K.K. Puri and ors. Vs. A.K. Puri and ors. - Court Judgment

Excerpt:
- b.a. khan, j. 1. these two appeals are directed against ex parte ad interim orders dated july 22, 1993 and august 3, 1993 passed in suits nos. 10 and 13 of 1993 by the learned district judge, jammu. the fate of these appeals depends upon the interpretation to be placed on the provisions of order 39 rule 3, cpc and all that primarily falls for determination is whether the rule is mandatory in character and whether non-compliance of its provisions results in invalidating the ex parte ad interim injunction. 2. the origin of the controversy can be traced to a family feud which has assumed the dimensions of corporation warfare of sorts. the parties are closely related and the two main contenders (appellant no. 1 and respondent no. 1) are brothers. they are spearheading two warring groups in the two private limited companies called 'devi dass-gopal krishan pvt. ltd.' and 'puri brothers industries (p) ltd.' the third group is represented by the widow of the third brother, late j.k. puri and all are engaged in gaining control of the company which is mainly engaged in manufacture of edible oil. 3. it transpires that rival groups at one stage decided to part company. some settlement is said to have been reached between them authorising one r.c. gupta chartered accountant to bifurcate and distribute the assets of the company and to appoint appellant no. 1 as managing director of the company. appellants are alleged to have back traded resulting in rupture of the settlement and the institution of the suits in the court of district judge, jammu. the only difference in the two suits is that they are filed in the name of two different plaintiffs. otherwise the reliefs prayed are identical seeking declaration that the meetings of the plaintiff company held on april 10, 1993, june 12, 1993 and june 30, 1993 and extraordinary general meeting of the shareholders dated 26th may, 1993 and the notice issued by appellant no. 1 convening an extraordinary general meeting to be held on 26th july, 1993 at moga was illegal, non est, unlawful, unauthorised and ultra vires the provisions of the companies act. a prohibitory injunction is also sought against appellants restraining them from holding the meeting of shareholders on july 26, 1993 and from acting upon or to implement or otherwise enforce the decisions taken by them in the meetings under challenge. 4. both the suits were instituted by respondent no. 1 on july 22, 1993 and in the application seeking interim relief, the trial court on 22-7-1993 passed on ex parte ad interim injunction in file no. 10 as under:-- '......in view of the urgency of the matter the requirement of notice under order 39 rule 3, cpc is dispensed with. consequently, let a notice be issued to the defendants/non-applicants herein for filing objections and in the meantime the defendants/non-applicant herein are restrained by way of ad interim injunction from convening the extra ordinary general meeting of the comany scheduled to be held on 26th july, 1993 at moga or on any other future date and defendants no. 2 and 3 from acting as directors of the plaintiffs company and/or implementing or otherwise enforcing the decisions allegedly taken in the alleged meetings of the board of directors on 10th april, 1993, 12th june, 1992 or 30th june, 1993 and defendants 1 to 4 (appellants) from attending and defendant no. 1 from presiding over or conducting any general or extra-ordinary general meeting of the share holders of the company on 26th july, 1993 or any other future date till further orders by this court subject to the objections of other side. put up on 5th august, 1993.' 5. after this order was passed, respondent no. 1 (plaintiff) appears to have in file no. 13 filed yet another application alleging that defendants in the suit were avoiding the process of the court and refusing to receive the court order. he prayed for restraining them from holding the proposed meeting of the board of directors which was meanwhile fixed for 3rd august, 1993. the trial court on consideration of the matter, passed the following order on august 3, 1993 :-- 'consequently, a notice be issued to the defendants/herein non-applicants for filing the objections and in the meantime in dispensing with the requirement of notice under order 39, rule 3 of cpc considering the urgency of the matter by way of interim injunction, the defendants/non-applicants are restrained from holding the proposed meeting of the board of directors or participating in the same, scheduled for 3rd of august, 1993 or convening any meeting on their own on any future date and in case the said meeting is held, the decision taken thereof shall not be implemented and further restraining the defendants/non-applicants to give effect to the decision taken in extra ordinary general meeting alleged to have held on 26th july, 1993 which was restrained by way of ad-interim injunction issued by this court but could not be served as the defendants had kept out the way for the purposes of avoiding the service, found from the material on record. defendants nos. 1 to 3 are further restrained by way of this interim direction not to function as directors of the plaintiff company or its property. the service of this order shall be effected by an advertisement in the newspaper having circulation in the locality in which the defendants/non-applicants reside or carry on business or presently working there....... this order is subject to objections by other side. put up for the appearance of the defendants non-applicants for objections on 5-8-1993. dt. 3-8-1993' 6. it is these two orders which are at the heart of a fierce controversy. the appellants have taken all conceivable objections to assail these orders, but have seriously pressed in service two objections to which i would advert to a little later. 7. before dealing with the meet of the matter, it would be appropriate to get ride of one or two side issues urged by the lc for parties in support of their case. as the issues related to the maintainability of the appeals, i don't propose to conduct their indepth examination for the sole reason that it would not be proper to do so by depriving the trial court to record its views thereon. mr. kohli's submission that impugned orders suffer from non-application of mind and decree the whole suit can be better urged and taken care of before the trial court. so can be all other points which have a bearing on the merit of the two orders. there is no record before me to deal with the over all merit of the rival claims. nor i am inclined to sit as a trial court in the matter when parties have all the opportunity to canvass their respective points of view before the court below. i am, however, prima facie convinced that the impugned orders are not perverse, as alleged by mr. kohli, warranting interference on emergency basis. 8. similarly, the lengthy debate on whether the orders impugned shall be treated to have been passed under order 39 rules 1 and 2 or under section 151 looses its relevance when the appeals require to be decided on other crucial issues. mt. thakur's effort to exclude them from the net of rules 1 and 2 with a view to strike at the maintainability of appeals may not be an exercise in futility, but it certainly does not require to be adjudicated in the circumstances of the case. 9. therefore, sidetracking all this, it would be better to take the bull by his horns rather than stray into an irrelevant exercise. proceeding so, it deserves to be restated that the back-drop of appellant's case is that the impugned orders are vitiated for non-compliance of provisions of rule 3 of order 39, cpc and for by-passing the caveat entered by the appellants on july 6, 1993 by the trial court. it would, therefore, be advantageous, at the very outset, to extract the relevant provisions for proper appreciation of rival contensions. these read thus:-- rule 3 of order 39: 'before granting injunction court to direct notice to opposite party.- the court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite party. provided that, where it is proposed to grant an injunction without giving notice of the application to the opposite party, the court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay, and require the applicant (2) to deliver to the opposite party, or to send to him by registered post immediately after the order granting the injunction has been made, a copy of the application for injunction has together with - (i) a copy of the affidavit filed in support of the application; (ii) a copy of the plaint; and (iii) copies of documents on which the applicant relies, and (b) to file, on the day on which such injunction is granted or on the day immediately following that day, an affidavit stating that the copies aforesaid have been so delivered or sent.' rule 4: 'order for injunction may be discharged, varied or set aside.- any order for an injunction may be discharged, or varied, or set aside by the court, on application made thereto by any party dissatisfied with such order.' 10. interpreting provisions of rule 3, mr. kohli contended that the rule is mandatory and its non-compliance vitiates the ex parte ad interim injunction passed by the trial court. according to him, the trial court could dispense with notice and pass ex parte injunction but it was bound to record reasons that it was doing so as the delay would defeat the purpose of injunction. the recording of such reasons is obligatory and not a mere formality and should indicate the application of mind by the court the test is whether it has stated the reasons that are likely to delay and frustrate the purpose of granting injunction. it can't get away by merely using the word 'urgency' which amounts to no reason in the eye of law. where such reasons for opinion of the court are not clearly stated there is no compliance of the provision. he urged that the provision is mandatory as is indicative from the use of word 'shall' and the court has no option but to satisfy its requirements. the court's omission to record reasons is fatal and even if material existed on the face of record to indicate such reasons, it was not open to the appellate court to substitute its opinion for that of the trial court. in other words, the appellate court could not look into the material to find out the existence of reasons to make up the omission of the trial court. he sought support from air 1989 madras 139; air 1990 all 134, air 1990 gauhati 73, air 1981 cal 351, air 1986 karnataka 98; air 1987 cal 172, air 1986 gujarat 17, air 1972 sc 2086, air 1969 sc 1167 and air 1962 sc 1694. 11. mr. thakur, lc for respondents, repelled all this by firstly urging that the trial court had committed no violation of the provision as it had given the reason by stating that there was urgency. he submitted that all that was required to be seen was whether the court was conscious or oblivious of the requirements of the provision and if it was conscious, it matters little as to whether it had used one word or so many words to indicate the reason so long as such word/expression was found relatable to the purpose of the rule. he emphasised that the present case is not a case where the reason was absent or missing altogether or that it was a perverse or irrational reason. on the contrary, it is a case where reason can be gathered though not stated in so many words. it is a different thing that it may not be regarded as a good reason for not being happily worded, but that should not strike at the very root of the injunction. 12. mr. thakur went a step further to contend that rule 3 is only directory and its non compliance does not vitiate the order even in cases suffering from total absence of reason, not to speak of a case where the reason is discernible on the face of record. he submitted that it would be travesity of justice to invalidate an order on a mere technicality of omission by the trial court to record the reason in detail when such reason was apparent on the face of record. he relied upon air 1963 sc 1526 : (1963 all lj 903) and air 1988 cal 25 to urge that a similar provision relating to 'recording of reasons' occurring in order 41 rule 27(2) had been held to be directory and harmless for the consequential order. he pleaded that subsequent events had proved the apprehension of the trial court correct in as much as appellants had held the questionable meeting on 26th july, 1993 despite the court order and had also scheduled another meeting for 3rd august, 1993. this by itself justified the exercise of discretion by the trial court. he took pains to distinguish all decisions cited by mr. kohli one by one to show that those cases had totally proceeded on the absence of reasons unlike the present case. 13. regarding allegation of by passing of the caveat by the trial court, he submitted that no such caveat was borne on the record of the district judge, jammu and on inquiry it had transpired that a caveat petition filed by appellants had not attached to another suit, pending between the parties. he refuted that there was any effort by trial court to by-pass it. even if it be assumed so, it could not be held fatal for the orders impugned. 14. considering the line of arguments, it presents a difficulty to keep the scales even in a border line case like this. but once the rationale and purpose of the provision is clear, it becomes easy to reach a fair conclusion. order 39 rules 1-4, cpc deals with the circumstances in which temporary injunction may be issued, varied set aside, discharged or its disobedience punished. only rules 3 and 4 are relevant for our purposes. rule 3 enjoins upon the court to give a notice of the application to the opposite party before issuing a temporary injunction. but at the same time it gives a discretion to dispense with the notice where it is satisfied that the resultant delay in serving the notice would defeat the very purpose of injunction. this rule was amended by act no. 11 of 1983 when a proviso was added to it requiring the court to record reasons for its opinion wherever it wanted to dispense with the notice to opposite party, that delay would defeat the object of granting injunction. the substance of the rule has remained intact though an additional constraint has been imposed on the court by requiring it to record reasons for its opinion so that ex parte injunctions are not granted as a matter of routine, arbitrarily, without any application of mind and taking the defendant by surprise. therefore, while the general rule is that no injunction should be granted without notice to opposite party, the exception is that it can be granted without notice where the court felt that the object of granting of such injunction would be defeated by delay if notice was issued to the opposite party. this exception could, however, be applied subject to the condition that 'court shall record reasons for its opinion that the object of granting the injunction would be defeated by the delay.' 15. the expression 'shall record the reasons for its opinion' is a focal point of the provision and appears to have been inserted to place fetters on the court to prevent it from acting casually and in a cavalier fashion and to constrain it to pass orders on application of mind and after adverting to the facts and circumstances of the case. to that extent, the purpose of the provision seems laudable. but that by itself does not answer the question posed and the true import of the expression 'shall record reasons for its opinion', still requires to be found along with whether the rule is mandatory and its non-compliance or substantial compliance vitiates or saves the ex parte injunction. 16. it, therefore, becomes important to know what is a reason and what kind of reason is envisaged by the provision and what should be the manner and method of its recording. black's law dictionary defines reason' as a faculty of mind by which it distinguishes good from evil, truth from falsehood and which enables the possession to deduce inference from facts or from propositions. for our purpose it should suffice to say that it is a deduction of an inference from facts. it constitutes the basis of an opinion or conclusion and is relatable. given regard to the terms of the controversial provision it is related to the delay that may be caused if the notice is issued to the other party and such delay defeats the purpose of the injunction. therefore, if the opinion or conclusion is that delay would defeat and frustrate the injunction, the reason should deduce the inference from the facts of delay. 17. i don't think that the provision contemplates any special manner of recording of such reasons. it is of little consequence how and in what manner it is stated so long as it is discernable from the order. the ways of expression always differ from person to person and from situation to situation. so there can't be straight jacket rule that the reason must be stated in so many words or in a, particular expression. some time even one word speaks volumes and so many words mean nothing. this is not to suggest that even a reason which is so hidden as to require a research to find it is a good reason. a reason may be good or bad, but all that is required for our purpose is that it must exist. it satisfies the requirement if the reason is discernible from the order and has a nexus with the object of the rule, the manner and method of its statement pales into insignificance. the length of expression or the number of words are no guide. the test, therefore, should be whether some kind of a reason relatable to the purpose of the rule is disclosed by the order and whether the court has been conscious of the requirement. where injunction order discloses some reason which is proximate to the objects of the rule and it is also apparent that the court is not oblivious of the requirement, it should be deemed a substantial compliance of the requirement. 18. mr. kohli's submission that the reasons contemplated by the proviso must emanate from the circumstances of the case and must be clearly stated and recorded by the trial court goes undisputed, but it is not to be all and end all of the requirement. his reliance upon air 1972 sc 2086 in this regard is also misplaced as that decision deals with the distinction between 'grounds' and 'opinion' and not with connotation of the reason or its manner of recording. 19. coming to the other aspect, whether rule 3 is mandatory and whether its non-compliance vitiates ex parte ad interim injunction and whether the appellate court can look into the record to gauge the reasons for dispensing with the notice by the trial court, it stands squarely answered by the supreme court in air 1963 sc 1526 : (1963 all lj 903). interpreting a similar expression 'shall record reasons for its opinion' occurring in order 41 rule 27(2), the apex court held thus (at page 1529; of air) :-- 'we are not prepared, however, to accept the contention of the appellant that the omission to record the reason vitiates the admission of the evidence. clearly, the object of the provision is to keep a clear record of what weighed with the appellate court in allowing the additional evidence to be produced....... the omission to record the reason must, therefore, be treated as a serious defect. even so, we are unable to persuade ourselves that this provision is mandatory, for, it does not seem reasonable to think that the legislature intended that even though in the circumstances of a particular case it could be definitely ascertained from the record why the appellate court allowed additional evidence and it is clear that the power was properly exercised within the limitation imposed by the first clause of the rule, all that should be set at naught merely because the provision in the second clause was not complied with. it may be mentioned that as early as 1885 when considering a similar provision in the corresponding section of the code of 1882, viz. section 586, the high court of calcutta held that this provision for recording reasons is merely directory and not imperative (gopal singh v. jhakri rai, ilr 12 cal. 37). we are aware of no case in which the correctness of this view has been doubted. it is worth noticing that when the 1908 code was framed and order 41, rule 27, took the place of the old section 568, the legislature was content to leave the provision as it was and did not think it necessary to say anything to make the requirement of recording reasons imperative. it is true that the word 'shall' is used in rule 27(2), but that by itself does not make it mandatory. we are, therefore, of opinion that the omission of the high court to record reasons for allowing additional evidence does not vitiate such admission.' the principle enunciated by the supreme court has been followed by a division bench of the high court in air 1988 cal 25 and in air 1985 orissa 222. viewed thus, i have no option, but to fall in line with the view taken by the supreme court and followed by calcutta high court. the judgments cited by mr. kohli on the point like air 1986 kant 98, air 1981 cal 351 and air 1993 orissa 78 make obiter observations about the rule being mandatory, unsupported by any reasons whatever and should be considered over ruled by the judgment of the supreme court. therefore, it is no use to quote from these judgments. it is true that the purpose of amendment of the rule in 1983 was to place fetters on the court to grant ex parte injunctions but that by itself or for that matter, the use of word 'shall' does not make the rule mandatory. it is directory indeed though imperativeness of its tenor need not be glossed over. proceeding on this premise, it should be considered substantial compliance of the rule where the reason is ascertainable from the order though not stated or recorded in so many words and is otherwise apparent on the record and above all the court is conscious of the requirement. i am also not inclined to accept the argument that the appellate court is debarred from looking into the record to find out the reason for dispensing with the notice by the trial court. it does not appeal to any logic or reason to suggest that the appellate court could look into every thing else done by the trial court except the reasons for dispensing with the notice which may otherwise be apparent on the record. 20. applying all this to the present case, all that requires to be seen is whether the trial court has given any reason for not putting the opposite party on notice. it has used the following expression: 'in view of the urgency of the matter the requirement of notice under order 39 rule 3 cpc is dispensed with.' the dispute is whether the use of the words 'urgency of the matter' amounts to a reason within the meaning of the provision. mr. kohli says it is not enough unless the court spells out the urgency and states its nature. mr. thakur, on the other hand, maintains that it convey every thing that is required when viewed in the context of the position revealed by the record. 21. it can hardly be disputed that the trial court has fallen short of words and has failed to refer to circumstances pointing to such urgency. but going by the legal position enunciated, it is not fatal for the order of injunction considering that the court appeared conscious of the requirement and the circumstances revealed by the record pointed to the urgency furnishing ground for dispensing with the notice. the record reveals that the suit was filed on july 22, 1993 along with application for grant of interim injunction for restraining defendants to hold any extraordinary general meeting of the shareholders of the plaintiff company scheduled for 26th july, 1993 at moga. it is pointed out that 25th july, 1993 being a sunday, the court was left with only three days to serve appellants which was not practicable, in the circumstances. therefore, if it had waited for the service of notice on appellants, the purpose of injunction which was to prevent them from holding the meeting on 26th july, 1993 would have been defeated. 22. i have gone through all the judgments cited and relied upon by mr. kohli and, in my view, all are distinguishable on facts and all deal with a situation where no reason had been recorded by the trial court for dispensing with the notice. i have not come across any judgment where the trial court had indicated some kind of reason and its order had been nullified on the ground that the reason was bad or fell short of words. 23. i am also not impressed by the argument that the trial court had by-passed the caveat entered by the appellants. even assuming so it could not lead to upsetting of the orders impugned. if the appellants believed that the matter involved high stakes, they should have been on guard to resist the passing of any ex parte ad interim injunction instead of waiting for a notice from the court. 24. in the light of the foregoing discussion, i hold that provisions of rule 3 of order 39, cpc are not mandatory, but directory and any non-compliance thereof, though a serious matter, does not invalidate the ex parte injunction. where the trial court is found conscious of the requirement of the rule and points to the reason for dispensing with the notice, even remotely, and supporting circumstances exist in the record, it should be regarded as substantial compliance of the rule. there is no bar for the appellate court to look for the reason in the record. it does not fill up any lacuna or omission of the trial court, nor does it substitute its opinion by doing so. 25. before parting, i deem it appropriate to advert to the growing tendency of the litigants to by-pass the trial courts in matters where ex parte orders are subject to objections of other side and even valid only till next date and vacation whereof can be sought under rule 4 of order 39, cpc before the trial court. it has been consistent policy and practice of this court not to entertain such appeals and not to interfere in such orders. a full bench of this court has approved of this policy in astral traders v. haji mohd. shaban dar, 1982 ker lj 324 : (air 1982 j & k 124) after giving reasons in its support. this practice has almost hardened into a rule and it is in very rare cases that a departure is made where impugned orders appear manifestly perverse or where these suffer from any manifest lack of jurisdiction or where the bias of the trial court is apparent on the face of record. there may be some other circumstances also which may warrant interference, but by and large, this policy is adhered to discourage litigating parties from rushing to this court. 26. in the present case also, there was no reason to depart from this policy, but for the appellants allegation that the orders impugned had been passed in violation of provisions of order 39. it is, therefore, made clear that this constitutes no precedent for any other case. 27. i am conscious of the hot contest between the parties and the high stakes involved in the matter. therefore, it becomes necessary to evolve some satisfactory arrangement so that both parties know the outcome of their rival claims. there is no dearth of instances where litigating parties obtain ex parte injunctions and manage to enjoy the fruits by dragging on the proceedings to the prejudice of opposite party. it is also a matter of common knowledge that the courts are so much overworked that even urgent matters invariably do not reach and suffer adjournments resulting in the continuation of such orders. this naturally causes prejudice and damage to the interests of the opposite party. therefore, keeping in regard all this, i deem it appropriate to prescribe a time frame for disposal of application for ad interim relief by the trial court. it is accordingly directed as under:-- a) that appellants (defendants) may file their objections to the application for grant of ad interim relief or may file application seeking vacation of the ex parte injunction within one week from today and may also file their written statement, if possible, along with whatever documents they may choose to rely upon; b) that upon this, the trial court shall consider and dispose of the ad interim injunction matter within two weeks thereafter after affording the parties an opportunity of being heard; c) that no adjournments shall be allowed to any party and the stay matter shall be considered and disposed of by the trial court within one month from today positively without any fail. these appeals are accordingly dismissed and the parties are directed to appear before the trial court on sept. 27, 1993 for further proceedings.