Pledges by adhivakta

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Corporate and Commercial Agreements

CHAPTER 9

PLEDGES
SYNOPSIS “PLEDGE”, “PAWNOR AND “PAWNEE” DEFINED DOCUMENTS AND SECURITIES PRECEDENTS • Pledge Deed • Pledge of Term Deposit as Additional Security for NCDs subscribed by Beta Bank

Pledge is handing over of goods as security for payment of a debt or performance of a promise. The person who hands over the goods is called bailor or pawnor and the person who takes it as security is called bailee or Pawnee. Section 172 of the Indian Contract Act gives definition of pledge pawnor and pawnee. It runs as follows: “Pledge”, “Pawnor and “Pawnee” defined The bailment of goods as security for payment of a debt or performance of a promise is called “pledge”. The bailor is in this called the “Pawnor”. The bailee is called “Pawnee”. A pledge is not exactly a mortgage. It is something between a simple lien and a mortgage. As the pawnor has no right of foreclosure since he has no absolute ownership at law and his equitable title cannot exceed what is specifically granted by law.1 Documents and Securities The law relating to Pawns contained in the Contract Act is not applicable to pledge of all clauses of documents. Title deeds of property are not “goods” that may be pledged within section 172. Government securities which are not specifically mentioned in section 173 cannot be pledged except by endorsement by the owner even if they are already in possession of the pledgee.2 A saving bank book can also be validly pledged. A saving bank book falls within the definition of goods. The pledge of a saving bank book must be held at least to stand on the same footing as pledge of scrip unaccompanied by blank transfer.3
1 Bal Krishna Gupta v Swadeshi Polytex Ltd., AIR 1985 SC 520. . . 2 J o i P a a h v Mukti Prakash, 22 CWN 297: 33 IC 89. . yt rks . 3 AIR 1959 J&K 67. .

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PRECEDENTS

PLEDGE DEED THIS DEED made at .................... this .................... day of ...................., 20..... BETWEEN Alpha AIRWAYS INDIA LIMITED, a Company existing within the meaning of the Indian Companies Act, 1956 having its Registered Office at .................... (address) hereinafter called the “Company” (which expression shall include its successors and assigns), of the ONE PART; AND .................... hereinafter referred to as either as the “Debenture Trustee” (which expression shall include its successors and assigns) of the SECOND PART; WHEREAS (A) The Company is engaged in the business of ....................; (B) On the invitation of the Company, Theta Bank Limited (the ‘Bank’) has agreed to subscribe, by private placement, non-convertible, non-marketable, secured, redeemable debentures (hereinafter referred to as the “Debentures”), issued by the Company to the Bank in the aggregate amount of Rs. .................... (Rupees .................... only), on the terms and conditions contained in the Subscription Agreement signed by the Company and the Bank this day (hereinafter called the “Subscription Agreement”); (C) Under the Subscription Agreement, the Company has agreed to secure the Debentures together with interest, costs and charges, by a hypothecation and mortgage on certain aircraft and equipment owned by the Company, and by a pledge of certain term deposits of the Company , in favour of a trustee for the benefit of the Debenture holders (as defined in the Subscription Agreement); (D) The Debenture Trustee has agreed to act as the trustee to hold the aforesaid security interest created for the benefit of the Debenture holders in accordance with a Debenture Trust Agreement between the Company and the Debenture Trustee (the ‘Debenture Trust Agreement’). (E) Contemporaneously with the allotment of the Debentures to the Bank and the execution of this Deed, the Company has created a security interest in certain aircraft and equipment owned by the Company in favour of the Debenture Trustee by entering into a mortgage deed with the Debenture Trustee (the ‘Mortgage Deed’). NOW, THEREFORE, in pursuance of the documents exchanged between the company and the Bank and in consideration of the Bank having subscribed to the Debentures in the aggregate amount of Rs. .................... (Rupees .................... only) on the terms and conditions as contained in the said documents and in the Subscription Agreement, the Parties hereby covenant that: Article 1: Definitions The capitalised terms used but not defined herein shall have the meaning as defined in the mortgage deed, unless otherwise indicated. Artilce 2: Grant of security

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2.1 To secure the due and complete redemption by the Company to the Debenture holders of the Debentures together with payment of all interests, additional interests, costs, charges, expenses and all other monies payable by the Company to the Debenture holders in respect of and/or on account of and/or by virtue of the Debentures, as well as any renewals, extension or changes in the form of said obligation or indebtedness, and the performance of its obligations, in accordance with all the terms, conditions, provisions, covenants and stipulations contained in the Debenture documents, the Company hereby mortgages, pledges, assigns, transfers and grants to the debenture trustee a security interest by way of an exclusive first charge in the term deposits of the Company aggregating Rs. .................... (amount in figure) .................... (amount in word) maintained with the Theta Bank, .................... Branch (the “Term Deposits”) by handing over the instrument evidencing the term Deposits to the Debenture trustee or to any person nominated by the Debenture trustee. 2.2 Irrevocable instructions.—The Company shall instruct the Term Deposit Bank with respect to the Term Deposits to act on the instructions of the Debenture trustee, inter alia, to .................... The instructions to the Term Deposit Bank shall be irrevocable until receipt by the Company of a certificate of the Debenture Trustee confirming the receipt by the Debenture holders and the Debenture trustee of all monies secured pursuant to this Agreement and the performance by the company of its obligations under the Debenture documents. Artilce 3: Company’s representations and warranties Except for the security interest granted herein, the company warrants that it is (or, to the extent security interest is created hereinafter , will be) the owner of the Term Deposits free from any Lien. The company further warrants that it will defend the term deposits against all claims and demands of any person claiming any interest therein by virtue of any Lien. The company represents and warrants to the Debenture Trustee that this Agreement, upon execution and delivery, will constitute the legal, valid and binding obligation of the Company and shall be enforceable in accordance with its terms. The company agrees to furnish the Debenture trustee with written legal opinions, satisfactory in form and substance to the Debenture trustee, verifying the aforesaid; representations and warranties. Artilce 4: Maintenance of security interest 4.1 General principle.—The company shall neither do nor allow anything that may prejudice the security interest hereby created or whereby the recovery or realisation thereof may be delayed, impeded, prejudiced, prevented or become time-barred nor create any security ranking pari-passu with the security hereby created. 4.2 Company to take steps.—The company shall promptly, at its own expense, take all steps, as may be necessary to safeguard the security interest of the Debenture trustee in the Term Deposits, and without limiting the generality of the foregoing: 4.2.1 not do or knowingly permit to be done or omit or knowingly permit to be

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omitted to be done any act or thing, which might reasonably be expected to jeopardise the security interest of the Debenture Trustee under this Agreement or the validity, enforceability or priority thereof; 4.2.2 on all occasions when the ownership of the Term Deposits is relevant, make clear to third parties that the Debenture trustee has a security interest under this Agreement in the Term Deposits; 4.2.3 not at any time pledge the credit of the Debenture holders or the Debenture trustee; 4.2.4 not create or knowingly permit to exist any Lien upon the Term Deposits other than permitted liens; 4.2.5 not do or knowingly permit to be done anything which may reasonably be expected to expose the Term Deposits to penalty, forfeiture or appropriation, and without prejudice to the foregoing, if any such penalty, forfeiture, or appropriation, occurs, give the Debenture trustee notice and use its best endeavours to procure the immediate release of the Term Deposits , as the case may be; 4.2.6 pay and discharge or cause to be paid and discharged when due and payable or make adequate provision by way of security or otherwise for all debts, damages, claims and liabilities which have given or might give rise to a Lien over or affecting the Term Deposits; and 4.2.7 not attempt, or hold itself out as having any power, to sell, assign, pledge, mortgage, or otherwise dispose of the Term Deposits. 4.3 Continuing security.—The security interest hereby created shall be a continuing security for payment of the monies due to the Debenture holders and the performance of its obligations by the Company under the Debenture documents and shall not affect, impair or discharge the liability of the company by winding up (voluntary or otherwise) or by any merger or amalgamation, reconstruction or otherwise of the company with any other company, or the takeover of the management or nationalisation of the undertaking of the company, or otherwise. Artilce 5: Books and Records The company shall keep proper books of accounts of its business and carefully keep and preserve all the documents, papers and vouchers in connection with or relating to the Term Deposits and will at any time when required produce such books, documents, papers and vouchers for inspection thereof by the Debenture trustee and its officers and agents and allow them access thereto and allow them to make copies or extracts from the same. Artilce 6: Taxes The company shall duly pay and discharge all contractual and statutory outgoings including all rents, rates, taxes, assessments, dues and duties including income-tax, sales tax, excise duties, customs duties, including those in respect of, the Term Deposits, this Agreement, any payments made hereunder or under any of the Debenture documents and duly perform and discharge all its obligations

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under the Debenture documents according to law and shall immediately upon any proceedings being adopted against the company for violation or alleged violation of any law or regulation give notice of such action or proceedings to the Debenture Trustee. The debenture trustee shall have the right to intervene in any such actions or proceedings entirely at the cost of Company and also a right to redeem the from confiscation and/or forfeiture by payment of such rates, rents, taxes, assessments, dues or duties and fine or penalty, etc., as may be payable by or levied on the company and the company shall on demand pay to the debenture trustee all such claims, rents, rates, taxes, assessments, dues or duties, fine or penalty, etc., as may have been paid by the Debenture trustee and also the cost of any such actions or proceedings including costs on full indemnity basis for legal counsel, with default interest (as defined in the Subscription Agreement) thereon until payment by the company of the same, the same shall be a charge on the Term Deposits. Artilce 7: Indemnities 7.1 Company’s indemnity: The company undertakes to indemnify the Debenture trustee and the Debenture holders against any cost, claim, loss, expense (including legal fees) or liability together with any value added or singular tax thereon, which it may sustain or incur, as a consequence of the entering into, delivery or performance of this Deed or the occurrence of any Event of Default (as hereinafter defined) or any default by the company in the performance of any of the obligations expressed to be assumed by it under the Debenture documents or otherwise. 7.2 Survival of indemnities: The indemnities by the company in favour of the Debenture trustee and the Debenture holders contained herein shall continue in full force and effect notwithstanding the termination or expiry of this Agreement. 7.3 Payment after-tax: Any payment, which the company shall be required to make to or for the account of the Debenture trustee or the Debenture holders with respect to any losses, which are subject to indemnification by the company under this Clause, shall be made on a net after-tax basis, if any taxes are imposed with respect to such payment. Artilce 8: Information The company will promptly furnish to the Debenture trustee all information the Debenture trustee from time to time reasonably requests regarding the Term Deposits. Artilce 9: Company’s Default 9.1 The company agrees that the occurrence of any of the following events shall constitute an “Event of Default” for the purposes of this Agreement: (a) An event of default under the Mortgage Deed; (b) Any misrepresentation made by the company to the Debenture Trustee in connection with or under this Deed; (c) The prospect of payment, performance or realization of the Term

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Deposits , in the opinion of the Debenture trustee, is or becomes significantly impaired; (d) The Company’s failure to perform any promise, Agreement, obligation, warranty or covenant made by it under this Deed, if such failure continues for a period of .................... business days after the Debenture Trustee has given the company notice of such failure. 9.2 Default notification.—NOTWITHSTANDING, anything else stated above and elsewhere in this Deed, the company will notify the Debenture Trustee immediately of the occurrence of any Event of Default and in all cases, such notice would be given within .................... hours of the occurrence of such Event of Default. 9.3 Remedies.—Should an Event of Default occur, the Debenture Trustee may employ all remedies allowed by law, including declaring all indebtedness of the Company owed under the Debenture documents, as well as any other indebtedness or liability of the company owed to the Debenture Trustee or the Debenture holders, immediately due and payable. 9.4 Rights upon default.—The Debenture Trustee and/or its nominee/s shall, without assigning any reason and at the risk and expenses of the company and if necessary as attorney for and in the name of the company, be entitled to take charge and/or possession of, seize, encash, recover, receive, appoint receiver of, or otherwise deal with the Term Deposits and enforce, realise, settle, compromise, refer to arbitration and deal in any manner with any rights or claims relating thereto, and to complete any engagements and carry on the business of the company through any agents, managers or otherwise without being bound to exercise any of these powers, or be liable for any losses in the exercise or non-exercise thereof and without prejudice to the Debenture trustee’s rights and remedies of suit or to the rights and remedies which the Debenture trustee may have under the Debenture Documents. 9.5 Application of moneys.—It is agreed that all moneys realised by enforcement sale or realisation of the Term Deposits or otherwise shall with all convenient dispatch be applied in the manner provided in the subscription Agreement (clause 1.12). 9.6 Costs.—The Company shall accept without question the Debenture trustee’s account of the costs, charges and expenses incurred in connection with the realisation of the Term Deposits by any agent or other authorised officer as the conclusive proof of the amount due from the company to the Debenture holders or the Debenture Trustee, the amount realised and expenses incurred and the Company shall forthwith pay to the Debenture trustee on demand any shortfall or deficiency, together with Default Interest and until such payment by the company the same shall be a charge on the Term Deposits. 9.7 Debenture Trustee’s directions.—As and when the Debenture Trustee seeks to enforce the security hereby created, the company shall comply with all such directions, as may be given by the Debenture Trustee. 9.8 Receivers.—The Debenture trustee, at any time after the security hereby

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created has become enforceable and whether or not the Debenture Trustee shall then have taken possession of the Term Deposits, and in addition to the powers hereinbefore conferred upon the Debenture Trustee, may have a receiver or receivers appointed of the said Term Deposits or any part thereof. The following provisions shall apply to such receiver/s: (i) unless otherwise directed by the Debenture Trustee, such receiver/s shall have and exercise all powers and authorities vested in the Debenture Trustee; (ii) such receiver/s shall, in the exercise of his powers, authorities and discretion, conform to the regulation and directions from time to time made and given by the Debenture Trustee; (iii) the Debenture Trustee may, from time to time, fix the remuneration of such receiver/s and may direct payment thereof out of the proceeds of the said Term Deposits but the company alone shall be liable for the payment of such remuneration; (iv) the Debenture Trustee, may from time to time and at any time, require such receiver/s to give security for the due performance of his duties as such receiver and may fix the nature and amount of the security to be given to the Debenture Trustee but the Debenture Trustee shall not be bound to require such security in any case; (v) the Debenture Trustee may hand over to such receiver/s any monies constituting part of the Term Deposits with the intent that the same may be applied for the purpose hereof by such receiver/s and the Debenture Trustee may, from time to time, determine what funds the receiver/s shall be at liberty to keep in hand with a view to the performance of his duties as such receiver/s; (vi) every such receiver/s shall be the agent of the company for all purposes and the company alone shall be responsible for his acts and defaults, loss or misconduct and liable on any contract or engagement made or entered into by him and for his remuneration and the Debenture Trustee shall not incur any liability or responsibility therefor by reason of its making or consenting to his appointment as such receiver/s. 9.9 Liens.—All proceeds from the realisation of the Term Deposits shall always be kept distinguishable and held as the exclusive property of the Debenture Trustee specifically appropriated to this security and to be dealt with only under the directions of the Debenture Trustee and the Company shall not create or suffer or attempt to make or suffer any Lien upon or over the same or any part thereof except the security interest of the Debenture Trustee hereunder. 9.10 No Prejudice.—Nothing herein shall prejudice the rights or remedies of the Debenture Trustee in respect of any present, future, further or other security, guarantee obligations or decree for any indebtedness or liability of the company to the Debenture Trustee. Nothing herein contained shall prejudice or affect any general or special lien to which the Debenture Trustee is or may by law or otherwise be entitled or any rights or remedies of the Debenture Trustee in respect

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of any present or future security, guarantee obligations or decree for any other indebtedness or liabilities of the company to the Debenture holders or the Debenture Trustee, nor shall anything herein contained prejudice the right of the Debenture Trustee to enforce or have recourse to the securities under this Deed without enforcing or having recourse in the first instance to any other security held by the Debenture holders or the Debenture Trustee from the Company including without limitation under the Mortgage Deed and the Debenture Trustee shall be entitled to sue on any one of such securities without being bound to sue on all such securities. Artilce 10: Execution and delivery of documents by company 10.1 General principle.—The company shall, at its own costs, execute/sign and deliver such other deeds or documents and do all such acts and things as may be required by the Debenture Trustee to establish, maintain or further perfect to the Debenture Trustee’s satisfaction, and/or enforce the security created hereunder Further, the Company shall promptly furnish such information and documents as the Debenture Trustee may reasonably request. The company will pay the cost of filing all appropriate documents in all public offices where the Debenture Trustee deems such filings necessary or desirable. 10.2 Indemnity.—The company shall pay on demand to the Debenture Trustee the costs on full indemnity basis incurred by the Debenture Trustee or the Debenture holders in connection with the preparation, engrossment and stamping in duplicate and execution of these presents or other security executed contemporaneously herewith in connection with the moneys hereby secured and of the registration of this security with the Registrar of companies and all other costs, on full indemnity basis, incurred or to be incurred by the Debenture Trustee in connection herewith, or with the enforcement or attempted enforcement of the security created or the protection or defence or perfection thereof or for the recovery of any moneys secured and of all suits and proceedings of whatsoever nature for the enforcement or realisation of the security created or the recovery of such moneys, or otherwise in connection herewith or in which the Debenture Trustee may be joined as a party or be otherwise involved in by reason of the existence of the security hereby created in favour of the Debenture Trustee. Artilce 11: Miscellaneous 11.1 Debenture Trustee’s records.—The Company acknowledges and agrees that the Debenture Trustee’s records (including, without limitation, account balances and transaction and statement details) shall be conclusive proof of the matters to which they relate. The company shall honour all its obligations to the Debenture Trustee, to the satisfaction of and as required by the Debenture Trustee and as per the records of the Debenture Trustee. 11.2 Waivers.—No waiver of any covenant, warranty or condition of this Deed, nor of any breach or default hereunder, shall be effective for any purpose whatsoever unless such waiver is in writing and signed by an officer of the Debenture Trustee. It is expressly agreed that the Debenture Trustee’s waiver of any breach or default by the company shall constitute a waiver only as to such

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particular breach or default and not a waiver of any further breach or default. 11.3 Governing Law.—The law governing this transaction shall be that of India as it may from time to time exist. The law of India shall apply to any and all matters arising from or related to this Deed and transaction, including any action to obtain possession of and foreclose upon the Term Deposits, and all other remedies which may be available including seeking a deficiency judgement against the company. 11.4 Arbitration.—Any dispute or difference which may arise out of this Deed or in relation thereto, including any dispute relating to its interpretation, validity or effect, shall be settled finally in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC). The arbitration proceedings shall be initiated by the party asking for arbitration submitting its request for arbitration to the Secretariat of the ICC. In such request for arbitration, the party shall nominate its arbitrator for confirmation by the ICC. The other Party shall nominate its arbitrator in its answer to the request for arbitration, which shall be supplied to the party asking for arbitration and the ICC within a period of .................... days of the receipt of the request for arbitration. The two arbitrators thus appointed shall within a further period of 30 (thirty) days elect the Chairman of the Arbitration Tribunal. In the event that the other party should fail to appoint its arbitrator within the .................... days or in the event the two arbitrators appointed for the parties do not agree on the appointment of the Chairman within .................... days of their appointment the ICC shall make the appointment of the Chairman or the appointment of one the arbitrator not timely made or as the case may be, and any such appointment shall be final and binding upon the Parties. The venue of the arbitration shall be ..................... Notwithstanding the above, in the event an Event of Default should occur, the Debenture Trustee (at its sole option) may institute a legal proceeding in any jurisdiction as may be appropriate in order for the Debenture Trustee to realise the Term Deposits. 11.5 Severability.—The provisions of this Deed shall be severable and, if any provisions are for any reason determined to be invalid, void or unenforceable, in whole or in part, the remaining provisions shall remain in full force and effect; provided that the purpose of the remaining valid, effective and enforceable provisions is not frustrated; and provided further that no party is substantially and materially prejudiced thereby. 11.6 Assignability.—The Debenture Trustee shall have the absolute right to assign, transfer or sell any of its rights under this Deed to any party of its choosing upon giving written notice thereof to the company. The company shall not assign or delegate any of its rights or obligations hereunder without the prior written consent of the Debenture Trustee. 11.7 Binding Agreement.—All obligations of the company hereunder shall bind the successors, and assigns of the company. If there be more than one, the Company hereunder, their liabilities shall be joint and several. All rights of the Debenture Trustee hereunder shall inure to the benefit of its successors and assigns. 11.8 Entire Agreement.—This Deed and the Debenture Documents constitute

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the entire agreement between and among the parties hereto with respect to the subject, matter hereof. There are no verbal understandings, agreements, representations or warranties between the parties, which are not expressly set forth herein. This Deed shall not be changed orally, but only in writing signed by the parties hereto. 11.9 Notice.—Any notice pertaining to this Deed shall be deemed sufficiently given if personally delivered or sent by registered or certified mail, return receipt requested, to the party to whom said notice is to be given. Notices sent by registered or certified mail shall be deemed given on the third day after the date or postmark. Until changed by written notice given by either party, the addresses of the Parties shall be as follows: Company Debenture Trustee The designated address of both parties must be located within India. The company shall immediately notify the Debenture Trustee in writing of any change of address from that shown in this Deed. IN WITNESS WHEREOF, the company has caused these presents to be executed on the day, month and year first hereinabove written, as hereinafter appearing. The Common Seal of....................has been hereunto affixed pursuant to the Resolution passed at the meeting of its Board of Directors held on the .................... day of .................... in the presence of (AS PER MEMORANDUM AND ARTICLES OF ASSOCIATION) SIGNED AND DELIVERED by .................... Constituted Attorney for .................... PLEDGE OF TERM DEPOSIT AS ADDITIONAL SECURITY FOR NCDS SUBSCRIBED BY BETA BANK Alpha Airways India Limited, (the “Company”) have issued non-convertible, secured, redeemable debentures of the face value of Rs. .................... (amount) each aggregating to Rs. ....................(amount) (the “Debentures”) to Beta Bank Limited (the “Debenture holders”), under the Subscription Agreement dated .................... 20..... (hereinafter called “the Subscription Agreement”). The company has mortgaged two Boeing 737-400 aircraft, bearing registration nos. .................... and Registration .................... and .................... and Registration .................... (together the “Aircraft”), in favour of State Bank of India (the “Debenture Trustee”) under a Debenture Trust and Mortgage Agreement executed on .................... 20..... between the Company and the Debenture Trustee (the “Debenture Trust and Mortgage Agreement”) to secure the performance of its obligations and payment of all monies payable under the Subscription Agreement and the Debenture Trust and Mortgage Agreement. As additional security for the performance of its obligations and payment of all monies (under the Subscription Agreement and the Debenture Trust and Mortgage Agreement) as aforesaid, the Company hereby pledges to the Debenture

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holders its rights, title and interest in three term deposits of .................... (amount) (initially bearing nos. .................... along with interest accrued thereon and not paid to the company (“Term Deposits”), with Beta Bank, .................... (address) (“Term Deposit Bank”) by handing over the three receipts in respect of the Term Deposits. The company undertakes to maintain the Term Deposits until the release of the Security as described under the Debenture Trust and Mortgage Agreement and Subscription Agreement. The company irrevocably undertakes to the Term Deposit Bank that the Term Deposit Bank can act and do such acts and deeds, at the cost of the company, to preserve the interest of the Debenture holders in the Term Deposits. The company hereby authorises the Term Deposit Bank to utilise the Term Deposits to pay the Debenture holders in full or partial settlement of claims arising under the Subscription Agreement and the Debenture Trust and Mortgage Agreement upon the happening of an Event of Default (subject to any cure periods as provided therein) under the Debenture Trust and Mortgage Agreement. IN WITNESS WHEREOF, Alpha Airways (India) Ltd. has caused its Common Seal to be affixed to this Pledge and to the duplicate hereof and the Debenture Trustee have caused this Pledge to be executed in duplicate on the day, month and year first above written. The Common Seal of Alpha Airways (India) Ltd. has been hereunto affixed pursuant to the Resolution passed at the meeting of its Board of Directors held on the .................... day of ...................., 20..... in the presence of .................... (name) and .................... (name) who have in taken thereof affixed, their respective signatures, hereto. SIGNED AND ACCEPTED by the within named Beta Bank by the hand of its Constituted Attorney for the Debenture holder. CONFIRMED, by the Term Deposit Bank —————


								
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