Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(Del) 698

IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Sahai Endlaw, Asha Menon, JJ.
Cyquator Media Services Pvt. Ltd. - Appellant
Versus
IDBI Trusteeship Services Ltd. & Anr. - Respondent
First Appeal From Order (O S) (Comm) No. 75 of 2020, 76 of 2020, 77 of 2020; Civil Miscellaneous Application No. 14173 of 2020, 14522 of 2020, 14523 of 2020, 14524 of 2020, 14525 of 2020, 14526 of 2020, 14527 of 2020
Decided On : 13-07-2020

Advocates Appeared:
Saket Sikri, Advocate, Vijay Aggarwal, Advocate, Tarun Singla, Advocate, Mudit Jain, Advocate, Naman Joshi, Advocate, Ayush Jindal, Advocate, Shailesh Pandey, Advocate, Vikalp Mudgal, Advocate, Ajay Kullar, Advocate, Neeraj Kishan Kaul, Advocate, Birendra Saraf, Advocate, Vikram Trivedi, Advocate, Jai Sanklecha, Advocate, Sunil Tilokchandani, Advocate, Nagarkatti Kartik, Advocate, Sachin Chandarana, Advocate, Ramchandra Madan, Advocate, Deepak Joshi, Advocate, Jagdeep Sharma, Advocate

The judgment establishes the principle that the pawnee has absolute discretion to decide whether or not to sell the pledged goods, and the economic stress faced by the appellants cannot restrain the pawnee from exercising its legal rights.

Headnote:
A&C Act - Arbitration & Conciliation Act, 1996 - Section 37, Commercial Courts Act, 2015 - Section 13 - FAO (OS) (COMM) 75/2020, 76/2020, 77/2020 - Summary of Acts and Sections: The judgment discusses the application of Section 37 of the Arbitration & Conciliation Act, 1996 and Section 13 of the Commercial Courts Act, 2015 in the context of appeals against the judgment of the learned Single Judge. It also delves into the obligations and rights of the parties under the Debenture Trust Deed, Share Pledge Agreements, and Corporate Guarantee Agreements.
Fact of the Case:

The appeals were filed against the judgment of the learned Single Judge who declined the relief claimed of a restraint on the respondent No. 1 exercising its rights under the Pledge Agreements and Corporate Guarantee Agreements. The respondent No.2/Essel Infraprojects Ltd. failed to redeem the Non-Convertible Debentures, leading to the invocation of the pledged securities by the respondent No.1/IDBI Trusteeship Services Ltd.
Finding of the Court:

The court found that the appellants did not challenge the rights of the respondent No.1/IDBI TSL as a pawnee and that the law granted absolute discretion to the pawnee to sell the shares. The court also held that the extraordinary situation due to the pandemic could not restrain the respondent from enforcing its legal rights.
Issues: The issues revolved around the invocation of pledged securities, the impact of the COVID-19 pandemic on financial transactions, and the discretion of the pawnee to sell the pledged goods.
Ratio Decidendi: The court emphasized the absolute discretion of the pawnee to decide whether or not to sell the pledged goods and held that the economic stress faced by the appellants could not be a ground to restrain the respondent from exercising its legal rights.
Final Decision: The appeals were dismissed as the court found no grounds for interference in the conclusions of the learned Single Judge.

JUDGMENT

Asha Menon, J. - C.M. No.14523/2020 (Exemption from filing duly affirmed affidavits along with the accompanying appeal and undertaking to pay court fees upon reopening of the Hon''ble court) & C.M. No.14524/2020, (Exemption from filing certified, fair and legible copies of documents) in FAO (OS) (COMM) 76/2020.

C.M. No.14526/2020 (Exemption from filing duly affirmed affidavits along with the accompanying appeal and undertaking to pay court fees upon reopening of the Hon''ble court) & C.M. No.14527/2020 (Exemption from filing certified, fair and legible copies of documents) in FAO (OS) (COMM) 77/2020

1. Allowed, subject to just exceptions and as per the extant rules.

2. The applications are disposed of.

FAO (OS) (COMM) 75/2020, C.M. Appln. No. 14173/2020 (for ad-interim stay & directions)

FAO (OS) (COMM) 76/2020, C.M. Appln. No.14522/2020 (for ad-interim stay &directions) and,

FAO (OS) (COMM) 77/2020, C.M.Appln. No.14525/2020 (for ad-interim stay & directions)

1. This appeal has been preferred under Section 37 of the Arbitration & Conciliation Act, 1996 (''A&C Act'') read with Section 13 of the Commercial Courts Act, 2015 against the common judgment of the learned Single Judge dated 03.07.2020 disposing of three petitions filed by the appellants under Section 9 of the A&C Act being (i) OMP(I)(COMM) 135/2020, (ii) OMP(I)(COMM) 136/2020 & (iii) OMP(I)(COMM) 137/2020, seeking interim relief pending arbitration. By the impugned judgment the learned Single Judge declined the relief claimed of a restraint on the respondent No. 1 herein exercising its rights under the Pledge Agreements and Corporate Guarantee Agreements, executed by the appellants in favour of the respondent No. 1.

2. The facts as relevant for the disposal of the present appeals are that the respondent No.2/Essel Infraprojects Ltd. (EIL) issued Non-Convertible Debentures (''NCD'') on 25.02.2015, aggregating the principal amount of Rs.425,00,00,000/-, which was subscribed by certain identified debenture holders for whose benefit respondent No.1/IDBI Trusteeship Services Ltd. (IDBI TSL) executed a Debenture Trust Deed (''DTD'') dated 22.05.2015. These debentures were redeemable by 22nd May, 2020.

3. The issuer company being respondent No.2/EIL was obligated to pay to the debenture holders the principal amount, the redemption premium and default interest (if any) once the debentures were redeemed alongwith certain other costs and expenses. In order to ensure that the obligations were met at the time of redemption, certain securities were incorporated in the DTD (Clause ''C'') (Annexure H in FAO (OS) 75 & 77/2020 and Annexure G in FAO (OS) 76/2020). Thus, a first and exclusive pledge was created by the appellant/ Cyquator Media Services Pvt. Ltd. (Pledgor No.1) (for short Cyquator) in favour of respondent No.1/IDBI TSL over fully paid-up equity shares of ZEE Entertainment Enterprises Limited (ZEEL) held by it. Similarly, an exclusive pledge was created by the appellant/Direct Media Distribution Venture Pvt. Ltd. (Pledgor No.2) (Direct Media) again in favour of respondent No.1/IDBI TSL, over fully paid-up equity shares of Dish TV India Ltd. (Dish) held by it and Khubsoorat Infra Private Limited also executed a similar pledge over shares held by it. Further, an irrevocable and unconditional, joint and several, Corporate Guarantee was executed by the Pledgors No.1 and 2.

4. For easy reference the various documents filed as Annexures to the separate appeals are listed below:

FAO (OS)(COMM) 75/2020 76/2020 77/2020 DTD Annexure H 22.05.2015 Annexure G 22.05.2015 Annexure H 22.05.2015 Share Pledge Agreement Annexure I 22.05.2015 Annexure F 01.02.2019 Annexure I 22.05.2015 Deed of Guarantee Annexure J 22.05.2015 - Annexure J 22.05.2015 Pledge Invocation Notice Annexure F 12.06.2020 Annexure F 12.06.2020 Annexure F 12.06.2020 Corporate Guarantee Notice Annexure G 12.06.2020 - Annexure G 12.06.2020

5. The DTD laid down what constituted the Events of Default in Clause 7 incl

Click Here to Read the rest of this document

2020 Supreme(Del) 698

The judgment establishes the principle that the pawnee has absolute discretion to decide whether or not to sell the pledged goods, and the economic stress faced by the appellants cannot restrain the pawnee from exercising its legal rights.

Cases Referred (5)