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ICICI Bank Limited Versus United Breweries (Holdings) Limited and Others

2016 (1) TMI 44 - BOMBAY HIGH COURT

Restraining the Appellants from selling 20,14000 shares of United Breweries Limited (the NDA shares) which were furnished as security under the Non-Disposal Agreement dated 12/11/2011 - appeal against the order of injunction granted by the learned Single Judge delivered in favor of Kingfisher Airlines Limited - maintainability of appeal - Held that:- no prima facie case has been made out by the Plaintiffs for grant of any interim relief and Plaintiff No.1 - United Breweries (Holdings) Limited wa .....

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clause 9.1 and 10 of the LPA which also has been incorporated under clause 3.1(h ) of the NDA. It is well settled that recitals alone do not spell out the intention of the parties but terms and conditions of the contract and intention of the parties have to be taken into consideration for arriving at any conclusion.

The interest component could be converted into equity shares and the loan component would be reduced to 403.72 crores with interest. However, both these components have be .....

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aim arising under Clause 10.1 of the Loan Purchase Agreement dated 21/12/2010? - Held Yes.

(2) Whether the Appellants' recompense claim was capable of being collateralised or secured? - Held Yes

(3) Whether the NDA shares were given in lieu of top-up obligation under clause 4.1.3 of the Loan Purchase Agreement only? - Held No.

Decided in favor of appellant bank. - APP(L)409/2015 A/W, APP312/2015, NOTICE OF MOTION (L) NOS. 905, 1285 AND 1305 OF 2015 - Dated:- 3-12 .....

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ENT: (Per Acting C.J.) BRIEF FACTS: 1. Both these appeals can be disposed of by a common judgment since the appellants in both these appeals are aggrieved by a Judgment and Order dated 16/4/2015 passed by the learned Single Judge in Notice of Motion (L) No.905 of 2015 in Suit (L) No.290 of 2015. 2. Written Submissions were submitted by Appellants/original Defendant Nos. 1 and 2 on 11/09/2015 and by Respondent Nos.1 and 2/original Plaintiffs on 28/10/2015. 3. Appellant - ICICI Bank Limited is the .....

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ng Defendant Nos. 1 and 2 from assigning or dealing with 20,14,000 shares of United Breweries Limited belonging to Plaintiff No.1. 5. Plaintiff No.1 - United Breweries (Holdings) Limited ( UBHL ) is a Company incorporated under the provisions of Companies Act having its registered Office at Bangalore and is a constituent of the UB Group Companies holding shares in various UB Group Companies, including in United Breweries Limited. Plaintiff No.2 - Kingfisher Finvest (India) Limited is a Company i .....

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to be appointed by UBHL. Defendant No.2 ICICI Bank Limited is a Banking Company incorporated under the Companies Act and is a Lender of money to the Plaintiffs. Defendant No.3. - Kingfisher Airlines Limited is a proforma Defendant and no reliefs are claimed against it. 6. Defendant No.3 - Kingfisher Airlines Limited started its airline business in the year 2003 and in the course of its business availed loan from Defendant No.2 - ICICI Bank Limited and also from number of other Banks. 7. Sometime .....

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existing loan.) This loan was secured by the following shares viz. (A) 31,47,985 shares held by UBHL in United Spirits Limited (USL); (B) 5,91,50,000 shares held by UBHL in Kingfisher Airlines; (C ) 17,89,410 shares held by Kingfisher Finvest (India) Limited in USL which are hereinafter referred to as the pledged shares . On account of the financial difficulty faced by Defendant No.3 - Kingfisher Airlines Limited, a request was made for restructuring its debts and, accordingly, Master Debt Recas .....

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SSA was executed between the Kingfisher Airlines Limited - Defendant No.3 and United Breweries (Holdings) Limited - Plaintiff No.1 and the LPA was executed between ICICI Bank Limited - Defendant No.2, United Breweries (Holdings) Limited - Plaintiff No.1 (as purchasing party) and Kingfisher Finvest (India) Limited Plaintiff No.2 as confirming party. 9. Since one of the conditions of restructuring was that the lenders would convert a portion of their credit facilities into preference share/equity .....

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10, Plaintiff No.1 - United Breweries (Holdings) Limited has twofold obligations viz (1) to purchase the loan granted by ICICI Bank Limited to Defendant No.3 - Kingfisher Airlines Limited as and when called upon to do so by the Appellant ICICI Bank Limited and (2) if the ICICI Bank Limited were to suffer a loss upon sale of the shares held by it of Kingfisher Airlines Limited - Defendant No.3 (after conversion of debt into equity) to recompense such loss to the ICICI Bank Limited and if there wa .....

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es. 10. On 31/03/2011 the CCPS (Preference Shares) were converted into 2,63,64,764 equity shares of Defendant No.3 - Kingfisher Airlines Limited at an allotment price of ₹ 68.48 per share. On 28/06/2011, a sister concern of Plaintiff No.1 viz. Margosa Consultancy Services ( Margosa ) issued a Letter of Comfort to the ICICI Bank Limited - Defendant No.2 to the effect that Margosa would provide security to the extent of ₹ 45 crores for meeting the claims of ICICI Bank Limited. 11. The .....

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ited held by it (hereinafter referred to as the NDA shares .) In view of this, Plaintiff No.1 - United Breweries (Holdings) Limited executed an irrevocable Power of Attorney in favour of Defendant No.1 - 3i Infotech Trusteeship Services Limited. 12. Sometime during January-February 2012, ICICI Bank Limited - Defendant No.2 sold 96,00,000 shares and, according to ICICI Bank Limited, this resulted in shortfall of ₹ 47 crores. This was recovered by ICICI Bank Limited out of Margosa Fixed Depo .....

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I Bank Limited - Defendant No.2 sold in tranches the following equity shares held by it in Defendant No.3 - Kingfisher Airlines viz (a) 7,753,120 shares at a total price of ₹ 35,669,604/- and (b) 9,011,644 shares at a total price of ₹ 35,535,293.80. This was in addition to the prior sale in January-February, 2012 of 96,00,000 shares. According to the ICICI Bank Limited, there was a total shortfall of ₹ 146 crores approximately which resulted from the aforesaid sale. Plaintiff N .....

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gave reply to the said letter claiming that the NDA shares were not offered as security for recompense claim and again demanded release of the NDA shares (equity shares of Kingfisher Airlines Limited) which were with ICICI Bank Limited - Defendant No.2. On 02/02/2014, ICICI Bank Limited - Defendant No.2 issued a notice to Plaintiff No.1 - United Breweries (Holdings) Limited and Defendant No.3 - Kingfisher Airlines Limited, stating therein the event of default under LPA and called upon Plaintiff .....

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otion was finally disposed of by an order dated 16/04/2015 and the Notice of Motion was made absolute in terms of prayer clause (a) and further directions were given to ICICI Bank Limited to deposit the NDA shares. 17. Being aggrieved by the said judgment and order passed by the learned Single Judge, Defendant Nos. 1 and 2 have filed the aforesaid two appeals. SUBMISSIONS MADE BY THE LEARNED SENIOR COUNSELS APPEARING ON BEHALF OF THE APPELLANTS. 18. Mr. Iqbal Chagla and Mr. Janak Dwarkadas, the .....

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of NDA would show that the NDA shares were meant to secure all of Plaintiff No.1 s LPA obligations. It was submitted that this was evident from Recital (c) and clauses 3.1(h), (i) and (k) of NDA. It was submitted that these clauses show that the NDA shares were furnished by Plaintiff No.1 - United Breweries (Holdings) Limited to secure the payment under LPA or NDA and failure of Plaintiff No.1 to perform the NDA would constitute an event of default under NDA. It was submitted that upon reading .....

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of sale of equity shares of the Kingfisher Airlines Limited held by the ICICI Bank Limited - Defendant No.2, if a loss is caused then the same would be compensated by sale of shares of Plaintiff No.1 - United Breweries (Holdings) Limited under the Non-Disposal Agreement. It was submitted that the learned Single Judge had erred in holding that the only security for the equity shares (CCPS) was the Margosa Fixed Deposit and not the NDA shares, is patently erroneous. It was submitted that conjoint .....

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of the Defendant Nos.1 and 2 i.e. the Appellants herein since the value of the NDA shares was admittedly reducing day by day and when the impugned order was passed the value was ₹ 235.26 crores and when the Appeals were filed it was ₹ 193.14 crores and on the date when the Appeals were reserved for judgment, the value was ₹ 171.65 crores. Secondly, it was submitted that these shares being shares of a public listed company, even assuming that the same were not a part of the secu .....

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i.e. the original Plaintiffs Nos. 1 and 2 submitted that the Plaintiffs had made out a prima facie case and that was accepted by the learned Single Judge and in appeal, therefore, this Court should not interfere with the said order. Reliance was placed on the judgment of the Apex Court in The Apex Court in Wander Ltd and Another vs. Antox India P. Ltd. 1990(Supp) SCC 727 as also on the Judgment of Division Bench of this Court in Avitel Post Studioz Ltd & Ors vs. HSBC PI Holdings (Mauritius) .....

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tion to Master Debt Recast Agreement, Preference Share Subscription Agreement and the Loan Purchase Agreement. He submitted that the shares which were pledged by three pledged agreements were given for the purpose of securing the loan of ₹ 400 crores approximately and not the equity shares purchased by ICICI Bank Limited in the form of Converted ICICI Bank Facilities. He then submitted that clause 4.1 of the LPA provided for security for the Loan Purchase Secured Obligation and under Claus .....

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the value of the ICICI Bank Facilities and to secure this obligation, clause 4.1.3 granted a right to the ICICI Bank Limited to call up the Respondent Nos. 1 and 2/original Plaintiff Nos.1 and 2 to pledge additional/top-up shares, if the value of the pledged shares fell below this threshold level. He then submitted that clause 10 of the LPA provided for repayment of the recompense amount. He submitted that this was secured by Margosa Consultancy Services Fixed Deposit. It was submitted that the .....

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under the Non-Disposal Arrangement were given only as a further top-up of the pledged shares and it covered the amount of the loan advanced by ICICI Bank Limited and not the equity shares which were transferred in the name of ICICI Bank Limited. He also submitted that from the Recitals of Non-Disposal Agreement viz Recitals (A), (B) and (C ), it was clear that to provide security of shares pledged as set out in the LPA, the parties had agreed to create additional security to ensure that the sti .....

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at page 995, Placitum E. 2. Investors Compensation Scheme Ltd. vs. West Bromwich Building Society 1 WLR [1998] 896 at page 912, Placitum E. 3. Mannai Investment Co. Ltd. vs. Eagle Star Life Assurance Co. Ltd. - 2 WLR [1997] 945 at page 967, Placitum G. 4. Antaios Compania Naviera S.A. vs. Salen Rederierna A.B. - 1 AC [1985] 191 at page 200, Placitum G. 5. Mumbai Metropolitan Region Development Authority vs. Unity Infraproject Ltd. [2008] 5 Bom CR 196 at page 201 & 204 at para 11-13 & 25. .....

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d worked itself out. He submitted that ICICI Bank received total consideration of ₹ 428 crores from IGCF in lieu of assigning the said loan of ₹ 403.72 crores and the pledged shares and therefore there was no obligation on the part of Plaintiffs towards the repayment of the loan either under LPA or NDA. It was submitted that IGCF sold the pledged shares far in excess of the loan amount assigned to it and that the IGCF had been ordered by the Hon ble Karnataka High Court vide order da .....

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nd the sale of these shares would render the suit infructuous. FINDINGS AND CONCLUSION: 20. We have heard the learned Senior Counsels Mr. Iqbal Chagla and Mr. Janak Dwarkadas appearing on behalf of the Appellants/original Defendant Nos. 1 and 2 and Mr. N.H. Seervai appearing on behalf of Respondent Nos. 1 and 2/original Plaintiff Nos. 1 and 2 respectively. 21. Appellants are aggrieved by the order of injunction granted by the learned Single Judge, restraining the Appellants from selling 20,14000 .....

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e shares. The principal contention of the Plaintiffs is that these 20,14,000 shares were not given as security towards the recompense amount under clause 10.1 of the LPA but were given as a top-up security to the shares which were pledged by three Agreements for securing the loan amount viz. ₹ 403.72 crores approximately. It was contended by the learned Senior Counsel appearing on behalf of Respondent Nos. 1 and 2/Plaintiff Nos. 1 an 2 that the equity shares of ₹ 170 crores were not .....

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ments viz (i) Master Debt Recast Agreement (ii) Preference Shares Subscription Agreement and (iii) Loan Purchase Agreement. 23. On the other hand, it is the case of Appellants/Defendant Nos. 1 and 2 that the NDA shares were also given for the purpose of security towards the recompense amount as per clause 10.1 of the LPA dated 21/12/2010. 24. Before we consider the rival submissions, admitted facts need to be recapitulated. 25. Original Defendant No.3 - Kingfisher Airlines Limited had taken fina .....

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mited was about 573.72 crores. This loan was secured by the shares held by United Breweries (Holdings) Limited in United Spirits Limited and Kingfisher Airlines Limited and also by Plaintiff No.2 - Kingfisher Finvest (India) Limited in United Spirits Limited. It was therefore agreed to enter into restructuring/recasting agreement and divide original loan in two parts. Out of ₹ 573.72 crores, the monetary loan would be reduced to ₹ 403.72 crores which was secured by the pledged shares .....

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paid-up equity shares of USL which would cover the ICICI Bank Facilities and fully paid-up shares of Kingfisher Airlines Limited which provided cover of 0.75 times ICICI Bank Facilities. There was, however, a clause 4.1.3 by which the ICICI Bank Limited could call upon Respondent Nos.1 and 2/original Plaintiff Nos.1 and 2 to pledge additional/top-up shares if the value of the pledged shares fall below the prescribed limit. 26. Clause 10 of the LPA provided for the payment of recompense amount in .....

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reement was entered into on 12/11/2011 and the ICICI Bank Limited accepted the Non-Disposal Undertaking in respect of 20,14,000 shares. The entire controversy revolves around the purpose for which 20,14,000 shares were given. According to Plaintiffs, the said undertaking for Non-disposal of 20,14,000 shares of UBL was given as a top-up or additional pledge for the payment of recast loan of ₹ 403.72 crores so that in the event the value of the pledged shares became less than the value which .....

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in the event of a default committed by Plaintiff No.1 - Respondent No.1 herein, to perform the NDA and on the occurrence of event of default, the Appellants/Defendant Nos. 1 and 2 could, under clauses 3.1(h), (i) and (k) of NDA, enforce the security by selling the NDA shares and appropriate the proceeds of the NDA shares towards discharge of the payment obligations under LPA. 27. In support of their rival submissions, both the parties have relied on all the agreements including definitions of v .....

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d? (3) Whether the NDA shares were given in lieu of top-up obligation under clause 4.1.3 of the Loan Purchase Agreement only? 28 It would be fruitful to prepare a chart showing the division of loan under the Master Debt Recast Agreement. Image No. 1 29. The learned single Judge has relied on Recitals (A), (B) & (C ) of the Non-Disposal Agreement and has come to the conclusion that these shares were given only as as a top-up / additional pledge as per clause 4.1.3 and not for the purpose of c .....

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se amount could not be incorporated or read into the Non-Disposal Agreement. The interpretation made by the learned Single Judge therefore is contrary to the known canons of interpretation of commercial transaction. We give the following reasons for our conclusion. 30. In October, 2010, when consortium of Banks agreed to restructure the loan given to Kingfisher Airlines Limited, three agreements were entered into viz. (I) Master Debt Recast Agreement dated 21/12/2010 between the Kingfisher Airli .....

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aint (2) agreement dated 30/06/2008 which is at Exhibit-B to the Plaint and (3) agreement dated 30/06/2008 which is at Exhibit-C to the Plaint. By virtue of this, the existing loan was secured by pledge over : (a) 31,47,985 shares held by United Breweries (Holdings) Limited in United Spirits Ltd. ( USL ) (b) 5,91,50,000 shares held by United Breweries (Holdings) Limited in Kingfisher Airlines Limited; and (c) 17,89,410 shares held by Plaintiff No.2 - Kingfisher Finvest (India) Limited in USL (co .....

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Recast Agreement dated 21/12/2010, Preference Share Subscription Agreement was executed on the same date. Similarly, Plaintiff No.1, Respondent No.1 herein i.e. United Breweries (Holdings) Limited gave an assurance to the ICICI Bank Limited in view of agreeing to restructure the Kingfisher Airlines debt. Under the Loan Purchase Agreement, there were two-fold obligations on United Breweries (Holdings) Limited viz (1) to purchase the loan granted by ICICI Bank Limited to the Kingfisher Airlines L .....

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y) to recompense such loss to the ICICI Bank Limited. If the said loss was not recompensed, it would constitute an event of default. These two conditions clearly revealed that both, the reduced loan of ₹ 403.72 crores with interest was secured by the pledged shares and additional pledged shares/top-up shares which were to be given in the event the value of the pledged shares went below 1.25 and 0.75 and, secondly, an amount of ₹ 170 crores in the form of equity shares also was secure .....

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oned in definition clause of LPA are quoted hereinbelow in tabular form:- Security by Pledged shares & additional security of shares/top-up. Security for equity shares of ₹ 170 crores differential amount (Recompense Amount) to be paid by Plaintiff No.1 - UBHL 4.1.1. The corporate Obligors shall ensure that the Loan Purchase Secured Obligations are secured by a first exclusive pledge over: 10. RIGHT TO RECOMPENSE AND OTHER PAYMENT OBLIGATIONS. 10.1 Recompense amount: i. such number of f .....

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such number of fully paid up equity shares of the Borrower, which provide a cover of 0.75 times the ICICI Bank Facilities as held by the Corporate Obligors, in a form and manner acceptable to ICICI Bank. 4.1.2. Notwithstanding anything to the contrary contained herein, the Confirming party shall create Pledge only over the fully paid up equity shares of USL while the Purchasing Party shall create pledge over fully paid up equity shares of both KFA and USL. ii. In case ICICI Bank is unable to div .....

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nsure that during the currency of this Agreement: i. the Value of the USL equity shares pledged in favour of ICICI Bank shall always be at least 1.25 times the ICICI Bank Facilities and shall pledge additional shares of USL to ensure that the Value of the USL shares pledged / to be pledged in favour of ICICI Bank does not fall below a 1.25 times cover of the ICICI Bank Facilities, within 15 days of being called upon to do so by ICICI Bank, in a form and manner acceptable to ICICI Bank; and iii. .....

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least 0.75 times the ICICI Bank Facilities. In case the Value of the KFA equity shares fall below the specified cover, the Corporate Obligors shall ensure: 1. DEFINITION & INTERPRETATION a. that suitable number of fully paid up equity shares of a listed group entity are pledged in favour of ICICI Bank so that a cover of 0.75 times the ICICI Bank Facilities is maintained; or 1.1. Definitions b. maintain a fixed deposit with lien marked to ICICI Bank, in a form and manner acceptable to ICICI .....

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equity shares of ₹ 170 crores). iii. The Corporate Obligors shall ensure that at no point of time shall the pledge created/proposed to be created over the equity shares of USL and the Borrower represent more than 30% (thirty percent) of the paid up share capital of either the Borrower or USL. 9.1. For the purpose of this Agreement the term Eevent of Default shall mean any of the events specified hereunder: (a)........ (b)........ (c ) Default in Payment of the Recompense Amount or Redempti .....

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h Converted ICICI Bank Facilities and the Yield Amount. Clause 3.1(h) of NDA secures the ICICI Bank in the event of default by Plaintiff No.1 - UBHL to make good the short-fall after sale of ₹ 170 crores equity shares and in that event ICICI Bank could sell 20,14,000 shares of UBL kept in DP Account through Defendant No.1 - 3i Infotech Trusteeship Services Limited. The contention of the learned Senior counsel appearing on behalf of the Respondent Nos. 1 and 2/original Plaintiff Nos. 1 and .....

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- 10.1(iii) Notwithstanding anything contained in this Agreement, the obligation of the Purchasing Party to pay the Recompense amount or the Redemption amount to ICICI Bank shall subsist even after the Loan Purchase Option has been exercised by ICICI Bank and shall survive till such time ICICI Bank recovers the Share Sale Proceeds which shall not be an amount lesser than the aggregate of the Converted ICICI Bank Facilities and the Yield amount. 11.1. This Agreement shall come into force on the E .....

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ty by United Breweries (Holdings) Limited to ensure that stipulated security cover is maintained at all times during the currency of the LPA and as additional security for fulfillment of the obligation of United Breweries (Holdings) Limited vis-a-vis the ICICI Bank Limited under the LPA but also to secure the recompense amount as defined at 10.1 of LPA. The Non-Disposal Agreement was to subsist until all obligations of United Breweries (Holdings) Limited under LPA were fulfilled. In this context .....

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r:- 3.1 The NDU Provider hereby irrevocably and unconditionally agrees, undertakes and confirms that, during the Term: (a)...... to (f)....... (g) and the NDU Provider : i. shall execute the Power of Attorney (in the manner set out in Schedule II (Format of Power of Attorney) in favour of the Attorney, thereby appointing the POA Agent as its legal attorney to do such acts, deeds and things as may be required under the terms of this Agreement and the Power of Attorney. ii. shall not revoke the au .....

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s, deeds and things as may be required under this Agreement shall constitute an Event of Default under this Agreement. The NDU Provider shall rectify / cure such Event of Default within a period of three (3) Business Days ( Cure Period ) from the occurrence of such Event of Default, failing which the NDU Provider shall promptly sell, transfer, assign and / or otherwise dispose-off for cash consideration on an arms length basis and with prior written consent of the Lender s Agent, the Cover Asset .....

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mited was not to be recompensed by sale of 20,14,000 shares of United Breweries Ltd. We are of the view that the learned Single Judge has clearly overlooked and ignored these vital clauses. 35. The factual position thereafter is that, initially, ICICI Bank in January-February, 2012 sold 96,00,000 shares which did not give the required returns and the short-fall of ₹ 47 crores was recovered out of margosa Fixed Deposit which was also given as security to recover the recompense amount. The c .....

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recitals also show that the definitions and terms used are to be given some meaning which are given in the LPA. It is inconceivable that the ICICI Bank, after restructuring the debts would not secure its amount of ₹ 170 crores which was held by it in the form of equity shares though specific clauses 9.1(c) and 10.1 have been incorporated in the LPA Agreement. The said clause 9.1(c) and 10.1 are relevant and which read as under:- 9.1. For the purpose of this Agreement the term Event of Defa .....

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ICICI bank Facilities, then the differential amount (the Recompense Amount ) shall be paid by the Purchasing Party within 7 Business Days of being called upon to do so by ICICI Bank in writing; The finding of the learned Single Judge has therefore been based on incorrect interpretation of the clauses in the LPA and NDA. 36. ICICI Bank in December, 2013 sold equity shares held by it in Kingfisher Airlines Limited and suffered a total shortfall of ₹ 146 crores approximately from the said sa .....

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) of the Non-Disposal Agreement. It will be necessary to produce the the said Recitals (A), (B) and (C ) which read as under:- (A) Pursuant to the Loan Purchase Agreement dated December 21, 2010 (as may be amended from time to time) (the LP Agreement ) entered into inter alia between United Breweries (Holdings) Limited (the Purchasing Party/UBHL/NDU Provider ) and the Lender, the NDU Provider and the Lender mutually agreed on the NDU Provider granting to the Lender an irrevocable option to requ .....

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ncy of the LP Agreement. (c) In terms of the LP Agreement and in order to provide assurance that it has the ability to fulfill its obligations under the LP Agreement, the NDU Provider has agreed not to divest or deal with the shares of the Company held by the NDU Provider unless such divestment or dealing is required to make payments as and when called upon by the Lender in terms of this Agreement and/or the LP Agreement, and undertakes to irrevocably appoint and authorize the Attorney to fulfil .....

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hare Subscription Agreement and Loan Purchase Agreement were entered into between the parties and if Recital (C ) is read in its proper perspective, it would indicate that the present agreement was executed for the purpose of securing the entire loan of the Kingfisher Airlines Limited which was to be purchased by Plaintiff No.1 - UBHL under the Loan Purchase Agreement. It cannot be forgotten that the Loan Purchase Agreement makes clear distinction between the pledged shares and equity shares (CC .....

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ulfillment of all obligations of Plaintiff No.1 - UBHL under the Loan Purchase Agreement. The intention of parties, therefore, become very clear from the Recitals as well as the contents of the clauses of the Non-Disposal Agreement. The contention of Mr. Seervai, the learned Senior Counsel appearing on behalf of Respondent Nos.1 and 2/original Plaintiff Nos. 1 and 2 that there was novation of contract in respect of Clause No.4.1 is not correct. 38. The law on construction of commercial document .....

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in my opinion to exceed what is permissible. But it does not follow that, renouncing this evidence, one must be confined within the four corners of the document. No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as the surrounding circumstances but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court shou .....

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is not always the meaning of the parties. Surrounding circumstances may stamp upon a contract a popular or looser meaning. The words loans and discounts are not so clear and certain that circumstances may not broaden them to include renewals. They often have that meaning in the language of business life. To take the primary or strict meaning is to make the whole transaction futile. To take the secondary or loose meaning, is to give it efficacy and purpose. In such a situation, the genesis and a .....

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ce would be interpreted in ordinary life. Almost all the old intellectual baggage of legal interpretation has been discarded. The principles may be summarised as follows. (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) The background was famously referred to by Lord Wilberfo .....

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and their declaration of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them. (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the .....

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g words or syntax: see Mannai Investments Co. Ltd. vs. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749. (5) The rule that words should be given their natural and ordinary meaning reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute .....

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2 W.LR. (1997) 945 has observed as under:- I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordin .....

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nse of the sentence and substitute alligator by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like allegory . Mrs. Malaprop s problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the same process of adjustments when people have made mistake about names or description or days or times because they have forgotten or become mi .....

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to clause 7(13) but naming 12 January 1995 as the day upon which he will do so, the tenant has made a mistake. He will reject as too improbable the possibility that the tenant meant that unless he could terminate on 12 January, he did not want to terminate at all. He will therefore understand the notice to mean that the tenant wants to terminate on the date on which, in accordance with clause 7(13), he may do so, i.e. 13 January. Similarly, the House of Lords in Antaios Compania Naviera S.A. Vs .....

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on to the whole purpose of the N.Y.P.E., time charter form. The owners relied on what they said was the literal meaning of the words in the clause. We would say that if necessary, in a situation such as this, a purposive construction should be given to the clause so as not to defeat the commercial purpose of the contract. While depreciating the extension of the use of the expression purposive construction from the interpretation of the statutes to the interpretation of private contracts, I agree .....

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cannot place emphasis on an isolated provision divorced from the context and unrelated to the other provisions which govern contractual obligations. Contracts represent business understandings between the parties. Commercial dealings between persons who are well versed in the transaction of business are regulated by contracts which parties ought to govern themselves. The law regulates those contracts and provides an ordered framework in which business dealings can be implemented. The duty of the .....

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o interprets the law be disjointed from the modern necessities to make business sense to business dealings. 25. A business like interpretation of contractual provisions must be adopted in construing contracts entered into by persons of business to govern business dealings. The Court must ensure that interpretation of law in commercial cases must not be disjointed from the intent and object which those having business dealings seek to sub-serve unless interpretation of contracts effectuates a bus .....

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duty bound to pay the recompense amount and upon its non-payment of the said total short-fall of ₹ 146 crores, Defendant No.1 - 3i Infotech Trusteeship Services Limited became entitled to sell these shares to recover the said short-fall and to whom Plaintiff No.1 - United Breweries (Holdings) Limited has given Power of Attorney to sell in the event of default being committed by it. Non-payment of short-fall and recompense amount clearly constituted the event of default under clause 9.1 and .....

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are due to ICICI Bank are to be satisfied and for that purpose the said shares were given as security. There cannot be any dispute regarding the ratio of the judgments on which reliance has been placed by Mr. Seervai, the learned Senior Counsel appearing on behalf of the Plaintiffs. The ratio of the said judgment, in fact, supports the case of ICICI Bank Limited and not that of the Plaintiffs. ICICI Bank and consortium of Banks had, in fact, permitted the Kingfisher Airlines to recast is debts .....

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f ₹ 146 crores in December, 2013 after the Appellant - ICICI Bank sold the pledged shares and called upon the Plaintiff No.1 - United Breweries (Holdings) Limited to pay the recompense amount. The submissions made by Mr. Seervai, the learned Senior Counsel appearing on behalf of the Plaintiffs therefore cannot be accepted. In fact, in the present case, the balance of convenience lies in favour of the Defendant No.1 - 3i Infotech Trusteeship Services Limited and Defendant No.2 - ICICI Bank .....

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r view, no prejudice would be caused to the Plaintiffs if these shares are sold and the amount of sale proceeds is kept in the DP Account. If the Plaintiffs succeed, they can always be compensated in terms of money or shares can be bought from the market. In any event, the Plaintiffs do not have any legal right to retain these shares in view of the clear terms and conditions of the contract and Non-Disposal Agreement of shares. 40. Reliance has been placed by the learned Senior Counsel appearing .....

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wn to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would norma .....

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nters (Mysore) Private Ltd vs. Pothan Joseph (1960) 3 SCR 713 : AIR 1960 SC 1156 : (SCR 721). ...... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jhanaton [1942 AC 130) the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case. The appellate .....

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e relevant clauses in LPA and NDA. We are, therefore, of the view that, in fact, the observations made by the Apex Court in the case of Wander Ltd (supra) would squarely apply to the facts of the present case and we have therefore no hesitation in setting aside the impugned order. 41. Accordingly we answer the three questions framed in para 27 above as under:- Questions Findings (1) Whether 20,14,000 shares of UBL furnished as security (NDA shares) under Non-Disposal Agreement dated 12/11/2011 w .....

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