9911796707
TMI Blog2019 (7) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial rights of the parties in fit cases for the ends of justice. The only exception is that the Civil Courts cannot in the guise of inherent powers available under Section 151 of the Code pass orders that are in conflict and are in contravention to the provisions of the Code. In the present scenario, the petitioner has brought down the threshold required for the subjective satisfaction of this Court required under Rule 1(b) by prima facie proving a case of collusion and fraud by the defendants. Furthermore, the conduct of the defendants as established in the prima facie findings gives further credence to the threat and perception of the petitioner that the defendants shall alienate their property in such a manner that the fruits of the decree shall not be available to the petitioner. It is to be further noted that the claim of the plaintiff is not predicated on a claim of simpliciter damages and losses caused to him but specific sums of money that have been passed on in an illegal and fraudulent manner by the employee to the distributors. The reports of KPMG and BDO are based on a careful audit of the documents in relation to the transactions. Upon such audit, the exact figur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 in C.S No. 51 of 2019 are both taken up for hearing simultaneously as the two applications are relating to similar cause of action in relation to the same plaintiff/company (hereinafter referred to as the petitioner ) and a common defendant. In C.S 50 of 2019 the common defendant is the defendant no. 5 while in C.S 51 of 2019 the common defendant is defendant no. 2. This defendant is the employee of the plaintiff company (hereinafter referred to as the employee ). Defendant no. 1 in C.S 50 of 2019 is a partnership firm while defendants 2 to 4 are the partners of the above partnership firm. These defendants were acting as distributors for various goods of the plaintiff company under the flagship brand of Tata Paras . Similarly in C.S 51 of 2019 the defendant no. 1 is the distributor company. The defendant no. 1 to 4 in C.S No. 50 of 2019 and the defendant no. 1 in C.S 51 of 2019 are hereinafter referred to, for the sake of convenience, singularly as the distributor no. 1 and the distributor no. 2 respectively and jointly as the distributors . 2. At the very outset, it is to be stated that this matter is being heard at the ad interim stage. I had given an option to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve sales executives informed all dealers within their territory about the price circulars issued by the petitioner. No other discounts or rebate of any manner whatsoever was provided by the petitioner, other than the ones indicated in the price circulars. D. The accounts managers of the petitioner issued credit notes on the basis of the price circulars in the SAP system of the petitioner. Once credit note was issued/passed, the balance dues payable by the dealers to the petitioner stood reduced to that extent. E. The distributors had been involved with the petitioner for more than two decades. The aforesaid policy of discount and/ or rebate had been extended to the distributors based on the price circulars in respect of bulk fertilizers issued by the petitioner. F. The employee of the petitioner as part of his job responsibility, used to calculate and extend the benefit of such rebates and discounts, inter alia, to the distributors, which were determined as per price circulars issued monthly, in respect of each of the products, depending upon the business requirements and management decisions of the petitioner. The extent of discounts and rebates in the form of credit note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distributor, refund of the same shall be done by them. It is to be noted that the minutes of this meeting along with the month wise reconciliation of accounts statements for the period 2015-16 and 2016-17 were emailed to the distributor. Subsequently, an ad hoc payment of ₹ 1 crore was made by the distributor to the petitioner. Thereafter, one of the partners (respondent no. 3) of the distributor no. 1 came for a meeting on February 9, 2018 with the petitioner and admitted to having received excess credit notes for the sum of ₹ 26 crores for the financial years 2015-2016 and 2016-2017. In his admission letter, he further stated that the employee had colluded with him and in exchange for the excess credit the employee received cash payments of approximately ₹ 3 crores. To show bona fide, a further payment of ₹ 50 lakhs was made by the distributor to the plaintiff company on that date itself. L. The partner of the distributor no. 1 thereafter on February 14, 2018 sent an email retracting the statement made on February 9, 2018 and alleged that the said statement had been made by him under duress and coercion. M. With respect to C. S. No. 51 of 2019, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustments, including of the repayments made by the distributor no. 2, a total sum of ₹ 43,77,961/- remained to the credit of the distributor no. 2 with respect to such dealings. The petitioner did not refund such sum to the distributor no. 2 and instead adjusted the same towards its outstanding from the distributor no. 2 referred to in para N above. P. KPMG, the audit firm entrusted with carrying on the investigation issued its report on March 20, 2018. With respect to the employee the KPMG report revealed the following :- a) The employee had made aggregate Cash Deposits in excess of ₹ 1.27 crores in different bank accounts. The employee had several banks accounts, and the sums in excess of ₹ 1.27 crores had been deposited on review of bank statements of only around 10 bank accounts. b) The employee had incurred expenditure of approximately ₹ 50 lakhs from his VISA Regalia credit card. c) The employee had made aggregate cash deposits in excess of ₹ 64 lakhs during the period of demonetization, that is, between November, 2016 and January, 2017. d) Income tax returns of the employee for the assessment years 2015-2016 and 2016-2017 reflec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. FK099S001) Code no. FK064S001) FK209S001) (Amount of (Amount of (Amount of excess credit excess credit excess credit notes issued) notes issued) notes issued) 2014-15 3,81,92,407/- 1,65,06,392/- 2,53,12,167/- 8,00,10,966/- 2015-16 5,70,64,071/- 3,55,35,672/- 3,09,57,407/- 12,35,57,150/- 2016-17 2,80,25,896/- 3,80,11,171/- 2,55,68,222/- 9,16,05,289/- 2017-18 57,11,203/- 48,05,366/- 1,20,32,586/- 2,25,49,155/- (till June) Total 12,89,93,578/- 9,48,58,601/- 9,38,70,382/- 31,77,22,561/- C.S. No. 51 of 2019 Financial Year Territory- Nadia (Dealership Code No.: FA059S001)(Amount of excess credit notes issued) [in Re.] (ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by them. He also placed the subsequent retraction by the distributor no. 1 and submitted that the retraction was an afterthought and contained preposterous statements such as the distributor no. 2 was not aware of the price circulars. He further submitted that the distributor no. 2 was evasive and had no explanation with regard to the minutes and excess credit statement emailed to him on November 17, 2017. He further relied upon the balance confirmations that were issued by the petitioner that were never disputed by the distributors. Mr. Mookherjee thereafter placed the list of immovable properties owned by the distributor no. 1 (Annexure 'DD' in G.A. No. 725 of 2019) and the distributor no. 2 (Annexure 'R' in G.A. No. 733 of 2019). 5. With regard to the employee, Mr. Mookherjee placed all the documents annexed to the petition that revealed the assets of the employee as also the cash deposits and credit card expenses of the employee. He submitted that the annual compensation of the employee when his service was terminated was only ₹ 11 lakhs and such substantial assets and cash deposits clearly indicate that these are the ill gotten gains received by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Limited Anr. [Coram: Sanjib Banerjee, J.] reported in 2010(2) CHN (CAL) 203 to buttress his argument. He, thereafter, relied upon Nanda Roy Ors. -v- Gynanidhi Trust Ors. [Coram: Arijit Banerjee, J.] reported in (2015) 4 ICC 817: (2015) 4 Cal LT 199: 2016 AIR CC 718: (2016) 1 CCC 216 to indicate in extensio the powers available to a chartered High Court. He thereafter placed Deckert et al. -v- Independence Shares Corporation et al. [Coram: Charles Evans Hughes, C.J. and Hugo L. Black, Felix Frankfurter, James C. McReynolds, William O. Douglas, Frank W. Murphy, Stanley F. Reed, Owen J. Roberts and Harlan F. Stone, JJ..] reported in 311 US 282 (1940) to indicate that even in cases of a money decree being sought by the plaintiff, an injunction can be passed by the court. He further relied upon an unreported judgment of the Calcutta High Court in Ajay Kumar Agarwal -v- Green Concretex Global Ltd. (GA No. 2685 of 2013, APOT No. 432 of 2013, CS No. 286 of 2013) [Coram: Ashim Kumar Banerjee and Dr. Mrinal Kanti Chaudhuri, JJ.] to show that the Calcutta High Court has taken a pragmatic approach in commercial matters putting the niceties of law in the back-sheet and directed the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are disputed, no prima facie case is made out by the petitioner. 10. On the legal aspects, Mr. Roy submitted that in a money claim the settled position of law is that no injunction can be granted unless it satisfies the test of Order 39, Rule 1(b) read with Section 94 of the Code. He submitted that the court can restrain the defendants from disposing of the property which is not the subject matter of the suit only if it appears that the defendant intends or threatens to dispose of the property with a view to defraud his creditors. He submitted that in the present case no such averments or material is present in the plaint and/or in the application for injunction. With regard to attachment before judgment as prescribed under Order 38, Rule 5 of the Code, he submitted that the tests laid down by the Supreme Court in the matter of Raman Tech and Process Engg. Co. and Another -v- Solanki Traders [Coram: R.V. Raveendran and P. Sathasivam, JJ.] reported in (2008) 2 SCC 302 have to be satisfied. He put reliance on Premraj Mundra -v- Md. Manek Gazi ors. [Coram: Sinha, J.] reported in AIR 1951 Cal 156 that had been approved in Raman Tech (supra). He submitted that no averments were pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the court has to be based on the pleadings and nothing beyond. He relied on Union of India -v- Ibrahim Uddin [Coram: Dr. B. S. Chauhan and Dipak Misra, JJ.] reported in (2012) 8 SCC 148 to support the above proposition. He further submitted that the plaintiff has resorted to suppression of material facts, and therefore, the ratio in S.P Chengalvaraya Naidu (Dead) by LRS -v- Jagannath (Dead) by LRS Ors. [Coram: Kuldip Singh and P. B. Sawant, JJ.] reported in (1994) 1 SCC 1 should be applied. He submitted that the Supreme Court in this judgment had clearly held that one who seeks equity must approach the court with clean hands. He further submitted that the particular case involved disputed questions of facts and the same cannot be adjudicated without a proper trial. He submitted that it is settled law that the court shall refrain from passing any discretionary and equitable relief when disputed questions of facts are present. He placed reliance on Air India Ltd. Ors. -v- Vishal Capoor Ors. [Coram: Ruma Pal, Dr. Ar. Lakshmanan and C. K. Thakker, JJ.] reported in (2005) 13 SCC 42 in support of the above proposition. 13. With regard to the powers of a Chartered High Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 999) 7 SCC 280 to submit that an expert is not a witness of fact and his evidence is that in the nature of an advisory character. He submitted that the reports filed by the plaintiff cannot be taken into account unless the same is subject to cross-examination in trial. He further relied on Keshav Dutt -v- State of Haryana [Coram: Altamas Kabir and Dr. M. K. Sharma, JJ.] reported in (2010) 9 SCC 286 to show that even a handwriting expert has to be examined as an expert witness and without doing so no reliance can be placed upon his opinion. He, thereafter, placed paragraphs 17, 25, 29 and 30 of a Calcutta High Court judgment in Boeing Company -v- R.M. Investment and Trading Co. Pvt. Ltd. [Coram: K. C. Agarwal, C.J. and M. G. Mukerjee, J.] reported in (1994) 2 Cal Lt 300 (HC) to submit that the inherent powers preserved by Section 151 of the Code are only to be used with respect to procedure and cannot be used to take away the substantive rights of a litigant. He further relied on a Calcutta High Court decision in Badal Chandra Kundu and Ors. -v- Netai Mahato and Ors. (C.O. 3813 of 2017) [Coram: Biswajit Basu, J.] and placed paragraph 19 to explain the functioning of Sections 94 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entatives of the petitioner. 17. Mr. Ray further submitted that the plaint itself runs an alternative and inconsistent plea of mistake having been committed by the plaintiff. He submitted that such an inconsistent plea by itself destroys the very foundation of the primary plea of fraud that has been made by the petitioner in the plaint. Mr. Anirban Roy, thereafter, painstakingly placed in great detail the judgments of the Supreme Court in Manoharlal Chopra (supra), Ramantech (supra) and Vinod Seth -v- Devinder Bajaj and Another [Coram: R.V. Raveendran and R.M. Lodha, JJ.] reported in 2010 (8) SCC 1 and the two Calcutta High Court judgments of the Division Bench in Sunil Kakrania (supra) and Kohinoor Steel Private Ltd. (supra) to repeat and reiterate the submissions made by Mr. Aniruddha Roy and Mr. Jishnu Chowdhury. The sum and substance of his submissions were that in the present factual matrix, this Court does not have any power to pass any injunction and/or attachment even if the Court comes to the finding that a prima facie case of fraud has been committed by the defendants. He reiterated the principles in relation to attachment and injunction and submitted that where specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the respondent no. 3 in G. A. No. 725 of 2019 (Annexure 'I' and Annexure 'L') dated February 9, 2018, admission of distributor no. 2 (Annexure 'H' in G. A. No. 735 of 2019) dated 19th February, 2018, the admissions of the employee on July 25, 2017 and in the two letters dated February 8, 2018 (Annexure 'E', 'J', 'K' in G. A. No. 725 of 2019) and the offer of employee to secure the plaintiff by a letter handed over on February 12, 2018 (Annexure 'M' in G. A. No. 725 of 2019). It is to be noted that the admissions made by the respondent no. 3 in C. S. 50 of 2019 were retracted on February 14, 2018 by an email sent by the respondent no. 3. In this letter, the respondent no. 3 stated that the distributor no. 1 was not aware of the price circulars by which the method of calculation or allocation of cash discounts, freights and other heads were given by the petitioner. The letter further recorded that in a meeting dated 14th November, 2017 he had sought for details of the excess credits so that he could reconcile the same at his end. The letter further explained the ad hoc payments of ₹ 1,50,00,000/- made on various date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unimpeachable. Based upon these emails and the price circulars exchanged during the relevant time, the audit report of BDO clearly chalks out the amount of excess credit that was passed by the employee to the distributors. It is to be noted that the distributor no. 2 never retracted his admission given on February 19, 2018 and the employee retracted his admission after four months, that is, after he was terminated from the service. This retraction on June 25, 2018 by the employee is obviously an afterthought and holds no water. With regard to the admissions of the distributor no. 1 the same were retracted after five days. However, this retraction does not explain the meeting held on 14th November, 2017. Furthermore, this retraction speaks about the distributor no. 1 not being aware of price circulars during the relevant period. This statement in the retraction is absolutely unbelievable, and accordingly, reduces the weightage of the entire retraction. Is it conceivable that a dealer who has been working with the petitioner and receiving discounts and rebates for almost two decades is not aware of the basis of the said discounts? In my opinion, such a situation cannot be conceivabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and were easily explained by Mr. S. N. Mookherjee in his reply. In fact on closer examination of these documents, I am of the view that the respondents have made their case far worse. The documents that have been handed over to this Court clearly indicate that the respondents have attempted to muddy the waters and befuddle the Court as these documents do not assist them in any manner. This attempt of the respondents to create a cumulonimbus cloud to confuse this Court was not expected and amounts to a churlish act, to put it euphemistically. The above acts, in my view was nothing but legal boondoggling, if one may use an American expression, and has consequently boomeranged on the respondents. 25. The question that arises now is whether the plaintiff is entitled to be secured for such a fraud that has been played on it. The contention of the respondents is that in a money decree for an unliquidated sum of damages no protection can be granted to a plaintiff. Before deciding on the legal issues that arise in this matter, I would like to pen down the relevant sections of the Code for a better understanding of the same. Accordingly, Section 4; Section 94; Section 151; Order 38, Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of the jurisdiction of the Court, the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security. (2) The plaintiff shall, unless the Court otherwise directs, specify the property required to be attached and the estimated value thereof. (3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified. [(4)] If an order of attachment is made without complying with the provisions of sub-rule (1) of this rule, such attachment shall be void.] Order 39, Rule 1. Cases in which temporary injunction may be granted. - Where in any suit it is proved by affidavit or otherwise- (a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or (b) that the defendant threatens, or intends, to remove or disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junctions in order to prevent the ends of justice from being defeated, that the word prescribed , according to Section 2, means prescribed by rules and that Rules 1 and 2 of Order 39 lay down certain circumstances in which a temporary injunction may be issued. 18. There is difference of opinion between the High Courts on this point. One view is that a Court cannot issue an order of temporary injunction if the circumstances do not fall within the provisions of Order 39 of the Code: Varadacharlu v. Narsimha Charlu [AIR 1926 Mad 258] ; Govindarajulu v. Imperial Bank of India [AIR 1932 Mad 180] Karuppayya v. Ponnuswami [AIR 1933 Mad 500 (2)] ; Murugesa Mudali v. Angamuthu Mudali [AIR 1938 Mad 190] and Subramanianv. Seetarama [AIR 1949 Mad 104] . The other view is that a Court can issue an interim injunction under circumstances which are not covered by Order 39 of the Code, if the Court is of opinion that the interests of justice require the issue of such interim injunction: Dhaneshwar Nath v. Ghanshyam Dhar [AIR 1940 All 185] ; Firm Bichchha Ram v. Firm Baldeo Sahai [AIR 1940 All 241] ; Bhagat Singh v. Jagbir Sawhney [AIR 1941 Cal 670] and Chinese Tannery Owners' Associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court to issue a commission in the exercise of its powers under Section 151 of the Code in circumstances not covered by Section 75 and Order 26, arose in Padam Sen v. State of Uttar Pradesh[(1961) 1 SCR 884] and this Court held that the Court can issue a commission in such circumstances. It observed at p. 887 thus: The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purposes mentioned in Section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the legislature. These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in Section 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the legislature. This restriction, for practical purposes, on the exercise of those powers is not because tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court, there is no question of implying any powers outside the limits of the Code. 27. The inherent powers are to be exercised by the Court in very exceptional circumstances, for which the Code lays down no procedure. Dissenting view (Per J.C. Shah, J.) 42. It is true that the High Courts constituted under Charters and exercising ordinary original jurisdiction do exercise inherent jurisdiction to issue an injunction to restrain parties in a suit before them from proceeding with a suit in another court, but that is because the Chartered High Courts claim to have inherited this jurisdiction from the Supreme Courts of which they were successors. This jurisdiction would be saved by Section 9 of the Charter Act (24 and 25 Vict. c. 104) of 1861 and in the Code of Civil Procedure, 1908 it is so expressly provided by Section 4. But the power of the civil courts other than the Chartered High Courts must be found within Section 94 and Order 39 Rules 1 and 2 of the Civil Procedure Code. (underlined by me for emphasis) 27. In Bhagat Singh Bugga (supra), the Calcutta High Court was dealing with a case of an anti injunction suit. In this case, the defendant had filed a prior su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 151 of the Code. The relevant paragraphs are delineated below: 3. It is necessary to consider first the point taken by Mr. Sen on behalf of the appellants that it is not open to the Court to pass any order of injunction in the exercise of its inherent jurisdiction under Section 151 of the CPC. His argument is that where the Code has clearly and fully dealt with a matter, there is no scope for any action under inherent jurisdiction. He further argues in this connection that a reading of S. 94 of the Code makes it clear that the provisions of O. 39 of the CPC were intended to be exhaustive as regards this matter of temporary injunction. For this proposition he has relied upon the decisions in the case of 'Hemendralal Roy v. Indo Swiss Trading Co. Ltd.', 24 Pat 496, and in the case reported in 'Nagabhushan Reddy v. Narasamma'. (1950) 2 Mad LJ 482. Quite clearly an opposite view was taken in the Allahabad case of 'Dhaneshwar Nath v. Ghanshyam Dhar', ILR (1940) All 201. 4. Notice must also be taken of an observation by Mookerjee, J. in the case of 'Nirode Barani Debi v. Chamatkarini Devya,' 19 Cal W.N. 205. While it is true that the Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these words. Applying this principle to the case before us, we are clearly of opinion that the mere fact that there are certain provisions as regards the issue of injunction in O. 39 of the CPC does not debar the Court from passing orders of temporary injunction for doing justice in the exercise of its powers under Section 151 of the CPC. It cannot in our opinion reasonably be argued that the provisions of Order 39 of the CPC were intended by the Legislature to be exhaustive. 29. In M. V. Elisabeth and Others (supra) the Supreme Court examined in detail the powers of the High Court in relation to the admiralty jurisdiction and came to the conclusion that the High Courts in India being Courts of unlimited jurisdiction are the repository of all judicial power under the Constitution except what is specifically excluded, and are, therefore, competent to issue directions for arrest of a foreign ship in exercise of statutory jurisdiction or even otherwise to effectuate the exercise of jurisdiction. The relevant paragraph is delineated below: 101. Law of 1890 apart, can the Indian High Courts after 1950 be denied jurisdiction to arrest a foreign ship to satisfy the claim of owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d jurisdiction, repository of all judicial power under the Constitution except what is excluded are competent to issue directions for arrest of foreign ship in exercise of statutory jurisdiction or even otherwise to effectuate the exercise of jurisdiction. Since the jurisdiction to entertain a suit on tort or contract in relation to cargo going out of the country in a ship is found to exist under the 1890 Act the High Court of Andhra Pradesh was competent to direct arrest of the foreign ship when it appeared in Indian waters. The High Court, therefore, rightly negatived the objection to issue direction to arrest the ship. 30. In Nanda Roy Ors. (supra) the Coordinate Bench of the Calcutta High Court examined minutely the origin and genesis of the remedy of injunction and also relied upon Manohar Lal Chopra (supra) to arrive at the ratio that the power to grant injunction stems from Section 94(c) of the Code and Order 39 indicates the circumstances in which the Court may exercise such powers. The Court held that the circumstances are by no means exhaustive and the Courts' power to issue a temporary injunction is not limited to the circumstances prescribed in Order 39. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divisions of the High Court. However, this did not create a new jurisdiction in the sense it did not give the right to an injunction to parties who previously had no legal right, but simply gave to the court when dealing with legal rights which were under its jurisdiction power to grant relief by way of injunction in fit and proper cases. 27. In India, the first statutory provision for grant of injunction was made by Sections 92, 93, 95 and 96 of the Civil Procedure Code, 1859. Section 92 laid down that in any suit in which it shall be shown to the satisfaction of the court that any property which is in dispute in the suit is in danger of being wasted, damaged or alienated by any party to the suit, it shall be lawful for the court to issue an injunction to such party commanding him to refrain from doing the particular act complained of or to give such other orders for the purpose of preventing him from wasting, damaging or alienating the property as to the court may seem fit. Section 93 provided that in any suit for restraining the defendant from the committal of any breach of contract or other injury, and whether the same may be accompanied with any claim for damages or not, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l prison and/or make such other interlocutory orders as may appear to the court to be just and convenient. Section 94 inescapably refers to Rules 1 and 2 of Order 39 of the CPC which have been set out hereinabove. 30. It may not be proper to say that the court derives its jurisdiction to pass an order of injunction from Section 94. It is too well established that the Court has an inherent power to pass an order of injunction where the facts and circumstances of a case so warrant to do complete justice between the parties. Section 151 of the CPC recognises such inherent power. Section 94 of the CPC expressly recognises the court's power to issue an order of injunction and Order 39 Rules 1 and 2 indicate the circumstances in which the court may exercise its power to grant temporary injunction. If circumstances which are not covered by Rules 1 and 2 of Order 39, warrant issuance of injunction, the court can still do it in exercise of its inherent jurisdiction. 31. In the case of Manoharlal -v- Seth Hiralal reported in AIR 1962 SC 527 it was held as per the majority view that it is well settled that the provisions of the Code are not exhaustive, for the simple reason that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 39. In any other facts and circumstances not covered by Rules 1 and 2 of Order 39, if justice do demands, the court can issue a temporary injunction in the exercise of its inherent power. Such power has always inhered in a court of law to be exercised for doing complete justice between the parties. Justice is above all and cannot be thwarted or defeated by technicalities. Section 151 of the Code recognises such inherent power of the Court. Such inherent power of the Court must be recognized as it is impossible to visualize all the circumstances that may arise in future while enacting a law or framing procedural rules. The inherent power is generally exercised to fill up a lacuna in the law and mainly on equitable considerations when the circumstances of a case so warrant. 31. The Supreme Court of the Unites States in Deckert et al. (supra) was dealing with an issue wherein the petitioner had prayed for the appointment of a receiver to take possession of the assets of the defendants and had also sought injunction restraining the defendants from transferring and disposing of any of the assets of the defendants. The case made out by the petitioner was that the defendants were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to some equitable relief. Whether or not they sufficiently allege or prove their right to all of the relief prayed in the bill we do not decide because the question is not before us. Hence, if the District Court had jurisdiction it was proper to consider whether injunctive relief should be given in aid of the recovery sought by the bill. 18. We hold that the injunction was a reasonable measure to preserve the status quo pending final determination of the questions raised by the bill. 'It is well settled that the granting of a temporary injunction, pending final hearing, is within the sound discretion of the trial court; and that, upon appeal, an order granting such an injunction will not be disturbed unless contrary to some rule of equity, or the result of improvident exercise of judicial discretion.' Prendergast v. New York Telephone Co., 262 U.S. 43, 50, 51, 43 S.Ct. 466, 469, 67 L.Ed. 853; Meccano, Ltd., v. Wanamaker, 253 U.S. 136, 141, 40 S.Ct. 463, 465, 64 L.Ed. 822. As already stated, there were allegations that Independence was insolvent and its assets in danger of dissipation or depletion. This being so, the legal remedy against Independence, without recourse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a bearing. 25. As observed earlier, the plaintiffs analogy of a Mareva injunction may be inapposite in a case for attachment before judgment of the present kind. Strictly speaking, the plaintiff has not sought to stop the first defendant from taking any of its assets beyond the territorial jurisdiction of this Court. The attachment that it sought and obtained at the ad interim stage relates to a bank account of the first defendant in New Delhi as would appear from paragraph 29 of the petition. The plaintiff is right when it asserts that section 136 and Rule 5(1)(a) of Order 38 of the Code contemplate the attachment before judgment of a property beyond the local limits of jurisdiction of a Court. Order 39 Rule 1(b) also permits a Civil Courts, without any limitation on the grounds of territorial jurisdiction, to issue an injunction to rein in a defendant who threatens, or intends, to remove or dispose of his property with a view to defrauding his creditors. 26. Since the execution of the agreement is not in dispute, the onus would be on the first defendant to demonstrate that the relevant clause providing for liquidated damages in the event of the lessee determining the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar Sundaram and Others [Coram: S. B. Sinha and H. S. Bedi, JJ.] reported in (2008) 2 SCC 724 for the proposition that when a huge sum of money is claimed, and the plaintiff prima facie establishes such amount, he would be entitled to secure his interest keeping in view the amount involved in the suit. The relevant paragraphs in Sourav Ganguly (supra) are delineated below: 10. Fundamentally, a claimant can seek such an extraordinary and drastic order that impedes the respondent's use of one or more assets not forming part of the agreement upon an unimpeachable liquidated claim being demonstrated and upon it being established that the respondent was taking steps to improperly deny the realisation of the claim. 11. The petitioner has referred to three judgments in support of his contention that a broader view of the matter must now be taken in the present day and age since claims do not get resolved or adjudicated upon within any reasonable time of their institution. In the first of the judgments relied upon by the petitioner, reported at 2010(2) CHN 203, inter alia, the following passage from the report has been relied on: 24. Two aspects need to be seriously consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l activity or any work at all in the Salt Lake office of the respondent. It is also the respondent's contention that the Friends Colony office that used to be registered office of the respondent company is no longer with the respondent. The earlier orders passed herein record the difficulty in effecting service on the respondent and the affidavits of service filed by the petitioner also reveal the manner of functioning of the respondent. It also appears from the correspondence exchanged between the parties and particularly, the letters addressed by the petitioner to the respondent, that even the guests who have been invited and who attended the programmes on the petitioner's request have not been paid the travel expenses, leave aside the honorarium. Certain prizes announced to participants in the programmes have also not been paid. It is also the admitted position that some of the key functionaries of the respondent company have been arrested. The petitioner has also referred to several creditors of the respondent company having instituted proceedings against the respondent. 15. The two channels aired by the respondent have been closed down. There is hardly any functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with respect to the procedure to be followed by the Court in deciding the cause before it. These powers are not powers over the substantive rights which any litigant possesses. Specific powers have to be conferred on the Courts for passing such orders which would affect such rights of a party. Such powers cannot come within the scope of inherent powers of the Court in matters of procedure, which powers have their source in the Court possessing all the essential powers to regulate its practice and procedure. 35. In Sunil Kakrania (supra) the Division Bench was sitting in appeal against an order of injunction restraining the defendants from transferring or alienating the suit property described in the plaint and from creating any third party interest in respect of the suit property till the disposal of the suit. The respondents relied heavily on this judgment to show that the Division Bench had in answer to the question whether in a money suit merely because the plaintiff has a strong case on merit, a Court can restrain the defendant from transferring or alienating his movable or immovable property during the pendency of the suit held in the negative on the ground that the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision Bench of this High Court was sitting in appeal filed by the defendant in a suit for recovery of money. The order assailed before the Division Bench was an order passed by the Civil Judge (Senior Division) restraining the defendant from transferring or alienating plant and machinery that had been sold by the plaintiff to the defendant. The Division Bench held that the plant and machinery would not amount as suit property and therefore, the claim was a mere money suit. The Division Bench further held that there was no averment in the plaint or the application for injunction that the defendant intended or threatened to remove or dispose of his property with a view to defrauding his creditors, and accordingly, held that Order 39 Rule 1 had no application to the case. The Division Bench also followed Raman Tech (supra) and held that in the facts and circumstances the test laid down in Raman Tech (supra) were not fulfilled and therefore no order of attachment before judgment can be made. The relevant paragraphs are delineated below: 23. Applying the aforesaid principles to the facts of the present case, we find that the sum and substance of the allegation that has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an order of injunction in the form of attachment before judgment or should give security during the pendency of the suit. 25. The next question is whether by invoking section 151 of the Code, the Court should pass an order of injunction or attachment even though the ingredients of Order 38 Rule 5 are absent. 26. The aforesaid question has recently been answered by a Division Bench of this Court in the case of Sunil Kakrania v. Saltee Infrastructure Ltd., reported in 2009 (3) CHN 417 : 2009 (3) CLT 671 : 2010 (1) ICC 204, in negative by giving detailed reasons and we find no reason to take a different view from the one taken therein. 27. In the case of Albert Judah Judah (supra), relied upon by Mr. Mitra, a learned Single Judge of this Court in paragraph 16 of the judgment held that in a money suit, the Court in exercise of power conferred under Order 39 Rule 1(b) of the Code can restrain a defendant from disposing of his property which is not the subject-matter of the suit if it appears that the defendant intended or threatened to dispose of his property with a view of defraud his creditors. We do not for a moment dispute the said provision and we have already indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the substantive rights of a party was considered in Manohar Lal Chopra (supra) and the Larger Bench therein upheld the Calcutta High Court views in Chinese Tannery Owners' Association and others (supra) and Bhagat Singh Bugga (supra). Furthermore, the Supreme Court in Manohar Lal Chopra (supra) did not distinguished between procedural and substantive rights with reference to the inherent powers of the Civil Court. Following the ratio, one may see that the Supreme Court has upheld injunctions granted in cases of anti suit injunctions, right to arrest a ship, bank guarantee matters involving fraud etc. that affect the substantive rights of parties. In light of the same, I am of the view that in rare and exceptional cases, Civil Courts may grant injunctions with regard to the procedural and substantial rights of the parties in fit cases for the ends of justice. The only exception is that the Civil Courts cannot in the guise of inherent powers available under Section 151 of the Code pass orders that are in conflict and are in contravention to the provisions of the Code. With regard to the inherent powers of the Chartered High Court, the minority judgment of Justice J. C. Shah rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnificantly reduced. This view of mine is buttressed by the ratio of the House of Lords in American Cyanamid Co -v- Ethicon Ltd. [Coram: Lord Diplock, Viscount Dilhorne, Lord Cross of Chelsea, Lord Salmon and Lord Edmund-Davies] reported in (1975) AC 396. In American Cyanamid Co (supra), that involved an issue in relation to prohibitory injunctions, the House of Lords held that the plaintiff needed to establish only a real possibility of success, and not a probability. The House of Lords in American Cyanamid Co (supra), held that there may be special circumstances wherein the general principle, that no injunction would lie if the plaintiff would be adequately compensated by an award of damages if he succeeds at the trial, would not apply. In the present scenario, the petitioner has brought down the threshold required for the subjective satisfaction of this Court required under Rule 1(b) by prima facie proving a case of collusion and fraud by the defendants. Furthermore, the conduct of the defendants as established in the prima facie findings gives further credence to the threat and perception of the petitioner that the defendants shall alienate their property in such a manner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) is clearly distinguishable and has no application to the facts and circumstances of the case in hand. 40. In Kohinoor Steel Private Ltd. (supra) the Division Bench followed its earlier judgment delivered in Sunil Kakrania (supra). Furthermore, in that case, the trial court had come to a finding that the defendant had earned a profit of ₹ 81.89 lakhs in the financial year coupled with the fact that the averments in the plaint with regard to Order 39 Rule 1(b) were vague and ambiguous. In fact, in this judgment, the Division Bench completely failed to examine the ratio laid down by the Supreme Court in Manohar Lal Chopra (supra). It is to be further noted that the Division Bench had approved the ratio passed in Albert Judah Judah -v- Rampada Gupta reported in AIR 1959 Cal 715 [Coram: P. C. Mallick, J.] that had held that in a money suit, the Court in exercise of power conferred under Order 39, Rule 1(b) of the Code can restrain the defendant from disposing of the property which is not the subject matter of the suit if it appears that the defendant intended or threatened to dispose of his property with a view to defraud his creditors. The Court, however, in the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the High Court in granting injunctions in appropriate cases, one in relation to a claim for a money decree and the second with respect to an anti injunction suit, respectively. 42. Before proceeding further, I would like to refer to L.C. Quinn -v- Leathem [Coram: Earl of Halsbury L.C., Lord Macnaghten, Lord Shand, Lord Brampton, Lord Robertson, and Lord Lindley.] reported in 1901 AC 495 wherein the House of Lords observed as follows: ........that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. ........... 43. I have to point out that umpteen number of judgments have been relied upon by the respondents on different principles of law. Keeping in view the principles in L. C. Quinn (supra) I am of the view that some of these judgments are, simply reiterating the principles of the judgments that have been dealt by my in detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'B' of G.A 725 of 2019) that required him to function in a honest and ethical manner. It is to be noted that an employee in a responsible position owes a kind of fiduciary duty to the employer and the employer would have proprietary rights over ill gotten gains of the said employee. Even if one were not to follow the standards as indicated above, an employee would be liable for losses and damages the employer incurs due to the fraud committed by the employee. In the instant case, the admission of the employee on various occasions starting from July, 2016 to February 2018 leave no room for doubt that the employee has committed fraud on the petitioner in this case. His own admission that he received 25 per cent as kickback by way of his letter dated February 8, 2018 speaks volumes and the same is accentuated by the offer by the employee by letter dated February 9, 2018 to secure the petitioner by offering a flat owned by him. In light of the same, I restrain the employee from transferring the property mentioned in Annexure 'M' at page 515 of G.A. 725 of 2019. Keeping in mind the quantum of damages, I further restrain the employee from transferring the shares, mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted on them. The law cannot be so narrow minded that it shall wait for umpteen years to give relief to a plaintiff that approaches the court and prima facie proves that fraud has been committed on him. It is a well established principle that fraud unravels all and no man can be allowed to take advantage of such fraud. I am well aware of the slow pace at which suits proceed and the fact that it can take over 15 years to 20 years for a decree to be passed in a suit. Owing to this delay, many a decree becomes infructuous and cannot even be executed. In my view, the Chartered High Courts have derived its powers from the Constitution of India. Article 225 of the Constitution preserved the jurisdiction, including inherent jurisdiction which existed on the date when the Constitution came into force, and accordingly, the High Court is the repository of power enabling it to reach its arms to do justice. Such being the case, I am of the view that the High Court has a duty to use its inherent powers, in appropriate cases for the ends of justice, equity and good conscience. Furthermore, in the commercial world of today it is the duty of the High Court to protect the honest businessman agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
