9911796707
TMI Blog1983 (9) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... dis listed in Ex ".K" by second defendant, Tapan Kumar Ghosh, for and on behalf of the bank was null and void and not binding on the bank and calling upon the Corporation to deliver up to the court the disputed bills of exchange and/or hundis for the purpose of cancellation and for a direction cancelling the same. In this suit the Bank took out a notice of motion No. 1156 of 1981, seeking to restrain by an interim injunction the Corporation from enforcing any claim whatever in any form or from relying on or giving effect to the bills of exchange or hundis involved in the dispute for the purpose of any suit or other proceedings including winding-up proceedings under the Companies Act, 1956, and/or the Banking Regulation Act, 1949, against the Bank. Notice of motion also included a prayer for an interim injunction restraining the defendants in any manner whatsoever either endorsing or negotiating or transferring the said bills of exchange or hundis and for appointment of a receiver to take custody of the bills of exchange and hundis listed in Ex".K". An ex parte ad interim injunction was granted as prayed for. When the notice of motion came up for hearing, the learned judge made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f branch manager at Worli, co-accepted the 16 usance bills and according to the Corporation the acceptance was evidenced by four letters issued by the Bank. When the usance bills matured and became due for payment, the Bank of Baroda on behalf of the Corporation called upon the Bank to make the payment of the amounts covered by the various usance bills. Simultaneously, the third defendant was asked to direct its bankers, the plaintiff-bank in this case, to discharge the usance bills and make the necessary payment. The solicitors of the Bank informed the Corporation that they were awaiting instruction from the head office of the Bank at Calcutta. Thereafter, the solicitors of the Corporation served a notice dated August 5, 1981, on the Bank calling upon if to make the payment under the usance bills co-accepted by the Bank within 4 days from the receipt of the notice. Soon, thereafter, the Bank filed a suit against the Corporation and two others as stated hereinbefore. The main contention of the Bank in the suit is that the chief branch manager, defendant No. 2, had not the requisite authority to co-accept the bills on behalf of the Bank and, therefore, the Bank had incurred no liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the CPC, 1908. Permanent injunctions can only be granted by the decree made at the hearing and upon merits of the suit and thereby defendant in the suit is perpetually enjoined from assertion of a right or from commission of an act, which would be contrary to the rights of the plaintiffs. Section 38 sets out situations in which the court can grant a perpetual injunction to the plaintiff to prevent the breach of an obligation existing in its favour, whether expressly or by implication. Section 38 is thus an enabling section which confers power on the court to grant perpetual injunction in situations and circumstances therein enumerated. Section 41 caters to the opposite situation. It provides that an injunction cannot be granted in the situation and circumstances therein set out. The Corporation relies on section 41(b) in support of its contention that the court had no jurisdiction to grant temporary injunction because perpetual injunction could not have been granted by the court in terms in which temporary or interim injunction was sought. Section 41(b) reads as under: "41. An injunction cannot be granted-... (b)to restrain any person from instituting or prosecuting any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... injunction is sought. Section 41(b) denies to the court the jurisdiction to grant an injunction restraining any person from instituting or prosecuting any proceeding in a court which is not subordinate to the court from which the injunction is sought. In other words, the court can still grant an injunction restraining a person from instituting or prosecuting any proceeding in a court which is subordinate to the court from which the injunction is sought. As a necessary corollary, it would follow that the court is precluded from granting an injunction restraining any person from instituting or prosecuting any proceeding in a court of co-ordinate or superior jurisdiction. This change in language deliberately adopted by the Legislature after taking note of judicial vacillation has to be given full effect. It is, therefore, necessary to unravel the underlying intendment of the provision contained in section 41(b). It must at once be conceded that section 41 deals with perpetual injunction and it may as well be conceded that it has nothing to do with interim or temporary injunction which as provided by section 37 are dealt with by the CPC. To begin with, it can be said without fear of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right and complains of its violation or infringement, can approach the court and seek relief. When such person is injuncted from approaching the court, he has to vindicate the right and then when injunction is vacated, he has to approach the court for relief. In other words, he would have to go through the gamut over again: when defending against a claim of injunction the person vindicates the claim and right to enforce the same; if successful he does not get relief but a door to the court which was bolted in his face is opened. Why should he be exposed to multiplicity of proceedings? In order to avoid such a situation the Legislature enacted section 41(b) and statutorily provided that an injunction cannot be granted to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought. Ordinarily a preventive relief by way of prohibitory injunction cannot be granted by a court with a view to restraining any person from instituting or prosecuting any proceeding and this is subject to one exception enacted in larger public interest, namely, a superior court can injunct a person from instituting or prosecuting an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or proceeding. If this be the purpose to achieve which power to grant temporary relief is conferred, it is inconceivable that where the final relief cannot be granted in the terms sought for because the statute bars granting such a relief ipso facto the temporary relief of the same nature cannot be granted. To illustrate this point, let us take the relief which the Bank seeks in its suit. The prayer is that the Corporation be restrained by an injunction of the court from presenting a winding-up petition under the Companies Act, 1956, or under the Banking Regulation Act, 1949. In other words, the Bank seeks to restrain the Corporation by an injunction of the court from instituting a proceeding for winding-up of the Bank. There is a clear bar in section 41(b) against granting this relief. The court has no jurisdiction to grant a perpetual injunction restraining a person from instituting a proceeding in a court not subordinate to it, as a relief, ipso facto temporary relief cannot be granted in the same terms. The interim relief can obviously be not granted also because the object behind granting interim relief is to maintain status quo ante so that the final relief can be appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1877 Act and the English equity jurisprudence and, therefore, where light is shed by decisions in England, the same must illumine our path. Where provisions are in pari materia between the English Act and the Indian Act and where local conditions do not materially differ from conditions in the U.K., one may keeping in view the conditions in our country look at the view taken by the English courts and if consistent with our jurisprudence, our social conditions, our chalked out path in which the law must move, one can profitably take help of the decision. There would be nothing wrong in referring to the same. But ignoring all the relevant considrations, one cannot bodily import English decisions in our system to develop a hybrid legal system and one cannot be so hypnotised by English decisions to overlook legislative changes introduced in Indian Law. With this caution, let us refer to one or two decisions relied on by Mr. Sen to expand the sweep of the language of section 41(b), so that the court can still injunct a person from instituting a proceeding which the person is otherwise entitled to institute in a court of co-ordinate or superior jurisdiction, in the teeth of expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person from instituting a proceeding. Similarly in Cercle Restaurant Castiglione Co. v. Lavery [1881] 18 Ch D 555, the court by its short order restrained defendant Lavery from presenting any petition to wind up the company in respect of any debt then due or alleged to have been due to him on certain conditions. In giving the short order, Jessel M.R. followed the decision in Cadiz Waterworks Co. [1874-75] 19 Eq Cases 182. One more decision to which our attention was drawn was the New Travellers' Chambers Ltd. v. Cheese and Green [1894] 70 LT 271, in which the defendant was restrained by an injunction of the court from presenting a winding up petition. In the last two mentioned cases also, no contention was raised, because obviously it could not be raised that the court had no jurisdiction to grant the injunction. In our opinion, these decisions are not at all helpful for two reasons: one that the Supreme Court of Judicature Act clearly provided that injunction cannot be granted restraining prosecuting a pending proceeding and the provision was silent on the question of granting an injunction restraining instituting a proceeding and in respect of which the 1963 Act is more specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a petition, followed immediately by a motion expressed to claim an interlocutory injunction in the same terms appears clumsy and inapposite. In occurs to me that it should be possible to devise some more apt form of procedure, for instance, an originating motion in the Companies Court". One more decision which we would like to refer is the one in Stonegate Securities Ltd. v. Gregory [1980] 1 All ER 241; [1980] Ch 576; [1980] 3 WLR 168 (CA). In that case, an injunction was granted restraining a creditor from presenting a winding-up petition on the ground that he was at best a contingent creditor and the company had sought an injunction to restrain the creditor from presenting a petition on any other basis than as the contingent creditor. For the same reasons for which we could not persuade ourselves to accept the earlier decisions as being helpful, these decisions would not be of any assistance. And it may be clarified that the reliance placed by Mr. Sen on the footnotes 7, 8 and 9 in Companies Act by Buckley, Fourteenth edition, page 524 and Palmer's Company Precedents, Part II, Seventeenth edition, at page 45 would not take his case further because these notes are based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appropriate case particularly in a suit where cancellation of certain negotiable instruments had been sought, it would be open to the court to restrain further action being taken on the said negotiable instrument particularly the action of the limited type which is sought to be restrained in the instant case, viz., winding up proceedings. The position may be different if a total bar was sought which perhaps may not be granted". Mr. Sen, learned counsel for the respondent-Bank, however, contended that even if the respondent-Bank is not entitled to injunction, temporary or perpetual, under section 41(b) or under O. 39 of the CPC, yet the court had inherent power to grant injunction and, therefore, this court should not interfere with the decision of the High Court at this stage. Reliance was placed on Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527; [1962] Supp 1 SCR 450. Raghubar Dayal J., speaking for the majority, in terms held that the court has inherent power to issue temporary injunction in cases, which were not covered by the provisions of O. 39 of the CPC. Shah J., in his dissenting judgment, took the contrary view and relied upon Padam Sen v. Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficiency of the company. Mr. Sen further urged that where the debt is bona fide disputed, a petition for winding up is not an alternative to the suit to recover the same, but may be a pressure tactic to obtain an unfair advantage and, therefore, despite the provision contained in section 41(b) the court must spell out a power in appropriate cases to injunct a person from filing a winding-up petition. Most of the decisions in England hereinabove discussed at length have been influenced by this aspect. This approach, however, clearly overlooks various statutory safeguards against admission, advertising and publication of winding up petitions. Section 433 of the Companies Act, 1956, sets out circumstances in which a company may be wound up by the court, one such being where the company is unable to pay its debts. Section 434 sets out the circumstances and situations in which a company may be deemed to be unable to pay its debts. Such a deeming fiction would arise where a notice is served upon the company making a demand of a debt exceeding Rs. 500 then due and requiring the company to pay the same and the company has for a period of 3 weeks neglected to pay the sum, or to secure or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a winding up petition. There is sufficient built-in safeguard in the provisions of the Companies Act and the Rules framed thereunder which would save the company from any adverse consequences, if a petitioner actuated by an ulterior motive presents the petition. This was taken notice of by this court in National 'Conduits ( P.) Ltd. v. S. S. Arora [1967] 37 Comp. Cas. 786 ; [1968] 1 SCR 430, wherein this court set aside the order of the High Court of Delhi which was of the opinion that once a petition for winding up is admitted to the file, the court is bound to forthwith advertise the petition. This court held that the High Court was in error in holding that a petition for winding up must be advertised even before the application filed by the company for staying the proceeding for the ends of justice or to prevent abuse of the process of the court. This court held that the view taken by the High Court that the court must as soon as the petition is admitted, advertise the petition is contrary to the plain terms of rule 96 and such a view, if accepted, would make the court an instrument, in possible cases, of harassment and even of blackmail, for once a petition is advertised, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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