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2020 (7) TMI 781 - HC - Indian LawsValidity of Pledge Invocation Notice and Corporate Guarantee Notice - seeking restraint on Respondent No. 1 from acting on the Pledge Invocation Notice against the Petitioner - restraint on Respondent No. 1 from acting on the Corporate Guarantee Notice against the Petitioner during the pendency of the present Petition and/or conclusion of arbitration proceedings - HELD THAT - There is no binding arbitration agreement, it is agreed between the parties through their counsels during the arguments that the said contention be kept open to be decided at the appropriate stage. Their statements are taken on record and the issue is left open. According to Dr. Saraf, the equity holding pattern in the case of a listed company would change daily - I am in agreement with the submissions of Dr. Saraf. Firstly, no such stipulation exists in the pledged agreements. The plea is clearly an afterthought only to wriggle out from the liability. Rather it is represented in the agreement that the Dish TV shares are freely transferrable without any restriction under any law, regulation or orders of any authority. It is not the case of the petitioner that such an approval was taken by it when it, bought the shares/at time of allotment. That apart, the shares are being freely traded in the stock market. The prayers as sought for by the petitioners cannot be granted - Petition dismissed.
Issues Involved:
1. Challenge to Pledge Invocation Notice and Corporate Guarantee Notice. 2. Impact of COVID-19 on market conditions and invocation of pledge. 3. Rights and obligations of the parties under the Debenture Trust Deed (DTD) and other related agreements. 4. Applicability of RBI and SEBI circulars during the pandemic. 5. Legal and contractual rights of the pledgee to sell pledged shares. 6. Requirement of Ministry of Information and Broadcasting approval for the invocation of pledge on Dish TV shares. Detailed Analysis: 1. Challenge to Pledge Invocation Notice and Corporate Guarantee Notice: - The petitions challenged the Pledge Invocation Notice and Corporate Guarantee Notice dated June 12, 2020. The petitioners sought to restrain the respondent from acting on these notices, including from invoking the pledge and selling the pledged shares in the open market during the pendency of the petition and/or arbitration proceedings. 2. Impact of COVID-19 on Market Conditions and Invocation of Pledge: - The petitioners argued that due to the COVID-19 pandemic, the stock markets were operating at historically lower points and were extremely volatile. They contended that the respondent should act fairly and in good faith, considering the unprecedented times. They also cited RBI and SEBI circulars that provided relaxations during the lockdown and argued for a postponement of the invocation of the pledge to achieve optimal recovery. 3. Rights and Obligations of the Parties under the Debenture Trust Deed (DTD) and Other Related Agreements: - The respondent argued that the petitioners had defaulted under the financing documents and that the respondent had the right to enforce its security in terms of the security documents. The respondent emphasized that it had the unfettered discretion to sell the pledged shares to recover their dues. The court acknowledged that the petitioners did not contest the rights of the respondent as a pawnee or its entitlement under the various contracts. 4. Applicability of RBI and SEBI Circulars During the Pandemic: - The petitioners relied on RBI and SEBI circulars that declared a moratorium on loans becoming due during the COVID-19 lockdown and provided relaxation on credit ratings. However, the court noted that these circulars did not ipso jure bar the invocation of the pledge. The court agreed with the respondent that the omission of relevant regulatory authorities to restrict the rights of the pledgee to invoke and sell pledged shares was deliberate and instructive. 5. Legal and Contractual Rights of the Pledgee to Sell Pledged Shares: - The court highlighted that under Section 176 of the Indian Contract Act, the discretion to sell the pledged shares lies with the pledgee. The pledgee is entitled to sell the shares at any time and price it considers best to discharge the outstanding amounts. The petitioners' rights are limited to ensuring that the sale is honestly and properly done and that the sale proceeds are applied to the debt. The court emphasized that the exercise of discretion by the respondent is not justiciable. 6. Requirement of Ministry of Information and Broadcasting Approval for the Invocation of Pledge on Dish TV Shares: - The petitioners argued that the invocation of the pledge on Dish TV shares without prior approval from the Ministry of Information and Broadcasting was illegal and void. However, the court found this plea to be an afterthought and noted that no such stipulation existed in the pledged agreements. The court agreed with the respondent that the shares were freely transferable without any restriction under any law, regulation, or orders of any authority. Conclusion: - The court dismissed the petitions, concluding that the respondent's rights to invoke the pledge and sell the pledged shares were not contested by the petitioners. The court found that the unprecedented times due to COVID-19 did not justify restraining the respondent from exercising its legal and contractual rights. The court also rejected the argument that the invocation of the pledge on Dish TV shares required prior approval from the Ministry of Information and Broadcasting.
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