Sunday, November 23, 2014

Revival of Sick Units Takes Precedence Over Loan Recovery

[The following post is contributed by Prachi Narayan of Vinod Kothari & Company. She can be contacted at]

The Supreme Court in its judgment in the case of KSL Industries Ltd vs. Arihant Threads Ltd on October 27, 2014 finally settled the position of law over the vexed issue of precedence of two special enactments, the Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”) and the Recovery of Debt Due to Banks & Financial Institutions Act, 1993 (“RDDBFI”).

Since both the enactments are special laws, there have been diverse views from the courts with regard to precedence of one over the other. The lurking issue is finally resolved with the unanimous judgement of the three judge bench of the Supreme Court which upheld that the provisions of SICA shall prevail over the provisions of RDDBFI.

The Case

The facts of the case are that Arihant Threads Ltd (Respondent) had availed a loan from IDBI Bank for its export-oriented spinning unit set up in Amritsar, Punjab. The Respondent defaulted in payment of loan installments and IDBI moved the Debt Recovery Tribunal (DRT), Chandigarh and obtained an ex-parte order in its favour in July 2003 to dispose off the Respondent’s assets. The Respondent stayed away from the DRT proceedings despite having been given a chance to explain its position.

In September 2004, the movable and immovable properties of the Respondent were valued accordingly and put for auction wherein KSL Industries Ltd (Appellant) was declared the highest bidder.

The Respondent moved an application in DRT, Delhi for settling the ex-parte order of DRT, Chandigarh in December 2004. DRT Delhi set aside the auction sale holding that the properties of the Respondent were not valued properly.

Subsequently, both the Respondent and the Appellant moved the Debt Recovery Appellate Tribunal (“DRAT”), Delhi. DRAT Delhi stayed the ex-parte order of DRT Chandigarh. Meanwhile, the Respondent invoked the provisions of SICA by making the reference to Board of Industrial Finance & Reconstruction (BIFR). The DRAT Delhi confirmed the sale in favor of Appellant.

However, before the sale formalities could be completed, the Respondent filed two Writ Petitions in the Delhi High Court on the ground that the debt recovery procedure cannot be carried out because of the prohibition in Section 22 of the SICA. The Delhi High Court allowed the writ petitions setting aside the order of DRAT, Delhi. The Appellant preferred an appeal in the Supreme Court where, the two-judge bench had a difference of opinion. Therefore, the matter was referred to the three-judge bench that ruled that the debt recovery procedure is barred under section 22 of the SICA, which shall prevail over Section 34 of the RDDBFI.


This judgment surely puts to rest the conundrum with regard to the precedence of one special enactment over other special act and is also quintessential to the rules of interpretation. The larger bench ruled that while addressing the precedence of SICA and RDDBFI, in view of the non obstante clause contained in both, one of the important tests is to carefully examine the purpose of the two enactments, so as to recognize and ensure that the purpose of both enactments is, as far as possible, fulfilled.

The General Rules of Interpretation

It is a settled principle of interpretation that a subsequent enactment has precedence over the previous enactment Further, the doctrine of “generalia specialibus non derogant” (general provisions will not abrogate special provisions) is also well settled.

In the instant case, both the principles became equally applicable and thus the confusion cropped up as to which principle of interpretation would apply.

However, in cases where such confusions spring up, the widely accepted rule of construction is that if one construction leads to a conflict, whereas on another construction the two enactments can be harmoniously construed, then the latter must be adopted.

The meaning of “Special”

Special in layman terms would mean “something otherwise than usual” or something designed for a particular purpose or occasion. It would not be a daunting task to ascertain when the base for comparison is “generic or general”. It becomes complicated when the task is to distinguish “the special” or “especial” between two specials.

The Apex Court has carefully and at breadth examined the issue of “especial” and addressed the same accordingly, laying down the determining factor to be the purpose of the enactment and the subject matter it deals with.

In the case of LIC vs. DJ Bahadur,[1] the Apex Court held that “In determining whether a statute is a special or a general one, the focus must be on the principal subject-matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer points of law.”

The purpose of SICA is to provide ameliorative measures for reconstruction of sick companies, and the purpose of RDDBFI is to provide for speedy recovery of debts of banks and financial institutions. Indeed both are special laws. With the purpose of reconstruction and matters incidental thereto, SICA must be considered as special law, though it may be a general law in relation to recovery of debts. Whereas RDDBFI is a special law, in relation to recovery of debts and SICA may be considered as general law.

In the above context, the approach is to carefully examine the purpose, intention and objectives the enactment aims so as to construe what is actually special and what becomes general.

Further, in order to ascertain the real purpose of both the enactments and also to address the ambiguity over why in this case the subsequent act would not prevail over the previous act, a deeper look into the Statement of Objects and Reasons of both enactments becomes imperative.

Statement of objects and reasons of SICA

The introduction to SICA states: “An Act to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.”

It is fairly clear from the above that SICA was enacted in 1985 to provide for timely determination of a body of experts for providing preventive and remedial measures that would need to be adopted to sick companies so as to address the ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the governments and locking up of investible funds of banks and financial institutions. In order to fully utilize the productive industrial assets, afford maximum protection of employment and optimize the use of funds of the banks and financial institutions, it was found imperative to revive and rehabilitate the potentially liable sick industrial companies. Further the Act not only aims to revive and rehabilitate all sick companies but those in the schedule to the Industries (Development and Regulation) Act, 1951 (IDRA), that are presumably vital to the economy of the nation.

In order to achieve the purpose for revival and rehabilitation, protection of sick companies from its creditors and the multitude of remedies which they may avail of against the sick company and its properties, it was vital and imperative for the BIFR to draw up a scheme best suited for the sick company. In this backdrop, section 22 of SICA was enacted dealing with suspension of legal proceedings, contracts, etc. during the continuation of BIFR proceedings.

Section 22 (1) provides that “Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding, anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.”

The Appellants had put forth that section 22 provides for stay on proceedings of winding up or execution and distress and does not provide for any stay on the recovery of debt process. The bench carefully examined the provision and ruled that the time when SICA when enacted in 1985, recovery under RDDBFI was neither in existence nor was such a mode contemplated. The section further was amended in 1994 include stay on suits for recovery of money or enforcement of security against the sick company. These words appear to have been inserted to expressly provide, rather clarify that no suits for the recovery of money, etc. would lie or be proceeded with against such a company. Further, the bench concluded that the even though “proceedings” under RDDBFI are not covered expressly but any proceeding resulting in the execution and distress against the property of such company would be construed as proceedings within the meaning of section 22.

Statement of objects and reasons of RDDBFI

The introduction to RDDBFI as provided in the text of the Act sets forth: “An Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto”

RDDBFI was enacted in 1993 by the Parliament to effectively address the issue of recovery of debts due to banks and locking of investible public funds that prevented proper utilization and recycling of funds for development of country. The urgent need to work out a suitable mechanism, through which the debts of banks and financial institutions could be realized without delay, was in the form of Special Tribunals, which would follow a summary procedure for adjudication. These Tribunals eventually came to be known as Debt Recovery Tribunals, which precisely was the intent behind enactment of RDDBFI. 

However, in view of multiple remedies under various other laws for recovery of money and order to protect the sanctity of proceedings and uphold the objectives for speedy recovery of debts, exclusive protections in form of section 18 and 34 were cautiously inserted by the Parliament.

Section 34 of RDDBFI provides “ (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries
Development Bank of India Act, 1989 (39 of 1989).”

Sub-section 1 as stated above is a saving as well as a non-obstante clause conferring an overriding effect of the provisions of the RDDB over other laws for the time being in force, while sub-section 2 is in addition to and not in derogation of the special statues as provided for. Further, it is pertinent to note here that reference to SICA and the Small Industries Development Bank of India Act, 1989 (39 of 1989), was inserted with effect from 17.01.2000 by Act No. 1 of 2000 of the Parliament.

Sub-section 1 starting with “save as provided in sub-section 2 ”, is a saving clause. According to Black’s Law Dictionary[2]A saving clause in a statute is an exception of a special thing out of the general things mentioned in the statute; it is ordinarily a restriction in a repealing act, which is intended to save rights, pending proceedings, penalties, etc., from the annihilation which would result from an. unrestricted repeal”

The meaning as set forth above clearly carves an exception for sub-section 2, thereby preserving the contents and interpretations as stated therein.

Further, upon cursory and plain reading of language of sub-section 2, it is fairly clear that when an Act provides that its provisions shall be in addition to and not in derogation of another law or laws, it means that the legislature intends that such an enactment shall co-exist along with the other Acts. Further, the act of the legislature to further amend and include SICA within the purview was also to be construed as per principles of co-existence. It is clearly not the intention of the legislature, in such a case, to annul or detract from the provisions of other laws.

It is herein important to construe the meaning of the phrase “not in derogation of”. Black’s Law Dictionary[3] defines derogation as “The partial repeal or abolishing of a law, as by a subsequent act which limits its scope or impairs its utility and force. Distinguished from abrogation, which means the entire repeal and annulment of a law”

In view of the above, it is undoubtedly clear that the subsequent Act cannot be in nature of limiting the scope of relief as provided under the previous act. It necessarily has to provide an impetus to the objectives of the previous act and not vitiate the same. The express inclusion of the phrase “not in derogation of” in sub-section 2 of section 34 of RDDBFI undoubtedly establishes that the legislature never intended to undermine the force and utility of SICA by enacting RDDBFI but rather intended to preserve the powers of the authorities under the SICA and save the proceedings from being overridden by the subsequent enactment i.e. the RDDBFI.


Even though the judgment settles the issue of precedence of SICA over RDDBFI, the implications are far-reaching and wide. Any defaulter could possibly apply to BIFR for reconstruction thus delaying debt recovery process and with courts frequently staying the recovery proceedings it would adversely affect the recovery climate in the country. Further, it would also largely affect the value of the collateral and its enforceability, as litigation as all know is a time consuming affair in the country. This clearly indicates that banks and financial institution would now have to bear the brunt of more bad loans.

It is further disheartening to see that legislation dating back as early as 1980 and 1990s are found contradicting three decades after. It surely indicates that drafting was ill-considered leaving it to the interpretation of the courts each time leading to severe inefficiencies in the implementation of the legislation.

- Prachi Narayan

[1] (1981) 1 SCC 315

Friday, November 21, 2014

SEBI Reforms – Part 2: Delisting

Delisting of securities tends to be somewhat controversial given that it represents the tension between the interests of the controlling shareholder who want to delist the company and the interests of minority shareholders who are caught between the options of exiting the company at the offered value or remaining in the company without the liquidity and protections that a stock exchange listing provides. These controversies have played out in the Indian markets as well thereby necessitating a review of the SEBI (Delisting of Equity Shares) Regulations, 2009.

The review commenced with SEBI’s discussion paper on the topic earlier this year. Somasekhar Sundaresan and I have separately analysed SEBI’s discussion paper (here and here, respectively). SEBI’s approach has been to address two broad concerns. First, the constraints and complexities in the delisting regime make it difficult for controllers to successfully delist. Second, public shareholders holding a significant stake can dictate terms as to the determination of the delisting price and thereby hold the other shareholders to ransom.

In the recently announced reforms, SEBI appears to have considered responses to the discussion paper. In tweaking the regime, SEBI has addressed one of the above issues, but not the other. The reforms continue to protect the interest of minority shareholders against both the controllers as well as significant public shareholders. On the other hand, it has arguably made it more difficult for controllers to delist their companies (rather than ease the process as it initially set out to do). An analysis of a few of the reforms would demonstrate this point further.

SEBI has reinforced the importance of the reverse book-building (RBB) process for delisting. While the RBB has arguably operated in favour of public shareholders, its rigidity has paid put to controllers’ delisting plans. It appeared from the discussion paper that SEBI may be willing to reconsider the utility of RBB in delisting, but in the end decided to stay with the option. Hence, it is unlikely that the new regime would make a significant difference to controllers’ delisting efforts. Although some of us had suggested alternatives to the RBB method that might facilitate value-generating delisting that might nevertheless protect the minority shareholders, that option does not appear to have found favour with SEBI.

Furthermore, the thresholds for delisting continue to be quite daunting. A successful delisting requires the satisfaction of two conditions: (i) the shareholding of the acquirer together with the shares tendered by public shareholders must constitute 90% of the total share capital of the company, and (ii) at least 25% of the number of public shareholders must tender in the RBB process.

As for the offer price, it would be determined through RBB and shall be the price at which the shareholding of the promoter, including the shareholding of the public shareholders who have tendered their shares, reaches the threshold limit of 90%.

At the same time, SEBI has undertaken some efforts relax some aspects of the process. For instance, the timelines for delisting have been reduced from approximately 117 working days to 76 working days. Public shareholders will benefit from taxation benefits accompany the proposal to use the stock exchange platform for delisting (which have also been extended to buyback and takeovers). Finally, exemptions have been carved out for small and medium-sized companies who are spared the strict norms for delisting.

A surprise inclusion in the reforms (that was conspicuously absent in SEBI’s discussion paper) is the streamlining of SEBI’s takeover regulations with the delisting regulations. It would now be possible for an acquirer who has made an offer under the takeover regulations to delist directly without increasing the public shareholding. This would ease the process for acquirers who wish to make an offer to the target’s shareholders and simultaneously delist the target if the offer is successful. It creates the badly needed symmetry between the regimes relating to takeovers and delisting. This recommendation made by the Takeover Regulations Advisory Committee (TRAC), which was ignored in the SEBI Takeover Regulations of 2011 and also in SEBI’s discussion paper on delisting, has finally seen the light of day.

In all, the reforms relating to delisting represent a mixed bag. The changes are incremental in nature, which do not affect the overall philosophy or address the broader concerns and tensions in delisting. Given this scenario, it is not clear if we will witness significant changes in the manner in which delisting is carried out in India or the type of problems faced. Again, we will have to await the text of the amendments to the regulations before making more detailed prognoses.

Thursday, November 20, 2014

SEBI Reforms – Part 1: Insider Trading

Yesterday, SEBI’s board unleashed a series of capital market reforms. These relate to insider trading, delisting, enforceability of the listing agreement and several other matters. In this post, I briefly examine the implications of the reforms on regulations pertaining to insider trading.

The SEBI board has approved a new set of regulations dealing with insider trading. While the text of the regulations are awaited, here I discuss some of the broad reforms announced. The impetus for reforms in this area came from the report of the SEBI appointed committee that was issued in December 2013 (as previously discussed here). In the current reforms, SEBI has broadly adopted the recommendations of the committee on several aspects, but it has either not adopted others or made significant changes.

First, the crucial definition of “insider” has been widened to include “persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI).”  It expands the nature of connections a person may have with the company so as to fall within the scope of an insider. Also, any person who is in possession of or has access to UPSI would also be an insider. At the same time, some proposals of the committee in this behalf have not been accepted, such as the inclusion of a public servant with access to UPSI as a connected person.

Second, immediate relatives would be presumed to be connected persons, with the burden shifted on to them to show that they were not in possession of UPSI. The evidentiary aspects of insider trading have been given great importance given the difficulties SEBI has faced in the past to establish that a person was in possession of UPSI. While the use of circumstantial evidence has worked in some cases, in others it has failed. This burden shifting effort may end up being somewhat crucial in SEBI’s efforts to curb insider trading.

Third, as regards communication of UPSI, certain allowance has been made for “legitimate purposes, performance of duties or discharge of legal obligations”. These has been a substantial discussion about the need for communication of UPSI in genuine commercial or investment transactions, such as due diligence for a private equity investments, which fell within the scope of the prohibition under the existing regime. The new regime makes some leeway for such genuine transactions (with some conditions) that may benefit the company and its investors more generally.

Fourth, where communication of UPSI is permitted, such as in the case of due diligence discussed above, the UPSI must be disclosed to the markets at least 2 days prior to the trading in the securities. This is necessitated so that information symmetry is created in the market such that no investor has any undue advantage.

Fifth, the scope of UPSI and “publication” have been clarified. For example, for information to be generally available (so as to fall outside the scope of UPSI), such information must be accessible to the public on a non-discriminatory platform which would ordinarily be the stock exchange platform. In other words, dissemination through the stock exchange is considered the preferred channel of publication. Furthermore, the definition of UPSI has been aligned with the information and disclosure requirements under the listing agreement.

Overall, some of the changes are indeed significant, given the mixed success of the present insider trading regime. However, as is usually the case, a lot will lie in the wording of the regulations and their interpretation.

Monday, November 17, 2014

The Bombay High Court on Mutual Mistake, Damages and Restitution

In Rolta v MIDC, the Bombay High Court has recently considered some important questions relating to the doctrine of mutual mistake, damages for breach of contract and restitution. It is worth examining the judgment closely as it appears to depart from some well-established principles of contract law.

The case arose out of a Memorandum of Understanding (‘MoU’) which Rolta and MIDC entered into in March 1999. The MoU provided that MIDC, which owned an industrial area known as the Millennium Business Park (‘the Park), would grant a 95-year lease of a building in the Park to Rolta. The building was described as ‘admeasuring 80,000 square feet…in the aggregate land area of 7435 square metres’. Rolta was to pay yearly rent of Rs. 100 and lease premium of Rs. 10.6 crores, the latter in four instalments. The first instalment, of about Rs. 53 lakhs, was paid as earnest money when the MoU was signed. The MoU provided that a lease deed for the building would be executed in the future on terms to be agreed and that Rolta was entitled to a refund of the earnest money without interest should agreement not be reached. Rolta already owned 25,000 square metres of land elsewhere, and it agreed to surrender 7435 square metres of this parcel of land to MIDC, with MIDC to facilitate the sale of the remainder of the parcel.

The lease deed which the MoU envisaged was never executed because a dispute arose between the parties about the construction of the MoU: Rolta claimed that it was entitled to a lease of the 80,000 sq ft building and of a certain portion of land referred to in the MoU (in exchange for the land it had surrendered), while MIDC said that the lease contemplated in the MoU was of the building only. Rolta sought specific performance and in the alternative damages. The arbitrator rejected the claim for specific performance (it is not clear on what grounds) but awarded damages instead. This was challenged in the High Court under section 34.

The Bombay High Court held that there was no contract between the parties because they did not ‘agree on the same thing in the same sense’. Before considering the Court’s reasoning, it is worth pointing out that the question of certainty of terms can arise in two different ways in specific performance cases. Under section 21(c) of the (old) Specific Relief Act, 1877, one ground for refusing specific relief was that the terms of the contract cannot be identified with ‘reasonable certainty’. This provision was omitted from the Specific Relief Act, 1963, based on the (erroneous) view of the Law Commission that any agreement whose terms are not certain is automatically void. That view is erroneous because, as Lord Hoffmann explained in Argyll Stores, the terms of an agreement may be sufficiently certain to constitute a contract, but not to justify the grant of specific performance. If, therefore, the Bombay High Court had invoked uncertainty as a ground for refusing specific performance, a question would have arisen about the effect of the deletion of section 21(c), but the Court went further and held that there was no agreement at all, that is, that there was no ‘consensus ad idem’ between the parties (see, eg, [36]). Yet, it also awarded ‘damages’ for breach of contract assessed on the basis that the contract ‘had never been entered into’.

Mutual Mistake
How was the Bombay High Court able to reach the conclusion that a written MoU signed by the parties is in fact not a contract? By accepting the proposition that Rolta’s interpretation of it (lease of building and land) was ‘as plausible’ (see [32]) as MIDC’s interpretation of it (lease of building only) and therefore that there was no consensus ad idem:

The MoU which is, of course, final and upon which the lease deed had to be executed was, therefore, seen by the parties differently. The parties, therefore, did not agree to the same thing in the same sense…The question of termination is seen to be secondary—in fact there was no agreement at all and none to terminate.  

It is respectfully submitted that this conclusion is wrong, because it is founded on the erroneous premise that ‘consensus ad idem’ requires subjective agreement between the parties. The test, in both Indian and English law, is what a reasonable person in the position of the parties would have understood the contract to mean: in the case of a written agreement, this involves asking how a reasonable person in the possession of all the shared background knowledge (excluding pre-contractual negotiations) would have understood the language used. In ITC v George Fernandes—a case that the Bombay High Court cites—the Supreme Court said expressly that contracts are construed objectively, and the principle is also illustrated by the well-known case of Smith v Hughes, where Blackburn J said this:

I apprehend that if one of the parties intends to make a contract on one set of terms, and the other intends to make a contract on another set of terms, or, as it is sometimes expressed, if the parties are not ad idem, there is no contract, unless the circumstances are such as to preclude one of the parties from denying that he has agreed to the terms of the other…If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms.

The Bombay High Court unfortunately appears to have overlooked this principle. It relies on another well-known case—Raffles v Wichelhaus—but the crucial difference is that Raffles, unlike Smith and this case, is what is known as a ‘perfect ambiguity’ case, ie, a case where a reasonable person would have had no basis for preferring the interpretation of one party to that of the other. The plaintiff in that case alleged that the defendants had agreed to buy 125 bales of Surat cotton to arrive ‘ex Peerless from Bombay’ and that they had refused to accept delivery when the ship arrived in Liverpool. The problem was that there were two ships named Peerless: one left Bombay in October and the other in December. The defendants pleaded that they meant the October Peerless and that the plaintiff had refused to deliver any cotton when this ship had arrived in Liverpool. Contrary to the Bombay High Court’s analysis (see [21]), judgment was actually given for the defendant on the ground that the plaintiff’s demurrer to the defendant’s plea was bad, and the case has subsequently treated as an application of the objective principle to circumstances where the parties were simply at cross-purposes (see, eg, Bell v Lever and Professor Brian Simpson’s historical account).

In this case, therefore, the question was simply how a reasonable person with all the background knowledge available to MIDC and Rolta would have understood the MoU: he must, ex hypothesi, have construed it either as an agreement to lease the building only, or as an agreement to lease the land as well, and that is what the MoU (objectively) means, irrespective of what MIDC and Rolta (subjectively) thought it meant. It is difficult to see how the objective construction of the MoU could possibly lead to the conclusion that there is no contract.

Assuming there was no contract at all, the question of awarding damages for breach of contract does not arise. Yet, the Bombay High Court, at [41], held that Rolta was entitled to a refund of the earnest money (and certain other heads) it paid with 9 percent interest, on the ground that this is ‘adequate compensation to put the petitioner in the same position as he would have been had the contract not been entered into’. If the court was indeed awarding damages for breach of contract (leaving aside the difficulty that there is no contract to breach), the object of the award should have been to put the claimant in the position in which he would have been if the ‘contract had been performed’, not ‘if the contract had not been entered into’ (see section 73 of the 1872 Act and Robinson v Harman). It may be that the High Court was making a restitutionary award even though it used the language of ‘compensation’ and ‘damages’: however, even if MIDC was enriched by the payment of Rs. 53 lakhs, it appears that it had a change of position defence since it constructed a building for Rolta for which it did not receive full payment, and presumably undertook other obligations as well. There are similar difficulties in the Court’s analysis of the other two heads of damages that were awarded (see [41] and the counterclaim in [43]).

In short, the judgment is, with respect, questionable because it appears to construe the MoU in terms of what the parties subjectively thought it meant, and award ‘damages’ for the breach of a ‘contract’ with the use of a restitutionary measure (but without identifying the defendant’s enrichment).