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TMI Blog2021 (1) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares are transferred into the Pledgee s account. Only after this, the Pledgee, i.e., in this case the Petitioner, would be in a position to choose to sell or to hold on to the shares as per its discretion. Therefore, this Bench finds that the contention of the Corporate Debtor that since the Pledge was invoked on 02.07.2020, it amounts to the value of debt being reduced to the extent of the existing price of the shares in the stock markets on 02.07.2020 which is about 2.06 crores in this case as not tenable. It is entirely at the discretion of Pledgee which is the Petitioner to sell the shares in case the Pledger makes the default. However, in the event the pledgee does not exercise the discretion, no blame can be put on the pledgee. It is therefore clear that the Pledgee has the discretion to decide if he wants to sell the pledged security, when to sell it and how much to sell it. The Pledger cannot dictate terms to the Pledgee on how to exercise his right. Two separate Applications can be filed simultaneously under Section 7 or not - HELD THAT:- As per the Judgment of Piramal, [ 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] two separate Applications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Corporate Debtor on 29.06.2015. Thereafter, the tenure of the Loan cum Pledge Agreement dated 29.06.2015 was extended by a period of 6 months up to 28.06.2016 through an addendum dated 28.12.2015 and the same was further extended by a period of 24 months up to 28.06.2018 through an addendum dated 31.03.2016 (Facility 1). 3. The Petitioner granted a loan of ₹2,00,00,000/- to the Corporate Debtor along with one Doshi Holdings Private Limited (Doshi) as coborrowers under another Loan cum Pledge Agreement dated 04.05.2016 for a term of 6 months from the date of disbursement. The amount was disbursed to the Corporate Debtor on 05.05.2016. Thereafter, the tenure of the Loan cum Pledge Agreement dated 04.05.2016 was extended by a period of 18 months up to 04.05.2018 through an addendum dated 06.10.2016 (Facility 2). 4. The Petitioner granted a loan of ₹1,00,00,000/- to the Corporate Debtor along with one Doshi Holdings Private Limited (Doshi) as coborrowers under another Loan cum Pledge Agreement dated 05.10.2016 for a term of 1 month from the date of disbursement. The amount was disbursed to the Corporate Debtor on 06.10.2016 (Facility 3). 5. Under the Loan Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner is NIL. Hence, the Petitioner filed the present Petition on 18.09.2020. 10. The Petitioner has enclosed the copy of following documents along with the Petition: i. Copy of Sanction Letter dated 27.06.2015; ii. Copy of Loan cum Pledge Agreement dated 29.06.2015; iii. Copy of Addendum to the Loan cum Pledge Agreement dated 28.12.2015; iv. Copy of Addendum to the Loan cum Pledge Agreement dated 31.03.2016; v. Copy of Sanction Letter dated 04.05.2016; vi. Copy of Loan cum Pledge Agreement dated 04.05.2016; vii. Copy of Addendum to the Loan cum Pledge Agreement dated 06.10.2016; viii. Copy of Sanction Letter dated 05.10.2016; ix. Copy of Loan cum Pledge Agreement dated 05.10.2016; x. Bank Account statements of the Petitioner showing debits in favor of the Corporate Debtor; xi. Copies of the correspondences between the Petitioner and the Corporate Debtor; xii. Copy of the cheque bearing No. 064101 dated 21.05.2020 of ₹ 2,00,00,000/- provided by the Corporate Debtor to the Petitioner; xiii. Ledger Account of the Corporate Debtor in the books of the Petitioner for the period 2015 to 2020. Reply of the Corporate Debtor : 11. The Corporate Debtor contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chose to invoke the pledge almost after 2 years after the purported default made by the Company in its repayment obligations. In the event the Petitioner was aggrieved by such default of Corporate Debtor, it could have exercised its pledge over Corporate Debtor Shares in 2018 itself when the price per share on the stock exchange was ₹ 14-16 per share. Had the Petitioner timely invoked the pledge, it would have recovered all the amounts that may have been outstanding and payable by Corporate Debtor to the Petitioner. Having voluntarily waited for 2 years, the Petitioner in this manner and with malafide intent cannot seek to now initiate actions under the Code against Corporate Debtor including invoking the pledge of shares. Having invoked the pledge, the Petitioner has now, with a malafide intent, illegally and wrongfully chosen not to sell/ transfer the Corporate Debtor Shares on the frivolous ground that there were no buyers for buying a large stake (i.e. Corporate Debtor Shares which constitute 17.45% of the shares of the Company). In effect, what the Petitioner has sought to do is to reduce the Doshi's shareholding in the Company and additionally recover illegally an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Premier Limited. The Corporate Debtor has admitted its default in payment of the debt to the tune of about ₹ 8.35 crores of which the Principal amount is of ₹ 6 crores and rest is interest as per rate applicable in terms of the Loan Agreements. 15. The Petitioner has disbursed the amount of ₹ 6 crore as loan to the Corporate Debtor along with Doshi Holdings Pvt. Ltd. (Doshi) as Co-borrower under three different Loan-cum-Pledge Agreements with the subsequent addendums. Under these Loan Agreements, the Co-borrower of the Corporate Debtor, Doshi has pledged 53.01 lakhs shares of the Corporate Debtor to the Petitioner to secure the repayment of amount disbursed. 16. The Bench notes that on 02.07.2020, when the Petitioner chose to exercise its rights. The said shares were trading at ₹ 3.90 per share of a face value of ₹ 10 per share amounting to a notional value, as claimed by the Petitioner, of ₹ 22,06,73,900/-. The Bench further notes that the debt, default and the inability to pay have been consistently admitted by the Corporate Debtor in its Affidavit of Reply. 17. The Corporate Debtor has basically raised two sets of contentions regarding non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Also, the Petitioner can not be held responsible for not invoking and selling the shares for a period of two years from the time of default. No fault can be attributed to the Petitioner for not invoking the shares and selling it immediately after default. 20. In this regard, the Bench notes that it is a settled law that any pledger, in this case Doshi, cannot compel a Pledgee (in this case Petitioner) to exercise power of sale as a mean to discharge debt. In this regard reference has been drawn to the High Court of Bombay Judgment of February 13, 2019 of Reliance Project Ventures and Management Pvt. Ltd. Vs. ECL Finance Ltd. wherein at Para 32, reference has been made to the Para 24 of the Judgement of National Securities Clearing Corporation Limited vs. Prime Broking Company (India) Limited which reads as under: "24. It is therefore clear that a pledgee has the discretion to decide whether he wants to sell the pledge security; when to sell it; and how much of it to sell. The pledgor can not dictate the terms to the pledgee on how he is to exercise his right. If this is the correct position in law, and that is how I understand it, then, I find at least prima facie that the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l it and how much to sell it. The Pledger cannot dictate terms to the Pledgee on how to exercise his right. 22. In view of the above this Bench is very clear that the decision of the Petitioner not to exercise option of invocation of shares at the time when the default occurred in 2018 and invoking it only on 02.07.2020 is perfectly correct as per law and he is well within his rights to exercise such discretion and no blame can be put by the Corporate Debtor on the Petitioner. It is also interesting to note here that even the Pledger (Doshi) way back on 19.02.2020, i.e., way before 02.07.2020 when the Petitioner invoked the Pledge, had written a letter, both in the capacity of Pledger and co-borrower, to the Petitioner and the relevant part of the same is quoted as "….. As an NBFC, I fully appreciate that you also face RBI, auditor and other scrutiny. Consequently, if you have to initiate legal action, I understand your position. The shares given as pledge have reduced dramatically in value and are not very heavily traded. Any sale will not yield any significant recovery. Hence, I request that you hold the pledged shares for whatever their worth presently." This clearly sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against one of the 'Corporate Debtor' ('Principal Borrower' or 'Corporate Guarantor(s)'), second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company. 33. For the reasons aforesaid, while we uphold the initiation of the 'Corporate Insolvency Resolution Process' initiated under Section 7 of the 'I&B Code' against 'Sunsystem Institute of Information Technology Pvt. Ltd.' - ("Corporate Guarantor No. 2") by impugned order dated 24th May, 2018, we hold that the impugned order dated 31st may, 2018 initiating 'Corporate Insolvency Resolution Process' under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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