Delhi High Court - Orders
Cmi Limited & Anr vs Bank Of Bahrain And Kuwait Bsc on 11 August, 2021
Author: C.Hari Shankar
Bench: C.Hari Shankar
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(COMM) 373/2021, IA 10053/2021 and IA 10054/2021
CMI LIMITED & ANR. ..... Plaintiffs
Through Mr. Kamal Nijhawan, Senior
Advocate with Mr. Pulkit Srivastava, Mr.
N.P. Gaur, Mr. Milan Negi & Mr. Sumit
Gaur, Advocates
versus
BANK OF BAHRAIN AND KUWAIT BSC ..... Defendant
Through
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
ORDER
% 11.08.2021
(Video-Conferencing)
IA 10054/2021 (Section 151 CPC)
1. Allowed, subject to all just exceptions.
2. The application is disposed of.
CS(COMM) 373/2021
1. 22,72,728 shares, held by Plaintiff No. 2 in the Plaintiff No. 1- company, stand invoked and encashed by the Defendant-Bank. The plaintiff, aggrieved thereby, has filed the present suit.
2. This suit owes its genesis to a Consortium Agreement dated 2nd Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 1 of 9 Signing Date:13.08.2021 15:54:01 March, 2021, whereby and whereunder a consortium of banks, which included the defendant bank, advanced a loan, to the plaintiffs, of ₹ 339.97 Crores. This agreement was followed by various addenda by which further credit facilities and overdraft facilities were extended. Mr. Kamal Nijhawan, learned Senior Counsel for the plaintiffs, has invited my attention to the covenants in the Consortium Agreement, related to the security provided by the plaintiffs against the loan advanced, which may be reproduced thus:
"DETAILS OF THE SECURITY PRIMARY SECURITY
1. First pari-passu charge by way of hypothecation over the inventory, book debts and floating charge on all the current assets of the Borrower, goods in transit, whether lying at Borrower's go down/warehouse or otherwise.
COLLATEAL SECURITY
1. Mortgage by way of equitable mortgage, on first pari- passu charge basis, over the following properties:
(a) Industrial property situated at 71, Sector 6, Faridabad in the name of the Borrower;
(b) Residential flat 173C, 2nd Floor, Ramprashtha, District Ghaziabad, in the State of Uttar Pradesh in the name of Mr. Amit Jain;
(c) Residential flat, Upper Ground Floor, situated at 1/3-A, Kundan Nagar, Khureji Khas, Shahdara, Delhi - 110092 in the name of Mr. Parag Jain, admeasuring 85.03 sq. mtrs.
(d) Residential property situated at C- 483, Yojna Vihar, Delhi - 110092 in the name of Ms. Vishwa Prabha Jain;
2. First pari-passu charge by way of hypothecation over Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 2 of 9 Signing Date:13.08.2021 15:54:01 the plant and machinery situate at Plot No. 71 and 82, Sector 6, Faridabad.
3. Mortgage on second pari passu charge basis over the factory land and building and plant and machinery at Village Mauza, Bhatoli Khurd, Tehsil Baddi; total admeasuring 107 Bigha and 06 Biswa (the "Baddi Unit").
Guarantees:
Personal Guarantee Sr. No. Name of the Guarantor 01 Amit Jain 02 Parag Jain 03 Vishwa Prabha Jain"
3. As such, Mr. Nijhawan submits that pledging of shares was not one of the securities, envisaged by the Agreement dated 2nd March, 2021 against the loan advanced thereunder.
4. The impugned invocation of shares has apparently been effected on the basis of a Pledge Agreement dated 27th May, 2021, whereunder 22,72,728 shares of Plaintiff No. 2 in the Plaintiff No. 1-Company, valuing approximately ₹ 10 crores, were pledged, against the extending of loan to the plaintiffs by the defendant.
5. The plaint alleges that Plaintiff No. 2 was not a party to the said Pledge Agreement. That apart, Mr. Nijhawan points out that this agreement related to the FDOD limits, to be extended by the defendant bank to Plaintiff No. 1 for ₹ 60 crores, which were never, in fact, extended. As such, he submits, the Defendant-Bank could not have invoked the shares of Plaintiff No. 1 held by Plaintiff No. 2, on the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 3 of 9 Signing Date:13.08.2021 15:54:01 basis of the aforesaid Pledge Agreement.
6. The impugned invocation has admittedly taken place in the context of a loan of ₹ 20 crores advanced by the Defendant-Bank to Plaintiff No.1. Mr. Nijhawan further drew my attention to the communication, dated 29th May, 2018 from the defendant to Plaintiff No. 2, whereby the defendant extended credit facilities of ₹ 20 crores, again covered by the securities envisaged in the Consortium Agreement, with no reference to any shares held by Plaintiff No. 2 in Plaintiff No. 1.
7. On 27th July, 2021, the Defendant-Bank wrote the plaintiffs, alleging that, as there was default, on the part of the plaintiffs, in making payment of interest on the loan extended to the plaintiffs to the extent of ₹ 10,29,033/-, it was proceeding to invoke the securities pledged against the said loan. Mr. Nijhawan points out that this communication did not specify the nature of the securities, which the defendant proposed to invoke and made no reference to the shares of Plaintiff No. 1 held by Plaintiff No. 2. There was no reason, therefore, the plaintiffs to believe, on the basis of the said letter dated 27th July, 2021, that the Defendant-Bank would invoke the shares of Plaintiff No. 1 held by Plaintiff No. 2.
8. That apart, Mr. Nijhawan also points out that the letter dated 27th July, 2021 refers to the loan of ₹ 20 crores, which have been extended by the Defendant-Bank to Plaintiff No. 1 vide the letter dated 29th May, 2018 and not to the amount of ₹ 60 crores, to which the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 4 of 9 Signing Date:13.08.2021 15:54:01 letter dated 15th May, 2021 refers and which was never in fact extended to Plaintiff No. 1.
9. The securities provided against the loan of ₹ 20 crores, as already noted hereinabove, did not include the shares of Plaintiff No. 1 held by Plaintiff No. 2.
10. Further, Mr. Nijhawan points out that the amount of ₹ 10,29,033/-, of which the plaintiffs were alleged by the letter dated 27th July, 2021, to be in default, was also paid by Plaintiff No.1 on 29th July 2021 and 30th July, 2021, thereby curing the aforesaid default.
11. In these circumstances, Mr. Nijhawan submits that the plaintiffs were unpleasantly surprised to learn, from the Pledge Master Report on the website of the National Securities Depository Limited that the defendant had invoked the 22,72,728 shares of Plaintiff No. 1 held by Plaintiff No. 2.
12. It is in these circumstances that the plaintiffs have moved this Court by means of the present suit containing the following prayer clause:
"In view of the afore-mentioned facts and circumstances, it is therefore, most respectfully prayed that this Hon'ble Court may graciously be pleased to:
(a) Pass a decree of Declaration in favour of the Plaintiffs and against the Defendant thereby declaring that Letter of Invocation of Security dated 27.07.2021 issued by the Defendant Bank against the Plaintiffs is null and void and directing the Defendant Bank to Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 5 of 9 Signing Date:13.08.2021 15:54:01 reinstate/ credit 22,72,728 Shares in the Demat Account of the Plaintiff No. 2 and;
(b) Pass a decree of Permanent Injunction in favour of the Plaintiffs and against the Defendant Bank, its agents, servants, representatives and anyone claiming through and for it, in any manner whatsoever, from transferring/ selling/ alienating and/or disposing off or creating any third party rights or otherwise parting with the 22,72,728 Shares of the Plaintiff No. 2 being pledged with the Defendant Bank and;
(c) Pass an appropriate direction in favour of the Plaintiffs and against the Defendant thereby restraining the Defendant from taking any coercive steps in relation to the Pledged Shares of the Plaintiffs and shall not take any precipitate action in regard to the sale/ transfer of 22,72,728 Shares and;
(d) Pass an appropriate direction in favour of the Plaintiffs and against the Defendant thereby restraining the Defendant bank from invoking/ encashing any other Security of the Plaintiff No. 1 Company on the basis of Letter of Invocation of Security dated 27.07.2021 and/or;
(e) Pass such further Order(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case."
13. Issue summons. Summons be served by all modes, including dasti. In order to expedite the matter, the plaintiffs are directed to effect dasti service on the defendant bank through their own agency for which purpose, the Registry is directed to provide dasti notices, to the plaintiffs' representative, so that service thereof could be effected on the defendant.
14. Affidavit of service along with proof thereof be placed on Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 6 of 9 Signing Date:13.08.2021 15:54:01 record before the next date of hearing.
15. Written statement, if any, be filed within a period of four weeks accompanied by an affidavit of admission and denial of the documents filed by the plaintiffs with advance copy to learned counsel for the plaintiffs, who may file replication thereto, if any, within a period of two weeks thereof accompanied by an affidavit of admission and denial of the documents filed by the defendant.
16. List on 21st October, 2021 before the Joint Registrar for completion of pleadings, admission and denial of documents and marking of exhibits.
IA 10053/2021 (Order XXXIX Rules 1 and 2 CPC)
17. By this application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC), interim relief has been sought in the following terms:
"It is, therefore, most respectfully prayed that the Hon'ble Court may be pleased to:
(a) Pass an ex-parte ad-interim injunction thereby retraining the Defendant Bank, its agents, servants, representatives and anyone claiming through and for it, in any manner whatsoever, from transferring/ selling/ alienating / disposing off or creating any third party rights or otherwise parting with the 22,72,728 Shares of the Plaintiff No. 2 being pledged with the Defendant Bank or invoking/ encashing any other Security of the Plaintiff No. 1 Company on the basis of Letter of Invocation of Security dated 27.07.2021, till the disposal of the suit; and/or Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 7 of 9 Signing Date:13.08.2021 15:54:01
(b) Pass such other further order(s) /direction(s) in favour of the Applicants and against the Defendant Bank as this Hon'ble Court may deem fit and necessary in the facts and circumstances of the case and in the interest of justice."
18. The plaintiffs have a clear prima facie case in their favour.
19. The shares, which have been invoked by the defendant bank, on the face of it, do not pertain to the loan of ₹ 20 crores, in respect of which the letter dated 27th July, 2021 was addressed by the defendant to Plaintiff No. 2. The security envisaged as having been provided against the loan of ₹ 20 crores, to which the said letter refers, do not include 22,72,728 shares of Plaintiff No. 1 held by Plaintiff No. 2.
20. These shares were contemplated as being pledged against a loan of ₹ 60 crores, which, according to submissions of Mr. Nijhawan, was never extended by the defendant to the plaintiffs and of which, therefore, there could be no question of default. The documents on record also vouchsafe this position.
21. That apart the amount in default was also liquidated by the plaintiffs even before the shares were invoked by the defendant bank. The reliance, by Mr. Nijhawan on the inter se Consortium Agreement dated 2nd March, 2021 is also justified.
22. Prima facie, therefore, the invocation of the shares of Plaintiff No. 1 as held by Plaintiff No. 2, by the bank, was irregular.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 8 of 9 Signing Date:13.08.2021 15:54:0123. I may note that the plaint additionally alleges that the invocation was not in terms of Clause 3.5(a) read with Clause 9.2 of the Pledge Agreement.
24. In view thereof, the plaintiffs are entitled to ex parte ad interim relief.
25. Issue notice on the application.
26. Response to this application, if any, be filed within a period of four weeks from today with advance copy to learned counsel for the plaintiffs, who may file rejoinder thereto, if any, before the next date of hearing.
27. Pending further orders, therefore, the defendant bank is restrained from transferring, selling, alienating, disposing of, or creating any third-party rights in respect of 22,72,728 shares of Plaintiff No. 1 held by Plaintiff No. 2, which were invoked/encashed by it, on the basis of the letter of invocation of security dated 27th July, 2021. The defendant bank is restrained from invoking or proceeding against any other security provided by the plaintiffs, pending further orders.
28. List this application for hearing and disposal, subject to completion of pleadings before the Court on 8th November, 2021.
C.HARI SHANKAR, J AUGUST 11, 2021/r.bararia Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI CS(COMM) 373/2021 Page 9 of 9 Signing Date:13.08.2021 15:54:01