TMI Blog2020 (10) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... under Master Restructuring JLF Agreement dated 29th June, 2015, the Pledge Agreement dated 2nd August, 2016 was executed, among other things, by Varan Corporation Ltd. in favour of SBICAP Trustee Company Ltd., a security trustee, acting as agent and security trustee for various lenders including for ICICI Bank Ltd. (Applicant). The corporate debtor has not undertaken any counter-indemnity obligation by the said pledge agreement dated 2nd August, 2016 in respect of any guarantee, indemnity, bond, documentary letter of credit or any other instrument given/issued by ICICI Bank. As per liquidator, ICICI Bank has also confirmed that there is no guarantee given by the corporate debtor - The corporate debtor has only given security in the form of a pledge of shares of borrower for the loan facilities granted by the applicant to the borrower. Therefore, it is worth to make a mention that the corporate debtor being not part of the loan agreement but only a facilitator to provide security by pledging the shares cannot be said to be a borrower. The terms of the deed of pledge are quite clear in this regard. Therefore, it can be said that the said security given for the above loan is merely co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of such decision. 4. The present application in hand should have been filed within 14 days of the decision of the liquidator. However, the same is filed after a delay of 18 days. Hence, it is also prayed by the applicant that this delay be condoned given section 238A of the I B Code read with section 5 of the Limitation Act, 1963. 5. The applicant submits that certain financial facilities were executed by and amongst Varan Resources Ltd. ('the borrower') and the applicant's Hong Kong Branch as agent and applicant's Singapore Branch as arranger starting from the year 2007 till the year 2015. A Master Restructuring JLF Agreement was also executed in the year 2015. On 2nd August, 2016, the borrower's facilities were among other things secured by a pledge over the borrower's shares which are held by the corporate debtor vide the deed of pledge dated 2nd August, 2016. 6. The account of the borrower was classified as a non-performing asset on 30th June, 2017. In this transaction, the corporate debtor, by pledging the shares of the borrower, held by itself, was a third party security provider for the borrower. This was the background of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s claim vide email dated 12th September, 2018 saying that the corporate debtor performed its part of the pledge agreement dated 2nd August, 2016, i.e., it has already pledged the equity shares of the borrower held by it in favour of SBICAP Trustee Company Ltd., the Security Trustee. 12. The applicant submits that the right of the applicant to recover the debt is concurrent to the right of the applicant to retain the pledged shares under section 176 of the Contract Act, 1872. The applicant is placing reliance on the decision of NCLT, Mumbai Bench in the matter of SREI Infrastructure Finance Ltd. v. Sterling International Enterprises Ltd. [MA 1584/2018 in CP No. 402/2018], order dated 13th March, 2019, the applicant submits that the mortgagee of the corporate debtor, who had an advanced loan to a third party, in that case, is given the status of a financial creditor of the corporate debtor. Hence, the applicant submits that the pledge, in the present case should also be treated as a financial creditor. 13. The liquidator, on the other hand, at the outset states that section 238A of the I B Code which prescribes the applicability of Limitation Act, 1963 on the I B Code, is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the pledged shares. All sums necessary to effect the indemnity and all sums payable by the pledgors shall form part of the secured obligations and shall constitute a charge on the pledged shares. (emphasis supplied) 15. This clause as reproduced above casts an obligation on the corporate debtor to indemnify the applicant for the event of default by the borrower. Clause 11 of the said pledge agreement does not state about the event of default . It is further stated that the corporate debtor is not even a party to the Master Restructuring JLF Agreement dated 31st March, 2015 as amended on 29th June, 2015. Hence, without quid pro quo, the corporate debtor cannot be a party to the said agreement, nor there subsists any privity of contract to file a claim before the liquidator of the corporate debtor. The corporate debtor has no nexus with the financial facilities provided by the applicant to the borrower, viz., Varan Resources Ltd. except that of providing a collateral security pledge of shares held by it of the borrower. 16. The liquidator further submits that the corporate debtor has already pledged the shares held by it of the borrower with the security trustee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Corporation Ltd. in favour of SBICAP Trustee Company Ltd., a security trustee, acting as agent and security trustee for various lenders including for ICICI Bank Ltd. (Applicant). The corporate debtor has not undertaken any counter-indemnity obligation by the said pledge agreement dated 2nd August, 2016 in respect of any guarantee, indemnity, bond, documentary letter of credit or any other instrument given/issued by ICICI Bank. As per liquidator, ICICI Bank has also confirmed that there is no guarantee given by the corporate debtor. 20. The corporate debtor has only given security in the form of a pledge of shares of borrower for the loan facilities granted by the applicant to the borrower. Therefore, it is worth to make a mention that the corporate debtor being not part of the loan agreement but only a facilitator to provide security by pledging the shares cannot be said to be a borrower. The terms of the deed of pledge are quite clear in this regard. Therefore, it can be said that the said security given for the above loan is merely collateral security. 21. It is worth to note that a collateral security given for the loan of a third party shall not be treated as a 'd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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