Delhi High Court - Orders
K.L. Enterprises Llp & Ors vs Bajaj Finance Limited on 28 April, 2020
Author: Jyoti Singh
Bench: Jyoti Singh
$~O-1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM) 102/2020 and IA 3772/2020, 3773/2020 and
3774/2020
K.L. ENTERPRISES LLP & ORS. ..... Petitioners
Through: Mr. Vikram Nankani, Senior
Advocate with Mr. Prateek Sekseria,
Mr. Tishampati Sen, Mr. Devesh
Juvekar, Mr. Ashish Parwani, Mr.
Dikshat Mehra, Ms. Riddhi Sancheti,
Ms. Abhisree Saujanya and Ms. Aarti
Kumar, Advocates
versus
BAJAJ FINANCE LIMITED ..... Respondent
Through: Mr. Kirti Uppal, Senior Advocate
with Mr. Mirza Aslam Beg and Ms.
Chandni Arora, Advocates along with
Mr. Babu Rao, Authorized
Representative of Bajaj Finance Ltd.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
ORDER
% 28.04.2020 IA No.3772/2020 (exemption from filing certified documents) Allowed, subject to all just exceptions.
Application stands disposed of.
IA No.3773/2020 (exemption from filing court fee) In view of the prevailing situation, the application is disposed of with O.M.P.(I) (COMM) 102/2020 Page 1 of 6 a direction to the applicants to pay the requisite court fee within a period of one week of lifting of the lockdown.
Application stands disposed of.
IA No.3774/2020 (exemption from filing affirmed and notarised affidavits) In view of the reasoning stated in the application, the same is disposed of with a direction to the applicants to file duly affirmed and notarised affidavits within a period of one week of lifting of the lockdown.
Application stands disposed of.
O.M.P.(I) (COMM). 102/2020
1. Present petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') seeking to restrain the respondent or any person(s) claiming through and/or under it, from selling/transferring/alienating and/or encumbering and/or creating any third party rights in respect of the shares of petitioner nos.1 to 5, which were pledged in favour of the respondent, as security for a loan taken by petitioner no. 1.
2. Petitioner no. 1 is a Limited Liability Partnership Firm engaged in the business of investment including advisory services in wealth management. Respondent is a registered Non-Banking Finance Company. Vide a Sanction Letter dated 28.08.2019, respondent sanctioned a LAS Facility for an additional amount of Rs.100 Crores in favour of the petitioners, in addition to an already sanctioned loan of Rs.250 Crores. On 11.11.2019, one of the petitioners executed a Loan-cum-Pledge Agreement with the respondent and pledged certain securities. On 12.12.2019, a Loan O.M.P.(I) (COMM) 102/2020 Page 2 of 6 Disbursement Kit containing a Loan-cum-Pledge Agreement, Demand Promissory Note, Letter of Continuity and Irrevocable Power of Attorney, was executed by petitioner Nos. 1, 2, 3 and 5 in favour of the respondent.
3. Petition was necessitated on account of imminent threat of sale of pledged shares, belonging to petitioner Nos. 1 and 3, by the respondent, on account of deficiency in maintaining minimum security - margin, which was required to be maintained equivalent to twice the loan value, in terms of the loan documents. According to the petitioners, decline in the value of shares occurred due to sudden outbreak of the pandemic COVID-19, resulting in a Nationwide Lockdown, which has adversely affected the business and the cash flow of the petitioners.
4. The main contention of learned senior counsel for the petitioners is that petitioners never defaulted in their liability to repay the loan amount or in maintaining the minimum security-margin, until the pandemic COVID- 19, yet, notwithstanding the unprecedented prevailing circumstances, respondent commenced invoking/selling the pledged shares and has also issued Recall Notices.
5. Learned senior counsel further argues that in the wake of pandemic COVID-19, Government and the Statutory Authorities, including RBI have issued several Circulars, whereby, Banks and NBFCs etc. have been directed to grant a Moratorium of three months in respect of Loans outstanding as on 01.03.2020. RBI has also provided a relief package and recently on 17.04.2020, RBI has further liberalised the relief to the Borrowers, in the wake of financial and economic impact of the pandemic.
6. Learned senior counsel for the petitioners further argues that, in all, the outstanding liability of the petitioners towards the respondent is roughly O.M.P.(I) (COMM) 102/2020 Page 3 of 6 about Rs.56 Crores, towards the principal amount and the value of remaining pledged shares, as on 22.04.2020, is approximately Rs.59,40,70,895/-. It is also argued that the petitioners are entitled to clear the outstanding liability under the terms of the loan agreement, till August 2021 and, therefore, it is unfair for the respondent to resort to coercive steps. Learned senior counsel for the petitioners submits that at this stage the relief he seeks to press is that the respondent be restrained from selling the remaining pledged shares, as even otherwise, the value of pledged shares has plummeted drastically.
7. Issue notice to the respondent, returnable on 21.05.2020.
8. Mr. Mirza Aslam Beg, Advocate accepts notice on behalf of the respondent.
9. Let reply be filed within a period of two weeks from today and rejoinder, if any, be filed before the next date of hearing.
10. Mr. Kirti Uppal, learned senior counsel for the respondent submits that it is incorrect for the petitioners to argue that they are in default only on account of the pandemic, as the documents on record would show that the petitioners have defaulted since January, 2020. Attention of the Court is drawn to the Letters and the Recall Notices sent by the respondent to the petitioners and it is contended that no comfort was ever provided to the respondent to satisfy that the petitioner would clear its outstanding liabilities.
11. After the matter was heard at some length, a pass over was sought by the counsels to exchange some proposals in order to resolve the issue, as an interim measure, in the wake of the pandemic COVID-19.
O.M.P.(I) (COMM) 102/2020 Page 4 of 612. Matter was taken up post lunch and the Court was informed that the parties have arrived at an understanding and worked out an interim arrangement. It has been agreed that:
A) Petitioners shall pledge further shares as Additional Security Coverage to the respondent. Shares will be pledged through two other legal Entities on behalf of the petitioners. Details and particulars of the Additional Securities have been discussed and will be formally exchanged during the course of the day. It is agreed that the Additional Security will be to the tune of Rs.25 Crores.
B) Petitioners and respondent shall comply with applicable laws to record the pledge of additional shares.
C) Respondent shall not, either itself, and/or under, and/or on behalf of the respondent sell/transfer/alienate and/or encumber, and/or part with the custody, control and possession of the remaining pledged shares, which are the subject matter of the present petition.
D) In the event, pursuant to the provision of Additional Security, the security cover, based on the market price of the respective shares, reduces to below INR 56 Crores, the petitioners undertake to provide additional shares and/or other securities to ensure that the total Security Coverage is maintained above INR 56 crores.
E) Currently, petitioner Nos. 5 and 6 are Partners of petitioner no. 1.
Petitioner Nos. 2 to 4 have resigned from the Partnership Firm on 31.01.2020. However, petitioner Nos. 2 to 6 undertake that, without prejudice to their respective rights and contentions under the law and contract, they shall remain liable to the respondent to the extent provided in the loan and security transaction documents, with respect to the liability O.M.P.(I) (COMM) 102/2020 Page 5 of 6 arising out of the Loan Facility extended by respondent to petitioner no.1.
13. The said arrangement would continue till the next date of hearing. Needless to state that this is only an interim arrangement and has been arrived at, on account of the unprecedented and peculiar circumstances, created by the ravaging effect of the pandemic COVID-19. The arrangement is without prejudice to the rights and contentions of the respective parties.
14. The parties would file their respective undertakings in terms of the interim arrangement arrived at. As agreed, during the hearing, the undertakings will be filed by way of letters from the Authorised Representatives of the petitioners and the respondent respectively, in view of the prevailing circumstances and thus filing of the undertakings in the form of affidavits is exempted. The undertakings would be filed by the respective parties during the course of the day and would be taken on record.
JYOTI SINGH, J APRIL 28, 2020 srb O.M.P.(I) (COMM) 102/2020 Page 6 of 6