{1} IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD APPEAL FROM ORDER NO.11 OF 2004 Pravinkumar s/o Jinabhai Patel, Age-64 years, Occ-Business R/o Plot Nos. 40 to 42, Near Collector’s Bungalow, Girna Taki Road, Jalgaon Tq & Dist-Jalgaon APPELLANT VERSUS 1. Kalpita Builders Pvt. Ltd., Jalgaon, through its Director, Anilkumar s/o Jinabhai Patel Age-57 years, Occ-Business R/o 153, Polan Peth, Jalgaon 2. Sow. Jayashree Jugalkishor Rathi Age-44 years, Occ-Housewife R/o Behind Bombay Lodge, Navi Peth, Jalgaon 3. Sandeep s/o Shivnarayan Zawar Age-39 years, Occ-Business R/o Behind Bombay Lodge, Navi Peth, Jalgaon 4. Smt.Indubai Onkardas Kabre Age-64 years, Occ-Household R/o Dharangaon, Tq-Erandol Dist-Jalgaon {2} 5. Sow.Sadhana Bhushan Mundada, Age-32 years, Occ-Housewife R/o At Post Pimprala Tq & Dist-Jalgaon 6. Kum.Jivanrani Narendra Raisoni Minor, under guardianship of natural mother Sow.Sangita Narendra Raisoni, R/o Jaikisan Wadi, Jalgaon 7. Sulochana Prakash Jain Age-44 years, Occ-Household R/o Jaikisan Wadi, Jalgaon 8. Vimal Shankar Sakhare Age-49 years, occ-Housewife R/p Vrindavan Apartment, Plot No.2, Hareshwar Nagar Jalgaon 9. Shankar Jagannath Sakhare Since dead, through LRs. 9(1) Smt.Vimal Shankar Sakhare Age-66 years, Occ-Household R/o Plot No.2, Vrindavan Apartment, “B” Building, Hareshwar Nagar, Jalgaon 9(2) Anil Shankar Sakhare Age-44 years, Occ-Service R/o Plot Nos.1 and 2, Vrindavan Apartment, “B” Building, Hareshwar Nagar, Jalgaon 9(3) Sunil Shankar Sakhare Age-51 years, Occ-Service {3} R/o Plot Nos.1 and 2, Vrindavan Apartment, “B” Building, Hareshwar Nagar, Jalgaon 10 Sow.Chhaya Prakash Potdar Age-39 years, Occ-Housewife R/o Block No.6, Vrindavan Apartment, Hareshwar Nagar, Jalgaon 11. Girnari Rameshwar Agrawal Age-49 years, Occ-Business R/o Ground Florr, Vrindavan Apartment, Hareshwar Nagar, Jalgaon 12. Vinod s/o Rameshwar Agrawal Age-49 years, Occ-Business R/o Vrindavan Apartment, Block No.3, Ground Floor, Hareshwar Nagar, Jalgaon 13. Kantilal Motilal Chajed Age-64 years, Occ-Business R/o Vrindavan Apartment, First Floor, Hareshwar Nagar, Jalgaon 14. Hemant Kantilal Chajed, Age-34 years, Occ-Business R/o Vrindavan Apartment, “B” Wing, First Floor, Hareshwar Nagar, Jalgaon 15. Sow. Asha Kishor Bende, Age-44 years, Occ-Housewife R/o Vrindavan Apartment, “B” Wing, First Floor, Hareshwar Nagar, Jalgaon {4} 16. Shivaji Gangadhar Temkar Age-59 years, Occ-Business R/o Vrindavan Apartment, “B” Wing, 2nd Floor, Hareshwar Nagar, Jalgaon 17. Chandramohan Gangadhar Temkar Age-44 years, Occ-Business R/o Vrindavan Apartment, “B” Wing, 2nd Floor, Hareshwar Nagar, Jalgaon 18. Satish Lalji Thakkar, Age-49 years, Occ-Business R/o Vrindavan Apartment, Plot No.4, 2nd Floor, Hareshwar Nagar, Jalgaon 19. Purushottam Chothuman Gujrathi, Age-40 years, Occ-Business R/o Vrindavan Apartment, “B” Wing, 2nd Floor, Hareshwar Nagar, Jalgaon 20. Sow.Nayana Dipak Patel, Age-39 years, Occ-Housewife, R/o Plot No.9, “B” wing Vrindavan Apartment, Behind Mahesh Pragati Mandal, Ring Road, Jalgoan RESPONDENTS ....... Mr. A.S.Bajaj, Advocate for appellant Mr. V.D.Sapkal h/f Mr.A.B.Kale, Advocate for respondent No.1 Mr.A.G.Talhar, Advocate for respondents No.4 and 5 Mr.V.B.Garud, Adv. for R-No.9(1), 9(2), 9(3), 10, 11, 12 & 16 to 20. ....... {5} [CORAM : A.V.POTDAR, J.] RESERVED ON : 25th March 2010 PRONOUNCED NO : 6th April 2010 JUDGMENT: 1. Present Appellant is the original defendant No.1 in Special Civil Suit No.63/1999 pending on the file of Second Joint Civil Judge, Senior Division, Jalgaon. The appellant, by this Appeal From Order, has challenged the order dated 19.12.2003 passed below Exhibit-5, an application for interim / temporary injunction. 2. It appears that this Appeal From Order is admitted on 29.04.2004 and since then was waiting for its turn for final hearing. 3. By the impugned order the appellant, original defendant No.1 is restrained from alienating plots and properties of the Company, “Kalpita Builders Pvt. Ltd., (herein after this company will be referred as “said company’ in the body of the judgment) and to maintain status quo and not to withdraw any amount from the bank accounts of the said company, during the pendency of the special civil suit No.63/1999. Respondents No.2 to 20, who are original defendants No.2 to 20, are directed to maintain status quo from further alienating of plots / flats purchased by them from the appellant. It appears that the impugned order is challenged by the appellant, defendant No.1 only {6} and the same is not challenged by original defendants No.2 to 20. Respondents No.2 to 20 are made party respondents to this Appeal From Order, as they are party defendants No.2 to 20 in special civil suit No.63/1999. 4. Heard learned counsel for respective parties. Learned counsel for respondents No.2 to 20 supported the appellant. Also perused the impugned order and the record received from the trial court. 5. Before considering the submissions of the learned counsel for the parties, it is necessary to enumerate few facts pleaded by both the parties, which are as follows: A) Respondent No.1, plaintiff, has filed Special Civil Suit No.63/1999 before the Civil Judge, Senior Division, Jalgaon against the present appellant and respondents No.2 to 20 for the reliefs that the sale deeds executed by the appellant in favour of respondents No.2 to 20, be declared as illegal and execution of the said sale deeds be set aside, for possession of the properties sold under the said sale deeds, for order of permanent injunction against the appellant not to alienate the properties mentioned in Schedule-A and B of the plaint and to furnish accounts and submit record of the properties in his possession. It appears that the said suit was filed by respondent No.1, plaintiff, purporting to be the director of the said company. Number of properties of the {7} said company are shown in the revenue record in the name of the appellant. As per the memorandum of article of the said company as well as resolution dated 01.01.1996 of the said company the dealing in respect of properties of the said company are to be dealt with by decision of majority of the directors or under the signature of two of the directors of the said company. It is alleged that at the material time the board of directors of the said company was / is of 3 directors. It is alleged that the appellant has sold the properties of the said company to respondents No.2 to 20 in violation of the resolution dated 01.01.1996 and it is also alleged that the appellant has misappropriated the sale proceeds. At the time of institution of the suit, construction of “C” wing of the building “Vrindavan Apartment” was in progress. The properties mentioned at serial No. 5 of Scheduled A bearing plots No.19 and 20 in survey No.255 so also properties mentioned in Schedule-B situated at village Bambori and Khedi Khurd are claimed to be in possession of the said company and it is alleged that the appellant, defendant No.1 is trying to dispose of the same and hence the suit. In the said suit application at Exhibit-5 for temporary injunction restraining the appellant, defendant No.1 from further alienating the remaining properties and to stop the operation of the bank accounts and bank transactions was filed. The said application, Exhibit-5 came to be allowed on 19.12.2003 and the said order is impugned in the present appeal from order. (B) Respondents No.2 to 20 had filed their respective say {8} cum written statements to the injunction application (Exhibit-5) contending that they have purchased the properties, which are in their possession, under registered sale deed, from the said company for valuable consideration. It is further contended by them that the sale deeds are executed in accordance with law and hence they are bona fide purchasers for the value without notice and hence according to them, they are unnecessarily dragged in this litigation for the interse dispute / conflict between the directors of the said company. (C) Present appellant has contested the suit as well as interim injunction application by filing say cum written statement inter alia contending that the property mentioned in Scheduled-B, situated at village Khedi Khurdi, is his individual property. It is further contended that respondent No.1, plaintiff, is retired as a Director of the said company w.e.f. 27.09.1997 and the same has also been recorded with the Registrar of Companies on 25.10.1997. Hence it was prayed that the plaintiff, respondent No.1 has no locus standi to file the special civil suit. It is further contended that the appellant and respondent No.1, plaintiff, were running number of businesses under different name of companies. As dispute arouse in the family business run by group of family companies of appellant, respondent No.1 and their relative, the same was referred to their brother in law, who agreed to act as an arbitrator. Thereafter, an interim Memorandum of Understanding (MOU) was recorded on 29.06.1996 and as the appellant was {9} looking after the management and administration of the said company, the said company was handed over / allotted to the appellant. Later on the entire record of the said company was also handed over to the appellant. Thereafter, change was accordingly effected in the constitution of the Board of Directors of the said Company, which was reported and recorded with the Registrar of Companies. The appellant had contended that the appellant has deposited the sale proceeds of the said properties with the said company and the same is also reflected in the accounts of the said company. The appellant has contended that the accounts of the said company are audited by the auditor of the company and most of the transactions done by the appellant are prior to the resolution dated 01.01.1996, after publishing an advertisement in daily newspaper, It is also contended that all the transactions are entered into books of accounts of the said company and hence the allegations of misappropriation of funds are false. Therefore, it was prayed to reject the injunction application and dismiss the suit. (D) From perusal of the record received from the trial court it is amply clear that voluminous record was produced by the parties before the lower court, which runs into 1300 pages. However, only relevant documents will be referred in the remaining part of the judgment, whenever required. 6. During the course of submissions it is contended on behalf of the appellant that though the impugned order is {10} challenged for the grounds mentioned in para 2 (I) to (XLXII), yet much emphasis is placed on the following grounds i.e. (1) that the respondent No.1, plaintiff, is guilty of suppression of material facts. (2) That the learned lower court has not properly appreciated the documentary evidence and true meaning of the documents produced before it (3) that the first respondent has no locus standi to file the present suit and (4) that whether the circumstances show that there is possibility of passing of the resolution dated 01.01.1994 about the affairs of the company. 7. As stated earlier, though the impugned order is not challenged by original defendants No.2 to 20, who are respondents No.2 to 20, yet they have supported the case of appellant and prayed to allow the appeal. 8. While contesting the present appeal, it is urged on behalf of respondent No.1, original plaintiff, that in the suit filed by him on 07.10.1999, an order was passed “suit to proceed without written statement against the appellant”, however, without setting aside the said order, the written statement filed by the appellant is accepted by the learned lower court and hence it is to be held that the appellant has not filed any pleadings before the lower court and, therefore, cannot make submissions on the facts, as there are no pleadings before the lower court. It is to be made clear, at this stage only, that this issue is already decided by this Court in a common order dated 02.09.2009 passed in Writ Petitions No. {11} 978/2004 and 3725/2004. The said order is not challenged by respondent No.1, original plaintiff, and hence this issue cannot be reopened in this appeal. 8a. Secondly, it is submitted by learned counsel for respondent No.1, plaintiff, that the ad interim order was passed on 02.08.1999 and the impugned order is passed on 19.12.2003 and the Appeal From Order is admitted on 29.04.2994, however, no stay is granted to the impugned order and considering the delay, no interference is required in the impugned order. However, fact remains that if the delay is caused due to prevailing system and not due to the tactics of the appellant, the litigant must not be blamed for the delay. 8b. Lastly, it is urged that the MOU dated 29.06.1996 is an interim arrangement and the same has not attained finality and hence if the same is not referred in the pleadings by the respondent No.1 plaintiff, the same would not amount to suppression of facts. It is further urged that the delayed change report in respect of constitution of board of directors of the company, filed with the office of Registrar of Companies, would indicate mala fides at the hands of the appellant and hence it is urged not to rely on the said MOU, which is made clear in the affidavit in reply filed by respondent No.1 and hence it is prayed to dismiss the appeal from order. {12} 9. In the backdrop of the rival contentions, perused the pleadings of the parties and the documents produced before the lower court. It appears that the family of appellant, respondent No. 1 and other relatives, is doing business through number of companies. The parties are well aware as how to deal with the transactions under the Company Law and matters relating to commercial transactions. The said company is one of the companies run by the family of appellant, respondent No.1 and other relatives. 10. It further appears that even before filing of the special civil suit No.63/1999, there was dispute between the appellant on one hand and respondent No.1 and his son namely Dashrath Patel on the other hand. However, till filing of RCS No.196/2003, no steps appear to be taken by respondent No.1 and his son Dashrath, to establish their rights as directors of the said company before the Company Law Board or any competent court of law dealing with the company law matters. It is apparent from the record received from the lower court that the present appellant has filed Special Civil Suit No.487/1996, in the capacity as a director of the said company, for specific performance of contract against one Vinodchandra Vallabhdas Ved (copies of relevant documents along with list are at Exhibit-192 in the record received from the trial court). In RCS No.487/1996, the respondent No.1, plaintiff, and his son Dashrath had filed application to implead them as party plaintiffs. However, the said application was rejected by Civil {13} Judge, Senior Division, Jalgaon. The said order of rejection was challenged by respondent No.1, plaintiff and his son by preferring Civil Revision Application No.330/2002 before this Court. It appears that the said Civil Revision Application is also rejected by this Court. It further appears that one more Special Civil Suit No. 5/2000, was filed by the present appellant in the capacity as the director of the said company, against one Kantilal for specific performance. In the said suit also son of respondent No.1 tried to intervene, however later on son of respondent No.1 withdrawn himself from the litigation at the appellate stage only. It is also a matter of record that during the pendency of special civil suit No. 63/1999, this record is produced before passing of the impugned order. It also appears that respondent No.1 and his son had filed RCS No.106/2003 challenging the resolution passed by appellant, his wife and other share holders of the said company, before the Civil Judge, Senior Division, Jalgaon (Relevant record is produced along with list Exhibit-191 of the record received from the lower court). All the pending litigations prima facie show that the legal right / claim of respondent No.1, plaintiff, is yet to be established and the title of respondent No.1, plaintiff is not clean and clear. Surprisingly, no reference of these documents is found in the order impugned. So also no reference of Special Civil Suit No.487/1996 finds place in the pleadings of plaintiff. 11. Turning to the aspect of locus standi of respondent No. 1, plaintiff, to file special Civil Suit No.63/1999, purporting to be {14} the director of the said company against the appellant as well as suppression of material facts by plaintiff, and appreciation of documents, as done by the trial court the same requires to be considered in the light of submissions advanced before this Court. 12. Learned counsel for the appellant heavily relied on the MOU dated 29.06.1996, by which the rights in the said company were occupied by the appellant. According to the present appellant, this MOU is acted upon by the appellant as well as by respondent No.1, plaintiff and accordingly changes were effected in the constitution of the company and thereafter the entire management of the said company was taken over by the appellant and hence, respondent No.1 or his son, has no locus or legal right in the said company. According to the appellant, this fact is suppressed by the plaintiff in the pleadings before the trial court and hence prayed to allow the appeal. Learned counsel for the appellant has also placed reliance on the memo of Writ Petition No.5419/2001 filed by respondent No.1. (copy of the said writ petition and its annexures along with list is at Exhibit-211 in the record of the lower court). In the para 6 of said writ petition, it was pleaded in respect of execution of the MOU, while in para 10 about production of form No.32 in respect of change in constitution of the company. These facts, disclosed in the pleadings of respondent No.1 in writ petition No.5419/2001, according to the appellant, indicate execution of MOU, which is suppressed by respondent No.1, plaintiff in the pleadings. Accordingly, it is urged that this goes to show that {15} respondent No.1, plaintiff, has no locus standi to file the present special civil suit and hence respondent No.1, plaintiff, is not entitled for any equitable relief, much less, relief of injunction. 13. While opposing this submissions, learned counsel for respondent No.1, plaintiff, tried to urge that as the MOU was interim / temporary arrangement during the arbitration proceedings and as the said MOU is yet to attain finality, the parties would not get absolute right under this MOU and hence if the said fact in respect of execution of the MOU, is not disclosed in the plaint, it would not amount to suppression of material facts and, therefore, the Appeal From Order may not be allowed on this ground. 14. While granting temporary injunction, it is necessary for the courts below, to consider whether prima facie case is made out by the plaintiff in respect of existence of legal rights in his favour and there is apprehension to the said legal rights at the hands of defendants or not. For this purpose, lower court is supposed to consider the documentary evidence in the light of the facts pleaded by the parties in support of their case. 15. From the documents produced along with list Exhibit-211, i.e. copy of writ petition No.5419/2001 filed by respondent No.1, plaintiff, against the Commissioner of Income Tax, it appears that respondent No.1, plaintiff had relied upon the {16} said MOU dated 29.06.1996 contending that on the basis of said MOU, he is not liable to pay the income tax of the said company which is allotted to the present appellant, who is party respondent No.5 in the said writ petition. It is worthy to note that along with the said writ petition, copy of the said MOU is also annexed at Exhibit-B. As per clause 2 (b) of Exhibit-B, respondent No.5 in writ petition No.5419/2001, i.e. said company, and two other companies are allotted to the present appellant. As per clause (4) of the said MOU, legal and financial liabilities of respondent No.5 company in the said writ petition, i.e. said company (Kalpita Builders Pvt.Ltd.,), and two other companies i.e. Vikram Laminators Pvt. Ltd., (VLPL) and APJ Corporation are allotted to the appellant. A stand was taken by respondent No.1, in the said writ petition No.5419/2001 that as the said companies are not allotted to him, he is not liable to pay the tax in respect of the said companies. 16. When the respondent No.1, plaintiff, has refused to pay the tax liability and had challenged the same in respect of the companies allotted to the appellant on the basis of said MOU, how he can claim profits from the said companies. The original plaintiff, present respondent No.1 is not allowed to claim profits from the said companies in view of law of estoppel. 17. It is surprising to note that though these facts are recorded by way of documentary evidence before the lower court, the lower court has not touched, considered or discussed the same {17} in the order impugned while allowing the temporary injunction application. The lower court only relying on the grounds that change in the constitution of the company was reported late with the Registrar of Companies, by furnishing Form No.32, has drawn a conclusion that the appellant has fabricated the said documents and arrived at otherwise conclusion, which is not proper appreciation of the documentary evidence on record and the trial court has wrongly allowed the temporary injunction application. 18. The Apex Court in the judgment, in the matter of “S.P.Chengalvarya Naidu V/s Jagannath” reported in AIR 1994 SC 853, has observed that - “the Court of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. It can be said without hesitation that a person whose case is based on falsehood has no right to approach the Court. He can be summarily thrown out at any stage of the litigation. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party.” (emphasis supplied). In the case in hand, respondent No.1, plaintiff, has challenged the income tax liability of the companies allotted to the appellant under the MOU, however, now claiming profit of those companies, without pleading these facts in the plaint, which amounts to suppression of material facts. {18} 19. The Apex Court, in the Judgment, in the matter of “Seema Arshad Zaheer V/s Municipal Corporation of Grater Mumbai” reported in (2006) 5 SCC 282, has observed that “Where lower court acts arbitrarily, capriciously or perversely in the exercise of its discretion, the appellate court will interfere-Granting temporary injunction on the basis of “no material” or refusal to grant temporary injunction are instances of such exercise of discretion- The expression “no material” for the said purpose, held, includes cases where there is no relevant material or where the material, taken as a whole is not reasonably capable of supporting the exercise of discretion.” (emphasis supplied). From the facts of the Appeal From Order and the record received from the lower court, it is apparent that the respondent No.1, plaintiff has lost his right due to execution of the MOU, which is not considered by the lower court and though respondent No.1, plaintiff, has no legal right to claim equitable relief yet granted interim injunction in his favour. 20. The Apex Court, in the ruling reported in (1998) 3 SCC 573 in the matter of “K.K.Modi V/s K.N.Modi” has observed that “Memorandum of Understanding arrived at between two groups, belonging to the same family regarding division of assets, the court should not lightly interfere with it especially when it has been substantially acted upon by the parties”. In the case in hand, the documents produced before the lower court, particularly, along with list Exhibit-211, copy of writ petition No.5419/2001 and {19} annexure-B, it it clear that the Memorandum of Understanding executed between the parties on 29.06.1996, was acted upon, which reflects from the acts of filing of writ petition No.5419/2001 by respondent No.1, plaintiff, and challenging the liability of payment of income tax