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TMI Blog2023 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the ICDA. A perusal of Clause 5 of the LoP would reveal that the Pledgee was entitled to invoke the pledge at any time in the event of default or otherwise for as many number of shares as the Pledgee/lender deems fit in its sole discretion. It further provided that such invocation of pledge would not amount to sale of shares to the lender and the borrower would not be entitled to any credit/adjustment on such invocation/transfer of shares to the lender s account on that date - A perusal of the terms of the ICDA as well as the LoP would clearly reveal that, in the event of any of the events occurring as provided in Clause 9 of the ICDA, accused No. 1 Company was entitled to sell the shares either to itself, its group companies or to any outsider. The accused No.1 Company had also agreed not to dispute or claim any loss on account of the price at which such securities were sold. 16. A perusal of the entire complaint would reveal that the only allegation is that accused No.1 Company had sold the shares to itself when the market price of the shares had fallen. The complainant/respondent No.1 has attempted to turn a purely contractual dispute between the parties into a crimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rs. 50,00,000/-, each to be repaid by 15th May 2000 and 5th June 2000. As per the ICD, security cover of 200% of the ICD amount was to be maintained. Accordingly, the complainant/respondent No.1 executed a Letter of Pledge (for short, LoP ) in favour of accused No.1 Company, pledging 15,00,000 of its equity shares as security, with each share valued at Rs. 16/-, thereby amounting to Rs. 2,40,00,000/-. 3.2. Prakash Aggarwal, Meera Goyal and Suresh Chand Goyal, appellants herein, who were Directors of accused No. 1 Company, were responsible for the management of its day to day affairs. They were arraigned as accused Nos. 2 to 4 in the original complaint. 3.3. On 3rd May 2000, accused No.1 Company issued a notice to the complainant/respondent No.1 asking it to pledge additional shares as the value of the pledged shares had decreased to Rs. 1,24,50,000/- on account of depression in the financial market, thereby, resulting in a shortfall of Rs. 75,50,000/- from the agreed security cover i.e. 200% of the ICD amount. 3.4. Due to financial hardship, the complainant/respondent No.1 was not in a position to repay the ICD amount on 5th June 2000, i.e. the due date, and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aforesaid order was challenged by filing a Criminal Revision Application No. 1276 of 2012 before the Court of Session for Greater Bombay at Bombay. Vide order dated 16th January 2016, the said criminal revision application was allowed, and the matter was remanded to the trial court, who was directed to re-record verification under Section 200 of the Code of Criminal Procedure,1973. 3.12. In the meantime, on 9th December 2015, an arbitral award was passed in favour of accused No.1 Company and the complainant/respondent No.1 was held liable to pay the claim amount of Rs.34,59,218/- with interest at the rate of 36% per annum. 3.13. Pursuant to the remand order dated 16th January 2016, the trial court, vide order dated 22nd March 2017, issued process under Sections 406, 420 read with Section 34 of the IPC read with Section 15-HA of the Security Exchange Board of India Act, 1992 (for short, SEBI Act ) against accused Nos. 1 to 4. 3.14. Aggrieved by the same, the accused filed Criminal Revision Application being No.128 of 2017 before the Court of Sessions, Dindoshi, Mumbai. Vide order dated 2nd December 2019, the said revision application was partly allowed. Insofar as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings and an arbitral award is also passed by the learned Arbitral Tribunal. He submits that the same is challenged by the complainant/respondent No.1 by a proceeding under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act ). He further submits that it could clearly be seen that the dispute between the parties, if any, is purely of civil nature and continuation of the criminal proceedings would amount to nothing else but an abuse of process of law. 7. Dr. Singhvi, on the contrary, submits that the complainant/respondent No.1 had informed the accused persons/appellants herein as early on 5th June 2000 to sell the shares. However, the accused persons/appellants chose not to sell the shares at that point of time as the market price was much higher. He submits that the very fact that the shares were sold by the accused persons/appellants to a Company wherein accused Nos. 2 and 3 are also Directors, at a meagre price, clearly exhibits a dishonest intention on their behalf. He submits that the complainant/respondent No.1, for the first time, came to know about the illegal act committed by the accused persons/appellants in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) . . d) . e) .. f) h) .. i) . 11. It is thus clear that in the event of any of the events occurring in sub-clauses (a) to (i) of Clause 9 of the ICDA, the lender would be entitled at its discretion to enforce its rights as mentioned in the ICDA, Deed of Personal Guarantees, Corporate Guarantee and LoP. A perusal of sub-clause (a) of Clause 9 of the ICDA would reveal that, if any installment of interest required to be paid as per the ICDA remains unpaid even after the expiry of 3 days from the respective due date for payment, accused No.1 Company was entitled to enforce its rights as mentioned in Clause 9 of the ICDA. Similarly, if any shortfall in the security pledged vide LoP executed, subject to which facility was granted, was not replenished even after giving due Notice, accused No.1 Company was entitled to invoke Clause 9 of the ICDA. 12. It will further be relevant to refer to Clauses 5 and 8(5) of the LoP, which read thus: 5. The Pledgee may invoke the pledge at any time in the event of default or otherwise for as many number of shares as the Pledgee/ lender deems fit in its sole discretion. However, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best price for the securities. 15. A perusal of the terms of the ICDA as well as the LoP would clearly reveal that, in the event of any of the events occurring as provided in Clause 9 of the ICDA, accused No. 1 Company was entitled to sell the shares either to itself, its group companies or to any outsider. The accused No.1 Company had also agreed not to dispute or claim any loss on account of the price at which such securities were sold. 16. A perusal of the entire complaint would reveal that the only allegation is that accused No.1 Company had sold the shares to itself when the market price of the shares had fallen. The allegation is that The accused in order to acquire more shares of complainant waited for further fall in share price and sold them only in 2001 for Rs. 24,67,531/-. Thus the accused jointly and severally are liable for unauthorized, illegal and fraudulent sale and also for breach of trust. The accused not only misappropriated the shares, but also cheated the complainant as the securities were handed over only as a surety in trust and on assurance of the accused which later proved to be false that the same will be dealt as per guidelines of SEBI. 17. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possibly have attracted an allegation of price manipulation. However, in the given circumstances, and for the reasons stated hereinabove, the allegations levelled by Respondent No.1 are misconceived and are liable to be rejected. 19. It is thus clear that the complainant/respondent No.1 was having knowledge of the sale of shares in the year 2001 itself when the arbitration proceedings were initiated. In the complaint, it is alleged that, during the pendency of the arbitration proceedings, the complainant/respondent No.1 became suspicious of the illegalities committed by the accused persons/appellants and sought for certain information. However, since the accused persons/appellants did not give the information, the complainant/respondent No.1 applied to Bombay Stock Exchange (for short, BSE ) and National Stock Exchange (for short, NSE ) in the year 2006 for details of sale of its shares by the accused persons/appellants on 24th August 2001, 31st August 2001, 3rd September 2001 and 12th September 2001. It is stated in the complaint that only thereafter, in the year 2006, the complainant/respondent No.1 came to know of the fact that most of the shares were sold at the closing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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