Mere act of invoking pledged shares does not discharge debt, rules SC

Top court says debt is not discharged till there has been an actual sale of the pledged items

The Supreme Court has held that mere invocation of a pledge by a creditor does not mean that the debt is discharged.

“A debt is not discharged till there has been an actual sale of the pledged items," the apex court has ruled.

This rule applies even to those creditors registered as beneficial owners as prescribed in Depositories Act, 1996.

This ruling would now enable creditors to be involved in the corporate insolvency resolution process of defaulting borrowers, where such borrowers had pledged demat shares to secure the debt. Also, such borrowers can no longer plead that the debt has