Delhi High Court - Orders
Rahul Dilip Shah vs Milestone Trusteeship Services ... on 16 February, 2022
Author: Asha Menon
Bench: Asha Menon
$~13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(COMM) 108/2022, I.As.2620/2022, 2621/2022 & 2622/2022
RAHUL DILIP SHAH ..... Plaintiff
Through: Mr. Dayan Krishnan, Sr. Adv. with
Mr. Ananya Kumar, Mr. Farid
Karachiwala, Mr. Rajat Joneja and
Ms. Pooja Kane, Advs.
versus
MILESTONE TRUSTEESHIP SERVICES PRIVATE LIMITED
& ORS. ..... Defendants
Through: None.
CORAM:
HON'BLE MS. JUSTICE ASHA MENON
ORDER
% 16.02.2022
[VIA VIDEO CONFERENCING]
I.A. 2622/2022 (exemption)
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
I.A. 2621/2022 (by the plaintiff seeking exemption from pre- institution mediation under Section 12A of the Commercial Courts Act, 2015)
3. For the reasons stated in the application, the same is allowed and Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 1 of 6 Signing Date:16.02.2022 22:56:59 the plaintiff is exempted from instituting pre-institution mediation.
4. The application is disposed of.
CS(COMM) 108/2022, I.A. 2620/2022 (by the plaintiff under Order XXXIX Rules 1 and 2 read with Section 151 CPC)
5. The plaint be registered as a suit.
6. This is a suit for declaration and permanent injunction.
7. Issue summons in the suit and notice in the application to the defendants by all permissible modes, returnable before the Joint Registrar.
8. The summons shall indicate that the written statement(s) to the suit and reply(ies) to the application be filed by the defendants within thirty days from the date of receipt of the summons. The defendants shall also file the affidavit of admission/denial of the documents filed by the plaintiff, failing which the written statement(s) shall not be taken on record.
9. The plaintiff is at liberty to file replication(s) to the written statement(s) and rejoinder(s) to the reply(ies) filed by the defendants within thirty days following the filing of the written statement(s)/reply(ies). The replication(s) shall be accompanied by the affidavit of admission/denial in respect of the documents filed by the defendants, failing which the replication(s) shall not be taken on record.
10. If any of the parties wish to seek inspection of any documents, the same shall be sought and given within the time lines.
11. Mr. Dayan Krishnan, learned senior counsel for the plaintiff, has Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 2 of 6 Signing Date:16.02.2022 22:56:59 sought interim directions in order to protect the interest of the plaintiff. It is submitted that the plaintiff was the Promoter and Director of defendant No.3/Katalyst Software Services Ltd. (hereinafter referred to as 'KSSL'). It is stated that the plaintiff was the majority shareholder in KSSL, having 28.88% shareholding. Out of this, in view of the fact that he was the Promoter, he pledged 26% of his shareholding in KSSL in accordance with the Share Pledge Agreement. It is submitted by the learned senior counsel that the pledge could be invoked only on satisfaction of certain conditions, as incorporated in the Share Pledge Agreement ('SPA', for short) dated 08th August, 2017, entered into between the plaintiff and the defendant No.1 and the Debenture Transfer Deed ('DTD', for short) dated 07th August, 2017 entered into between the KSSL and defendant No.1.
12. According to the learned senior counsel, none of these conditions have been satisfied. It is submitted that the plaintiff had pledged its share only because he was assured of a majority in the management of the Company. However, due to certain differences, certain proceedings are pending before the NCLT, Mumbai, but as a result of those proceedings, the plaintiff learnt of the intent of the other shareholders to remove him from the Directorship. Thus, he resigned of his own on 12th January, 2022. On 13th January, 2022, he sent a letter to defendants No.2 & KSSL to release the pledge as there were other securities available to KSSL and also highlighted that the pledge could continue only till the plaintiff had management control and not thereafter. Having resigned from the directorship, there was no reason why his shares should remain pledged on behalf of KSSL. Instead of responding to this letter, defendants No.1 Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 3 of 6 Signing Date:16.02.2022 22:56:59 & 2 invoked the Pledge under the SPA and the defendant No.1 transferred the pledged shares to itself.
13. It is pointed out that under the DTD, to effect the change in the management, an NOC was required from the debenture-holders, but no such NOC is on the record. Furthermore, a cooling period was also provided for apart from a standstill period, none of which, was given effect to, before the defendant No.1 appropriated the pledged shares. The Notice for Invocation (Document No. 24 of the Plaintiff's Documents) is dated 3rd February, 2022 and as is evident from the HDFC Ltd. depository transaction statement, the transfer was effected on 4th February, 2022. Thus, the three days cooling period provided for in clause 6.1 of the DTD before the pledge could be invoked, has been given the go-by. As regards the Standstill period prescribed under clause 14.4.5(b) of the DTD that too was also not adhered to in the present case, before the said pledged shares were appropriated by defendant No.1. Rather, after the suit papers were served on the defendants, a letter dated 14th February, 2022 was received yesterday by the plaintiff in reference to the Standstill period of 30 days directing the plaintiff to redeem the pledged shares, failing which, they would be sold and the debt recovered. The letters have been forwarded to the Court Master. The same be made part of the record.
14. It is further submitted that under clause 14.4.5(c) of the DTD, the pledged shares can be sold only after these were valued by a SEBI registered Merchant Banker. Reference was also made to Section 176 of the Contract Act, 1872, to submit that even thereunder, when the pledged goods are sold, the amount is adjusted, the excess being paid to the Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 4 of 6 Signing Date:16.02.2022 22:56:59 pawnor/pledger and the balance recovered from the pawnor/pledger, if the sale proceeds fell short of the debt, in respect of which, the goods were submitted as collateral security. It was submitted that given the conduct of the defendant, if the shares, now in the possession of the defendant No.1, were to be sold and the plaintiff was able to prove his case and succeed finally in the suit, irretrievable damage would be caused to him, as the shares would be lost forever. On the other hand, the defendants would face no loss, as there were several other securities incorporated in clause 6.1, as amended by the Amendment to the DTD dated 21st August, 2021 (Document No. 8 of the Plaintiff's Documents), which could cover their debts.
15. It is clear that the contentions raised by learned senior counsel for the plaintiff require to be inquired into. The alleged non-adherence to the terms of the DTD and the SPA will have to be explained by the defendants. Presently, the shares are with the defendant No.1 and post the receiving of the information of the filing of the present suit, the defendant No.1 has given time to the plaintiff to redeem his pledged shares, reflecting that there is no immediate urgency for the sale of the pledged shares.
16. In the circumstances, the plaintiff having disclosed a prima-facie case, the balance of convenience in his favour and irreparable loss and injury that may result if no interim protection is granted, till the next date of hearing, the defendants shall maintain status quo in respect of the pledged shares of the plaintiff being 32,82,720 equity shares amounting to 26% of the paid-up shares capital of the defendant No.3/KSSL.
Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 5 of 6 Signing Date:16.02.2022 22:56:5917. Provisions of Order XXXIX Rule 3 CPC be complied with.
18. List before the Joint Registrar on 28th March, 2022, for completion of service and pleadings.
19. The order be uploaded on the website forthwith.
ASHA MENON, J FEBRUARY 16, 2022/ck Signature Not Verified Signed By:MANJEET KAUR CS(COMM) 108/2022 Page 6 of 6 Signing Date:16.02.2022 22:56:59