Lenders can claim dues only after passing of Interim Award

Bombay High Court: In a case of a company involved in a dispute and undergoing arbitration, a bench comprising of G.S. Patel, J. directed its lenders to wait for the passing of interim award before taking steps to get their money back. In the instant case, a company was incorporated to construct a bridge on a build, operate and transfer basis. A tax policy announced subsequently gave vehicles operating within a 5 km radius a substantial discount in toll rates, which affected the profitability and feasibility of the project. As the plaintiffs were unable to service their debts, the lender banks moved to sell off the pledged shares. The plaintiff company then approached the Court to restrain the lender banks from selling off the pledged shares before the passing of interim award in an arbitration between the company and State Government as they were expecting a favourable decision.

The Court held the request of the plaintiffs to be ‘reasonable’ and ‘moderate’ and in interest of both the parties and thereby directed the consortium of lenders to wait for arbitrators to pass the interim award. The Court further clarified that if the Interim Arbitral Award was not in favour of the Plaintiffs, the Defendants would be at liberty to immediately take steps to enforce the pledged security of 20,00,000 shares of the company without further reference to the Court. The lenders could sell pledged shares as well as invoke the personal guarantee given by the company’s promoters and directors. Kalyan Sangam Infratech Ltd vs. IDBI Bank Ltd, 2015 SCC OnLine Bom 2055 10-04-2015