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19. Learned Counsel for the Respondent No. 2 (Financial Creditor) submits that Regulation 58(8) of the Debentures Regulations is subject to the terms of Share Pledge Agreement and the pledge is governed by the Indian Contract Act.

20 In the present case the whole controversy arises when SBI CAP Trustee Company Ltd. issued a notice of invocation of pledge shares dated 20.12.2017. (Annexure 8 Page 240 of Reply of Respondent No. 2 (Financial Creditor)). In such a situation we are considering the effect of invocation of pledge shares.

21. Admittedly the Loan Document for phase I lenders and phase II lenders are different and default has been committed by the Corporate Debtor in respect of both phases. In the present case the share pledge by the Corporate Debtor were invoked by the SBI CAP Trustee Company Ltd. on the instruction of phase I lenders in relation to phase I facility agreement.

COMPANY APPEAL (AT)(INSOLVENCY) No.1220 of 2019 & 1450 of 2019

22. There is Share Pledge Agreement dated 23.09.2016 by the Appellant (IPCL) and MEL in favour of SBI CAP Trustee Company Ltd. When the Corporate Debtor committed default then at the instruction of the Financial Creditor, the SBI CAP Trustee Company Ltd. issued notice of invocation of pledged shares dated 20.12.2017, relevant portion of the notice is reproduced here:-

This notice is being issued to you without prejudice to our rights and remedies against the Borrower. Nothing contained in this letter will be construed as a waiver (in full or part) of any or rights or remedies under the Financing Documents or defaults thereunder. The Lenders and other Secured Parties expressly reserve the right to declare further defaults or invoke security from time to time."

23. A bare perusal of the notice of invocation shows that the pledge had been invoked only on behalf of the phase I lenders. This notice was issued without prejudice to the rights and remedies against the borrower under the Financing Documents. This notice also specifically mentioned that COMPANY APPEAL (AT)(INSOLVENCY) No.1220 of 2019 & 1450 of 2019 the lenders and other secured parties expressly reserving the right to declare further default or invoke security from time to time.

27. It is argued on behalf of the Appellant that after invocation of pledge and subsequent transfer of shares the Financial Creditor held 95.2% shares of the Corporate Debtor. Thus, the entire debt of the Financial Creditor stood discharged. If this is the position, then why the Corporate Debtor after receiving the notice of invocation of pledged shares dated 20.12.2017 sent an acknowledgement of debt on 16.02.2017 (See Annexure 20 of Page 313 Reply of Financial Creditor Vol. II) and after transfer of shares sent letters dated 25.05.2018 and 11.06.2018 for settlement. It shows that even after transfer of shares in the Demat Account of SBI CAP Trustee Company Ltd., there exist a debt of more than Rs. 1 lakh and there is a default on the part of the Corporate Debtor. COMPANY APPEAL (AT)(INSOLVENCY) No.1220 of 2019 & 1450 of 2019