2018 (12) TMI 1436 - Tri - Companies Law

Offering corporate guarantee for the loan availed - outstanding liability under a corporate guarantee offered at the instance of the petitioner - Held that - The petitioner had deliberately made false averments with respect to the loss of shares and its consequent formal reporting with the police. It is not denied that loan was availed from Celica Developers P. Ltd., by Apsom Turner in which the petitioner alone had interest being a director on its board and his wife holding a major stake therein. This Bench is unable to appreciate the petitioner s stand that the respondents cannot hold on to a security in the absence of a written agreement. Under such circumstances the right to claim the shares or to redeem the pledge cannot be adjudicated by this forum. The pledge of shares necessitates only possession to be handed over. The pledgee has a right to hold on to them as security in the event of bailing out the pledgor, till he is duly paid. The respondents submit that they are ready and willing to return the shares upon their claim being satisfied. No merit in the prayer made by the petitioner. This Bench does not find it equitable to direct the respondents to hand over the share certificates over which they assert their lien having bailed out Apsom Turner P. Ltd., by liquidating the outstanding liability under a corporate guarantee offered at the instance of the petitioner. The entitlement of the respondent to recover their claim is already a subject matter of adjudication. Should the suit, for recovery be adjudicated in their favour, they would well be within their rights to appropriate the proceeds under the shares in execution proceedings if the pledge is not redeemed. It would be grossly inequitable to direct the respondent to hand over the security to the petitioner without the claim of the respondents being satisfied. On payment of the guaranteed debt in full, the surety is entitled to all securities assigned to him, which can only be adjudicated by a civil court.

Summary

Issues:
Petition under sections 46 and 56 of the Companies Act, 2013 regarding lost share certificates and issuance of duplicate certificates.

Analysis:
The petitioner, a shareholder of the respondent company, claimed that 87,010 fully paid-up equity shares were lost or untraceable since April 2016 and requested duplicate share certificates. The background revealed a family settlement where shares were transferred to the petitioner, but the respondent held the company's reins. The respondent contended that the shares were pledged as security for a loan availed by another company where the petitioner and his wife were involved.

The respondents provided a deed of guarantee for the loan, indicating the pledge of shares and subsequent default by the petitioner in repaying the loan. The respondents initiated arbitration proceedings and paid a substantial sum under an arbitral award, seeking recovery from the company where the loan was utilized. The respondent argued that retaining the shares as security was justified due to the debt discharged on behalf of the company.

The Tribunal found that the petitioner made false claims about the lost shares and acknowledged the loan availed by the company where the petitioner had a significant interest. The absence of a written agreement for pledging shares did not invalidate the respondent's right to hold them as security until the debt was repaid. The Tribunal deemed it inequitable to direct the respondents to return the shares without satisfying their claim, as the matter was already subject to adjudication in a pending suit for recovery.

Consequently, the Tribunal dismissed the petition, stating that the relief sought was beyond the scope of the Companies Act, 2013, as it required adjudication rather than mere directions. The decision highlighted the importance of honoring pledges and the rights of parties involved in financial transactions, emphasizing the need for proper documentation and legal recourse in such matters.

Conclusion:
The judgment addressed the complexities of share pledging, loan guarantees, and debt recovery within the framework of the Companies Act, 2013. It underscored the significance of legal agreements, equitable considerations, and the role of civil courts in resolving disputes related to securities and financial obligations.