In Brief
A financial services company pledged dematerialised shares as security for a loan. When the borrower defaulted, the lender invoked the pledge and registered itself as "beneficial owner" of the shares. The pledgor then claimed to be a secured creditor to the extent of the shares' value in the insolvency proceeding. The Supreme Court held that registration as beneficial owner under the Depositories Act does not constitute actual sale under the Contract Act. The pledgee retains its right to sell after giving notice, and the pledgor may redeem before actual sale. The pledgee is thus a financial creditor for the full loan amount, and the pledgor has no claim based on the pledged shares' value.
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