Axis Finance Ltd. vs Sunil Kedia And Anr.

The petitioner seeks a restraint on the respondents from transferring or alienating their shares in a project â€" “Modello Highs†â€" or from

withdrawing their share of profit from Modello Ventures LLP; which is the developer of the project (Modello Highs) in Kolkata.

The basis of the petitioner’s claim is an agreement dated 17th January, 2018 for extending a loan of Rs.13 crores to the respondents. A mortgage

was created on 18th January, 2018 on an immovable property situated at 15B, Ballygunge Park, Kolkata as security for the loan. The agreement

provided for the payment obligations of the respondents and entitled the petitioner to recall the facility.

The undisputed fact is that the respondents failed to honour their payment obligations and the petitioner exercised its call/put option which required the

respondents to repay the entire facility within 19th January, 2020 as would appear from a letter dated 10th December, 2019. A communication was

issued by the petitioner on 22nd January, 2019 notifying a revision in the interest rate and reiterating the sequential rundown of the facility granted to

the respondents. A Letter of Demand dated 10th February, 2020 was issued by the petitioner by which the term loan facility of Rs.3 crores was

recalled.

Learned counsel appearing for the petitioner seeks to reinforce the claim on the basis of two admissions on the part of the respondents. The first being

the letter issued on 22nd January, 2019 resetting the interest rate which was signed by the respondent no.1 and a restructuring plan for the repayment

proposed by the respondents by way of a letter dated 27th March, 2021. According to counsel, the restructuring required the respondents to pay at

least Rs.2 crores to the petitioner which was not done. Counsel submits that the respondents have further filed a collusive suit in the Alipore Court in

respect of the mortgaged property for encumbering the said property. It is submitted that the suit has been filed by the mother of the first respondent

claiming to be a lessee of the property in question. The claim of the first respondent’s mother in the suit is that she is being ousted from the

property by her son. Counsel submits that the petitioner has invoked the provisions of the Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (SARFAESI Act) in respect of the mortgaged property and is awaiting resolution of the said proceedings.

Learned counsel appearing for the respondents resists orders being passed on the application on the ground that the petitioner has not made out any

case under Order XXXIX Rule 1 of The Code of Civil Procedure, 1908 for an order of temporary injunction.

Counsel submits that the first respondent is only a 25% shareholder of Modello Ventures LLP. Second, the suit filed in the Alipore Court cannot

impair the rights of the petitioner as, according to the petitioner, it is a “meritless suitâ€. Counsel submits that the petition does not disclose any

facts which would warrant an order under Order XXXIX Rule 1(b) of the CPC.

The issue which arises for consideration is the threshold requirement for obtaining an injunction under Order XXXIX Rule 1(b) of The Code of Civil

Procedure. The case sought to be made out by the petitioner of the respondents threatening to deal with their properties is essentially premised on the

aforesaid provision. Paragraph 16 of the application states that the respondents are secreting away and removing their movable assets and properties

to frustrate the suit. There is also an averment to the effect of the respondents diverting huge sums of money to defeat the claims of the petitioner.

The case run on the respondents attempting to dispose of their properties is precisely what is contemplated under Order XXXIX Rule 1(b) which is set

out below;

“Order XXXIX. 1. Cases in which temporary injunction may be granted.â€" Where in any suit it is proved by affidavit or otherwiseâ€

(a)..................

(b) that the defendant threatens, or intends, to remove or dispose of his property with a view to defrauding his creditors,

(c) ...................â€​

Order XXXIX Rule 1 requires the three conditions enumerated therein to be proved by the party who seeks a temporary injunction in relation to the

acts provided in sub-rules (a), (b) and (c). The objective of the court is to prevent the property in dispute in a suit from being wasted, damaged or the

plaintiff being dispossessed of the said property or being prejudiced by any act done by the defendant to the property in dispute in the suit pending trial.

Under Order XXXIX Rule 1(b) the injury contemplated arises from the defendant threatening or intending to or actually removing or disposing of the

defendant’s property for defrauding the plaintiff. The shift in perspective is the use of the expression “his†under Order XXXIX Rule 1(b) in

comparison to “property in dispute in a suit†under Order XXXIX Rules 1 (a) and (c). A weightier onus is hence placed on the plaintiff to prove

the circumstances warranting orders under either of these two provisions. The higher order of proof required can be explained thus; injuncting a

property in dispute in a suit where both parties would have the opportunity of determining their rights in the course of trial has less severe implications

compared to a defendant being injuncted from removing his personal property â€" which is not in dispute â€" from the jurisdiction of the court. Orders

of this nature are therefore generally passed only after further proof on affidavits. The caveat to this is where the plaintiff comes forward with

irrefutable proof that the defendant is indeed in the process of fleeing from court processes by removing his property for reducing the plaintiff’s

claim to a paper decree. Simply put, there must be a sense of a real and imminent risk to the plaintiff’s claim being irrevocably diminished if the

Court waits for further proof of the projected damage. The credibility of the perceived threat must hence be assessed before the court proceeds to

grant a temporary injunction in the nature of an attachment to protect the plaintiff.

In the present case there is no such evidence of the respondents doing any of the acts contemplated under Order XXXIX Rule 1 (b) of the CPC. The

suit filed by the mother of the respondent no. 1 in respect of the mortgaged property has been described as a meritless suit in the words of the

petitioner. The petitioner has the option of contesting the suit. Proceedings under the SARFAESI Act in respect of the mortgaged property also has

the potential of affording relief to the petitioner at an appropriate stage in the near future. The two communications from the respondents by which the

respondents have acknowledged their liability to repay the term loan and the proposal for restructuring the said loan cannot be equated with the

complete denial of the money received by the respondent in Prabha Surana vs Jaideep Halwasiya, an unreported decision of this Court in CS 52 of

2021. In Harleen Jairath vs Prabha Surana, (2019) 4 CHN 412, a Division Bench of this court noted the documents disclosed in relation to third party

interest being actually created by the defendants in respect of the property in question despite the huge amount of money which was outstanding from

the defendants. The decision of the Court to protect the interest of the plaintiff was based on the defendants encumbering their assets soon after

receiving the notice of demand from the plaintiffs, as noted in paragraphs 43 and 54 of the Report. Both Kohinoor Steel Private Ltd. Vs Pravesh

Chandra Kapoor; AIR 2011 Cal 29, and Sunil Kakrania & Ors vs M/s. Saltee Infrastructure Ltd.; AIR 2009 Cal 260, Division Bench decisions of this

Court, noted the absence of any averment in the plaint or the application for injunction of the defendant threatening to remove his property and held

that a vague allegation that the defendant is unable to pay its debts to the creditors is not sufficient. Sunil Kakrania reinforced the strict requirements

of Order XXXIX Rule 1(b) in a suit for a money claim. It was further clarified that a Court, in exercise of its inherent powers, cannot pass orders

under Orders XXXVIII and XXXIX if the substantive right of a litigant would be affected by the order. In Abheya Realtors Pvt. Ltd. vs. SSIPL Retail

Ltd.; 2010 (2) CHN 203, the Court pointed to the downside of a plaintiff having to wait for a decree by which time the claim may become irrelevant.

This decision would be relevant to the present case if the petitioner was asked to wait till trial and beyond.

The other factors which would make this court step back instead of rushing in to pass an order of injunction at this stage is the restricted shareholding

of the respondent no. 1 in Modello Ventures LLP which would not be conducive to passing an order of injunction as prayed for. The respondents must

also be given a chance to respond to the allegation of a collusive suit being filed to defeat the claim of the petitioner. Moreover, the respondents’

proposal of restructuring the loan facility was given in March of this year which unequivocally expresses the respondents’ intention to repay the

loan. The respondents’ conduct does not warrant pressing the panic button and passing an order of injunction at this stage without affidavits first

being called for.

This court is disinclined to pass any order of injunction for the above reasons, without first being satisfied that the petitioner has made out a prima-

facie case for a temporary injunction and that the balance of convenience and the prospect of irreparable injury to the petitioner would call for such an

order.

The respondents shall file their affidavit in opposition within two weeks, reply within a week thereafter.

List this matter after three weeks.