Balakrishnan Baburajan vs Murali Narayanan & Ors.

The instant Company Appeal has been preferred by the Appellant, who is the petitioner in TIBA/35/KOB/2019. In the said proceedings, the Appellant filed an application bearing IA(IBC)/117/KOB/2022, seeking the grant of an interim order during the pendency of the Company Petition. However, the said application was dismissed on the grounds of the principles of res judicata and estoppel, on the basis that an earlier application filed by the Appellant seeking similar interim relief, namely IA(IBC)/169/KOB/2021, had already been rejected.

The Respondents were duly served with notice. However, as reflected in the order sheet, from the date of institution of the Company Petition and throughout the proceedings thereafter, the Respondents have neither appeared nor filed any objections. In such circumstances, this Tribunal has no option but to proceed to decide the Company Appeal ex parte on its merits.

The principles governing the grant of interim relief during the pendency of a Company Petition are well settled. Such proceedings before the principal court or tribunal take the form of interlocutory proceedings, the sole object of which is to maintain status quo or grant interim protection during the pendency of the Company Petition until its final adjudication. Any observations or findings recorded in interlocutory or interim orders do not have any binding effect on, nor do they influence, the final decision in the Company Petition. The Company Petition must be adjudicated independently on its own merits, without being influenced by any findings recorded in interlocutory applications filed for the grant of interim relief. Upon final adjudication of the Company Petition, such interlocutory orders lose their significance by operation of the doctrine of merger, unless specifically preserved by an express order of the court or tribunal.

In a proceedings, where a petitioner has filed an interlocutory application seeking interim relief and the same has been rejected, such rejection does not operate as a bar to the filing of a subsequent application seeking similar relief, provided it is based on new grounds or changed circumstances. The grant of interim relief at any stage during the pendency of the principal proceedings depends upon the facts and circumstances prevailing at that time, which are inherently variable and require fresh judicial scrutiny. Even if the principles under Section 11 of the Code of Civil Procedure, 1908, are considered, the doctrine of res judicata applies only to the final adjudication of a suit, which, in the present context, would correspond to the Company Petition. Therefore, dismissal of an interlocutory application will not amount to a final decision on the merits of the Company Petition or on the cause of action involved. Therefore, Section 11 of the CPC cannot be invoked to dismiss a subsequent interlocutory application for interim relief on the ground of res judicata.

Hence, the view taken by the Learned Tribunal in rejecting the subsequent application for interim relief on the ground of res judicata is unsustainable in law, particularly in light of the language and scope of Section 11 of the CPC. Furthermore, there can be no estoppel against law in the enforcement of a legal right, especially when such right may recur or arise during the pendency of proceedings. Once it is held that the subsequent application is not barred by res judicata, the said statutory remedy available to a litigant cannot be denied by invoking the principle of estoppel. The rejection of an earlier application will not estop a party from seeking appropriate interim protection to safeguard legal rights that may be infringed upon during the pendency of the Company Petition.

Hence, in either of the circumstances, the principle of the estoppel or res judicata will not apply for the purposes of considering application of interim relief, the grant of which does not have an effect of determination of a right finally. Hence, the Company Appeal would stand allowed. The impugned order dated 23.03.2023 would stand quashed. The matter is remitted back to the Learned Tribunal to redecide the application being IA(IBC)/117/KOB/2022, exclusively on its merit afresh, without being influenced by the earlier decision taken in IA(IBC)/169/KOB/2021. All pending interlocutory applications will stand closed.