Analysis of Shareholding and Financial Accommodations

Explore the intricate legal analysis conducted by the court regarding shareholding patterns and financial accommodations in a recent case. The court scrutinized the details of encumbered and unencumbered shares, examining the implications of various orders passed by higher courts. Stay tuned to discover the insights uncovered during this legal evaluation.


  • Notice was issued on 11.08.2017 in Special Leave Petition (Civil)No. 20417 of 2017.
  • The court directed that status quo be maintained regarding the shareholding of FHHPL in FHL.
  • The unencumbered shares held by FHHL in FHL are protected by the order dated 23.02.2018 passed by the Hon’ble Supreme Court and cannot be encumbered/alienated by FHHL.
  • The status quo granted in earlier orders dated 11.08.2017 and 31.08.2017 did not apply to shares of FHL held by FHHPL that had been encumbered before the interim orders.
  • Significant decline in the number of shares held by FHHPL from September 2016 to December 2018 was noted.
  • Various banks/financial institutions filed applications seeking modification/clarification regarding encumbered shares of FHL held by FHHPL.
  • Orders dated 11.08.2017 and 31.08.2017 by the Supreme Court barred the selling/alienating of both encumbered and unencumbered shares held by FHHL in FHL.
  • Later modification by the Supreme Court on 15.02.2018 allowed the sale of encumbered shares by the respective lenders.
  • Despite assurances given to the court, there were sales and fresh encumbrances on shares from 06.03.2017 to 31.08.2017 and post 15.02.2018.
  • The number of unencumbered shares steadily declined, with a significant drop from 7,31,68,281 to 6,01,607 as per the provided chart.
  • Affidavit filed on 08.02.2017 indicated that the value of unencumbered shares was substantial and sufficient.
  • The court emphasized that the orders on shareholding patterns should be viewed along with assurances given before the Delhi High Court.

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  • The petitioner argued that no project was initiated with the sanctioned amount of Rs.350 crores, and the money was siphoned off through transactions.
  • The petitioner requested disclosure of the arrangements under which shares were pledged to understand the purpose of the loan obtained.
  • It was highlighted that the due diligence conducted by banks/financial institutions for the loan facility should be made clear.
  • Certain advocates representing the banks stated that the issue had been previously considered by the court and there were no specific pleadings to respond to.
  • The petitioner pointed out that the number of shares remained constant in the initial entries, questioning why unencumbered shares were pledged or sold without proper explanation.
  • It was observed that banks did not foresee the consequences of their actions when seeking modification/clarifications, leading to a significant reduction in the petitioner’s shareholding.
  • Learned Senior Counsel submitted that various orders passed by the High Court and this Court prevented the sale of shares held by FHHPL directly.
  • A device was used to structure the arrangement so that the shares were targeted by banks and financial institutions for recovery.

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  • Shares of SRL Limited below 5% of share capital to be sold to external investor
  • Equity shares of SRL Limited held by Malav Holding Private Limited to be sold
  • No intention to sell unencumbered investments held by Respondent No.19
  • Proposal under discussion to sell 29,00,000 equity shares of SRL Limited
  • Proceeds from sale to pare down debt, net assets remain unchanged
  • Value of unencumbered assets declared is sufficient security for enforcement of Award
  • Proposals to issue further capital in downstream companies
  • Book value of investments of RHC Holding Private Limited mentioned
  • Internal valuation shows fair value of unencumbered investments of Respondent No.19
  • Loans and advances recoverable by Respondent No.19 mentioned
  • Proposal to merge SRL with another listed group company
  • Promoters remain single largest shareholders in companies issuing fresh capital
  • Induction of Private Equity fund may improve finances of downstream companies
  • Fair value of unencumbered assets does not include 5 crore equity shares of Fortis Healthcare Limited
  • Instances of sale of shares observed to reduce control of FHHPL
  • Aggregate book value of investments held by all Respondents mentioned

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  • Banks and financial institutions directed to submit basic documents related to loans and financial accommodations involving FHL shares
  • Details of securities offered in connection with loan arrangements to be provided
  • Information on encumbered and unencumbered shares of FHL held by FHHPL in September 2016 and August 11, 2017 to be disclosed
  • Details of shares put under encumbrance after August 11, 2017 to be provided
  • Disclosure of shares of FHL sold by banks/financial institutions from January 2017 required
  • Clarification on whether encumbrance created after August 11, 2017 was part of a new arrangement/agreement and details of such arrangement to be provided
  • Information on any additional security given under the new agreement/arrangement to be disclosed
  • Value of encumbered shares in September 2016, August 11, 2017, and subsequent dates to be provided
  • Matters to be listed for further consideration on February 24, 2021
  • Responses from banks and financial institutions to be filed by February 22, 2021


Case Number: SLP(C) No.-020417 / 2017

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