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Judgment
The appellants have challenged the legality of the
Order dated 30-8-2016, passed by the XXVII Additional City
Civil Judge, Bangalore City (CCH-9), whereby the learned
Civil Judge has granted a temporary injunction in favour of
the respondent No. 1, Ms. Shreya Sanjeev. By the said
order, the learned Civil Judge has barred the appellants from
interfering with the management and affairs of the Alliance
Business School Company (''the Company'', for short), and of
the Alliance University (''the University'', for short). In this
order, the respondent No. 1 shall be referred to as "the
plaintiff".
Briefly the facts of the case are that Ms. Shreya
Sanjeev, the plaintiff, has filed a civil suit for declaration and
permanent injunction against the Company, the University,
and against other persons, including the appellants.
The plaintiff claims that originally, Mrs. Priyanka B.
S., the appellant No. 2., owned 51,500 shares of the
Company. However, subsequently, on 4-3-2015, she
transferred her shares to Mr. shivappa Mantur. The plaintiff
further claims that she bought the said shares from Mr.
Mantur for a consideration of Rs. 5,50,000/-. Thus, she has
acquired 20.60 % of the total shareholding of the Company.
She further claims that in its Board Meeting dated 11-2-
2016, the Board has approved the transfer of shares to her.
Hence, she is a substantial shareholder of the Company.
The plaintiff further claims that the Company, as
the Sponsoring Body of the University, runs the University.
Since the University is the sole asset of the Company, since
she has a substantial holding of the Company, therefore, she
is equally interested in the welfare of the University.
Furthermore, according to the plaintiff, after
5-3-2015 a rift has developed within the management of the
Company. For, after the shares were transferred by
Mrs. Priyanka B. S. to Mr. Shivappa Mantur on 5-3-2015,
the appellant No. 1, Mr. Madhukar Angur, and the appellant
No. 2, Mrs. Priyanka B. S. lodged a criminal complaint,
against Mrs. Shaila Chebbi Govind, respondent No.5, Mrs.
Mala Gouda, the respondent No.6, Mr. Abhay Chebbi, the
respondent No.7, and Mr. Prakash Budoor, the respondent
No.8 before the police. The appellants claimed that they were
forced to transfer the shares on 5-3-2015. Subsequently, the
Board of Management has split into two warring factions;
one faction is lead by Mr. Madhukar Angur and Mrs.
Priyanka Angur who claim that they never transferred their
shares on 5-3-2015, and have never resigned from the
directorship of the Company; the other faction is led by Mr.
Sudhir Angur, the younger brother of Mr. Madhukar Angur,
and by Mrs. Shaila Chabbi Govind, Mrs. Mala Gouda, and
Mr. Abhay Chebbi, who claim that Mr. Madhukar Angur
and Mrs. Priyanka B. S. have not only transferred their
shares, but have also resigned from the Board of
Management of the Company.
Furthermore, according to the Plaintiff,
Mr. Madhukar Angur and his faction is constantly,
interfering with the management of the Company and with
the daily affairs of the University. Hence, the suit for
declaration and permanent injunction against the Company,
the University, and against the appellants and others.
The appellants, as the defendant Nos. 8 and 9, filed
their written statements; they denied the averments made in
the plaint. According to them, the plaintiff is falsely claiming
to be a substantial shareholder of the Company. For Mrs.
Priyanka B. S. had never transferred her shares to Mr.
Shivappa Mantur. Moreover, even if it were admitted for the
sake of arguments. that Mrs. Priyanka had transferred her
shares to Mr. Mantur, even then all the formalities for
transfer of shares from Mr. Shivappa Mantur to the plaintiff
were yet to be completed. Therefore, the plaintiff was
unjustified in claiming to be the substantial shareholder of
the Company. Thus, according to them, the plaintiff has no
locus standi to approach the learned Civil Court. Moreover,
the plaintiff lacks the locus standi, the suit is not even
maintainable before the court. The other averments were
equally and emphatically denied.
Along with the plaint, the plaintiff also filed an
application for temporary injunction under Order XXXIX,
Rules 1 and 2 of the CPC. The appellants filed their
objections to the same. However, by order dated 30-8-2016,
the learned Civil Judge has granted the temporary injunction
in favour of the plaintiff in the terms mentioned hereinabove.
Hence, the present appeal before this Court.
Mr. Laxminarayana, the learned Senior Counsel for
the appellants, has raised the following contentions before
this court: firstly, relying on the case of Maria Margarida
Sequeira Fernandes and Others v. Erasmo Jack De
Sequeira (Dead) through LR''s. [ (2012) 5 SCC 370] the
learned Senior Counsel has pleaded that the learned Civil
Judge is supposed to have carefully examined the pleadings
of the parties. However, the learned Civil Judge has failed to
do so. Thus, the learned Civil Judge has fallen short of
performing his judicial duty.
Secondly, the appellants had specifically raised the
issues with regard to the locus standi of the plaintiff, and
with regard to the maintainability of the suit. Although the
learned Civil Judge has noticed the said contentions in the
impugned order, but the learned Civil Judge has ignored the
said pleas. Thus, a grave injustice has been caused to the
appellants.
Thirdly, the appellants had pleaded that Section 56 of
the Companies Act prescribes a complete procedure for
transfer of shares. Even if, for the sake of arguments, it is
accepted that Mr. Shivappa Mantur had transferred his
shares to the plaintiff, even then the procedure for
transferring of shares was not completed. For, according to
Section 56 of the Companies Act, a person buying the shares
has to pay the requisite stamp duty, and has to be registered
as a shareholder in the register maintained by the Company.
However, so far, there is no evidence to show that the
plaintiff has paid the requisite stamp duty, and has been
registered, as a shareholder, in the Company''s register. Till
the said process is complete, the plaintiff cannot claim to be
a shareholder of the Company. Thus, the plaintiff continues
to be a stranger to the Company.
Fourthly, the learned Civil Judge has not examined
the resolution dated 11-2-2016 passed by the Board of
Directors of the Company. The said resolution merely directs
the plaintiff to take the necessary steps for paying the
requisite stamp duty, and that the matter with regard to
registering her as a shareholder in the Company''s register
would be taken up on a future date. According to the learned
Senior Counsel, the resolution dated 11-2-2016 clearly
proves that neither the requisite stamp duty has been paid,
nor the plaintiff has been taken on the register of the
Company. Thus, she is not justified in claiming herself to be
"a substantial shareholder" of the Company.
Fifthly, since the learned Civil Judge has not closely
examined the pleadings and the documents, specially the
resolution dated 11-2-2016, the learned Civil Judge has
erred in concluding that the plaintiff is "a shareholder of the
Company".
Sixthly, since the plaintiff is not a shareholder, she
has no locus standi to file a suit concerning the working of
the Company, or of the affairs of the University. After all, she
is an alien to both the entities. Thus, the suit is not even
maintainable. But the learned Civil Judge has ignored the
issues of locus standi, and of maintainability. Hence, the
learned Civil Judge has grossly erred in granting the
temporary injunction in favour of the plaintiff.
Seventhly, the issue of maintainability of the suit was
essential for deciding the existence of prima facie case in
favour of the plaintiff. However, as the said issue has not
even been touched by the learned Civil Judge, the learned
Civil Judge has erred in concluding that the plaintiff has a
prima facie case in her favour.
Eighthly, since the plaintiff is a stranger both to the
Company and to the University, there is no cause of action
that she can plead before the learned trial court. Moreover,
the plaintiff is not entitled to the main reliefs prayed by her
in the plaint. Therefore, the question of granting the
temporary injunction in favour of the plaintiff would not even
arise. Yet, the learned Civil Judge has granted the temporary
injunction. Hence, the learned Civil Judge has not only
grossly erred, but has also caused a grave injustice to the
appellants.
Ninthly, in order to buttress his plea with regard to the
non-maintainability of the suit, the learned Senior Counsel
has elaborately argued that since the plaintiff has not been
registered on the Company''s register, since there was a
delay, in registering her as a shareholder, the plaintiff could
have filed either a suit for specific performance against
Mr. Shivappa Mantur, or could have approached the
Company Law Board for rectification of the Company
Register. But, in either case, the present suit for declaration
and permanent injunction is neither maintainable against
the University or Company, nor certainly against the
appellants. Therefore, the impugned order deserves to be set
aside by this Court.
On the other hand, Mr. Sajan Poovayya, the
learned counsel for the respondents, has raised the following
counter-contentions:-
Firstly, once a person has invested money in a
Company, by buying its shares, the person has a legitimate
interest both in the smooth functioning of the Company, and
in the assets of the Company. Admittedly, the plaintiff had
invested Rs.5,50,000/- while buying the shares from
Mr. Shivappa Mantur. Undoubtedly, she was holding
20.60% of the total share holdings subscribed/held by all
the share holders of the Company. Therefore, obviously, she
has deep rooted interest in the functioning of both the
Company, and its sole asset, namely the University.
Secondly, once all the formalities for transfer of shares
are completed, then under Section 56 of the Companies Act,
the Company has no other option, but to register the
shareholder as a member of the Company. Therefore, the
Company has no option but to register the plaintiff as its
shareholder.
Thirdly, while relying on the case M/s. Howrah
Trading Co. Ltd., v. Commissioner of Income-Tax,
Central, Calcutta [ AIR 1959 SC 775] and on the case of
Life Insurance Corporation of India v. Escorts Limited
and Others [ (1986) 1 SCC 264] the learned Senior
Counsel has pleaded that once the shares have been
transferred from the transferor to the transferee, even if the
shareholder has not been registered with the Company, even
then, the transferee has certain equitable rights in his/her
favour. Therefore, even if the plaintiff has not been
registered with the Company, for the sake of argument, even
then, she has certain equitable rights in her favour.
Therefore, she is entitled to file a suit for declaration and for
permanent injunction against the Company, the University,
and the appellants who are needlessly interfering with the
functioning of the Company and the University.
Fourthly, the plaintiff has sufficient cause of action for
filing the suit. Relying on the cases of Ponnala
Lakshmmaiah v. Kommuri Pratap Reddy and Others
[ (2012) 7 SCC 788] and Raptakos Brett & Co. Ltd. v.
Ganesh Property [ (1998) 7 SCC 184] the learned counsel
has pleaded that the pleadings will have to be taken as a
whole in order to see if a cause of action arises or not.
A holistic reading of the pleading would reveal that the
plaintiff had purchased the shares, and the Board had
resolved that the shares were legitimately transferred.
However, Mr. Madhukar Angur, and Mrs. Priyanka B.S.,
were questioning the legality of the said transfer. Thus, a
cloud of suspicion was placed on the validity of the transfer
of shares. Moreover, as the appellants were interfering with
the functioning of the Company, and the University, and
since the plaintiff has vital interests in the smooth
functioning of both the entities, she has ample cause of
action before the learned trial court.
Lastly, having considered the relevant documents, the
learned Civil Judge was justified in concluding that the
plaintiff has a prima-facie case and has balance of
convenience in her favour. And in case, temporary
injunction were not granted to the plaintiff, an irreparable
loss would be caused to her. Since, the three essential
ingredients for grant of an injunction were fully established,
the learned Civil Judge has validly and legally granted the
temporary injunction. Thus, the learned Senior Counsel has
supported the impugned order.
Heard the learned Senior Counsel for the parties,
perused the impugned order, and considered the case law
cited at the Bar.
Needless to say, injunction springs from equity.
Being an equitable relief, the court must not only be alive to
the requirements of law, but also should be aware of the
principles of equity while granting an interim injunction.
In the case of Lakshminarasimhiah and Others v.
Yalakki Gowda [AIR 1965 Mys 310] it was observed as
under:
The extraordinary character of the Injunctive remedy and the danger that its use in improper cases may result in serious loss or inconvenience to an innocent party require that the power to issue it should not be lightly indulged in, but should be exercised sparingly and cautiously only after thoughtful deliberation, and with a full conviction on the part of the court of its urgent necessity. In other words, the relief should be awarded only in clear cases, reasonably free from doubt, and, when necessary, to prevent great and irreparable injury. The Court should therefore, be guided by the fact that the burden of proof rests upon the complainant to establish the material allegations entitling him to relief.
Undoubtedly, while considering the grant or
refusal of a temporary injunction, the court needs to
examine three factors, namely the existence of a prima facie
case, the balance of convenience, and the irreparable loss. In
turn, while considering the existence of prima facie case, the
court should examine the question of locus standi, the issue
of maintainability of the suit, the existence of a cause of
action, and the existence of a triable case.
Of course, in the case of Wander Ltd. v Antox
India [1990 (Supp) SCC 727] ), the Hon''ble Supreme Court
has defined the limits of the appellate court while dealing
with exercise of discretionary power either by the
subordinate Judge or by a Single Judge. The Apex Court
observed as under:
In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunction. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a
conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court''s exercise of discretion.
Thus, the ultimate issue before this court is
whether the learned trial court has exercised its discretion
reasonably or arbitrarily, judiciously or capriciously, in
accordance with settled principles of law regulating grant of
interlocutory injunction or de hors the said principles or
not? But before this ultimate issue can be decided, this court
would have to consider whether the learned trial court has
performed its judicial duty while dealing with the application
of temporary injunction or not?
In the case of Maria Margarida Sequeira
Fernandes and Others v. Erasmko Jack De Sequeira
(Dead) through LR''s. [ (2012) 5 SCC 370] the Apex Court
has opined as under:
A Judge in the Indian system has to be regarded as failing to exercise its jurisdiction and thereby discharging its judicial duty, if in the guise of remaining neutral, he opts to remain passive to the proceedings before him. He has to always keep in mind that ''every trial is a voyage of discovery in which truth is the quest''. In order to bring on record the relevant fact, he has to play an active role; no doubt within the bounds of the statutorily defined procedural law.
The Hon''ble Supreme Court further held as follows:
In a suit for mandatory injunction, then it is the bounden duty and obligation of the court to critically examine the pleadings and documents and pass an order of injunction while taking pragmatic realities.in (sic) consideration. The Court''s primary concern has to be to do substantial justice.
While deciding the present case, this court would have
to bear in mind the aforementioned principles.
Section 56 of the Companies Act deals with
transfer and transmission of securities. The relevant portion
of Section 56 of the Companies Act is as under:
S. 56. Transfer and transmission of Securities: (1) - A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities.
Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.
(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
A bare perusal of the above provision clearly reveals
that a Company is prevented from registering transfer of
shares until and unless the conditions mentioned therein are
fulfilled. According to sub-section 1, the instrument of
transfer should be in proper form as prescribed by the Rules;
it must be duly stamped, dated and executed by or on behalf
of the transferor, and the transferee; it should be delivered to
the Company by the transferor within a period of sixty days
from the date of execution; it must be accompanied with the
certificates relating to the shares; and if no such certificate is
in existence, then it must also be accompanied with letter of
allotment of shares.
Secondly, according to sub-section 2, sub-section 1
does not curtail the power of the company to register shares.
Thus, even if the conditions of sub-section 1 were fulfilled,
even then, the Company shall have the discretionary power
to register, or not to register the share holder. It is in the
light of Section 56 (2) of the Companies Act, that it has been
observed that registration of a shareholder by a Company
shall be subject to Articles of Association of the Company.
Therefore, in order to see if the plaintiff has been
registered as a shareholder with the Company or not, it is
imperative to consider the provision with regard to
registration of a shareholder by the Company as contained in
its Articles of Association, and to see if the requirements of
Section 56 of the Companies Act have been fulfilled or not.
According to the Articles of Association of the
Company, the Company has the absolute discretionary
power to register, or not to register a shareholder. Therefore,
Mr. Sajan Poovayya, the learned Senior Counsel, is
unjustified in claiming that merely because the requirements
of Section 56 (1) of the Companies Act has been fulfilled, the
Company is legally bound to register the shareholder. For,
such an argument is both against the Articles of Association
of the Company, and against Section 56 (2) of the
Companies Act.
The resolution dated 11.02.2016, dealing with the
plaintiff ''s transfer of shares reads as under:
" Transfer of Shares
The Chairman informed the Board that the Company has received Share Transfer application from the existing shareholder, namely Shri.Shivappa Mantur requesting the company to complete the formalities of Share Transfer to Ms. Shreya Sanjeev for a total of 51500 shares (Fifty One thousand Five Hundred); Shares bearing Distinctive Nos. From: A178501 To: A230000 (Both inclusive). The Chairman also told the
Board that Shri. Shivappa Mantur confirms that he had received the full consideration for the Transfer of Shares from the Transferee, namely Ms. Shreya Sanjeev.
The Chairman placed the requisite documents for approval of the Board and thereafter it was unanimously:
RESOLVED THAT the Board be and hereby accorded to complete all formalities with respect to the transfer of shares from Shri. Shivappa Mantur to Ms. Shreya Sanjeev after receiving duly executed and duty stamped share transfer application in the next Board Meeting. "
Mr. Abhay G. Chebbi
Director- Alliance Business School
DIN : 03193689 "
(Emphasis Added)
A bare perusal of the resolution clearly reveals
that the Board has merely "accorded (accorded what is
unclear) to complete all the formalities with respect to the
transfer of shares, after receiving duly executed, and duly
stamped share transfer application. (Further), the case
would be considered in the next Board Meeting." Thus, it is
amply clear that till 11.02.2016, all the formalities with
regard to the transfer of shares were not completed.
Moreover, the instrument of transfer was not duly stamped.
Thus, the requirements of Section 56 (1) of the Companies
Act were not even fulfilled as the transfer application was
neither duly executed, nor duly stamped. Most importantly,
the resolution did not grant the permission to register the
transfer of shares on the Company register. In fact, the
resolution merely deferred the consideration of the case to a
future date. Hence, the plaintiff has not even been registered
as a shareholder on the Company''s register. Therefore, the
conclusion drawn by the learned Civil Judge that the
plaintiff is a shareholder of the Company is clearly belied by
the resolution dated 11.02.2016, and by the requirement of
law as contained in Section 56 (1) of the Companies Act.
A bare perusal of the plaint clearly reveals that in
Para 2 of the plaint, the plaintiff had clearly pointed out that
"the transfer of share has been done in her favour by the
transferor Mr. Shivappa Mantoor, the defendant No.3 herein,
in the Board Meeting of the defendant Company held on
11.02.2016 pending the completion of formalities of
registration of share transfer with the Sub-registrar, endorsing
the share certificates in the next Board Meeting of the first
defendant Company ." (emphasis added). Thus, even the
plaintiff admits that all the formalities for completing the
transfer of shares were not completed by 11.02.2016.
Furthermore, even the appellants had raised the contention
before the learned Civil Judge that the plaintiff was not the
shareholder of the Company, and the suit was not
maintainable. But, notwithstanding the said pleas, the
learned Civil Judge has failed to examine the plaint and to
consider the resolution dated 11.02.2016 filed by the
plaintiff. Thus, the learned Civil Judge has failed to perform
his judicial duty. Hence, the learned Civil Judge has erred
in concluding that the plaintiff is a shareholder of the
Company.
Mr. Sajan Poovayya has relied on the cases of
M/s. Howrah Trading Co. Ltd. (supra) and Life Insurance
Corporation of India (supra) to vehemently argue that even
if a transferee of shares has not been registered as a
shareholder in the Company''s Register, even then such a
transferee of shares has equitable rights in his/her favour.
Though the plea is partly correct, but it fails to support the
case of the plaintiff. For, in the case of M/s. Howrah
Trading Co. Ltd. (supra) the Hon''ble Supreme Court has
observed as under:
But transfer of shares are common and they take place either by a full executed document such as was contemplated by Regulation 18 of Table A of the Indian Companies Act, 1913, or by what are known as "blank transfers''''. In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share script to the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of a ''blank transfer'''', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and failed to pay it to him.
During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign
documents in relation to the issuance of fresh capital, call for emergent meetings and interalia, also compel the transferor to pay such dividend as he may have received. See. E.D. Sassoon and Co., Ltd. v. K.A. Patch, 45 Bom.LR 46 approved in Mathalone v. Bombay Life Assurance Co.Ltd., 1954 SCRF 117; (AIR 1953 SC 385). But these rights though they no doubt, clothe the transferee with an equitable ownership, are not sufficient to make the transferee a full owner, since the legal interest vis-à-vis the company still outstands in the transferor; so much so, that the company credits the dividends only to the transferor and also calls upon him to make payment of any unpaid capital which may be needed.
Thus, the equities exist only between the
transferor and the transferee, and not between the transferee
and the Company. Most importantly, since the equities do
not exist between the transferee and the Company, the
transferee, whose name is not on the company''s register,
cannot file a claim against the Company.
Similar view was also expressed by the Hon''ble
Supreme Court in the case of Life Insurance Corporation
of India (supra). In the said case, the Apex Court opined
that " while a transfer may be effective between transferor and
transferee from the date of transfer, the transfer is truly
complete and the transferee becomes a share holder in the
true and full sense of the term, with all the rights of a
shareholder, only when the transfer is registered in the
Company''s Register. A transfer effective between the
transferor and the transferee is not effective as against the
Company and persons without notice of the transfer until the
transfer is registered in the Company''s Register. "
Therefore, till the plaintiff''s transfer of shares is
registered in the Company''s Register, she merely has certain
equitable rights against the transferor, namely Mr. Shivappa
Mantoor. But she does not have any right against the
Company. Thus, she cannot file any claim or suit against
the Company. Since, she is alien to the Company, prior to
her transfer of shares being registered by the Company, the
plaintiff cannot claim that she has a right to question the
functioning of the Company, or the right to question the
working of the University, which is the asset of the
Company. For, during the interim period between the
transfer of shares, and the shareholder being registered with
the Company, only a transfusion has begun, but the
transplantation is not complete. Therefore, Mr.
Lakshminarayana, the learned Senior Counsel, is well
justified in claiming that since the plaintiff has not been
registered as a shareholder of the Company, as the complete
formalities still need to be finished, therefore, the suit is not
even maintainable in the eyes of the law.
Mr. Sajan Poovayya, the learned Senior Counsel is
unjustified in claiming that merely because a person has
invested in the Company, by buying its shares, ipso-facto the
person gains the right to question the functioning of the
Company, and the right to protect its assets. The said plea
is belied by the principles laid down by the Hon''ble Supreme
Court in the case of case M/s. Howrah Trading Co. Ltd.,
(supra), and in the case of Life Insurance Corporation of
India (supra).
The plaintiff has sought the following reliefs from
the learned Trial Court:- firstly, to declare "the rights of
defendant Nos. 3 to 7 as the share holders/Directors and
present Board of Management of the Defendant No.1
Company as valid. Secondly, "that defendant No.8 to 12
have no manner of interest in the first defendant Company
with effect from 04.03.2015, consequent to the transfer of
shares and resignation tendered by them." Thirdly, to
declare the acquisition of share interest from the transferor
as has been approved in the Board Meeting dated
11.02.2016 is legal and valid. Fourthly, to restrain
defendant Nos.8 to 12 or anyone on their behalf from
interfering with the affairs and management of the first
defendant Company. Lastly, to issue a permanent
prohibitory injunction against defendant Nos. 4 to 7 from
acting in any manner detrimental to the rights and interest
of the plaintiff.
As discussed and observed above, since the
plaintiff is a stranger to the Company the main relief prayed
by her cannot even be granted. Even the relief sought for
declaring transfer of shares as valid cannot be granted until
and unless the formalities for transfer of shares are
completed in accordance with Section 56 (1) of the
Companies Act, and until and unless, the Company abuses
its discretionary power and denies the right to be registered
as a shareholder. There is not an iota of evidence to show
that the requirements of Section 56 (1) of the Companies Act
have been fulfilled by the plaintiff. Thus, prima-facie the
trial court would not be in a position to grant the main relief
prayed by the plaintiff. Hence, the learned trial court has
erred in granting the temporary injunction in favour of the
plaintiff.
Lastly, since the plaintiff is alien to the
functioning of the Company and to its assets, the plaintiff
has no prima-facie case in her favour qua the management
of the Company and qua its assets. Since the suit is prima-
facie not maintainable against the Company, the University
and against the appellants, the learned Civil Judge is
unjustified in concluding that the plaintiff has a prima-facie
case in her favour. Moreover, she does not have any balance
of convenience in her favour. Furthermore, since the
formalities for transfer of shares are still incomplete, the
question of irreparable loss to the plaintiff does not even
arise. Hence, Mr. Lakshminarayan, the learned Senior
Counsel is justified in claiming that the three essential
ingredients for grant of injunction are not present in the
instant case.
Undoubtedly, the power to grant injunction
should not be invoked as a knee jerk reaction. The power
has to be exercised after due deliberation, care and caution.
But in the present case, it seems that the learned Civil
Judge was overwhelmed by the documentary evidence
produced by the plaintiff to support her case. Therefore,
learned Civil Judge failed to critically examine the pleadings
of the parties, and to objectively deal with the contentions
raised by the parties. Thus, the learned Civil Judge has
failed to perform his essential judicial duties. Swayed by the
documentary evidence produced by the plaintiff, the learned
Civil Judge has forgotten to ask the fundamental questions
as to what is the locus of the plaintiff, and if the suit is even
maintainable or not? Surprisingly, despite the appellant
having raised these two issues, the learned Civil Judge has
brushed them under the carpet, and conveniently ignored
the pleas. Thus, the approach of the learned Civil Judge is
not in accordance with law. Moreover, since the findings are
belied both by the documentary evidence and by the
requirements of law, the conclusions drawn are arbitrary,
unreasonable and perverse.
Since this court is of prima facie opinion that
the plaintiff has no locus standi, that the suit is not
maintainable against the Company, the University, and
against the appellants and others, therefore, this court need
not go into the other pleas raised by Mr. Laxminarayana, the
learned Senior Counsel: the plaintiff should have filed a suit
for specific relief against Mr. Shivappa Mantur, or that the
plaintiff should have approached the Company Law Board
for rectification of the Company''s register.
But by way of abundant caution, it is hereby
clarified that the learned trial court shall not be influenced
by any observations made by this court while finally deciding
the suit. For, naturally the suit has to be decided on the
basis of evidence produced by both the sides, and on the
basis of independent, and objective assessment of the
evidence so produced.
For the reasons stated above, the order dated
30.08.2016 is set aside. Consequently, the appeal is hereby
allowed.