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TMI Blog2009 (2) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... and R3/D2 and D3 contends that the trial court has no jurisdiction to decide on the issue inasmuch as the same issue is pending before the Company Law Board Bench, Southern Region, Chennai in C.P.94/07 and further ought not to have passed the interim order of injunction in respect of allotment of shares since the first respondent/petitioner/plaintiff has filed Form 2 for the allotment of 5,87,000 shares and the Form FCGPR with the Reserve Bank of India along with the Certificate issued by the Statutory Auditor of the Company and the Company Secretary stating that it has allotted 5,87,000 shares to the first revision petitioner and that in the normal course of business the second revision petitioner has been approached by Ramesh, Mahendran and S. Sriharan who travelled to Kualalumpur several times to initiate him to invest in the fast growing hospitality market in South India and on the recommendation of the said S.Sriharan and after visiting Chennai the Board of Directors of the first Civil Revision petitioner has decided to invest in Hotel Business in India and it approached S.Sriharan a friend of the second respondent/first defendant and when the second revision petitioner met t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to maintain the company petition before the Company Law Board and moreover, the contention of the Company that amounts have been remitted by the first civil revision petitioner is only towards loan and not towards share capital is contrary to the documents and records of the Company and added further, the trial Court has not acted as per Order XXXIX R.3 A of the Civil Procedure Code by not hearing the matter within 30 days from the date of passing of the order and that the order has been passed on 6-6-2008 and in short, the trial Court has failed to comply with the requirement of the mandate prescribed under the Civil Procedure Code. 4. The further stand of the revision petitioners is that the trial Court has not taken up the I.A.8812/08 for hearing inspite of the request made by the learned counsel for the revision petitioners and as a matter of fact, the trial Court has adjourned I.A.8812/08 on ten occasions without adducing reasons and further, the fraud has been played on the Court by the respondents when they have not disclosed either in the plaint or in the affidavit in O.S.3737/08 that the identical issue is pending before the Company Law Board in C.P.94/07 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the trial Court in granting the ad interim injunction in I.A.8812/08 in O.S.3737/07 is liable to be set aside by this Court in the interest of justice. In support of his contention, he relies on the decision in State of Andhra Pradesh v. T. Suryachandra Rao [2006] 1 LW 547 wherein the Honourable Supreme Court has observed as follows : "10. "Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensures therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are not built in the infra-structure of a corporate company and that the material before the Court, in the instant case was not sufficient to indicate that there was an enforceable family arrangement. The plaintiffs were not entitled to the ad interim injunctions as prayed for." Added further, he seeks in aid of the Honourable Supreme Court decision in S.P. Chengalvaraya Naidu v. Jagannath AIR 1994 SC 853, wherein it is held as follows:- "The courts of law are meant for imparting justice between the parties. One who comes to the Court, must come with clean hands. It can be said without hesitation that a person whose case is based on falsehood has no right to approach the Court. He can be summarily thrown out at any stage of the litigation. A litigant, who approaches the Court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party." (p. 853) 11. The learned counsel for the revision petitioners has drawn the attention of this Court to the decision Union of India, Attornic Energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icata." (p. 322) 12. Also, the learned counsel for the revision petitioners relies on the decision of this Court in J. Uma Maheswari v. S. Peter 2006 (5) CTC 568 wherein it is held that 'the absence of direction to comply with mandatory requirements under Order 39 Rule 3-A of the Civil Procedure Code, the injunction was liable to be suspended/set aside. Further that the parties should be given opportunities to agitate their rights before the concerned Court and direction has been issued to the trial Court to dispose of the application according to law.' 13. The gist of the argument of the learned counsel for the revision petitioners is that in cases of gross injustice and patent violation of elementary principles of law, this Court has to necessarily interfere with the order of the trial court passed in I.A.8812/08. 14. The learned counsel for the revision petitioners contends that the Company Secretary of the Company has issued Certificates before the Company Law Board and the Statutory Auditor of the Company on 31-1-2006 candidly show that 5,87,000 shares of Rs. 100 each has been allotted by the Company and further that the Balance Sheet of the Company as on 31-3-2006 also ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inward remittance by the first respondent-company, it has to allot shares to the petitioner and, therefore, in accordance with Foreign Exchange Management Act, the first respondent-company has filed its return in FGR Form on 30-1-2006, etc., and out of the funds remitted by the first revision petitioner, the first respondent-company has purchased a land measuring 2.16 acres in Coimbatore for a sum of Rs. 3,25,00,000 and that the revision petitioners being a non-resident of India have not been posted with information and when they asked for details from the second respondent/first defendant etc., and that after purchase of the property at Coimbatore all is not well with the first respondent-company and that some foul play has been suspected and that the first revision petitioner has filed a suit before this Court in C.S. No. 661/07 for the relief of permanent injunction restraining the first respondent-company from disposing of the property and that the said suit has been dismissed and in that suit, on 16-8-2007, the second respondent (in civil revision petition) has filed an affidavit in Application No. 611/07 admitting that 5,87,000 shares have been allotted to the first revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed another Auditor, one M.V. Sampath as Statutory Auditor of the company, who has certified the accounts for the year ending 31-3-2005, 31-3-2006, 31-3-2007 and the same have been filed before the Registrar of Companies and in regard to the Annual General Meeting of the first respondent-Company on 7-7-2005 at 10 a.m., the Return is filed and in regard to the notice of the Annual General Meeting of the first respondent-company on 29-9-2006 at 10 a.m., the Return is filed subsequently and in regard to the Annual General Meeting of the first respondent-company on 28-9-2007, the Return is filed and these will show that all is not well with the first respondent-Company and that the Balance Sheet do not also disclose the paid up share capital of 56,88,000 equity shares of Rs. 100 each and it depicts only one lakh as paid up share capital and that the Balance Sheet as on 31-3-2005 of the first respondent-company has been signed by the mother and the son and that the Balance Sheet as on 31-3-2006 has also been signed in that way and in the Balance Sheet as on 31-3-2007 of the respondent-company Alagurajan has signed and that he has been appointed as the Director on 10-3-2005 and his w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot open to the first respondent-company to turn round and say these documents have been fabricated and that the first respondent/Plaintiffs Company has filed a suit before the City Civil Court in O.S.3737/08 without disclosing the pending proceedings before the Company Law Board and has obtained an order of interim injunction and that the first respondent/Plaintiffs Company has no prima facie case balance of Convenience and the trial Court has not taken into account of an irreparable loss and that the order of the trial court is bereft of reason and, therefore, prays for allowing the civil revision petition in the interest of justice. 17. Per contra, the learned counsel for the first respondent submits that the petitioners claimed that they have been allotted shares and if the claim is accepted they will become shareholders of the first respondent/Plaintiffs Company and as per Memorandum and Articles of Association of the first respondent-company shares can be allotted by the Board of Directors of the Company and that the first respondent/Plaintiffs Company has filed a suit in O.S.3737/08 on the file of XV Assistant City Civil Court, Chennai praying for declaration that the Return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel for the first respondent/Plaintiff the suit O.S.No. 3737/08 filed by the plaintiff before the City Civil Court is maintainable in law and that the jurisdiction of the Civil Court has not been ousted. 20. The learned counsel for the first respondent/Plaintiff relies on the decision of the Honourable Court Dwarka Prasad Agarwal v. Ramesh Chandra Agarwal [2003] 117 Comp. Cas. 201 (SC), wherein it is held as follows :- "By sections 9 and 10 of the Companies Act, 1956, the jurisdiction of the civil court has not been ousted section 9 of the Code of Civil Procedure, 1908 confers jurisdiction upon the civil courts to determine all disputes of civil nature unless it is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar the jurisdiction of the civil court requires strict interpretation. The court, it is well-settled, would normally lean in favour of the construction, which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. Even otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent-company had been disputed by the petitioner-company. Hence, the issues involved required the adjudication of the civil court and therefore, the dismissal of the application by the trial court did not warrant any interference." 21. On the side of the first respondent/Plaintiff, the decision of the Honourable Supreme Court in Shamshad Ahmad v. Tilak Raj Bajaj [2008] 9 SCC 1 is relied on to the effect that : "...though powers of a High Court under Articles 226 and 227 are very wide and extensive over all courts and Tribunals throughout the territories in relation to which it exercises jurisdiction, such powers must be exercised within the limits of law and that the power is supervisory in nature and that the High Court does not act as a court of appeal or court of error and it can neither review nor reappreciate, nor reweigh the evidence upon which determination of a subordinate court or inferior Tribunal purports to be based or to correct errors of fact or even of law and to substitute its own decision for that of the inferior Court or Tribunal and that the powers are required to be exercised most sparingly and only in appropriate cases in order to keep the subordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany Law Board and under section 399 of the Companies Act, the shareholders have right to approach the Company Law Board and that the Company has no right in this regard and that the duty of the first respondent-company is to take action and not to remain as a watch-dog and in regard to the filing of the form F.I.R. is pending and when one is not a Director he cannot claim dividend and inasmuch as the order of the trial Court passed in I.A.No. 8812 of 2008, dated 11-6-2008 is a non-speaking one the revision has to be allowed by this Court to prevent aberration of justice. 26. It is not out of place for this Court to point out that in the decision Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 11 SCC 3141 at pg. 320, the Honourable Supreme Court has held that "dispute as to inheritance of shares is eminently a civil dispute and cannot be said to be a dispute as regards of oppression and/or mismanagement so as to attract company Court's jurisdiction under section 397 and/or section 398 and that adjudication of a power question of title as to shares is not contemplated under section 397 of the Companies Act, especially if a civil suit is pending inspite of the same, as in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is prepared and the manner in which the total sums representing them are distributed over the several types of assets. In short, a balance sheet is an historical document. Suffice it to point out that a balance sheet must not be a mere inventory in the considered opinion of this Court. Also, a balance sheet is known as a statement of Assets and Liabilities net worth and it is called as 'Statement of Financial Position'. In the Companies Act, it is the duty of the Directors of a Company to see that the regular and correct Account Books are kept. 32. Normally, it is the duty of the Directors and the Management to ensure that the provisions of the Companies Act have been complied with. However, where there is contravention of legal requirement by a Company which has a bearing on the accounts and transactions of the Company, an Auditor would in the normal course of his inquiry become aware of them and it would need to be brought to the notice of the shareholders. In short, an Auditor should, however, not merely state the facts, leaving it to be inferred that a contravention of legal requirements has taken place, but he should spell out that in his opinion a contravention of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Holder measured for the purposes of liability and dividend by a sum of money. 35. Be that as it may, this Court points out the decision R.R. Rajendra Menon (No. 2) v. Kochin Stock Exchange Ltd. [1990] 69 Comp. Cas. 256 , wherein it is held that 'unless a particular matter is specified in the Companies Act as one to be dealt with by the Company Court, it cannot exercise jurisdiction merely because it is also a matter which relates to a Company and that there is no provision in the Companies Act, expressly or impliedly specifying that an application to compel a Company to comply with the requirements of section 257 of the Companies Act would lie before the Company Court etc.'. 36. Yet another decision R.K. Jain v. Branch Registered (Iron & Steel) Stock Holders Association Ltd. [1978] 48 Comp. Cas. 401 (Punj. & Har.), it is held that "a petition under section 166 read with section 171 of the Companies Act, 1956, to seek the primary relief that the meeting of the respondent-Company be declared illegal and void is not maintainable and the only remedy available to the petitioner is to file a civil suit." 37. In the decision Piyush Kanti Guha v. West Bengal Pharmaceutical & Phytoche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes. Proviso to rule 3 of Order 39 of the Code of Civil Procedure attracts the principle that if a constitute requires a thing to be done in a particular manner it should be done in that manner or not all....." (p. 177) 40. In Wajid Ali Mirza v. M.A. Qaher AIR 1989 NOC 113 (AP), whereby it is held as follows :- "Civil P.C. (5 of 1908), 0.43, R.1 ( r), O.39, R.1 - Appeal against ex parte interim injunction - Ex parte order of injunction passed by court after due compliance of O.39, R.3 - Held, proper course was to direct aggrieved party to approach same court for vacating ex parte order, when its continuance would not result in abuse of process of Court." (p. 45) 41. In the decision Bengal Club Ltd. v. V. Chowdhury AIR 2003 Cal. 96, it is among other things held that "a person aggrieved by an order of ex parte injunction by way of filing an appeal can urge before the appellate Court that the plaintiff before trial Court has suppressed the facts." 42. In Airport Authority of India v. M. Paradise Hotel & Restaurant AIR 2002 Gauhati 146, it is held that : "an ex parte ad interim temporary injunction is appealable and not amenable to revisional jurisdiction of High Court". Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while making an ex parte order of an interim injunction has been removed by the introduction of R.3, which provides that the Court after recording reasons for its satisfaction that the object of granting injunction would be defeated by delay, etc., may pass an order of ex parte ad interim injunctions under Rr. 1 and 2 of O.39. It does not stand to scrutiny that an ad interim order devoid of reasons, rendered in violation of the well known principles that a judicial order must contain reasons, and in violation of the mandatory provision of R.3 can escape the jurisdiction of the appellate Court, but the same order can be revised by the very same Court. Judicial order must be reasoned order. After the amendment, it must contain reason. The trial court must apply its mind to the materials placed before it, and, on being satisfied about the requirements of O.39, Rr. 1 and 2 make the order. Further, R.3 enjoins "reasons to be recorded". Under these circumstances when the trial court is required by law state reasons, but does not furnish them in its order, it violates the provisions of the Code.' By its own inaction or intentional violation of the mandatory provisions of the Rules a Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An activist Judge is the answer to irresponsible law suits. The trial Courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage etc....." (p. 2423) 46. Where an ex parte interlocutory order is unjust then, appeal is maintainable notwithstanding the remedy available to a party under Order 39 Rule 4 of Civil Procedure Code. In fact, the two remedies are available to a defendant against an order of ex parte injunction (i) an application under Order 39 Rule 4 of Civil Procedure Code for varying or vacating the order; (ii) an appeal under Order 43 Rule 1(r); the two remedies are concurrent. In Celin v. Thomas Johnson AIR 2006 Ker. 297, it is observed that "the remedy available against an order vacating injunction is to file an appeal under Order 43 Rule 1(r) of Civil Procedure Code and not writ petition". Further the trial Court's order ought to be a reasoned one. At least an outline of process reasoning should be there. Needless to say that an unreasoned order may be just, but may not appear to be so to the person affected. Per contra, a reasoned order will have the appearance of justice. 47. A perus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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