Madras High Court
Dr.(Mrs.) Rajam Sethuraman vs "Maha Semam Trust" on 19 December, 2013
Author: V.Ramasubramanian
Bench: V.Ramasubramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19-12-2013 CORAM THE HON'BLE MR. JUSTICE V.RAMASUBRAMANIAN O.A.Nos.158, 159 and 694 of 2012 & 520 of 2013 and A.Nos.1183, 3572, 3573, 3574, 2927, 2928 and 2929 of 2012 in C.S.No.143 of 2012 O.A.Nos.158, 159 and 694 of 2012 & 520 of 2013 and A.Nos.1183, 3572, 3573 and 3574 of 2012 1.Dr.(Mrs.) Rajam Sethuraman 2.J.Mohammed Nazir 3.M.Rabia Banu .. Applicants/Plaintiffs vs. 1."Maha Semam Trust", a Public Charitable Trust, Represented by its Registered Office at No.4, Dr.Natesan Road, Ashok Nagar, Chennai-600 083. 2.Dr.N.Sethuraman 3.Mr.N.Rajagopal 4.H.Sivananthan 5.V.Sathiyanarayanan 6.M.Saibaba 7.P.Lakshmi 8.D.Usha Devi 9.M/s.S.M.I.L.E. Microfinance Ltd., Through its Managing Director, (Formerly Semam Micro Finance Investment, Literacy and Empowerment Ltd., a Company registered under the Indian Companies Act, 1956 and having its Registered Office at No.4, Dr.Natesan Road, Ashok Nagar, Chennai-600 083 Represented by its Chairman Dr.N.Sethuraman. 10.M.Sathiya Moorthy 11.Dr.S.Brathibha 12.C.Ponnuchamy 13.N.Bhuvaneswari 14.A.Tamilarason 15.J.Bradley Swanson 16.Aleem Remtula 17.Indrani Singh 18.Madurai Power Trust, Represented by its Managing Trustee S.Ramesh at 4/126A, Lake Area, Melur Road, Uthangudi, Madurai-625 107. 19.Madurai Poor Women's Empowerment Trust Represented by its Managing Trustee Dr.N.Sethuraman at No.2/47B, Melur Road, Uthangudi, Madurai-625 017. 20.Meenakshi Hotels and Entertainment Pvt. Ltd., Represented by its Managing Director S.Ramesh, at No.44/1, G.N.Chetty Road, T.Nagar, Chennai-600 017. 21.Fathi Software Pvt Ltd., Represented by its Director Dr.S.Brathibha at No.434, Mosque Street, Anna Nagar, Madurai-20. 22.ICICI Bank, a Banking Company registered under the Banking Companies Act, at No.7, Bazullah Road, T.Nagar, Chennai-600 017 Represented by its Branch Manager. 23.Indian Bank, a Nationalized Bank, registered under The Banking Companies Act, at No.69, First Avenue, Ashok Nagar, Ashok Pillar, Chennai-600 083. .. Respondents/Defendants. A.Nos.2927 to 2929/2012: J.Bradley Swanson .. Applicant/15th Defendant in A.2927/12 Aleem Remtula .. Applicant/16th Defendant in A.2928/12 Indrani Singh .. Applicant/17th Defendant in A.2929/12 vs. 1.Dr.(Mrs.)Rajam Sethuraman 2.J.Mohammed Nazir 3.M.Rabia Banu .. Respondents/Plaintiffs in A.Nos.2927 to 2929/12 O.A.No.158 of 2012 is filed by the applicants, seeking an interim order of injunction restraining ICICI Bank (22nd respondent) from making any payment or releasing any amount from the Current Account of the 9th defendant by name SMILE Micro Finance Limited. O.A.No.159 of 2012 is filed by the applicants, for an interim injunction restraining the Indian Bank from making any payment or releasing any amount from the Current Account of the 9th defendant SMILE Micro Finance Limited. O.A. No.694 of 2012 is filed by the applicants, seeking an interim order of injunction restraining the 9th defendant namely SMILE Micro Finance Ltd., from making any payment to Fathi Software Pvt. Ltd., which is the 21st defendant. O.A.No.520 of 2013 is filed by the applicants, seeking an interim order of injunction restraining the defendants 9 to 17 from transferring the control of the 9th defendant company namely SMILE Metro Finance Limited in favour of a company by name DWM Investments (Cyprus) Ltd. A.No.1183 of 2012 is filed by the applicants, praying for the appointment of a Commissioner/Chartered Accountant or Auditor to inspect all books of accounts, ledgers, computerised accounting, financial dealings including bank accounts, profit and loss account, income tax accounts of the Trust and to submit a report before this Court, within a time frame. A.No.3572 of 2012 is filed by the applicants, seeking a direction to the 18th defendant namely Mr.S.Ramesh, who is the Managing Trustee of yet another Trust by name Madurai Power Trust, to produce before this Court the original share certificates. A.No.3573 of 2012 is filed by the applicants, seeking a direction to defendants 2 to 8 to furnish details regarding the transfer of the properties of the first defendant Trust to the 9th and 10th defendants with effect from 1.4.2011. A.No.3574 of 2012 is filed by the applicants for a direction to defendants 9 to 17 to furnish details of the royalty amount paid by the 9th defendant to the first defendant Trust. A.Nos.2927, 2928 and 2929 of 2012 are filed by the 15th, 16th and 17th defendants under Order I, Rule 10 (2) of the Code of Civil Procedure for striking out their names from the array of parties, on the ground that they are not necessary and proper parties to the proceedings. For Applicants in O.A.Nos.158, 159 and 694 of 2012 and O.A.No.520 of 2013 as well as in A.Nos.1183, 3572 to 3574 of 2012 : Mr.K.Subramanian, Senior Counsel for Mr.Javid Khan. For Respondents 9, 10 & 14 : Mr.Mr.P.Ramalingam For Respondents 2 & 19 : Mr.S.Ramesh For Respondent-4 : Mr.R.Subramaniam For Respondents-15, 16 & 17 : Mr.P.H.Arvindh Pandian, Senior Counsel. For Respondents-20 & 21 : Mr.C.V.Vijayakumar C O M M O N O R D E R
A Trust by name 'Maha Semam Trust', was created, purportedly as a Public Charitable Trust, by one Dr.Mrs.Rajam Sethuraman, who is the first plaintiff in the above suit. Her daughter by name S.Brathibha and 4 other ladies became the co-trustees at inception. The Deed of Trust was registered as document No.150 of 1999 on 7.7.1999 in the Office of the Sub-Registrar of Madurai (North).
2. It appears that in the year 2001, Dr.Mrs.Rajam Sethuraman resigned from the Trusteeship and her son S.Ramesh was inducted as a Trustee. Subsequently, under a Supplementary Deed dated 10.2.2005, Dr.N.Sethuraman, who is the second defendant herein and who is also the husband of the first plaintiff-Founder Trustee, was also inducted as a Trustee. Though the Registered Office of the Trust was only at No.2/47-B, Melur Road, Uthangudi, Madurai 625 107, as per the Deed of Trust, the Founder Trustee Dr.Mrs.Rajam Sethuraman and 2 others, filed two applications before this Court viz., (i) A.No.42 of 2012 for leave to sue under Clause 12 of the Letters Patent, inasmuch as some of the defendants were residing outside the jurisdiction of this Court and (ii) A.No.123 of 2012 under Section 92 of the Code of Civil Procedure, for leave to institute a suit for the framing of a Scheme and for certain other reliefs.
3. It appears that on 5.1.2012, K.B.K.Vasuki, J., allowed the application for leave under Clause 12 of the Letters Patent viz., A.No.42 of 2012. Subsequently, the application for leave under Section 92 of the Code in A.No.123 of 2012 was also allowed by the same learned Judge, by an order dated 12.1.2012. It must be brought on record here that the application for leave under Section 92 was allowed without notice to any of the defendants. But it must also be brought on record that none of the defendants has chosen to file any application for revocation of leave granted under Section 92 of the Code.
4. After both applications for leave were allowed, the suit got numbered as C.S.No. 143 of 2012. Along with the suit, the plaintiffs filed three interlocutory applications viz.,
(i) O.A.No.158 of 2012, seeking an interim order of injunction restraining ICICI Bank (22nd respondent) from making any payment or releasing any amount from the Current Account of the 9th defendant by name SMILE Micro Finance Limited;
(ii) O.A.No.159 of 2012 for an interim injunction restraining the Indian Bank from making any payment or releasing any amount from the Current Account of the 9th defendant SMILE Micro Finance Limited; and
(iii) A.No.1183 of 2012 for the appointment of a Commissioner/Chartered Accountant or Auditor to inspect all books of accounts, ledgers, computerised accounting, financial dealings including bank accounts, profit and loss account, income tax accounts of the Trust and to submit a report before this Court, within a time frame.
5. It appears that all the 3 applications viz., O.A.Nos.158 and 159 of 2012 and A.No.1183 of 2012, were moved for ad interim ex parte orders on 30.3.2012. On the said date, the same learned Judge, ordered notice in both the applications for injunction viz., O.A.Nos.158 and 159 of 2012. But in the application A.No.1183 of 2012 for the appointment of a Commissioner/Chartered Accountant or Auditor, the learned Judge passed an ex parte order on 30.3.2012, appointing an Advocate by name R.Shivakumar as a Commissioner. The mandate given to the Commissioner was to inspect all the accounts including the bank accounts, profit and loss account, income tax accounts, the reports submitted by the Auditor of the first defendant Trust from 2005 till date and to submit a report, on or before 6.6.2012.
6. It appears that in pursuance of the warrant of commission issued to him, the Advocate Commissioner visited the Offices of the first defendant Trust at Chennai, Madurai and Tirunelveli and made enquiries. Since the warrant of commission enabled the Advocate Commissioner to engage the services of a Chartered Accountant, the Advocate Commissioner seems to have appointed two teams of Auditors (as seen from his interim report) under the guidance and supervision of the Chartered Accountant by name N.Ayyaswamy.
7. After service of notices in the above 3 applications, the defendants 15, 16 and 17 in the suit came up with applications in A.Nos.2927, 2928 and 2929 of 2012, under Order I, Rule 10 (2) of the Code of Civil Procedure for striking out their names from the array of parties, on the ground that they are not necessary and proper parties to the proceedings.
8. Thereafter, the plaintiffs came up with 4 more applications viz.,
(i) O.A. No.694 of 2012, seeking an interim order of injunction restraining the 9th defendant namely SMILE Micro Finance Ltd., from making any payment to Fathi Software Pvt. Ltd., which is the 21st defendant;
(ii) A.No.3572 of 2012, seeking a direction to the 18th defendant namely Mr.S.Ramesh, who is the Managing Trustee of yet another Trust by name Madurai Power Trust and who is also the son of the first plaintiff and second defendant, to produce before this Court the original share certificates;
(iii) A.No.3573 of 2012, seeking a direction to defendants 2 to 8 to furnish details regarding the transfer of the properties of the first defendant Trust to the 9th and 10th defendants with effect from 1.4.2011; and
(iv) A.No.3574 of 2012 for a direction to defendants 9 to 17 to furnish details of the royalty amount paid by the 9th defendant to the first defendant Trust.
9. At last, if it really happens to be the last, the plaintiffs came up with one more application in O.A.No.520 of 2013, seeking an interim order of injunction restraining the defendants 9 to 17 from transferring the control of the 9th defendant company namely SMILE Metro Finance Limited in favour of a company by name DWM Investments (Cyprus) Ltd. This application alone was first moved before me for ad interim ex parte orders on 19.7.2013 on the ground that there was an emergency. Therefore, after hearing the learned Senior Counsel for the applicants/plaintiffs and after acceding to the request of the respondents to file a counter, I passed an interim order on 19.7.2013, directing the maintenance of status-quo as on that date namely 19.7.2013. Thereafter all the applications were taken up by me for hearing.
10. I have heard Mr.K.Subramanian, learned Senior Counsel for the plaintiffs, who are the applicants in O.A.Nos.158, 159 and 694 of 2012 and O.A.No.520 of 2013 as well as in A.Nos.1183, 3572 to 3574 of 2012. I have also heard Mr.P.Ramalingam, learned counsel appearing for the defendants 9, 10 and 14, Mr.S. Ramesh, learned counsel appearing for defendants 2 & 19, Mr.R.Subramaniam, learned counsel appearing for the fourth defendant, Mr.P.H.Arvindh Pandian, learned Senior Counsel appearing for defendants 15, 16 and 17, who are also the applicants in A.Nos.2927 to 2929 of 2012 and Mr.C.V.Vijayakumar, learned counsel appearing for the 20th and 21st defendants.
11. As seen from the above narration of facts, I have on hand 8 applications filed by the plaintiffs, 4 of which are for interim orders of injunction, 1 for appointment of Commissioner and 3 for interim directions. I also have on hand, 3 applications filed by defendants 15 to 17 to strike out their names from the array of parties. Therefore, I shall refer to the parties only as plaintiffs and defendants, to avoid any confusion that may be created by referring to them as applicants and respondents.
12. Before proceeding further, I should bring on record one thing and it is about the relationship between some of the parties to this litigation. The defendants 2 and 3 are brothers. The second defendant, who is a Doctor and Urologist by profession, is the husband of the first plaintiff. The 11th defendant is the daughter of the first plaintiff and the second defendant. Similarly, Mr.S.Ramesh, representing the defendants 18 and 20, is the son of the first plaintiff and the second defendant. It appears that the first plaintiff and the second defendant have 2 sons and a daughter, out of which one son and a daughter are parties to this dispute, in their capacities as Director/Managing Director of defendants 11, 18, 20 and 21. It has become necessary to bring this relationship on record, in view of certain facts that would unfold in the course of our discussion.
PLAINT AVERMENTS
13. Since the suit on hand is a Scheme Suit filed under Section 92 of the Code, it is first necessary to take note of the averments contained in the plaint. The averments contained in the plaint, in brief, are as follows:-
(i) The first defendant is a Public Charitable Trust registered under a Deed of Trust dated 7.7.1999 with the first plaintiff as the Founder Trustee and 5 other ladies, including the first plaintiff's daughter as co-trustees;
(ii) The Trust was created with the object of eradicating poverty and improving the social status and self esteem of rural women, to reduce problems such as violence and exploitation and sustain up-liftment of socio-economic, educational and health status through Self Help Groups;
(iii) Some of the objects include strengthening of women's credit and savings groups, mobilisation of funds for extending credit facilities through NGOs and funding agencies, strengthening the leadership of groups and cluster committees, promotion of sustainable economic up-liftment through the Self Help Groups and to develop viable income generating activities and imparting training skills to women etc.;
(iv) The Trust was registered under Section 12-AA of the Income Tax Act, 1961 and the income derived by the Trust is exempt from tax;
(v) The Trust initially commenced its operations on the model of Self Help Groups. Therefore, it provided loans to poor women belonging to various income groups, trained them in basic marketing skills and supported their livelihood projects;
(vi) The project of the Trust was modelled on the lines of Grameen Bank of Bangladesh. Under this model, 5 members constituted a group and 8 such groups unite to form a Centre. In other words, there will be 40 members in each Centre;
(vii) A Field Development Officer will organise, co-ordinate and guide the functioning of 12 to 15 Centres. A branch of the Trust, comprised of 40 to 50 Centres, headed by a Branch Manager;
(viii) At the time of filing of the suit, the second defendant (husband of the first plaintiff) was the Chairman of the Board of Trustees. At the time of inception, he was not a Trustee. He was inducted under a Supplementary Deed dated 10.2.2005, after the first plaintiff resigned in the year 2001;
(ix) After the induction of the second defendant, a systematic and a calculated design was formulated for diverting the funds of the Trust by the induction of the fourth defendant, who is a henchman of the second defendant as one of the Trustees and appointing the son S.Ramesh as the Vice-President;
(x) Crores of Rupees from the first defendant Trust were diverted by the second defendant and his son Ramesh to new Trusts floated by them, which are sham institutions established for defrauding the first defendant;
(xi) A perusal of the first defendant's balance sheets would show that considerable amounts were diverted for purposes alien to the objects of the Trust and with a view to benefit the second defendant, his son and daughter;
(xii) The second defendant, his son and his henchman (fourth defendant) floated a company by name Semam Micro Finance Investment, Literacy and Empowerment Ltd., which was later renamed as SMILE Micro Finance Limited, which is the 9th defendant;
(xiii) The idea of floating the 9th defendant company was to divert the funds of the first defendant Trust. As a first step towards this objective, the funds of the first defendant Trust were transferred to the newly floated company.
(xiv) The defendants 2 to 8, 11, 18 and 19 misappropriated huge amounts from the first defendant Trust. This has landed up the Trust in serious financial implications;
(xv) The shareholding ratio in the 9th defendant company would show that the said company is under the control of the second defendant, his son Ramesh and daughter Brathibha;
(xvi) The Board of Directors of the 9th defendant are (1) M.Sathiyamoorthy (2) Dr.S.Brathibha (daughter of Dr.N.Sethuraman) (3) C.Ponnuchamy (4) N.Bhuvaneswari (5) A.Tamilarason (6) J.Bradley Swanson (7) Aleem Remtula (8) Indrani Singh, who are arrayed as defendants 10 to 17.
(xvii) The second defendant, divided the first defendant Trust into two Units viz., (1) Maha Semam Trust to implement the welfare programmes and (2) SMILE Micro Finance Limited, a financial organisation incorporated under the Companies Act. This is impermissible and unlawful, as per the concept of Public Trust;
(xviii) The division of the Trust into two Units and the siphoning of the funds were carried out by the second defendant by first authorising the alienation of the funds of the Trust to the 9th defendant, then transferring the members of the Trust to the 9th defendant upon payment of royalty to the Trustees and then by providing corporate guarantee to the 9th defendant for the purpose of obtaining a loan of Rs.2 crores from HDFC Bank, Mumbai and later enabling the 9th defendant to obtain loan from Standard Chartered Bank. Thus, a Public Charitable Trust was converted into a commercial venture finance company and this was achieved by executing a Supplementary Deed of Trust dated 6.3.2007;
(xix) On the basis of the Supplementary Deed of Trust, for the execution of which there was no power, the trust sanctioned huge loans for non members either for starting small businesses or for studies abroad;
(xx) The Trust earned huge amounts of money by the sweat, blood and toil of poor female workers and these monies are now siphoned off to the businesses and other Trusts floated by the second defendant. The other Trusts floated by him are 18th and 19th defendants;
(xxi) The funds of the first defendant Trust, transferred to the 9th defendant are available in their current account at ICICI Bank, T.Nagar as well as in the current account at Indian Bank, Ashok Nagar. Therefore, these accounts are liable to be frozen;
(xxii) The financial data as reflected in the annual reports of the first defendant Trust as well as in the annual reports of the 9th defendant for the period 2005-2006 to 2010-2011 show that the operating expenses ratio to the total income of the first defendant Trust is 74.05%, which is 3 times that of the 9th defendant, which stands at 29.53%. This is due to the absorption of the expenses of 9th defendant by the first defendant Trust;
(xxiii) In the annual reports for the years 2006-2007 and 2007-2008, the second defendant in his presidential report stated that the first defendant Trust continued to handle the loan portfolio of 9th defendant and he also gave detailed information about the work carried out by the first defendant for the 9th defendant. Though the 9th defendant pays some amount to the first defendant towards reimbursement of expenses, it is only for record purposes and does not actually cover the entire expenses incurred by the first defendant Trust for and on behalf of the 9th defendant;
(xxiv) The defendants 2 to 8 have thus acted against the interest of the first defendant Trust and have committed breach of trust. The branches of the first defendant Trust were converted in a phased manner from 2006 onwards into branches of 9th defendant;
(xxv) By the end of 2010, almost 116 branches of the first defendant Trust except 36 branches in Tirunelveli Region have been converted as branches of the 9th defendant;
(xxvi) By a resolution dated 30.12.2010, the Board of Directors of the first defendant transferred its members to 9th defendant with effect from 1.4.2011 by fixing a royalty amount. Consequently, all activities of the Trust have come to a standstill;
(xxvii) The membership of the first defendant Trust increased year by year from 2000 to 2009, but recorded a decline thereafter. On the contrary, the membership of the 9th defendant increased during 2006-2011 phenomenally, as seen from the following chart:-
Year No. of members in Maha Semam Trust No. of members in SMILE Ltd 31.03.2001 400 0 31.03.2002 9278 0 31.03.2003 22660 0 31.03.2004 26017 0 31.03.2005 48295 0 31.03.2006 92145 91724 31.03.2007 221613 202825 31.03.2008 232393 232393 31.03.2009 288822 288822 31.03.2010 101896 300759 31.03.2011 103380 390368 (xxviii) By virtue of the Trust managing the loan portfolio of the 9th defendant, major expenses of 9th defendant are shared by the Trust. In the annual report for the year 2008-2009, the second defendant has indicated in his presidential report that during the said year, the first defendant Trust handled disbursal of loans to the tune of Rs.18,943.8 lakhs for 2,51,127 women clients, out of which Rs.13,241.50 lakhs was handled on behalf of other institutions like the 9th defendant;
(xxix) The website of the first defendant discloses that the members of the first defendant have been transferred to 9th defendant and the Branch Offices of the first defendant in 25 Districts have also been transferred to the 9th defendant;
(xxx) By a resolution dated 30.12.2010, the first defendant resolved to appoint temporary staff for the expansion of 9th defendant in view of the fact that their request for opening new branches in 4 Districts came to a standstill for want of NOC from the 9th defendant and for want of funds to the tune of Rs.20 crores. This resolution proves that the Trustees are at the mercy of the 9th defendant even for opening new branches;
(xxxi) The second defendant Dr.N.Sethuraman, his son S.Ramesh and his daughter Dr.S.Brathibha are guilty of diversion and siphoning off the funds of the Trust. Mr.S.Ramesh is also the Managing Director of Meenakshi Hotels and Entertainment Pvt. Ltd., which is the 20th defendant. A sum of Rs.150 crores had been paid from out of the funds of the first defendant Trust to 20th defendant without any justification and Mr.S.Ramesh is receiving a sum of Rs.35,000/- per month from April 2008 as a Consultant;
(xxxii) The said Mr.S.Ramesh also floated another Trust by name "Madurai Poor Women Empowerment (Power) Trust" under a registered deed dated 26.9.2005. The object of this Trust is also to promote savings and credit activities among poor women;
(xxxiii) The Area Manager and Branch Manager of the first defendant Trust as well as the fourth defendant have been appointed as Trustees of Madurai Poor Women Empowerment Trust, indicating clearly that the said Trust is only a front organisation of the first defendant Trust;
(xxxiv) Mr.S.Ramesh is also collecting rent of Rs.13,000/- for the property taken on rent by the first defendant Trust. Till date a sum of Rs.15,40,000/- has been paid to him unauthorisedly from out of the funds of the first defendant towards consultation charges;
(xxxv) By a registered deed dated 20.3.2006, the second defendant Dr.N.Sethuraman also created another Trust under the name and style of Madurai Poor Women Empowerment Trust. This Trust is also created on identical terms as that created by Mr.S.Ramesh. These two Trusts are created by the father-son duo to camouflage the misappropriation of funds;
(xxxvi) Dr.S.Brathibha, who was the Chairman of the 9th defendant, was also associated with the first defendant as its Trustee. She is now Executive Director of the Trust. She is taking a monthly salary of Rs.1,55,000/- and a rent of Rs.15,000/- from first defendant Trust from July 2010. She has been so far paid a sum of Rs.27,20,000/- from the Trust funds;
(xxxvii) On 2.6.2005, Dr.S.Brathibha incorporated a Private Company by name Trinity Signal Technology, which was later renamed Fathi Software Pvt. Ltd., which is the 21st defendant herein. The second defendant Dr.N.Sethuraman is the Director of the said company;
(xxxviii) By an agreement dated 5.4.2007, 21st defendant agreed to provide software solution to 9th defendant in consideration of a sum of Rs.7,500/- per month per system per branch for the financial year 2006-2007; Rs.10,000/- per month per system per branch for the financial year 2007-2008 and Rs.12,000/- per month per system per branch for the subsequent financial years. An increment of 20% is provided once in 5 years. The second defendant Dr.N.Sethuraman and his daughter are both Directors in 9th defendant as well as in 21st defendant;
(xxxix) The agreement dated 5.4.2007 was witnessed by S.Ramesh and huge amounts were transferred from 9th defendant to 21st defendant on the basis of the said agreement.
(xl) On 14.9.2011, Dr.Brathibha sent a legal notice to 9th defendant claiming arrears of Rs.5,51,79,000/- for the use of software from 2007. This claim is bogus and has no valid basis. The misdeeds of Dr.N.Sethuraman and his son and daughter have seriously affected the financial status of the first defendant Trust;
(xli) The Trustees of the first defendant Trust are also indulging in acts of waste and misuse of the funds of the Trust, as seen from the following:-
(a) A payment of Rs.92,00,625/- was made to Guru Capital India Ltd., as a brokerage for arranging Rs.50 crores share capital from a company in Cyprus by name DWM during the financial years 2009-2010 and 2010-2011;
(b) A payment of Rs.34,52,463/- was made to M/s.AZB and Partners towards consultation charges for the due diligence conducted on 9th defendant on behalf of DWM;
(c) A payment of more than Rs.1 crore was made as commission for various persons for arranging a loan to the Trust and 9th defendant;
(xlii) Under the guise of granting small business loans to fictitious members of the first defendant, the second defendant and fourth defendant (who are trustees) have siphoned off amounts to the tune of Rs.20 crores. If only an audit is conducted by an independent Auditor, the exact loss to the Trust could be found out;
(xliii) The first defendant Trust owns two properties, one at Palayamkottai and another in Uthangudi Village, Madurai (North) Taluk. The Registered Office of the first defendant Trust as well as the 9th defendant Pvt Limited company are within the territorial jurisdiction of this Court and hence the intervention under Section 92 is essential.
14. On the above pleadings, the plaintiffs seek the following reliefs in the above suit :-
(a) Removal of the defendants 2 to 8 from the Trusteeship of the first defendant Maha Semam Public Charitable Trust;
(b) A direction to the defendants 2 to 8 to render accounts relating to the Maha Semam Public Trust properties along with the original documents, title deed etc.;
(c) Ordering inventory of the movable and immovable properties of the first defendant Maha Semam Trust;
(d) Settling a Scheme for a proper administration of the first defendant Maha Semam Trust in future.
15. Keeping in mind the averments contained in the plaint, which I have briefly summarised in para 13 above, and also keeping in mind the reliefs prayed for in the suit, as culled out in the preceding paragraph, let me now come to the interlocutory applications. As pointed out earlier, there are 11 applications on hand, 8 of which were filed by the plaintiffs and 3 filed by defendants 15 to 17.
16. In one of those applications, namely, A.No.1183 of 2012, the plaintiffs sought the appointment of an Advocate Commissioner for inspecting all the accounts as well as the reports of the auditors of the first defendant Trust from the year 2005 and to file a report into Court. In pursuance of the warrant of commission issued to him by the order dated 30.3.2012, the Commissioner appears to have taken the assistance of a team of auditors and visited the offices of the first defendant Trust at Chennai, Madurai and Tirunelveli. After collecting as many records as possible and after gathering as much information as is feasible, the Advocate Commissioner has filed an interim report on 06.6.2012 and sought further time.
17. In the light of the fact that the Advocate Commissioner could not lay his hands, for whatever reasons, upon all the records of the Trust and in view of the fact that he could file only an interim report, it was contended by Mr.K.Subramaniam, the learned senior counsel for the plaintiffs that all the applications could be finally heard and disposed of, only after the Commissioner filed his full-fledged report. It is his contention that with the aid of an interim report, which is incomplete, the substantial issues raised in these applications cannot be answered one way or the other.
18. But, on the other hand, the learned counsel appearing for defendants 9, 15 to 17 and 21 contended that there is no prima facie case in favour of the plaintiffs to continue to have the benefit of an interim order passed by me in O.A.No.520 of 2013. Therefore, the learned counsel appearing for the respondents requested me to hear all the applications and decide them.
19. Therefore, it is necessary to resolve the above conflict at first. This can be done by having a look at the interim report. If the interim report discloses that there could be something brewing in the distant horizon, I should await a final report. If it does not, I need not. Therefore, I would now take a look at the interim report.
20. In his interim report dated 06.6.2012, the Advocate Commissioner has recorded some valuable information. The parties have not chosen to file any objections to the interim report. Some of the observations in the interim report, which have a bearing upon the course of action to be adopted by me, are as follows:
(i) that on 24.4.2012, the Advocate Commissioner, accompanied by the Chartered Accountant appointed by him, went to the office of the first defendant Trust at No.4, Dr.Natesan Road, Ashok Nagar, Chennai 83, but found that only the office of the 9th defendant was functioning therein;
(ii) that the office of the first defendant Trust was functioning in the building adjacent to the said building;
(iii) that one Mr.Guru, Manager (Accounts) informed the Commissioner that all the relevant documents are available only in the Madurai office of the first defendant Trust;
(iv) that the team of auditors who visited the Madurai Office found that there were no documents;
(v) that the team of auditors who visited the Madurai office were informed by the fourth defendant H.Sivananthan (one of the Trustees) that all relevant documents are available only at Tirunelveli office;
(vi) that the auditors who visited the Tirunelveli office were informed that the documents were not available even therein;
(vii) that in response to written communications sent by the Advocate Commissioner to all the Trustees, who are defendants 2 to 8, Dr.N.Sethuraman (D2) handed over on 18.5.2012, the Resolution Book of the Trust for the period from 12.4.2004 to 07.6.2011;
(viii) that by a letter dated 18.5.2012, the fourth defendant informed the Commissioner that he was only a "nam-ke-vas Trustee" and that all operations of the Trust are carried out by Dr.Brathibha;
(ix) that by a letter dated 19.5.2012, another Trustee by name P.Lakshmi (7th defendant) also stated that she used to sign wherever she was asked to sign by Dr.Brathibha, without even reading and knowing the contents;
(x) that by a letter dated 18.5.2012, one more Trustee by name D.Usha Devi (8th defendant) informed the Commissioner that right from the inception, she was a dummy, who did not know anything about the activities of the Trust; and
(xi) that Dr.Brathibha also sent a reply dated 31.5.2012 through her lawyer refuting the allegations made against her by the others.
21. The report of the Advocate Commissioner contains the assurances given to him by the second defendant Dr.N.Sethuraman, to produce all the records and resolutions on or before 5th July 2012. Therefore, the Commissioner has stated that in the absence of books of accounts and other documents, he was unable to submit a comprehensive report.
22. Interestingly, the interim report submitted by the Advocate Commissioner contains, apart from his correspondence with the Trustees, the copies of the resolutions allegedly passed by the Board of Trustees on various dates, namely 10.02.2006, 14.7.2006, 06.3.2007, 15.5.2008, 19.12.2009, 22.01.2010, 30.12.2010, 07.6.2011. All these resolutions very clearly indicate that all the meetings of the Board of Trustees were held only at the Madurai office and not at Chennai office. Not one of the aforesaid meetings was held at No.4, Dr.Natesan Road, Ashok Nagar, Chennai 83.
23. Similarly, the Advocate Commissioner has filed two notebooks, both containing the minutes of the meeting of the Board of Trustees of the Trust. A perusal of the same also shows that all the meetings of the Board at all points of time were conducted only at Madurai.
24. There is a significance to the above observation. The plaintiffs have filed about 21 documents as plaint documents under Order VII, Rule 14(1), CPC. Plaint document 1 is the copy of the Trust Deed dated 7.7.1999. Plaint document No.2 is the Trust Deed dated 21.12.2000. Plaint document No.4 is the supplementary Deed of Trust dated 10.02.2005. Plaint document No.8 is the supplementary Deed of Trust dated 06.3.2007.
25. In plaint document No.1, which is the original Deed of Trust dated 07.7.1999, the address of the registered office of the Trust is indicated in Clause 3 as "2/47-B, Melur Road, Uthangudi, Madurai - 625 107". In the same document, the residential address of the first plaintiff is also indicated to be the same. The residential address of the daughter Dr.S.Brathibha is also indicated as the same. Interestingly, the second defendant, Dr.N.Sethuraman, was the person who has attested the signatures of all the six Trustees, in plaint document No.1, as seen from the endorsements contained on the reverse of the first page. His residential address is also indicated as the same.
26. Therefore, it is clear that the second defendant Dr.N.Sethuraman, his wife Dr.Rajam Sethuraman, who is the first plaintiff herein and their daughter Dr.S.Brathibha, all had their residence only at 2/47-B, Melur Road, Uthangudi, Madurai - 625 107. The address of the registered office of the Trust was also just the same, as per the original Deed of Trust. Clause 17 of this Deed of Trust contained an interesting provision which reads as follows:
"LITIGATION - JURISDICTION:
For the purpose of jurisdiction, the City Civil Court Madurai and the Original side of the High Court, Madras, shall be deemed to be the Court having jurisdiction to entertain and try the litigation."
27. Since parties cannot confer jurisdiction upon a Court by contract, the aforesaid Clause 17 is of no relevance, unless a part of the cause of action had arisen at Chennai. Even if a part of the cause of action had arisen at Chennai, for the present suit, it is necessary for the plaintiffs to have obtained leave under Clause 12 of the Letters Patent. Though the plaintiffs have obtained leave under Clause 12 of the Letters Patent, in A.No.42 of 2012, by order dated 10.01.2012, the prayer for leave under Clause 12 did not include the first defendant. A look at the Judge's summons in support of A.No.42 of 2012 filed under Clause 12 of the Letters Patent would show that the plaintiffs sought leave only insofar as the defendants 2 to 8, 18, 19 and 21 are concerned. This was on the ground that these defendants were neither residing nor carrying on business within the jurisdiction of this Court.
28. But, insofar as the first defendant is concerned, the plaintiffs did not seek leave under Clause 12. However, they have given the address of the registered office of the first defendant as No.4, Dr.Natesan Road, Ashok Nagar, Chennai 600 083. But, this is not the address of the registered office of the first defendant Trust, as demonstrated by Plaint document No.1.
29. Plaint document No.2 is a "Supplementary and Rectification Deed of Mahasemam Trust", executed on 21.12.2000 at Madurai and registered again in the Office of the Joint Sub Registrar, Madurai (North). The objects for which this Deed was executed, were 3 fold namely, (i) to include the name of one P.Dhandapani as one of the Trustees with effect from 5.11.2000; (ii) to amend the objects clause and the clause relating to the sources of income of the Trust and (iii) to invest cheque signing powers upon the President or the Treasurer.
30. Interestingly, the fourth defendant H.Sivanantham who has informed the Advocate Commissioner in writing that he is only a nam-ke-vas Trustee, had attested the original Deed of Trust dated 7.7.1999 as well as this Supplementary Deed of Trust dated 21.12.2000. Even this Supplementary Deed of Trust dated 21.12.2000 did not contain any clause for shifting the address of Registered Office of the Trust from Madurai to Chennai.
31. Plaint document No.4 is another Supplementary Deed of Trust executed on 10.2.2005. Interestingly, the first plaintiff appears to have resigned, by the time this Deed was executed. After her resignation, the defendants 2, 3, 4 and one S. Ragothaman appear to have been inducted as Trustees. Therefore, this plaint document No.4 viz., the Supplementary Deed dated 10.2.2005 was signed by the defendants 2, 3 and 4 along with the then existing Trustees. The purpose for which this Supplementary Deed was executed was to amend the clauses relating to resources of the Trust, handling of bank accounts, investment of the funds and certain other provisions. This plaint document No.4 was also executed only at Madurai and registered as document No.37 of 2005 in the Office of the Joint Sub Registrar of Madurai (North).
32. Even plaint document No.4 dated 10.2.2005 did not contain a clause for shifting the Registered Office of the Trust from Madurai to Chennai. On the contrary, an amendment was introduced by plaint document No.4, to clause 17 that concerned the question of jurisdiction. The original clause 17 which I have extracted in paragraph 26 above, conferred jurisdiction upon the City Civil Court at Madurai and the Original Side of this High Court. By plaint document No.4, the said clause 17 was sought to be modified as follows:-
"For the purpose of jurisdiction, the City Civil Court at Madurai and the Original Side of the High Court, Madras, Madurai Bench, shall be deemed to be the Court having jurisdiction to entertain and try the litigation."
As pointed out earlier, neither the original clause 17 nor the amended clause 17 could really confer jurisdiction upon this Court in so far as a suit under Section 92 is concerned. Perhaps in respect of suits filed by the Trust against third parties, but not under Section 92, they may be able to come to this Court if a part of the cause of action had arisen here. In any case, the Original Side of this Court never went to the Madurai Bench. Therefore, the amendment to clause 17 has no effect, in so far as the jurisdiction of this Court under Section 92 is concerned.
33. Plaint document No.8 is another Supplementary Deed of Trust dated 6.3.2007. This was also executed only at Madurai and registered in the Office of the Joint Sub Registrar, Madurai (North) as document No.84 of 2007. The purpose for which this Supplementary Deed was executed was also to amend the objects clause and the clause relating to funds. Even this plaint document No.8 did not seek to shift the Registered Office of the Trust from Madurai to Chennai.
34. The above facts, as revealed by plaint document nos. 1, 2, 4 and 8, coupled with the fact that all the meetings of the Board of Trustees, as reflected in all the Board Resolutions, enclosed to the Advocate Commissioner's report, have taken place only at the Madurai Office, make it clear that the plaintiffs have falsified the address of the first defendant Trust, only with a view to create an identity conflict with the ninth defendant and to file the Scheme suit on the file of this Court.
35. If the plaintiffs had not given in the plaint, the address of the Registered Office of the first defendant Trust as No.4, Dr.Natesan Road, Ashok Nagar, Chennai-83, the above suit would not have been numbered, unless the plaintiffs had taken leave under clause 12 of the Letters Patent, in addition to the leave under Section 92 CPC. The application for leave under Clause 12 of the Letters Patent, filed in A.No.42 of 2012, did not cover the first defendant. Therefore, the above suit, as it stands today, is not maintainable for want of leave under Clause 12 of the Letters Patent, as against the Trust, for framing of a Scheme for which alone the suit has been filed.
36. It is not as though the plaintiffs are innocent third parties, who were misled to think that the Registered Office of the Trust is at Chennai, merely on account of a mention somewhere in some report. The first plaintiff was the founder Trustee and the Registered Office was located at her own residence at Madurai. The second defendant who is now the Chairman of the Trust, is the husband of the first plaintiff and both of them reside under the same roof. Therefore, the first plaintiff cannot feign ignorance of the fact that the Registered Office of the Trust was only at Madurai and it continues to be at Madurai.
37. Even the plaintiffs 2 and 3 cannot feign ignorance about the address of Registered Office of the Trust. The third plaintiff is the wife of the second plaintiff. In their affidavit in support of the application for leave under Section 92 of the Code, the second plaintiff has claimed that he was associated with the affairs of the Trust, ever since December 2000, when his long time close friend by name P.Dhandapani became a Trustee. Therefore, the second and third plaintiffs, by their own claim, have been associated with the Trust for the past about 13 years from the year 2000. Hence, they are supposed to have known the correct address of Registered Office of the Trust. The verification by the plaintiffs, towards the end of the plaint, is not expected to be an empty formality. Therefore, the statement made by the plaintiffs in the long and short cause title of the plaint as though the first defendant Trust has its Registered Office at Chennai appears to be a deliberate falsehood. At the end of paragraph 37 of the plaint, the plaintiffs have reiterated that the Registered Office of the first defendant Trust as well as the Registered Office of the ninth defendant company are within the territorial jurisdiction of this Court at Ashok Nagar, Chennai. This is a false statement made by the plaintiffs, though they know fully well that the Registered Office of the first defendant Trust is at Madurai.
38. As a matter of fact, in her counter affidavit to A.No.694 of 2012, the daughter of the first plaintiff, has questioned the maintainability of the above suit, for want of jurisdiction. The daughter of the first plaintiff has filed the counter affidavit, on behalf of the defendants 20 and 21 and she has stated in para 2 of her counter affidavit in A.No.694 of 2012 that the Registered Office of the first defendant Trust is at No.2/47-B, Melur Road, Uthangudi, Madurai-625 107 and that the plaintiffs have misled this Court by giving a wrong address within the jurisdiction of this Court and that the plaintiffs are thus guilty of coming to Court with unclean hands. In paragraph 3 of the counter affidavit, the defendants 20 and 21 have stated that the plaintiffs 2 and 3 are also residing only at Madurai and that they have given local address deliberately to bring this suit within the jurisdiction of this Court.
39. The second plaintiff has filed a reply to the counter affidavit of defendants 20 and 21. In paragraph 3 of the reply affidavit, the second plaintiff has relied upon plaint document No.14 which is the copy of the Annual Report of the first defendant Trust for the year 2008-2009 and it is available from pages 226 to 247 of the typed set of documents filed by the plaintiffs. In the last page of the said report for the year 2008-2009 (page 247), it is indicated as though the Registered Office of the Trust is at No.4/22, Dr.Natesan Road, Ashok Nagar, Chennai-83. Therefore, the plaintiffs reiterate that the Registered Office of the first defendant Trust is only at Chennai.
40. But unfortunately for the plaintiffs, there is intrinsic evidence even in the said Annual Report to falsify the said claim. This evidence is in the following form:-
(i) At page 228, where the Annual Report 2008-2009 begins, the address of the first defendant Trust is indicated as "1,2, Lake Area, Melur Road, Uthangudi Post, Near Meenakshi Mission Hospital and Research Centre, Madurai-625 107";
(ii) At page 230, the names of persons who constituted the Editorial Committee of the said Report are furnished. Though there are several names, the names of only two persons i.e., C.Lakshmanan and G.Panneerselvam alone appear along with their addresses. Their addresses are only at Madurai. The address of G. Panneerselvam is indicated as that of the Trust itself and it is at 1,2, Lake Area, Melur Road, Uthangudi Post, Near Meenakshi Mission Hospital and Research Centre, Madurai-625 107;
(iii) At page 238, the particulars of the members of the Board of Trust are furnished. The addresses of all of them including that of the defendants 2 to 4, are indicated only at Madurai. Not a single person has his address at Chennai;
(iv) Even the income and expenditure account for the year ended 31.3.2009 in comparison to the year ended 31.3.2008, as furnished in page 241, which is signed by the Chartered Accountant as well as by defendants 2 and 4 show that the account was finalised and passed only at Madurai on 8.5.2009; and
(v) The columns regarding managerial remuneration, auditor's remuneration etc., furnished by the Chartered Accountant and attested by the defendants 2 and 4, available at page 244, shows that it was signed at Madurai;
41. Therefore, it is clear that the plaintiffs have furnished a false address in the plaint deliberately for the purpose of maintaining the scheme suit in this court. The information contained in the Annual Report 2008-2009 cannot be taken to be correct or true. The second plaintiff, in his reply, has also relied upon a Statement of Account of the first defendant Trust as on 21.9.2012 with the HDFC Bank. Apart from the fact that it is only a xerox copy, I do not wish to attach any credibility to the same, without a concrete proof in the form of a Supplementary Deed of Trust. When every amendment to the original Deed of Trust was effected through Supplementary Deeds, all of which were executed and registered at Madurai and when none of these Supplementary deeds contain a clause for change of registered office of the Trust from Madurai to Chennai, I do not know how they could have shifted the address of the Registered Office of the Trust to Chennai without any scrap of paper.
42. Interestingly, the second defendant has not come up with any counter to many of the above applications taken out by the plaintiffs. Though the second defendant clearly knows where the Registered Office of the Trust is, he has not chosen to challenge the maintainability of the suit, on the ground that the Registered Office of the Trust is at Madurai. The reasons appear to be too obvious to state.
43. In the counter affidavit of Dr.S.Brathibha, the daughter of the first plaintiff and the second defendant, she has made serious allegations of collusion between the first plaintiff and the second defendant. The relevant portion of paragraph 4 of the counter affidavit of Dr.S.Brathibha, filed on behalf of defendants 20 and 21, to A.No.694 of 2012 reads as follows:-
"4. I state that the second respondent herein Dr.N. Sethuraman is the permanent resident of Madurai and husband of the first plaintiff, both of them residing at one roof at Madurai. I submit that the first plaintiff and the second defendant are the mother and father of these respondents and Dr.N.Sethuraman sets up his wife to file the above suit for the purpose of supporting his younger son, Dr.S.Gurushankar. I state that there are several litigations between the mother, father and younger son, Dr.Gurushankar, on one side and elder son, S.Ramesh, 20th respondent herein, along with Dr.Brathibha, the 21st respondent herein, on the other side are pending before Subordinate Courts at Madurai. I submit under the circumstances Dr.N.Sethuraman engineered the present suit through his wife, Dr.Mrs.Rajam Sethuraman with an intention to create problems to these respondents by filing the suit in the Original Side of the High Court without territorial jurisdiction."
44. When such a serious allegation of collusion is made by the daughter against the mother and the father, one would expect at least one of them to file a reply refuting the said allegation. But interestingly, it is the second plaintiff and not the first plaintiff (mother) who has filed a reply. The second defendant (father) has not chosen to file a rejoinder to the counter filed by the daughter making the above allegations.
45. Some times, events speak more eloquently than the parties themselves could do. This is how the principle of res ipso loquiter developed. Apart from the failure of the second defendant (father) to refute the allegations of collusion made by the daughter, there is one more interesting twist. The last of the applications filed by the plaintiffs is O.A.No.520 of 2013. The prayer in O.A.No.520 of 2013 is to restrain the defendants 9 to 17 from transferring the control of the 9th defendant in favour of DWM Investments (Cyprus) Ltd. The said application was filed on 15.7.2013 and was moved before me for ad interim ex parte orders of injunction on 19.7.2013. I granted an order of status quo on the said date. Thereafter, the 9th defendant came up with a counter seeking to vacate the interim order.
46. When the above application O.A.No.520 of 2013 was posted along with other applications for hearing, the second defendant Dr.N.Sethuraman had come up with an application in O.A.No.901 of 2013 under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim order of injunction restraining (i) SMILE Micro Finance Ltd., which is the 9th defendant in the above suit and (ii) DWM Investments (Cyprus) Ltd., from taking any major management decisions in the 9th defendant company. This application has been filed by Dr.N.Sethuraman on the basis of a Shareholders Agreement and a Subscription Agreement, both dated 21.12.2009, which contain a clause for arbitration.
47. In other words, Dr.N.Sethuraman, who is the second defendant in the above suit and who has put up a make-belief fight against the plaintiffs by filing a written statement as though he is opposing the allegations made by the plaintiffs, has now come up with an application seeking the very same interim relief that the plaintiffs have also sought against the 9th defendant and the foreign investor. To put it differently, the plaintiffs and the second defendant have consensus ad idem in so far as the prayer in O.A.No.520 of 2013 in the above suit is concerned.
48. There is yet another reason to think that there is collusion. Despite taking formal objections to the allegations contained in the plaint, the second defendant has acted very clever by willingly producing some records to the Advocate Commissioner and withholding many records from him. By refraining from fighting the suit and the miscellaneous applications with his heart and soul, but seeking similar reliefs in collateral proceedings, the second defendant appears to be reaping the benefits of the Scheme suit filed by his wife, so that he could settle scores (i) first with his daughter and (ii) next with foreign investors. Therefore, the allegation made by his daughter that the suit on hand is not really a Scheme suit under Section 92 CPC, but actually a scheme suit engineered by his Doctor-father, cannot be brushed aside easily.
49. It is well settled that where leave is necessary, the grant of such leave is a condition precedent and it should have been obtained at the time of institution of the suit. As observed by a Division Bench of this court in Clan Line Steamers Ltd., vs. Gordon Woodroffe [(1979) 92 LW 541], "if leave to sue was required under clause 12, but it was not obtained at the time of institution of the suit, that defect cannot be cured by subsequently granting leave".
50. Today, it is borne out by records that the plaintiffs did not seek or obtain leave under clause 12, in so far as the first defendant trust is concerned. Therefore, the suit against the first defendant is not maintainable. If it is not maintainable as against the first defendant, it cannot proceed against the other defendants, since the suit is primarily one under section 92 of the Code for framing a scheme for the administration of the first defendant trust.
51. The non maintainability of the suit due to a procedural lacunae (want of leave under clause 12), has today transcended the stage of mere technicality, due to the plaintiffs furnishing a wrong address deliberately for the first defendant trust. When people who come to court, resort to such tactics, the court is duty bound, as pointed out by the Supreme court in T.Arivandandam vs. Satyapal {1977 (4) SCC 467} to throw such suits out even without any formal request from the defendants.
52. Keeping the above prelude in mind, let me now take up the applications one after another.
O.A.Nos.158 and 159 of 2012:
53. The reliefs sought by the plaintiffs in these applications are (i) to restrain the ICICI Bank (22nd defendant) from making any payment from the current account of the 9th respondent and (ii) to restrain the Indian Bank (23rd defendant) from making any payment from the current account of the 9th respondent
54. In both these applications, this Court ordered only notice, when they came up for hearing on 30.3.2012. No ex parte interim order was granted. Now a period of one year and 9 months have passed. Therefore, at this distance of time, I do not see any justification to grant an interim order.
55. Even on merits, the plaintiffs have not demonstrated any prima facie case, balance of convenience or irreparable hardship. The main allegation on the basis of which the plaintiffs seek these interim reliefs, is that the funds of the Trust have been diverted, the members of the Trust have been transferred and huge payments are made to and out of the account of the 9th defendant. But there is no proof in support of all these allegations.
56. In any case, as I have pointed out earlier, the plaintiffs have not come to Court with clean hands. They have given a false address for the first defendant Trust, with a view to avoid an application under Clause 12 of the Letters Patent, at least in so far as the first defendant is concerned. Therefore, such persons are not entitled to the relief of injunction. Moreover, no injunction can be granted against the operation of bank accounts of a running company. Hence, O.A.Nos.158 and 159 of 2012 are dismissed.
A.No.1183 of 201257. This application is for the appointment of an Advocate Commissioner/ Chartered Accountant or an Auditor for the purpose of inspecting all the account books, ledgers, computerised accounting, financial dealings including the bank accounts, profit and loss account, income tax accounts, the report submitted by the Auditor of the Trust from the year 2005 till date and for submitting a report about them.
58. Though by an ex parte order, a Commissioner was appointed on 30.3.2012 by this Court, with a mandate to submit a report on or before 6.6.2012, the Trustees appear to have selectively given a few ledgers and a few resolutions. Therefore, the Commissioner filed only an interim report.
59. In view of the above, Mr.K.Subramaniam, learned Senior Counsel for the plaintiffs submitted that the Trustees should be directed to cooperate with the Advocate Commissioner and that only after all the records are handed over to the Advocate Commissioner, a clear picture about the manner in which the Trust is functioning, could be deciphered. But I do not think that it is necessary. The reasons are as follows:-
(i) Many of the Trustees including the fourth defendant, the seventh defendant and the eighth defendant have made it clear that they are only dummies or nam-ke-vas Trustees. It appears that the second defendant alone has absolute control over the affairs of the Trust and the other Trustees are only name lenders.
(ii) The plaintiffs allege that the second defendant is in collusion with the daughter and son. The daughter has alleged that the first plaintiff (mother) and the second defendant (father) are in collusion. It appears to me that all the members of the family are in collusion to settle scores with third parties. Therefore, the second defendant may not even allow the Advocate Commissioner to execute the warrant of commission fully and finally.
(iii) In any case, this Court cannot appoint an Advocate Commissioner to inspect the books of accounts, ledgers, bank accounts, income tax accounts etc., and file a report. Under Order XVI, Rule 6, of the Code of Civil Procedure, the plaintiffs can always summon any person to produce a document. Instead of taking recourse to such a step, the plaintiffs have sought the appointment of an Advocate Commissioner. It is well settled that an Advocate Commissioner can be appointed for specific purposes under Order XXVI of the Code either for examination of witnesses or for making local investigations or for conducting scientific investigation or for the performance of a ministerial act or for the sale of movable property or for examination or adjustment of accounts or for partition of immovable property. The power to issue a commission under Order XXVI, Rule 11, for examination or adjustment of accounts, can be exercised at the time of trial, if found necessary. At this stage, no justification has arisen.
(iv) The bank accounts, profit and loss account, income tax account etc., are all available in public domain and can always be summoned by this Court at the time of trial, if found necessary. Therefore, the appointment of a Commissioner is unnecessary.
60. For all the above reasons, the application for appointment of a Commissioner A.No.1183 of 2012 is dismissed. The Commissioner already appointed shall stand discharged.
A.Nos.3572 to 3574 of 2012:
61. The reliefs sought in these applications are (i) a direction to one Mr.S. Ramesh (son of the second defendant) who is the Managing Trustee of the 18th defendant, to produce the original share certificates of the Power Trust; (ii) a direction to the defendants 2 to 8 to submit details of the transfer of the first respondent Trust members to the 9th defendant company with effect from 1.4.2011; and (iii) a direction to the defendants 9 to 17 to submit details of the royalty amount paid by the 9th defendant to the first defendant Trust.
62. In so far as A.No.3572 of 2012 is concerned, the direction sought is actually in the nature of a direction summoning the production of documents. This can be done at the time of trial in terms of the provisions of Order XVI, Rule 6, CPC. Therefore, with this observation A.No.3572 of 2012 is dismissed.
63. In so far as A.No.3573 of 2012 is concerned, the prayer is for directing defendants 2 to 8 to submit the details of the transfer of the first defendant Trust member to the 9th defendant with effect from 1.4.2011. But fundamentally, this application appears to have been filed under a total misconception about what the term "Trust members" connote.
64. The term "Trust members" would normally mean only the Trustees. A Trust can have (i) an author or a founder (ii) a Trustee and (iii) beneficiaries. It appears that the plaintiffs have misconstrued and misunderstood the beneficiaries of the first defendant Trust to be the members of the Trust. Out of such a misunderstanding, the plaintiffs seek a direction in A.No.3573 of 2012.
65. From the averments made in the plaint, it appears that the first defendant Trust had lot of women beneficiaries who had formed themselves into Self Help Groups and to whom financial aid was given by the first defendant Trust. These persons are not Trust members, but are only beneficiaries.
66. Even if they have been transferred enbloc as borrowers of the 9th defendant Micro Finance Company, it would have no bearing upon the claim made in the suit. There is no prohibition in law for the beneficiaries of a Public Charitable Trust, to cease to be the beneficiaries of the Trust. There is also no prohibition in law for these beneficiaries to go to a Micro Finance Company and obtain a loan. But the plaintiffs have misconstrued these beneficiaries to be the members. Therefore, A. No.3573 of 2012 is bad for a fundamental flaw in the understanding of the plaintiffs. Hence, this application is dismissed.
67. The next application A.No.3574 of 2012 is for a direction to the defendants 9 to 17 to submit details of the royalty amount paid by the 9th defendant to the first defendant Trust. The 9th defendant has filed a counter to this application. In this counter, they have categorically stated in para 17 that the 9th defendant has not paid any royalty either to the first defendant or to any other defendants. They have made it clear that the 9th defendant had no financial dealings with the first defendant Trust in connection with the transfer of Trust members. Therefore, no direction can be given to the 9th defendant to furnish details of any royalty amount that they have not paid to the first defendant. Hence, A.No.3574 of 2012 is dismissed.
A.Nos.2927, 2928 and 2929 of 2012:
68. These applications are filed by the defendants 15, 16 and 17 for striking out their names from the array of parties. The applicants claim that they are not necessary and proper parties to the suit and that they have unnecessarily been dragged into a Scheme suit filed under Section 92 of the Code of Civil Procedure for the framing of a Scheme for the administration of the Trust.
69. But the applications are opposed by the plaintiffs by filing independent counter affidavits running to about 26 pages containing 42 paragraphs. But 90% what is contained in the counter affidavits are only repetition of the plaint averments and the extract of the Commissioner's Report.
70. In so far as the prayer of defendants 15 to 17 to strike out their names from the array of parties is concerned, the plaintiffs have relied upon a Shareholders Agreement dated 21.12.2009 and a Subscription Agreement dated 21.12.2009 entered into by and between 4 parties. To the Shareholders Agreement dated 21.12.2009, there were 4 parties viz., (i) the 9th defendant herein described as "the Company"; (ii) DWM Investments (Cyprus) Ltd., a company incorporated at Cyprus and described in the agreement as "Investor"; (iii) a group of about 5 persons collectively described as "Promoters" including the second defendant herein, his daughter Dr.S.Brathibha and his 2 sons Dr.S.Guru Shankar and S.Ramesh; and (iv) a group of about 17 persons described as "Existing Shareholders". To the Subscription Agreement dated 21.12.2009, all of them except "Existing Shareholders" were parties.
71. Therefore, the plaintiffs claim that the defendants 15 to 17 herein who represented DWM Investments (Cyprus) Ltd., and who got nominated to the Board of Directors of the 9th defendant are necessary and proper parties to the above suit.
72. In other words, the theme of the song sung by the plaintiffs for roping in the defendants 15 to 17 in the above suit, is that they represented DWM Investments (Cyprus) Ltd., in the Shareholders Agreement and Subscription Agreement and they participated in the management of the affairs of the 9th defendant company.
73. But at the outset, it is surprising that the plaintiffs claim knowledge about the Shareholders Agreement and the Subscription Agreement. Neither the first plaintiff nor the plaintiffs 2 and 3 were parties to those two agreements. The plaintiffs have alleged collusion between the second defendant Dr.N.Sethuraman and his daughter and son. But the daughter has alleged that the suit itself is the brainchild of her father who is the second defendant. The statement of the daughter appears to be more than probable in view of the fact that the second defendant has independently sued the 9th defendant and the foreign investor DWM Investments (Cyprus) Ltd., in O.A.No.901 of 2013. The relief sought by the second defendant in that application is exactly the same as the plaintiffs seek in O.A.No.520 of 2013. Therefore, I have to view with suspicion, the impleadment of defendants 15 to 17 as parties to the above suit.
74. In any case, keeping my suspicion aside for a minute, let me have a look at the plaint averments to see if the plaintiffs either have a cause of action against the defendants 15 to 17 or seek any reliefs against them.
75. In the entire plaint running to about 38 paragraphs, the plaintiffs have not stated anything about the defendants 15 to 17. Even in the cause of action paragraph viz., paragraph 37, the plaintiffs have not indicated any semblance of a cause of action against defendants 15 to 17.
76. No relief is also sought against defendants 15 to 17 in the plaint. But it is only in the counter affidavit filed in application A.Nos.2927 to 2929 of 2012 that the plaintiffs speak about the Shareholders Agreement, Subscription Agreement etc., dated 21.12.2009. It is not the case of the plaintiffs that they came to know about those two agreements only after the suit was instituted. If this was so, they could not have impleaded defendants 15 to 17 even in the first instance, but they would have only come up with an application for impleadment subsequently.
77. In other words, on the basis of subsequent pleadings made in interlocutory applications, the impleadment of a party even in the first instance cannot be justified. In so far as a civil suit is concerned, there can be no doubt that the plaintiff is the dominus litus. Therefore, the plaintiff will certainly have a right to implead anyone against whom he or she had a cause of action or anyone against whom he or she seeks a relief.
78. But the party, who is so impleaded, should satisfy at least any one of the two tests viz., that of being a necessary or at least a proper party.
79. In S.Krishnan vs. Rathinavel {2007 (2) LW 810}, I had an occasion to consider the scope of Order I, Rule 10, CPC. After referring to various decisions, I indicated the tests to be applied in paragraph 17 of the decision as follows:-
17. In a nut shell, the tests to be applied for determining the right of a party to implead another, in a pending suit or other proceeding, may be crystallized into the following categories:-
a) If without his presence no effective and complete adjudication could be made;
b) If his presence is necessary for a complete and effectual adjudication of the dispute though no relief is claimed against him;
c) If there is a cause of action against him;
d) If the relief sought in the suit or other proceedings is likely to be made binding on him;
e) If the ultimate outcome of the proceedings is likely affect him adversely;
f) If his role is really that of a "necessary witness" but is sought to be camouflaged as a "necessary party";
If a party to a litigation satisfies the court that the person sought to be impleaded, passes any one or more of the above tests, then he is entitled to get the discretion of the court exercised in his favour. The above tests are not exhaustive and at times, even if a person falls under any one of the above categories, the court may refuse to implead him. To quote an example, a subsequent purchaser of a property, which forms the subject matter of the suit, may satisfy the tests (d) and (e) above mentioned and yet the court may decline to implead him on the basis of the doctrine of lis pendens. Therefore the above list is only a broad statement of the principles that could be culled out from judicial precedents."
80. The above decision was also referred to with approval by N.Paul Vasanthakumar, J., in S.Krishnakumari vs. G.Vijayalakshmi @ Brinda {2010 (1) L.W. 243}.
81. Keeping the above principles in mind, if we have a look at the plaint, it will be seen that the plaintiffs have had no cause of action against the defendants 15 to 17 in their individual capacities. No relief is also sought against defendants 15 to 17. They have unnecessarily been roped in, obviously with a view to enable the second defendant to settle scores with the foreign investors DWM Investments (Cyprus) Ltd., as seen from the collateral proceedings in O.A.No.901 of 2013 filed by the second defendant under Section 9 of the Arbitration and Conciliation Act, 1996. A reference to the order passed by me in the said application today (simultaneously with this order) would show that what the second defendant is seeking to achieve in this suit through his wife under Section 92 of the Code, is the same as the second defendant is seeking to achieve in his own right under Section 9. In such circumstances, it is clear that the defendants 15 to 17 have been deliberately impleaded with malicious intentions and that they are neither necessary nor proper parties. Hence the applications A.Nos.2927, 2928 and 2929 of 2012 are allowed.
O.A.No.694 of 2012:
82. The plaintiffs seek in this application, an interim order of injunction to restrain the 9th defendant from making any payment to the 21st defendant. This prayer is sought on the basis that the daughter of the first plaintiff and the second defendant, who was a Director both in the 9th defendant and in the 21st defendant, had made a claim for payment of a license fee of more than Rs.5.50 crores from the 9th defendant on the basis of an agreement dated 5.4.2007 executed by the second defendant as the Chairman of the 9th defendant with the 21st defendant. The plaintiffs claim that the funds of the Trust and the properties of the Trust have been diverted to the 9th defendant and that from the 9th defendant the funds are sought to be diverted to the 21st defendant on the basis of such a bogus agreement.
83. When a company in Cyprus by name DWM Investments (Cyprus) Ltd., invested Rs.50 crores in the 9th defendant company, under 2 agreements dated 21.12.2009, they were not aware of the existence of such an agreement dated 5.4.2007. But the 21st defendant served a legal notice upon the 9th defendant in September 2009. When the second defendant was questioned by the foreign investors, the second defendant, his daughter and all his nominee Directors resigned from the Board of Directors of the 9th defendant in October 2011. Thereafter, the second defendant, as though to demonstrate his purity by taking a test of fire, lodged a criminal complaint against his daughter, alleging forgery of his signature in the agreement dated 5.4.2007.
84. Therefore, on the basis of the above, the plaintiffs seek an interim injunction against the 9th defendant from making any payment to the 21st defendant on the basis of any agreement that the 9th defendant had with the 21st defendant.
85.But the 9th defendant, represented by its Chairman and Managing Director, has filed a counter affidavit to O.A.No.694 of 2012. In paragraph 13 of the counter affidavit, the 9th defendant has stated categorically that they are not liable to pay any amount to the 21st defendant. As a matter of fact, the 21st defendant has already filed a suit against the 9th defendant in O.S.No.2432 of 2012 and the 9th defendant is defending the said suit.
86. In the course of hearing of the above applications, the Chairman and Managing Director of the 9th defendant filed an additional affidavit. Paragraphs 2 to 4 of the additional affidavit reads as follows:-
"2. I state that the 9th Respondent herein denies the existence of any agreement dated 5.4.2007 and also denies any liability arising out of the alleged agreement.
3. I state that till date the 9th Respondent herein has not made any payment to the 21st Respondent under the said agreement dated 5.4.2007. The payments have been made only for usage of software for the period 1.4.2011 to 31.3.2013 as per the rates agreed upon between us and the 21st Respondent in the Letter of Intent dated 27.3.2012. The total payment for this period amounts to Rs.1,25,30,095/- (Rupees One Crore Twenty Five Lakhs Thirty Thousand and Ninety Five only).
4. I state that as on 31.3.2013 we have stopped using the software of the 21st Respondent and have also issued a "termination letter" to that effect. Hence presently there is no payment being made to the 21st Respondent and no business relationship exists."
87. In the light of the above statement made on oath by the 9th defendant, there is no justification for the grant of an order of injunction. Moreover, I have already expressed my doubts about the maintainability of the suit without a prior leave under Clause 12 of the Letters Patent, in so far as the first defendant is concerned. Therefore, this application is also liable to be dismissed. Accordingly, O.A.No.694 of 2012 is dismissed.
O.A.No.520 of 2013:
88. This is an application filed by the plaintiffs seeking an interim order of injunction restraining the respondents 9 to 17 from transferring the control of the 9th defendant company in favour of a third party by name DWM Investments (Cyprus) Limited.
89. This application is filed by the plaintiffs on the ground that under two agreements dated 21.12.2009, one termed as Subscription Agreement and another termed as Shareholders Agreement, a company incorporated at Cyprus by name DWM Investments (Cyprus) Ltd., invested Rs.50 crores in the 9th defendant company; that by virtue of those agreements, the defendants 15 to 17 became the nominee Directors on the side of the Investors in the 9th defendant company; and that by a public notice issued in newspapers in the name of the 15th defendant, on 15.6.2013, DWM Investments (Cyprus) Ltd., informed the public of the taking over of the control of the 9th defendant company and that therefore, it is necessary to injunct such an action, for stopping the investment of the first defendant Trust from slipping away to a foreign country thereby becoming untraceable.
90. In order to appreciate the scope of the relief sought in this O.A.No.520 of 2013, it is unavoidable but to travel beyond the plaint averments. This is for the reason that in O.A.No.520 of 2013, the plaintiffs have pleaded so many things that do not form part of the plaint averments. The score that is actually sought to be settled in this application is not actually between the plaintiffs and the Trust on the one hand and the Trustees on the other hand. The fight in this application is actually a proxy war that the plaintiffs seek to fight on behalf of the second defendant against the foreign investor DWM Investments (Cyprus) Limited. Therefore, with great reluctance, I have to go beyond the pleadings in the plaint, as the plaintiffs dragged me to do so by introducing new averments in the present application without incorporating those averments in the original plaint.
91. A list of dates and events, as culled out from (i) the plaint (ii) the affidavit of the plaintiffs in support of O.A.Nos.694 of 2012 and 520 of 2013 and (iii) the averments contained in the affidavit of the second defendant in support of his own application in a collateral proceeding in O.A.No.901 of 2013 under Section 9 of the Arbitration and Conciliation Act, 1996 would reveal the following sequence of events:-
(i) The first defendant Trust was established in July 1999;
(ii) The 9th defendant company was started by the second defendant and his coterie in November 2005;
(iii) On 21.12.2009, two agreements came into existence. One was a Subscription Agreement entered into by and between 3 parties viz., the 9th defendant, the foreign investors by name DWM Investments (Cyprus) Ltd., and the entire family of the second defendant describing themselves as "Promoters". To the Shareholders Agreement entered into on the same day, there were 4 parties. All the 3 parties to the Subscription Agreement along with a group of persons styled as "Existing Shareholders" were the parties to the Shareholders Agreement. Under both the above agreements, DWM Investments (Cyprus) Ltd., invested Rs.50 crores in the form of equity shares in the 9th defendant company and acquired 66.64% of the paid up capital of the company. However, the Board of Directors of the 9th defendant was to comprise of 9 persons, 6 nominated by the Promoters and 3 by the foreign investors. The control of the 9th defendant was also to continue with the Promoters. To facilitate this, the foreign investors gave proxies in favour of the second defendant to the extent of about 31% of the shares.
(iv) However, in September 2011, the 9th defendant company received a shocking legal notice from the 21st defendant claiming a sum of Rs.5.51 crores allegedly due under a Software License and Maintenance Agreement dated 5.4.2007 executed by the second defendant as Chairman and Managing Director of the 9th defendant company, in favour of a company floated by his daughter.
(v) Shocked at such a claim that came after nearly 2 years of the equity participation, the foreign investors issued Indemnity Notices to the second defendant, forcing the second defendant, his daughter and other nominee Directors to resign from the Board of Directors of the 9th defendant company in October 2011. Simultaneously, the foreign investor revoked the proxies in favour of the second defendant;
(vi) Instead of challenging the revocation of proxies that happened in October 2011, the second defendant appears to have set up the plaintiffs to file the above suit, under the pretext of a Scheme suit under Section 92 of the Code. The plaint was actually signed and verified in January 2012. Instead of opposing serious allegations of mismanagement, collusion and diversion of funds made against him by the plaintiffs, the second defendant virtually enjoyed the breeze under the shadow of the litigation initiated by the plaintiffs for more than a year;
(vii) In June 2013, the foreign investor issued a paper publication indicating the change of control of the management of the 9th defendant in terms of Article 6.4 read with Article 3.2.3 of the Shareholders Agreement and Article 8.3 of the Subscription Agreement. Immediately, one would have expected the Promoters, who could have been aggrieved by such an action, to come up with a legal action against the foreign investor, but the Promoters did not do so;
(viii) On the other hand, the plaintiffs came up with the above application O.A.No.520 of 2013, seeking an injunction restraining the 9th defendant from transferring its control to the foreign investor, thereby virtually singing the tune intended for the second defendant and the group of persons termed as "Promoters";
(ix) Thereafter, the second defendant himself has independently come up with a proceeding under the Arbitration and Conciliation Act, 1996 in O.A.No.901 of 2013.
92. Today, by a separate order, I had dismissed O.A.No.901 of 2013. The reasons stated by me in the said order would equally hold good even for O.A.No.520 of 2013.
93. However, relying upon two decisions of the Supreme Court and one decision rendered by me, Mr.K.Subramaniam, learned Senior Counsel for the plaintiffs submitted that when allegations of diversion of the funds of a Public Charitable Trust are made, any change in the control of management of a company which had had the benefit of such diversion of funds cannot be permitted.
94. But I do not think that the plaintiffs have made out a prima facie case of diversion of funds. On the contrary, the Trust, which was established as a Public Charitable Trust, appears to have entered into a commercial venture as a non-banking financial Corporation by creating the 9th defendant company and thereafter inviting a foreign investor to pump in Rs.50 crores. In other words, the funds have flowed in the reverse direction.
95. Since the first defendant Trust was created by the first plaintiff and her daughter, perhaps as the brainchild of the second defendant and also since the second defendant later promoted the 9th defendant company, the parties have started suffering from an identity crisis. I do not know how after the creation of the 9th defendant company, the Income Tax Department continued to treat the first defendant as a Public Charitable Trust. The Trust as well as the 9th defendant, appear to have been treated as a family enterprise by the second defendant, his wife, his daughter and 2 sons, which is why the family members are before various Courts, including Criminal Courts, seeking partition in a camouflaged manner.
96. In T.Varghese George vs. Kora K.George {2012 (1) SCC 369}, the Supreme Court was primarily concerned with the question whether a Public Charitable Trust would lose its character simply because of the institutions run by it getting recognised as minority institutions. The Supreme Court answered the question in the negative. Consequently, the Supreme Court held that a Scheme had to be framed under Section 92.
97. In Shiromani Gurdwara Parbandhak Committee vs. Mahant Harnam Singh {2003 (11) SCC 377}, the Supreme Court reiterated the time tested principle that a suit under Section 92 of the Code is fundamentally on behalf of the entire body of persons who are interested in the Trust. It is a representative suit and it binds not only the parties named in the cause title, but all those who share common interest and who are interested in the Trust.
98. In Sanjay Gupta vs. The Corporation of Chennai {2011 (3) CTC 58}, it was observed that the Court has a duty and obligation to test whether the right claimed by third parties against a Trust, on the basis of documents executed by the Trustees, is a right properly and validly acquired or not. Therefore, it is contended by Mr.K.Subramaniam, learned Senior Counsel for the plaintiffs that the validity of the transactions entered into by the Trustees with the 9th defendant company and by the 9th defendant company with third parties, has to be tested.
99. But in the case on hand, I see very clearly that the parties are either trying to settle a family feud among themselves or trying to settle scores with a foreign investor. Apprehending that a direct and straight litigation with the foreign investor may not bring the desired result, a Scheme suit under Section 92 appears to have been designed, invented and engineered by doctors. This is clear from several facts such as (i) the furnishing of a wrong address for the first defendant Trust so as to maintain the suit on the file of this Court; (ii) the allegation of the wife against the husband, daughter and son, of collusion, fraud etc.; (iii) the allegation of the father against the daughter, of forgery; (iv) the allegation of the daughter against the father, of collusion with the mother; and (v) the independent proceedings filed by the father against the foreign investors.
100. In view of the above, I find no justification, apart from the reasons stated in O.A.No.901 of 2013 to grant an injunction as prayed for and hence O.A.No.520 of 2013 is also dismissed.
101. In fine, O.A.Nos.158, 159 and 694 of 2012 & 520 of 2013 and A.Nos. 1183, 3572, 3573, 3574 of 2012 are dismissed. But A.Nos.2927, 2928 and 2929 of 2012 are allowed. There will be no order as to costs.
19-12-2013
Index : Yes.
Internet : Yes.
Svn/kpl
V.RAMASUBRAMANIAN,J
Svn/kpl
Common Order in
O.A.Nos.158, 159 and 694 of 2012
& 520 of 2013 and
A.Nos.1183, 3572, 3573, 3574,
2927, 2928 and 2929 of 2012 in
C.S.No.143 of 2012
19-12-2013