Court rules NDA shares can secure recompense claim under Loan Purchase Agreement, setting aside previous order.

The court found that the Non-Disposal Agreement (NDA) shares were intended to secure the appellants' recompense claim under the Loan Purchase Agreement (LPA). The court concluded that the recompense claim was capable of being collateralized and that the NDA shares were not solely for the top-up obligation under the LPA. As a result, the court set aside the previous order and allowed the appeals, maintaining the status quo until a specified date for the respondents to seek further orders.

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Issues Involved:
1. Whether 20,14,000 shares of UBL furnished as security under the Non-Disposal Agreement (NDA) dated 12/11/2011 were available as security for the appellants' recompense claim under Clause 10.1 of the Loan Purchase Agreement (LPA) dated 21/12/2010.
2. Whether the appellants' recompense claim was capable of being collateralized or secured.
3. Whether the NDA shares were given solely for the top-up obligation under Clause 4.1.3 of the LPA.

Issue-wise Detailed Analysis:

Issue 1: Whether 20,14,000 shares of UBL furnished as security under the NDA were available as security for the appellants' recompense claim under Clause 10.1 of the LPA.

The appellants argued that the NDA shares were meant to secure all of Plaintiff No.1's obligations under the LPA, including the recompense claim. They pointed to clauses 3.1(h), (i), and (k) of the NDA, which they claimed clearly envisaged the use of the NDA shares to cover any shortfall resulting from the sale of equity shares of Kingfisher Airlines Limited. The respondents, however, contended that the NDA shares were provided solely as a top-up security to maintain the value of the pledged shares and were not intended to cover the recompense amount. The court found the appellants' interpretation more convincing, noting that the clauses in the LPA and NDA, when read together, indicated that the NDA shares were indeed intended to cover the recompense amount.

Issue 2: Whether the appellants' recompense claim was capable of being collateralized or secured.

The appellants maintained that the recompense claim was secured by the NDA shares, as evidenced by the terms of the LPA and NDA. The court agreed, highlighting that the LPA clearly stipulated that the recompense amount was to be paid by the purchasing party in the event of a shortfall from the sale of equity shares. The NDA further provided that the NDA shares could be sold to cover any such shortfall, thereby securing the recompense claim.

Issue 3: Whether the NDA shares were given solely for the top-up obligation under Clause 4.1.3 of the LPA.

The respondents argued that the NDA shares were provided solely to top-up the pledged shares under Clause 4.1.3 of the LPA and were not intended to secure the recompense amount. The court, however, found that the NDA shares were intended to secure both the top-up obligation and the recompense claim. The court noted that the NDA and LPA contained specific clauses that allowed the NDA shares to be sold to cover any shortfall resulting from the sale of equity shares, thereby securing the recompense claim.

Findings and Conclusion:

The court concluded that the learned Single Judge had misinterpreted the Non-Disposal Agreement and the Loan Purchase Agreement, resulting in an erroneous finding. The court found that the NDA shares were indeed intended to secure the recompense claim and that the appellants' recompense claim was capable of being collateralized. The court also found that the NDA shares were not given solely for the top-up obligation under Clause 4.1.3 of the LPA. Accordingly, the court set aside the impugned order of the learned Single Judge and allowed the appeals.

Conclusion:

The impugned order passed by the learned Single Judge was set aside, and the appeals were allowed. The court ordered that the status quo be maintained until 5th January 2016, to allow the respondents time to seek further interim orders from the Apex Court.

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