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Harinarayan G. Bajaj, Shailesh Harinarayan Bajaj, Krishna Harinarayan Bajaj, Rahul Harinarayan Bajaj Versus Reliance Capital Limited, & Ms. Sesa Sterlite Limited

2018 (1) TMI 496 - BOMBAY HIGH COURT

Transfer of the pledged securities - repayment of loan - bounced cheques - Held that: - even if we assume that the sale of the pledged securities by defendant no.1 was illegal and that plaintiffs were entitled to redeem the pledged securities, they can do so only against payment of the entire amount outstanding to defendant No.1 as if the disputed sale did not occur and the sale proceeds were not appropriated towards plaintiffs' debt - At no point in time did plaintiffs object to such sale or co .....

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on that alleged account. - The law is well settled that no notice under Section 176 is even necessary where the pledgor was consulted or acquiesced in the sale. - Sale of any pledged share in excess of what was only required to be sold to recover the amount due, would be illegal. - It is well settled that the relief sought by parties should not be refused on technical and pedantic grounds. Once the substantive prayers and the cause for justice is borne out in the pleadings, then th .....

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handurkar, Ms. Bhavna Singh and Mr. Paresh Patkar i/b. Mulla and Mulla and CBC for defendant no.1. JUDGMENT: 1. This suit was filed for a declaration that plaintiffs as pledgors and defendant no.1 as pledgee had reached an understanding for transfer of the pledged securities (shares of defendant no.2) in favour of defendant no.1 at an agreed sum and for payment over to plaintiffs, on accounts being taken, of the amount lying in excess after satisfaction of the outstanding dues. In the alternativ .....

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e loan, admittedly, was sanctioned by defendant no.1 vide its letter dated 11th July, 1995, repayable in 8 months, i.e., on 12th March, 1996. Material terms are as set out hereinbelow: 1. Facility Principal Amount: ₹ 500 lakhs (Rs. Five Hundred lakhs only) Nature of Facility: Loan against shares Rate of Interest: Calculated at monthly/rests payable in arrears Period: 8 months Date of Maturity: 12th March, 1996 Collateral Security: Pledge of following shares: Name of scrip No. Sesa Goa Ltd. .....

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anding what is stated hereinabove, we shall, at any time and from time to time, be entitled to notify you and thereafter charge interest at such notified rate and this letter shall be construed as if such revised rates were mentioned herein. 2. In case of default either in the payment of interest, additional interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and expenses when demanded, you shall pay additional interest at rate of 2 .....

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ment of Pledge dated 12th July, 1995 to secure the said advance of ₹ 5 Crores. Under this Agreement, plaintiffs pledged, in favour of defendant no.1, 2,00,000 shares of defendant no.2, Sesa Goa Ltd. (later name was changed to Sesa Sterlite Ltd.). Plaintiff no.1 also executed in favour of defendant no.1 a demand promissory note dated 12th July 1995 for the said sum of ₹ 5 Crores and a Power of Attorney of the same date, whereby defendant no.1 was authorized to sell the pledged securit .....

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and capitalize the amount of such interest and charge interest thereon by way of compound interest as if such amount was an additional loan granted by RCL to the Borrower carrying interest at the same rate in addition to charging compensatory interest at the rate of ____% p.a. from the date of default to the date of actual payment of such defaulted amount. The Borrower further agrees that RCL shall be entitled to change rates and/or periodicity of interest and compensatory interest etc. mentione .....

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nt this agreement whether for the purpose of forming Additional Security for any sum already lent and advanced or by way of substitution for and in lieu of any shares and securities which may have been delivered or may be delivered to RCL under this Agreement or otherwise howsoever (hereinafter called the said Securities) shall to be deemed to have been pledged as security to RCL for the due repayment by the Borrower to RCL of any moneys due to RCL from time to time. The expression the moneys du .....

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the name of RCL or their nominee the said Securities or any of them. 11. That this Agreement is to operate as security for the moneys from time to time due to RCL as also for the ultimate balance to become due on the said Loan Account and the said account is not to be considered exhausted by reason of the said Account being brought to credit at any time or from time to time as long as the facility is not terminated. 14. (i) The occurrence of the following shall be treated as default on the part .....

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you or on your behalf from time to time. (d)…. 14. (ii) On the happening of an event of default, RCL shall be entitled, after giving 7 (seven)days written notice to the Borrower(s), to sell or otherwise dispose of the Securities or any of them in such manner and at such price as RCL shall think most appropriate, without being liable for any loss or dimunition in value thereby sustained, and apply the net proceeds of such sale (after deducting all costs, charges and expenses incurred in s .....

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the said securities pledged and provided, inter alia, : b) I have pledged the said securities with M/s. Reliance Capital Ltd. having its corporate office at Mittal Chambers, Ground Floor, 228, Nariman Point, Bombay 400 021, as collateral security with an authority to M/s. Reliance Capital Ltd. to sell, transfer and/or dispose of the said securities as they deem fit. c) ….. 1. To sell and transfer the said securities to any party/person and receive the sale consideration in respect of the .....

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espect of this advance, admittedly this second amount of ₹ 5 Crores was also advanced on the same terms and conditions as stipulated in Exh.P­1, sanction letter dated 11th July, 1995. The second loan was disbursed on 17th July, 1995 and was repayable on 17th January, 1996, i.e., in 6 months. Plaintiff no.1 and defendant no.1 entered into identical set of documents in respect of the second tranche of ₹ 5 Crores including, inter alia, an Agreement of Pledge dated 12th July, 1995, a .....

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of plaintiffs to Reliance Share and Stock Broking Ltd . While the post­dated cheques for interest were initially honoured from time to time, plaintiffs committed a default in respect of the last installment of ₹ 10,19,178/­ payable by way of interest on the second tranche of ₹ 5 Crores as well as the principal sum of ₹ 5 Crores which fell due for payment on 17th January, 1996. By its letter dated 9th February, 1996 , plaintiff no.1 sought an extension of one month s ti .....

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ceed to sell or otherwise dispose of the securities to recover our dues. You will be liable for all costs and consequences thereof. 6. By a further letter dated 7th March, 1996 , defendant no.1 recorded that despite repeated assurances, defendant no.1 was yet to receive any monies from plaintiffs. By this letter, defendant no.1 expressly informed plaintiffs that they had initiated negotiations for sale of shares of Sesa Goa Ltd. pledged by you as security for loan of ₹ 10 Crores given to y .....

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the letter says ­ Re:­Loan of ₹ 10 Crores given to you and first loan was in any ways falling due for repayment on 12th March, 1996. 7. Meanwhile, the post­dated cheque furnished by plaintiff no.1 for repayment of the first tranche of ₹ 5 Crores was dishonoured. By its letter dated 21st March, 1996 , defendant no.1 recorded this default and called upon plaintiff no.1 to forthwith repay the said sum of ₹ 5 Crores alongwith overdue interest thereon @ 36% p.a. (though .....

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mits them to charge interest at such notified rate and the sanction letter shall be construed as if such revised rates were mentioned therein. I am afraid, defendant no.1 is not correct, because Exh.P­14 cannot be called a notification by defendant no.1 as contemplated in clause 4 (b)(1) of Exh.P­1 for entitlement to interest at 36% p.a. It can be only construed as a demand notice as required under section 138 of the Negotiable Instruments Act. I must hasten to add, I am not making any o .....

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e cheques for ₹ 1.5 crores furnished by this letter dated 7th May, 1996 was subsequently replaced by 3 cheques of ₹ 50 lakhs each. 10 By a letter dated 29th May, 1996 plaintiffs recorded that two cheques of ₹ 50 lakhs each had been honored by them towards principal and interest. They sought extension of time till 4th June, 1996 for repayment of the remaining ₹ 50 lakhs which was to fall due on 30th May, 1996. By this letter, plaintiffs also requested defendant no.1 to rel .....

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as followed by a letter dated 12th August, 1996 from plaintiffs to defendant no.1 where plaintiffs referred to their failure to make timely repayment of the total loan of ₹ 10 crores availed by them. By the said letter, plaintiffs sought details of the shares already sold by defendant no.1 and requested not to press for any sale of the remaining shares lying in their custody to adjust against the remaining amount due to you either in the NSE or BSE. Plaintiff no.1 claimed that he was in th .....

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ring the subsistence of the pledge, lodged the share certificates and share transfer forms with Sesa Sterlite Ltd. (Defendant No.2) for transfer of the shares in the name of defendant no.1. This was as a step in aid to a future enforcement of the pledge and the sale of the pledged securities. 13. By their letter dated 30th August, 1996 defendant no.2 ­ Sesa Sterlite Ltd. informed plaintiffs of the lodgment by defendant no.1 of the pledged securities for transfer in its name. By a letter date .....

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erms of the agreement between the parties but also with the admitted position that plaintiffs were by that date clearly in default of their payment obligations. 14. It is the case of defendant no.1 that subsequently, plaintiffs agreed to withdraw their objection to the transfer of the pledged securities in the name of defendant no.1 and the enforcement thereafter by defendant no.1 of the pledge to recover the outstanding dues. In that context, by a letter dated 24th September, 1996 addressed to .....

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and were at peace with it. In any event, plaintiffs did not express any desire at this stage to redeem the pledged securities by tendering the amounts due. It is also significant that at this time plaintiffs did not assert the existence of any arrangement whereby the transfer of the shares in the name of defendant no.1 were to be treated as a sale at any price. 15. This assertion was made for the first time by a letter dated 30th December, 1996 where plaintiffs set up an alleged understanding w .....

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1 to itself at a cost of ₹ 310/­ per share and that defendant no.1 was liable to render accounts on that basis and to pay over to plaintiffs the balance remaining along with interest at the rate of 24% per annum. In other words, the letter constituted an assertion that the pledge had come to an end and that defendant no.1 was now the owner of the shares. 16. By its letter dated 3rd January, 1997 addressed to plaintiff no.1, defendant no.1 recorded the sale, at a net rate of ₹ 255 .....

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ient submits that it is totally within your discretion as to when and what rate to sell the shares. As far as my client is concerned, my client is entitled to receive the statement of accounts and balance surplus funds lying in your hands after adjusting loan amounts with interest thereon. My client is further, as stated earlier, entitled to return of documents lying with you. In view of what is aforesaid my client submits that you are free to take decision as to when, how and at what rate to se .....

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not clear what the contents were. Plaintiff no.1, however, states that a reply was in fact received in paragraph 24 of his witness statement where he asserts Vide the said letter, 1st defendant Company reneged from the oral agreement reached between me and Mr. Sadashiv Rao on behalf of 1st defendant Company with regard to the appropriation of the 1,61,486 pledged shares of 2nd defendant Company by 1st defendant Company at the rate of ₹ 310 per share. 18. Meanwhile, defendant no.1 continue .....

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that context, the plaintiffs asserted:­ xxxxxxxx 4. With reference to paragraph 4 of your letter, your clients have overlooked my clients contention that your clients were free to decide as to when your clients would sell the shares as your clients had appropriated the shares lying with them on August 8, 1996 @ ₹ 310/­ per share and had already lodged the shares with the company for transfer. My client submits that since your clients had become legal owners of the shares, they were .....

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es not admit any transaction undertaken by your clients thereafter i.e. August 8, 1996 since your clients had appropriated the said shares lying with them on August 8, 1996 as already made clear in my letter dated December 30, 1996. In view of the same my client denies the rest of your allegations and contentions in the paragraph under reply. As far as my client is concerned both, the loan accounts as set out by you stand fully settled and in fact my client has to recover substantial excess amou .....

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ment A ). My client further denies the correctness of Statement B . My client submits that our clients have sought to appropriate monies in an arbitrary manner to which my client had never agreed. My client had specifically instructed your clients to appropriate the amounts of sale of shares prior to August 8, 1996 towards the principal amount of loans. Therefore my client denies the correctness of Statement B . 8. With reference to paragraph 8 of your letter, since my client has denied the corr .....

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n defendant no.1 to furnish accounts on the basis set out by them, namely, the appropriation of the pledged securities by defendant no.1 at the rate of ₹ 310/­ per share and the payment over to plaintiffs of the alleged surplus amounts along with interest at the rate of 24% per annum. In other words, plaintiffs continued to stand by and to seek enforcement of the alleged arrangement with Mr. Sadashiv Rao. It should be noted that plaintiffs, at no stage, sought to redeem the pledged sec .....

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g and to pay over the alleged surplus. 22. Prayers (a) and (e) of the suit were relatable to this primary case set up by plaintiffs. Prayer (a) was for a declaration that the entire loan of ₹ 10 crores together with interest thereon stood repaid on or about 8th August, 1996 to the 1st defendant while prayer (e) was for payment over to plaintiff no.1 of an amount of ₹ 1,35,82,049/­ alleged to be due on accounts being drawn on the basis that the shares had been appropriated at the .....

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said 1,61,486 shares lying with them as pledged shares, pledged by plaintiff no.1. The plaintiffs say that thus defendant no.1 had no marketable title and were not entitled to sell the said shares in the market. The plaintiffs say that plaintiffs are ready and willing to pay the entire amount of loan together with interest thereon upon defendant no.1 returning the said very shares as set out in Exhibit A hereto. The plaintiffs say that defendant no.1 thus have no title in the said shares and the .....

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the shares mentioned in the list (being Exhibit A hereto) have been purportedly sold as plaintiffs intend to join them as necessary parties to the suit. Plaintiffs are entitled to the said shares and are entitled to an order for return of the said shares. Defendant no.1 should be directed to procure the same from the market, if they have sold and transfer the said shares. The plaintiffs are entitled to an order and decree accordingly. The remaining prayers in the plaint relate to this alternati .....

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y defendant no.1 with the Prothonotary and Senior Master of this Hon'ble Court and the 36 unsold shares have been handed over to plaintiffs. 24. On the pleadings filed by the parties, the following issues were framed :­ 1. Do the plaintiffs prove that the agreement averred in paragraph 14 of the Plaint was arrived at between the defendant no.1 and plaintiff no.1? 2. Do the plaintiffs prove that on 8thAugust 1996 both the loans stood repaid? 3. Whether the plaintiffs proves that 400 share .....

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fendant no.1 was not by way of sale but was only to facilitate sale of the said shares in exercise of its right as pledgee? 7. Does defendant no.1 prove that it was entitled to sell the 1,61,486/­ shares of the Defendant No.2 in its capacity as pledge as alleged in paragraph 13 of the Written Statement? 8. Does defendant no.1 prove that 1,61,486/­ shares of the Defendant No.2 were sold by defendant no.1 after due notice to the plaintiff no.1? 9. Does the defendant no.1 prove that only a .....

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led evidence only of one Mr. Madan Mohan Chaturvedi, the Chief Manager of defendant no.1. 27. Plaintiffs abandoned their main plea and fell back on their alternative one, i.e., redemption. In paragraphs 35 and 36 of the affidavit in examination in chief, PW­1 has stated : 35. I further say that I have never received any notice from the 1st defendant Company before it embarked on its purported exercise of selling the 1,61,450 shares of the 2nd defendant Company that formed part of the aggrega .....

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Mr. Sadashiv Rao had no authority on behalf of the 1st defendant Company to enter into such an agreement, I am ready and willing to repay the balance principal amount of approximately ₹ 2,97,50,000/­ which stood outstanding as of 19th June, 1996 or any such other amount which is ordered to be paid by me to the 1st defendant Company by this Honorable Court with due interest thereon at the rate of 24% p.a. till the date of filing of the present Suit, on the 1st defendant Company being si .....

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the plaintiffs in terms of prayer clauses (b), (c), (d), (d1), (d2), and (d3) with the levy of appropriate costs on the 1st defendant Company. Therefore, though various submissions were made to prove the main case of plaintiffs that defendant no.1 had agreed appropriation of 1,61,486 shares of defendant no.2 company at the rate of ₹ 310/­ per share, plaintiffs having abandoned their main plea including prayer for accounts, I do not consider it necessary to deal with all those arguments .....

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verments: 10. ….. RIDER F In the first week of July, 1996, the Defendant No.1 had called for additional security and accordingly, the Plaintiff No.1 handed over 400shares of the Defendant No.2 company under the cover of his letter dated 8th July, 1996 as pledge. The Plaintiffs crave leave to refer to and rely upon the letter dated 8th July, 1996 addressed by Plaintiff No.1 to the Defendant No.1 enclosing the aforesaid shares when produced. …… It is the position of defendant .....

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of 2nd defendant company with 1st defendant Company vide my letter dated 8th July, 1996. Plaintiffs have not produced any letter by which defendant no.1 called upon plaintiffs to furnish the additional security as alleged. It is the case of plaintiffs that in the first week of July 1996, defendant no.1 had called for additional security and accordingly plaintiff no.1 had handed over 400 shares of defendant no.2 under the cover of its letter dated 8th July, 1996 [Exh.P­25] as additional secur .....

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24,424 shares of 2nd defendant were released by 1st defendant in favour of the 1st plaintiff. In respect of the transaction dated 6th July, 1996, 1st defendant ought to have released only 24,024 shares instead of releasing 24,424 shares. The said 24,424 were in non­marketable lot and could not be segregated and due to this difficulty 1st defendant had to release the full 24,424 shares instead of releasing 24,024 shares. In view of this, 1st plaintiff by his letter dated 8th July, 1996 forwa .....

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ct of dividend on 1,61,386 shares to plaintiff no.1 in its books, shows that it certainly had more than 1,61,086 shares pledged by plaintiff no.1 with it as on the date of book closure of defendant no.2. Hence, the defence of replacement of 400 shares is contrary to defendant no.1 s own records and pleadings. In my view, the 400 equity shares have been handed over by plaintiffs to defendant no.1 as additional security. 32. ISSUE NOS.4,7, 8 and 9 : It is plaintiffs' case : (a) that two loans .....

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econd loan and that amounts remained outstanding only on the first; (d) that the notice dated 23rd February, 1996 issued by defendant no.1 for sale of pledged securities was in view of plaintiffs being in default of the second loan at the time and that in any event the said notice had been waived on account of defendant no.1 having extended time for payment by plaintiffs of their outstanding dues; (e) that 98,850 shares of defendant no.2 ­ Sesa Sterlite Limited were sold by defendant no.1 wi .....

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(a) that while two amounts of ₹ 5 crores each were advanced by defendant no.1 to plaintiffs, they were treated as a single loan for all practical purposes by both parties. It is an admitted position that except for the date on which the two tranches were repayable, the two amounts were advanced on the same terms and conditions as reflected in the sanction letter dated 11th July, 1995. Defendant no.1 has maintained a single ledger account in respect of the composite loan of ₹ 10 crore .....

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pledged assets. In any event, the correspondence exchanged between the parties makes it manifest that plaintiffs were fully aware that defendant no.1 intended to enforce their rights as pledgees by sale of the entire pledged securities; (e) that plaintiffs were also aware contemporaneously of the sale from time to time, by defendant no.1 of the pledged securities and did not object to the same. On the contrary, plaintiffs consistently maintained, on the basis of the alleged oral agreement struc .....

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the alternative. Their main plea proceeded on the basis that the pledge had come to an end and that defendant no.1 had become owners of the shares on 8th August, 1996. It is only at the stage of oral evidence that plaintiffs for the first time abandoned their principal plea and fell back on their alternative one; (h) that the two pleas raised by plaintiffs in the plaint are mutually destructive and, in any event, the alternative plea which plaintiffs have chosen to press is entirely unsupported .....

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ate also proceeds on the basis that an aggregate 3,87,000 shares of Sesa Goa Limited had been pledged against an aggregate loan of ₹ 10 crores. It is in any event an admitted position that the two advances of ₹ 5 crores each are governed by the same terms and conditions as reflected in the sanction letter dated 11th July, 1995. The plea that the two amounts were distinct and that accounts were required to be maintained in respect of each separately is merely a belated afterthought in .....

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dged securities offered by plaintiffs for the first advance of ₹ 5 crores and the second advance of ₹ 5 crores is also not meaningful. This is in view of the fact that the Pledge Agreement (Exh.P2/P8) in clause 5 (a) thereof, makes it clear that shares pledged to secure one facility would be deemed to have been pledged as security for any monies due to defendant no.1 from time to time. Further, the Pledge Agreement (Exh.P2/P8) also makes it clear, in clause 14 (1)(c) thereof, that an .....

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d and in particular the correspondence exchanged between the parties. The letters dated 29th March, 1996, 7th May, 1996, 6th June, 1996 and 12th August, 1996 not only treat the two advances as a composite one, but also concede that both loans were outstanding. It is only on sale of the pledged securities that the amounts advanced to plaintiffs and the interest due thereupon were fully recovered. Whether defendant no.1 was justified in selling all those shares that they sold is a point which has .....

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ither with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly . 60. Application of payment where debt to be discharged is not indicated. ­ Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to hi .....

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ount towards the earliest liability in point of time. It has tendered in evidence (but never provided earlier to plaintiffs though asked for) a ledger account prepared on that basis. Even if no appropriation had been made, even under Section 60, the payments would stand appropriated towards the earliest dues rather than the dues that may have become payable first. In any event, in the light of plaintiffs' repeated acknowledgments that both loans were in default, the issue is not relevant. 37 .....

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ording to defendant no.1, this entire argument is misconceived as this case is not reflected in the pleadings. According to Mr. Sen, plaintiffs have not contended that the notice dated 23rd February, 1996 was the only notice or that it was only in respect of 1,87,000 shares or that it was waived by defendant no.1 or that the subsequent sale of the pledged securities by defendant no.1 was vitiated by want of notice. In the absence of this case having been pleaded, plaintiffs were not entitled to .....

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d Bank Ltd AIR 1958 Cal. 644 and in Official Assignee V/s. Madholal Sindhu AIR 1947 Bombay 217. Counsel Ms. Sonal submitted that it has not been reversed by the Federal Court on this point of law and therefore it is still good law. (ii) Clause 14 (ii) of the Pledge Agreement requires a seven days written notice to be given to plaintiff no.1 for repayment before defendant no.1 can sell or otherwise dispose of the pledged securities. (iii) Clause 16 of the Pledge Agreement lays down the procedure .....

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en delivered in the ordinary course of post. (iv) The argument of counsel for defendant no.1 that tender of hard cash is a precondition to filing a suit for redemption and in the absence of such tender, the suit is bad, is incorrect. (v) Plaintiff had filed the present suit after defendant no.1 started selling the balance pledged shares on and from 2nd January, 1997 and informed plaintiff no.1 about the same by its letters starting from 3rd January, 1997 [Exh.P­32] and in paragraph 22 at pag .....

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fs have in the alternative to prayer clause (c) prayed that defendant no.1 be ordered and decreed to make available to plaintiffs 1,61,486 shares by procuring the same from the market against receipt of a sum of ₹ 2,61,43,159/­ or such other sum as this Hon ble Court may deem fit and proper. Thus, according to plaintiffs they have tendered the balance loan amount in the plaint and if this Court comes to a conclusion that the sale of 1,61,450 shares by defendant No.1 was invalid, the Co .....

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64,58,000 shares as on date of the judgment, as per the ratio laid down in Dhian Singh V. Union of India AIR 1958 SC 274 along with the accrued benefits with due interest thereon after deducting the balance loan amount payable by plaintiff no.1 to defendant no.1. A chart showing the conversion of 1,61,450 shares into 64,58,000 shares and the details of the dividend that has accrued on them was also submitted by plaintiffs. (vi) If defendant no.1 was ready and willing to perform its part of the c .....

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ender of hard cash. (vii) The pledge was brought to an end by plaintiffs when they filed the present suit for redemption and expressed their willingness to repay the balance loan amount and to redeem the pledged shares. Section 177 of the Indian Contract Act which is reproduced hereunder further elaborates such a situation. Section 177 - Defaulting pawnor s right to redeem - If a time is stipulated for the payment of the debt, or performance of the promise, for which the pledge is made, and the .....

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f S. 176 which gives the pledgee the right to sell; and if the sale is not in conformity with those provisions, then the equity of redemption in the pledger is not extinguished. Therefore, plaintiffs herein are well within their rights to redeem their pledged shares even as of today by tendering the requisite amounts to defendant no.1 on defendant no.1 reciprocally agreeing to return the equivalent number of 1,61,450 of defendant no.2 along with the due benefits accrued thereon the same as per t .....

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The plaintiffs had shown their readiness and willingness to repay the loan amount but since beginning the Bank insisted for submission of Letters of Administration by the plaintiffs which was in fact, not necessary, particularly when the Bank had transferred another loan account of the deceased in the name of the plaintiffs. Mr. Chandurkar further submitted that it had become clear to the plaintiffs that even if they repay the loan amount, the Bank would not return gold ornaments unless they pro .....

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, wherein it is held as under (para17) : if the pawnee is not in a position to deliver the goods he cannot have both the payment of the debt and also the goods. 5 Smt. Artibala Mohanty v. State Bank of India, AIR 1991 Orissa 260, in which it is held as under : Where the Bank as the pawnee was not in a position to deliver back the goods on account of the seizure made by the police. The Bank as the pawnee having refused to perform its obligation of redelivering the goods on debts being satisfied c .....

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liability of the plaintiffs to pay interest would stop after August, 1982. I find no illegality in the conclusion drawn by the appellate Court. (ix) Without prejudice and in the alternative, it was submitted by plaintiffs that in the context of the facts of the present suit, no tender of any amount is warranted from plaintiffs to defendant no.1 since the shares of defendant no.2 pledged in the present case have benefits accrued on the same which amount to much more than what is due from plaintif .....

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plaintiffs have in any event offered to pay in the suit. Plaintiffs' counsel also relied upon Section 51 of the Contract Act dealing with performance of reciprocal promises and the judgment in Official Assignee vs. Madholal Sindhu (supra) to submit that actual tender of hard cash is not required in a redemption suit when the sale is invalid. Ms. Sonal submitted this judgment though has been reversed in Appeal by the Federal Court in Madholal Sindhu v. The Official Assignee (supra) on facts, .....

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t I was not convinced. 40. Counsel for plaintiffs also submitted that the instant case is a claim made by a pledger for redemption in detinue upon invalid sale of the pledged goods by the pledgee. As the pledgee in the instant case has sold the pledged goods and disabled itself from returning them even if actual payment was tendered by the pledger, the pledger is not required to make actual payment. It was further submitted that the nature of the pledged goods does not make any difference to the .....

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asily available and replaceable goods and non- replaceable goods would put a higher burden on the pledger of the former, would be arbitrary. 41. Per contra, counsel for defendant no.1 submitted plaintiff's case that they are entitled to redeem the pledged securities including all accruals thereupon such as bonus shares issued and dividend paid out merely by tendering the amount due from plaintiffs to defendant no.1 on the date of institution of the suit is patently erroneous. According to Mr .....

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ted without cause by the pledgee or where the pledgee has rendered himself incapable by supervening circumstances from returning the pledged goods. The judgments relied upon by Plaintiffs, namely S.L. Ramaswamy Chetty & Anr. v. M.S.A.P.L. Palaniappa Chettiar, AIR 1930 Mad 364; Aratibala Mohanty v. State Bank of India, AIR 1991 Ori 260 and State Bank of India v. Mangalabai Deshmukh, AIR 2005 Bom 221 according to Mr. Sen deal with this limited exception, which has no application to the facts o .....

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ad become the owner of the shares. The mere statement that plaintiffs were ready and willing to pay the amounts due did not constitute a valid tender or even an offer in law. As such, even if we assume that the sale of the pledged securities by defendant no.1 was illegal and that plaintiffs were entitled to redeem the pledged securities, they can do so only against payment of the entire amount outstanding to defendant No.1 as if the disputed sale did not occur and the sale proceeds were not appr .....

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State Bank of India vs. Smt. Mangalabai G. Deshmukh (Supra) regarding payment of the outstanding amount being a precondition for the exercise of a right of redemption are equally of no assistance insofar as those are cases where an honest tender was in fact made in an attempt to redeem the pledged securities. The reliance on the proposition in Aratibala Mohanty (Supra) that interest would cease to run in the event a pledgee renders himself incapable of returning the pledged securities is also in .....

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interest in the pledged securities, defendant no.1 had become the owner of the shares and was free to deal with them as it pleased without even informing plaintiffs (Exh.P­33). Plaintiffs have claimed on the basis of the Judgment of the Hon'ble Supreme Court in Dhian Singh Sobha Singh & Anr. v. Union of India (Supra) that the present suit was an action in detinue as distinct from an action in conversion. However, it is manifest from the Judgment itself that the ingredients for an ac .....

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as no wrongful detention by defendant no.1 of the pledged securities. On the contrary, it was plaintiffs' case prior to and in the suit itself, that the shares belonged to defendants. As such, plaintiffs' purported action in wrongful detention must necessarily fail. 42 In my view, plaintiffs' case is belied by the record. The notice dated 23rd February, 1996 does not confine itself to the 1,87,000 shares pledged by plaintiffs in respect of the second tranche of ₹ 5 crores. As n .....

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loan of ₹ 10 crores. This also constituted adequate notice for the purpose of Section 176 of the Indian Contract Act, 1872. Even otherwise, plaintiffs' knowledge that defendant no.1 intended to enforce the pledge by sale of the securities is also amply clear from the letter dated 12th August 1996 where they requested defendant no.1, as a matter of indulgence, not to proceed with the sale of the pledged securities. This was followed by defendant no.1, during the continuance of the pledg .....

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uently, in circumstances about which there is a dispute between the parties, plaintiffs withdrew their objection for transfer of the shares in the name of defendant no.1. That dispute notwithstanding, it is clear that plaintiffs knew at the time that defendant no.1 proposed to deal with the shares. 43. At no point in time did plaintiffs object to such sale or contend that the sale was illegal or invalid on account of want of notice. On the contrary, plaintiffs repeatedly asserted that defendant .....

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or acquiesced in the sale. See Madholal Sindhu of Bombay v. Official Assignee of Bombay, AIR 1950 FC 21. It is also a settled position that Section 176 only requires notice of the intention to sell and not notice of the particulars of the intended sale. Sankaranarayana iyer Saraswathy Amal v. The Kottayam Bank Ltd., AIR 1950 Travancore Cochin 66, (FB) and Hulas Kunwar v. Allahabad Bank Ltd., AIR 1958 Cal 644, 649. The pledgee is free to choose his own time to exercise the power of sale and is i .....

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intention to enforce the pledge, plaintiffs were perfectly well aware of defendant no.1's intention to sell the pledged securities. As such, the requirements in law for a valid sale of the pledged securities by defendant no.1 are fully met and the contention of plaintiffs that the sale is null and void as against them has to be rejected. 45. Plaintiffs case for redemption is premised on the alleged illegality of the sale of the pledged securities by defendant no.1. As set out herein, the en .....

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llated on the issue of whether defendant no.1 had become an owner of the shares on 8th August, 1996 or were merely exercising their rights as pledgees thereafter. The answers, displays an inability to choose decisively between the principal case in the plaint which has been abandoned and the alternative plea. PW­1 also was unable to make out a case that plaintiffs had offered the balance amount in return for the pledged shares which defendant no.1 was not ready to give up. PW­1 was unabl .....

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other documents will act as a waiver of that or any other right nor shall any single or partial exercise preclude any future exercise of that right. As such, no argument of waiver, merely on the ground of forbearance or extension of time, is available to plaintiffs. Plaintiffs have in support of their case of waiver relied on the judgments of the Hon'ble Calcutta High Court in Hulas Kunwar v. Allahabad Bank Ltd. (Supra) and the judgment in Pigot v. Kubley C.B. (N.S.) 701. Neither of the jud .....

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nt case. The disputed sales occurred at a time when plaintiffs were admittedly in default and had consciously not objected to the transfer of the pledged shares in the name of defendant no.1, being fully aware that defendant intended to deal with them. The facts support no case of waiver by defendant no.1 of any notice or of any right to enforce the pledge. 48. In view of this conclusion, I do not see any need to go into other elaborate arguments made by the opposing counsel. 49. It was also arg .....

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39; counsel disagreed. Since plaintiffs have given up its main plea, I do not wish to spend time on this argument of defendant no.1. 50. It is the case of defendant no.1 in its written statement that only an amount of ₹ 5,61,413.50 stands to the credit of the loan account of the first plaintiff in its books. Issue no.9 has been framed in this regard. 51. Defendant no.1 has relied upon the accounts of plaintiff no.1 maintained by it in its books to show that a sum of ₹ 5,61,413.50 sta .....

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ction letter dated 11th June, 1995 [Exh.P­1] which contains the terms and conditions for both the loans, provided for the rate of interest to be at 24%. Clause 4(b)(1) thereof, provides that defendant no.1 would be entitled to notify plaintiff no.1 of the change in interest rate and thereafter be entitled to charge interest at such notified rate. Clause 4(b)(1) is as under: 4(b)(1) Notwithstanding what is stated hereinabove, we shall, at any time and from time to time, be entitled to notify .....

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e Agreement reproduced earlier, makes it clear that any notification to change the rate of interest during the continuance of the facility had to be made in writing by defendant no.1. 53. Defendant no.1 claims to be entitled to levy interest at the rate of 36% on the basis of its letter dated 21st March, 1996 [Exh.P­19], which is a notice issued by it under the provisions of Section 138 of the Negotiable Instruments Act, after default in repayment of the first loan. DW­1 during his cross .....

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r clause 4(b)(2) of the sanction letter [Exh.P­1], defendant no.1 was entitled to levy additional interest @ 2% in the following words: 4(b)(2) In case of default either in the payment of interest, additional interest, the repayment of the principal amounts as and when due and payable or reimbursement of all costs, charges and expenses when demanded, you shall pay additional interest at the rate of 2% above the interest rate for the Facility, on the overdue interest, principal amount, costs, .....

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nd without monthly rests and not at 26% p.a. [Exh.P­10]. 56. The sanction letter dated 11th July, 1995 [Exh.P­1] provides that the rate of interest would be calculated at monthly rests payable in arrears. The Demand Promissory Notes dated 12th July, 1995 [Exh.P­6] and 13th July, 1995 [Exh.P­12] do not provide for any such rests. The last postdated cheques given by plaintiff no.1 towards interest of both the loans was dishonoured upon presentation [cheque at Sr. No.8 of Exh.P­ .....

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defendant no.1 in its letters dated 23rd February, 1996 [Exh.P­17], 7th March, 1996 [Exh.P­18] and 21st March, 1996 [Exh.P­19]. Even in the Statement of Account maintained by defendant no.1 [Exh.D­10], interest has not been levied at monthly rests or any additional interest charged. Defendant no.1 had never levied interest at monthly rests or otherwise additional interest and hence is not entitled to. 58. Therefore, sale of any pledged share in excess of what was only required t .....

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ow many pledged shares were sold beyond the number that was required to be sold to recover that amount less 36 shares returned by defendant no.1 to plaintiff no.1 pursuant to order dated 22nd July 1997, what would be the number after excess share sold were split and bonus shares issued by defendant no.2­company (accretions) and the dividend that would have been paid on those shares (unpaid dividend) after 4th March 1997. The matter was placed again for directions on 9th November 2017, 16th N .....

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tions Statement of Accounts on the basis of interest @ 24% p.a. Simple interest 24% Statement of Accounts on the basis of interest @ 24% p.a. Simple interest 24% Amount Payable 76,27,649 Amount Payable 75,30,289 Sale Rate 262 Sale Rate 262 No. of Shares 29,113 No. of Shares 28,742 No. of Shares after accretions 1164520 No. of Shares after accretions 1149680 Rate 300 Rate 300 Value 3493,56,000 Value 3449,04,000 Dividend 588,37,373 Dividend 580,87,582 4081,93,373 4029,91,582 59. Mr. Sen, of course .....

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to render accounts and to pay over the alleged surplus. Rendering of accounts will squarely apply to both the primary case of plaintiffs and the alternative plea. Moreover, issue no.9 reads as under : (9) Does the defendant no.1 prove that only a sum of ₹ 5,61,413.50 stood to the credit of the loan account of plaintiff no.1 as per Exhibit 1 to the Written Statement? 61. This situation, that more shares were sold than required, would not have arisen but for the decision of defendant no.1 to .....

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e that it was plaintiff no.1 who had approached defendant no.1 for financial assistance and plaintiff no.1 had defaulted in its payment but at the same time, defendant no.1 could not arrogate itself to the position that without any basis, and because they had possession of the pledged shares, and the value of the shares were much more than the amount repayable by plaintiffs, go on selling the shares when there was no need. 62. The effect of this is defendant no.1 had wrongfully detained the shar .....

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ruct the course of justice. With respect to moulding reliefs in the interest of justice, powers of the Court are wide. Keeping in mind the rights and obligations of the parties to the suit and the issues involved, the Court can undoubtedly take note of changed circumstances and suitably mould the relief to be granted to the party concerned in order to mete out justice in the case. As far as possible the anxiety and endeavour of the Court should be to remedy an injustice when it is brought to its .....

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mmencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief for the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or .....

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