TaxTMI 
TaxTMI 
2019 (7) TMI 1668
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....nt is the employee of the plaintiff company (hereinafter referred to as "the employee"). Defendant no. 1 in C.S 50 of 2019 is a partnership firm while defendants 2 to 4 are the partners of the above partnership firm. These defendants were acting as distributors for various goods of the plaintiff company under the flagship brand of "Tata Paras". Similarly in C.S 51 of 2019 the defendant no. 1 is the distributor company. The defendant no. 1 to 4 in C.S No. 50 of 2019 and the defendant no. 1 in C.S 51 of 2019 are hereinafter referred to, for the sake of convenience, singularly as "the distributor no. 1" and "the distributor no. 2" respectively and jointly as "the distributors". 2. At the very outset, it is to be stated that this matter is being heard at the ad interim stage. I had given an option to the defendants in both the suits to file short affidavits providing an undertaking that they shall not alienate their immovable property pending disposal of the interlocutory applications. However, the defendants refused to do so and desired to argue the matter out without filing any affidavits as they were unwilling to give any undertaking at this stage. 3. The brief facts of the case a....
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.... Once credit note was issued/passed, the balance dues payable by the dealers to the petitioner stood reduced to that extent. E. The distributors had been involved with the petitioner for more than two decades. The aforesaid policy of discount and/ or rebate had been extended to the distributors based on the price circulars in respect of bulk fertilizers issued by the petitioner. F. The employee of the petitioner as part of his job responsibility, used to calculate and extend the benefit of such rebates and discounts, inter alia, to the distributors, which were determined as per price circulars issued monthly, in respect of each of the products, depending upon the business requirements and management decisions of the petitioner. The extent of discounts and rebates in the form of credit notes in favour of the dealers (including the distributors) used to be uploaded in the SAP system of the petitioner by the employee using the unique login ID assigned to him by the petitioner. G. In or about October, 2016, the regional accounts team of the petitioner discovered that the employee had issued credit notes to the distributors in excess of its entitlement and the same were reversed s....
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....butor no. 1 came for a meeting on February 9, 2018 with the petitioner and admitted to having received excess credit notes for the sum of Rs. 26 crores for the financial years 2015-2016 and 2016-2017. In his admission letter, he further stated that the employee had colluded with him and in exchange for the excess credit the employee received cash payments of approximately Rs. 3 crores. To show bona fide, a further payment of Rs. 50 lakhs was made by the distributor to the plaintiff company on that date itself. L. The partner of the distributor no. 1 thereafter on February 14, 2018 sent an email retracting the statement made on February 9, 2018 and alleged that the said statement had been made by him under duress and coercion. M. With respect to C. S. No. 51 of 2019, a meeting was arranged between the petitioner and the representative of the distributor no. 2 on February 19, 2018 at the office of the petitioner. The representative of the distributor no. 2 had been told that aberrations and irregularities were found in the dealership ledger statement of the distributor no. 2. The petitioner had also stated that credit notes in excess of the entitlement of the distributor no. 2 ha....
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.... 20, 2018. With respect to the employee the KPMG report revealed the following :- a) The employee had made aggregate Cash Deposits in excess of Rs. 1.27 crores in different bank accounts. The employee had several banks accounts, and the sums in excess of Rs. 1.27 crores had been deposited on review of bank statements of only around 10 bank accounts. b) The employee had incurred expenditure of approximately Rs. 50 lakhs from his VISA Regalia credit card. c) The employee had made aggregate cash deposits in excess of Rs. 64 lakhs during the period of demonetization, that is, between November, 2016 and January, 2017. d) Income tax returns of the employee for the assessment years 2015-2016 and 2016-2017 reflect gross total income of only Rs. 6,95,160/- and Rs. 7,69,284/- respectively. e) The employee had made aggregate payments in excess of Rs. 45 lakhs towards premia for insurance policies. f) The employee had invested aggregate sum of excess of Rs. 32 lakhs towards mutual funds and fixed deposits. g) Equity transactions of around Rs. 3.42 crores had been carried out in the account of Pradip Kumar Singh (the father of the employee) in the financial year 2016-2017. h) Th....
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....ed (Dealership Code no. (Dealership Code no. FK099S001) Code no. FK064S001) FK209S001) (Amount of (Amount of &nb....
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....; 12,89,93,578/- 9,48,58,601/- 9,38,70,382/- 31,77,22,561/- C.S. No. 51 of 2019 Financial Year Territory- Nadia (Dealership Code No.: FA059S001)(Amount of excess credit notes issued) [in Re.] (till June) 2014-15 32,76,618/- 2015-16 1,63,66,140/- 2016-17 1,00,29,847/- 2017-18 5,74,137/- Total 3,02,46,742/- T. After giving credit for the sums paid by the distributors, the sum of Rs. 28,25,48,558/- became payable from the distributor no.1 and Rs. 2,58,68,781/- payable by the distributor no. 2. The decree sought in both the plaints further includes the interest payable on the above dues till March 5, 2019. 4. Mr. S. N. Mookherjee, Senior Advocate, appearing on behalf of the plaintiffs in both the suits has placed the documents that specifically highlighted the alleged fraud....
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....ition that revealed the assets of the employee as also the cash deposits and credit card expenses of the employee. He submitted that the annual compensation of the employee when his service was terminated was only Rs. 11 lakhs and such substantial assets and cash deposits clearly indicate that these are the ill gotten gains received by way of kick-backs from the distributors. He further relied on the admissions of the employee wherein he had admitted to the fact of having received 25 per cent of the excess credits as kick- backs from the distributors as also the letter wherein the employee had offered to the plaintiff as security a flat owned by the employee and his wife. 6. Mr. Mookherjee submitted that in the present fact scenario, where a clear cut prima facie case of fraud has been established in the interlocutory application, an ad interim injunction is required to be issued for protection of the petitioner. He submitted that the fraudulent conduct of the respondents in the dealings with the petitioner makes it imperative for this Court to protect and secure the petitioner. He submitted that the petitioner had great apprehension that the respondents would alienate/transfer th....
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....ay Kumar Agarwal -v- Green Concretex Global Ltd. (GA No. 2685 of 2013, APOT No. 432 of 2013, CS No. 286 of 2013) [Coram: Ashim Kumar Banerjee and Dr. Mrinal Kanti Chaudhuri, JJ.] to show that the Calcutta High Court has taken a pragmatic approach in commercial matters putting the niceties of law in the back-sheet and directed the defendants to secure the claim of the plaintiff in a money suit. 8. Mr. Aniruddha Roy, counsel appearing on behalf of the distributor no. 1 submitted that the petitioner had discovered the alleged discrepancies and fraud in 2016, and thereafter in July of 2017, but had chosen to file the suit belatedly on 5th March, 2019. He submitted that an order of injunction is an equitable relief and the same stands defeated due to immense delay caused by the plaintiff. He further submitted that the claim of the plaintiff against the respondent is a simpliciter unsecured money claim that has till date not been crystallized. He submitted that the case made out in the plaint requires a full fledged trial and no interim order seeking any kind of protection/security at this stage can be passed. 9. Mr. Roy submitted that the various entries and materials that have been a....
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.... Co. and Another -v- Solanki Traders [Coram: R.V. Raveendran and P. Sathasivam, JJ.] reported in (2008) 2 SCC 302 have to be satisfied. He put reliance on Premraj Mundra -v- Md. Manek Gazi & ors. [Coram: Sinha, J.] reported in AIR 1951 Cal 156 that had been approved in Raman Tech (supra). He submitted that no averments were present in the interlocutory petition that would satisfy the test of Order 38, Rule 5 of the Code. 11. With respect to the inherent powers provided in Section 151 of the Code, Mr. Roy submitted that these powers do not operate over substantive rights of a litigant. He submitted that the defendants have substantive rights over their immovable and movable properties guaranteed under the Constitution of India and no court has the inherent powers to forcibly seize such property, as such an action would invade into the substantive rights of a citizen, and the same is not permissible under Section 151 of the Code. To buttress his arguments as made above, he relied on Sunil Kakrania & Ors. -v- M/s. Saltee Infrastructure Ltd. and another [Coram: Bhaskar Bhattacharya and Prasenjit Mandal, JJ.] reported in AIR 2009 Cal 260 and Kohinoor Steel Private Ltd. -v- Pravesh Chan....
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....ry and equitable relief when disputed questions of facts are present. He placed reliance on Air India Ltd. & Ors. -v- Vishal Capoor & Ors. [Coram: Ruma Pal, Dr. Ar. Lakshmanan and C. K. Thakker, JJ.] reported in (2005) 13 SCC 42 in support of the above proposition. 13. With regard to the powers of a Chartered High Court, he submitted that Clause 19 of the Letters Patent provides and empowers this Court to apply law and equity in a particular case to pass necessary orders. However, he submitted that as in the present case, the law in relation to money claims is well settled by two Division Bench judgments of this Court, the same operate as a binding precedent on this Court. He submitted that when law is settled and has a binding effect it is only the law which shall prevail and equity shall have no place to play. He further submitted that when there is a conflict between law and equity it is the law who has to prevail in accordance with the Latin maxim "dura lex sed lex", which means "the law is hard, but it is law". He submitted that equity can only supplement the law but it cannot supplant or override it. He relied on Council for Indian School Certificate Examination -v- Isha Mit....
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.... respect to procedure and cannot be used to take away the substantive rights of a litigant. He further relied on a Calcutta High Court decision in Badal Chandra Kundu and Ors. -v- Netai Mahato and Ors. (C.O. 3813 of 2017) [Coram: Biswajit Basu, J.] and placed paragraph 19 to explain the functioning of Sections 94 and 151 read with Order 39, Rule 1 and 2. Mr. Chowdhury also referred to Premraj Mundra (supra), Vareed Jacob (supra) and Manohar Lal Chopra (supra) to buttress his argument that the powers under Section 151 of the Code cannot be used to affect the substantive rights of a litigant. Mr. Chowdhury thereafter produced a document issued by the plaintiff to the respondent no. 1 with reference to region Murshidabad to indicate that on 14th of February, 2018 the outstanding closing balance was only Rs. 25 lakhs odd. He submitted that the earlier admissions of the distributor to Rs. 69 lakhs odd was explained by this document. He argued that post admission documents may destroy the admission, thereby, rendering a situation where the admission cannot be relied upon. He referred to paragraphs 6, 7 and 8 of a Calcutta High Court judgment in Scope Vincom Industries Private Limited -v-....
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....ent factual matrix, this Court does not have any power to pass any injunction and/or attachment even if the Court comes to the finding that a prima facie case of fraud has been committed by the defendants. He reiterated the principles in relation to attachment and injunction and submitted that where specific provisions are provided in the Code, the Court cannot travel beyond the Code under any circumstances. He further relied on the Supreme Court judgment in Jaisri Sahu -v- Rajdewan Dubey and Others [Coram: P.B. Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta and T.L. Venkatarama Aiyar, JJ.] reported in AIR 1962 SC 83 to emphasize on the Doctrine of Precedents to submit that this Court is bound by the two Division Bench Judgments of the Calcutta High Court relating to issue of an injunction in the case of a money claim. 18. I have heard counsel appearing on behalf of the plaintiff and the respondents in both the suits and perused the documents filed by the plaintiff in the interlocutory applications filed before me. I have also gone through a bunch of documents filed by Mr. Aniruddha Roy appearing on behalf of the distributor no. 1. Mr. Jishnu Chowdhury, counsel appearing on behalf o....
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....er heads were given by the petitioner. The letter further recorded that in a meeting dated 14th November, 2017 he had sought for details of the excess credits so that he could reconcile the same at his end. The letter further explained the ad hoc payments of Rs. 1,50,00,000/- made on various dates and also stated that both the letters of February 9, 2018 had been issued by the respondent no. 3 under duress and threat. 21. With regard to the admission made by the distributor no. 2 on 19th February, 2018, there is no retraction whatsoever. However, Mr. Jishnu Chowdhury, counsel appearing on behalf of the said respondent produced certain documents to show that the admitted amount of Rs. 64 lakhs odd had been refunded by the respondents, and in fact, it was the plaintiff that owed money to the defendant. With regard to the employee, a letter was issued by him on June 25, 2018 (Annexure 'A' of supplementary affidavit in G. A. No. 725 of 2019), four months after the admissions made by him on February 9, 2018. In this letter, he states that upon grave threat and duress the company officials of the plaintiff had obtained his signatures and scribe over various documents. It is to b....
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....ngly, reduces the weightage of the entire retraction. Is it conceivable that a dealer who has been working with the petitioner and receiving discounts and rebates for almost two decades is not aware of the basis of the said discounts? In my opinion, such a situation cannot be conceivable in the commercial world. Furthermore, the exchange of emails from pages 651 to 690 in G.A. No. 725 of 2019 completely denounces the stand of the distributor no. 1. Hence, at this ad interim stage no reliance can be placed on this retraction. On a careful examination of the documents as indicated above, I am of the clear view, as one needs to be at an ad interim stage, that fraud has been committed by the respondents on the petitioner. 24. In fact, the irregular manner in which the respondents have sought to hand over documents before this Court to obfuscate the case of the plaintiff has further strengthened my view. Mr. Jishnu Chowdhury appearing on behalf of the distributor no. 2 handed over a customer ledger for the period of February 1, 2018 to February 28, 2018 of the petitioner company in relation to the distributor no. 2 that showed that the outstanding closing balance was Rs. 25,71,639.62/-....
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....amages no protection can be granted to a plaintiff. Before deciding on the legal issues that arise in this matter, I would like to pen down the relevant sections of the Code for a better understanding of the same. Accordingly, Section 4; Section 94; Section 151; Order 38, Rule 5, and Order 39, Rule 1 are delineated below: Section 4. Savings. - (1) In the absence of any specific provision to the contrary, nothing in this Code shall be deemed to limit or otherwise affect any special or local law now in force or any special jurisdiction or power conferred, or any special form of procedure prescribed, by or under any other law for the time being in force. (2) In particular and without prejudice to the generality of the proposition contained in sub-section 91), nothing in this Code shall be deemed to limit or otherwise affect any remedy which a landholder or landlord may have under any law for the time being in force for the recovery of rent of agricultural land from the produce of such land. Section 94. Supplemental proceedings. - In order to prevent the ends of justice from being defeated the Court may, if it is so prescribed,- (a) issue a warrant to arrest the defendant and b....
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.... affidavit or otherwise- (a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or (b) that the defendant threatens, or intends, to remove or dispose of his property with a view to [defrauding] his creditors, [(c) that the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit,] the Court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property [or dispossession of the plaintiff, or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit] as the Court thinks fit, until the disposal of the suit or until further orders. 26. At this juncture, I propose to examine in detail some of the judgments relied upon by all the parties. In the case of Manohar Lal Chopra (supra) the Supreme Court was dealing with an anti suit injunction issued by the Civil Court in Indore restraining the defendant appellant fro....
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....ce require the issue of such interim injunction: Dhaneshwar Nath v. Ghanshyam Dhar [AIR 1940 All 185] ; Firm Bichchha Ram v. Firm Baldeo Sahai [AIR 1940 All 241] ; Bhagat Singh v. Jagbir Sawhney [AIR 1941 Cal 670] and Chinese Tannery Owners' Association v. Makhan Lal [AIR 1952 Cal 560] . We are of opinion that the latter view is correct and that the Courts have inherent jurisdiction to issue temporary injunctions in circumstances which are not covered by the provisions of Order 39 CPC. There is no such expression in Section 94 which expressly prohibits the issue of a temporary injunction in circumstances not covered by Order 39 or by any rules made under the Code. It is well settled that the provisions of the Code are not exhaustive, for the simple reason that the legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them. The effect of the expression "if it is so prescribed" is only this that when the rules prescribe the circumstances in which the temporary injunction can be issued, ordinarily the Court is not to use its inherent powers to make the necessary orders in the i....
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....e not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the legislature. This restriction, for practical purposes, on the exercise of those powers is not because those powers are controlled by the provisions of the Code but because it should be persumed that the procedure specifically provided by the legislature for orders in certain circumstances is dictated by the interests of justice. 23. The case reported as Maqbul Ahmad v. Pratap Narain Singh [LR 62 IA 80] does not lay down that the inherent powers of the Court are controlled by the provisions of the Code. It simply holds that the statutory discretion possessed by a Court in some limited respects under an Act does not imply that the Court possesses a general discretion to dispense with the provisions of that Act. In that case, an application for the preparation of a final decree was presented by the decree-holder beyond the period of limitation prescribed for the presentation of such an application. It was however contended that the Court possessed some sort of judicial discretion which would enable it to relieve the decree- holder from the o....
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....Rules 1 and 2 of the Civil Procedure Code." (underlined by me for emphasis) 27. In Bhagat Singh Bugga (supra), the Calcutta High Court was dealing with a case of an anti injunction suit. In this case, the defendant had filed a prior suit in the Court of the sub-ordinate judge Gujranwala. The issue was decided by the Calcutta High Court staying the previously instituted suit at Gujranwala relying on the inherent powers of the Calcutta High Court. The High Court held that the law cannot make express provisions against all inconveniences and the Court, therefore, had inherent power to act ex debito justitiae where the circumstances of the case required. The Court held that the balance of convenience enabled the Court to pass the interim order of injunction. The relevant extracts are provided below: "In Durga Dihal Das -v- Anoraji (3) it was said by Blair J. that the Code is not exhaustive, there are cases which are not provided for in it, and he declined to believe that the High Court must fold its hands and allow injustice to be done. These words were adopted by Woodroffe J. in the case of Hukum Chand Boid v. Kamalanand Singh (4) and he added that the law cannot (as pointed out....
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....v. Ghanshyam Dhar', ILR (1940) All 201. 4. Notice must also be taken of an observation by Mookerjee, J. in the case of 'Nirode Barani Debi v. Chamatkarini Devya,' 19 Cal W.N. 205. While it is true that the Court was not, in this case, directly dealing with the point whether an injunction could be granted and the observation therein might be considered obiter, there can be no doubt as to what the learned Judges thought in the matter. Their view clearly was that in a suitable case the Court could give an order of injunction in the exercise of its jurisdiction under Section 151 of the CPC even though the provisions of O. 39 of the CPC might not give it any authority to do so. 5. The principles that underlie a decision of the question whether on a certain matter there are certain provisions in the Code that bar the exercise of powers under Section 151 of the CPC were considered by this Court in the Full Bench case of 'Abdud Karim Abu Ahmad Khan Ghauznavi v. Allahabad Bank Ltd.,' 44 Cal. 929. Dealing with the argument similar to what has been addressed to us here Woodroffe, J. observed: ".......Doubtless this exercise of inherent jurisdiction must be exercised ....
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....uate the exercise of jurisdiction. The relevant paragraph is delineated below: "101. Law of 1890 apart, can the Indian High Courts after 1950 be denied jurisdiction to arrest a foreign ship to satisfy the claim of owner of a bill of lading for cargo taken outside the country? Without entering into any comparative study of jurisdiction of High Court of England and the High Courts in our country the one basic difference that exists today is that the English courts derive their creation, constitution and jurisdiction from Administration of Justice Act or Supreme Court Act but the High Courts in our country are established under the Constitution. Under it Article 225 preserved the jurisdiction, including inherent jurisdiction, which existed on the date the Constitution came into force and Article 226 enlarged it by making it not only a custodian of fundamental rights of a citizen but as repository of power to reach its arms to do justice. A citizen carrying on business which is a fundamental right cannot be rendered helpless on the premise that the jurisdiction of High Courts stood frozen either under statute of England or any custom or practice prevailing there or the High Court of ....
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....Court may exercise such powers. The Court held that the circumstances are by no means exhaustive and the Courts' power to issue a temporary injunction is not limited to the circumstances prescribed in Order 39. The Court further held that the powers to grant injunction as always inhere in a Court of law and may be exercised for doing complete justice between the parties. The relevant paragraphs are delineated below: "23. Before going into the question which is before this Court, it may be interesting to trace the origin and genesis of the remedy of injunction. 24. In England, under the old Chancery practice an injunction was a writ, issued by the order and under the seal of a court of equity. It was of two kinds. One was the Writ Remediat. This was issued for a variety of purposes including to stay proceedings in courts of law, in the spiritual courts, the courts of admiralty or in some other court of equity: to restrain the indorsement or negotiation of notes and bills of exchange, sale of land, sailing of ship, transfer of stock, alienation of a specific chattel etc. 25. Under the old procedure followed prior to 1864, the Curt of Chancery was the only court which had ju....
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....seem fit. Section 93 provided that in any suit for restraining the defendant from the committal of any breach of contract or other injury, and whether the same may be accompanied with any claim for damages or not, it shall be lawful for the plaintiff at any time after the commencement of the suit, and whether before or after judgment, to apply to the court for an injunction to restrain the defendant from the repetition or continuance of the breach of contract and wrongful act complained of or the committal of any breach of contract or injury of a like kind arising out of the same contract or relating to the same property or right; and such injunction may be granted by the court on such terms as to the duration of the injunction, keeping an account, giving security or otherwise, as to such court shall seem reasonable and just, and in case of disobedience, such injunction may be enforced by imprisonment in the same manner as a decree for specific performance; provided always, that any other for an injunction may be discharged or varied or set aside by the court on application made thereto by any power dissatisfied with such order. Section 95 provided that before granting injunction, ....
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....the case of Manoharlal -v- Seth Hiralal reported in AIR 1962 SC 527 it was held as per the majority view that it is well settled that the provisions of the Code are not exhaustive, for the simple reason that the legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them. The effect of the expression 'if it is so prescribed' in Section 94 of the code is only this that when the Rules in Order 39 prescribe the circumstances in which temporary injunction can be issued, ordinarily the court is not to use its inherent power to make the necessary orders in the interest of justice, but is merely to see whether the circumstances of the case bring it within the prescribed rule. If the provisions of Section 94 were not there in the Code, the Court could still issue temporary injunctions, but it could do that in the exercise of its inherent jurisdiction. It is in the incidence of the exercise of the power of court to issue temporary injunction that the provisions of Section 94 of the Code have their effect and in not taking away the right of the court to exercise its inherent power.....
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....e defendants and had also sought injunction restraining the defendants from transferring and disposing of any of the assets of the defendants. The case made out by the petitioner was that the defendants were guilty of fraudulent misrepresentations and concealments in their sale and advertisement of contract certificates to the petitioner in violation of the Securities Act of 1933. In this factual background, the Supreme Court held that a suit to rescind a contract induced by fraud and to recover the consideration paid may be maintained in equity at least where there are circumstances making the legal remedy inadequate. The relevant paragraphs are provided below: "2. Two important questions are presented by these petitions. The first is whether the Securities Act of 1933, 48 Stat. 74, 15 U.S.C.A. § 77a et seq., authorizes purchasers of securities to maintain a suit in equity to rescind a fraudulent sale and secure restitution of the consideration paid, and to enforce the right to restitution against a third party where the vendor is insolvent and the third party has assets in its possession belonging to the vendor. The second question is whether such purchasers must show that....
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.... 141, 40 S.Ct. 463, 465, 64 L.Ed. 822. As already stated, there were allegations that Independence was insolvent and its assets in danger of dissipation or depletion. This being so, the legal remedy against Independence, without recourse to the fund in the hands of Pennsylvania, would be inadequate. The injunction was framed narrowly to restrain only the transfer of $38,258.85, and the trial judge required petitioners to furnish security for any losses respondents might suffer. In view of this we cannot say that the trial judge abused his discretion in granting the temporary injunction." 32. In Abheya Realtors Pvt. Ltd. (supra), a Coordinate Bench of this High Court in its original jurisdiction was dealing with the rights of parties in a lease deed that contained a lock in period for three years. The lock in period clause stipulated that if the lessee (defendant) desired to surrender the lease during the lock in period of three years it would have to pay monthly rent for the remaining lock in period. The Court held that an agreement which related to a commercial matter with a person binding himself to pay lease rent at an agreed rate and covenanting to make payment of an ascertain....
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....s creditors. 26. Since the execution of the agreement is not in dispute, the onus would be on the first defendant to demonstrate that the relevant clause providing for liquidated damages in the event of the lessee determining the lease within the lock-in period, is a penalty that would fall foul of the Contract Act. It would also be the first defendant's obligation to establish what the plaintiff could have done to mitigate its damages and the consequential reduction, if at all, of the first defendant's liability as to liquidated damages. The agreement here relates to a commercial matter and a person binding himself to pay lease rent at an agreed rate and covenanting to make payment of an ascertainable amount for a breach on his part may not be altogether let off merely by citing the non-compliance of a statutory provision that such person was liable, in the first place, to comply with. It is such conduct of the first defendant that, in the ultimate analysis, tilts the balance in the manner in which the discretion is exercised in this case. Though the first defendant's offer to secure the claim by way of a bank guarantee was undoubtedly made without prejudice, in the ....
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.... their institution. In the first of the judgments relied upon by the petitioner, reported at 2010(2) CHN 203, inter alia, the following passage from the report has been relied on: "24. Two aspects need to be seriously considered. At the time that the Civil Procedure Code came to be made suits would not take years or decades to be brought to trial as is usually the case these days. The strength of the principle that an apparently good claim would not justify an order for attachment to be made before final judgment is rendered, needs to be seen with reference to the time and place in which such principle was born. The second aspect is that even without a defendant attempting to defraud its creditors or the plaintiff, the vicissitudes of the commercial market may leave the defendant with little to offer as judgment-debtor upon the decree being made. The sheer passage of time between the institution of an action and the trial thereof that has now come to be accepted as par for the course may make the claim irrelevant or even the claimant disinterested. That would result in an erosion of the confidence in the system and lead suitors to undesirable quarters for more effective results. ....
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....tioner has also referred to several creditors of the respondent company having instituted proceedings against the respondent. 15. The two channels aired by the respondent have been closed down. There is hardly any functioning at the offices of the respondent in Calcutta. An affidavit has been filed in a rather cavalier manner on behalf of the respondent where an officer who was not associated with the respondent at the time that the agreement was executed between the parties has made statements as to what transpired at that time and has verified the statements to be true to his knowledge. 16. There is a justifiable apprehension, in the circumstances, as to whether the petitioner will be entitled to realise the money upon the arbitral reference being concluded, particularly, since there does not appear to be any defence at all to the substantial money claim of the petitioner. 17. The respondent says that some of the properties over which the subsisting orders operate do not belong to the respondent. To such extent, the orders may not be effective but the respondent is not prejudiced if there are orders that operate on properties which are not owned by the respondent. The condu....
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....f has a strong case on merit, a Court can restrain the defendant from transferring or alienating his movable or immovable property during the pendency of the suit" held in the negative on the ground that the power under Section 151 of the Code cannot be exercised with reference to the substantive rights of property of a defendant. The relevant paragraphs are delineated below: "30. The sum and substance of those two decisions of the Supreme Court is that in exercise of power under Section 151 of the Code, a Court can pass such order which is not in conflict with substantive right of a party and that such order is necessary for ends of justice provided further that there is no bar in the Code for passing such order which must be procedural in nature. "31. In the case of Manohar Lal (AIR 1962 SC 527) (supra), the Court was considering whether a party should be restrained from proceeding with his suit which was earlier in point of time till the disposal of a later suit filed by the other party in exercise of inherent power when Section 10 of the Code was not attracted. The Court answered the question in negative but made the observations quoted earlier regarding power of the Court ....
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.... be made. The relevant paragraphs are delineated below: "23. Applying the aforesaid principles to the facts of the present case, we find that the sum and substance of the allegation that has been made in the application for temporary injunction was that the defendant is in a penurious condition, that it is unable to pay back its debts to the creditors and that if the decree was passed in the suit, the plaintiff would not be in a position to execute the decree if the defendant was able to transfer or alienate the property mentioned in the application. On the basis of such vague allegation, in our view, no order or direction to give security or injunction in the form of attachment can be passed as held above. The names of the alleged creditors whose debts the defendant is unable to pay have not been disclosed. Simply because in the overdraft account of the banks, there is no credit balance, such fact does not necessarily imply that the defendant is unable to pay its debts when it is the finding of the learned Trial Judge that the profit of the defendant in current financial year is about Rs. 81.89 lakh. There is even no allegation that the defendant is trying to remove or dispose o....
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....that the defendant intended or threatened to dispose of his property with a view of defraud his creditors. We do not for a moment dispute the said provision and we have already indicated that in this case, there is no averment in the application for injunction in terms of Order 39 Rule 1(b) of the Code that the defendant threatened or intended to dispose of his property with a view to defraud his creditors. Thus, the said decision does not help the plaintiff in any way. 28. On consideration of the entire materials on record we find that the plaintiff having failed to make out any case of attachment before judgment as provided in Order 38 of the Code, the learned Single Judge should have dismissed the application itself instead of calling upon the defendant to show cause and granting ad interim order of injunction in the nature of attachment before judgment." 37. From a plain reading of the judgments discussed above it appears that the Supreme Court has held that Section 94 read with Order 39, Rule 1 is not exhaustive and circumstances may be present that are beyond the provisions. In such circumstances, the Courts have held that power may be exercised by the Civil Courts under S....
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....are in conflict and are in contravention to the provisions of the Code. With regard to the inherent powers of the Chartered High Court, the minority judgment of Justice J. C. Shah read with the majority judgment therein clearly poses no restriction on the Calcutta High Court. The Calcutta High Court judgment in Nanda Roy (supra) also deals with the raison d'etre and the source of the inherent powers of Chartered High Courts. 38. In the present case, I shall first examine whether there is a need for this Court to resort to the inherent powers of the Chartered High Court or the power under the Code itself is sufficient to pass orders in the facts and circumstances of this case. The respondents have argued that an order of attachment under Order 38 Rule 5 cannot be passed unless the test laid down in Raman Tech (supra) are complied with. Time and again the principles laid down in Raman Tech (supra) have been followed by the Supreme Court and High Courts. In the present case, the tests laid down in Raman Tech (supra) have not been fulfilled, and therefore, no order for attachment before judgment can be passed by this Court. With regard to Order 39, Rule 1, one may only examine Rul....
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....stablished in the prima facie findings gives further credence to the threat and perception of the petitioner that the defendants shall alienate their property in such a manner that the fruits of the decree shall not be available to the petitioner. It is to be further noted that the claim of the plaintiff is not predicated on a claim of simpliciter damages and losses caused to him but specific sums of money that have been passed on in an illegal and fraudulent manner by the employee to the distributors. The reports of KPMG and BDO are based on a careful audit of the documents in relation to the transactions. Upon such audit, the exact figures of excess credit have been ascertained, and therefore, the claim of the plaintiff is of an ascertained sum of money that has been illegally and fraudulently siphoned off by the employee in favour of the distributors. Ergo, in my view this is a fit case for granting an ad interim injunction against the defendants, in the manner discussed hereinafter, to secure the claim of the plaintiff. 39. I shall now deal with the two Division Bench judgments of the Calcutta High Court heavily relied upon by the respondents being Sunil Kakrania (supra) and K....
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....r of the suit if it appears that the defendant intended or threatened to dispose of his property with a view to defraud his creditors. The Court, however, in the facts of the above case felt that there were no averments in the application for injunction in terms of Order 39, Rule 1(b) of the Code that the defendant threatened or intended to dispose of his property with a view to defraud his creditors, and accordingly, set aside the order of injunction passed by the trial court below [see paragraph 27 of Kohinoor Steel Private Ltd. (supra)]. This judgment also does not deal with the powers of a Chartered High Court. In view of the fact that the factual matrix therein was completely different, no case for fraud had been made out and the fact that the Division Bench in Kohinoor Steel Private Ltd. (supra) was dealing with the powers of the Civil Court, I am of the view that this judgment has no application in the present facts and circumstances, and is accordingly, distinguishable on facts and in law. 41. My view, that in cases of fraud and claim for specified damages, an ad interim injunction would lie, is further reiterated and supported by the ratio of two coordinate bench judgment....
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....s in L. C. Quinn (supra) I am of the view that some of these judgments are, simply reiterating the principles of the judgments that have been dealt by my in detail while some of the judgments relate to issues that have no bearing on the instant facts. In relation to the submission that there has been considerable delay on the part of the petitioner in approaching the High Court, I am of the view that such is not the case. In July, 2017 the fraudulent transactions were discovered and the plaintiff immediately suspended the employee and moved to a different mechanism of delivery on cash with the distributors. The petitioner immediately appointed KPMG to unearth the truth of the fraudulent transactions. Upon receipt of the report of KPMG on March 20, 2018 the employee was terminated and a criminal case was filed in the month of May 2018 against the employee and the distributors. The petitioner also, thereafter, appointed BDO to quantify the extent of excessive credits passed on to the distributors. The BDO report was received on February 4, 2019 and immediately, thereafter, on March 8, 2019 both the suits and interlocutory applications were filed. As can be seen from the above dates d....
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....ure 'M' at page 515 of G.A. 725 of 2019. Keeping in mind the quantum of damages, I further restrain the employee from transferring the shares, mutual funds and fixed deposits lying in his own name. Keeping the balance of convenience and inconvenience in mind, the above ad interim injunction restraining the respondents from transferring the properties as indicated above shall be restricted to the extent of Rs. 10 crores for the distributor no. 1, Rs. 1 crore for the distributor no. 2 and Rs. 1 crore for the employee. In my view, the above amounts are required to be secured in favour of the petitioner by the respondents respectively. The respondents shall be at liberty to file appropriate application to secure the above amounts as indicated above, and upon such security being given, the restraining order against the party concerned may be lifted, subject to satisfaction of this Court. I make it clear that the ad interim orders passed above shall continue till disposal of the interlocutory applications or till passing of any modification order, whichever is earlier. 46. As the present order has been passed at the ad interim stage, the respondents are directed to file their af....