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2019 (2) TMI 1965 - BOMBAY HIGH COURTPledge of shares to defendant no. 5 - defendant no. 5 sold the shares to defendant nos. 1 to 4 and that was not permissible under the contract - HELD THAT:- It is settled law that no pledgor can decide when and how a pledgee should exercise its right to sell. Section 176 makes it clear that it is the discretion of the pledgee to sell the pledged goods (shares in this case) in case the pledgor makes default and if the pledgee exercises that discretion or does not exercise that discretion, no blame can be put on the pledgee. What is required is if pledgee decides to exercise its discretion to sell, it has to give reasonable notice of sale to pledgors. In this case, defendants have given reasonable notice. It has to be noted that the Debenture Trust Deed states the Trustee can, after giving a written notice of one business day to the pledgors (each pledgor acknowledges and agrees to be reasonable notice under applicable law), take any of the action as quoted and dealt with earlier. Plaintiffs while entering into the Debenture Trust Deed found one business day was reasonable notice. Two event of defaults were communicated to plaintiffs, one in August 2018 and other on 9th October 2018 and plaintiffs have taken no steps to rectify those event of defaults. Plaintiffs have not even paid the 2% additional interest which plaintiffs were supposed to pay on RPL shares being downgraded by ICRA. Plaintiffs did not even take any steps to maintain the security cover ratio. Therefore, it does not lie in the mouth of plaintiffs to find any fault with defendants. The defendants have done nothing contrary to the provisions of the contract and applicable law. Events of default happened in August 2018 and October 2018. ICRA has also observed that RPL is non co-operative. Admittedly, the penal interest has not been paid by plaintiffs and they have not restored the security cover ratio. In the light of this, defendants cannot be stopped from exercising their rights under the contract and applicable law - The balance of convenience also lies in favour of defendants, particularly, in view of the fact that the Chairman of RCOM, which is one of the flagship company and who is also Chairman of the Reliance ADAG group of companies has made a statement that RCOM, whose 2% shares are pledged with defendant no. 5 to secure the debentures issued to defendant nos. 1 to 4, is filing for bankruptcy. Shri Dwarkadas said RCOM has already filed for bankruptcy. It is also stated in the plaint, RCOM is facing insolvency proceedings. In such a situation plaintiffs, after giving notice as required under the pledge agreements sold part of the pledged shares. Further, Shri Chinoy had made no submissions as to what plaintiffs proposed to do for the 2% shares of RCOM pledged with defendant no. 5. No case is made out for granting any ad-interim relief as prayed for - Ad-interim relief rejected.
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