TaxTMI 
TaxTMI 
2023 (5) TMI 4
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....t No.1 herein, thereby, upholding the order dated 22nd March 2017. 3. The facts, in brief, giving rise to the present appeals are as under: 3.1. Ganesh Benzoplast Ltd., the original complainant and respondent No. 1 herein, availed two Inter Corporate Deposit (hereinafter referred to as "ICD") facilities, dated 14th February 2000 and 7th March 2000, from Morgan Securities and Credits Pvt. Ltd - accused No. 1. The said ICD were for Rs. 50,00,000/-, each to be repaid by 15th May 2000 and 5th June 2000. As per the ICD, security cover of 200% of the ICD amount was to be maintained. Accordingly, the complainant/respondent No.1 executed a Letter of Pledge (for short, "LoP") in favour of accused No.1 Company, pledging 15,00,000 of its equity shares as security, with each share valued at Rs. 16/-, thereby amounting to Rs. 2,40,00,000/-. 3.2. Prakash Aggarwal, Meera Goyal and Suresh Chand Goyal, appellants herein, who were Directors of accused No. 1 Company, were responsible for the management of its day to day affairs. They were arraigned as accused Nos. 2 to 4 in the original complaint. 3.3. On 3rd May 2000, accused No.1 Company issued a notice to the complainant/respondent No.....
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....pany. 3.10. The complainant/respondent No.1, on 11th February 2011, filed a criminal complaint being CC No. 56/SW/2011 against accused Nos.1 to 4, alleging fraud, cheating and criminal breach of trust, before the trial court. Vide order dated 11th September 2012, the Magistrate issued process against all the accused for offences punishable under Sections 403, 406, 420 and 120-B of Indian Penal Code, 1860 (for short, "IPC"). 3.11. The aforesaid order was challenged by filing a Criminal Revision Application No. 1276 of 2012 before the Court of Session for Greater Bombay at Bombay. Vide order dated 16th January 2016, the said criminal revision application was allowed, and the matter was remanded to the trial court, who was directed to re-record verification under Section 200 of the Code of Criminal Procedure,1973. 3.12. In the meantime, on 9th December 2015, an arbitral award was passed in favour of accused No.1 Company and the complainant/respondent No.1 was held liable to pay the claim amount of Rs.34,59,218/- with interest at the rate of 36% per annum. 3.13. Pursuant to the remand order dated 16th January 2016, the trial court, vide order dated 22nd March 2017, issued p....
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....fault or otherwise. In the LoP, the authority was also given to sell and dispose of the said securities. He further submits that, as per the LoP itself, the accused No.1 Company could have sold the shares to themselves. 6. Shri Divan further submits that, with regard to the very same dispute, the arbitration proceedings were conducted between the parties. The complainant/respondent No.1 has participated in the said arbitration proceedings and an arbitral award is also passed by the learned Arbitral Tribunal. He submits that the same is challenged by the complainant/respondent No.1 by a proceeding under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Arbitration Act"). He further submits that it could clearly be seen that the dispute between the parties, if any, is purely of civil nature and continuation of the criminal proceedings would amount to nothing else but an abuse of process of law. 7. Dr. Singhvi, on the contrary, submits that the complainant/respondent No.1 had informed the accused persons/appellants herein as early on 5th June 2000 to sell the shares. However, the accused persons/appellants chose not to sell the shares at t....
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....ant to refer to the following part of Clause 9 of the ICDA: "9. .......... a) Any installment of interest if any required to be paid in installment as agreed hereinabove remains unpaid even after the expiry of 3 days from the respective due date for payment. b) Any shortfall in the security pledged vide Letter of Pledge executed subject to which facility granted is not replenished even after giving due Notice as provided therein. c) ........... d) .......... e) ........... f) ............ h) ........... i) ............." 11. It is thus clear that in the event of any of the events occurring in sub-clauses (a) to (i) of Clause 9 of the ICDA, the lender would be entitled at its discretion to enforce its rights as mentioned in the ICDA, Deed of Personal Guarantees, Corporate Guarantee and LoP. A perusal of sub-clause (a) of Clause 9 of the ICDA would reveal that, if any installment of interest required to be paid as per the ICDA remains unpaid even after the expiry of 3 days from the respective due date for payment, accused No.1 Company was entitled to enforce its rights as mentioned in Clause 9 of the ....
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....greed that it has understood the concept and shall not create any dispute on the same. 14. A perusal of sub-clause (v) of Clause 8 of the LoP would reveal that a specific authority has been given by the Pledgee to sell and dispose of the said securities under the circumstances mentioned in the LoP. The complainant/respondent No.1 has also agreed to undertake all deeds and acts to dispose of the said shares to adjust the outstanding amount. The complainant/respondent No.1 has further agreed that it would not question whether accused No.1 Company had got the best price for the securities. 15. A perusal of the terms of the ICDA as well as the LoP would clearly reveal that, in the event of any of the events occurring as provided in Clause 9 of the ICDA, accused No. 1 Company was entitled to sell the shares either to itself, its group companies or to any outsider. The accused No.1 Company had also agreed not to dispute or claim any loss on account of the price at which such securities were sold. 16. A perusal of the entire complaint would reveal that the only allegation is that accused No.1 Company had sold the shares to itself when the market price of the shares had fallen. The a....
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.... above, that the average market price per share as on 02.08.2001 was Rs. 2.95 per share. Such marginal fluctuations in the price of shares; and that too when the Claimant was constrained to realize the entire security in the face of habitual default by Respondent No.1; with not many takers for the shares; cannot be described as a consequence of price manipulation, resulting in any wrongful loss to the Respondents. 33. Had the share been priced at something like Rs. 8 or 10 per share in August, 2001; then a sale by the Claimant in the region of Rs.2/- etc. could possibly have attracted an allegation of price manipulation. However, in the given circumstances, and for the reasons stated hereinabove, the allegations levelled by Respondent No.1 are misconceived and are liable to be rejected." 19. It is thus clear that the complainant/respondent No.1 was having knowledge of the sale of shares in the year 2001 itself when the arbitration proceedings were initiated. In the complaint, it is alleged that, during the pendency of the arbitration proceedings, the complainant/respondent No.1 became suspicious of the illegalities committed by the accused persons/appellants and sought ....