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TMI Blog2023 (9) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 176 which is prohibited - this contention is misplaced. This Court in Madhaolal Sindhu [ 1946 (8) TMI 19 - BOMBAY HIGH COURT ] was not concerned with the issue which arises herein namely whether the conferring of voting rights upon the Pledgee constitutes contracting out of Section 176. It is a settled position that the Contract Act, including law of pledge is not exhaustive. In the present case, the mandatory provision of Section 176 of the Contract Act which provides for giving a reasonable notice prior to sale has infact been complied with. The Pledge Deeds mandate reasonable notice to be given before the sale i.e. Clause 7.3 and 8 of the Pledge Deed. The Pledgee has in compliance with the clauses of the Pledge Deeds which are in terms of the mandatory provision of Section 176 of the Contract Act issued notice of sale to the Plaintiff and the Plaintiff s right to redeem the Suit shares from JCF remains intact - the Pledge Deeds in the present case which confer voting rights on the Pledgee beyond what is specified and expressly provided for under Section 176 of the Contract Act cannot be voided as it is permissible for the parties to incorporate into the Pledge Deeds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the defrauded party. The parties to the Pledge Deeds including the Plaintiff were fully aware of the character and nature of the documents namely the Deeds of Pledge that were executed. By the Deeds of Pledge, the Plaintiff was pledging certain shares held by it in favour of Catalyst for the benefit of Yes Bank as security for the Loans advanced by Yes Bank. Thus, no case has been made out of there being a fraud as to the character of the contract which would render the document void ab-initio - The Plaintiff has alleged illegality in respect of the use of the loans amount, which does not render the loans themselves illegal and / or unlawful. Prima facie, it is not found that a case of fraud as contemplated under Section 23 is made out. The Pledge Deeds itself provide that the consideration for the Pledgor under the Pledge Deeds is the advancement of the loan to the Borrowers. The Borrowers having received and utilized the loans, it cannot be said that the Plaintiff has not received any benefit from the loan transaction and Pledge Deed. Further, the Plaintiff has not clarified why the Suit shares were Pledged by them in the first place if no consideration / benefit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Dish TV i.e. Jawahar Lal Goel Group. 3. Defendant No. 1-Catalyst Trusteeship Limited (for short Catalyst ) is a Pledgee and security trustee for the beneficial interest of Yes Bank Limited. Defendant No. 2-Yes Bank Limited was the single largest shareholder of Dish TV, holding 25.63% shares (including 0.85% through IDBI Trusteeship Services Limited) till 21st December 2022, after which Yes Bank transferred its share holding in Dish TV to JCF, pursuant to assignment of its stressed asset portfolio aggregating upto INR 48,000 Crores (approx.) to JCF together with the underlying security created thereof. Defendant No. 3-Dish TV India Limited ( Dish TV ) is a public limited company of which Jawahar Lal Goel (the brother of Subhash Chandra) is a former Managing Director of Dish TV, holder of 0.01% shares of Dish TV. Defendant Nos. 4 to 9 Essel Group Entities are collectively referred to as Borrowers of Yes Bank Limited who had advanced loans to the Borrowers amounting to INR 5,270 Crores (referred to as the loan transaction ). The Plaintiff had in turn pledged 44,00,54,852 shares of Dish TV for securing these loans. Defendant No. 10 JCF is a company to whom Yes Bank has assig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) the Pledgee, under its powers of realization upon enforcement of security, is entitled to transfer or cause any of the Suit Shares to be transferred to and registered in the name of any of the Pledgee s successors, assigns or transferees. [Clause 4.1(b)] (vi) the Plaintiff has undertaken not to stop or attempt to stop any transfer of Suit Shares in the name of Pledgee or its nominee [Clause 10.3(b)]. (vii) Clauses 12 (i) and (iii) under Pledge Deed dated 5th July 2018 (identical to Clauses 12 (i) and (iii) of the Pledge Deed dated 6th May 2019) provide as follows: 12. Power of Attorney (i) Power of attorney Without prejudice to the Pledgor's rights under Clause 5, each Pledgor hereby irrevocably appoints the Pledgee as the attorney of such Pledgor on its behalf and in the name of such Pledgor to do all acts and things and execute all documents which such Pledgor could itself do in relation to any of the Security Assets or in connection with any of the matters provided for in this Deed. (iii) General delegation The Pledgee shall have full power to delegate the powers, authorities and discretions conferred on it or him by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The top management of Yes Bank was subsequently changed. 12. On 13th March 2020, Yes Bank was reconstructed under a Central Government Mandated Scheme. The Scheme had been necessitated on account of Yes Bank s significant exposure to Non-Performing Assets ( NPAs ). At or around this time, the Essel Group s total outstanding dues to Yes Bank were to the tune of INR 7,698 Crores out of which, INR 6,789 Crores (i.e. 90% of Yes Bank s exposure to the Essel Group) was classified as NPAs by Yes Bank. 13. On 29th May, 2020 Catalyst transferred the suit shares of Dish TV into its own account which the Plaintiff claims is without intimation to them and which Catalyst claims to have been done in accordance with the terms of the Pledge Deeds. 14. A disclosure under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ( Takeover Code ) was made on 1st June 2020 to SEBI, on account of the fact that the suit shares are held in a listed company, namely Dish TV. Reserve Bank of India ( RBI ) was thereafter informed by Yes Bank on 2nd June 2020 that there had been a transfer of the suit shares inter alia under the Pledge Deeds. 15. Subhash Chandra, claiming to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein that the funds have been utilized for the actual purpose for which the loan was sanctioned and there is no diversion of funds. The said OTS was thereafter, rejected by Yes Bank vide letter dated 14th June 2021. Thereafter, the Essel Group had in response dated 15th June 2021, once again called upon Yes Bank to consider its settlement offer and copied the said letter to the officials of the RBI. 20. Catalyst on 7th August 2021 transferred the suit shares in Dish TV to Yes Bank which Yes Bank claims that this was in accordance with the terms of the Pledge Deeds. Relevant public disclosures in this regard were made by Yes Bank. 21. On 12th August 2021, Dish TV issued a notice with a proposal to conduct its Annual General Meeting ( AGM ) on 27th September 2021. 22. On 21st September 2021, Yes Bank issued a Notice under Section 100 of the Companies Act, 2013 formally requisitioning an Extraordinary General Meeting ( EGM ) of Dish TV. 23. Yes Bank filed a complaint on 24th September 2021 with the Economic Offences Wing, Mumbai ( EOW ) against the Borrowers [Defendant Nos. 5, 7 to 9 as also RPW Projects Private Limited (which is under liquidation) and Pan India Infrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its Promoter/Promoter Group shareholders, including the Plaintiff, before NCLT, Mumbai. Yes Bank has referred to the EOW complaint in the Company Petition. 28. Yes Bank had also challenged the Section 102 Notices before the Allahabad High Court in writ proceedings being Criminal Miscellaneous Writ Petition No. 11135 of 2021. By an order dated 25th November 2021, the Allahabad High Court dismissed the Writ Petition. Yes Bank filed a Special Leave Petition being Special Leave Petition (Crl.) No. 9192 of 2021 before the Supreme Court. The Supreme Court stayed the operation of the Section 102 Notices and stayed further proceedings in connection with the Subhash Chandra Complaint and the FIR. It is necessary to note that by subsequent order dated 24th January 2023, the Supreme Court set aside the impugned order dated 25th November 2021 of the Allahabad High Court and restored the proceedings before the Allahabad High Court for fresh disposal on merits. The Supreme Court had directed that its interim order dated 30th November 2021 shall continue until the disposal of the writ proceedings. 29. On 5th December 2021, Dish TV issued notice of its AGM held on 30th December 2021. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt directed that the results / outcome of the AGM to be held on 30th December 2021 will abide by the decision in the Interim Application. The learned Senior Counsel for the Plaintiff accordingly stated that the Plaintiff is not challenging the rejection of ad-interim reliefs, by filing any appeal and hence the Court need not given any reasons. In view of this statement, no reasons are recorded for rejection of the prayer for ad-interim relief. 33. On 30th December 2021, Dish TV held its 33rd AGM. However, Dish TV did not declare, disclose and implement the results of its 33rd AGM. Instead it chose to make a statutory disclosure that in order to comply with this Court s direction by way of order dated 23rd December 2021, Dish TV had requested the scrutinizer to place all the information relating to the e-voting along with his Report, in a sealed cover and hand over to the Company Secretary and Compliance Officer of the Company, who shall in turn place the same before this Court for further directions. The Scrutinizer has confirmed that he has submitted all the information relating to e-voting along with his Report pertaining to the results of the voting conducted at the AGM in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rim Application was disposed of on the very same day of its filing i.e. on 17th February 2022 as infructuous upon the statement made by the learned Senior Counsel for the Plaintiff that review of the order dated 23rd December 2021 is sought and that he does not desire to press Interim Application (L) No. 4788 of 2022 at this stage. 37. The Plaintiff has filed Review Petition (L) No. 5303 of 2022 on 22nd February 2022 in the present Interim Application seeking review of the Order dated 23rd December 2021. It is necessary to note that the Review Petition was disposed of, as withdrawn by subsequent order dated 17th January 2023, in view of the subject matter of the review being brought on record by way of amendment to the Plaint. This was pursuant to the application for amendment of the Plaint filed by the Plaintiff to place on record the EOW complaint by stating that it was suppressed by Yes Bank. This application was allowed vide order dated 8th April 2022. 38. The Plaintiff filed Interim Application (L) No. 13155 of 2022 seeking the disclosure and production of the Annexures to the EOW Complaint in furtherance to the notice to produce dated 16th February 2022. 39. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge was justified in declining to exercise the discretion in an application for the grant of ad-interim relief. 46. On 26th September 2022, Dish TV held its 34th AGM and dislosed the results on the same day. 47. Assignment Agreement was executed between Yes Bank and JCF on 16th December 2022 as per Section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( SARFAESI Act ) for transfer of the loans extended to the Borrowers. Yes Bank by the said Agreement assigned its stressed asset portfolio aggregating upto INR 48,000 Crores approx. to JCF together with the underlying security created therefore stated to be under the provisions of the SARFAESI Act. 48. Pursuant to the Assignment Agreement, e-mails were addressed by the Company Secretary of Yes Bank and representative of JCF on 20th December 2022 making disclosures as to the purported transfer. 49. A letter dated 3rd January 2023 was addressed by JCF to the Plaintiff, intimating them of the purported transfer of all rights and interest in the financial asset pertaining to Essel Corporate Resources Private Limited together with security created thereto i.e. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the statutory law and judicial pronouncements which hold that a Pledgee has only a special interest in the pledged goods, Yes Bank has repeatedly sought to exercise rights of ownership, including voting rights in respect of the shares. 55. Mr. Seervai has submitted that prior to addressing the issue with regard to the Pledgee having only a special interest in the pledged goods, and independent of the illegality of the conduct of Yes Bank and JCF in respect of the shares, the pledge is vitiated as fraud and thus, the pledge is void ab initio. 56. Mr. Seervai has submitted that a reading of the criminal complaints made by Yes Bank on the one hand and the Borrowers on the other (through Subhash Chandra) reveals that both parties namely, the lender and borrower entered into a transaction knowing that the stated purpose of the loans advanced by Yes Bank was not the real purpose. Mr. Seervai has submitted that it is sufficient at the interim stage for the Plaintiff to make out a prima facie case in respect of the allegations of fraud. He has submitted that the documents on record make out a very strong, demonstrable prima facie case that justifies the grant of interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed in 2016-2017, further disbursements were approved on 29th December 2016 with an additional amount of Rs. 2,510 Crores being disbursed thereafter with full knowledge of the true nature of the transaction and its real purpose. He has submitted that from Clause 1.3.2., which is Disbursement of Funds in Annexure 11, it is mentioned that in December 2016 and January 2017, Rs. 1,700 Crore were disbursed to three entities, out of which Rs. 500.00 Crore was to be used for reduction of Yes Bank exposure in Videocon. He has further relied upon Clause 1.2 of Annexure 11, which mentioned that Yes Bank expected the Videocon - Essel Merger deal to have a large cash component which would help reduce Yes Bank s exposure in Videocon. Further, in Clause 1.3.2., it is mentioned that the said transaction was then approved on 29th December, 2016. 60. Mr. Seervai has submitted that though the aforementioned Clauses of Annexure 11 were referenced at great length in oral arguments urged by the Plaintiff in Rejoinder, this was not be dealt with at all by Counsel for Yes Bank/JCF during surrejoinder. 61. Mr. Seervai has placed reliance upon the statement of objections filed by the State of Ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routed in a manner that constitutes a criminal offence under penal statutes, is ex facie vitiated by fraud, the secondary or collateral transaction, being the pledge of shares, is also vitiated by fraud and void ab initio. 65. Mr. Seervai has placed reliance upon the English case of Lazarus Estates Ltd. Vs. Beasley 1956 1 QB 702. The Court of Appeal had considered a case arising out of justification of increase in rent basis a declaration by the landlord under the Housing Repairs and Rents Act. A 28 day period was contemplated by law to challenge such declaration. The tenant did not challenge it within this period, but also did not pay the increased rent. The landlord contended that once the statutory period had passed, a Civil Court could not venture into the question of fraud at all. The Court held that if this argument is correct, the landlords would profit greatly from their fraud. The increase in rent would pay the fine many times over. ... No Court will allow a person to keep an advantage which he has obtained by fraud.... Fraud unravels everything. The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of the nature of a pledge and rights/interest of a Pledgee. He has submitted that assuming arguendo that the Pledge Deeds are valid and enforceable, the law of pledge (both under statutory provisions and case law) does not contemplate the rights sought to be exercised by Yes Bank and JCF, namely the entire gamut of ownership rights including voting rights in the case of dematerialized shares. 71. Mr. Seervai has submitted that the provisions of the Contract Act apply to a pledge of goods, including securities such as shares. A pledge is a type of bailment , defined under Section 148 of the Contract Act as the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them . 72. Mr. Seervai has referred to Section 172 of the Contract Act, which defines pledge as constituting a particular species of bailment, namely the bailment of goods as security for payment of a debt or performance of a promise . The bailor in the case of a pledge is called the Pawnor and the bailee the Pawnee . He has submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , para 33. wherein the Supreme Court had referenced an earlier decision viz. Bank of Bihar Vs. State of Bihar 1972 3 SCC 196. The Supreme Court found that in Bank of Bihar (supra), it was held that a Pawnee had a special property which was not of ordinary nature on the goods pledged and so long as his claim was not satisfied no other creditor of the Pawnor had any right to take away the goods or its price. Beyond this no other right was recognized in a Pawnee in the above decision. 77. Mr. Seervai has also relied upon the decision of the Division Bench of this Court in Official Assignee of Bombay Vs. Madholal Sindhu ILR 1948 Bom 1, pages 39 to 41, which held that it is open to parties to incorporate into any contract any incident which is not contrary to or inconsistent with any provision contained in the Act. But they can only override a specific provision contained in the Act provided the particular section dealing with the provision contains a saving clause in respect of special contracts to the contrary. If one looks at the various sections of the Indian Contract Act, one finds that some of them specifically mention in the absence of a contract to the contrary . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge. Neither the Depositories Act nor the DP Regulations envisage or contemplate the exercise of proprietary rights by a Pledgee upon invocation of a pledge, since the recording as owner is only for the purpose of effecting the sale. Furthermore, the provisions of the Depositories Act are not contrary to or in derogation of the law that applies to pledge transactions under Sections 172 to 180 of the Contract Act. 81. Mr. Seervai has thereafter, dealt extensively with the decision of the Supreme Court in PTC India (supra). He has submitted that in PTC India s case the Supreme Court has considered the effect of the Depositories Act and the SEBI (Depositories and Participants) Regulations, 1996 on a pledge of dematerialized shares made under the Act. He has referred to the facts of the PTC India s case where the loan was extended by PTC India (supra) in favour of Nagapatnam Power and Infratech Limited ( NSL ) to secure the loan, a pledge was created by Mandava Holdings Pvt. Ltd. ( MHL ) in favour of PTC India (supra). NSL defaulted on the loan, resulting in the invocation of pledge by PTC India (supra). Insolvency proceedings in respect of NSL were instituted before the NCLT, Hyd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right of redemption of the mortgagor. 84. Mr. Seervai has submitted that the Supreme Court in PTC India (Supra) has held that the Pledgee has merely a special interest in the pledged goods and never at any time holds an absolute interest in the property pledged. 85. Mr. Seervai has submitted that the arguments urged by Yes Bank/JCF to the contrary obliterate the distinction between a pledge and a mortgage, treating the two as virtually interchangeable, but nevertheless seeking to take the benefit of the procedure set out under the Depositories Act, which is applied solely to pledges. 86. Mr. Seervai has thereafter, referred to the decisions which have also drawn distinction between a pledge and mortgage namely Md. Sultan Vs. Firm Rampratap Kannayalal 1963 SCC Online AP 214, Shatzadi Begum Vs. Girdharilal AIR 1976 AP 273, Maharashtra State Co-op Bank Vs. Assistant Provident Fund Commissioner 2009 10 SCC 123 and The Odessa 1915 AC 145. He has submitted that in Shatzadi Begum (supra), the judgment in The Odessa (supra) was cited with approval, stating that the latter emphasized the notion of enjoyment is excluded from the concept of pledge and if something more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shares. No assignment as contemplated under Clause 2.1.3 has been executed between JCF and Yes Bank. 92. Mr. Seervai has submitted that the Pledge Deeds have not themselves been transferred or assigned in favour of JCF by Yes Bank. The Pledgee under the Pledge Deeds continues to be Catalyst and Yes Bank has claimed to exercise rights under the Pledge Deeds as a Constituted Attorney/Proxy of the Plaintiff or a nominee of Catalyst in conjunction with being recorded as a beneficial owner. He has submitted that none of these puts Yes Bank into the shoes of Catalyst as a Pledgee or assignee of the pledge. Therefore, it is inconceivable that without an intervening assignment of the pledge from Catalyst in favour of Yes Bank and a subsequent assignment of the pledge from Yes Bank in favour of JCF, JCF can ever be said to have stepped into the shoes of Catalyst as Pledgee. In addition to this, no clause under the Assignment Agreement envisages a direct transfer of shares, being the underlying security for the loans, to Yes Bank. Any attempt, therefore, to claim rights in the shares without such transfer is impermissible in law. 93. Mr. Seervai has thereafter, referred to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a pledge. 97. Mr. Seervai has submitted that there is no case made out by Yes Bank/JCF in their arguments in Sur-Rejoinder that there are difficulties in the sale of the shares pledged. These excuses urged for the first time in Sur-Rejoinder should not deter this Court from granting the reliefs prayed for by Plaintiff. It is well settled that a party cannot take advantage of its own wrong. This is precisely what Yes Bank and JCF seek to do. He has submitted that acceding to these submissions would amount to this Court putting a premium on the illegal acts of commission and omission committed by Yes Bank/JCF. He has submitted that the excuses made out for the first time by Yes Bank/JCF that percentage of shareholding pledged carries a special value can never be an excuse not to sell the suit shares and insisted continue to illegally assert rights of ownership, which are antithetical to the status of a Pledgee. 98. Mr. Seervai has submitted that in view of the law set out above and the Plaintiff admittedly being owner of the shares, relief sought for in the Interim Application be granted and the Plaintiff be allowed to vote in all future meetings of Dish TV. He has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Lallan Prasad (supra) at paragraph 16. He has submitted that it is the right that exists so that a Pledgee can compel the payment of the debt due. In this context he has relied upon the decision of the Supreme Court in Bank of Bihar (supra) at Paragraph 5. He has submitted that it is the right of possession of pledged goods as security and in case of default, the right to bring a Suit against the Pledgor as well as to sell the goods after giving reasonable notice of sale. In this regard he has relied upon the decision of the Supreme Court in PTC India (supra) at Paragraph 31. He has submitted that it is the right in the pledged goods which is higher than the mere right of detention of goods but lesser than the general property rights in the goods. He has relied upon PTC India (supra) at Paragraph 35 in this context. He has further submitted that while there is no jus in re in favor of the Pledgee , it gives him no more than a jus in rem such as a lienholder possesses, but with this added incident that he can sell the property moto proprio and without any assistance from the Court. In this context he has relied upon the Odesa (supra) at Page 159. 101. Mr. Andhyarujina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Andhyarujina has submitted that in PTC India (supra) the Supreme Court has held that that the right to enjoyment is a right arising from ownership and not from a pledge [Paragraph 29 of PTC India (supra)]. 107. Mr. Andhyarujina has submitted that in the decision of the Supreme Court in PTC India (supra) it has been held that the sale of pledged goods by the Pledgee to itself is not conceived [(Paragraph 64 of PTC India (supra)] and does not constitute an actual sale under Section 176 of the Contract Act and amounts to conversion [Paragraph 63 of PTC India (supra)]. 108. Mr. Andhyarujina has made submissions on right to vote on shares being inseparable (unless context otherwise requires) from the ownership of shares itself. Such rights inter alia are privileges incidental to the ownership of shares . In this context he has relied upon the decision of Supreme Court of Chiranjit Lal Chowdhuri Vs. The Union of India (UOI) AIR 1951 SC 41 and Others at Paragraph 83. It has been held in Chiranjit Lal Chowdhuri (supra) that personal rights flowing from the ownership of the shares and cannot by themselves be acquired, disposed of, or taken possession of . 109. Mr. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that there is no enjoyment of goods in the case of a pledge. He has submitted that a Pledgee has only limited rights or special property in law, on default, the Pledgee can only either bring a suit or sell with notice. As such, the Pledgee is not entitled to vote on shares or act as an owner of the shares. 113. Mr. Andhyarujina has submitted that the controversy in the present case has arisen from the fact that the pledged goods in question are dematerialized shares and the arguments that have been sought to be created by Yes Bank on the basis of Depositories Act Depositories Regulations. He has submitted that neither the Depositories Act nor the Depositories Regulations have changed the position of the law of pledges or the Pledgee s rights under the Contract Act. This has been well settled by the Supreme Court, in PTC India (supra), after considering both the Depositories Act and the Depositories Regulations in detail. He has drawn reference to Paragraph 75 and 81 to 85 of PTC India (supra) in this context. He has further submitted that in Paragraph 82 of PTC India (supra), the Supreme Court has held that Section 176 and 177 are not obliterated, in so far as they wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations. 117. Mr. Andhyarujina has submitted that the registration of the Pledgee as a beneficial owner does not make the Pledgee the beneficial owner in the true meaning of the term as generally under the Depositories Act and Depositories Regulations, but only accords it such status for the sale of the dematerialized shares and for procedural compliances. This is evident from the fact that the right to redemption of a Pledgor continues even after the Pledgee has been registered and acquired status as beneficial owner and only ceases on actual sale to a third person. In this context, he has relied upon Paragraph 84 of PTC India (supra). 118. Mr. Andhyarujina has thereafter referred to Section 25 of the Depositories Act which empowers the Securities and Exchange Board of India ( SEBI ) to make regulations. This is how the Depositories Regulation came to be passed. 119. He has referred to Regulation 58(8) of the Depositories Regulations, which states : Manner of creating pledge or hypothecation 58 (8) Subject to the provisions of the pledge document, the Pledgee may invoke the pledge and on such invocation, the depository shall register the Pledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Angamuthu Ammal (1997) 2 SCC 53, wherein it has been held that the phrase unless context otherwise requires must be applied and given effect to where the definition or expression is preceded by the words unless the context otherwise requires . He has submitted that the phrase unless context otherwise requires must be applied, in the present case where the context of pledge is concerned. Any other reading would not only render the entire law of pledges otiose and be contrary to the decision of the Supreme Court in PTC India (supra) which has held that there is no change to the law of pledges, but also would render the language unless context otherwise requires otiose. 126. Mr. Andhyarujina has referred to Section 28 of the Depositories Act which provides that The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force relating to the holding and transfer of securities. He has submitted that the Depositories Act itself provides that it is in addition to and not derogatory to other laws relating to transfer of securities. 127. Mr. Andhayarujina has further referred to Section 2 of the Companies Act, 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Suit shares. Mr. Andhayarujina has submitted that the provisions Viz. Sections 5(2), 5(2A), and 5(3) of the SARFAESI Act, which was relied upon on behalf of J.C. Flowers are not applicable. Section 5(2) of the SARFEASI Act only applies in cases, where the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the asset reconstruction company. In the present case, Yes Bank is not a lender in relation to the financial asset, namely, the pledged shares of Defendant No. 3 and is not even a lender to the Pledgee i.e. the Plaintiff in relation to the pledged shares. 133. Mr. Andhayarujina has submitted that Section 5(2) of the SARFEASI Act only applies where the bank is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset or assignment or licence of intangible asset . In the present case, Yes Bank has not financed the acquisition of shares. Accordingly, this provision does not apply to the present case and no rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract Act apply to bailments as defined under Section 148 of the Contract Act. It follows that the said provisions also apply to Pledges. Bailment itself contemplates contractual conditions of use and possession of bailed goods which may be prescribed in the contract of bailment. He has submitted that the Pledge Deeds that are the subject matter of the present Interim Application is nothing but contracts of bailment setting out the conditions of use and possession of the Suit Shares i.e. the bailed goods. 137. Mr. Khambata has relied upon the decision of Supreme Court in PTC India (supra). The Supreme Court while discussing the law of pledge observes that Sections 148 to 171 of Chapter IX of the Contract Act lay down the general law pertaining to bailments and pledges are nothing but a subset of bailments . The Supreme Court has also referred to the case of Md. Sultan and Ors.(supra) which holds that a contract of pledge is a bailment of goods. 138. Mr. Khambata has referred to Section 180 of the Contract Act under which the bailee has the same remedies as that of the owner of the goods in case of deprivation of use or possession of the goods bailed or for any injury to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in the Act. 142. Mr. Khambata has submitted that under common law as can be seen from Chitty on Contracts - Law of Contracts, The Common Law Library, 34th Edition, Volume II., (T)he right of the Pledgee to use the thing pledged will depend upon the agreed terms of the pledge . 143. Mr. Khambata has submitted that nothing under Section 172-179 of the Contract Act prohibits parties to a pledge from contractually agreeing upon additional terms and conditions, so long as they are not in derogation of mandatory provisions of the Contract Act. 144. Mr. Khambata has submitted that the decision of this Court in Madholal Sindhu (supra), had considered a case, where the pledge document sought to confer rights on a Pledgee to sell the pledged shares without giving reasonable notice of sale. It held that this would be prohibited by the express provisions of Section 176 of the Contract Act and thus void. 145. Mr. Khambata has submitted that the Supreme Court in PTC India (supra) has approved of this finding of Madholal Sindhu (supra). Moreover, in PTC India (supra), the Supreme Court holds that the Pawnor has a right of redemption against third parties when the Pawnee do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the Patna Court has held that even a mortgagee has a right of sale. Further, the Madras High Court in L T Finance Ltd. Vs. J.K.S. Constructions Pvt. Ltd. 2014 SCC OnLine Mad 302 has expressed doubt as to the ratio and correctness of Mahamaya Debi (Supra). 150. Mr. Khambata has dealt with the contention of the Plaintiff and Dish TV s case that a pledge by operation of law creates a species of special property or special interest in the pledged goods in favour of the Pledgee; whereas the general property or general interest in the pledged goods (which includes rights of enjoyment of the pledged goods) continues to vest in the Pledgor by virtue of its ownership of the pledged goods. He has submitted that special property of a Pledgee is a concept under common law. Sections 172 to 179 of the Contract Act do not talk of any special interest or special property rights of a Pledgee. Thus, there is no statutory bar under the Contract Act from conferring any additional rights on a Pledgee by contract, save and except any term that violates mandatory provisions of the Contract Act. He has submitted that none of the decisions relied upon by the Plaintiff and Dish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to bailed goods i.e. a Pledgee has the whole present interest in the pledged property until the debt is paid off. 154. Mr. Khamabata has submitted that the express terms of the contract of pledge will prevail and if there are no express terms, the Pledgee may hold or even assign the pledged goods until the debt is discharged. In this context, he has relied upon Donald Vs. Suckling (1866) LR 1 QB 585 at Pages 604, 608 and 613. He has submitted that the Pledgee has a right to protect the pledged goods and its interests therein during the subsistence of the pledge. 155. Mr. Khamabata has submitted that the extent of the special property of a Pledgee will depend not only on the provisions of the Contract Act but also on what additional rights are conferred on the Pledgee by the contract of pledge. 156. Mr. Khambata has submitted that it is settled law that only a shareholder listed as a member in the Register of Members of a company is entitled to exercise voting rights over the shares. In this context, he has relied upon decision of the Supreme Court in Life Insurance Corporation of India Vs. Escorts Ltd. and Ors. (1986) 1 SCC 264, at Paragraphs 84, 95 100. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that No person, including the Pawnee, can transfer the pawn held in dematerialised form without being registered as a beneficial owner . This is a mandatory stipulation which does not seek to curtail or restrict, but on the other hand respects party autonomy and freedom to decide the terms of the pledge. He has made specific reference to the Paragraph 70 and 79 of PTC India (supra) in this context. 161. Mr. Khambata has submitted that the Depositories Act provides for only two categories of owners viz. registered owner who has necessarily to be a depository and a beneficial owner in whom all the rights vest. He has relied upon the decision of the Supreme Court in PTC India (supra) at Paragraph 69, wherein it is held that The Depositories Act establishes the depository ecosystem and introduces the concepts of a registered owner and beneficial owner The depository , as the registered owner, does not have any voting right or any other right in respect of the securities held by it. The beneficial owner shall be solely entitled to all rights, benefits, and liabilities attached to the securities held by the depository . He has submitted that this has been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s must be read down in the context of the said common law principle to mean a Pledgee-beneficial owner who cannot have the full rights of a member . He has submitted that Dish T.V. has not demonstrated that the context of the definition of member in Section 2(55)(iii) of the Companies Act, 2013 or of beneficial owner in Section 2(1)(a) of the Depositories Act does not require adopting a meaning other than as the definitions and provisions of these Acts expressly provide. He has submitted that the words which are not defined in the Companies Act shall have the meanings assigned to them in the Depositories Act (Sections 2(95) the Companies Act). Thus, a beneficial owner is not defined under the Companies Act and therefore its meaning under Section 2(1)(a) of the Depositories Act will have to be read into the Companies Act. Thus, a beneficial owner under the Depositories Act will also be beneficial owner for the purposes of the Companies Act and the beneficial owner will then be a member under Section 2(55)(iii) of the Companies Act. Neither of these Acts envisage a curtailment/ colouring of the definition of beneficial owner under Section 2(1)(a) of the Depositories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in any manner permitted by law upon such terms as the Pledgee determines and to cause all or any part of the Suit Shares to be transferred into its name or its nominees as has been provided for in Clause 7.1 (a) and (c) of the Pledge Deeds. Further, the Plaintiff has undertaken not to stop or attempt to stop any transfer of Suit Shares in the name of the Pledgee or its nominee as this is provided for in Clause 10.3(b) of the Pledge Deeds. The Pledgee has been appointed as the Plaintiff s attorney inter alia to do all acts in relation to any of the Security Assets. The Pledgee has been empowered to delegate the powers conferred on it by the Pledge Deed (including the Power of Attorney) to any Person. This is provided for in Clause 12 of the Pledge Deeds. Further, the Powers of Attorney dated 1st May, 2019 and 6th May, 2019 allow the Pledgee to delegate the powers conferred on the Pledgee under the POAs to any other Person as provided for in Clause 18 of the Pledge Deeds. 168. Mr. Khambata has submitted that the transfers of Suit shares are also permitted under law. Regulation 58(8) of the 1996, Depositories Regulations (identical to Regulation 79(8) of the 2018, Depositories Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these shares and its right to deal with these pledged shares is absolute. Therefore, the ARC is required to be recognised as Pledgee by all third parties, including statutory authorities. He has relied upon the decision of Delhi High Court in UV Asset Reconstruction Company Ltd. Vs. Union of India Ors. (supra) at Paragraph 9 in this context. 172. Mr. Khambata has submitted that the contention of the Counsel for the Plaintiff that the Pledgee cannot claim that it is a member under the Companies Act and can hold the Suit Shares forever without selling them, is misconceived. It is well settled that the Pledgee cannot be compelled by the pawner to sell the pledged goods. Power to sell is conferred on the Pawnee for his benefit and it is his sole discretion to exercise the power of sale or not. Even where the value of the goods deteriorates due to time, no relief can be granted to the Pawnor against the Pawnee as the Pawnor is legally bound to clear the debt and obtain possession of the pawned goods. In this context he has relied upon PTC India (supra) at Paragraph 39, 42 and 62. 173. Mr. Khambata has submitted that though Yes Bank was desirous of selling the Suit Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces Wing, Mumbai (EOW). The Plaintiff has claimed that the complaint was recently discovered by the Plaintiff and it confirms and reiterates the contents of the criminal Complaint dated 22nd June 2020 filed by Mr. Subhash Chandra. The Plaintiff has placed reliance on Lazarus Estates Ltd. (supra) to submit that fraud unravels all and vitiates judgments, contracts and all transactions and that nothing that has been obtained by fraud can be permitted to stand. Mr. Khambata has submitted that the Plaintiff s reliance on Lazarus is entirely misplaced as in the case Lazarus, a landlord had obtained a decree from a County Court on the basis of a false and fraudulent declaration pertaining to repairs in a rent increase form. An appeal against the decree was allowed and the tenant was permitted to raise the defence of fraud. He has submitted that the Plaintiff has plucked out a stray sentence from the judgment and taken it out of context to claim that fraud vitiates all. The decision in Lazarus (supra) contains the line in passing see as to contracts Master Vs. Miller (1791) 4 T.R. 320 ... . 176. Mr. Khambata has submitted that in Master Vs. Miller , the Court only dealt wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided. He has relied upon the authorities which have considered this position which are as under : (i) The House of Lords in Saunders (executrix of the estate of Rose Maud Gallie, deceased) Vs. Anglia Building Society [1970] 3 WLR 1078 (ii) Ningawwa Vs. Byrappa Shiddappa Hireknrabar Ors. ( Ningawwa ) (1968) 2 SCR 797 (iii) Mohan Vishnu Satardekar Vs. LIC 2023 SCC OnLine Bom 423 (iv) Ramesh Mali v M/s Samrat Associates Ors. Jt dt 18.07.2022 passed by this Court in IA (L) No. 2566 of 2022 in S(L) 29721/2021 (v) Dularia Devi v. Janardan Singh Ors. 1990 (Supp.) SCC 216 180. Mr. Khambata has submitted that in order to establish that the pledge is void, the Plaintiff would have to meet the narrow test of fraud as to character which it does not meet. It is not the Plaintiff s case that the Plaintiff was tricked into signing something that turned out to be a different document altogether. In the present case, the Plaintiff has explicitly acknowledged in the Plaint at Paragraph 2, 5, 8, 8D, 11, 24C, 24H, 24I that the underlying transaction was a loan and the transaction impugned in the Suit was a pledge, thus demonstrating that the Pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the knowledge of the Plaintiff as early as on 20th November 2021. The Plaintiff is Respondent No. 15 in the Oppression Mismanagement Petition and has admittedly been served a copy of the Oppression Mismanagement Petition. The Oppression Mismanagement Petition contains a detailed recounting of the Subhash Chandra Complaint and the FIR registered in the matter and annexes both the Subhash Chandra Complaint and the FIR dated 12th September, 2020. The Oppression Mismanagement Petition also makes a reference to the EOW Complaint and the proceedings filed by the Borrowers before the Saket District Court. 184. Mr. Khambata has submitted that despite having prior knowledge of the alleged fraud, the Plaintiff did not and has not till date addressed a letter or any communication seeking to avoid the pledge transactions and/or the Pledge Deeds on account of being voidable on grounds of fraud. He has submitted that even the Plaint, both as originally filed and as amended till date, contains no averment to the effect that the Plaintiff has avoided the transactions and/or the Pledge Deeds. 185. Mr. Khambata has thereafter referred to various Paragraphs of the Plaint filed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the Plaintiff is alleging illegality in use of the Loan amounts, which does not render the Loans themselves illegal and/or unlawful. He has submitted that even if the allegations contained in Subhash Chandra compliant to the effect that the Borrowers were induced to take the Loans are accepted arguendo (whilst being denied), fraud/illegality as contemplated under Section 23 is not made out. 188. Mr. Khambata has referred to the decision of the Supreme Court in Gurmukh Singh v. Amar Singh (1991) 3 SCC 791 wherein Supreme Court explained that a contract for the commission of a fraud (upon a third party or for a purpose prohibited in law) would be fraudulent in its object or consideration. He has submitted that it is not the Plaintiff s case that the Pledge Deeds were entered into as a fraud upon someone. The consideration for the Pledge Deeds viz. the Loans advanced to the Borrowers (the Essel Group) were mis-utilised by the Borrowers will not render the object or consideration of the Pledge Deeds fraudulent. At the highest, that would be a case of fraud upon the Plaintiff to secure the Plaintiff s consent i.e. under Sections 17 and 19 of the Contract Act. 189. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 Crores (approx.) could be utilised by the Videocon Group to repay its outstanding dues to Yes Bank is an incredible argument. He has submitted that this does not make any commercial sense as no bank would advance upwards of INR 5,000 Crores to evergreen outstanding dues worth INR 1,400 Crores. This theory offers no explanation for the remaining INR 4000 Crores (approx.) amount which was clearly used by the Borrowers for extraneous purposes. 192. Mr. Khambata has submitted that Sections 64 and 65 of the Contract Act provide for restitution in case of voidable/void contracts. Section 64 provides that the party rescinding a voidable contract shall restore the benefit it received thereunder to the person from whom it was received. Section 65 provides that when an agreement is discovered to be void, or when a contract becomes void, the person receiving advantage under such agreement is bound to restore it or compensate the person from whom he received such advantage. He has submitted that assuming whilst denying that the Plaintiff is entitled to avoid the Pledge Deeds and/or that the Pledge Deeds are declared void, and assuming that Yes Bank/JCF is therefore bound to return the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Plaintiff cannot conflate two separate types of fraud and substitute one for the other. It is settled law that the fraud must prove as pleaded in its Plaint that a charge of fraud must be substantially proved as laid and when one kind of fraud is charged another kind of fraud cannot be substituted in its place. He has relied upon decision of the Proviso Counsel in Abdool Hoosein Zenail Abadin Vs. Charles Agnew Turner 1887 SCC OnLine PC 10 and the Supreme Court in Bijendra Nath Srivastava Vs. Mayank Srivastava (1994) 6 SCC 117 in this context. 196. Mr. Khambata has submitted that the Plaintiff has not produced any evidence in support of its case of fraud. The Plaintiff has only relied upon the complaints filed before investigation authorities, affidavits filed by investigating authorities and/or letters issued by such authorities to establish its case on fraud. The Affidavit dated 10th January, 2022 filed by the State of Uttar Pradesh in SLP (Cri) No.9192 of 2021 makes it clear that the same has been filed based on a preliminary investigation and it does not purport to (nor can it) rendeer any conclusive finding with respect to the validity of the documents and transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary. The scheme of the Indian Contract Act is that it is competent to parties to incorporate into any contract any incident which is not contrary to or inconsistent with any provision contained in the Act. But they can only override a specific provision contained in the Act provided the particular Section dealing with that provision contains a saving clause in respect of special contracts to the contrary. If one looks at the various sections of the Indian Contract Act, one finds that some of them specifically mention in the absence of a contract to the contrary. There is no such saving clause in S. 176, and in my opinion its provisions are mandatory, and it is not open to parties to contract themselves out of those provisions. 202. The said decision has to be read in light of the facts of that case. There, the pledge documents sought to confer rights on the Pledgee to sell the Pledged shares without giving reasonable notice of sale. This Court held that the conferring of such rights is prohibited by the expressed mandatory provision viz. Section 176 of the Contract Act and thus void. 203. The Plaintiff has placed reliance upon Madhaolal Sindhu (Supra) in support of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds any incident which is not contrary to or inconsistent with the said provisions governing Pledges in the Contract Act. 206. There have been submissions made by the Plaintiff and / or Dish TV on the distinction between Pledge and mortgage of movables and contending that the right of enjoyment of pledged goods such as right to vote is inconsistent with the pledge but consistent with a mortgage of movables. In my view decision of the Andhra Pradesh High Court in Shatzadi Begum (Supra) relied upon by the Plaintiffs in this context is inapplicable to the present case as the Court in that case had not considered the law of bailment of goods. In my prima face view a pledge is a form of bailment and this is apparent from Section 172 of the Contract Act. The Supreme Court in PTC India (Supra) holds that pledges are nothing but a subset of bailment and Section 148 to 171 and 180 and 181 of the Contract Act will apply to a pledge. Further, the use of pledged goods by Pledgee post invocation of pledge but prior to sale is not barred either under Section 176 or any other provision of the Contract Act. 207. In the present case the use of the pledged goods will include exercise of votin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) have all considered contracts conferring special rights on the Pledgee, including the right to vote and in none of these cases was there a finding to the effect that additional rights conferring on the Pledgee were contrary to the Contract Act. Further, in PTC India (Supra), the Supreme Court has noted the concept of Special Property in a Pledgee and despite which has held that the contract of pledge can contain any terms governing the pledge. This has been held in paragraph 28 of the said decision. In the case before the Supreme Court the additional terms included voting rights. 211. The decision of the Supreme Court in Lallan Prasad (Supra) has been relied upon by the Plaintiff and Dish TV to contend that a pledge is an intermediate between a simple lien and a mortgage. This decision is required to be read in light of the facts of that case. The issue for determination was whether the Pledgee can sue to recover the underlying debt and also keep the pledged property. The Supreme Court in that context referred to the Pledgee s Special Property and the Pledgor s general property rights in the pledged goods and held that satisfaction of a debt extinguishes a pledge / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing rights with respect to the pledged shares is inapplicable to the facts of the present case. In that case unlike the present cases, the Pledgee had neither invoked the pledged shares nor was the Pledgee registered as a member of the company in its Register of Members. In my view, the said decision confirms that only the holder of the shares whose name is entered in the Register of the Company has a right to vote at the meetings of the Company. 215. In the present case, it would be necessary to consider the position post enactment of the Depositories Act, 1996 and the 1996 Depositories Regulations. In my view, both are required to be read harmoniously with the provisions relating to contract of pledge under the Contract Act. In the present case, the Pledgee was registered as beneficiary owner of the dematerialized Suit shares in the record of the depository. Regulation 58 (8) of the 1996 Depositories Regulations, which is para materia with Regulation 79(8) of 2018 Depositories Regulations is applicable and provides as under : Subject to the provisions of the pledge documents, the Pledgee may invoke the pledge and on such invocation, the depository shall register the Ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner and / or in any manner dilute or restrict such status. 220. Having perused the relevant provisions of the Depositories Act, it is clear that the Depositories Act does not contemplate different kinds of beneficiary owners. There is no limitation on the Pledgee s rights as beneficial owner and / or limitation as to the Pledgee having right to sell but having no other right. Thus, the contention on behalf of the Plaintiff and / or Dish TV to the effect that the only rights which the Pledgee has upon being transposed as beneficial owner, under the Depositories Act and the Depository Regulations is only for effecting the sale and does not contemplate the exercise of voting rights by the Pledgee upon invocation of the pledge does not merit acceptance. 221. A Company is duty bound in law to recognize only a beneficial owner / member whose name appears on the register of members as having all rights and benefits including voting rights in relation to the shares. I do not find any merit in the submission on behalf of Dish TV that the definition of beneficial owner and member under Section 2(1)(a) of the Depositories Act and Section 2(55) of the Companies Act having been cav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Deeds of Pledge that the Pledgee is entitled to enforce the security interest and take possession and dispose of all or any part of the suit shares in any manner permitted by law upon such terms as the Pledgee determines and to cause all or any part of the Suit Shares to be transferred into its name or its nominees. The Plaintiff has under Clause 10.3 (b) of the Deeds of Pledge undertaken not to stop or attempt to stop any transfer of Suit shares in the name of the Pledgee or its nominee. Further, the Powers of Attorney dated 1st May, 2019 and 6th May, 2019 allow the Pledgee to delegate the powers conferred on the Pledgee under the Power of Attorney to any other person as can be seen from the Clause 18 of the Powers of Attorney. The transfer of shares by the Pledgee to its own name are permitted under law. These transfers are not considered to be a sale as can be seen form the decision of PTC India (Supra) at paragraph 95 and 105. This has also been recognized in Bank of Bihar (Supra). 224. There have been various submissions made with regard to the transfer of Suit shares from Yes Bank to JCF. This transfer took place pursuant to the Assignment Agreement dated 16th December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable to Pledge Deeds cannot be accepted. If this interpretation of the Plaintiff is to be accepted, in my prima facie view this would render Section 5(1) and 5(2) read with definition of financial asset in Section 2(l) otiose in respect of Pledges. Thus, this interpretation of the Plaintiff cannot be considered to be a possible interpretation. 228. The other provision namely Section 5(2A) which the Plaintiff has relied upon to contend that this is only provision which JCF could, if at all have placed reliance upon, is inapplicable in the present case as the Borrowers have not purchased the Suit shares from the loan funds as contemplated thereunder. However, it is not necessary to consider that provision having held that the transfer to JCF is permissible under the aforementioned provisions viz. Section 5 read with Section 2(l) of the SARFAESI Act. 229. Thus, in my prima facie view, the Suit shares stand transferred to JCF and that this is pursuant to the Assignment Agreement which provides for the assignee to acquire loans and underlying security interest and Pledges in respect of the loan as can be seen from the recital C thereof read with Clause 2.1.2 thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 filed by Yes Bank with the Economic Offences Wing, Mumbai ( EOW ). The Plaintiff has maintained that the EOW complaint confirms and reiterates the contents of the criminal complaint dated 22nd June, 2020 filed by Mr. Subhash Chandra. The Plaintiff contends that as per the EOW Complaint, Yes Bank has admitted that the loan transaction was not for the purpose stated in the loan document but was to be utilized for paying the outstanding debt owed to Yes Bank by the Videocon group. Further, upon reading of both the complaints, the Plaintiff claims that the ostensible purpose of the loans advanced by Yes Bank was only a front for the real purpose viz. reducing Yes Bank s exposure in the Videocon account and to circumvent applicable regulations of the Reserve Bank of India. 233. I have perused the material on record including the aforementioned two complaints. In my prima facie view, the Plaintiff had prior knowledge of the alleged fraud i.e. prior to the filing of the present Suit but despite which the Plaintiff did not avoid the Pledge Deeds. The alleged fraud does not in my prima facie view render the loan transaction void but at the highest would render the transaction voidable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk. At the highest the fraud alleged would be one which falls under Section 17 and 19 of the Contract Act. Thus, the alleged fraud being voidable, it was necessary for the Plaintiff to have avoided the pledge deeds in the event the Plaintiff s case of fraud is accepted. It is well settled that in the event a defrauded party has elected to affirm the Pledge Deeds, it is not open to the Plaintiff to resile from such election. The decisions relied upon on behalf of the Yes Bank viz. Clough v. London and North Western Railway Company (supra), Kunja Lal Bhuiya v. Haralal Bhuiya (supra) and Mumbai International Airport Pvt. Ltd. v. Golden Chariot (supra) are apposite. 236. The reliance placed by the Plaintiff on Lazarus Estates Ltd. (supra) is misconceived. In that case although it has been held that fraud unravels all and vitiates judgments, contracts and all transactions, this has been held in the facts of that case. There a landlord had obtained a decree from a County Court on the basis of a false and fraudulent declaration pertaining to repairs in a rent increase form. An appeal against the decree was allowed and the tenant was permitted to raise the defence of fraud. It was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provision is not attracted in the present case where there is nothing about the granting of loans (the stated consideration under the Pledge Deeds) being illegal / unlawful consideration since the loans were advanced by Yes Bank and accepted by the Borrowers. The Plaintiff has alleged illegality in respect of the use of the loans amount, which does not render the loans themselves illegal and / or unlawful. Prima facie, I do not find that a case of fraud as contemplated under Section 23 is made out. 239. The Supreme Court in Gurmukh Singh (supra) has explained that a contract for commission of a fraud upon a third party or purpose prohibited in law would be fraudulent in its object or consideration. It is not the Plaintiff s case that the Pledge Deeds were entered into as a fraud upon someone. The fact that the consideration for the Pledge Deeds viz. the loans advanced to the Borrowers (the Essel Group) were mis-utilised by the Essel Group will not render the object or consideration of the Pledge Deeds fraudulent. At the highest, that would be a case of fraud upon the Plaintiff to secure the Plaintiff s consent i.e. under Sections 17 and 19 of the Contract Act. In fact, it is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CF on the ground that it is entitled to avoid the Pledge Deeds and / or the Pledge Deeds are required to be declared void. They must also return the benefit received under the loan transactions and the Pledge Deeds to Yes Bank / JCF. I prima facie do not find any merit in the contention of the Plaintiff that the Plaintiff has received no benefit from the loan transaction and Pledge Deeds and that it is Yes Bank and proposed Borrowers having received the benefit under the Pledge Deeds are required to restore the Suit shares to the Plaintiff. The Pledge Deeds itself provide that the consideration for the Pledgor under the Pledge Deeds is the advancement of the loan to the Borrowers. The Borrowers having received and utilized the loans, it cannot be said that the Plaintiff has not received any benefit from the loan transaction and Pledge Deed. Further, the Plaintiff has not clarified why the Suit shares were Pledged by them in the first place if no consideration / benefit was received by the Plaintiff under the Pledge Deeds. I do not find merit in the Plaintiff s claim to be an innocent party. 243. I am of the prima facie view that, at this stage the Plaintiff has not produced any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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