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TMI Blog2007 (6) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in Delhi, for loans for funding its capital requirements for development of a chip called Versatile Component Unit (VCU). Defendant No. 1, is stated to have advanced amounts from time to time to the tune of ₹ 52.08 crores. A loan agreement dated 15.4.2005 was entered into between the appellant No. 1/defendant No. 1 company, plaintiff company, Mr. Dhruv Varma, Mr. R.L.Varma and Mr. R.L.Varma and Sons (HUF) whereby the plaintiff company and the other parties acknowledged that a sum of ₹ 19.20 crores stood advanced by the defendant company to the plaintiff company. According to the defendant that agreement stipulated that a further sum of ₹ 2 crores would be advanced to the plaintiff company and that the amount advanced would carry interest at 12 % per annum. Further the plaintiff company was liable to repay the entire outstanding dues to the defendant company in four equal quarterly Installments commencing from the date immediately succeeding the date on which the 'moratorium period' as defined in the Agreement, expired but not later than the final maturity date. The moratorium period was to be 18 months from the date of the Agreement. The Agreement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 10.3.2005 and thereafter some more shares were transferred by Mr. Dhruv Varma to Wogan Technologies. 5. It is stated that Defendant No. 1 stepped into the shoes of ICICI by repaying to the latter the ₹ 2 crores that had been advanced by ICICI to the plaintiff. That was the background to the execution of the loan agreement dated 15.4.2005 referred to in para 4. The loan agreement shows that there were positive and negative covenants in the loan agreement and under Clause 7.1 if there was failure to repay the principal or the interest of the amount borrowed within three business days of the due date, it would constitute default. Clause 8 gave an option to the Lender, in the event of default in repayment of the loan, to have the outstanding amount converted into equity shares in the Borrower i.e. Vasu Tech Ltd., the plaintiff. 6. This was followed by a memorandum of understanding dated 31.8.2006 in which the plaintiff company acknowledged its liability to pay a sum of ₹ 49,81,93,273 to the defendant No. 1 company. It is stated that there were default in payments of both interest and principal amount. Later, along with covering letters dated 27.9.2006, 11.10.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed for an ad interim ex parte injunction. 10. The learned Single Judge by the impugned order dated 28.3.2007, while directing summons to issue in the suit, granted an ad interim ex parte injunction as prayed for by the plaintiff. In the impugned order the learned Single Judge noted the submission of the plaintiff that the cheques issued by the plaintiff 'were liable to be returned to the plaintiff and the defendants had no right to encash the same.' The impugned order also noted the submission of the learned Senior counsel appearing for the plaintiff that 'the plaintiff shall extend the validity of the cheques if so directed by the Court.' The learned Single Judge was also informed that the plaintiff had received notice of the winding up petition filed in the Punjab and Haryana High Court. Thereafter the learned Single Judge passed the following Order: Having heard learned senior counsel for the plaintiff and having perused the plaint, application and documents on record, I am satisfied that the plaintiff has made out a prima facie case for grant of an ad interim injunction. Grave and irreparable loss would undoubtedly ensure to the plaintiff if the interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiff. A bare reading of the covering letters would have exposed the falsity of the plaintiff's stand that the amounts were not to be treated as loans and Therefore the cheques were not to be encashed. 13. Lastly, Mr.Chandhiok submits that the suit itself was not maintainable as the prayer made therein was in effect to restrain the defendants from instituting the proceedings against the plaintiff under Section 138 of the Negotiable Instruments Act, 1888 (NI Act). Such a suit was barred under Sections 41(b) and 41(d) of the Specific Relief Act, 1963. The plaintiff was fully aware that the cheques if presented would be dishonoured. He submits that in light of the above facts and circumstances, an unconditional ad interim ex parte injunction restraining the defendant from presenting cheques for recovering the amount of ₹ 61.63 crores could not have been passed by the learned Single Judge. Submissions of the respondent plaintiff 14. Appearing for the plaintiff on advance notice Mr. Sandeep Sethi, learned senior counsel raises a preliminary objection to the maintainability of this appeal. He submits that the impugned order passed under Order XXXIX Rule 1 is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd where it is unable so to do, it shall record its reasons for such inability. 4. Order for injunction may be discharged, varied or set aside Any order for an injunction may be discharged, or varied, or set aside by the Court, on application made thereto by any party dissatisfied with such order: Provided that if in an application for temporary injunction or in any affidavit support such application a part has knowingly made a false or misleading statement in relation to a material particular and the injunction was granted without giving notice to the opposite party, the Court shall vacate the injunction unless, for reasons to be recorded, it considers that it is not necessary so to do in the interests of justice: Provided further that where an order for injunction has been passed after giving to a party an opportunity of being heard, the order shall not be discharged, varied or set aside on the application of that party except where such discharge, variation or setting aside has been necessitated by a change in the circumstances, or unless the Court is satisfied that the order has caused under hardship to that party. 17. The rationale of Rule 3A, which was inserted by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njunction. In such circumstances the party who does not get justice due to the inaction of the Court in following the mandate of law must have a remedy. So we are of the view that in a case where the mandate of Order 39 Rule 3A of the Code is flouted, the aggrieved party, shall be entitled to the right of appeal notwithstanding the pendency of the application for grant or vacation of a temporary injunction, against the order remaining in force. In such appeal, if preferred, the appellate Court shall be obliged to entertain the appeal and further to take note of the omission of the subordinate Court in complying with the provisions of Rule 3A. In appropriate cases, the appellate Court, apart from granting or vacating or modifying the order of such injunction, may suggest suitable action against the erring judicial officer, including recommendation to take steps for making adverse entry in his ACRs. Failure to decide the application or vacate the ex- parte temporary injunction shall, for the purposes of the appeal, be deemed to be the final order passed on the application for temporary injunction, on the date of expiry of thirty days mentioned in the Rule. 19. The upshot of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the defendant under Order XXXIX Rule 4 CPC. 2. We now turn to the consequences of the non-compliance with the main requirement of Rule 3 A, i.e. disposal of the application under Order 39 Rule 4 CPC by the learned Single Judge within 30 days of its being filed. This Court is bound by the mandate of the Hon'ble Supreme Court in A.Venkatasubbiah Naidu. The said judgment makes it abundantly clear that the affected party which is unable to get its application under Order 39 Rule 4 disposed of in terms of Rule 3A, can file an appeal and in such event the appellate court is 'obliged to entertain the appeal and further to take note of the omissions of the subordinate court....' In that view of the matter the defendant is justified in preferring this appeal and this Court is obliged to entertain the appeal. 23. We are unable to accept the submissions of Mr. Sethi that the appeal is barred by limitation. The defendants were expecting till 29.5.2007 that their application would be disposed of by the learned Single Judge. The expectation was a reasonable one and the defendants cannot be faulted on that score. The period of limitation for filing the appeal should be take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;purely with a view to give comfort to the defendants as collateral security, till the shares were transferred, post-dated cheques were given from time to time' In para 42 it simply lists out the details of the 16 cheques. These letters unequivocally reflect that the cheques were being issued for repayment of a loan and there is no whisper that they are being offered as a collateral as claimed in the plaint. There is a high probability that had the learned Single Judge been shown these letters, the unconditional ex parte injunction may not have been granted. The very basis of the plaintiff's claim that these cheques were not intended for repayment of the loan would have been in doubt. Therefore, the withholding of these letters should result in drawing an adverse inference against the plaintiff. This is definitely one ground why the ad interim injunction should be vacated. Prima Facie case not made out 27. Mr. Sethi was at pains to point out that there were e-mails of 9.5.2006, 10.10.2006 and 6.12.2006 exchanged between which indicated that the loan amount was to be made good by issuance of shares in Vasucorp Inc. However, Mr. Sethi is unable to explain how the seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the criminal court cannot be fettered by the civil court.' 30. The decision of this Court in Atul Kumar Singh v. Jalveen Rosha AIR 2000 Del 38 was in a case where the plaintiff had issued four cheques issued in favor for the defendant for a value of ₹ 7 lakhs. The cheques when presented were dishonoured. After service of notice under Section 138 NI Act, the plaintiff filed a suit for a declaration that 'the defendant is not entitled to any benefit on account of holding the cheques' and to injunct the defendant 'from using or claiming any benefit by virtue of possessing the instruments.' This Court, while allowing the defendant's application for rejecting the plaint, held that (AIR, p.40): The reliefs claimed in this suit are in substance for an injunction restraining the defendant from prosecuting the criminal case instituted against the plaintiff. Section 41(b) of the SRA denies to the Court the jurisdiction to grant an injunction restraining any person from prosecuting any proceedings in a Court. Consequently, the injunction sought by the plaintiff cannot be granted since it would have the effect of preventing the defendant from prosecutin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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