The Supreme Court has directed the Arbitral Tribunal to dispose of an application of jurisdictional challenge raised by Eveready Industries India in the case with KKR India Financial Services without being influenced by observations of the Division and Single Bench of the Delhi High Court.
In an order dated April 1, the apex court also asked Eveready not to “dissipate or dispose” of its assets, except in the usual course of business. The order said that the petitioner (Eveready) is restrained from creating any encumbrances of its unencumbered assets for a period of four weeks or till further orders of the Arbitral Tribunal, whichever is earlier.
Eveready informed stock exchanges about the order on Saturday and said that the company is in the process of taking appropriate action as required, based on advice from its legal counsel.
Company sources pointed out that the apex court order was a relief to the extent that it was allowed to create charge or sell assets in the “usual course of business” as opposed to a blanket injunction earlier.
Sources also pointed out that in four weeks the Arbitral Tribunal would have to decide on whether Eveready could be made a party to the arbitration proceedings.
In February, a Division Bench of the Delhi High Court upheld an injunction order by the Single Bench that prevented Eveready, as part of the Williamson Magor group, from selling, transferring, alienating, disposing, assigning, dealing, encumbering or creating third party rights on any of its assets, and carrying out any change in its capital structure, or any corporate or debt restructuring.
Eveready had opposed the injunction and also raised a jurisdictional challenge under the Arbitration & Conciliation Act, 1996, in respect of arbitration proceedings before the Arbitral Tribunal of the International Chamber of Commerce on grounds that no proceedings can be made against it as it was not a party to any agreement or arrangement with the petitioner (KKR).
A special leave petition (SLP) was filed by Eveready in the Supreme Court against the Division Bench order. The apex court then passed an order on April 1.
The legal case arose as KKR sought to recover a Rs 200 crore loan extended to Williamson Magor & Company and Williamson Financial Services.
KKR had moved Delhi High Court under Section 9 of the Arbitration and Conciliation Act, as there was an arbitration agreement in the facility agreement, to seek a restraint against the borrowers, guarantors, obligor and Williamson Magor group companies – Eveready, McLeod Russel India, McNally Bharat Engineering –from dealing with their assets.
So while the borrowers were the holding companies – Williamson Magor & Company and Williamson Financial Services – the restraining order by the Single Bench and Division Bench impacted Eveready, McNally and McLeod as KKR invoked the “group companies doctrine”. Hence, Eveready moved the SLP in the Supreme Court.
Eveready is in the process of going through a change. The Burman family – promoters of Dabur India – who have the largest shareholding in Eveready announced an open offer for an additional 26 per cent and intent to take control on February 28. Following this, Khaitan family members – existing promoters of Eveready – stepped down from the board.
In addition, Eveready has appointed consultancy firm, Bain & Company, to chart out a business strategy. In the future it may even look at new verticals of growth which may require capital infusion. The Single Bench and Division Bench order prevented any change in its capital structure, or any corporate or debt restructuring.
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