Bombay High Court
Suryajirao @ Chimanrao Shankarrao ... vs New Phaltan Sugar Works Ltd., ... on 14 July, 1994
Equivalent citations: 1995(2)BOMCR201
JUDGMENT A.V. Savant, J.
1. This petition under Article 227 of the Constitution demonstrates how a clever litigant can take undue advantage of some ad-interim orders obtained during the pendency of a Court proceeding and thereby misuse or abuse the process of law and present the other side with a fait accompli rendering him totally helpless in the matter. The question is : Should the Court be a mute spectator to such an undersirable course of events as would be reflected in this Judgment?
2. The petition arises out of the order dated 25th April, 1991 passed by the 3rd Additional District Judge, Satara, dismissing Misc. Civil Appeal No. 65 of 1991. The said appeal arose out of the order dated 13th March, 1991 passed by the trial Judge below Exh. 5 in Regular Civil Suit No. 53 of 1991. Under the impugned orders, the petitioner's application for interim relief has been rejected.
3. The petitioners are the original plaintiffs in Regular Civil Suit No. 53 of 1991. The said suit was filed pursuant to the liberty granted by the Division Bench of this Court in Criminal Writ Petition No. 1543 of 1990, decided on 4th February, 1991. In the suit, the main relief prayed for is to the effect that the Extraordinary General Meeting of the first respondent company held on the 2nd January, 1991 be declared illegal and void. This prayer is based on the allegations of fraud practised by respondents Nos. 2 and 3 in contriving a situation around the 2nd January, 1991, which had rendered the petitioners totally helpless in the matter. Taking undue advantage of certain ad-interim orders passed by this Court on the 31st December, 1990 in Criminal Writ Petition No. 1543 of 1990, which was subsequently withdrawn, the meeting was held on 2nd January, 1991 under strange circumstances which will be set out hereafter.
4. A Sugar Factory which was formerly known as 'Apte Amalgamation' was, under the Agreement dated 26th September, 1985 transferred to the New Phaltan Sugar Works Limited, respondent No. 1 in this petition. There are about 8000 shareholders of the said respondent No. 1 company spread in the three districts of Pune, Solapur and Satara. The first petitioner - Suryajirao Kadam - is a Director and claims to be the Chairman at the relevant time. The second and third petitioners are the shareholders of the first respondent Company. Respondent No. 2 - Jairam Bhosale - is the shareholder and it is he who has filed Criminal Writ Petition No. 1543 of 1990. Respondent No. 3 - Vishnu Gade, respondent No. 4 - Madhavrao Apte, respondent No. 6 - Chandrakant Bhosale claim to be the directors and respondent No. 5 - Vijayrao Boravake - is the shareholder.
5. In the Annual General Meeting held on 22nd September, 1989, certain directors retired by rotation. The next Annual General Meeting was thereafter to be held on the 28th September, 1990. Company Petition No. 585 of 1990 was filed in this Court by respondent No. 5 Vijayrao Boravake and some others praying for an injunction restraining the first respondent company from holding the said Annual General Meeting on the 28th September, 1990. By an order passed on 27th September, 1990, this Court refused to grant the interim injunction on the ground that there was a serious dispute between the rival groups of shareholders and that serious inconvenience would be caused to the shareholders if the meeting was to be stayed. Certain directions were, however, given by this Court regarding the business to be transacted in the said meeting. All the learned Counsel stated before me that the said Company Petition No. 585 of 1990 is still pending, but we are not concerned with it here.
6. As a result of this Court's refusal to grant the interim relief in respect of the meeting to be held on the 28th September 1990, the said meeting was held in which the first petitioner- Suryajirao Kadam - was elected as the Chairman of the company. It appears that the rival group of shareholders led by the third respondent Vishnu Gade was not satisfied with the outcome of the Annual General Meeting held on the 28th September, 1990 and, therefore, they filed Regular Civil Suit No. 321 of 1990 on the 13th November 1990. It is alleged that respondents Nos. 2 and 3 put up some shareholders as the plaintiffs in Regular Civil Suit No. 321 of 1990. The said suit was filed for challenging the election of the first petitioner Kadam as the Chairman in the Annual General Meeting held on the 28th September, 1990. Interim relief was prayed for in the said suit. Ex-parte ad-interim injunction was granted on the 14th November, 1990 for a period of 30 days. However, on the 21st December, 1990 the trial Judge vacated the ex-parte interim order and dismissed the application at Exh. 5 for interim relief in the said Suit No. 321 of 1990. It has been observed in the said order that the first petitioner Kadam was elected as the Chairman of the company in the meeting held on 28th September, 1990. A reference was made to the Company Petition No. 585 of 1990, in which this Court had refused to grant an injunction against the holding of the meeting on 28th September, 1990. On the material that was placed before the learned trial Judge, he came to the conclusion that no case was made out for grant of injunction against the first petitioner Kadam restraining him from functioning as the Chairman. All the learned Counsel stated before me that the said Suit No. 321 of 1990 is also pending, but we are not concerned with that suit either.
7. On 19th November, 1990, two requisitions were submitted by the shareholders of the petitioners' group; one requisition was for removal of the third respondent Vishnu Gade from the Board of Directors under section 283(1)(g) of the Companies Act, 1956 and the other requisition was for conversion of the first respondent private limited Company into a Co-operative Society in accordance with the declared policy of the State Government. On the 23rd November, 1990, as a counterblast to the above requisitions submitted by the petitioners' group, the supporters of the third respondent Gade also submitted a requisition for the removal of the first petitioner Kadam from the Board of Directors.
8. On the 28th December, 1990 the Board of Directors passed a resolution removing the third respondent Gade from the Board of Directors under section 283(1)(g) of the Companies Act. Pursuant to the two sets of requisitions mentioned above viz. the requisitions submitted by the petitioners' group on the 19th November, 1990 and the one submitted by the respondents' group on the 23rd November, 1990, a notice was issued on November 30, 1990 convening an Extraordinary General Meeting of the first respondent Company to be held on Wednesday, the 2nd January 1991 at 01.00 p.m. at the Ganesh Mandap, Sakharwadi, Taluka Phaltan, District : Satara. This Notice is at Exh. A/Pg. 31. However, on the 27th December, 1990 orders were promulgated by the Executive Magistrate, Phaltan, purporting to act under section 144 of the Code of Criminal Procedure and by the Additional District Magistrate, Satara, purporting to act under section 37 of the Bombay Police Act. The order under section 144 of the Code of Criminal Procedure is at page 580 preventing the holding of any meeting, procession etc. between 1st January, 1991 and the midnight between 2nd and 3rd January, 1991. There is a reference to the two groups led by the first petitioner Kadam and the third respondent Gade preventing them from coming together for the purpose of holding any meeting, procession etc. The order under section 37(1)(3) of the Bombay Police Act is at page 582 preventing the assembly of persons and carrying of arms between the period 1st January, 1991 and 7th January, 1991. There is no dispute before me that these orders were given immediate and wide publicity on radio and in the newspapers. They appeared in the local newspapers on the 28th December, 1990 and were broadcasted on the radio in the local news, also on the 28th December, 1990.
9. Criminal Writ Petition No. 1543 of 1990 was filed by the 2nd respondent - Jairam Bhosale - on 31st December, 1990 during the Christmas Vacation. The learned Vacation Judge was moved for an ex-parte ad-interim order, after serving only the Government Pleader. The first petitioner Kadam, though made a party-respondent No. 4 to the said Criminal Writ petition, was not served with any notice. Upon hearing the Counsel for the petitioner Bhosale and the Government Pleader, this Court granted an ad-interim stay of the Orders passed under section 144 Cr.P.C. and section 37 of the Bombay Police Act. The result was that there was no prohibition on holding the meeting that was scheduled to be held on 2nd January, 1991. Unfortunately, however, none from the petitioners' group knew of this development. A large body of shareholders spread in the three districts of Pune, Solapur and Satara was kept in dark about the ex-parte ad-interim order obtained by the second respondent Bhosale from this Court in Criminal Writ Petition No. 1543 of 1990 behind the back of the petitioners. Whereas wide publicity was given to the prohibitory orders dated 27th December, 1990, published on 28th December, 1990 and announced on the radio on the same day, no publicity was given to the ad-interim stay granted by this Court on 31st December, 1990. Admittedly, the shareholders of the first respondent Company are spread over the three districts of Pune, Solapur and Satara. The second respondent Bhosale who obtained the ad-interim ex-parte order from this Court on 31st December, 1990 in Criminal Writ Petition No. 1543 of 1990 and got the packet containing the writ the same day, seems to have conveniently reached Phaltan on 2nd January, 1991 and produced the order before the concerned authorities only on the date on which the meeting was to be held. The second respondent could have easily reached Phaltan on the 1st January, 1991 in the morning and the fact that this Court had passed an ad-interim order of stay could have been made known to some people. This was not done. The petitioners' group was labouring under the bona fide belief that no meeting would be held on the 2nd January, 1991 because of the prohibitory orders published earlier. Obviously, respondent Nos. 2 and 3 and the shareholders belonging to their group knew of this strategy devised by respondents Nos. 2 and 3 in quietly obtaining the ad-interim ex-parte stay from this Court behind the back of the petitioners and not making it known to anybody. The result of this ex-parte ad-interim stay granted by this Court on 31st December, 1990 was that only the members belonging to the group of the respondents, who knew of this strategy and the sinister plan devised by respondents Nos. 2 and 3 attended the meeting held on 2nd January, 1991. Obviously, there was none on behalf of the petitioners to move any of their resolutions and hence, the main resolution which was moved was the one for removal of the first petitioners Kadam from the Board of Directors of the first respondent Company. This is clear from the minutes of the meeting held on the 2nd January, 1991 at pages 613 to 620 in which nobody moved the resolution which was earlier proposed by the petitioners' group since none from their group was present but by a resolution the first petitioner Kadam was removed from the Board of Directors.
10. Being successful in, thus, illegally holding the meeting on 2nd January, 1991, and what is more important, having succeeded in keeping the petitioners' group totally in the dark about the developments that took place in this Court in Criminal W.P. No. 1543 of 1990 and about the meeting that was held on the 2nd January, 1991, the second respondent Bhosale quietly withdrew Criminal W.P. 1543 of 1990. Indeed, the said writ petition had fully served its purpose the moment the meeting of 2nd January, 1991 was held. Even before the writ petition was admitted, the respondents Nos. 2 and 3 had succeeded in the said writ petition without the first petitioner - Kadam - who was respondent No. 4 in the said writ petition - being heard in the matter and, consequently, he was thrown out of the Board of Directors. The order passed by this Court on 4th February, 1991 permitting the 2nd respondent to withdraw the said petition, though brief, is quite eloquent. It will be worthwhile reproducing the said Order as under :
"ORDER :
CORAM S.W. PURANIK AND M.F. SALDANHA, JJ.
Heard Dr. Naik for petitioner, Mr. Bhimrao Naik for respondent and Mr. Page Public Prosecutor for State.
Dr. Naik seeks to withdraw this writ petition as the same has become infructuous at this stage itself. Mr. Bhimrao Naik appears and contends that his client respondent No. 4 has been materially prejudiced by the interim order obtained by the petitioner during vacation and prays that this Court should take stringent action against the petitioner for having secured interim order behind the back of respondent No. 4 and not having communicated it to the respondent No. 4. We have heard both parties at considerable length. We find that the scope of this writ petition was limited in so far as the order under section 144 of the Criminal Procedure Code was concerned. The petition has become infructuous. We do realise that the respondent No. 4 feels genuinely aggrieved by the ad-interim order of the vacation Judge but at the same time we would be wrong in expanding the scope of this writ petition to enquire into the disputed question of mala fides of the petitioner or alleged fraud played by the petitioner. At any rate the legality or otherwise of requisition meeting of the Sakhar Karkhana can be independently and effectively challenged by the aggrieved parties before a proper forum.
Hence with above observations, Leave granted to the petitioner to withdraw this Criminal Writ Petition. 4-2-1991"
11. It is pursuant to the above Order, and the very strange situation created as a result of the meeting held on the 2nd January, 1991 secretly by the respondents' group, keeping the petitioners' group in dark, that the petitioners have filed Regular Civil Suit No. 53 of 1991 on the 21st February, 1991 in the trial Court at Phaltan and it is out of the refusal to grant interim injunction in the said suit, that the present writ petition arises.
12. I have already set out above briefly, the reliefs prayed for in the present suit to the effect that the Extraordinary General Meeting held on the 2nd January, 1991 was illegal and void and that respondents Nos. 3 to 6 be restrained from implementing the resolutions passed in the said meeting held on 2nd January, 1991. There is a prayer for an injunction restraining respondent No. 3 Gade from acting as the Chairman of respondent No. 1 Company. The election of respondent No. 6 as a director in the said meeting was also prayed to be declared as illegal and void. There is a specific prayer that interim relief, as prayed for by a separate application, be granted. This is prayer (F) in the plaint. The prayers are at pages 122 to 124.
13. In the plaint, there are allegations of the sinister design by which respondent Nos. 2 and 3 had created a very strange situation on the 2nd January, 1991. In the first place, prohibitory orders under section 144 Cr.P.C. and section 37 of the Bombay Police Act, promulgated on the 27th December, 1990, were given wide publicity on radio and in the newspapers on 28th December, 1990. Thus, the entire body of the shareholders was kept under the impression that the meeting to be held on the 2nd January, 1991 will not be held as a result of the said prohibitory orders. Then respondent No. 2 Bhosale quietly approached this Court by filing Criminal Writ Petition No. 1543 of 1990 and on 31st December, 1990 obtained an ex-parte ad-interim order from the learned Vacation Judge, without serving any notice on the first petitioner - Kadam, who was respondent No. 4 in the said Criminal Writ Petition. Though the packet containing the ex-parte ad-interim order was obtained from this Court on 31st December, 1990, the order was kept secret, giving no publicity. Admittedly, the shareholders of the first respondent Company are spread over three districts and they are as many as 8000, spread in different interior villages in the three districts. Obviously, the group of respondents No. 2 and 3 knew of this sinister design and they were in readiness to attend the meeting of 2nd January, 1991 and present the first petitioner with a fait accompli. Only the shareholders belonging to the group of the 2nd and 3rd respondents attended the meeting on the 2nd January, 1991 and passed a resolution removing the first petitioner as the director of the first respondent Company. Serious allegations of fraud are made in the plaint which is at pages 107 to 124. These allegations have been repeated in the application for interim relief, which is at pages 35 to 48. The Division Bench Order permitting the withdrawal of the Criminal Writ Petition has been quoted verbatim both in the plaint and in the application for interim relief. The said Division Bench Order clearly suggests fraud and the sinister design on the part of respondents No. 2 and 3 and the manner in which the first petitioner Kadam was seriously prejudiced. In these circumstances, the interim relief prayed in the suit was for an injunction restraining respondents Nos. 3 to 6 from implementing the resolutions passed in the meeting held on the 2nd January, 1991. Injunction was also prayed for restraining the third respondent Gade from acting as the Chairman of the Company.
14. This Application for interim relief was submitted on the 21st February, 1991 and on the 22nd February, 1991, an ad-interim order of "status quo ante" as on 1st January, 1991 was passed. This was after hearing both sides and the position which prevailed on the 1st January, 1991 was ordered to prevail by the Order dated 22nd February, 1991. However, after fully hearing all the parties, the application for interim relief was dismissed on some flimsy grounds which, in my view, are wholly untenable. In spite of a judgment of this Court being cited, which permitted passing of mandatory interim orders, it was held that the ratio of the said decision in the case of Ramdularidevi Vishwanath Dubey and another v. Ramtej Shiridutt Mishra, reported in 1989 Maharashtra Law Journal, pg 930, was inapplicable. It was strangely held that some others who had attended the said meeting, who obviously belonged to the respondents' group, had not challenged the said meeting or the business transacted in the said meeting and hence, no relief could be granted to the petitioners. Thus, without discussing either the details of the merits of the matter, or the strategy employed by respondents Nos. 2 and 3 and the developments between 27th December, 1990 and 2nd January, 1991, the application for interim relief was rejected on 13th March, 1991.
15. Against this Order passed by the trial Court, the petitioners filed Misc. Civil Appeal No. 65 of 1991. Unfortunately, the Appeal has been dismissed on grounds which are not only wholly untenable in law, but which show a total non-application of mind and, to say the least, a totally perverse approach.
16. I have heard all the learned Counsel at length; Shri C.J. Sawant for the petitioners; Dr. B.R. Naik for the main contesting respondents Nos. 1 and 3; Shri P.D. Naik for respondent No. 2; Shri R.S. Chitnis for respondent No. 4; Shri Vijay Patil for respondent No. 5 and Shri R.S. Bhonsale for respondent No. 6. Shri Vijay Patil for respondent No. 5 has not advanced any arguments and has left the matter to the Court. However, Shri P.D. Naik, Shri R.S. Chitnis and Shri R.S. Bhonsale have adopted the arguments of Dr. B.R. Naik.
17. Shri Sawant has taken me through the entire order passed by the learned Appellate Judge, particularly the reasoning which has been set out from para 9 onwards. At the outset, it is difficult to appreciate the very first point framed by the learned Judge. It reads as under :
"1. Whether question as to upon which, relief, by way of any interim temporary injunction can appropriately be given is evolved?"
With a view to eliminating any possible mistake in typing, I have checked the certified copy. It is the same. The point is framed exactly in the above words and it is reiterated in the course of the reasoning in para 10. In para 10 it has been observed that there was no prayer for interim declaration in the application Exh. 5. Shri Sawant states that there is a total misreading of the plaint and the application for interim relief and there is also total non-application of mind to the plaint and the application for interim relief. It is further observed in para 10 of the appellate order that there are no allegations about the alleged fraud and the question of fraud practised by respondents No. 2 and 3 has not been raised in the application for interim relief. A bare reading of the application for interim relief would show that this is not so. The least that I can say is that there is a total non-application of mind to the averments made in the plaint and in the application for interim relief.
18. It has been observed then in para 11 of the appellate order that the contents of the resolution passed in the meeting held on the 2nd January, 1991 were not made known to the Court. This is again a wholly incorrect statement since the agenda and the resolutions are annexed to the plaint. In the say filed by the respondents, also, all the documents were annexed and were before the learned Judge even at the stage of passing of the interim order in the trial Court. They are before me today. Unless one ignores the plaint and the annexures, it is impossible to record such a finding. It is then observed in para 11 that the particulars and the details of the meeting of the 2nd January, 1991 were not set out and, therefore, it was not possible to grant injunction restraining the implementation of the resolutions passed in the said meeting. This is again a result of total non-application of mind to the pleadings and the evidence that was placed before the learned Judge.
19. In para 12 of the appellate order, it has been observed that there was no legal injury to the plaintiffs. I am surprised at this approach. The first plaintiff Kadam was removed from the Board of Directors and he has filed the suit challenging the said removal. Is it possible to say that there was no legal injury to his rights? In para 13 it is observed that no interim relief could be granted in the facts that were set out. This is strange. The above conclusions are summarised in para 16.
20. Shri Sawant has very bitterly criticised the approach of both the learned Judges. I am in total agreement with the said criticism. Sometimes, constraint outweighs restraint. This is one such case. One is compelled to say so in the interest of the institution. Both the impugned judgments show total non-application of mind to the admitted facts on record. If only, one were to peruse the plaint and its annexures, the application for interim relief and the say filed by the respondents in reply, one could not have recorded the findings which have been recorded by the learned Judges. The approach reflected in both the orders is totally perverse, says Shri Sawant. He is right in his submission.
21. So much is the perversity and so much is the non-application of mind writ large in the two orders impugned before me that Dr. Naik frankly stated that he was not able to justify and of the conclusions arrived at by the learned appellate Judge or by the learned trial Judge. I would have elaborated upon each of the reasoning of the learned Judges to demonstrate as to how absurd the said reasoning is and how there is total non-application of mind and the perversity in approach. But since Dr. Naik has fairly stated that he is not in a position to support any of the two orders, I have refrained from going into the details of the said two orders. It must be stated in fairness to all the learned Counsel for the respondents that they adopted Dr. Naik's stand and frankly stated that they were not in a position to support any of the two orders passed by the learned Judges.
22. The case made out by the petitioners is so clear that, ultimately, today, Dr. Naik conceded that the petition should be allowed in terms of the order which I propose to make. Normally, one avoids making general observations on merits when the suit is pending. But the manner in which respondents No. 2 and 3 have acted and the way both the judgments are delivered left no choice for me. However, I have avoided any discussion of the evidence on record. As stated above, all the learned Counsel have put the entire material before me, which forms part of the record of the learned trial Judge. Voluminous documents have been placed before me and all the learned Counsel have taken me through the voluminous record, running into 869 pages. I am not referring to the entire material in details, because firstly, the suit is pending and secondly, the Counsel for the respondents fairly stated that it is impossible for them either to support the impugned orders or to oppose the prayers in the petition.
23. Hence, the Order :-
(i) Both the impugned Orders viz. the Order dated 13th March, 1991 passed by the learned trial Judge, below Exh. 5 in Regular Civil Suit No. 53 of 1991 and the Order dated 25th April, 1991 passed by the learned Appellate Judge in Misc. Civil Appeal No. 65 of 1991 are hereby quashed and set aside.
(ii) Pending the hearing and disposal of Regular Civil Suit No. 53 of 1991, there shall be interim relief in terms of prayer (A), prayer (B), excluding the bracketed portion viz. (Director and/or) (see page 48) and prayer (C) of Exh. 5 dated 21-2-91 in the suit.
(iii) Thus, it is clarified that the plaintiffs' Application Exh. 5 in the trial Court for interim relief is granted in terms of prayers (A), (B), except the bracketed portion at Page 48 viz. (Director and/or) and prayer (C).
(iv) The position of petitioner No. 1 Kadam prior to 2nd January, 1991 is hereby restored.
(v) In view of passage of time, it is no longer necessary to continue the interim order passed in terms of prayer (b-i) of this Writ Petition.
(vi) Respondents Nos. 2 and 3 will together pay the costs of each of the petitioners, quantified at Rs. 1,500/-. Thus, respondents No. 2 and 3 together will pay Rs. 4,500/- as costs of the three petitioners.
24. Rule made absolute in the above terms.
25. Certified Copy, if applied for, to be issued expeditiously.