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Exclusive: Bombay High Court rules in favour of Tata Capital in contempt case

Shah Junaid/VCCircle
Madhucon Infra

The Bombay High Court has pronounced its verdict in a case where Tata Capital Financial Services Ltd (TCFSL) had accused Madhucon Infra Ltd of failing to keep aside Rs 25 crore from the proceeds of a majority stake sale to a private equity company, despite agreeing to do so in a consent order.

Tata Capital Ltd (now TCFSL) had sanctioned a Rs 50-crore loan to Madhucon Infra in March 2011, the terms of which were agreed upon by the infrastructure company and its subsidiary Madhucon Projects Ltd. However, after paying partly, the company failed to repay the dues. The Tata Group company sought repayment of principal and interest, due since 2013.

The court has ordered two months' imprisonment to Madhucon Infra managing director Srinivasa Rao Kamma for contempt of court. It also directed him to pay a fine of Rs 2,000.

The division bench, comprising Justice AS Oka and Justice Anuja Prabhudessai, observed, “We have already held that this is a gross case of wilful and deliberate breach of the undertaking given to this court.”

“Taking an overall view of the matter...we are of the view that this is a fit case where the respondent...is punished by directing him to undergo sentence for simple imprisonment for a period of two months,” said the court in its order passed in the last week of December 2016. “We also propose to direct him to pay a fine of Rs 2,000,” said the ruling.

However, the court further observed, “Only with a view to ensure that one more opportunity is given to the contemnors...we propose that the substantive sentence shall not take effect for a period of two months.”

“In case full compliance is made within the stipulated time, it will open for the contemnors to apply for revoking the substantive sentence,” said the order.

When contacted, Ashok Paranjpe, managing partner of law firm MDP Partners that is representing TCFSL in the matter, confirmed the court order but declined comment since the matter is sub judice. An email query to Madhucon Infra remained unanswered till the time of writing this article.

The dispute
In August 2016, a division bench of the High Court comprising Justice VM Kanade and Justice Swapna S Joshi had asked the BSE-listed Madhucon Infra to explain why it shouldn’t initiate action against the road developer for contempt in the case.

The dispute began in October 2015 when Madhucon Projects said that it agreed to sell a 74% stake in Madhucon Agra-Jaipur Expressways Ltd to Singapore's Cube Highways and Infrastructure Pte Ltd for Rs 248 crore. Cube Highways is the Indian investment platform of private equity firm I Squared Capital.

Madhucon Agra-Jaipur Expressways operates the stretch between Bharatpur and Mahua in Rajasthan on the highway that connects the tourist hubs of Agra and Jaipur.

According to Tata Capital Financial’s petition, Madhucon Projects failed to inform the lender about the transaction. The petition said that on 18 February 2016, both parties agreed that the road developer would keep Rs 25 crore in a separate bank account by the first week of March as security for claims till the court decides on the dispute.

Under the terms of the consent agreement filed in court at the time, Madhucon Projects was allowed to sell the 74% stake and it agreed to deposit Rs 25 crore from the first tranche of money it would get from the stake sale.

However, it failed to deposit Rs 25 crore and, on 12 April, it said the deal with Cube Highways had been completed, according to the petition. This prompted Tata Capital Financial to file a contempt petition in the court.

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I Squared Capital Advisors LLC is a private equity firm with $3.8 billion assets under management. It provides growth capital to companies operating in United States of America, Europe and high growth economies based on risk-adjusted metrics across sectors and geographies. The firm seeks to invest in infrastructure projects including energy, utilities and transport. The company was founded in 2012 and is based in New Delhi, India with additional offices in United States of America, Houston, London, Hong Kong and Singapore.


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