Bombay High Court
Pushpanjali Tip Up Pvt.Ltd vs Mrs.Renudevi Choudhary & Ors on 5 February, 2014
Author: S.C. Gupte
Bench: S.C. Gupte
sat 1/17 nm (l) 2150-2013.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION (LODGING) NO. 2150 OF 2013
IN
SUIT (LODGING) NO. 978 OF 2013
Pushpanjali Tip Up Pvt.Ltd. ...Applicant / Plaintiff
vs.
Mrs.Renudevi Choudhary & Ors. ...Defendants
Mr.Aspi Chinoy, Senior Advocate with Ms.Ankita Singhania i/b. Mr.Ashok
Dhanuka for Plaintiff.
Ms.Deepti Padma with Ms.Jyoti Ghag i/b. M/s.Thakore Jariwala & Associates for
Defendant Nos.1 and 2.
Mr.Arif Bookwala, Senior Advocate with M/s.Yash Choksi, Ajay Khandar and
Jayant Gaikwad i/b. M/s.Ajay N. Khandar & Co. for Defendant No.3.
CORAM : S.C. GUPTE, J.
05 FEBRUARY 2014
JUDGMENT :
The suit is in respect of shares purportedly pledged by the Plaintiff with Defendant Nos.1 and 2 under loan agreements separately entered into by the Plaintiff with Defendant No.1 and with Defendant No.2. It is the case of the Plaintiff that in spite of recovery of the entire outstanding loan with interest, Defendant Nos.1 and 2 have fraudulently sold or transferred shares held as security in breach of the loan agreements as also in breach of trust.
2 By the present Notice of Motion, the Plaintiff has sought an interim injunction restraining Defendant Nos.1, 2 and 3 (who is the depository participant with whom Defendant Nos.1 and 2 have accounts) from transferring any of the ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 2/17 nm (l) 2150-2013.doc balance shares lying in the depository accounts of Defendant Nos.1 and 2. An interim injunction is also sought against Defendant Nos.4 and 5, who are the depositories in respect of the said shares, from transferring any of the balance shares lying in the DP accounts of Defendant Nos.1 and 2.
3 It appears that since the passing of an ad-interim order on the Notice of Motion, certain further shares have been transferred by Defendant No.3 on behalf of Defendant Nos.1 and 2, whilst some other shares lying in the DP Accounts of Defendant Nos.1 and 2 have been confiscated by Defendant No.3.
Having regard to these transactions executed since the filing of the suit, the Plaintiff has amended the plaint as also the present Notice of Motion seeking in addition to the original prayers an interim restraint on Defendant No.3 from making pay-ins of shares sold by Defendant No.3 through the Stock Exchanges and clearing corporations on behalf of Defendant Nos.1 and 2 and directions to Defendant Nos.1 to 3 to deposit in this Court the sums received from sale of shares in excess of the liability owed by the Plaintiff to Defendant Nos.1 and 2.
4 The suit loan agreements, which have been entered into by the Plaintiff separately with Defendant No.1 and Defendant No.2, a mother and daughter duo, are dated 8 March 2013 and 19 March 2013, respectively, for the sums of Rs.3 crores and 2 crores. Shares of Flexituff International Ltd. worth Rs.11.25 crores owned by the Plaintiff were kept as a security with Defendant Nos.1 and 2 towards the loan of the aggregate sum of Rs.5 crores, under the agreements. These agreements have common clauses, the relevant of which are set out below:
::: Downloaded on - 13/02/2014 23:13:10 :::sat 3/17 nm (l) 2150-2013.doc "1. The lender agrees to extend and give a Loan to the borrower a sum of Rs.3,00,00,000/- (Rupees Three Crores) provided value of securities provided with the lender is sufficient to give coverage as provided under clause 2 hereafter.
1. The borrower agrees to keep at all times during the currency of the Loan securities to be approved by the lender of 2.25 times the value of loan including interest accrued thereon. For example, Shares worth Rs.6,75,00,000/- will be kept as a security for availing the Loan of Rs.300.00 lacs.
2. Without prejudice to the provisions hereinbefore, Loan facility will be available for a period of 90 days i.e. from March 12, 2013 to June 10, 2013 and the Borrower shall repay the same on due date.
The lender may at its absolute discretion agree to renew the facility on a written request received from the borrower.
In the absence of a written consent for renewal, the Borrower shall be bound to repay the entire outstanding amount together with accrued interest thereon on expiry of 90 days from the date of disbursement of the loan. In case maturity falls on a Bank Holiday, the provisions of the Negotiable Instruments Act, 1961, as regards the date of payment shall apply.
3. The Loan shall carry interest @ 18.00% (Eighteen percent) per annum to be payable on monthly basis on reducing balance method i.e. on the outstanding amounts.
4. In consideration of the said facility, the original securities mentioned in Schedule 'A' attached to this Agreement are hereby provided by the borrower in favour of the lender as exclusive charge to the lender towards repayment of the principal amount, interest, costs and any other charges, etc., due to the lender under the Loan agreement or otherwise. Any change in the securities hereby provided may be effected by execution of as supplementary schedules(s).
Such Supplementary Schedule(s) would be deemed to form part and parcel of this Agreement and would not require execution of a fresh agreement. Such change in the Schedule would, inter alia, include substitution/replacement with fresh securities or additional securities.
7. In case of expiry of the date or in case of any other default, the lender shall have full rights to sell, dispose of or otherwise deal with the said securities on such terms and price that the lender may think fit and apply the net proceeds towards satisfaction of the Loan amount outstanding the Borrower along with interest, charges, etc.
8. Any default in payment of dues would entail an interest charge of 24% per annum on the entire dues of the lender remaining outstanding, without prejudice to the lender's other rights available as per this agreement or otherwise under the law.
12. The lender will keep the rights to utilise the provided securities/shares, which can be used as collateral for his own margin ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 4/17 nm (l) 2150-2013.doc purpose."
5 There is no dispute that the shares purportedly pledged by the Plaintiff with Defendant Nos.1 and 2 have been duly transferred to the DEMAT accounts of Defendant Nos.1 and 2, which are held by the latter with Defendant Nos.4 and 5.
6 Between March and June 2013, there were certain payments made by the Plaintiff to Defendant Nos.1 and 2 towards interest on the said loan. It is the case of the Plaintiff that on 18 and 19 June 2013, an amount of Rs.2 crores of loan was repaid by the Plaintiff by two RTGS transfers of Rs.1 crore each. It is also the case of the Plaintiff that it was agreed between the parties to renew the loan facility for the balance sum of Rs.3 crores.
7 On 29 June 2013, Defendant Nos.1 and 2 sold 78,000 shares of the Plaintiff valued at Rs.1.76 crores. The sale has been admitted by Defendant Nos.1 and 2 in their affidavit in reply to the Notice of Motion.
8 It is the case of the Plaintiff that on becoming aware of the sale of the said shares, the Plaintiff held several meetings with Defendant Nos.1 and 2 during which the Plaintiff objected to the said sale of shares and Defendant Nos.1 and 2 were requested to return the balance shares in the account of Defendant No.1 and the excess already recovered in respect of the loan. It is the case of the Plaintiff that one Akshay Seksaria, who is the representative of Defendant No.3, was present in the said meeting. Mr.Seksaria's presence is, however, disputed by the Defendants.
::: Downloaded on - 13/02/2014 23:13:10 ::: sat 5/17 nm (l) 2150-2013.doc
9 During the week ending 21 September 2013, further 40,231 shares
of the Plaintiff valued at Rs.88,50,000/- were sold by Defendant Nos.1 and 2 from their respective DP accounts. Sale of these shares as well as the value received towards such sale have been admitted by Defendant Nos.1 and 2 in their affidavit in reply.
10 It is the case of the Plaintiff that further meetings took place between the Plaintiff and Defendant Nos.1 and 2 at which the Plaintiff objected to the sale of shares and requested the Defendants to return the excess shares.
Once again, it is the case of the Plaintiff that the said Saksaria, representative of Defendant No.3, was present during these meetings. It is the case of the Plaintiff that out of the balance shares held by Defendant Nos.1 and 2, only 13,600 Shares were returned on 15 October 2013, whereas 27,100 shares were returned on 28 October 2013 aggregating to a total number of 40,700 shares of the Plaintiff held purportedly as a security by Defendant Nos.1 and 2.
11 It is the case of the Plaintiff that on 28 October 2013, a further 42,000 shares valued at approximately Rs.90 lakhs were sold by Defendant Nos.1 and 2. (This fact, however, was not mentioned in the suit as originally filed.) 12 It is, thus, the case of the Plaintiff that in addition to the sum of Rs.2 crores received towards return of loan, the Defendants had already received a sum of Rs.354.50 lakhs, i.e. Rs.1.76 lakhs (sale of 78,000 shares) plus Rs.88.50 lakhs (sale of 40,231 shares) plus Rs.90 lakhs (sale of 42,000 shares) from the ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 6/17 nm (l) 2150-2013.doc sale of total of 1,59,230 shares against their outstanding of Rs.3 crores. It is, thus, the case of the Plaintiff that the entire amount of the two loans aggregating to Rs.5 crores has been returned together with interest by the Plaintiff and that the Plaintiff was, in the premises, entitled to re-transfer of the shares held as a security by Defendant Nos.1 and 2.
13 In these premises, the Plaintiff filed the present suit and applied for ad-interim reliefs in the Notice of Motion. It is the case of the Plaintiff that the Plaintiff made an exparte application on 29 October 2013 at 11.00 a.m. for an ad-
interim injunction against the Defendants to restrain them from selling or transferring of the shares of the Plaintiff. The Plaintiff was, however, directed to give a notice and renew the application at 3.00 p.m. The Plaintiff claims that notices were thereupon served on Defendant Nos.1 and 2 for the hearing of the ad-interim application at 3.00 p.m. It is the case of the Plaintiff that Defendant No.3 refused to accept the service under the pretext of acknowledging it and after making the clerk of the Plaintiff's Advocate wait at the reception. It is the case of the Plaintiff that upon receipt of this notice, Defendant Nos.1 and 2 started selling the shares through Defendant No.3, which selling, in fact, resulted in the price of the share dropping from Rs.220 to Rs.177 per share. The Plaintiff claims that 74,575 shares were sold against receipt of Rs.1.46 crores.
14 On 29 October 2013 in the afternoon session, this Court granted ad-
interim injunction till 30 October 2013 restraining further transfer of shares. It is the case of the Plaintiff that by various e-mails sent on 29 October 2013, copies of the ad-interim order were served on Defendant No.3 and even soft copies of ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 7/17 nm (l) 2150-2013.doc the Notice of Motion and affidavit in support of the Notice of Motion were provided to Defendant No.3.
15 On 30 October 2013, when the matter was again called out in the afternoon for continuation of ad-interim relief granted on 29 October 2013, Defendant Nos.1 and 2 as well as Defendant No.3 were represented by Advocates, whereas Defendant No.4 was represented by its officers. This Court allowed the Plaintiff to amend the plaint and directed that the shares which are retained by Defendant Nos.1 and 2 in their custody shall not be treated or shall not be used for providing security by Defendant Nos.1 and 2 to any third party.
This Court further directed Defendant No.3 to retain proceeds of the shares sold on 29 October 2013 in a separate account till further orders of the Court and not to adjust the same in the accounts of Defendant Nos.1 and 2. The statement of the learned Counsel for Defendant No.3 that as on that date, i.e. 30 October 2013, a total of 2,61,528 shares had not been sold, was recorded by the Court.
The Plaintiff submits that it is now wrongfully claimed by Defendant No.3 that the balance shares have been appropriated by Defendant No.3 towards squaring off the shortfall in the margin of Defendant Nos.1 and 2.
16 On the basis of the aforesaid facts, the Plaintiff prays for an interim restraint against Defendant No.3 from transferring further the shares purportedly confiscated by him and to bring into the Court the entire sum realized on the sale of shares effected between 29 and 30 October 2013.
::: Downloaded on - 13/02/2014 23:13:10 ::: sat 8/17 nm (l) 2150-2013.doc
17 Mr. Chinoy, the learned Senior Counsel for the Plaintiff, submitted
that the suit shares were pledged with Defendant Nos. 1 and 2 for securing the loan liability owed by the Plaintiff to Defendant Nos. 1 and 2; that the loan liability having been fully discharged, the Plaintiff was entitled to re-transfer of the balance shares held by Defendant Nos. 1 and 2 as a security; Defendant Nos. 1 and 2 were incapable of transferring to Defendant No. 3 any higher right than they themselves possessed in the shares offered as security; and Defendant No. 3 was not, therefore, entitled to sell or transfer the shares. Mr. Chinoy submitted that Defendant No. 3 had knowledge of the transaction between the Plaintiff and Defendant Nos. 1 and 2, and therefore, of the rights of the Plaintiff as pawnor with respect to the shares and as such could not have dealt with the shares to the prejudice of those rights.
18 Ms. Panda, the learned Counsel for Defendant Nos. 1 and 2, submitted that Defendant Nos. 1 and 2 had legitimate claims towards damages as well as interest charges wrongly calculated, against the Plaintiff and this being a money claim simplicitor interim relief claimed cannot be granted.
19 Mr. Bookwala, the learned Senior Counsel appearing for Defendant No. 3, on the other hand, submitted that the suit shares were not in physical form, but were dematerialized; that any pledge of such shares had to be in conformity with the provisions of the Depositories Act, 1996; that the pledge claimed by the Plaintiff not being in such conformity, the pledge was not binding on Defendant No. 3, who was a depository participant holding these shares as a margin for his ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 9/17 nm (l) 2150-2013.doc constituents - Defendant Nos. 1 and 2. Mr. Bookwala denied that Defendant No. 3 had any knowledge of the transaction between the Plaintiff and Defendant Nos.
1 and 2, and submitted that the latter appeared to be in collusion to defeat the rights of Defendant No. 3.
20 Let me at first deal with the rights as between the Plaintiff on the one hand and Defendant Nos. 1 and 2 on the other. Defendant Nos. 1 and 2 do not dispute the transaction of pledge. They also do not dispute the payments claimed by the Plaintiff as having been made to Defendant Nos. 1 and 2 towards repayment of the loan. All that they submit is that the Plaintiff has calculated interest at the rate of 18% p.a. on the loan amount due after 10 June 2013 (this being the due date of repayment) on the basis of a purported renewal of loan, but there was no such renewal and in the premises, the Plaintiff is bound to pay a penal rate of interest, i.e. at the rate of 24% p.a., on the overdue amount after 10 June 2013. This will, however, make a difference of a few lakhs of Rupees in the repayment calculations, Rs.7,65,190/- to be precise as per the Plaintiff's own reckoning. But Defendant Nos. 1 and 2 also claim damages against the Plaintiff.
It is their case that they had taken F. & O. position for June 2013 expiry period and utilized the subject shares as a collateral. They claim that due to non-
payment of the loan amount by the Plaintiff in time, they suffered heavy charges/losses to the tune of over Rs. 1.00 crore, which the Plaintiff is bound to compensate. Now, this claim of Defendant Nos. 1 and 2 is in the nature of special damages. Prima facie there is nothing to indicate that this F. & O. position and the likelihood of any resultant loss was actually conveyed to the Plaintiff so as enable Defendant Nos. 1 and 2 to claim damages towards the same from the ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 10/17 nm (l) 2150-2013.doc Plaintiff. This being the position, it can be safely concluded at least at this prima facie stage that as between the Plaintiff and Defendant Nos. 1 and 2, the latter are bound to retransfer the shares to the Plaintiff.
21 The real question, which arises in the matter, is whether Defendant No. 3 is bound by this alleged pledge and therefore, not entitled to deal with the security. There I am afraid the Plaintiff is on a shaky ground. The subject shares were admittedly dematerialized and held in a fungible form. The shares were admittedly transferred by the Plaintiff to Defendant Nos. 1 and 2 (may be for creating a security) and were recorded in the name of Defendant Nos. 1 and 2.
Under Section 10 of the Depositories Act, 1996 ("the Act"), whilst Defendant Nos.
1 and 2 were the beneficial owners of the shares, Defendant Nos. 4 and 5 being the depositories, were deemed to be the registered owners thereof for the purposes of effecting transfer of ownership in the shares on behalf of the beneficial owners. Section 12 of the Act provides for pledge or hypothecation of securities held in a depository. The Section reads as follows.
"12. Pledge or hypothecation of securities held in a depository.-
(1) Subject to such regulations and bye-laws, as may be made in this behalf, a beneficial owner may with the previous approval of the depository create a pledge or hypothecation in respect of a security owned by him through a depository.
(2) Every beneficial owner shall give intimation of such pledge or hypothecation to the depository and such depository shall thereupon make entries in its records accordingly.
(3) Any entry in the records of a depository under sub-::: Downloaded on - 13/02/2014 23:13:10 :::
sat 11/17 nm (l) 2150-2013.doc
section (2) shall be evidence of a pledge or
hypothecation."
22 The Securities and Exchange Board of India has in
exercise of the powers under Section 25 of the Depositories Act made the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. The regulations require the depository to maintain, inter alia, records of all approvals, notices, entries and cancellation of pledge or hypothecation, as the case may be, vide regulation 38(1)(e). Regulation 58 reads thus :
"58. Manner of creating pledge or hypothecation.--(1) If a beneficial owner intends to create a pledge on a security owned by him, he shall make an application to the depository through the participant who has his account in respect of such securities.
(2) The participant after satisfaction that the securities are available for pledge shall make a note in its records of the notice of pledge and forward the application to the depository.
(3) The depository after confirmation from the pledgee that the securities are available for pledge with the pledgor shall within fifteen days of the receipt of the application create and record the pledge and send an intimation of the same to the participants of the pledgor and the pledgee.
(4) On receipt of the intimation under sub-regulation (3) the participants of both the pledgor and the pledgee shall inform the pledgor and the pledgee respectively of the entry of creation of the pledge.
(5) If the depository does not create the pledge, it shall send along with the reasons an intimation to the participants of the pledgor and the pledgee.
(6) The entry of pledge made under sub-regulation (3) may be cancelled by the depository, if the pledgor or the pledgee makes an application to the depository through its ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 12/17 nm (l) 2150-2013.doc participant:
Provided that no entry of pledge shall be cancelled by the depository without prior concurrence of the pledgee.
(7) The depository on the cancellation of the entry of pledge shall inform the participant of the pledgor.
(8) Subject to the provisions of the pledged document, the pledgee may invoke the pledge and on such invocation, the depository shall register the pledgee as beneficial owner of such securities and amend its records accordingly.
(9) After amending its records under sub-regulation (8) the depository shall immediately inform the participants of the pledgor and pledgee of the change who in turn shall make the necessary changes in their records and inform the pledgor and pledgee respectively.
(10) (a) If a beneficial owner intends to create a hypothecation on a security owned by him, he may do so in accordance with the provisions of sub-regulations (1) to (9).
(b) The provisions of sub-regulations (1) to (9) shall mutates mutandis apply in such cases of hypothecation :
Provided that the depository before registering the hypothecatee as a beneficial owner shall obtain the prior concurrence of the hypothecator.
(11) No transfer of security in respect of which a notice or entry of pledge or hypothecation is in force shall be effected by a participant without the concurrence of the pledgee or the hypothecate, as the case may be."
23 The suit pledge was admittedly not created with the previous approval of the depository or intimation from the then beneficial owner of the securities, namely, the Plaintiff. There was no compliance with Regulation 58.
Naturally, there were no entries in the records of the depository to that effect as a result. Such entries could have been the only evidence of pledge recognized by ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 13/17 nm (l) 2150-2013.doc the Act. This being the position, Defendant No. 3 (depository participant) could not be expected to act on any pledge, to which Defendant Nos. 1 and 2 (the beneficial owners) were parties. So also, Defendant Nos. 4 and 5 (the depositories) could not be prevented from effecting transfer of the shares on behalf the beneficial owners.
24 This court, in the case of Jry Investments Private Limited Vs. Deccan Leafine Services Ltd. 1, considered the rights of an owner of shares who had transferred the same with intention of creating security, to prevent dealing in such shares by the transferee in the event of failure of consideration for such security. A similar argument, as in our case, was advanced that the transferee had no title to pass on. This court considered the provisions of the Act and Regulation 58 quoted above and held:
"21. It is, therefore, clear that the Act and the regulations contain a whole and self-contained procedure for the creation of pledges. In any case, since it is not possible to physically deliver demated shares and therefore pledge them in accordance with the Indian Contract Act, 1872, it must be held that a pledge of such shares can only be validly created in accordance with the provisions of the Depositories Act, 1996."
25 In Jry Investments Case (supra), this court on the basis of the analysis of the provisions, as indicated above, held that the transfer could not be prevented. The ratio of that case would apply to the facts of our case as well.
26 Mr. Chinoy, however, in his rejoinder, submitted that Jry
1 (2004) 121 CompCas 12 Bom
::: Downloaded on - 13/02/2014 23:13:10 :::
sat 14/17 nm (l) 2150-2013.doc
Investments Case ought to be distinguished since in that case the court came to a conclusion that prima facie the intention was to transfer shares and not to pledge them, and that there was an express power "to trade, sell, assign or transfer" the rights / obligations of the stock during the continuance of the agreement. Mr. Chinoy submitted that in our case, there was a clear pledge and the relevant clause merely permitted the pawnee to use the shares pawned "as collateral for his own margin purpose". Now, as recognized by the trade, a margin may be kept by a client desiring to deal in securities options with the depository participant in the form of cash or shares deposited as collateral in leau of such cash. In the event of the client being unable to square off an overdue position, the depository participant can appropriate the cash or deal with the shares kept as collateral, as the case may be. The Depository Participant - Client Agreement authorizes the depository participant to do so. Transfer of shares to a third party with authority to use the shares as "collateral for his own margin purpose" would, thus, imply nothing but the authority to permit the depository participant "to trade, sell, assign or transfer" the rights/obligations of the stock.
27 Mr. Chinoy, secondly, submitted that in Jry Investments Case the subsequent transferees were bona fide purchasers for value without notice of the defect in their transferor's title, there being no reason to suspect any such defect.
But, says Mr. Chinoy, in our case Defendant No. 3 was put to express notice of the pledge transaction between the Plaintiff and Defendant Nos. 1 and 2 and was aware of the defect in the title of the latter, and therefore, in our case, transfer by Defendant No. 3 could be prevented. Mr. Chinoy's case on the alleged knowledge of Defendant No. 3 is based on the following:
::: Downloaded on - 13/02/2014 23:13:10 ::: sat 15/17 nm (l) 2150-2013.doc
(i) presence of Seksaria, the representative of Defendant No. 3 in the
alleged meetings between the Plaintiff and Defendant Nos. 1 and 2;
(ii) non-filing of any affidavit in denial by Seksaria, who is still employed with Defendant No. 3; and
(iii) the events of 29 and 30 October 2013, which indicate that the behavior of Defendant No. 3 was not consistent with the conduct of a bona fide depository participant unaware of any defect in the title of the beneficial owner.
28 Let me test each of these contentions and consider whether they lead to the conclusion sought to be drawn by Mr. Chinoy. Firstly, there is no case made out in the Plaint at all of any meetings with Defendant No. 3 . The so called meetings are referred to in para 15 of the Plaint but they are said to be between the Plaintiff and Defendant Nos. 1 and 2. There is no reference to the presence of Defendant No. 3 or any of its representatives in such meetings. In the absence of any pleading that the transferee had notice of any defect in the title of the transferor, it is difficult to accept the case suggested by the learned Counsel on the basis of some reference in an affidavit filed in the Notice of Motion. Non-filing of any affidavit by Seksaria, who is supposed to have attended the alleged meetings, is also of no consequence in the premises. Events of 29 and 30 October do prima facie show that there was some anxiety on the part of Defendant No. 3 to hurriedly sell or confiscate the shares, just when the ad-
interim order was being considered and later when it was passed. Mr. Chinoy ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 16/17 nm (l) 2150-2013.doc submitted that this conduct shows knowledge of the rights of the Plaintiff. To my mind, if at all, it shows knowledge of the Plaintiff's claim to the right rather than knowledge of the right itself, much less its acknowledgment. Learned Counsel for Defendant No. 3, on the other hand, explains this conduct thus: By a circular dated 21 October 2013, National Stock Exchange (NSE) revised the list of approved securities when the shares of Flexituff International Ltd. were removed from the approved list of securities acceptable towards margin requirements with effect from 1 November 2013; without these shares being reckoned towards the margin requirement, the account of Defendant Nos. 1 and 2 would have shown a huge naked debit, which Defendant No. 3 would in any event have been forced to pay to NSE; Even if the open F & O position of Defendant Nos. 1 and 2 was squared off, they would still have been liable to pay more than Rs. 6 crores to Defendant No. 3; Defendant No. 3 had given notice to Defendant Nos. 1 and 2 in that behalf; since the position was neither squared off nor secured by an adequate alternative margin, Defendant No. 3 had to sell and transfer the Flexituff shares held as collateral before 1 November 2013 and therefore, did so on 29 October and 30 October 2013. Mr. Chinoy, on the other hand, relies on the circumstances of 29 October and 30 October and claims that there are serious discrepancies between the version of Defendant No. 3 and the documents on record and that this is indicative of an attempt on the part of Defendant No. 3 to somehow defeat the court orders or at any rate, beat them. Learned Counsel for Defendant No. 3 submits that Defendant No. 3 had no knowledge of the ad-
interim application made on 29 October and sold/transferred the shares on 29 October and 30 October 2013, before the court orders were communicated to Defendant No. 3. In an appropriate case, it would have been necessary to go ::: Downloaded on - 13/02/2014 23:13:10 ::: sat 17/17 nm (l) 2150-2013.doc deeper into this aspect. But, here I am convinced that even if I were to eventually find that there was indeed an attempt to overreach the court, that does not imply that the Plaintiff is therefore entitled to any equitable relief. The Plaintiff has not, on his pleadings, made out any case for such relief. On this aspect, it is sufficient for me to record a prima facie finding that the conduct of Defendant No. 3 does not imply any knowledge or acknowledgment on its part of the rights of the Plaintiff, as suggested by Mr. Chinoy.
29Having regard to the reasons set out above, there is no case made out for grant of any interim relief to the Plaintiff.
30 Notice of Motion is, therefore, dismissed. Ad-interim orders passed earlier are vacated.
31 On the application of the learned Counsel for the Plaintiff, the ad-
interim reliefs operating till today are continued for a further period of three weeks from today.
(S.C. Gupte, J.) ::: Downloaded on - 13/02/2014 23:13:10 :::