2015 (10) TMI 2659 - HC - Indian Laws

Temporary injunction - Restriction on transferability of the equity shares holding by the Opposite Party No. 1 under the said agreement - Held that - The reasonable interpretation which can be assigned to a different sub Clauses under the assignment Clause is that the right to assign the rights under the agreement can be exercised by the investor subject, however, to signing the Deed of Adherence in the prescribed form. Sub Clause 28.3.1 of the assignment Clause put a fetter on the part of the company and the promoter to assign any right or obligation under the agreement without prior consent of the investor. Sub Clause 28.3.2, from its meaningful reading does not put any restrictions on the investor to assign any of their rights under the agreement to a third party but such assignment should be followed by a Deed of Adherence strictly in terms of Annexure 13.2 thereof. Sub Clause 28.3.3 is an additional Clause which permits the investor to assign its right under the said agreement to any of its affiliates in the same manner as indicated in a proceeding Clause. There is no quarrel to the proposition of law that the temporary injunction is passed in aid of the final relief. An application for injunction is considered and decided on a well recognized three parameters, namely, existence of prima-facie case, plans of convenience and inconvenience and irreparable loss and injury. It admits no ambiguity to say that if the Court lacks inherent jurisdiction the prayer for injunction can be refused as the said order shall be a nullity. Though several provisions of SICA is placed before this Court to demonstrate that the allegations contained in the plaint can very well be agitated before the BIFR and therefore the provisions contained under Section 26 of the SICA bars the jurisdiction of the Civil Court to determine such dispute it would be too early to accept such proposition and can be said with certainty that the Civil Court s jurisdiction is completely ousted under the said provision. It is a settled law that the Court should read the plaint a whole and not in isolated manner. This Court, therefore, cannot accept the contention of the Opposite Party at this stage that the issues involved in the suit is squarely comes when the purview of SICA so as to apply the embargo created therein. Since this Court does not find the existence of a prima facie case having made out in application for temporary injunction in view of the findings recorded hereinabove, there is no infirmity and / or illegality in the impugned order by which an application for temporary injunction is rejected by this Trial Court.

Summary

Issues Involved:
1. Grant of leave for filing Revisional Application without certified copy.
2. Temporary injunction application dismissal.
3. Jurisdiction of Civil Court under Section 26 of SICA.
4. Legality of share transfer and directorial appointments.
5. Applicability of Share Subscription and Shareholders' Agreement clauses.
6. Interpretation of "affiliates" under the agreement.
7. Applicability of Supreme Court judgments.

Detailed Analysis:

1. Grant of Leave for Filing Revisional Application Without Certified Copy:
The petitioner was granted leave to file the Revisional Application without the certified copy of the order, as the Trial Court's order was passed on the last working day before the long Puja Vacation. The Court entertained the Revisional Application under Article 227 of the Constitution of India because there was no Vacation Bench available to receive and entertain the appeal.

2. Temporary Injunction Application Dismissal:
The Trial Court dismissed the application for temporary injunction and scheduled the next hearing for an application under Order 7 Rule 11 of the Code of Civil Procedure. The Revisional Application was considered due to the absence of a Vacation Bench. The petitioner argued that the Trial Court misconstrued Section 26 of SICA and misapplied the Supreme Court judgment in Tata Motors Ltd. v. Pharmaceuticals Products of India Ltd. & Anr., leading to the wrongful rejection of the temporary injunction.

3. Jurisdiction of Civil Court Under Section 26 of SICA:
The respondent contended that the Civil Court lacked jurisdiction due to the provisions of Section 26 of SICA, which is a self-contained code. The Court noted that it was too early to definitively conclude that the Civil Court's jurisdiction was entirely ousted by SICA. The Court referenced the Supreme Court judgment in Tata Motors Ltd., which held that SICA, being a special statute, prevails over the Companies Act in case of inconsistencies.

4. Legality of Share Transfer and Directorial Appointments:
The petitioner challenged the legality of the share transfer and the nomination of five directors by the Opposite Party No. 3, arguing it violated the status-quo order by BIFR and the Share Subscription Agreement, which allowed transfer only to affiliates. The respondent argued that the agreement did not restrict share transfer and that the directors were validly appointed. The Court found that the appointed directors were already in place before the suit was filed, and thus the prayer for temporary injunction had become infructuous.

5. Applicability of Share Subscription and Shareholders' Agreement Clauses:
The petitioner emphasized Clause 28.3.3, arguing that the Opposite Party No. 3 was not an affiliate of Opposite Party No. 1 and thus could not assert rights under the agreement. The Court interpreted the clauses harmoniously, concluding that the equity shares were freely transferable, and the Shareholders' Agreement, being a private contract, could not contain provisions contrary to the Articles of Association.

6. Interpretation of "Affiliates" Under the Agreement:
The Court examined the definition of "affiliates" in the agreement, which included entities under common control. It found no restriction on the transferability of shares by the investor, provided the Deed of Adherence was signed. The Court concluded that the agreement allowed for such transfers, subject to the stipulated conditions.

7. Applicability of Supreme Court Judgments:
The Court reviewed the applicability of the Supreme Court judgments cited by both parties. It found that the principles laid down in Tata Motors Ltd. and Ghanshyam Sarda were relevant but did not conclusively bar the Civil Court's jurisdiction at this stage. The Court emphasized that the plaint should be read as a whole and not in isolation.

Conclusion:
The Court dismissed the Revisional Application, finding no prima facie case for granting temporary injunction. It upheld the Trial Court's order, stating there was no infirmity or illegality in rejecting the application for temporary injunction. The Court reiterated that the temporary injunction is passed in aid of the final relief, and the Civil Court's jurisdiction was not conclusively ousted by SICA at this stage. The Revisional Application was thus dismissed without any order as to costs.