COVID-19 pandemic: Vikram Nankani, Vineet Naik, Somasekhar with Naik Naik get interim relief for Future Group from Bombay High Court

In view of the prevailing market situation due to the COVID-19 pandemic, the Bombay High Court today restrained IDBI Bank and others from selling the pledged shares of Future Retail Ltd. .The interim order was passed by a Single Judge Bench of Justice KK Tated. .Future Corporate Resources Pvt Ltd is the promoter of Future Retail Ltd (FRL) and the holding company of Rural Fairprice Wholesale Ltd..It had pledged the equity shares held by it in FRL, as security for the debentures issued by Rural Fairprice Wholesale Ltd..Threatening to sell these pledged shares, IDBI Trusteeship Services Ltd, in its capacity as a debenture trustee, issued notices of default to Future Corporate Resources Pvt Ltd and Rural Fairprice Wholesale Ltd by reason of the latter’s inability to maintain the minimum-security cover stipulated in the Debenture Trust Deeds..Rural Fairprice Wholesale Ltd and Future Corporate Resources Pvt Ltd (Plaintiffs) thus moved the High Court seeking urgent declaratory and injunctive relief against IDBI Bank and others in connection with the threatened invocation and/or sale of FRL shares..Pressing for an ad-interim relief at this stage, the Plaintiffs argued that if the shares are sold in the present situation, an irreparable loss would be caused to them..It was submitted that the inability to maintain the contractually stipulated minimum-security cover was solely attributable to the unprecedented outbreak of COVID-19 pandemic..It was stated that the Plaintiffs engaged in the retail business and with malls, stores, shops, and other public places shut for safety and well being of the public, business houses like Future Group have been severely affected..The Court was further informed that the fall in the stock price of FRL from Rs 376.15 on February 17, 2020, to Rs 138.4 on March 17, 2020 was on account of the overall tanking of the stock market due to the COVID-19 pandemic..Arguing that such a situation could not have been contemplated by either parties, the Plaintiffs asserted that threatening to sell the pledged shares in these circumstances was unfair, disproportionate, commercially unreasonable and untenable in law or equity..It was also submitted that as per Debenture Trust Deed, IDBI Banks and others were fully secured and till date, there was not a single default in payment with respect to the debentures..One of the Defendants, UBS AG London Branch opposed grant of any ad -interim injunction on the ground that as on today, they had to recover more than Rs 610 Crores and as per the present market value, valuation of shares are not more than Rs. 350 Crores..After hearing the parties, the Court noted that when the Debenture Trust Deed was executed, market value of the shares were Rs 350 per share and because of COVID-19, share market had collapsed and the per share calue had come below Rs 100..The Court thus opined, .Considering the present situation of market and COVID-19, I am of the opinion that plaintiffs are required ad-interim protection till next date.Bombay High Court.Accordingly, the Court issued a temporary injunction on the sale notices issued by IDBI and other Defendants for sale of pledged FRL shares..The Plaintiffs were represented by Senior Advocates Vikram Nankani, Vineet Naik with Advocates Somshekhar Sundaresan and Sumeet Nankani. The counsel were instructed by Naik Naik and Company..UBS was represented by Advocates Anirudh Hariani, Varghese Thomas, Hormaz Mehta, Yohaan Limathwal. Counsel were briefed by J Sagar Associate. .The matter would be heard next on May 4. .Read the Order: