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Sri Suryanarayana Paper And Boards Private Limited And Others v. V. Padmakumar And Others
Factual and Procedural Background
These two revision petitions challenge the Orders passed by the District Munsif, Udumalaipet, in I.A Nos. 266 and 267 of 1995, which granted ad interim injunctions on 31.1.1995. In I.A No. 266 of 1995, the injunction restrained the respondents from deleting Article 16 of the Articles of Association of the 1st respondent company, which the plaintiffs claimed violated their rights under those Articles. In I.A No. 267 of 1995, the injunction restrained respondents 2 to 6 from transferring their shares in the 1st respondent company without first offering them to the plaintiffs and restrained the company from registering such transfers. The District Munsif granted the injunctions without recording reasons for doing so and issued notices subsequently. The revision petitions were filed under Article 227 of the Constitution of India, challenging the jurisdiction of the District Munsif and the validity of the interim injunction orders.
Legal Issues Presented
- Whether the District Munsif, Udumalaipet, had jurisdiction to entertain the suit and grant interim injunctions, given that the 1st defendant company and other defendants were located in Coimbatore, while the suit was filed in Udumalaipet.
- Whether the orders granting ex parte interim injunctions without recording reasons violated the mandatory procedural requirements under Order 39, Rule 3 of the Code of Civil Procedure.
- Whether the revision petitioners suppressed material facts and committed fraud by not disclosing their appearance and counter affidavits in the trial court while obtaining interim relief from the revisional court.
Arguments of the Parties
Respondents' Arguments
- The revision petitioners suppressed relevant facts by not disclosing their appearance in the suit and filing of counter affidavits in I.A Nos. 266 and 267 of 1995.
- The revision petitioners failed to inform the trial court and the plaintiffs about the interim order suspending the injunctions passed by this Court, constituting fraud.
- Reliance was placed on the Supreme Court judgment in S.P Chengalvaraya Naidu v. Jagannath emphasizing that courts should not be used as instruments of fraud and that litigants must come with clean hands.
Revision Petitioners' Arguments
- They denied suppression of facts, stating that they appeared in the suit on 9.2.1995 and filed counter affidavits accordingly.
- They contended there was no need to seek adjournments, but the plaintiffs themselves took adjournments on 14.2.1995 and 17.2.1995.
- They argued that the plaintiffs were not willing to proceed with the matter and that the alleged non-disclosure of the interim order to the trial court was not relevant to the revision petitions.
- They submitted that any challenge to the General Body Meeting held on 20.2.1995 or other matters should be pursued through appropriate legal remedies.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| R.I & C. Syndicate Ltd. v. A. Vairaprakasam (1988-2-L.W. 179 = AIR 1989 Madras 139) | Mandatory requirement to record reasons when granting ex parte injunction under Order 39, Rule 3 of CPC. | The Court relied on this case to emphasize that failure to record reasons violates procedural law and that granting injunctions without reasons is deprecated. |
| Morgan Stanley Mutual Fund v. Kartica Das (1994-4 S.C.C 225) | Upholds the principle that courts must record reasons when granting ex parte injunctions under Order 39, Rule 3. | Supported the Court's view that the procedural safeguard is mandatory and non-compliance invalidates the injunction. |
| Shivkumar Chadha v. Municipal Corporation of Delhi (1993 (3) SCC 161) | Requirement that courts must record reasons for ex parte injunctions to protect parties' rights and ensure procedural fairness. | The Court quoted this case extensively to explain the rationale behind mandatory reason-recording and its non-optional nature. |
| Taylor v. Taylor (1875-1-Ch.D. 426) | Statutory requirements must be complied with strictly; if a statute prescribes a manner, it must be followed. | Used to support the principle that non-compliance with Order 39, Rule 3 proviso is not excusable. |
| Nazir Ahamed v. Emperor (1936 P.C 253) | Strict compliance with statutory procedural requirements is necessary. | Reinforced the Court’s position on mandatory compliance with procedural rules for injunctions. |
| Ramachandra Keshav Adke v. Govind Joti Chavare (1975 I SCC 915) | Compliance with procedural requirements in statutory provisions is essential. | The Court cited this case to illustrate similar procedural strictness applied in other statutory contexts. |
| S.P Chengalvaraya Naidu v. Jagannath (A.I.R 1994 SC 53 = 1994-1-L.W. 21) | Principle of clean hands and that courts must not be used to perpetrate fraud. | Respondents relied on this case to allege fraud by revision petitioners; the Court found factual disputes and did not apply the principle against the petitioners. |
Court's Reasoning and Analysis
The Court analyzed the procedural requirements under Order 39, Rule 3 of the Code of Civil Procedure, which mandates that when an injunction is granted without notice to the opposite party, the court must record reasons explaining why delay would defeat the object of the injunction. The Court found that the District Munsif granted the ad interim injunctions without recording such reasons, thereby violating the mandatory procedural safeguards established by precedent and statute.
Furthermore, the Court considered the jurisdictional issue, noting that the 1st defendant company and respondents 2 to 6 were located in Coimbatore, where the company’s registered office is situated, while the suit was filed in Udumalaipet. The Court held that the District Munsif, Udumalaipet, lacked jurisdiction to entertain the suit, and the suit ought to have been returned for presentation in the proper court.
Regarding allegations of suppression of facts and fraud by the revision petitioners, the Court observed factual disputes and declined to accept the contention that the petitioners acted fraudulently. The Court also held that any failure to inform the trial court or plaintiffs of the interim order passed by the revisional court was not relevant to the validity of the interim injunction orders under challenge.
Consequently, the Court concluded that the interim injunction orders granted by the District Munsif were unsustainable and without jurisdiction, necessitating their setting aside.
Holding and Implications
The revision petitions are allowed, and the orders passed by the District Munsif, Udumalaipet on 31.1.1995 granting interim injunctions in I.A Nos. 266 and 267 of 1995 are set aside.
The interlocutory applications for injunctions are dismissed with no costs. The direct effect of this decision is to nullify the interim orders granted without jurisdiction and in violation of mandatory procedural requirements. The Court noted that the respondents retain the right to challenge the validity of the General Body Meeting and pursue appropriate remedies, but no new precedent was established beyond enforcing existing procedural mandates and jurisdictional principles.
These two revision petitions are against the Orders passed by the District Munsif, Udumalaipet, in I.A Nos. 266 and 267 of 1995, granting ad interim injunction at the time of ordering notice on 31.1.1995 In I.A No. 266 of 1995 the injunction was for restraining the respondents from taking any steps to delete Article 16 of the Articles of Association of the 1st respondent company in violation of the rights of the plaintiffs under the said Articles. In I.A No. 267 of 1995, the injunction was one for restraining, respondents 2 to 6 from transferring the shares held by them in the 1st respondent company to any persons without offering them in the first instance to the plaintiffs and restraining the company from registering or giving any effect to the transfer of such shares. In both the applications the orders passed are in the following terms:
“Heard and perused. Issue notice with copy of documents. Ad interim injunction granted till 9.2.1995”
2. Order 39, Rule 3 of the Code of Civil Procedure contains a specific provision that after it is proposed by the Court to grant an injunction without giving notice of the application to the opposite party, the court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay. The court is also enjoined to do certain other things. It is not necessary to mention them here. Referring to the said provision of the Code, I held in R.I & C. Syndicate Ltd. v. A. Vairaprakasam (1988-2-L.W. 179=AIR 1989 Madras. 139) that if an order of injunction is made without recording the reasons, the injunction would be in violation of the procedure under Order 39, Rule 3 of C.P.C, and I had deprecated the practice of granting such orders of injunction. The said principle is also laid down by the Supreme Court in Morgan Stanley Mutual Fund v. Kartica Das (1994-4 S.C.C 225). Referring to an earlier judgment in Shivkumar Chadha v. Municipal Corporation of Delhi (1993 (3) SCC 161), the Supreme Court extracted the following passage from the said judgment;
“… the court shall ‘record the reasons’ why an ex parte order of injunction was being passed in the facts and circumstances of a particular case. In this background, the requirement for recording the reasons for grant of ex parte injunction, cannot be held to be a mere formality. This requirement is consistent with the principle that a party to a suit, who is being restrained from exercising a right which such party claims to exercise either under a statute or under the common law, must be informed why instead of following the requirement of Rule 3, the procedure prescribed under the proviso has been followed. The party which invoices the jurisdiction of the court for grant of an order of restrain against a party, without affording an opportunity to him of being heard, must satisfy the court about the gravity of the situation and court has to consider briefly these factors in the ex parte order. We are quite conscious of the fact that there are other statutes which contain similar provisions requiring the court or authority concerned to record reasons before exercising power vested in them. In respect of some of such provisions it has been held that they are required to be complied with but non-compliance therewith will not vitiate the order so passed. But same cannot be said in respect of the proviso to Rule 3 of Order 39. The Parliament has prescribed a particular procedure for passing of an order of injunction without notice to the other side, under exceptional circumstances. Such ex parte orders have far-reaching effect, as such a condition has been imposed that court must record reasons before passing such order. If it is held that the compliance with the proviso aforesaid is optional and not obligatory, then the introduction of the proviso by the Parliament shall be a futile exercise and that part of Rule 3 will be surplusage for all practical purposes. Proviso to Rule 3 of Order 39 of the Code attracts the principle that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor (1875-1-Ch.D. 426) and Nazir Ahamed v. (Emperor 1936 P.C 253). This Court has also expressed the same view in respect of procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramachandra Keshav Adke v. Govind Joti Chavare (1975 I SCC 915)”. The Court then observed:—
“As such whenever a court considers it necessary in the facts and circumstances of a particular case to pass an order of injunction without notice to other side, it must record the reasons for doing so and should take into consideration, while passing an order of injunction, all relevant factors, including as to how the object of granting injunction itself shall be defeated if an ex parte order is not passed”.
In the same case, the Supreme Court has also pointed out that the residence of a company in India is where its registered office is located and normally cases should be filed only where the registered office of the company is situate. In the present case, admittedly all the defendants in the suit are only in Coimbatore. The 1st defendant is a company, which has its registered office at Coimbatore. Defendants 2 to 6 who are the shareholders of the 1st defendant company are also residing in Coimbatore. The plaintiffs are residing in Udumalaipet. In paragraph 13 of the plaint it is alleged that the cause of action arose within the jurisdiction of the Court at Udumalaipet, where the plaintiffs are residing and where they are entitled to receive the notices from the 1st defendant company. Admittedly the plaintiff did not receive any notice from the 1st defendant company on the date when they filed the suit or when they obtained an order of injunction. In those circumstances, the court at Udumalaipet had no jurisdiction whatever to entertain the suit of the plaintiff. The court ought to have returned the suit for presentation in proper court even on the allegations contained in the plaint. In spite of the averment in paragraph 13 of the plaint the District Munsif, Udumalaipet chose to receive the plaint and granted an interim order as prayed for by the plaintiffs.
3. For the aforesaid reasons, both the orders of interim injunction are unsustainable and they have to be set aside. These revisions are filed under Art. 227 of the Constitution of India.
4. Learned counsel for the plaintiffs submits that the revision petitioners have suppressed certain relevant facts and obtained interim orders from this court hen they filed the revisions. According to him, the revision petitioners entered appearance in the suit on 9.2.1995 and filed counter affidavit in I.A Nos. 266 and 267 of 1995. It is also stated by him that they prayed for an adjournment and the matter was adjourned to 14.2.1995 It is submitted that from the said date, the matter was adjourned to 17.2.1995 and then to 20.2.1995 It is vehemently contended that the revision petitioners have not brought to the notice of this Court the factum of their having entered appearance in the suit and filing a counter for the purpose of contesting the applications. It is also argued that on 17.2.1995, the revision petitioners did not bring to the notice of the trial Court or to the plaintiffs that they had obtained an interim order of suspension from this Court in these Civil Revision Petitions. It is therefore contended that the revision petitioners are guilty of fraud and they should not get any beneficial order from this Court. Reliance is placed on the judgment of the Supreme Court in S.P Chengalvaraya Naidu v. Jagannath (A.I.R 1994 SC 53 = 1994-1-L.W. 21 (SC). The following passage is referred to by learned counsel:
“The principle of ‘finality of litigation’ cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands, we are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court process a convenient lever to retain the illegal-gains indefinitely. We have no hesitation to say 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”.
The principle enunciated by the Supreme Court in the above decision will not apply to the present revision petitions. The contentions of learned counsel for the respondents are factually disputed by the revision petitioners. According to them, on 9.2.1995 defendants were ready to get along with the matter and that is why they filed the counter affidavit on that date. There was no necessity for them to ask for any adjournment of the matter. It is stated by them that the plaintiffs were not willing to get along with the proceedings and they took an adjournment on 14.12.1995 and again on 17.2.1995 and the matter was posted to 20.2.1995 In view of the disputed facts, it is not possible to accept the contention that the revision petitioners had suppressed some facts before this Court when they obtained an interim order from this Court.
5. The contention that they had not brought to the notice of the trial court or the plaintiffs the passing of the interim order by this Court will not give rise to any argument in these revision petitions or to help the respondents to contend that the revision petitions shall be dismissed. It is only a subsequent cause of action, if at all. According to learned counsel, if the plaintiffs had been made aware of the orders of this Court on 16.2.1995, they would have taken steps either to get the order of this Court vacated immediately or to have filed another suit in the court at Coimbatore and obtained interim reliefs. Learned counsel for the revision petitioners submits that the copy of the order of this Court was not available to them till 20.2.1995 and therefore they did not inform the trial court of the same on 16.2.1995 Whatever may be the relevant facts in that regard, it is not relevant in the present revision petition. In so far as these revision petitions are concerned, the orders of the trial court passed in the interlocutory application are wholly unsustainable and without jurisdiction and they have to be set aside. If it is open in law to the respondents to challenge the validity of the General Body Meeting held on 20.2.1995 of the company, they can resort to such remedies as are available to them in law. They can urge all the facts which are relevant and necessary in their case for getting the relief prayed for by them in such a proceeding.
6. In the result, the revision petitions are allowed. The orders passed by the District Munsif, Udumalaipet on 31.1.1995 are set aside. I.A Nos. 266 and 267 of 1995 are dismissed, No costs.
KA/RR/VCS
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