JUDGMENT
Lokeshwar Prasad, J.
(1) This Order will dispose of plaintiffs’ application (IA 4800/97), filed under Order Xxxix, Rule 1 & 2 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as `the CPC’) and the application (IA 5642/97), filed on behalf of defendant No. 1, under Order Xxxix, Rule 4 read with Section 151. CPC. The facts, relevant for the disposal of the above mentioned two applications lie in narrow compass. The plaintiffs have filed the present suit for permanent and mandatory injunction, declaration and directions assailing the notice dated the 29th April, 1997 (Annexure-A), issued by defendant No. 1 Company, calling for the `Extraordinary General Meeting’ (`EGM’ for short) of the members of Usha International Limited on 29th May, 1997 with the prayer that a decree declaring that notice dated 29th April, 1997, issued by defendant No. 1 Company is bad in law and directing defendant No. 1 Company and/or its promoters to make an offer to the general public as envisaged by the Substantial Acquisitions of Shares and Takeovers Regulations 1997 and a decree in favour of the plaintiffs and against defendant No. 2 directing defendant No. 2 to immediately initiate proceedings against defendant No. 1 Company in accordance with the Sebi Regulations, be passed in favour of the plaintiffs and against the defendants. It is also prayed that a mandatory order directing the defendants not to proceed with the Egm, proposed to be held on 29th May, 1997 pursuant to notice dated 29th April, 1997, be also passed. The plaintiffs have also prayed that a declaration be issued to the effect that defendant No. 1 has violated. the Sebi guidelines and that the defendant No. 1 is liable to make a public offer to the general public in terms of Sebi Regulations.
(2) Alongwith the plaint, the plaintiffs have also filed an application (IA 4800/97) under Order Xxxix, Rule 1 & 2 read with Section 151, Civil Procedure Code with the prayer that an ad interim ex-parte injunction in favour of the plaintiffs and against defendant No. 1, stalling the holding of Egm of defendant No. 1, scheduled for 29th May, 1997 pursuant to notice dated 29th April, 1997 be passed. It is also prayed that the exparte injunction as prayed in, para 8(a) of the application be confirmed in favour of the plaintiffs upon return of motion. The above mentioned application alongwith the Suit (Suit No. 11 28/97) came up for hearing for the first time before this Court on 27th May, 1997 and this Court after hearing the learned Counsel states as under: “THIS is an application filed on behalf of the plaintiff under Order 39, Rules 1 and 2 read with Section 151, CPC. Issue notice to the defendants. At this stage Mr.Dilip Goswami with Mr. Rahul Srivastav appear for defendant No. 1 and accept notice of the above mentioned application on behalf of defendant No. 1. Issue notice of the application to defendant No. 2 returnable on 10th July, 1997. I have heard the learned Counsel for the plaintiffs and defendant No. 1, have also carefully gone through the averments made in the plaint and the contents of the application, which is duly supported by an affidavit. The main thrust of the arguments of the learned Counsel for the plaintiffs is that the notice dated the 29th, April, 1997, calling for Extraordinary General Meeting (EGM) for 29th May, 1997 is not in conformity with the statutory Regulations framed under Section 30 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as (`the Act’) and if an ex-parte interim order is not passed, the very purpose of filing the application would stand defeated by delay as the main object of the Act is to protect the interest of small investors. After hearing the learned Counsel for the parties (plaintiff and defendant No. 1) I am also satisfied that, if an ex-parte interim order is not passed, the very purpose of filing, the application would stand defeated by delay.’ It is, therefore, directed that the meeting (EGM) scheduled for 29th May, 1997 may take place as scheduled but any decision taken in the above said meeting shall not be given effect to till the next date. Reply to the above mentioned application on behalf of defendant No. 1 be filed within four weeks with advance copy to the Counsel for the plaintiffs, who may file rejoinder by the next date. List on 10th July, 1997. Plaintiff to comply with the provisions of Order 39, Rule 3, Civil Procedure Code insofar as defendant No. 2 is concerned. Dasti.”
(3) Defendant No. 1 on 3.7.97 filed an application (IA 5642/97) under Order Xxxix, Rule 4 read with Section 151, Civil Procedure Code with the prayer that the order dated the 27th May, 1997, passed in Ia 4800/97, be vacated.
(4) Reply to the plaintiffs’ application (IA 4800/97) has been filed only on behalf of defendant No. 1. No reply to the above said application has been filed on behalf of defendant No. 2 and on 10.7.97 the learned Counsel for defendant No. 2 made a statement that defendant No. 2 has not to file any reply to the above mentioned application as no relief has been claimed against defendant No. 2 in the above said application. As regards the application (IA 5642/97) filed by defendant No. 1 under Order Xxxix, Rule 4 read with Section 151, Cpc, the position is that a detailed reply has been filed on behalf of the plaintiffs.
(5) In so far as the above mentioned two applications one filed by the plaintiffs under Order Xxxix, Rules 1 & 2 read with Section 151, Civil Procedure Code bearing No. 4800/97 and the other one filed by defendant No. 1 under Order Xxxix, Rule 4 read with Section 151, Civil Procedure Code bearing No. 5642/97 – are concerned I have heard the learned Counsels for the parties at length and have also carefully gone through the documents/material on record. As per settled law, culled out from various decisions, relief under Order Xxxix, Rules 1 & 2 can be given to an applicant provided the applicant is in a position to satisfy the Court that the applicant has a `prima facie case’; that the `balance of convenience’ is in his favour and that `irreparable loss/injury’ would be caused to him if the relief is not granted to him. The phrases `prima facie’ case’; `balance of convenience’ and `irreparable loss’ are not rhetoric phrases for incantation, but words of width and elasticity to meet myriad situations, presented by men’s ingenuity in given facts, and circumstances, hedged with sound exercise of judicial discretion to meet the end of justice. The burden is always on the applicant/plaintiff to satisfy the Court that there is a `prima facie case’ in his favour which needs adjudication at the trial. The existence of prima facie right and infraction of the enjoyment of his property or the right, is a condition for the grant of temporary injunction. However, satisfaction that there is a `prima facie case’ by itself is not a sufficient ground to grant injunction. The Court further has to satisfy itself that non-interference by the Court would result in irreparable injury to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and that the applicant needs protection from the consequences of apprehending injury. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury but means only that the injury must be a material one, namely, one that cannot be adequately compensated by way of damages. While granting relief under the above provisions the Court has also to see that the `balance of convenience’ must be in favour of granting injunction. In other words, the Court while granting or refusing to grant injunction, is expected to exercise sound judicial discretion to find out the amount of substantial mischief or injury which is likely to be caused to the parties if the injunction is refused and compare it with that it is likely to be caused to the other side if the injunction is granted. If on weighing competing possibilities or probabilities of likelihood of injury and if the Court considers that pending the suit the subject matter should be maintained in status quo, an injunction under the above provisions would be granted by the Court. Their Lordships of the Supreme Court in case Dalpat Kumar Vs. Prahlad Singh , have held that before granting injunction the Court would be circumspect and look to the conduct of the party, the probable injuries to either party and whether the plaintiff could be adequately compensated if the injunction is refused.
(6) In the light of the above settled legal position it is to be seen as to whether in the present case the plaintiffs have a `prima facie case’ in their favour; whether the `balance of convenience’ is also in their favour and whether `irreparable loss/injury’ would be caused to the plaintiffs if the relief sought for is not granted to them. As per the case of the plaintiffs, the cause of action for filing the present suit has primarily arisen to the plaintiffs as a result of the issue of notice dated the 29th April, 1997 (Annexure-A) by defendant No. 1-company calling for the `EGM’. The above said notice, impugned in the present proceedings, reads as under: “NOTICE Notice is hereby given that the Extraordinary General Meeting of the Members of Usha International Limited will be held as scheduled below: Day: Thursday Date: 29th May, 1997 Time:4.00 P.M. Venue : Ficci Auditorium Tansen Marg, New Delhi – 110 001 to transact the following business: 1. To consider and if thought fit to pass with or without modification(s) the following resolution as special resolution: “Resolved that in accordance with the provisions of Section 81 and other applicable provisions, if any, of the Companies Act, 1956, and subject to such approvals, sanctions and permissions as may be necessary and subject to such terms and conditions and modifications as may be prescribed while granting suchpprovals, and which may be agreed to by the Board of Directors of the Company or any Committee duly constituted and authorised by the Board (hereinafter referred to “Committee”), consent of the Company be and is hereby accorded to the Board of Directors or Committee for issuing 4,00,000 Equity Shares of Rs. 10.00 each or warrants to be converted into one Equity Share of Rs. 10.00 each per warrant on preferential basis to promoter companies on such terms and conditions as may be decided by the Board of Directors or Committee and at such prices which may be determined in accordance with the guidelines, approvals, sanctions and/or permissions issued/granted by Government of India (GOI), Securities and Exchange Board of India (SEBI) or such other Authorities as may be necessary in this regard and at such time as the Board of Directors or Committee in its absolute discretion thinks fit.” 2. To consider and if thought fit to pass with or without modification(s) the following resolution as special resolution: “Resolved that pursuant to Section 370 of the Companies Act, 1956 and other applicable provisions, if any, consent of the Company be and is hereby given to give any loans or any guarantee or provide any security in connection with the loan made by any other person to, or to any other person by any Company or to any Company on such terms and conditions as may be decided by the Board from time-to-time even through such loans, guarantees or securities may be in excess of the percentages specified in Section 370 of the Companies Act, 1956 and of such sums of money as may be deemed requisite by the Board for the business of the Company, provided however that loans or guarantees to be given or securities to be provided together with the loans or guarantees already given and securities already provided does not exceed the sum of Rs. 30 crore at any one time.” By Order of the Board For Usha International Limited New Delhi (N.S. GHATE) 29th April, 1997 Company SECRETARY”
(7) With the above said notice explanatory statement as provided for under Section 173(2) of the Companies Act, 1956 (hereinafter referred to as the Companies Act’) is also annexed.
(8) Since the learned Counsel for defendant No. 2, during the course of arguments, raised a preliminary objection with regard to the maintainability of the present suit on the ground that the same is barred in terms of the provisions of Section 20A of the Securities & Exchange Board of India Act, 1992 (hereinafter referred to as the `SEBI Act’) read with Regulation Nos. 38, 39, 40, 41, 42(2) and 44 of the Securities and Exchange Board of India Substantial Acquisitions of Shares and Takeovers) Regulation, 1977, I consider it appropriate to first examine the above submission because if prima facie the suit itself is barred by operation of law the present application, filed by the plaintiffs, would decidedly not survive.
(9) As per the submissions made by the learned Counsel for the plaintiffs the above plea, taken by defendant No. 2, is without any substance and not tenable in the eyes of law because the plaintiffs in the present proceedings are assailing the impugned notice not solely on the ground that the same is violative of the provisions of the Sebi Act or the Rules/Regulations framed there under but also because of the fact that the same is violative of the mandatory provisions of the Companies Act, more particularly, the provisions contained injection 173, Sub-Section (2) and since the allegations of the plaintiffs are also to the effect that the impugned notice also suffers from the vice of the non-compliance of the mandatory provisions of the Companies Act, the present proceedings taken by the plaintiffs before this Court are not barred as pleaded by the learned Counsel for defendant No. 2. The learned Counsel for defendant No. 1, while referring to the ambit and scope of Sections 15Y and Section 20A of the Sebi Act and the pleadings of the parties, submitted that since the subject matter of the suit is covered by the Sebi Act, the jurisdiction of the Civil Court in terms of the above said provisions of the Sebi Act is barred irrespective of the fact that in the present proceedings the plaintiffs inter alia complain of non-compliance of the provisions of Section 173(2) of the Companies Act.
(10) In order to decide the above question it is necessary to examine the ambit and scope of Section 15Y and Section 20A of the Sebi Act which read as under.
“CIVIL Court not to have jurisdiction.- No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an Adjudicating Officer appointed under this Act or a Securities Appellate Tribunal Constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.”
“BAR of jurisdiction – No order passed by the Court shall have jurisdiction in respect of any matter which the Board is empowered by, or under, this Act to pass any order and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any order passed by the Board by, or under, this Act.”
(11) Section 15Y refers to Adjudicating Officers appointed under the Sebi Act or Securities Appellate Tribunal constituted under the above said Act whereas Section, 20A refers to Securities & Exchange Board of India constituted under Section 3 of the Act. The words “is empowered by or under this Act” occurring in the above said: provisions are of utmost significance and as a result of the insertion of these words, the ambit and scope of the above said provisions of the Act is much widened so as to include within its fold all suits and proceedings in respect of any matter which an Adjudicating Officer appointed under the Act or a Tribunal constituted under the Act is empowered by or under the Act to determine and any matter which the Board is empowered by or under the Act to pass any order. At this stage prima facie it is not in dispute that the concerned competent authority under the Sebi Act, on a complaint made, is already seized of the matter. Moreover, on the basis of the averments made in the plaint and the contents of the application, it is apparent that the main thrust of the case of the plaintiffs is that the impugned notice issued by defendant No. 1 is in violation of the guidelines issued by the Sebi Act and the rules and regulations framed thereunder.
(12) In view of the position explained above I am inclined to agree with the views expressed by the learned Counsel for the plaintiffs and in my opinion too prima facie it appears that in view of the provisions contained in Sections 15Y and 20A of the Sebi Act the jurisdiction of the Civil Court in the present proceedings appears to be barred. However, since this Court is not dealing with the matter finally and, at this stage is only dealing with the interlocutory applications filed by both the parties, no final view on the above point is being expressed by this Court and only a tentative view on the basis of submissions made by the learned Counsel for both the parties is being expressed by this Court solely for the purposes of the disposal of the above mentioned two applications presently under consideration of this Court.
(13) The learned Counsel for the plaintiffs, during the course of arguments has further submitted that the impugned notice, calling for the Egm for 29th May, 1997, is bad in law because of the non-compliance of the statutory requirements of the Companies Act, more particularly, that of Section 173, Sub-section (2) and also because of the fact that the same is violative of the provisions of the Sebi Act and the rules/regulations framed thereunder. The learned Counsel for defendant No. 2 also submitted that the impugned notice is violative of the provisions of the Sebi Act and the rules/regulations framed thereunder. The learned Counsel for the plaintiffs on the other hand submitted that the impugned notice suffers from no under the rules/regulations framed thereunder. He further submitted that even if it is found that the impugned notice suffers from any infirmity or has any defect in terms of the provisions of the Sebi Act or rules/regulations framed thereunder in that event that would not be a ground for grant of any injunction as sought for by the plaintiffs because the concerned competent authority under the Sebi Act is already seized of the matter and in case after following due process, as laid down under the Act or the rules/regulations framed thereunder, the above said authority arrives at a finding against defendant No. 1 in that event the concerned authority can issue suitable directions or can take appropriate action as the case may be but no interim order restraining or injuncting defendant No. 1 can be passed in the given facts.
(14) The above question relating to explanatory statement referred to in Section 173(2) of the Companies’ Act came up for consideration before a Division Bench of the Calcutta High Court consisting of P.B. Mukerjee, CJ. and B.C. Mitra, J. in case Sita Ram Jaipuria and Others Vs. Banwari Lal Jaipuria, , and it was held: “THE important point of this decision is that in construing the provisions like Section 173(2) too rigid an interpretation should not be made as to “hamper the conduct of business”. Section 173(2) of the Companies Act means a notice and explanatory statement which should give notice of the essence and substance of the transaction intended to be passed at the meeting. It is a business document. It must be used in a commonsense business way. So long as that standard is satisfied this Court should not be astute to find legal and technical points to defeat the notice and the explanatory statement.”
(15) Another Division Bench of the same High Court in case East India Commercial Company (P) Ltd. Vs. Raymon Engineering Works Ltd. while considering the above question held that it is not the function of an explanatory statement to travel beyond the scope of proposed resolution and only material facts have to be given and not the detailed particulars.
(16) The Kerala High Court in case K. Meenakshi Amma Vs. Sreerama Vilas Press & Publications (P) Ltd. and Others (1992) 73 Comp. Cases 285, relying on the decision of the Calcutta High Court in Sita Ramjaipuria’s case (supra) has held that the intention behind the provisions of Section 173(2) of the Companies Act has to be understood in a meaningful manner.
(17) In case Joseph Michael Vs. Travancore Rubber and Tea Company Ltd. 1984 Klt 238, a Division Bench of Kerala High Court comprising Bhaskaran Ag.C.J. and Fathima Beevi, J. has held that a very minor defect arising out of strict non-conformity with the provisions contained in Section 173(2) will not render the amendment of Articles of Association null and void.
(18) In view of the above decisions and various other judicial pronouncements the settled legal position is that a notice like the impugned one and the explanatory statement attached to it, can be condemned as tricky, if the same is likely to mislead the shareholders or if there is omission to state facts which would enable the shareholders to decide if they would attend the meeting or not. A notice and an explanatory statement can also be condemned if there is suppression of material facts. Applying these well settled tests it cannot be stated that the impugned notice or the explanatory statement attached to it were either tricky or misleading or that there was deliberate suppression or omission of facts which ought to have been communicated to the shareholders to enable them to decide if they would attend the meeting or not.
(19) The learned Counsel for the plaintiffs has placed reliance on decisions in cases Needle Industries (India) and Others Vs. Needle Industries Newey (India) Holding Ltd. and Others, ; Piercy Vs. S. Mills and Company Ltd., (1918-19) All. E.R. 313(Ch.D.) and Mohan Lal. Vs. Ssj Cotton & Jute Mills . There can be no two opinions insofar as the legal proposition laid down in the above said decisions. However, in the facts and circumstances of the present case the same, in my opinion, in no way helps the cause of the plaintiffs insofar as the above mentioned application is concerned.
(20) On a perusal of material on record, more particularly, the written statement filed on behalf of defendant No. 1, it is apparent that another shareholder of defendant No. 1 company by name Jagdish C. Aggarwal had filed a suit in the Calcutta High Court also assailing the impugned notice with more or less identical prayers and when no relief was given to him by the High Court of Calcutta he filed a Special Leave Petition [SLP(Civil) 11 107/97]. The above mentioned Special Leave Petition filed by said Shri Jagdish C. Aggarwal has been dismissed by the Supreme Court vide order dated 20th May, 1997 which reads as under:- “THE Special Leave Petition is dismissed. Such frivolous petitions should not have been entertained by the High Court.”
(21) The above order, passed by the Apex Court, in an identical matter virtually clinches the matter finally and in the presence of the above said order, for the decision of the above mentioned two applications, it was not necessary for this Court to have discussed the other contentions advanced by the learned Counsel for both the parties. However, after taking into consideration all the aspects of the matter including the contentions advanced at the Bar by the learned Counsels for both the parties I am not in favour of making an order of injunction as prayed for by the plaintiffs in their application. In order to avoid repetition, I am only summarizing the main grounds which are as follows:’ (i) The plaintiffs have no prima facie case in their favour; (ii) The balance of convenience is also not in favour of the plaintiffs as they are holding only a minimal amount of shares. (iii) No irreparable loss is going to be caused to the plaintiffs if their prayer for grant of injunction is refused because in the first place if the concerned competent, authority under the Sebi Act, who is already seized of the matter, arrives at a finding against defendant No. 1 in that event that authority can pass suitable orders/directions to load off the shares or to reduce the share capital or to compensate the plaintiffs for any loss-damage, that may be sustained by the plaintiffs. The plaintiffs have not brought on record any document or any material which may indicate that after the issue of notice or after the Egm held on 29th May, 1997 the value of their shares or the value of the share of the defendant No. 1 Company has gone down/decreased. On the other hand if this Court passes any order injuncting/restraining defendant No. 1 from giving effect to the decisions taken in the Egm held on 29th May, 1997 in that event in my opinion, an irreparable loss/damage would be caused to the defendant No. 1. (iv) In my opinion the explanatory statement prima facie does not lack the requisite particulars (it must be noted that at this stage I am not hearing the main suit). Lack of particulars, on which much has been said, is not such as to justify me to stay the decisions taken in the Egm held on 29th May, 1997 which has already been passed in a meeting held on 29th May, 1997 and approved by an overwhelming majority of shareholders.
(22) In view of the above discussion, in my opinion, the application filed by the plaintiffs, bearing Ia No. 4800/97 has no merit and is liable to be dismissed. Accordingly, the same is dismissed. The application of defendant No. 1 bearing Ia No. 5642/97 is allowed and the an interim order dated 27th May, 1997 is directed to be vacated forthwith.
(23) Nothing stated hereinabove shall amount to expression of any opinion on the merits of the main suit pending trial. In the facts and circumstances of the case the parties are left to bear their own costs.
(24) Ias 4800/97 and 5642/97 stand disposed of in above terms.