Delhi High Court
Catalyst Trusteeship Private Limited vs Nayan N. Raheja & Ors. on 23 January, 2020
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 23rd January, 2020
+ CS(COMM) 373/2019 & IAs No.9962/2019 (u/O XXXIX R-1&2
CPC), 9963/2019 (u/O II R-2 CPC), 9964/2019 (u/O XXXVIII
R-5 CPC), 16584/2019 (of D-3 u/S 14 of IBC), 16586/2019 (of D-
1,2&4 u/O VII R-11 CPC) & 16589/2019 (of D-1,2&4 u/O
XXXIX R-4 CPC)
CATALYST TRUSTEESHIP PRIVATE LIMITED..... Plaintiff
Through: Mr. Tanmay Mehta, Mr. Atul
Sharma, Ms. Arveena Sharma and
Mr. Kamal Gupta, Advs.
Versus
NAYAN N. RAHEJA & ORS. ..... Defendants
Through: Mr. Sandeep Sethi, Sr. Adv. with
Mr. Gaurav Mitra, Ms. Manmeet
Kaur, Mr. Yashvardhan Bandi, Mr.
Raghuveer Kapur and Mr. Adit
Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The plaintiff has sued defendants No.1 to 5, namely (i) Nayan N.
Raheja, (ii) Navin M. Raheja, (iii) Raheja Developers Ltd., (iv) Marvel
Woods Private Ltd. and (v) Riyasat Towers Private Ltd., for permanent
injunction, to restrain (a) defendants No.1 to 3 from selling, transferring or
creating third party interest in their movable and immovable properties
including commercial space forming part of a project having both
residential units and commercial spaces, located at Kathputli, Patel Nagar,
New Delhi; (b) defendant No.4 from selling, transferring or creating third
party interest in respect of any part or portion of plot admeasuring 117
Kanal 32 Marla equivalent to 14.82 acres in Village Mandkola Tehsil
CS(COMM) No.373/2019 Page 1 of 21
Hathin District Palwal in the State of Haryana; (c) defendants No.1 and 2
from leaving the territorial jurisdiction of this Court; and, (d)
officials/directors of defendants No.3&4 from leaving the territorial
jurisdiction of this Court, all till the entire amount outstanding to the
plaintiff is realised. Relief of directing the defendants No.1 to 4 to disclose
the details of their properties/assets and to furnish security for an amount
equivalent to Rs.217,77,00,000/- claimed to be outstanding to the plaintiff
as on 30th April, 2019, is also sought. The defendant No.5 is impleaded as
a proforma defendant.
2. It is the case of the plaintiff in the plaint, (i) that the defendant No.5,
engaged the in the construction business, to augment its financial resources,
issued 2600 secured, redeemable, non-convertible debentures and
appointed the plaintiff to act as trustee for the holders of the debentures; (ii)
that the defendants No.1&2, to secure the debenture holders, furnished their
personal guarantees and the defendant No.3 furnished a corporate
guarantee, in favour of the plaintiff; (iii) that the defendant No.4 mortgaged
the land aforesaid in Palwal, Haryana to secure the debenture holders; (iv)
that as per the terms of the issue of debentures, the defendant No.5 was
required to pay interest and other dues to the debenture holders; (v) that the
defendant No.5 failed to maintain financial discipline and committed
defaults in performance of the terms and conditions of the Debenture Trust
Deeds; (vi) that the plaintiff as the debenture trustee for the benefit of the
debenture holders issued a default notice dated 2nd May, 2019 and called
upon the defendant No.5 to redeem the debentures and to pay the entire
amount of the debentures amounting to Rs.217,77,00,000/- due as on 30th
April, 2019, together with further interest; (vii) that the said letter was also
CS(COMM) No.373/2019 Page 2 of 21
issued to the defendants No.1 to 4 as guarantors/mortgagors; (viii) that the
defendant No.5 failed to regularise the payments and further notices were
issued by the plaintiff in this context including for invocation of guarantees
and for redemption of mortgage; (ix) that notices under Section 13(2) of
The Securitisation and Reconstruction of Financial Assets and Enforcement
of Securities Interest Act, 2002 (SARFAESI Act) were also issued to the
defendants stating that on failure of the defendants to comply with the said
notices, the plaintiff shall be constrained to initiate action under Section
13(4) of the SARFAESI Act; (x) that the defendants No.1 to 4 are liable to
immediately pay the dues of the plaintiff/debenture holders; (xi) that the
defendants No.3 to 5, instead of complying with their obligations of
payment of dues, filed a suit before the Civil Judge, Gurugram; (xii) that
the dispute in the said suit is essentially between the defendants No.3 &5;
(xiii) that the plaintiff has repeatedly reminded the defendants No.1 to 4 of
their undertaking under the Debenture Deeds, that they shall not sell,
transfer, encumber their assets without prior approval of the plaintiff but
the defendants have neglected doing the same also; (xiv) that an application
under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) has
also been filed by the plaintiff against the defendant No.5 for
commencement of insolvency resolution process against the defendant
No.5; (xv) that the guarantees furnished by the defendants No.1 to 3 and
mortgages provided by the defendants No.3&4 constitute material security
for payment of the dues of the plaintiff/debenture holders in respect of the
debentures; (xvi) that availability of assets with the guarantors and
mortgagors is of utmost importance for effective enforcement of rights
under the guarantee and mortgage agreements/documents; (xvii) that the
CS(COMM) No.373/2019 Page 3 of 21
defendants No.3&4, under the documents executed by them in favour of
the plaintiff, have specifically agreed and undertaken not to transfer or
create third party interest in their assets; (xviii) that the plaintiff apprehends
that the defendants No.1 to 4, to avoid their liabilities and to frustrate the
process of law for enforcement of its rights and securities, would transfer
or dispose off their assets, thereby jeopardising the interest of the
plaintiff/debenture holders and in which event the plaintiff/debenture
holders will suffer irreparable loss and injury; it is therefore necessary to
protect the rights and entitlements of the plaintiff/debenture holders against
defendants No.1 to 4, by restraining the defendants No.1 to 4, as sought;
(xix) that the plaintiff, as on date is not claiming any recovery or
enforcement of rights with respect to the mortgaged property, as the
plaintiff has already initiated appropriate proceedings under Section 7 of
the IBC against the defendant No.5 and under Section 13(2) of the
SARFAESI Act against the defendants No.3 to 5 and it is necessary that till
the culmination of those proceedings, the defendants are restrained, as
sought; and, (xx) that the Debt Recovery Tribunal (DRT) and the National
Company Law Tribunal (NCLT) do not have jurisdiction to grant the
injunction sought.
3. The suit along with the applications for interim relief, attachment
before judgment and under Order II Rule 2 of the Code of Civil Procedure,
1908 (CPC), came up before this Court first on 25th July, 2019 when inter
alia the following order was passed:
"6. I have enquired from the senior counsel for the
plaintiff, whether such a suit for injunction simplicitor
lies. It is felt that the injunction sought has to be in an
CS(COMM) No.373/2019 Page 4 of 21
appropriate proceeding for realization of monies and
separate proceedings, one for injunction and the other for
realization of the amounts due, cannot be initiated.
7. The senior counsel for the plaintiff states that
proceedings under the Insolvency & Bankruptcy Code,
2016 have already been initiated against defendant no.5
Riyasat Towers Pvt. Ltd. and no relief in this suit is
claimed against the defendant no.5. However, with
respect to defendants no. 1 to 4, it is stated that
proceedings under the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act) have been initiated and on
mere initiation whereof, there is no restraint against the
defendants no. 1 to 4 from dealing with their properties. It is
further stated that the personal guarantee/s furnished are
with respect to the specified property but under the deeds
executed, the said defendants have agreed not to alienate
any other property till the guarantee stands.
8. On enquiry, it is informed that the notice under
Section 13(2) of the SARFAESI Act was issued on 19th
May, 2019.
9. No satisfactory reply is forthcoming as to why
proceedings under Section 13(4) have not been initiated
as yet and which if had been initiated, would have
obviated the need for filing this suit.
10. I have also enquired from the senior counsel for the
plaintiff, the entitlement in law of the plaintiff as a
debenture trustee to sue inasmuch as the cause of action,
if any, appears to be of the debenture holder.
11. The senior counsel for the plaintiff besides drawing
attention to the provisions of the Debenture Trust Deed
entitling the plaintiff as debenture trustee to sue, has also
drawn attention to Section 71(6) of the Companies Act,
2013 which mandates the debenture trustee to take steps
to protect the interest of the debenture-holders and
redress their grievances in accordance with such rules as
may be prescribed.
CS(COMM) No.373/2019 Page 5 of 21
12. It needs consideration, whether owing to Section
71(6) supra a debenture holder is barred from taking
proceedings against the company issuing debentures or
has to rely only on the debenture trustee to initiate such
proceedings.
13. Issue summons of the suit and notice of the
application for interim relief to the defendants by all
modes including dasti and electronic returnable on 30 th
August, 2019.
14. Till further orders, the defendants no. 1 to 4 are
restrained from alienating, encumbering or parting with
possession of their movable or immovable assets and the
defendants are further directed to maintain status quo in
respect of movable and immovable assets held by them.
15 Provisions of Order XXXIX Rule 3 of the Code of
Civil Procedure, 1908 (CPC) be complied forthwith."
4. The counsel for all the defendants, save defendant No.3, appeared
before this Court on 30th August, 2019. On that date, it was informed that
the NCLT, after 25th July, 2019, had declared a moratorium with respect to
the defendant No.3 under Section 14 of the IBC and appointed an Interim
Resolution Professional (IRP); however the National Company Law
Appellate Tribunal (NCLAT), vide order dated 27th August, 2019 had
stayed further proceedings by the IRP.
5. The defendants No.1,2&4 filed IA No.16586/2019 under Order VII
Rule 11 of the CPC, pleading (a) that the suit claim is barred by Sections
34 & 35 of the SARFAESI Act which bar the jurisdiction of the Civil Court
with respect to any matter in which DRT/Debt Recovery Appellate
Tribunal (DRAT) have jurisdiction; (b) that the plaintiff as a debenture
trustee is a „secured creditor‟ in terms of Section 2(zd) of the SARFAESI
CS(COMM) No.373/2019 Page 6 of 21
Act and whereunder jurisdiction is vested solely with the DRT/DRAT, to
the exclusion of this Court; (c) that Section 34 of the SARFAESI Act bars
the grant of injunction by a Court in respect of any action taken in
pursuance of the power under the Act; (d) that the plaintiff having invoked
the provisions of the SARFAESI Act and having taken benefit of the
provisions for enforcement of security interest under Section 13, as a
„secured creditor‟, is legally barred from initiating or continuing any suit or
proceeding in a Civil Court and is estopped from doing so; (e) that all
questions relating to secured assets are required to be decided by the DRT
or DRAT; (f) that even otherwise, law does not permit grant of injunction
when no successive or consequential relief is sought; (g) that by way of the
present suit, the defendants No.1 to 4 are sought to be restrained from
dealing with their assets till realisation by the plaintiff of its dues; this
amounts to an indefinite injunction and such a position is manifestly
untenable in law; (h) that no recovery is being sought in the present matter;
recovery is being sought under Section 7 of the IBC and only from the
defendant no.5; (i) that the relief obtained ex-parte on 25th July, 2019 is in
fact the final relief claimed in the suit; and, (j) that the requisite court fees
has not been paid on the plaint.
6. The aforesaid application being IA No.16586/2019 under Order VII
Rule 11 of the CPC came up before this Court on 26 th November, 2019,
when on request of the counsel for the plaintiff, hearing thereof was
adjourned to 15th January, 2020, when the senior counsel for the plaintiff
and the senior counsel for the defendants No.1,2&4 were heard and suit
posted for today for further hearing.
CS(COMM) No.373/2019 Page 7 of 21
7. The counsels have been further heard.
8. Though during the hearings on 26th November, 2019 and 15th
January, 2020, the senior counsel for the defendants No.1,2&4 had argued
for rejection of the plaint also on the grounds of (i) the jurisdiction of this
Court being barred by Sections 34 & 35 of the SARFAESI Act; (ii) the
plaintiff being a secured creditor, the jurisdiction for recovery of its
dues/enforcement of its interest vested exclusively with the DRT/DRAT to
the exclusion of the jurisdiction of this Court; and, (iii) the plaintiff having
admittedly issued notices under Section 13(2) of the SARFAESI Act, being
legally barred from initiating or continuing any suit or proceeding in a Civil
Court, but during the hearing today, the senior counsel for the defendants
No.1,2&4 has confined his arguments on the rejection sought of the plaint
to the ground of, the suit for injunction simplicitor being not maintainable
and being barred by Section 41(h) of the Specific Relief Act, 1963. Thus,
the need to record the arguments earlier made by the counsels with respect
to the grounds of rejection which have not been pressed, is not felt.
9. As far as the query made by this Court from the senior counsel for
the plaintiff on 25th July, 2019, when the suit had first come up before this
Court, of the entitlement of the plaintiff as a debenture trustee to maintain
the suit, the senior counsel for the defendants No.1,2&4, on enquiry states
that the said defendants are not seeking rejection of the plaint on the said
ground either. Since the defendants have not contested the locus of the
plaintiff as a debenture trustee to maintain the suit, I do not deem it
appropriate to delve into the said aspect either.
CS(COMM) No.373/2019 Page 8 of 21
10. The senior counsel for the defendants No.1,2&4 has argued, (i) that
Section 41(h) of the Specific Relief Act bars the grant of injunction when
equally efficacious relief can certainly be obtained by any other usual mode
of proceeding; (ii) that the claim of the plaintiff is of monies being due
from the defendants No.1 to 4 to the plaintiff; the usual mode of proceeding
when monies are due from the defendants No.1 to 4 to the plaintiff, is to
sue for recovery of money; (iii) that the same is not only an equally
efficacious relief but a more efficacious relief which can be obtained by the
plaintiff; the relief claimed by the plaintiff of permanent injunction to
restrain the defendants No.1 to 4 from dealing with their properties, would
not get the plaintiff its monies; (iv) that this Court in Bharat Heavy
Electricals Ltd. Vs. DPC Engineering Project Pvt. Ltd. (2011) 184 DLT
292 examined the issue, whether an injunction, which effectively directs
payment, can be issued by the Court although disputes concerning that
issue were pending and observed (a) that in order to claim an amount if a
person is allowed to seek an injunction instead of filing a suit for recovery,
then no suit for recovery need ever have to be filed and every suit of
recovery will be filed as a suit for injunction directing payment without
requiring ad valorem court fees to be paid; (b) that such relief of injunction
is impermissible by virtue of Section 41(h) of the Specific Relief Act; and,
(c) that when no final injunction can be granted, surely an interim
injunction cannot be granted; what cannot be finally claimed, cannot also
be claimed by way of an interim order; (v) that the plaintiff, without
seeking the relief of recovery of money, cannot seek an injunction; (vi) that
the plaintiff may never claim recovery of money but cause damage to the
defendants No.1 to 4 by prohibiting them from dealing with their
CS(COMM) No.373/2019 Page 9 of 21
properties; (vii) reliance is also placed on State of Haryana Vs. Dr. Prem
Singh Mann 1996 SCC OnLine P&H 1324 holding that the equally
efficacious remedy of suing for recovery of money being available, owing
to the bar of Section 41(h) of the Specific Relief Act, a suit for mandatory
injunction seeking a direction to the State Government to pay amounts to
the plaintiff, does not lie; (viii) reliance is also placed on the judgment
dated 29th May, 2019 of the High Court of Punjab and Haryana in Civil
Revision No.518/2017 (O&M) titled Spectrum Life Medical Device
Private Limited Vs. EMC Super Speciality Hospital Private Limited, also
holding that when an efficacious remedy in the form of a suit for recovery
of money is available to the plaintiff, suit for permanent injunction to
restrain the creditors of the defendants from releasing monies due to the
defendants and restraining the defendants from encashing the cheques
already received, was not maintainable; (ix) that the liability of defendants
is joint and several and making of a claim by the plaintiff against the
defendants No.1,2&4 is not dependent upon the ability of the plaintiff to
make a claim against the other defendants or defendant No.5, which is
under insolvency resolution process; the plaintiff can sue defendants
No.1,2&4 without suing defendant No.5; (x) that the debt, insofar as
against defendants No.1,2&4, stands crystallised and cause of action if any
for recovery of money has accrued to the plaintiff; (xi) that there is no
principle of splitting up of claims; and, (xii) restraining the defendants, as
has already been done vide order dated 25th July, 2019, is causing civil
death of the defendants.
11. The counsel for the plaintiff has argued that the plaintiff is not
seeking to restrain the defendants from dealing with their assets and
CS(COMM) No.373/2019 Page 10 of 21
properties in perpetuity, while not taking any steps against the defendants
for recovery of money due from the defendants to the plaintiff. It is
contended that injunction may be granted till 14 th May, 2022 i.e. till the
time the plaintiff will be within the limitation available for taking action for
recovery of money; alternatively it is stated that injunction may be granted
till expiry of 330 days from the date when the insolvency proceedings were
initiated against the defendant No.5 i.e. till 17 th September, 2020. It is
argued that public monies are at stake and till the outcome of the IBC
proceedings initiated with respect to the defendant No.5 is known, the
plaintiff does not want to spend huge amount of money on court fees which
will be required to be paid for initiating an action for recovery of the sum
of Rs.217,77,00,000/- due as on 30th April, 2019. It is contended that it
will amount to wastage of public money on court fees.
12. The counsel for the plaintiff further argued that the plaintiff is only
seeking to enforce a negative covenant and which is permitted vide Section
42 of the Specific Relief Act. Attention is drawn to page 234 of Part III-A,
Volume II file, being a Guarantee Agreement dated 18 th April, 2017
executed by defendants No.1&2 in favour of the plaintiff and Clause 4.1
whereof is as under:
"4.1 The Guarantors shall not transfer, mortgage or
create any charge in any manner howsoever on any
of their respective assets, properties etc.. The
particulars of the movable and immovable
properties owned by the Guarantors as on date of
this Guarantee have been provided in Schedule-1
hereto. The Guarantors undertake to notify the
Debenture Trustee, in writing, the particulars of
immovable and movable properties acquired or
CS(COMM) No.373/2019 Page 11 of 21
inherited by them within a reasonable time, so long
as the Guarantee remains in force. The
Guarantors shall within three (6) months from the
date of close of every financial year, provide the
net worth certificate alongwith the list of
immovable and movable properties owned by the
Guarantors to the Debenture Trustee;"
It is argued that the injunction sought is merely in enforcement of the
contract of the defendants No.1&2 with the plaintiff. It is contended that
the remedy of suing for recovery of the amounts due, though available to
the plaintiff, is not an efficacious remedy, inasmuch as, after 330 days of
commencement of the insolvency proceedings with respect to defendant
No.5, the plaintiff may be left with a much smaller claim than today,
against the defendants No.1,2&4.
13. On enquiry, it was informed that the plaintiff is a part of the
Committee of Creditors constituted with respect to defendant No.5 and has
already presented its claim against the defendant No.5 in the insolvency
proceedings.
14. The counsel for the plaintiff has further argued that Order II Rule 2
of the CPC is not attracted because the cause of action is different and IA
No.9963/2019 under Order II Rule 2 of the CPC has been filed by way of
abundant caution. Reliance in this regard is placed on S. Nazeer Ahmed
Vs. State Bank of Mysore (2007) 11 SCC 75 holding that in respect of a
suit in enforcement of a mortgage, the bar under Order II has been kept out
by Order XXXIV Rules 14&15 of the CPC. Reliance is also placed on
ELGI Finance Ltd. Vs. Essrope Mills Ltd. 2006 SCC OnLine Mad 536
holding that a suit by the person who has given equipment on hire purchase
CS(COMM) No.373/2019 Page 12 of 21
against the person to whom the equipment has been given, to restrain the
defendant from preventing the plaintiff from repossessing the equipment,
on default in payment being made, was not barred by Section 22(1) of the
then Sick Industrial Companies (Special Provisions) Act, 1985 because the
ownership of the hired equipment remained of the plaintiff and hence the
proceedings in the suit did not fall within the scope of Section 22(1) of the
Act. Lastly, it is argued that the remedy of suing for recovery of money is
not efficacious because after the culmination of IBC proceedings with
respect to the defendant No.5, the plaintiff may not be required to sue for
the entire amount which is due.
15. The senior counsel for the defendants No.1,2&4 has in rejoinder
contended that merely because court fees will have to be paid does not
make the proceeding any less efficacious. It is argued that even the
Government of India has to pay court fees and so the argument of "public
money" is not a legal argument. Lastly, it is contended that the reliance
placed on ELGI Finance Ltd. supra is misconceived.
16. I have considered the rival contentions.
17. The factual scenario in short is that, though the plaintiff has become
entitled to recover its dues from the defendants No.1 to 4 as guarantors of
the money advanced to the defendant No.5 but is not wanting to
immediately sue for recovery of the said dues. The plaintiff wants to await
the outcome of the insolvency proceedings qua the defendant No.5 i.e. if
the defendant No.5 is ordered to be wound up or sold, to first see how
much, on liquidation or sale of the defendant No.5, falls to the share of the
plaintiff; and to thereafter only, sue the defendants No.1 to 4 for the
CS(COMM) No.373/2019 Page 13 of 21
balance due. The plaintiff however, in the meanwhile, wants this Court to
restrain the defendants No.1 to 4 from dealing with their assets from which
amount due from them can be recovered. The only reason given by the
plaintiff for not suing for recovery of monies immediately is monetary i.e.
the plaintiff would be required to pay court fees on the entire sum due,
when during the pendency of the suit, the plaintiff may recover some part
of the said claim in liquidation of defendant No.5.
18. The question is, whether the plaintiff is entitled to do so.
19. In my opinion, the plaintiff is not entitled to do so. My reasons are
as under:
(A) In a suit for permanent injunction to restrain the defendants
No.1 to 4 from alienating their assets and on the strength whereof the
plaintiff accepted the guarantees furnished by defendants No.1 to 4,
it will be open to the defendants to contend (i) that they had not
stood as guarantors and/or mortgagors for the amount due; and/or (ii)
that the amount claimed to be due is not due from the defendant No.5
to the plaintiff, to be due from the defendants No.1 to 4 as guarantors
of defendant No.5 to the plaintiff; and/or (iii) that the plaintiff for
any other reason, is not entitled to recover the amounts from the
defendants No.1 to 4. The said defences once raised will have to be
adjudicated and without which adjudication permanent injunction
sought cannot be granted. The adjudication will be in the nature of
determining the right of the plaintiff under the documents claimed to
be executed by the defendants No.1 to 4.
(B) The aforesaid determination would be akin to determination of
CS(COMM) No.373/2019 Page 14 of 21
title to immovable property and in relation to which the Supreme
Court in Anathula Sudhakar Vs. P. Buchi Reddy (2008) 4 SCC 594
has held that where a cloud is raised over the plaintiff‟s title and he
does not have possession, a suit for declaration and possession, with
or without a consequential injunction, is the remedy; where the
plaintiff‟s title is not in dispute or under a cloud but he is out of
possession, he has to sue for possession with a consequential
injunction; where there is merely an interference with plaintiff‟s
lawful possession or threat of dispossession, it is sufficient to sue for
an injunction simplicitor; however a suit for injunction simplicitor is
concerned only with possession and the issue of title will then
normally not be directly and substantially in issue; the prayer for
injunction will be decided with reference to the finding on
possession; in case of vacant sites, the issue of title may directly and
substantially arise for consideration as without a finding thereon, it
will not be possible to decide the issue of possession; but a finding
on title cannot be recorded in a suit for injunction, unless there are
necessary pleadings and appropriate issue regarding title; even where
there are necessary pleadings and issue, if the matter involves
complicated questions of fact and law relating to title, the Court will
relegate the parties to the remedy by way of comprehensive suit for
declaration of title, instead of deciding the issue in a suit for mere
injunction; only if the matter involved is simple and straightforward,
the Court may decide upon the issue regarding title, even in a suit for
injunction--but such cases are the exemption to the normal rule that
question of title will not be decided in a suit for mere injunction.
CS(COMM) No.373/2019 Page 15 of 21
(C) The plaintiff herein by filing a suit for injunction simplicitor is
in fact seeking determination of its claim against the defendants No.1
to 4 and which endeavour of the plaintiff is in the teeth of Anathula
Sudhakar supra and it is best that such an endeavour is nipped in the
bud instead of taking up the limited resources of this Court, when the
law in this regard is clear.
(D) Invocation of Section 42 of the Specific Relief Act on behalf
of the plaintiff, in my view, is totally misconceived. For Section 42
to be applied, (i) the contract must comprise an affirmative
agreement to do a certain act, coupled with a negative agreement,
express or implied, not to do a certain act; and, (ii) the Court should
be unable to compel specific performance of the affirmative
agreement. It is only then that an injunction to perform the negative
agreement is permitted. Here, the counsel for the plaintiff has not
even argued that the Court is unable to compel specific performance
of the affirmative agreement. The affirmative agreement is the
agreement of the defendants No.1 to 4 standing guarantee for the
dues of the defendant No.5. The counsel for the plaintiff admits that
the plaintiff is in a position to recover the money and is not doing so
only to first find out how much it gets in the event of liquidation or
sale of defendant No.5 and is waiting to sue for recovery from
defendants No.1 to 4 of the balance amount, only to save on court
fees. Such planning is of the volition of the plaintiff and not owing
to any inability of the Court. Even otherwise with respect to Section
42 of the Specific Relief Act, I have in Yogesh Radhakrishnan Vs.
Media Networks & Distribution (India) Ltd. (2013) 201 DLT 773
CS(COMM) No.373/2019 Page 16 of 21
and Times Internet Limited Vs. ALT Digital Media Entertainment
Limited MANU/DE/2743/2019 held, (i) that the negative covenant,
enforcement whereof is provided for in Section 42 has to be distinct
from the agreement which is found to be not enforceable; (ii) that
Section 42 provides for a situation where even though agreement
may be found to be specifically not enforceable but the defendant has
separately agreed not to do a certain act and permits grant of an
injunction restraining the defendant from doing that act; (iii) that
Section 42 cannot be interpreted as making the agreement which is
non-enforceable, enforceable; (iv) that if Section 42 were to be read
in such a manner, it would amount to making contracts specifically
enforceable, notwithstanding the provisions of the Specific Relief
Act; and, (v) that Section 42 will have no application where the
positive and negative covenants have the same effect. The agreement
of the defendants no.1 to 4 with the plaintiff, not to deal with their
assets is only to enable the plaintiff to recover dues under the
guarantee/mortgage furnished by defendants no.1 to 4 and to the
same effect and is not separate from the agreement of
guarantee/mortgage.
(E) The purpose of Section 41(h) of the Specific Relief Act is to
prevent multiplicity of proceedings. I have hereinabove already held
that the claim of the plaintiff for injunction simplicitor would require
determination of the same issue which would arise in a suit for
recovery of money, which according to the plaintiff also have fallen
due from the defendants No.1 to 4 to the plaintiff. However, such
determination carried out in this suit for injunction would not get the
CS(COMM) No.373/2019 Page 17 of 21
plaintiff its monies and the plaintiff, even after succeeding in this
suit, would have to file a suit for recovery of money and in which
suit the same determination would be required, leading to
multiplicity of proceedings and to prevent which the Legislature has
incorporated Section 41(h) in the Specific Relief Act. The grant of a
relief of injunction, in any case, is discretionary in nature and the
Court will not lean towards exercising discretion in favour of a
plaintiff in entertaining a suit for injunction simplicitor, when
equally efficacious remedy can certainly be obtained by the usual
mode of suing for recovery of money and when the Legislature has
prohibited grant of injunction. Exercise of discretion by the Courts
on such pleas as urged by the counsel for the plaintiff also, has led to
an uncertainty in law and chance being taken by litigants and
counsels to institute suits expressly barred by law, in an attempt to
prevail over the discretion of the Court. However, as stated, exercise
of such discretion contrary to the legislative mandate is not only not
permitted in law but results in a situation where no opinion on law
can be given with certainty, leading to increase in litigation and in
turn leading to the country being perceived as a litigious State where
no legal opinion can be given and outcome of a litigation cannot be
predicted with certainty.
(F) I had during the hearing invited attention of the counsels to the
judgments holding that a suit for permanent injunction filed to
restrain the seller from selling the property agreed to be sold to
another, filed after the cause of action for the relief of specific
performance of the agreement to sell had accrued, bars the
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subsequent suit for permanent injunction. Reference in this regard
may be made to Kamal Kishore Saboo Vs. Nawabzada Humayun
Kamal Hasan Khan (2001) 90 DLT 45 (DB). Perhaps worried
therefrom, the counsel for the plaintiff hastened to remind of the
pending application being IA No.9963/2019 under Order II Rule 2 of
the CPC and contended that even if holding the suit to be not
maintainable, it be clarified that the plaintiff would be entitled to
take appropriate remedy in law.
(G) The plaintiff however need not worry on this account. I have
in Rohit Kumar Vs. A.S. Chugh (2008) 155 DLT 424 held that a suit
for permanent injunction to restrain the seller from selling the
property, filed after the cause of action for seeking specific
performance of the agreement to sell has accrued, is barred by
Section 41(h) of the Specific Relief Act and being so barred, mere
filing thereof cannot bar the subsequent filing of the suit for specific
performance. Supreme Court also, in Rathnavathi Vs. Kavita
Ganashamdas (2015) 5 SCC 223 has held that the cause of action
for a suit for permanent injunction is different from cause of action
for a suit for specific performance and thus filing of a suit for
permanent injunction cannot bar a subsequent suit for specific
performance. Thus, the filing of this suit and rejection thereof as not
maintainable would not come in the way of the plaintiff suing the
defendants No.1 to 4 for recovery of money.
(H) With respect to Section 41(h) of the Specific Relief Act, (i) in
Sunil Kumar Vs. Ram Parkash (1988) 2 SCC 77, a suit by a
CS(COMM) No.373/2019 Page 19 of 21
coparcener for permanent injunction to restrain the Karta of a Joint
Hindu Family from alienating joint Hindu property in pursuance to a
sale agreement with a third party, was held to be not maintainable, in
view of the efficacious remedy available of getting the sale set aside
and recovering possession of the property; (ii) in Reckit Benckiser
(India) Limited Vs. Naga Limited (2003) 104 DLT 490, a suit for
permanent injunction to restrain disparagement was held to be not
maintainable in view of the alternate remedy available of
approaching the then Monopolies and Restrictive Trade Practices
(MRTP) Commission; it was also held that no claim for damages,
being the preliminary and substantive relief, having been made in the
suit, injunction would be barred; (iii) in Geetanjali Nursing Home
(P) Ltd. Vs. Dr. Dileep Makhija (2003) 107 DLT 180, a mere suit
for injunction to restrain the defendant from entering the property
without suing for recovery of possession, was held to be barred by
Section 41(h) of the Specific Relief Act; (iv) in B.L. Malhotra Vs.
DDA (2009) 164 DLT 86, a mere suit for permanent injunction to
restrain the Delhi Development Authority (DDA) from cancelling
the lease of the property was held to be not maintainable in view of
the alternate remedy available of impugning the action of DDA of
cancelling the lease.
20. The suit thus fails and is held to be not maintainable.
21. The counsel for the plaintiff seeks extension of interim order already
in force, to enable the plaintiff to take appropriate steps.
22. Thus, while dismissing the suit as not maintainable, it is clarified that
CS(COMM) No.373/2019 Page 20 of 21
the plaintiff shall be entitled to sue on the facts pleaded, for the appropriate
relief to which it may be entitled and the interim order in force is extended
for a period of 15 days from today (since the order after correction is being
released on 26th February, 2020), it is clarified that the interim order dated
25th July, 2019 shall continue in force till 13 th March, 2020, whereafter it
will automatically lapse.
23. The plaintiff to pay costs of the suit to the defendants No.1 to 4 with
legal fees and expenses assessed at Rs.8 lacs.
Decree sheet be drawn up.
RAJIV SAHAI ENDLAW, J.
JANUARY 23, 2020 „bs‟..
(Corrected and released on 26th February, 2020).
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