TaxTMI 
TaxTMI 
2022 (11) TMI 1518
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....th the defendant bank. 1.3 Business of the defendant no.2 company was hit during COVID-19 Pandemic and meetings were held with the defendant bank for restructuring of the cash credit facility. The cash credit facility of the defendant no.2 company was declared as a non-performing asset (NPA) by the defendant bank on 18th October, 2021, and on 20th October, 2021, the defendant bank sent a loan recall notice to the plaintiff and the defendant no.2 company. 1.4 On 27th October, 2021, a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was sent by the defendant bank to the defendant no.2 company and the plaintiff. On 19th January, 2022, the defendant bank issued another notice under Section 13(2) of the SARFAESI Act. Further, the defendant bank sent another notice on 3rd September, 2022 to the plaintiff expressing its intention to surrender the two LIC policies assigned in favour of defendant bank to recover the outstanding amount under the cash credit facility. 1.5 On 6th September, 2022, the defendant bank invoked the pledge in respect of the 19,79,549 shares i.e. 30% promoters&#....
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....aid share pledge agreement, Schedules-I and II to the said agreement were kept blank. Subsequently, the defendant bank filled the date and time of execution in Schedule I of the said agreement, and the defendant bank filled in 48,08,237 shares in Schedule-II of the said agreement. II. The defendant bank has failed to give sufficient notice to the plaintiff in terms of Section 176 of the Indian Contracts Act, 1872, for sale of the pledged shares. III. Two LIC policies were not assigned by the plaintiff in favour of the defendant bank, only a lien was created. Reliance is placed on the Sanction letter dated 13th October, 2020 and the Schedule thereto. 6. Counsel for the defendant has made the following submissions: I. The plaintiff has wrongly averred in the plaint that the defendant bank was seeking to sell 48,08,237 shares of the defendant no.2 company. Only 19,79,549 shares were pledged by the plaintiff with the defendant bank and therefore, the defendant bank could not sell any further shares. II. The allegations of forgery made in the plaint are completely baseless. The share pledge agreement along with the aforesaid Schedules was executed by the plaintiff on 7th July, ....
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....writ petition filed by the plaintiff. However, the plaintiff ought to have informed the filing of the present suit to the writ court as well as the counsel appearing on behalf of the defendant bank before the writ court. Clearly, this was a dishonest attempt on part of the plaintiff to obtain an ex parte order behind the back of the defendant bank. Therefore, the interim order passed by this Court on 23rd September, 2022 is liable to be vacated on the said ground alone. 10. The defendant bank along with the application filed under Order XXXIX Rule 4 of the CPC has placed on record the share pledge agreement dated 7th July, 2021. The Schedule I to the said agreement mentions the date of the agreement as 7th July, 2021, and Schedule II of the said agreement clearly mentions that 19,79,549 shares of the defendant no.2 company have been pledged by the plaintiff with the defendant bank. The said schedule bears the signatures of plaintiff in his own right and as an authorized signatory of the defendant no.2 company. 11. It is the plaintiff's own case that 19,79,549 shares of the defendant no.2 company have been pledged by the plaintiff with the defendant bank. Therefore, I do not f....
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....ied to dematerialised securities that have been transferred to the third parties in accordance with the provisions of the Depositories Act, by-laws and rules, it would materially impact certitude in the transaction in listed dematerialised securities which would become vulnerable to challenge even when the arm's length purchasers are innocent third-party buyers for valuable considerations. Open market operations would be affected. To this extent, therefore, we do hold that the dictum in Madholal Sindhu (supra) and Nabha Investment (supra), that the pawnor has a right to redemption against third parties when the pawnee does not give reasonable notice under Section 176 of the Contract Act, would not apply to listed dematerialised securities which are sold by the pawnee in accordance with the provisions of the Depositories Act, by-laws and rules. In fact, the stipulations in Section 12 of the Depositories Act and Regulation 58 of the 1996 Regulations have in built provisions in terms of which the pawnor and the pawnee are informed about the change of status with the pawnee making a request and being accorded a status of the 'beneficial owner'. The pawnee cannot make the sa....
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.... bank was entitled to invoke the pledge at its own discretion without giving prior intimation to the plaintiff. Under Regulation 58(8) of the SEBI (Depositories And Participants) Regulations, 1996, a pledgee is entitled to invoke the pledge in terms of the provisions of the pledge document. Further, upon invocation, the depository would register the pledgee as the beneficial owner of the said securities. 16. In the present case, the pledge in respect of 19,79,549 shares was invoked by the defendant bank on 6th September, 2022, and the plaintiff was duly informed of the same by way of a text message dated 6th September, 2022 received from NSDL, a screenshot of which is filed at page no.112 of the plaintiff's documents. Subsequently, a notice was issued by the defendant bank on 15th September, 2022 calling upon the plaintiff to clear the outstanding liabilities within seven days, failing which the defendant bank shall sell the pledged shares. Counsel for the plaintiff contends that the aforesaid notice does not amount to reasonable notice as envisaged under Section 176 of the Indian Contracts Act, 1872. 17. As observed by the Supreme Court in PTC India (supra), whether the peri....