Pledged securities notice requirement satisfied when borrower is informed of intended sale; ex parte injunction on bank action was vacated.

The Delhi High Court dealt with pledged dematerialised shares and assigned LIC policies, holding that an ex parte interim injunction obtained without fair disclosure and on insufficient service could not stand. It found no prima facie case of forgery and held that the balance of convenience favoured the bank, so the restraint on sale of the pledged shares and surrender of the policies was vacated. On notice, the Court held that Section 176 of the Indian Contract Act is satisfied when the pawnor is made aware of the pawnee's intention to sell; the text message and later notice together constituted reasonable notice. It also held that the LIC policies were validly assigned, not merely subject to lien, and could be proceeded against by the bank.

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Issues: (i) Whether the ex parte interim injunction restraining sale of the pledged shares and surrender of the LIC policies should be vacated; (ii) whether the bank was required to give further reasonable notice before selling the pledged dematerialised shares; (iii) whether the LIC policies could be treated as merely subject to lien, or were validly assigned and recoverable by the bank.

Issue (i): Whether the ex parte interim injunction restraining sale of the pledged shares and surrender of the LIC policies should be vacated.

Analysis: The injunction was obtained after the plaintiff had already filed and withdrawn a writ petition on the same subject without informing the writ court or the bank's counsel. The service shown on the record was insufficient to justify an ex parte order obtained behind the back of the opposite side. The Court also found that the pledge agreement and its schedules reflected the pledged shares correctly, and that the plaintiff's allegations of forgery were unsupported. On these facts, the plaintiff failed to establish a prima facie case and the balance of convenience favoured the bank.

Conclusion: The ex parte interim injunction was vacated.

Issue (ii): Whether the bank was required to give further reasonable notice before selling the pledged dematerialised shares.

Analysis: Section 176 of the Indian Contract Act requires reasonable notice of sale by a pawnee, and the notice requirement is to make the pawnor aware of the intention to sell and afford an opportunity of redemption. The pledge deed expressly permitted invocation without prior intimation, and the plaintiff was informed of invocation by text message on 6 September 2022. The subsequent notice dated 15 September 2022 had to be read with that earlier intimation and, on the facts, amounted to reasonable notice. The Court also held that the pledged shares, being already pledged and invoked, did not require separate inclusion in the notice under Section 13(2) of the SARFAESI Act.

Conclusion: The bank had given sufficient notice and was entitled to proceed against the pledged shares.

Issue (iii): Whether the LIC policies could be treated as merely subject to lien, or were validly assigned and recoverable by the bank.

Analysis: The notices and record showed that the two LIC policies were assigned in favour of the bank, not merely subjected to a lien. The bank was entitled to realise them without issuing a fresh notice to the plaintiff. In any event, the policies were already the subject matter of proceedings under Section 13(2) of the SARFAESI Act, and Section 34 barred their being made the subject matter of the civil suit.

Conclusion: The LIC policies were validly assigned and could be proceeded against by the bank.

Final Conclusion: The interlocutory protection granted to the plaintiff was withdrawn, the bank's objections succeeded, and the suit was permitted to continue without the interim restraint.

Ratio Decidendi: In matters concerning pledged dematerialised securities, a notice requirement under Section 176 of the Indian Contract Act is satisfied when the pawnor is made aware of the pawnee's intention to sell, and an ex parte injunction will not be sustained where it was obtained without fair disclosure and the balance of convenience lies with the pledgee.

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