High Court of Judicature at Bombay Considers Interim Injunction in Pledge Enforcement and Share Transfer Dispute — Application Seeks to Restrain Voting and Transfer Rights Over Pledged Shares. Pledgee Rights Under Section 176 of Indian Contract Act, 1872 and SEBI Takeover Code Disclosure Obligations Are Central to Dispute.

Case Note & Summary

The matter arose from Interim Application (L) No. 29574 of 2021 filed in Commercial Suit No. 189 of 2022 before the High Court of Judicature at Bombay. The applicant/plaintiff, World Crest Advisors LLP, held 9,52,100 shares, i.e. 0.05% of Dish TV India Limited, and was a pledgor of 44,00,54,852 shares of Dish TV, being admittedly part of the Promoter Group of Dish TV, namely the Jawahar Lal Goel Group. The defendants included Catalyst Trusteeship Limited as pledgee and security trustee for the beneficial interest of Yes Bank Limited, Yes Bank Limited as the original lender, Dish TV India Limited as the public limited company whose shares were pledged, Essel Group entities (Defendant Nos. 4 to 9) as borrowers, and J.C. Flowers Asset Reconstruction Private Limited as the proposed defendant and assignee of Yes Bank's stressed asset portfolio. Yes Bank had advanced loans amounting to INR 5,270 crores to the borrowers between November 2015 and April 2018. Catalyst was appointed as Yes Bank's security trustee in 2018. The plaintiff and Catalyst executed two pledge deeds dated 5 July 2018 and 6 May 2019 pledging a total of 44,00,54,852 shares of Dish TV as security for loans of INR 4,210 crores. The pledge deeds conferred upon the pledgee rights including voting rights, power to enforce security interest, and power of attorney upon default. In July 2019, Yes Bank through Catalyst invoked the pledges under Section 176 of the Indian Contract Act, 1872, alleging borrower default. The plaintiff acknowledged the pledge in a letter dated 24 July 2019. On 13 March 2020, Yes Bank was reconstructed under a Central Government mandated scheme due to significant non-performing assets; the Essel Group's total outstanding dues were approximately INR 7,698 crores, with about INR 6,789 crores classified as NPAs. On 29 May 2020, Catalyst transferred the suit shares into its own account, which the plaintiff claimed was without intimation; Catalyst claimed it was done under the pledge deeds. In June 2020, disclosures were made to SEBI under the Takeover Code and to RBI. Subhash Chandra filed a criminal complaint alleging misuse of loans, leading to an FIR registered on 12 September 2020 at Gautam Buddh Nagar Police Station, Greater Noida, against former officers of Yes Bank. In July 2020, Yes Bank recalled the loan facilities and issued show cause notices under the RBI Master Circular on Willful Defaulters. The borrowers challenged these before the Saket District Court, New Delhi, which passed an ex parte ad-interim order on 13 October 2020 restraining Yes Bank from selling 44,53,48,990 shares of Dish TV. That order operated for over nine months until the Saket Court proceedings were withdrawn on 3 August 2021. In the present interim application, the plaintiff sought an injunction restraining Yes Bank and J.C. Flowers Asset Reconstruction Private Limited from exercising rights including voting rights in respect of the suit shares, from transferring, alienating, or creating third party rights, and from interfering in the management and affairs of Dish TV. The court reserved judgment on 25 April 2023 and pronounced it on 4 September 2023. The extracted text does not include the court's analysis, reasoning, or final order.

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