Morgan Securities and Credits Private Limited Vs BPL Limited & Others (Karnataka High Court)
Summary: The Karnataka High Court closed a civil contempt petition filed by Morgan Securities and Credits Private Limited against BPL Limited and its directors alleging wilful disobedience of an order dated 10.07.2020 restraining the judgment debtor from alienating or encumbering its properties, including those disclosed through affidavits. The complainant alleged that an increase in share capital would dilute the value of shares and relied on a Delhi High Court decision concerning dilution of controlling interest.
It also referred to an extraordinary general meeting resolution dated 11.11.2025 authorising contracts with a related party, M/s E.R.Computers Private Limited, in the ordinary course of business on an arm’s length basis up to ₹100 crore, and authorising the Board to secure a loan by creating a charge or pledge over tangible and intangible assets. The Court found that no document demonstrated that transactions pursuant to the resolution concerned the assets disclosed in Annexure-L. It considered the list of trade marks in Annexure-M irrelevant at that stage, given the resolution. Since counsel could not demonstrate which assets had actually been charged or pledged, and no document evidenced alienation or encumbrance, the Court closed the contempt petition. Liberty was granted to file a fresh petition, in accordance with law, upon securing documents evidencing breach of the restraint order. All pending applications were also closed.
Cases Discussed
- Morgan Securities & Credits Pvt. Ltd. v. BPL Ltd. & Anr., CCP (O) 5/2017 & CCP (O) 35/2017, order dated 18.12.2018 (Delhi High Court). The complainant relied on this decision to contend that an increase in subscribed share capital in favour of third parties, diluting controlling interest, would violate an order restraining creation of third-party interest in shares. The Karnataka High Court closed the present petition because documentary evidence of alienation or encumbrance was not produced.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. This petition is filed alleging willful disobedience of the order dated 10.07.2020, passed by this Court in Writ Petition No.1153/2020 and Writ Petition No. 6381/2020 (Annexure-A). The relevant extract of the order is below:
“Keeping in view the above submissions, it is reiterated that the Judgment Debtor shall not alienate or encumber any of its properties including those which have already been disclosed by way of affidavits until further orders.
Call these matters in the fourth week of August, 2020 since both the sides submit that Judgment Debtor’s appeal pending before Division Bench of the Hon’ble Delhi High Court, is slated for hearing in the third week of August, 2020.”
[Emphasis Supplied]
2. Learned counsel has referred to the list of properties appearing at Annexures- L & M, which are respectively the first and second list of properties, filed by the accused to contend that the accused are going ahead with increasing their share capital thereby diluting the value of shares. In addition, reliance has been placed on the judgment of the Delhi High Court captioned Morgan Securities & Credits Pvt. Ltd. v. BPL Ltd. & Anr1. to contend that increase in subscribed share capital in favour of third parties, resulting in dilution of the controlling interest, would amount to violation of an order restraining creation of third-party interest in the shares.
3. The attention of the Court has been drawn to the extract of the minutes of the extraordinary meeting of the members of the company- BPL Limited dated 11.11.2025, to contend that a resolution has been passed by its Board of Directors, which authorises them to secure a loan by way of creation of charge/pledge on tangible/intangible assets of the company and registering the same with the relevant authorities.
4. As stated above, the complainant/petitioner has contended that the accused are liable to be punished for disobeying the order dated 10.07.2020 in WP No.1153/2020 & WP No.6381/2020 passed by a learned Single Judge of this Court. In essence, it is the case of the complainant/petitioner that the accused are violating the order by seeking to create encumbrances on the properties of the accused in terms of the Resolution dated 11.11.2025 passed in the Extra Ordinary General Meeting (hereinafter referred to as (‘EGM’) of the accused No.1/company.
5. An examination of the resolution passed at the EGM sets out that the approval to the Board of Directors of the accused No.1/company has been granted to enter into contracts and continue in existing contracts in arrangement with M/s E.R.Computers Private Limited, a related party of the company and that these contracts will be carried out at an arm’s length basis in the ordinary course of business upto a sum of Rs.100 Crores. It further states that the Board of Directors is authorized to secure the loan by way of creation of charge/pledge on the tangible and intangible assets of the accused No.1/company.
6. Although the extract of this EGM Resolution has been annexed, no document has been placed on record reflecting that in pursuance thereof, the transactions sought are in relation to any of the assets of the accused No.1/company as are set out in the undated affidavit of the assets filed at Annexure-L to this petition.
6.1 So far as concerns contents of the Annexure-M, these are the list of trade mark owned by the accused No.1/company and thus, would not be relevant at this stage, given the resolution.
7. Thus, the learned counsel has not been able to demonstrate the assets that have been charged or pledged by the accused so as to come within a contempt of the order dated 10.07.2020 passed by this Court.
8. Given that the complainant/petitioner has not placed on record any document reflecting either alienation or encumbrance of the properties of the accused No.1/company, the contempt petition is closed.
9. However, liberty is granted to the complainant/petitioner to file afresh in the event that if they are able to secure documents evidencing breach of the order dated 10.07.2020 by the accused, albeit in accordance with the law.
10. The petition is disposed of in the aforegoing terms. All pending applications stand closed.
Notes:
1 CCP (O) 5/2017 & CCP (O) 35/2017 v/o 18.12.2018
