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2018 Supreme(Bom) 15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. SHRIRAM, J.
Harinarayan G. Bajaj and Ors. - Plaintiffs
Versus
Reliance Capital Limited and Ors. - Defendants
SUIT NO. 2205 OF 1997
Decided On : 05-01-2018
For the Plaintiffs : Ms. Sonal, Mr. Vivek M. Sharma.
For the Defendant : Mr. J.P. Sen, Mr. Omkar Chandurkar, Ms. Bhavna Singh, Mr. Paresh Patkar, Mulla and Mulla and CBC.
Headnote:
Constitution of India,1950 - Agreement of Pledge - Demand promissory note - Reliefs in nature of redemption - Suit was filed for a declaration that plaintiffs as pledgors - In case of default either in payment of interest additional interest repayment of 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 above interest rate for Facility on overdue interest, principal amount costs charges or expenses and/or from respective due dates for payment and/or repayment - No failure to exercise or delay in exercising any of our rights hereunder or under any 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 - Pursuant to sanction letter plaintiffs entered into an Agreement of Pledge to secure said advance of Rs-5 Crores – Held, Jurisdiction and propriety vis a vis circumstances which come into being subsequent to commencement of proceedings- It is basic to our processual jurisprudence that right to relief must be judged to exist as on date a suitor institutes legal proceeding - Equally clear is principle that procedure is handmaid and not mistress of judicial process- If a fact arising after lis has come to court and has a fundamental impact on right to relief for manner of moulding it is brought diligently to notice of tribunal it cannot blink at it or be blind to events which stultify or render inept decretal remedy - Equity justifies bending rules of procedure where no specific provision or fair-play is violated with a view to promote substantial justice subject of course to absence of other disentitling factors or just circumstances- Nor can Court contemplate any limitation on this power to take note of updated facts to confine it to trial Court – Order accordingly
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 alternative, plaintiffs also sought relief's in the nature of redemption of the pledged securities (shares of defendant no.2) on the basis that the sale thereof by defendant no.1 was null and void. Plaintiffs, however, abandoned their main case in its entirety and pressed only their alternative plea for redemption. No relief is sought against defendant no.2.
2. In or around July 1995, plaintiff no.1 approached defendant no.1 seeking a loan in a sum of Rs.5,00,00,000/- (Rupees Five Crores Only). The loan, admittedly, was sanctioned by defendant no.1 vide its letter dated 11th July, 1995 Exh. P1, repayable in 8 months, i.e., on 12th March, 1996. Material terms are as set out hereinbelow:
“1. Facility
Principal Amount: Rs.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. | 200000 |
Margin: 30%
Rate of Interest: 24%
2. General Conditions Precedent
The availment of the Facility will be subject tour receiving, in a form and substance satisfactory to us, of:
(a)…..
(e) Agreement of Pledge in form and substance satisfactory to us duly executed
(f) pledge of collateral security at our office/custodial (if specified)
(g) Demand Promissory Note for Rs.5,00,00,000.
(h) postdated cheques for principal and interest payments
(i)….
4. Covenants
(b) 1. Notwithstanding 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% above the interest rate for the Facility, on the overdue interest, principal amount, costs, charges or expenses and/or from the respective due dates for payment and/or repayment.
3. …
4. No failure to exercise or delay in exercising any of our rights hereunder or under any 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.”
3. Pursuant to the sanction letter, plaintiffs entered into an Agreement of Pledge dated 12th July, 1995 Exh. P2 to secure the said advance of Rs.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 Exh.P6 for the said sum of Rs.5 Crores and a Power of Attorney of the same date, Exh.P7 whereby defendant no.1 was authorized to sell the pledged securities, as deemed fit. The clauses (which had few blanks) in the Agreement of Pledge, that are relevant for the present, are set out hereinbelow:
“4. In default of payment of any one/two installments of interest as stated above RCL shall be entitled to demand payment of the entire amount then outstanding in respect of the said debt as if the period for repayments has expired and shall also be entitled, on failure to pay the interest on due dates, to debit the overdue interest on the Borrower’s Loan and capitalize t
