2000 (8) TMI 1053 - HC - Companies Law

Summary

Issues Involved:
1. Whether the plaintiff has got a prima facie case and the balance of convenience is in their favor?
2. Whether the interim injunction already granted in O.A. No. 688 of 2000 is liable to be vacated?
3. To what relief?

Detailed Analysis:

Issue 1: Prima Facie Case and Balance of Convenience

The plaintiff-company, incorporated in 1983, engaged in hire-purchase and leasing, provided financial assistance to the first respondent for acquiring computers under two hire-purchase agreements. The first respondent defaulted on payments, resulting in an outstanding amount of Rs. 78,52,110. Despite legal notices, the dues remained unpaid. The plaintiff alleged that the first respondent issued a prospectus for a public issue of equity shares, misleading the public by not disclosing the outstanding liabilities and pending litigations.

The plaintiff argued that the non-disclosure of material information in the prospectus misleads the public, posing a risk to investors. They contended that the first respondent's financial unsoundness and the ongoing criminal case against them warranted an injunction to prevent the public issue.

Issue 2: Interim Injunction

The first respondent countered that the plaintiff had suppressed material facts, including a restraining order from the Debt Recovery Tribunal preventing the first respondent from making payments. They argued that there were no misleading statements in the prospectus and that they had disclosed their liabilities, including the hire-purchase assistance from the plaintiff, in the prospectus. They also highlighted that the public issue had already been oversubscribed, and the interim injunction would harm the investors and lead to multiplicity of proceedings.

The court noted that the plaintiff did not provide evidence of a pending criminal case against the first respondent. The prospectus included necessary disclosures about the liabilities, and the plaintiff's apprehensions were deemed unfounded. The court emphasized that the plaintiff's remedy was to file a suit for recovery of the dues, not to prevent the public issue.

Issue 3: Relief

The court concluded that the plaintiff did not have a prima facie case, and the balance of convenience favored the first respondent. The interim injunction was vacated, and the first respondent was allowed to proceed with the public issue. The court also noted the lack of board resolution authorizing the plaintiff to file the suit, indicating procedural lapses on the plaintiff's part.

Conclusion:

The court dismissed Original Application No. 688 of 2000, vacated the interim injunction, and allowed Application No. 3107 of 2000. The first respondent was awarded costs of Rs. 5,000. The judgment emphasized the necessity for plaintiffs to follow proper legal procedures and not misuse interim reliefs to coerce settlements.