IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No 381 of 1994 For Approval and Signature: Hon'ble MR.JUSTICE H.H.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- ASHOKKUMAR J PANDYA Versus SUYOG CO OP HOUSING SOC LTD & 2 -------------------------------------------------------------- Appearance: MR SM SHAH FOR MR KV SHELAT for Appellant MR SB VAKIL FOR MR BG JANI for Respondents No. 1 MR HASMUKH PATEL AGP for Respondent Nos.2-3 -------------------------------------------------------------- CORAM : MR.JUSTICE H.H.MEHTA Date of decision: 21/03/2002 C.A.V. JUDGEMENT 1. This is an appeal under Section 104 of the Civil Procedure Code read with Order 43, Rule 1(r) of the Civil Procedure Code filed by the original defendant No.1 in Special Civil Suit No.236 of 1993, which is still pending on the file of learned Civil Judge (S.D.), Ahmedabad (Rural), Mirjapur, at Ahmedabad challenging an order dated 24/2/1994 passed below application Ex.5 in the aforesaid suit. 2. The original defendant No.1 is the appellant, while plaintiff and defendant Nos.2 and 3 are the respondent Nos. 2 and 3 respectively (For the sake of convenience parties will be referred to hereinafter as the plaintiff and respective defendants. 3. The facts leading to this Appeal from Order in a nutshell are as follows :- 3.1 On or about 29/7/1993, original plaintiff filed aforesaid Special Civil Suit No.236 of 1993 against the defendant Nos.1 to 3 mainly for following reliefs; [a] A decree of mandatory injunction directing defendant No.2 to grant a necessary permission under Section 20(1)(a) of the Urban Land (Ceiling and Regulation) Act, 1976 (For short the "ULC Act") giving exemption to the suit land described in para-2 of the plaint from operation of Chapter-III of the said Act and also grant a permission to sell the suit land by defendant No.1 to the plaintiff. [b] As an alternative prayer, plaintiff has prayed for a decree of mandatory injunction directing defendant No.2 to take appropriate decision after giving an opportunity to the parties and the Commissioner, who may be appointed by the trial Court in the suit for the application under Section 20 of the Act, which is pending before the defendant No.2 as admitted by defendant No.2 in his letter No.UK/2080-700/15-V.1 dated 20/4/1987. [c] For a decree for specific performance for the suit agreement dated 31/1/1978 executed by the defendant No.1 in favour of the plaintiff with a further direction to defendant No.1 to execute a final sale deed of the suit land in favour of the plaintiff by receiving a consideration of Rs.3,15,650/-- from the plaintiff and in case, if defendant No.1 fails to execute a final sale deed, for appointment of Court Commissioner to execute the sale deed and get the sale registered for and on behalf of the trial Court. [d] In case, if the Court refuses to grant a decree for specific performance, then a money decree to recover Rs.1,32,41,000/-- with interest at the rate of 18% P.A. in favour of the plaintiff executable against the defendant No.1. [e] For a perpetual prohibitory injunction restraining defendant No.1 from transferring, selling or assigning the suit land by way of sale, mortgage, gift etc. to any third party and also from transferring the actual physical possession of the suit land to any third party. [f] For perpetual prohibitory injunction restraining defendant No.1 from acting against the terms and conditions of agreement for sale dated 31/1/1978. [g] For perpetual prohibitory injunction restraining defendant No.2 disposing the ULC application dated 30/4/1980 with a negative decision. 3.2 On the day on which the plaintiff filed the aforesaid suit, plaintiff also submitted an application Ex.5 for an interim injunction, pending the suit restraining defendant No.1 from transferring, selling or assigning the suit land, which is described in para-2 of the application by way of sale, mortgage, gift etc. to any third party and also from transferring the physical possession of the suit land to any third party and also from acting against the terms and conditions of an agreement of sale-deed dated 31/7/1978. The plaintiff also prayed for an interim injunction restraining defendant No.2, pending the suit from disposing the ULC application dated 30/4/1980 with a negative decision. By aforesaid application below Ex.5, the plaintiff also prayed for an interim mandatory injunction directing the defendant No.1 to initiate the proceedings before the defendant No.2 for the provisions under the Act and also to furnish all necessary information and produce all the documents and make a representation before defendant No.2 for disposal of the application under Section 20 of the Act made by defendant No.1 and the plaintiff on 30/4/1980. 3.3 On that very day i.e. 29/7/1993, the learned Judge of the trial Court was pleased to grant an ad-interim injunction restraining defendant No.1 and/or his Power of Attorney holder Shri Dinesh Jayantkumar Thakkar from transferring or alienating the suit land bearing Survey No.428/1, situated on the outskirts of village Vejalpur by way of sale and also from selling or transferring the physical possession of the suit land to any third party. The learned Judge of the trial Court also directed the defendant No.1 and his Power of Attorney holder to maintain a status-quo with regard to suit land as prevailing on the date of the suit. On that day, the learned Judge of the trial Court also granted an ad-interim injunction restraining defendant No.2 from exparte disposing of application dated 30/4/1980 jointly made by plaintiff and defendant No.1 and further directed to maintain a status-quo with regard to the said land till the final decision on application Ex.5 The learned Judge of the trial Court was also pleased to issue urgent show cause notice against the defendants. 3.4 Both the parties submitted respective affidavits and relevant documents in support of their respective cases. Thereafter, after hearing arguments of learned advocates for both the parties, the learned Judge of the trial Court has been pleased to come to conclusions that plaintiff has got a prima facie case and balance of convenience would be in favour of the plaintiff, if injunction is granted and plaintiff will sustain an irreparable injury, if injunction is refused. On the basis of such conclusions, the learned Judge of the trial Court, by passing an impugned order dated 24/2/1994 granted an interim injunction restraining defendant No.1, his agent, servant from transferring the suit land to any party by way of sale. The learned Judge of the trial Court also granted an interim injunction in favour of the plaintiff restraining defendant Nos.2 and 3 from taking exparte decision or any action on an application dated 30/4/1980 submitted under the provisions of the said Act, without making due inquiry and investigation. The learned Judge of the trial Court also granted an interim mandatory injunction directing the defendant No.1 and his Power of Attorney holder to furnish all necessary documents in the proceedings initiated under the provisions of the Act to defendant Nos.2 and 3 before whom that proceeding is pending. The aforesaid order was passed, pending the final decision in the suit. 4. As against that order dated 24/2/1994, the original defendant No.1 has preferred this present Appeal as stated in para-1 hereinabove. This appeal came to be admitted on 10/3/1995. It appears from the record that in connection with Civil Application No.4477 of 1994, this Court issued a Rule on 10/3/1995. 5. Before this appeal was taken up for final hearing, the learned advocate for the appellant has produced a paper-book containing copies of all relevant documents (pages 1 to 128) in one file. Similarly, the respondent No.1 has produced a paper-book containing copies of few documents and that paper-book run from page Nos.120 to 129. The learned senior advocate Mr.S.M.Shah has produced a simple note containing sequence of events which took place right from 31/1/1978 to 24/2/1994. 6. Heard Mr.S.M.Shah, learned senior advocate for and on behalf of Mr.K.V.Shelat, learned advocate for the appellant, Mr.S.B.vakil, learned senior advocate for and on behalf of Mr.B.G.Jani, learned advocate for the respondent No.1 and Mr.Hasmukh Patel, learned AGP for respondent nos.2 and 3, in detail, at length. 7. This Appeal from Order is filed by affected defendant No.1 by challenging an order dated 24/2/1994 passed below application Ex.5 in the aforesaid suit. Admittedly, the said application below Ex.5 was presented by the plaintiff under Order 39, Rules 1 and 2 of the Civil Procedure Code for an interim injunction, pending the suit. That application was submitted to seek equitable relief from the trial Court and the trial Court after examining the material on record passed a discretionary order in favour of the plaintiff. Such a discretionary order is expected to be a judicial order passed by the learned Judge of the trial Court, keeping in mind, the well settled principle of law with regard to interim injunction, which is nothing but an equitable relief. Under the circumstances, it is necessary to know as to what is ambit and scope of such Appeal from Order and what are the powers of Appellate Court, while dealing with such Appeal from Order. 8. In the case of Wander Ltd. and Another v/s. Antox India P. Ltd., reported in 1990 (Supp) Supreme Court Cases 727. The Hon'ble Supreme Court has held in para-14 at page-733 as follows. "14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate Court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the Court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar,J. in Printers (Mysore Private Ltd. v. Pothan Joseph. "... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jhanaton '.. the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case'." The appellate judgment does not seem to defer to this principle." 9. In a recent case of Laxmikant V. Patel v/s. Chetanbhai Shah and another, reported in 2001 AIR SCW 4989. The Hon'ble Supreme Court has held in para-17 at page-4997 as follows :- "17. We are conscious of the law that this Court would not ordinarily interfere with the exercise of discretion in the matter of grant of temporary injunction by the High Court and the trial Court and substitute its own discretion therefor except where the discretion has been shown to have been exercised arbitrarily or capriciously or perversely or where the order of the Court under scrutiny ignores the settled principles of law regulating grant or refusal of interlocutory injunction. An appeal against exercise of discretion is said to be an appeal on principle. Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the Court below solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in a judicial manner the fact that the appellate Court would have taken a different view may not justify interference with the trial Court's exercise of discretion [(See Wander Ltd. v. Antox India P. Ltd., 1990 (Supp) SCC 727 and N.R.Dangre v. Whirpool Corporation, 91996) 5 SCC 714)]. However, the present one is a case falling within the well accepted exceptions. Neither the trial Court nor the High Court have kept in view and applied their mind to the relevant settled principles of law governing the grant or refusal of interlocutory injunction in trade mark and trade name disputes. A refusal to grant an injunction in spite of the availability of facts, which are prima facie established by overwhelming evidence and material available on record justifying the grant thereof, occasion a failure of justice and such injury to the plaintiff as would not be capable of being undone at a latter stage. The discretion exercised by the trial Court and the High Court against the plaintiff, is neither reasonable nor judicious. The grant of interlocutory injunction to the plaintiff could not have been refused, therefore, it becomes obligatory on the part of this Court to interfere." 10. In the case of Dalpatkumar and another v/s. Prahalad and others, reported in 1992 (1) S.C.C. 719. The Hon'ble Supreme Court has observed in para-6 (Page-721 - 722) as follows :- "Undoubtedly, in a suit seeking to set aside the decree, the subject matter in the earlier suit, though became final, the Court would in an appropriate case grant ad interim injunction when the party seeks to set aside the decree on the ground of fraud pleaded in the suit or for want of jurisdiction in the Court which passed the decree. But the Court would be circumspect before granting the injunction and look to the conduct of the party, the probable injuries to either party and whether the plaintiff could be adequately compensated if injunction is refused." Keeping in mind, the aforesaid legal position, the rival contentions of both the parties are considered by this Court. 11. To consider the contentions taken by both the parties, it is necessary to note some admitted facts for which there is no serious dispute from either side. (A) A base of the suit i.e. agreement for sale is at pages 53 to 59 in paper-book supplied by the appellant. This agreement for sale (Banakhat) was executed by defendant No.1 in favour of 4 persons, who were promoters of Shri Suyog Co-operative Housing Society (Proposed), Ahmedabad. (B) On 31/1/1978, the stamp paper for this Banakhat was purchased by the defendant No.1. (C) On 30/3/1978, Shri Suyog Co-operative Housing Societies (Proposed) of Vejalpur, Taluka, City and District Ahmedabad came to be registered under Section 10 of the Gujarat Co-operative Societies Act, 1961. A note has been made in the certificate, which is at page 118, to the effect that the said Mandali was of Members of Backward Class it is registered without land. (D) There are about 12 terms and conditions in this Banakhat. (E) On 2/10/1978, defendant No.1 put an endorsement below aforesaid Banakhat and extended the period stated in Condition No.2 of Banakhat from 12 months to 24 months. (F) On 28/1/1980, defendant No.1 again extended the period stated in Condition No.2 of Banakhat from 12 months to 27 months. (G) Condition No.2 in the said Banakhat was to the effect that period of 12 months was fixed for obtaining a permission from the Government and also for initiating a proceeding to get the title cleared for the land described in aforesaid Banakhat. (H) On 30/4/1980, the present plaintiff and defendant No.1 jointly submitted an application to the Government to grant an exemption under Section 20 of the Act. (I) On 21/8/1982, the Government of Gujarat i.e. defendant No.3 passed an order (Page 119) for said application dated 30/4/19809 by which the said application dated 30/4/1980 came to be rejected. (J) On 7/5/1991, the defendant No.1 addressed a notice (Page 60) to promoters of Shri Suyog Co-operative Housing Society (Proposed), Ahmedabad. (K) On 30/3/1993, as stated in para-13 of written statement of defendant at page 36 to 52, the promoters did not accept that notices dated 7/5/1991, as a result of which either new notice or same notice was sent to plaintiff. (L) On 8/4/1993, the plaintiff by its reply dated 8/4/1993 at pages 64 to 67 replied the notice of defendant No.1, sent on 30/3/1993. (M) On or about 28/7/1993, the plaintiff filed the aforesaid Special Civil Suit for reliefs stated in para-3 hereinabove. 12. Mr.S.M.Shah, learned advocate for the appellant has argued on the following points :- [a] The base of the suit i.e. agreement for sale in favour of proposed Housing Society, on the date of the suit was solely void, nullity and unenforceable and, therefore, the plaintiff is not entitled to any relief. To enlarge his arguments, he has urged that agreement for sale, which is at page-53 on the paper-book supplied by the appellant (Mark-3/2) was executed by the defendant No.1 i.e. present appellant in favour of Shri Suyog Co-operative Housing Society (Proposed), Ahmedabad and not in favour of plaintiff. As per Mark-3/2, the said Housing Society (Proposed) was represented by its four chief promoters. Admittedly, on 31/1/1978, the said society was not got registered under the provisions of the Gujarat Co-operative Societies Act, 1961. It is also an admitted fact that the said Housing Society (Proposed) came to be registered under the provisions of the Gujarat Co-operative Societies Act, 1961, on 30/3/1978 for which, a copy of certificate of the registration is produced at page-118 in the paper-book supplied by the appellant. Mr.S.M.Shah has argued that in eye of law, the said Housing Society (Proposed) was not a legal entity to enter into an contract with defendant No.1 and, therefore, that agreement for sale (Mark-3/2) is a nullity and no cause of action can be said to have been arisen on the strength of such nullity contract. To substantiate his arguments, he has cited following authorities. [A] In the case of Ramji Mandir Narsinhji & Ors. v. Narsinh Nagar Alias Tekri Co.op Housing Society Ltd. & Ors., reported in 1979, 20 G.L.R. 801, wherein the Division Bench of this Court has held that a contract between a non-existent society on whose behalf some one purports to act is a nullity and gives rise to no cause of action. For Housing Society registered under the Co-operative Societies Act, 1961, it is further held that in view of Section 37 of the Gujarat Co-operative Societies Act, it is clear that a Co-operative society becomes a legal person after it is registered and it is after its registration that it acquires the capacity to enter into contracts. No provision of the Act has been pointed out under which the promoters of a society can act on behalf of the society before it has been registered and has come into existence. Ultimately, it has been held that the agreement of lease entered into between the defendant trust on one hand and a non-existent co-operative society on the other hand was a nullity and gave no rise to cause of action for the society and, therefore, such an agreement of lease cannot be specifically enforced against the defendants. [B] The plaintiff of aforesaid cited case carried the matter further by filing Civil Appeal No.4398 of 1997 to the Hon'ble Supreme Court. Mr.S.M.Shah has cited a xerox copy of certified copy of the judgment dated 1/8/2001 rendered by the Hon'ble Supreme Court in aforesaid Civil Appeal No.4398 of 1997. This Judgment is now reported in 2002 (1) G.L.H. 290 (S.C.). The Hon'ble Supreme Court has upheld the decision taken by this Court and held that the provision of Section 37 of the Gujarat Co-operative Societies Act and Rule 3 of the Gujarat Co-operative Societies Rules, 1965, show that the society becomes competent to acquire, hold and dispose of property only when it is registered and not otherwise. By observing in its judgment, the Hon'ble Supreme Court held that there was no assignment of rights of Nanubhai Jogibhai Desai flowing from the agreement in favour of the Society. It has been held that in absence of such assignment, the Society was not competent to file a suit for specific performance of agreement to sell under the Act. Thus, the aforesaid decision reported in (1979) 20 G.L.R. 801 has been confirmed by the Hon'ble Supreme Court. [C] The case of Jayantilal Hansraj Shah & Ors. v. Hemkunverben Dolatrai Dave & Ors., reported in 1996 (3), 37 (3) G.L.R. 522. Looking to the facts of the cited case, it is held by this Court that the agreement for sale executed by Late Maharaja Shri Indravijaysinhji in favour of the petitioners, who are members of the proposed Vijay Co-operative Housing Society is a nullity and creates no right in favour of the petitioners. As the agreement to sell dated July 10, 1980 is nullity, it cannot be specifically enforced and, therefore, even a suit for specific performance of the said agreement cannot be brought by the petitioner in a competent Court. By placing reliance on the aforesaid case of Ramji Mandir Narsinhji & Ors.(Supra), this Court has held that as the agrement to sell dated July 10, 1980 is nullity, it cannot be specifically enforced and, therefore, even a suit for specific performance of the said agreement cannot be brought by the petitioners in a competent Court. By citing the aforesaid two authorities, Mr.S.M.Shah, learned advocate for the appellant has vehemently argued that basically plaintiff is not entitled to have a cause of action in his favour on the basis of such nullity contract and hence, he is not entitled to a decree for specific performance. When at the end of trial, if plaintiff is not entitled to a decree for specific performance, on the basis of such nullity contract, plaintiff is not entitled to an interim injunction pending the suit. [b][i] Mr.S.M.Shah has taken an another contention in connection with the Condition Nos.5 and 7 of agreement for sale (Mark-3/2). As per Condition No.5, both the parties of Mark-3/2 i.e. Housing Society (Proposed) and defendant No.1 had to make a joint application for a permission under Sections 20, 21 and 26 of the ULC Act and on such permission being granted by Government defendant No.1 had to execute a final sale-deed in favour of the Housing Society (Proposed) and expanses to be incurred for such final sale-deed, were to be borne equally by both the parties. [ii] Condition No.7 of Mark-3/2 is to the effect that in case, if permission is not granted by the Competent Authority then in that case, executant of agreement for sale had to give a notice to the first party i.e. Housing Society (Proposed) and on receipt of such notice, the agreement for sale is to be treated as cancelled, as if, no such Banakhat was ever executed. It is also stated in Condition No.7 that under the aforesaid circumstances, when Banakhat is to be treated as cancelled, then in that case, the second party i.e. defendant No.1 shall return an amount of earnest money of Rs.15,000/-- without interest, within 8 days and the first party i.e. Housing Society (Proposed) shall have to return the said Banakhat to the second party i.e. defendant No.1. [iii] Mr.S.M.Shah has argued that the appellant has produced a copy of Yadi dated 21/8/1982 addressed to Competent Authority