Stay on Invocation of Pledged Shares

In the matter of Rural Fairprice Wholesale Limited & Anr. v. IDBI Trusteeship Services Limited & Ors., the High Court of Bombay granted an ad interim relief to the Petitioner by restraining IDBI Trusteeship Limited (“Trustee”) from selling the shares pledged to them by Petitioner Company, to secure the repayment obligations of the Petitioner under the debenture trust deed (“DTD”).


The value of the pledge shares, being Rs. 350 per share on the date of execution date of the DTD had fallen to less than Rs. 100 per share on March 01, 2020 due to the market collapse on account of COVID-19 pandemic.

Consequently, the Petitioner was unable to provide additional security to maintain the security cover in terms of the DTD. The Trustee accordingly, issued a mandatory redemption event notice to the Petitioner in terms of the DTD.

Since the Petitioner was unable to redeem the debentures and pay the outstanding amount aggregating to Rs. 600 Crores on the due date, the Trustee also issued a notice to the Petitioner for invocation of pledge of shares, in order to recover its dues.


The High Court of Bombay noted that the fall in security cover for the debentures was on account of an unprecedented collapse in the markets due to COVID-19, and held that if the pledged shares are sold by the Trustee at the present market rate, it would cause ‘irreparable’ loss to the Petitioners.

Accordingly, in order to provide protection to the Petitioner, the Court stayed the sale of pledged shares till the next hearing of the case. Further, the mandatory redemption notices issued by the Respondent to the Petitioner were declared illegal and/ or invalid and/ or improper by the Court.