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80. Mr. Seervai has submitted that when a pledge is invoked, the Pledgee is transposed as the "beneficial owner" for the limited and sole purpose of effectuating a prospective sale upon the invocation of the pledge. Neither the Depositories Act nor the DP Regulations envisage or contemplate the exercise of proprietary rights by a Pledgee upon invocation of a pledge, since the recording as "owner" is only for the purpose of effecting the sale. Furthermore, the provisions of the Depositories Act are not contrary to or in derogation of the law that applies to pledge transactions under IAL-29574-21.doc Sections 172 to 180 of the Contract Act.

139. Mr. Khambata has submitted that a Deed of Pledge can include terms governing the pledge over and above those in Sections 172-179 of the Contract Act. He has submitted that though under Section 176 of the Contract Act, it is provided that " If the Pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the Pawnee may bring a suit against the Pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the Pawnor reasonable notice of the sale..." However, the use of pledged goods by the Pledgee post invocation of pledge but prior to sale is not barred either under Section 176 or any other provision of the Contract Act. This will include exercise of voting rights if the pledged goods are shares.

206. There have been submissions made by the Plaintiff and / or Dish TV on the distinction between Pledge and mortgage of movables and contending that the right of enjoyment of pledged goods such as right to vote is inconsistent with the pledge but consistent with a mortgage of movables. In my view decision of the Andhra Pradesh High Court in Shatzadi Begum (Supra) relied upon by the Plaintiffs in this context is inapplicable to the present case as the Court in that case had not considered the law of bailment of goods. In my prima face view a pledge is a form of bailment and this is apparent from Section 172 of the Contract Act. The Supreme Court in PTC India (Supra) holds that pledges are nothing but a "subset of bailment" and Section 148 to 171 and 180 and 181 of the Contract Act will apply to a pledge. Further, the use of pledged goods by Pledgee post invocation of pledge but prior to sale is not barred either under Section 176 or any other provision of the Contract Act.

IAL-29574-21.doc

233. I have perused the material on record including the aforementioned two complaints. In my prima facie view, the Plaintiff had prior knowledge of the alleged fraud i.e. prior to the filing of the present Suit but despite which the Plaintiff did not avoid the Pledge Deeds. The alleged fraud does not in my prima facie view render the loan transaction void but at the highest would render the transaction voidable at the instance of the defrauded party. The Suit dated 14th October, 2020 filed by the Defendant No.5, Essel Corporate Resources Pvt. Ltd. before the Saket District Court at New Delhi, being one of the suits filed by the Borrowers challenging Yes Bank's invocation of the pledged shares, demonstrates that the Borrowers were aware of the allegations of fraud as early as in October 2020. The Suit has referred to the FIR registered pursuant to Subhash Chandra's complaint and ongoing criminal investigation into Subhash Chandra's complaint. The Suit only seeks to invalidate the invocation of the pledge and not the pledge itself. There were identical Suit filed by the Borrowers. Ultimately all the Suits were withdrawn by the Borrowers with liberty to file fresh Suits. However, no such fresh suits have ever been filed. Further, the Oppression and Mismanagement Petition being Company Petition No.411 of 2021 dated 21st November, 2021 filed by Yes Bank before the NCLT, Mumbai IAL-29574-21.doc demonstrates that the Subhash Chandra Complaint and the alleged fraud was within the knowledge of the Plaintiff on 20th November, 2021. There is a reference made to the Subhash Chandra Complaint and FIR registered, both of which have been annexed to the Petition. Further, the Oppression and Mismanagement Petition makes a reference to the EOW Complaint and the proceedings filed by the Borrowers before the Saket District Court.