Partly allowed

M/s Toll (Asia) Pte Ltd. v. Hdfc Bank Ltd. & Ors.

DRAT18 Jul 2025MISC APPEAL/4/2019

Case brief

AI extract

What is this about?

The tribunal held that a Letter of Comfort is not automatically a guarantee document and its nature depends on terms. The lower court's finding treating the letter as security was set aside in the interlocutory stage, while the invalidity of share transfer remains subject to final order evidence.

What did the court decide?

The finding that the Letter of Comfort was security was set aside and expunged. The finding on share transfer validity is subject to confirmation in the main order.

M/s Toll (Asia) Pte Ltd. versus Hdfc Bank Ltd… — Contract and Commercial Disputes | DRAT (2025)

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MA 4/2019

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 18^th day of July, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN CHAIRPERSON

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MA 4/2019

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(arising out of IA 107/2016 & 108/2016 in OA 84/2016 on the file of DRT-II, Chennai)

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Between

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M/s Toll (Asia) Pte Ltd. Represented by its Authorised Signatory/Director, Mr. Sheetal Gulati, Toll Global Logistics Division, No.5, Clementi Loop, Singapore 129 816.

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…..Appellant

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And

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1. M/s HDFC Bank Limited, Represented by its Assistant Vice President, Mr. Gomathinathan Subramanian, B Wing, 7^th Floor, Prince Kushal Towers, No.96, Anna Salai, Chennai 600002.

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2. M/s BIC Logistics Ventures Ltd. Represented by its Director, A261, Defence Colony, New Delhi 110 024.

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Also At:

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“Ega Trade Centre” Old No.809, New No.318, Poonamallee High Road, Kilpauk, Chennai 600 010.

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3. M/s BIC Logistics Ltd. A261, Defence Colony, New Delhi 110 024.

MA 4/2019

Also At:

“Ega Trade Centre” Old No.809, New No.318, Poonamallee High Road, Kilpauk, Chennai 600 010.

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…..Respondents Counsel for Appellant : Senior Counsel Shri M.S. Krishnan for Ld. Counsel Shri C. Balaji Counsel for 1^st Respondent : M/s Ramalingam & Associates

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R2 & R3 are given up.

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ORDER

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This appeal is filed under Section 20 RDB Act against the order against the

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common order dated 3.9.2018 passed by Learned Presiding Officer, DRT-II, Chennai in IA 107/2016 and IA 108/2016 in OA No.84/2016.

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a) IA 107/2016 was filed to pass an order of injunction, restraining the respondents or their agents, etc. from in any manner diluting, parting with and/or transfer any share holding of first respondent company before the Tribunal, till the date of disposal of the OA ;

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b) IA 108/2016 was filed to appoint an Advocate Receiver in respect of the business activities of the first respondent before the Tribunal for

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monitoring, supervising, management over the first respondent’s business

activities.

MA 4/2019

These applications were allowed by the Tribunal below vide a Common Order 3.9.2018 by Learned Presiding Officer, DRT-II, Chennai. Challenging the Common Order passed, this appeal is filed.

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Learned Counsel for the appellant submitted that appellant through its wholly owned subsidiary company viz. M/s Toll (India) Logistics Pvt. Ltd. has 40% of the share holding in the second respondent company viz. BIC Logistics Ventures Ltd. BIC Logistics Ltd, the third respondent herein, has 60% share holding in BIC Ventures Ltd. BIC Logistics Ventures Ltd., the second respondent herein, availed loan facility from the first respondent bank. For the said loan, 3^rd respondent M/s BIC Logistics Ltd stood as a guarantor. As a promoter of M/s BIC Logistics Ventures Ltd., M/s BIC Logistic Ltd., the appellant offered a Letter of Comfort in favour of first respondent bank. As per the Letter of Comfort dated 17.2.2010, appellant had not offered any guarantee for the loan sanctioned to the second respondent. It is a formal letter of comfort given in favour of the borrower, informing its capacity to repay the loan amount. However, in the impugned order, Learned Presiding Officer, DRT-II, Chennai had recorded that the Letter of Comfort given by the appellant was given as a security for the loan availed by the 2^nd respondent. That is not correct. It

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MA 4/2019

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was also recorded that sale of 40% of share holding of the appellant in

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the second respondent company, without the consent of the bank is invalid in law and the transfer of shares is null and void. This finding is recorded in the interlocutory application, when it requires consideration of evidence from either side in detail for such a finding to be recorded in the final order. Learned Counsel for the appellant is aggrieved only against this part of the order mentioned above. Appellant has no grievance with regard to appointment of an Advocate Receiver and grant of injunction. In support of his submission that letter of comfort is not a guarantee document, Learned Counsel relied on the judgment passed by the Hon’ble Supreme Court of India in re United Breweries (Holding) Ltd. Vs. Karnataka State Industrial Investment and Development Corporation Ltd and others reported in 2011 SCC Online Kar 4012.

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Learned Counsel for first respondent bank opposed this appeal on the ground that appellant had not honoured the undertaking given with regard to transfer of share holding. Appellant is bound to make good of the loss caused to the bank. Comfort Letter forms part of the loan security. Contrary to the terms given in the Comfort Letter, appellant transferred the shares. Letter informing withdrawal of comfort letter cannot be accepted, if it breached the terms already entered into.

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MA 4/2019

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Against the undertaking given not to transfer the share holding without

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prior advice of the bank, the said transfer had been made. Thus contending, Learned Counsel for respondent prayed for dismissal of the appeal.

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From the submissions of Learned Counsel appearing for parties, especially Learned counsel for appellant that appellant has no grievance against allowing both IAs, granting injunction and appointing Advocate Receiver. What is agitated here is the finding of the Learned Presiding Officer that Letter of Comfort is a security for the loan availed by the 2^nd respondent. Other grievance is with regard to the finding that sale of 40% of share holding of the appellant is invalid in law and the transfer is null and void. This finding, according to Learned Counsel for appellant, has to be recorded only in the final disposal of the Original Application, after considering the documents and other evidence produced.

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7. The point that arises for consideration in this Appeal is that “ Whether the Letter of Comfort can be considered, as a security for the Loan availed by second respondent?”

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When this question arose for consideration before the Hon’ble High Court of Karnataka, Hon’ble High Court of Karnataka in re United

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MA 4/2019

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Breweries (Holding) Ltd. Vs. Karnataka State Industrial Investment and

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Development Corporation Ltd and others reported in 2011 SCC Online

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Kar 4012, referred by Learned Counsel for appellant, supra, observed as

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follows:

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“Letter of Comfort is more in the nature of a recommendatory letter. If a person has not stood as a guarantor or a surety, he cannot be treated as a Guarantor or a Surety without their being a specific undertaking given by him that he would discharge the liability of the 3^rd person in case of his default”

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Whether Letter of Comfort can be considered as a guarantee document

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depends on the terms of letter of comfort. Relevant portion of Letter of

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Comfort is extracted herein:

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“We, Toll (Asia) Pte Ltd have promoted a JV company “BIC Ventures Logistics Ltd” (the company) with BIC Logistics Ltd. BIC Ventures Logistics Ltd have informed us that your Bank has agreed to consider the sanction from time to time of various banking facilities amounting to INR 100 million.

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We confirm that we, through our wholly owned subsidiaries hold and beneficially own 40% of the voting shares of the Company. We also confirm that we will not dispose of any shares in the Company which would result in our shareholding in the Company being reduced below 40%, without prior advice to you.

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We hereby confirm that we are, and shall be, cognizant of the uses which the Company proposes to put these facilities to, and we desire and request you to make these facilities available to the Company upon the terms and conditions which it may negotiate with you. We assure you that the financial position of the company is sound and it is in a position to satisfactorily meet its obligation and liabilities in respect of the said facilities with you.

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We are of course interested in the continued successful operations of the Company and in the performance of its debt obligations and we also assure you that we will not do anything nor take any steps so as to permit the Company to enter into liquidation (whether compulsory or voluntary) or

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MA 4/2019

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any arrangement with its creditors in a manner as to prejudice your rights against the company in respect of the said facilities.

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It is our policy that the Banks which deal with our group companies/our subsidiaries are not put to any financial loss or embarrassment. We, therefore, shall do whatever is necessary in order to ensure, to the proportion of our shareholding in the Company, the repayment by the Company of its indebtedness to you under the said facilities as and when the same becomes due and payable.

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In consideration of your making these facilities available, we agree and undertake that so long as any moneys are still owing to your Bank by the Company, we shall not reduce our shareholdings nor shall we sell, assign, transfer, pledge, or otherwise encumber or dispose of in any manner our shareholdings in our company. “

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From this comfort letter, it can be gathered that “appellant along with BIC Logistics Limited promoted the second respondent company, the company is sound and in a position to substantially meet its obligations and liabilities, that the promoters will not take any steps to permit the Company to enter into liquidation (whether compulsory or voluntary) or any arrangement with its creditors in a manner as to prejudice the rights against the company in respect of the said facilities”. Nowhere there is an undertaking for repayment of the loan due to the bank in case second respondent fails to pay the loan amount. Only if a guarantee is given in terms of Section 126 of Transfer of Property Act 1882, the guarantor can be made legally bound. That sort of undertaking is not given by the appellant in the Letter of Comfort.

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MA 4/2019

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The purport and intent of the Letter of Comfort dated 17.2.2010 has to

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be decided only in the final order, after receiving evidence in support of the case of the parties. The finding of the Learned Presiding Officer that Letter of Comfort was given as security by the appellant to the loan borrowed by the 2^nd respondent in the interlocutory application is not correct. Therefore, that portion of the finding alone is set aside and expunged.

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With regard to other finding that transfer of shares is contrary to the letter of comfort is null and void, this Tribunal finds from the Letter of comfort that appellant gave a clear undertaking that it will not dispose of any shares in the second respondent company which would result in reduction of share holding below 40%, without prior advice of the bank. It is not disputed by the appellant that shares had been transferred when loan is still due from 2^nd respondent to the appellant. Therefore, this finding cannot be considered as not correct or illegal. However, this finding is subject to confirmation in the main order on the basis of evidence produced before the Learned Presiding Officer.

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MA 4/2019

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In this view of the matter, it is ordered as follows:

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a) The portion of the finding of the Learned Presiding Officer, DRT-II, Chennai in the impugned common order dated 3.9.2018 passed in IA No.107/2016 & 108/2016 that Letter of Comfort was given as a security by the appellant to the loan borrowed by the 2^nd respondent alone is set aside and expunged.

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b) The finding of the Learned Presiding Officer that share had been sold/transferred by the appellant without the consent of the Bank is null and void, is subject to confirmation in the main order on the basis of evidence produced before the Learned Presiding Officer.

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In the result, this Appeal MA 4/2019 is disposed of, as indicated

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above.

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Parties are directed to bear their own costs.

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Pending IAs, if any, stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 18^th Day of July, 2025)

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Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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M/s Toll (Asia) Pte Ltd. v. Hdfc Bank Ltd. & Ors.

Case brief

What is this about?

What did the court decide?

M/s Toll (Asia) Pte Ltd. v. Hdfc Bank Ltd. & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Parties & counsel

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Case details

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