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TMI Blog2011 (8) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... amages against the defendants. 3. The brief facts of the case are that on 12th July, 2010, Facility Agreement was entered into between defendant No.1 and defendant No.3 whereby defendant No.1 advanced a loan of ₹ 250 crores against various securities to the defendant No.3. One of the securities is a pledge of shares of the plaintiff which were to be kept in non-disposal escrow account. The other securities are hypothecation of movable properties, mortgage of immovable properties, corporate guarantees etc given by the defendant No.3. The plaintiff is not a party to this Facility Agreement, even though, plaintiff is group company of defendants No.3 and 4. 4. Defendant No.3 was required to maintain a security cover of two times of the Facility Amount (Rs.250 crores) by escrow of such number of shares in the Escrow Account in accordance with Non- Disposal and Escrow Agreement in form and manner satisfactory to the defendant No.1. As per the terms of Facility Agreement the said amount was to be repaid by defendant No. 3 at the end of 36 months from the date of disbursement of the loan i.e. from July, 2010. 5. On 12th July, 2010, a Non-Disposal and Escrow Agreement was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the security cover further had fallen to 1.05 times against the stipulated cover of 2 times and the value of the share was 47.25% against the stipulated cover and defendant No.1 requested defendant No.3 to provide cash margin of ₹ 118.129 crores to restore the collateral value to 2 times of the loan outstanding. 11. By another notice dated 21.06.2011, the defendant No.1 asked defendant No.3 to urgently provide cash margin to restore the collateral value to 2 times of the loan outstanding. 12. On 22.06.2011 it topped up the security cover by pledging 11,81,29,000 shares, increasing the total number of escrowed shares to 27,37,29,000 shares to escrow account, i.e. 28.59% share capital of defendant No.4 and security cover improved to 1.68 times, but still, it was below the prescribed cover. 13. As the same was below the stipulated cover, the defendant No.1, by notice dated 27.06.2011 asked defendant No.3 and the plaintiff to provide the necessary cash margin to restore security cover of 2 times within 3 days, failing which the defendant No.1 would take necessary action as per financial documents. 14. Defendant No.3 on 28.06.2011 replied to the above letter and tried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es including about 9.71 crores shares which were required to be released by the defendant No.1 in case the defendant No.1 is to be believed. By letter dated 04.08.2011 issued by the defendant No.1 to plaintiff and Global Holding Corporation Pvt. Ltd., it was informed that the defendant No.1 shall be retaining 9.71 crores shares (approx.), i.e., remaining shares which formed a part of security for erstwhile loan to defendant No.3 till the time debt is paid by the defendant No.3. 20. It is also alleged by the plaintiff that even during the hearing of interim application, the defendant No.1 sold 1,77,926 and 1,27,500 shares without notice on 03.08.2011 and 04.08.2011 respectively in violation of the mandatory provision of Section 176 of the Contract Act, 1872. Therefore, the entire action of the defendant is void ab initio being contrary to law. Thus, the entire security deserves to be reverted back to the plaintiff. 21. It is also submitted that a pawnee/defendant No.1 cannot invoke the pledge and appropriate the security to itself, since, as a pledgee/pawnee it only has a special right in the pledged goods whereas the general ownership remains with the owner. The second part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on deposit of money as held in the case of Nabha Investment Pvt. Ltd. (supra). As the suit has not been filed by defendant No.3, thus, the suit filed by the plaintiff is not maintainable. 27. It is alleged by the defendant No.1 that the plaintiff is guilty of Suppressio Veri and Suggestio Falsi in as much as it has concealed the material facts and withheld the vital documents at the time of filing the suit, i.e. the defendant No.1‟s letters dated 02.06.2011, 20.06.2011 and 21.06.2011 whereby the defendant No.1 requested the defendant No.3 to make up the cash margin security cover in terms of the agreement executed between the parties were not filed with the present suit. It is also stated alleged that the plaintiff has annexed with the list of documents filed the plaint a draft of non-disposable and escrow agreement. The original agreement executed between the parties bearing the signatures of the parties has deliberately not been filed. Significantly, the last para of clause 4.2 (c) is missing in the agreement filed by the plaintiff. The said clause is reproduced herein below for the sake of convenience:- It is clarified that the failure of the Borrower and/or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) the Hon‟ble Court observed : 33. The fact that 3,50.000 shares have been pledged in favour of the Government of Uttar Pradesh also would not make any difference. Sections 172 to 178-A of the Indian Contract Act, 1872 deal with the contract of pledge. A pawn is not exactly a mortgage As observed by this Court in Lallan Prasad v. Rahmat Ali the two ingredients of a pawn are: (1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee and (2) a pawnee has only a special property in the pledge but the general property therein remains in the pawner and wholly reverts to him on discharge of the debt. A pawn therefore is a security, where, by contract a deposit of goods is made as security for a debt. The right to property vests in the pledgee only so far as is necessary to secure the debt.The pawner however has a right to redeem the property pledged until the sale. (emphasis supplied) In Bank of Bihar v. State Bank of Bihar also this Court has reiterated the above legal position and held that the pawnee had a special property which was not of ordinary nature on the goods pledged and so long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debt, or he may sell the thing pledged on giving the pawnor reasonable notice or the same. The contention that notice of the contemplated sale to the pawnor should be inferred from his letter dated 13.8.1948, cannot hold water inasmuch as the said letter does not disclose that a reasonable notice had been given by the pawnee to the pawnor to sell the securities. A notice of the character contemplated by Section 176 cannot be implied. Such notice has to be clear and specific in language indicating the intention of the pawnee to dispose of the security. No such intention was disclosed by the Bank in any letter to the respondent. 7. As regards the terms of agreement dated 31.12.1946 under which the pawnee had been authorized to sell the securities in case the credit balance of the debtor fell below the margin, it could not avail the Bank in acting contrary to law. An agreement of this character would be inconsistent with the provisions of the Contact Act and, as such, would be wholly void and unenforceable. (iii) Co-operative Hindustan Bank Ltd. vs. Surendra Nath Dey and Ors; AIR 1932 Calcutta 524. The relevant para is reproduced as under : These being the facts, we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without notice. The said part of stipulation is an agreement which is beyond the law and the parties by agreeing otherwise cannot waive the mandatory provisions of the law. Thus, the said stipulation agreeing beyond section 176 of the Indian Contract Act, 1872 is against law and public policy. 29. Learned Senior Counsel for the plaintiff submitted that in order to secure interest of the plaintiff in the said shares, the defendant No. 1 should be restrained by way of interim order of this court from illegally appropriating the shares of the plaintiff without issuing notice and the Court should also declare that the transaction already undertaken by the defendant no. 1 as null and void. 30. Per contra, Mr. Maninder Singh, learned Senior Counsel for the defendant No.1 has resisted the injunction application by making the submissions which can be enunciated as under: 1) Mr. Singh, learned Senior Counsel for the defendant No.1 submitted that the plaintiff has no locus to file the suit as the plaintiff is not privy to the contract and as such the plaintiff is not pawnor and the pawnor is actually defendant No. 3 who is not before the court and the present suit filed by the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in terms of the agreement executed between the parties were not filed by the plaintiff. b) The agreement which NDPE has not filed which has been actually signed by the parties where in clause 4.2 (c) is missing which reads: It is clarified that the failure of the borrower and/ or the share holder to meet the Top up requirement and to pay the cash Top up within the stipulated time shall constitue an event of default Thus, by concealing the said facts, the plaintiff is guilty of unequitable conduct and is thus not entitled for the interim injunction. Mr. Singh, learned Senior Counsel concluded that the court in view of the above submissions advanced should dismiss the injunction application and the suit of the plaintiff. 31. Before examining the rival submissions of the parties, I deem it appropriate to first discuss the law on subject and some facts. In the present case, so far, none of the defendant has filed the written statement. The defendants No.3 and 4 have not addressed their submissions nor have they filed reply to the interim injunction. In the memo of parties they are mentioned as proforma defendants. 32. Apart from the other points raised by the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue shares, then defendant No.1 shall issue a Cash Top Up Notice to the defendant No.3 who within 3 working days would pre- pay the obligations in accordance with the Facility Agreement to the extent that upon such payment, the Escrow share value is equal to or greater than the Required Escrow Value-Shares. 37. The agreement further provides that failure of the borrower (defendant No.3) or share-holder (plaintiff) to meet the Top Up requirement and to pay the Cash Top Up within the stipulated time shall constitute as an event of default. Clause 5 of the agreement deals with sale or disposal of escrow shares under which the defendant No.2 has been appointed an attorney by the plaintiff to sell/pledge/invoke or otherwise dispose the shares. 38. Admittedly, the security cover was not raised two times of the facility amount within the stipulated time despite of the various notices issued to the defendant No.3 and within the knowledge of the plaintiff as admitted in the plaint. It is clear that defendant No.3 and plaintiff did not top up requirement and to pay cash top up within the stipulated time, thus, it constitutes an event of default within the meaning of default under Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is defined, the same is reproduced here under:- 172. Pledge‟, pawnor‟ and pawnee‟ defined - The bailment of goods as security for payment of a debt or performance of a promise is called pledge‟. The bailor is in this case called the pawnor‟. The bailee is called pawnee‟. 41. On reading, it becomes clear that the delivery of the possession of the goods as security for the payment of the debt and/ or performance of the promise is a pledge. The person who delivers the goods is a bailor or pawner and the person to whom goods are delivered is pawnee. 42. The delivery of the said possession of the goods can be actual or constructive. The courts have held that delivery of the title deeds or railway receipts is delivering the goods itself and thus the same can also lead to valid pledge. 43. A reading of section 178 onwards would reveal that the pawnor must have some interest in the goods pledged which will determine the valid pledge. This is due to the reason that the person making the pledge must be either the owner or in the possession of the goods with the consent of the owner or in the possession of the goods under the voidable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut notice of the fact that the pawner has no authority to pledge, only then the said section would be applicable to make it a valid pledge. 47. The significance and scope of section 178 of the Act has been discussed by the Court in Firm Poonamchand Shankarlal and Co. Bombay vs. Firm Deepchand Sireymal, Ujjain Others, AIR 1972 MP 40, wherein Division Bench has observed thus: 8. When a pledge is made in the ordinary course of business by a merchantile agent who is known to be carrying on business as such and who is in the possession of the goods pledged, the pledge is protected if subsequently if it is discovered that the goods pledged really belonged to third person and the pledgor had no authority to pledge them. In such a case, the pledge will be as valid as if pledgor had been specifically authorized by the owner to pledge them. Section 178 of the Contract Act enacts as follows: This section provides an exception to a fundamental rule of the law of transfer of property that no man can give better title than he himself possess, the latin maxim being Nemo Dat Quod Non Habet . As a corollary of this fundamental rule, no one can pledge goods unless he is the owner or law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to justify such transaction. The relevant clauses of the agreement are reproduced herein after along with the definition clauses: 1(h) Company means GTL infrastructure Limited, a company incorporated under the Act with the corporate identity no. U74210MH2004PLC144367 and having its registered office at Maestros House MIDC, Building no. 2, Sector 2, Millenium Business Park, Mahape, Navi Mumbai - 400710 1(hhh) Share holder means GTL Limited more particularly described in the Non Disposal and Escrow Agreement and or any other person or entity who shall be escrowing the shares in pursuance to section 12.1 of this Agreement. 8 Security The Facility Amount together with all interest, liquidated damages, prepayment costs, other costs, charges, expenses and other monies whatsoever stipulated in or payable under Finance documents shall be secured by the following as continuing seciurity fot the obligations: a) ...... b) ..... c) ..... d) Escrow of such number of shares of the company so as to maintain a security cover of two times of the facilty amount in accordance with the non disposal and escrow agreement in a form and manner satisfactory to the lender. 13 Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re consideration by putting the shares into escrow account. Further, the said escrow agreement again talks about the right to transfer, sell, pledge etc of the defendant No. 1 which has already been agreed between defendant No. 1 and defendant No. 3 in the facility agreement. However, this time in the escrow agreement, the parties agree for the same rights and the wordings used in the said clauses are Share holder/ Borrower interchangeably and their obligations are reaffirmed. 53. The said clauses of the escrow agreement are reproduced hereinafter: 5. Sale or disposal of Escrow Shares 5.1 The share holder confirms that in consideration of lender advancing the facility to the borrower, the shareholder has agreed inter alia to appoint the escrow agent as its constituted attorney by executing an irrecovable 5.2 The Share Holder/Borrower acknowledges and agree that the Escrow Agent, as its Attorney, is irrevocably authorized upon the occurrence of an Event of Default to promptly sell, pledge, transfer, invoke, assign and/or otherwise dispose of for monetary consideration, the Escrowed Shares and deposit the proceeds of such sale of the Escrowed Shares in the Payment Account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the consideration is moving wherein the shares are being put to escrow account through the escrow agent pursuant to the facility agreement. Fourthly, the plaintiff becomes the part of the main contract by entering into the same very covenant in the escrow agreement although with an attempt to provide an authority to the attorney to sell, transfer or pledge the shares at the instance of the defendant No.1/ lender but simultaneously agreeing to allow the use of its shares for selling, pledging etc in the event of his default or the default of the defendant No. 3. 54. Further clause 5.5 itself makes it clear that the parties acknowledge that the actions stated in 5.3, 5.4 may be initiated which included the pledge by the attorney at any point after the receipt of a notice from the lender/ defendant No. 1 informing the attorney o f the borrower‟s and shareholder‟s default in meeting the loan obligations and the occurrence of the event of the default. This means that the by this covenant the parties including the plaintiff and defendant no. 1 and defendant No. 3 recognizes by referring to the facility agreement, the plaintiffs obligations in the pledge and its non perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these reasons, it cannot be said that the plaintiff has no role to play. Rather, the present case relates to a pledge wherein the owner/ shareholder of the shares of defendant No. 4 has authorized the defendant No. 3 to enter into such pledge acting as joint promissor. This can be prima facie inference which can be drawn by looking into the events which are turning up as stated above. This situation is more akin to the authorized pawn as defined under section 178 with the exception that in this case, the defendant no. 1 was aware and so as the defendant No. 3 and they have legitimized the transaction by making the plaintiff a party. 60. Now I shall proceed to discuss the law relating to notice under section 176 of the Contract Act, 1872. It is now well settled that the right to redemption of the pledge exists with the pawner till the time sale of the goods is made by the pawnee in the event of the default by the pawnor. The pawnee has only the right to retention of the goods till the time of realization of debt and not the right to enjoying the same or forfeiture. In order qualify the sale of the goods, the provision of notice under section 176 is made to safeguard the pawned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money is advanced on the faith of it is not sufficient in itself to pass special property in the chattel to the pawnee. Delivery of the chattel pawned is a necessary element in the making of a pawn. But delivery and advance need not be simultaneous and a pledge may be perfected by delivery after the advance is made. Satisfaction of the debt or engagement extinguishes the pawn and the pawnee on such satisfaction is bound to redeliver the property. The pawner has an absolute right to redeem the property pledged upon tender of the amount advanced but that right would be lost if the pawnee has in the meantime lawfully sold the property pledged. A contract of pawn thus carries with it an implication that the security is available to satisfy the debt and under this implication the pawnee has the power of sale on default in payment where time is fixed for payment and where there is no such stipulated time on demand for payment and on notice of his intention to sell after default. The pawner however has a right to redeem the property pledged until the sale. If the pawnee sells, he must appropriate the proceeds of the sale towards the pawner's debt, for, the sale proceeds are the pawner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch may persuade me taking a view in line with the view taken by the Andhra Pradesh High Court. 22.8.Here I may utilise this opportunity for extracting other principles of law laid down by Chagla,J. in his illuminating judgment which are based on several authorities. They are :- (i) The provisions of Section 176 Contract Act are mandatory. The applicability and sweep of Section 176 unlike several other provisions on the same subject is not eclipsed by the phrase- in the absence of a contract to the contrary. The notice that is to be given to the pledgor of the intended sale by the pledgee is a special protection which statute has given to the pledgor and parties cannot agree that in the case of any pledge, the pledgee may sale the pledged articles without notice to the pledgor (para 55) (ii) If a sale is held of the shares under authority of the pledgor then it could convey to the purchaser full title in the shares; sale under Section 27 of Sale of Goods Act title conveyed to the purchaser would not be a title better than that of the seller. (Para 56). (iii) Notice under Section 176 of Contract Act must be given before the power of sale can be exercised. If the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready and willing to deliver up the property pledged without suit if the debt has been paid, the plaintiff will no doubt be made to pay the costs of the defendant but his suit cannot be dismissed. But if it turns out that in the circumstances which preceded the suit, it would have been perfectly useless to tender the money to the pledge as for instance, where the pledge declares in advance his inability to return the pledged property, in such a case if the pledgee was at fault in putting it beyond his power to return the goods the pledgor cannot be defeated on account of his not going through a useless ceremony of tender. Sec.51, Contract Act makes the matter clear when it declares that neither party to reciprocal promises need perform his promise unless the other party is ready and willing to perform his promise. (24) To my mind the correct position of law appears to be this. Tender of money by the pawnor and return of pledged property by the pawnee are mutual reciprocal and simultaneous obligations of the two parties. Ordinarily, the pawnor must tender the money and hand it over the same to the pawnee if the latter is returning the pledged property to the pawnee. But there ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p or security cover. That is the same promise which the defendant No. 1 is finding faulty (as the plaintiff has not done the same earlier) and invoking the pledge. In these circumstances, qualifying the right of the plaintiff to come before this court with a deposit of the equivalent sum which is the part of the defendant No. 3‟s obligation may not be appropriate. Therefore, I find that the suit against the defendant is maintainable as such to the extent it seeks to prohibit illegal forfeiture or sale of the pledged goods without notice. 68. The complaint of the plaintiff is precisely that the defendant No. 1 should not sell the shares without issuing notice to him and not that the shares must be released to him. There are three steps in the present case in relation to the pledge which needs examination after the occurrence of the event for default: a) Creation of pledge - Wherein the defendant no. 2 is authorized through defendant no. 1 to create a pledge from the escrow account. b) Forfeiture or sale to defendant no. 1 itself and appropriation - After creation of the pledge, the defendant no. 1 can effect the sale to himself which has been done in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 13th July 2011 wherein it calls upon the defendant No. 3 to comply the security cover failing which shall lead to invocation of pledge should be construed as notice. I am of the opinion that the said letters cannot be treated as notice under section 176 of the Act. It is due to two fold reasons, first being that it is the intimation or letter written by the defendant No. 1 to the defendant No. 3 for creation of pledge or invoking the pledge on the occurance of default which is separate and distinct from the act of the sale which happens after the creation of pledge. In the present case, the happening of default leads to both the events creation of pledge as well as it entitles the defendant No. 1 to effect the sales. Thus, the requirement under section 176 comes into play when the defendant No. 1 proceeds to sell the securities in the event of the default and not on the action of invocation of the pledge. Thus, if the said letters would have clearly spelt out that the defendant No. 1 is proceeding to sell particular amount of shares from the security, the same would have been construed as notice of sale. Secondly, there must be reasonable notice, ordinarily the pledgee issues th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiff is intrinsic part of the agreement. It is to be noted that the escrow agreement is not the separate agreement from that of the facility agreement. Rather, the escrow agreement brings into the existence of the future/ executory consideration as stated in the facility agreement. Further, the escrow agreement refers to the facility agreement and rather the plaintiff confirms and affirms the same covenants relating to sales and transfers and pledging of shares as done by the defendant No. 3 in the facility agreement. The escrow agreement is thus the extension of the facility agreement itself and rather executes the obligations stated in the main agreement. Thus, the plaintiff is the part of the agreement and hence cannot be held to be a stranger to the agreement. C. It is correct when Mr. Singh, learned senior counsel states that the defendant No. 1 must realize the debt amount and there should not be any hinderance when the pawner is himself at default. However, the said realization has to be legal whether done with or without the intervention of the court. This court is not against the realization of sum through the sale which is the right of the defendant but the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so in view of the clear mandate of Section 176. Thus, this court deems it fit for the defendant No. 1 to issue notice in relation to shares which the defendant shall sell in future. 75. In support of his submissions, Mr Maninder Singh, learned Senior Counsel, has referred to various clauses of the Facility Agreement as well as Non-Disposal and Escrow Agreement which are as under: Clause 14 of the Facility Agreement sets out remedies in event of default. Relevant portions thereof are reproduced herein below for the convenience of this court. Section 14 - Remedies of an Event of Default 14.1 Upon the occurrence of any Event of Default, the Lender shall have the right, but not the obligation, to inter alia, cancel the Facility and call upon the Borrower to forthwith repay all loans, interest, accrued thereon and all other amounts under the Finance Documents without any further notice of default, presentment or demand for payment or other notice or demand of any kind or nature whatsoever such notice, presentment or demand being hereby irrevocably waived by the Borrower) whereupon all the Loans and interest accrued therein and other amounts shall become immediately payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Encumbrance on the Escrowed Shares in favour of the Lender/Escrow Agent (or any other person nominated by the Lender/Escrow Agent to hold such Encumbrance) for the benefit of the Lenders, as security for or for the purpose of paying-off or discharging any and all amounts, which may from time to time be or become outstanding under any of the Transaction Documents. 5.4 The Share Holder/Borrower agrees that any sale, transfer, assignment and/or disposition (including creation of any Encumbrance by the Attorney as its agent can be on such terms as the Attorney in its discretion deems fit or as may be advised by the Lender and at such costs and prices as may be decided by the Attorney without the Attorney being held responsible for any losses (whether direct or indirect in relation to any future or present profit) or expenses that the Share Holder may suffer or incur. 5.5 The Parties acknowledge and agree that the actions set out in Clauses 5.3 and 5.4 above may be initiated and undertaken by the attorney at any point in time after the receipt of a notice from the Lender, informing the attorney of the borrower‟s and share holder‟s default in meeting the loan obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in view of the said sale is liable to recovered on the foot of tort of conversion. (Kindly see the view taken in Nabha Investment Pvt. Ltd. (supra)). 77. The same view was also expressed by Chagla J in Official Assignee vs. Madho Lal Sindhu (supra) in the following words: 59 The pledgor has right to call upon the pledge to redeem the shares on payment of the debt. If the pledge has transferred the shares, he is entitled to call upon the transferee for the same because the transferee does not acquire anything more than the right, title and interest of the pledge which is to retain the goods as a pledge till the debt is paid off. If the pledgor may not be in the position to redeem, he may contend himself with merely suing the pledge for conversion if any damage has resulted by reason of the goods being sold without the proper notice. 78. In the present case too, number of shares to the tune of 17,63,68,219 have already been invoked into pledge and the proceeds to the same have been appropriated by the defendants of the sum of ₹ 251 crore. In the said shares, the pledgee/ defendant No. 1 has assigned the same to himself without notice attempting to appropriate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the reason that there are also various stipulated clauses in both the agreements wherein the parties have agreed by themselves that in the event of failure what action the defendant No.1 can take. Therefore, the defendant No.1 after the default could proceed as per the said terms and without waiting for expiry period of 36 months. 80. In view of above discussion, the conclusions which can be discerned are outlined as under: a) The plaintiff‟s role in the agreement cannot be obviated as it acts as co pawnor or joint promissor wherein his promise to the extent of the top up or to provide security cover is secured against the security of share along with the promise to repay the loan by the defendant No. 3. Both are entitled to redemption and more so when they are group companies of each other. b) The notice under section 176 of the Indian Contract Act, 1872 is mandatory so as to give ample and reasonable chance to the pledgor to make the redemption prior to the sale. Rather, the right to sale accrues only when the notice for sale is given although the remedies of pledge to file suit and other remedies prescribed under Section 176 are available without notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his favour as the defendant is still a valid pledgee of more than 27 crore shares which are still open to redemption in view of my finding that the status of the defendant No. 1 is still of pledgee. The plaintiff has also expressed its reservation by not depositing or offering the debt amount of ₹ 250 crores by saying that its obligation is confined to topping up the security cover and if any redemption is available it is for the defendant No. 3 only after 36 months have elapsed although my finding is that the plaintiff is co promisor or co pawnor, the plaintiff has equal right of redemption as the property belongs to that of the plaintiff, the said fact tilts the balance of convenience in favour of the defendants as the defendant will be more inconvenienced in case the defendant is not allowed to proceed further legitimately in the transaction. The irreparable loss will also ensue to the defendant in case any embargo is put on the legitimate rights of the defendant No.1 as a pledgee of the shares as the event of default has already occurred. 82. Accordingly, the relief mentioned in IA no.11586/ 2011 cannot be granted in the terms prayed by the plaintiff except by disposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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