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Judgment
K.K. Sasidharan, J.—This civil revision petition is directed against the order dated 9.6.2009 in I.A. No. 8567 of 2009 in O.S. No. 4553 of
2009 on the file of the learned XV Assistant City Civil Judge, Chennai, whereby and whereunder an order of ex parte injunction was granted
against the revision petitioners restraining them from dealing with or presenting the cheques and promissory notes issued by the respondents till the
petitioners exhaust their rights against the secured properties.
Suit Relief:
The suit in O.S. No. 4553 of 2009 was instituted by the respondents/plaintiffs against the revision petitioners/defendants with the following
prayer:
(i) For a permanent injunction restraining the defendants from in any manner dealing with or presenting the cheques issued by the plaintiffs morefully
described in the 1st schedule hereunder till the defendants exhaust its rights against the secured properties.
(ii) For a permanent injunction restraining the defendants from in any manner dealing with the promissory notes of the plaintiffs tillth defendants
exhaust its rights against the secured properties.
(iii) Permit the plaintiffs to sell the 2nd schedule mentioned properties and deposit the sale proceeds into he court.
(iv) Cost of the suit.
Background Facts:
In the plaint in O.S. No. 4553 of 2009 it was the contention of the respondents that initially they have taken a loan of Rs. 15 crores from the
revision petitioners agreeing to pay interest at 21% per annum. The loan was disbursed during February, 2007. The respondents have executed a
promissory note with a letter of continuity, deed of mortgage which includes deed of indemnity and deed of power of attorney and a deed of
guarantee. They have also issued post dated cheques for payment of monthly interest as well as for monthly instalments of the loan amount.
Subsequently they have taken a further sum of Rs. 21,75,00,000/- as loan during September, 2007 agreeing to pay interest at 29% per annum. In
order to secure the said loan, the respondents have again executed a promissory note, mortgage deed and deed of guarantee. They have also
issued a cheque for the entire loan amount as well as thirty numbers of post dated cheques towards equal monthly instalments and one post dated
cheque for monthly interest.
During June, 2008, the respondents have taken a third loan for a sum of Rs. 30 crores and immovable property worth Rs. 150 crores was given
as security for sanctioning the said loan. Necessary mortgage was executed in respect of the third loan also. The respondents have also issued post
dated cheques towards EMI and undated cheque for the entire loan amount.
While the matter stood thus, the revision petitioners as per their letter dated 1.10.2008 increased the rate of interest unilaterally from 25% to
26.5% and from 26.5% to 28% with effect from 1.10.2008. The interest was further enhanced from 28% to 29% without their consent. The
revision petitioners have issued the statement of accounts wherein it was mentioned that the rate of interest charged was 33%. However there was
no positive action taken by the revision petitioners to reduce the interest rate. The interest demanded by the revision petitioners was found to be
usurious. In view of the financial crisis, the respondents defaulted in paying the two equal monthly instalments. The revision petitioners have been
harassing the respondents by threatening that they would present the undated cheques and make them to pay more than what was actually liable.
On 4.5.2009 the officers of the revision petitioners came to the office of the first respondent and created a big scene as if the respondents are
worth nothing and demanded cheque for a sum of Rs. 50 lakhs. To avoid unpleasant atmosphere in the office, the first respondent was constrained
to hand over a cheque for a sum of Rs. 50 lakhs on 18.5.2009. In such circumstances, for the purpose of avoiding multiplicity of proceedings and
further litigation, the respondents were advised to file a suit for prohibitory injunction restraining the revision petitioners from depositing the cheques
and promissory notes till the mortgaged properties are sold.
With respect to the Arbitration clause as found in the agreement executed between the parties, it was the contention of the respondents that the
suit is in the nature of a ""quia timet action"" to prevent irreparable injury on account of the demonstrable untrustworthy and irresponsible action of
the revision petitioners and as such there was no prohibition imposed in the said agreement for invoking the Arbitration clause. Accordingly they
have prayed for a judgment and decree of permanent injunction.
The respondents have also filed I.A. No. 8567 of 2009 for an order of interim injunction during the pendency of the suit. The said application
was filed along with the suit.
In the affidavit filed in support of the application, the respondents have reiterated their contention as found in the plaint. They have prayed for an
interim injunction without notice to the revision petitioners.
The interlocutory application was taken up for consideration by the learned trial Judge and as per order dated 9.6.2009, the learned trial Judge
was pleased to grant an order of ex parte interim injunction which reads thus:
Heard. records perused. Prima facie case and balance of convenience made out. Ad interim injunction and notice till 18.6.2009. Order 39 Rule
3(a) CPC to be complied with.
The injunction though granted only upto 18.6.2009 was subsequently extended on 18.6.2009 even after the appearance of the revision
petitioners. The said order reads thus:
Complied with Order 39 Rule 3 Notice. Vakalath filed for Rule 1 and Rule 2, counter by 3.7.2009. I.O.E.T.
Aggrieved by the ex parte order of injunction, the respondents in I.A. No. 8567 of 2009 had preferred this civil revision petition.
Rival Contentions:
The learned Senior Counsel for the revision petitioners contended that the very suit filed by the respondents are liable to be struck off as there
was no cause of action to file a suit of the nature pleaded in the plaint. According to the learned Senior Counsel, by way of the present suit, the
revision petitioners are injuncted from encashing the cheques or acting on the basis of the promissory notes. The revision petitioners, being
creditors are entitled to decide the mode and manner in which they have to proceed with the security and it is not for the respondents to insist that
they should exercise the option to present the cheques and dealing with the promissory notes only after exhausting their right against the secured
properties. The learned Senior Counsel also pointed out that even though the prayer was to restrain the revision petitioners from dealing with the
promissory notes, the plaint schedule does not contain a schedule showing the promissory notes and as such the learned trial Judge erred in
ignoring of the fundamental defect of the matter and granted an order of injunction very mechanically. The learned Senior Counsel further
contended that while granting an exparte order of injunction, the learned trial Judge was expected to record reasons. However very strangely other
than reproducing the provisions of Order 39 Rule 1, there was no indication in the order as to whether the learned trial Judge has considered the
issue on the basis of the available pleadings and documents. It was the further contention of the learned Senior Counsel that even after the
appearance of the revision petitioners before the trial Court on 18.6.2009, injunction was extended mechanically without recording reasons. The
learned Senior Counsel also contended that the suit itself is an abuse of process of law and as such the learned trial Judge should not have granted
an order of interim injunction which would amount to granting the very relief claimed in the suit itself.
The learned Senior Counsel appearing on behalf of the respondents contended that there was a unilateral enhancement of the rate of interest by
the revision petitioners which made the respondents to file the suit for injunction. According to the learned Senior Counsel, the property of the first
respondent company is worth several crores and there was no difficulty for them to pay the entire loan instalments and as such it was not necessary
to encash the cheques or to proceed against the promissory notes. The learned Senior Counsel also contended that the question of arbitration is a
matter to be considered by the learned trial court after the appearance of the revision petitioners and by filing an application and therefore there
was no justification in contending for the position that the suit itself was not maintainable.
Analysis:
The suit is one for permanent injunction with respect to the cheques and promissory notes given by the respondents to the revision petitioners.
The cheques were given towards payment of equal monthly instalments of the loan amount. The promissory notes and property security were also
given as security for due discharge of the loan amount. The substantive prayer in the civil suit is to restrain the revision petitioners from presenting
the cheques before the concerned bank or to make use of the promissory notes unless and until they proceed against the collateral security. The
relief in the interlocutory application was also the same. The respondents have sought for an order of interim injunction to restrain the revision
petitioners from presenting the cheques or proceed against the promissory notes during the pendency of the civil suit.
While considering an application under Order 39 Rule 1 of the CPC the Court was expected to consider the cumulative factors namely, the
prima facie case, balance of convenience and irreparable injury. The trial Court has also to examine as to whether in the factual situation as shown
in the plaint, the application for injunction was maintainable or a prima facie case was made out for grant of an order of injunction. Several factors
have to be taken into consideration by the trial court before granting an order of injunction ex parte.
When the trial court was approached with an application for interim injunction, the Court was expected to issue notice to the other side before
the grant of such injunction. In short, injunction with notice to the opposite party is the rule and ex parte injunction is only an exception. Therefore
the Court was expected to consider the factual matrix and in the event the court coming to a conclusion that giving notice of the application to the
opposite party, would defeat the object of granting the injunction, it would enable the Court to grant an injunction ex parte. However the
petitioners should be directed to comply with Order 39 Rule 3(a) of the CPC forthwith. Therefore while granting an injunction ex parte, there was
no opportunity for the opposite party to submit their defence. The duty is heavily on the trial court to examine the plaint as well as the affidavit filed
in support of the application for injunction and only after satisfying itself about the merits of the case as pleaded in the plaint and the prima facie
case made out in the injunction application, the court was expected to grant an order of injunction.
While granting an injunction ex parte, the Court was required to consider the prima facie case and balance of convenience. It is not sufficient
that the Court reproduces the ingredients of Order 39 Rule 1 of the Code of Civil Procedure. The attempt of the court should be to assess the
merits of the case pleaded by the petitioner on prima facie basis and the order should contain reasons which weighed with the learned trial Judge
for granting the order of injunction. Reasons should be indicated in the order. Reasons introduce clarity to the order and it would also enable the
appellate or revisional authority to assess the factors which made the learned trial Judge to grant the order of ex parte injunction.
In Director, Horticulture Punjab and Others Vs. Jagjivan Parshad, , the Supreme Court underlined the necessity to record reasons in the
following words:
Reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in
its order indicative of an application of its mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has
rendered the High Court�s judgment not sustainable.
15. ...Even in respect of administrative orders Lord Denning, M.R. in Breen v. Amalgamated Engg. Union observed: 1971 (1) All ER 1148
observed: (All ER p. 1154h) �The giving of reasons is one of the fundamentals of good administration.� In Alexander Machinery (Dudley)
Ltd. v. Crabtree 1974 1 CR 120 it was observed:
Failure to give reasons amounts to denial of justice. Reasons are live links between the mind of the decision-taker to the controversy in question
and the decision or conclusion arrived at.
Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the �inscrutable face of the
sphinx�, it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial
review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system. Another rationale is that the
affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the
order made, in other words, a speaking-out. The �inscrutable face of a sphinx� is ordinarily incongruous with a judicial or quasi-judicial
performance.
(See Chairman and Managing Director, United Commercial Bank and Others Vs. P.C. Kakkar, .
In Seema Arshad Zaheer and Others Vs. Municipal Corpn. of Greater Mumbai and Others, , at page 294, the Supreme Court underlined the
factors to be taken into consideration by the Court at the time of granting an order of temporary injunction thus:
The discretion of the court is exercised to grant a temporary injunction only when the following requirements are made out by the plaintiff: (i)
existence of a prima facie case as pleaded, necessitating protection of the plaintiff�s rights by issue of a temporary injunction; (ii) when the need
for protection of the plaintiff�s rights is compared with or weighed against the need for protection of the defendant�s rights or likely
infringement of the defendant�s rights, the balance of convenience tilting in favour of the plaintiff; and (iii) clear possibility of irreparable injury
being caused to the plaintiff if the temporary injunction is not granted. In addition, temporary injunction being an equitable relief, the discretion to
grant such relief will be exercised only when the plaintiff�s conduct is free from blame and he approaches the court with clean hands.
The Supreme Court in M. Gurudas and Others Vs. Rasaranjan and Others, explained as to what is meant by prima facie case thus:
While considering an application for injunction, it is well settled, the courts would pass an order thereupon having regard to:
(i) Prima facie case
(ii) Balance of convenience
(iii) Irreparable injury.
A finding on �prima facie case� would be a finding of fact. However, while arriving at such a finding of fact, the court not only must arrive
at a conclusion that a case for trial has been made out but also other factors requisite for grant of injunction exist.
The order passed by the learned trial Judge does not contain any reason much less justifiable reasons for grant of an order of interim injunction.
No attempt was made by the learned trial Judge to examine as to whether the suit with the prayer as found in the plaint filed in O.S. No. 4553 of
2009 was maintainable. In case the respondents are not entitled for a decree as prayed for by them it is not possible for them to obtain an order of
interim injunction during the pendency of such suit. Therefore the primary thing which the learned trial Judge should have noted was about the
merits of the case pleaded in the plaint atleast on a prima facie basis to form an opinion as to whether he would be justified in granting an interim
injunction in a suit of the nature as filed by the respondents.
It is true that there is a alternative remedy available to the revision petitioners under Order 39 Rule 4 of the Code of Civil Procedure. It is also
true that in normal circumstances the opposite party should be relegated to the appellate remedy instead of invoking the constitutional remedy.
However in case where there was a genuine doubt with respect to the very maintainability of the suit and there was no attempt on the part of the
learned trial Judge to examine the prima facie case of the matter before granting an order of injunction, there is no point in directing the parties to
approach the appellate remedy.
The Honourable Supreme Court in Seema Arshad Zaheer and Others Vs. Municipal Corpn. of Greater Mumbai and Others, considered the
term ""arbitrary, capricious and perverse"" with reference to a proceeding under Order 39 Rule 1 of the CPC and observed thus:
Where the lower court acts arbitrarily, capriciously or perversely in the exercise of its discretion, the appellate court will interfere. Exercise of
discretion by granting a temporary injunction when there is �no material�, or refusing to grant a temporary injunction by ignoring the relevant
documents produced, are instances of action which are termed as arbitrary, capricious or perverse.
In Kishore Kumar Khaitan and Another Vs. Praveen Kumar Singh, the Supreme Court indicated the extent of jurisdiction under Article 227 of
the Constitution of India thus:
The jurisdiction under Article 227 of the Constitution may be restrictive in the sense that it is to be invoked only to correct errors of
jurisdiction. But when a court asks itself a wrong question or approaches the question in an improper manner, even if it comes to a finding of fact,
the said finding of fact cannot be said to be one rendered with jurisdiction and it will still be amenable to correction at the hands of the High Court
under Article 227 of the Constitution. The failure to render the necessary findings to support its order would also be a jurisdictional error liable to
correction.
(Emphasis supplied)
The Supreme Court in Surya Dev Rai Vs. Ram Chander Rai and Others, , considered the nature of jurisdiction under Article 227 of the
Constitution of India with reference to the decided cases and held thus:
Article 227 of the Constitution confers on every High Court the power of superintendence over all courts and tribunals throughout the
territories in relation to which it exercises jurisdiction excepting any court or tribunal constituted by or under any law relating to the armed forces.
Without prejudice to the generality of such power the High Court has been conferred with certain specific powers by clauses (2) and (3) of Article
227 with which we are not concerned hereat. It is well settled that the power of superintendence so conferred on the High Court is administrative
as well as judicial, and is capable of being invoked at the instance of any person aggrieved or may even be exercised suo motu. The paramount
consideration behind vesting such wide power of superintendence in the High Court is paving the path of justice and removing any obstacles
therein. The power under Article 227 is wider than the one conferred on the High Court by Article 226 in the sense that the power of
superintendence is not subject to those technicalities of procedure or traditional fetters which are to be found in certiorari jurisdiction. Else the
parameters invoking the exercise of power are almost similar.
Upon a review of decided cases and a survey of the occasions, wherein the High Courts have exercised jurisdiction to command a writ of
certiorari or to exercise supervisory jurisdiction under Article 227 in the given facts and circumstances in a variety of cases, it seems that the
distinction between the two jurisdictions stands almost obliterated in practice. Probably, this is the reason why it has become customary with the
lawyers labelling their petitions as one common under Articles 226 and 227 of the Constitution, though such practice has been deprecated in some
judicial pronouncement. Without entering into niceties and technicality of the subject, we venture to state the broad general difference between the
two jurisdictions. Firstly, the writ of certiorari is an exercise of its original jurisdiction by the High Court; exercise of supervisory jurisdiction is not
an original jurisdiction and in this sense it is akin to appellate, revisional or corrective jurisdiction. Secondly, in a writ of certiorari, the record of the
proceedings having been certified and sent up by the inferior court or tribunal to the High Court, the High Court if inclined to exercise its
jurisdiction, may simply annul or quash the proceedings and then do no more. In exercise of supervisory jurisdiction, the High Court may not only
quash or set aside the impugned proceedings, judgment or order but it may also make such directions as the facts and circumstances of the case
may warrant, maybe, by way of guiding the inferior court or tribunal as to the manner in which it would now proceed further or afresh as
commended to or guided by the High Court. In appropriate cases the High Court, while exercising supervisory jurisdiction, may substitute such a
decision of its own in place of the impugned decision, as the inferior court or tribunal should have made. Lastly, the jurisdiction under Article 226
of the Constitution is capable of being exercised on a prayer made by or on behalf of the party aggrieved; the supervisory jurisdiction is capable of
being exercised suo motu as well.
In T. Arivandandam Vs. T.V. Satyapal and Another, , the Supreme Court considered the power of the trial Court to reject the plaint under
Order 7 Rule 11 of the CPC as well as the grant of ex parte orders in meritless cases. His Lordship Mr. Justice V.R. Krishna Iyer in His
Lordship''s inimitable style observed that the pathology of litigative addiction ruins the poor of this country and the Bar has a role to cure this
deleterious tendency of parties to launch frivolous and vexatious cases and further observed thus:
Another moral of this unrighteous chain litigation is the gullible grant of ex parte orders tempts gamblers in litigation into easy courts. A judge who
succumbs to ex parte pressure in unmerited cases helps devalue the judicial process.
(Emphasis supplied)
Therefore on a careful consideration of the entire matter, I am of the view that the learned trial Judge miserably failed to consider the
fundamental principles governing the grant of injunction and passed a mechanical order. The learned trial Judge also failed to consider the primary
question as to whether he would be in a position to grant a decree of permanent injunction for the relief claimed by the respondents. In case it was
not possible for the trial Court to grant the relief in the main suit there was no question of granting interlocutory order in such matters.
The cheques were issued by the respondents towards repayment of loan by way of equal monthly instalments. There was a clear admission in
the plaint about the issuance of cheques as well as promissory notes. It is true that the respondents have also executed mortgages in respect of their
property. The payer in the suit is to restrain the revision petitioners from presenting the cheques for encashment before the bank or in any other
manner dealing with the promissory notes till they exhaust the right against the secured properties. Therefore the question which has to be decided
by the learned trial Judge was as to whether he should grant a decree in favour of the respondents to restrain a private financial institution from
presenting the cheques which was given for payment of monthly instalments. However no such attempt was made by the learned trial Judge before
granting the ex parte interim injunction. Therefore I am of the view that the order impugned in the civil revision petition is liable to be set aside and
the matter has to be considered by the learned trial Judge afresh.
Accordingly, the order dated 9.6.2009 in I.A. No. 8567 of 2009 is set aside and the matter is remitted to the learned trial Judge for fresh
consideration. However it is made clear that it is open to the learned trial Judge to consider the injunction application on merits and in accordance
with law without in any way being influenced by the observation as contained in this order, as those observations were made only for the purpose
of deciding the civil revision petition.
In the result, the civil revision petition is allowed. Consequently, the connected MP is closed. No costs.