IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :07.04.2011 CORAM : THE HONOURABLE Mrs.JUSTICE R.BANUMATHI and THE HONOURABLE Mr.JUSTICE V.PERIYA KARUPPIAH O.S.A.Nos.167 & 168 of 2010 1.K.Balasubramanian 2.M.Rathinakumar 3.S.Chandrasekar ... Appellants in both the appeals. Vs. 1.M/s.Citrex Products Limited rep. by its Director, V.Rajendran. 2.R.Padma 3.R.Ganesh Raj rep. by Power of Attorney Holder, V.Rajendran. 4.Rajeswari Satish 5.R.Sathish Raj 6.V.Rajendran 7.Usha Selvarathinam 8.P.Selvarathinam 9.M.Jaya 10.K.Mahalingaswamy 11.N.Ayyamperumal ... Respondents in both the appeals. Prayer: Original Side Appeal No.167 of 2010 is filed against the Order dated 29.03.2010 made in A.No.5472 of 2005 in C.S.No.51 of 2005 on the file of this Court. Original Side Appeal No.168 of 2010 is filed against the Order dated 29.03.2010 made in O.A.No.1106 of 2005 in C.S.No.51 of 2005 on the file of this Court. For Appellants : Mr.T.R.Mani, Senior Counsel for Mr.Praksh Goklaney https://hcservices.ecourts.gov.in/hcservices/ For Respondents: Mr.M.S.Krishnan, Senior Counsel for M/s.Sarvabhauman Associates for R1, R3 to R6 No Appearance for R2, R7 to R11 COMMON JUDGMENT R.BANUMATHI,J Dispute over the control and management of the 1st Respondent/Plaintiff Company – M/s.Citrex Products Limited is the subject matter in these appeals. These appeals arise out of the common order passed dismissing A.No.5472 of 2005 declining to strike out the name of 1st Respondent/Plaintiff Company and dismissing O.A.No.1106 of 2005 declining the relief of temporary injunction against Plaintiffs 2 to 6 from interfering with the affairs of the 1st Plaintiff Company. Defendants 6, 8 and 9 are the Appellants herein. 2. Case of Plaintiffs is that 1st Plaintiff Company borrowed a loan of Rs.1,18,17,677.15 from the Defendants Group of Companies for the purpose of discharging the mortgage loan due to the consortium of the Banks consisting of Indian Overseas Bank, Canara Bank and TIIC and to redeem the suit schedule property. 1st Defendant Company viz., Vishwapriya Group has number of Companies in its Group and Annexure-I to the plaint contains the entire list of Group of Companies. 1st Defendant Company agreed to give short term loan of Rs.1,18,17,677.15 to enable the 1st Plaintiff Company to discharge the loan to Indian Overseas Bank, Canara Bank and TIIC. Case of Plaintiffs is that as security for the said loan, 1st Plaintiff Company executed various documents and several blank papers and also made to open the accounts with the Times Bank with whom the Defendants Group of Companies had a tie-up. Plaintiffs are said to have executed the documents as security viz., (i) Agreement of sale dated 02.06.1997; (ii) Mortgage deed dated 02.06.1997 for Rs.2,56,000/-; and (iii) Pledge of the shares by some of the plaintiffs. 3. Further case of Plaintiffs is that out of Rs.1,18,17,677.15 extended by way of a loan, Rs.1,30,55,995.40 was paid by the Plaintiffs within the period of 22 months. While that being so, in the month of June 2004 the Plaintiffs came to know that returns of the 1st Plaintiff Company had been filed from 29.07.2003 by some of the Defendants. In or about some time, Appellants have also filed two suits viz., O.S.Nos.57 of 2004 and 64 of 2004 on the file of Sub-Court, Ponneri. After enquiry, Plaintiffs realised that some https://hcservices.ecourts.gov.in/hcservices/ of the documents taken as security from them have been misused by the Appellants to create the instruments as though they have taken over the Company as well as the property. C.S.No.51 of 2005 has been filed by the Plaintiffs for the reliefs:- (i)to declare that the pledge of the 900 shares belonging to Plaintiffs 2, 3, 5 to 11 infavour of the 2nd Defendant stands discharged and consequently direct the 2nd Defendant to return the 900 shares pledged by Plaintiffs 2, 3, 5 to 11; (ii)in the alternative to declare that the transfer of the 900 shares belonging to Plaintiffs 2, 3, 5 to 11 by the 2nd Defendant is null and void and not binding upon the Plaintiffs; (iii)to declare that Plaintiffs 2 to 6 continue to be the Directors of the 1st Plaintiff company and Plaintiffs 2, 3, 5 to 11 continue to be the shareholders of the 1st Plaintiff company and consequently restrain the Defendants by means of a permanent injunction from in any manner interfering with the management of the 1st Plaintiff company; and (iv)for a declaration that the agreement of sale dated 02.06.1997 and 25.08.1995 is null and void and not binding upon the 1st Plaintiff company. 4. Alleging that Plaintiffs are attempting to encroach into the property and that the Power of Attorney executed infavour of Defendants dated 7.4.1999 is irrevocable, Appellants as Plaintiffs have filed O.S.No.57 of 2004 seeking for the following reliefs:- (i)declaration that the sale deed dated 13.07.1998 registered as Document No.1761 of 1998 on the file of Sub Registrar, Ponneri in respect of Schedule 'B' property is void abinitio. (ii)declaration that the sale deed dated 13.07.1998 registered as Document No.1765 of 1998 on the file of Sub Registrar, Ponneri in respect of the Schedule 'C' property is void abinitio. (iii)declaration that a power of attorney dated 07.4.1999 and registered as Document No.362 of 1999 on the file of Sub Registrar, Adyar infavour of Plaintiffs 2 to 4 is irrevocable. (iv)Direct the 5th Defendant to hand over to the Plaintiffs [Appellants] vacant possession of the property described in Schedule 'D'. (v)for permanent injunction restraining the Defendants [Respondents] from disturbing the Plaintiffs [Appellants] peaceful possession of the schedule mentioned property comprised in Survey Nos.157/1, 124/12, 124/48 and 124/11 in Thatchur village, Ponneri https://hcservices.ecourts.gov.in/hcservices/ Taluk, Chingleput District. (vi)for permanent injunction restraining the Defendants [Respondents] from dealing with the schedule mentioned property comprised in Survey Nos.157/1, 124/12, 124/48 and 124/11 in Thatchur village, Ponneri Taluk, Chingleput District. 5. Along with C.S.No.51 of 2005, Plaintiffs have filed O.A.No.58 of 2005 for grant of interim injunction restraining the Defendants from in any manner interfering with the control and management of the 1st Plaintiff Company. By an order dated 30.08.2005, Justice D.Murugesan dismissed O.A.No.58 of 2005 and vacated the interim injunction holding that the " ..... administration of the company shall always vest with the Directors, whose names are entered with the Registrar of Companies and so long as the Directors, who are on roll, are not removed in the manner known to law ...... and the change is effected in the records maintained by the Registrar of Companies, the Directors are entitled to administer the company". 6. Being aggrieved by the said order dated 30.08.2005, an appeal in O.S.A.No.202 of 2005 was preferred. By the Judgment dated 05.09.2005, the Division Bench of this Court found that they did not find any reason to differ the prima facie conclusion of the learned single Judge however, to protect the interest of the Company, the Division Bench modified the order of the learned single Judge as under:- "(1) Neither the appellants nor the respondents shall alienate any of the immovable assets or movable assets belonging to the company without the permission of the court. (2) The appellant No.5 viz., Mr.R.Sathish Raj shall function as Receiver of the Company for the purpose of collecting rent from the various lessees in respect of the properties already leased out. After collecting such amount, the amounts shall be deposited in the name of the company. No amount shall be withdrawn from the account without the specific permission of the learned Single Judge. (3) For the purpose of meeting out any expenses towards upkeep and maintenance of the properties in question, if it is agreed between the appellants and the respondents to incur such expenditure, such amount can be withdrawn on the basis of the joint signature of appellant No.5 viz., Mr.R.Sathish Raj and the 8th respondent viz., Mr.M.Rathinakumar. (4) it is open to the 5th appellant – R.Sathish Raj in his capacity as Receiver, to approach the learned Single https://hcservices.ecourts.gov.in/hcservices/ Judge to withdraw any amount for any other purposes and in such event, we expect the learned Judge to consider the question of granting permission for such withdrawal after hearing the respective parties concerned. (5) The appellant No.5 viz., Mr.R.Sathish Raj shall also file accounts before the learned Single Judge once in three months with copies of the other side." The said Judgment of the Division Bench came to be modified/clarified by the Supreme Court in Civil Appeal No.1009 of 2006 as under:- "So far as direction No.3 given by the Division Bench is concerned, in case there is any dispute regarding the expenditure claimed to have been made and there is no concurrence between present appellant No.4 viz. Mr.R.Satish Raj and present respondent No.8 viz. Mr.M.Rathinakumar it shall be open to the concerned parties to move learned Single Judge for such directions as may be necessary." 7. O.A.No.1106 of 2005 - Appellants have filed this application seeking for an interim injunction restraining the Plaintiffs from taking any decisions in connection with the affairs of the 1st Plaintiff Company or implementing the same. A.No.5273 of 2005 – Appellants have filed this application to strike out the name of 1st Plaintiff Company. Appellants alleged that Plaintiffs claiming to be the Directors of the Company have fraudulently without the knowledge of the Board and without any valid authorisation of the Board opened Bank accounts in the name of the Company to siphon off the company's monies. Referring to the sale deed dated 13.07.1998 registered as Document Nos.1761/1998 and 1765/1998, Appellants averred that several such transactions have taken place wherein monies have been siphoned off and in view of the past conduct of the Plaintiffs, it became necessary to restrain the Plaintiffs from taking any decision or implementing the same in any aspect or affairs of 1st Plaintiff Company-M/s.Citrex Products Limited. 8. Plaintiffs have resisted both the applications contending that the Judgment of the Division Bench as modified by the Supreme Court held that 5th Plaintiff is the Receiver of the 1st Plaintiff Company and 5th Plaintiff has been entrusted with the task of collecting the rents from the tenant of the 1st Plaintiff Company. Plaintiffs further averred that the only condition imposed by the Division Bench and not disturbed by the order of the Supreme Court is that the 5th Plaintiff should take the permission of this Court before withdrawing any amounts. Division Bench has also given a direction that neither party should make any alienations. It was further averred that 1st Plaintiff Company does not have any https://hcservices.ecourts.gov.in/hcservices/ business and the only income is from its tenant in respect of 14 acres that belong to the 1st Plaintiff Company. 9. Upon consideration of rival contentions of both parties, learned single Judge held that as per the Judgment of the Division Bench in O.S.A.No.202 of 2005, 5th Plaintiff – R.Sathish Raj was appointed as Receiver and the same was not disturbed by the Supreme Court. Learned single Judge further held that Plaintiffs have averred fraud and forgery and Defendants have made counter allegations and in the light of the stand taken by both Plaintiffs and Appellants, the contentious issues raised in the applications could be decided only after the trial after the parties adduced oral and documentary evidence and on those findings, dismissed both the applications which are subject matter of challenge in these Appeals. 10. Along with those two applications [A.No.5472 of 2005 and O.A.No.1106 of 2005], Defendants have also filed A.No.5282 of 2005 to disclose the name and particulars of the occupants who are in occupation of the premises and A.No.5283 of 2005 to issue a direction to the Plaintiffs to render the accounts. By common order dated 29.03.2010, those two applications also came to be dismissed against which no appeals are preferred. 11. Heard Mr.T.R.Mani, learned Senior Counsel appearing for the Appellants and Mr.M.S.Krishnan, learned Senior Counsel appearing for Respondents 1, 3 to 6. 12. Learned Senior Counsel appearing for Appellants Mr.T.R.Mani has submitted that in view of the concurrent finding in O.A.No.58 of 2005 and O.S.A.No.202 of 2005 where it was held that Appellants constituted the majority of the 1st Plaintiff and while so, the suit filed in the name of the Company as the 1st Plaintiff by the other Plaintiffs is not maintainable. Case of Appellants is that in view of the uncontroverted finding, 1st Plaintiff Company is controlled by the Appellants who constitute majority and while so, Plaintiffs cannot claim to represent the Company. In this regard, learned Senior Counsel would submit that: (i) the uncontroverted finding in O.A.No.58 of 2005 and in O.S.A.No.202 of 2005 that Appellants are majority Directors in control which has not been modified up to the Supreme Court; and (ii) no suit can be filed by a Company without consent of its Board. Learned Senior Counsel mainly contended that the management of the 1st Plaintiff Company is in the hands of the Appellants who are in majority and continued to be so. Learned Senior Counsel would further contend that when Plaintiffs are not at all Directors and are at best can be part of the Board constituting the minority thereof cannot be allowed to take decisions and implementing the same on behalf of the Company. https://hcservices.ecourts.gov.in/hcservices/ 13. Learned Senior Counsel for Appellants has drawn our attention to the short and long cause title of the plaint. In the short cause title, 1st Plaintiff Company is said to be represented by V.Rajendran - 6th Plaintiff whereas in the statutory declaration under Order VI, Rule 14(A) C.P.C., 1st Plaintiff Company is stated to be represented by the Director R.Padma, the 2nd Plaintiff. According to Appellants, such inconsistency is fatal to the suit and 1st Plaintiff Company cannot be arrayed as Plaintiff unilaterally by the other Plaintiffs. 14. Learned Senior Counsel for Appellants further submitted that the dispute raised by the individual Plaintiffs with regard to their shareholding and directorship would fall within the purview and domain of the Company Law Board. Appellants claim to have filed Form-32 before the Registrar of Companies. Main contention of the Appellants is that the Company controlled by them cannot be made a plaintiff in a suit filed against them and no consent has been obtained from the Board of Directors for initiating any legal action. 15. Claiming that they constituted majority of the Board and that they are in control and management, learned Senior Counsel for Appellants mainly submitted: (i) Plaintiffs had five Directors on the Board of the Citrex Products Limited having acquired control of the same in 1995; (ii) Seven of the Defendants had been inducted as Directors of the said Company in June 1997 and have continued to be Directors since then; (iii) Defendants constituted 7 of the 12 Directors and they had constituted majority; (iv) appointment of Directors and their continuation on the Board has been recorded in various documents at the Registrar of Companies even in 1997 and that the Defendants are in majority control of the Companies Board since April, 2000. 16. Per contra, Mr.M.S.Krishnan, learned Senior Counsel for Respondents submitted that it was only a loan transaction and at no point of time Defendants had taken over 1st Plaintiff/borrower Company as well as the property belonging to the borrower Company. According to Plaintiffs, Appellants appear to have filed Form-32 before the Registrar of Companies only in 2003. Section 303(2) of Companies Act requires filing of Form-32 by a Company regarding particulars of appointment of Directors and Managers and charges amongst them. Learned Senior Counsel for Respondents submitted that the Registrar of Companies is merely an Office of Record and no right would flow to a party merely by entering his name in Form- 32 and it is for him to independently prove that he is the Director. Learned Senior Counsel would further contend that mere filing of Form-32 there is no statutory presumption infavour of the https://hcservices.ecourts.gov.in/hcservices/ persons who are described as Directors in such Forms unlike Sections 193 and 195 of the Companies Act which give a rebuttable presumption for the contents of a Minutes Book. According to Plaintiffs, they are in effective control of the 1st Plaintiff Company and that they are the shareholders and they continued to be the shareholders of the 1st Plaintiff Company. 17. At this juncture, it is pertinent to note that Defendants themselves have filed O.S.No.64 of 2004 before Sub-Court, Ponneri wherein 1st Plaintiff – M/s.Citrex Products Limited has been stated as 1st Plaintiff represented by its Director M.Rathnakumar who is the 6th Defendant/2nd Appellant herein. In the said suit, Appellants sought for the reliefs – (i) declaring that Plaintiffs 2 to 4 [Appellants herein] are the only Directors of the 1st Plaintiff Company; (ii) for a declaration that the sale deed dated 01.09.2004 registered as Document No.3545 of 2004 on the file of Sub Registrar, Ponneri is void abinitio; (iii) directing Defendants 1 to 6 [Respondents herein] to render accounts of monies received and expended in respect of all transactions relating to the period 02.06.1997 till the date of decree; (iv) for a permanent injunction restraining the Defendants [Respondents herein] from in any manner dealing or interfering with the affairs of the 1st Plaintiff company or in any manner claiming to represent the 1st Plaintiff company. 18. By a perusal of the averments in the said suit O.S.No.64 of 2004, it is clear that Appellants themselves seek for declaration that they are the only Directors of 1st Plaintiff – M/s.Citrex Products Limited and the claim of Appellants itself is the subject matter of dispute in the suit O.S.No.64 of 2004. When both parties claimed to be in control and management of the 1st Plaintiff Company, having regard to the nature of controversy, the issue as to who is in actual control could be gone into only at the time of trial when the parties adduce oral and documentary evidence. In this regard, it is pertinent to note that Plaintiffs have produced number of documents before us stating that those documents are to be produced as evidence at the time of trial. Having regard to the nature of the dispute, we are of the view that the learned single Judge has rightly held that the contentious issues raised by the Appellants in the Interlocutory Application could be decided only after conducting an elaborate enquiry. 19. Holding that Court will abstain from passing an interlocutory order which has the effect, or tends to be susceptible of an inference of pre-judging some of the important issues that require to be decided in the main matter, in AIR 1992 SC 63 [Sub-Committee of judicial Accountability v. Union of India and others], the Supreme Court held as under:- https://hcservices.ecourts.gov.in/hcservices/ "3. ... We are afraid,having regard to the nature of the controversy and the nature of the issues arising in the main matter it appears to us, in the particular circumstances of this case, to abstain from making an interlocutory order which has the effect, or tends to be susceptible, of an inference of pre-judging some of the important and delicate issues that require to be decided in the main matter. We, therefore, think we should abstain at this stage from considering the prayer on the strength of the case sought to be made out in the main writ petition." The ratio of the above decision is squarely applicable to the case on hand. In our considered view, having regard to the controversy that the issues raised in the interlocutory applications are in the nature which are required to be determined in the main suit after the parties adduced oral and documentary evidence. Lest, it would amount to pre-judging the important issues arising between the parties. 20. In O.A.No.1106 of 2005, Appellants sought for interim injunction restraining the Plaintiffs from taking any decisions in connection with the affairs of the 1st Plaintiff Company or implementing the same. In so far as the prayer in O.A.No.1106 of 2005, Mr.T.R.Mani, learned Senior Counsel for Appellants submitted that Plaintiffs' prayer for interim injunction [O.A.No.58 of 2005] was dismissed mainly on the ground that Appellants constituted a majority and while so, Plaintiffs cannot reopen the issue contending that they are in control of the 1st Plaintiff Company. The prayer in this application mainly on the premise of Appellants' claim that they are the majority on the Board of Directors. Learned Senior Counsel has submitted that Plaintiffs are not the Directors and at best they could be a part of the Board constituting a minority thereof cannot be allowed to take a decision and implementing the same on behalf of the 1st Plaintiff Company in exercise of any power. According to Appellants, O.A.No.1106 of 2005 is purely an application arising to implement the orders passed in O.A.No.58 of 2005. According to Appellants, the conduct of Plaintiffs in leasing out the premises without consent of the Appellants and several other acts committed by the Plaintiffs constituting a cause for passing protective orders restraining the Plaintiffs from taking any decision or implementing any of them in respect of the 1st Plaintiff Company. As pointed out earlier, as per the judgment in O.S.A.No.202 of 2005, 5th Plaintiff was appointed as Receiver of the 1st Plaintiff Company and that he has been entrusted with the task of collecting rents from the tenant of the 1st Plaintiff Company. 21. During the course of arguments, it was submitted that as on date 1st Plaintiff Company does not have any business and only https://hcservices.ecourts.gov.in/hcservices/ income was from its tenant [Larsen & Tubro] in respect of 14 acres that belong to the Company. According to Plaintiffs, even Larsen & Tubro vacated the premises. 5th Plaintiff has been appointed as Receiver only for the purpose of collecting rents. When both the parties have taken diametrically opposite stand and earlier in the interlocutory application when the parties have fought out the litigation up to the Supreme Court, it would not appropriate to pass any interim injunction restraining the Plaintiffs from taking any decisions or implementing any of them in respect of the 1st Plaintiff Company. Any such interim injunction would amount to pre-judging some of the important issues that are required to be decided in the main matter. Extensively referring to the stand taken by both the Plaintiffs and Defendants, the learned single Judge rightly held that having regard to the nature of controversy and issues involved between the parties, it would not appropriate to pass any interim injunction. As such the learned single Judge rightly dismissed the application and we do not find any reason warranting interference with the order of learned single Judge. 22. For the foregoing reasons, both the appeals are dismissed. Consequently, connected M.Ps. are closed. No costs. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar. bbr Copy to: The Sub-Asst. Registrar Original Side, High Court. 2 ccs to Mr.Prakash Goklaney, Advocate, Sr. 25224 1 cc to M/s. Sarvabhuman Associates, Sr. 25667 O.S.A.Nos.167 & 168/2010 JRG (CO) kk 3/5 https://hcservices.ecourts.gov.in/hcservices/