’s control;

(5) the existence of the Status Quo Order and the possibility of the Injunction Application being in breach of the order;

(6) that Eraaya had not exhibited complete versions of several of the documents it relies upon and

(7) that Eraaya was not transparent about the position as to the timing of the risk of losing Ebix.

[139]Issues are also raised as to(i) the opacity of the evidence as to the draw down of US$20m of the proceeds from the Second Bond Issue when the Bondholders only consented to the entire US$20m being released for the purposes of repaying a loan from Oyster Bay;

(ii) issues as to the authenticity of Schedule 1 to the Second Settlement Agency Agreement, which Eraaya has declined to address;

(iii) Eraaya’s conduct in the Proceedings to date – in particular in seeking to shut out the Bondholders from defending the Injunction Application.

[140]Finally there is the question of delay. Elara refused to provide the confirmation now sought by the Injunction Application on 5 November 2024. Eraaya’s evidence explains that, after that date, Eraaya and GLAS were negotiating the terms of the draft pledge until 17 January 2025, when negotiations failed. There has been no explanation as to:(1) why Eraaya did not bring proceedings to require Elara to give the confirmation before that date, given that Eraaya asserts that its claim is so strong that there is “no defence to the claim at all” or

(2) why Eraaya did not serve the Injunction Application until almost two months later, on 12 March 2025.

[141]Of these factors the only one to which I would be minded to give much weight in this context is the question of delay – and that in itself elides with the seventh of the clean hands points. The other points really are more concerned with the way in which this hearing was obtained on an expedited basis.

[142]Delay however is a factor which legitimately falls to be taken into account in the Court’s assessment. It adds another element to the balance against the grant of relief. However, with or without that factor the result would be the same: the application for an injunction fails. Joinder Application: Legal Principles General Principles

Joinder Application: Legal Principles

[143]CPR 19.2(2) provides a wide power enabling the Court to order a person to be added as a new party if:

“(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue”

[144]Authorities in this area tend to be very fact-specific, but themes emerge. In particular, in considering whether it is desirable to add a new party pursuant to CPR 19.2(2)(a) or (b), the “two lodestars” are the policy objective of enabling parties to be heard if a decision in the case may affect their rights and the Overriding Objective: RePablo Star Ltd

[2017] EWCA Civ 1768

[2018] 1 WLR 738

(CA) [60].

[145]As noted in Republic of Uganda v Rift Valley Railways (Uganda) Ltd(In Liquidation)

[2020] EWHC 3653 (Comm)

[30], CPR 19.2(2)(a) thus has two conditions or stages:(1) whether the new party can “assist the court to resolve the matters in dispute in the proceedings” (a jurisdictional test); and

(2) whether it is desirable to add the new party to achieve that end (a discretion).

[146]CPR 19.2(2)(b) has three conditions:(1) an issue between the new party and an existing party;

(2) the issue is connected to the matters already in dispute in the proceedings: and

(3) it is desirable to add the new party to resolve that issue: see Molavi v Hibbert

[2020] EWHC 121 (Ch)

[ 2020] 4 WLR 46 (Ch) [64].

The issues between the parties

[147]The issues between the parties distilled down into the following points: 1) There are two essentially procedural disputes: a) Is it permissible to add a party as a defendant without the claimant’s consent? Eraaya says not. b) Is it necessary for the application to join to be supported by a draft pleading? Here Eraaya says it is. 2) In addition, there are issues as to whether the requisite hurdles are met. These are in essence: a) Merits: Eraaya disputes whether the proprietary claim by the Bondholders is properly arguable. b) Desirability: Then there is the issue of whether any such interest overlaps sufficiently with the issues in this action such that it would be desirable to determine the claims together and whether there are valid case management reasons for (or against) joinder. Analysis

[148]Dealing first with the initial procedural point – the supposed bar to adding a defendant against the claimant’s wishes, this has no force. Eraaya’s case was advanced by reference to: Pawley v Whitecross Dental Care Ltd and another

[2021] EWCA Civ 1827

at [31] (Stuart-Smith LJ), qualifying what Coulson J held in Milton Keynes Council v Viridor

[2016] EWHC 2764 (TCC)

, [2016] 6 Costs L.R 1041 to the effect that the Court had no power to join a defendant against the wishes of the claimant.

[149]It is true that in that passage Stuart Smith LJ did say that:

“…in any normal claim for damages where the claimant has chosen to sue some but not all potential defendants and has advanced their claim against the chosen defendants on a basis that cannot be dismissed as fanciful …it is wrong in principle in such a case for the court to exercise the power to join a party as a defendant and to require the claimant to pursue a claim against the newly-joined party where the claimant opposes that joinder. The …principle is not limited to cases where the claimant would become potentially liable for the costs of the new defendant.”

[150]However, what this illustrates is that there is no general principle that a claimant has a right to choose its defendants. The point being discussed here is one which arises when the claimant has the same claim against a potential variety of defendants. In those circumstances a claimant does have a right to choose against which of these defendants it will seek relief (leaving them then to work out the questions of contribution inter se). This however is not such a case. There is no claim against the Bondholders in respect of the confirmation sought. Any claim which Eraaya has against the Bondholders is a materially different claim; and in reality the centre of gravity of the dispute between Bondholders and Eraaya is the Bondholders’ claim against Eraaya. There is no authority that a claim of this nature cannot or should not be joined if it otherwise meets the requirements of the rule.

[151]Indeed there is support for this approach in the case of in Shetty v Al Rushaid Petroleum Investment Company & Ors

[2011] EWHC 1460 (Ch)

. In that case the existing defendants and a proposed new defendant applied under CPR 19.2(2)(b) for the new defendant to be added as a party and permitted to bring a counterclaim against the claimant, who opposed the application on the basis that it had no desire to make a claim against that defendant. The Court granted the application, holding that: (1) the fact that the claimant has chosen not to sue the new defendant itself is not a barrier to joinder, as CPR 19.2(2)(b) is “not limited to the addition only of a defendant against whom the claimant would want to make a claim or whose joinder is needed to complete the claimant’s cause of action”;

[152]As to merits, this point of course has essentially been dealt with in connection with the injunction application. The Bondholders appear to have an arguable proprietary claim - even if there is likely to need to be careful thought given to its exact formulation. And in addition, it is clear that the Bondholders have a claim in damages which is arguable. Thus there is plainly an arguable claim by the Bondholders.

[153]Then as to the discretion and the question of desirability I conclude that the balance of the relevant considerations plainly falls in favour of joinder.

[154]There is sufficient cross over between the two claims that joinder of the Bondholders can “assist the Court” to resolve the issues in Eraaya’s claim. The principal matter in issue in the Proceedings is whether Eraaya is entitled to specific performance/a final mandatory injunction requiring Elara to provide the confirmation, which would lead to GLAS paying the Unutilised Proceeds to Eraaya. The principal defence to the claim appears to be that on the true construction of the Second Settlement Agency Agreement it is not required to give the Confirmation under Clause 3.4 until either the Collateral has been granted or the Bondholders give their consent. While there are plainly issues as to the admissible evidence on this topic there are aspects of the Bondholders’ evidence as to the reasons why Clause 3.4 was amended which will form the relevant factual matrix for that question.

[155]I do not agree that the nature of the two claims means that case management considerations militate against joinder. In particular, it is not (as Eraaya submits) the case where (borrowing a phrase from Gaia River SA v Behike Ltd and another

[2020] EWHC 2981 (Comm)

) joinder would “introduce unnecessary complexity into the proceedings”. It is perfectly permissible to join a defendant who may bring counterclaims that are more fact heavy than the original claim. In many cases – as here – the more fact heavy cross claim may in fact add necessary material to the more narrowly formulated claim. This is not a case like Gaia. There the Court was understandably concerned about “introducing considerable potential complexity into proceedings between two existing parties by joining two other parties who may have extensive disputes between themselves”. Here the Bondholders’ claims are a logical part of the main claim – in that the Bondholders are the real parties with an interest – Elara being something of a “bit part player”. This is a necessary concomitant of the fact that there is an arguable case that the Bondholders hold (or will hold) a proprietary right to all or most of the Unutilised Proceeds. Thus, to decide whether to grant a final injunction, the Court necessarily will need to determine whether the Bondholders currently (or will in future) hold a proprietary right to all or most of those funds. The proprietary issue between Eraaya and the Bondholders is inextricably connected with the key issue in the Proceedings.

[156]In addition: 1) There exist issues between Eraaya and the Bondholders as to whether Eraaya has breached its obligations under the relevant contracts or made misrepresentations. These issues are also connected to the matters currently in dispute in the Proceedings. In particular, the issues between Eraaya and the Bondholders arise out of the same factual circumstances as those which underpin the issues in the Proceedings, and they raise the same fundamental questions (including, for example, questions concerning when the pledge was properly to be put in place and when the Unutilised Proceeds are properly to be transferred to Eraaya, if at all). There is an obvious risk of inconsistent judgments if the two sets of issues are determined separately. 2) The Bondholders have a direct economic interest in the outcome of the Proceedings, whereas Elara does not, such that the Bondholders are best placed to advance any arguments regarding how the Proceedings will affect the Bondholders’ interests. Elara only has a limited economic interest in the outcome of the dispute; it has no economic interest in the Unutilised Proceeds, leaving aside the payment of its fees due from those proceeds (which is not in issue). Elara will not be in possession of all of the relevant documents or have access to key witnesses. Given all this, there is force in the contention that the Bondholders are best placed to advance the arguments concerning those breaches.

[157]This is not a case where adding a defendant will (as Eraaya submits) introduce unnecessary complication into the proceedings. What it will do is ensure that the judge hearing the dispute has all relevant material before them, and that they are not deciding significant issues based on a partial evidential deck, (or with one hand tied behind their back). While Eraaya’s evidence suggested that its claim could be determined “with limited, if any, factual evidence and disclosure”, even the limited scrutiny possible at the interlocutory stage makes it clear that to do so would leave the judge with important questions incapable of being answered.

[158]Overall therefore joining the Bondholders makes obvious sense. It will:(1) save expense (as it will avoid a multiplicity of proceedings dealing with the same or similar issues – with the inevitable risk of inconsistent findings);

(2) deal with the issues in a proportionate way, given the large sum of money involved and the interlocking nature of the matters in issue and the underlying subject matter;

(3) ensure that all matters in issue are dealt with expeditiously; and

(4) allot an appropriate share of the Court’s resources to these issues (as determining these matters in the context of one proceeding will save valuable court time).

[159]Finally for completeness Eraaya asserts that the Bondholders’ application should be dismissed solely because they have failed to produce a draft pleading. However CPR does not require an applicant for joinder to produce a draft pleading, and Eraaya has cited no authority in support of such a proposition. In fact, if an application to add a party is contested and the parties file evidence in relation to that application, the Court may consider the matter more analogous to summary judgment and determine the application based on the evidence: PeCe Beheer BV v Alevere Ltd

[2016] EWHC 434 (IPEC)

[38]-[44]; Credico Marketing Ltd v Lambert

[2021] EWHC 204 (QB)

[33]-[37]. In such cases, which include this one, no pleading is required.

[160]The tests under CPR 19.2(2) are met. While it may not be right that, as they submitted, the Bondholders are positively entitled to an appropriate joinder order, I consider that it is clearly appropriate to exercise the discretion to do so, subject only to the question of abuse of process which is dependent upon the conclusions on collateral use. Collateral Use Application The Law

Collateral Use Application

[161]CPR r.31.22(1) provides:

“A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where – (a) the document has been read to or by the court, or referred to, at a hearing which has been held in public; (b) the court gives permission; or (c) the party who disclosed the document and the person to whom the document belongs agree.”

[162]CPR 32.12 provides for the same restriction on the use of a witness statement for purposes other than for the proceedings in which it was served, subject to similar exceptions (consent of the witness, permission by the court, and a hearing in public).

[163]A central policy rationale for the rule in CPR 31.22 is that “compulsory” disclosure is an invasion of a person’s private right and this should be matched by corresponding limitation on use of the documents disclosed: IG Index v Loete

[2014] EWCA Civ 1128

[42]; Tchenguiz v SFO

[2014] EWCA Civ 1409

[56].

[164]The rules on collateral use bind the party to whom the documents are disclosed. They also extend (by way of the common law implied undertaking) to solicitors (Harman v Secretary of State for the Home Department

[1983] 1 AC 280

(HL) at 284), and to any third party who is aware that the documents have been disclosed in the course of proceedings (Vneshprombank v Bedzhamov

[2020] EWHC 2114 (Ch)

at [46]]).

[165]The rules protect not only the documents and statements themselves but also information derived from and contained within them. This includes information embodied in a copy and stored in the mind of someone who has seen the documents: Lakatamia Shipping Co Ltd v Su

[2020] EWHC 3201 (Comm)

[2021] 1 WLR 1097

(Ch) at [49].

[166]In assessing whether CPRs 31.22 and 32.12 prohibit a particular “use”, the question is whether “what is being done is [being done] for the purposes of the proceedings, or some other purpose”: Caldero Trading Ltd v Beppler & Jacobson Ltd

[2012] EWHC 1069 (Ch)

[65].

[167]It is not a collateral or ulterior use to use disclosed documents for the purposes of adding new causes of action or parties to the same cause of action in which the documents have been disclosed. Joinder of additional parties as a result of disclosure is “a common procedural occurrence”: Matthews and Malek, Disclosure (6th edn, 2023) paragraph 19-28.

[168]In Grosvenor Chemicals Ltd v UPL Europe Ltd

[2017] EWHC 1893 (Ch)

, the Court held that it was permissible to use disclosed documents to assert a related cause of action in the same proceedings against a third party. Birss J held the fact that any new causes of action:

“may also involve a person not currently a party but who could properly be joined as a co-defendant does not make the circumstances fall outside [CPR 31.22]. ‘The proceedings’ referred to in the rule does not have a narrow meaning confined to a narrow view of the causes of action pleaded in the existing statements of case…”

[169]Where use outside the parameters of CPR 31.22 is sought permission can be sought – in advance or retrospectively. The grant of permission depends upon the specific circumstances, which must be carefully examined. In general, even ahead of time, there must be “special circumstances which constitute a cogent reason for permitting collateral use”: Tchenguiz (CA) [66].

[170]The grant of retrospective permission is rare: Lakatamia Shipping Co Ltd v Su

[2020] EWHC 3201 (Comm)

[2021] 1 WLR 1097

. Relevant considerations include whether:(1) prejudice has been caused to any other litigant;

(2) the breach was inadvertent;

(3) if a proper application had been made timeously it would have been granted;

(4) the proportionality of debarring the applicant from use of the documents;

(5) the documents reveal criminal offences or fraud (if so, disclosure to a victim of the offence should be permissible); and

(6) the degree of use: Lakatamia ; Tchenguiz v SFO

[2014] EWHC 1315 (Comm)

[19]; Shlaimoun v Mining Technologies International Inc

[2011] EWHC 3278 (QB)

at [46].

The parties’ submissions

[171]The primary position of the Bondholders (and Elara, who issued an application mirroring that of the Bondholders) is that their past use, and their legal representatives’ past use of the application documents served on Elara the Documents does not breach CPR 31.22 or 32.12. As such, they seek an appropriate declaration which confirms this fact. That application was forcefully opposed.

[172]In essence the Bondholders and Elara submitted that there was no breach, by reference to Grosvenor Chemicals Ltd v UPL Europe Ltd

[2017] EWHC 1893 (Ch)

and Caldero Trading Ltd v Beppler & Jacobson Ltd

[2012] EWHC 1609 (Ch)

. Their position was that this use of the Documents was, by definition, use “for the purpose of the proceedings” in which the Documents were disclosed, and not for some collateral purpose. Alternatively they submitted that if there had been a breach retrospective permission should be granted in the light of the facts that: 1) The Bondholders and their legal team only used the Documents for 3.5 days, two of which were a weekend, and then only for the purpose of considering how to respond to the Injunction Application. In that regard: 2) It would not have been a collateral use for Elara to use the disclosed Documents for the purposes of adding the Bondholders as a new party to the Injunction Application, being the action in which the Documents were disclosed. In the circumstances, it should make no difference that Elara provided the Documents to the Bondholders who then used them to consider how to respond to the Injunction Application, as opposed to Elara itself using the Documents to apply to add the Bondholders as Respondents to that Application and then providing the Documents to the Bondholders. A contrary conclusion would be a victory of form over substance. 3) The Bondholders were (and are) the parties who would be most affected if the Court wrongly granted the injunctive relief sought.

[173]Eraaya contended by reference to Vardy v Rooney

[2022] EWHC 304 (QB)

at [90] that the case fell well on the wrong side of the line. It is said not to be remotely akin to cases such as Caldero Trading or Grosvenor Chemicals, to be a provision to separate third parties for them to use as they wished – and without any qualification in the cover letter and to be clearly advertent – deliberate and with an aim in mind. Consequently it is said that retrospective permission should not be granted.

Analysis

[174]The first question is therefore whether there was any breach of the collateral use restriction – whether the use was always for the purpose of the proceedings. I conclude that it cannot fall within that definition.

[175]At the time of the provision of the Documents the Bondholders were not parties to the proceedings, and there was no application to make them so. They were strangers to the litigation. Therefore the authorities relied upon by the Bondholders are not apt: those were cases in which documents were used by a party already within the proceedings to add a party to the proceedings, without providing them with the documents in question first. In terms of the cases relied upon: 1) Grosvenor Chemicals: as Mr Head pointed out, in that case Birss J held that a party is entitled to use documents produced on disclosure to raise new causes of action which relate to the same proceedings even if the claim is against a party and also a non-party. But this is not a case of use(i) by provision to/use in relation to a party within the proceedings or

(ii) a case where the use is within the proceedings at all. It is a provision of the documents outside the proceedings to a non-party. Of course it is the case that the Bondholders had an interest in the proceedings; but they were not parties. And while Mr Anderson tried to conjure a restriction on use out of the covering letter it is hard to see the wording on page 3 of the letter as being any meaningful restriction (the wording being: “Given the very obvious interest of the Majority Bondholders in the outcome of the Proceedings and the Application, it is our client’s view that they should be parties to the Proceedings. We invite them to consider applying to be joined under CPR 19.4.”). No other wording could even be suggested as a limitation, and certainly the initial wording accompanying the provision was entirely permissive. 2) Caldero: that was a case where provision was to a funder. I agree with Eraaya that that is different to the current situation. Funders are not parties, but they are already involved in the litigation by means of the funding relationship. The provision there was not with a view to the expansion of the ambit of the claim or the introduction of new claims. Again provision to a party outside the litigation for them to use as they see fit is a use beyond what was sanctioned in this case.

[176]The battle was more fiercely joined on the Vardy case. It is hard to see how the present case can be other than a fortiori the Vardy case in one sense. That concerned a Part 20 claim made by a party to the litigation. This use must be seen as one step more distinct and thus more overtly collateral. At the same time there is force in the point made by the Bondholders that in another sense this case was further from the “truly collateral case”; the nature of the claim to be made there was probably more distinct in nature (misuse of private information/GDPR claim) than the claim which the Bondholders were encouraged to consider here, which as I have indicated, has a considerable overlap.

[177]There is a sense of a distinction between the situation of joinder and separate proceedings. That is reflected in the apparent tension between the dictum of Birss J in Grosvenor at [160] where he says:

“To use documents disclosed in proceedings to write a letter before joinder to a third party (aside from a truly collateral case) is not a breach of r31.22” and [60] of my own judgment in Lakatamia where I said (by reference to [162] of Grosvenor) “it seems to be quite clear (were it not self-evident) that using information and/or documents from one set of proceedings to threaten a third party falls squarely within the scope of the restriction on collateral use.”

[178]However as the judgment of Steyn J in Vardy makes clear, it seems that any such distinction is not a bright line one - if parties may be joined based on truly distinct causes of action it is (as it was there) artificial to regard use for a distinct claim - albeit one to be brought in the same proceedings - as use for the purposes of the proceedings. There is also an uncomfortable element of retrospectivity in the line suggested at [150] in Grosvenor - based on whether the claim would fall foul of a Henderson v Henderson analysis if brought separately.

[179]The boundary of “the proceedings” and “truly collateral” is therefore unclear, and is likely to give rise to future debate. That reinforces a point which I made in Lakatamia that “what constitutes “use” of a document for the purpose of CPR 31.22 is very broad - perhaps more so than most litigators might think.” Caution on the part of those thinking of providing litigation documents to others is imperative.

[180]However the indicia in the present case are: 1) The overlap of the facts and arguments between the claim and the Bondholders’ cross claim places the current case somewhat on the cusp of the Grosvenor approach. As I have indicated, it is a case where joinder is appropriate, but that is not because the cross claim falls squarely within the ambit of the current proceedings. It is because of overlap and other matters; 2) I am dubious as to whether any potential Henderson based test would be met; 3) This case is different to Grosvenor and Vardy in the nature of the collateral use. This is not use for direct joinder, use by a third party with no guarantee of involvement in proceedings.

[181]Accordingly wherever exactly the line may fall as to content and “the proceedings” (and this case was certainly at least near the borderline) this use was not for the proceedings. The provision to the Bondholders of the Documents and their use by the Bondholders were each a breach of the collateral use rule.

[182]That then brings into question whether retrospective permission should be granted. While retrospective permission is, as Coulson J said in Shlaimoun, to be granted rarely, it remains a general discretion to be exercised in the interests of justice and having regard to all the circumstances.

[183]In the present case it is appropriate on balance to grant this retrospective permission. In that regard: 1) While it is hard to call this use inadvertent – in that it was plainly deliberate, I am satisfied that it was not a deliberate advertent breach. As is clear from the preceding passages of this judgment: a) The breadth of the restriction is probably not as well understood by litigators as it should be; b) The current case is sufficiently close to the border that even a litigator fairly alive to the issue might well, as Elara’s solicitors say they did, consider that this was use for the purpose of the proceedings and therefore not a breach; 2) The authorities place considerable weight on the prejudice suffered by the affected party. Here despite Mr Head’s best efforts, there really is none; and indeed he realistically accepted that there may be questions about how serious the breach was; 3) If an application had been made timeously I have no doubt at all that it would have been granted. In a sense this question is answered by the reaction of Henshaw J in ordering the Bondholders to be made Respondents to the application. As the White Book notes at 23.0.21, natural justice principles require that an applicant should give notice of an application to a respondent whose interests are affected by the relief sought. The underlying presumption is that a party whose interests are affected by the relief sought should be made a respondent to the application; 4) As for proportionality, it would plainly be disproportionate to debar the Bondholders from using the Documents.

[184]Permission is therefore granted (both as to the provision (Elara) and use (Bondholders)). However, it should not be thought that this conclusion in any way detracts from the principles noted above. This is an unusual case and the decision arises as a matter of balancing various case specific factors.

[185]On one level (given the result) it might have been expected that Eraaya would not contest permission; however in my judgment it was entirely right to do so. Where there has been a breach of the collateral use rule it is important that the question of permission is referred to the Court so that the restriction is properly maintained and policed. It remains the case that the restrictions in CPR 31.22 and 31.12 are important and very seriously regarded by the Court. In many cases – even potentially where another party is neutral about the application - breaches will not result in retrospective permission being given.

[186]Having said this it is not the case that Eraaya’s approach to this issue was beyond criticism. Eraaya was (in the result) right to say that there had been a breach and to ensure the appropriate considerations were drawn to the Court’s attention. It was of course also entirely proper to contest retrospective permission against a background where the authorities make clear that it is rarely granted.

[187]However the ferocity and emphasis devoted to this point (in conjunction with the listing debates) was not appropriate – and does tend to suggest that Elara’s contention that the issue was being weaponized to attempt to get the issues determined without full evidence and full argument from interested parties, had some truth in it. Part of the approach which must be deprecated was the way in which Eraaya’s evidence not only (as noted above) strayed considerably beyond evidence of fact and into argument but also made serious allegations of impropriety against the Bondholders’ solicitors. Thus Mr McDonald alleged that the sworn evidence of the Bondholders’ solicitors was “disingenuous” as to the approach to notice not having been given to Bondholders. In fact, as noted above, the substance of the point as to other interests (and the related point of delay) is one which should really have been made clear at the outset. In relation to the Bondholders’ solicitors’ answers as to collateral use he contended that their sworn evidence was “implausible” in saying that the legal advisers had only considered the documents in the context of the injunction application, “not credible” (as to limited use of the documents), “lacks any credibility” and “is simply untrue” (as to stopping use of the documents once the collateral use point had been raised).

[188]These latter comments in particular amount to a fairly unambiguous contention that the Bondholders’ solicitors (officers of the Court) had lied in sworn evidence to the Court. That is a very serious allegation indeed and is not one which should have been made without a proper factual basis. It is notable that Mr Head in his submissions explicitly refused to adopt this line of argument, making it clear that he in no way sought to impugn the honesty of the Bondholders’ solicitors.

Post script: Collateral Use and Joinder (Abuse of Process)

[189]It then becomes necessary to revisit the question of joinder in light of the conclusions on collateral use. Eraaya submitted that the entire strategy to join the claim rather than simply making representations on the Injunction Application was itself a product of the unlawful collateral use and that the claim was hence an abuse of process and liable to be struck out, relying on(i) Miller v Scorey

[1996] 1 WLR 1122

;

(ii) Disclosure (6th Ed) at 19-23

(iii) the commentary in the White Book (2025) at 31.22.1 (p.980):

“A claim based on a misused document will, ordinarily, be dismissed as an abuse of the process of the court…”

[190]While this will often be the result, and probably almost inevitably so where there has been deliberate use of a document in breach of CPR 31.12/22, this is a case where(i) I have concluded that the misuse was not deliberate and with knowledge

(ii) the claim was not based on the misused documents (they provided the “heads up” as to the existence of a need to make a claim, but not the material for the claim) and

(iii) the balance in favour of joinder is clear, not just for the parties but also for the Court. In those circumstances it would be counterproductive and wrong in principle to dismiss the joinder application on this basis.

Conclusion on the Applications

[191]For the reasons given above: 1) The Injunction Application is dismissed; 2) The Joinder Application is granted; 3) The declarations sought under the Collateral Use Applications are not granted; 4) Retrospective permission for collateral use is granted.

Eraaya Lifespaces Limited v Elara Capital Plc & Ors [2025] EWHC 1506 (Comm)

Introduction

The Facts

Engagement of Elara

The Bridging Loans

The First Settlement Agency Agreement

The Offering Circular

The First Bond Issue

The Second Bond Issue

The Dispute Emerges

The Claim and the Listing of this Hearing

Injunction Application

The Parties’ Submissions

The Merits of Eraaya’s claim: analysis

The Proprietary Issues

The Issues

Express Trust

Quistclose

Bare Trust

Balance of convenience

Damages not an adequate remedy: Eraaya’s case

Other Discretionary factors and conclusion

Joinder Application: Legal Principles

The issues between the parties

Collateral Use Application

The parties’ submissions

Analysis

Post script: Collateral Use and Joinder (Abuse of Process)

Conclusion on the Applications

Cited in 2 later judgments