Supreme Court - Daily Orders
Stci Finance Ltd. vs Cedar Infonet Pvt. Ltd. on 16 April, 2019
Bench: D.Y. Chandrachud, Hemant Gupta
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 3980 OF 2019
(@ Special Leave Petition (C) 32776/2018)
STCI FINANCE LTD. Appellant(s)
VERSUS
CEDAR INFONET PVT. LTD. & ORS. Respondent(s)
O R D E R
Leave granted.
This appeal arises from a judgment and order of a learned Single Judge of the Delhi High Court dated 8 May 2018 in a summary suit under Order XXXVII of the Code of Civil Procedure, 19081. By the order impugned in appeal, the respondents who are the defendants have been granted unconditional leave to defend the suit.
The facts as they are material for the disposal of the present appeal lie in a narrow frame.
The appellant, by a ‘loan facility agreement’ dated 17 November 2010 agreed to grant a loan to the first respondent in the amount of Rs 50 crores for a term of twelve months with interest at the rate of 12% per annum, payable monthly. A deed of guarantee was executed by the second respondent. Signature Not Verified Digitally signed by MANISH SETHI Date: 2019.04.24
In March 2011, the first respondent pledged 1,42,62,000 17:00:09 IST Reason: shares of Tulip Telecom Ltd., a sister concern of the first 1 (“CPC”) 2 respondent managed and controlled by the second respondent. The shares were pledged on different dates between March 2011 and September 2012. Since 2013, Tulip Telecom Ltd. is in liquidation. A provisional liquidator has been appointed on 12 February 2015.
The loan was disbursed by the appellant in two tranches:
the first tranche of Rs 25 crores was disbursed on 4 March 2011 while the second representing the balance of Rs 25 crores was disbursed in equal amounts of Rs 12.5 crores on 30 November 2011 and 31 December 2011.
The first respondent executed an acknowledgment of debt and securities on 20 November 2011. The first tranche was renewed by a sanction letter dated 5 March 2012 for a period of twelve months on a revised rate of interest of 14% p.a. with monthly rests, subject to the execution of security documents. The case of the appellant is that the pledged shares recorded a steep decline in value.
On 27 August 2012, the appellant invoked the pledge of 27,000 shares in terms of the loan agreement. The case of the appellant is that on 7 September 2012, a joint lenders meeting was held of the parent company, Tulip Telecom Ltd., whose shares had been pledged. The first and second respondent requested the borrowers, including the appellant, to place the selling of the pledged shares on hold and offered additional security. On 1 October 2012, the appellant agreed to accept a second charge on certain immovable property situated at Vasant Vihar, New Delhi belonging to the second and third respondents 3 subject to an NOC from the first charge holder, HDFC Ltd. and the execution of joint guarantees by the second and third respondents.
The appellant invoked the pledge of 39,82,000 shares on 3 October 2012. On 5 October 2012, soon after the invocation of the pledge, the first respondent passed a Board resolution requesting the second and third respondents to furnish collateral security by way of a second charge on the mortgaged asset. Following the grant of an NOC by the fourth respondent, the second and third respondents executed a joint guarantee on 19 October 2012.
According to the appellant, all the lenders on the request of the second respondent agreed on 25 January 2013 not to place the pledged shares for sale. The loan was renewed by the appellant on 5 February 2013 for a period of six months at a revised rate of interest of 15% with monthly rests. This was secured by the execution of an acknowledgment of debt of securities dated 8 February 2013. There was a further renewal of the loan facility on 18 November 2013 for a period of two years. On 3 March 2014 this was secured by the execution of another acknowledgment on the part of the first respondent.
The appellant issued demand notices on 19 May 2014 and 23 July 2014. The first respondent, while admitting its liability on 23 July 2014, sought time to make payment towards overdue interest. The account of the first respondent was classified as NPA on 1 August 2014. On 2 September 2014 and 15 September 2014, the appellant issued a loan recall notice calling upon 4 the respondents to pay a sum of Rs 55,22,05,107 due as on 1 September 2014.
On 4 May 2016, there was a demand notice for an outstanding of Rs 72.19 crores together with interest.
A suit was instituted on 27 March 2017 before the High Court of Delhi under Order XXXVII, CPC for the recovery of a sum of Rs 80.82 crores together with interest. The first, second and third respondents filed an application seeking unconditional leave to defend. This application was allowed by the order of the learned Single Judge, granting unconditional leave to defend the suit.
Shorn of details, the learned Single Judge was of the view that under Regulation 58(8) of the Depositories Regulations, on the invocation of the pledge, the depository is liable to register the pledgee as beneficial owner. According to the learned Single Judge, under Section 10 of the Depositories Act, 1996 (“the Act”) the beneficial owner would be entitled to all rights in respect of the shares. Hence, what weighed with the learned Single Judge is the defence that on the invocation of the pledge of shares and transfer to its account, the appellant was entitled to sell the shares and to realise their value. This, in the view of the learned Single Judge, raised a triable issue entitling the defendants to unconditional leave to defend.
During the course of the hearing of the present appeal, Mr C.A. Sundaram, learned senior counsel appearing on behalf of the appellant tendered an affidavit of the appellant indicating 5 the value of the pledged shares on the date of the invocation. The first and third respondents have responded on affidavit.
At the present stage, in order to obviate any controversy in regard to the factual position, it would be appropriate for the Court to advert to what, even according to the first and third respondents, is the factual position.
In the affidavit which has been filed by the first and third respondents on 16 April 2019, the following position has been indicated in regard to the invocation of 40,09,000 shares of Tulip Telecom Ltd. by the appellant:
Date Shares Rate Value
Cedar Share 27.8.2012 27,000 100.41 Rs. 27,11,070.00
Invocation
03 Oct-12 39,82,000 41.49 Rs.16,52,13,180.00
Total Share Rs. 16,79,24,250.00
Invocation
The affidavit records that besides the value of Rs 16.79 crores of the pledge which was invoked, the first, second and third respondents paid an amount of Rs 18.24 crores to the appellant on diverse dates which are indicated in the chart annexed as Annexure R-1 to the above reply. Evidently, this payment is towards the interest liability of the first, second and third respondents.
From the above factual narration, it has emerged before the Court that even if the case of the first, second and third respondents were to form the basis of evaluation, the value of the pledged shares on the date of the invocation was Rs 16.79 crores.
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Mr. Neeraj Kishan Kaul, learned senior counsel appearing on behalf of the first, second and third respondents has submitted that the payments which have been made by the first, second and third respondents in the amount of Rs 18.24 crores should also be taken into consideration in determining the ultimate directions that would be issued by this Court.
The principal amount of the loan which was advanced by the appellant to the first, second and third respondents is Rs 50 crores. Even going by the value of the 40,09,000 pledged shares on the date of invocation, at the highest an amount of Rs 16.79 crores may for the purposes of deciding the application for leave to defend be excluded from the principal claim. Even going by this hypothesis, the balance out of the principal amount namely, Rs 34 crores would have to be secured.
Hence, at the present stage, we are of the view that the interest of justice would demand that the first, second and third respondents should be granted conditional leave to defend subject to the deposit of an amount of Rs 34 crores. This amount shall be deposited within a period of three months from today. Of the above amount, an amount of Rs 10 crores shall be deposited on or before 15 May 2019, an amount of Rs 10 crores shall be deposited on or before 15 June 2019 while the balance of Rs 14 crores shall be deposited on or before 15 July 2019. On the deposit of the above amount, the first, second and third respondents shall be entitled to leave to defend. Upon deposit before the Registry of the Delhi High Court, the amount shall be invested in a fixed deposit of a nationalised bank, to abide 7 by the final result of the suit.
In the event, the first, second and third respondents default in the payment of the installments or any part thereof, necessary consequences under the law shall ensue and the appellant shall be entitled to move the High Court for a decree in terms of Order XXXVII of the CPC. The direction for the investment of the amount shall be without prejudice to the right of the appellant to apply before the learned Single Judge of the Delhi High Court for withdrawal of the amount deposited subject to furnishing such security as may be ordered and directed by the High Court. Any such application shall be considered by the High Court, if it is made.
All the rights and contentions of the parties on questions of law and fact are kept open to be adjudicated upon at the trial of the suit.
We accordingly, allow the appeal and set aside the impugned judgment and order of the High Court. The appeal is disposed of in terms of the above directions.
Pending application(s), if any, shall stand disposed of.
...............................J. (DR. DHANANJAYA Y. CHANDRACHUD) ...............................J. (HEMANT GUPTA) NEW DELHI APRIL 16, 2019 8 ITEM NO.1 COURT NO.11 SECTION XIV S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No(s). 32776/2018 (Arising out of impugned final judgment and order dated 08-05-2018 in CSC No. 247/2017 passed by the High Court Of Delhi at New Delhi) STCI FINANCE LTD. Appellant(s) VERSUS CEDAR INFONET PVT. LTD. & ORS. Respondent(s) (IA 168103/2018-PERMISSION TO PLACE ON RECORD SUBSEQUENT FACTS) Date : 16-04-2019 This appeal was called on for hearing today. CORAM :
HON'BLE DR. JUSTICE D.Y. CHANDRACHUD HON'BLE MR. JUSTICE HEMANT GUPTA For Appellant(s) Mr. C.A. Sundaram, Sr. Adv.
Mr. Raj Shekhar Rao, Adv.
Mr. Abhinav Mukhi, Adv.
Mr. Abhishek Gupta, Adv.
Ms. Rohini Musa, Adv.
Mr. Abhishek Agarwal, AOR For Respondent(s) Mr. Neeraj Kishan Kaul, Sr. Adv.
Ashim Vachher, Adv.
Mr. Pawash Piyush, Adv.
Mr. Joby P. Varghese, AOR UPON hearing the counsel the Court made the following O R D E R Leave granted.
The appeal is allowed in terms of the signed reportable order. Pending application(s), if any, shall stand disposed of.
(MANISH SETHI) (SAROJ KUMARI GAUR) COURT MASTER (SH) BRANCH OFFICER
(Signed reportable order is placed on the file)