THE HONOURABLE SRI JUSTICE N.V. RAMANA AND THE HONOURABLE SRI JUSTICE K.S. APPA RAO Civil Miscellaneous Appeal No. 98 of 2011 JUDGMENT: (Per NVR,J) This civil miscellaneous appeal is filed against the order dated 31.01.2011 passed in I.A. No. 405 of 2010 in O.S. No. 8 of 2010 by the VI Additional District Judge, Siddipet, allowing the petition filed by the 1st respondent herein, plaintiff in the suit, by granting temporary injunction, restraining the appellant herein, 2nd defendant in the suit, or its directors, subordinates, advisors, servants, workers or whosoever they may be claiming right through the 2nd defendant, appellant herein, or respondents 2 to 4, from raising any constructions of whatsoever over the petition schedule property. The 1st respondent herein namely M/s. RRD Roofing and Trading Pvt. Ltd., filed the suit O.S. No. 8 of 2010 against the appellant namely D.R.S. Warehousing (South) Pvt. Ltd., and respondents 2 to 5 herein, for declaration of title and for a consequential declaration of the registered sale deed bearing document No. 374/2010 dated 27.03.2010 as sham and nominal document and not binding on the plaintiff and also for recovery of possession and mesne profits. The 1st respondent-plaintiff along with the suit filed the present I.A. No. 405 of 2010, seeking temporary injunction, restraining the appellant-2nd defendant or its directors, subordinates, advisors, servants, workers or whosoever they may be claiming under the 2nd defendant, or respondents 2 to 4, from raising any constructions of whatsoever over the petition schedule property. It was the case of the 1st respondent-plaintiff that they have entered into a facility agreement dated 07.04.2008 with one Kotak Alternate Opportunities (India) Fund (KAOIF), a trust organized under the Indian Trusts Act, 1982, and acting through Investment Manager, Kotak Investment Advisors Limited, which was clearly signed by the 2nd respondent herein and its other directors, as promoters, and also by DRS Logistics (Pvt.) Limited, by which, they were termed as borrower and at their request, the KAOIF agreed to provide financial assistance to them in the form of a term loan facility with a limit of Rs.25,00,00,000/- for the purpose of acquiring land to an extent of Ac.28.00 at Medchal and payment of land development charges. Towards security for the loan transaction under the said facility agreement, the 1st respondent-plaintiff created mortgage over Ac.28.15 cents of land of Hosur Taluk, by way of deposit of title deeds, and also created mortgage over third party property, besides pledging the shares held by all their promoters, executing demand promissory note by themselves, and personal guarantee of Mr. Ramesh Agarwal, the Director, which has to be substituted by a Corporate Guarantee of DRS Logistics Private Limited, as detailed in Schedule I appended to the agreement. The said Facility Agreement dated 07.04.2008 was preceded by a draft term sheet between Kotak Investment Advisors Limited (KIAL) as well as Mr. Ramesh Agarwal, which refers to the plaintiff as a Special Purpose Vehicle (SPV) and according to which the investor shall infuse upfront capital upto Rs.954 millions to the plaintiff for land acquisitions in order to receive a 75% stake in the plaintiff company, and similarly the DRS Logistics (P) Ltd. shall bring an additional capital of Rs.33 million in order to receive a 25% stake in it. It also referred to the lands which were identified to be purchased at Hyderabad, Tamilnadu and Maharashtra, which include the suit property of which due diligence was also obtained at the instance of DRS Logistics (P) Limited. However, due to various reasons, the said Facility Agreement did not materialize. It was the further case of the 1st respondent-plaintiff that the 2nd respondent herein, one of its Directors, attended the Board Meeting on 08.04.2008 along with the other directors of DRS Group of Companies including DRS Logistics (P) Ltd., and it was clearly confirmed under item 3 of the minutes of the meeting that the 1st respondent- plaintiff is the SPV (Special Purpose Vehicle) which has been set up for the purpose of acquiring the land in the name of the plaintiff company and that the said DRS Logistics would hold 25% stake in the SPV i.e. the plaintiff company. Certain other discussions relating to other issues were also held in the said meeting and pursuant thereto, based on a further authorization made to the 2nd respondent, the land being petition schedule property was to be purchased. While so, the 2nd respondent represented that the identified land could as well be purchased and could be sold at a later point of time, by which the plaintiff could earn profits in view of real estate boom, and thereby he induced the plaintiff to purchase the property. He further misrepresented that the plaintiff cannot purchase the entire suit schedule property in their name, as it would be in violation of ceiling laws in the State of A.P. Believing the same, the plaintiff had obtained Demand Drafts bearing Nos. 430388 to 430392, dated 24.04.2008, for total sale consideration of Rs.5.00 crores, arranged through Kotak Mahindra Bank, Somajiguda, Hyderabad, and sent them to Hyderabad, for disbursing the amounts to different vendors. However, the 2nd respondent, instead of purchasing the property in the name of the plaintiff company, has fraudulently got registered the agreement of sale-cum-power of attorney bearing document No.1012/2008 dated 14.05.2008, in his name. When the 2nd respondent was questioned as to registration of the property in his name, instead of plaintiff’s name, he stated that the said deal was only to avoid ceiling laws and the document was only a power of attorney and as soon as the land is converted into non-agricultural land, the same would be registered in plaintiff’s name. At the request of the plaintiff, the 2nd respondent executed a Memorandum of Understanding dated 02.12.2008 and conceded expressly that the petition schedule property was acquired in his name, instead of the plaintiff’s name, that funds were received from the plaintiff, including stamp duty and registration fee and development charges, and that the plaintiff alone have got exclusive right over the petition schedule property. Having executed the said Memorandum of Understanding, the 2nd respondent, in collusion with his sons i.e. respondents 3 and 4, who are the directors of the appellant company, the 2nd defendant in the suit, for whom the 2nd respondent also worked as Managing Director, has fraudulently transferred the property in favour of the appellant-2nd defendant, under a registered sale deed dated 27.03.2010. Thereafter, the 1st respondent-plaintiff enquired and came to know that the appellant-2nd defendant had availed term loan of Rs.35.00 crores from the 5th respondent i.e. State Bank of Hyderabad, Mallepally Branch, to set up a warehouse facility comprising 7,50,000/- square feet, by mortgaging the petition schedule property purchased under registered sale deed dated 27.03.2010 from the 2nd respondent, besides providing personal guarantee of respondents 3 and 4, the sons of the 2nd respondent. Further, it was contended by the 1st respondent- plaintiff that the appellant-2nd defendant has already started constructions in the petition schedule property, without obtaining proper sanction from the competent authority, and if it is permitted to proceed further with the constructions, it would cause prejudice to the plaintiff and disbursement of amounts by the 5th respondent bank for such works would lead to multiplicity of litigation. The 1st respondent- plaintiff thus prayed for grant of temporary injunction as stated above. The 2nd respondent-1st defendant filed counter denying the allegations made by the 1st respondent-plaintiff and stating that he was holding a share of 33% in the plaintiff company and Mr. Rajendra Agarwal and Ramesh Agarwal are holding share of 34% and 33% respectively. He further stated that the said Rajendra Agarwal and Ramesh Agarwal have conspired together and, without following due process of law and without issuing notice to him, have reduced his share from 33% to 1% on 31.03.2009, while the stake of Ramesh Agarwal has been increased from 33% to 49.48% and the stake of Rajendra Agarwal from 34% to 24.76%. The said reduction and re- allocation of the shares is only to knock away the property of the plaintiff company. There are various disputes between the plaintiff company and M/s. DRS Logistics Pvt. Ltd., and several cases are initiated by them against each other and about 13 cases on criminal and civil side are pending between them. While that be so, the DRS Logistics Pvt. Ltd. has entered into a facility agreement dated 07.04.2008 with M/s. Kotak Alternate Opportunities (India) Fund (KAOIF), which is acting through its investment manager Kotak Investment Advisors Ltd., and under that agreement, plaintiff company is identified as Special Purpose Vehicle, for extending of loans by KAOIF, and the KAOIF released a sum of Rs.25 crores in favour of the plaintiff company to purchase lands throughout the country. While so, the plaintiff company, in pursuit of purchasing lands in Hyderabad, has advanced an amount of Rs.5.00 crores for the petition schedule lands. It was further pleaded by the 2nd respondent that he never induced the plaintiff company to purchase the petition schedule property and as per the instructions of other directors, he had entered into negotiations with the landlords of the petition schedule property and negotiated the price. The total sale consideration for the petition schedule property is Rs.11.00 crores, out of which Rs.5.00 crores is towards sale consideration and Rs.6.00 crores is towards contract of developing the petition schedule property to be given compulsorily to the landlord or the company nominated by them, and that on receipt of Rs. 5.00 crores, the landlords have executed agreement of sale with power of attorney without possession for the limited purpose. It was further stated that M/s. DUA Associates Law Firm has not cleared the verification of title deeds for considerable time and that due to non-completion of transaction on behalf of the plaintiff company and also due to the world economic recession and slump in real estate market in the State of Andhra Pradesh, the prices of the lands have come down enormously and under the circumstances, there was pressure from the landlords for payment of balance consideration towards charges of the development agreement or contract. Pursuant to follow-ups by the 2nd respondent, an amount of Rs.99,99,000/- has been paid through cheque bearing No. 025792 drawn on Kotak Mahindra Bank dated 30.07.2008, but however, on presentation by the landlords, the said cheque was dishonoured due to insufficient funds, and therefore the landlords refused to complete the sale transaction as agreed. While so, the plaintiff exhausted the balance of the amount released by KAOIF and there were no funds with the plaintiff company to complete the sale transaction, and at that stage, Mr. Ramesh Agarwal, director of the plaintiff company, expressed his views that it would not be desirable and feasible to purchase the petition schedule property in the existing real estate scenario. In view of that, the landlords were asked to cancel the agreement of sale and refund the amounts, but they refused to do so. Thereupon, Mr. Ramesh Agarwal has instructed respondents 2 and 3 to alienate the land on ‘as is where is basis’. The said Ramesh Agarwal has also sent e-mail to the 2nd respondent on 08.09.2008 and also to the 3rd respondent, who is one of the directors of DRS Logistics Pvt. Ltd., to alienate the petition schedule land, so as to minimize the losses to DRS Logistics Pvt. Ltd. and plaintiff company. Pursuant thereto, the appellant namely DRS Logistics Pvt. Ltd. purchased the petition schedule land, which the plaintiff is aware, and on receipt of sale consideration from the appellant, the same was repaid to DRS Logistics Pvt. Ltd., as per the directions of Mr. Ramesh Agarwal. It was further pleaded by the 2nd respondent-1st defendant that the plaintiff cannot have grievance over the alienation of the petition schedule land to the appellant and that the petition schedule property was never the property of the plaintiff company at any point of time nor there was any transfer of title by the landlords in favour of the plaintiff company much less any agreement of sale in its favour, and as such claiming rights of whatsoever over the petition schedule property by the plaintiff is without any right or authority. The reason for not executing the agreement of sale in favour of the plaintiff company was that the landlords have refused to execute the agreement of sale as the plaintiff was not agreeing for execution of agreement of sale in its favour, till they receive full amount, and in such circumstances, the 2nd respondent- 1st defendant obtained registered sale agreement-cum-power of attorney, vide document No.1012/2008 dated 14.05.2008 in his individual name. He, thus, pleaded that as per the instructions of the plaintiff’s other directors and with their consent and knowledge, he executed sale deed in favour of the appellant, on receipt of valid sale consideration, and he prayed for dismissal of the petition. The appellant and respondent No.4 filed separate counter- affidavit, which was adopted by respondent No.3. It was stated that the plaintiff approached the Court with unclean hands by suppressing material facts and as such they are not entitled for the relief of interim injunction, which is equitable in nature. It was further stated that the 2nd respondent namely Dayanand Agarwal and his younger brothers Ramesh Agarwal and Rajendra Agarwal are running business under the name and style of DRS Logistics Pvt. Ltd., which was established and incorporated under the provisions of Companies Act, 1956. While reiterating the stand taken by the 2nd respondent in his counter as to the circumstances in which the appellant purchased the petition schedule property, it was stated that with the prior consent of Mr. Ramesh Agarwal, director of the plaintiff company, the 2nd respondent executed sale deed in favour of the appellant on receipt of valid sale consideration and that the plaintiff is very much aware of the purchase of the petition schedule property by the appellant from the 2nd respondent and also aware of the fact that the appellant has invested huge amounts in developing the property, to meet its business requirements. Having kept quiet for more than six months, filing the present petition seeking the relief to stop further constructions is mala fide, and that silence on the part of the plaintiff with the full knowledge that the appellant is developing the petition schedule property, amounts to waiver of its rights to object the development already made and the constructions already started. It was further pleaded that the appellant has admittedly raised huge loans from the 5th respondent bank and if injunction is granted and petition is allowed, the appellant would be put to irreparable loss and damage and would suffer huge financial loss and if the constructions are allowed to be made, whereas no loss and damage would be caused to the plaintiff. It was, thus, pleaded that there is no prima facie case and balance of convenience in favour of the plaintiff to grant interim injunction as prayed for, and the petition be dismissed. The Court below, having considered the rival contentions of the parties and having perused the documentary evidence adduced by them, held that the petition schedule property was purchased with the amounts of the plaintiff company and that the entire sale consideration was paid by the plaintiff company, even though the property was registered in the name of the 2nd respondent under agreement of sale cum power of attorney. Therefore, prima facie, the property belongs to the plaintiff company, and if the defendants are permitted to proceed with the development works in the petition schedule property, the purpose of suit, which is filed for declaration of title, would be defeated, and as such the prima facie case and balance of convenience is in favour of the plaintiff, for grant of interim injunction. Accordingly, the Court below allowed the petition filed by the plaintiff, 1st respondent herein, and granted temporary injunction in favour of the plaintiff, restraining the appellant or its directors, subordinates, advisors, servants, workers or whosoever they may be claiming right through the appellant, or respondents 2 to 4, from raising any constructions of whatsoever over the petition schedule property. Aggrieved thereby, the appellant filed the present civil revision petition. Learned counsel for the appellant mainly contended that the 1st respondent-plaintiff, while seeking the reliefs of mesne profits and recovery of possession of the suit schedule properly, cannot seek the relief of injunction alternatively, and the Court below, without considering the same, has erroneously granted temporary injunction as prayed for by the 1st respondent-plaintiff. He further submitted that the suit schedule property was alienated in favour of the appellant, by virtue of registered sale deed dated 27.03.2010, pursuant to the instructions given by Mr.Ramesh Agarwal, Director of the plaintiff company, through e-mail dated 18.09.2008, and upon receipt of sale consideration from the appellant, the 2nd respondent has repaid the entire sale consideration of Rs.5.00 crores, said to have been paid by the plaintiff, to DRS Logistics Pvt. Ltd., on the instructions of said Ramesh Agarwal, Director of the plaintiff company. He further submitted that no reply affidavit or rejoinder has been filed by the plaintiff, denying the repayment of Rs.5.00 crores by the 2nd respondent, but however, the Court below without considering the same and without considering the fact that the suit was filed after five months of the execution of sale deed in favour of the appellant, granted injunction in favour of the 1st respondent, which is unjustified. He further submitted that the appellant has already mortgaged the suit schedule properly with the 5th respondent bank and obtained Rs.35.00 crores of loan and invested the said amount on the petition schedule property, for its development, and thus if injunction granted by the Court below is not vacated, the appellant would be put to irreparable loss. He, thus, prayed to set aside the order under appeal and allow the appeal. On the other hand, learned counsel for the 1st respondent- plaintiff submitted that the petition schedule property was purchased with the loan amount obtained by the plaintiff company from KAOIF, but the 2nd respondent fraudulently obtained sale deed in his name. He further submitted that the recitals of agreement of sale dated 14.05.2008 clearly indicate that the sale consideration was paid by way of demand drafts obtained by the plaintiff company from Kotak Mahindra Bank. Further, the appellant company was incorporated on 10.08.2009 i.e. after execution of agreement of sale dated 14.05.2008 and respondents 3 and 4, who are none other than the sons of 2nd respondent, are the Directors of the appellant company. The petition schedule property is agricultural land and the appellant has not produced any material to show that it has got the land converted into non-agricultural purpose. The appellant is said to have obtained bank loan of Rs.35.00 crores, by mortgaging the petition schedule property, and in the event it fails to repay the same, the petition schedule property, which was purchased with the funds of the plaintiff company, would be seized and in such event the plaintiff will be left with no remedy. The Court below, taking into consideration all these aspects, granted interim injunction in favour of the plaintiff, and the appellant, who is not the true owner, has no right to file the present appeal and the plaintiff, thus, prayed for dismissal of the appeal. He relied upon the decision of the Supreme Court in Maharwal Khewaji Trust (Regd.), Faridkot, v. Baldev Dass[1]. Heard Mr. C. Prakash Reddy, learned senior counsel for the appellant-2nd defendant and Mr. Vedula Venkata Ramana, learned senior counsel for the 1st respondent-plaintiff, and perused the order under appeal and other material available on record. Before proceeding to consider the rival contentions of the parties on merits, we feel it appropriate to refer to the settled principles of law that govern the grant of interim or temporary injunction orders. Grant of interim or temporary injunction is a judicial process, by which a party is restrained from doing a particular act or thing pending disposal of the main suit. The burden lies on the plaintiff, who seeks interim or temporary injunction to establish that he has got a prima facie case and that the balance of convenience lies in his favour for grant of injunction and that he will be put to irreparable loss and injury, if interim or temporary injunction is not granted. The grant of interim injunction under Order 39 Rules 1 and 2 of the Code of Civil Procedure is solely discretionary relief in its equitable jurisdiction. Generally, the appellate Court does not have any wider jurisdiction while hearing the appeal against such an order of the trial Court and it does not interfere with the discretion exercised by the trial Court and substitute its own discretion, except where such discretion has been exercised arbitrarily, capriciously or perversely or where the Court has ignored the settled principles of law, regulating grant or refusal of interlocutory injunction. An appeal against exercise of discretion is an appeal on principle. The Court, at this stage, acts on certain well- settled principles of administration in the form of interlocutory remedy, which is both temporary and discretionary. When the findings recorded by the trial Court on the issues of prima facie case, balance of convenience, and irreparable injury are perverse and when the trial Court failed to appreciate the law, pleadings and also evidence adduced by the parties properly, then the appellate Court can interfere with the order and rectify the mistake committed by the trial Court. Therefore, the Court while considering an application for grant of interim or temporary injunction, has to invariably satisfy for itself whether the plaintiff has made out a prima facie case, balance of convenience is in his favour for grant of injunction or irreparable loss would be caused if injunction is not granted. The apex Court in its judgment in Dalpat Kumar vs. Prahlad Singh[2], highlighted the importance of the phrases, prima facie case, balance of convenience and irreparable injury, as follows: “The phrases “prima facie case”, “balance of convenience” and “irreparable injury” are not rhetoric phrases for incantation but words of width and elasticity, intended to meet myriad situations presented by men’s ingenuity in given facts and circumstances and should always be hedged with sound exercise of judicial discretion to meet the ends of justice. The Court would be circumspect before granting the injunction and look to the conduct of the party, the probable injury to either party and whether the plaintiff could be adequately compensated if injunction is refused.” The apex Court further observed that prima facie case should not be confused with prima facie title, and held as under: “…….Prima facie case is not to be confused with prima facie title which has to be established, on evidence at the trial. Only prima facie case is a substantial question raised, bona fide, which needs investigation and a decision on merits. Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. The court further has to satisfy that non-interference by the court would result in 'irreparable injury' to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequences of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury, but means only that the injury must be a material one, namely one that cannot be adequately compensated by way of damages…….” The apex Court, in Colgate Palmolive INDIA Limited Vs Hindustan Lever Limited[3], observed that while considering an application for grant of interim or temporary injunction, apart from prima facie case, balance of convenience and irreparable injunction, the following considerations should also weigh with the Court: “(i) extent of damages being an adequate remedy; (ii) protect the plaintiffs interest for violation of his rights though, however, having regard to the injury that may be suffered by the defendants by reason therefor; (iii) the Court while dealing