2025 (12) TMI 1000 - HC - Indian Laws

Interim injunction under Order XXXIX Rules 1-2 CPC against fabricated MOAs allegedly backing Section 138 NI Act claims

HC, on an application under Order XXXIX Rules 1 and 2 CPC, granted interim injunction in favour of the plaintiff in a suit challenging three Memoranda of ... Application filed on behalf of the plaintiff under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 - Seeking grant of interim relief - MOAs are false and fabricated and hence void ab-initio or not - HELD THAT:- The three impugned MOAs make a reference to certain cheques that were given by the plaintiff to the defendants, which could be used by the defendants to recover the amounts due from the plaintiff in case of breach of the terms of the impugned MOAs. There is nothing to doubt the genuineness of the certificates issued by HDFC Bank and J&K Bank. If the chequebooks containing the aforesaid cheques were issued on 15th October 2020 and 4th December 2020 respectively, how could the cheques which were part of the said chequebooks be handed over by the plaintiff to the defendants on or before 17th August 2019. There are merit in the arguments raised on behalf of the plaintiff that the aforesaid three impugned MOAs, at least on a prima facie view, appear to be fabricated and manufactured documents, which were produced at a later stage when the defendants decided to file cases against the plaintiff under Section 138 of the NI Act - plaintiff has thus been able to make out a prima facie case in his favour. Balance of convenience is also in favour of the plaintiff and against the defendants and irreparable loss, harm and injury would be caused to the plaintiff if on the basis of the impugned MOAs, the defendants continue to file and prosecute cases against the plaintiff. Till the final adjudication of the present suit, the defendants are restrained from acting upon or enforcing the following Memorandum of Agreements: (a) Memorandum of Agreement dated 20th March 2019 between the plaintiff and the defendant no.1 for a sum of Rs. 15,00,000/-; (b) Memorandum of Agreement dated 17th August 2019 between the plaintiff and the defendant no.1 for a sum of Rs. 1,15,00,000/-; (c) Memorandum of Agreement dated 17th August 2019 between the plaintiff and the defendant no.3 for a sum of Rs. 40,00,000/-. Application disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1.1. Whether the plaintiff established a prima facie case that the three impugned Memorandum of Agreements are fabricated and not duly executed loan/investment agreements. 1.2. Whether the contemporaneous email correspondence and draft Memorandum of Understanding support the plaintiff's plea that the actual agreed terms differed materially from those recorded in the impugned Memorandum of Agreements. 1.3. Whether the mention of specific cheque numbers in the impugned Memorandum of Agreements, in light of the bank certificates regarding issuance dates of the relevant cheque books, indicates fabrication of those agreements. 1.4. Whether, applying the tests of prima facie case, balance of convenience and irreparable injury, the defendants should be restrained from acting upon or enforcing the impugned Memorandum of Agreements, including for proceedings under Section 138 of the Negotiable Instruments Act, 1881. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Prima facie case of fabrication of the impugned Memorandum of Agreements Interpretation and reasoning 2.1. The Court examined the plaintiff's case that he was doing coal supply business through a partnership firm, that defendant no.2 agreed to invest in his business through defendant no.1, and that documents signed by him under coercion/misrepresentation were later misused to manufacture the impugned Memorandum of Agreements showing financial assistance of Rs. 15,00,000/-, Rs. 1,15,00,000/- and Rs. 40,00,000/-. 2.2. The Court contrasted this with the defendants' stand that the three Memorandum of Agreements were duly executed and notarized in 2019 pursuant to the plaintiff's request for financial assistance, that the plaintiff defaulted in repayment, and that subsequent dishonour of cheques led to Section 138 proceedings, to which the present suit was allegedly a counterblast. 2.3. On the material placed, the Court focused on two key aspects indicating inconsistency with the defendants' version: (i) the terms relating to interest and returns as reflected in the contemporaneous draft Memorandum of Understanding and emails, and (ii) the reference to specific cheque numbers in the impugned agreements which, according to bank certificates, could not have existed at the stated dates of execution. 2.4. These circumstances, taken cumulatively, led the Court, at the interim stage, to doubt the authenticity of the impugned Memorandum of Agreements and to treat them as prima facie fabricated or manufactured documents, allegedly deployed when the defendants decided to initiate proceedings under Section 138 of the Negotiable Instruments Act. Conclusions 2.5. The Court held that, on a prima facie view, the plaintiff has made out a credible case that the three impugned Memorandum of Agreements appear to be fabricated and not reflective of the actual transaction or agreed terms. Issue 2 - Effect of contemporaneous draft MOU and email correspondence on the agreed financial terms Interpretation and reasoning 2.6. The Court scrutinized the email trail involving the plaintiff, defendant no.2 and the Chartered Accountant, Mr. Chandan Ghosh, including: (a) Email dated 12 August 2019 from Mr. Ghosh indicating his engagement to draft the agreement on a concessional fee, showing his connection with defendant no.2. (b) Emails where the plaintiff clearly asserted that the assured return to defendant no.1 would be a minimum of 18% per annum. (c) Email dated 15 August 2019, by which Mr. Ghosh circulated a draft MOU dated 14 August 2019, recording that defendant no.1 would be entitled to 50% profit from the plaintiff's business, subject to a minimum of 18% per annum on Rs. 1,00,00,000/-. (d) Email dated 16 August 2019 from a witness, also providing for interest at 18% per annum. 2.7. Clause 3(i) of the draft MOU dated 14 August 2019, as reproduced by the Court, explicitly provided for a minimum return of 18% per annum on Rs. 1,00,00,000/- or 50% of profits, whichever is higher, i.e., simple interest at 18% per annum on capital contributed. 2.8. The Court contrasted this with the clauses in the three impugned Memorandum of Agreements, which stipulate interest at 2.5% per month on a compoundable basis, along with additional specified profits, thereby drastically increasing the financial burden on the plaintiff. 2.9. The Court reasoned that, since the parties were negotiating and circulating drafts containing a term of simple interest at 18% per annum as late as mid-August 2019, it 'completely defies logic' that within a day the terms would be unilaterally and drastically altered to compound interest at 2.5% per month and substantial additional profits, which materially prejudiced the plaintiff. 2.10. The Court further relied on an email dated 9 October 2019 from the plaintiff to defendant no.1 enclosing another draft MOU, again providing a guaranteed share of not less than 18% on the outstanding financial assistance, which email was duly acknowledged by defendant no.2. This indicated that the MOU was still under discussion and not executed at least till 9 October 2019, whereas the defendants' case was that the impugned Memorandum of Agreements had already been executed on 20 March 2019 and 17 August 2019. Conclusions 2.11. The Court concluded that the contemporaneous draft MOU and email correspondence support the plaintiff's plea that the agreed terms contemplated simple interest at 18% per annum and profit sharing, not compound interest at 2.5% per month with additional profit payments, thereby reinforcing the prima facie inference that the impugned Memorandum of Agreements do not reflect the original understanding and appear suspect. Issue 3 - Cheque numbers and bank certificates as indicators of fabrication Interpretation and reasoning 2.12. The Court examined Clause 9 of the two impugned Memorandum of Agreements dated 17 August 2019 (with defendant no.1 and defendant no.3, respectively), which both recite that the plaintiff has 'handed over' specified banker's cheques drawn on HDFC Bank Ltd., Ranchi Branch, and J&K Bank, Ranchi Branch, to secure the financial transaction and enable recovery in case of default. 2.13. The impugned clauses specifically refer to cheque numbers in the HDFC series (e.g., 000086, 000112, 000113, 000126, 000127, 000133) and J&K Bank series (e.g., 133442, 133443, 186444, 186445). 2.14. The plaintiff produced a certificate from HDFC Bank showing that cheques bearing serial numbers 000126 to 000150, including some of those mentioned in the impugned agreements, were issued only on 15 October 2020. 2.15. The plaintiff also produced a certificate dated 28 August 2023 from J&K Bank stating that cheques bearing serial numbers 186401 to 186450, which include the J&K Bank cheque numbers cited in the impugned agreements, were issued only on 4 December 2020. 2.16. The defendants argued that the cheques mentioned in the impugned documents were only recorded for security and were not actually handed over at the time of execution, and further relied on the plaintiff's admission that the cheque numbers relate to his own HDFC and J&K Bank accounts, suggesting that such details could only have come from him. 2.17. The Court held that this explanation is 'plainly contrary' to the express language of Clause 9 in both agreements, which clearly states that the cheques have been 'handed over' to the lenders at the time of execution, not merely noted as future securities. 2.18. At the interim stage, the Court found no reason to doubt the genuineness of the bank certificates. On the face of these certificates, the relevant cheque books were issued in October and December 2020, rendering it impossible for the plaintiff to have handed over those cheques on or before 17 August 2019 as recorded in the impugned agreements. Conclusions 2.19. The Court held that the chronological impossibility arising from the bank certificates, when read against the clear recitals in Clause 9 of the impugned agreements, strongly supports the plaintiff's contention that the agreements were created or modified later and are prima facie fabricated. Issue 4 - Entitlement to interim injunction restraining enforcement of the impugned Memorandum of Agreements Legal framework (as applied by the Court) 2.20. The Court applied the settled threefold test for grant of interim injunction under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908: (i) existence of a prima facie case; (ii) balance of convenience; and (iii) likelihood of irreparable loss, harm or injury to the applicant if relief is denied. Interpretation and reasoning 2.21. On prima facie case, the Court relied on (a) the inconsistency between the negotiated terms in the draft MOU/emails and the onerous terms in the impugned agreements, and (b) the bank certificates disproving the existence of the cheques at the time when the impugned agreements purport to record their handing over. These factors cumulatively indicated that the impugned agreements were, at least prima facie, fabricated or manufactured. 2.22. On balance of convenience, the Court noted that allowing the defendants to act upon the impugned agreements, including by relying on them in criminal complaints and other proceedings, would seriously prejudice the plaintiff, especially when the very validity and authenticity of those agreements is under substantial, prima facie supported challenge. 2.23. On irreparable loss, harm and injury, the Court held that if the defendants continued to file and prosecute cases against the plaintiff on the basis of the impugned Memorandum of Agreements pending adjudication of their validity, the plaintiff would suffer irreparable consequences that could not be adequately compensated by damages. Conclusions 2.24. The Court concluded that the plaintiff has established a strong prima facie case, that the balance of convenience lies in his favour, and that he would suffer irreparable harm if interim protection is not granted. 2.25. Accordingly, the Court restrained the defendants, till final adjudication of the suit, from acting upon or enforcing the three impugned Memorandum of Agreements, namely: (a) Memorandum of Agreement dated 20 March 2019 (Rs. 15,00,000/-); (b) Memorandum of Agreement dated 17 August 2019 with defendant no.1 (Rs. 1,15,00,000/-); (c) Memorandum of Agreement dated 17 August 2019 with defendant no.3 (Rs. 40,00,000/-). 2.26. The Court clarified that all observations are confined to the adjudication of the interim application and shall not affect the final decision in the suit.