2020 (6) TMI 273 - HC - Indian Laws

Court dismisses defendant's application for injunction, upholds plaintiff's rights as secured creditors.

Vistra ITCL (India) Ltd. & Anr. Versus Lalit Kumar Jain & Ors.

Vistra ITCL (India) Ltd. & Anr. Versus Lalit Kumar Jain & Ors. - TMI Issues Involved:1. Jurisdiction of the Civil Court under Section 430 of the Companies Act.2. Maintainability of the application by defendant Nos.1 and 3 on behalf of defendant No.4.3. Grant of mandatory injunction without a counterclaim under Order XXXIX Rule 1(a) CPC.4. Equitable relief under Section 151 CPC.Issue-wise Detailed Analysis:1. Jurisdiction of the Civil Court under Section 430 of the Companies Act:The plaintiffs argued that the civil court's jurisdiction is barred by Section 430 of the Companies Act, which was reiterated by the Supreme Court in Shashi Prakash Khemka vs. NEPC Micon. The court analyzed whether the relief sought in the application arises from a dispute amenable to the jurisdiction of the Tribunal or Appellate Tribunal under the Companies Act. The court noted that the relief sought in this application is not based on oppression but on the inaction of the plaintiff No.2, which would result in loss to defendant No.4. The court concluded that the reliefs sought partake the character of a civil dispute, and the remedy under the Companies Act may not be adequate. Hence, the application is not barred under Section 430 of the Companies Act.2. Maintainability of the Application by Defendant Nos.1 and 3 on Behalf of Defendant No.4:The court held that defendant No.3, being a 99% shareholder of defendant No.4, can file the application in a representative capacity due to the necessity to avoid denial of justice. The court relied on the Madhya Pradesh High Court's ruling in Prakashchandra Rajmal Jain, which allows a shareholder to institute a suit in a representative capacity when there is an absolute necessity to waive the rule to avoid denial of justice.3. Grant of Mandatory Injunction Without a Counterclaim under Order XXXIX Rule 1(a) CPC:The court examined the principles for granting mandatory injunctions at an interlocutory stage, which include having a strong case for trial, preventing irreparable injury, and maintaining the status quo ante. The court found that the reliefs sought by the applicants do not arise out of the plaintiffs' cause of action and are not incidental thereto. The court also noted that the reliefs sought cannot be granted in the absence of a counterclaim and are not in the nature of restoring the status quo ante. Therefore, the court found no ground to grant the reliefs of mandatory injunction under Order XXXIX Rule 1(a) CPC.4. Equitable Relief under Section 151 CPC:The applicants argued for equitable relief under Section 151 CPC, claiming that the failure to deposit the amount would cause serious financial loss to defendant No.4. The court noted the competing rights of secured creditors (plaintiffs) and unsecured creditors (POSCO), emphasizing that secured creditors have higher claims. The court found that the plaintiffs, as secured creditors, have a first charge on the property of defendant No.4, and it would be inequitable to create a further charge on the property to satisfy the claim of an unsecured creditor. The court also noted that the applicants' claim of defendant No.4 being a joint venture with the plaintiffs was unfounded, as the relevant agreements had been superseded. The court concluded that the reliefs sought by the applicants cannot be granted either under Order XXXIX Rule 1(a) CPC or by way of equity.Conclusion:The application filed by defendant Nos.1 and 3 was dismissed, with the court finding no grounds to grant the reliefs of mandatory injunction or equitable relief. The court upheld the plaintiffs' rights as secured creditors and emphasized the necessity of adhering to the contractual agreements between the parties.