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1999 Supreme(Cal) 398
High Court Of Calcutta
Satyabrata Sinha, Mahemmad Habeeb Ansari
COMMONWEALTH DEVELOPMENT CORPORATION - Appellant
Versus
RICOCHET COMMERCIAL PVT.LTD - Respondent
G. A. 229 Of 1999
Decided On : 07/27/1999
The principles of res judicata apply in different stages of the same suit, and a court cannot pass an order of injunction in a suit that is not maintainable.
Headnote:
SECURITIES CONTRACTS (REGULATION) ACT, 1956 - SECTIONS 13 & 16 - INTERIM ORDER OF STATUS QUO - MAINTAINABILITY - JURISDICTION - LOCUS STANDI - RES JUDICATA - EQUITABLE RELIEF - CLEAN HANDS - SHAREHOLDER'S RIGHT TO SELL SHARES - PRINCIPLES OF RES JUDICATA - TERRITORIAL JURISDICTION - ILLEGALITY OF CONTRACT - DOCTRINES OF "EX DOLO MALO NON ORITUR ACTION" OR "EX TURPI CAUSES" - BENEFIT OF COMPROMISE - PUBLIC POLICY - APPEAL - JUDGMENT AND ORDER SET ASIDE.
Fact of the Case:
Plaintiff filed a suit for declaration that any settlement or agreement for acquisition of entire shareholding of defendant No. 3 by defendant No. 2 is illegal, null, and void, and for injunction restraining defendants from giving effect to any such agreement. The Madras High Court granted an interim order of status quo as regards shareholding of CDC and DSQ. The appellant-tenant (CDC) challenged the interim order, arguing that the plaintiff had no prima facie case, the application was barred by res judicata, and the plaintiff had disentitled himself from obtaining equitable relief due to his conduct.
Finding of the Court:
The court held that the findings of the Division Bench of this Court dated 17.12.1998 were binding upon the learned single Judge and that the learned trial Judge was under an obligation to examine the maintainability of the suit in great details before passing an order of injunction. The court also held that the plaintiff had not come to the Court with clean hands and that the appellant was entitled to sell his shares to any person he liked. The court further held that the principles of res judicata applied in different stages of the same suit and that the learned trial Judge could not have passed an order of injunction in a suit that was not maintainable. The court also held that the appellant had not taken benefit of the compromise and that it was not necessary to go into the larger question of whether the compromise decree was a nullity being opposed to the public policy or not.
Issues: 1. Whether the plaintiff had a prima facie case to maintain the suit? 2. Whether the application was barred by res judicata? 3. Whether the plaintiff had disentitled himself from obtaining equitable relief due to his conduct? 4. Whether the appellant was entitled to sell his shares to any person he liked? 5. Whether the principles of res judicata applied in different stages of the same suit? 6. Whether the learned trial Judge could have passed an order of injunction in a suit that was not maintainable? 7. Whether the appellant had taken benefit of the compromise? 8. Whether it was necessary to go into the larger question of whether the compromise decree was a nullity being opposed to the public policy or not?
Ratio Decidendi: 1. The court held that the findings of the Division Bench of this Court dated 17.12.1998 were binding upon the learned single Judge and that the learned trial Judge was under an obligation to examine the maintainability of the suit in great details before passing an order of injunction. 2. The court held that the plaintiff had not come to the Court with clean hands and that the appellant was entitled to sell his shares to any person he liked. 3. The court held that the principles of res judicata applied in different stages of the same suit and that the learned trial Judge could not have passed an order of injunction in a suit that was not maintainable. 4. The court held that the appellant had not taken benefit of the compromise and that it was not necessary to go into the larger question of whether the compromise decree was a nullity being opposed to the public policy or not.
Final Decision: The appeal was allowed, and the impugned Judgment and order was set aside. There was no order as to costs.
( 1 ) THIS appeal is directed against a judgment and order dated 13. 5. 99 whereby and whereunder an interim order granted by the said court was directed to continue with certain clarification. The said order was passed in a suit filed by the 1st respondent herein, inter alia, praying for the following reliefs:-
"a) Declaration that any settlement, arrangement and/or agreement arrived at by and between the defendants Nos. 2 and 3 for acquisition of the entire shareholding of the defendant No. 3 of and in the defendant No. 3 of and in the defendant No. 1 by the defendant No. 2 and/or his associates, is illegal, null and void;
b) Decree for delivery up of any settlement, arrangement and/or agreement referred to in prayer (a) hereinabove and the same be cancelled and adjudged void;
c) Perpetual injunction restraining the defendants and each one of them from giving any effect or further effect to any settlement, arrangement and/or agreement made by and between the defendants or any one of them for acquisition of the entire shareholding of the defendant No. 3 or any part thereof of and in the company, viz. the defendant No. 1 by the defendant No. 2 or his associates or any other person in any manner whatsoever, d) Perpetual injunction restraining the defendant No. 3 from receiving any payment as consideration for transfer of its entire shareholding in the company from the defendant No. 2 or any of the defendants in any manner whatsoever.
( 2 ) THE fact of the matter is as follows:-One Dinesh Dalmia (Dalmia) filed a suit in the Madras High Court against the appellant-tenant (CDC) and DSQ Software Limited (DSQ), a company controlled by Dalmia contending that he was entitled to buy and CDC was obliged to sell 38-lakh equity shares held by CDC in DSQ. The said suit was compromised on 24th October, 1998 on the following terms:
"a) CDC agreed to sell the shares held by it in DSQ to Dalmia for Rs. 60 crores approximately; b) Dalmia was requitred to deposit earnest money of Rs. 5 crores with an agreed escrow agent; c) Dalmia was to pay the balance and complete the transaction on or before 12. 00 noon on November 30, 1998; d) The share certificates of the shares were to be split into smaller marketable lots by DSQ and delivered to the escrow agent; e) Dalmia was to obtain all statutory and other permissions for sale of shares; f) In the event of Dalmia's failure to complete the transaction by the due date, the earnest money deposited by him, was to be forfeited to the credit of CDC. "
( 3 ) PURSUANT to the terms of the said consent order, Dalmia deposited a sum of Rs. 5 crores with the escrow agent. In the meantime two suits were filed, one by Mr Sampath contending to be a shareholder of DSQ against CDC, Dalmia, DSQ; and the escrow agent being O. S. No. 8053 of 1998 before XIV Assistant City Civil Judge, Chennai. In the said suit it was contended that:
(a) The Plaintiff had, purchased shares in DSQ; relying upon the representation contained in the prospectus of DSQ that CDC was to be a major investor in DSQ.
(b) The compromise between CDC on one hand and DSQ and the respondent No. 3 on the other was in violation of the listing agreement between the Stock Exchanges and DSQ.
( 4 ) IN the said suit an application for injunction was prayed for and ex-parte ad-interim injunction was granted whereby CDC and escrow agent were restrained from executing any transfer deeds or transferring or receiving any consideration for the shares held by CDC in DSQ either in favour of Dalmia or his nominee or any third party.
( 5 ) ANOTHER suit has been filed for the reliefs set out herein before: -However, Dalmia having not been able to comply with the terms and conditions of the said consent order dated 24th October, 1998, the forfeiture clause came into operation. On 30. 11. 1998 CDC filed a proceeding before the Madras High Court impugning the ex parte order of injunction passed by City Civil Court and the operation thereof was stayed.
( 6 ) T
