Case Note & Summary
The case involves three commercial appeals filed under Section 13(1-A) of the Commercial Courts Act, 2015, challenging an order dated 5 June 2023 passed by a learned Single Judge of the Bombay High Court. The impugned order made absolute an ad-interim injunction granted on 26 October 2021, restraining the defendants (including DBS Bank, successor to Lakshmi Vilas Bank) from selling, transferring, or disposing of shares pledged by the plaintiffs (Cheerful Trade & Realty Developers Pvt. Ltd. and Aristo Realty Developers Ltd.) as security for credit facilities extended to defendant Nos. 2 and 3. The background facts are that Lakshmi Vilas Bank sanctioned credit limits to defendant No. 2, and between August 2008 and March 2012, the plaintiffs pledged 75 lakh shares of Shree Global Tradefin Ltd. in favour of the bank. Two supplemental agreements were executed in 2017. After the borrower was declared a non-performing asset and Lakshmi Vilas Bank merged with DBS Bank in November 2020, the bank issued a notice for sale of pledged shares in June 2021. The plaintiffs filed a suit seeking a declaration that there was no valid pledge and for return of shares, along with an interim application for injunction. The learned Single Judge granted ad-interim relief on 26 October 2021, and after hearing arguments on 18 May 2022, passed the final order on 5 June 2023, making the ad-interim order absolute. The appellants (Ashok Investors Trust Ltd., DBS Bank India Ltd., and Subhakaran and Sons) challenged the order primarily on the ground of delay in passing the order, arguing that the one-year delay caused prejudice. They also contended that the closure dates in the pledge forms indicated that the pledges had lapsed, and that the plaintiffs' conduct showed no urgency. The respondents argued that delay alone is not a ground to set aside an order unless prejudice is demonstrated, and that the appellants did not raise the delay issue before the Single Judge. The court considered the rival submissions and examined the principles laid down in Anil Rai v. State of Bihar, Ram Bali v. State of U.P., Telstar Travels Pvt. Ltd. v. Enforcement Directorate, Oriental Insurance Co. Ltd. v. Zaixhu Xie, and Balaji Baliram Mupade v. State of Maharashtra. The court held that while delay in delivery of judgment is undesirable, it does not per se vitiate the order; the party complaining must show actual prejudice. Since the appellants failed to demonstrate any prejudice caused by the delay, and did not raise the issue before the Single Judge, the court found no ground to interfere. On the merits of the pledge, the court noted that the closure dates in the forms are merely procedural deadlines for confirmation of pledge creation and do not indicate cessation of the pledge. The court also referred to Jaswantrai Manilal Akhaney v. State of Bombay for the principle that the right of redemption continues until lawful sale. Consequently, the court dismissed all three appeals, upholding the impugned order.
Headnote
A) Civil Procedure - Interlocutory Orders - Delay in Pronouncement - Prejudice Requirement - Delay of over one year in passing an interlocutory order does not automatically render the order invalid; the party complaining must demonstrate actual prejudice caused by the delay. The court relied on Anil Rai v. State of Bihar, (2001) 7 SCC 318 and other precedents to hold that mere delay is not a ground to set aside the order. (Paras 13-15) B) Contract Law - Pledge of Shares - Closure Date - Interpretation - The closure date mentioned in pledge/hypothecation forms is the last date for the pledgee's Depository Participant to confirm creation of the pledge; it does not indicate that the pledge ceases to subsist after that date. The pledge continues as a continuous security until lawfully redeemed or sold. (Paras 7, 16) C) Contract Law - Pledge - Right of Redemption - The pledgor has a right to redeem the pledge by full payment at any time if no fixed period is stipulated, or after the fixed date, and this right continues until the thing pledged is lawfully sold, as held in Jaswantrai Manilal Akhaney v. State of Bombay, AIR 1956 SC 575. (Para 8)
Issue of Consideration
Whether the delay of more than a year in passing the impugned order has caused prejudice to the appellants and therefore the impugned order is liable to be set aside?
Final Decision
All three commercial appeals are dismissed. The impugned order dated 5 June 2023 is upheld.
Law Points
- Delay in delivery of judgment/order does not per se vitiate the order
- Prejudice must be demonstrated by the party complaining of delay
- Right of redemption of pledge continues until lawful sale
- Closure date in pledge form does not indicate cessation of pledge
