TMI Blog1983 (9) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... iciently solvent to satisfy the claim as and when established. It has also to record an affirmative finding that the Corporation—the creditor—is not seeking bona fide to present a petition for winding up but is actuated by an ulterior motive in presenting the petition. The decision of the Appellate Bench is conspicuously silent on these relevant points and for this additional reason also the appeal must succeed. - 7348 OF 1983 - - - Dated:- 19-9-1983 - D.A. DESAI AND V. BALAKRISHNA ERADI, JJ. Sankar Ghose, Miss Radha Rangaswamy and Rangaswamy for the Appellant. A.K. Sen, R.C. Nag, Rameshwar Nath and A.K. Sil for the Respondent. JUDGMENT Desai, J. First respondent, United Industrial Bank Ltd. ("Bank" for short), having its registered office at 7, Red Cross Place, Calcutta, filed Suit No. 1508 of 1981, on the original side of the Bombay High Court against the appellant The Cotton Corporation of India Ltd. ("Corporation" for short) and one Tapan Kumar Ghosh, who at the relevant time was the chief branch manager of the Worli branch of the bank and defendant No. 3 Bradbury Mills Ltd., an existing company within the meaning of the Companies Act, 1956, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order is impugned in this appeal. As the suit is pending awaiting adjudication on merits, every attempt would be made by us to avoid any expression of opinion on the merits of the suit. The few facts which we propose to set out are for the purpose of understanding and appreciating the contention only, the correctness or otherwise of the allegation of facts being immaterial for the present purpose. The Corporation is engaged in the business of purchasing and selling cotton to textile mills in India. The policy of the Corporation appears to be to sell cotton against cash payment, but in some cases to accommodate the textile mills the sale is effected on credit against acceptance of usance bills co-accepted by the bankers of the textile mills guaranteeing payment on due dates. The third defendant, Bradbury Mills Ltd., is alleged to have purchased cotton of the aggregate value of Rs. 45,75,000 and in payment of the price issued 16 usance bills. The third defendant by its letter dated May 21, 1981, had informed the Corporation that the Bank has given an undertaking, to the Government of Maharashtra to monitor the cash flow of the third defendant and, hence, it had to operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the court has such powers in view of the provisions contained in O. 39 of the CPC read with section 37 of the Specific Relief Act, 1963, or in exercise of the inherent powers of the court under section 151 of the CPC. This position is seriously contested by the appellant in this appeal. The reliefs which the Bank as plaintiff is seeking in the suit filed by it are a declaration that the Bank is not liable to honour and discharge the usance bills co-accepted in its name by its chief branch manager-defendant No. 2, as envisaged by section 34 and a further relief that the disputed bills of exchange and hundis be delivered to the court for cancellation and be cancelled as envisaged by section 31. It is in this suit that the Bank has obtained an interim injunction restraining the Corporation from presenting a winding-up petition against the Bank. Part III of the Act bears the heading "Preventive Relief" and the fasciculus of sections therein included provide for injunctions generally. Section 36 provides that preventive relief is granted at the discretion of the court by injunction, temporary or perpetual. Section 37 specifies the nature and character of temporary and perpetual in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the superior court can regulate proceedings in a court subordinate to it. It is implicit in this assumption and the language used in section 56( b ) that the court could not grant injunction under section 56( b ) of the repealed Act to stay proceeding in a court superior in heirarchy to the court from which injunction is sought. But by judicial interpretation, a consensus was reached that as injunction acts in personam while the court by its injunction cannot stay proceedings in a court of superior jurisdiction; it could certainly by an injunction restrain a party before it from further prosecuting the proceeding in other courts, may be superior or inferior, in the heirarchy of courts. To some extent this approach not only effectively circumvented the provision contained in section 56 of the repealed Act but denuded it of its content. The Legislature took notice of this judicial interpretation and materially altered the language of the succeeding provision enacted in section 41( b ) replacing section 56( b ) of the repealed Act while enacting the Specific Relief Act of 1963. The Legislature manifestly expressed its mind by enacting section 41( b ) in such clear and unambiguous l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by restraining him from instituting or prosecuting a proceeding before a subordinate court. Save this specific carving out of the area where access to justice may be impeded by an injunction of the court, the Legislature desired that the courts ordinarily should not impede access to justice through court. This appears to us to be the equitable principle underlying section 41( b ). Accordingly, it must receive such interpretation as would advance the intendment, and thwart the mischief it was enacted to suppress, and to keep the path of access to justice through court unobstructed. Viewed from a slightly different angle, it would appear that the legal system in our country envisages obtaining of redressal of wrong or relief against unjust denial thereof by approaching the court set up for the purpose and invested with power both substantive and procedural to do justice that is to grant relief against invasion or violation of legally protected interests which are jurisprudentially called rights. If a person complaining of invasion or violation of his rights is injuncted from approaching the court set up to grant relief by an action brought by the opposite side against whom he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld comprehend both interim and perpetual injunction. It is, however, true that section 37 specifically provides that temporary injunctions which have to continue until a specified time or until further order of the court are regulated by the CPC. But if a dichotomy is introduced by confining section 41 to perpetual injunction only and section 37 read with 0. 39 of the CPC being confined to temporary injunction, an unnecessary grey area will develop. It is indisputable that temporary injunction is granted during the pendency of the proceeding so that while granting final relief the court is not faced with a situation that the relief becomes infructuous or that during the pendency of the proceeding an unfair advantage is not taken by the party in default or against whom temporary injunction is sought. But power to grant temporary injunction was conferred in aid of or as auxiliary to the final relief that may be granted. If the final relief cannot be granted in terms as prayed, for, temporary relief in the same terms can hardly, if ever, be granted. In State of Orissa v. Madan Gopal Rungta, AIR 1952 SC 12; [1952] SCR 28, a Constitution Bench of this court clearly spelt out the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a court not subordinate to that from which injunction is sought, the court demarcated the unoccupied area by holding that even if the court cannot grant injunction to the stay proceeding, it can certainly injunct a party from instituting or prosecuting a proceeding in a court not subordinate to that from which the injunction was sought. But it is this very interpretation which attracted the attention of the Legislature, and it respondend by specific change in language to nullify the interpretation so that it becomes crystal clear that an injunction cannot be granted to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction was sought. The power to grant injunction in personam was thus legislatively curtailed. Legislative response to court's interpretation has to be noticed and in our opinion the alteration in the language provides the legislative response to the judicial interpretation, and cannot be wished away, but must be given effect. Mr. Sen, however, urged that the Specific Relief Act, 1877, was founded on English equity jurisprudence and therefore, it was permissible to refer to English law on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... language with section 41( b ) which specifically provides that an injunction cannot be granted to restrain a person from instituting and prosecuting any proceeding. The relevant provision in our country covers both the situations while in England it covers only one situation. This clear distinction in' law has to be kept in view before applying English decisions to which our attention was drawn. And now to the decisions, in Cadiz Waterworks Co. v. Barnett [1874-75] 19 Eq Cases 182, the court on being satisfied that the company was solvent and that the debt was bona fide disputed and that the object of the defendant in the case was not the bona fide purpose of honestly compelling the payment of his debt but for the purpose of making an unjust attempt to compel them to submit to an unjust demand, restrained the respondent from presenting a petition for winding up the company in the court. In reaching this conclusion it was observed that if a winding up petition is presented and advertised it would inflict irreparable injury on the plaintiffs, while at the same moment it would not possibly do the defendant the slightest good. Let it be definitely made clear that not a whisper w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding up petition was not the proper remedy in the circumstances of the particular case. In that case, a minority shareholder was sought to be restrained by an injunction of the court at the instance of the company from presenting a winding up petition on the ground that it was just and equitable to wind up the company. Pennycuick J. declined to grant the interim injunction and the company appealed. The Court of Appeal, while reversing the decision, held that in the circumstances of the case a winding up petition was not a proper remedy and granted the injunction. The power to grant injunction in such circumstances was not shown to be referable to any statutory provision nor was it pointed out that there was any statutory inhibition against granting it and the source of power was traced to the inherent powers of the court. One more decision we came across and which to some extent deviates from the consistent view taken in all the aforementioned decisions, is the one Bryanston Finance Ltd. v. de Vries ( No. 2 ) [1976] 1 All ER 25. While vacating the injunction granted in broad terms, the Court of Appeal held that the presentation of a petition in the circumstances discussed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 41( b ) deals with perpetual injunction and the grant or refusal of temporary injunction is governed by O. 39, CPC, and there is well-recognised dichotomy between the two. The learned judge appeared to be of the opinion that where the final relief cannot be granted, temporary relief in aid can as well not be granted because that would also be contrary to the provision of section 41( b ). This view was reiterated by the same learned judge in Krishnadevi P. Gupta v. Banwarilal Hanuman-prasad Tibrewala, AIR 1976 Bom 233. He also took note of the fact that the Chief Justice of the same High Court had affirmed the view in another proceeding before him. Therefore, as far as the Bombay High Court is concerned, there appeared to be a near unanimous view that the court had no jurisdiction to grant interim injunction restraining a person from instituting any proceeding in a court not subordinate to that from which the injunction is sought in view of the provision contained in section 41( b ) of the Act. Surprisingly, the Division Bench of the Bombay High Court against whose decision the present appeal is heard did not even choose to refer or to overrule any of these dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not held that the contention of the Corporation is frivolous or untenable or the claim is mala fide . This becomes clear from the observation of the court that the order passed by it is not founded on the merits of the Bank's case or lack of merit in any claim which the Corporation may have against the plaintiff-Bank and it would be open to the Corporation to file a regular suit or summary suit against the plaintiff-Bank in which appropriate orders would be passed by the court seized of the matter as and when the occasion arises for the same. We find it very difficult to appreciate this approach of the court because the court has not rejected even at the stage of the consideration of prima facie case or on balance of convenience that the claim of the Corporation is frivolous or untenable or not prima facie substantiated. On the contrary the court leaves it open to the Corporation to file a suit if it is so advised. The High Court only restrains the Corporation from presenting a winding-up petition. We again see no justification for this dichotomy introduced by the court in respect of various proceedings which were open to the Corporation to be taken against the Bank leaving some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs a discretionary power on the judge not to give any directions at that stage but merely issue a notice to the company before giving directions. If upon receipt of such notice the company appears and satisfies the judge that the debt is bona fide disputed or the presentation of the petition is mala fide , actuated by an ulterior motive, or an abuse of the process of the court certainly the judge may decline to admit the petition and may direct the party presenting the winding up petition to prove its claim by a suit or in any other manner. It is undoubtedly true that a winding up petition is not a recognised mode for recovery of a debt and if the company is shown to be solvent and the debt is bona fide disputed, the court generally is reluctant to admit the petition. Therefore, the power is conferred on the judge before whom the petition comes up for admission to issue pre-admission notice to the company so that the company is not taken unawares and may appear and point out to the judge that the petitioner is actuated by an ulterior motive and presentation of the petition is a device to pressurise the company to submit to an unjust claim. This is a sufficient safeguard against m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission on the ground that the petitioner was not acting bona fide in filing the petition and in the facts before the Kerala High Court it allowed the application of the company and the winding up petition was dismissed. We are, therefore, not disposed to accept the contention of Mr. Sen that the power to grant injunction restraining one from presenting a winding up petition must either be spelt out for the protection of the company or as held by decisions hereinabove quoted kept intact and should not be tinkered with to save the company from being harassed by persons actuated by it will towards the company from presenting the petition. Turning to the facts of this case, let it be recalled that the learned single judge had declined to grant any temporary injunction against the present appellant, the Corporation, and in our opinion rightly. The Appellate Bench interfered with the order for the reasons which are far from convincing and it overlooked the provision contained in section 41( b ) and the effect thereof. Taking the most favourable view of the decision of the Appellate Bench and assuming that the Bench had in its mind the inherent power of the court to grant injunction des ..... 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