England and Wales High Court (Commercial Court) Decisions

i)                    to set aside the order of Picken J dated 24 November 2017 (“the Registration Order”) registering a judgment of the Bangalore Debt Recovery Tribunal (“the DRT”) in favour of the Claimants against Dr Mallya (“the DRT Judgment”) under the Foreign Judgments (Reciprocal Enforcement) Act 1933 (“the 1933 Act”), or to suspend enforcement of the Registration Order; and

ii)                  to set aside a worldwide freezing order granted by Picken J on 24 November 2017 and continued by Moulder J on 8 December 2017 (“the WFO”).

i)                    the setting aside of the Registration Order;

ii)                  a stay of enforcement in England of the DRT Judgment; or

iii)                that his application to set aside the Registration Order be adjourned for a sufficient period to enable his extant appeal in India against the DRT Judgment, or his related challenge brought in the High Court of Bombay, to be disposed of.

“1(1) If, in the case of any foreign country, Her Majesty is satisfied that, in the event of the benefits conferred by this Part of this Act being extended to, or to any particular class of, judgments given in the courts of that country or in any particular class of those courts, substantial reciprocity of treatment will be assured as regards the enforcement in that country of similar judgments given in similar courts of the United Kingdom, She may by order in Council direct

(a) that this Part of this Act shall extend to that country;

(b)   that such courts of that country as are specified in the Order shall be recognised courts of that country for the purposes of this Part of this Act; and

(c) that judgments of any such recognised court, or such judgments of any class so specified, shall, if within subsection (2) of this section, be judgments to which this Part of this Act applies.”   

“1(3)      For the purposes of this section, a judgment shall be deemed to be final and conclusive notwithstanding that an appeal may be pending against it, or that it may still be subject to appeal, in the courts of the country of the original court.”

“2(1)  A person, being a judgment creditor under a judgment to which this Part of this Act applies, may apply to the High Court at any time within six years after the date of the judgment, or, where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings, to have the judgment registered in the High Court, and on any such application the court shall, subject to proof of the prescribed matters and to the other provisions of this Act, order the judgment to be registered:

Provided that a judgment shall not be registered if at the date of the application—

(a) it has been wholly satisfied; or

(b) it could not be enforced by execution in the country of the original court.”

“2(2)      Subject to the provisions of this Act with respect to the setting aside of registration –

(a) a registered judgment shall, for the purposes of execution, be of the same force and effect;…

as if the judgment had been a judgment originally given in the registering court and entered on the date of registration

Provided that execution shall not issue on the judgment so long as, under this Part of this Act and the Rules of Court made thereunder, it is competent for any party to make an application to have the registration of the judgment set aside, or, where such an application is made, until after the application has been finally determined.”

“4. The following Courts of the said territories shall be deemed Superior Courts of the said territories for the purposes of Part 1 of the said Act [the 1933 Act], that is to say:-

(a) The Supreme Court.

(b)   All High Courts and Judicial Commissioners’ Courts.

(c) All District Courts.

(d)   All other Courts whose civil jurisdiction is subject to no pecuniary limit provided that the Judgment sought to be registered under the said Act is sealed with a seal showing that the jurisdiction of the Courts is subject to no pecuniary limit.”

“4(1)      On an application in that behalf duly made by any party against whom a registered judgment may be enforced, the registration of the judgment—

(a) shall be set aside if the registering court is satisfied—

(i)      that the judgment is not a judgment to which this Part of this Act applies or was registered in contravention of the foregoing provisions of this Act;

 …

(vi)    that the rights under the judgment are not vested in the person by whom the application for registration was made; …”

“5(1)      If, on an application to set aside the registration of a judgment, the applicant satisfies the registering court either that an appeal is pending, or that he is entitled and intends to appeal, against the judgment, the court, if it thinks fit, may, on such terms as it may think just, either set aside the registration or adjourn the application to set aside the registration until after the expiration of such period as appears to the court to be reasonably sufficient to enable the applicant to take the necessary steps to have the appeal disposed of by the competent tribunal.”

i)                    the setting aside of the Registration Order on the grounds that

a)                  the DRT Judgment does not qualify (and is not capable of qualifying) as a judgment of a “Superior Court” within the meaning prescribed by Section 4 of the 1958 Order in Council; and/or

b)                 the DRT Judgment can be enforced only in the manner prescribed by the Debt Recovery Tribunal Regulations 2015 (the “DRT Regulations”), and so is not permitted to be enforced in England and the Registration Order ought not to have been made; or

ii)                  as a matter of discretion under section 5 of the 1933 Act, the setting aside of the Registration Order on the grounds that:

a)                  Dr Mallya’s appeal in the DRAT is pending against the DRT Judgment; and/or

b)                 Dr Mallya’s pending and prior claim in the Bombay High Court will, if successful, as a matter of Indian law override and supersede the DRT Judgment; or

iii)                a stay of enforcement of the DRT Judgment in England (i) pending the determination of Dr Mallya’s appeal against the DRT Judgment and/or the determination of his challenge in the Bombay High Court, or (ii) on the basis that the DRT Regulations do not permit enforcement of the DRT Judgment in England; or

iv)                (at the very least) an adjournment of Dr Mallya’s application under section 5 of the 1933 Act until after the expiration of such period as appears to the court to be reasonably sufficient to enable Dr Mallya to take the necessary steps to have his appeal (and Bombay High Court challenge) disposed of in India.  During the pendency of such an adjournment, no enforcement steps would be permissible: see CPR 74.9(1)(b).  Given the significant amount of time it will take for those processes to conclude in India (which is common ground), Dr Mallya takes a pragmatic approach that such an adjournment may need to be granted in stages with a reporting mechanism built into the order so that the English court may be kept informed of developments.

“The [DRT] and the [DRAT] shall not be bound [by] the procedure laid down by the Code of Civil Procedure, 1908 …, but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the [DRT] and the [DRAT] shall have powers to regulate their own procedure including the places at which they shall have their sittings.”

“… section 22 of the RDB Act … came up for consideration by the Apex Court [the Supreme Court of India] in the case of I.C.I.C.I. vs. Grapco Industries Ltd. and ors. reported in AIR 1999 SC 1975 wherein paragraph 11 the Apex Court has clearly observed that section 22 does not mean that the [DRT] will not have jurisdiction to exercise the powers of a Court as contained in the Code of Civil Procedure, rather, the [DRT] can travel beyond the Code of Civil Procedure. …”

i)                    that the DRT’s Final Order could not be “enforced by execution in the country of the original court” i.e. in India within section 2(1)(b) of the 1933 Act: only the Recovery Certificate can be so enforced but the rights in the Recovery Certificate are vested in the Recovery Officer not the Claimants and so “the rights under the judgment are not vested in the person by whom the application for registration was made” for the purposes of section 4(1)(vi);

ii)                  the DRT Judgment is not enforceable outside India and so should not be the subject of registration under the 1933 Act;

iii)                the DRT was not a “Superior Court” within § 4 of the 1958 Order in Council because the DRT Judgment was not “sealed with a seal showing that the jurisdiction of the Courts is subject to no pecuniary limit”; and

iv)                there is no statutory mechanism under which the DRT can issue a judgment that is so sealed or under which the Presiding Officer had the power to issue his letter under seal of 27 July 2017 confirming the DRT’s unlimited pecuniary jurisdiction.

“The tribunal may, after giving the applicant and the defendant an opportunity of being heard … pass interim or final order as it deems fit which may include order for payment of interest from the date on which payment of the amount is found due ...”

“… the Consortium of Bankers led by State Bank of India have expressed their intention to register the said Debt Recovery Certificate with the Hon’ble Queen’s Bench Division, the Royal Courts of Justice, London, United Kingdom for the purposes of enforcement of the Debt Recovery Certificate in United Kingdom as against the respondents and their assets, if any, in the United Kingdom”

“For the said purposes, State Bank of India has filed an affidavit praying for sealing of the Final Order and the amended Debt Recovery Certificate in terms of the provisions of the Foreign Judgments (Reciprocal Enforcement) Act 1933 and The Reciprocal Enforcement of Judgments (India) Order, 1958 as applicable in United Kingdom.” (my emphasis)

Further, the actual application to register in this court relates to both the DRT Judgment dated 19 January 2017 and the Amended Recovery Certificate dated 10 April 2017.

“Present OA [Original Application] stands allowed as prayed for with costs in following manner

a)  Defendants No. 1 to 4 jointly and severally shall pay a sum of Rs. 6203,35,03,879=42 … with further interest at the rate of 11.50% p.a with yearly rests from the date of the application till the date of complete realization.

…

c)  In the event of failure of defendants to pay the said OA amount, the applicant bank is at liberty to sell the hypothecate/mortgaged movables/immovables properties described in schedules of the main petition according to law as sought by the applicant bank in the OA.

d) The Applicant Banks are also at liberty to proceed against the person and properties of the defendants 1 to 4 in execution proceedings;

e) Applicant Bank shall file latest Memo of calculation of OA amount together with interest, costs etc., ... to enable the office to prepare Recovery Certificate for the amount to be paid by the Defendants 1 to 4 to the Applicant Banks

f) Office is directed to issue Recovery Certificate as sought by the Applicant Banks in the OA and do the needful as required under law forthwith.” (my emphasis)

i)                    the RDB Act does not confer extra-territorial jurisdiction on the DRT or its Recovery Officer: its jurisdictional scope is limited to only certain parts of India, and it has not been imbued with a procedure enabling its judgments to enjoy reciprocal enforcement outside India;

ii)                  even within India, section 19(23) of the RDB Act requires that when a Recovery Certificate is issued by a DRT in one region and the asset to be seized is situated beyond its territorial jurisdiction, then the DRT has to send copies of its certificate to that jurisdiction so that enforcement can take place there: a requirement that does not apply to a judgment of the District Court; and

iii)                when the DRT was set up in 1993 it was designed to be a streamlined judicial process offering summary adjudication of disputes.  That the DRT and the District Courts are different in nature and cannot be treated as equivalent is well established.

i)                    the DRT when it gives a judgment issues a Recovery Certificate, and DRT Regulations 33 to 38 (in Chapter IX) prescribe the methods of execution by the Recovery Officer, which do not include enforcement in a reciprocal jurisdiction;

ii)                  by contrast, section 44A of the Code of Civil Procedure (“CPC”) in India provides for the execution in reciprocating territories (of which the UK is one) of judgments of the Indian civil courts.  The DRT is not bound by the CPC (see s.22(1) of the RDB Act) and instead is governed by the rules and regulations passed under the RDB Act; and

iii)                the Central Government is empowered under section 36 of the RDB Act to make rules/regulations to carry out the provisions of the RDB Act.  As things stand, DRT regulations 33-38 are the only such rules governing methods of execution.  If a different or additional method (such as enforcement in a reciprocal jurisdiction) is to be prescribed, it is for the Central Government to do so under section 36.

“… under Section 17 of Chapter 3 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB & FI Act), this Tribunal is vested with exclusive jurisdiction, powers and authority to entertain and decide applications from the Banks for recovery of debts due to such banks.  In fact, under Section 18 of the same chapter, the jurisdiction, power and authority of all other Courts except the Supreme Court and High Court under Article 226 and 32 [which relate to constitutional issues], are barred in relation to recovery of debts due to banks. …”

“A Consortium of Bankers led by State Bank of India, a statutory corporation had filed an Original Application under OA 766/2013 interalia seeking adjudication of Debt and issuance of Debt Recovery Certificate against M/s Kingfisher Airlines Ltd., a Public Limited Company, M/s United Breweries Holdings Ltd., a Public Limited Company, Dr. Vijay Mallya son of late Sri Vittal Mallya and M/s Kingfisher Finvest (India) Ltd., This Debt Recovery Tribunal constituted and established under the Recovery of Debts due to Banks and Financial Institutions Act 1993 (now known as the Recovery of Debts and Bankruptcy Act, 1993) hereinafter called the Act, after adjudication of the claim had passed a Final Order dated 19.01.2017 and used an amended Debt Recovery Certificate dated 10.04.2017 under No.11395 as against the said respondents and their assets for a sum of Rs.6203,35,03,879.42/- (Rupees Six Thousand Two Hundred and Three crores Thirty five Lakhs Three Thousand Eight Hundred and Seventy Nine and Paise Forty Two Only) with interest and costs as stated therein.

Presently, the Consortium of Bankers led by State Bank of India have expressed their intention to register the said Debt Recovery Certificate with the Hon’ble Queen’s Bench Division, the Royal Courts of Justice, London, United Kingdom for the purposes of enforcement of the Debt Recovery Certificate in United Kingdom as against the respondents and their assets, if any, in the United Kingdom.  For the said purposes, State Bank of India has filed an affidavit praying for sealing of the Final Order and the amended Debt Recovery Certificate in terms of the provisions of the Foreign Judgments (Reciprocal Enforcement) Act 1933 and The Reciprocal Enforcement of Judgments (India) Order, 1958 as applicable in United Kingdom.

This Debt Recovery Tribunal after considering the said request made by way of affidavit, hereby confirms by way of sealing as required under UK Act, that this Debt Recovery Tribunal constituted and established under the Recovery of Debts due to Banks and Financial Institutions Act 1993 (now known as the Recovery of Debts and Bankruptcy Act, 1993) has been vested under Section 1(4) of the aforesaid Act, with no upper limit on the pecuniary jurisdiction but with lower limit of Rs.10 lacs on pecuniary jurisdiction.  This Tribunal has exclusive jurisdiction to entertain applications filed by the banks and financial institutions for recovery of debt due to them for any amount above Rs.10,000,000/- (Rupees Ten lakhs), adjudicate and issue Recovery Certificate.

Yours truly,

[signature]

(K. Srinivasan)

Presiding Officer

Debt Recovery Tribunal

Bengaluru”

Each page of the letter was sealed with the seal of the DRT.

“(d) All other Courts whose civil jurisdiction is subject to no pecuniary limit provided that the Judgment sought to be registered under the said Act is sealed with a seal showing that the jurisdiction of the Courts is subject to no pecuniary limit”

i)                    section 19(25) governs the DRT’s judicial powers and not its administrative powers.  It is Section 36 (and the Rules and Regulations made under it) that prescribe the DRT’s administrative powers, and those do not provide a mechanism for compliance with the 1958 Order in Council; and 

ii)                  the Presiding Officer’s letter of 27 July 2017 was not an order or a direction, and certainly not an exercise of a judicial power.  Had it been such, the Claimants’ petition for this relief would have been notified to Dr Mallya and an opportunity afforded to him to be heard in accordance with ordinary principles of natural justice.

i)                    On its proper construction the letter of 27 July 2017 is a ruling or direction that the jurisdiction of the DRT is subject to no upper pecuniary limit, and is clearly something which the Presiding Officer was permitted to issue and affix with the seal of the DRT.

ii)                  Justice Singhvi states that he knows of no reason why the Presiding Officer could not confirm that there was no such limit and attach the seal of the DRT to that confirmation.

iii)                Justice Jain’s argument is over-technical and illogical.  The Claimants repeat the points which I summarise in § 51 above.

“(1) The Registrar shall have the custody of the records of the Tribunal and shall exercise such other functions as are assigned to him under these rules or by the Presiding Officer by a separate order in writing.

(2) The official seal shall be kept in the custody of the Registrar.

(3) Subject to any general or special direction by the Presiding Officer, the seal of the Tribunal shall not be affixed to any other order, summons or other process save under the authority in writing from the registrar.”

The opening words of rule 22.3 imply that the Presiding Officer has the power to give a special direction for the use of the court seal.   On that basis it seems to me that the issue of the letter of 27 July 2017 was within his powers.  More generally, I have seen no reason to take the view that the Presiding Officer is unable to conduct administrative (as opposed to judicial) functions without the need for explicit statutory authorisation for each and every such act.

i)                    Dr Mallya and UBHL lodged appeals 212 days out of time in October 2017, along with applications to condone delay and for waiver of the pre-condition to deposit with the DRAT a portion of the sums awarded by the DRT Judgment.  The appeal documents contained errors which the DRAT required to be corrected but which it appears were not corrected.

ii)                  On 2 January 2018 the appeal of Dr Mallya was dismissed.

iii)                On 5 March 2018 Dr Mallya issued applications to restore the appeal and for condonation of the delay in issuing that restoration application, 27 days after the 30-day period to the making of such an application.

iv)                On 28 March 2018 the DRAT made an interim order directing Dr Mallya to deposit Rs.3,101 crores with the DRAT before 25 April 2018 as a pre-condition to the DRAT considering his applications to restore the appeal and for condonation of the delay in filing the appeal.  That sum has not been deposited.

v)                  On 13 April 2018 Dr Mallya issued an application in the Karnataka High Court challenging the DRAT’s order.  That application has not yet been disposed of.

i)                    On 26 March 2013 Dr Mallya, UBHL and KFin commenced proceedings in the Bombay High Court challenging, among other things, the validity of the Personal Guarantee.

ii)                  The court ordered the determination as a preliminary of the question “whether this Court has jurisdiction to try and entertain the present suit”.

iii)                On 17 July 2015 Dr Mallya applied to withdraw the application for interim relief in the Bombay High Court, seeking at the same time to reverse the court’s decision to determine the question of jurisdiction as a preliminary issue.  That application remains pending.

iv)                Dr Mallya’s evidence is that his claim in the Bombay High Court would, if successful, as a matter of Indian law override and supersede the DRT Judgment.

“If, on an application to set aside the registration of a judgment, the applicant satisfies the registering court either that an appeal is pending, or that he is entitled and intends to appeal, against the judgment ...”

“I am afraid that I cannot agree with the judge's approach to this matter. He seemed to have regarded it as if there was a summons under R.S.C., Ord. 14 in which the question is whether there is an arguable point. But I think this procedure to enforce a foreign judgment is quite different from Ord. 14. Here is a German judgment which is equivalent to an English judgment. If the plaintiffs had obtained an English judgment, we should not, for one moment, grant a stay simply because the defendants had brought a cross-claim in another action against the plaintiffs. So here we should not stay execution in this German judgment simply because Laubscher's have brought a cross-action in England against Wagner.” (p317 D-E per Lord Denning MR)

“For those reasons I agree entirely that this appeal should be allowed and would only add a few words on a matter of general principle. Section 2 (2) of the Foreign Judgments (Reciprocal Enforcement) Act, 1933 , makes it plain that judgments of any foreign court to which the Act has been applied by Order in Council when registered rank exactly the same as a judgment of a court in this country. Accordingly whilst, of course, R.S.C., Ord. 47, r. 1 may in certain circumstances be relied on when it is sought to obtain a stay on a foreign judgment in the same way as it might in certain circumstances be relied upon when a stay is sought of a judgment of one of the courts of this country, that can only successfully be done when there are "special circumstances which render it inexpedient to enforce the judgment or order." For my part I too, with all respect to the approach of the judge in chambers, consider the tests to be applied when an application is made under R.S.C., Ord. 47, r. 1 are quite different from those applicable to Ord. 14 proceedings. In the present case there are no special circumstances whatsoever that would render it inexpedient to enforce the German judgment and many that tend the other way.” (p319A-C per Sachs LJ)

i)                    Dr Mallya brought proceedings in Bombay on the basis of the location of the defendants’ registered offices.  However, the Personal Guarantee contains an exclusive jurisdiction clause which provides that jurisdiction lies with “the courts and tribunals in Bengaluru” (Bangalore).  The DRT has ruled that Dr Mallya volunteered to submit to the jurisdiction of the courts and tribunals in Bangalore.  Justice Singhvi’s evidence is that that finding will be final and binding on the plaintiffs to the suit before the Bombay High Court. 

ii)                  In any event, in order to circumvent the jurisdiction clause Dr Mallya would have to persuade the Bombay court that his allegations about the validity of the Personal Guarantee also impugn the jurisdiction clause, i.e. that under Indian law it is not severable.

iii)                Dr Mallya had the opportunity to dispute the validity of the Personal Guarantee and did so, on certain grounds, before the DRT.  Evidence on the issue was advanced by the Claimants and Dr Mallya, and the Claimants’ two witnesses were cross-examined.  The DRT held that the Personal Guarantee is valid.  

iv)                That finding would appear to give rise to a res judicata on the issue as between Dr Mallya and the Claimants to which the Bombay High Court would give effect.

v)                  Justice Jain expresses the view that no res judicata could arise because the DRT and DRAT have no jurisdiction to grant declaratory relief, whereas that is the nature of the relief Dr Mallya seeks in the Bombay High Court.  Justice Jain quotes from the decision of the Supreme Court of India in Srimati Raj Lakshmi Dasi v Banamali Sen [1953] SCR 154 where the Court said:

“In order successfully to establish a plea of res judicata or estoppel by record it is necessary to show that in a previous case a court, having jurisdiction to try the question, came to a decision necessarily and substantially involving the determination of the matter in issue in the later case.”

Applying this test, and with respect to Justice Jain, I find it difficult to accept that the DRT’s lack of power to award the remedy of declaratory relief means that the DRT lacks jurisdiction “to try the question”.  I find much more compelling Justice Singhvi’s view that a decision of the DRT (unless reversed on appeal by the DRAT) does operate as a res judicata in other proceedings between the parties on the same substantive issue.

vi)                In so far as Dr Mallya relies in the Bombay claim on his allegations of coercion and/or breach of RBI circulars, I am for the reasons given earlier not persuaded that those allegations have apparent merit.

i)                    The starting point is that the Claimants have a judgment which they are entitled to enforce.

ii)                  Dr Mallya did not file a timely appeal: he had the right to appeal from the DRT Judgment within 30 days but did not do so.  Instead he attempted to appeal 212 days out of time, but even then did not submit a valid application. 

iii)                The prospects of Dr Mallya being allowed to appeal out of time to the DRT appear slim.

iv)                Dr Mallya’s claim in the High Court of Bombay has to overcome a substantive objection that the court lacks jurisdiction by reason of an exclusive jurisdiction agreement.

v)                  There appears to be a good argument that the Bombay court would in any event be bound by the DRT’s findings as res judicata.

vi)                In any event, the evidence and arguments presented to this court do not suggest that Dr Mallya has good prospects on the merits in relation to either his proposed appeal or his application to the court in Bombay.

vii)              There is no reason to believe Dr Mallya would suffer irremediable harm if the Registration Order or its enforcement were not set aside or stayed. The Claimants are state owned banks and are likely, if required, to be readily able to reimburse Dr Mallya any sums ordered.  

viii)            Conversely, any of the forms of relief Dr Mallya seeks would be likely to cause prejudice to the Claimants.  The proceedings he wishes to pursue would be likely to last a minimum of 18 months, and on the basis that Dr Mallya wishes in any event to pursue his claim in the Bombay court would take many years. 

ix)                In the meantime, the Claimants are likely to be out of their money.  In addition, there is a risk of the value of Dr Mallya’s assets deteriorating, and/or being subject to claims by other creditors, and a risk of Dr Mallya being declared bankrupt.

x)                  I do not accept the further point made on behalf of Dr Mallya that since ownership of some of Dr Mallya’s alleged assets is likely to be in dispute, it would not be sensible to use time and resources on those issues until the outcome of Dr Mallya’s appeal is known.  On the footing that for the reasons given above the Claimants are prima facie entitled to enforce their judgment, it would not be right to require them to await on costs/resources grounds the outcome of (a) an appeal which at present is out of time and not currently extant or (b) a claim in Bombay which is prima facie in breach of an exclusive jurisdiction clause and subject to a res judicata objection, and (in both cases) whose merits are doubtful.

xi)                Similarly, it would not be just to require the Claimants to wait (as Dr Mallya submitted) on the basis that (a) assets of UBHL, which is jointly and severally liable with Dr Mallya, have been attached at the instance of the DRT Recovery Officer and are said to be worth £385 million, or (b) Dr Mallya has applied for the release of other assets currently under attachment at the instance of government authorities in India.  Whilst it is possible that value will eventually be realised from such assets for the benefit of the Claimants, the timing and value involved are uncertain, and in any event that possibility is in my view not a factor, or a factor of any real significance, against allowing the Claimants to take the benefit of the judgment they have obtained.

i)                    No risk of dissipation of assets

ii)                  Delay

iii)                Material non-disclosure

i)                    The purpose of a freezing order is to ensure that the court’s judgment is not rendered valueless “by an unjustifiable disposal of assets” (Ketchum International Plc v Group Public Relations Holdings Ltd [1997] 1 W.L.R. 4, CA).

ii)                  What has to be shown is that there is, without an injunction, “a real risk that a judgment or award in favour of the claimants would go unsatisfied” (Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft m.b.h und Co K.G.  [1983] 1 W.L.R. 1412, CA). However, the order is not designed to prevent perfectly normal dispositions, such as the payment of ordinary trading debts, even though their effect may be that any ultimate judgment goes partly or wholly unsatisfied.  The conduct in question must be unjustifiable (Mobil Cerro Negro Ltd v Petroleos de Venezuela SA [2008] 1 Lloyd’s Rep. 684 (Walker J) at paras 36 and 41)

iii)                The claimant should depose to objective facts from which it may be inferred that the defendant is likely to move assets or dissipate them; unsupported statements or expressions of fear have little weight (O’Regan v Iambic Productions (1989) 139 N.L.J. 1378 (Sir Peter Pain).)

iv)                It is a fundamental principle that a freezing order is not granted for the purpose of providing security for the claim.

i)                    the fact that the DRT Judgment has not been met, nor have any sums been paid voluntarily,

ii)                  the findings of contempt by the Indian Supreme Court,

iii)                the timing of Dr Mallya’s move to England,

iv)                the criminal proceedings against Dr Mallya, and

v)                  the complex ownership structure of Dr Mallya’s assets.

“… in the order dated 7.4.2016 this court had directed [Dr Mallya] to disclose the assets in an affidavit.  The only purpose for disclosing the assets was to have a fair idea for the petitioners to go for a meaningful settlement on the proposals made by [Dr Mallya].  There is no petition before us for clarification or modification of order dated 07.04.2016.  In the above circumstances, we do not find any tenable objection in disclosing these assets to the petitioners.”

The court also commented:

“We are distressed to note that [Dr Mallya] has not responded to our Order dated 7^th April, 2016 in the letter and spirit of the said Order. He was to show us his bonafides by showing the color of money in the form of a substantial deposit towards dues in the region of 18,000 crores to arrive at a meaningful settlement. It appears there is no bonafides in his offer for settlement. Apparently, statements made by counsel on his behalf were made only as a ploy to gain time”.

i)                    This was not an offer by Dr Mallya to pay his own indebtedness, but an attempt to transfer UBHL’s shareholding in United Spirits Ltd. and United Breweries Ltd. to the Karnataka High Court as part of UBHL’s challenge to the winding-up order made against it.  It was in any event prevented by the Enforcement Directorate.

ii)                  It was not represented at the time as an offer by Dr Mallya to settle, although he now says it was.

iii)                Even if it had been an offer, it would have been at a significant discount to the DRT Judgment debt.

iv)                The context of UBHL’s application was a petition by BNP Paribas to wind the company up, a fact which itself illustrates the point that other creditors also lay claim to the assets.

i)                    “He is guilty of disobeying the Orders passed by this Court in not disclosing full particulars of the assets as was directed by this Court.”

ii)                  “He is guilty of violating the express Orders of Restraint passed by the High Court of Karnataka in the same Cause from which the present proceedings have arisen.”

“On plain reading of the Orders, in our view, whether the properties were in the hands of the concerned respondents on the date when the orders of restraint were passed by the High Court or had come into their hands or under their control at a later point in time, regardless of such qualification all properties whether movable or immovable were governed by the orders of restraint.  There is no ambiguity of any sort and the Orders of restraint are quite clear.  Consequently, funds amounting to US$ 40 million which came to be under the control of and in the hands of Respondent No.3 [Dr Mallya] were completely covered and governed by said orders of restraint.

…

The explanation that the funds now stand transferred in favour of the trusts over which Respondent No.3 has no control at all, in fact aggravates the extent of violation.  It is clear that the funds which were in the control of Respondent No.3 have now been sought to be put beyond the reach of processes of court, which is reflective of the intent.”

“… Respondent No.3 was obliged and duty bound to appear in person in response to the notice issued by this Court in Contempt Petition.  Instead, he chose to file application seeking recall of the orders issuing notice.  Having considered the matter, we see no reason to recall that order …  Respondent No.3 is therefore duty bound to appear in person in the present contempt proceedings.

Since Respondent No.3 has not filed any reply to the Contempt Petition nor did he appear in person, though we have found him guilty of having committed contempt of court, we deem it necessary to give him one more opportunity and also hear him on the proposed punishment.  We therefore adjourn matter to 10.07.2017 for hearing Respondent No.3 in person on matters in issue including one regarding the proposed punishment to be awarded to him for contempt of court.  … Respondent No.3 may keep his affidavit ready to be tendered on the same day by stating mitigating circumstances, if any and any other submissions he chooses to advance.”

i)                    he has lived in England since 1992 where he has, and continues to have, indefinite leave to remain;

ii)                  he has been a non-resident Indian since 1988; 

iii)                his family ties to England are considerable, with his mother and step siblings all living here;

iv)                since 1988, his trips to India have been visits for business and (from 2002 to 2016) to fulfil his parliamentary duties at the Council of States, which sits for only 153 days a year;

v)                  on 2 March 2016 he travelled from India (where he had been in parliament on 1 March 2016) to the UK on his way to Switzerland.  This was to attend a long-scheduled meeting of the World Motor Sports Council on which he has sat for 7½ years.  Having done so, he returned to England on 4 March 2016; and

vi)                the Claimants’ mistaken belief that Dr Mallya was planning to settle in London was the trigger for their applications to take his passport, and not the other way round.

i)                    Dr Mallya faces serious criminal charges.

ii)                  The charges are brought not by the Claimants but by the Central Bureau of Investigation.

iii)                They follow detailed investigations by the Indian police.

iv)                The initial charges followed a consideration of at least 477 documents.

v)                  They also identified 76 witnesses.

vi)                The charges also followed investigations by the Directorate of Enforcement which independently concluded that Provisional Attachment Orders should be made against various assets on the basis that they had been involved in money laundering. 

vii)              Provisional Attachment Order 11/2016 was issued on 11 June 2016 and confirmed on 1 December 2016.  The confirmation decision was a 201 page analysis and decision which followed a 9-day hearing at which Dr Mallya and the other defendants were all represented by counsel.  Its conclusions included that:

“Thus, the acts of Shri Vijay Mallya, UBHL and others indicate that a criminal conspiracy was hatched for obtaining/sanctioning of bank loan to M/s KAL [Kingfisher Airlines Ltd] in gross violations of established/prescribed procedures and M/s KAL had no intent for repayment of loan ab initio.

Further, the money trail analysis revealed that out of the total loan of Rs 860.92 crore, sanctioned and disbursed by IDBI, Rs. 423 has been remitted out of India.  The said payments were shown to be made towards aircraft rental leasing and maintenance, servicing & spare parts.  There are huge variations in the payments especially in the leasing payments even for the same class and type of Aircrafts for the same time period.  Despite repeated reminders, M/s KAL has failed to submit supporting documents such as lease agreements etc. to substantiate that the payments are bonafide.  Therefore, it establishes that not only the said bank loan was obtained in questionable manner, it also establishes siphoning of the said loan abroad in a calculated and pre designed manner.

During the course of investigation, it was observed that M/s KAL was declared wilful defaulter by IDBI bank …

The proceeds of crime thus generated has been routed and transferred abroad.  Investigations … further revealed that Shri Vijay Mallya has held a number of movable and immovable properties in India as well as outside India through his various companies established by him through his office personnel and which were directly or indirectly controlled by him.  It may be recalled that Shri Vijay Mallya has tendered his personal guarantee and M/S UBHL has tendered corporate guarantee and as such, they are involved in the offence of money laundering.

…

During the course of investigation, it was revealed that Shri Vijay Mallya was the Chairman of M/s KAL at the material time and was instrumental in taking the material decisions pertaining to the affairs of the said Company, including obtaining of loans from various banks.  Numerous opportunities were given to Shri Vijay Mallya, to appear in person to present his case before the Investigating Authority, by way of issuance of Summons.  However, he failed to respond to the Summons and didn’t appear in person before the Investigating Authority.  Accordingly, a letter was issued to the Regional Passport Office, N. Delhi for revocation of his passport, the request which was considered and accordingly, his passport was revoked by the Ministry of External Affairs, Government of India, …”

viii)            The confirmation decision records that the defendants had filed replies, and “were also given liberty to file written submission/arguments/synopsis which have been done by the concerned Defendants.  The different Counsels appeared on behalf of the Defendants and argued the matter at length.”  The decision concluded in relation to money laundering that:

“There is overwhelming evidence regarding generation of proceeds of crime by commission of the scheduled offences.  There is sufficient evidence of such proceeds of crime having been utilized by the Defendants.”

i)                    His business and financial affairs are simply a reflection of his (and his highly successful late father’s) long-standing business life, and not evidence of an attempt (least of all a recent attempt) to put assets beyond reach as the Claimants suggested.  Dr Mallya is the son of the late Vittal Mallya, who founded the United Breweries Group of companies.  He died in 1983, and Dr Mallya took over the running of the Group.

ii)                  He has given asset disclosure in India and now in England (pursuant to the WFO).  He has also been asked numerous questions by the Claimants’ solicitors in correspondence about his assets, which he has answered, notwithstanding his application to discharge the WFO.

i)                    A property in Cornwall Terrace is owned by a BVI company, Rose Capital Ventures (“RVC”). RVC is owned by Gladco Properties Inc., which is in turn owned by Continental Administration Services Limited (“CASL”) as trustee of the Sileta Trust, a Mallya family trust.

ii)                  Ladywalk and Bramble Lodge in Hertfordshire are owned by Ladywalk LLP, an English limited liability partnership. It is said that the members of Ladywalk LLP are CASL (99.9%) and Mr Andrea Vallabh (0.1%) which he holds as nominee for CASL. CASL in turn holds that 0.1% membership interest as trustee of the Sileta Trust. CASL holds 49.95% of the membership interest as trustee of the Welwyn Property Trust, and 49.95% of the membership interest as trustee of the Tewin Property Trust. The finance for the purchase of the properties was provided by Ladywalk Investments Limited (“LIL”), a BVI company. LIL is wholly owned by Sileta Holdings Limited (“SHL”). SHL is in turn wholly owned by CASL as trustee of the Sileta Trust.

i)                    one of the Hertfordshire properties (Ladywalk or Bramble Lodge) was “his” property; and

ii)                  he had a right to occupation of Cornwall Terrace on the basis of an irrevocable licence from RCV and a right to enforce the fact that RCV holds the property on trust for him, his mother and his son.  Dr Mallya says that his right to occupy “arises under a contractual licence, a proprietary estoppel or a constructive trust”, and there are no documents in relation to the trust because it is a constructive trust. 

i)                    The Claimants could have sought (but did not) pre-judgment freezing relief in support of the DRT proceedings, which they launched in June 2013, under Section 25 of the Civil Jurisdiction and Judgments Act 1982. 

ii)                  The Claimants obtained an asset restraint order against Dr Mallya in India in support of their DRT proceedings as long ago as 3 September 2013, which they said extended to Dr Mallya’s non-Indian assets and which they obtained on the basis of there being a risk of dissipation of those non-Indian assets (including English assets) in September 2013. 

iii)                The Claimants could have sought post-judgment freezing relief (again under section 25) when the DRT Judgment was handed down in January 2017. 

iv)                The Claimants obtained a fresh asset restraint order in India as part of the DRT Judgment, which again the Claimants contend froze Dr Mallya’s non-Indian assets.

v)                  The Claimants could have applied promptly for freezing relief either after the amended Recovery Certificate was granted on 10 April 2017 or after the letter dated 27 July 2017 addressed to the QBD purporting to satisfy the 1958 Order in Council.  The four months’ delay after July 2017 was said by the Claimants to be to allow the 13 claimant banks all to consent to the making of the application, but that is hardly the degree of urgency to be expected when seeking interim relief. 

i)                    The Claimants (mistakenly, he says) “believed that [Dr Mallya] was intending to move to London to dispose of certain assets and frustrate their enforcement action” in March 2016 (according to Mr Gair’s affidavit on behalf of the Claimants).

ii)                  In support of interim applications in the DRT made on 2 March 2016, the Claimants asserted “that [Dr Mallya] has decided to settle in London, obviously with an intention to defeat the process of this Honourable Tribunal. If [Dr Mallya] is allowed to do so, it will become difficult for the [Claimants] to recover the entire amount due to them” and that “it is apprehended that [Dr Mallya] may alienate their assets in favour of 3^rd parties with a view to defeat the [Claimants’] claims”.

i)                    Whilst in early 2016 Dr Mallya made some attempts to settle the matter, those offers were on bases which the Claimants had reasonable grounds for considering unsatisfactory.  More recently, he has taken the position that he has no liability under the Personal Guarantee on grounds which the DRT has rejected, as well as on the apparently entirely unmeritorious basis that it extended only to assets in India. 

ii)                  His lengthy delays in seeking to appeal long out of time from the DRT Judgment, and his attempt to rely on the proceedings in the Bombay High Court (likely to last of the order of seven years and brought in apparent breach of an exclusive jurisdiction clause) as a basis for declining to satisfy the DRT Judgment, are suggestive of a wish to avoid/delay as long as possible the satisfaction of his obligations.

iii)                The Supreme Court of India has concluded that Dr Mallya was in contempt of court on two counts, one relating to dissipation of assets in breach of an order of the High Court of Karnataka and one relating to failure to make disclosure required by a previous order of the Supreme Court.

iv)                Dr Mallya’s payment away in February 2016 of the US$40 million received from Diageo was a carefully pre-arranged transfer of a significant sum of money away from Dr Mallya’s control, before the public announcement of the relevant transaction, and at a time when the Claimants were pursuing legal action to recover substantial amounts from Dr Mallya under his Personal Guarantee.  It was a plain and unjustifiable dissipation of assets.

v)                  On 20 October 2016 the Karnataka High Court held that there was a prima facie case of contempt against Dr Mallya for having created a pledge over shares in UBHL in breach of an oral undertaking given by Dr Mallya to the Court on 26 July 2013.  This matter carries somewhat less weight as it was a prima facie case only and is disputed by Dr Mallya.

vi)                Dr Mallya’s departure from India, to where he has never since returned, and his resistance to India’s application to extradite him to face trial on serious criminal charges, provide some grounds for regarding him as a fugitive from justice.

vii)              An adjudicating authority, after lengthy and detailed consideration of evidence and submissions, has concluded that Dr Mallya has been involved in a criminal conspiracy involving money laundering and has on that basis confirmed a provisional attachment of assets of companies with whom he has been closely involved.

viii)            The above factors taken together evidence a risk of dissipation of assets, and in those circumstances it is reasonable also to take into account the complexity of the structures used by Dr Mallya for the holding of assets, which would be likely to facilitate any dissipation of assets.

“The stronger the case for the order sought and the less serious or culpable the non-disclosure, the more likely it is that the court may be persuaded to continue or re-grant the order originally obtained. In complicated cases it may be just to allow some margin of error. It is often easier to spot what should have been disclosed in retrospect, and after argument from those alleging non-disclosure, than it was at the time when the question of disclosure first arose.”

“If the duty of full and frank disclosure is not observed the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.”

i)                    The Claimants should have drawn Picken J’s attention to the fact that they sought and obtained asset restraint orders in India in 2013, which they considered extended to assets outside India, and on the basis of there being a risk of dissipation of those non-Indian assets (including English assets).

ii)                  The Judge should have been told that in March 2016 the Claimants applied to the DRT for various relief against Dr Mallya including removal of his passport, his arrest and to garnish the Diageo money.

iii)                It should have been drawn to the Judge’s attention that the Claimants had in fact applied for a fresh asset restraint order in India in 2017 which was granted as part of the DRT Judgment, which again the Claimants considered froze Dr Mallya’s non-Indian assets.  Although the full DRT Judgment was exhibited to the Claimants’ affidavit evidence, Picken J was specifically directed only “to glance” at the DRT Judgment, and confirmed at the start of the hearing that he had only “peeped/glanced” at it.  The DRT Judgment was exhibited to the evidence in support of the Registration Order, not to the affidavit in support of the WFO, and the Judge was not taken to the passages of the DRT Judgment that dealt with the Claimants’ interim applications for asset restraining relief and the order granting that relief against Dr Mallya.

iv)                As a result, the Claimants’ explanation of their delay in the context of the risk of dissipation omitted highly material considerations and gave a misleading impression of what had been going on.  In particular, the court was asked (urgently and without any notice being given to Dr Mallya) to grant a freezing order over English assets which were (on the Claimants’ case) already subject to an asset restraining order made by the DRT.

v)                  The Claimants were not candid in their explanation of the delay in applying for a WFO.

vi)                The Claimants failed to disclose that Dr Mallya’s Indian assets valued at 56% of the DRT Judgment debt, and the Indian assets of UBHL valued at 89%, have already been attached, secured or seized, and that those steps have been taken for (at least) the potential benefit of the Claimants.

vii)              The Claimants failed to disclose to the court Dr Mallya’s contention that the value of the Personal Guarantee (if valid at all) is limited in law to the value of his Indian assets from time to time.  Dr Mallya’s position was well known to the Claimants since April 2016 because he set it out in his affidavit to the Supreme Court of India.

viii)            Despite making much of Dr Mallya’s purported failure “to volunteer payments to discharge his liabilities”, the Claimants failed to disclose to the court his settlement offers and other attempts to discharge his debts to the Claimants.

i)                    the Registration Order was properly made;

ii)                  it is not appropriate to set aside the Registration Order, to stay enforcement or to adjourn the application to set the Registration Order aside;

iii)                the Claimants have established a good case for the continuation of the WFO, and there are no grounds on which it would be just to set it aside.