Legal Question in Civil Litigation in India

Sir, as per your suggestion i enclose all details below.

Whether the agreement that was entered into was a structure obligation and whether there are any judgments that talk about what reasonable notice is with regard to s.176 of the Indian Contracts Act, 1872 and if any of them mention what a reasonable period of time would be.

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In the matter of:

Mr. Dhoni & Ors. ��� Petitioners

Versus

Greedy Limited ��.. Respondent No. 1

Share Your Burden Limited ��.. Respondent No. 2

Competition Commission of India ��.. Respondent No. 3

Securities and Exchange Board of India ��.. Respondent No. 4

Reserve Bank of India ��.. Respondent No. 5

Facts:

1. On January 1, 2009, Greedy Limited, a company organized under the laws of Mauritius (�GL�) entered into an investment agreement (the �Agreement�) with: (i) Double Your Money Private Limited (�DYMPL�), a private limited company incorporated under the [Indian] Companies Act, 1956, as amended (the �Companies Act�) having its registered office in New Delhi; (ii) Private Resorts Limited, a company incorporated under the Companies Act, having its registered office in New Delhi (�PRL�), and listed on the Bombay Stock Exchange (the �BSE�), where its stocks are frequently traded; and, (iii) Mr. Dhoni (�MD�); in terms of which GL acquired 35% of the issued and paid-up equity share capital of DYMPL (the �GL Shares�).

2. DYMPL is a subsidiary of PRL, and MD is the promoter of PRL. PRL is in the business of running hotels and owns five (5) operational hotels and two (2) under-construction hotels in the National Capital Region of Delhi (the �NCR�). DYMPL provides maintenance and house-keeping services to the five (5) operational hotels owned by PRL.

3. The Agreement contains inert alia the following provisions:

Clause 2.1(j): �Exit Event� means any date on which the market price of PRL quoted on the Bombay Stock Exchange falls below Rs. 100/- per share.

Clause 2.1(s): �Pledged Shares� mean 100,000 equity shares of PRL held by MD, representing in the aggregate 30% of the paid-up equity share capital of PRL.

Clause 5: PRL hereby grants to GL the option to sell any or all of the GL Shares to MD, if, any time after the expiry of two (2) years from the date hereof, an Exit Event occurs (�Put-Option�) at the price and in accordance with Clause 6 of the Agreement, provided that such Put-Option is exercised within 60 days of the relevant Exit Event.

Clause 7: In order to secure the obligation of MD to buy shares from GL in the event of an exercise by GL of its Put-Option, MD agrees to pledge to GL, the Pledged Shares along with all of his rights, title, interests, benefits, claims and demands whatsoever in respect of the Pledged Shares as security for the due discharge in full, of the obligations of MD under Clauses 5 and 6 of the Agreement upon the terms and conditions set forth herein.

Clause 8: In the event of a failure of MD to buy shares from GL in accordance with Clause 7, GL may after a notice in writing to MD enforce its pledge on the Pledge Shares.

Clause 9: GL shall not sell any GL Shares without first offering such GL Shares to MD (�ROFR�) who may within 30 days of receipt of such notice from GL, exercise its ROFR in accordance with the terms of the Agreement.

Clause 22: The Agreement shall be governed by the laws of the Republic of India, without giving effect to any choice of law of conflict of law provision or rule. Each party agrees that the competent courts at New Delhi, India shall have the exclusive jurisdiction to settle any dispute arising out of or in connection with the Agreement, and accordingly, submits to the exclusive jurisdiction of such courts.

Clause 23: Each and every obligation under the Agreement shall be treated as a separate obligation and shall be severally enforceable as such. In the event of any obligation or obligations being or becoming unenforceable in whole or in part, to the extent of such unenforceability, such provisions shall be deemed to be deleted from the Agreement, and any such deletion shall not affect the enforceability of the remainder of the Agreement not so deleted, provided the fundamental terms of the Agreement are not altered.

4. A notification issued by the Reserve Bank of India (the �RBI�) prior to the date of the Agreement permitted resident Indians to pledge securities of an Indian company to non-residents as security for a �structured obligation�.

5. On September 6, 2010, PRL made an announcement on the BSE that its sixth hotel was completed and operational (the �New Hotel�). The market price of PRL on this date was Rs. 120/- per share.

6. In connection with the Commonwealth Games held in New Delhi, the Municipal Corporation of Delhi (the �MCD�) had undertaken a project to lay underground cables in certain parts of the NCR, including the area surrounding the New Hotel. On September 15, 2010, while working underground in the road adjoining the New Hotel, the MCD discovered unexplored gas reserves.

7. On November 5, 2010, PRL received a notice from the MCD that after detailed inspection, the MCD believed that the site of the New Hotel had unexplored gas reserves which were national assets, and gave PRL 3 months� notice to vacate the New Hotel that would be demolished.

8. On February 10, 2011, PRL announced its financial results for the 9-month period ended December 31, 2010, showing a net loss of Rs. 25/- crores on account of the vacant rooms during Commonwealth Games and the closure of the New Hotel. The market price of PRL after such announcement fell to Rs. 90/- per share.

9. On February 25, 2011, GL sent a notice to MD in accordance with the terms of the Agreement to exercise its Put-Option and required MD to purchase all the GL Shares from GL prior to March 15, 2011. MD failed to comply with the terms of this notice.

10. On March 20, 2011, GL entered into an agreement with Share Your Burden Limited, an entity organized under the laws of Mauritius (�SYBL�), to sell the GL Shares to SYBL at a loss in two (2) tranches in the following manner, subject to any regulatory or governmental approval/s:

(a) 30% of the GL Shares to be transferred on March 20, 2011; and

(b) 70% of the GL Shares to be transferred on June 15, 2011.

11. On March 21, 2011:

(a) GL sent a notice to MD that since MD failed to pay the amount due under the Agreement upon the exercise of the Put-Option, it was enforcing its pledge on the Pledge Shares in accordance with the terms of the Agreement.

(b) The market price of PRL on March 21, 2011 fell to Rs. 70/- per share.

(c) SYBL submitted share transfer forms to DYMPL to register the share transfer of 30% GL Shares.

12. On March 22, 2011, MD, DYMPL and PRL (collectively, the �Petitioners�) filed a petition before the High Court of Delhi, and after several hearings, the matter has now been posted for the final hearing on [May 6, 2011]. The petition contained averments which include but are not limited to, the following:

(a) By failing to comply with its obligation under the Agreement, MD was only acting in accordance with law, since put options are not enforceable under Indian law.

(b) The creation of pledge in favor of GL is void, or alternatively, GL can not enforce the pledge without making an open offer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended.

(c) MD was not given sufficient notice by GL before exercising the pledge.

(d) The sale of GL Shares by GL to SYBL is a breach of Clause 9 of the Agreement since such GL Shares were not offered first to MD.

(e) Since 70% of GL Shares are to be transferred after June 1, 2011, DYMPL cannot register the transfer of any GL Shares without the prior approval of the Competition Commission of India.

Based on the above, the Petitioners have prayed for an injunction on GL against enforcing the pledge on the Pledge Shares and sale of the GL Shares to SYBL, and that appropriate writ(s), direction(s) and/or order(s) be issued in respect of inaction on part of the Competition Commission of India, the Securities and Exchange Board of India and the RBI.

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