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47. The Respondent No. 2 gave the background and the events compelling lenders and the Respondent No. 2 to acquire equity due to operation of law subsequent to invocation of pledged shares and partial conversion of debt into shares. The Respondent No. 2 submitted that on 22.03.2016, in an attempt to implement Scenario-II, a review meeting was held at MoP to discuss the issues relating to revival of the project and inter-alia, discussed issue regarding Endorsement of NHPC/NHDC as new 'Promoter' as suggested by HLC, however, NHPC declined the suggestion and as such as an interim measure, the Respondent No. 2 along with other lenders were persuaded to get involved in affairs of the Respondent No. 2 to sustain the revival measures. The Respondent No. 2 elaborated that the implementation of Scenario II was envisaged by way of invocation of pledge in favour of various consortium lenders, and exercise of the conversion right by Respondent No. 2, as entailed Comp. App. (AT) (Ins.) No. 1287 & 1291 of 2022 under the SLA for partially converting Respondent No. 2 's subordinate debt into equity, in order to acquire majority equity as per the mandate of the HLC under Scenario-II. The Respondent No. 2 further clarified that on 19.05.2016, a notice for Invocation of Pledge was issued to the Respondent No. 1 and its Promoter/pledgor and only thereafter on 27.05.2016, Respondent No. 2 issued a Notice to the Respondent No. 1 for partial conversion of subordinate debt into equity.

For this preposition, place reliance on the Judgment of Hon'ble Supreme Court in the case of Balkrishna Gupta Vs. Swadesi Polytex Ltd. (1985) 2 SCC 167. Wherein Hon'ble Supreme Court has held that even after the pledge is Comp. App. (AT) (Ins.) No. 1287 & 1291 of 2022 enforced, the legal title in the shares pledged would not vest in the pledgee and the pledgee has only a special interest/property to retain the shares as a collateral or sell them in accordance with Section 176 of the Indian Contract Act. Hon'ble Bombay High Court in the case of United Breweries (Holdings) Ltd. & Ors. Vs. State Bank of India & Ors. (order dated 02.04.2013) in notice of Motion (L) No. 718 of 2013 in Suit (L) NO. 263 of 2013 held that invocation of pledge and transfer of pledged securities to the pledgee's Demat Account did not violate the Section 176 of the Indian Contract Act and did not result in the pledgor being divested of their rights to the pledged shares. The same view has been taken by this Appellate Tribunal in MAIF investments India Pvt. Ltd. Vs. M/s Ind. Bharath Energy (Utkal) Ltd., (Company Appeal (AT) (Ins) No. 597 of 2018). Thus, the invocation of pledge in itself does not amount to transfer of shares or discharge of debt. This Appellate Tribunal in the case of PFS held that invocation of pledged of shares amounts to discharge of debt. However, Hon'ble Supreme Court has stayed the proceedings. Therefore, this Judgment does not help the Appellants.

14. After hearing Learned Counsel for the parties, we have perused the record.

15. The following two issues are crop up in these Appeals.

(a) Whether the Application under Section 7 of I&B Code, filed pursuant to the RBI Circular dated 12.02.2018?

Comp. App. (AT) (Ins.) No. 1287 & 1291 of 2022

(b) Whether the liability of the Corporate Debtor stood discharged in view of the invocation of the pledged shares by the Financial Creditor.

18. According to the Appellants after invocation of the pledged shares the Financial Creditor became 95.2% shareholder of the Corporate Debtor and the entire dues of Corporate Debtor stood discharged. In support of this submissions Learned Counsel for the Appellants cited two Judgments one of this Appellate Tribunal in the case of PTC India Financial Services Ltd. (Supra) in which it is held that once shares are transferred to the Financial Creditor, the Financial Creditor became the owner of the shares. The another Judgment of Hon'ble High Court of Delhi in the case of Tendril Financial Services Pvt. Ltd. (Supra) in this Judgment it is held that as per the Regulation 58 of Security Exchange Board of India (Depositors and Participants) Regulations, 1996, the moment the shares are transferred to the Demat Account of the beneficiary after invocation of pledge shares, such transfer amounts to sale and transferee became the beneficial owner of the shares.

26. In the light of the Judgement of Hon'ble High Court of Delhi in Tendril Financial Services Pvt. Ltd. (Supra). We are convinced with the arguments of Learned Counsel for the Appellants that the moment the shares transferred to the Demat Account of the SBI CAP Trustee Company Ltd. it became the beneficial owner of the shares as also held by this Appellate Tribunal in the case of PTC India Financial Services Ltd (Supra). Learned Counsel for the Appellants tried to impress that pursuant to invocation of pledged shares the Financial Creditor became the shareholder of the Corporate Debtor. We are unable to convince with this argument and held that after invocation of pledged shares the SBI CAP Trustee Company Ltd. became the shareholder of the Corporate Debtor, as per the Clause 2.6.2 of the Share Pledge Agreement dated 23.09.2016. The Financial Creditor is not party in the above referred agreement. In the notice dated 20.12.2017 it is mentioned that invocation of pledged shares shall not prejudice the rights and remedies available to the Financial Creditor under the Financing Documents. Therefore, it cannot be said that after invocation of the pledged shares by the SBI CAP Trustee Company Ltd., the Financial Creditor cannot maintain the Application under Section 7 of I&B Code, or the entire dues of the Corporate Debtor stood discharged.