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1997 Supreme(Del) 700
High Court Of Delhi
M.R.GOYAL - Appellant
Versus
USHA INTERNATIONAL LIMITED - Respondent
Interim Application 4800 of 1997
Decided On : 08/27/1997
ALPANA PODDAR, H.N.SALVE, KAPIL SIBAL, MADAN LOKUR, RAHUL SRIVASTAVA, VIBHU BHAKRU
Headnote:Securities and Exchange Board of India Act, 1992 - Section 20A — SEBI Ast. Regulations 1971 — Maintainability of — Civil suit — Order 39 Rules 1, 2 and 4 — Ad-interim injunction and vacation of — Notice of EGM on stay of decision of EGM — Sought permanent, mandatory Injunctions; declaration and directions assigning impugned notice — Section 15Y and Section 20A — Ambit and scope of SEBI Act — Statutory requirements — Non-compliance of — Effect of — Prima facie case; balance of convenience; irreparable loss — Defendant pleaded under SEBI provisions suit is barred by operation of law — Survival of suit — Interim order directed to be vacated forthwith — Application filed by plaintiff has no merit — Dismissed. Held:
I am inclined to agree with the views expressed by the learned Counsel for the plaintiffs and in my opinion too prima facie it appears that in view of the provisions contained in Sections 15Y and 20A of the SEBI Act the jurisdiction of the Civil Court in the present proceedings appears to be barred. However, since this Court is not dealing with the matter finally and, at this stage is only dealing with the interlocutory applications filed by both the parties, no final view on the above point is being expressed by this Court and only a tentative view on the basis of submissions made by the learned Counsel for both the parties is being expressed by this Court solely for the purposes of the disposal of the above mentioned two applications presently under consideration of this Court.
After taking into consideration all the aspects of the matter including the contentions advanced at the Bar by the learned Counsels for both the parties I am not in favor of making an order of injunction as prayed for by the plaintiffs in their application. In order to avoid repetition, I am only summarizing the main grounds which are as follows:
(i) The plaintiffs have no prima fade case in their favour;
(ii) The balance of convenience is also not in favor of the plaintiffs as they are holding only a minimal amount of shares.
(iii) No irreparable loss is going to be caused to the plaintiffs if their prayer for grant of injunction is refused because in the first place if the concerned competent, authority under the SEBI Act, who is already seized of the matter, arrives at a finding against defendant No. 1 in that event that authority can pass suitable orders/directions to load off the shares or to reduce the share capital or to compensate the plaintiffs for any loss-damage, that may be sustained by the plaintiffs. The plaintiffs have not brought on record any document or any material which may indicate that after the issue of notice or after the EGM held on 29th May, 1997 the value of their shares or the value of the share of the defendant No. 1 Company has gone down/decreased. On the other hand if this Court passes any order injuncting/restraining defendant No. 1 from giving effect to the decisions taken in the EGM held on 29th May, 1997 in that event in my opinion, an irreparable loss/damage would be caused to the defendant No. 1.
(iv) In my opinion the explanatory statement prima facie does not lack the requisite particulars (it must be noted that at this stage I am not hearing the main suit). Lack of particulars, on which much has been said, is not such as to justify me to stay the decisions taken in the EGM held on 29th May, 7997 which has already been passed in a meeting held on 29th May, 1997 and approved by an overwhelming majority of shareholders.
( 1 ) THIS Order will dispose of plaintiffs application (IA 4800/97), filed under Order XXXIX, Rule 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter REFERRED TO to as `the CPC ) and the application (IA 5642/97), filed on behalf of defendant No. 1, under Order XXXIX, Rule 4 read with Section 151. CPC. The facts, relevant for the disposal of the above mentioned two applications lie in narrow compass. The plaintiffs have filed the present suit for permanent and mandatory injunction, declaration and directions assailing the notice dated the 29th April, 1997 (Annexure-A), issued by defendant No. 1 Company, calling for the `extraordinary General Meeting (`egm for short) of the members of Usha International Limited on 29th May, 1997 with the prayer that a decree declaring that notice dated 29th April, 1997, issued by defendant No. 1 Company is bad in law and directing defendant No. 1 Company and/or its promoters to make an offer to the general public as envisaged by the Substantial Acquisitions of Shares and Takeovers Regulations 1997 and a decree in favour of the plaintiffs and against defendant No. 2 directing defendant No. 2 to immediately initiate proceedings against defendant No. 1 Company in accordance with the SEBI Regulations, be passed in favour of the plaintiffs and against the defendants. It is also prayed that a mandatory order directing the defendants not to proceed with the EGM, proposed to be held on 29th May, 1997 pursuant to notice dated 29th April, 1997, be also passed. The plaintiffs have also prayed that a declaration be issued to the effect that defendant No. 1 has violated. the SEBI guidelines and that the defendant No. 1 is liable to make a public offer to the general public in terms of SEBI Regulations.
( 2 ) ALONGWITH the plaint, the plaintiffs have also filed an application (IA 4800/97) under Order XXXIX, Rule 1 and 2 read with Section 151, Civil Procedure Code with the prayer that an ad interim ex-parte injunction in favour of the plaintiffs and against defendant No. 1, stalling the holding of EGM of defendant No. 1, scheduled for 29th May, 1997 pursuant to notice dated 29th April, 1997 be passed. It is also prayed that the exparte injunction as prayed in, para 8 (a) of the application be confirmed in favour of the plaintiffs upon return of motion. The above mentioned application alongwith the Suit (Suit No. 11 28/97) came up for hearing for the first time before this Court on 27th May, 1997 and this Court after hearing the learned Counsel states as under:
"this is an application filed on behalf of the plaintiff under Order 39, Rules 1 and 2 read with Section 151, CPC. Issue notice to the defendants. At this stage Mr. Dilip Goswami with Mr. Rahul Srivastav appear for defendant No. 1 and accept notice of the above mentioned application on behalf of defendant No. 1. Issue notice of the application to defendant No. 2 returnable on 10th July, 1997. I have heard the learned Counsel for the plaintiffs and defendant No. 1, have also carefully gone through the averments made in the plaint and the contents of the application, which is duly supported by an affidavit. The main thrust of the arguments of the learned Counsel for the plaintiffs is that the notice dated the 29th, April, 1997, calling for Extraordinary General Meeting (EGM) for 29th May, 1997 is not in conformity with the statutory Regulations framed under Section 30 of the Securities and Exchange Board of India Act, 1992 (hereinafter REFERRED TO to as (`the Act ) and if an ex-parte interim order is not passed, the very purpose of filing the application would stand defeated by delay as the main object of the Act is to protect the interest of small investors. After hearing the learned Counsel for the parties (plaintiff and defendant No. 1) I am also satisfied that, if an ex-parte interim order is not passed, the very purpose of filing, the application would stand defeated by delay. It is, therefore, di
