Bombay High Court Condemns ‘Prejudicial’ Delay, Quashes Injunction Order in Pledged Shares Dispute, Directs Expedited Hearing
Kiran Raj
The Bombay High Court has set aside an order that made an ad-interim injunction permanent in a commercial dispute involving pledged shares. The division bench, comprising Chief Justice Alok Aradhe and Justice Bharati Dangre, stated that the significant delay in pronouncing the order caused prejudice to the appellants. The court has directed a fresh adjudication of the injunction application within six weeks.
The appeals arose from a commercial dispute concerning pledged shares between Ashok Investors Trust Ltd., DBS Bank India Ltd., and Subhakaran and Sons (appellants) on one side, and Cheerful Trade & Realty Developers Pvt. Ltd. (formerly known as Prawas Leasing & Finance Pvt. Ltd.) and Aristo Realty Developers Ltd. (respondents) on the other.
The dispute originated when Lakshmi Vilas Bank Ltd. (later merged with DBS Bank India Ltd.) sanctioned a credit facility to one of the defendants. As security, the plaintiffs pledged shares of M/s. Shree Global Tradefin Ltd. (SGTL) in favor of the bank. Between 2008 and 2012, a total of 75,00,000 shares were pledged through various pledge agreements.
The plaintiffs alleged that the pledged shares were no longer enforceable and sought their return. In 2021, they filed a commercial suit seeking a declaration that there was no valid pledge and an injunction restraining the defendant bank from selling the shares. The single judge granted an ad-interim injunction on October 26, 2021, preventing the sale of the shares.
Subsequently, the plaintiffs filed another interim application in 2022 seeking disclosure of shares already sold and the deposit of proceeds with them. The single judge heard arguments on May 18, 2022, but only passed an order on June 5, 2023, making the ad-interim injunction permanent.
The appellants challenged this decision on the grounds that the delay in pronouncing the order caused undue prejudice and that their arguments were not adequately considered.
The division bench examined whether the delay of over a year in pronouncing the order had prejudiced the appellants. Citing precedents, the court noted:
"Judicial discipline requires promptness in delivery of judgment. The delay in delivery of the judgment/order deprives an aggrieved person of an opportunity to approach the higher forum."
The court observed that the Commercial Courts Act, 2015, mandates that judgments be delivered within 90 days of concluding arguments. Since arguments had concluded on May 18, 2022, and the order was issued on June 5, 2023, the delay violated statutory requirements.
The bench also found that the single judge did not sufficiently address the essential ingredients of an injunction—prima facie case, balance of convenience, and irreparable harm. Instead, the order primarily analysed the validity of certain supplemental agreements executed in 2017, which the plaintiffs contested as forged and fabricated.
The appellants contended that the pledged shares were continuous security and that the plaintiffs’ failure to demand their return between 2013 and 2021 indicated that the pledges had not expired. The appellants argued that under the law, pledged shares could be redeemed by repaying the loan at any time before their lawful sale. The single judge’s order did not engage with this argument in depth.
The respondents, on the other hand, asserted that the delay in judgment alone was not sufficient grounds for setting aside the order. They contended that the appellants had failed to comply with previous court directions and could not seek relief without fulfilling their obligations under the ad-interim order. The respondents further argued that the plaintiffs had not pledged their own shares but were seeking to enforce contractual obligations against the bank.
The bench noted that the single judge had recorded the plaintiffs’ arguments in paragraph 8 and 9 of the order but did not sufficiently consider them while delivering the final decision. The court found the reasoning in paragraph 14 of the order inadequate for confirming the injunction.
The Bombay High Court stated that the significant delay in pronouncing the order, coupled with the failure to adequately consider the appellants’ arguments, caused prejudice to them. Consequently, it quashed the order dated June 5, 2023, and remanded the case for a fresh decision on the injunction application. The court directed:
"The learned Single Judge is requested to decide the application for temporary injunction within a period of six weeks from today."
The court also noted that before the ad-interim order was issued on October 26, 2021, 16,00,000 pledged shares had already been sold. The appellants had been restrained from alienating the remaining shares. To prevent further prejudice, the division bench maintained this restriction, stating that until the fresh decision was made, the remaining shares should not be alienated, transferred, or disposed of.
Advocates Representing the Parties
- For Appellant in COMAPL 21452/2023 (Ashok Investors Trust Ltd.): Mr. Zal Andhyarujina, Senior Advocate, with Ms. Akanksha Agarwal and Mr. Rohan Vasa, instructed by Argus Partners.
- For Appellant in Commercial Appeal (L) No. 21524/2023 (DBS Bank India Ltd.): Mr. Atharva A. Dandekar.
- For Appellant in COMAPL 21538/2023 (Subhakaran and Sons): Mr. Neerav Merchant with Ms. Neha Surte, instructed by Thakordas & Madgavkar.
- For Respondents (Cheerful Trade & Realty Developers Pvt. Ltd. & Aristo Realty Developers Ltd.) in all appeals: Mr. Ashish Kamat, Senior Advocate, with Ms. Simantinee Mohite, Mr. S.K. Srivastav, Ms. Malika Mondal, and Mr. Hitanshu Jain, instructed by S.K. Srivastav & Co.
Case Title: Ashok Investors Trust Ltd. & Ors. v. Cheerful Trade & Realty Developers Pvt. Ltd. & Ors.
Neutral Citation: 2025: BHC-OS:3678-DB
Case Number: Commercial Appeal (L) No. 21452 of 2023 & connected matters
Bench: Chief Justice Alok Aradhe & Justice Bharati Dangre
[Read/Download order]
