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TMI Blog2002 (11) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... all the applications is as follows :- The 1st respondent formerly known as M/s. Shriram Auto Components (Madras) Limited, a company registered under the Companies Act, 1956 with effect from 29-2-1996 and in the new name registered with effect from 14-4-2000, engaged in the manufacture of precision turned components for automobile industry and having registered office at Old Mahabalipuram Road, Perungudi, Chennai. Defendants 2 to 4 are the guarantors guaranteeing due repayment of the dues by the 1st defendant. The 5th defendant is a US based company having entered into partnership with the 1st defendant to take over the stake in the 1st defendant company. Defendants 6 and 7 have also given financial assistance to the 1st defendant having joint equitable mortgage along with the petitioner of the landed properties mentioned in the A schedule. The 1st defendant availed a Rupee Term Loan of Rs. 100 lakhs and a Foreign Currency Term Loan of US dollars 1.8 Million (equivalent to Rs. 640 lakhs) sanctioned by the petitioner under Project Finance Scheme for setting up a project at an estimated cost of Rs. 2100 lakhs at Edaiyankuppam Village, Thandalam Panchayat, Tiruporur Taluk for manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign company does not specifically mention about exclusion of securities given by the petitioner to take over of 26 per cent stake of the 1st respondent company and it would affect the safety of loan given by the plaintiff and also the securities furnished in schedules A and B. The 1st respondent had committed beach of the agreements governing the said loans. The plaintiff would loss Rs. 1,225 lakhs together with interest and other charges. The plaintiff has got a primary paramount and exclusive right for self and as agent for respondents 6 and 7 on the securities consisting of the immovable and movable properties mentioned in the schedule till repayment is made in full. It has become imperative for the petitioner to safeguard the interest for self and as agent of respondents 6 and 7 by declaring its primary, paramount and exclusive right on the securities given by way of equitable mortgage by deposit of title deeds relating to immovable property as well as movables. If the respondents are not restrained from alienating the securities, it would cause irreparable injury and loss to the plaintiff which cannot be compensated. It is very necessary to take inventory of the movabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcentage of the promoters holding as on the date of the loan agreements as it held only 65.4 per cent and the balance is more than 26 per cent and there cannot be any objection on the part of the plaintiff in the disinvestment of any portion of shares over and above the value of Rs. 630 lakhs. There is no sinister design in the investment as the 1st defendant has informed the plaintiff by its letter dated 17-7-2002 and also explained. When the securities are intact and not alienated and the guarantees are intact, there is no reason for any apprehension. The process of disinvestment had gone through various public authorities and Government of India including the Foreign Investment Promotion Board. The securities already offered to the plaintiff and its associates will remain quite intact and there is no question of pledging of securities to the 5th defendant or any other party. The 1st defendant or the guarantors never intended to encumber, alienate or deal with the securities already offered to the plaintiff. The application for interim injunction is not sustainable. There is no relief asked for appointment of Commissioner in the main suit and, as such, the present relief is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other person dealing with the shares of respondents 1 to 3 and also restrain them from delivering title or possession in respect of the securities. The 1st respondent is engaged in the manufacture of precision turned components for automobile industry and having registered office at Chennai. Defendants 2 to 4 are the guarantors guaranteeing due repayment of the dues Defendants 2 to 4 are the guarantors guaranteeing due repayment of the dues by the 1st defendant. The 5th defendant is a US based company having entered into partnership with the 1st defendant to take over 26 per cent shareholding in the Company. Defendants 6 and 7 have also given financial assistance to the 1st defendant. It is admitted that the 1st defendant availed a Rupee Term Loan of Rs. 100 lakhs and a Foreign Currency Term Loan of US dollars 1.8 Million (equivalent to Rs. 640 lakhs) sanctioned by the petitioner under Project Finance Scheme for setting up a project at an estimated cost of Rs. 2,100 lakhs. They also executed a loan document on 1-8-1997 and the 1st defendant created equitable mortgage in favour of the plaintiff on 12-1-1998 by depositing title deeds relating to the immovable properties. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 5th defendant, the shareholding of the plaintiff is not going to be affected. Only out of the balance of 36 per cent, about 26 per cent alone is sought to be transferred in favour of the 5th defendant, who happened to be their clientele in USA. Moreover, the present suit itself is not maintainable and according to the learned senior counsel, the remedy available to the plaintiff is to file a suit for recovery of the amount before the Debt Recovery Tribunal and relied upon section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act. There is no violation of breach of any agreement. So far as the shareholding of the plaintiff is concerned, the arrangement with the 5th defendant, who is a regular customer of the 1st defendant had come forward to fund the 1st respondent company as partner of the business proposal. The 1st defendant is prepared to give an undertaking that they would not transfer the shareholding of the plaintiff or alienate immovable properties mentioned in schedule A. So far as the movable properties mentioned in B schedule are stock in trade. In short, the proposal was only for disinvestment for public issue portion of Rs. 330 lakhs and this w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is an identical case similar to the present one and it has been held that the suit was maintainable. The learned counsel for the plaintiff also relied on Central Bank of India v. Abdul Mazid [1996] II Banking Cases 27 (DB), wherein it was observed that in view of section 152 of the Contract Act, the Bank cannot save itself from the loss suffered because of the negligence of the plaintiff Bank and its officers and since it failed to mitigate the loss. The analogy in this decision also can be made applicable to the case on hand. 14. The learned senior counsel for the 1st respondent 1st defendant relied on United Bank of India v. Debts Recovery Tribunal AIR 1999 SC 1381 as follows : ". . . In ascertaining the question whether any particular claim of any bank or financial institution would come within the purview of the Tribunal created under the Act, it is imperative that the entire averments made by the plaintiff in the plaint have to be looked into and then find out whether notwithstanding the specially created Tribunal having been constituted, the averments are such that it is possible to hold that the jurisdiction of such Tribunal is ousted. Therefore, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole." (p. 74) 17. Reliance is also placed upon Gujarat Bottling Co. Ltd. v. Coca Cola Co. JT 1995 (6) SC 3, wherein it is held as follows : "Interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated." 18. Reliance is also placed upon S.V. Doraisamy v. T. Dayalan [2002] 2 CTC 462 that "person seeking inj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the Lender is fully satisfied that the Borrower has complied with all the stipulated terms and conditions precedent to such disbursement. 22. The Hypothecation Agreement also provides that the Lenders at any time after the security hereby constituted has become enforceable and whether or not the Lenders shall then have entered into or taken possession of and in addition to the powers hereinbefore conferred upon the Lenders after such entry into or taking possession of, may have a receiver or receivers appointed of the said Goods or any part thereof. 23. The learned counsel for the plaintiff also relied upon a news item in "Business Line" dated 30-5-2002 under the head "US Company said to pick up 26 per cent in Rambal". It is clearly stated that the 5th defendant is also picking up 26 per cent stake in Rambal for a consideration of Rs. 2.5 crores, for which it recently got an approval from the Board. There was also exchange of notices between the parties and in fact, the 1st defendant in his reply dated 30-6-2002 has stated as follows : "Your clients being a leading Financial Institution, do know that the automotive industry, more particularly the component industry is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the contesting defendants that they were not aware of any such clause either in the agreement or in the guarantee documents. I am of the view that the transfer of 26 per cent share to the 5th defendant company would definitely alter the composition of the Board and now it cannot be said whether the company would prosper or incur loss. It is, however, open to the 1st defendant to get in touch with the plaintiff bank as well as defendants 6 and 7 and after getting their concurrence or approval only, they can transfer the 26 per cent share and till then, an order of interim injunction has to be necessarily granted to preserve the status quo relating to the shareholding in the 1st defendant company. Hence, the points are answered accordingly. 25. For the reasons stated above, interim injunction is granted restraining defendants 1 to 5 from transferring, alienating and registering the shares in the name of the 5th defendant or any other person relating to 26 per cent of the shareholding in the company and interim injunction is granted restraining defendants 1 to 5 and their men from alienating or encumbering or transferring A schedule property. In respect of B schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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