BANK OF BAHARAIN AND KUWAIT B.S.C. Vs. GSL (INDIA) LTD. AND ORS.

JUDGEMENT

(1.) THIS is an application For recovery of Rs. 5,02,77,239/ - with interest @ 23% p.a., being dues under Letter of Credit (L/C) Account.

(2.) THE Borrower (defendant No. 1) is a company of which defendant Nos. 2 and 3 are Directors but sued as guarantors. These defendants along with defendant Nos. 4 to 7 are sued as pledgers of shares of defendant No. 1 company. The defendant Nos. 4 and 5 are family members of defendant Nos. 2 and 3. The defendant Nos. 6 and 7 are sister companies of defendant No. 1.

(3.) THE defendant No. 1 by letter dated 8.4.1996 eventually requested the applicant to convert the outstanding amount under the L/C into term loan and offered to repay the same by quarterly instalments beginning from January 1997. H also offered to pledge its shares held by its promoters and associates worth Rs. 350 lakh. The applicant by letter dated 20.7.1996 approved the proposal to restructure the L/C overdues into term loan on certain terms and conditions contained in the letter. The defendant No. 1 by letter dated 20.9.1996 forwarded to the applicant 350 lakh shares of defendant No. 1 held by persons/companies mentioned in the letter as and by way of pledge to secure the amount due under the term loan facility. The defendant No. 1 however did not comply with the terms and conditions. By letter dated 14.10.1996, the defendant No. 1 further forwarded additional one lakh shares of defendant No. 1 company also as and by way of pledge to secure the amount due under the term loan facility. The applicant received share certificates in respect of the aforesaid shares along with transfer forms duly signed by the holder. The applicant also received resolutions passed by the companies who held some of the shares resolving to pledge the shares. The applicant by letter dated 6.11.1996 forwarded the aforesaid 4.50 lakh pledged shares for transferring in its name. The defendant No. 1 by letter dated 26.12.1996 informed the applicant that the shares duly transferred would be returned to the applicant after the approval of the shares transfer committee of defendant No. 1. But, subsequently by letter dated 28.12.1996, it requested that 1.50 lakh shares held by three companies mentioned in the letter and pledged with the applicant be returned and substituted by shares held by defendant Nos. 4 and 5 which were forwarded with the letter. The applicant agreed to the substitution and under the two letters dated 30.12.1996, the new 1.50 lakh shares were also sent to defendant No. 1 for the purpose of transfer. The defendant No. 1 however failed and neglected to return the said shares duly transferred in the name of the applicant. The applicant avers that as defendant No. 1 failed to return the shares and as it did not receive personal guarantee of defendant Nos. 2 and 3, the L/C overdues could not be converted into loan account. The applicant therefore by Advocate's letter dated 19.2.1997 called upon defendant Nos. 1 to 3 to pay the amounts. Therefore this original application for recovery of the amount by sale of pledged shares and of the hypothecated properties.