Restitution after misleading conduct in possession dispute leads to restoration of interim injunction and theatre premises.

A party that secured closure of an interim injunction by stating it was no longer interested in the property, while simultaneously pursuing possession through tax recovery steps, was found to have acted without bona fides and to have misled the court. The principle of restitution required restoration of the position existing before the disputed dispossession, so the interim injunction was restored and possession of the theatre premises was directed to be returned pending further orders. The competing question whether rule 39 or rule 40 of the Income-tax (Certificate Proceedings) Rules, 1962 applied was left open for decision in the main proceedings.

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Issues: Whether the order closing the interim injunction was liable to be set aside and whether possession of the theatre premises was liable to be restored to the applicant on account of the manner in which possession was taken by the respondents and the Income-tax Department.

Analysis: The applicant's possession had been disturbed after the respondents obtained closure of the interim injunction by filing a memo stating that they were no longer interested in the property, while simultaneously pursuing steps to secure possession through the tax recovery machinery. The Court found that this course of conduct was not bona fide and amounted to securing an advantage by misleading the Court. The rival controversy as to whether rule 39 or rule 40 of the Income-tax (Certificate Proceedings) Rules, 1962 applied was not finally examined in these applications, since that question could be agitated in the main proceedings. In the circumstances, the principle of restitution and the need to restore the position existing before the disputed dispossession were held to require immediate restoration of possession.

Conclusion: The order dated 21 June 2005 was set aside, the interim injunction was restored, and the applicant was entitled to restoration of possession of the suit theatre premises pending further orders.

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