9911796707
TMI Blog1997 (8) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... the prayer that a decree declaring that notice dated 29-4-1997, issued by defendant No. 1 company is bad in law and directing defendant No. 1 company and/or its promoters to make an offer to the general public as envisaged by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 -[1997] 90 Comp. Cas. (St.) 38, and a decree in favour of the plaintiffs and against defendant No. 2, directing defendant No. 2 to immediately initiate proceedings against defendant No. 1 company in accordance with the SEBI Regulations, be passed in favour of the plaintiffs and against the defendants. It is also prayed that a mandatory order directing the defen- dants not to proceed with the EGM, proposed to be held on 29-5-1997, pursuant to notice dated 29-4-1997, be also passed. The plaintiffs have also prayed that a declaration be issued to the effect that defendant No. 1 has violated the SEBI guidelines and that defendant No. 1 is liable to make a public offer to the general public in terms of the SEBI Regulations. 2 . Along with the plaint, the plaintiffs have also filed an application (LA. No. 4800 of 1997) under Order XXXIX, rules 1 and 2 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within four weeks with advance copy to counsel for the plaintiffs, who may file rejoinder by the next date. List on July 10, 1997. The plaintiff to comply with the provisions of Order 39, rule 3, Civil Procedure Code insofar as defendant No. 2 is concerned. Dasti." Defendant No. 1 on 3-7-1997, filed an application (I.A. No. 5642 of 1997) under Order XXXIX, rule 4 read with section 151, with the prayer that the order dated 27-5-1997, passed in I.A. No. 4800 of 1997, be vacated. Reply to the plaintiffs application (I.A. No. 4800 of 1997) has been filed only on behalf of defendant No. 1. No reply to the abovesaid application has been filed on behalf of defendant No. 2 and on 10-7-1997, the learned counsel for defendant No. 2 made a statement that defendant No. 2 has not to file any reply to the abovementioned application as no relief has been claimed against defendant No. 2 in the abovesaid application. As regards the application (I.A. No. 5642 of 1997) filed by defendant No. 1 under Order XXXIX, rule 4 read with section 151, the position is that a detailed reply has been filed on behalf of the plaintiffs. 3. Insofar as the abovementioned two applications - one filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caused to the parties if the injunction is refused and compare it with that which is likely to be caused to the other side if the injunction is granted. If on weighing the competing possibilities or proba- bilities of likelihood of injury and if the Court considers that pending the suit the subject-matter should be maintained in status quo, an injunction under the above provisions would be granted by the Court. Their Lord- ships of the Supreme Court in the case Dalpat Kumar v . Prahlad Singh AIR 1993 SC 276, have held that before granting injunction the Court would be circumspect and look to the conduct of the party, the probable injuries to either party and whether the plaintiff could be adequately com- pensated if the injunction were refused. 4. In the light of the above settled legal position, it is to be seen as to whether in the present case the plaintiffs have a prima facie case in their favour; whether the balance of convenience is also in their favour and whether irreparable loss/injury would be caused to the plaintiffs if the relief sought for is not granted to them. As per the case of the plaintiffs, the cause of action for filing the present suit has prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions as may be decided by the Board from time to time even though such loans, guarantees or securities may be in excess of the percentages specified in section 370 of the Companies Act, 1956, and of such sums of money as may be deemed requisite by the board for the business of the company, provided, however, that the loans or guarantees to be given or securities to be provided together with the loans or guarantees already given and securities already provided does not exceed the sum of Rs. 30 crores at any one time. By order of the Board for USHA INTERNATIONAL LIMITED New Delhi(N.S. Ghate) 29th April, 1997Company Secretary" With the abovesaid notice an explanatory statement as provided for under section 173(2) of the Companies Act, 1956 ( the Companies Act ), is also annexed. 5. Since the learned counsel for defendant No. 2, during the course of arguments, raised a preliminary objection with regard to the maintain- ability of the present suit on the ground that the same is barred in terms of the provisions of section 20A of the Securities and Exchange Board of India Act, 1992, ( the SEBI Act ), read with regulations 38, 39, 40, 41, 42(2) and 44 of the Securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd under this Act shall be appealable except as provided in section 20 and no civil court shall have jurisdiction in respect of any matter which the Board is empowered by, or under, this Act to pass any order and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any order passed by the Board by, or under, this Act." Section 15Y refers to the Adjudicating Officers appointed under the SEBI Act or the Securities Appellate Tribunal constituted under the abovesaid Act whereas section 20A refers to the Securities and Exchange Board of India constituted under section 3 of the Act. The words is empowered by or under this Act , occurring in the abovesaid provisions, are of utmost significance and as a result of the insertion of these words the ambit and scope of the abovesaid provisions of the Act is much widened so as to include within its fold all suits and proceedings in respect of any matter which an Adjudicating Officer appointed under the Act or a Tribunal constituted under the Act is empowered by or under the Act to determine and any matter on which the Board is empowered by or under the Act to pass any ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be a ground for grant of any injunction as sought for by the plaintiffs because the concerned competent authority under the SEBI Act is already seized of the matter and in case, after following the due process, as laid down under the Act or the rules/regulations framed there under, the abovesaid authority arrives at a finding against defendant No. 1 in that event the concerned authority can issue suitable directions or can take appropriate action, as the case may be, but no interim order restraining or injuncting defendant No. 1 can be passed in the given facts. The above question relating to the explanatory statement referred to in section 173(2) came up for consideration before a Division Bench of the Calcutta High Court consisting of P.B. Mukerjee CJ. and B.C. Mitra J. in the case of SitaramJaipuriav. Banwarilal Jaipuria AIR 1972 Cal. 105, and it was held: "40. The important point of this decision is that in construing the provisions like section 173(2) too rigid an interpretation should not be made as to hamper the conduct of business . Section 173 ( 2 ) of the Companies Act means a notice and explanatory statement which should give notice of the essence and substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC); Piercy v. S. Mills Co. Ltd. [1918-19] All ER 313 (Ch. D) and Sheth Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton Jute Milk Co. Ltd [1964] 34 Comp. Cas. 777 (Guj.). There can be no two opinions insofar as the legal proposition laid down in the abovesaid decisions is concerned. However, in the facts and circumstances of the present case, the same, in my opinion, in no way helps the cause of the plaintiffs insofar as the above mentioned applica- tion is concerned. 14. On a perusal of the material on record, more particularly the written statement filed on behalf of defendant No. 1, it is apparent that another shareholder of defendant No. 1 company by name Jagdish C. Aggarwal had filed a suit in the Calcutta High Court also assailing the impugned notice with more or less identical prayers and when no relief was given to him by the High Court of Calcutta he filed a special leave petition [SLP (Civil) No. 11107 of 1997]. The abovementioned special leave petition filed by the said Shri Jagdish C. Aggarwal has been dismissed by the Supreme Court, vide order d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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