2009 (4) TMI 1002 - HC - Companies Law

Summary

Issues Involved:
1. Applications for interim relief and amendment of the plaint.
2. Nature of the transaction: loan with shares as security vs. outright sale of shares.
3. Opposition to the amendment of the plaint.
4. Determination of interim relief.

Summary:

1. Applications for Interim Relief and Amendment of the Plaint:
The plaintiffs sought interim relief and amendment of the plaint. The nine plaintiffs instituted a suit against nine defendants for a permanent injunction. The plaintiffs No. 6 & 7 companies, engaged in film production, had their shares pledged as security against a loan of Rs. 1 crore. The plaintiffs claimed that the defendants failed to release the full loan amount and threatened to sell the shares, leading to the present suit.

2. Nature of the Transaction:
The controversy centered on whether the transaction was a loan with shares as security or an outright sale. The plaintiffs argued it was a loan transaction, supported by disclosure letters to the Bombay Stock Exchange u/s Regulation 13(6) of SEBI (Prohibition of Insider Trading) Regulation 1992 and Regulation 7(3) of SEBI (SAST) Regulation 1997. The defendants denied any loan transaction, claiming the shares were sold at agreed prices due to the plaintiffs' urgent need for funds.

3. Opposition to the Amendment of the Plaint:
The defendants opposed the amendment applications, arguing it would change the nature and character of the suit. The court found the amendments necessary for adjudication and allowed them, noting the discrepancy in the names of the companies (plaintiff No. 6 and No. 7) was due to a clerical error.

4. Determination of Interim Relief:
The court considered whether the transaction was a loan with shares as security or an outright sale. The court noted several factors indicating the transaction might not be a simple sale, such as the off-market nature of the transaction and the significant difference between the alleged sale price and the market price. The court found the plaintiffs' case could not be dismissed summarily and required trial. The court directed the plaintiffs to deposit Rs. 75 lacs with interest at 3% per month in the court and file an undertaking to compensate the defendants for any loss due to the interim order. The interim relief was granted, restraining the defendants from dealing with the shares during the pendency of the suit.

Conclusion:
The applications for amendments were allowed, and the interim relief was granted subject to the plaintiffs depositing the due amount and filing an undertaking. The matter required trial to determine the true nature of the transaction.