Once an ARC has become the new pledgee of shares, having acquired by way of a Debt Assignment Deed, its right to deal with these pledged shares is absolute, and is required to be recognised by all third parties, including statutory authorities like the National Depository – UV Assest Reconstruction Company Ltd. Vs. Union of India & Ors. – Delhi High Court

In the present case, UVARCL has, in accordance with Section 5 of the SARFAESI Act, purchased the NPA account of BCL from SBI, alongwith all assets, including the pledged shares. However, National Depository denied to substitute its name in the record maintained by National Depository in respect of the pledged shares of the BCL Hon’ble High Court held that once the original pledgee, with whom the shares were pledged by the BCL for availing certain loans, has issued specific instructions to the National Depository to substitute the name of the petitioner in its place, there is no justification for the National Depository to deny the petitioner’s request. Merely because the Depositories Act, 1996 or the SEBI (Depositories and Participant) Regulations, 2018 do not lay down any procedure for making such a substitution, does not imply that the National Depository can refuse to incorporate changes in the ownership of the pledged shares, which already stand vested with the petitioners by way of Section 5(2) and (3) of the SARFAESI Act.

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