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BOMBAY HIGH COURT
K.R. Shriram, J.
Harinarayan G. Bajaj and Ors. —Plaintiffs
versus
Reliance Capital Limited and Anr. —Defendants
Ordinary Original Civil Jurisdiction Suit No.2205 of 1997
Decided on 5.1.2018
Counsel for the Parties:
For the Plaintiffs:Ms. Sonal Advocate a/w. Mr. Vivek M. Sharma, Advocate
For the Defendant No.1:Mr. J.P. Sen, senior Advocate a/w. Mr. Omkar Chandurkar, Ms. Bhavna Singh and Mr. Paresh Patkar i/b. Mulla and Mulla and CBC.
IMPORTANT POINT
No notice under Section 176 of Contract Act is necessary where pledgor was consulted or acquiesced in sale.
Headnote:Indian Contract Act, 1882—Sections 176—Sale of pledged thing—Notice—No notice under Section 176 is even necessary where pledgor was consulted or acquiesced in sale—Section 176 only requires notice of intention to sell and not notice of particulars of intended sale—In present case, defendant no. 1 has not only made manifest its intention to sell pledged securities but has promptly communicated to plaintiffs particulars of each sale—Even otherwise, apart from fact that defendant no. 1 had in fact given notice of its intention to enforce pledge, plaintiffs were perfectly well aware of defendant no. 1’s intention to sell pledged securities—As such, requirements in law for a valid sale of pledged securities by defendant no. 1 are fully met and contention of plaintiffs that sale is null and void as against them has to be rejected—Relief sought by parties should not be refused on technical and pedantic grounds—Once substantive prayers and cause for justice is borne out in pleadings, then Court would be fully within its jurisdiction to mould reliefs and any technicality would not obstruct course of justice—Suit decreed. (Paras 44 and 63)
Result: Suit decreed.
K.R. Shriram, J.—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 reliefs 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[1*], repayable in 8 months, i.e., on 12th March, 1996. Material terms are as set out here in below:
[1.* Exh. P1]
| “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[2*] 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[3*] for the said sum of Rs. 5 Crores and a Power of Attorney of the same date,[4*] 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:
[2.* Exh. P2]
[3.* Exh. P6]
[4.* Exh. P7]
“4. In default of payment of any one/two installments of interest as stated above RCL shall be entitled t
