Phooltas Harsco Rail Solutions Private Limited vs Auto Components Private Limited and Others

Harish Tandon, J.—1. On the returnable date the defendants after notice appear and raise a vehement objections to continue with the ex-parte ad interim order of injunction on various grounds including suppression of material facts. Normally the Court should not pass an ex-parte injunction without giving notice of application to the other side. There is an exception to the aforesaid rule evident from Order 39 Rule 3 of the Code of Civil Procedure providing recording of reasons before passing such order if the object of granting the injunction would be defeated by delay. The recording of reason is not a mere formality but imperative. It is mandatory on the part of the Court to record reasons as the avoidance thereof may entail the dismissal of the said order. The order satisfying the mandatory requirement may not ipso-facto be extended on the returnable date after the defendants are noticed and the court can refuse to extend the ad interim order on apparent suppression of facts by the plaintiff. The role of the court in recording reasons while granting ex-parte ad interim order of injunction is emphasized by the Supreme Court in case of Shiv Kumar Chadha v. Municipal Corporation Of Delhi and Ors. Reported in , 1993(3) SCC 161 in these words:--

"32. Power to grant injunction is an extraordinary power vested in the court to be exercised taking into consideration the facts and circumstances of a particular case. The courts have to be more cautious when the said power is being exercised without notice or hearing the party who is to be affected by the order so passed. That is why Rule 3 of Order 39 of the Code requires that in all cases the court shall, before grant of an injunction, direct notice of the application to be given to the opposite party, except where it appears that object of granting injunction itself would be defeated by delay. By the Civil Procedure Code (Amendment) Act, 1976, a proviso has been added to the said rule saying that "where it is proposed to grant an injunction without giving notice of the application to the opposite party, the court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay...."

The imperative nature of the proviso has to be judged in the context of Rule 3 of Order 39 of the Code. Before the proviso aforesaid was introduced, Rule 3 said "the court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite-party.". the proviso was introduced to provide a condition, where court proposes to grant an injunction without giving notice of the application to the opposite-party, being of the opinion that the object of granting injunction itself shall be defeated by delay. The condition so introduced is that the court "shall record the reasons" why an ex parte order of injunction was being passed in the facts and circumstances of a particular case. In this background, the requirement for recording the reasons for grant of ex parte injunction, cannot be held to be a mere formality. This requirement is consistent with the principle, that a party to a suit, who is being restrained from exercising a right which such party claims to exercise either under a statute or under the common law, must be informed why instead of following the requirement of Rule 3, the procedure prescribed under the proviso has been followed. The party which invokes the jurisdiction of the court for grant of an order of restraint against a party, without affording an opportunity to him of being heard, must satisfy the court about the gravity of the situation and court has to consider briefly these factors in the ex parte order. We are quite conscious of the fact that there are other statues which contain similar provisions requiring the court or the authority concerned to record reasons before exercising power vested in them. In respect of some of such provisions it has been held that they are required to be complied with but non-compliance therewith will not vitiate the order so passed. But same cannot be said in respect of the proviso to Rule 3 of Order 39. The Parliament has prescribed a particular procedure for passing of an order of injunction without notice to the other side, under exceptional circumstances. Such ex parte orders have far-reaching effect, as such a condition has been imposed that court must record reasons before passing such order. If it is held that the compliance with the proviso aforesaid is optional and not obligatory, then the introduction of the proviso by the Parliament shall be a futile exercise and that part of Rule 3 will be a surplusage for all practical purposes. Proviso to Rule 3 of Order 39 of the Code, attracts the principle, that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor and Nazir Ahmed v. Emperor. This Court has also expressed the same view in respect of procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramchandra Keshav Adke v. Govind Joti Chavare."

The requirement of providing reasons while granting the ex-parte injunction was further noticed by the Supreme Court in case of Morgan Stanley Mutual Fund v. Kartick Das reported in , 1994 (4) SCC 225. Not only the ratio laid down in Shiv Kumar Chadha (supra) was accepted and approved but the principles laid down therein has further been advanced in succinctly observing

"36. As a principle, ex parte injunction could be granted only under exceptional circumstances. The factors which should weigh with the court in the grant of ex parte injunction are--

(a) whether irreparable or serious mischief will ensue to the plaintiff;

(b) whether the refusal of ex parte injunction would involve greater injustice than the grant of it would involve;

(c) the court will also consider the time at which the plaintiff first had notice of the act complained so that the making of improper order against a party in his absence is prevented;

(d) the court will consider whether the plaintiff had acquiesced for sometime and in such circumstances it will not grant ex parte injunction;

(e) the court would expect a party applying for ex parte injunction to show utmost good faith in making the application.

(f) even if granted, the ex parte injunction would be for a limited period of time.

(g) General principles like prima facie case, balance of convenience and irreparable loss would also be considered by the court.

In United Commercial Bank v. Bank of India, this Court observed: (SCC pp. 787-88, paras 52-53)

"No injunction could be granted under Order 39, Rules 1 and 2 of the Code unless the plaintiffs establish that they had a prima facie case, meaning thereby that there was a bona fide contention between the parties or a serious question to be tried. The question that must necessarily arise is whether in the facts and circumstances of the case, there is a prima facie case and, if so, as between whom? In view of the legal principles applicable, it is difficult for us to say on the material on record that the plaintiffs have a prima facie case. It cannot be disputed that if the suit were to be brought by the Bank of India, the High Court would not have granted any injunction as it was bound by the terms of the contract. What could not be done directly cannot be achieved indirectly in a suit brought by the plaintiffs.

Even if there was a serious question to be tried, the High Court had to consider the balance of convenience. We have no doubt that there is no reason to prevent the appellant from recalling the amount of Rs. 85,84,456. The fact remains that the payment of Rs. 36,52,960 against the first lot of 20 documents made by the appellant to the Bank of India was a payment under reserve while that of Rs. 49,31,496 was also made under reserve as well as against the letter of guarantee or indemnity executed by it. A payment ''under reserve'' is understood in banking transactions to mean that the recipient of money may not deem it as his own but must be prepared to return it on demand. The balance of convenience clearly lied in allowing the normal banking transactions to go forward. Furthermore, the plaintiffs have failed to establish that they would be put to an irreparable loss unless an interim injunction was granted."

This Court had occasion to emphasise the need to give reasons before passing ex parte orders of injunction. In Shiv Kumar Chadha v. Municipal Corpn. of Delhi, it is stated as under: (SCC pp. 176-77, paras 34-35)

"...the court shall ''record the reasons'' why an ex parte order of injunction was being passed in the facts and circumstances of a particular case. In this background, the requirement for recording the reasons for grant of ex parte injunction, cannot be held to be a mere formality. This requirement is consistent with the principle, that a party to a suit, who is being restrained from exercising a right which such party claims to exercise either under a statute or under the common law, must be informed why instead of following the requirement of Rule 3, the procedure prescribed under the proviso has been followed. The party which invokes the jurisdiction of the court for grant of an order of restrain against a party, without affording an opportunity to him of being heard, must satisfy the court about the gravity of the situation and court has to consider briefly these factors in the ex parte order. We are quite conscious of the fact that there are other statutes which contain similar provisions requiring the court or the authority concerned to record reasons before exercising power vested in them. In respect of some of such provisions it has been held that they are required to be complied with but non-compliance therewith will not vitiate the order so passed. But same cannot be said in respect of the proviso to Rule 3 of Order 39. The Parliament has prescribed a particular procedure for passing of an order of injunction without notice to the other side, under exceptional circumstances. Such ex parte orders have far-reaching effect, as such a condition has been imposed that court must record reasons before passing such order. If it is held that the compliance with the proviso aforesaid is optional and not obligatory, then the introduction of the proviso by the Parliament shall be a futile exercise and that part of Rule 3 will be a surplusage for all practical purposes. Proviso to Rule 3 of Order 39 of the Code, attracts the principle, that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor, and Nazir Ahmed v. Emperor. This Court has also expressed the same view in respect of procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramchandra Keshav Adke v. Govind Joti Chavare. As such whenever a court considers it necessary in the facts and circumstances of a particular case to pass an order of injunction without notice to other side, it must record the reasons for doing so and should take into consideration, while passing an order of injunction, all relevant factors, including as to how the object of granting injunction itself shall be defeated if an ex parte order is not passed."

In Shiv Kumar Chadha (supra) the Court was oblivion of the fact that once an ex-parte ad interim order of injunction is passed, the same are extended in routine manner and continue to operate for many years. It is profitable to quote paragraph 31 of Shiv Kumar Chadha (supra) which runs thus:--

"31. Under the changed circumstance with so many cases pending in courts, once an interim order of injunction is passed, in many cases, such interim orders continue for months; if not for years. At final hearing while vacating such interim orders of injunction in many cases, it has been discovered that while protecting the plaintiffs from suffering the alleged injury, more serious injury has been caused to the defendants due to continuance of interim orders of injunction without final hearing. It is a matter of common knowledge that on many occasions even public interest also suffers in view of such interim orders of injunction, because persons in whose favour such orders are passed are interested in perpetuating the contraventions made by them by delaying the final disposal of such applications. The court should be always willing to extend its hand to protect a citizen who is being wronged or is being deprived of a property without any authority in law or without following the procedure which are fundamental and vital in nature. But at the same time the judicial proceedings cannot be used to protect or to perpetuate a wrong committed by a person who approaches the court."

As deduced from the above although the Court is not denuded of its power to pass ex-parte injunction provided the reasons are given that the delay in passing such injunction would be defeated but it is imperative to record reasons for the same. There is no fetter on the part of the Court to refuse in extending the ex-parte injunction after the defendant is noticed and a clear case of suppression of material facts are surfaced before the Court and yet extend the ex-parte ad interim order unless those materials form part of the record either in form of an affidavit to an injunction application or invoking Order 39 Rule 4 of the Code of Civil Procedure. It would amount to giving premium to recalcitrant litigant who is guilty of suppression of material facts and allowed to enjoy the ex-parte ad interim order of injunction. The suppression of material facts has been seriously viewed and operated as deterrent against the unscrupulous litigant who has not approached the Court with clean hands. The injunction is both discretionary and equitable in nature. The discretionary jurisdiction should be exercised on a sound principle of law and ex debito justitiae to prevent the misuse and/or abuse of the legal rights. The suppression of material facts disentitles the initiator of the proceeding, blessed with an ex-parte injunction, to go on reaping the benefits there from and made the Court to give its vetting and blessings in extending the ex-parte injunction.

There are upteem number of judgments wherein the Court refuses to extend or pass a temporary injunction on the ground of suppression of material facts and this Court, therefore, feels that the point which is somewhat settled should not detain the Court in elaborately discussing except the one of the judgment rendered in Dalip Singh v. State of Uttar Pradesh & Ors. Reported in , 2010(2) SCC 114, which illustrates the importance of suppression of material facts. It is further to bear in mind that every fact which does not constitute the cause of action, if not disclosed cannot stand in the way of either granting the temporary injunction or extending the same applying the principles of suppression of material facts. The fact must be material and of such nature that if surfaced on record may disentitle the suitor to get an injunction. A distinction is to be drawn between the suppression of "facts" and suppression of "material facts". As in case of former, the party cannot suffer for non-disclosure but in later case the Court may refuse to exercise discretionary jurisdiction. The support can be lend to a judgment of the Supreme Court in case of General Manager, Haryana Roadways v. Jai Bhagwan & Anr. Reported in , 2008(4) SCC 127 wherein it is held:--

"13. Suppression of material fact is viewed seriously by the superior courts exercising their discretionary jurisdiction. In S.J.S. Business Enterprises (P) Ltd. v. State of Bihar this Court on suppression of fact held: (SCC p. 173, para 13)

As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the courts to deter a litigant from abusing the process of court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case."

The said observation was quoted with approval by one of us in Arunima Baruah v. Union of India, wherein the question which was raised was: How far and to what extent suppression of fact by way of non-disclosure would affect a person''s right of access to justice? The Court notices that so as to enable it to refuse to exercise its discretionary jurisdiction, the suppression must be of material fact. What would be a material fact, suppression whereof would disentitle the appellant to obtain a discretionary relief, would depend upon the facts and circumstances of each case.

Recently, in Prestige Lights Ltd. v. SBI this Court held: (SCC p. 461, para 33)

"33. ...The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a court of law is also a court of equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the writ court may refuse to entertain the petition and dismiss it without entering into merits of the matter."

This Court cannot resist from quoting the observation rendered in case of Dalip Singh (supra) wherein the developing trend of suppressing the material facts and obtaining an order of injunction have been noted in the following:--

"1. For many centuries Indian society cherished two basic values of life i.e. "satya" (truth) and "ahimsa" (non-violence). Mahavir, Gautam Buddha and Mahatma Gandhi guided the people to ingrain these values in their daily life. Truth constituted an integral part of the justice-delivery system which was in vogue in the pre-Independence era and the people used to feel proud to tell truth in the courts irrespective of the consequences. However, post-Independence period has seen drastic changes in our value system. The materialism has overshadowed the old ethos and the quest for personal gain has become so intense that those involved in litigation do not hesitate to take shelter of falsehood, misrepresentation and suppression of facts in the court proceedings.

In the last 40 years, a new creed of litigants has cropped up. Those who belong to this creed do not have any respect for truth. They shamelessly resort to falsehood and unethical means for achieving their goals. In order to meet the challenge posed by this new creed of litigants, the courts have, from time to time, evolved new rules and it is now well established that a litigant, who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief, interim or final."

On the conspectus of the law enunciated above, let me examine whether the present case falls within the aforesaid four corners and disentitles the plaintiffs to get the ex-parte injunction extended.

The substratum of the suit is that the respondent No. 2 was an employer of the petitioner and was posted as Director Deputy Manager, Quality Control and Quality Assurance and was possessed of various confidential information, trade secrets which should not be divulged to the rivals as opposed to professional ethics. Both the petitioner and the respondent No. 1 are in the similar trade and participate in the tender floated by the railways for supply of utility vehicles. The plaint proceeds that the railways issued a tender in the year 2012 which was opened on 15.04.2013 awarding the contract to the petitioner to supply 12 numbers of utility vehicles and the respondent No. 1 to supply and commission two numbers of such vehicle. The petitioner claims to have developed drawings and designs to be used for the railway track laying operations which was known to the respondent No. 2 while working in such post and after the resignation, have passed on such drawings and designs to the respondent No. 2 for the purpose of manufacturing such utility vehicles to several vendors of the petitioner.

The Annexure "A" to the injunction application clearly shows that the respondent No. 2 was appointed in such posts by Speed Crafts Ltd., whose registered office is at Patna in Bihar and was working in Haridwar in the state of Uttarakhand. The plaintiff have its registered office within the jurisdiction of this Court and for the purpose of the jurisdiction certain letters exchanged with their vendors have been disclosed in the injunction application. First of such letter was addressed to M/s. Brilliant Hydraulic of 73, Netaji Subhas Road, Kolkata - 700 001 on 4th January, 2016 inviting their attention that several complaints have been received regarding unofficial disclosure of the drawings by the respondent No. 1 who is admittedly operating from Kanpur in the state of Uttar Pradesh and information was sought whether the drawing of the respondent No. 1 is similar to the drawing of the petitioner.

The said Brilliant Hydraulic responded on 9th January, 2016 signifying their categorical stand that sharing of the information is against their business ethics and principles. Curiously enough in the next letter dated 9th January, 2016 caused by the petitioner to the said vendor the opening sentence reveal that there has been an unofficial disclosure of the drawing given by the respondent No. 1 to the said vendor and such drawing is a replica and reproduction of the drawing and design of the petitioners. An undated letter claimed to have been issued by Prince Engineering Corporation, Howrah, wherein the said vendor unequivocally and in express terms indicated that the drawing submitted by the respondent No. 1 is identical and similar to the drawings of the plaintiffs. The respondent No. 2 has taken a serious exception to the said letter and has drawn the attention of the Court of several discrepancies and the fallacious in the contents thereof.

The first and foremost objection on suppression of material facts is that there is no privity of contract between the respondent No. 2 and the petitioner, as admittedly the petitioner was employed with Speed Crafts Ltd. and not with the plaintiff. It is further submitted that the said employer of the respondent No. 2 have lodged a complaint with the local police station at Haridwar alleging the violation of the provisions of the Copyrights Act and therefore the claim of the petitioner on such drawings and design is unfounded and unenforceable right has accrued in favour of the petitioner. It is seriously argued by the respondent No. 2 that the entire plaint proceeds on the basis that there is a relationship of employer and employee between the petitioner and the respondent No. 2 and therefore there is a gross suppression of material facts that the respondent No. 2 was never employed with the petitioner. Further attention of the Court is drawn to the other facts that at the time of awarding contract by the railways to the petitioner and the respondent No. 1, the petitioner was in employment and the resignation was offered much after that and therefore the entire case of providing the trade secrets and the trade information being confidential in nature, is concocted and based on created documents.

On meticulous examination of the averments made in the plaint this Court finds the substance in the arguments advanced by the respondent No. 2 that there is no reflection that the respondent No. 2 was ever employed with the petitioner. Rather Annexure "A" which is a letter of appointment clearly depicts that their relationship of the employer and employee was with the Speed Crafts Ltd. At the time of passing the ad interim order of injunction the Court proceeded on the statements made at the Bar that the said Speed Crafts is a sister concern of the petitioner and the respondent No. 2 was the employee of the said company. The Court further observed that the defendant No. 2 acted in breach of the confidentiality clause and made available to the respondent No. 1 the technical and engineering design of various parts relating to utility vehicle to the vendors of the petitioner. The ad interim order was passed in terms of prayer (c) and (d) of the notice of motion to operate till 10th February, 2016. A leave was further granted to the petitioner to file supplementary affidavit to show the nexus between the petitioner and the Speed Crafts that it is a sister concern of the petitioner. The plaint and the injunction application are silent on the above aspect and it is only on the basis of the submissions made at the time of pressing the injunction application for ex-parte injunction those facts were surfaced. In the supplementary affidavit filed by the petitioner the Memorandum and Article of Association of the petitioner are disclosed where from it appears that the Speed Crafts was having a 40% stake therein. The pleadings have an important role in a civil proceeding as the rights of the parties must be clearly pleaded as the relief is based thereupon. Unless the pleadings are verified the Court should not venture to take into account the extraneous facts not forming part of the pleadings and proceed to pass an order merely on the statement made at the Bar.

Order 6 Rule 17 of the Code permits the party to the proceeding to alter and amend the pleading and the leave to be granted by the Court. The so called sister concern i.e. Speed Crafts Ltd. have asserted their right by lodging a complaint with the local police station at Haridwar alleging the violation under the Copyrights Act and the matter appears to be sub judice. The present suit is not based on the violation of the Copyright owned by the petitioner and the difficulty in bringing the suit on such allegation before this Court is well known to the petitioner. Both have sighted certain judgments on the principles of granting injunction in a suit based on violation of a trademark and copyright which this Court feels need not to be considered as the nature of the suit does not indicate that any cause of action on such aspect has been pleaded. There is an apparent suppression of the material facts viz. the factum of lodging a complaint with the police authority by the Speed Crafts, the resignation of the respondent No. 2 much after the finalization of the tender by the railway authority etc.

This Court, therefore finds that those facts have a material bearing in the suit and non-disclosure has a serious repercussion on extension of ex-parte injunction. The ex-parte ad interim order of injunction granted on 18th January, 2016 is not extended.

The respondent No. 2 is directed to file affidavit in opposition disclosing all the materials placed before this Court and such affidavit in opposition shall be filed within 2 (two) weeks from date, reply if any shall be filed within a week thereafter the injunction application shall appear after 3 (three) weeks in the supplementary list.