2000 (7) TMI 900 - HC - Companies Law

Summary

Issues:
Interpretation of clauses in a mortgage deed - legality and public policy compliance.
Validity of the respondent's actions in invoking section 69 of the Transfer of Property Act.
Prima facie case and balance of convenience analysis for granting interim injunction.

Interpretation of Clauses in a Mortgage Deed:
The applicants filed a suit challenging clauses 6 and 7(z) of the mortgage deed, arguing they were unlawful, illegal, void, and against public policy. The clauses involved the collection of recurring deposits and interest on defaults. The court noted the applicants' default in recurring deposit payments and emphasized the need to pay the principal amount regardless of clause legality. The court found the applicants' delay tactics apparent and ruled against their claim of clauses violating public policy or contract law. The court highlighted the applicants' awareness of the clauses when signing the deed and deemed their objections a delay tactic.

Validity of Respondent's Actions under Section 69:
The respondent, a Nidhi under the Companies Act, collected deposits and faced the risk of default if unable to repay deposit holders. The court noted the applicants' attempt to delay payment and prevent the property auction under section 69 of the Transfer of Property Act. The court emphasized the importance of debtors like the applicants honoring their obligations to prevent losses to deposit holders. The court found the applicants' lack of interest in paying the principal amount concerning and ruled in favor of the respondent, stating the applicants had no prima facie case. The court granted a conditional order for the applicants to pay a specific amount within a set period to avoid auctioning the property under section 69.

Prima Facie Case and Balance of Convenience Analysis:
The court considered whether the applicants had a prima facie case and analyzed the balance of convenience. Despite granting an interim injunction for six weeks, the court mandated the applicants to deposit 50% of the principal amount within the same period. Failure to comply would automatically vacate the injunction, allowing the respondent to proceed with auctioning the property under section 69 of the Transfer of Property Act. The court's decision aimed to balance the interests of both parties while ensuring the applicants fulfilled their financial obligations promptly.