Bombay High Court Restrains ICICI Home Finance From Selling MEP Infra Shares

The Bombay High Court restrained ICICI Home Finance Ltd. from further selling shares of MEP Infrastructure Developers Ltd. offered as a collateral against a term loan by the road developer’s promoter group firm.

The relief, however, is subject to timely payments of dues by Ideal Toll and Infrastructure Pvt. Ltd. as per the timelines prescribed by the court, according to the order by Justice AK Menon, who heard the case via video-conferencing.

While prohibiting ICICI Home Finance from declaring Ideal Toll’s account as a non-performing asset till it commits a default, the court directed the company to deposit Rs 1.71 crore in instalments and interest in a staggered manner before May 15. The court, however, allowed the lender to sell the pledged shares if toll company defaults on making repayments.

The court passed a separate order to restrain ICICI Home Finance from selling the pledged shares on a petition by a non-executive director of MEP Infra.

ICICI Home Finance had sold some of the shares pledged by Ideal Toll after the stock of MEP Infra tumbled, tracking the worst selloff in Indian equities in more than a decade due to the disruption caused by the Covid-19 outbreak. Ideal Toll moved the court to restrain mortgage lender from selling pledged shares and sought return of shares already sold.

Courts in India are granting relief to beleaguered companies hit hard by the outbreak of Covid-19 outbreak and the resultant lockdown imposed by the central government. The Delhi High Court recently restrained Yes Bank from declaring Anant Raj Ltd. as a NPA on similar grounds.

Here are the key arguments in the Ideal Toll matter:

What Ideal Toll Said

Vikram Nankani, senior counsel appearing for Ideal Toll, sought a restraint order against ICICI Home Finance arguing:

• The price of pledged shares had dived from Rs 40 to Rs 11.5 due to the lockdown imposed by the government which affected the revenue of MEP Infra. ICICI Home Finance ignored this fall and further sought to sell the shares.
• ICICI Home Finance proceeded with a partial sale of the pledged shares despite the moratorium on payment of instalments on all terms loans announced by the Reserve Bank of India.
• The home finance company had a sufficient security cover because the pledged shares, even at their lowest valuation, were valued at Rs 6 crore.
• The Delhi High Court had allowed relief to Anant Raj Ltd. on similar grounds in a recent case and had restrained Yes Bank from classifying the account as an NPA.

ICICI Home Finance’s Counter

ICICI Home Finance argued:

• The RBI moratorium would not apply in this case as it becomes effective for loan repayments after March 1, while the amount from Ideal Toll was overdue since January.
• The account would become a non-performing asset by April 13 if it is not regularised by payment of specified amounts.