TMI Blog1994 (5) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... to the opposite side could ever be granted at all. The grounds urged in the injunction application were insufficient for the grant of such a relief. There is an increasing tendency on the part of litigants to indulge in speculative and vexatious litigation and adventurism which the for a seem readily to oblige. We think such a tendency should be curbed. Having regard to the frivolous nature of the complaint, we think it is a fit case for award of costs, more so, when the appellant has suffered heavily. Therefore, we award costs of ₹ 25,000 in favour of the appellant. It shall be recovered from the first respondent. the writ petition has rightly come to be rejected though, in our view, it would have been better had the High Court given reasons instead of dismissing it summarily - CIVIL APPEAL NOS. 4584 AND 4587 OF 1994 - - - Dated:- 20-5-1994 - M.N. VENKATACHALIAH, S. MOHANAND A.S. ANAND, JJ. Ashok H. Desai, Arun Jaitley, R. Karanjawala, Ms. Dina Wadia, Ms. Nandini Gore and Mrs. M. Karanjawala for the Appellant. K.V. Viswanathan and L.P. Agrawala for the Respondent. JUDGMENT Mohan, J. Leave granted. The appellant is a domestic mut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 283 (Delhi)). That was subsequently confirmed on January 4, 1994. One Dr. Arvind Gupta filed Writ Petition No. 14 of 1994 against SEBI. In effect, he sought to stay the public issue from being floated. That writ petition was rejected. On the same grounds, as were urged in the writ petition, the respondent moved the Calcutta District Consumer Disputes Redressal Forum seeking to restrain the public issue from being floated. The principal grounds taken were that the appellant's offering circular was not approved by the SEBI. There are several irregularities in the same. The basis of allotment is arbitrary, unfair and unjust. The appellant was seeking to collect money by misleading the public. The following order was passed on January 4, 1994, by the Calcutta District Consumer Disputes Redressal Forum : "Petitioner files the complaint today. Register. Issue notice of show cause against OPs. Considering the utmost urgency of the case as cited by the learned lawyer for the petitioner, we are inclined to pass an interim order, otherwise the application would be frustrated. Accordingly, we direct OP 1 and OP 2 and its men, agents, collecting banks not to proceed any further w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A prospective investor has no say in the valuation of shares issued. That is determined by the general body of shareholders. Should a prospective investor have any legal right and if the issue of capital is not to his desire, he may not opt to subscribe. He cannot intentionally with the objection of which he is personally aware, subscribe to the issue and challenge its very terms. ( e )Under the scheme of the Consumer Protection Act, a consumer forum is competent to deal with the complaint if it relates to goods bought or services rendered. Thus, the District Consumer Forum has no jurisdiction whatsoever to deal with this case. ( f )Section 2( c ) of the Act defines a complaint and lists four cases where investigation, inquiry and relief could be granted. The complaint in relation to public issue of shares, namely, future goods, does not fall within any one of the four categories of which a complaint can be filed under the provisions of the Act. ( g )Section 14 of the Act deals with the nature of relief that can be granted. This section does not envisage grant of any interim relief or an ad interim relief. The section contemplates only a final relief. In the instant case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Calcutta at the Bank of Baroda, Old Court House Street and Corporation Bank, Cappling Street. Both these branches, it is urged, are non-existent while there is no branch of the Bank of Baroda at Old Court House Street. There is no street called Cappling Street at Calcutta. The basis of allotment what is styled "first come first served" was, it is urged, intended to confuse and designed to deceive the innocent investors. The applications were received in 45 centres simultaneously. No priority number was given. Hence, the appellant would be in a position to deny to each one of the investors on the ground that he had not come or approached the appellant first. As a result, the appellant will be able to amass enormous sums of money by way of interest and thereafter return the amount to the respective investors. The failure to stipulate the period before which the refund would be effective is, it is further urged, a serious irregularity violating regulation 23. The Calcutta District Forum has, it is claimed, power to issue the restraint order under the Act. Such injunctions are not unknown to law as seen from the Financial Services Act, 1986, of the United Kingdom. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the fate of this civil appeal but also the appeal arising out of S.L.P.(C) No. 321 of 1994. In order to decide these questions, it will be necessary to set out the factual matrix. On April 11, 1988, the Government of India by an administrative circular constituted the Securities and Exchange Board of India (SEBI) for investors' protection. On January 30, 1992, an ordinance known as the Securities and Exchange Board of India Ordinance was promulgated. On February 21, 1992, a bill was introduced, namely, the Securities and Exchange Board of India Bill of 1992, which became the Act on April 4, 1992. It came into force on January 13, 1992, as stated in section 1( iii ) of the Securities and Exchange Board of India Act. On May 29, 1992, the Capital Issues (Control) Act, 1947, was repealed. Mutual funds in India are regulated by the Securities and Exchange Board of India pursuant to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1993. Under the said regulations, all mutual funds in India as also asset management companies and custodians of mutual funds' assets are required to be registered with the Securities and Exchange Board of India. No mutual fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce being held by Indian shareholders such as HDFC, Stock Holding Corporation of India, etc. Morgan Stanley Asset Management India Pvt. Ltd. was granted the certificate of incorporation on October 12, 1993, by the Registrar of Companies, Bombay, and its memorandum and articles of association has also been approved by the SEBI as per the provisions of the said Regulations. Regulation 27 of the said regulations provides that no mutual fund shall announce the scheme unless such scheme has been approved by the trustees of the mutual fund and by the SEBI. On November 8, 1993, the board of trustees by a circular resolution approved the draft scheme, the same was forwarded to the SEBI on November 10, 1993. The scheme was duly scrutinised and examined by the SEBI. By its letter dated November 23, 1993, addressed to Enam Financial Consultants Pvt. Ltd., one of the joint lead managers, SEBI gave its approval. It is stated that the scheme has been examined by them in terms of the provisions of the regulations. It suggested certain amendments as detailed in enclosures thereto. The SEBI also advised the said Enam Financial Consultants Pvt. Ltd. to submit three copies of the printed offering c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 per unit, payable in full upon application. The offer will be open for subscription commencing January 6, 1994, and will remain open until one day after notice of the date of closure is given through advertisement in major national daily newspapers, with the latest date of closure being twelve working days after the opening date. If subscriptions for at least 18 crore units have not been received by the closure date, the offering will be terminated and all subscriptions will be returned within 78 days from the closure date. In the event that the issue is oversubscribed, allotments will be made on a "first come first served" basis. However, MSMF reserves the right to accept or reject any subscriptions, including subscriptions in excess of the targeted amount. See 'Terms of the issue.' Date of closure: The issue will be kept open for a minimum of three working days and a maximum of twelve working days. The board will proceed to close the issue by giving one day's notice of the date of closure through advertisements in the major national daily newspapers when approximately 75 per cent, of the targeted amount is collected. Only those subscriptions which are received before the expiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt at a press conference held at Calcutta on December 16, 1993. Regular clarifications were issued in this regard by the appellant. The scheme came to be advertised by the appellant on December 13, 1993. The respondents chose to make an application to the consumer forum on the eve of opening of the scheme. It was on that application, the impugned order came to be passed. In this factual background, we will take up the questions set out for determination. Question 1: Whether a prospective investor could be a consumer within the meaning of the Consumer Protection Act, 1986? The definition of consumer is contained under section 2( d ) of the Act which reads as under : "2( d )( i ) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or ( ii ) hires an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder who is on the register, and only a person who is on the register is in the full sense of the word owner of the share. But the title to get on the register consists in the possession of a certificate together with a transfer signed by the registered holder. This is what Bharucha had. He had the certificates and blank transfers, signed by the registered holders. It would be an upset of all stock exchange transactions if it were suggested that a broker who sold shares by general description did not implement his bargain by supplying the buyer with the certificate and blank transfers, signed by the registered holders of the shares described. Bharucha sold what he had got. He could sell no more. He sold what in England would have been choses in action, and he delivered choses in action. But in India, by the terms of the Contract Act, these choses in action are goods. By the definition of goods as every kind of movable property it is clear that, not only registered shares, but also this class of choses in action, are goods. Hence equitable considerations not applicable to goods do not apply to shares in India" . Again, in Madho Lal Sindhu of Bombay v. Official Assignee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the goods or any package containing such goods, with a view to obtaining any relief provided by or under this Act" . Certainly, clauses 2( iii ) and ( iv ) of the Act do not arise in this case. Therefore, what requires to be examined is, whether any unfair trade practice has been adopted. The expression "unfair trade practice" as per rules shall have the same meaning as defined under section 36A of the Monopolies and Restrictive Trade Practices Act of 1969. That again cannot apply because the company is not trading in shares. The share means a share in the capital. The object of issuing the same is for building up capital. To raise capital means making arrangements for carrying on the trade. It is not a practice relating to the carrying on of any trade. Creation of share capital without allotment of shares does not bring shares into existence. Therefore, our answer is that a prospective investor like the respondent or the association is not a consumer under the Act. Question No. 2: Whether the appellant-company trades in shares? From the above discussion, it is clear that the question of the appellant-company trading in shares does not arise. Question No. 3: Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suit were to be brought by the Bank of India, the High Court would not have granted any injunction as it was bound by the terms of the contract. What could not be done directly cannot be achieved indirectly in a suit brought by the plaintiffs. Even if there was a serious question to be tried, the High Court had to consider the balance of convenience. We have no doubt that there is no reason to prevent the appellant from recalling the amount of Rs. 85,84,456. The fact remains that the payment of Rs. 36,52,960 against the first lot of 20 documents made by the appellant to the Bank of India was a payment under reserve while that of Rs. 49,31,496 was also made under reserve as well as against the letter of guarantee or indemnity executed by it (the Bank of India). A payment 'under reserve' is understood in banking transactions to mean that the recipient of money may not deem it as his own but must be prepared to return it on demand. The balance of convenience clearly lies in allowing the normal banking transactions to go forward. Furthermore, the plaintiffs have failed to establish that they would be put to an irreparable loss unless an interim injunction was granted" . This cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ylor [1875] 1 Ch D 426 and Nazir Ahmed v. Emperor, AIR 1936 PC 253(2). This court has also expressed the same view in respect of the procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramchandra Keshav Adke v. Govind Joti Chavare [1975] 1 SCC 915; AIR 1975 SC 915. As such whenever a court considers it necessary in the facts and circumstances of a particular case to pass an order of injunction without notice to the other side, it must record the reasons for doing so and should take into consideration, while passing an order of injunction, all relevant factors, including as to how the object of granting injunction itself shall be defeated if an ex parte order is not passed" . In this case, the public advertisement was given as seen above, on December 13, 1993; the petition was filed on January 4, 1994, and the impugned order of the consumer forum came to be passed on the following day. As to why the respondent chose to come at the eleventh hour and where was the need to pass an urgent order of injunction, are matters which are not discernible. Besides, tested in the light of the case-law set out above, the impugned order which is be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to undo the damage done by such an interim order. Therefore, the court must ensure that the plaintiff comes to the court well in time so that notice may be served on the defendant and he may have his say before any interim order is passed. The reasons set out in the preceding paragraphs of our judgment in relation to the factors which should weigh with the court in the grant of ex parte injunctions and the rulings of this court must be borne in mind. Question No. 5: What is the scope of section 14 of the Act? The said section reads as under : "(1)If, after the proceeding conducted under section 13, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to take one or more of the following things, namely : ( a )to remove the defect pointed out by the appropriate laboratory from the goods in question; ( b )to replace the goods with new goods of similar description which shall be free from any defect; ( c )to return to the complainant the price, or, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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