TMI Blog2003 (8) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 30-11-1995 called gateway equipment purchase agreement and a restated agreement dated 10-7-1997 for the same equipment are void. As a consequence thereof, the plaintiff has sought a decree of U.S. $ 120,490,000 with further interest on the principal sum of U.S. $ 90,330,000 relatable to the amount paid by it for purchase of shares and another sum of ₹ 377,21,54,857. The particulars of claim at Exh. 'C' are in respect of to (i) Equity Investment in Iridium Lic.; (ii) expenses incurred for setting up gateway at Pune; (iii) other expenses incurred relating to Iridium system of which include several facilities like building, office equipments, etc; (iv) payment made to the Department of Telecommunication; and (v) cumulative operational losses incurred by the plaintiff till 31-3- 2002. No part of the claim is based on a debt due to the plaintiff i.e. an ascertained sum of money. It is a claim for unliquidated damages based on an adjudication of the defendants' liability if the Court finds that the plaintiff was induced to purchase the equity and the equipment and to make other expenditure on the basis of fraudulent mis-statement of misrepresentation by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly owned subsidiary of the defendant No. 1 Motorola. The defendant No. 2 i.e. Iridium Lic. is a wholly owned subsidiary of the defendant No. 1 Motorola. It is facing bankruptcy proceedings. Its predecessor Iridium Inc. was also a wholly owned subsidiary of Motorola, the 1st defendant. 8. The Iridium system has been described as the first commercial wireless communications system that was designed to provide global digital service to hand-held telephones similar to today's cellular phones. It comprises a constellation of about 66 low orbit satellites which are designed to communicate directly with hand-held equipments with one another and with terrestrial interconnection points (gateways) as well as earth based system control facilities. This infrastructure was designed to act as a digital satellite network between telecommunication facilities on the ground, or through gateway and public telephone networks. 9. It appears that the defendant No. 2 Iridium Lic. and its predecessor was incorporated as a wholly owned subsidiary of the defendant No. 1 Motorola Inc. essentially for the Iridium system. According to the plaintiff, therefore, the defendant No. 1, who was the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c financial institutions, viz., I.D.B.I., I.C.I.C.I., Exim Bank, etc. After incorporation of the plaintiff on 24-10-1994 the investments made by the I.D.B.I., I.C.I.C.I., S.B.I. and Exim Bank were transferred in favour of the plaintiff and was transferred. The equity of the plaintiff in Iridium Lic. were allotted to the plaintiff. The shares in the plaintiff were allotted to these financial institutions as consideration for transfer of their shares in the Iridium Lic to the plaintiff. This is incorporated in the stock purchase agreement of 16-1- 1995. Thus, for all practical purposes, the agreements in question in this suit are agreements between the plaintiff on the one hand and the defendants on the other. For the sake of convenience, the investment by the institutions is referred to as investment by the plaintiff, even though some of it was made when the plaintiff had not been incorporated. 15.According to the plaintiff, the defendant No. 1 promoted the Iridium system and made representation to various investors, including the Chairman, I.D.B.I., Chairman, V.S.N.L., Managing Director, I.C.I.C.I., Chairman of H.D.F.C., Vice-Chairman and Managing Director of IL FS and made se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and space. The PPM projected that the total cost of the Iridium system would be U.S. $ 4 billion (Rs. 12,000 crores approx.). The defendant No. 1 was scheduled to invest about U.S. $ 300 million (Rs. 945 crores approx.) and the balance amount of U.S. $ 3.68 billion (Rs. 11,055 crores approx.) was, therefore, required to be sourced from outside. 18.According to the plaintiffs, eventually after the system was launched, all these representations turned out to be false. The problems were as follows. The signal could not be picked up inside the building or cars and the user had to go to open window and use the telephone outside the window or at the window in the electronic sight of the satellite. If a user wanted to use the telephone inside the car, it was necessary for him to install an additional antenna which was required to be open to the sky in line with the satellite. The size and weight of the said telephone and its antenna were extremely unwieldy and bulky and put off a lot of prospective customers. Moreover, the initial lot of handsets were required to be recalled and even where the Iridium signals could be picked, the quality of the same was extremely poor even for voice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y anywhere on the earth surface at any time. It was expected to provide service with 16 db. link path i.e. the volume at which the voice can be heard over the system. This according to the plaintiff did not prove true. There is a serious dispute between the parties as to the intent and meaning of the representation. I have dealt with them only to the extent necessary for considering a prima facie case. 21.For instance, as regards the global coverage, the defendants submitted that a plain reading of the statements show that right from the beginning, they had pointed out certain limitations under severe or usual conditions, for example in natural or 'concrete' canyons such as Manhattan. There was a clear statement that these conditions typically prove troublesome for other forms of wireless communication, including cellular and these exist in the Iridium system also. They submit that the equipment is hand-held and the statement that it is similar in size and weight to today's hand-held cellular telephones has obvious reference to the cellular telephone of the period 1990 to 1992 which in some cases was as large as a domestic cordless phone. They admit that by today&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stems. These assumptions are critical because the company expects that almost all of its costs will be fixed. Thus, while the company believes its projections are reasonable, the company is unlikely to achieve its projected financial results if these assumptions prove to be optimistic. It is thus obvious that whether the representations in the P.P.M. referred to above were wilful and deceitful or whether they were made honestly, having regard to the existing technology which eventually turned out to be wrong is a matter that can be properly gone into only at the trial of the suit. 23.As regards the role of the gateways which, according to the plaintiff, was not necessary to establish at all, it was pointed on behalf of the defendants in the P.P.M. itself the role of the gateway as follows:- Multiple gateways were contemplated as the Iridium System is being designed to route communications over the network through a gateway interconnection with the terrestrial P.S.T.N. that is closest to the origination or destination of the particular call. This feature is expected to minimize terrestrial toll charges incurred by Iridium users and is expected to result in least cost routin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng these projections are reasonable, although no representation is made as to their accuracy or attainability. See RISK FACTORS . Based on the above statements, the learned Counsel appearing for the defendants submitted that the investment includes certain risks and that the prospective investor should carefully consider the disclosure clauses in the Memorandum, including those under the caption RISK FAC TORS. In fact, the P.P.M. requires the investors to consult their Counsel and Advisors before investing in shares. It is a fact that such statements have been made in the P.P.M. and, in fact, if the projected financial information as stated has the basis of the assumptions. Prima facie, without further evidence, it must be observed that the representations made in the P.P.M. were conditional and clearly called upon the investors to make their own evaluation. THE STOCK PURCHASE AGREEMENT: 25.Moreover, the stock purchase agreement dated 19-7-1993 under which the plaintiff acquired their equity contains clauses as follows:- The investor/IL FS is capable of evaluating the merits risks of the purchase of the shares. In purchasing shares, such investor has relied onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the system which show that it is a failure. They withheld that P.P.M. from the plaintiff, although it was meant to the existing investors and while withholding it continued to accept investment which the plaintiff would not have made, had it known the contents of the 1995 P.P.M. 28.It appears that the plaintiff has made investments in the defendants No. 2 right from 1994 to 1999 which includes the investment in gateways. On the other hand, the learned Counsel for the defendants submits that the 1995 P.P.M. did not record a failure of the system but plainly stated the limitations on the systems. According to the defendants, this P.P.M. was not withheld from the plaintiff. In fact, according to the defendants, this was handed over to one of the shareholders of the plaintiff i.e. the I.D.B.I. and there is correspondence to that effect. Whether the contents of the 1995 P.P.M. were known is discussed later. THE GATEWAY EQUIPMENT PURCHASE AGREEMENT: 29.Moreover, as regards the Gateway Equipment Purchase Agreement, it must be noted that Article 31 of that agreement specifically declares that the said agreements:- Constitutes the entire understanding between the parties conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mobile satellite services primarily for users who require communications services in areas where landline or terrestrial wireless service is unavailable, inconvenient, of poor quality or unreliable. (b)The ISU and pager for the Iridium system are still under development. Motorola has informed the company that the portable hand held ISU Motorola will develop is expected to be significantly larger and heavier than todays smallest and lightest pocket sized, hand held cellular telephones and is expected to have a significantly longer and thicker antenna than hand held cellular telephones. (c)As with any wireless communications system and particularly any satellite-based wireless service, there will be certain service limitations or degradation due to the interference or attenuation imposed by natural or man-made obstructions between the satellites and subscriber equipment. Such limitations will vary, sometimes significantly, as actual situations and conditions vary and as the satellites in the Iridium system move across the sky. Based upon current testing and stimulations, it is expected that such limitations will also vary according to the particular subscriber equipment being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use inside a moving automobile makes the effect of other environmental obstructions temporary but more pronounced. However, the company believes that it will be possible to largely eliminate this loss of signal strength through the use of an optional portable antenna that could be quickly affixed to, and removed from, the exterior of the automobile. Motorola has indicated that it is working on the developments of such an antenna. (g)Market: The potential market for Iridium services is the world-wide market for global personal voice, paging and date communications. However, because Iridium services will generally be priced higher than terrestrial land line and wireless services where they are available, and will offer more limited service quality and signal penetration than mature cellular and paging systems, the company's strategy is not based upon direct competition with such terrestrial systems. Rather, Iridium services are targeted at meeting the communications needs of users who (i) are travelling outside their none territory in an area served only by incompatible local wireless standards (ii) are otherwise located where terrestrial landline or wireless services are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um system will lack the operational capacity to provide local services to larger numbers of subscribers in concentrated areas and the company's system is not expected to afford the same voice quality, signal strength, or ability to penetrate various environments (such as buildings) as terrestrial cellular systems. Rather the company expects its subscribers to use Iridium services in areas or situations where local cellular system use a standard incompatible with that of the users home market or where terrestrial service is unavailable, inconvenient, of poor quality or unreliable. The extension of land based telecommunications systems to areas that are currently not serviced by landline or cellular telephone systems will reduce demand for the company's service. (k)RISK FAC TORS: The ultimate success of the Iridium system will depend upon subscriber acceptance which in turn will depend upon a number of factors, including price, technical capabilities of the Iridium system and the extent of availability of alternative telecommunications systems. If the level of actual subscriber demand and usage for Iridium service is significantly below that, or develops significantly more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas that are served by mature cellular systems. The extension of land-based telecommunications systems to areas that are not currently serviced by landline or cellular telephone or paging systems could reduce demand that might otherwise exist in such areas for the company's services. The company may also compete for business travel customers with businesses that provide short term rentals of cellular telephones capable of operating in specific countries or regions. These businesses often have rental locations at airports, hotels and other locations. According to the plaintiff, had they known that the defendants had accepted the advantages of the landline system over the Iridium system as is apparent from Clause (a) above and that the hand-held unit would remain larger than today's smallest and lightest pocket sized hand-held cellular telephones or that there would be certain service limitations or degradation due to interference imposed by natural or man-made obstructions between the satellites and subscriber equipment; that there would be degradation which would include the inability to initiate or receive calls; interruptions of service ranging from brief to moderat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed certain officers to act as their powers of attorney for the purpose of S-1. As is apparent, the issue is whether knowledge of this form S- 1 could be attributed to S.H. Khan. The defendants have squarely alleged the plaintiff's knowledge of the action of the defendants' Board through their representative. For instance, in regard to the meeting of the Related Party Contracts Committee held on 17-4-1996 which specially authorised the delayed implementation of facts and data details, they have alleged that though not S.H. Khan, one M. Raza, Managing Director of the plaintiff, was present. Further, in relation to the 1995 P.P.M. of S-1 document, the defendants have alleged that both the documents are issued with the approval of the Board of Directors of the defendant No. 1 which included S.H. Khan. Further in para 79 of the affidavit, the defendants have clearly alleged as follows:--- Even otherwise, the 1995 S-1 was issued by Iridium Inc. after approval of the Board of Directors in 1995 which contained representations similar to those contained in the 1995 P.P.M. and was available with the plaintiff through its representatives on the Board of Directors of Iridium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment, it is no answer to show that the investor ought to have made inquiries. Cases were also cited for the proposition that the intention to deceive is not relevant. With respect, there is no doubt about the proposition that where fraudulent misrepresentation or wilful concealment is established, it would be extremely inequitable and unjust to uphold the plea that those deceived ought to have made proper inquiry or have had constructive notice of some of the facts on which they were induced to invest. However, I am not inclined to go into those cases relied upon by the plaintiff in detail because it is not well-established that there has been a fraudulent misrepresentation or wilful concealment of facts by the defendants in this case. It must be noted that each of those cases relied upon by the plaintiff, though very instructive, are cases where fraudulent misrepresentation, etc. was established at the trial. The cases relied upon by the plaintiff are the Directors C. of the Central Railway Company of Venezuela v. Joseph Kisch, reported in 1867(2) E I A 99; Aaron's Reefs Limited v. Twiss, reported in 1896 A.C. 273 and Arnison v. Smith, reported in 1888(110) C.A. 348. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ISFIED ABOUT THE PROSPEC TS AND PROGRESS SO FAR AC HIEVED TOWARDS IMPLEMENTATION OF THE PROJEC T AND THE EFFEC TIVENESS OF THE MEASURES TAKEN/PROPOSED TO BE TAKEN TO MITIGATE VARIOUS RISKS ASSOCIATED WITH THE PROJECT(.) It is important to note that by this letter, the IDBI has communicated the feeling of the INDIAN INVESTORS. Obviously, this includes the plaintiff who is undoubtedly an Indian investor. It is obvious from this reply that the letter along with the 1995 P.P.M. inviting investment of 300 million US $ from the existing shareholders was received by S.H. Khan, who was a nominated Director on the Board of the defendant No. 2. It is, to my mind, no answer, as contended on behalf of the plaintiff, that the letter forwarding 1995 P.P.M. was not addressed to the plaintiff and, therefore, the plaintiff was entitled to make the statement in the plaint that a copy of the 1995 P.P.M. was not made available to the plaintiff . It must be seen that the statement in the plaint is not only to the effect that the 1995 P.P.M. was not furnished to the plaintiff, but it is also to the effect that it was not made available to the plaintiff. The correspondence referred to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apart from the fact that goes against the plaintiff's case that they continued to make investments because the 1995 PPM was withheld from them and, therefore, the investments are induced by misrepresentation and fraud; the plaintiff's case seems to be vitiated by what prima facie appears to be a palpable false statement made in the plaint to the effect that a copy of the 1995 PPM was not available to the plaintiff. In my view, therefore, relying on the judgment of the Supreme Court in S.P. Chengalvaraya Naidu v. Jagannath, reported in MANU/SC/0192/1994 : AIR1994SC853 , this conduct of the plaintiff by itself is sufficient to deny it any relief. In that case, their Lordships have observed as follows:- If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the Court as well as on the opposite party. In the present case, I am of view that the plaintiff has come to this Court with a case that they were not made aware of the 1995 PPM. In fact, this statement is made in para 24 of the plaint which is said to contain Fraudulent, dishonest and deceitful intent of the 1st defendant and knowledge that the mis- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of attachment before judgment or of an injunction. In fact, the plaintiff is disentitled for any relief from this Hon'ble Court in view of the false and misleading statements in the plaint. Nevertheless, I have dealt with other points raised on behalf of the parties, in view of the fact that the matter has been argued at length and the points were canvassed at the Bar at length. ORDER XXXVIII, Rule 5: 37.In the present notice of motion, the plaintiff has prayed, inter alia, for an interim order of an attachment before judgment under Order XXXVIII, Rule 5 or Order XXXIX, Rule 1(b) of the C.P.C. Order XXXVIII, Rule 5 reads as follows:--- 5(1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him,--- (a) ......................................... (b) ......................................... the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the defendant is about to deal with its property in the manner aforesaid since, in my view, even if the power is available under section 151 of the C.P.C., it does not appear that while exercising that power, the Court can or ought to abandon condition on which the power is conferred on a Court to grant an order or attachment before judgment or injunction under Order XXXIV, Rule 1(b). 40. Now admittedly in the present case, the defendant is a foreign Corporation. In the affidavit-in-reply, it is stated that the defendant No. 1 is a reputed company which has been doing business in India for the past 20 years and has a turnover in the past four years ranging from 37 million US $ to 43 million US $. The defendant No. 1 is a reputed foreign Corporation in existence for over 70 years and is amongst the top 50 fortune 500 companies in the world. It operates in over 100 countries and has large assets in the U.S.A., U.K., Singapore, China and other countries. For the purpose of this case, the assets in the U.S.A. and U.K. have some importance as is mentioned later. 41. In India, the defendant No. 1 carries on the sale of equipment and undertakes projects for the Government of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order in the nature of a garnishee order for attaching the money receivable by the defendant No. 2 by way of attachment before judgment. Now there is no doubt that though a garnishee order is normally passed after the Court passes the decree, there is power in this Court to grant such an order before judgment vide judgment dated 15-10-1992 of a Division Bench of this Court in Appeal No. 704 of 1992 in Notice of Motion No. 2042 of 1992 in Suit No. 2678 of 1992, Triangle Drilling Limited another v. Jagson International Limited another. 43.It appears from the affidavit in support of the notice of motion that no material from which any intent of the defendants to remove monies receivable by them can be inferred. Admittedly, the property in question i.e. the money receivable under the consent terms are already outside the jurisdiction of this Court and there is no specific provision under Order XXXVIII, Rule 5 to enable this Court to attach the property which is already outside the jurisdiction of this Court. The plaintiff, therefore, seeks an injunction under Order XXXIX, Rule 1(b) against the defendants and under section 151 of the Code. In my view, in the absence of any mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purposes mentioned in section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the legislature. It is also well recognised that the inherent power is not to be exercised in a manner which will be contrary to or different from the procedure expressly provided in the Code. The learned Counsel submitted that if an injunction was granted under section 151 or an order of attachment before judgment is made thereunder, it ought not to be granted de hors the principle underlying the grant of injunction or attachment before judgment, viz., even without the intention of the defendant threatening to remove or dispose of its property with a view to defeating its creditors, in case of an injunction or with an intent to obstruct or delay the execution of a decree that may be passed against him in case of an attachment before judgment. In my view, this submission deserves acceptance. Parliament has clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, that right directly affects its right to carry on business. Such a right, in my view, cannot be affected or interfered with by this Court in exercise of its inherent powers under section 151. The law laid down by the Supreme Court in Padam Sen's case was affirmed by their Lordships in Manohar Lal's case, reported in MANU/SC/0056/1961 : AIR1962SC527 , after quoting the aforesaid passage from Padam Sen's case, their Lordships observed as follows:--- These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in section 151 itself. But those powers are 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 presumed that the procedure specifically provided by the legislature for orders in certain circumstances is dictated by the interests of justice. Thus, even though it might be possible, as a matter of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling with his property at a time when no order against him has been made. Thereupon, the Court observed that none of the above statement was made in relation to a defendant who was out of the jurisdiction but has assets in the country. The Court relied on a statute of 1873 and 1925 and held that the Court gave a wide discretion to grant an interlocutory injunction whenever it appears to the Court to be just or convenient. The Court referred to the Mareva case itself and observed that unless an interlocutory injunction were granted ex parte, the debtor could and probably would, by a single telex or telegraphic message, deprive the shipowner of the money to which he was plainly entitled and described the procedure of a Mareva injunction by which the defendants' property within the jurisdiction of the Court can be frozen by an order of the Court as just and convenient. The Court referred to an earlier case decided by Kerr, J., where such an injunction was granted:--- A plaintiff has what appears to be an indisputable claim against a defendant resident outside the jurisdiction, but with assets within the jurisdiction which he could easily remove, and which the Court is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who was not based in England was likely to leave the country at short notice also. Finding that the husband was a person outside the jurisdiction of the Court, a Mareva injunction was granted. In the present case, as will be apparent, there does not seem to be any material for inferring that the defendant No. 1 is likely to leave India at a short notice. In fact, the learned Counsel for the defendant No. 1 stated that the defendant No. 1 undertakes to give a notice to this Court in case it intends to cease its business. 49.Apart from the fact that it is not necessary to consider the question of attachment before judgment from the point of view of a Mareva injunction, a practice which appears to have been adopted by the English Court initially because there was no statutory power to make an order for attachment before judgment, it appears that such an injunction ought not to be granted in the present case even if looked at from the point of view of the law relevant to this injunction as developed by the courts in India. Before dealing with the case in point, it is necessary to note the true fact that in the present case, the plaintiff seeks the attachment in the nature of a garni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junction. Lord Denying said the following:--- Much as I am in favour of the Mareva injunction, it must not be stretched too far lest it be endangered. In endeavouring to set out some guidelines, I have had recourse to the practice of many other countries which have been put before us. They have been most helpful. These are the points which those who apply for it should bear in mind. (i) The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the Judge to know; see The Assios. (ii) The plaintiff should give the particulars of his claim against the defendant, stating the ground of his claim and the amount thereof, and fairly stating the points made against it by the defendant. (iii) The plaintiff should give some grounds for believing that the defendants have assets here. I think that this requirement was put too high in the unreported case of MBPXL Corporation v. Intercontinental Banking Corporation. In most cases the plaintiff will not know the extent of the assets. He will only have indications of them. The existence of a bank account in England is enough, whether it is in overdraft or not. (iv) The plaintiff should give some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of all matters within the plaintiff's knowledge. For example, the plaintiff has failed to make a disclosure of the fact of a winding up petition having been admitted against it. The plaintiff has given no material for inferring that there is a risk of assets being removed in order to defeat the decree that may be passed against it. On the other hand, it appears that the defendants' business is growing as observed earlier. More important, it seems that the plaintiff undertaking in damages is essential, particularly since they are seeking an order which has the potential of stopping the defendants from doing business. In such a situation, the undertaking in damages should be good. Having regard to the pendency of the winding up proceedings, it is difficult to see that the value of the plaintiff's undertaking in damages, in case their claim turns out to be unjustified. 52.The observations of Kerr.L.J. in Z Ltd. v. A, reported in 1982(1) All.E.R. 556, are pertinent. These observations in particular show that the injunction ought not to be granted where the removal of the assets is in the ordinary course of the defendants business, but only where the intention to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the defendant should not be free to use his assets to pay his debts. Of course, if the plaintiff should obtain a judgment against a defendant company, and the defendant company should be wound up, its previous payments may thereafter be attacked on the ground of fraudulent preference, but this is an entirely different matter which should be dealt with at the stage of the winding up. It is not to be forgotten that the plaintiff's claim may fall, or the damages which he claims may prove to be inflated. Is he in the meanwhile, merely by establishing a prima facie case, to preclude the bona fide payment of the defendant's debts? When taxed with this point Counsel for the plaintiffs suggested that in such circumstances the appropriate course of a defendant's creditors was to proceed to judgment because the enforcement of judgments by execution would not constitute breaches of the Mareva injunction against the defendant. This I consider to be an unsatisfactory answer. It does not make commercial sense that a party claiming unliquidated damages should, without himself proceeding to judgment, prevent the defendant from using his assets to satisfy his debts as they fail due an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permit the defendant artificially to create such a situation. Therefore, unless the Court discerns an injunction on the part of the defendants to take action to frustrate the subsequent orders of the Court as under Order XXXVIII, Rule 5, the attachment before judgment or such an injunction would not follow. 55.In fact, in Polly Peck International Plc. v. Nadir, reported in 1992(4) All.E.R. 769, an English Court very firmly established the principle that a Mareva injunction ought not to interfere with the ordinary course of business of the defendants. The Court observed as follows:--- As a general principle, a Mareva injunction ought not to interfere with the ordinary course of business of the defendant. It is not intended to give the plaintiff security in advance of judgment but merely to prevent the defendant from defeating the plaintiff's chances of recovery by dissipating or secreting away assets. This principle makes the grant of a Mareva injunction against a bank, at any rate a bank carrying on a normal banking business, very difficult. 56.In fact, in a subsequent decision in Customs Excise v. Anchor Foods, reported in 1999(3) All.E.R. 268, another Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd fraudulent Indian defendants, although the foreigner might be a man of blemishless finance and character, yet, because he is a foreigner, and because the decree against him will have to be transmitted abroad for execution, the Court is vested with the jurisdiction to call for security. This jurisdiction has to be appropriately exercised in all cases which come before the Court. This decision has obviously no application to the present case since it is a decision under Order XXXVIII, Rule 1(b) of the C.P.C. which deals exclusively with a natural defendant or as accepted by the Calcutta High Court to apply to a ship, is about to leave the country. Order XXXVIII, Rule 1(b) obviously has no application to a natural Corporation. The principle underlying has no application to the present case since there is no material on record to show that the defendant is about to leave the country. 58.From the discussions above, I find that there is no merit in the plaintiff's argument that the balance of convenience lies in their favour merely because the defendant No. 1 is a Corporation having large assets all over the world and it could do with the defendants no harm. Indeed, the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment is enforceable in the same manner as the judgment of a sister state which is entitled to full faith and credit. Section 4 of the said Act reads as follows:--- 4. Grounds for non-recognition.-(a) A foreign judgment is not conclusive if (1) the judgment was rendered under a system which does not provide impartial Tribunals or procedures compatible with the requirements of due process of law, (2) the foreign Court did not have personal jurisdiction over the defendant; or (3) the foreign Court did not have a jurisdiction over the subject-matter. (b) A foreign judgment need not be recognised if (1) the defendant in the proceedings in the foreign Court did not receive notice of the proceedings in sufficient time to enable him to defend; (2) the judgment was obtained by fraud; (3) the cause of action claim for relief on which the judgment is based is repugnant to the public policy of this state; (4) the judgment conflicts with another final and conclusive judgment; (5) the proceeding in the foreign Court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that this is not a case where it could be said that irreparable injury would be caused to the plaintiff if an injunction is withheld. Apart from this, the plaintiff's business has obviously come to a standstill. The defendants business is increasing. In fact, figures show that it is increasing in India. I am, therefore, of view that even on this ground, it cannot be said that irreparable injury would be caused to the plaintiff if the injunction is withheld. On the other hand, if an injunction is granted, there is no doubt that the defendants would become incapable of receiving any moneys by way of price of goods supplied and this would seriously prejudice the contracts entered into by the defendants and the interest of parties with which it is doing business. In fact, one of the respondents Bharati Cellular appeared before this Court and expressed such an apprehension. 6 1 . Though, several suppression are alleged by the defendant, one suppression of fact appears to be of consequence. The plaintiff has suppressed the fact that it had been subjected to the process of winding up at the time of the institution of the suit. The suit was instituted on 16-9-2002. The winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he defendant No. 2, unless a clear case of fraud perpetrated by the defendant No. 1 Motorola Inc., through the defendant No. 2 Iridium Lic is made out, there is no occasion to lift the corporate veil and reach Motorola. In view of my findings above, I do not decide this question since I have decided the matter on the basis that the representations by the defendant No. 2 were fully backed and supported by the defendant No. 1. 63. Therefore, I am of view that the plaintiff is not entitled to any interim relief and Notice of Motion No. 2557 of 2002 is dismissed. 64. In Notice of Motion No. 2793 of 2002, the plaintiff has sought similar reliefs in respect of the amount payable by the defendant No. 1, viz., Motorola Inc. In view of the dismissal of Notice of Motion No. 2557 of 2002, I find no merit in the present motion which is hereby dismissed. 65.In accordance with the undertaking given by the defendant No. 1, the defendant No. 1 is directed to give immediate notice if it intends to cease its business activities in India and shall in no case commence its winding up operations in India without six months' notice in advance to the plaintiff. 66. Copy of this judgment du ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
