Strategic Credit Capital Private ... vs Jaroli Vincom Private Limited & Ors. on 11 July, 2016

[Cites 13, Cited by 0]

Delhi High Court

Strategic Credit Capital Private ... vs Jaroli Vincom Private Limited & Ors. on 11 July, 2016

1. The aforesaid applications have been filed by ICICI Bank Limited, firstly, to seek impleadment as a party defendant in the present suit and, secondly, to seek vacation/ clarification of the ex-parte ad-interim order of injunction dated 29.09.2015 passed by this Court in the plaintiff's application, i.e. I.A. No.20390/2015 under Order XXXIX Rules 1 & 2 CPC. By the said order dated 29.09.2015 which continues in force till date this Court restrained the defendants "from, in any manner, taking any action which would dilute or lessen the security margin against the shares to an amount of less than 45% of the loans advanced by the plaintiffs to defendant Nos. 1 to 9 and are further restrained from altering the shareholding structure and share capital structure of defendant No.10.".

2. To understand the controversy arising in the present suit and the case of the applicant ICICI Bank Limited, the relevant background facts may first be taken note of.

3. The case of the plaintiffs, in short, is that a few major investor shareholders were seeking to exit from the defendant No.10 company i.e. ABG Shipyards Ltd. (ABGSL) which is a public limited company. Plaintiff No.2 advanced loans to defendants No.1 to 9-who are described as CS(OS) 2941/2015 Page 2 of 44 "Promoter related entities", ABG International Private Limited (ABGIPL for short), Mahavir Distributors Pvt. Ltd. and Aarakshan Trading Pvt. Ltd. (collectively known to as "Borrowers") vide separate loan agreements between 2005 to 2013, at different intervals to enable them to purchase those shares from the exiting investor shareholders, at the behest of defendant No.11. In consideration of the said loans, defendant Nos. 1 to 9, inter alia, pledged their purchased shares as security for repayment of the loan and interest to plaintiff No.2. Defendant No.10 is India's largest private sector ship-building company and is a part of the ABG group of companies. ABGIPL had 55.71% shareholding in ABGSL as on 30.06.2015 - making it a majority stakeholder in defendant No.10 company. The plaintiffs state that defendant No.11- Mr.Rishi Aggarwal, holds and controls the ABG group of companies and is also a promoter of defendant No.10 company.

4. The said loans were availed of from plaintiff No.2 for an amount aggregating to Rs.805.1 Crores. The said purchase of shares of defendant No.10 company, by defendant Nos. 1 to 9 were made from the stock exchanges. According to the plaintiffs, it was under the instructions of the promoter/ defendant No.11, as well as under the instructions of defendant No.10 company that defendants No.1 to 9, Mahavir Distributors Pvt. Ltd. and Aarakshan Trading Pvt. Ltd. purchased the shares of the defendant No.10 company from the stock market. The case of the plaintiffs is that defendant No.5 holds 14.36% shareholding in defendant No.10 company. The plaintiffs disclose in the plaint the interconnection between the defendants in terms of common directorship and shareholding, inter se the said defendants.

CS(OS) 2941/2015 Page 3 of 44

5. The case of the plaintiffs is that each of the borrowers, in concert with defendant No.10 & 11, have purchased the said shares of defendant No.10 company with the mala fide intent to circumvent the embargo set under the laws, regulations and the Take Over Code of Securities Exchange Board of India (SEBI), which would have required the defendant No.10 and 11 to make certain disclosures for each purchase of shares made by defendant No.11 beyond the prescribed limit. According to the plaintiffs, defendant No.11 consolidated his control over defendant No.10 by benami purchase of shares through the Promoter related entities. The objective of the said exercise, according to the plaintiffs was:

"(i) to consolidate the shareholding of Defendant No. 11 in Defendant No. 10 Company to allow it to maintain its strategic control over the affairs and management of Defendant No. 10 Company; (ii) a market making exercise in relation to such shares being purchased and (iii) for raising funds for Defendant No. 10 Company in the future without any further issue of shares."

6. The plaintiffs disclose in the plaint that under the loan agreements entered into between the plaintiff No.2 and defendants No.1 to 9 respectively-which appear to contain similar, if not identical, terms & conditions, the borrowers were obliged to make payment of their installments of loans, apart from interest, expenses and charges, as and when they became due and payable. They were also obliged to maintain the security cover provided by them at a margin within the prescribed limits. From the reading of the plaint, it appears that the loan agreements entered into between the plaintiff No.2 as lender and defendants No.1 to 9 as the borrowers, apart from others, contain identical clauses 3.1 and 3.2 which CS(OS) 2941/2015 Page 4 of 44 relate to the aspect of "margin" and "additional security". The said clauses read as follows:

"3.1 Margin: So long as there exists any Loan Balance due from the Borrower to the Lender, the Lender may require the Borrower to maintain or cause to maintain with the Lender at all times, a Margin of such percentage as stipulated in the Schedule(s) of Terms relevant to the Facility or as varied by the Lender consisting of Securities acceptable to the Lender. The computation of the value of the securities shall be based on the "Market Price". The Lender may calculate the Margin in respect of each Loan separately or collectively, in respect of all the Loans.

The Borrower agrees that the Lender prescribes the date and time by which the margin/ security are to be made available and the Lender may refuse to accept any payments in any form after such deadline for margin/ security expires. 3.2 Additional Security: In the event that the market value (or net asset value, in case of units) of the Security given as margin falls, or if in the circumstances, the Lender deems fit, the Lender may serve upon the Borrower a notice demanding additional security/ collateral by way of delivery of further securities being securities of companies/ mutual funds/ entities acceptable to it or any other security as mutually agreed upon between the Borrower and the Lender and the Borrower shall make up the difference either by payment in cash to the Lender or by causing the delivery of additional Securities, acceptable to the Lender, of the value necessary to make up the difference immediately. The Borrower shall also execute and submit to the Lender, such Security along with necessary documents for creation of the Security. Notwithstanding that no Event of Default as enumerated under this Agreement and/ or Schedule(s) of Terms relevant for the Facility has occurred, the Lender will also have the option to sell/ transfer any portion of the Securities and apply the amount realized towards liquidation of part of the Loan balance(s), so as to maintain the CS(OS) 2941/2015 Page 5 of 44 Margin required under this Agreement and/ or Schedule(s) of Terms relevant for the Facility."

7. The plaintiffs state that in respect of the loans advanced to M/s Aarakshan Trading Pvt. Ltd. (which is not party to the suit), there was a breach of the terms of the loan agreement and the security agreement, as the said borrower failed to maintain the margin at the minimum prescribed limit. Consequently, vide a notice dated 22.07.2015, the pledge of shares made by the said entity was invoked by plaintiff No.2. Thereafter, the said 12.18% shares held by Aarakshan Trading Pvt. Ltd. in defendant No.10 were purchased by plaintiff No.1. Accordingly, plaintiff No.1 is now a shareholder in defendant No.10 company, holding 65,66,654 shares equivalent to 12.18% shareholding in defendant No.10 company.

8. The plaintiffs further state that plaintiff No.1 also holds additional 3.52% shareholding in defendant No.10 company. On 25.07.2015 plaintiff No.2 assigned-by way of direct assignment the loans and receivables, as defined, together with all rights, title and interest of plaintiff No.2 under and in relation to the loan documents as well as security documents in favour of plaintiff No.1. Thus, plaintiff No.1 stepped into the shoes of plaintiff No.2 as the lender of loans to defendant Nos. 1 to 9. However, the obligation of collection of the loans, interest etc. remained with plaintiff No.2. Plaintiff No.2 is also obliged to provide other services as defined under the terms of the collection and servicing agreement dated 25.07.2015 entered into between the plaintiff No.1 and plaintiff No.2.

9. The plaintiffs state that defendants No.1 to 9 have defaulted in repaying their respective loans extended to them. In addition, they have CS(OS) 2941/2015 Page 6 of 44 failed to maintain the security cover at a margin at prescribed limits in accordance with all terms of their respective facility documents. The outstanding loan position as on 03.09.2015 which includes the principal, interest, penalties and other charges of defendants No.1 to 9 has been disclosed in the plaint as follows:

         Defendant No.       Outstanding Loan Sanctioned Loan
                             Amount (in INR) Amount (in INR)

         Defendant No.1          3,53,81,17,415      160,00,00,000/-

         Defendant No.2          3,52,31,31,716      165,00,00,000/-

         Defendant No.3          1,12,78,22,659       55,00,00,000/-

         Defendant No.4               72,40,07,420    50,00,00,000/-

         Defendant No.5               56,40,93,926    21,00,00,000/-

         Defendant No.6          1,00,00,00,801       70,00,00,000/-

         Defendant No.7               16,53,65,902     8,00,00,000/-

         Defendant No.8               14,04,11,913     7,00,00,000/-

         Defendant No.9               52,64,51,649    30,00,00,000/-

10. The plaintiffs state that on 08.09.2015, default notices were issued to defendants No.1 to 9. The said defendants were informed that the market value of the shares pledged by each of them had fallen in a manner such that the security cover had fallen below the margins that the said defendants were obliged to maintain in respect of the outstanding loan. Defendants No.1 to 9 were directed to provide additional marketable and unencumbered CS(OS) 2941/2015 Page 7 of 44 securities, free from lock-in and of adequate value to plaintiff No.1 so as to increase the security cover, in accordance with the respective agreements with defendants No.1 to 9. The plaintiffs have tabulated the value of the security cover after its devaluation in the plaint as follows:

Lender Outstanding Collateral Current Security Loan including Value as of security Cover as Penalty: 03 cover per interest etc. as September agreement on 3 2015 September 2015 JAROLI 3,53,81,17,415 35,34,21,687 0.10x 1.75x VINCOM PVT.

LTD.

KBS TRADING 3,52,31,31,716 28,26,41,293 0.08x 1.75x PVT. LTD.

SEAGLIMPSE 56,40,93,926 3,24,42,455 0.06x 1.75x INVESTMENTS PVT. LTD.

AAUREOLE    16,53,65,902                1,43,14,478     0.09x     2x
CONSULTANTS
PVT. LTD.
CAROL                52,64,51,649       18,52,50,236 0.35x        2x
SECURITIES
PVT. LTD.
GKK CAPITAL 1,00,00,00,801              4,95,42,864     0.05x     2x
MARKETS
PRIVATE LI
NAVIN      14,04,11,913                 1,65,22,033     0.12x     2x
KHANDELWAL




CS(OS) 2941/2015                                                   Page 8 of 44
 PRIME                1,12,78,22,659    3,65,88,270    0.03x       2x
SECURITIES
LTD.
PRIMESEC             72,40,07,420      2,38,09,331    0.03x       2x
INVESTMENTS
LIMITED
Total                11,30,94,03,401 99,45,32,648

11. In response to the default notice, defendant No.8 - acting for himself and on behalf of the Khandelwal group, i.e. defendants No.1, 2 and 6 sent a reply dated 21.09.2015 stating that they were not in a position to provide any additional security to plaintiff No.1. In the said reply, the defendant No.8, inter alia, stated that the loans were taken at the behest of, and under the instructions of the promoter of defendant No.10, namely defendant No.11, and that the shares were to be purchased from the Standard Chartered Private Equity Limited (which were being sold on the stock exchange), since promoters were unable to purchase the said shares beyond a particular limit.

Hence, the said defendants, namely defendants No.1, 2, 6 and 8 were asked to act as the front for purchase of the said shares. The said defendants also stated in the reply that the intention behind the purchase of the said shares was to consolidate the shareholding of defendant No.11 in the defendant No.10 company; to allow him to maintain his strategic control over the affairs and management of defendant No.10 company; that it was a marketing exercise in relation to the purchase of said shares; that it was done to enable raising of funds for defendant No.10 company in future, without issuance of any further shares; that the promoter of defendant No.10 had assured a certain return per share to the defendants/ borrowers, stating that CS(OS) 2941/2015 Page 9 of 44 there would be a strategic investor brought in the defendant No.10 company; that defendants No.10 & 11 had defaulted in their promise extended to the borrowers and other broking entities who had been approached for purchase of shares in defendant No.10 by defendant No.11, and; that the said defendants are contemplating taking of legal action against the promoter of defendant No.10.

12. The plaintiffs state that the reply aforesaid undermines the securities given by defendants No.1 to 9 against the outstanding loans advanced by the plaintiffs amounting to Rs.11,30,94,03,401. The plaintiffs state that plaintiff No.1 being a shareholder of defendant No.10 company received a notice dated 13.08.2015 for holding of the Annual General Meeting (AGM) of defendant No.10 company on 30.09.2015. This notice shows the mala fides of defendants No.10 & 11 to dilute the value of the securities held by the plaintiffs against the loans extended to defendant Nos. 1 to 9. Item No.5 of the AGM notice issued by defendant No.10 relates to passing of a resolution to create, offer, issue securities in the form of equity shares, secured or unsecured debentures, bonds or any other securities for a value of Rs.2,000/- Crores, the effect thereof would be to dilute the value of the security (8.84% shareholding in defendant No.10) pledged with the plaintiffs. The plaintiffs also state that they "are also given to understand that Defendant No.11 is pursuing debt restructuring or other restructuring of Defendant No.10 company". The plaintiffs state that defendants No.10 & 11, through defendants No.1 to 9, have defrauded and cheated the plaintiffs and continue to act in a manner which is eroding and diluting the securities held by the plaintiffs, and they are ensuring that the monies lent out by the plaintiffs CS(OS) 2941/2015 Page 10 of 44 cannot be recovered in terms of the various agreements. The said conduct of the defendants, it is claimed, has given rise to the present cause of action against the defendants. The plaintiffs also set out their grievance that the proposed resolutions and notice for AGM shows that there is no guideline prescribed with regard to the pricing of the issue, the mode of issue (to be issued through private placement, or otherwise)-which enables defendant No.11 to exercise the authority derived by virtue of the proposed resolution to the detriment of the plaintiffs. By enabling defendant No.10 to issue shares without qualification on pricing or mode, there is a reasonable and real threat of loss of value of the securities held by the plaintiffs against the loans extended inasmuch, as, such issuance would necessarily dilute the percentage of shareholding pledged with the plaintiffs as security, and would also impact the valuation of the securities themselves, depending on the pricing of the fresh issue that may be made by defendant No.10. In this background, the substantive reliefs sought in the suit against the defendants are the following:

"A. A decree of Permanent Injunction restraining the Defendants and/ or its agents and/ or representatives from taking any action which may in any manner whatsoever directly and/ or indirectly dilute, whether in value or in percentage, the securities given to the Plaintiffs in the form of shares held by Promoter related entities in Defendant No.10 Company against the outstanding loans amounting to INR 11,30,94,03,401/- from Promoter related entities to Plaintiff No.1;

B. A decree of Permanent Injunction restraining the Defendants from interfering with the Plaintiff No.1's voting and other beneficial rights in respect of equity shares of Defendant CS(OS) 2941/2015 Page 11 of 44 No.10 company as are pledged to or otherwise held by the Plaintiff No.1;"

13. On 29.09.2015, the Court, at the stage of ex-parte hearing, while issuing summons in the suit and notice in the stay application, i.e. I.A. No.20390/2015, inter alia, observed as follows:

" It is the plaintiffs' case that they had advanced loans to the tune of Rs.805 crores, which currently, along with interest totals an outstanding amount of Rs.1130 crores. The loans were secured against the shares of the defendant No.10-company under Clauses 3.1 & 3.2 of the loan agreement which provided for the maintenance of a margin of security in terms of the market value of the shares of defendant No.10, as would be intimated by the plaintiffs from time to time. The schedule of the terms of the loan agreement requires the defendants to provide a margin of 30% against the shares and further 15% margin for immediate disposal (Clauses 7 & 8 of the facility schedule of terms of loan against shares).

Mr. Rajiv Nayar, the learned Senior Advocate for plaintiff No.1 would submit that the defendants propose to dilute the security margin of the plaintiffs and latter's request to maintain status quo apropos the value and percentage of the shares has been rejected vide letter dated 21st September, 2015 (page 2899). The letter inter alia reads as under:

"We refer to your notice dated 8 September 2015 wherein you have requested for (i) an additional margin security cover in relation to the Loan Agreement (as defined therein), and (ii) end use certificate in relation to the loans disbursed under the Loan Agreement. Please note that we are unable to fulfil your request for furnishing additional security at this stage. It is important to note that KBS Trading purchased the aforementioned securities at a price of INR 360 per share. However, with the interest on the said CS(OS) 2941/2015 Page 12 of 44 amount adding up the minimum holding cost of these securities is nearly INR 900 per share as on the date of this letter and our holding cost has gone up considerably. As on date, the effective holding of KBS Trading is approximately 33,00,000 shares of ABG Shipyard amounting to INR 270 crores. KBS Trading and the undersigned were assured that a strategic investor shall be infusing funds in ABG Shipyard and we were given to understand that discernible profits would be made-on the shares of ABG Shipyard. However, none of the aforementioned objectives, were achieved and the assurances were not fulfilled by ABG Shipyard and / or its promoters. To our knowledge, apart from the undersigned, many other broking entities (including companies controlled by die promoters of ABG Shipyard), were also made to carry out a similar exercise. Such companies took loans for the purpose of purchase of Securities of ABG Shipyard. These loans were, to our knowledge, secured by guarantees and, share pledge from group companies of ABG Shipyard, including ABG International Private Limited, ABG Cement Hold Co Private Limited etc! The undersigned and several other broking entities approached by the promoters of ABG Shipyard, are contemplating joint and several actions against ABG Shipyard and its promoters to make up for the loss incurred as a consequence of the aforementioned securities purchase undertaken at the behest of ABG Shipyard and its promoters."

The learned Senior Advocate submits that if the value of the shares falls below the agreed 45% (30%+15%), it would seriously impair the security of the plaintiffs in the loans advanced to the defendants. He seeks an injunction against the defendants from diluting their interests in the 45% security margin of the shares against the loans.

CS(OS) 2941/2015 Page 13 of 44

This Court is of the view that the plaintiffs have made out a prima facie case for an ex parte ad interim injunction and in case such an order is not passed at this stage, their rights and interests would be irreparably prejudiced. The balance of convenience too lies in favour of the plaintiffs.

In the circumstances, till the next date of hearing, the defendants are restrained from, in any manner, taking any action which would dilute or lessen the security margin against the shares to an amount of less than 45% of the loans advanced by the plaintiffs to defendant Nos. 1 to 9 and are further restrained from altering the shareholding structure and share capital structure of defendant No.10."

14. The background in which the aforesaid two applications have been made by ICICI Bank Ltd. may now be taken note of.

15. The case of the applicant ICICI Bank Ltd. is that it has advanced substantial sums of money - to the tune of Rs.4,379 Crores, to defendant No.10. The said monies are in addition to loans advanced by various other secured lenders. The other secured lenders/ banks who have advanced loans to defendant No.10 are the following:

"(i) State Bank of India, (ii) Bank of Baroda, (iii) Bank of India, (iv) Punjab National Bank, (v) IDBI Bank Limited, (vi) Indian Overseas Bank, (vii) Export Import Bank of India, (viii) Dena Bank, (ix) Syndicate Bank, (x) Laxmi Vilas Bank, (xi) South Indian Bank, (xii) Oriental Bank of Commerce, (xiii) Andhra Bank, (xiv) IFCI Limited, (xv) Indian Bank, (xvi) Punjab and Sind Bank, (xvii) Canara Bank, (xviii) State Bank of Patiala, (xix) State Bank of Travancore and (xx) Central Bank of India."

16. The applicant ICICI Bank Ltd. states that defendant No.10 is under a restructuring scheme and a Corporate Debt Restructuring process (CDR CS(OS) 2941/2015 Page 14 of 44 process) is already ensuing. The applicant bank is acting as the monitoring institution (M.I.) in the said CDR process. The aforesaid 20 banks/ financial institutions, apart from the applicant, are collectively the CDR lenders. The present applications have been filed by ICICI Bank Ltd. in a representative capacity as the monitoring institution for the CDR lenders, pursuant to a joint lender meeting held on 23.12.2015, wherein the majority CDR lenders have consented to the Strategic Debt Restructuring invocation and called upon the applicant to take necessary steps in relation to the order dated 29.09.2015.

17. The applicant states that as on 30.09.2015, a sum of Rs.3544 Crores is outstanding from defendant No.10 to the applicant bank alone. The applicant has set out the particulars of the agreements entered into between defendant No.10 on the one hand, and the lending banks on the other hand, from time to time. The working capital finances granted by the consortium of banks, including the applicant, was increased from Rs.865 Crores (vide a Working Capital Consortium Agreement dated 14.02.2006), in stages, to Rs.9132 Crores (vide a 7th supplementary agreement dated 29.03.2012). A further Supplemental and Amendatory Agreement was executed between defendant No.10 and various banks, including the applicant on 04.12.2013. In March, 2014, defendant No.10 had an outstanding debt of INR 11,216 Crores owned to the lenders. The said debt was restructured. From out of the 28 lenders, 22 had agreed to restructure the loans (CDR lenders total outstanding debt was Rs.9975 Crores in March 2014). As a consequence thereof, a CDR scheme was prepared and a provisional letter of approval by the CDR Cell was issued on 27.03.2014 as per the RBI guidelines.

CS(OS) 2941/2015 Page 15 of 44

18. On 28.03.2014, a Master Restructuring Agreement (MRA) was executed between defendant No.10 on the one hand, and 21 banks/ financial institutions, including the applicant (collectively referred to as CDR lenders) on the other hand. In relation to the salient terms of the said MRA, the applicant has stated the following:

"1. Vide Section 2.7.9 (iv) (d) of the MRA, the Defendant No.10 had also provided in favour of the CDR Lenders, the right to compulsorily convert an amount aggregating to INR 1000 crores out of total INR 1561 crores, being the Funded Interest Term Loan (FITL) and interest thereon, into equity shares or 0.01% compulsorily convertible preference shares, before 31.03.2016. It is stated that this is a pre-existing right available with the CDR Lenders upon the execution of the MRA.

2. The existing debt of ABG as on the date of execution of the MRA, INR 11,216 crores (Rupees Eleven Thousand Two Hundred and Sixteen crores only) was restructured. Accordingly, the interest thus accrued (but not paid) from 01.08.2013, till certain identified dates, was converted into a Funded Interest Term Loan. Therefore, a moratorium was granted for different time periods with respect to different type of facilities.

3. The repayment of certain loans was postponed until expiry of the corresponding period of moratorium and repayment of certain loans has already commenced from the fiscal quarter ending on 30.09.2015.

4. Additional priority loans of a cumulative sum of INR 1,813 crores (Rupees One Thousand Eight Hundred and Thirteen crores) was granted for three identified capital expenditures.

5. Working capital facilities were also restructured.

CS(OS) 2941/2015 Page 16 of 44

6. Vide Section 2.4.3(viii) read with Section 6.6(ii), the CDR Lenders also have a right to convert entire/ part of the defaulted interest and entire/ part of the defaulted principal into Equity Shares.

7. In addition to the existing security, vide Section 3.1.1

(vi), the Promoters (namely Rishi Agarwal and ABG International Private Limited), agreed to pledge 15% of the shareholding of ABG in favour of the Security trustee, namely "3i-Infotech Trusteeship Services Limited", for the benefit of the CDR Lenders.

8. Further, vide Sections 3.1.1 (vi) read with 3.3, the Promoters also agreed to pledge the balance 49% of the shareholding of ABG in favour of the Security Trustee, for the benefit of the CDR Lenders within 1 year of the issuance of the CDR Letter of Approval."

19. The applicant states that the Letter of Approval was issued by the CDR Empowered Group on 27.03.2014. Thereafter the finalized minutes were issued on 23.04.2014 as per which;

"1. The right to convert the debt into equity was acknowledged therein [Clause (xiv)].

2. The obligation of the promoters to pledge the entire shareholding of ABG was also acknowledged therein [Clause (xvii)]."

20. On 30.12.2014, defendant No.10 submitted a compliance status on fulfillment of various conditions stipulated under the CDR scheme. The applicant further states that the CDR lenders were informed of the passing of the order dated 29.09.2015 sometime in October, 2015. The applicant also states that a majority of 17 banks out of 22 banks, forming part of the Joint Lenders Forum (JFL) - who represent 85.5% of the total debt by value and 77% by number, approved the invocation of the Strategic Debt Restructuring CS(OS) 2941/2015 Page 17 of 44 (SDR) in relation to the defendant No.10 in its meeting of 23.12.2015. Thus, defendant No.10 consented to the right of the CDR lenders to compulsorily convert a part of FITL given (being Rs.1,000/- Crores) into equivalent shares or compulsorily convertible preference shares (before 31.03.2016). Accordingly, for the effective exercise of this contractual right by the CDR lenders, and further in the light of the RBI prescribed SDR mechanism, defendant No.10 would be required to issue additional shares. The applicant states that the order dated 29.09.2015 is blocking the aforesaid mechanism of debt restructuring of defendant No.10. The applicant states that defendant No.10 owes a sum of Rs.13,623 Crores to the CDR lenders. The stake of not only the applicant, but several other banks and institutions are involved. The CDR lenders have undertaken a process of revival of the ABG through the SDR mechanism (as prescribed by the Reserve Bank of India) by the Joint Lenders Forum meeting dated 23.12.2015, where majority of CDR lenders have furnished their consent.

21. The submission of the applicant is that the ex-parte ad-interim order of injunction granted by this Court on 29.09.2015, insofar as it restrains the alteration of the shareholding structure and share capital structure of defendant No.10, obstructs the implementation of the SDR scheme. The applicant submits that the aforesaid material facts & circumstances were not disclosed by the plaintiffs to this Court while obtaining the ex-parte ad- interim order of injunction dated 29.09.2015. The applicant submits that the exercise of various rights created in favour of the CDR lenders under the MRA, including the creation of pledge of the shareholding in defendant No.10 for the benefit of the CDR lenders, and the right to convert their CS(OS) 2941/2015 Page 18 of 44 outstanding debts into equity in defendant No.10, have been obstructed by the passing of the ex-parte ad-interim order of injunction dated 29.09.2015.

22. Mr. Vashisht, learned senior counsel appearing for the ICICI Bank Ltd. has firstly drawn the attention of the Court to the decision of the Division Bench of this Court in Bhisham Sawhney and Another Vs. Union of India & Others, 1994 (30) DRJ 318, to submit that the present applications are maintainable at the behest of the applicant since the ex-parte ad-interim order of injunction dated 29.09.2015 passed by this Court prejudicially affects the applicant and the other CDR lender banks and institutions. He submits that if the applicant can, with the leave of the Court, prefer an appeal against the said ex-parte order of injunction, the applicant can just as well, seek impleadment as a party defendant in the suit and pray for vacation/ modification of the said order as well. He relies on Smt. Jatan Kumar Golcha Vs. Golcha Properties (P) Ltd. (in liquidation), (1970) 3 SCC 573, to submit that the ex-parte ad-interim order of injunction prejudicially affecting the applicant and the other CDR lenders violates the principles of natural justice, as the applicant and the other CDR lenders were not granted any opportunity of hearing before the passing of the said order and thus, the said order should be recalled. In this decision, the Supreme Court also held that an appeal would be competent at the behest of a person not a party to the proceedings who is prejudicially affected by the order passed by the Court.

23. Mr. Vashisht submits that the rights of the plaintiffs arise from, and are founded upon the terms of the loan agreements entered into between plaintiff No.2 and defendants No.1 to 9 individually. Defendant Nos. 10 and CS(OS) 2941/2015 Page 19 of 44 11 are not even party to those agreements. A reading of clauses 3.1 and 3.2 of the said loan agreements, which are identical, shows that in relation to each of the borrowers, namely defendants No.1 to 9 - so long as the loan balance exists and is due, the lender-namely plaintiff No.2, could require the borrower to maintain with the lender, at all times, a margin of such percentage (in value terms) as stipulated in the loan agreement "consisting of securities acceptable to the lender". Clause 3.2 which deals with the aspect of additional security, stipulates that "in the event of that market value of the security given as margin falls, or if in the circumstances, the Lender deems fit, the Lender may serve upon the Borrower a notice demanding additional security/ collateral by way of delivery of further securities being securities of companies/ mutual funds/ entities acceptable to it or any other security as mutually agreed upon between the Borrower and the Lender ... ... ...". This clause also provides that "the Lender will also have the option to sell/transfer any portion of the Securities and apply the amount realized towards liquidation of part of the Loan balance(s), so as to maintain the Margin required under this Agreement ... ... ...".

24. Mr. Vashisht submits that under the loan agreements entered into between the plaintiff No.2 and defendants No.1 to 9, the obligation of the borrowers, namely defendants No.1 to 9 was to maintain margin of securities. The said loan agreements do not oblige the borrowers to maintain the said margin by either maintaining the percentage of their shareholding in the companies of which shares/ securities are offered as pledge, or to offer further shares/ securities of the same company, so as to make the requisite margin. The same do not oblige defendant Nos. 10 and/or 11 to ensure that CS(OS) 2941/2015 Page 20 of 44 the percentage of shareholding that the pledged shares represent, should be maintained at all times.

25. Mr. Vashisht submits that neither defendant No.10 company, nor defendant No.11 are parties to the loan agreements entered into between plaintiff No.2 on the one hand, and the defendants No.1 to 9 individually on the other hand. Therefore, neither defendant No.10, nor defendant No.11 are bound by the said agreements. He further submits that the loan agreements do not stipulate that the shareholding of the borrowers, namely defendants No.1 to 9 in defendant No.10 company shall remain of the same value as it existed at the time of creation of the pledge of their respective shares by defendants No.1 to 9 in favour of plaintiff No.2, or that they would represent the same percentage of share in defendant No.10 company throughout the subsistence of the loan agreements.

26. Mr. Vashisht submits that a Working Capital Consortium Loan was granted by a consortium of 11 banks, including the applicant, to defendant No.10 as early as on 14.02.2006. The same was revised, as noticed hereinabove from time to time, thereby granting larger working capital finances to defendant No.10 of Rs.9132 Crores vide 7th supplementary agreement dated 29.03.2012. On 28.03.2014, the MRA was entered into between defendant No.10 and 22 banks/ financial institutions, namely the CDR lenders. Mr. Vashisht specifically draws the attention of the Court to clause 2.7.9 which deals with Funded Interest Term Loans (FITL) facilities, and in particular to clause (iv) (d) thereof which, inter alia, provides:

"(d) Conversion of the FITL Facilities into CDR Equity Shares CS(OS) 2941/2015 Page 21 of 44 The Borrower acknowledge, confirms and agrees that with effect from the Cut-Off Date, out of the total amount of FITL Facility, an amount aggregating to Rs.1000,00,00,000 (Rupees One Thousand Crores) shall be compulsorily converted into CDR Equity Shares/0.01 CCPS before March 31, 2016.

Further, the CDR Lenders shall also have the option to convert the balance FITL Facilities or any interest payable on the FITL Facilities, into CDR Equity Shares/0.01 CCPS at any time during the tenure of the FITL Facilities in accordance with this Agreement and Applicable Laws, including but not limited to the SEBI ICDR Regulations and the Companies Act."

27. Thus, it has been agreed by defendant No.10 to convert an amount aggregating to Rs.1,000/- Crores compulsorily into CDR equity shares before 31.03.2016. The CDR lenders also have the option to convert the balance FITL facilities or any interest payable on the FITL facilities into CDR equity shares at any time during the tenure of FITL facilities in accordance with the MRA. Mr. Vashisht also draws the attention of the Court to clause 3 of the MRA dealing with the "security", which gives description of the security given by the borrower, namely defendant No.10 as:

"First pari passu charge over the following (Pooled Assets):

All moveable (both fixed and current assets) & immoveable assets of the Company excluding all moveable assets pertaining to rigs number Y-310 and Y-311, in relation to Drilling and Offshore Pte. Ltd., Singapore."

28. He also refers to clause 3.1.1 (vi) which obliges the promoters to pledge 51% of their shareholding in the borrower company, namely defendant No.10, in favour of the security trustee for the benefit of the CDR lenders. The balance 49% of the shareholding of the promoters in the borrower company was obliged to be pledged within one month from the CS(OS) 2941/2015 Page 22 of 44 date of issuance of CDR LOA. The expression "promoter" has been defined in MRA to collectively mean "Rishi Aggarwal" (defendant No.11) and "ABG International Pvt. Ltd." (ABGIPL). Mr. Vashisht has also referred to the communication dated 23.04.2014 sent by the CDR Cell to the applicant bank which conveys the decisions taken by the said Cell on 24.03.2014 in relation to the defendant No.10 company. Some of the salient conditions set out in the said approval letter for restructuring of debts under the CDR mechanism are the following:

"(xiv) An amount aggregating to Rs.1000 crore out of total FITL of Rs.1561 crore and interest thereon shall be compulsorily converted into equity shares or 0.01% compulsorily convertible preference shares (0.01% CCPS) before March 31, 2016. Exim Bank to be excluded from converting FITL into equity/ CCPS and will continue their funding as FITL facility.

(xv) The working capital limits (post carving out irregularity) at FBWC of Rs.1870 crore and NFB at Rs.4412 crore to continue. Rate of interest on FBWC to be charged @ 11% p.a. (ICICI BR+1%).

(xvi) Promoters shall bring in Rs.300 crore (which is 30.46% of lenders' sacrifice and 2.62% of restructure debt) upfont. Sacrifice worked out at Rs.985 crore. Final sacrifice to be calculated by each lender individually based on their discount rate.

(xvii) Promoters to pledge their entire shareholding in ABG out of which 51% shareholding within 3 months and balance within 1 year.

(xviii) Promoters to pledge their entire shareholding in ABG International Ltd. out of which 25% of shareholding within 2 months and balance within 1 year.

CS(OS) 2941/2015 Page 23 of 44

(xix) Corporate Guarantee of ABG International Pvt. Ltd.

along with promoters' shareholding in it shall be pledged to lenders giving additional funding only.

(xx) Promoters to bring back investment of Rs.236 crore in Standard Chartered Trust (Cayman) Ltd. within 2 months and to be routed through TRA.

(xxi) Fund based priority debt will be released only after:

a. Pledge of 51% of promoters' shareholding in ABG.

b. Pledge of 25% of promoters' shareholding in ABG Interntional Ltd.

c. Bringing back Rs.236 crore investments in Standard Chartered Trust (Cayman) Ltd."

29. Mr. Vashisht submits that the aforesaid communication shows that the MRA entered into between CDR lenders and defendant No.10 on 28.03.2014 were in consonance with the decisions taken by the CDR Cell on 24.03.2014. Mr. Vashisht submits that on 08.06.2014, the Reserve Bank of India came out with the SDR scheme. Under the said scheme, the CDR Cell could consider the following options while restructuring the loan:

" Possibility of transferring equity of the company by promoters to the lenders to compensate for their sacrifices;

Promoters infusing more equity into their companies; Transfer of the promoters' holdings to a security trustee or an escrow arrangement till turnaround of company. This will enable a change in management control, should lenders favour it."

30. Attention has also been drawn to paragraph B of sub-paragraph (iii),

(iv) and (v) of paragraph 3 of the SDR scheme to submit that the same CS(OS) 2941/2015 Page 24 of 44 provides for conversion of whole or part of the loan into equity shares and thereafter to achieve change of ownership by transfer of the majority shareholding in the company under debt restructuring. Mr. Vashisht submits that the objective of the MRA is to require the promoters who are majority shareholders in defendant No.10, to pledge 100% of their shares in the defendant No.10 company, and also to convert a part of the debt into equity so that, if considered necessary, a new investor could be brought into the defendant No.10 company to revive the same.

31. He has also drawn the attention of the Court to the minutes of the Joint Lenders Meeting held on 23.12.2015 in relation to defendant No.10, wherein out of 22 banks present, 17 voted in favour of SDR representing 85.5% of the total debt by value and 77% by number. Accordingly, SDR invocation was approved by majority- both by number and by value. Mr. Vashisht submits that under clause 2.4.3 dealing with CDR package standard conditions, the borrower, namely defendant No.10 agreed that the CDR lenders shall have a right to convert entire/ part of defaulted amount into equity shares in the manner provided in the MRA.

32. He has also referred to the notice given by defendant No.10 dated 13.08.2015 for calling the AGM. Along with the said notice, the Annual Report 2014-15 is enclosed which discloses that the defendant No.10 company has made a reference under the CDR system for restructuring its debts. It also discloses the factum of approval of the restructuring package and the factum of defendant No.10 entering into the MRA with the CDR lenders on 28.03.2014. It sets out that the key features of the CDR package, which are elaborated at point No.5 under the "Director Report" forming part CS(OS) 2941/2015 Page 25 of 44 of the Annual Report. Thus, the plaintiffs were well-aware that the agenda for the Annual General Meeting, inter alia, proposed the passing of resolution for conversion of debt into equity, or for issuance of further shares/ securities, in terms of the CDR system and the MRA entered into between defendant No.10 company and the CDR lenders. However, this aspect was suppressed from the Court while obtaining the ex-parte ad- interim order of injunction dated 29.09.2015.

33. Mr. Vashisht has placed reliance on the decision of this Court in IDBI Trusteeship Services Ltd. & Anr. Vs. Arch Pharmalabs Ltd. & Ors., 2014 (145) DRJ 175, wherein in similar circumstances, the Court modified the ex- parte ad-interim order of injunction insofar as it operated to obstruct the debt restructuring of the company in question. The suit had been filed by the plaintiff against the company under restructuring, namely Arch Pharmalabs Limited (defendant No.1) and its promoters (defendants No.2 to

4). The defendant No.1 company amassed debts of over Rs. 2718 crores owed to several creditors. Consequently, it filed a reference with the Corporate Debt Restructuring Empowered Group (CDREG) under the CDR mechanism of RBI. The substance of the case set up by the plaintiffs and the reliefs sought in the suit-which are somewhat on the same lines, as in the present suit, are set out in the following extract from this decision:

"9. Thus, the sum and substance of the case set up is that the Defendants in league with each other had induced HNI initially to accept equity shares of Defendant no. 1 with an undertaking to buy back the same within six months but having failed to do so, the same were converted into NCDs for a term of one year. However, neither the interest nor the CS(OS) 2941/2015 Page 26 of 44 principal amount of the debentures was paid by the Defendants.

10. In para 28 of the plaint, the Plaintiffs state as under:-

"28. The Plaintiffs apprehend that the Defendant no. 1 may enter into such transactions involving disposal of it's assets and business undertakings and further issuance of equity capital which are detrimental and prejudicial to the interests of the Plaintiff no. 1 in its capacity as the Debenture Trustee to the Debenture holders and for the benefit of debenture holders and thereby directly affecting the value of the Pledged Shared. Such actions directly prejudice and affect the valuation of the Pledged Shares and thereby interfering and wrongfully prejudicing the Plaintiff no. 1's rights in its capacity as the Debenture Trustee under law as well as the Share Pledge Agreement to invoke and Sell the Pledged Shares."

11. Thus, the Plaintiffs sought the relief of declaration that IDBI is entitled to exercise of voting rights in respect of the fully paid up shares of Defendant no. 1 held by it and a mandatory and permanent injunction restraining Defendants no. 1 to 5 not to act in any manner whereby the value of the 46,77,674 fully paid up equity shares of Defendant no. 1 which had been pledged in favour of the Plaintiffs are in any manner reduced or dissipated."

34. Defendant No.1 filed its written statement. The position of defendant No. 10 is similar vis-a-vis the plaintiffs on the one hand and the applicant ICICI Bank and the other CDR lenders on the other hand. The Court summarized the main defence of defendant No.1 in the following words:

"13. Apart from raising other defences, the plea raised by Arch Pharma (Defendant no. 1) is that Defendant no. 1 is not a party to the transaction including the Share Pledge CS(OS) 2941/2015 Page 27 of 44 Agreement dated 12.04.2013. It is stated that Plaintiff no. 1 invoked the pledge on 04.10.2013 and instructed Defendant no. 1's depository participant to transfer all the shares to its demat account. It is stated that Plaintiff no. 1 was recorded in the answering Defendant's statement of holding as well as the register of members as holder and Plaintiff no. 1 was recognised as its shareholder with all the rights. Defendant no. 1 has denied that Plaintiff no. 1 was prevented from exercising its right vis-à-vis 46,77,674 shares transferred to it. It is stated that IDBI TSL (Plaintiff no. 1) was given entitlement to all the rights as the share holders.

14. It is the case of Arch Pharma that the Final Restructuring Package for Defendant no. 1 was approved by CDREG on 26.09.2013. The Master Restructuring Agreement (MRA was signed by 32 out of 34 CDR members and the restructuring package is in the process of being implemented. It is averred that Defendant no. 1 is bound by the terms of the Final Restructuring Package and MRA and can conduct its affairs only in accordance with the direction given by CDREG and the Monitoring Institutions.

15. It is averred by Arch Pharma that it was the individual decision of the HNI to avail the shares of Defendant no. 1 at its free will. Defendant no. 1 has emphasised that since there is no privity of contract between the Plaintiffs and Defendant no. 1, the Plaintiffs cannot stand in the way of its CDR package."

[Emphasis supplied]

35. In the said case as well, ICICI Bank moved an application under Order I Rule 10 CPC and under Order XXXIX Rule 4 CPC for vacation of ex-parte ad-interim order of injunction obtained by the plaintiff which, inter alia, restrained the defendant No.1 company, amongst others "from undertaking any sale limit sale of any undertaking and from undertaking any Corporate Debt Restructuring". Some of the pleas raised by the ICICI Bank CS(OS) 2941/2015 Page 28 of 44 Ltd in the said case-which have a striking resemblance to the pleas raised in the present case, are recorded in the order as follows:

"18. According to the application, the NCDs were secured by, inter alia, pledge of over 46,77,674 fully paid up, freely transferable unencumbered shares of Defendant no. 1. The CDR scheme is well within the knowledge of the Plaintiffs and the Plaintiffs concealed the factum of form of CDR scheme.

19. The applicant has emphasised that upon invocation of the pledge, Plaintiffs have become part owners/share holders of Defendant no. 1 whereas the applicant and CDR members remain secured creditors of Defendant no. 1. Since Defendant no. 1 was facing difficulty in repayment of loan amount to the CDR members, they agreed to restructuring of the loan of Defendant no. 1 and entered into the MRA on 27.12.2013 whereby a number of facilities including the following were provided to Defendant no. 1:-

"Moratorium of two year on interest and principal payment and re-scheduling of instalment of outstanding term loan.

Interest rate reduced to 10.50% fixed for the first two years and then to be reset based on the financial performance of the company (Defendant no. 1).

Interest during moratorium period to be converted into Funded Interest Term Loan.

Repayment is assumed in 32 structured quarterly instalments commencing from June 30, 2015 till March 31, 2023........"

20. According to the applicant, the Plaintiffs had concealed material facts including execution of MRA which was well within their knowledge. Otherwise also, since the injunction CS(OS) 2941/2015 Page 29 of 44 order dated 23.01.2014 is prejudicially affecting the interest of the applicant and CDR members, the applicant is a necessary party and since the CDR package is in the interest of Defendant no. 1, the Plaintiffs cannot stand in the way of the restructuring package to Defendant no. 1, particularly when there is no privity of contract between the Plaintiffs and Defendant no. 1. Thus, the applicant prays for its impleadment and vacation of the injunction order dated 23.01.2014."

[Emphasis supplied]

36. The Court in its conclusion, inter alia, observed as follows:

"33. On the basis of the admitted pleadings, it is established that there was no privity of contract between the Plaintiffs and Defendant no. 1. There were personal guarantees given by Defendants no. 2 to 4 and certain guarantees by other subsidiary company promoted by Defendants no. 2 to 4. Applicant becomes interested in the present suit in view of the fact that it is one of the secured creditor of Defendant no. 1 company and the Plaintiffs have no right to stand in the way of restructuring package (CDR package) offered under the MRA.

34. In Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay, (1992) 2 SCC 524, the Supreme Court while emphasizing wide discretion of the Court in impleading necessary and proper parties stated that if the intervener has a cause of action against the Plaintiff relating to the subject matter of the existing action, the Court has power to join the intervener to avoid multiplicity of actions. Paras 6, 8 and 14 of the report are extracted hereunder:

6. ..........................................................

8. .................................If the intervener has a cause of action against the plaintiff relating to the subject matter of the existing action, the Court has power to join the intervener so as to give effect CS(OS) 2941/2015 Page 30 of 44 to the primary object of the order which is to avoid multiplicity of actions.

xxxxxxx

14. ............................ It is, therefore, necessary that the person must be directly or legally interested in the action in the answer, i.e., he can say that the litigation may lead to a result which will affect him legally that is by curtailing his legal rights. It is difficult to say that the rule contemplates joining as a defendant a person whose only object is to prosecute his own cause of action. Similar provision was considered in Amon v. Raphael Tuck & Sons Ltd. [(1956) 1 All ER 273 : (1956) 1 QB 357], wherein after quoting the observations of Wynn-Parry, J. in Dollfus Mieg et Compagnie S.A. v. Bank of England [(1950) 2 All ER 605, 611], that their true test lies not so much in an analysis of what are the constituents of the applicants' rights, but rather in what would be the result on the subject matter of the action if those rights could be established, Devlin, J. has stated:

"The test is 'May the order for which the plaintiff is asking directly affect the intervener in the enjoyment of his legal rights'."

35. The applicant stands on a better footing than in the cases of Moser Bear India Limited and Deutsche Trustee Company Ltd. in as much as in the instant case, there is no privity of contract between the Plaintiffs and Defendant no. 1 and thus, the Plaintiffs have no right to object to the CDR scheme formulated by the applicant and the interim order is operating against the applicant also.

CS(OS) 2941/2015 Page 31 of 44

36. Consequently, the applicant is permitted to be impleaded as a proper party to the present suit. I.A. No. 8777/2014 is allowed accordingly.

37. Order dated 23.01.2014 is liable to be modified to the extent it operates against Defendant no. 1 as, as stated earlier, the Plaintiffs were entitled to enforce their rights only against Defendants no. 2 to 8.

38. It goes without saying that Plaintiff no. 1 has all the rights of pledged shares as if Plaintiff no. 1 is shareholder which it is at liberty to exercise. So, the order dated 23.1.2014 is modified and set aside so far as it operates against Defendant no. 1." (emphasis supplied)

37. Mr. Vashisht also placed reliance on Morgan Stanley Mutual Fund Vs. Kartick Das, (1994) 4 SCC 225, to submit that as a principle, ex-parte injunction should be granted only under exceptional circumstances and, even if granted, the ex-parte injunction should be for a limited period of time. He submits that the aforesaid ex-parte ad-interim order of injunction dated 29.09.2015 is seriously prejudicing the implementation of the SDR scheme.

38. On the other hand, Mr. Rajiv Nayar, learned senior counsel for the plaintiff in opposition to the present applications submits that the conditions set out in the meeting of the General Lenders held on 23.12.2015 have not been met till date. These standing conditions taken note of in the said minutes are as follows:

"Pending conditions Infusion additional promoter's contribution of Rs.1.80 billion;

CS(OS) 2941/2015 Page 32 of 44

Creation of pledge over promoter's shareholding in the Company;

Creation of pledge over shares of holding company (ABG International Limited) and one group company (ABG Shipyard Singapore Pte. Limited);

Realisation of investment in SCB sponsored Cayman Island based mutual fund amounting to Rs.2.36 billion; and Creation and perfection of charge over entire immoveable assets of ABG Shipyard Limited."

39. Similarly, the conditions Nos. (xvii), (xx) & (xxi) set out in the communication dated 23.04.2013 conveying the decision taken by the CDREG on 24.03.2014 which have been set out hereinabove have still not been fulfilled. On the contrary, it has been disclosed by the applicant in I.A. No.1612/2016 that additional priority loans of cumulative sum of Rs.1813 Crores were granted for 3 identifiable capital expenditures to defendant No.10. Mr. Nayyar submits that in the face of the aforesaid factual background, the plea of the applicant premised upon the CDR and the MRA are red herring. He submits that CDR has not taken off at all.

40. Mr. Nayar further submits that the present applications have been filed highly belatedly. The interim order have been passed by this Court on 29.09.2015 of which the applicant derived knowledge in October 2015. The present applications have been filed 5 months later on 02.02.2016. Mr. Nayar submits that the applicant ICICI Bank is neither a necessary nor a property party to the present suit and is not entitled to either seek impleadment or variation of ex-parte ad-interim order of injunction. In support of his submission he has placed reliance on Mumbai International CS(OS) 2941/2015 Page 33 of 44 Airport Pvt. Ltd. Vs. Regency Convention Centre & Hotels Pvt. Ltd. and Others, (2010) 7 SCC 417 : Civil Appeal No.4900/2010 decided by the Supreme Court on 06.07.2010. In answer to the plea of the applicant that there is no privity of contract between plaintiffs and defendants No.10 & 11, Mr. Nayar placed reliance on the communication dated 21.09.2015 issued by Jaroli Vincom Pvt. Ltd., KBS Trading Pvt. Ltd., GKK Capital Markets Pvt. Ltd and Navin Khandelwal, who are defendants No.1, 2, 6 & 8 respectively in the present suit. The said defendants have acknowledged in their reply to the plaintiff's notice of 08.09.2015, that the loans had been taken by them for purchase of shares of ABGSL from stock market "at the request and under the instructions of the promoters of ABG Shipyard as well as company ABG Shipyard". They stated that in their aforesaid reply that the promoters of ABG Shipyard approached them to purchase shares of ABGSL.

41. Mr. Nayar submits that 24.5% shares of ABGSL/ defendant No.10 stand pledged to the plaintiffs. In this regard, reliance is also placed upon the written statement filed by defendants No.1, 2, 6 & 8 and in particular paragraphs 3 to 6 thereof. Mr. Nayar submits that there is no suppression made by the plaintiffs in their plaint in relation to the debt restructuring process undertaken by defendant No.10. He submits that sufficient disclosure has been made in this regard in paragraph 16(r) of the plaint, wherein they have stated that "The plaintiffs are also given to understand that defendant No.11 is pursuing debt restructuring or other restructuring of defendant No.10 company". Mr. Nayar submits that the decision relied upon by the applicant ICICI Bank in IDBI Trusteeship Services Ltd. (supra) is not applicable in the facts of the present case, as there are material CS(OS) 2941/2015 Page 34 of 44 differences in the two. Mr. Nayar submits that in the said decision, the ex- parte ad-interim order of injunction passed by the Court restrained the corporate or debt restructuring of the defendant No.1 company, namely M/s Arch Pharmalabs Ltd. However, no such injunction was sought by the plaintiff in the present case, and none had been granted.

42. At this stage, I may also take note of the fact that the plaintiff moved I.A. No.7013/2016 after orders were reserved in the aforesaid applications, to submit that the Monitoring Committee in its meeting held on 19.05.2016 has decided that the CDR has failed. On the other hand, the submission of learned senior counsel for the applicant ICICI Bank is that, in any event, the rights of ICICI Bank under the Master Restructuring Agreement and under the SDR system - to bring in strategic investors, are preserved.

43. Mr. Chandhiok, learned senior counsel appearing for defendants No.10 & 11 submits that the total shareholding of the plaintiffs over which they have control - including the pledged shares of defendants No. 1 to 9, in defendant No.10 company are presently to the tune of 24.05%. He further submits that the plaintiffs have admitted the receipt of the notice of the AGM dated 13.08.2015 and they have also admitted that defendant No.11 is pursuing debt restructuring of defendant No.10 company. He points out that the outside liability of defendant No.10-which was non-performing, was to the tune of Rs.1805 Crores. The same is to be restructured.

44. Having heard learned counsels and perused the record referred to and the decisions relied upon, I am of the view that both the applications of the applicant ICICI Bank have merit and deserve to be allowed. The ex-parte CS(OS) 2941/2015 Page 35 of 44 ad-interim order of injunction granted by this Court as extracted above, undisputedly, comes in the way of the applicant and the other lender banks in proceeding with and implementing the CDR/ SDR or the MRA, and exercising their rights as lenders. Under the said process, the lender banks, who are secured creditors, are entitled to convert the outstanding loans and interest into equity. The promoters of defendant No.10 are also obliged to pledge their 100% shares, and under the restructuring scheme, the applicant ICICI Bank and the other lenders can bring in a strategic investor so as to bring about a change of management coupled with infusion of funds, so that the debts and liabilities of defendant No.10 company could be met. The ex- parte ad-interim order of injunction comes in the way of the said process inasmuch, as, the same restrains all the defendants, which include defendants No.10 & 11 as well from "altering the shareholding structure and share capital structure of defendant No.10". In the light of the decisions of the Division Bench of this Court in Bhisham Sawhney (supra) and of the Supreme Court in Smt. Jatan Kumar Golcha (supra), it is clear that the applicant ICICI Bank would be entitled to ventilate its grievance against the ex-parte ad-interim order of injunction by preferring an appeal and, therefore, it is equally available to the applicant ICICI Bank to approach this Court itself for vacation/ modification of ex-parte ad-interim order of injunction while, at the same time, seek impleadment as a party defendant in the suit to oppose the grant of such a wide and sweeping order of injunction, which comes in the way of the applicant in proceeding with the implementation of the CDR/ SDR scheme and the enforcement of the rights of the applicant under the Master Restructuring Agreement. The CS(OS) 2941/2015 Page 36 of 44 decision of this Court in IDBI Trusteeship Services Ltd. (supra) is also relevant and squarely applies to the facts of the present case.

45. Reliance placed by Mr. Nayar on Mumbai International Airport Pvt. Ltd. (supra) appears to be completely misplaced, as that was a very different case on facts. In this case, the Mumbai International Airport Pvt. Ltd. sought impleadment as a defendant in a pending action between the respondent Regency Convention Centre and Hotels Pvt. Ltd. and the Airports Authority of India, on the ground that the development of the Chhatrapati Shivaji International Airport, Mumbai had been handed over to the appellant for maintenance, development and expansion by the Airports Authority of India. In the suit between Regency Convention Centre and Hotels Pvt. Ltd and the Airports Authority of India an order of injunction had been passed in favour of the plaintiff. It was in this background that the Supreme Court in paragraph 14 observed as follows:

"14. On a careful examination of the facts of this case, we find that the appellant is neither a necessary party nor a proper party. As noticed above, the appellant is neither a purchaser nor the lessee of the suit property and has no right, title or interest therein. The first respondent-plaintiff in the suit has not sought any relief against the appellant. The presence of the appellant is not necessary for passing an effective decree in the suit for specific performance. Nor is its presence necessary for complete and effective adjudication of the matters in issue in the suit for specific performance filed by the first respondent- plaintiff against AAI. A person who expects to get a lease from the defendant in a suit for specific performance in the event of the suit being dismissed, cannot be said to be a person having some semblance of title in the property in dispute."

CS(OS) 2941/2015 Page 37 of 44

46. The same cannot be said to be true in the facts of the present case. The applicant ICICI Bank and the other lenders are seeking to enforce their rights under the CDR/ SDR system and the Master Restructuring Agreement with defendants No.10 & 11. It is the plaintiffs, who have obtained an ex- parte ad-interim order of injunction which has interdicted the implementation of the debt restructuring process under the CDR/ SDR and the MRA.

47. In IDBI Trusteeship Services Ltd. (supra) the fact situation was more or less identical with that of the present case. Accordingly, the locus of the applicant to get impleaded as a party defendant is clearly established and the application for impleadment deserves to be allowed. It is ordered accordingly.

48. For grant and continuation of interim injunction in favour of the plaintiffs, the plaintiffs have to stand on their own feet and make out a strong prima facie case in its favour; demonstrate that the balance of convenience is in its favour, and; that the denial of the injunction would cause irreparable injury to the plaintiff. The rights of the plaintiffs primarily stem from the loan agreements entered into between plaintiff No.2 and defendants No.1 to 9 from time to time. The said loan agreements contain standard terms & conditions on a printed form. Admittedly, neither defendant No.10 ABGSL, nor defendant No.11-the promoter of ABSL are parties to the said loan agreements. Under the said loan agreements, the borrowers, namely defendants No.1 to 9 respectively bound themselves to repay the loan and interest taken by each of them from plaintiff No.2. The obligation to provide security/ margin and additional security was also that CS(OS) 2941/2015 Page 38 of 44 of defendants No.1 to 9 individually, and no such obligation was undertaken by either defendant No.10 or defendant No.11. Clauses 3.1 and 3.2 of the loan agreements do not stipulate that the additional security to be furnished (in case the valuation of the security initially furnished falls below the stipulated value), should be of the same kind and nature, as had been initially provided by the borrower while taking the loan. The only requirement is that the margin has to be in respect of "securities acceptable to the lender". The expression "securities" is also defined in the loan agreements to mean:

"as acceptable to the lender, shares, scrips, stocks, debt instruments (including but not limited to debentures, bonds, RBI relief Bonds, deposits, collateralized debt obligations and securitized debt instruments), government securities, units of mutual Funds, units of collective investment schemes, promissory notes, annuities, FDRs, guarantees, bullion, movable or immovable property, security receipt as defined under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act; derivate instruments and securities as defined in the Securities Contract Regulation Act."

49. Therefore, the securities need not necessarily be in the form of further shares of defendant No.10 alone. In fact, defendants No.1 to 9 may not even be holding shares of defendant No.10 beyond what are already pledged as security under the respective loan agreements with plaintiff No.2. Consequently, under the loan agreements, the plaintiffs cannot insist on issuance of further securities in the form of shares of defendant No.10 by the borrowers, namely defendants No.1 to 9. Under the loan agreements, the defendants No.1 to 9 did not hold out any representation or promise to plaintiff No.2 that their respective shareholdings in defendant No.10 shall CS(OS) 2941/2015 Page 39 of 44 continue to be maintained at the same level i.e. percentage, as it existed on the day when the shares were offered and accepted as security by plaintiff No.2. Being ordinary shareholders, defendants No.1 to 9, in any event, could not have made any such representation or promise, and even if the same were to be made the same would not bind defendant No.10, or its promoter defendant No.11.

50. The submission of the plaintiffs that defendants No.1 to 9 have been set up by defendant No.11 is neither here nor there. There is no material placed on record by the plaintiffs to corroborate this assertion, apart from the reply of defendant Nos. 1, 2, 6 and 8 aforesaid. Even if it were to be assumed for the sake of argument that defendant No.11 prompted defendant Nos.1 to 9 to purchase the shares that were being offloaded by the erstwhile strategic investor, with the further representation that they would earn handsome returns thereon, and based on that representation defendants No.1 to 9 obtained loans from plaintiff No.2, the same would not prevent defendants No.10 & 11 from undertaking restructuring of the secured loans advanced by banks and financial institutions to defendant No.10. From the averments of the applicant, it is clear that the consortium of banks, including the applicant ICICI Bank had been engaged in financing the business of defendant No.10 since 2006. Their exposure kept on increasing, and finally when defendant No.10 appeared to be in no position to service the loans and interest advanced by the applicant and other banks, defendant No.10 sought restructuring of the loans by resort to CDR/ SDR. Defendants No.10 and 11 have entered into the said process and also executed the Master Restructuring Agreement (MRA) with a view to salvage the poor financial CS(OS) 2941/2015 Page 40 of 44 condition of defendant No.10. Being secured creditors, the applicant bank and the other consortium lenders were entitled to resort to the CDR/SDR route and to enter into the Master Restructuring Agreement with defendants No.10 & 11 to recover their loans. The mechanism for restricting of defendant No. 10 undertaken by the applicant and the other 20 odd banks is well recognized and promoted by the RBI.

51. Pertinently, in the present suit, this Court is not concerned with the issue as to whether or not the terms & conditions of the CDR/ SDR process have been met and complied with. That is a matter for the lender banks and defendants No.10 & 11 to look into and sort out. As a shareholder, or a lender to shareholder, who create a pledge of their shares of defendant No.10 to secure their loans, the plaintiffs prima facie has no right to interfere with the process of restructuring of debts being undertaken by defendants No.10 & 11 with the applicant bank and the other banks and financial institutions.

52. Merely because in the process of restructuring of the loans granted by the applicant ICICI Bank and other lender banks the percentage of shareholding held and pledged to the plaintiffs in defendant No.10 falls, prima facie, does give a cause of action in favour of the plaintiff to seek a restraint against defendants No.10 & 11 from altering the shareholding structure or share capital structure of defendant No.10. The plaintiffs have their defined rights under the loan agreements with defendants No.1 to 9 and so far as those rights are concerned, the plaintiffs are well within their rights to enforce the same. However, there is no right vested in the plaintiffs by virtue of the loan agreements, which binds defendant Nos.10 & 11 not to CS(OS) 2941/2015 Page 41 of 44 alter the shareholding structure or capital structure of defendant No.10. Pertinently neither defendant No.10 nor defendant No.11 are indebted to the plaintiffs in any manner, nor are they parties to the loan agreements.

53. In IDBI Trusteeship Services Ltd. (supra), the learned Single Judge quoted the following extract from Moser Bear India Limited Vs. Citibank N.A., London Branch, Company Appeal No.114/2012 decided on 20.12.2012:

"5. Undoubtedly allowing the appellant Company to sign the documents under the CDR process would tantamount to creation of further charge in favour of the banks/financial institutions which are already having a first charge over the assets of the appellant Company. We are however not impressed with the doubts expressed by the respondent as to the viability of the revival scheme of the appellant Company. It can safely be assumed that the banks/financial institutions and the CDR machinery created by the RBI would not have agreed to re-structure the debt and/or grant further financial facilities to the appellant Company without being satisfied as to the possibility of the revival of the appellant Company.

6. It is the settled position in law that the Company would not be ordered to be wound up merely because the debt is admitted. Winding up of a Company affects a large number of other persons/entities also including the workers and the others associated with the business of the Company. Though the appellant Company owes a considerable amount to the respondent but is indebted in a much larger amount to the other secured creditors who at present are supporting revival rather than winding up of the appellant company. The respondent is admittedly an unsecured creditor. We are of the opinion that if at this stage, the impugned order is allowed to come in the way of the proposal for revival of the appellant Company which had been sanctioned by the machinery set-up in this regard by the RBI and which has the approval of the CS(OS) 2941/2015 Page 42 of 44 banks and financial institutions, the same may cause irreparable injury not only to the appellant Company but also to other creditors, workers and others associated with the business of the appellant company."

[ emphasis supplied ]

54. In Moser Bear India Limited (supra), the Court accordingly, modified the interim injunction to permit the execution of the Master Restructuring Agreement under the CDR process. In IDBI Trusteeship Services Ltd. (supra), the court also took note of Deutsche Trustee Company Ltd. Vs. Tulip Telecom Ltd., Co. App. No. 1529/2013, decided on 16.04.2014, where the request of the Plaintiff being unsecured creditors seeking injunction against CDR scheme was declined by this Court, and Kotak Mahindra Bank Ltd. v. Arch Pharmalab Pvt. Ltd., Exh. 20 & 26 in OA No. 33/2014, decided by Mumbai Debts Recovery Tribunal-III on 30.04.2014, where ex-parte interim injunction passed against the Defendant company was vacated by the Debts Recovery Tribunal - III, Mumbai so that CDR scheme could be pursued.

55. As already noted hereinabove, in IDBI Trusteeship Services Ltd. (supra), on the basis that there is no privity of contract between the plaintiffs and the defendant No.1 company - who was under restructuring of debts, the Court vacated the injunction insofar as it interfered with the restructuring package (CDR Package). In my view, there is no inordinate delay in moving the applications by the applicants. The failure of the CDR mechanism is also not relevant for the present purpose. Even if that fails, it does not entitle the plaintiff to seek an injunction qua alteration of the CS(OS) 2941/2015 Page 43 of 44 shareholding structure and share capital structure of the defendant No. 10 company.

56. For all the aforesaid reasons, the applicant's application under Order XXXIX Rule 4 CPC being I.A. No. 1612/2016 is also allowed, and the interim order dated 29.09.2015 is modified to the extent that the same shall not come in the way of defendants No.10 & 11 from altering the shareholding structure and share capital structure of defendant No.10 ABGSL. It is, however, clarified that the plaintiffs shall continue to enjoy the rights in respect of shares of defendant No.10 company held by them as shareholders and in respect of shares pledged with them by defendants No.1 to 9 under the respective loan agreements.

57. The applications stand disposed of in the aforesaid terms leaving the parties to bear their respective costs.

(VIPIN SANGHI) JUDGE JULY 11, 2016 CS(OS) 2941/2015 Page 44 of 44

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