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2023 Supreme(Cal) 1512

IN THE HIGH COURT AT CALCUTTA
Biswaroop Chowdhury, J.
M/s Aei Engineering Industries Pvt. Ltd. and Others – Petitioners
Versus
M/s Linear Merchants Pvt. Ltd. and Another – Respondents
FMAT No. 305 of 2023, CAN No. 1 of 2023
Decided On : 19-07-2023

Advocates:
Advocate Appeared:
For the Appellants : Satadeep Bhattacharya, Dhruv Surana, Muskan Bengani, Jai Kumar Surana
For the Respondents: Arjun Mookherjee, Hera Nafis

Headnote:(A) Code of Civil Procedure - Section 151 - Ad interim injunction - Ex parte order passed by the lower court restraining appellants from operating their bank account was found to lack adequate justification - No acts of insolvency were reported to warrant such a restraint without affording a hearing to the appellants - Supreme Court established that an appellate court may intervene if a lower court's order is perverse or unreasonable, but the current order was not deemed perverse - Court directed the lower court to rehear the application with proper reasoning. (Paras 4, 12, 18, 19)

Facts of the case:
Petitioners challenged an ex parte injunction order mandating them to maintain a balance of Rs. 25,00,000 in their account pending litigation, claiming that the order lacked justification and was passed without due process after multiple adjournments by the respondent.

Findings of Court:
The appeal was upheld; the court found the lower court's order lacked sufficient reasoning and failed to consider the required procedural safeguards inherent to such interim applications.

Issues: The legality and justification of the ex parte injunction order and the court’s discretion regarding interim measures in the case of money suits.

Ratio Decidendi: The court emphasized the necessity of reasoned orders and that interim relief should not be granted without adequate factual basis, ensuring that parties are given an opportunity to present their case before any restrictive measures are imposed.

Result: The ex parte order was set aside and the lower court was directed to reconsider the interim application with the respondents present.

Table of Content
1. court admits the appeal and simplifies proceedings. (Para 1 , 2)
2. appellants challenge ex parte order's justification. (Para 3 , 4 , 5 , 6)
3. required judicial discretion in injunction matters. (Para 7 , 8 , 9 , 10)
4. attachment of assets requires evidence of insolvency. (Para 11 , 12 , 13)
5. appellate intervention criteria based on judicial reasoning. (Para 14 , 15 , 16 , 17)
6. impugned order set aside; procedural directive issued. (Para 18 , 19 , 20 , 21)

JUDGMENT :

Biswaroop Chowdhury, J.

1. We formally admit the appeal.

2. As the point involved is very short, we have heard out the appeal after dispensing with all formalities.

3. The appellants are aggrieved by an ex parte ad interim order passed by the learned court below restraining them from operating their bank account without leaving a balance representing the claim of the respondent/plaintiff, i.e. Rs. 25,00,000/ (rupees twenty five lakhs).

4. Mr. Bhattacharya, learned Advocate appearing for the appellant submitted that there was no occasion for the court to pass the order ex parte when the suit had been filed on 17th March, 2022 and the respondent/plaintiff had taken numerous adjournments to comply with the procedure for prosecution of the suit.

5. He said on 22nd June, 2023 there was no cause for passing the order ex-parte.

6. He also points out that the learned judge merely narrated the case of the respondent/plaintiff in the plaint and proceeded to pass the interim order without any supporting reason.

7. Mr. Arjun Mookherjee, learned Advocate appearing for the respondent no. 1 made very forceful submissions before this court. He placed the impugned judgment and order where the learned judge had narrated the facts of the case and also recorded the findings arrived at by him. Although the learned judge was unable to draw his own conclusion, prima facie, from the facts of the case, nevertheless, learned counsel tried to submit that the ultimate finding reached by the learned judge pointed to an affirmation on his part of the plaint case.

8. More importantly, he showed us Skyline Education Institute (Pvt.) Ltd. v. S.L. Vaswani & Ors. AIR 2010 SC 3221 (2010) 2 SCC 142 . On the basis of this judgment he contended that once the court of first instance exercised its discretion to grant or refuse to grant an injunction the appellate court would normally not interfere with that exercise of discretion just because it held a different opinion.

9. Rahul S. Shah v. Jinendra Kumar Gandhi & Ors. AIR 2021 SC 2161 : (2021) 6 SCC 418 also cited by learned counsel is a most interesting case which in paragraph 42 directed the courts to follow some directions, one of which was that the court may in appropriate cases under Section 151 of the Code of Civil Procedure, demand security to ensure satisfaction of any decree.

10. If the Supreme Court direction is to be obeyed a liberal view of Order 38, Rule 5 of the CIVIL PROCEDURE CODE is to be taken.

11. From this perspective was the impugned order restraining the respondent from operating their bank account valid?

12. Ordinarily, in a money suit before the decree, the plaintiff is not entitled to attach the assets of the defendant and cause it to be sold to realize its claim. We may do so only after obtaining the decree. An exception to this rule is when the defendant commits acts of insolvency by alienation of his properties to defeat the rights of any decree holder.

13. In those circumstances, the court passes an order of attachment or a restraint order to prevent such disposition. To obtain such an order some details have to be provided of the acts of insolvency committed by the defendant. In this case no details are available in the impugned order. Merely on the averments made in the plaint the impugned order has been passed.

14. We are bound by the law laid down by the Supreme Court in Skyline. But in that case the circumstances in which the appellate court can intervene were not in issue. Those circumstances are when the order

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