2022 (6) TMI 1424 - HC - Companies Law

Bank is a nominee or transferee of the shares or not? Seeking an injunction restraining defendant nos. 1 and 2 and their servants and agents from participating in an Extraordinary General Meeting (EGM) of the defendant no.3 (Company) scheduled on 24th June, 2022 and from exercising any right including voting rights in respect of the suit shares - seeking permission to exercise voting rights in respect of the suit shares at the said EGM - seeking restraint on defendant nos. 1 and 2 and their servants and agents or nominees from interfering or seeking participation in the management of the affairs of the Company. HELD THAT - That interim application was scheduled to be heard by this court but was withdrawn only to pursue a Review Petition in view of certain additional facts that had come to the knowledge of the applicant. The plaint was amended and the Review Petition is pending. There was a controversy whether the Review Petition was moved at all, but today it is pointed out that the Review Petition has been listed on board. There is no reason why the plaintiff/applicant has not moved that court since the issue is sought to be reopened on the basis of additional disclosures and fact thus their application could have been made in the Review. However, despite pendency of the Review Petition, the attempt of the applicant is now to once again seek relief which was part of IAL 4778 which was withdrawn - no case is made out for ad-interim relief on the basis of the arguments advanced - The Review Petition continues to be pending. Contentious issues have been raised as to the legal capacity of the bank since the applicant has contended that the bank is not a nominee but an alleged transferee. The applicant has not made out a prima facie case nor is the balance of convenience favouring grant of relief. No irreparable harm is likely to be caused to the plaintiff/applicant. There is no occasion to once again consider grant of relief which was part of IAL 4778 which was consciously withdrawn to pursue the Review Petition which is still being pursued. Ad-interim relief is refused - List per CIS.

Summary

Issues:
1. Application for ad-interim relief seeking injunction restraining defendants from participating in an Extraordinary General Meeting (EGM) and exercising voting rights.
2. Dispute regarding the right of defendant nos. 1 and 2 to vote at the EGM.
3. Previous applications for similar reliefs and subsequent legal proceedings.
4. Justification for the present interim application based on changed circumstances and legal precedents.
5. Dispute raised by the defendant bank opposing the application.
6. Plaintiff's submission regarding the amended plaint and the effect of a recent Supreme Court judgment.
7. Defendant bank's claim as a nominee of defendant no. 1 and entitlement to voting rights.
8. Dispute over whether the bank is a nominee or transferee of the shares.
9. Clarification sought regarding Regulation 58(8) and the pledgee's rights.
10. Defendant's argument of repeated attempts to stall legitimate proceedings.
11. History of legal proceedings and attempts to prevent the bank's recovery efforts.
12. Claim of a valid pledge including voting rights as per the agreement.
13. Evaluation of previous applications and the pending Review Petition.
14. Decision on ad-interim relief and further procedural steps.

Analysis:

1. The plaintiff sought ad-interim relief to restrain defendants from participating in an EGM and exercising voting rights. The application was based on the plaintiff's claim that defendant nos. 1 and 2 had no right to vote at the EGM due to a Security Trustee Agreement involving the pledge of suit shares. The plaintiff also sought permission to exercise voting rights and prevent interference in the company's management.

2. Previous applications for similar reliefs were highlighted, including the denial of relief in a prior application and subsequent legal proceedings initiated by the bank. The plaintiff argued that changed circumstances justified the present application, emphasizing the alleged violation of the Security Trustee Agreement by defendant no. 1 and the plaintiff's right to redeem the pledged shares.

3. The defendant bank opposed the application, claiming entitlement to voting rights as a nominee of defendant no. 1. The bank argued that past voting rights exercised and outstanding payments from borrowers supported their position, contending that the application was an attempt to stall legitimate proceedings.

4. The plaintiff's submission emphasized the amended plaint and a recent Supreme Court judgment supporting their case. The plaintiff argued that the bank had no voting rights as an alleged illegal transferee of the shares, citing the law as now settled in their favor.

5. The court considered the dispute over the bank's status as a nominee or transferee of the shares, with the plaintiff vehemently denying any nomination and asserting an illegal transfer. The court was urged to grant relief based on the settled law and the plaintiff's entitlement to relief.

6. After hearing extensive submissions, the court found no grounds for ad-interim relief due to the pending Review Petition and the lack of a prima facie case. The court noted the contentious issues regarding the bank's legal capacity and the absence of irreparable harm to the plaintiff, leading to the refusal of ad-interim relief and setting further procedural steps.