Posted On by &filed under Delhi High Court, High Court.


Delhi High Court
M/S Goyal Mg Gases Ltd. And Ors. vs M/S Punjab Wireless Systems Ltd. … on 11 September, 2001
Equivalent citations: AIR 2002 Delhi 159
Author: K Gupta
Bench: K Gupta


ORDER

K.S. Gupta, J.

1. This order will govern the disposal of IA No. 3156/2001 filed under Order XXXIX Rules 1 & 2 read with Section 151 CPC by the plaintiffs.

2. Suit was instituted alleging that defendant No. 1-company is holding 51% equity shares in defendant No. 4-company while remaining 49% shares are held by defendant No. 2-company. Under a Inter Corporate Deposit Agreement dated 29th April, 1998, the plaintiff No. 1-company deposited with defendant No. 1 and amount of Rs. 1 crore which was repayable with interest on 27th August, 1998. Defendant No. 1 being unable to repay this amount with interest vide letter dated 1st February, 1999 requested plaintiff No. 1 to roll-over ICD for an additional period of 134 days. Plaintiff No. 1 agreed to roll-over the ICD for said period and a fresh Inter Corporate Deposit Agreement dated 1st February, 1999 was entered into between the parties. In order to secure plaintiff No. 1 for re-payment of said amount with interest, the defendant NO. 1 pledged a total of 85 lacs shares held by it in Punwire Trunking Services Ltd. under a letter of pledge dated 1st February, 1999. Defendant No. 1 further entered into an agreement with plaintiff No. 1 to pledge its 51% shareholding (45,90,000 number of equity shares) in defendant No. 4 in the event of default in making payment of said dues by it. It is further alleged that plaintiff No. 2 purchased from plaintiff No. 1, 51% shareholding of defendant No. 1 in defendant No. 4-company. Under said agreement dated 1st February, 1999, the deposit matured on 15th June, 1999. Defendant No. 1 was to make payment of Rs. 13,21,644/- by way of interest besides principal amount of Rs. 1 crore to plaintiff No. 1. Defendant No. 1 issued cheques bearing No. 0417438 for Rs. 1 crore towards principal and No. 0417439 for Rs. 8,02,348/- towards interest on 15th June, 1999. However, on presentation both these cheques were dishonoured for insufficient funds. Thereafter, plaintiff No. 1 issued a notice under Section 138 of Negotiable Instruments Act, 1881 to defendant No. 1 calling upon it to make payment of both the cheques within 15 days failing which proceeding under said Section 138 was threatened to be initiated against it. On 20th July, 1999, the defendant No. 1 made payment of an amount of Rs. 3,33,022/- which was adjusted towards overdue interest. Defendant No. 1 failed to make payment of the balance due towards principal and interest despite service of demand letter dated 3rd November, 1999 through registered post, by plaintiff No. 1.’ It is alleged that by the order dated 27th July, 2000 passed by the High Court of Punjab & Haryana in C.A. No. 705/99 in C.P. No. 226/99 – H.S. Oberoi and Associates Vs. Punjab Wireless Systems Ltd., a provisional liquidator was appointed for defendant No. 1-company. Plaintiff No. 1 wrote a letter dated 15th September, 2000 to the provisional liquidator asking him to hand over 45,90,000/- equity shares held by defendant No. 1 in defendant No. 4-company Along with duly signed transfer deed(s) towards discharge of the amount due from defendant No: 1. Thereafter on 8th November, 2000, the plaintiff No. 1 again wrote to the provisional liquidator to hand over additional 10,00,008 number of shares as 45,90,000 shares were insufficient to discharge the debt. Provisional liquidator has failed and neglected to hand over the said shares of defendant No. 4 to plaintiff No. 1. It is stated that defendant No. 2 intends to sell its 49% shareholding to defendant No. 3 at a price of Rs. 2.33 per share. Under clause 14 of Article of Association of defendant No. 4, the plaintiff No. 1 is entitled to exercise right of first refusal on the shares proposed to be sold by defendant No. 2 to defendant No. 3. Plaintiff No. 1 sent a letter dated 14th November, 2000 to defendant No. 1 through provisional liquidator stating that plaintiff No. 1 is entitled to the right of first refusal on said shareholding and defendant No. 1 must communicate this fact to defendants 2 & 3 and further that plaintiff No. 1 is willing to purchase said shareholding at the same price and/or at an additional amount of 25 paise per share. It is stated that in view of infringement of the rights of plaintiff Nos. 1 & 2, the plaintiffs 1 & 2 had earlier instituted Suit No. 2565/2000 against the defendants. In that suit after notice, plaintiff No. 3 entered into an agreement with defendant No. 2 for purchase of its 49% shareholding in defendant No. 4-company on 6th February, 2001. In view of this agreement, the parties moved joint application being No. 1261/2001 under Order XXIII Rules 1 & 3 read with Section 151 CPC for withdrawal of suit. Subsequent to withdrawal of suit, the plaintiffs took all necessary steps to complete the transaction of sale and performed their obligations under the said agreement dated 6th February, 2001. It is stated that it was also agreed separately between the parties that due diligence would be done on defendant No. 4-company by plaintiff No. 3 and defendant No. 2 would co-operate and give all such information which may be necessary for due diligence. However, defendant No. 2 dragged its foot and started delaying the entire process and did not allow complete due diligence. The plaintiff No. 3 has a right to get the said agreement dated 6th February, 2001 extended beyond 31st March, 2001. Due to winding up proceeding of defendant No. 1, the defendant No. 2 though a minority shareholder in defendant No. 4, is running the company including its day to day affairs. Prayers at (a) to (e) in the suit which are material, are reproduced below:-

“(a) Decree of permanent injunction in favor of the plaintiffs restraining defendant No. 2 from transferring, assigning, alienating and/or offering for sale of its shares of defendant No. 4 to defendant No. 3 or to any other person in any manner whatsoever.

(b) Decree of permanent injunction in favor of the plaintiffs restraining defendant No. 4 from changing : its share capital structure and/or taking any policy decision without the majority representation of the plaintiff No. 1 on the Board of defendant No. 4.

(c) Decree of mandatory injunction in favor of plaintiffs directing defendant No. 4 to treat the plaintiff No. 1 and/or to as the holder of the said 55,90,008 shares of defendant No. 4 to issue notices as member as to attend General Meeting of its members.

(d) Decree of permanent injunction in favor of the plaintiffs restraining the defendant No. 4 from registering and/or permitting any other person apart from the plaintiffs to exercise the voting and/or other rights in respect of said 55,90,008 shares of the defendant No. 4.

(e) Decree of mandatory injunction in favor of the plaintiffs directing the defendant No. 2 to extend the Agreement dated 6th February, 2001.

(f) Decree of permanent injunction restraining the defendant No. 4 from making any payment to defendant No. 2 or any of its group/associate company.”

3. Aforesaid IA No. 3156/2001 was filed seeking grant of reliefs as claimed in the plaint by way of interim measure. By the order dated 30th March, 2001 while issuing notice for 18th July, 2001, the defendant No. 4 was restrained from changing its share capital structure as obtaining on that date and any sale of shares in defendant No. 4 by defendant No. 2 to defendant No. 3 was to abide by the order which may ultimately be passed on merits in the I.A.

4. Defendant 2 & 4 have contested the application by filing replies. In its reply it is alleged by defendant No. 2 that plaintiffs 1 & 2 in law could not have filed the present suit having unconditionally withdrawn suit No. 2565/2000 on 7th February, 2001. This suit being based on cause of action as in Suit No. 2565/2000, plaintiffs 1 & 2 by virtue of Order XXIII of Rule 1(4) CPC are precluded from filing it. Suit is also barred under Order II Rule 2 as also under Section 11CPC at the instance of plaintiffs 1 & 2. It is alleged that plaintiffs 1 & 2 had expressly relinquished all their claims in respect of 49% shareholding of answering defendant in defendant No. 4-company and that issue cannot be adjudicated again. Suit relates to disposition of property of defendant No. 1-company and is, therefore, not maintainable in view of Section 446(1) of Companies Act, 1956 except by leave of Punjab & Haryana High Court in C.P. No. 226/99. It is further alleged that plaintiffs never had in their possession 51% shares owned by defendant No. 1-company so as to make any claim in law as to pledge in respect thereto. Alleged transfer of this shareholding is void. It is stated that plaintiff No. 3 had no privity of contract with answering defendant uptil 6th February, 2001 which privity was to end on 31st March, 2001. Infact, it so ended without resulting in any definitive agreement for sale/purchase of the shares in question. It is stated that answering defendant entered into a Subscription and Shareholders’ Agreement on 11th January, 1996. Article 6 of this agreement provides for the manner of disposition of shares of defendant No. 4-company. Article 6.1 gives right of first refusal, namely, a shareholder seeking to sell, transfer or assign any or all of his shares, is free to do so provided that the non-transferring shareholder shall have a right of first refusal to purchase or nominate any other party to purchase the shares owned by the transferee shareholder. The non-transferring shareholder is required to exercise such a right is not more than 30 days after the receipt of written notice from the transferring shareholder setting forth the price, currency, purchaser’s name and other conditions for purchase of such interest. Article 6.4 of the agreement expressly states that shareholders would not have the right and shall not pledge their respective interest in defendant No. 4’s capital as a security for any specific debt or other specific obligation as a part of general assets of a shareholder. Said provisions of the agreement are pari materia to articles 14 to 17 of the Articles of Association of defendant No. 4-company. Article of Association of defendant No. 4 is in the public domain and will be deemed to be within the knowledge of plaintiffs. It is alleged that plaintiffs are neither the registered shareholders of defendant No. 4-company nor have been nominate by defendant No. 1 for completing the purchase of share of that company. That being so, the plaintiffs do not have any right exercisable under said Article 6.4 of the agreement. It is alleged that provisional liquidator is currently in charge of the affairs of defendant No. 1-company including 51% shareholding held by defendant No. 1 in defendant No. 4-company. It is further pleaded that after withdrawal of Suit No. 2565/2000, answering defendant addressed a letter to the provisional liquidator recording that it had received a bona fide offer from plaintiff No. 3 for purchase of its entire shareholding including the unallotted capital. It was expressly pointed out that earlier offer of defendant No. 3 had already lapsed/expired on 25th December, 2000 by efflux of time. Answering defendant requested defendant No. 1 through the provisional liquidator to grant no objection at the earliest for sale of its 49% shareholding. Although the terms of sale of shares including the price thereof had already been agreed to as per offer dated 6th February, 2001 made by plaintiff No. 3 and there was no requirement whatsoever to permit any due diligence in respect of defendant No. 4-company, nevertheless at the request of plaintiffs, answering defendant through defendant No. 4 offered all assistance and free inspection into the records and registers of defendant No. 4-company to enable plaintiff No. 3 to carry out due diligence. It is denied that answering defendant dragged its foot and delayed the execution of Definitive agreement between the parties as alleged. It is further denied that plaintiffs took all necessary steps to complete the transaction of sale or perform their obligation to complete the transaction, as alleged. It is claimed that the order dated 30th March, 2001 hurts the answering defendant; has great potential to cause irreparable injury to defendant No. 4 and, thus, deserves to be vacated.

5. In its reply while supporting the stand taken in the reply by defendant No. 2, defendant No. 4 has additionally pleaded that names of plaintiffs do not appear in the Register of members maintained by it and, therefore, they cannot stake their claim in any matter whatsoever on the premise that it is a shareholder of answering defendant. It is alleged that even the title of Guarantee Agreement-cum-Agreement dated 10th February, 1999 suggests that it is merely an agreement to pledge and not an actual pledge of the shares of answering defendant by defendant No. 1-company.

6. In the rejoinder filed by the plaintiffs to the reply of the defendant No. 2, it is alleged that withdrawal of Suit No. 2565/2000 was as a result of fraud played by defendant No. 2 in collusion with defendants 3 & 4 and same is, therefore, not binding on them. It is claimed that plaintiffs are entitled to institute the present suit seeking substantive reliefs. Moreover, a part of cause of action entitling the plaintiffs to file this suit, had accrued to them after 7th February, 2001.

7. Provisional official liquidator also filed an application seeking stay of suit till necessary leave under Section 446(1) of the Companies Act, 1956 is obtained by the plaintiffs in said C.P. No. 226/99.

8. Needless to repeat that one of the grounds on which grant of reliefs to plaintiffs 1 & 2 is opposed by defendants 2 & 4 is that on account of unconditional withdrawal by them of Suit No. 2565/2000 on 7th February, 2001, they are precluded under Order XXIII sub-rule (4) of Rule 1 CPC from filing this suit. Submission advanced by Sh. A.S. Chandhiok for plaintiffs was two fold. First, suit No. 2565/2000 was withdrawn without prejudice to the right of plaintiffs. Second, present suit is based on fresh cause of action arising out of agreement dated 6th February, 2001 which was not available at the time Suit No. 2565/2000 was instituted. In support of submission, reliance was placed on the decisions to which I shall be referring hereinafter, one by one.

9. In the decision in Radha Krishna and Anr. Vs. The State of Rajasthan and Ors., , it was held that Court has no power, apart from Order XXIII Rule 1 CPC to allow a suit to be withdrawn with liberty to file a fresh one, and the power has to be exercised subject to the conditions prescribed therein. While leave is granted to the plaintiff to withdraw from the suit with liberty to bring a fresh suit, the order must not be one dismissing the suit with liberty to bring a fresh suit but one granting permission to the plaintiff to withdraw from the suit with liberty to bring a fresh suit.

10. In Sukumar Banerjee Vs. Dilip Kumar Sarkar and Ors. , , it was held that where the plaintiff files an application to withdraw from the suit with liberty to sue afresh and the Court passes an order giving permission to withdraw the suit but nothing is said in the order regarding plaintiff’s liberty to institute a fresh suit on the same cause of action, the order has to read as granting permission to the plaintiff to sue afresh on the same cause of action.

11. In the decision in Papinayakanahalli Venkanna and Ors. Vs. Janadri Venkanna Setty, , the memo filed by the petitioner in H.R.C.OP No. 5/1967 read:-

“The petitioner herein submits that some of the elders and wellwishers, have undertaken to amicably settle the matter outside Court. Hence, the above petition is not pressed for the present.”

12. Order which came to be passed on the memo by the Court on 7th January, 1969 read thus:-

“7-1-69 : Sri. M.N.M. filed a memo stating that he does not press the petition. Petition is dismissed without costs.”

13. Issue No. 3 in the petition was whether the petitioner’s claim was barred under the provision of Order XXIII rule 1(3) CPC. In this backdrop, the submission advanced on behalf of petitioner was (i) that the provision of Order XXXIII Rule 1 CPC was not applicable and (ii) even if it was applicable, the order dated 7th January, 1969 must be construed as if, by implication, the permission had been granted by the Court. While dealing with second contention in para No. 8 (at page 169) it was held:-

“The second contention of Sri Joshi cannot be accepted, it was maintained, that the words “for the present” should be construed as seeking permission of the Court for filing a fresh application, by implication, and therefore, in the circumstances in which the memo is worded, and order is passed by the Principal Munsiff on 7-1-1969, Sri Joshi argued, it should be held that there was compliance with sub-rule (4) of 0.23 R. 1 C.P.C. It is difficult to accept such a contention. The words “for the present” would only indicate the proximity of time and nothing else. But to read that the petitioner-landlord had sought permission from the Court to bring a fresh action is to re-write the memo. Moreover, the permission that is contemplated under 0.23 R. 1(4) C.P.C. is required to be specifically granted by an order, if so requested by the petitioner; it is not possible to hold, that the petitioner had made such a request in the memo and the same was granted by the Court.”

14. In Manohar Lall Vs. Narain Dass & Anr. , , it was held that to claim eviction under clause (k) of sub-section (1) of Section 14 of Delhi Rent Contract Act, the landlord was required to prove that the tenant had not stopped the breach of the condition even after the service of the notice on him. Each such notice furnished a new cause of action. Subsequent petition for eviction was based on the notice which was issued long after the decision of the first case. Therefore, it cannot be said that the subject matter in subsequent eviction petition was the same as in earlier petition.

15. In Superintendent (Tech.I) Central Excise, I.D.D., Jabalpur and Ors. Vs. Pratap Rai, , after taking note of the term ‘without prejudice’ as defined in Black’s Law Dictionary and Wharton’s Law Lexicon, it was held in para No. 7 of the judgment at page 1246 that the said term means (1) that the cause or the matter has not been decided on merits, (2) that fresh proceedings according to law were not barred.

16. In Umesh Jha Vs. The State and Anr. , AIR 1956 Patna 425, it was held that words ‘without prejudice’ import into any transaction that the parties had agreed that as between themselves the receipt of money by one and its payment by the other shall not of themselves have any legal effect on the rights of the parties, but they shall be open to settlement by legal controversy as if the money had not been paid.

17. Adverting to present suit, copy of plaint of aforesaid Suit No. 2565/2000 is placed at pages 23 to 54 on part-III file. Comparison of plaints of two suits would reveal that paras up to 30 with minor additions in paras 1 & 2 of the plaint in present suit, have been bodily lifted from Suit No. 2565/2000. Further, prayer clauses (a), (b), (c) & (d) in present suit are identical to prayer clause (a), (b), (c), & (d) in Suit No. 2565/2000. Copies of the joint application being IA No. 1261/2000 filed under Order XXIII Rules 1 & 3 read with Section 151 CPC in said Suit No. 2565/2000 is at pages 137 & 138 while that of the order passed in that IA as also in suit at page 141 part-III file. Said IA was filed alleging that parties had compromised the dispute between them amicably out of court; in view of understanding reached outside the Court, the plaintiffs wish to withdraw the suit; plaintiffs also give up their claim against defendant No. 2 is respect of 49% shares owned by defendant No. 2 in defendant No. 4; amount of Rs. 1,39,00,000/- deposited pursuant to the order dated 20th November, 2000 by the plaintiffs in the name of Registrar, has to be released Along with interest in plaintiffs favor. It was prayed that suit, without prejudice, to the rights of plaintiffs be allowed to be withdrawn and amount of Rs. 1,39,00,000/- Along with interest released in plaintiffs’ favor. Orders dated 7th February, 2001 which came to be passed in the said IA and suit which are material, are reproduced below:-

“Present: Ms. A. Dutt for the plaintiff.

Mr. Adarsh Malik for
Defendant No. 1.

Mr. D.A. Dave, Sr. Advocate with
Ms. Minakshi for Defendant
No. 2.

Mr. A.N. Haksar, Sr. Advocate
with Mr. R.K. Agarwal for
Defendant No. 4.

I.A. 1261/00 to be numbered.

By this I.A. the Plaintiff seeks withdrawal of the Suit Without Prejudice to the rights and contentions of the party in accordance with law. Since the withdrawal is unconditional, the request in the I.A. is granted.

I.A. disposed off accordingly.

S.NO. 2565/00 I.A. 11957/00

In view of the above order, the Suit is dismissed as withdrawn. The amount of Rs. 1,39,00,000/- deposited by the plaintiff’s order to be released in favor of the plaintiff. Learned Counsel for Official Liquidator for Defendant No. 1 states that the request for transfer of Shares in favor of the Plaintiff will be considered in accordance with law, expeditiously if the application for the said purpose is received from Defendant No. 2.

There shall be no order as to Cost.”

18. As noted in IA No. 1261/2000, since the matter was compromised in view of understanding reached between the parties out of Court, there was no occasion to have granted to plaintiffs 1 & 2 the leave to institute fresh suit in respect of the subject matter involved in Suit No. 2565/2000 nor was such a permission even sought in the said IA by plaintiffs 1 & 2. Also taking note of the ratio in Superintendent (Tech.I) Central Excise, I.D.D. Jabalpur’s case, (supra), the words ‘without prejudice to the right of plaintiffs’ as occurring in the prayer clause in said IA No. 1261/2000 on which great emphasis was laid on behalf of plaintiffs, in the context they have been used, would only mean that said Suit No. 2565/2000 was sought to be withdrawn as compromised and not on merits. None of the aforementioned decisions rendered by Rajasthan, Calcutta, Karnataka and Delhi High Courts have any bearing on the issue at hand.

19, Coming to second contention referred to above, it may be noticed that in aforesaid Suit No. 2565/2000 as also in present suit, the parties to suit are identical excepting addition of Doogar & Associates Ltd. as plaintiff No. 3 in latter suit. Offer dated 6th February, 2001 which is stated to have furnished fresh cause of action to plaintiffs 1 & 2 is in between plaintiff No. 3 and defendant No. 2 for purchase by plaintiff No. 3 of 49% shareholding of defendant No. 2 in defendant No. 4. From the discussion made in preceding paras, it is manifest that subject matters qua plaintiffs 1 & 2 in Suit No. 2565/2000 and present suit are identical and plaintiffs 1 & 2 had given up their claim with respect to 49% shareholding held by defendant No. 2 in defendant No. 4. In this backdrop, fresh cause of action with regard to reliefs at (a), (b), (c), & (d) cannot be claimed by plaintiffs 1 & 2 on the basis of offer as contained in letter dated 6th February, 2001. Relief (f) is ancillary to the reliefs at (a) to (d). It will not be out of place to state that although in the rejoinder filed to the reply of defendant No. 2, the plaintiffs have alleged that withdrawal of Suit No. 2565/2000 was as a result of fraud played by defendant No. 2 in collusion with defendants 3 & 4 and thus the same is not binding on them but such a plea has neither been taken in the plaint nor consequential relief in that behalf claimed in the suit. For the foregoing discussion, it must follow that plaintiffs 1 & 2 are, prima facie, precluded from filing the present suit under Order XXIII sub-rule (4) of Rule 1 CPC. Having reached this conclusion, I need not examine the merits of the claim of plaintiffs 1 & 2 qua the said reliefs including the objection taken by the contesting defendants as also provisional liquidator that without the leave of Winding Up Court under Section 446(1), Companies Act, present suit in so far as it relates to 51% shareholding held by defendant No. 1 in defendant No. 4 is not legally maintainable.

20. This brings me to aforesaid prayed (e) as made in plain for issue of mandatory injunction directing defendant No. 2 to extend the offer as contained in the letter dated 6th February, 2001 beyond 31st March, 2001. Copy of said letter on the letter head of plaintiff No. 3 (DAL) and addressed to defendant No. 2 (MIDC) is placed at page 129 to 131 on part-III file. Omitting immaterial portions, it read as under:-

“Re: Purchase of MIDC Shareholding in Procall Ltd.

Dear Sir,

This letter sets forth the terms under which Doogar & Associates Ltd. (DAL) has offered to acquire the complete shareholding of MIDC and/or it subsidiaries (collectively Motorola) in Procall Ltd.

Purchase Offer

DAL Will

1. Pay to MIDC for acquiring Motorola Shareholding in Procall a sum of Rs. 48,33,713/- (Forty Eight Lakhs Thirty three Thousand Seven Hundred Thirteen Only) as consideration towards acquisition of 53,70,792 shares of Procall @ of Re. 0.90 (Ninety Paise Only) per share. MIDC assures transfer of all its right in relation to 5,09,208 (applied for) unallotted shares at nominal value of Re. 1 (one only).

2. Assume MIDC’s and/or its subsidiary’s guaranteed share of Procall debt of Rs. 2,50,00,000/- (Two Crore Fifty Lakhs Only) owned by Procall to IFCI and have MIDC and/or subsidiary released from its guarantee to IFCI to the extent of the amount mentioned herein.

3. Agrees that Procall shall pay to MINC/MIDC’s Indian. Subsidiary, Motorola India Ltd. (MIL) monies presently payable at Rs. 2.30 crore (Two Crore Thirty Lakhs Only) toward supplies made.

4. Be entitled to all such assets, profits, shares and advances to which Motorola may be entitled and/or held by Motorola in Procall DAL also recognizes that in addition to the liabilities mentioned in this offer letter, there are other liabilities which Procall has to discharge.

5. Assume MIDC’s guarantee of Rs. 80,00,000/- (Eighty Lakhs Only) furnished by MIDC towards performance guarantee by Procall to DOT.

Motorola Will

1. Subject to Official Liquidator’s approval and DAL fulfillling its obligations MIDC will transfer its shareholding in Procall to DAL within 4 weeks of the execution of the Definitive Agreement.

2. Obtain NOC and such clearances as may be required from IFCI and DOT for transfer of MIDC shareholding in Procall. DAL agrees to assist MIDC in these endeavors.

Disclosure…..

Confidentially…..

Costs…..

Consents…..

Termination

This arrangement shall stand terminated.

i. If the Definitive Agreement has not been executed by 31.3.2001 provided that such termination will not effect the liability of the either party hereto for breach of any provisions hereof prior to the termination. Upon such termination, parties will have no further obligations hereunder or otherwise against each other except as stated in the confidentially clause above.

Governing Law

This letter will be governed and construed in accordance with the laws of India.”

21. Legal position as obtaining in India in regard to interim mandatory injunction was summarised in paras 13 & 14 of the decision in Dorab Cawasji Warden Vs. Coomi Sorab Warden and Ors. , by the Supreme Court thus:-

“In one of the earliest cases in Rasul Karim & Anr. v. Pirubhai Amirbhai (1914) 2nd 38 Bom 381:

(AIR 1914 Bom 42), Beaman, J. was of the view that the court’s in India have no power to issue a temporary injunction in mandatory from but Shah, J. who constituted a bench in that case did not agree with Beaman, J. in this view. However, in a later Division Bench judgment in Champsey Bhimji & Co. v. Jamna Flour Mills Co. Ltd. (1914 Bom 195), two learned Judges of the Bombay High Court took a different view from Beaman, J. and this view is now the prevailing view in the Bombay High Court. In M. Kandaswami Chetty v. P. Subramania Chetty (1918) 2nd 41 Mad 208 : (AIR 1918 Mad 588) a Division Bench of the Madras High Court held that court’s in India have the power by virtue of order 39, Rule 2 of the Code of Civil Procedure to issue temporary injunctions in a mandatory form and differed from Beaman’s view accepting the view in Champsey Bhimji & Co. v. Jamna Flour Mills Co. (supra). In Israil v. Shamser Rahman (1914) 2nd 41 Cal 436 : (AIR 1914 Cal 362), it was held that the High Court was competent to issue an interim injunction in a mandatory form. It was further held in this case that in granting an interim injunction what the Court had to determine was whether there was a fair and substantial question to be decided as to what the rights of the parties were and whether the nature and difficulty of the questions was such that it was proper that the injunction should be granted until the time for deciding them should arrive. It was further held that the Court should consider as to where the balance of convenience lie and whether it is desirable that the status quo should be maintained. While accepting that it is not possible to say that in no circumstances will the courts in India have any jurisdiction to issue and ad interim injunction of a mandatory character, in Nandan Pictures Ltd. v. Art Pictures Ltd., , a Division Bench was of the view that if the mandatory injunction as granted at all on an interlocutory application it is granted only to restore the status quo and not granted to establish a new state of things differing from the state which existed at the date when the suit was instituted.

14. The relief of interlocutory mandatory injunctions are thus granted generally to preserve or restore the status quo of the last non-contested status which preceded and pending controversy until the final hearing when full relief may be granted or to compel the undoing of those acts that have been illegally done or the restoration of that which was wrongfully taken from the party complaining. But since the granting of such an injunction to a party who fails or would fail to establish his right at the trial may cause great injustice or irreparable harm, courts have evolved certain guidelines. Generally stated these guidelines are:

(1) The plaintiff has a strong case for trial. That is, it shall be of a higher standard than a prima facie case that is normally required for a prohibitory injunction.

(2) It is necessary to prevent irreparable or serious injury which normally cannot be compensated in terms of money.

(3) The balance of convenience is in favor of the one seeking such relief.”

(emphasis supplied)

22. Perusal of aforesaid termination clause in letter dated 6th February, 2001 would reveal that the offer regarding acquisition of 49% shareholding of defendant No.2 in defendant No.4 by plaintiff No.3 was to stand terminated automatically if the Definitive agreement was not executed by 31st March, 2001. Although, by the letter dated 19th March, 2001 (copy at page 156 on part-II file), the plaintiff No.3 had requested defendant No.2 to extend the time for execution of agreement by another one month but the same was turned down by defendant No.2 by the letter dated 23rd March, 2001 (copy at pages 157 & 158). In the course of arguments on behalf of plaintiffs, the defendant No.2-company was accused of having not performed its part of obligation under said letter dated 6th February, 2001. On the other hand, similar charge was levelled against plaintiff No.3 by Sh.A.M.Singhvi appearing for defendant No.2. By the time, this suit came to be filed, the matter was in the realm of offer. Plaintiff No.3 can be adequately compensated in terms of money if there had been breach of obligation under the said letter on the part of defendant No.2. Further, in the facts and circumstances of case, plaintiff No.3 cannot be said to have made out case of higher standard than a prima facie case which is required to be established for prohibitory injunction. Considering the ratio in Dorab Cawasji Warden’s case (supra), or der of interim mandatory injunction extending the offer beyond 31st March, 2001 is not called for. Application thus deserves to be dismissed and order dated 31st March, 2001 vacated.

Consequently, the application is dismissed and order dated 30th March, 2001 vacated.


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