STRATEGIC CREDIT CAPITAL PRIVATE LIMITED & ANR. vs. JAROLI VINCOM PRIVATE LIMITED & ORS.

* IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment reserved on: 31.03.2016
% Judgment delivered on: 11.07.2016

+ I.A. No.1612/2016 (under Order I Rule 10 CPC) and I.A.
No.1613/2016 (under Order XXXIX Rule 4 CPC) in CS(OS)
2941/2015
STRATEGIC CREDIT CAPITAL PRIVATE
LIMITED & ANR ..... Plaintiffs

Through: Mr. Rajiv Nayar, Senior Advocate
along with Mr. Manik Dogra,
Advocate for plaintiff No.1.
Mr. Sandeep Sethi, Senior Advocate
along with Ms. Anuradha Mukherjee,
Mr. Harminder Chawla, Ms. Radhika
Dubey & Ms. Samapika Biswal,
Advocates for plaintiff No.2.

versus

JAROLI VINCOM PRIVATE LIMITED & ORS ..... Defendants

Through: Mr. Aditya Gupta, Advocate for
Mr.Abhay Gupta, Advocate for
defendants No.1, 2, 6 & 8.
Ms. Evneet Uppal, Advocate for
defendants No.3 & 4.
Mr. A.S. Chandhiok, Senior Advocate
along with Mr. Rajiv Tyagi, Mr.Afsar
Nabi, Mr Divakar Kumar &
Mr.Sambhav Gupta, Advocates for
defendants No.10 & 11.
Mr. Abhinav Vashisht, Senior
Advocate along with Mr. Ritesh Isaac
& Ms. Aakanksha Nehra, Advocate
for the applicant/ ICICI Bank.
CS(OS) 2941/2015 Page 1 of 44


CORAM:
HON’BLE MR. JUSTICE VIPIN SANGHI

J U D G M E N T


VIPIN SANGHI, J.

1. The aforesaid applications have been filed by ICICI Bank Limited,
firstly, to seek impleadment as a party defendant in the present suit and,
secondly, to seek vacation/ clarification of the ex-parte ad-interim order of
injunction dated 29.09.2015 passed by this Court in the plaintiff’s
application, i.e. I.A. No.20390/2015 under Order XXXIX Rules 1 & 2 CPC.
By the said order dated 29.09.2015 which continues in force till date this
Court restrained the defendants “ from, in any manner, taking any action
which would dilute or lessen the security margin against the shares to an
amount of less than 45% of the loans advanced by the plaintiffs to defendant
Nos. 1 to 9 and are further restrained from altering the shareholding
structure and share capital structure of defendant No.10. ”.
2. To understand the controversy arising in the present suit and the case
of the applicant ICICI Bank Limited, the relevant background facts may first
be taken note of.
3. The case of the plaintiffs, in short, is that a few major investor
shareholders were seeking to exit from the defendant No.10 company i.e.
ABG Shipyards Ltd. (ABGSL) which is a public limited company. Plaintiff
No.2 advanced loans to defendants No.1 to 9-who are described as
CS(OS) 2941/2015 Page 2 of 44

“Promoter related entities”, ABG International Private Limited (ABGIPL for
short), Mahavir Distributors Pvt. Ltd. and Aarakshan Trading Pvt. Ltd.
(collectively known to as “Borrowers”) vide separate loan agreements
between 2005 to 2013, at different intervals to enable them to purchase those
shares from the exiting investor shareholders, at the behest of defendant
No.11. In consideration of the said loans, defendant Nos. 1 to 9, inter alia,
pledged their purchased shares as security for repayment of the loan and
interest to plaintiff No.2. Defendant No.10 is India’s largest private sector
ship-building company and is a part of the ABG group of companies.
ABGIPL had 55.71% shareholding in ABGSL as on 30.06.2015 - making it
a majority stakeholder in defendant No.10 company. The plaintiffs state that
defendant No.11- Mr.Rishi Aggarwal, holds and controls the ABG group of
companies and is also a promoter of defendant No.10 company.
4. The said loans were availed of from plaintiff No.2 for an amount
aggregating to Rs.805.1 Crores. The said purchase of shares of defendant
No.10 company, by defendant Nos. 1 to 9 were made from the stock
exchanges. According to the plaintiffs, it was under the instructions of the
promoter/ defendant No.11, as well as under the instructions of defendant
No.10 company that defendants No.1 to 9, Mahavir Distributors Pvt. Ltd.
and Aarakshan Trading Pvt. Ltd. purchased the shares of the defendant
No.10 company from the stock market. The case of the plaintiffs is that
defendant No.5 holds 14.36% shareholding in defendant No.10 company.
The plaintiffs disclose in the plaint the interconnection between the
defendants in terms of common directorship and shareholding, inter se the
said defendants.
CS(OS) 2941/2015 Page 3 of 44

5. The case of the plaintiffs is that each of the borrowers, in concert with
defendant No.10 & 11, have purchased the said shares of defendant No.10
company with the mala fide intent to circumvent the embargo set under the
laws, regulations and the Take Over Code of Securities Exchange Board of
India (SEBI), which would have required the defendant No.10 and 11 to
make certain disclosures for each purchase of shares made by defendant
No.11 beyond the prescribed limit. According to the plaintiffs, defendant
No.11 consolidated his control over defendant No.10 by benami purchase of
shares through the Promoter related entities. The objective of the said
exercise, according to the plaintiffs was:
“(i) to consolidate the shareholding of Defendant No. 11 in
Defendant No. 10 Company to allow it to maintain its strategic
control over the affairs and management of Defendant No. 10
Company; (ii) a market making exercise in relation to such
shares being purchased and (iii) for raising funds for
Defendant No. 10 Company in the future without any further
issue of shares.”
6. The plaintiffs disclose in the plaint that under the loan agreements
entered into between the plaintiff No.2 and defendants No.1 to 9
respectively-which appear to contain similar, if not identical, terms &
conditions, the borrowers were obliged to make payment of their
installments of loans, apart from interest, expenses and charges, as and when
they became due and payable. They were also obliged to maintain the
security cover provided by them at a margin within the prescribed limits.
From the reading of the plaint, it appears that the loan agreements entered
into between the plaintiff No.2 as lender and defendants No.1 to 9 as the
borrowers, apart from others, contain identical clauses 3.1 and 3.2 which
CS(OS) 2941/2015 Page 4 of 44

relate to the aspect of “margin” and “additional security”. The said clauses
read as follows:
“3.1 Margin: So long as there exists any Loan Balance due
from the Borrower to the Lender, the Lender may require the
Borrower to maintain or cause to maintain with the Lender at
all times, a Margin of such percentage as stipulated in the
Schedule(s) of Terms relevant to the Facility or as varied by the
Lender consisting of Securities acceptable to the Lender. The
computation of the value of the securities shall be based on the
“Market Price”. The Lender may calculate the Margin in
respect of each Loan separately or collectively, in respect of all
the Loans.
The Borrower agrees that the Lender prescribes the date and
time by which the margin/ security are to be made available
and the Lender may refuse to accept any payments in any form
after such deadline for margin/ security expires.
3.2 Additional Security: In the event that the market value (or
net asset value, in case of units) of the Security given as margin
falls, or if in the circumstances, the Lender deems fit, the
Lender may serve upon the Borrower a notice demanding
additional security/ collateral by way of delivery of further
securities being securities of companies/ mutual funds/ entities
acceptable to it or any other security as mutually agreed upon
between the Borrower and the Lender and the Borrower shall
make up the difference either by payment in cash to the Lender
or by causing the delivery of additional Securities, acceptable
to the Lender, of the value necessary to make up the difference
immediately. The Borrower shall also execute and submit to
the Lender, such Security along with necessary documents for
creation of the Security. Notwithstanding that no Event of
Default as enumerated under this Agreement and/ or
Schedule(s) of Terms relevant for the Facility has occurred, the
Lender will also have the option to sell/ transfer any portion of
the Securities and apply the amount realized towards
liquidation of part of the Loan balance(s), so as to maintain the
CS(OS) 2941/2015 Page 5 of 44

Margin required under this Agreement and/ or Schedule(s) of
Terms relevant for the Facility.”
7. The plaintiffs state that in respect of the loans advanced to M/s
Aarakshan Trading Pvt. Ltd. (which is not party to the suit), there was a
breach of the terms of the loan agreement and the security agreement, as the
said borrower failed to maintain the margin at the minimum prescribed limit.
Consequently, vide a notice dated 22.07.2015, the pledge of shares made by
the said entity was invoked by plaintiff No.2. Thereafter, the said 12.18%
shares held by Aarakshan Trading Pvt. Ltd. in defendant No.10 were
purchased by plaintiff No.1. Accordingly, plaintiff No.1 is now a
shareholder in defendant No.10 company, holding 65,66,654 shares
equivalent to 12.18% shareholding in defendant No.10 company.
8. The plaintiffs further state that plaintiff No.1 also holds additional
3.52% shareholding in defendant No.10 company. On 25.07.2015 plaintiff
No.2 assigned-by way of direct assignment the loans and receivables, as
defined, together with all rights, title and interest of plaintiff No.2 under and
in relation to the loan documents as well as security documents in favour of
plaintiff No.1. Thus, plaintiff No.1 stepped into the shoes of plaintiff No.2
as the lender of loans to defendant Nos. 1 to 9. However, the obligation of
collection of the loans, interest etc. remained with plaintiff No.2. Plaintiff
No.2 is also obliged to provide other services as defined under the terms of
the collection and servicing agreement dated 25.07.2015 entered into
between the plaintiff No.1 and plaintiff No.2.
9. The plaintiffs state that defendants No.1 to 9 have defaulted in
repaying their respective loans extended to them. In addition, they have
CS(OS) 2941/2015 Page 6 of 44

failed to maintain the security cover at a margin at prescribed limits in
accordance with all terms of their respective facility documents. The
outstanding loan position as on 03.09.2015 which includes the principal,
interest, penalties and other charges of defendants No.1 to 9 has been
disclosed in the plaint as follows:

10. The plaintiffs state that on 08.09.2015, default notices were issued to
defendants No.1 to 9. The said defendants were informed that the market
value of the shares pledged by each of them had fallen in a manner such that
the security cover had fallen below the margins that the said defendants
were obliged to maintain in respect of the outstanding loan. Defendants
No.1 to 9 were directed to provide additional marketable and unencumbered
CS(OS) 2941/2015 Page 7 of 44

securities, free from lock-in and of adequate value to plaintiff No.1 so as to
increase the security cover, in accordance with the respective agreements
with defendants No.1 to 9. The plaintiffs have tabulated the value of the
security cover after its devaluation in the plaint as follows:

CS(OS) 2941/2015 Page 8 of 44

11. In response to the default notice, defendant No.8 – acting for himself
and on behalf of the Khandelwal group, i.e. defendants No.1, 2 and 6 sent a
reply dated 21.09.2015 stating that they were not in a position to provide any
additional security to plaintiff No.1. In the said reply, the defendant No.8,
inter alia , stated that the loans were taken at the behest of, and under the
instructions of the promoter of defendant No.10, namely defendant No.11,
and that the shares were to be purchased from the Standard Chartered
Private Equity Limited (which were being sold on the stock exchange), since
promoters were unable to purchase the said shares beyond a particular limit.
Hence, the said defendants, namely defendants No.1, 2, 6 and 8 were asked
to act as the front for purchase of the said shares. The said defendants also
stated in the reply that the intention behind the purchase of the said shares
was to consolidate the shareholding of defendant No.11 in the defendant
No.10 company; to allow him to maintain his strategic control over the
affairs and management of defendant No.10 company; that it was a
marketing exercise in relation to the purchase of said shares; that it was done
to enable raising of funds for defendant No.10 company in future, without
issuance of any further shares; that the promoter of defendant No.10 had
assured a certain return per share to the defendants/ borrowers, stating that
CS(OS) 2941/2015 Page 9 of 44

there would be a strategic investor brought in the defendant No.10 company;
that defendants No.10 & 11 had defaulted in their promise extended to the
borrowers and other broking entities who had been approached for purchase
of shares in defendant No.10 by defendant No.11, and; that the said
defendants are contemplating taking of legal action against the promoter of
defendant No.10.
12. The plaintiffs state that the reply aforesaid undermines the securities
given by defendants No.1 to 9 against the outstanding loans advanced by the
plaintiffs amounting to Rs.11,30,94,03,401. The plaintiffs state that plaintiff
No.1 being a shareholder of defendant No.10 company received a notice
dated 13.08.2015 for holding of the Annual General Meeting (AGM) of
defendant No.10 company on 30.09.2015. This notice shows the mala fides
of defendants No.10 & 11 to dilute the value of the securities held by the
plaintiffs against the loans extended to defendant Nos. 1 to 9. Item No.5 of
the AGM notice issued by defendant No.10 relates to passing of a resolution
to create, offer, issue securities in the form of equity shares, secured or
unsecured debentures, bonds or any other securities for a value of Rs.2,000/-
Crores, the effect thereof would be to dilute the value of the security (8.84%
shareholding in defendant No.10) pledged with the plaintiffs. The plaintiffs
also state that they “ are also given to understand that Defendant No.11 is
pursuing debt restructuring or other restructuring of Defendant No.10
company ”. The plaintiffs state that defendants No.10 & 11, through
defendants No.1 to 9, have defrauded and cheated the plaintiffs and continue
to act in a manner which is eroding and diluting the securities held by the
plaintiffs, and they are ensuring that the monies lent out by the plaintiffs
CS(OS) 2941/2015 Page 10 of 44

cannot be recovered in terms of the various agreements. The said conduct of
the defendants, it is claimed, has given rise to the present cause of action
against the defendants. The plaintiffs also set out their grievance that the
proposed resolutions and notice for AGM shows that there is no guideline
prescribed with regard to the pricing of the issue, the mode of issue (to be
issued through private placement, or otherwise)-which enables defendant
No.11 to exercise the authority derived by virtue of the proposed resolution
to the detriment of the plaintiffs. By enabling defendant No.10 to issue
shares without qualification on pricing or mode, there is a reasonable and
real threat of loss of value of the securities held by the plaintiffs against the
loans extended inasmuch, as, such issuance would necessarily dilute the
percentage of shareholding pledged with the plaintiffs as security, and would
also impact the valuation of the securities themselves, depending on the
pricing of the fresh issue that may be made by defendant No.10. In this
background, the substantive reliefs sought in the suit against the defendants
are the following:
“A. A decree of Permanent Injunction restraining the
Defendants and/ or its agents and/ or representatives from
taking any action which may in any manner whatsoever directly
and/ or indirectly dilute, whether in value or in percentage, the
securities given to the Plaintiffs in the form of shares held by
Promoter related entities in Defendant No.10 Company against
the outstanding loans amounting to INR 11,30,94,03,401/- from
Promoter related entities to Plaintiff No.1;
B. A decree of Permanent Injunction restraining the
Defendants from interfering with the Plaintiff No.1’s voting and
other beneficial rights in respect of equity shares of Defendant
CS(OS) 2941/2015 Page 11 of 44

No.10 company as are pledged to or otherwise held by the
Plaintiff No.1;”
13. On 29.09.2015, the Court, at the stage of ex-parte hearing, while
issuing summons in the suit and notice in the stay application, i.e. I.A.
No.20390/2015, inter alia , observed as follows:
“ It is the plaintiffs’ case that they had advanced loans to
the tune of Rs.805 crores, which currently, along with interest
totals an outstanding amount of Rs.1130 crores. The loans were
secured against the shares of the defendant No.10-company
under Clauses 3.1 & 3.2 of the loan agreement which provided
for the maintenance of a margin of security in terms of the
market value of the shares of defendant No.10, as would be
intimated by the plaintiffs from time to time. The schedule of the
terms of the loan agreement requires the defendants to provide
a margin of 30% against the shares and further 15% margin for
immediate disposal (Clauses 7 & 8 of the facility schedule of
terms of loan against shares).
Mr. Rajiv Nayar, the learned Senior Advocate for
plaintiff No.1 would submit that the defendants propose to
dilute the security margin of the plaintiffs and latter’s request
to maintain status quo apropos the value and percentage of the
shares has been rejected vide letter dated 21st September, 2015
(page 2899). The letter inter alia reads as under:
“We refer to your notice dated 8 September 2015
wherein you have requested for (i) an additional
margin security cover in relation to the Loan
Agreement (as defined therein), and (ii) end use
certificate in relation to the loans disbursed under
the Loan Agreement. Please note that we are
unable to fulfil your request for furnishing
additional security at this stage. It is important to
note that KBS Trading purchased the
aforementioned securities at a price of INR 360
per share. However, with the interest on the said
CS(OS) 2941/2015 Page 12 of 44

amount adding up the minimum holding cost of
these securities is nearly INR 900 per share as on
the date of this letter and our holding cost has
gone up considerably. As on date, the effective
holding of KBS Trading is approximately
33,00,000 shares of ABG Shipyard amounting to
INR 270 crores. KBS Trading and the undersigned
were assured that a strategic investor shall be
infusing funds in ABG Shipyard and we were given
to understand that discernible profits would be
made-on the shares of ABG Shipyard. However,
none of the aforementioned objectives, were
achieved and the assurances were not fulfilled by
ABG Shipyard and / or its promoters. To our
knowledge, apart from the undersigned, many
other broking entities (including companies
controlled by die promoters of ABG Shipyard),
were also made to carry out a similar exercise.
Such companies took loans for the purpose of
purchase of Securities of ABG Shipyard. These
loans were, to our knowledge, secured by
guarantees and, share pledge from group
companies of ABG Shipyard, including ABG
International Private Limited, ABG Cement Hold
Co Private Limited etc! The undersigned and
several other broking entities approached by the
promoters of ABG Shipyard, are contemplating
joint and several actions against ABG Shipyard
and its promoters to make up for the loss incurred
as a consequence of the aforementioned securities
purchase undertaken at the behest of ABG
Shipyard and its promoters.”
The learned Senior Advocate submits that if the value of
the shares falls below the agreed 45% (30%+15%), it would
seriously impair the security of the plaintiffs in the loans
advanced to the defendants. He seeks an injunction against the
defendants from diluting their interests in the 45% security
margin of the shares against the loans.
CS(OS) 2941/2015 Page 13 of 44

This Court is of the view that the plaintiffs have made out
a prima facie case for an ex parte ad interim injunction and in
case such an order is not passed at this stage, their rights and
interests would be irreparably prejudiced. The balance of
convenience too lies in favour of the plaintiffs.
In the circumstances, till the next date of hearing, the
defendants are restrained from, in any manner, taking any
action which would dilute or lessen the security margin against
the shares to an amount of less than 45% of the loans advanced
by the plaintiffs to defendant Nos. 1 to 9 and are further
restrained from altering the shareholding structure and share
capital structure of defendant No.10.”

14. The background in which the aforesaid two applications have been
made by ICICI Bank Ltd. may now be taken note of.
15. The case of the applicant ICICI Bank Ltd. is that it has advanced
substantial sums of money – to the tune of Rs.4,379 Crores, to defendant
No.10. The said monies are in addition to loans advanced by various other
secured lenders. The other secured lenders/ banks who have advanced loans
to defendant No.10 are the following:
“(i) State Bank of India, (ii) Bank of Baroda, (iii) Bank of
India, (iv) Punjab National Bank, (v) IDBI Bank Limited, (vi)
Indian Overseas Bank, (vii) Export Import Bank of India, (viii)
Dena Bank, (ix) Syndicate Bank, (x) Laxmi Vilas Bank, (xi)
South Indian Bank, (xii) Oriental Bank of Commerce, (xiii)
Andhra Bank, (xiv) IFCI Limited, (xv) Indian Bank, (xvi)
Punjab and Sind Bank, (xvii) Canara Bank, (xviii) State Bank of
Patiala, (xix) State Bank of Travancore and (xx) Central Bank
of India.”
16. The applicant ICICI Bank Ltd. states that defendant No.10 is under a
restructuring scheme and a Corporate Debt Restructuring process (CDR
CS(OS) 2941/2015 Page 14 of 44

process) is already ensuing. The applicant bank is acting as the monitoring
institution (M.I.) in the said CDR process. The aforesaid 20 banks/ financial
institutions, apart from the applicant, are collectively the CDR lenders. The
present applications have been filed by ICICI Bank Ltd. in a representative
capacity as the monitoring institution for the CDR lenders, pursuant to a
joint lender meeting held on 23.12.2015, wherein the majority CDR lenders
have consented to the Strategic Debt Restructuring invocation and called
upon the applicant to take necessary steps in relation to the order dated
29.09.2015.
17. The applicant states that as on 30.09.2015, a sum of Rs.3544 Crores is
outstanding from defendant No.10 to the applicant bank alone. The
applicant has set out the particulars of the agreements entered into between
defendant No.10 on the one hand, and the lending banks on the other hand,
from time to time. The working capital finances granted by the consortium
of banks, including the applicant, was increased from Rs.865 Crores (vide a
Working Capital Consortium Agreement dated 14.02.2006), in stages, to
th
Rs.9132 Crores (vide a 7 supplementary agreement dated 29.03.2012). A
further Supplemental and Amendatory Agreement was executed between
defendant No.10 and various banks, including the applicant on 04.12.2013.
In March, 2014, defendant No.10 had an outstanding debt of INR 11,216
Crores owned to the lenders. The said debt was restructured. From out of
the 28 lenders, 22 had agreed to restructure the loans (CDR lenders total
outstanding debt was Rs.9975 Crores in March 2014). As a consequence
thereof, a CDR scheme was prepared and a provisional letter of approval by
the CDR Cell was issued on 27.03.2014 as per the RBI guidelines.
CS(OS) 2941/2015 Page 15 of 44

18. On 28.03.2014, a Master Restructuring Agreement (MRA) was
executed between defendant No.10 on the one hand, and 21 banks/ financial
institutions, including the applicant (collectively referred to as CDR lenders)
on the other hand. In relation to the salient terms of the said MRA, the
applicant has stated the following:
“1. Vide Section 2.7.9 (iv) (d) of the MRA, the Defendant
No.10 had also provided in favour of the CDR Lenders, the
right to compulsorily convert an amount aggregating to INR
1000 crores out of total INR 1561 crores, being the Funded
Interest Term Loan (FITL) and interest thereon, into equity
shares or 0.01% compulsorily convertible preference shares,
before 31.03.2016. It is stated that this is a pre-existing right
available with the CDR Lenders upon the execution of the
MRA.
2. The existing debt of ABG as on the date of execution of
the MRA, INR 11,216 crores (Rupees Eleven Thousand Two
Hundred and Sixteen crores only) was restructured.
Accordingly, the interest thus accrued (but not paid) from
01.08.2013, till certain identified dates, was converted into a
Funded Interest Term Loan. Therefore, a moratorium was
granted for different time periods with respect to different type
of facilities.
3. The repayment of certain loans was postponed until
expiry of the corresponding period of moratorium and
repayment of certain loans has already commenced from the
fiscal quarter ending on 30.09.2015.
4. Additional priority loans of a cumulative sum of INR
1,813 crores (Rupees One Thousand Eight Hundred and
Thirteen crores) was granted for three identified capital
expenditures.
5. Working capital facilities were also restructured.
CS(OS) 2941/2015 Page 16 of 44

6. Vide Section 2.4.3(viii) read with Section 6.6(ii), the
CDR Lenders also have a right to convert entire/ part of the
defaulted interest and entire/ part of the defaulted principal into
Equity Shares.
7. In addition to the existing security, vide Section 3.1.1
(vi), the Promoters (namely Rishi Agarwal and ABG
International Private Limited), agreed to pledge 15% of the
shareholding of ABG in favour of the Security trustee, namely
“3i-Infotech Trusteeship Services Limited”, for the benefit of
the CDR Lenders.
8. Further, vide Sections 3.1.1 (vi) read with 3.3, the
Promoters also agreed to pledge the balance 49% of the
shareholding of ABG in favour of the Security Trustee, for the
benefit of the CDR Lenders within 1 year of the issuance of the
CDR Letter of Approval.”
19. The applicant states that the Letter of Approval was issued by the
CDR Empowered Group on 27.03.2014. Thereafter the finalized minutes
were issued on 23.04.2014 as per which;
“1. The right to convert the debt into equity was
acknowledged therein [Clause (xiv)].
2. The obligation of the promoters to pledge the entire
shareholding of ABG was also acknowledged therein
[Clause (xvii)].”
20. On 30.12.2014, defendant No.10 submitted a compliance status on
fulfillment of various conditions stipulated under the CDR scheme. The
applicant further states that the CDR lenders were informed of the passing of
the order dated 29.09.2015 sometime in October, 2015. The applicant also
states that a majority of 17 banks out of 22 banks, forming part of the Joint
Lenders Forum (JFL) – who represent 85.5% of the total debt by value and
77% by number, approved the invocation of the Strategic Debt Restructuring
CS(OS) 2941/2015 Page 17 of 44

(SDR) in relation to the defendant No.10 in its meeting of 23.12.2015.
Thus, defendant No.10 consented to the right of the CDR lenders to
compulsorily convert a part of FITL given (being Rs.1,000/- Crores) into
equivalent shares or compulsorily convertible preference shares (before
31.03.2016). Accordingly, for the effective exercise of this contractual right
by the CDR lenders, and further in the light of the RBI prescribed SDR
mechanism, defendant No.10 would be required to issue additional shares.
The applicant states that the order dated 29.09.2015 is blocking the aforesaid
mechanism of debt restructuring of defendant No.10. The applicant states
that defendant No.10 owes a sum of Rs.13,623 Crores to the CDR lenders.
The stake of not only the applicant, but several other banks and institutions
are involved. The CDR lenders have undertaken a process of revival of the
ABG through the SDR mechanism (as prescribed by the Reserve Bank of
India) by the Joint Lenders Forum meeting dated 23.12.2015, where
majority of CDR lenders have furnished their consent.
21. The submission of the applicant is that the ex-parte ad-interim order
of injunction granted by this Court on 29.09.2015, insofar as it restrains the
alteration of the shareholding structure and share capital structure of
defendant No.10, obstructs the implementation of the SDR scheme. The
applicant submits that the aforesaid material facts & circumstances were not
disclosed by the plaintiffs to this Court while obtaining the ex-parte ad-
interim order of injunction dated 29.09.2015. The applicant submits that the
exercise of various rights created in favour of the CDR lenders under the
MRA, including the creation of pledge of the shareholding in defendant
No.10 for the benefit of the CDR lenders, and the right to convert their
CS(OS) 2941/2015 Page 18 of 44

outstanding debts into equity in defendant No.10, have been obstructed by
the passing of the ex-parte ad-interim order of injunction dated 29.09.2015.
22. Mr. Vashisht, learned senior counsel appearing for the ICICI Bank
Ltd. has firstly drawn the attention of the Court to the decision of the
Division Bench of this Court in Bhisham Sawhney and Another Vs. Union
of India & Others , 1994 (30) DRJ 318, to submit that the present
applications are maintainable at the behest of the applicant since the ex-parte
ad-interim order of injunction dated 29.09.2015 passed by this Court
prejudicially affects the applicant and the other CDR lender banks and
institutions. He submits that if the applicant can, with the leave of the Court,
prefer an appeal against the said ex-parte order of injunction, the applicant
can just as well, seek impleadment as a party defendant in the suit and pray
for vacation/ modification of the said order as well. He relies on Smt. Jatan
Kumar Golcha Vs. Golcha Properties (P) Ltd. (in liquidation) , (1970) 3
SCC 573, to submit that the ex-parte ad-interim order of injunction
prejudicially affecting the applicant and the other CDR lenders violates the
principles of natural justice, as the applicant and the other CDR lenders
were not granted any opportunity of hearing before the passing of the said
order and thus, the said order should be recalled. In this decision, the
Supreme Court also held that an appeal would be competent at the behest of
a person not a party to the proceedings who is prejudicially affected by the
order passed by the Court.
23. Mr. Vashisht submits that the rights of the plaintiffs arise from, and
are founded upon the terms of the loan agreements entered into between
plaintiff No.2 and defendants No.1 to 9 individually. Defendant Nos. 10 and
CS(OS) 2941/2015 Page 19 of 44

11 are not even party to those agreements. A reading of clauses 3.1 and 3.2
of the said loan agreements, which are identical, shows that in relation to
each of the borrowers, namely defendants No.1 to 9 – so long as the loan
balance exists and is due, the lender-namely plaintiff No.2, could require the
borrower to maintain with the lender, at all times, a margin of such
percentage (in value terms) as stipulated in the loan agreement “ consisting of
securities acceptable to the lender ”. Clause 3.2 which deals with the aspect
of additional security, stipulates that “ in the event of that market value of the
security given as margin falls, or if in the circumstances, the Lender deems
fit, the Lender may serve upon the Borrower a notice demanding additional
security/ collateral by way of delivery of further securities being securities
of companies/ mutual funds/ entities acceptable to it or any other security as
mutually agreed upon between the Borrower and the Lender … … … ”. This
clause also provides that “ the Lender will also have the option to
sell/transfer any portion of the Securities and apply the amount realized
towards liquidation of part of the Loan balance(s), so as to maintain the
Margin required under this Agreement … … … ”.
24. Mr. Vashisht submits that under the loan agreements entered into
between the plaintiff No.2 and defendants No.1 to 9, the obligation of the
borrowers, namely defendants No.1 to 9 was to maintain margin of
securities. The said loan agreements do not oblige the borrowers to maintain
the said margin by either maintaining the percentage of their shareholding in
the companies of which shares/ securities are offered as pledge, or to offer
further shares/ securities of the same company, so as to make the requisite
margin. The same do not oblige defendant Nos. 10 and/or 11 to ensure that
CS(OS) 2941/2015 Page 20 of 44

the percentage of shareholding that the pledged shares represent, should be
maintained at all times.
25. Mr. Vashisht submits that neither defendant No.10 company, nor
defendant No.11 are parties to the loan agreements entered into between
plaintiff No.2 on the one hand, and the defendants No.1 to 9 individually on
the other hand. Therefore, neither defendant No.10, nor defendant No.11
are bound by the said agreements. He further submits that the loan
agreements do not stipulate that the shareholding of the borrowers, namely
defendants No.1 to 9 in defendant No.10 company shall remain of the same
value as it existed at the time of creation of the pledge of their respective
shares by defendants No.1 to 9 in favour of plaintiff No.2, or that they would
represent the same percentage of share in defendant No.10 company
throughout the subsistence of the loan agreements.
26. Mr. Vashisht submits that a Working Capital Consortium Loan was
granted by a consortium of 11 banks, including the applicant, to defendant
No.10 as early as on 14.02.2006. The same was revised, as noticed
hereinabove from time to time, thereby granting larger working capital
th
finances to defendant No.10 of Rs.9132 Crores vide 7 supplementary
agreement dated 29.03.2012. On 28.03.2014, the MRA was entered into
between defendant No.10 and 22 banks/ financial institutions, namely the
CDR lenders. Mr. Vashisht specifically draws the attention of the Court to
clause 2.7.9 which deals with Funded Interest Term Loans (FITL) facilities,
and in particular to clause (iv) (d) thereof which, inter alia, provides:
“(d) Conversion of the FITL Facilities into CDR Equity
Shares
CS(OS) 2941/2015 Page 21 of 44

The Borrower acknowledge, confirms and agrees that with
effect from the Cut-Off Date, out of the total amount of FITL
Facility, an amount aggregating to Rs.1000,00,00,000 (Rupees
One Thousand Crores) shall be compulsorily converted into
CDR Equity Shares/0.01 CCPS before March 31, 2016.
Further, the CDR Lenders shall also have the option to convert
the balance FITL Facilities or any interest payable on the FITL
Facilities, into CDR Equity Shares/0.01 CCPS at any time
during the tenure of the FITL Facilities in accordance with this
Agreement and Applicable Laws, including but not limited to
the SEBI ICDR Regulations and the Companies Act.”
27. Thus, it has been agreed by defendant No.10 to convert an amount
aggregating to Rs.1,000/- Crores compulsorily into CDR equity shares
before 31.03.2016. The CDR lenders also have the option to convert the
balance FITL facilities or any interest payable on the FITL facilities into
CDR equity shares at any time during the tenure of FITL facilities in
accordance with the MRA. Mr. Vashisht also draws the attention of the
Court to clause 3 of the MRA dealing with the “security”, which gives
description of the security given by the borrower, namely defendant No.10
as:
“First pari passu charge over the following (Pooled Assets):
All moveable (both fixed and current assets) & immoveable
assets of the Company excluding all moveable assets pertaining
to rigs number Y-310 and Y-311, in relation to Drilling and
Offshore Pte. Ltd., Singapore.”
28. He also refers to clause 3.1.1 (vi) which obliges the promoters to
pledge 51% of their shareholding in the borrower company, namely
defendant No.10, in favour of the security trustee for the benefit of the CDR
lenders. The balance 49% of the shareholding of the promoters in the
borrower company was obliged to be pledged within one month from the
CS(OS) 2941/2015 Page 22 of 44

date of issuance of CDR LOA. The expression “promoter” has been defined
in MRA to collectively mean “Rishi Aggarwal” (defendant No.11) and
“ABG International Pvt. Ltd.” (ABGIPL). Mr. Vashisht has also referred to
the communication dated 23.04.2014 sent by the CDR Cell to the applicant
bank which conveys the decisions taken by the said Cell on 24.03.2014 in
relation to the defendant No.10 company. Some of the salient conditions set
out in the said approval letter for restructuring of debts under the CDR
mechanism are the following:
“(xiv) An amount aggregating to Rs.1000 crore out of total
FITL of Rs.1561 crore and interest thereon shall be
compulsorily converted into equity shares or 0.01%
compulsorily convertible preference shares (0.01%
CCPS) before March 31, 2016. Exim Bank to be
excluded from converting FITL into equity/ CCPS and
will continue their funding as FITL facility.
(xv) The working capital limits (post carving out irregularity)
at FBWC of Rs.1870 crore and NFB at Rs.4412 crore to
continue. Rate of interest on FBWC to be charged @
11% p.a. (ICICI BR+1%).
(xvi) Promoters shall bring in Rs.300 crore (which is 30.46%
of lenders’ sacrifice and 2.62% of restructure debt)
upfont. Sacrifice worked out at Rs.985 crore. Final
sacrifice to be calculated by each lender individually
based on their discount rate.
(xvii) Promoters to pledge their entire shareholding in ABG
out of which 51% shareholding within 3 months and
balance within 1 year.
(xviii) Promoters to pledge their entire shareholding in ABG
International Ltd. out of which 25% of shareholding
within 2 months and balance within 1 year.
CS(OS) 2941/2015 Page 23 of 44

(xix) Corporate Guarantee of ABG International Pvt. Ltd.
along with promoters’ shareholding in it shall be pledged
to lenders giving additional funding only.
(xx) Promoters to bring back investment of Rs.236 crore in
Standard Chartered Trust (Cayman) Ltd. within 2 months
and to be routed through TRA.
(xxi) Fund based priority debt will be released only after:
a. Pledge of 51% of promoters’ shareholding in ABG.
b. Pledge of 25% of promoters’ shareholding in ABG
Interntional Ltd.
c. Bringing back Rs.236 crore investments in Standard
Chartered Trust (Cayman) Ltd.”

29. Mr. Vashisht submits that the aforesaid communication shows that the
MRA entered into between CDR lenders and defendant No.10 on
28.03.2014 were in consonance with the decisions taken by the CDR Cell on
24.03.2014. Mr. Vashisht submits that on 08.06.2014, the Reserve Bank of
India came out with the SDR scheme. Under the said scheme, the CDR Cell
could consider the following options while restructuring the loan:
“ Possibility of transferring equity of the company by
promoters to the lenders to compensate for their sacrifices;
Promoters infusing more equity into their companies;
Transfer of the promoters’ holdings to a security trustee
or an escrow arrangement till turnaround of company. This
will enable a change in management control, should lenders
favour it.”
30. Attention has also been drawn to paragraph B of sub-paragraph (iii),
(iv) and (v) of paragraph 3 of the SDR scheme to submit that the same
CS(OS) 2941/2015 Page 24 of 44

provides for conversion of whole or part of the loan into equity shares and
thereafter to achieve change of ownership by transfer of the majority
shareholding in the company under debt restructuring. Mr. Vashisht submits
that the objective of the MRA is to require the promoters who are majority
shareholders in defendant No.10, to pledge 100% of their shares in the
defendant No.10 company, and also to convert a part of the debt into equity
so that, if considered necessary, a new investor could be brought into the
defendant No.10 company to revive the same.

31. He has also drawn the attention of the Court to the minutes of the
Joint Lenders Meeting held on 23.12.2015 in relation to defendant No.10,
wherein out of 22 banks present, 17 voted in favour of SDR representing
85.5% of the total debt by value and 77% by number. Accordingly, SDR
invocation was approved by majority- both by number and by value. Mr.
Vashisht submits that under clause 2.4.3 dealing with CDR package
standard conditions, the borrower, namely defendant No.10 agreed that the
CDR lenders shall have a right to convert entire/ part of defaulted amount
into equity shares in the manner provided in the MRA.
32. He has also referred to the notice given by defendant No.10 dated
13.08.2015 for calling the AGM. Along with the said notice, the Annual
Report 2014-15 is enclosed which discloses that the defendant No.10
company has made a reference under the CDR system for restructuring its
debts. It also discloses the factum of approval of the restructuring package
and the factum of defendant No.10 entering into the MRA with the CDR
lenders on 28.03.2014. It sets out that the key features of the CDR package,
which are elaborated at point No.5 under the “Director Report” forming part
CS(OS) 2941/2015 Page 25 of 44

of the Annual Report. Thus, the plaintiffs were well-aware that the agenda
for the Annual General Meeting, inter alia, proposed the passing of
resolution for conversion of debt into equity, or for issuance of further
shares/ securities, in terms of the CDR system and the MRA entered into
between defendant No.10 company and the CDR lenders. However, this
aspect was suppressed from the Court while obtaining the ex-parte ad-
interim order of injunction dated 29.09.2015.
33. Mr. Vashisht has placed reliance on the decision of this Court in IDBI
Trusteeship Services Ltd. & Anr. Vs. Arch Pharmalabs Ltd. & Ors. , 2014
(145) DRJ 175, wherein in similar circumstances, the Court modified the ex-
parte ad-interim order of injunction insofar as it operated to obstruct the
debt restructuring of the company in question. The suit had been filed by
the plaintiff against the company under restructuring, namely Arch
Pharmalabs Limited (defendant No.1) and its promoters (defendants No.2 to
4). The defendant No.1 company amassed debts of over Rs. 2718 crores
owed to several creditors. Consequently, it filed a reference with the
Corporate Debt Restructuring Empowered Group (CDREG) under the CDR
mechanism of RBI. The substance of the case set up by the plaintiffs and
the reliefs sought in the suit-which are somewhat on the same lines, as in the
present suit, are set out in the following extract from this decision:
“ 9. Thus, the sum and substance of the case set up is that the
Defendants in league with each other had induced HNI
initially to accept equity shares of Defendant no. 1 with an
undertaking to buy back the same within six months but
having failed to do so, the same were converted into NCDs for
a term of one year. However, neither the interest nor the
CS(OS) 2941/2015 Page 26 of 44

principal amount of the debentures was paid by the
Defendants.
10. In para 28 of the plaint, the Plaintiffs state as under:-
“28. The Plaintiffs apprehend that the Defendant
no. 1 may enter into such transactions involving
disposal of it's assets and business undertakings
and further issuance of equity capital which are
detrimental and prejudicial to the interests of the
Plaintiff no. 1 in its capacity as the Debenture
Trustee to the Debenture holders and for the
benefit of debenture holders and thereby directly
affecting the value of the Pledged Shared. Such
actions directly prejudice and affect the valuation
of the Pledged Shares and thereby interfering
and wrongfully prejudicing the Plaintiff no. 1's
rights in its capacity as the Debenture Trustee
under law as well as the Share Pledge Agreement
to invoke and Sell the Pledged Shares.”
11. Thus, the Plaintiffs sought the relief of declaration that
IDBI is entitled to exercise of voting rights in respect of the
fully paid up shares of Defendant no. 1 held by it and a
mandatory and permanent injunction restraining Defendants
no. 1 to 5 not to act in any manner whereby the value of the
46,77,674 fully paid up equity shares of Defendant no. 1
which had been pledged in favour of the Plaintiffs are in any
manner reduced or dissipated.”
34. Defendant No.1 filed its written statement. The position of defendant
No. 10 is similar vis-a-vis the plaintiffs on the one hand and the applicant
ICICI Bank and the other CDR lenders on the other hand. The Court
summarized the main defence of defendant No.1 in the following words:
“13. Apart from raising other defences , the plea raised by Arch
Pharma (Defendant no. 1) is that Defendant no. 1 is not a
party to the transaction including the Share Pledge
CS(OS) 2941/2015 Page 27 of 44

Agreement dated 12.04.2013. It is stated that Plaintiff no. 1
invoked the pledge on 04.10.2013 and instructed Defendant no.
1's depository participant to transfer all the shares to its demat
account. It is stated that Plaintiff no. 1 was recorded in the
answering Defendant's statement of holding as well as the
register of members as holder and Plaintiff no. 1 was
recognised as its shareholder with all the rights. Defendant no.
1 has denied that Plaintiff no. 1 was prevented from exercising
its right vis-à-vis 46,77,674 shares transferred to it. It is stated
that IDBI TSL (Plaintiff no. 1) was given entitlement to all the
rights as the share holders.
14 . It is the case of Arch Pharma that the Final Restructuring
Package for Defendant no. 1 was approved by CDREG on
26.09.2013. The Master Restructuring Agreement (MRA was
signed by 32 out of 34 CDR members and the restructuring
package is in the process of being implemented. It is averred
that Defendant no. 1 is bound by the terms of the Final
Restructuring Package and MRA and can conduct its affairs
only in accordance with the direction given by CDREG and
the Monitoring Institutions.
15. It is averred by Arch Pharma that it was the individual
decision of the HNI to avail the shares of Defendant no. 1 at
its free will. Defendant no. 1 has emphasised that since there
is no privity of contract between the Plaintiffs and Defendant
no. 1, the Plaintiffs cannot stand in the way of its CDR
package.”
[Emphasis supplied]
35. In the said case as well, ICICI Bank moved an application under
Order I Rule 10 CPC and under Order XXXIX Rule 4 CPC for vacation of
ex-parte ad-interim order of injunction obtained by the plaintiff which, inter
alia , restrained the defendant No.1 company, amongst others “ from
undertaking any sale limit sale of any undertaking and from undertaking any
Corporate Debt Restructuring ”. Some of the pleas raised by the ICICI Bank
CS(OS) 2941/2015 Page 28 of 44

Ltd in the said case-which have a striking resemblance to the pleas raised in
the present case, are recorded in the order as follows:
“18. According to the application, the NCDs were secured
by, inter alia, pledge of over 46,77,674 fully paid up, freely
transferable unencumbered shares of Defendant no. 1. The
CDR scheme is well within the knowledge of the Plaintiffs
and the Plaintiffs concealed the factum of form of CDR
scheme.
19. The applicant has emphasised that upon invocation of the
pledge, Plaintiffs have become part owners/share holders of
Defendant no. 1 whereas the applicant and CDR members
remain secured creditors of Defendant no. 1. Since Defendant
no. 1 was facing difficulty in repayment of loan amount to the
CDR members, they agreed to restructuring of the loan of
Defendant no. 1 and entered into the MRA on 27.12.2013
whereby a number of facilities including the following were
provided to Defendant no. 1:-
“Moratorium of two year on interest and principal
payment and re-scheduling of instalment of
outstanding term loan.
Interest rate reduced to 10.50% fixed for the first
two years and then to be reset based on the
financial performance of the company (Defendant
no. 1).
Interest during moratorium period to be converted
into Funded Interest Term Loan.
Repayment is assumed in 32 structured quarterly
instalments commencing from June 30, 2015 till
March 31, 2023……..”
20. According to the applicant, the Plaintiffs had concealed
material facts including execution of MRA which was well
within their knowledge. Otherwise also, since the injunction
CS(OS) 2941/2015 Page 29 of 44

order dated 23.01.2014 is prejudicially affecting the interest of
the applicant and CDR members, the applicant is a necessary
party and since the CDR package is in the interest of
Defendant no. 1, the Plaintiffs cannot stand in the way of the
restructuring package to Defendant no. 1, particularly when
there is no privity of contract between the Plaintiffs and
Defendant no. 1. Thus, the applicant prays for its impleadment
and vacation of the injunction order dated 23.01.2014.”
[Emphasis supplied]
36. The Court in its conclusion, inter alia , observed as follows:
“33. On the basis of the admitted pleadings, it is established
that there was no privity of contract between the Plaintiffs and
Defendant no. 1. There were personal guarantees given by
Defendants no. 2 to 4 and certain guarantees by other
subsidiary company promoted by Defendants no. 2 to 4.
Applicant becomes interested in the present suit in view of the
fact that it is one of the secured creditor of Defendant no. 1
company and the Plaintiffs have no right to stand in the way
of restructuring package (CDR package) offered under the
MRA.
34. In Ramesh Hirachand Kundanmal v. Municipal
Corporation of Greater Bombay, (1992) 2 SCC 524, the
Supreme Court while emphasizing wide discretion of the Court
in impleading necessary and proper parties stated that if the
intervener has a cause of action against the Plaintiff relating
to the subject matter of the existing action, the Court has
power to join the intervener to avoid multiplicity of actions.
Paras 6, 8 and 14 of the report are extracted hereunder :
6. ………………………………………………….
8. ……………………………If the intervener has
a cause of action against the plaintiff relating to
the subject matter of the existing action, the Court
has power to join the intervener so as to give effect
CS(OS) 2941/2015 Page 30 of 44

to the primary object of the order which is to avoid
multiplicity of actions.
x x x x x x x
14. ………………………. It is, therefore, necessary
that the person must be directly or legally
interested in the action in the answer, i.e., he can
say that the litigation may lead to a result which
will affect him legally that is by curtailing his
legal rights. It is difficult to say that the rule
contemplates joining as a defendant a person
whose only object is to prosecute his own cause of
action. Similar provision was considered in
Amon v. Raphael Tuck & Sons Ltd. [(1956) 1 All
ER 273 : (1956) 1 QB 357], wherein after quoting
the observations of Wynn-Parry, J. in Dollfus Mieg
et Compagnie S.A. v. Bank of England [(1950) 2
All ER 605, 611], that their true test lies not so
much in an analysis of what are the constituents of
the applicants' rights, but rather in what would be
the result on the subject matter of the action if
those rights could be established, Devlin, J. has
stated:
“The test is ‘May the order for which
the plaintiff is asking directly affect
the intervener in the enjoyment of his
legal rights’.”
35. The applicant stands on a better footing than in the cases
of Moser Bear India Limited and Deutsche Trustee Company
Ltd. in as much as in the instant case, there is no privity of
contract between the Plaintiffs and Defendant no. 1 and thus,
the Plaintiffs have no right to object to the CDR scheme
formulated by the applicant and the interim order is operating
against the applicant also.
CS(OS) 2941/2015 Page 31 of 44

36. Consequently, the applicant is permitted to be impleaded as
a proper party to the present suit. I.A. No. 8777/2014 is allowed
accordingly.
37. Order dated 23.01.2014 is liable to be modified to the
extent it operates against Defendant no. 1 as, as stated earlier,
the Plaintiffs were entitled to enforce their rights only against
Defendants no. 2 to 8.
38. It goes without saying that Plaintiff no. 1 has all the rights
of pledged shares as if Plaintiff no. 1 is shareholder which it
is at liberty to exercise. So, the order dated 23.1.2014 is
modified and set aside so far as it operates against Defendant
no. 1.” (emphasis supplied)

37. Mr. Vashisht also placed reliance on Morgan Stanley Mutual Fund
Vs. Kartick Das , (1994) 4 SCC 225, to submit that as a principle, ex-parte
injunction should be granted only under exceptional circumstances and,
even if granted, the ex-parte injunction should be for a limited period of
time. He submits that the aforesaid ex-parte ad-interim order of injunction
dated 29.09.2015 is seriously prejudicing the implementation of the SDR
scheme.
38. On the other hand, Mr. Rajiv Nayar, learned senior counsel for the
plaintiff in opposition to the present applications submits that the conditions
set out in the meeting of the General Lenders held on 23.12.2015 have not
been met till date. These standing conditions taken note of in the said
minutes are as follows:
“Pending conditions
Infusion additional promoter’s contribution of Rs.1.80 billion;
CS(OS) 2941/2015 Page 32 of 44

Creation of pledge over promoter’s shareholding in the
Company;
Creation of pledge over shares of holding company (ABG
International Limited) and one group company (ABG Shipyard
Singapore Pte. Limited);
Realisation of investment in SCB sponsored Cayman Island
based mutual fund amounting to Rs.2.36 billion; and
Creation and perfection of charge over entire immoveable
assets of ABG Shipyard Limited.”
39. Similarly, the conditions Nos. (xvii), (xx) & (xxi) set out in the
communication dated 23.04.2013 conveying the decision taken by the
CDREG on 24.03.2014 which have been set out hereinabove have still not
been fulfilled. On the contrary, it has been disclosed by the applicant in I.A.
No.1612/2016 that additional priority loans of cumulative sum of Rs.1813
Crores were granted for 3 identifiable capital expenditures to defendant
No.10. Mr. Nayyar submits that in the face of the aforesaid factual
background, the plea of the applicant premised upon the CDR and the MRA
are red herring. He submits that CDR has not taken off at all.
40. Mr. Nayar further submits that the present applications have been
filed highly belatedly. The interim order have been passed by this Court on
29.09.2015 of which the applicant derived knowledge in October 2015. The
present applications have been filed 5 months later on 02.02.2016. Mr.
Nayar submits that the applicant ICICI Bank is neither a necessary nor a
property party to the present suit and is not entitled to either seek
impleadment or variation of ex-parte ad-interim order of injunction. In
support of his submission he has placed reliance on Mumbai International
CS(OS) 2941/2015 Page 33 of 44

Airport Pvt. Ltd. Vs. Regency Convention Centre & Hotels Pvt. Ltd. and
Others , (2010) 7 SCC 417 : Civil Appeal No.4900/2010 decided by the
Supreme Court on 06.07.2010. In answer to the plea of the applicant that
there is no privity of contract between plaintiffs and defendants No.10 & 11,
Mr. Nayar placed reliance on the communication dated 21.09.2015 issued by
Jaroli Vincom Pvt. Ltd., KBS Trading Pvt. Ltd., GKK Capital Markets Pvt.
Ltd and Navin Khandelwal, who are defendants No.1, 2, 6 & 8 respectively
in the present suit. The said defendants have acknowledged in their reply to
the plaintiff’s notice of 08.09.2015, that the loans had been taken by them
for purchase of shares of ABGSL from stock market “ at the request and
under the instructions of the promoters of ABG Shipyard as well as company
ABG Shipyard ”. They stated that in their aforesaid reply that the promoters
of ABG Shipyard approached them to purchase shares of ABGSL.
41. Mr. Nayar submits that 24.5% shares of ABGSL/ defendant No.10
stand pledged to the plaintiffs. In this regard, reliance is also placed upon
the written statement filed by defendants No.1, 2, 6 & 8 and in particular
paragraphs 3 to 6 thereof. Mr. Nayar submits that there is no suppression
made by the plaintiffs in their plaint in relation to the debt restructuring
process undertaken by defendant No.10. He submits that sufficient
disclosure has been made in this regard in paragraph 16(r) of the plaint,
wherein they have stated that “ The plaintiffs are also given to understand
that defendant No.11 is pursuing debt restructuring or other restructuring of
defendant No.10 company ”. Mr. Nayar submits that the decision relied upon
by the applicant ICICI Bank in IDBI Trusteeship Services Ltd. (supra) is
not applicable in the facts of the present case, as there are material
CS(OS) 2941/2015 Page 34 of 44

differences in the two. Mr. Nayar submits that in the said decision, the ex-
parte ad-interim order of injunction passed by the Court restrained the
corporate or debt restructuring of the defendant No.1 company, namely M/s
Arch Pharmalabs Ltd. However, no such injunction was sought by the
plaintiff in the present case, and none had been granted.
42. At this stage, I may also take note of the fact that the plaintiff moved
I.A. No.7013/2016 after orders were reserved in the aforesaid applications,
to submit that the Monitoring Committee in its meeting held on 19.05.2016
has decided that the CDR has failed. On the other hand, the submission of
learned senior counsel for the applicant ICICI Bank is that, in any event, the
rights of ICICI Bank under the Master Restructuring Agreement and under
the SDR system – to bring in strategic investors, are preserved.
43. Mr. Chandhiok, learned senior counsel appearing for defendants
No.10 & 11 submits that the total shareholding of the plaintiffs over which
they have control – including the pledged shares of defendants No. 1 to 9, in
defendant No.10 company are presently to the tune of 24.05%. He further
submits that the plaintiffs have admitted the receipt of the notice of the
AGM dated 13.08.2015 and they have also admitted that defendant No.11 is
pursuing debt restructuring of defendant No.10 company. He points out that
the outside liability of defendant No.10-which was non-performing, was to
the tune of Rs.1805 Crores. The same is to be restructured.

44. Having heard learned counsels and perused the record referred to and
the decisions relied upon, I am of the view that both the applications of the
applicant ICICI Bank have merit and deserve to be allowed. The ex-parte
CS(OS) 2941/2015 Page 35 of 44

ad-interim order of injunction granted by this Court as extracted above,
undisputedly, comes in the way of the applicant and the other lender banks
in proceeding with and implementing the CDR/ SDR or the MRA, and
exercising their rights as lenders. Under the said process, the lender banks,
who are secured creditors, are entitled to convert the outstanding loans and
interest into equity. The promoters of defendant No.10 are also obliged to
pledge their 100% shares, and under the restructuring scheme, the applicant
ICICI Bank and the other lenders can bring in a strategic investor so as to
bring about a change of management coupled with infusion of funds, so that
the debts and liabilities of defendant No.10 company could be met. The ex-
parte ad-interim order of injunction comes in the way of the said process
inasmuch, as, the same restrains all the defendants, which include
defendants No.10 & 11 as well from “ altering the shareholding structure
and share capital structure of defendant No.10 ”. In the light of the
decisions of the Division Bench of this Court in Bhisham Sawhney (supra)
and of the Supreme Court in Smt. Jatan Kumar Golcha (supra), it is clear
that the applicant ICICI Bank would be entitled to ventilate its grievance
against the ex-parte ad-interim order of injunction by preferring an appeal
and, therefore, it is equally available to the applicant ICICI Bank to
approach this Court itself for vacation/ modification of ex-parte ad-interim
order of injunction while, at the same time, seek impleadment as a party
defendant in the suit to oppose the grant of such a wide and sweeping order
of injunction, which comes in the way of the applicant in proceeding with
the implementation of the CDR/ SDR scheme and the enforcement of the
rights of the applicant under the Master Restructuring Agreement. The
CS(OS) 2941/2015 Page 36 of 44

decision of this Court in IDBI Trusteeship Services Ltd. (supra) is also
relevant and squarely applies to the facts of the present case.
45. Reliance placed by Mr. Nayar on Mumbai International Airport Pvt.
Ltd. (supra) appears to be completely misplaced, as that was a very different
case on facts. In this case, the Mumbai International Airport Pvt. Ltd.
sought impleadment as a defendant in a pending action between the
respondent Regency Convention Centre and Hotels Pvt. Ltd. and the
Airports Authority of India, on the ground that the development of the
Chhatrapati Shivaji International Airport, Mumbai had been handed over to
the appellant for maintenance, development and expansion by the Airports
Authority of India. In the suit between Regency Convention Centre and
Hotels Pvt. Ltd and the Airports Authority of India an order of injunction
had been passed in favour of the plaintiff. It was in this background that the
Supreme Court in paragraph 14 observed as follows:
“14. On a careful examination of the facts of this case, we find
that the appellant is neither a necessary party nor a proper
party. As noticed above, the appellant is neither a purchaser
nor the lessee of the suit property and has no right, title or
interest therein. The first respondent-plaintiff in the suit has not
sought any relief against the appellant. The presence of the
appellant is not necessary for passing an effective decree in the
suit for specific performance. Nor is its presence necessary for
complete and effective adjudication of the matters in issue in
the suit for specific performance filed by the first respondent-
plaintiff against AAI. A person who expects to get a lease from
the defendant in a suit for specific performance in the event of
the suit being dismissed, cannot be said to be a person having
some semblance of title in the property in dispute.”
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46. The same cannot be said to be true in the facts of the present case.
The applicant ICICI Bank and the other lenders are seeking to enforce their
rights under the CDR/ SDR system and the Master Restructuring Agreement
with defendants No.10 & 11. It is the plaintiffs, who have obtained an ex-
parte ad-interim order of injunction which has interdicted the
implementation of the debt restructuring process under the CDR/ SDR and
the MRA.
47. In IDBI Trusteeship Services Ltd. (supra) the fact situation was more
or less identical with that of the present case. Accordingly, the locus of the
applicant to get impleaded as a party defendant is clearly established and the
application for impleadment deserves to be allowed. It is ordered
accordingly.
48. For grant and continuation of interim injunction in favour of the
plaintiffs, the plaintiffs have to stand on their own feet and make out a
strong prima facie case in its favour; demonstrate that the balance of
convenience is in its favour, and; that the denial of the injunction would
cause irreparable injury to the plaintiff. The rights of the plaintiffs
primarily stem from the loan agreements entered into between plaintiff No.2
and defendants No.1 to 9 from time to time. The said loan agreements
contain standard terms & conditions on a printed form. Admittedly, neither
defendant No.10 ABGSL, nor defendant No.11-the promoter of ABSL are
parties to the said loan agreements. Under the said loan agreements, the
borrowers, namely defendants No.1 to 9 respectively bound themselves to
repay the loan and interest taken by each of them from plaintiff No.2. The
obligation to provide security/ margin and additional security was also that
CS(OS) 2941/2015 Page 38 of 44

of defendants No.1 to 9 individually, and no such obligation was undertaken
by either defendant No.10 or defendant No.11. Clauses 3.1 and 3.2 of the
loan agreements do not stipulate that the additional security to be furnished
(in case the valuation of the security initially furnished falls below the
stipulated value), should be of the same kind and nature, as had been
initially provided by the borrower while taking the loan. The only
requirement is that the margin has to be in respect of “securities acceptable
to the lender”. The expression “securities” is also defined in the loan
agreements to mean:
“as acceptable to the lender, shares, scrips, stocks, debt
instruments (including but not limited to debentures, bonds,
RBI relief Bonds, deposits, collateralized debt obligations and
securitized debt instruments), government securities, units of
mutual Funds, units of collective investment schemes,
promissory notes, annuities, FDRs, guarantees, bullion,
movable or immovable property, security receipt as defined
under the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act; derivate instruments
and securities as defined in the Securities Contract Regulation
Act.”
49. Therefore, the securities need not necessarily be in the form of further
shares of defendant No.10 alone. In fact, defendants No.1 to 9 may not even
be holding shares of defendant No.10 beyond what are already pledged as
security under the respective loan agreements with plaintiff No.2.
Consequently, under the loan agreements, the plaintiffs cannot insist on
issuance of further securities in the form of shares of defendant No.10 by the
borrowers, namely defendants No.1 to 9. Under the loan agreements, the
defendants No.1 to 9 did not hold out any representation or promise to
plaintiff No.2 that their respective shareholdings in defendant No.10 shall
CS(OS) 2941/2015 Page 39 of 44

continue to be maintained at the same level i.e. percentage, as it existed on
the day when the shares were offered and accepted as security by plaintiff
No.2. Being ordinary shareholders, defendants No.1 to 9, in any event,
could not have made any such representation or promise, and even if the
same were to be made the same would not bind defendant No.10, or its
promoter defendant No.11.
50. The submission of the plaintiffs that defendants No.1 to 9 have been
set up by defendant No.11 is neither here nor there. There is no material
placed on record by the plaintiffs to corroborate this assertion, apart from the
reply of defendant Nos. 1, 2, 6 and 8 aforesaid. Even if it were to be
assumed for the sake of argument that defendant No.11 prompted defendant
Nos.1 to 9 to purchase the shares that were being offloaded by the erstwhile
strategic investor, with the further representation that they would earn
handsome returns thereon, and based on that representation defendants No.1
to 9 obtained loans from plaintiff No.2, the same would not prevent
defendants No.10 & 11 from undertaking restructuring of the secured loans
advanced by banks and financial institutions to defendant No.10. From the
averments of the applicant, it is clear that the consortium of banks, including
the applicant ICICI Bank had been engaged in financing the business of
defendant No.10 since 2006. Their exposure kept on increasing, and finally
when defendant No.10 appeared to be in no position to service the loans and
interest advanced by the applicant and other banks, defendant No.10 sought
restructuring of the loans by resort to CDR/ SDR. Defendants No.10 and 11
have entered into the said process and also executed the Master
Restructuring Agreement (MRA) with a view to salvage the poor financial
CS(OS) 2941/2015 Page 40 of 44

condition of defendant No.10. Being secured creditors, the applicant bank
and the other consortium lenders were entitled to resort to the CDR/SDR
route and to enter into the Master Restructuring Agreement with defendants
No.10 & 11 to recover their loans. The mechanism for restricting of
defendant No. 10 undertaken by the applicant and the other 20 odd banks is
well recognized and promoted by the RBI.
51. Pertinently, in the present suit, this Court is not concerned with the
issue as to whether or not the terms & conditions of the CDR/ SDR process
have been met and complied with. That is a matter for the lender banks and
defendants No.10 & 11 to look into and sort out. As a shareholder, or a
lender to shareholder, who create a pledge of their shares of defendant
No.10 to secure their loans, the plaintiffs prima facie has no right to interfere
with the process of restructuring of debts being undertaken by defendants
No.10 & 11 with the applicant bank and the other banks and financial
institutions.
52. Merely because in the process of restructuring of the loans granted by
the applicant ICICI Bank and other lender banks the percentage of
shareholding held and pledged to the plaintiffs in defendant No.10 falls,
prima facie, does give a cause of action in favour of the plaintiff to seek a
restraint against defendants No.10 & 11 from altering the shareholding
structure or share capital structure of defendant No.10. The plaintiffs have
their defined rights under the loan agreements with defendants No.1 to 9 and
so far as those rights are concerned, the plaintiffs are well within their rights
to enforce the same. However, there is no right vested in the plaintiffs by
virtue of the loan agreements, which binds defendant Nos.10 & 11 not to
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alter the shareholding structure or capital structure of defendant No.10.
Pertinently neither defendant No.10 nor defendant No.11 are indebted to the
plaintiffs in any manner, nor are they parties to the loan agreements.
53. In IDBI Trusteeship Services Ltd. (supra), the learned Single Judge
quoted the following extract from Moser Bear India Limited Vs. Citibank
N.A., London Branch , Company Appeal No.114/2012 decided on
20.12.2012:
“5. Undoubtedly allowing the appellant Company to sign the
documents under the CDR process would tantamount to
creation of further charge in favour of the banks/financial
institutions which are already having a first charge over the
assets of the appellant Company. We are however not
impressed with the doubts expressed by the respondent as to the
viability of the revival scheme of the appellant Company. It can
safely be assumed that the banks/financial institutions and the
CDR machinery created by the RBI would not have agreed to
re-structure the debt and/or grant further financial facilities
to the appellant Company without being satisfied as to the
possibility of the revival of the appellant Company.
6. It is the settled position in law that the Company would not
be ordered to be wound up merely because the debt is admitted.
Winding up of a Company affects a large number of other
persons/entities also including the workers and the others
associated with the business of the Company. Though the
appellant Company owes a considerable amount to the
respondent but is indebted in a much larger amount to the
other secured creditors who at present are supporting revival
rather than winding up of the appellant company. The
respondent is admittedly an unsecured creditor. We are of the
opinion that if at this stage, the impugned order is allowed to
come in the way of the proposal for revival of the appellant
Company which had been sanctioned by the machinery set-up
in this regard by the RBI and which has the approval of the
CS(OS) 2941/2015 Page 42 of 44

banks and financial institutions, the same may cause
irreparable injury not only to the appellant Company but also
to other creditors, workers and others associated with the
business of the appellant company.”
[ emphasis supplied ]
54. In Moser Bear India Limited (supra), the Court accordingly,
modified the interim injunction to permit the execution of the Master
Restructuring Agreement under the CDR process. In IDBI Trusteeship
Services Ltd. (supra), the court also took note of Deutsche Trustee
Company Ltd. Vs. Tulip Telecom Ltd. , Co. App. No. 1529/2013, decided
on 16.04.2014, where the request of the Plaintiff being unsecured creditors
seeking injunction against CDR scheme was declined by this Court,
and Kotak Mahindra Bank Ltd. v. Arch Pharmalab Pvt. Ltd. , Exh. 20 & 26
in OA No. 33/2014, decided by Mumbai Debts Recovery Tribunal-III
on 30.04.2014, where ex-parte interim injunction passed against the
Defendant company was vacated by the Debts Recovery Tribunal - III,
Mumbai so that CDR scheme could be pursued.
55. As already noted hereinabove, in IDBI Trusteeship Services Ltd.
(supra), on the basis that there is no privity of contract between the plaintiffs
and the defendant No.1 company – who was under restructuring of debts,
the Court vacated the injunction insofar as it interfered with the restructuring
package (CDR Package). In my view, there is no inordinate delay in
moving the applications by the applicants. The failure of the CDR
mechanism is also not relevant for the present purpose. Even if that fails, it
does not entitle the plaintiff to seek an injunction qua alteration of the
CS(OS) 2941/2015 Page 43 of 44

shareholding structure and share capital structure of the defendant No. 10
company.
56. For all the aforesaid reasons, the applicant’s application under Order
XXXIX Rule 4 CPC being I.A. No. 1612/2016 is also allowed, and the
interim order dated 29.09.2015 is modified to the extent that the same shall
not come in the way of defendants No.10 & 11 from altering the
shareholding structure and share capital structure of defendant No.10
ABGSL. It is, however, clarified that the plaintiffs shall continue to enjoy
the rights in respect of shares of defendant No.10 company held by them as
shareholders and in respect of shares pledged with them by defendants No.1
to 9 under the respective loan agreements.
57. The applications stand disposed of in the aforesaid terms leaving the
parties to bear their respective costs.


(VIPIN SANGHI)
JUDGE
JULY 11, 2016

CS(OS) 2941/2015 Page 44 of 44