2002 (11) TMI 665 - HC - Companies Law

Summary

Issues Involved:
1. Prima facie case and balance of convenience.
2. Entitlement to interim injunction against respondents 1 to 5.
3. Appointment of an Advocate Commissioner to take inventory of movables.

Issue-wise Detailed Analysis:

1. Prima Facie Case and Balance of Convenience:
The court examined whether the applicant/plaintiff bank had a prima facie case and whether the balance of convenience was in their favor. The plaintiff bank argued that they had a primary, paramount, and exclusive right to the securities provided by the 1st defendant, which included immovable and movable properties. The plaintiff bank had provided significant financial assistance to the 1st defendant, which defaulted on repayment, resulting in a liability exceeding Rs. 12 crores. The plaintiff bank contended that the 1st defendant's partnership with the 5th defendant, involving a 26% share transfer, breached the loan agreements and jeopardized the securities. The court found that the plaintiff had a prima facie case, as the 1st defendant entered into an agreement with the 5th defendant without the plaintiff's approval, violating the pre-conditions of the loan agreement.

2. Entitlement to Interim Injunction Against Respondents 1 to 5:
The plaintiff sought an interim injunction to prevent the transfer or alienation of shares and securities. The 1st defendant admitted to borrowing from the plaintiff and other defendants but argued that the share transfer would not affect the plaintiff's securities. The court noted that the loan agreement included a clause that required the 1st defendant to obtain the plaintiff's approval before disposing of any shareholding. The court also considered the potential impact of the share transfer on the company's management and the value of the securities. Consequently, the court granted an interim injunction restraining the transfer or alienation of the 26% shareholding and the immovable properties listed in Schedule A. However, the court did not grant an interim injunction for the movable properties listed in Schedule B, as they were stock-in-trade essential for the company's operations.

3. Appointment of an Advocate Commissioner to Take Inventory of Movables:
The plaintiff requested the appointment of an Advocate Commissioner to take an inventory of the movable assets described in Schedule B. The court acknowledged the plaintiff's concern about safeguarding the securities but decided against appointing an Advocate Commissioner. Instead, the court allowed the plaintiff and defendants 6 and 7 to send representatives to the 1st defendant's company once a month to take inventory of the movables, with the 1st defendant required to cooperate.

Conclusion:
The court granted an interim injunction restraining the transfer or alienation of the 26% shareholding and the immovable properties listed in Schedule A. The court did not grant an interim injunction for the movable properties listed in Schedule B but allowed for monthly inventory checks by the plaintiff and defendants 6 and 7. The applications were ordered accordingly.