1984 (1) TMI 237 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the trial court.
2. Plaintiff's standing as a shareholder.
3. Validity of the interim injunction order.
4. Bona fides of the plaintiff and the nature of the litigation.
5. Irreparable damage and balance of convenience.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Trial Court:
The trial court lacked pecuniary jurisdiction to entertain the suit. The plaintiff sought relief concerning Rs. 688 lakhs and distribution of dividends exceeding three crores. The valuation clause in the plaint falsely claimed that the reliefs were not capable of monetary valuation. This should have alerted the trial court to return the plaint for presentation to the proper court.

2. Plaintiff's Standing as a Shareholder:
At the time of filing the suit, the plaintiff was not a shareholder of Brooke Bond. The plaintiff had transferred all his shares years before filing the suit. Despite this, the plaint falsely averred that he was a shareholder to establish locus standi. This false averment rendered the suit non-maintainable.

3. Validity of the Interim Injunction Order:
The interim injunction order of December 20, 1983, was unwarranted and unsustainable. The trial court failed to apply judicial mind and ignored the amended Order 39 of the CPC, which mandates reasons for granting such orders. The trial court also disregarded a similar order previously stayed by the High Court. The impugned order lacked reasons and failed to meet the requisite tests for granting interim relief.

4. Bona Fides of the Plaintiff and the Nature of the Litigation:
The litigation was frivolous and vexatious, constituting an abuse of the court's process. The plaintiff's conduct was bereft of bona fides, and the suit was initiated with ulterior motives. The litigation was orchestrated by a third party, Malhotra, exploiting the judicial system. The plaint was a conglomeration of irrelevant and oppressive elements, aimed at subverting Brooke Bond's interests.

5. Irreparable Damage and Balance of Convenience:
The plaintiffs failed to establish a prima facie case of irreparable damage or balance of convenience. The transfer of surplus to reserves or payment of dividends could not cause irreparable damage. Brooke Bond's financial position was sound, and any potential liability from the amalgamation scheme was speculative and not a known liability. Therefore, the plaintiffs' suit and interim reliefs sought therein would cause more harm to Brooke Bond and its shareholders than any purported injury claimed by the plaintiffs.

Conclusion:
The appeals were allowed, the impugned order of December 20, 1983, was set aside, and the notice of motion was dismissed. The litigation was deemed frivolous and vexatious, warranting an order of compensatory costs. The court emphasized the need to nip such litigation in the bud to maintain confidence in the judicial system.