Delhi High Court restrains Hero Fincorp from invoking any third party rights in shares pledged by Petitioner

The High Court of Delhi by an order dated 2nd July, 2020 has restrained Hero Fincorp Ltd. from selling, invoking or creating any third party rights in the shares pledged by Jayneer Infrapower & Multiventures Pvt. Ltd, 25FPS Media Pvt. Ltd. and Asian Satellite Broadcast Pvt. Ltd.

The order dated 02.07.2020 was passed in a Petition under Section 9 of the Arbitration &
Conciliation Act, 1996 preferred by Jayneer Infrapower & Multiventures Pvt. Ltd, 25FPS Media Pvt. Ltd. and Asian Satellite Broadcast Pvt. Ltd before the High Court of Delhi seeking a restrain against Hero Fincorp Ltd. from invoking, selling, alienating, and/or in any manner creating third party interests in the shares pledged by them.

Trust Legal advised and represented Jayneer Infrapower & Multiventures Pvt. Ltd, 25FPS Media Pvt. Ltd. and Asian Satellite Broadcast Pvt. Ltd. Arguments on behalf of the Petitioners were led by Mr. Joy Basu, Sr Advocate, and instructed by the Trust Legal team comprising of Partners Mr. Sudhir Mishra, Ms. Ritwika Nanda, and Ms. Petal Chandhok.

Hero Fincorp Ltd. was represented by Cyril Amarchand Mangaldas and led by Mr. Sandeep Sethi, Sr Advocate.

The dispute between the parties arose when Hero Fincorp sought to invoke the shares pledged by the Petitioners to secure a loan facility which now stands re-paid, on the argument that in terms of the loan facility agreement, pledges, and securities were cross collaterised and irrespective of the repayment of the loan, the pledged shares can be invoked for the breach of other loan facilities availed by the common borrower.

The High Court while passing the order dated 02 July 2020 has inter alia, held that at the stage of deciding a Petition under Section 9 A&C Act, the Hon’ble Court is only required to hold a prima facie view. The High Court held that the intention of the parties and the interpretation of the agreement has to be done on a conjoint reading of all the terms rather than basing it on select provisions. The High Court further held that in view of slight incongruity in the clauses of the Agreements, the clauses have to be read harmoniously in a manner to gauge the true intent of the parties.

On a conjoint reading of the agreements, the Hon’ble High Court held that the Petitioners have a prima facie case and the balance of convenience also lies in favour of the Petitioners.