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TMI Blog2013 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... 65 - SUPREME COURT] - It had been highlighted that where the pawnor repays the debt he was entitled to the return of the pawned goods - the pawnee cannot be permitted to get repayment of the debt as also retain the pawned goods and thus gain an unjust double advantage - There was nothing which would militate against the issue sought to be raised by the respondent in the case - Decided against petitioner. - CO. PET. No.350/2010 & CO. APPL. No.1590/2010 - - - Dated:- 30-7-2013 - R. V. Easwar,JJ. For the Petitioner : Through: Mr.C. Mukund, Mr.Ashok Kumar Jain, Mr.Pankaj Jain Mr. P.V. Saravanaraja, Advocates. For the Respondent : Mr. Lakshmi Gurung Mr. Sujeet Kumar, Advocates. JUDGMENT R. V. Easwar, J. This is a petition filed under sections 433(e), 434 and 439 of the Companies Act, 1956 ( the Act ) filed by SICPA India Pvt. Ltd. ( the petitioner ) seeking winding-up of Brushman (India) Ltd., hereinafter referred to as the respondent or the respondent-company . 2. The petition has been filed under the following circumstances. The petitioner advanced a loan of Rs. 3 crores in July, 2008 to the respondent against the pledge of shares worth Rs. 5.50 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter relating to the further fund-raising by way of issuance of GDRs was discussed. Finally, the letter contained a notice to the respondent-company that (i) notice of the EGM to be held shall be sent to it well in time and that (ii) the petitioner proposed to nominate a person of our choice on the Board of your Company . It was also stated that if no reply is received within seven days, the petitioner would approach the SEBI. 6. Between March and May, 2010, the petitioner sold 18,74,000 pledged shares, retaining 1000 shares, and realised a sum of Rs. 1,69,95,042. The market value of the shares as on 31-5-2010, according to the petitioner, was Rs. 7.79 per share. Thus the petitioner gave credit for Rs. 1,70,02,832 to the respondent and calculated the balance due from the respondent at Rs. 4,93,17,156, including interest. 7. In accordance with the above calculations, the petitioner sent the statutory notice u/s. 434(1)(a) to the respondent on 1-6-2010 demanding the aforesaid amount and intimating that if the amount is not paid within three weeks, winding up proceedings will be initiated. The respondent sent a reply on 15-6-2010 pointing out that a sum of Rs. 5 lacs paid by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial issues which have to be determined, particularly with reference to Section 176 of the Indian Contract Act, 1872 which deals with the pledgor s and pledgee s rights and duties which rule out the applicability of section 433. It is submitted that the petitioner deliberately delayed the sale of the shares till March-May, 2010 by which time the market value had fallen and the loss caused on account of the delay is attributable only to the petitioner. It is pointed out that the respondent has filed a Civil Suit (OS) No. 3116/2011 in this court against the petitioner in which these issues have been raised and has prayed for recovery of Rs. 2.5 crores from the petitioner on the basis of the market value of the shares on the dates on which they were got transferred to the DEMAT account of the petitioner. 11. These arguments of the respondent are sought to be countered on behalf of the petitioner. It is pointed out that the defence based on section 176 of the Contract Act is an after-thought and no such defence was taken at any point of time during the prolonged exchange of correspondence between the parties and that it is taken for the first time in the reply filed before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the stipulated time, two courses are open to the pledgee-lender: (a) he may either bring a suit on the original debt or promise in which case he has the right to retain the pledged goods as collateral security or (b) he may sell the pledged goods on giving the pledgor reasonable notice of the sale. If the proceeds of the sale are less than the amount of the debt, the pledgor is still liable to pay the balance of the debt; if the proceeds of the sale exceed the debt outstanding, the excess shall be paid over to the pledger-lender. It has been held that under this section, the pledgor cannot compel the pledgee to sell the goods pledged at a particular point of time, but if the pledgee exercises the power of sale, the pledgor has the right to insist that the sale should be honestly and properly made and the sale proceeds be applied to the debt. In case the sale is improperly exercised, the pledgee is liable to pay damages caused thereby to the pledgor. These rules were noticed by a Division Bench of the Madras High Court (Coutts-Trotter, C.J., and Pandalai,J.) in SL. Ramaswamy Chetty v. M.S.A.PL. Palaniappa Chettiar (AIR 1930 Mad. 364). In this case, it was also held that the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner s intention to get the shares transferred to the petitioner s DEMAT account. Thus, either way, there is difficulty in the petitioner explaining the transfer of the shares in its name. 16. That the petitioner got the shares transferred in its name cannot be disputed, for the reason that it was only on the basis that it was the owner of the 18,75,000 shares constituting a major chunk (17.28%) of the shareholding, that the petitioner wrote to the respondent-company on 27-10-2009 asking for explanation for the latter s failure to send notices of the AGM and also demanded the appointment of its nominee as a director. This letter and the conduct of the petitioner confirm the fact that it became the owner of the shares in August-September, 2009. The consequence is that even if it is held, on the authority of the Privy Council and the Madras judgments (supra), that the sale to itself was not an unauthorised act on the part of the petitioner, still the petitioner has to answer why the value of the shares on those dates (August-September, 2009) cannot be taken into account for the purpose of reducing the indebtedness of the respondent. Even the Madras judgment (supra) say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Rs. 10.10 crores on 2-9-2009 (when the petitioner got all the shares transferred to its DEMAT account). 20. It is a matter of speculation whether the petitioner desired to control the affairs of the respondent-company. The facts that it transferred the shares to itself, asked for the respondent s explanation for the lapse in issuing notices and further demanded a position for its nominee in the latter s board, prima facie appear to be consistent with the intention to gain control of the respondent-company. Further, there is no plausible explanation for holding on to the shares until March-May, 2010, by which time their value had fallen further. 21. These are substantial issues which the petitioner has to answer. These defences do not amount to mere moonshine, nor do they lack in bona fide. They raise legal issues. This court cannot examine the relative merits and demerits of the claim and hold a trial, but I am of the view that prima facie they appear to merit consideration. They satisfy the tests propounded in the three judgments of the Supreme Court (supra). They cannot at any rate be dismissed as being without any substance. 22. Relying on M/s Goodwill India Ltd v. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pledged goods, if no time is stipulated for the sale in the agreement. It is the duty of the pledgee to give reasonable notice of the sale, but once notice has been given, the exact time at which the goods would be sold is not a matter on which the pledgor has any say. These are well-settled principles, and the cited judgment does no more than expound them. 24. Geeta Prints Ltd. v Falcon Industries (2009) 148 Comp Cas 146 is a judgment of the Gujarat High Court (Division Bench) and my attention was drawn to the observations at page 151 of the report. There, admittedly, the respondent-company did not reply to the statutory notice sent by the lender-company. The question was whether it gave rise to the statutory presumption. That question is entirely different. The judgment also discusses the scope of section 434(1)(a) of the Act, as to when a company shall be deemed to be unable to pay its debts. That question does not arise here. For the same reasons, the judgment of a Division Bench of this Court in Joti Prasad Bala Prasad v A.C.T. Developers (P) Ltd. (1990) Comp. Cas. 601 also does not seem to be of any relevance. There, the single judge dismissed the petition for winding- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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