SUNAIR HOTELS LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) The appellant (hereafter "Sunair") impugns a judgment and order of the learned single judge, dismissing its writ petition; it had challenged the decision of the Union of India ("UOI" hereafter) dated 29.02.2016 directing investigation by the Serious Fraud Investigation Office ("SFIO", hereafter) under Section 212(1)(c) of the Companies Act, 2013.

(2.) Sunair is a public limited company incorporated in 1977 under the Companies Act , 1956 ("the Act" hereafter). Sunair is engaged inter alia in the business of establishing and managing hotels; it is not listed on any national stock exchange and is held among 44 of its shareholders. One of Sunair's shareholders is VLS Finance Ltd. (hereafter "VLS"), a public limited company incorporated under the Companies Act , 1956. VLS is a non-banking financial company engaged inter alia in the business of leasing and portfolio investments in equity shares, with an expertise in funding projects. It is joined as second respondent in this case.

(3.) The record reveals a chequered litigious history between Sunair and VLS since 1998. In 1982, the NDMC allotted a plot of land to Sunair for a hotel project. This license was further supplemented with an additional license deed executed in 1988 and possession was subsequently received. In June 1993, pursuant to a joint-venture agreement between Sunair and M/s Aeroflot, a wholly-owned subsidiary of Sunair (Sun Aero Ltd) was set up to carry out the hotel project. In 1993 M/s Aeroflot withdrew from the joint venture and consequently Sun Aero Ltd. entered into a management contract with ACCOR Asia PTE Ltd., Singapore. In the interim, there was a dispute between the NDMC and Sunair (along with its subsidiaries) concerning the allotted land. This dispute was taken up by the Delhi High Court and in 1994 the Court ruled in favour of Sunair and it was once again given possession of the land. Under the management contract with ACCOR dated 9 th September 1994, Sunair transferred the development rights of the abovementioned land to its subsidiary, for the purpose of constructing the hotel. On 11 th March, 1995 VLS and Sunair signed a MOU, according to which VLS was to invest Rs.7 crores as share capital in Sunair and was also to provide a sum of Rs. 10 crores as security deposit and the promoters of Sunair were to invest a sum of Rs. 22 crores by way of their contribution to the share capital. Under the terms of the MOU, VLS was to arrange a public issue of shares for Rs. 10 crore and to mobilize a sum of Rs. 85 crore by way of loans. VLS partially fulfilled its obligations under the MOU and in 1995 invested a sum of Rs. 7 crore and a security deposit of Rs. 8 crore.