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2014 (2) TMI 1375 - HC - Indian LawsGrant of Interim relief - Fraudulent transfer of shares - shares purportedly pledged by the Plaintiff with Defendant Nos.1 and 2 under loan agreements - It is the case of the Plaintiff that in spite of recovery of the entire outstanding loan with interest, Defendant Nos.1 and 2 have fraudulently sold or transferred shares held as security in breach of the loan agreements as also in breach of trust - whether Defendant No. 3 is bound by this alleged pledge and therefore, not entitled to deal with the security? HELD THAT:- The suit pledge was admittedly not created with the previous approval of the depository or intimation from the then beneficial owner of the securities, namely, the Plaintiff. There was no compliance with Regulation 58 - Naturally, there were no entries in the records of the depository to that effect as a result. Such entries could have been the only evidence of pledge recognized by sat 13/17 nm (l) 2150-2013.doc the Act. This being the position, Defendant No. 3 (depository participant) could not be expected to act on any pledge, to which Defendant Nos. 1 and 2 (the beneficial owners) were parties. So also, Defendant Nos. 4 and 5 (the depositories) could not be prevented from effecting transfer of the shares on behalf the beneficial owners. This court, in the case of JRY INVESTMENTS (P.) LTD. VERSUS DECCAN LEAFINE SERVICES LTD. [2003 (3) TMI 601 - HIGH COURT OF BOMBAY], considered the rights of an owner of shares who had transferred the same with intention of creating security, to prevent dealing in such shares by the transferee in the event of failure of consideration for such security. A similar argument, as in our case, was advanced that the transferee had no title to pass on - In Jry Investments Case, this court on the basis of the analysis of the provisions, held that the transfer could not be prevented. The ratio of that case would apply to the facts of our case as well. In the absence of any pleading that the transferee had notice of any defect in the title of the transferor, it is difficult to accept the case suggested by the learned Counsel on the basis of some reference in an affidavit filed in the Notice of Motion. Non-filing of any affidavit by Seksaria, who is supposed to have attended the alleged meetings, is also of no consequence in the premises. Events of 29 and 30 October do prima facie show that there was some anxiety on the part of Defendant No. 3 to hurriedly sell or confiscate the shares, just when the adinterim order was being considered and later when it was passed. Learned Counsel for Defendant No. 3 submits that Defendant No. 3 had no knowledge of the adinterim application made on 29 October and sold/transferred the shares on 29 October and 30 October 2013, before the court orders were communicated to Defendant No. 3. In an appropriate case, it would have been necessary to go sat 17/17 nm (l) 2150-2013.doc deeper into this aspect. But, here I am convinced that even if I were to eventually find that there was indeed an attempt to overreach the court, that does not imply that the Plaintiff is therefore entitled to any equitable relief. The Plaintiff has not, on his pleadings, made out any case for such relief. On this aspect, it is sufficient for me to record a prima facie finding that the conduct of Defendant No. 3 does not imply any knowledge or acknowledgment on its part of the rights of the Plaintiff, as suggested by Mr. Chinoy. There is no case made out for grant of any interim relief to the Plaintiff - Notice of Motion dismissed.
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