TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the interim injunction restraining purchase of shares of the target company should continue on the ground that the proposed acquisition was prima facie a breach of fiduciary duty and intended to secure or maintain control for the directors' benefit. (ii) Whether the balance of convenience and the equitable principles governing injunctions justified continuation of the restraint pending final hearing.
Issue (i): Whether the interim injunction restraining purchase of shares of the target company should continue on the ground that the proposed acquisition was prima facie a breach of fiduciary duty and intended to secure or maintain control for the directors' benefit.
Analysis: The operative memorandum of understanding was between the Mehta group and the disinvesting public body, and the company seeking to fund the purchase was not shown to be a party to that arrangement. The arrangement indicated that the obligation to acquire the shares rested with the Mehta group, and the use of corporate funds to discharge that obligation could prima facie amount to diversion for the benefit of the directors rather than for the company. The governing principle applied is that directors' powers are fiduciary in character and cannot be exercised merely to maintain or acquire control or for personal aggrandisement, even if some incidental corporate benefit may result.
Conclusion: The proposed acquisition was prima facie objectionable as being for an extraneous purpose and the injunction was rightly continued.
Issue (ii): Whether the balance of convenience and the equitable principles governing injunctions justified continuation of the restraint pending final hearing.
Analysis: The Court treated the matter as one involving prima facie breach of trust and found that the alleged commercial advantage to the company was, at best, incidental and uncertain. In such a situation, the equitable relief of injunction was appropriate, and the normal inquiry into irreparable injury did not displace relief where breach of trust was made out prima facie. The Court also noted that the statutory scheme and BIFR-related materials did not conclusively establish the company's authority to proceed with the acquisition at the interim stage.
Conclusion: The balance of convenience supported continuation of the interim injunction.
Final Conclusion: The appeals failed at the interlocutory stage, and the restraint on the proposed share purchase was maintained until the final decision in the company petition.
Ratio Decidendi: Directors may not use corporate powers or funds merely to secure or preserve control for themselves or their associates, and where a prima facie breach of trust is shown, an injunction may be continued without insisting on proof of irreparable injury in the ordinary sense.
TaxTMI 
