IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD MONDAY, THE SIXTEENTH DAY OF NOVEMBER TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE B.PRAKASH RAO and THE HON'BLE MR JUSTICE G.BHAVANI PRASAD C.M.A.NOs : 910 & 999 of 2008 Between: Chetan Plast (P) Ltd., Feelkhana, Hyderabad and another. ..... APPELLANT(S) AND Sri Satyanarayana Sirigiri THE HON'BLE MR JUSTICE B.PRAKASH RAO and THE HON'BLE MR JUSTICE G.BHAVANI PRASAD C.M.A.NOs : 910 & 999 of 2008 COMMON JUDGMENT (Per GBP,J): The unsuccessful plaintiffs in O.S.No.95 of 2008 on the file of the III Additional Chief Judge, City Civil Court, Hyderabad, filed these two Civil Miscellaneous Appeals against the dismissal of I.A.No.860 of 2008 and I.A.No.1274 of 2008 in O.S.No.95 of 2008, filed by them, respectively, for an interim injunction and for the appointment of a receiver, by separate orders dated 07-07-2008. 2. The plaintiffs approached the trial Court with the suit and the interlocutory applications contending that the 2nd plaintiff is the Managing Director of the 1st plaintiff company incorporated under the provisions of the Companies Act and dealing with manufacturing, processing, buying, selling and importing all types of containers, bottles and plastic ware etc. The plaintiffs complain that disputes arose between them and the respondent and other partners. In pursuance of which, an arbitrator was appointed. But still the respondent was alleged to have indulged in sale of scrap and other finished goods worth Rs.5,00,000/- without accounting for the same, due to which, they sought for an interim injunction against the respondent pending the suit from interfering with the day to day business of the company and also for appointment of a receiver for supervising the smooth conduct of business of the company pending the suit for a permanent injunction of similar nature. 3. The respondent contested the reliefs claimed contending that he along with 2nd plaintiff and others has a share in the 1st plaintiff company and he never resorted to any illegal activities concerning the business or stocks of the company. He stated that being a 50% share holder in the company and a director, he can neither be restrained by means of a temporary injunction nor can be excluded from the company by the appointment of a receiver. 4. In I.A.No.860 of 2008, Exs.A-1 to A-3 and Ex.sB-1 to B-3 were marked during enquiry while there was no oral or documentary evidence for the parties in I.A.No.1274 of 2008. 5. The trial Court in the impugned order referred to the contentions and documents of both the parties and further observed that admittedly the 1st plaintiff company is a registered company in which the 2nd plaintiff and the respondent are the share holders. It is also noted from the documents of both the parties that the allegations regarding the illegal activities of the respondent including his selling any goods and not accounting for the same have to be adjudicated after appropriate consideration during the trial, but not at the interlocutory stage, as there is no prima facie material probablising any such illegal activities. The trial Court also observed that the respondent being a 50% share holder of the company cannot be injuncted from exercising his rights with reference to the company and the trial Court also noted that in I.A.No.1623 of 2005 in O.S.No.924 of 2005/Ex.B-1 order, the request of the 2nd plaintiff herein for a similar relief was rejected on merits and the same had become final. The trial Court, therefore, noted that there was no balance of convenience in favour of the plaintiffs for the grant of injunction nor is it just and convenient to appoint a receiver to run the business of the company. After coming to such a conclusion, the trial Court relied on binding precedents cited by the learned counsel for the respondent reported in Firm Ashok Traders and another Vs. Gurumukh Das Saluja and others and Anupama Homes India Pvt. Ltd. Vs. P.Shouri Raja and others. The trial Court observing that it is a serious matter to appoint a receiver in respect of such business, found that it is not just and reasonable either to injunct the respondent or to appoint a receiver and consequently dismissed both the applications. 6. The plaintiffs contended herein again that the trial Court failed to take into consideration the reports filed by the advocate-commissioner in I.A.No.861 of 2008 in I.A.No.1273 of 2008 in O.S.No.924 of 2005, whereunder, the inventory of the stock in trade and other articles was recorded and the plaintiffs also complained that the trial Court has not taken into account the letter of the respondent himself addressed to Karnataka Bank to freeze the bank account of the company in question. The plaintiffs, therefore, contended that the action of the respondent in selling the stocks even when the status quo as on that day was subsisting, showed that the respondent did not comply with the orders of the trial Court and the electricity bills from March 2008 to July 2008 showed that the machinery was being used in the factory notwithstanding status quo order. The plaintiffs further contended that the 2nd plaintiff was not misappropriating the funds as alleged by the respondent and also argued that the earlier orders in O.S.No.924 of 2005 in respect of some other matter, were not the subject matter of present litigation. The plaintiffs, therefore, desire that their applications should succeed reversing the impugned orders in both the appeals. 7. The learned counsel for both the parties are heard at length. 8. It is seen from the pleadings and documentary evidence placed by both the parties before the trial Court that the fact of the company being a company incorporated under the Companies Act, and the 2nd plaintiff and the respondent being the share holders is not in dispute and the claim of the respondent that he is a 50% share holder is not factually in question. Such a share holder, who is also directing the company, is sought to be prevented from playing his role in respect of running the business of the company on the ground of vague allegations of misappropriation, in proof of which no positive material has been produced before the Court by the plaintiffs. What the plaintiffs seek to rely on is the report of the advocate commissioner in the suit while conducting an inventory. Since the collection of evidence through the report of an advocate commissioner is impermissible in law, the same cannot be relied upon. If really, there is ultimately oppression or mis-management in running the business of the company, Chapter-6 of the Companies Act provides for appropriate proceedings to be taken in such cases and the right to invoke Sections 397 and 398 of the Companies Act could have been availed by the 2nd plaintiff, if the allegations in any manner do bring the dispute within the scope of the said provisions. 9. It is also to be noted that the Specific Relief Act, 1963 specifically enumerates the cases where injunction has to be refused like under Section 41 (h) of the said Act where an equally efficacious relief can be obtained by any other usual mode of proceedings and an injunction is not granted where running business is involved. The specific mandatory provision under the Specific Relief Act, 1963, against grant of injunction in such cases, could not have been contravened by the trial Court. The findings of the trial Court that there was total absence of any material to prima facie show any illegal activities on the part of the respondent are not demonstrated as incorrect or contrary to the evidence on record. Hence, its conclusion that the respondent being a 50% shareholder of the company and a director could not be prevented by an injunction is not open to interference. Similar is the finding of the trial Court that the appointment of a receiver is a serious matter, more so, in respect of running business. It is obvious that when even prima facie considerations that should be established for granting an interim injunction could not be established by the plaintiffs, the same material could not have been in any manner sufficient to conclude any justification for the appointment of a receiver. 10. A copy of the order of I.A.No.1623 of 2005 in O.S.No.924 of 2005, dated 23-12-2005 on the file of the I Additional Senior Civil Judge, Ranga Reddy District at L.B.Nagar, Hyderabad, provided by the learned counsel for the respondent, clearly shows that the parties herein were also parties there under in dispute about their claims concerning business activities of the same company and also some partnership businesses and the conclusions of that trial Court were also against the grant of an injunction, which conclusions had become final. It is thus clear that the 2nd plaintiff was making efforts to exclude the respondent from the business of the company and the partnerships by some means or the other without having any substantial basis for making such allegations. He is resorting to multifarious litigation and hence, there is no equity in his favour. Therefore, in any view of the matter, the plaintiffs’ appeals have to fail. 11. Accordingly, both the Civil Miscellaneous Appeals are dismissed without costs. _______________________ JUSTICE B.PRAKASH RAO Date: 16th November 2009 _____________________________ JUSTICE G.BHAVANI PRASAD KVR