2024 (11) TMI 1530 - SC - Indian Laws

Appeal allowed: Appellate exceeded Order 43 CPC jurisdiction by substituting view without showing perversity; Order 39 Rules 1-2 standards reaffirmed

The SC allowed the appeal and set aside the HC's impugned order, holding the HC exceeded its limited appellate jurisdiction under Order 43 CPC by ... Grant of temporary injunction under Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908 - failure to make out any prima facie case as the power of attorney executed in favour of the defendant no. 1 is not under challenge - appellate jurisdiction under order 43 of the CPC - Meaning of expression 'perverse' - doctrine of lispendens. Appellate jurisdiction under order 43 of the CPC - HELD THAT:- Order 43 of the CPC specifies the orders against which an appeal lies. Sub Rule (r) of Rule 1 of the said order provides that an appeal would lie against an order made under Rules 1, 2, 2A, 4 and 10 of Order 39 of the CPC respectively - It is pertinent to note that in Printers [1960 (4) TMI 69 - SUPREME COURT] this Court had held that ignoring relevant facts is also a ground for interfering with the discretion exercised by the trial court. In Neon Laboratories Ltd. v. Medical Technologies Ltd. [2016 (3) TMI 787 - SUPREME COURT] this Court held that the Appellate Court should not flimsily, whimsically or lightly interfere in the exercise of discretion by a subordinate court unless such exercise is palpably perverse. Perversity can pertain to the understanding of law or the appreciation of pleadings or evidence. In other words, the Court took the view that to interfere against an order granting or declining to grant a temporary injunction, perversity has to be demonstrated in the finding of the trial court. This Court in Shyam Sel & Power Ltd. v. Shyam Steel Industries Ltd. [2022 (3) TMI 1391 - SC ORDER] observed that the hierarchy of the trial court and the appellate court exists so that the trial court exercises its discretion upon the settled principles of law. An appellate court, after the findings of the trial court are recorded, has an advantage of appreciating the view taken by the trial judge and examining the correctness or otherwise thereof within the limited area available. It further observed that if the appellate court itself decides the matters required to be decided by the trial court, there would be no necessity to have the hierarchy of courts. The appellate court in an appeal from an interlocutory order granting or declining to grant interim injunction is only required to adjudicate the validity of such order applying the well settled principles governing the scope of jurisdiction of appellate court under Order 43 of the CPC which have been reiterated in various other decisions of this Court. Principles governing grant of temporary injunction - HELD THAT:- In the case of Anand Prasad Agarwal v. Tarkeshwar Prasad [2001 (5) TMI 937 - SUPREME COURT], it was held by this Court that it would not be appropriate for any court to hold a mini-trial at the stage of grant of temporary injunction. The burden is on the plaintiff, by evidence aliunde by affidavit or otherwise, to prove that there is “a prima facie case” in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition precedent for the grant of temporary injunction. Prima facie case is not to be confused with prima facie title which has to be established on evidence at the trial. Only prima facie case is a substantial question raised, bona fide, which needs investigation and a decision on merits - The Court while granting or refusing to grant injunction should exercise sound judicial discretion to find the amount of substantial mischief or injury which is likely to be caused to the parties, if the injunction is refused and compare it with that which is likely to be caused to the other side if the injunction is granted. If on weighing competing possibilities or probabilities of likelihood of injury and if the Court considers that pending the suit, the subject matter should be maintained in status quo, an injunction would be issued. Thus, the Court has to exercise its sound judicial discretion in granting or refusing the relief of ad interim injunction pending the suit. Meaning of the expression 'perverse' - HELD THAT:- Any order made in conscious violation of pleading and law is a perverse order. In Moffett v. Gough, the Court observed that a perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence - in the facts of the present case, the High Court overstepped its appellate jurisdiction under Order 43 of the CPC and substituted its own view for the one taken by the trial court without giving any categorical finding as to why the order of the trial court could be said to suffer from any perversity, capriciousness, arbitrariness, malafides or having been passed in ignorance of the settled principles governing the grant of injunction under Order 39 of the CPC. It is true that the doctrine of lispendens as enunciated in Section 52 of the T. P. Act takes care of all pendente lite transfers; but it may not always be good enough to take fullest care of the plaintiffs interest vis-a-vis such a transfer - It must be noted that Rule 1 of Order 39 of the Code clearly provides for interim injunction restraining the alienation or sale of the suit property and if the doctrine of lispendens as enacted in Section 52 of the T. P. Act was regarded to have provided all the panacea against pendente lite transfers, the Legislature would not have provided in Rule 1 for interim! injunction restraining the transfer of suit property. Rule 1 of Order 39, clearly demonstrates that, notwithstanding the Rule of lispendens in Section 52 of the T. P. Act, there can be occasion for the grant of injunction restraining pendente lite transfers in a fit and proper case. The impugned order passed by the High Court is set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the High Court, in an appeal under Order 43 CPC against an interlocutory order granting a temporary injunction, exceeded its appellate jurisdiction by substituting its own view for the discretion exercised by the trial court without demonstrating perversity, arbitrariness, capriciousness or malafides. 2. Whether the plaintiffs established the classical requisites for grant of temporary injunction under Order 39 CPC - namely, a prima facie case, irreparable injury, and balance of convenience - in respect of a registered sale deed allegedly executed by a co-owner relying on a long-standing power of attorney. 3. Whether pendente lite transfers are always adequately addressed by the doctrine of lis pendens (Section 52, T.P. Act) so as to render interim injunctions restraining alienation unnecessary, and when an injunction against further transfers is justified despite lis pendens. 4. Whether the High Court impermissibly considered extraneous matters (including collateral civil and criminal proceedings and allegations of mala fides or political influence) in vacating the interim injunction without engaging the settled legal parameters applicable to interlocutory relief. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Scope of appellate interference with interlocutory orders (Order 43 CPC) Legal framework: An appeal lies against interlocutory orders under Order 39 by virtue of Order 43 CPC, but the appellate court's jurisdiction to disturb the discretionary exercise of a trial court is circumscribed. Interference is permissible only where the trial court's discretion was exercised arbitrarily, capriciously, perversely, in mala fide, or in ignorance of settled principles governing interlocutory injunctions. Precedent treatment: The Court applied the settled doctrine that an appellate court should not substitute its own discretion merely because it would have taken a different view; rather it must show that the trial court's order is palpably perverse or suffers from the enumerated vices. The decision follows the established approach of examining whether the discretion was properly and judicially exercised and whether any egregious error warrants interference. Interpretation and reasoning: The Court examined the High Court's approach and found that it substituted its own assessment of facts and merits without pointing to any demonstrable perversity or arbitrariness in the trial court's reasoning. The High Court's sweeping conclusions and reliance on collateral matters did not satisfy the stringent standard required to overturn an interlocutory discretionary order. Ratio vs. Obiter: Ratio - appellate interference with interlocutory discretionary orders is limited and must be predicated on perversity, capriciousness, arbitrariness, malafides, or disregard of law. Obiter - observations on the inclination of appellate courts to exercise caution when reviewing interlocutory discretion. Conclusions: The High Court overstepped its appellate jurisdiction by substituting its view for that of the trial court without demonstrating the requisite grounds for interference. The impugned appellate order was set aside on this basis. Issue 2 - Prima facie case, irreparable injury and balance of convenience for interim injunction Legal framework: Grant of temporary injunction requires the plaintiff to show (i) a prima facie case in its favour (not equivalent to prima facie title), (ii) that refusal would cause irreparable injury not adequately compensable by damages, and (iii) that the balance of convenience favors granting relief. Courts must avoid mini-trials at the interlocutory stage. Precedent treatment: The Court reiterated that the trial court's evaluation of these elements, if made reasonably and judicially, should not be lightly displaced; mere possibility of a different view by the appellate court is insufficient for interference. Interpretation and reasoning: On the record the trial court found that the plaintiffs had produced the 1991 registered sale deeds showing joint ownership and that the subsequent 2018 sale deed in favour of a co-owner's son lacked signatures of plaintiffs. The trial court concluded there was a prima facie case, balance of convenience in plaintiffs' favour, and risk of loss irreparable in money terms. The High Court did not point to specific misreading or perverse conclusions by the trial court on these elements; rather it adopted the defendants' version and collateral material without establishing that the trial court's conclusions were untenable. Ratio vs. Obiter: Ratio - where the trial court, after considering pleadings and documents, reaches a possible view on the three injunction tests, the appellate court must not set it aside absent perversity. Obiter - description of what constitutes irreparable injury and caution against mini-trials. Conclusions: The trial court's grant of interim injunction met the threshold for interlocutory relief on the material before it and its discretion was not shown to be perverse; therefore the appellate reversal was unwarranted. Issue 3 - Effectiveness of lis pendens and need for injunction against pendente lite transfers Legal framework: Section 52 (doctrine of lis pendens) ensures that transfers pendente lite are subject to the result of the suit, but Rule 1 of Order 39 CPC explicitly contemplates interim injunctions restraining alienation of suit property. Equity may be required to prevent hardship or defeat of substantive relief even where lis pendens operates. Precedent treatment: The Court treated established authorities acknowledging that lis pendens does not always fully protect the plaintiff's equitable interests; courts may, in fit cases, restrain transfers to preserve status quo and prevent consequences (e.g., bona fide third-party improvements) that could defeat relief at trial. Interpretation and reasoning: The Court noted practical scenarios (e.g., third-party bona fide purchaser who makes substantial improvements) where lis pendens may not adequately preserve plaintiffs' interests and where an injunction to maintain status quo is appropriate. Given the nature of the dispute and the trial court's findings, restraining further alienation was considered justified. Ratio vs. Obiter: Ratio - lis pendens is not a panacea; Rule 1 of Order 39 contemplates cases where injunction against alienation is proper to protect substantive rights. Obiter - illustrative examples of hardship that may arise absent injunctions. Conclusions: An injunction restraining further encumbrances or transfers of the suit property was appropriate; any subsequent transfer during pendency will remain subject to lis pendens and the trial court's ultimate adjudication. Issue 4 - Consideration of extraneous matters by appellate court and standard of engagement required Legal framework: Appellate courts must confine themselves to testing the correctness of the interlocutory order within the legal parameters governing appellate review of discretionary orders; extraneous materials and collateral proceedings should not displace this limited inquiry unless they bear directly and cogently on perversity or illegality of the order. Precedent treatment: The Court emphasised established cautionary principles that appellate courts should not supplant trial court fact-finding nor indulge in a mini-trial on collateral allegations of mala fides or misuse of influence absent clear connection to the exercise of discretion. Interpretation and reasoning: The High Court relied heavily on other civil and criminal litigations and broad allegations of harassment and political influence to justify vacating the injunction. The Court found this approach improper because the High Court did not demonstrate that such matters rendered the trial court's order perverse or arbitrary; instead, it accepted the defendants' contentions without adequately engaging the trial court's reasoning. Ratio vs. Obiter: Ratio - appellate courts must avoid deciding interlocutory appeals by resorting to extraneous collateral matters unless they demonstrably establish the trial court's exercise of discretion to be perverse or illegal. Obiter - admonition to appellate courts to exercise appellate jurisdiction with restraint and reasoned engagement. Conclusions: The High Court's consideration of extraneous matters, without pointing to demonstrable perversity in the trial court's order, was improper and rendered its order deficient; the appellate order was therefore set aside and status quo restored subject to lis pendens and trial adjudication. OVERALL CONCLUSION The High Court erred in vacating the trial court's interim injunction by substituting its own view without demonstrating the strict grounds required for appellate interference with discretionary interlocutory orders. The trial court's grant of interim injunction satisfied the threshold considerations for interlocutory relief on the material before it; lis pendens does not preclude the grant of injunctions restraining further transfers in fit cases. The High Court's order is set aside, and status quo over the suit property is directed to be maintained pending final adjudication, with any further transfers subject to lis pendens.