Cotton Corporation of India Vs. United
Industrial Bank [1983] INSC 125 (19 September 1983)
DESAI, D.A.
DESAI, D.A.
ERADI, V. BALAKRISHNA (J)
CITATION: 1983 AIR 1272 1983 SCR (3) 962 1983
SCC (4) 625 1983 SCALE (2)324
CITATOR INFO :
D 1987 SC 874 (18)
ACT:
Specific Relief Act, 1963-S. 41(b)-Whether
court has jurisdiction to grant injunction restraining any person from
instituting any proceeding in a court not subordinate to that from which
injunction is sought ?
HEADNOTE:
A Branch Manager of the respondent-Bank
co-accepted 16 usance bills of the aggregate value of over Rs. 45 lakhs
relating to purchases of cotton made by a textile mill from the
appellant-Corporation. When the usance bills matured, the Corporation called
upon the Bank to make payment. The Bank filed a suit against the Corporation
praying inter alia for a declaration that the co-acceptance of the usance bills
by its Branch Manager was null and void as he did not have the requisite
authority to co-accept the bills on behalf of the Bank and also for an interim
injunction restraining the Corporation from presenting a winding-up petition
under the Companies Act, 1956. The prayer for injunction was turned down by a
Single Judge of the High Court but the same was granted by a Division Bench
which heard the appeal against the order of the Single Judge. The narrow
question examined in this appeal was. Whether in view of the provision
contained in s. 41(b) of the Specific Relief Act, 1963, the court will have
jurisdiction to grant an injunction restraining any person from instituting any
proceeding in a court not subordinate to that from which the injunction is sought?
Allowing the appeal,
HELD: From the language used in s. 56(b) of
the Specific Relief Act, 1887 (which was the predecessor provision of s. 41(b)
of the 1963 Act) it was clear that the court could not stay a proceeding in a
court superior in hierarchy to the court from which injunction was sought; but
by a process of judicial interpretation a consensus had been reached that a
court could by an injunction restrain a party before it from further
prosecuting the proceeding in other courts, superior or inferior. To some
extent this approach had not only effectively circumvented the provision
contained in s. 56(b) of the repealed Act but also denuded it of its content.
The legislature took notice of this judicial interpretation and materially
altered the language of the succeeding provision. It manifestly expressed its
mind by enacting s. 41(b) in such clear and unambiguous language that an
injunction cannot be granted to restrain any person-the language takes care of
injunction acting in personum-from instituting or prosecuting any proceeding in
a Court not subordinate to that from which injunction is sought. This change in
language deliberately adopted by the legislature has to be given full effect.
[970 F-H; 971 A-B, D] 963 (i) Anyone having a right, that is a legally
protected interest, complains of its infringement and seeks relief through
Court must have an unhindered, uninterrupted access to law courts. Access to
court in search of justice according to law is the right of a person who
complains of infringement of his legally protected interest and a fortiori
therefore, no other court can by its action impede access to justice. This
principle is deducible from the Constitution which seeks to set up a society
governed by rule of law. As a corollary it must yield to another principle that
a superior court can injunct a person by restraining him from instituting or
prosecuting a proceeding before a subordinate court. Save this specific carving
out of the area where access to justice may be impeded by an injunction of the
court, the legislature desired that courts ordinarily should not impede access
to justice through court. This is the equitable principle underlying s. 41(b).
Accordingly, it must receive such
interpretation as would advance the intendment and thwart the mischief it was
enacted to suppress and to keep the path of access to justice through court
unobstructed. [971 F-H; 972 A-B] (ii) The legal system in our country envisages
obtaining redressal of a wrong or relief against unjust denial thereof by
approaching the court set up for the purpose. If a person complaining of
invasion of his rights is injuncted from approaching the court set up to grant
relief by an action brought by the opposite side against whom he has a claim
and which he wanted to enforce through court, he would have to first defend
that action and vindicate his right and thereafter, when the injunction is
vacated, he has to approach the court for relief. In order to avoid such
multiplicity of proceedings, the legislature enacted s. 41(b) and statutorily
provided that an injunction cannot be granted by a court with a view to
restraining any person from instituting or prosecuting any proceeding in a
court not subordinate to that from which the injunction is sought. [972 C-F; G]
(iii) The contention that s. 41 (b) is not attracted because it deals only with
perpetual injunction cannot be accepted. The expression 'injunction' in s.
41(b) is not qualified by an adjective and therefore it would comprehend both
interim and perpetual injunction. It is true that s. 37 specifically provides
that temporary injunctions which have to continue until a specified time or
until further order of the court are regulated by the Code of Civil Procedure.
But if a dichotomy is introduced by confining s. 41 to perpetual injunction
only and s. 37 read with o. 39 C.P.C. being confined to temporary injunction,
an unnecessary grey area will develop. It is indisputable that temporary
injunction is granted during the pendency of the proceeding so that while granting
final relief the Court is not faced with a situation that the relief becomes
infructuous or that during the pendency of the proceeding an unfair advantage
is taken by the party in default or against whom temporary injunction is
sought. But power to grant temporary injunction was conferred in aid of or as
auxiliary to the final relief that may be granted. If the final relief cannot
be granted in terms as prayed for, temporary relief in the same terms can
hardly if ever be granted. [973 C-F] State of Orissa v. Madan Gopal Rungta,
[1952] S.C.R. 28 referred to.
964 Udyog Mandir v. Messrs. Contessa Knit
Wear and Ors., A.I.R. [1975] Bom. 158; and Krishnadevi P. Gupta & Anr. v. Banwarilal
Hanuman Prasad Tibrewala, A.I.R. [1976] Bom. 233 approved.
In the instant case the Bank seeks to
restrain the Corporation by an injunction of the court from instituting a
proceeding for winding-up of the Bank. There is a clear bar in s. 41(b) against
granting this relief. The court has no jurisdiction to grant a perpetual injunction
restraining a person from instituting a proceeding in a court not subordinate
to it as a relief, and therefore; ipso facto temporary relief cannot be granted
in the same terms.
[974 B-C] (iv) One cannot bodily import
English decisions into our system to develop a hybrid legal system and one
cannot be so hypnotised by English decisions to overlook legislative changes
introduced in Indian Law. Where provisions are in pari materia between the
English Act and the Indian Act and where local conditions do not materially
differ from the conditions in U.K., one may, keeping in view the conditions in
our country, look at the view taken by the English Courts and if consistent
with our jurisprudence, our social conditions and our chalked out path in which
the law must move, one can profitably take help of the decision.
[975 D-E] Cadiz Waterworks Co. v. Barnett,
[1874-75], 19 Equity Cases 182; Circle Restaurant Castiglione Co. v. Lavery,
[1881] 18 Ch. Div. 555; and New Travellers Chambers Ltd. v. Messrs Cheese &
Green, [1894] 17 Law Times Reports 171-plea to take notice of, declined.
Buckley: Companies Act, 14th Edn., footnotes
7, 8 and 9, P. 524; and Palmer's Company Precedents, Part II, 17th Ed. p.
45-plea to take notice of declined.
Hungerford Investment Trust Ltd. v. Haridas
Mundhra & Ors.,[1972] 3 S.C.R. 690, at 701; Chales Forte Investments Ltd.
v. Amanda, [1963] 2 All E.R. 940; Bryanston Finance Ltd. v. De Vries, [1976] 1
All E.R. 25; and Stonegate Securities Ltd. v. Gregory, [1980] 1 All E.R. 241;
referred to.
(v) The Court can in appropriate cases grant
temporary injunction in exercise of its inherent power in cases not covered by
O. 39, C.P.C, But the inherent power of the Court cannot be invoked to nullify
or stultify a statutory provision. While exercising inherent power, the court
should not overlook the statutory provision in s. 41(b) which clearly indicates
that injunction to restrain initiation of proceeding cannot be granted. [980
C-D] Manoharlal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, [1962] Supp. 1
S.C.R. 450: and Padam Sen v. State of U.P.;
[1961] 1 S.C.R. 884; referred to.
In the instant case, the appellate judgment
does not contain the slightest reference to the invocation of the inherent
power of the court in granting the order of injunction now under challenge. Not
only that, but the court has not held that the contention of the Corporation is
frivolous or untenable or 965 the claim is mala fide. This becomes clear from
the observation of the court that the order passed by it is not founded on the
merits of the Bank's case or lack of merit in any claim which the Corporation
may have against the plaintiff-Bank and it would be open to the Corporation to
file a regular suit or summary suit against the plaintiff- Bank in which
appropriate orders would be passed by the court seized of the matter as and
when the occasion arises for the same.
[980 D-F] (vi) The contention that the
presentation of winding-up petition coupled with advertisement thereof in
newspaper as required by law has certain serious consequences on the status,
standing, financial viability stability and operational efficiency of the
company, and where the debt is bona fide disputed, a petition for winding-up,
which is not an alternative to the suit to recover the same, may be a pressure
tactic to obtain an unfair advantage, and therefore, the court must, despite
the provision in s.
41(b), spell out a power in appropriate cases
to injunct a person from filing a winding-up petition, cannot be accepted. This
contention overlooks the various statutors safeguards against admission,
advertising and publication of winding-up petitions. There is sufficient
built-in safeguard in the provisions of the Companies Act and the Rules framed
thereunder which would save the company from any adverse consequences, if a
petitioner actuated by an ulterior motive presents the petition. According to
rule 96 of the Companies (Court) Rules, 1959 a petition for winding-up has to
come up in chambers before the Company Judge and not in open court, and the
rule confers a discretionary power on the judge not to give any directions at
that stage but merely issue a notice to the company before giving directions.
If upon receipt of such notice the company appears and satisfies the judge that
the debt is bona fide disputed or the presentation of the petition is mala
fide, or actuated by an ulterior motive, or abuse of the process of the court,
the Judge may decline to admit the petition and may direct and party presenting
the winding-up petition to prove its claim by a suit or in any other manner.
This is the jurisdiction of the Company Court and it cannot be restrained from
exercising the same by some other court restraining the creditor from presenting
a winding-up petition. [981 B-H; 982 A; D] National Conduits Pvt. Ltd. v. S. S.
Arora, [1968] 1 S.C.R, 430, referred to.
George v. The Athimattam Rubber Co. Ltd.,
A.I.R. 1964 Kerala 212, approved.
In the instant case, even assuming that the
Appellate Bench had in its mind the inherent power of the court to grant
injunction despite statutory inhibition and consistent with the view taken by
the courts in England, it had then in order to do justice between the parties
first reach an affirmative finding that the winding-up petition as and when
presented by the Corporation would be frivolous and would constitute an abuse
of the process of the court or would be a device to pressurise the Bank to
submit to an unjust and dishonest claim. It must also reach an affirmative
conclusion that the debtor-Bank is sufficiently solvent to satisfy the claim as
and when established. It has also 966 to record an affirmative finding that the
Corporation is not seeking bona fide to present a petition for winding-up but
is actuated by an ulterior motive in presenting the petition. However, the
decision of the Appellate Bench is conspicuously silent on these relevant
points. [983 E-H; 984 A]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 7348 of 1983.
Appeal by Special leave from the judgment and
order dated the 19th March, 1982 of the Bombay High Court in Appeal No. 527 of
1981 in notice of motion No. 1156/81 in Suit No. 1508/81.
Sankar Ghose, Miss Radha Rangaswamy and
Rangaswamy for the Appellant.
A.K. Sen, R. C. Nag, Rameshwar Nath and A. K.
Sil for the Respondents.
The Judgment of the Court was delivered by
DESAI, J. First respondent United Industrial Bank Limited ( Bank for short')
having its registered office at 7, Red Cross Place, Calcutta filed Suit No.
1508 of 1981 on the original side of the Bombay High Court against the
appellant-The Cotton Corporation of India Limited ('Corporation' for short) and
one Tapan Kumar Ghosh, who at the relevant time was the Chief Branch Manager of
the Worli Branch of the Bank and defendant No. 3-Bradbury Mills Limited, an
existing Company within the meaning of the Companies Act, 1956 carrying on
business at Maulana Azad Road, Jacob Circle, Bombay praying for a declaration
that the acceptance and or co-acceptance of the bill of exchange and/or hundies
listed in Exhibit 'K' by second defendant Tapan Kumar Ghosh for and on behalf
of the Bank was null and void and not binding on the Bank and calling upon the
Corporation to deliver up to the Court the disputed bills of exchange and/or
hundies for the purpose of cancellation and for a direction cancelling the
same. In this suit the Bank took out a notice of motion No. 1156 of 1981
seeking to restrain by an interim injunction the Corporation from enforcing any
claim whatever in any form or from relying on or giving effect to the bills of
exchange or hundies involved in the dispute for the purpose of any suit or
other proceedings including winding-up proceedings under the Companies Act,
1956 and/or the Banking Regulation Act, 1949 against the Bank. Notice of motion
also included a prayer for an interim injunction restraining 967 the defendants
in any manner whatsoever either endorsing or negotiating or transferring the
said bills of exchange or hundies and for appointment of a receiver to take
custody of the bills of exchange and hundies listed in Exh. 'K'. An ex- parte
ad-interim injunction was granted as prayed for. When the notice of motion came
up for hearing, the learned judge made the following order :
"...Mr. Chagla confines prayer (a) only
to the filing of winding up petition by Defendant No. 1 and
He presses prayer (b) in full. Notice of
motion as against the Defendant No. 1 dismissed. The Notice of Motion made
absolute in terms of prayer (a) in so far winding up is concerned as against
the defendant No. 3, so far as prayer (b) is concerned, the bills are in the
possession of the Ist Defendants and there is no question of other defendants
negotiating the same.
Notice of Motion dismissed as regards prayer
(b) also against Defendants 2 and 3..." The Bank having been dissatisfied
with the rejection of the Notice of Motion against the Corporation preferred Appeal
from an order No. 527 of 1981. A Division Bench of the Bombay High Court
allowed the appeal and issued interim injunction restraining the Corporation
from presenting a winding up petition, the order being in the same terms as
made against the 3rd defendant by the learned Single judge.
The correctness and validity of this order is
impugned in this appeal.
As the suit is pending awaiting adjudication
on merits, every attempt would be made by us to avoid any expression of opinion
on the merits of the suit. The few facts which we propose to set out are for
the purpose of understanding and appreciating the contention only, the
correctness or otherwise of the allegation of facts being immaterial for the
present purpose.
The Corporation is engaged in the business of
purchasing and selling cotton to textile mills in India. The policy of the
Corporation appears to be to sell cotton against cash payment, but in some
cases to accommodate the textile mills the sale is effected on credit against
acceptance of usance bills co-accepted by the bankers of the textile mills
guaranteeing payment on due dates. 3rd defendant Bradbury 968 Mills Limited is
alleged to have purchased cotton of the aggregate value of Rs. 45,75,000 and in
payment of the price issued 16 usance bills. The 3rd defedant by its letter
dated May 21, 1981 had informed the Corporation that the Bank has given an
undertaking, to Government of Maharashtra to monitor the cash flow of the 3rd
defendant and hence it had to operate account with that Bank only, and it
requested the Corporation to accept usance bills co-accepted by the Bank.
The Corporation asserts that the Bank through
defendant No. 2 its Chief Branch Manager at Worli co-accepted the 16 usance
bills and according to the Corporation the acceptance was evidenced by four
letters issued by the Bank. When the usance bills matured and became due for
payment, the Bank of Baroda on behalf of the Corporation called upon the Bank
to make the payment of the amounts covered by the various usance bills. Simultaneously,
the 3rd defendant was asked to direct its bankers, the plaintiff-bank in this
case, to discharge the usance bills and make the necessary payment.
The Solicitors of the Bank informed the
Corporation that they were awaiting instruction from the head office of the
Bank at Calcutta. Thereafter, the Solicitors of the Corporation served a notice
dated August 5, 1981 on the Bank calling upon it to make the payment under the
usance bills co-accepted by the Bank within 4 days from the receipt of the notice.
Soon thereafter the Bank filed a suit against the Corporation and 2 others as
stated hereinbefore. The main contention of the Bank in the suit is that the
Chief Branch Manager defendant No. 2 had not the requisite authority to
co-accept the bills on behalf of the Bank and therefore, the Bank had incurred
no liability under the usance bills. There is some allegation of fraud but it
is not relevant for the present purpose. The suit is pending on the Original
Side of the Bombay High Court.
A very narrow question which we propose to
examine in this appeal is : Whether in view of the provision contained in Sec.
41(b) of the Specific Relief Act, 1963 ('Act' for short), the Court will have
jurisdiction to grant an injunction restraining any person from instituting any
proceeding in a court not subordinate to that from which the injunction is
sought ? The contention may be elaborated thus : Can a person be restrained by
an injunction of the Court from instituting any proceeding which such person is
otherwise entitled to institute in a court not subordinate to that from which
the injunction is sought? In the facts of the present case, the narrow question
is whether the Corporation can be restrained by an injunction of the court from
presenting a winding-up petition against the Bank ? The High Court 969 seems to
hold that the Court has such powers in view of the provisions contained in 0.39
of the Code of Civil Procedure read with Sec. 37 of the Specific Relief Act,
1963 or in exercise of the inherent powers of the Court under Sec. 151 of the
Code of Civil procedure. This position is seriously contested by the appellant
in this appeal.
The reliefs which the Bank as plaintiff is
seeking in the suit filed by it are a declaration that Bank is not liable to
honour and discharge the usance bills co-accepted in its name by its Chief
Branch Manager-defendant 2 as envisaged by Sec. 34 and a further relief that
the disputed bills of exchange and hundies be delivered to the Court for
cancellation and be cancelled as envisaged by Sec. 31. It is in this suit that
the Bank has obtained an interim injunction restraining the Corporation from
presenting a winding-up petition against the Bank.
Part III of the Act bears the heading
'Preventive Relief' and fasciculus of sections therein included provide for
injunctions generally. Sec. 36 provides that preventive relief is granted at
the discretion of the Court by injunction, temporary or perpetual. Sec. 37
specifies the nature and character of temporary and perpetual injunctions.
Temporary injunctions are such as are to
continue until a specified time, or until the further order of the Court, and
they may be granted at any stage of a suit, and are regulated by the Code of
Civil Procedure, 1908. Permanent injunctions can only be granted by the decree
made at the hearing and upon merits of the suit and thereby defendant in the suit
is perpetually enjoined from assertion of a right or from commission of an act,
which would be contrary to the rights of the plaintiffs. Section 38 sets out
situations in which the court can grant a perpetual injunction to the plaintiff
to prevent the breach of an obligation existing in its favour, whether
expressly or by implication. Sec. 38 is thus an enabling section which confers
power on the court to grant perpetual injunction in situations and
circumstances therein enumerated. Sec. 41 caters to the opposite situation. It
provides that an injunction cannot be granted in the situation and
circumstances therein set out. The Corporation relies on Sec. 41 (b) in support
of its contention that the court had no jurisdiction to grant temporary
injunction because perpetual injunction could not have been granted by the
Court in terms in which temporary or interim injunction was sought. Sec. 41 (b)
reads as under :
"41. An injunction cannot be granted :-
970 (a) ................
(b) to restrain any person from instituting
or prosecuting any proceeding in a court not subordinate to that from which the
injunction is sought;
......................." The predecessor
of Sec. 41 (b), Sec. 56 (b) of the Specific Relief Act of 1887 repealed by 1963
Act read as under :
"56. Injunction cannot be granted :- (a)
.....................
(b) to stay proceeding in a Court not
subordinate to that from which the injunction is sought," A glance at the
two provisions, the existing and the repealed would reveal the legislative
response to judicial interpretation. Under Sec. 56 (b) of the repealed Act, the
Court was precluded by its injunction to grant stay of proceeding in a court
not subordinate to that from which the injunction was sought. In other words,
the Court could stay by its injunction a proceeding in a court subordinate to
the court granting injunction. The injunction granting stay of proceeding was
directed to the Court and the Court has to be the Court subordinate to the one
granting the injunction.
This is postulated on the well recognised
principle that the superior court can regulate proceedings in a court
subordinate to it. It is implicit in this assumption and the language used in
Sec. 56 (b) that the court could not grant injunction under Sec. 56 (b) of the
repealed Act to stay proceeding in a court superior in hierarchy to the Court
from which injunction is sought. But by judicial interpretation, a consensus
was reached that as injunction acts in personum while the Court by its
injunction cannot stay proceedings in a Court of superior jurisdiction; it
could certainly by an injunction restrain a party before it from further prosecuting
the proceeding in other courts may be superior or inferior in the hierarchy of
courts. To some extent this approach not only effectively circumvented the
provision contained in Sec. 56 of the repealed Act but denuded it of its
content. The Legislature took notice of this judicial interpretation and
materially altered the 971 language of the succeeding provision enacted in Sec.
41 (b) replacing Sec. 56 (b) of the repealed Act while enacting Specific Relief
Act of 1963. The Legislature manifestly expressed its mind by enacting Sec. 41
(b) in such clear and unambiguous language that an injunction cannot be granted
to restrain any person, the language takes care of injunction acting in personum,
from instituting or prosecuting any proceeding in a court not subordinate to
that from which injunction is sought. Sec. 41(b) denies to the court the
jurisdiction to grant an injunction restraining any person from instituting or
prosecuting any proceeding in a court which is not subordinate to the court
from which the injunction is sought. In other words, the court can still grant
an injunction restraining a person from instituting or prosecuting any
proceeding in a court which is subordinate to the court from which the
injunction is sought. As a necessary corollary, it would follow that the court
is precluded from granting an injunction restraining any person from
instituting or prosecuting any proceeding in a court of co-ordinate or surerior
jurisdiction. This change in language deliberately adopted by the Legislature
after taking note of judicial vacillation has to be given full effect.
It is, therefore, necessary to unravel the
underlying intendment of the provision contained in Sec. 41 (b). It must at
once be conceded that Sec. 41 deals with perpetual injunction and it may as
well be conceded that it has nothing to do with interim or temporary injunction
which as provided by Sec. 37 are dealt with by the Code of Civil Procedure. To
begin with, it can be said without fear of contradiction that anyone having a
right that is a legally protected interest complains of its infringement and
seeks relief through court must have an unhindered, uninterrupted access to law
courts. The expression 'court' here is used in its widest amplitude
comprehending every forum where relief can be obtained in accordance with law.
Access to justice must not be hampered even at the hands of judiciary. Power to
grant injunction vests in the court unless the Legislature confers specifically
such power on some other forum. Now access to court in search of justice
according to law is the right of a person who complains of infringement of his
legally protected interest and a fortiori therefor, no other court can by its
action impede access to justice.
This principle is deducible from the
Constitution which seeks to set up a society governed by rule of law. As a
corrolary, it must yield to another principle that the superior court can
injunct a person by restraining him from instituting or 972 prosecuting a
proceeding before a subordinate court. Save this specific carving out of the
area where access to justice may be impeded by an injunction of the court, the
Legislature desired that the courts ordinarily should not impede access to
justice through court. This appears to us to be the equitable principle
underlying sec. 41 (b).
Accordingly, it must receive such
interpretation as would advance the intendment, and thwart the mischief it was
enacted to suppress, and to keep the path of access to justice through court
unobstructed.
Viewed from a slightly different angle, it
would appear that the legal system in our country envisages obtaining of
redressal of wrong or relief against unjust denial thereof by approaching the
court set up for the purpose and invested with power both substantive and
procedural to do justice that is to grant relief against invasion or violation
of legally protected interests which are jurisprudentially called rights. If a
person complaining of invasion or violation of his rights, is injuncted from
approaching the court set up to grant relief by an action brought by the
opposite side against whom he has a claim and which he wanted to enforce
through court, he would have first to defend the action establishing that he
has a just claim and he cannot be restrained from approaching the court to
obtain relief. A person having a legal right and complains of its violation or
infringement, can approach the court and seek relief. When such person is
injuncted from approaching the court, he has to vindicate the right and then
when injunction is vacated, he has to approach the court for relief. In other
words, he would have to go through the gamut over again: When defending against
a claim of injunction the person vindicates the claim and right to enforce the
same. If successful he does not get relief but a door to court which was bolted
in his face is opened. Why should he be exposed to multiplicity of proceedings?
In order to avoid such a situation the Legislature enacted sec. 41 (b) and
statutorily provided that an injunction cannot be granted to restrain any
person from instituting or prosecuting any proceeding in a court not
subordinate to that from which the injunction is sought. Ordinarily a
preventive relief by way of prohibitory injunction cannot be granted by a court
with a view to restraining any person from instituting or prosecuting any
proceeding and this is subject to one exception enacted in larger public
interest, namely, a superior court can injunct a person from instituting or
prosecuting an action in a subordinate court with a view to regulating the
proceeding before the subordinate courts. At any rate the court 973 is
precluded by a statutory provision from granting an injunction restraining a
person from instituting or prosecuting a proceeding in a court of coordinate
jurisdiction or superior jurisdiction. There is an unresolved controversy
whether a court can grant an injunction against a person from instituting or
prosecuting a proceeding before itself but that is not relevant in the present
circumstances and we do not propose to enlarge the area of controversy.
Mr. Sen, learned counsel for the
respondent-Bank, contended that sec. 41 (b) is not at all attracted because it
deals with perpetual injunction and the temporary or interim injunction is
regulated by the Code of Civil Procedure specially so provided in Sec. 37 of
the Act.
Expression 'injunction' in sec. 41 (b) is not
qualified by an adjective and therefore, it would comprehend both interim and
perpetual injunction. It is, however, true that Sec. 37 specifically provides
that temporary injunctions which have to continue until a specified time or
until further order of the court are regulated by the Code of Civil Procedure.
But if a dichotomy is introduced by confining Sec. 41 to perpetual injunction
only and Sec. 37 read with O. 39 of the Code of Civil Procedure being confined
to temporary injunction, an unnecessary grey area will develop. It is
indisputable that temporary injunction is granted during the pendency of the
proceeding so that while granting final relief the court is not faced with a
situation that the relief becomes infructuous or that during the pendency of
the proceeding an unfair advantage is not taken by the party in default or against
whom temporary injunction is sought.
But power to grant temporary injunction was
conferred in aid or as auxiliary to the final relief that may be granted. It
the final relief cannot be granted in terms as prayed for, temporary relief in
the same terms can hardly if ever be granted.
In The State of Orissa v. Madan Gopal
Rungta(1) a Constitution Bench of this Court clearly spelt out the contours
within which interim relief can be granted. The Court said that 'an interim
relief can be granted only in aid of, and as ancillary to, the main relief
which may be available to the party on final determination of his rights in a
suit or proceedings. If this be the purpose to achieve which power to grant
temporary relief is conferred, it is inconceivable that where the final relief
cannot be granted in the terms sought for because the statute bars granting
such a relief ipso facto the 974 temporary relief of the same nature cannot be
granted. To illustrate this point, let us take the relief which the Bank seeks
in its suit. The prayer is that the Corporation be restrained by an injunction
of the Court from presenting a winding-up petition under the Companies Act,
1956 or under the Banking Regulation Act, 1949. In other words, the Bank seeks
to restrain the Corporation by an injunction of the court from instituting a
proceeding for winding-up of the Bank. There is a clear bar in Sec. 41 (b)
against granting this relief. The Court has no jurisdiction to grant a
perpetual injunction restraining a person from instituting a proceeding in a
court not subordinate to it, as a relief, ipso facto temporary relief cannot be
granted in the same terms.
The interim relief can obviously be not
granted also because the object behind granting interim relief is to maintain
status quo ante so that the final relief can be appropriately moulded without
the party's position being altered during the pendency of the proceedings.
Mr. Sen, however, urged that even though the
Legislature has materially altered the language of the corresponding provision
in sec. 56(b) of 1877 Act while enacting Sec. 41 (b), yet the change in
language would have no impact on the view of law taken by the courts while
interpreting sec. 56(b) of the repealed Act. Proceeding along this line, Mr.
Sen urged that under sec. 56(b) of the 1877 Act even though injunction could
not be granted to stay proceedings in a court not subordinate to that from
which injunction is sought, the Court by an interpretative process spelt out a
power to grant injunction in personum against a party from instituting a
proceeding. It is true that giving a literal meaning to the provision contained
in sec. 56(b) which denied the power to the Court to grant injunction to stay
proceedings in a court not subordinate to that from which injunction is sought,
the court demarcated the unoccupied area by holding that even if the court
cannot grant injunction to stay the proceeding, it can certainly injunct a
party from instituting or prosecuting a proceeding in a court not subordinate
to that from which the injunction was sought. But it is this very
interpretation which attracted the attention of the Legislature, and it
respondent by specific change in language to nullify the interpretation so that
it becomes crystal clear that an injunction cannot be granted to restrain any
person from instituting or prosecuting any proceeding in a court not
subordinate to that from which the injunction was sought.
The 975 power to grant injunction in personum
was thus legislatively curtailed. Legislative response to court's
interpretation has to be noticed and in our opinion the alteration in the
language provides the legislative response to the judicial interpretation, and
cannot be wished away, but must be given effect.
Mr. Sen, however, urged that the Specific
Relief Act, 1877 was founded on English equity jurisprudence and therefore, it
was permissible to refer to English law on the subject wherever the Act did not
deal specifically with any topic. (See Hungerford Investment Trust Limited v.
Haridas Mundhra & Ors .)(1) It was further submitted that 1963 Act is
equally based on the experience derived from the working of the 1877 Act and
the English equity jurisprudence and therefore, where light is shed by
decisions in England, the same must illumine our path. Where provisions are in
pari materia between the English Act and the Indian Act and where local
conditions do not materially differ from the conditions in U.K., one may
keeping in view the conditions in our country look at the view taken by the
English courts and if consistent with our jurisprudence, our social conditions,
our chalked out path in which the law must move, one can profitably take help
of the decision. There would be nothing wrong in referring to the same. But
ignoring all the relevant considerations, one cannot bodily import English
decisions in our system to develop a hybrid legal system and one cannot be so
hypnotised by English decisions to overlock legislative changes introduced in
Indian Law.
With this caution, let us refer to one or two
decisions relied on by Mr. Sen to expand the sweep of the language of Sec.
41(b), so that the court can still injunct a person from instituting a
proceeding which the person is otherwise entitled to institute in a court of
coordinate or superior jurisdiction, in the teeth of express 'prohibition'
enacted in sec. 41(b).
To start with, it would be advantageous first
to notice Sec. 24(5) of the Supreme Court of Judicature Act of 1873 now
reenacted as Supreme Court of Judicature (Consolidation) Act 1925, which reads
as under :
"No case or proceeding at any time
pending in the High Court of Judicature or before the Court of Appeal shall be
restrained by prohibition or injunction." 976 It would appear at a glance
that an injunction cannot be issued to stay a pending proceeding in the High
Court of Judicature or before the Court of Appeal. The section does not refer
to initiation or institution of proceeding . On a grammatical interpretation of
the section it would be open to the court to spell out a power to grant
injunction to restrain a person from instituting a proceeding because what is
barred by the statute is injunction from prosecuting a pending proceeding.
Compare this language with Section 41(b) which specifically provides that an
injunction cannot be granted to restrain a person from instituting and prosecuting
any proceeding. The relevant provision in our country covers both the
situations while in England it covers only one situation. This clear
distinction in law has to be kept in view before applying English decisions to
which our attention was drawn.
And now to the decisions : In Cadiz
Waterworks Company v. Barnett(1), the court on being satisfied that the Company
was solvent and that the debt was bona fide disputed and that the object of the
defendant in the case was not the bona fide purpose of honestly compelling the
payment of his debt but for the purpose of making an unjust attempt to compel
them to submit to an unjust demand, restrained the respondent from presenting a
petition for winding-up the Company in the Court. In reaching this conclusion
it was observed that if a winding-up petition is presented and advertised, it
would inflict irreparable injury on the plaintiffs, while at the same moment it
could not possibly do the defendant slightest good. Let it be definitely made
clear that not a whisper was raised challenging the jurisdiction of the Court
to grant such an injunction and obviously could not be raised in view of the
provision in Supreme Court of Judicature Act of 1873 extracted hereinbefore
which did not deny to the Court the power to grant an injunction restraining a
person from instituting a proceeding. Similarly in Circle Restaurant
Castiglione Company v. Lavery(2) the court by its short order restrained
defendant Lavery from presenting any petition to wind-up the company in respect
of any debt then due or alleged to have been due to him on certain conditions.
In giving the short order, Jessel and followed the decision in Cadiz Waterworks
Company. One more decision to which our attention was drawn was the New
Travellers' Chambers Ltd. v. Messrs. Cheese and Green(2) in which the defendant
was restrained 977 by an injunction of the court from presenting a winding-up
petition. In the last two mentioned cases also, no contention was raised,
because obviously it could not be raised, that the court had no jurisdiction to
grant the injunction. In our opinion these decisions are not at all helpful for
two reasons : one that the Supreme Court of Judicature Act clearly provided
that injunction cannot be granted restraining prosecuting a pending proceeding
and the provision was silent on the question of granting an injunction
restraining instituting a proceeding and in respect of which the 1963 Act is
more specific, clear and unambiguous; and secondly, at no time in all the three
decisions, the defendant against whom the injunction was sought ever questioned
the jurisdiction of the court to issue an injunction restraining it from
presenting a winding-up petition thereby inviting the court to give a specific
ruling on the subject. We are, therefore, disposed to take no notice of these
decisions.
However, in the course of further
investigation on the point, we tumbled across Chales Forte Investments Ltd. v. Amanda.(1)
The Court of Appeal in that case unanimously held that the presentation of a
winding-up petition could be restrained by an injunction, granted under the
inherent jurisdiction of the court to stay proceedings which were vexatious or
an abuse of the process of the court, for amongst others the principal reason
that a winding up petition was not the proper remedy in the circumstances of
the particular case. In that case a minority share-holder was sought to be
restrained by an injunction of the court at the instance of the company from
presenting a winding-up petition on the ground that it was just and equitable
to wind up the company. Pennycuick, J. declined to grant the interim injunction
and the company appealed. The Court of Appeal while reversing the decision held
that in the circumstances of the case winding-up petition was not a proper
remedy and granted the injunction. The power to grant injunction in such
circumstances was not shown to be preferable to any statutory provision nor was
it pointed out that there was any statutory inhibition against granting it and
the source of power was traced to the inherent powers of the Court.
One more decision we came across and which to
some extent deviates from the consistent view taken in all the aforementioned
decisions, is the one Bryanston Finance Ltd. v. De Vries.(2) While 978 vacating
the injunction granted in broad terms, the Court of Appeal held that the
presentation of a petition in the circumstances discussed in the judgment,
would not be an abuse on the ground that it could not possibly succeed. In a
concurring judgment, Sir John Pennycuick observed as under:
"I should like to add that where a
company seeks relief of this kind the procedure by way of writ claiming an
injunction to restrain presentation of a petition, followed immediately by a
motion expressed to claim an interlocutory injunction in the same terms,
appears clumsy and inapposite. In occurs to me that it should be possible to
devise some more apt form of procedure for instance an originating motion in
the Companies Court." One more decision which we would like to refer is the
one in Stonegate Securities Ltd. v. Gregory.(1) In that case an injunction was
granted restraining a creditor from presenting a winding-up petition on the
ground that he was at best a contingent creditor and the company had sought an
injunction to restrain the creditor from presenting a petition on any other
basis than as the contingent creditor.
For the same reasons for which we could not
persuade ourselves to accept the earlier decisions as being helpful, these
decisions would not be of any assistance.
And it may be clarified that the reliance
placed by Mr. Sen on foot-note 7, 8 and 9 in Companies Act by Buckley,
Fourteenth Edition, page 524 and Palmer's Company Prededents, Part II
Seventeenth Edition at page 45 would not take his case further because these
notes are based on the aforementioned decisions.
Canvassing for the contrary view Mr. Ghosh,
learned counsel for the appellant referred to Udyog Mandir v. M/s. Contessa
Knit Wear and Ors.(2) wherein the late Vaidya, J.
set aside an interim injunction granted by
the judge of Small Causes Court restraining a defendant in a suit before him
from proceeding with the Arbitration case initiated under the Maharashtra
Co-operative Societies Act. The learned judge held that the Arbitrator
functioning under the Maharashtra Co-operative Societies Act is not a court
subordinate 979 to the Small Causes Court and in that case sec. 41 (b) would
deny jurisdiction to the court to grant an injunction because a court cannot
even do temporarily what it has been prohibited by law to do finally or
perpetually. Though it is not made clear, the learned judge was not impressed
the contention that sec. 41 (b) deals with perpetual injunction and the grant
or refusal of temporary injunction is governed by Order 39 Code of Civil
Procedure and there is well- recognised dichotomy between the two. The learned
judge appeared to be of the opinion that where the final relief cannot be
granted, temporary relief in aid can as well not be granted because that would
also be contrary to the provision of Sec. 41 (b). This view was reiterated by
the same learned judge in Krishnadevi P. Gupta and Anr. v. Banwarilal
Hanumanprasad Tibrewala and Ors.(1) He also took note of the fact that the
Chief justice of the same High Court had affirmed the view in another
proceeding before him. Therefore, as far as Bombay High Court is concerned,
there appeared to be a near unanimous view that the court had no jurisdiction
to grant interim injunction restraining a person from instituting any
proceeding in a Court not subordinate to that from which the injunction is
sought in view of the provision contained in Sec. 41 (b) of the Act.
Surprisingly, the Division Bench of the
Bombay High Court against whose decision the present appeal is heard did not
even choose to refer or to over- rule any of these decisions and proceeded to
dispose of the contention in respect of provision contained in Sec. 41 (b) in
the following terms, the meaning of which we find difficult to unravel. Says
the Court :
"Our attention was also drawn to the
provisions contained in the Specific Relief Act and in particular to sec. 41
thereof. It appears to us that in an appropriate case particularly in a suit
where cancellation of certain negotiable instruments had been sought, it would
be open to the Court to restrain further action being taken on the said
negotiable instrument particularly the action of the limited type which is
sought to be restrained in the instant case viz. winding up proceedings. The
position may be different if a total bar was sought which perhaps may not be
granted." Mr. Sen, learned counsel for the respondent-Bank however,
contended that even if the respondent-Bank is not entitled to injunction,
temporary or perpetual, under sec. 41 (b) or under 0.39 of the Code of Civil
Procedure, yet the court had inherent power to grant injunction and therefore
this Court should not interfere with the decision of the High Court at this
stage. Reliance was placed on Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth
Hiralal.(1) Raghubar Dayal, J.
speaking for the majority in terms held that
the court has inherent power to issue temporary injunction in cases which were
not covered by the provisions of 0.39 of the Code of Civil Procedure. Shah, J.
in his dissenting judgment took the contrary view and relied upon Padam Sen v.
State of U. P.(1) In view of the majority decision, it must be conceded that
the court can in appropriate cases grant temporary injunction in exercise of
its inherent power in cases not covered by 0.39 C.P.C. But while exercising
this inherent power, the court should not overlook the statutory provision
which clearly indicates that injunction to restrain initiation of proceeding
cannot be granted. Sec. 41 (b) is one such provision. And it must be remembered
that inherent power of the court cannot be invoked to nullify or stultify a
statutory provision. We have meticulously gone through the appellate judgment
and we find not the slightest reference to the invocation of the inherent power
of the court in granting the order of injunction now under challenge. Not only
that, but the court has not held that the contention of the Corporation is
frivolous or untenable or the claim is malafide. This becomes clear from the
observation of the court that the order passed by it is not founded on the
merits of the Bank's case or lack of merit in any claim which the Corporation
may have against the plaintiff-Bank and it would be open to the Corporation to
file a regular suit or summary suit against plaintiff-Bank in which appropriate
orders would be passed by the court seized of the matter as and when the
occasion arises for the same. We find it very difficult to appreciate this
approach of the Court because the Court has not rejected even at the stage of
the consideration of prima facie case or on balance of conviction that the
claim of the Corporation is frivolous or untenable or not prima facie
substantiated. On the contrary the Court leaves open to the Corporation to file
a suit if it is so advised. The High Court only restrains the Corporation from
presenting a winding-up petition. We again see no justification for this
dichotomy introduced by the Court in respect of various proceedings which were
open to the Corporation to be taken against the Bank leaving some 981 open and
some restrained by injunction. Neither in statute law nor in equity, we find
any justification for this dichotomy.
Mr. Sen, however, urged that the presentation
of winding-up petition coupled with advertisement thereof in newspaper as
required by law has certain serious consequences on the status, standing,
financial viability and stability and operational efficiency of the company.
Mr. Sen further urged that where the debt is bona fide disputed, a petition for
winding-up is not an alternative to the suit to recover the same but may be a pressure
tactic to obtain an unfair advantage and therefore, despite the provision
contained in sec. 41(b) the court must spell out a power in appropriate cases
to injunct a person from filing a winding- up petition. Most of the decisions
in England hereinabove discussed a length have been influenced by this aspect.
This approach, however, clearly overlooks various statutory safeguards against
admission, advertising and publication of winding-up petitions. Sec. 433 of the
Companies Act, 1956 sets out circumstances in which a company may be wound-up
by the Court, one such being where the company is unable to pay its debts. Sec.
434 sets out the circumstances and situations in which a company may be deemed
to be unable to pay its debts. Such a deeming fiction would arise where a
notice is served upon the company making a demand of a debt exceeding Rs. 500
then due and requiring the company to pay the same and the company has for a
period of 3 weeks neglected to pay the sum, or to secure or compound for it to
the reasonable satisfaction of the creditor. Rule 95 of the Companies (Court)
Rules, 1959 provides that the petition for winding-up a company shall be
presented in the Registry.
Then comes Rule 96 which is very material. It
provides that:
upon the filing of the petition, it shall be
posted before the Judge in Chambers for admission of the petition and fixing a
date for the hearing thereof and for the directions as to the advertisements to
be published and the persons, if any, upon whom copies of the petition are to
be served. The Judge may, if he thinks fit, direct notice to be given to the
Company before giving directions as to the advertisement of the petition. It
would appear at a glance that the petition has to come-up in Chambers before
the company Judge and not in open Court, and the Rule confers a discretionary
power on the judge not to give any directions at that stage but merely issue a
notice to the company before giving directions. If upon receipt of such notice
the company appears and satisfies the judge that the debt is bona fide disputed
or the presentation of the petition is mala fide actuated by an ulterior 982
motive, or abuse of the process of the Court certainly the judge may decline to
admit the petition and may direct the party presenting winding-up petition to
prove its claim by a suit or any other manner. It is undoubtedly true that
winding-up petition is not a recognised mode for recovery of debt and if the
company is shown to be solvent and the debt is bona fide disputed, the Court
generally is reluctant to admit the petition. Therefore, the power is conferred
on the judge before whom the petition comes-up for admission to issue
pre-admission notice to the company so that the company is not taken unaware
and may appear and point out to the judge that the petitioner is actuated by an
ulterior motive and presentation of the petition is a device to pressurise the
company to submit to an unjust claim. This is a sufficient safeguard against
mala fide action and the company would not suffer any consequences as
apprehended, and the company can as well appear and ask for stay of further
proceeding till the petitioner-creditor proves his debt by a regular suit. This
is the jurisdiction of the Company Court and it cannot be restrained from
exercising the same by some other court restraining the creditor from
presenting a winding-up petition. There is sufficient built- in safeguard in
the provisions of the Companies Act and the Rules framed thereunder which would
save the company from any adverse consequences, if a petitioner actuated by an
ulterior motive presents the petition. This was taken notice of by this Court
in National Conduits (P) Ltd. v. S. S. Arora.(1) wherein this Court set aside
the order of the High Court of Delhi was of the opinion that once a petition
for winding-up is admitted to the file, the Court is bound to fourth with
advertise the petition. This Court held that the High Court was in error in
holding that a petition for winding-up must be advertised even before the
application filed by the company for staying the proceeding for the ends of
justice or to prevent abuse of the process of the court.
This court held that the view taken by the
High Court that the court must as soon the petition is admitted, advertise the
petition is contrary to the plain terms of Rule 96 and such a view if accepted,
would make the court an instrument, in possible cases, of harassment and even
of blackmail, for once a petition is advertised, the business of the company is
bound to suffer serious loss and injury. This legal position effectively
answers the apprehension voiced by Mr. Sen and even entertained by the High
Court as also it can be said with confidence that this must be the procedure,
Pennycuick J. was in search of when in Bryanston 983 Finance Ltd. case he said
that it should be possible to devise some more apt form of procedure than to
injunct a person from initiating the proceeding. In fact, the Kerala High Court
in George v. The Athimattam Rubber Co. Ltd. Thodupuzha (2) went to the extent
of showing that when a pre- admission notice is issued to the company under
Rule 96, it would be open to the company to appear and ask for stay of
proceedings or even revoke the admission on the ground that the petitioner was
not acting bona fide in filing the petition and in the facts before the Kerala
High Court it allowed the application of the company and the winding-up
petition was dismissed. We are, therefore, not disposed to accept the
contention of Mr. Sen that the power to grant injunction restraining one from
presenting a winding-up petition must either be spelt out for the protection of
the company or as held by decisions herein above quoted kept intact and should
not be tinkered with to save the company from being harassed by persons
actuated by ill-will towards the company from presenting the petition.
Turning to the facts of this case, let it be
recalled that the learned Single Judge had declined to grant any temporary
injunction against the present appellant, the Corporation, and in our opinion
rightly. The Appellate Bench interfered with the order for the reasons which
are far from convincing and it overlooked the provision contained in sec. 41
(b) and effect thereof. Taking the most favourable view of the decision of the
Appellate Bench and assuming that the Bench had in its mind the inherent power
of the court to grant injunction despite statutory inhibition and consistent
with the view taken by the courts in England, it had then in order to do
justice between the parties first reach an affirmative finding that the
winding-up petition as and when presented by the Corporation-the creditor would
be frivolous and would constitute an abuse of the process of the court or a
device to pressurise the Bank to submit to an unjust and dishonest claim. It
must also reach an affirmative conclusion that the debtor-Bank is sufficiently
solvent to satisfy the claim as and when established. It has also to record an
affirmative finding that the Corporation-the creditor is not seeking bona fide
to present a petition for winding-up but is actuated by an ulterior motive in
presenting the petition. Decisions in New Travellers' Chambers Ltd., Chales
Forte Investments Ltd. and Bryanston Finance Ltd. (supra) would require these
findings to be recorded before an interim injunction can be granted. The
decision of the Appellate Bench is 984 conspicuously silent on these relevant
points and for this additional reason also the appeal must succeed.
The appeal is accordingly allowed and the
order of the Appellate Bench is set aside and the one made by the learned
Single Judge Modi, J. is restored with costs.
H.L.C. Appeal allowed.
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