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Bombay HC dismisses SUN-AREA’s appeal against CLB order in Rustomjee case; PE firm approaches SC

SUN-AREA had invested Rs 234.9 cr in Rustomjee Group’s holding company in 2009 and early this year filed a case alleging fraud, misutilisation of funds and default in payment of interest.

The Bombay High Court has dismissed an appeal by real estate dedicated private equity firm SUN-AREA Property Partners (formerly SUN-Apollo) against Mumbai-based developer Rustomjee Group, which challenged the decision of Company Law Board (CLB) asking the two parties to go for an arbitration. Sources told VCCircle that the real estate investment fund has now taken the case to the  Supreme Court.

SUN-AREA had appealed against the CLB order dated October 12, 2012 which dismissed an ad-interim petition filed by the investment firm and had asked both the parties to undergo arbitration as defined in their shareholders’ agreement clause.

Justice R D Dhanuka said in his judgement dated November 6, “In view of the order passed in Company Appeals by this Court holding that appeals under Section 10F of the Companies Act, 1956 is not maintainable, reliefs claimed in Company Applications does not survive and are accordingly disposed of. It is made clear that this court has not expressed any views on the merits of the order passed by the CLB referring and/or refusing to refer parties.”

SUN-AREA has now appealed to the Supreme Court to hear the case, said a source privy to the development. However this could not be immediately ascertained.

When contacted, the spokesperson for SUN-AREA declined to comment.

In a transaction gone sour, SUN-AREA had invested Rs 234.9 crore (out of the proposed sum of approximately Rs 300 crore) in Rustomjee Group’s holding company Keystone Realtors over three years ago.

Earlier this year, the real estate-focused fund’s two associate companies, Mausmi SA Investments LLC Private Equity fund based in Mauritius and Cyprus-based Mausmi Ventures, had filed a case against the developer, alleging fraud, misutilisation of funds and default in payment of interest, among other violations, as per the shareholders’ agreement.

SUN-AREA got an interim relief on Aug 8 after a petition to CLB. However, Rustomjee appealed against this and it was set aside by the Bombay High Court, which also ordered the CLB to hear the ad-interim application, while advising Rustomjee not to create third-party rights without the permission of the High Court on FSI sales in Virar in Mumbai.

The private equity fund owns 539 shares of Keystone Realtors, representing 20 per cent stake in the company. Mausmi also held 167 Series A compulsory convertible debentures (CCDs) and 1,160 Series C CCDs of the holding firm. The transaction was intermediated by Kotak Mahindra.

Also Read: CLB rejects SUN-Apollo’s petition against Rustomjee; PE firm to approach Bombay HC


(Edited by Prem Udayabhanu)