Bombay High Court
Shamirth Infra Private Limited vs Mayuresh on 9 June, 2025
Author: N.J.Jamadar
Bench: N. J. Jamadar
2025:BHC-OS:8423
IAL14838 of 2024+.doc
Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
SANTOSH
SUBHASH INTERIM APPLICATION (L) NO.14838 OF 2024
KULKARNI IN
Digitally signed by
SANTOSH SUBHASH
KULKARNI
COMM. SUIT NO.45 OF 2024
Date: 2025.06.09
17:14:33 +0530
Shamirth Infra Pvt. Ltd. and Ors. ... Applicants
In the matter between
Shamirth Infra Pvt. Ltd. and Ors, ... Plaintiffs
versus
Mayuresh and Ors. ... Defendants
WITH
INTERIM APPLICATION (L) NO.400 OF 2024
IN
COMM. SUIT NO.45 OF 2024
Shamirth Infra Pvt. Ltd. and Ors. ... Applicants
In the matter between
Shamirth Infra Pvt. Ltd. and Ors, ... Plaintiffs
versus
Mayuresh and Ors. ... Defendants
Mr. D. D. Madon, Senior Advocate with Ms. Sachi Lodha, Mr.
Gaurav Mehta, Mr. Aditya Miskita, Mr. Bhanu Chopra, Ms.
Shamina Taly, Mr. Aziz Mohd. Ms. Sehyr Taly i/by S.
Mahomedbhai and Co., for Plaintiffs.
Mr. Ashish Kamat, Senior Advocate with Mr. Akshay Puranik, Mr.
Amey Miraskar, Mr. Harsh Moorjani with Mr. Madhur Arora i/by
Khaitan and Co., for Defendant Nos.1 and 2.
Mr. Naushad Engineer, Senior Advocate with Mr. Yohaan
Limathwalla, Mr. Ashok Dhanuka, Ms. Dispy Sequeira i/by
Pragnya Legal, for Defendant No.3.
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Santosh
CORAM : N. J. JAMADAR, J.
RESERVED ON : 14 OCTOBER 2025
PRONOUNCED ON : 9 JUNE 2025
JUDGMENT :
1. The Plaintiffs have taken out these Interim Applications for diverse interim reliefs in a suit instituted, inter alia, for declarations that the Loan Agreements executed by the Plaintiffs are illegal and void as the Plaintiffs were made to agree to illegal, extortionate, onerous and usurious terms by deceitful and malafide acts and omissions on the part of the Defendants, the sale of the pledged shares is illegal, void and non-est in the eye of law and the Plaintiffs are entitled to redeem the pledged shares.
2. The background facts necessary for determination of these applications can be summarized as under :
2.1 Shamirth Infra Pvt. Ltd. (SIPL) is a Private Limited Company.
Plaintiff Nos.2 to 5 are the promoters and share holders of SPIL. Plaintiff Nos.2 to 5 together have 100% shareholding in SIPL. SIPL is, inter alia, engaged in the business of real estate development and has been currently undertaking development of a commercial building 'Parth IT Park' on a plot No.86A situated at Sector 15, CBD Belapur, Navi Mumbai.
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IAL14838 of 2024+.doc Santosh 2.2 M/s. Mayuresh - Defendant No.1, is a registered Partnership Firm. M/s. Mayuresh (D1) is also engaged, inter alia, in the business of real estate development. Welvan Securities Pvt. Ltd. (D2) is a Private Limited Company. Welvan (D2) is also engaged in the business of real estate development. Welvan (D2) is a sister concern of Mayuresh. Both have common promoter group comprising of, inter alia, Mr. Shreegopal Barasia. 2.3 Vistra (ITCL) India Limited (D3) is a Public Limited Company. Vistra (D3) is engaged in the business, inter alia, of providing corporate trusteeship services and has been acting as a security trustee for Mayuresh (D1) in relation to its transactions with the Plaintiffs.
2.4 CIDCO is the owner of Plot No.86A. Under a Tripartite Agreement dated 2 June 2004, Welvan (D2) acquired the leasehold rights in the said plot. Shreegopal Barasia, Promoter of Welvan (D2), desired to resell the plot. At the representation of Barasia, Plaintiff Nos.2 and 3, who had considerable experience and expertise in the development of real estate, agreed to take over the said plot. On 20 January 2005 Plaintiff Nos.2 and 3 were inducted as the directors of Welvan (D2).
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IAL14838 of 2024+.doc Santosh 2.5 The Plaintiffs claimed, Welvan (D2) induced Plaintiff Nos.2 and 3 to invest a sum of Rs.13,89,90,635/- in the said project with a specific understanding that the project would eventually be handed over to the Plaintiffs.
2.6 The Plaintiffs claim, despite assurances, it was only around the year 2019-20, Welvan (D2) agreed to handover the said project to the Plaintiffs subject to series of extortionate and onerous conditions, which were forced upon the Plaintiffs with a threat that unless Plaintiffs agree to such conditions, Welvan (D2) would back out of the deal. Plaintiff Nos.2 to 5, thus, incorporated SIPL as the special purpose vehicle to take over the said project. Plaintiff Nos.2 and 3 resigned as the directors of the Board of Welvan (D2). 2.7 On 13 October 2020, an Agreement for Sale came to be executed by and between Welvan (D2) and SIPL, whereby Welvan (D2) agreed to sell/ assign and SIPL agreed to acquire the said plot for a total consideration of Rs.23,03,00,000/-. After adjusting the amounts towards the investment and expenses incurred by the Plaintiffs and deductions, it was agreed that the balance sale consideration of Rs.8,50,89,365/- would be paid by SIPL to Welvan (D2) on or before 17 October 2020, failing which SIPL was to pay 4/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh interest thereon @ 24% compounded quarterly. 2.8 The Plaintiffs aver, to finance the balance consideration and development of the project, Welvan (D2) coerced the Plaintiffs to avail the finance from M/s. Mayuresh (D1) at excessive interest and on onerous terms. On account of the circumstances in which the Plaintiffs found themselves, the Plaintiffs were coerced to agree to the onerous terms and exorbitant rate of interest. On 26 November 2020, the Plaintiffs claim, an Agreement was executed between SIPL and Welvan (D2), whereby Welvan (D2) agreed to earmark an area about 14,706 sq.ft., which would not be alienated or sold by SIPL till the alleged disputes between SPIL and Welvan (D2) were resolved. A Tripartite Agreement was also executed between CIDCO, SIPL and Welvan (D2) transferring the leasehold rights in favour of SIPL.
2.9 The Plaintiffs claim, they were compelled to execute the alleged Agreement dated 20 February 2021, whereunder M/s. Mayuresh (D1) agreed to extend loan of Rs.4 Crores to SIPL on extraneous and onerous terms. Under the Amended and Restated Loan Agreement dated 29 July 2021, the limit of loan was extended to Rs.26 Crores. The Plaintiffs alleged, the draft of the 5/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh loan agreements were never shared with the Plaintiffs before their execution. Nor the Plaintiffs were provided copies of the agreements after their execution. The terms of these loan agreements are, ex-facie, one-sided, onerous and extraneous. Apart from the usurious interest rate of 24% p.a. charged by Welvan (D2) and 36% p.a. charged by M/s. Mayuresh (D1), the Plaintiffs were made to secure the credit facility by providing several valuable securities, such as hypothecation of the receivables from the said project and the Plaintiff Nos.2 to 5's shareholding in SIPL.
2.10 As a part of the alleged deceitful design, the Plaintiffs alleged, SIPL was made to enter into Security Trustee Agreement dated 29 July 2021, whereby Vistra (D3) was appointed as a Security Trustee for the securities created/to be created under the Restated Loan Agreement. The Restated Loan Agreement contemplated execution of various documents i.e. Agreements for creation of pledge of shares, hypothecation of receivables, opening of escrow accounts etc. (Transaction Documents). 2.11 Pursuant thereto, on 5 February 2022, Plaintiff Nos.2 to 5 executed Share Pledge Agreement in favour of the Security Trustee 6/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh to pledge their respective shareholdings in SIPL. 2.12 The Plaintiffs alleged various acts of omission and commission on the part of the Defendants with a view to usurp the assets and control of SIPL. On the one hand, SIPL and the project suffered on account of the default on the part of M/s. Mayuresh Group. On the other hand, M/s. Mayuresh (D1) continued to levy and demand interest and default interest under the 2020 Agreement for Sale and the Restated Loan Agreement. M/s. Mayuresh (D1) forced the Plaintiffs to draw amounts under the Loan Agreements in order to make payment of interest and default interest alleged to be due.
2.13 The Plaintiffs claim, on 16 May 2023, M/s. Creative Homes, a registered Partnership firm, filed a complaint with Economic Offences Wing (EOW) against Mr. Shreegopal Barasia. To give a counter blast, M/s. Mayuresh (D1), Welvan (D2) and Vistra (D3), in collusion and connivance with each other, threatened to invoke the security provided for the loans. Exorbitant demands were made by Mayuresh (D1) and Vistra (D3).
2.14 As a part of the malafide design, on 31 August 2023, Vistra (D3) addressed a purported default notice (first default notice). 7/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh On 4 October 2023, Vistra (D3) falsely claimed that the alleged Event of Default had occurred and notified SIPL that Vistra (D3) was invoking the Pledge created in relation to the pledged shares. Default notices have been assailed by the Plaintiffs on a number of grounds, including that the said notices were in breach of the Pledge Agreements, the provisions contained in Section 176 of the Indian Contract Act, 1872 and were actuated by malafide. 2.15 The Plaintiffs alleged, initially Vistra (D3) offered to sale the pledged shares to an undisclosed third party for a consideration of Rs.35 Crores. It was later informed that the said third party withdrew its offer and Vistra (D3) decided to sell the pledged shares to Mayuresh (D1) for a consideration of Rs.15 Crores only. The said action of Vistra (D3) was in breach of its fiduciary and statutory obligations. Vide Email dated 5 October 2023, Vistra (D3) informed Plaintiff Nos.3 and 4 that the pledged shares have been allegedly transferred to Mayuresh (D1) for a consideration of Rs.15 Crores only.
2.16 It is the case of the Plaintiffs that the purported sell of the pledged shares by Vistra (D3) to Mayuresh (D1) is not an 'actual sale' in the eye of law. It, in fact, amounts to conversion of the 8/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh pledged property. Such conversion of the pledged property is legally impermissible. Moreover, Mayuresh (D1) has claimed set-off qua the purchase price. Such set off is also impermissible in law. 2.17 The Agreement for Pledge never covered payment of the balance consideration under the Agreement for Sale dated 13 October 2020, Mayuresh (D1) has purported to include the alleged outstanding under the said Agreement for Sale towards Welvan (D2) to claim set-off. Since the Agreement for Pledge never covered the alleged liability under the Agreement for Sale, the pledged shares could not have been sold, much less, set off claimed in respect thereof. The Notice of Sale was also legally infirm. It gave less than 24 hours time to the Plaintiffs to redeem the pledge in breach of the stipulations in the agreements to provide at least 2 days notice. Even two days period notice was not reasonable. The Sale Notice dated 5 September 2023 was never served on Plaintiff Nos.2 to 5. Nor it quantified the alleged outstanding amount. The purported sale of the pledged shares was also bad in law as the Plaintiffs vide letter dated 5 October 2023 offered to pay the entire outstanding amount.
2.18 Invocation of pledge was illegal and in breach of the terms of 9/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh the Pledge Agreement. There were no events of default on the part of the Plaintiffs. If at all there were any events of default, the Defendants had waived the same. The purported sale was bad in law as the shares were sold for a partly sum of Rs.15 Crores, though a month prior thereto, they were offered to be sold for a price of Rs.35 Crores. According to the Plaintiffs, the cumulative value of the pledged shares was in the range of Rs.173 Crores. The sale of the shares for a partly sum of Rs.15 Crores was but a fraud on the Plaintiffs. The purported transfer of the pledged shares to Mayuresh (D1), the real pledgee, does not constitute actual sale. The Plaintiffs, thus, asserted the right of redemption of Plaintiff Nos.2 to 5 continued to subsist.
2.19 The Plaintiffs have, thus, instituted a suit for declaration that the sale of the pledged shares is illegal, void ab-initio, invalid and non-est and Plaintiff Nos.2 to 5 have a valid and subsisting right to redeem the pledged shares upon payment of the amounts due to M/s.Mayuresh (D1) under the lawful terms of the Restated Loan Agreement. Interest charged by Defendant No.1 under the Restated Loan Agreement is usurious and excessive. The Transaction Documents are unlawful and void and a host of 10/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh consequential reliefs.
First Interim Application:
3. The Plaintiffs initially filed Interim Application (L) No.400 of 2024 seeking interim reliefs asserting, inter alia, that the project in question is likely to generate the net revenue of over Rs.315 Crores. The Plaintiffs have made substantial progress in the project. The Plaintiffs have incurred huge costs of over Rs.32 Crores for the said development. By taking undue advantage of the situation, the Defendants were trying to oust the Plaintiffs from the said project on the strength of miss-appropriation of the pledged shares. The Defendants have illegally withheld their consent for transfer of monies to the vendors etc., from the escrow accounts set up under the Escrow Agreement. The Plaintiffs, therefore, prayed for interim relief in the nature of an order to cancel the purported sale of the pledged shares, restore status quo prior to 5 October 2023, permit Plaintiff Nos.2 to 5 to exercise their right of redemption and direct Defendant Nos.1 to 3 to return the pledged shares and prohibitory and mandatory consequential reliefs.
Second Interim Application:
4. The Plaintiffs have taken out another Interim Application 11/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh being IA(L) No.14838 of 2024 asserting, inter alia, that since September 2023, on account of withholding of NOC's by Defendant Nos.1 to 3, the Plaintiffs had not been able to sell any units in the said project. The Plaintiffs have been put to serious financial squeeze. Without prejudice to all the contentions raised by the Plaintiffs, including the challenge to the legality and validity of the Transaction Documents, the Plaintiffs have received a sanction letter from the another entity to advance Rs.39 Crores to the Plaintiffs, and, thus, the Plaintiffs intend to pay the Defendant No.1 the entire loan amount along with the interest @ 36% p.a. aggregating to Rs.21,69,76,649/- and to Defendant No.2 a sum of Rs.13,29,61,242/-, being the entire balance consideration of Rs.8,50,89,365/- and the interest accrued thereon. Thus, the Plaintiffs be permitted to make the aforesaid payment and it be ordered that the said amount stands fully and finally adjusted against all the amounts payable by the Defendant Nos.1 and 2, and Defendant Nos.1 and 2 be, in turn, directed to confirm full and final receipt of the due amount and issue 'no due certificate' to the Plaintiffs and, consequentially, all the Transaction Documents be treated to be cancelled and the original share certificates and the 12/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh instruments be delivered back to the Plaintiffs.
Response of Defendant Nos.1 and 3:
5. Defendant Nos.1 and 3 resisted the applications by filing affidavits in reply. At the outset, the very tenability of the second Interim Application was questioned. It was contended that when this Court declined to grant ad-interim relief in the first Interim Application i.e. IA(L) No.400 of 2024, the Plaintiffs have filed fresh Application for interim reliefs on the self-same grounds. The Second Application for interim reliefs is, thus, not at all tenable.
6. Defendant Nos.1 to 3 have contended that the premise of the interim relief in the first and second Interim Application is irreconcilably inconsistent. In the first application, legality and validity of the Transaction Documents was sought to be questioned alleging, inter alia, that those instruments were the creatures of fraud and coercion. Whereas, in the second Interim Application, the Plaintiffs professed to act upon the Transaction Documents and seek to pay the due amounts, albeit much lower than the contractual obligations. Therefore, both the applications being mutually inconsistent, do not deserve to be entertained.
7. Defendant Nos.1 and 3 contend, the grant of reliefs prayed in 13/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh the Interim Applications would amount to granting final reliefs at an interim stage, which is not legally permissible.
8. Defendant No.1 categorically contends that the Plaintiffs have approached the Court with unclean hands. The Plaintiffs have suppressed material facts which bear upon the claim of the Plaintiffs that they were made to execute the instruments by practicing fraud. The circumstances which led to the execution of the Transaction Documents have been traced by Defendant No.1. Referring to the sequence of events and the various documents, executed by the Plaintiffs, Defendant No.1 contends, the falsity and incredulity of the claim of the Plaintiffs that they were unaware of the contents of the documents is clearly borne out. The Plaintiffs have categorically acknowledged the liability to pay balance consideration of Rs.8,50,89,365/- under the Agreement for Sale along with interest, repetitively. The Transaction Documents executed by the Plaintiffs were backed by the resolutions passed by the Board of Directors of SIPL. This factor squarely dents the claim of the Plaintiffs that they were made to execute the documents under coercion or duress.
9. On the aspect of the pledge of shares of SIPL, Defendant No.1 14/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh makes reference to the terms of the Share Pledge Agreement and Pledge Power of Attorney executed in favour of Vistra (D3). There is no infirmity in either invocation of the pledge or the sale notice or sale of the pledged shares by Vistra (D3). The Plaintiffs had not only acknowledged the liability to pay the outstanding loan amount and balance consideration along with accrued interest, but also acted upon the Transaction Documents by depositing interest at the agreed terms. It is, therefore, not open for the Plaintiffs to assail the legality and validity of the Transaction Documents. A reference is made to the correspondence addressed on behalf of the Plaintiffs purportedly acknowledging the liability, default on the part of the Plaintiffs in discharge of the liability, as agreed, and the failure on the part of the Plaintiffs to discharge the liability even after the Plaintiffs were put to notice.
10. Emphasis was laid on the fact that on 5 October 2023, the Plaintiffs clearly acknowledged their liability to pay the outstanding amount under the Loan Agreements and other Transaction Documents. Therefore, belated attempt to question the legality and validity of the transaction and the invocation of the pledge, is devoid of substance.
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11. It was denied that Vistra (D3) had acted at the behest of Mayuresh (D1). Vistra (D3) was an independent entity, who had discharged its obligations under the Security Trusteeship Agreement. Upon the occurrence of the events of default, the Plaintiffs lost their right attached to the pledged shares. Thus, the Plaintiffs cannot without discharging the loan secured by the pledge question the action of the security trustee. It was also denied that the sale of pledge shares by Vistra (D3) to Mayuresh (D1) amounts to conversion. Until and unless the entire outstanding amount is repaid by the Plaintiffs to the Defendant No.1, the Plaintiffs cannot redeem the pledged shares.
12. In response to Interim Application (L) No.14838 of 2024, in addition to the aforesaid grounds of resistance, Defendant No.1, at the outset, assailed the tenability of the Application. Reliefs claimed in the instant application are akin to final reliefs sought in the plaint. At this stage, the Court would not be justified in delving into the exact amount due and payable by the Plaintiffs to Defendant No.1. That would warrant adjudication after the appraisal of evidence. The Plaintiffs, thus, cannot be permitted to wriggle out of the liability by offering to pay the sum, which is far 16/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh less than the amount due and payable in accordance with the terms of the contract between the parties. It was, inter alia, contended that the Plaintiffs were liable to pay the agreed amount of Rs.31,11,90,595/- to Defendant No.1 towards the balance loan amount. Likewise, the Plaintiffs were liable to pay Rs.14,09,63,709/- to Defendant No.1 towards the balance consideration under the Agreement for Sale dated 13 October 2020. Unless the entire amount is paid, the Plaintiffs are not entitled to the reliefs sought in the instant application.
13. At any rate, Defendant No.1 contends, the Plaintiffs cannot ask for cancellation of Earmarking Agreement dated 26 November 2020. According to Defendant No.1, earmarking of 14,706 sq.ft. constructed area in the project was not to secure the loan advanced by Defendant No.1 to the Plaintiff No.1 or in respect of the transaction of transfer of leasehold rights by Defendant No.2 to Defendant No.1, but towards settlement of other disputes and differences between the parties and their group concerns. Therefore, even if payment of the entire outstanding consideration amount along with interest accrued thereon was made by the Plaintiffs to Defendant No.1, the Plaintiffs were not entitled to 17/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh cancellation of Earmarking Agreement.
14. Vistra (D3) has filed common affidavit in reply to both the Interim Applications. With reference to the role of Vistra (D3) in the context of the loan agreements between Defendant No.1 and Plaintiff No.1, Vistra (D3) contends, it was appointed as a security trustee under the Security Trustee Agreement dated 29 July 2021. Thereupon, Plaintiffs executed Share Pledge Agreement and Pledge Power of Attorney in favour of Vistra (D3) and thereby pledge was created in favour of Vistra (D3) in respect of 100% shares held by Plaintiff Nos.2 to 5 in SIPL.
15. Vistra (D3) contends, since there was default on the part of the Plaintiffs No.1 in making repayment of the loan, and failure to adhere to the terms of the Loan Agreement, Vistra (D3) had addressed various letters to the Plaintiffs. Eventually, vide first notice of default dated 31 August 2023, Vistra (D3) documented various events of default and called upon the Plaintiffs to remedy the situation. In view of the default on the part of the Plaintiffs, Vistra (D3) was constrained to invoke the pledge. Initially, one Balaji Enzymes and Chemical Pvt. Ltd. had made a conditional offer for a valuation of Rs.35 Crores. Eventually, the said party 18/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh withdrew its offer as it was asked to make an unconditional offer. On 27 September 2023, Mayuresh (D1) addressed a letter to Vistra (D3) offering to purchase the pledged shares at the valuation of Rs.15 Crores. The Plaintiffs were intimated about the said offer on 4 October 2023 and were called upon to redeem the pledge. It was only after the default on the part of the Plaintiffs, Vistra (D3) decided to transfer the pledged shares to Mayuresh (D1). It was, thus, denied that the invocation and sale of the pledged shares was not in accordance with law.
16. Vistra (D3) claimed to have fully complied with the terms of the contract and the provisions of law in conducting the sale of the pledged shares. Under the terms of the Pledge Agreement, Vistra (D3) was not liable to find out market value of the pledged shares, and was entitled to sell the pledged shares at the best value available.
17. In any event, the Plaintiffs do not have any contractual right to object to the sale of the pledged shares by Vistra (D3) on account of the alleged financial loss. It was denied that the sale of the pledged shares to Mayuresh (D1) amounts to illegal conversion.
18. Lastly, Vistra (D3) would contend, relief of declaration that 19/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh the sale of pledged shares is invalid and illegal cannot be granted at an interim stage. Even otherwise, the Plaintiffs cannot be permitted to exercise rights in respect of the pledged shares till the contractual obligations of the Plaintiffs are not discharged.
19. An affidavit in Rejoinder, followed by an Affidavit in Sur- Joinder on behalf of Defendant No.1, have been filed.
Submissions:
20. In the wake of the aforesaid facts and pleadings, I have heard Mr. Madon, the learned Senior Advocate for the Plaintiffs, Mr. Ashish Kamat, the learned Senior Advocate for Defendant Nos.1 and 2, and Mr. Naushad Engineer, the learned Senior Advocate for Defendant No.3, at some length. With the assistance of the learned Counsel for the parties, I have perused the material on record including the documents tendered to substantiate the rival claims.
On behalf of the Plaintiffs:
21. Mr. Madon, the learned Senior Advocate for the plaintiffs, canvassed a multi-pronged submission to assail the legality and validity of the "transaction documents", in general, and the sale of pledged shares, in particular. Firstly a strenuous effort was made 20/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh by Mr. Madon to bolster up the stated case of the plaintiffs that the plaintiffs were coerced to execute the transaction documents, including the loan agreement, restated and amended loan agreement, pledge agreement and the agreement to earmark the constructed portion of the project in favour of Welvan (D2). The terms of the agreements, especially the levy of interest at 36% p.a. compounded quarterly - a plainly usurious rate of interest - and extortionate stipulations therein, according to Mr. Madon, per se render the agreements void and illegal.
22. Mr. Madon made a valiant attempt to substantiate the claim that the draft copies of the agreements, which were eventually executed, were never furnished to the plaintiffs and, even after the execution thereof, neither those documents, nor copies thereof were furnished to the plaintiffs. Cumulatively, the transaction documents are void under Section 23 of the Indian Contract Act.
23. Secondly, Mr. Madon would urge Mayuresh (D1) has wrongly appropriated the debt owed to Welvan (D2) under the agreement for sale dated 13th October, 2020. The plaintiffs had never agreed for such novation of the contract between the parties. Welvan (D2) was neither a lender under either loan agreement nor a pledgee. 21/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh The pledge agreement does not cover the liability which the plaintiffs owed to Welvan (D2). The invocation of the pledge for the discharge of the said liability was clearly in breach of the pledge agreement and in teeth of Section 174 of the Indian Contract Act. Laying emphasis on the fact that Mayuresh (D1) purportedly transferred the balance sale consideration to Welvan (D2) on 5 th July, 2021 by which time, restated loan agreement and the share pledge agreement were yet to be executed, Mr. Madon would urge, under no circumstances, the pledge could have been invoked for the discharge of the said liability.
24. In substance, the thrust of the submission of Mr. Madon was that the agreement for sale dated 13th October, 2020, on the one part, and the two loan agreements, dated 20 th February, 2021 and 29th July, 2021, on the other part, constituted two distinct transactions. Defendant Nos.1 and 3 were not entitled to merge those two transactions and invoke the pledge. An endeavour was made by Mr. Madon to urge that the defendants have banked upon a forged and fabricated letter dated 26 th November, 2020, purportedly addressed on behalf of the plaintiffs acknowledging the enhancement in the rate of interest from 24% to 36% on the 22/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh balance consideration payable under the agreement for sale dated 30th October, 2020 and, by including the said amount, at such usurious and exorbitant rate of interest, defendant Nos.1 and 3 have invoked the pledge.
25. Thirdly, Mr. Madon would submit that the terms of the pledge agreement were explicitly one sided and onerous. Vistra (D3) was, in fact, an agent of defendant No.1. That explains the utterly biased and unjust manner in which Vistra (D3) discharged its duties as a security trustee. Apart from the fact that the two days notice for sale of the pledged securities is in itself unreasonable, according to Mr. Madon, in fact, Vistra (D3) did not give even two days notice to the plaintiffs. The first notice dated 5 th September, 2023 for purported sale of the pledged shares for Rs.35 Crores was abandoned. The second notice dated 4 th October, 2023 was never served on plaintiff Nos.2 and 5, the pledgors. Nor the said sale notice dated 4th October, 2023 quantified the alleged outstanding amount. These infirmities in the sale notice, according to Mr. Madon, completely erode the legality and validity of the actions of Vistra (D3) and the consequent sale.
26. Fourthly, Mr. Madon urged with a degree of vehemence that 23/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh the purported sale of the pledged shares in favour of Mayuresh (D1) is legally infirm, on a number of counts:
26.1 First and foremost, as Vistra (D3) is an agent of Mayuresh (D1) the purported sale to Mayuresh (D1), the pledgee, was, in effect, sale to self and amounted to "conversion".
26.2 To buttress the submission that the sale of the pledged security by the pledgee to himself does not amount to "actual sale"
of the pledged security and in such a case the right of the pledgor to redeem the pledge is not lost, Mr. Madon placed a very strong reliance on the judgment of the Supreme Court in the case of PTC India Financial Services Limited vs. Venkateswarlu Kari and another1.
26.3 Second, Mayuresh (D1) professed to set off the alleged outstanding amount under the first transaction of agreement for sale dated 13th October, 2020, towards the price of the pledged shares. There was no real passing of consideration. The purported sale in favour of Mayuresh (D1) was against all canons of the duties of the pledgee.
26.4 Third, the sale of the pledged shares to Mayuresh (D1) was 1 (2022) 9 Supreme Court Cases 704.24/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh illegal as the plaintiffs vide letter dated 5 th October, 2023 had offered to pay due amount even before the purported fictitious sale.
Without providing a reasonable opportunity to the plaintiffs to redeem the pledge, Vistra (D3) went on to notify the sale in favour of Mayuresh (D1).
26.5 Fourth, Mr. Madon would urge, the purported sale of the pledged shares was at a gross undervaluation. A month prior to the purported sale, Vistra (D3) had received an offer of Rs.35 Crores. Even the said offer of Rs.35 Crores, was much low. The pledged shares were valued at Rs.173 Crores. Support was sought to be drawn from the valuation report obtained by the plaintiffs.
27. Lastly, Mr. Madon would urge as the plaintiffs have shown the willingness to pay the due amount under the loan agreement as well as the agreement for sale, the Court can balance the equities by permitting the plaintiffs to redeem the pledge, even at an interim stage. Mr. Madon made a painstaking effort to demonstrate that a very strong prima facie case is made out by the plaintiffs to redeem the pledge at an interim stage. To this end, Mr. Madon placed reliance on the judgments of the Supreme Court in the cases of Deoraj vs. State of Maharashtra and others 2 and 2 (2004) 4 Supreme Court Casees 697.25/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh Dorab Cawasji Warden vs. Coomisorab Wardenand others3.
On behalf of Defendant Nos.1 and 2:
28. Mr. Kamat, the learned Senior Advocate for defendant Nos.1 and 2, stoutly resisted the submissions on behalf of the plaintiffs.
At the outset, it was urged that the plaintiffs do not deserve to be heard on the merits of the matter as the plaintiffs have approached the Court with unclean hands. The plaintiffs have suppressed material facts and documents and made an endeavour to obtain an ad-interim order. When the Court declined to grant ad-interim relief, the plaintiff filed second application for interim relief. Mr. Kamat would urge, the second application for interim relief i.e. IA(L)/14838/2024, is at complete variance with the case set up by the plaintiffs in the plaint.
29. Amplifying the submissions, Mr. Kamat would urge the plaintiffs have pleaded contradictory and self-destructive case, and are, thus, dis-entitled from claiming any relief. The claim of the plaintiffs in the plaint is that the transaction documents are illegal and void. Surprisingly the second application for interim relief is predicated on the legality and validity of those transaction 3 (1990) 2 Supreme Court Cases 117.
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IAL14838 of 2024+.doc Santosh documents and the plaintiffs seek performance of the very transaction documents, which are stated to be illegal and void.
30. Assailing the case of the plaintiffs that the loan agreements were executed sans the free will of the plaintiffs and, thus, illegal and void, Mr. Kamat would urge, there are a number of documents which indicate that the plaintiffs had executed those agreements fully cognizant of the nature and import thereof and out of their own volition. Those documents were conveniently and deliberately suppressed by the plaintiffs.
31. Mr. Kamat would urge, the plaintiffs suppressed the fact that in the Articles of Association of plaintiff No.1, "loan agreement" has been defined to mean the Amended and Restated Loan Agreement dated 29th July, 2021. The plaintiff No.1 had included the said Amended and Restated Loan Agreement in the disclosure under Form MGT14, filled with the Registrar of Companies. Those loan agreements were executed after the Board of Directors of plaintiff No.1 passed Resolutions in the meetings in which the draft agreements were placed for consideration and approved. All these documents were suppressed by the plaintiffs.
32. Mr. Kamat would urge the legal position is well neigh settled 27/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh that a party who sets up a false case by suppressing material facts and does not approach the Court with clean hands is not entitled to be heard much less granted any relief. To lend support to this submission, Mr. Kamat placed reliance on the judgments of the Supreme Court in the cases of Bhaskar Laxman Jadhav and others vs. Karmaveer Kakasaheb Wath Education Society and others4 and S. P. Chengalvaraya Naidu (Dead) by LRs. vs. Jagannath (Dead) by LRs. and others5
33. In order to bolster up the submission that the plaintiff is not entitled to take inconsistent and mutually-distructive pleas, Mr. Kamat placed reliance on the judgment of the Supreme Court in the case of Baldev Singh and others vs. Manohar Singh and another6 and a decision of this Court in the case of Shyamlal Biharilal Pandey vs. Reliance Infrastructure Ltd. and others7.
34. On the merits of the assertions of the plaintiffs as regards the transaction documents, Mr. Kamat would urge there is material to indicate that not only the transaction documents were executed by the plaintiffs voluntarily but also to show that the 4 (2013) 11 Supreme Court Cases 31.
5 (1994) 1 Supreme Court Cases 1.
6 (2006) 6 SCC 498.
7 2009 (2) Mh.L.J. 204.
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IAL14838 of 2024+.doc Santosh plaintiffs had acted upon those documents fully. Taking the Court through the correspondence exchanged between the parties, Mr. Kamat would submit that there are multiple acknowledgments of liability on the part of the plaintiffs. It was only after the second notice of sale by Vistra (D3), upon persistent default by the plaintiffs, the plaintiffs raised false and frivolous defences.
35. Mr. Kamat further submitted that the plaintiffs are in breach of the obligations under the loan agreements. Without obtaining the consent of defendant No.3, the plaintiff No.1 sold three units in the project and unlawfully appropriated the sale proceeds instead of depositing the same in the Escrow Account. Such dishonest conduct on the part of the plaintiffs plainly dis-entitles the plaintiffs from seeking any equitable relief. To this end, reliance was placed on the judgment of the Supreme Court in the case of Gujarat Bottling Co. Ltd and others vs. Coca Cola Co., and others 8.
36. Refuting the claim of the plaintiffs that the invocation of the pledge was infirm, Mr. Kamat would urge that if the facts of the case are appreciated in the light of the stipulations in the pledge agreement, an inference becomes inescapable that the Vistra (D3) invoked the pledge after providing an efficacious opportunity to the 8 (1995) 5 Supreme Court Cases 545.
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IAL14838 of 2024+.doc Santosh plaintiffs to redeem the pledge. The contention that the plaintiffs were not informed about the due amount, according to Mr. Kamat, was a clear subterfuge. Mr. Kamat took the Court through the record to demonstrate that not only the defendants had repetitively indicted the amount due and payable by the plaintiffs but even the plaintiffs had acknowledged the amount which they owed to the defendants. In the face of the clear failure and neglect on the part of the plaintiffs, Vistra (D3) was fully justified in invoking the pledge, urged Mr. Kamat.
37. Mr. Kamat would urge that the thrust of the submission on behalf of the plaintiffs that the sale of the pledged shares in favour of Mayuresh (D1) amounts to conversion is misconceived. Vistra (D3), the security trustee, is an independent entity, who has acted in accordance with the terms of the transaction documents, upon the occurrence of the events of default. The sale of the shares by Vistra (D3) was in exercise of the powers given to Vistra (D3) under the transaction documents. Mr. Kamat made an endeavour to distinguish the judgment in the case of PTS India Financial Services (supra). It was urged that in the said case the pledgee had transferred the pledged shares in his own name. In the case at 30/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh hand, it was Vistra (D3), who effected the sale, in the capacity of the security trustee. Therefore the judgment in the case of PTS India Financial Services (supra) does not govern the facts of the case.
38. As an alternative submission, Mr. Kamat would urge that even if the sale of the shares by defendant No.3 in favour of defendant No.1 is held to be illegal, the plaintiffs would not be entitled to return of the shares as the pledge would continue to operate. Therefore, no relief can be granted in favour of the plaintiffs, on the said count.
39. Mr. Kamat would urge, the interim reliefs can only be granted in aid of the final reliefs. The prayers in the second application for interim relief can by no stretch of imagination be said to the reliefs in the aid of the final reliefs in the suit. On the contrary, the prayers in the second interim application are premised on a diametrically opposite case of performance of the transaction documents. Reliance was placed on the judgments in the cases of Maharashtra Jeevan Pradhikaran and another vs. Lark Construction Pvt. Ltd.9 and Cotton Corporation of India 9 2005(1) Mh.L.J 953.
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IAL14838 of 2024+.doc Santosh Limited vs. United Industrial Bank Limited and others10.
40. Mr. Kamat would contend the prayers in the interim application are akin to the final reliefs, which cannot be granted at an interlocutory stage. To buttress this submission Mr. Kamat banked upon the judgments of the Supreme Court in the cases of Metro Marins and Another vs. Bonus Watch Co. (P) Ltd. and others11 and State of U.P. and others vs. Ram Sukhi Devi12.
41. Lastly, it was submitted that the plaintiffs, who have approached the Court contending that the agreements are void under Section 23 of the Contract Act, cannot seek assistance of the Court in the enforcement of such illegal contract. For this purpose, Mr. Kamat placed reliance on the judgment of the Supreme Court in the case of Narayanamma and another vs. Govindappa and others13.
On behalf of Defendant No.3:
42. Mr. Naushad Engineer, the learned Senior Advocate for the Vistra (D3), resisted the prayers in the application, especially the second application, by canvassing a submission that, on first 10 (1983) 4 Supreme Court Cases 625.
11 (2004) 7 Supreme Court Cases 478.
12 (2005) 9 Supreme Court Cases 733.
13 (2019) 19 Supreme Court Cases 42.
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IAL14838 of 2024+.doc Santosh principles, the plaintiffs cannot be permitted to take a summersault and seek relief under the transaction documents; which were alleged to be illegal and void. Mr. Engineer took the Court through the transaction documents and the correspondence exchanged between the parties to substantiate the case that Vistra (D3) invoked the pledge and sold the pledged shares, lawfully. It was submitted that the notice dated 4 th September, 2023 invoking the pledge does not suffer from any legal infirmity. The contemporaneous correspondence indicates that the plaintiffs were given adequate and efficacious notice as regards defaults in the performance of their obligations under the transaction documents and the consequences that would ensue.
43. Mr. Engineer would urge, the contention on behalf of the plaintiffs that the plaintiffs were not apprised of the due amount is factually incorrect and, even otherwise, Mr. Engineer would urge, in law, it was not peremptory to specify the exact amount due under the pledge. To buttress the submission that the exact amount due under the pledge need not be mentioned, Mr. Engineer placed reliance on the judgment of this Court in the case of Harinarayan G. Bajaj Share and Stock Consultant and another vs. 33/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh Reliance Capital Limited14 and a judgment of Nagpur High Court in the case of Motilal s/o Babulal vs. Lakhmichand s/o Lalla Prasad Agarwal15.
44. Mr. Engineer supplemented the submission of Mr. Kamat that, in the facts of the case, there is no substance in the submissions on behalf of the plaintiffs that the sale of the pledged shares to Mayuresh (D1) amounts to conversion. Mr. Engineer reiterated that, in any event, the alleged conversion does not invalidate the pledge of the shares under the pledge agreement. In that event, the pledged shares will return to the trustees. The plaintiffs would be required to redeem the shares by paying the entire amount due thereunder. Thus, according to Mr. Engineer, the purported willingness shown under the second interim application to pay part of the due amount is of no significance. Therefore, the plaintiffs do not deserve any relief.
Submission in Rejoinder:
45. Mr. Madon joined the issue by canvassing the submissions that there was no suppression of material facts, as alleged by the defendants. Since the facts were known to both the parties, 14 2018 SCC OnLine Bom 42.
15 1942 SCC OnLine MP 36.
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IAL14838 of 2024+.doc Santosh omission by one would not constitute suppression. To buttress these submissions, Mr. Madon placed reliance on the judgments of the Supreme Court in the cases of Commissioner of Central Excise, Nagpur vs. Ballarpur Industries Ltd. 16, M/s. S.J.S. Business Enterprises (P) Ltd. vs. State of Bihar and Ors. 17 and Government of NCT of Delhi and another vs. BSK Realtors LLP and another18.
46. Mr. Madon forcefully submitted that there is no inconsistency in the case set up in the plaint and the second application. The prayers in the second interim application are essentially in elaboration of the prayers in the first interim application. It was further urged, there is no absolute prohibition for the plaintiffs to take inconsistent pleas. The plaintiffs can claim alternate reliefs on the basis of inconsistent allegations, submitted Mr. Madon. A strong reliance was placed by Mr. Madon on the judgment of the Supreme Court in the case of Ganesh Prasad vs. Rajeshwar Prasad and others19.
47. Mr. Madon further submitted that the crux of the matter that 16 (2007) 8 SCC 89.
17 AIR 2004 Supreme Court 2421.
18 (2024) 7 Supreme Court Cases 370.
19 2023 SCC OnLine SC 256.
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IAL14838 of 2024+.doc Santosh the sale of the pledged shares by Vistra (D3), an agent, in favour of Mayuresh (D1) amounts to self-sale and, thus, conversion, has not at all been met by the defendants. Laying stress on the value of the pledged shares and the purported unjustifiability of the claims of defendant No.1, Mr. Madon would urge, the interest of the plaintiffs deserves to be protected.
Consideration:
48. To start with uncontroverted facts. Plaintiff Nos.2 to 5 are the promoters, and together hold 100% share holding in SIPL (P1).
Plaintiff Nos.2 to 5 are the brothers. Plaintiff No.4 is the son of plaintiff No.2. Plaintiff No.5 is the son of plaintiff No.3. There is not much controversy over the relations inter se defendant Nos.1 and 2. Welvan (D2) the sister concern of Mayuresh (D1). By and large, it is not in dispute that plaintiff Nos.2 to 5, on the one part, and defendant Nos.1 and 2, on the other part, have had other transactions, apart from the transaction in question.
49. The aforesaid backdrop of business dealings between plaintiff Nos.2 to 5 and defendant Nos.1 and 2 deserves to be kept in view, to properly appreciate the controversy between the parties. It would, therefore, be necessary to have a brief resume of the 36/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh transactions and events that transpired, in three parts. First, the transactions leading to the agreement for sale dated 13 th October, 2000. Second, the financial dealings between the parties resulting in the loan agreements dated 20th February, 2021 and Amended and Restated Loan Agreement dated 29 th July, 2021, and the share pledge agreement. Third, the consequences that ensued upon the alleged default on the part of the plaintiffs in the discharge of the liabilities under those agreements.
50. With regard to the first part, incontrovertibly, Welvan (D2) had leasehold rights in respect of plot No.86A. Though the parties are at issue over the manner in which plaintiff Nos.2 and 3 got involved into IT Park project, yet, it is incontrovertible that, plaintiff Nos.2 and 3 had evinced interest to acquire the said project alongwith leasehold rights in plot No.86A. The parties are also at issue over the consideration for the transfer of the said leasehold rights by Welvan (D2) in favour of the plaintiffs.
51. Prima facie, two board resolutions passed in the meetings of plaintiff No.1 dated 1st September, 2020 and 12th October, 2020, throw light on this aspect of the matter. The board resolution dated 1st September, 2020 (Exhibit-A to the reply on behalf of 37/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh defendant No.1) clearly records that Welvan (D2) had demanded Rs.23,03,00,000/- alongwith 25% of the total constructed area of the project as a consideration. The offer of the plaintiffs was only Rs.23,03,00,000/-. As the negotiations were underway, it was resolved to reserve the additional 25% total area to be constructed in the name of Welvan (D1) and that SIPL (P1) shall demarcate the said 25% constructed area and no third party rights would be created in the said 25% constructed area. The resolution further records that the balance consideration would be paid by 17 th October, 2020 and delay in payment shall entail interest at the rate of 24% p.a., compounded quarterly.
52. The second resolution dated 12th October, 2020 (Exhibit-B), in terms, records that all the Directors approved and initialed the draft copy of the agreement for sale and it was resolved to purchase the leasehold rights of Welvan (D2), and all the Directors had approved the MoU for the reservation of 25% total constructed area in the project. And that the MoU be executed between Welvan (D2) and SIPL (P1). The plaintiffs also executed declarations. Plaintiff Nos.2 to 5, inter alia, agreed to indemnify the payments to be made to Welvan (D2) pursuant to the agreement for sale and 38/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh MoU (Exhibit-E to the reply).
53. It would be contextually relevant to note that on 26 th November, 2020 an agreement to earmark the area came to be executed and registered. Recitals 2 and 3 of the said agreement indicate that despite the execution of the agreement for sale dated 13th October, 2020, considering the unresolved disputes/existing issues between the plaintiffs and Welvan (D2), the plaintiffs agreed to earmark 14706 sq.ft. (136 sq.mtrs. area) between 6 to 13 th floor of the project and reserve the same in the joint names of the plaintiffs and Welvan (D2) and that SIPL (P1) will not be entitled to create any rights over the said earmarked area until the existing disputes/issues were resolved and settled as recorded between the parties.
54. A cumulative consideration of the events, leading to the execution of the agreement for sale dated 13 th October, 2020 and the area earmarking agreement dated 26th November, 2020, especially, in the light of the board resolutions dated 1 st September, 2020 and 12th October, 2020, prima facie leads to an inference that the agreement for sale dated 13th October, 2020 cannot be read in isolation. The area earmarking agreement is prima facie part and 39/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh parcel of the bargain. This gives heft to the submission on behalf of the defendants that the obligation under the area earmarking agreement dated 26th November, 2020 may survive even after the discharge of the liabilities under the agreement for sale and the loan agreements. Secondly, the sequence of events and execution of multiple documents justifies an inference that there were multiple transactions between the parties and the jural relationship cannot be appraised through the prism of the lender and borrower only.
55. This propels me to the second leg of the transactions. Pursuant to the agreement for sale dated 13 th October, 2020, tri- parte agreement was executed between the plaintiffs, Welvan (D2) and CIDCO transferring the leasehold rights in favour of the plaintiffs. On 26th November, 2020, an affidavit-cum-declaration was signed by plaintiff No.1 and plaintiff Nos.3 to 5 that the tri- parte agreement was subject to the terms of agreement for sale dated 13th October, 2020 (Exhibit-D). Incontrovertibly, under the agreement for sale dated 23rd October, 2020, the balance consideration of Rs.8,50,89,365/- was to be paid by 17 th October, 2020 and that the delayed payment would entail interest at the 40/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh rate of 24% p.a.
56. Though there is a serious controversy over the fact as to whether the plaintiffs agreed to pay interest at the rate of 36% on the said amount, vide communication dated 26 th November, 2020 (Exhibit-E), which is alleged to be forged by the plaintiffs, the fact remains that the said balance consideration was not paid. Vide communication dated 24th May, 2021, indisputably, the plaintiffs acknowledged the liability to pay the balance consideration of Rs.8,50,89,365/-. A request was made, however, not to charge interest on the said amount on account of Covid-19 Pandemic. Thus, the controversy is restricted to the rate at which the interest was liable to be paid.
57. Moving to the liability towards Mayuresh (D1), indisputably, under the loan agreement dated 20th February, 2021, Mayuresh (D1) agreed to advance a loan of Rs.4 Crore. The Amended and Restated Loan Agreement to provide finance to the tune of Rs.26 Crores was executed on 29th July, 2021. It would be contextually relevant to note that on 21st July, 2021, SIPL (P1) passed a board resolution to avail the term loan not exceeding Rs.26 Crores from Mayuresh (D1), under the transaction documents, which were 41/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh defined thereunder, on the security, inter alia, of the leasehold rights of SIPL (P1) in the suit property and pledge of 100% shares of SIPL (P1).
58. In the backdrop of the aforesaid nature of the transaction, with a clear understanding about the relationship between Mayuresh (D1) and Welvan (D2), especially backed by the board resolutions passed by SIPL (D1), before the execution of each of the instruments, the bold case of the plaintiffs that the plaintiffs were not provided the copies of draft agreements before execution and even after execution, deserves to be appreciated.
59. As noted above, the board resolutions inter alia record that the directors considered and approved the draft of the instruments to be executed and it was resolved that all the Directors would be the executants. On first principles, prima facie, it does not appeal to human credulity that the plaintiffs would have been coerced to execute the instruments, without even delivering the copies of the instruments. The circumstances of the case do not appear to be such that the SIPL (P1), a corporate entity, found itself in such a situation that its bargaining power was completely impaired. On the contrary, an inference becomes sustainable that two corporate 42/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh entities had entered into commercial transactions after weighing the pros and cons thereof. The claim of the plaintiffs that they were unaware of the contents of the instruments until after the dispute arose, therefore, cannot be readily acceded to.
60. Equally untenable is the submission on behalf of the Plaintiffs that the terms of the contract between the parties are onerous and extortionate as interest was agreed to be charged @ 36% p.a.. It was for the parties to determine as to how best to regulate their business relations. The mere fact that the interest was agreed to be paid at a steep rate, by itself, does not imply that the consent was vitiated by coercion or undue influence. A host of factors like, liquidity and stringency in money market, credit- worthiness of the borrower, potentiality of the borrowed capital generating revenue bear upon the determination of the rate of interest by the parties.
61. It is trite, a commercial contract must be read and understood in its entirety so as to attribute to it a business meaning which was within the understanding of the contracting parties. Since the execution of the contracts was preceded by the Board resolutions wherein all the terms, including the rate of 43/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh interest at which the liability was to be discharged, were considered and approved, the submission that the rate of interest was usurious and extortionate does not, prima facie, carry conviction.
62. The second limb of the submission that the contracts are otherwise unfair and unconscionable also does not advance the cause of the Plaintiffs. In the case of Central Inland Water Transport Corporation Ltd. and Anr. V/s. Brojo Nath Ganguly and Anr.20, the Supreme Court enunciated that the principle that the Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, will not apply where the bargaining power of the contracting parties is equal or almost equal and where both the parties are businessmen and contract is a commercial transaction.
63. It is interesting to note that to redeem the pledge, the Plaintiffs proposed to avail finance from Areion Financers Pvt. Ltd. @ 24% p.a., compounded on a monthly basis, with a stipulation for default interest @ 2% pm over and above the regular interest rate. In effect, in the event of default, the rate of interest would 20 (1986) 3 SC 156 44/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh catapult to 48% p.a.
64. It is in this context, the element of economy in the disclosure of true and full facts by the plaintiffs assumes significance. Evidently, the board resolutions, the disclosures made to the Registrar of Companies, the reference to the restated and amended loan agreement as the loan agreement in the Articles of Association of SIPL (P1), were not placed on the record of the Court. Mr. Madon attempted to salvage the position by canvassing a submission that the aforesaid documents cannot be said to be material from the point of view of the determination of the controversy between the parties and, thus, it would not amount to suppression.
65. In the case of Bhaskar Jadhav (supra), on which reliance was placed by Mr. Kamat, the Supreme Court enunciated that it is for the litigant to come upfront and clean with all material facts and then, on the basis of the submissions made by the learned Counsel, leave it to the Court to determine whether or not a particular fact is relevant for arriving at a decision.
66. In the case at hand, the omission to disclose the aforesaid documents assumes critical salience as an endeavor was made on 45/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh behalf of the plaintiffs to assert that the instruments were got executed sans free consent and, thus, vitiated. The passing of the board resolutions preceding the execution of the instruments and the subsequent conduct on the part of the plaintiffs in incorporating those very instruments in the Articles of Association and reporting the same to the Corporate Regulator materially erodes the foundation of the plaintiffs such claim. Therefore, the endeavour of Mr. Madon to wriggle out of the situation by submitting that those facts and documents, which were allegedly suppressed were not material does not merit acceptance. Consequently, reliance by Mr. Madon on the decisions in the cases of Ballarpur Industries (supra), SSJ Business Enterprises (supra) and BSK Realtors (supra) does not advance the cause of the submission on behalf of the plaintiffs.
67. This propels me to the third part of the dispute between the parties, i.e. pledge, invocation of pledge and the sale of pledged securities. The share pledge agreement (Exhibit-O to the plaint) was executed on 5th February, 2022. Under clause 2.1 of the share pledge agreement, the plaintiff Nos.2 to 5, the pledgors, agreed and confirmed that for securing the due payment, repayment or 46/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh reimbursement, as the case may be of the outstanding and all amounts payable thereof in accordance with the terms of the transaction documents, the pledgors pledged the shares. The Amended and Restated Loan Agreement dated 29th July, 2021, defines the "transaction documents" to include, "any other agreement or document which the lender designates as "transaction documents". Under clause 6.1 of the Share Pledge Agreement, upon the occurrence of event of default the security trustee was entitled, at its sole discretion, to invoke the pledge on the collateral and/or transfer or register in its name or in the name of any other person, as it shall deem fit, all or any of the collaterals, and sale the collateral in accordance with the clause 6.2.
68. The relevant part of clause 6.2 reads as under:
"6.2 Power of Sale
(a) At any time after the occurrence of an Event of Default and if the Security Trustee intends to exercise its right of sale, it may issue a Notice for Sale to the Pledgors. If, within 2 (two) days after the date on which the Notice for Sale is issued, the Outstandings have not been discharged in full to the Satisfaction of the Security Trustee, the Security Trustee may, without prejudice to its other rights under Applicable Law and under or pursuant to this Pledge Agreement sell, transfer, and dispose of any or all the Collateral in 47/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh accordance with this Clause 6.2 and appropriate its proceeds, at the cost of the Pledgors. The Pledgors agree that such period of 2 (two) days constitutes reasonable notice for the purposes of Section 176 of the Indian Contract Act, 1872.
(b) Any sale of Collateral made by the Security Trustee pursuant to this Pledge Agreement may be made without the intervention of the court and without any consent of or further notice to any Pledgor at a public or private sale or on any securities exchange for cash, upon credit or for future delivery or transfer or procure registration in the name of the Security Trustee, or any of its nominees at the cost of the Pledgors, as the Security Trustee may in its absolute discretion deem fit. The Collateral (or any relevant part thereof) may be sold subject to any conditions which the Security Trustee may think fit to impose (i) to any person (including any person connected with the Pledgors or the Security Trustee); (ii) subject to any conditions which the Secured Parties may think fit to impose and (iii) at any price which the Security Trustee in its absolute discretion, considers to be the best obtainable in the circumstances. The Security Trustee shall not be obliged to make any sale of the Collateral if it determines not to do so, regardless of the fact that notice of such sale may have been given.
(c) The Security Trustee shall not be liable to the Pledgors or any other person for any costs, losses, liabilities or expenses relating to the sale of the Collateral or from any act, or omission of the Security Trustee, or its officers or employees in relation to the Collateral or in connection with any Finance Document. The Pledgors shall not have any claim against the Security Trustee in respect of any loss arising out of any sale pursuant to this Clause 6.2 or any postponement of such sale howsoever caused and whether or not a better price could or might have been obtained upon the sale or disposition of the whole or any part of the 48/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh Collateral by deferring or advancing the date of such sale or otherwise howsoever."
69. The aforesaid clauses, envisage a notice of sale to the pledgors. The pledgors agreed that the said period of two days constituted reasonable notice within the contemplation of Section 176 of the Indian Contract Act, 1872 and that the pledgors shall not have any claim against the security trustee in respect of any loss arising out of any sale in exercise of the said power.
70. The material on record indicates that the first notice of sale was issued on 5th September, 2023 to petitioner Nos.1 to 5 recording the events of default, and apprising the plaintiffs that an offer was received from a third party bidder to purchase the pledged security for Rs.35 Crores. There is not much controversy over the fact that the said sale did not materialize and, eventually, Balaji Enzymes and Chemical Pvt. Ltd., the said bidder, withdrew the offer on 11th September, 2023, since the conditions subject to which the offer was made were not accepted by Vistra (D3), the security trustee.
71. The trigger for the second notice of sale dated 4 th October, 2023 (Exhibit-UU to the plaint) was the bid received from Mayuresh (D1) the lender to acquire 100% shares of SIPL (P1), the 49/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh borrower, for an aggregate consideration of Rs.15 Crore. By the said notice, a final opportunity to redeem the pledged shares by depositing the amount not later than 6 pm on 5th October, 2023, was given to the Plaintiffs.
72. The invocation of the pledge and the sale of pledged shares to Mayuresh (D1) is at the heart of the controversy. The submission on behalf of the plaintiffs that there was no effective notice as the plaintiffs were not intimated about the exact due amount before invoking the pledge, need not detain the Court. The communication dated 9th June, 2023 addressed by Vistra (D3) to the plaintiffs, specified the outstanding amount then due and called upon the plaintiffs to timely service the future interest. The communication dated 31st August, 2023, in terms, documented as many as seven events of default and made known the intent of the security trustee to invoke the pledge. The communication in response to the aforesaid notices by Vistra (D3), by the plaintiffs, makes the position as to the understanding of the plaintiffs with regard to their liability absolutely clear. It was, inter alia, informed that the plaintiffs had cleared all the dues till December, 2022 and the plaintiffs were committed to pay all legitimate dues. Clause 16 50/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh of the said reply, in the context of the controversy between the parties, assumes immense significance. It reads as under:
"16. Please share the calculation of interest working on loan of Rs.18,20,00,000/- and of Rs.8,50,89,365/- delayed charges interest working. As apparently there seems to be mistake in working of interest amount. Please specify on what amount at what rate of interest and for how many days, interest amount is worked out."
73. The aforesaid response of the plaintiffs prima facie makes it clear that the plaintiffs reckoned that the liability was not restricted to the repayment of the loan under the loan agreement to the tune of Rs.18,20,00,000/-. And the plaintiffs were also liable to discharge the balance consideration of Rs.8,50,89,365/- and the interest thereon. This communication, in a sense, militates against the stated case of the plaintiffs that the first transaction of sale of leasehold rights and the second transaction of availing finances were completely distinct. As noted above, the entire gamut of the circumstances is required to be appreciated in the context of the relations between the plaintiffs and defendants and defendants inter se.
74. In addition, the reply to the second notice of sale, dated 5 th October, 2023 (Exhibit-UU to the plaint), makes it clear that, 51/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh without prejudice to the stand of the plaintiffs, the plaintiffs had decided to pay entire outstanding loan amount and in order to calculate and understand the total outstanding loan amount due and payable Vistra (D3) was called upon to provide SIPL (P1) the following details.
"12. In order to calculate and understand the total outstanding amount due and payable we request you to provide us the following details:
(i) interest statement on the loan amount;
(ii) ledger statement of the loan amount;
(iii) appropriation of repayment towards principal and interest done by you/Security Trustee towards the loan amount;
(iv) interest statement on the amount payable to M/s. Welvan Securities Private Limited;
(v) appropriation of repayment towards principal and interest done you M/s. Welvan Securities Private Limited towards the amount due to M/s. Welvan Securities Private Limited;
(vi) statement of levy of delay/default charges, if any."
75. The aforesaid reply on behalf of the plaintiffs again underscores the fact that the parties acknowledged that the balance consideration payable under the agreement for sale was paid by Mayuresh (D1) to Welvan (D2), as is evident from the extract of account, and the plaintiff agreed to secure even the said 52/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh payment by way of pledge of the shares. Therefore, the submissions on behalf of the plaintiffs that there was no adequate notice of the due amount, and the outstanding amount under the agreement for sale could not have been taken into account, prima facie, do not merit acceptance.
76. Nor the submission of Mr. Madon that despite the offer to pay the outstanding amount, the sale was effected and, therefore, it is infirm, carries substance. The number of notices issued by Vistra (D3) calling upon the plaintiffs to remedy the events of default and pay the outstanding amount, coupled with the fact that the amounts were not tendered, sustain an inference that the offer to pay the outstanding amount was not backed by the concrete action of payment.
77. This takes me to the pivotal issue of the legality of the sale in favour of Mayuresh (D1). As noted above, Mayuresh (D1) evinced interest after Balaji Enzymes and Chemical Pvt. Ltd. withdrew the offer. Under clause 8 of the offer letter dated 27 th September, 2023 Mayuresh (D1), informed Vistra (D3) that it proposes to acquire 100% of the invoked pledged shares alongwith the project, and set off dues aggregating to INR 15 Crore and the balance outstanding 53/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh facility shall continue to be due and payable by the borrower to the lender. Whether the security trustee could have accepted the said offer and sold the pledged security to the lender, is the moot question.
78. The challenge to the sale of the pledged security in favour of the lender is three-fold. First, it amounts to conversion. Second, there is no real sale as there was no parting of consideration and the set off is impermissible. Third, the sale of the pledged security was at gross under-valuation.
79. On the first count, Mr. Madon would urge, the legal position is settled by the judgment of the Supreme Court in the case of PTC Financial Services Limited (supra). In the said case, the Supreme Court considered the question at to whether the Depositary Act, 1996 has the legal effect of overwriting the provisions relating to the contracts and pledge under the Contract Act, 1872 and the common law as applicable in India. After an exhaustive reference to the decisions, which bear upon the sale of the pawn by the pawnee to self and the divergence in the views of the High Courts over the sale of the pawn by the pawnee to self, the Supreme Court enunciated the law as under:
54/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh "(v) Sale of the pledged goods by the pawnee to self
64. Dictum in the above judgments and Section 177 of the Contract Act, which confers on the defaulting pawnor the right to redeem the pledged goods till "actual sale", does not support pawnee's sale to self. Sale to self would in terms of the judgment in Official Assignee of Bomay v. Madholal Sindhu' (1946 SCC OnLine Mad 62) is a case of conversion and not "actual sale", and therefore, would not affect the pawnor's right to redemption under Section 177 of the Contract Act. Judgment of the Calcutta High Court in Haridas Mundra v. National & Grind-Lays Bank Ltd.
(1962 SCC OnLine Cal 184) also states this rule. Earlier, the Privy Council in Neikram Dobay v. Bank of Bengal (1891 SCC OnLine PC
25), observed that the sale of goods by the bank as the pawnee to itself is unauthorized but did not entitle the pawnor to have the goods back. The pawnor would be required to pay back the debt for which the goods were pledged as security to redeem the goods. If the loan remains unpaid after the demand, the pawnee is entitled to sell the goods and credit the proceeds towards the outstanding debt. After the goods are sold to a third party, the pledge ends. The pawnee in such cases would be liable if he fails to credit the loan account with the proceeds on the sale of the pawned goods. The pawnee may also be liable, subject to the contract, for damages for converting the goods for his use.
65. Several other High Courts have similarly opined and we agree that the Contract Act does not conceive of sale of the pawn to self and consequently, the pawnor's right to redemption in terms of Section 177 of the Contract Act survives till "actual sale". In Ramdeyal Prasad v. Sayed Hasan, (1943 SCC OnLine Pat 50) the Patna High Court has held that the sale by the pawnee to himself of the securities pledged is void; it does not put an end to the contract of the pledge to entitle the pawnor to recover the goods without payment of the amount thereby secured, nor does it 55/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh entitle the pawnor to damages. The pawnor is bound by the resale duly effected by the pawnee to third persons. However, where the pawnee has erroneously represented to the pawnor before such resales that the securities have been sold and, therefore, no longer available for redemption, the pawnee becomes liable for the value as conversion.
66. A Division Bench of the Madras High Court in S.L. Ramaswamy Chetty and Another v. M.S.A.P.L. Palaniappa Chettiar, (1929 SCC OnLine Mad 62) relying upon the decision of the Privy Council in Neikram Dobey v. Bank of Bengal (1891 SCC OnLine PC 25), opined that where the pawnee has the power to sell in default, takes over upon himself the property pledged without the authority of the pawnor by crediting its value in the account with him, this act, though an unauthorized conversion would not put an end to the contract of pledge.
67. There is one solitary judgment of the single judge of the Punjab and Haryana High Court in Dhani Ram and Sons v. The Frontier Bank Ltd. and Another, (1961) SCC OnLine Punj 81) which holds that the sale of the pawned goods by the pawnee to himself is not void, and the pawnee was held to be the legal owner of the pledged shares. This decision proceeds with the incorrect understanding of the ratio in Neikram Dobay (supra), and thus, we deem it appropriate to overrule this ratio in Dhani Ram and Sons (supra).
........
105. Regulation 58(8) entitles the pawnee to record himself as a 'beneficial owner' in place of the pawnor. This does not result in an 'actual sale'. The pawnee does not receive any money from such registration which he can adjust against the debt due. The pledge creates special rights including the right to sell the pawn to a third party and adjust the sale proceeds towards the debt in terms 56/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh of Section 176 of the Contract Act. The reasoning that prior notice under Section 176 of the Contract Act would interfere with transparency and certainty in the securities market and render fatal blow to the Depositories Act and the 1996 Regulations is far- fetched as it fails to notice that the right of the pawnee is to realise money on sale of the security. The objective of the pledge is not to purchase the security. Purchase by self, as held above, is conversion and does not extinguish the pledge or right of the pawnor to redeem the pledge. Equally, it may be a disincentive for both the pawnor and the pawnee in many cases, if we accept this interpretation and ratio, which would inhibit them from entering into a transaction creating a pledge. Difficulties and disputes regarding price, valuation, right to redemption etc. could invariably arise. There would also be difficulties in case the dematerialised securities are not traded as in the present case."
(emphasis supplied)
80. The Supreme Court has enunciated in clear and explicit terms that the Contract Act does not conceive a sale of the pawn to self and, consequently, the pawnor's right to redeem in terms of Section 177 of the Contract Act survives till "actual sale". The objective of the pledge is not to purchase the security. Purchase by self is conversion and does not extinguish the pledge or the right of the pawnor to redeem the pledge.
81. The endeavour of Mr. Kamat to distinguish the aforesaid judgment on the ground that, in the instant case, there is an 57/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh independent security trustee and, thus, it cannot be said that the pawnee has resorted to self sale, appears attractive, at the first blush. However, the submission would warrant a judicious scrutiny keeping in view of the substance of the matter. Absent the intervention of security trustee, the sale clearly falls within the dragnet of the mischief of conversion. In the case at hand, the concomitant circumstances cannot be lost sight of. It is not the case that Mayuresh (D1) did compete with other bidders. In fact, upon the non-materialization of the first bid, under a fortnight, Mayuresh (D1) offered to purchase the pledged security for a consideration of Rs.15 Crore, by way of set off against the dues owed by the plaintiffs to Mayuresh (D1). In such circumstances, the second and third count of challenge to the validity of the sale also come to the fore. In effect, the price of pledged security, as determined by Mayuresh (D1), itself, was set off against the debt owed by plaintiff No.1 to Mayuresh (D1). The agency of security trustee, in the circumstances of the case, prima facie, does not seem to have made any qualitative difference.
82. As regards the value fetched by the sale of the pledged security, the submission of Mr. Engineer, the learned Counsel for 58/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh Vistra (D3) that, under the pledge agreement Vistra (D3) was not liable to find out the market value of the pledged shares and was entitled to sell the pledged shares at the best value available, is required to be appreciated in the face of the contemporaneous circumstances. Evidently, a month prior to the sale in favour of Mayuresh (D1), an offer to purchase the pledged security for Rs.35 Crore was received. The time-lag was too short to erode the value of the pledged security by more than half. Moreover, Vistra (D3) prima facie does not seem to have considered whether the consideration of Rs.15 Crore, offered by Mayuresh (D1), was optimum and the best value available. All these issues, would undoubtedly merit adjudication at the trial. However, the plaintiffs have succeeded in making out a prima facie case to assail the legality and validity of the sale in favour of Mayuresh (D1).
83. The submissions on behalf of the defendants that on account of suppression of facts and the breach of obligations, the plaintiffs are not entitled to any relief, in my considered view, is unworthy of acceptance. The challenge to the sale of the pledged security by Vistra (D3) on the three counts, noted above, stands on a completely different footing. The taint of suppression of facts, does 59/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh not get attracted to the factum of sale, as such, for the challenge is essentially to the justifiability of the action of Vistra (D3), in selling the pledged security, and Mayuresh (D1), in purchasing the pledged security, in its character as the real pledgee. The challenge to the sale of pledged security on the aforesaid counts is, prima facie, sustainable despite the failure on the part of the Plaintiffs to make out the case that the instruments were illegal and void.
84. Does the aforesaid prima facie finding entitle the Plaintiffs to seek redemption of the pledge, at an interim stage? The Court has to be alive to the fact that the Plaintiffs are seeking redemption by offering to pay the amount which they consider to be due, and not according to the terms of the instruments. There is substance in the submission on behalf of the defendants that the plaintiffs will have to encounter an impediment of seeking the enforcement of the very instruments, which were stated to be illegal and void.
85. The aforesaid consideration would indicate that the claim of the plaintiffs that the instruments in question were got executed without their free consent are not, prima facie, borne out by the material on record. On the contrary, there is voluminous material to show that the plaintiffs have acknowledged the execution of the 60/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 ::: IAL14838 of 2024+.doc Santosh instruments and even acted upon them. The board resolutions furnish the prelude to the due execution of the instrument. The reporting and disclosures before the regulatory authorities, constitute the sequel to the due execution of the instruments. In addition, there are documents which evidence the payment of interest in accordance with the terms of the contract between the parties. The plaintiffs had deducted TDS on the said interest as well. Moreover, the communications addressed by the plaintiffs on 31st August, 2023 and 5th October, 2023, adverted to above, in a sense, constitute the acknowledgment of the liability.
86. In the face of the aforesaid material, at this stage, the Court cannot delve into the rival claims as to the exact amount due and payable, under the instruments. The question as to whether the interest was payable on the agreed terms, whether the plaintiffs had agreed to pay interest on the balance consideration at the enhanced rate of 36% p.a., vide communication dated 26 th November, 2020, whether the said letter dated 26 th November, 2020 is forged, as alleged, and the correctness of the various amounts claimed to be due and payable by the plaintiffs to defendant No.1 as shown in the table (Exhibits-H and I appended to the affidavit- 61/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::
IAL14838 of 2024+.doc Santosh in-reply dated 18th June, 2024), are all matters for evidence and trial. Therefore, at this interlocutory stage, this Court would not be justified in entertaining the prayer to direct the defendants to accept the amount, as computed by the plaintiffs, towards the full and final settlement of the claim of the defendants.
87. The upshot of the aforesaid consideration is that, the plaintiffs have succeeded in making out a prima facie case as regards the component of legality and validity of the sale of the pledged security by Vistra (D3) in favour of Mayuresh (D1). It is true, even if the said sale is declared to be illegal and void, the pledge would not come to an end. However, the interest of the plaintiffs with regard to the pledged security deserves to be adequately protected, during the pendency of the suit, lest further transfer of the pledged security by Mayuresh (D1) would cause prejudice to the plaintiffs and also lead to multiplicity of the proceedings. Therefore, a limited interim relief in terms of prayer clause (d) (i) of IA(L)/400/2024 deserves to be granted.
88. Hence, the following order:
:ORDER:
(A) IA(L)/14838/2024 stands rejected.
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IAL14838 of 2024+.doc Santosh (B) IA(L)/400/2024 stands partly allowed in terms of prayer clause (d(i)) only in the following terms :
(i) Mayuresh (D1), its agent or any person claiming under it, is restrained by an order of temporary injunction from alienating, disposing of, encumbering, creating any third party rights in or parting with possession of, the pledged shares, till the final disposal of the suit.
(ii) Rest of the prayers in IA(L)/400/2024 stand rejected.
(iii) Costs in cause.
( N.J.JAMADAR, J. ) 63/63 ::: Uploaded on - 09/06/2025 ::: Downloaded on - 09/06/2025 22:40:21 :::