Bombay High Court
Aviat Chemicals Private Limited vs Jagmohansingh Arora & Others on 24 January, 2000
Equivalent citations: 2000(3)BOMCR90, 2000(3)MHLJ66
Author: S.S. Nijjar
Bench: S.S. Nijjar
ORDER S.S. Nijjar, J.
1. This Judge's Summons has been taken out by the applicants Aviat Chemicals Private Ltd. (hereinafter referred to as "Aviat") for a direction to the respondents Jagmohansingh Arora & others (hereinafter referred to as "Aroras") to pay to Aviat an amount of Rs. 1,22,77,000/- on account of loss of profit and loss of reputation and goodwill and legal costs.
2. Aroras had filed a Company Application being Company Application No. 152 of 1999 inter alia for setting aside of the order dated 17th December, 1998. This application was taken out by Aroras on the ground that Aviat had obtained the order dated 17th December, 1998 from the Company Court by suppressing material facts and by playing a fraud on the Court. On 4th February, 1999 Aroras were granted ad interim relief whereby Aviat was restrained from alienating or encumbering immovable property of Aviat and from carrying out production activities from the formulation unit which was set up by Aviat. An undertaking in terms of Rule 148 of the Bombay High Court (O.S.) Rules was furnished by Aroras in March 1999. Subsequently, the Company Application was heard on 23rd March, 1999, 24th March, 1999 and on 26th March, 1999. The application was dismissed on 9th April, 1999. It was held that the application made by Aroras was not bona fide. It was also held that the application is merely speculative in nature. The application had been disguised as a demonstration against a party who is said to have defrauded the Court .
3. It is submitted by Mr. Dwarkadas that Aviat had set up a state of the art formulation unit, for the manufacture of muttivitamin drops/multivitamin syrups. An order for purchase of 16,00,000 15ml Multivitamin drops of the value of Rs. 1,51,68,000/- and 7,00,000 200ml Multivitamin Surup of the total value of Rs. 1,26,70,000/- for the months of February 1999 and March 1999 had to be aborted in view of the ad interim order. It is stated that as a direct consequence of the ad interim order, Aviat had suffered a tremendous loss of profit which is estimated at Rs. 87,77,000/-. The particulars of claim are attached to the affidavit in support of the Application at Exhibit G. The loss of reputation and goodwill is valued at Rs. 25 lacs. The legal costs are estimated at Rs. 10 lacs.
4. At the threshold the learned Counsel Mr. V. Krishna for Aroras has submitted that this Judge's Summons deserves to be dismissed in limine. He submits that even if the undertaking is given under Rule 148, the quantification of the damages can only be done by the Civil Court. For that purpose, Aviat will have to take out necessary legal proceedings in the Civil Court. Aroras cannot be made to pay the amount claimed by way of a summary procedure in the present Judge's Summons. On the other hand, Mr. Dwarkadas has submitted that the only appropriate remedy is to refer the disputed amounts to the Commissioner for taking accounts. The learned Counsel has relied upon a judgment of this Court in the case of Haji Abdul Rehman Haji Mahomed Kadwani v. Munjibhai Khatao & Company, reported in Vol. XXVIII Bom.L.R. 1077. After considering the provisions of Rule 329 of the Bombay High Court (O.S.) Rules, it is held by Mirza, J., that "Ho limit is placed to the quantum of damages to be awarded by the Court under the aforesaid Rule". The learned Single Judge had also negatived the submission that the damages are limited by section 95 of the Civil Procedure Code, on the basis that the limit contained in section 95 would apply only to mofussil courts and would not apply to High Court whilst exercising its jurisdiction under the Letters Patent. Thereafter the learned Judge made a reference to the Commissioner of the Court to ascertain and report what damages are to be paid. Mr. V. Krishna the learned Counsel appearing for Aroras had tried to distinguish the aforesaid authority on the ground that the facts in that case were not similar to the facts in the present case. That, according to the learned Counsel, was the case of withdrawal. In the present case, the matter has been contested with full vigour. After the dismissal of the Application filed by Aroras, the matter was carried in appeal before the Division Bench. The Division Bench has dismissed the appeal by its order dated 29th June, 1999. Thereafter Special Leave Petition has been lodged in the Supreme Court. The S.L.P. has not been listed for hearing as yet. This application had come up for hearing initially on 12th January, 2000, and it was adjourned to 17th January, 2000. On that day, Mr. Dwarkadas was directed to furnish the details and materials with regard to the three claims as noticed above. Mr. Dwarkadas has placed on record a number of documents and certificates issued by P.C. Menon Associates, Chartered Accountants certifying the loss of profit as well as the loss of goodwill. Mr. Dwarkadas has also placed on record the details of the legal expenses incurred. The exact amount quantified is Rs. 9,32,020/-. These expenses have been calculated upto the date of the dismissal of the Company Application No. 152 of 1999 which had been filed by Aroras. Mr. V. Krishna disputes the figures. He submits that the details have been furnished just now in the Court. However, even a perusal of these documents would show that the figures claimed are not correct. He submits that according to these accounts, the profit for the period 1-4-1999 to 31-12-1999 is Rs. 1,77,64,190/-. The injunction was operative only from 4th February, 1999 till 9th April, 1999. This is a period of only a little more than two months. Therefore, the loss of profit could not be as much as claimed. Similarly with regard to the loss of goodwill, the learned Counsel submits that no material has been placed on record that there has been any recall of any inter corporate deposit which had been made with Aviat. With regard to legal costs, the learned Counsel submits that, firstly the Application of Aroras had been dismissed with costs on 9th April, 1999. Therefore, nothing could be claimed prior to 9th April, 1999, as they would be covered by the judgment of this Court. Secondly, in any event, the legal expenses can only be awarded on the basis of the High Court Rules and Orders and not on the basis of the bills which may have been submitted by the solicitors.
5. I have considered the various submissions made by the learned Counsel. In my view, if one was to accept the submission of Mr. V. Krishna that even if an undertaking is given under Rule 148 of the High Court (O.S.) Rules, the matter of quantification of damages can only be decided by a Civil Court, it would almost amount to obliterating the rule. Rule 148 reads as under :
"A party to whom interim relief has been granted shall, before the order is issued, unless the Court otherwise directs, given an undertaking in writing, or through his Advocate to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such order."
6. A perusal of this Rule shows that it is mandatory in nature. A party to whom interim relief has been granted is bound before the order is issued to give an undertaking in writing to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such order. This undertaking can only be waived on the specific directions of the Court. The object underlying the Rule is to put the party at whose instance the interim order is obtained, on notice that if the other parties sustain any injury, then the party obtaining the interim order is bound to compensate the party injured. In the present case, the application filed by Aroras has been found to be not bona fide. The allegations of fraud and misrepresentation against Aviat have been rejected. Even the appeal filed against the order of this Court has been dismissed by the Division Bench. Whilst dismissing the appeal the Division Bench observed as follows :
"It is not in dispute that the name of the appellants is not on the register of members. Having perused the record, we have serious doubts even about the claim of the appellants of having purchased 50% shares in 1992. The pleadings as also the Deed of Memorandum of Understanding dated 22nd December 1992 speak for themselves. This is besides the fact that the appellants name was not on the register of members. We are also in agreement with the learned Single Judge that no fraud was committed. We find no substance in the grievance of the appellants. If at all they have any right, they can, in accordance with law, sue Chawlas."
7. In view of the above, it is incumbent on Aroras to compensate Aviat for the damages and the loss of profit which they have suffered due to the passing of ad interim order dated 4th February, 1999.
8. In the case of Haji Abdul Rehman (supra), this Court was considering the impact of section 95 of the Civil Procedure Code on the Original Side Rules of this Court. It is held as follows :
"The question, I have to consider here, is, whether the defendants' claim to damages should be restricted to a sum of Rs. 1,000 under the summary procedure provided by section 95 of the Civil Procedure Code. Under section 129 of the Civil Procedure Code the High Court of Bombay is empowered to make rules not inconsistent with the Letters Patent to regulate its own procedure in the exercise of its Ordinary Original Civil Jurisdiction. Under that power the High Court has framed Rule 329 of the High Court Rules which, in my opinion, supplants section 95 of the Civil Procedure Code. That rule provides as follows :---
"A party to whom an interim injunction has been granted shall, before it is issued, unless the Judge otherwise directs, give an undertaking in writing, or through his advocate, to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such injunction."
No limit is placed to the quantum of damages to be awarded by the Court under this rule."
Thereafter with regard to the method to be adopted for computation of damages has been set out as follows:---
"There will, therefore, be a reference to the Commissioner of this Court to ascertain and report what damages, if any, the defendants have sustained by reason of the interim injunction dated April 30, 1923. The plaintiffs will be at liberty to urge all points before the Commissioner including the point of waiver which they have urged before me today. Further costs and directions reserved."
9. From a perusal of the above, it shows that there is no limit on the quantum of damages which can be granted under Rule 148 of the High Court (O.S.) Rules. It also becomes apparent that it is not necessary to compel the parties to undergo the lengthy procedure of the Civil Suit to establish the quantum of damages. The matter can well be left to the Commissioner of this Court to ascertain the damages.
10. In view of the above, the matter is referred to the Commissioner for taking accounts to calculate the amount which is due and payable by Aroras to Aviat on the basis of the claim put forward in Exhibit G to the affidavit in support of the Judge's Summons. The Commissioner is directed to submit a report of quantification of damages under the separate heads within a period of four weeks from the receipt of a copy of this order.
11. It is made clear that the submissions made by Mr. V. Krishna with regard to the quantum have only been noticed and are not to be treated as having been rejected. The Commissioner for taking accounts to hear both the sides before giving the report after noticing all the objections which may have been raised by either parties.
12. Aroras would be permitted to raise objections before the Commissioner on depositing a sum of Rs. 5 lacs in Court as condition precedent. The question of costs on the reference to the Commissioner is kept open and is to be decided at the final hearing of the Judge's Summons.
Judge's Summons to be placed for hearing on the Commissioner's Report being made available.