S. Sundaram Pillai and Others vs P. Govindaswami and Another

This revision petition is directed against a wholly unsustainable order which has the effect of divesting the petitioners of ownership of 12,387

shares by an ad interim mandatory injunction which has been almost mechanically passed by the trial Court.

It is not necessary to go into the merits of the suit which the Plaintiff-respondent 1 has filed in the City Civil Court, Madras, in which substantially

the Plaintiffs case is that the first and second defendants (Petitioners 1 and 2) on behalf of defendants 3 to 21 (Petitioners 3 to 21) in the suit had

agreed to transfer to the Plaintiff 1 6,387 equity shares of Messrs. Century Flour Mills Limited, Madras, respondent 2 herein.

Respondent 2 herein is a Public Limited Company hereinafter referred to as the Company, in which admittedly defendants 1 to 20 had obtained

12,387 shares in pursuance of an agreement between the plaintiff and defendants dt. 12-12-1976. One of the terms of the agreement dt. 12-12-

1976 was that the first, second and third defendants were to be made Directors, out of whom the first defendant was to be the full-time Director of

the Company. The defendant 21 also owns 4000 shares in the company. According to the Plaintiff., these shares were transferred to the defendant

1 in pursuance of an arrangement under which defendant 21 had advanced a loan to the plaintiff and it was agreed that the defendant 2 was to be

eligible only to the interest and other benefits arising out of these shares. The plaintiff has already filed a suit C.S. No. 458 of 1983 on the original

side of this Court for a declaration of ownership of those shares and an injunction has been issued to the 21st defendant restraining him from in any

manner dealing with those 4000 shares. That order has later been vacated and an appeal filed by the plaintiff against the order vacating the

injunction was later withdrawn.

The plaintiffs case is that at the annual general meeting held on 22-7-1983, the first three defendants were not elected as Directors and

consequently the first defendant had automatically vacated office as whole-time Director of the Company. There is some dispute between the

parties with regard to the meeting dt. 22-7-1983 and some of the defendants including defendant 21 have already filed in this Court Company

Petition No. 17 of 1983 under Ss. 397 and 398 of the Companies Act.

4A. It may be, at this stage, conveniently stated that in Company Applications Nos. 397 and 398 of 1983 in Company Petition No. 17 of 1983,

by an order dt. 22-8-1984, a learned single Judge of this Court has held that no valid annual general meeting was held on 22-7-1983 and that

petitioners 1, 5 and 6 in the Company Petition, who are defendants 1, 2 and 3 in the suit, continued to be the Directors as per the unamended Art.

The learned Judge has further held that since there was no annual general meeting on 22-7-1983 the term of directors had to be reckoned

from 30-9-1982. Accordingly, the learned Judge made an order that the respondents in the Company Petition would be restrained by an injunction

from interfering in any manner with the three defendants functioning as Directors of the Company and the first defendant discharging his duties as

whole-time Director of the Company. A further injunction was issued against the first respondent in the Company Petition from convening or

holding meeting of the Board of the first respondent-Company without due notice in writing by registered post to petitioners 1, 5 and 6 in the

Company Petition. It appears that after this order was passed by the learned single Judge, the Suit came to be filed on 6-9-1984 in which,

surprisingly, no reference has been made to the order of the single Judge, but averments have been made to the contrary that the three defendants

have ceased to be directors of the Company. However, the substantial relief which is asked for in the Plaint is that by way of settlement of some

money transactions between the parties through the good offices of one Sri N. P. V. Ramaswamy udayar, an agreement has been arrived at

between the parties, by which the first two defendants, on behalf of the remaining defendants, agreed to transfer 16,387 equity shares of the

company to the plaintiff. The details of the holding of each of the defendants were given in the plaint as a Schedule. These are not relevant for the

purpose of this revision petition. It was also alleged that some cash payments were made and since the defendants were not transferring the shares,

the Plaintiff was forced to file the suit. In the suit, as many as eight substantive reliefs had been sought. The main relief is one of declaration that the

plaintiff is the owner of 16,387 equity shares of Messrs. Century Flour Mills Limited, Madras. The other relief is for a direction to the defendants

to deposit the s1hare certificates in the Court. The third relief is that the defendants should deposit the shares transfer forms of the shares and the

company should be prohibited from entertaining any application for transfer in the name of any person other than the plaintiff. There was also a

prayer for direction to the company to issue duplicate shares in lieu of 12,387 shares standing in the name of defendants 1 to 20. In his own right,

defendant 21 had 4,000 shares. A direction was sought against defendant No. 21 for transferring those 4,000 shares. An additional relief was

sought, namely, that defendants 1 to 20 should be restrained from dealing in any manner with 12,387 shares by way of sale, hypothecation, pledge,

mortgage, transfer, etc., till the final disposal of the suit. An injunction was also sought that defendants 1 to 20 should be restrained from exercising,

their voting rights in respect of the said 12. 387 shares.

At this stage, it has to, be mentioned that in Company Petition No. 17 of 1983, the plaintiff in this suit has filed an application for recording the

terms of the compromise, under which, according to the Plaintiff, the defendants were tinder an obligation to transfer the shares. This application is

C.A. No. 583 of 1984 (Page 19 of the paper book)., In this application, the details as to the compromise have been given and it is stated that

several drafts were exchanged between the parties and the final terms arrived at between the plaintiff and defendants 1 to 3 were recited. It was

stated that the defendants were unwilling to abide by the terms and that is why it became necessary to file the application for directions under R. 9

of the Company Court Rules and O. 23 and R. 3 CPC read with S. 402 of the Companies Act to record the compromise and issue suitable

directions giving effect to the terms concluded between the parties. A Judge''s summons was taken out. For this purpose, along with the affidavit,

memo of settlement arrived at between the petitioner and respondents"" was filed. This was done in Aug., 1984 i.e. prior to the suit. However, this

finds no reference in the plaint itself.

Now, on the day on which the suit was filed, three separate interim applications came to be filed by the Plaintiff, viz., I.A. Nos. 16444, 16445

and 16446 of 1984. There is an endorsement on I.A. No. 16444 of 1984 that application was received at 5p.m. on 6-9-1984. Since

chronologically the other two applications bear later numbers, at best. they must have been received at the same time or a few minutes later. On

receipt of these three applications which have endorsements of the counsel that there is not caveat in the suit register, the Registry seems to have

registered those applications and they were put up before the Court almost immediately. The endorsements made by the Registry on the three

applications were, therefore, to have taken some time and all this obviously happened after 5 p.m. The learned Judge granted all the three

applications by making interim orders also most immediately after they were filed and the three orders are identical in terms. It is enough to

reproduce the order on I.A. No. 16444 of 1984 which reads as follows : --

....... Heard: perused case records. Satisfied that the object of granting the interim injunction would be defeated by the delay.

Hence ad interim injunction and notice : 8-10-84. Sd ..........8-9-1984

There is intrinsic evidence in this record to indicate how mechanically these orders have been made without any application of mind, because the

order in I.A. No. 16446 of 1984 renders wholly ineffective, the orders made on Applications Nos. 16444 and 16445 of 1984 on the same day

and at the same time. Application No. 16444 of 1984 was intended for the relief of an ad interim injunction restraining the defendants 1 to 20 from

disposing of in any manner 12.387 shares by sale, mortgage, gift, pledge or otherwise till the disposal of the suit. This order which is at page 73 of

the paper book had in effect frozen the shares. I.A. No. 16445 of 1984 was made for an ad interim injunction restraining defendants 1 to 20 from

exercising voting rights in respect of 12,387 shares of Messrs. Century Flour Mills Limited. The occasion for exercising voting rights would arise

only if and when a meeting of shareholders would be held. This injunction was granted and defendants 1 to 20 were restrained from exercising

voting rights in respect of the disputed shares. The combined effect of these two orders is that defendants 1 to 20 were prevented from exercising

their rights as either shareholders or the first three defendants functioning as Directors of the Company. Also virtually, the effect of these two orders

was that the order of the learned single Judge in Company Applications Nos. 397 and 398 of 1983 which was made about two weeks prior to the

date on which the trial Judge granted injunction was completely set at naught. It is also obvious that these orders were obtained by the Plaintiff

without disclosing the fact that there was already an order of the High Court holding that the three defendants continued to be Directors of the

Company.

What is surprising is that after having made these orders, the learned Judge has also made an order. which is challenged in this revision petition. on

the same day directing Century Flour Mills Limited. which is described as Garnishee, ""to issue forthwith duplicate shares in respect of 12,387

shares of Messrs. Century Flour Mills Limited standing in the name of defendants 1 to 20"" to the plaintiff. The learned Judge has made a further

order directing that the said 12,387 shares should be immediately transferred in the name of the plaintiff. The result of this order is that there are

now no shares in -respect of which the order made on the two earlier applications on which those orders can operate. The effect of this order also

is that the suit filed by the plaintiff substantially stands decreed on the very day on which the suit has been filed at the end of the day. This order of

mandatory injunction has been challenged in this revision petition.

When the matter came up for admission, since allegations were made against the learned Judge in the memorandum of revision as well as in the

complaint made to me for being dealt with administratively that the injunction order was made after court hours and without notice to the parties

who would be seriously affected by such an injunction, I directed the learned Judge to make a report as to how such an order came to be passed

ex parte. The learned Judge has sent a report that at the time when he made the order he was satisfied that the object of granting the order would

be defeated by the delay and that he bona fide thought that an interim order could be made which could be reversed. In this report, however, he

has further stated that he now realizes that he should not have passed the ad interim order of mandatory injunction.

Mr. Gandhi who appears on behalf of the original plaintiff, has, at the outset, contended that the revision petition filed by the defendants should

be dismissed, because no appeal or revision petition lies against an interim order, and he has placed reliance on a Division Bench decision of this

court in Abdul Shukoor v. Umachander AIR 1976 Mad 350. The Division Bench has, in Abdul Shukoor''s case AIR 1976 Mad 350, held that no

appeal will lie against an ex parte and ad interim injunction but the specific remedy available in O. 39, R. 4 CPC has to be availed by the

interdicted party so that a final reasoned order could be obtained in the trial Court itself against which the Code has provided an obvious appeal

under O. 43, R. 1 (r) CPC. That was a case in which against an ad interim temporary injunction restraining the defendants from interfering with the

plaintiffs peaceful possession and enjoyment of the suit property the defendants filed an appeal before the Subordinate Judge and the Subordinate

Judge passed an order suspending the interim injunction. This order of the Subordinate Judge was challenged in the revision petition. While holding

that the order of ad interim injunction was not appealable, the Division Bench held that the order of the Subordinate Judge was absolutely without

jurisdiction, because no appeal lay against the ad interim order and the order of the Subordinate Judge was set aside. Now, it is true that the

Division Bench has held in Abdul Shukoor''s case AIR 1976 Mad 350 that no appeal lies against an order of ad interim injunction. But, to accept

the contention of the plaintiff in the present case that the defendants should first appear before the trial Court and move the trial Court for setting

aside the injunction, would really have the effect of permitting the plaintiff to have the benefit of an order which is patently erroneous and to say the

least, perverse and has been obtained by suppressing material facts. In any case, the High Court, in the exercise of its revisional jurisdiction under

S. 115 of CPC cannot allow an order. which amounts to an abuse of the powers vested in the trial Court, to stand once such an order comes to

the notice of the High Court.

It is apparent that there are several infirmities in the order of an interim mandatory injunction made by the trial Court. The Petition seeking an

order of ad interim mandatory injunction purports to have been made ""under S. 151 CPC read with O. 39, R. 7"". Originally, the petitioner appears

to have been made under O. 39, Rr. 1, 2 and 7, but the figures ""1, 2"" and the word ''and'' have been struck off. Now it is true that if there is a

power in the Court to grant a relief, mention of a wrong provision of law in the petition will not deprive a party of his right to a relief if he is

otherwise entitled to such relief. But when positively a petition is filed under O. 39, R. 7 CPC the learned Judge should have applied his mind to

the question as to whether the case before him really fell within O. 39, R. 7 CPC. O. 39, R. 7 CPC which has the marginal heading, ""Detention,

preservation, inspection, etc., of subject-matter of suit,"" enables the Court to make three kinds of orders specified in Cl. (a), fb) and (c). O. 39 R.

7(l) CPC reads as follows : -

7(1). The court may on the application of any party to a suit, and on such terms as it thinks fit -

(a) make an order for detention preservation or inspection of any property which is the subject-matter of such Suit, or its to which any question

may arise therein;

(b) for all or any of the purposes aforesaid authorises any person to enter upon or into any land or building in the possession of any other party to

such suit; and

(c) for all or any of the purposes aforesaid authorize any samples to be taken. or any observation to be made or experiment to be tried. which may

seem necessary or expedient for the purpose of obtaining, full information of evidence.

Mr. Gandhi appearing on behalf of the plaintiff was fair enough to concede that the ad interim mandatory injunction could not have been asked for

under O. 39 R. 7 of the CPC at all. The learned Judge has obviously not applied his mind to the correct provision of law under which the plaintiff

was asking for an order of tin ad interim mandatory injunction.

The second infirmity in the order is that the order of ad interim mandatory injunction is made against ""Messrs. Century Flour Mills Limited

which is not even a party to the suit. Messrs. Century Flour Mills Limited is a public limited company and merely by adding the name of Messrs.

Century Flour Mills Limited as respondent 22 in the petition for ad interim mandatory injunction it would not empower the court to issue an

injunction against Messrs. Century Flour Mills Limited directing it to issue duplicate shares. In para 10 of his affidavit in support of his application in

I.A. No. 16446 of 1984. the plaintiff has stated--

I am taking this application impleading M/s. Century Flour Mills Ltd., having its registered Office at Indian Chamber Buildings. First Floor.

Esplanade, Madras 600108 as the Garnishee so as to help this Hon''ble Court to pass necessary orders directing the Garnishee M/s. Century

Flour Mills Ltd. Madras to issue duplicate shares in respect of 12387 shares standing in the name of defendants 1 to 20 and also direct the

Garnishee M/s. Century Flour Mills Ltd., Madras, to transfer the 12387 shares in the name of the plaintiff and save him from irreparable loss"".

It is not known as to how Messrs. Century Flour Mills Limited was described as a ""Garnishee"" and in what proceedings Messrs. Century Flour

Mills Limited was a garnishee. Technically, assuming that Messrs. Century Flour Mills Limited was under the control of the Plaintiff, the trial Court

Could not have made an order of ad interim mandatory injunction without Messrs. Century Flour Mills Limited being a party to the suit. The fact

that an ad interim order of Mandatory injunction has been against the company which is not even a party to the suit and not against the defendants,

itself indicates at the interim mandatory injunction has been issued in a most casual manner without any application of mind.

The learned Judge seemed to have completely lost sight of the fact that the ad interim order of mandatory injunction was in this case of a very

peculiar type and the right of the plaintiff to get such an ad interim injunction could not be determined without reference to the provisions of the

Companies Act. The right of a party to have duplicate shares issued or to have his name entered in the Register of Members of a public limited

company has to be determined with reference to the provisions of the Companies Act. The shares in a company is movable property. S. 82 of the

Companies Act provides that the shares or other interest of any member in a Company shall be movable property, transferable in the manner

provided by the articles of the Company. Transfer of shares is a matter in respect of which there is an express statutory provision in S. 108 of the

Companies Act. S. 108(l) which provides that the transfer of a share is not to be registered except on production of the instrument of transfer,

reads as follows : -

A company shall not register a transfer of shares in, or debentures, of, the company unless a proper instrument of transfer duly stamped and

executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the

transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence,

along with the letter of allotment of the shares or debentures :

Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of

transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on

behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit :

Provided further that nothing in this section shall prejudice any power of the company to register as a shareholder or debenture holder any person

to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law"".

This provision shows that a Company is prohibited from registering the transfer of share in the company unless there is a proper instrument of

transfer which is duly stamped and which is executed by or on behalf of the transferor and by or on behalf of the transferee is delivered to the

company along with the certificate relating to the shares or debentures as the case may be. However, under the proviso, if it is proved to the

satisfaction of the Board of Directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee

has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit, but this can be done only on an

application in writing to the company by the transferee and bearing the stamp required for an instrument of transfer. However, if the shares of

company have been transmitted by operation of law, the company is entitled to register as shareholder or debenture holder the person to whom the

shares have been transmitted by operation of law. Sub-sec. (I A) of S. 108 requires the instrument of transfer of shares to be in the prescribed

form. There is an elaborate procedure prescribed under S. 108 which has to be complied with before a transferee of a share could have his name

registered in the Books of the company. The provisions of S. 108 would therefore show that the title of the transferee to get on the register of

shareholders consists in the possession of the share certificates, together with the transfer form signed by the registered holder See AIR 1926 38

(Privy Council) The combined effect of S. 82 read with S. 108 of the Companies Act is that though the shares of a company are ''movable''

property, in so far as the company is concerned, unless there is a valid deed of transfer in accordance with S. 108 of the Companies Act, the

transferee cannot claim to have his name entered in the Register of Members of the Company.

Even so far as issue of duplicate shares of the company is concerned, the right to get a duplicate share is regulated by S. 84. Under S. 84(l) a

certificate, under the common seal of the company, specifying any shares held by any member, is prima facie evidence of the title of the members

to such shares. Sub-sec. (2) of S. 84 reads as follows : -

A certificate may be renewed or a duplicate of a certificate may be issued if such certificate -

(a) is proved to have been lost or destroyed, or

(b) having been defaced or mutilated or torn is surrendered to the company"".

The learned Judge has not considered the effect of S. 84 or S. 108 of the Companies Act when he went on to make an order that duplicate shares

should be issued and the said shares should be immediately transferred in the name of the plaintiff. The learned Judge was bound to consider

whether he could issue an injunction against a company which is not a party and whether the plaintiff was entitled to by-pass the provisions of the

Companies Act when he asked for the several reliefs as prayed in the plaint. He should have considered these matters on his own even if the

Plaintiffs counsel had not referred to them.

Important questions of law are involved in the suit. The Plaintiffs right to get the ownership of the shares in question itself is not beyond doubt.

Such a right is not founded on any document and will have to be decided only on oral evidence. It could not even be prima facie said that the

plaintiff had any present undisputed right on the basis of a compromise which even according to the plaintiff himself, the concerned defendants

were not accepting. There was clear suppression of facts on the part of the plaintiff when he did not disclose to the court the fact that he had

applied for the alleged compromise being recorded in the company court. He has also not disclosed that there was already an adjudication in the

company court before the filing of the suit (and) that the three defendants continue to be the Directors of the company. Injunction is an equitable

relief and the suppression of the above facts was, in my view enough to deprive the plaintiff of the right to get the relief of injunction.

There are not only disputed questions with regard to the present right of the plaintiff to the ownership of the shares in question, but as already

pointed out, important questions of law are involved in respect-of the provisions Of the Companies Act, and it was wholly improper on the part of

the trial Court to make an order of ad interim mandatory injunction in the present case. A mandatory injunction is an order compelling a defendant

to restore things to the condition in which they were when the plaintiffs complaint was made. Salmond defines ''Mandatory Injunction'' as ""an order

requiring the defendant to do a positive act for the purpose of putting an end to a wrongful state of things created by him, or otherwise, in fulfilment

of the legal obligations, for example, an order to pull down a building which he had already erected to the obstruction of the plaintiffs lights"".

Mandatory injunctions are dealt with by S. 39 of the Specific Relief Act which reads as follows : -

When to prevent the breach of an obligation, it is necessary to compel the performance of certain acts which the court is capable of enforcing, the

court may in its discretion grant an injunction to prevent the breach complained of, and also to compel performance of the requisite acts.

A mandatory injunction can therefore be issued in order to compel the performance of certain acts in order to prevent the breach of an obligation

which the court is capable of enforcing. It is true that the obligation may flow from a contract. But then, an agreement enforceable at law has. to be

there between the parties on the basis of which the obligation can be ascertained. In the, instant case, the agreement on which the plaintiff is relying

is itself to be established.

The object of an injunction is prevention (sic) and the maintenance of the status quo ante. Normally this object is achieved by merely making a

restrictive order which forbids the carrying out of a threat of injury, or the repetition of an injurious act. In a given case, however, the acts

committed by the defendant may leave an abiding injury and it may be difficult to restore the status quo ante unless that which has been done is

undone. A mandatory injunction is issued to undo the effect of an injurious act. A very familiar example of such an injury is where the defendant

erected a building which causes a perpetual obstruction to the access of light to the plaintiffs house, to which amount of light he has a legal right. In

such a case, it is obvious that restoration of the parties to their former condition is impossible except by ordering the demolition of the building.

Sometimes in order to prevent the breach of the legal right a fid to compel the performance, of certain acts the defendant is ordered to undo that

which he has done. A mandatory injunction is granted only in rare cases and normally a mandatory injunction is granted, if at all, only to restore the

status quo and not to establish a new state of things differing from the state which existed at the date when the suit was instituted. The effect of a

mandatory injunction so far as the defendant is concerned is more serious than in the case of a prohibitory injunction, because, where by a

mandatory injunction the defendant is enjoined to do any particular act, he may be put to expenses and trouble which may be very considerable.

That is why, though the power to grant injunction has to be exercised with great caution, much greater caution is necessary in the case of making an

order of mandatory injunction which is very rarely granted.

The present case is an'' illustration of what harm a mandatory injunction can cause when passed in a casual manner, as a matter of course. The

plaintiff has still to establish his right to the shares in question. The factum of the compromise in pursuance of which the plaintiff claims that the

defendants had promised to transfer the shares to him, is itself the subject-matter of an application under 0. 23, R. 3 CPC before the Company

Court. The averments in the plaint which will have to be established before the plaintiff can claim any right to the shares in question, are disputed

questions of fact on which evidence will have to be recorded when the suit goes to trial, because the main issue in the suit is the facturn of the

compromise on which the plaintiff relies. Even on the averments in the plaint it cannot be said that the plaintiff has made Out any prima facie case

for a mandatory injunction and yet the defendants have been summarily divested of the ownership of the shares in question of the value of more

than Rs. 10 lakhs by one stroke of the pen of the learned Judge. In the view I have taken, the order of mandatory injunction made by the trial

Court is set aside and the application No. 16446 of 1984 is rejected.

Before parting with the case, it is necessary to observe that the trial Courts realise that injunctions, whether prohibitory or mandatory, should

not be granted as a matter of course and the trial Court must exercise extreme caution and care before an order of injunction is made and it has to

decide the question relating to the grant of an ad interim injunction according to well established principles. The trial Court, even at the stage of

making an ad interim order of injunction, has to apply its mind seriously to the question whether the plaintiff has made out a prima facie case for the

grant of an injunction. The circumstance that an ad interim order can be vacated after the defendant appears and contests the correctness of the

order of injunction is no justification for issuing an injunction as a matter of course.

Accordingly, the order of the trial Court made in I.A. No. 16446 of 1984 is set aside. The revision petition is allowed with costs. Counsel''s

fees are computed at Rs. 500.

I am informed that the defendants have already moved the Company Court for the transfer of the suit to its file. Having regard to the manner in

which the trial Court has dealt with the matter, it will be in the interest of justice to withdraw the suit from that court and transfer the suit to the file

of the Principal Judge, City Civil Court. Till such time as the Company Court decides the application for transfer of the suit from the City Civil

Court to the High Court, the suit shall now be tried by the Principal Judge, City Civil Court, Madras. If the suit is not transferred to the High Court,

the suit will continue for trial in the Court of the Principal Judge. ,

Revision allowed.