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2020 (6) TMI 273 - HC - Indian LawsGrant of mandatory injunction - Raising finances to meet the requirement of deposit of ₹4 crores in terms of the decision of the Hon ble Supreme Court by creating an appropriate security in respect of such number of unsold units - raising of funds by way of issuance of non-convertible debentures (NCD s) on a private placement basis in two tranches - HELD THAT - Applicants in the present application are defendant No.1 and 3 in the suit who are acting in representative capacity of defendant No.4. As noted above, the present suit has been filed by the plaintiffs for recovery of a sum of ₹448,75,58,347/- from defendant Nos. 1 to 4 jointly and severally and for permanent and mandatory injunction. The dispute between the parties is investment of the plaintiff No.2 in defendant No.4 of which defendant No.3 is 99% shareholder. The plaintiffs claim that by virtue of Shares Subscription Agreement and the other documents agreed to between the parties, the plaintiff No.2 is the only secured creditor of defendant No.4 and thus has first charge on the property of defendant No.4. Case of the applicants is that as per the Resolution dated 15th January, 2018 defendant No.1 has been absolved of part liabilities post the Resolution, however he continues to be responsible for the litigation including the one in relation to POCSO where the award for a sum of ₹45 crores has been passed against defendant No.4. ₹1 crore has already been deposited from the account of defendant No.4 pursuant to the extension of time granted by the Hon'ble Supreme Court on 11th May, 2020 and if a further sum of ₹4 crores is not deposited, the defendant No.4 would have to incur the liability of a sum of ₹45 crores immediately and thus the requirement of Section 1(a) that the property in dispute in the suit i.e. property of defendant No.4 is in danger of being wasted or alienated is satisfied. Even if the suit is finally disposed of the reliefs as sought by the applicants/defendant Nos.1 and 3 cannot be granted to them in the absence of a counter claim. The reliefs sought are not in the nature of seeking restoration of status-quo ante or the position at the time when the suit was filed. The applicants/defendant Nos.1 and 3 have also not made out a strong case so that during the trial they would be in a position to assert the right as sought to be enforced by the present application. Further, the reliefs sought by the applicants/defendant Nos.1 and 3 do not arise out of the plaintiffs cause of action nor are incidental thereto. To consider the plea of equity raised, it would be appropriate to note that though the claim of the applicants is that in the defendant No.4 the land was brought by the applicants and they also infused a capital of ₹130 crores, however when this Court raised further queries from learned counsel for the applicants the said claim is found to be apparently incorrect, for the reason it was accepted that the land for the project was transferred to defendant No.4 on payment of approximately ₹130 crores taken as a loan and when the agreement was entered into with the plaintiffs, from the sum of ₹190 crores infused by the plaintiffs received as debenture subscriptions, the liability of ₹130 crores which was the value of the project land was discharged. Thus the investment of the applicants in the defendant No.4 project even as per their claim is to the extent of approximately ₹130 crores which fact is also refuted by the plaintiffs according to whom the defendant Nos.1 to 3 hold Series B Non-Convertible Debentures of defendant No.4 for an amount of ₹17 crores only and not ₹130 corres as claimed. Thus the investment of the plaintiff No.2 in defendant No.4 being admittedly ₹190 crores is far more than that of the applicants. This Court finds that the reliefs as sought by the applicants/defendant Nos.1 and 3 cannot be granted either under Order XXXIX Rule 1(a) CPC or by way of equity - Application dismissed.
Issues Involved:
1. Jurisdiction of the Civil Court under Section 430 of the Companies Act. 2. Maintainability of the application by defendant Nos.1 and 3 on behalf of defendant No.4. 3. Grant of mandatory injunction without a counterclaim under Order XXXIX Rule 1(a) CPC. 4. Equitable relief under Section 151 CPC. Issue-wise Detailed Analysis: 1. Jurisdiction of the Civil Court under Section 430 of the Companies Act: The plaintiffs argued that the civil court's jurisdiction is barred by Section 430 of the Companies Act, which was reiterated by the Supreme Court in Shashi Prakash Khemka vs. NEPC Micon. The court analyzed whether the relief sought in the application arises from a dispute amenable to the jurisdiction of the Tribunal or Appellate Tribunal under the Companies Act. The court noted that the relief sought in this application is not based on oppression but on the inaction of the plaintiff No.2, which would result in loss to defendant No.4. The court concluded that the reliefs sought partake the character of a civil dispute, and the remedy under the Companies Act may not be adequate. Hence, the application is not barred under Section 430 of the Companies Act. 2. Maintainability of the Application by Defendant Nos.1 and 3 on Behalf of Defendant No.4: The court held that defendant No.3, being a 99% shareholder of defendant No.4, can file the application in a representative capacity due to the necessity to avoid denial of justice. The court relied on the Madhya Pradesh High Court's ruling in Prakashchandra Rajmal Jain, which allows a shareholder to institute a suit in a representative capacity when there is an absolute necessity to waive the rule to avoid denial of justice. 3. Grant of Mandatory Injunction Without a Counterclaim under Order XXXIX Rule 1(a) CPC: The court examined the principles for granting mandatory injunctions at an interlocutory stage, which include having a strong case for trial, preventing irreparable injury, and maintaining the status quo ante. The court found that the reliefs sought by the applicants do not arise out of the plaintiffs' cause of action and are not incidental thereto. The court also noted that the reliefs sought cannot be granted in the absence of a counterclaim and are not in the nature of restoring the status quo ante. Therefore, the court found no ground to grant the reliefs of mandatory injunction under Order XXXIX Rule 1(a) CPC. 4. Equitable Relief under Section 151 CPC: The applicants argued for equitable relief under Section 151 CPC, claiming that the failure to deposit the amount would cause serious financial loss to defendant No.4. The court noted the competing rights of secured creditors (plaintiffs) and unsecured creditors (POSCO), emphasizing that secured creditors have higher claims. The court found that the plaintiffs, as secured creditors, have a first charge on the property of defendant No.4, and it would be inequitable to create a further charge on the property to satisfy the claim of an unsecured creditor. The court also noted that the applicants' claim of defendant No.4 being a joint venture with the plaintiffs was unfounded, as the relevant agreements had been superseded. The court concluded that the reliefs sought by the applicants cannot be granted either under Order XXXIX Rule 1(a) CPC or by way of equity. Conclusion: The application filed by defendant Nos.1 and 3 was dismissed, with the court finding no grounds to grant the reliefs of mandatory injunction or equitable relief. The court upheld the plaintiffs' rights as secured creditors and emphasized the necessity of adhering to the contractual agreements between the parties.
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