2018 (1) TMI 496 - HC - Indian Laws

Court orders defendant to deliver shares or pay value with interest. Plaintiffs granted relief for wrongful share sale.

Harinarayan G. Bajaj, Shailesh Harinarayan Bajaj, Krishna Harinarayan Bajaj, Rahul Harinarayan Bajaj Versus Reliance Capital Limited, & Ms. Sesa Sterlite Limited

Harinarayan G. Bajaj, Shailesh Harinarayan Bajaj, Krishna Harinarayan Bajaj, Rahul Harinarayan Bajaj Versus Reliance Capital Limited, & Ms. Sesa Sterlite ... Issues Involved:1. Agreement and understanding between the parties regarding the pledged securities.2. Validity of the sale of pledged securities by the defendant.3. Entitlement of the plaintiffs to redeem the pledged securities.4. Calculation of the outstanding amount and interest.5. Entitlement to additional shares and dividends due to alleged wrongful sale.Detailed Analysis:Issue 1: Agreement and Understanding Between the Parties- Plaintiffs’ Claim: Plaintiffs claimed an oral understanding with Mr. Sadashiv Rao of defendant no.1 that the pledged shares would be appropriated at a rate of Rs. 310 per share, and accounts would be drawn accordingly.- Defendant’s Position: Defendant no.1 denied any such oral agreement and asserted that Mr. Sadashiv Rao was not authorized to enter into such an agreement.Issue 2: Validity of the Sale of Pledged Securities- Plaintiffs’ Argument: Plaintiffs argued that the sale of 1,61,450 shares by defendant no.1 was without notice and thus illegal. They contended that the notice dated 23rd February 1996 pertained only to the second loan and that defendant no.1 waived its right to sell by extending the repayment time.- Defendant’s Counter: Defendant no.1 maintained that both loans were treated as a single composite loan, and the notice dated 23rd February 1996, along with subsequent communications, constituted adequate notice for the sale of the pledged securities. Defendant no.1 argued that plaintiffs were aware of the sale and did not object to it at the time.Issue 3: Entitlement of the Plaintiffs to Redeem the Pledged Securities- Plaintiffs’ Stand: Plaintiffs abandoned their main plea and pressed for redemption, claiming they were ready and willing to repay the outstanding amount upon the return of the shares.- Court’s View: The court noted that the plaintiffs did not make any tender or offer of the outstanding amounts before filing the suit. The court held that plaintiffs could only redeem the pledged securities by paying the entire outstanding amount as if the disputed sale did not occur.Issue 4: Calculation of the Outstanding Amount and Interest- Plaintiffs’ Position: Plaintiffs argued that the interest should be calculated at 24% per annum simple interest, not at the 36% rate unilaterally decided by defendant no.1.- Defendant’s Calculation: Defendant no.1 provided a statement showing the amount payable and the number of shares sold based on 24% simple interest. The court found that defendant no.1 wrongfully detained shares by calculating interest at 36% per annum and selling more shares than required.Issue 5: Entitlement to Additional Shares and Dividends- Court’s Decision: The court held that plaintiffs were entitled to the shares with accretions and unearned dividends based on the excess shares sold by defendant no.1. The court directed defendant no.1 to deliver 11,49,680 fully paid equity shares or pay the equivalent value, along with Rs. 5,80,87,582 towards unearned dividends, less the amount already paid.Conclusion:The court decreed in favor of the plaintiffs, ordering defendant no.1 to either deliver the equivalent shares or pay the value along with unearned dividends and interest at 24% per annum from the date of the decree until payment. The court emphasized that the plaintiffs were entitled to relief due to the wrongful sale of excess shares by defendant no.1.