2020 (3) TMI 1359 - HC - Indian Laws

Seeking grant of ad-interim relief in favour of plaintiffs - restraint to defendant no.2 from taking any steps for selling the shares in the market - HELD THAT - It is to be noted that when Debenture Trust Deed was executed, market value of the shares were ₹ 350 per share and because of COVID-19, share market has collapsed and per share comes below ₹ 100. Considering the present situation of market and COVID-19, it is opined that plaintiffs are required adinterim protection till next date - it is declared that the Mandatory Redemption Event Notices dated 11 March 2020 and 13 March 2020 (Exhibits D-I and D-2 hereto), and the Event of Default Notices dated 17 March 2020 (Exhibits E-1 and E-2 hereto) and Notices of Sale dated 18 March 2020 (Exhibits F-1 and F-2 hereto), are all illegal and/or invalid and/or improper - a permanent injunction restraining the Defendants from acting upon and/or giving effect to and/or implementing, directly or indirectly, in any manner whatsoever is granted.

Summary

Issues involved:
Interim injunction against sale of pledged shares due to market collapse amid COVID-19 pandemic.

Analysis:
The case involved an application seeking an injunction against the respondent from acting on notices related to the sale of shares pledged by the applicants. The plaintiffs argued that the outstanding loan payable to the defendant was approximately ?610 crores, and they had pledged 8% of their equity shares as security. The market value of the shares had significantly dropped due to the COVID-19 situation, causing potential irreparable loss if the shares were sold. The plaintiffs relied on the security clause of the Debenture Trust Deed to support their claim for interim protection.

On the other hand, the defendant opposed the grant of ad-interim relief, stating that they needed to recover more than ?610 crores, and the current market valuation of the shares was not sufficient to cover the debt. The court noted the significant drop in the market value of the shares from ?350 per share to below ?100 due to the pandemic. Considering the circumstances, the court found it necessary to provide ad-interim protection to the plaintiffs until the next hearing date.

The court granted ad-interim relief as requested by the plaintiffs, declaring certain notices as illegal and ordering a permanent injunction to prevent the defendants from acting upon the notices related to the sale of pledged shares. The court scheduled the matter for further hearing on a specified date to monitor the situation and provide necessary directions. This detailed analysis highlights the key arguments presented by both parties, the court's assessment of the market conditions, and the legal basis for granting the interim injunction to protect the plaintiffs' interests during the ongoing financial crisis caused by the pandemic.