Case: La-Fin Financial Services Private Limited Vs. Il & Fs Financial Services Private Limited


Decision reasoning: 0[ds]The first contention raised by Mr Naphade was that the Letter of Undertaking dated 20th August, 2009to the Plaint), is not a concluded contract and therefore, no prayer for specific performance can be granted in relation thereto. According to Mr Naphade, therefore, no interim relief could have been granted in aid of the final relief of specific performance. To understand this controversy, we have perused the Letter of Undertaking in some detail. The said Letter of Undertaking starts of by referring to the SPA dated 20th August, 2009 signed between the Plaintiff, MCX Ltd andunder which the Plaintiff had agreed to invest in the share capital ofThe Letter of Undertaking further specifically records that the Plaintiff had agreed to invest in the equity ofon the assurance and undertaking of the Defendant that it would purchase the Plaintiffs shareholding inon the terms and conditions set out in the Letter of Undertaking.On a reading of the Letter of Undertaking as a whole, at least prima facie, we are unable to agree with the submissions of Mr Naphade that the same amounted only to an offer, and was therefore, not a concluded contract between the Plaintiff and the Defendant. Firstly, clause (1) of the said Letter of Undertaking categorically contemplates that the Defendant or its nominees have an obligation to purchase the Plaintiffs shareholding inby giving a written notice at any time after completion of one year from the date of investment but no later than three years thereof, after which the Plaintiffs right to call upon the Defendant to purchase its shareholding would lapse. The price at which the shareholding would be purchased is also mentioned in the said clause and stipulates that the Buy Back Price would be (i) a price which provides an Internal Rate of Return (IRR) of 15% on the investment or; (ii) a price at which the most recent transaction ofequity shares is carried out byor MCX Ltd or FTIL group, whichever is higher. Clause 2 of the Letter of Undertaking also contemplates thatplans to come out with an IPO and the Defendant assures the Plaintiff that the IPO price would not be less than the Buy Back Price, and that the Plaintiff would be provided the right to completely exit by way of an offer for sale, or else the Defendant shall provide the Buy Back Offer as set out in Clause 1, at the Buy Back Price, before the listing of the shares. Clause 3 further contemplates that once the Plaintiff, by written communication calls upon the Defendant to purchase its shareholding, the same will be consummated within seven days unless mutually extended. Clause 7 further provides that this letter has been given by the Defendant for valuable and bonafide consideration and the Defendant undertakes not to contest this letter for lack of consideration.24. We are unable to accede to the submissions of Mr Naphade that the Letter of Undertaking only amounted to an offer, which according to Mr Naphade was withdrawn, before it was accepted by the Plaintiff. By virtue of the said Letter of Undertaking, the Plaintiff was persuaded to invest in the equity share capital ofon the basis that its shareholding inwould be purchased in the future by the Defendanton the terms and conditions set out in the Letter of Undertaking.To our mind, this commitment/obligation of the Defendant was complete and it was not merely an offer to purchase the Plaintiffs shareholding at a future date. We say this also because the Letter of Undertaking itself records that the same has been given for valuable consideration. If the Letter of Undertaking was merely an offer, as contended by Mr Naphade, there would be no question of the same being given for any consideration, because an offer does not have to be coupled with consideration. This would therefore indicate that the Letter of Undertaking was something more than merely an offer as contended by the Mr. Naphade. Therefore, at least prima facie at the interim stage of the suit, we are unable to agree with the submissions of Mr Naphade that the Letter of Undertaking, being merely an offer, was not unenforceable.25. Equally, we find the reliance placed by Mr Naphade on paragraphs 77 and 104(vii) of a decision of this Court in Writ Petition No.213 of 2011, decided on 14th March, 2012 (supra) (to further his argument that there was no concluded contract), is wholly misplaced. The Division Bench was deciding a writ petition in which a decision of SEBI rejecting the application filed byfor permission to undertake the business as a Stock Exchange, was challenged. This order of SEBI was passed under section 4 of the Securities Contracts (Regulation) Act, 1956 read with sections 11 and 19 of the Securities Exchange Board of India Act,reading the aforesaid judgment and the relevant paragraphs pointed out above, we are clearly of the view that the Division Bench did not seek to hold anything of the sort as is sought to be contended by Mr Naphade. The Division Bench does not hold that the Letter of Undertaking is merely an offer and therefore not a concluded contract. In fact, reading the judgment it is clear that even the Division Bench was of the view that the option given by the Defendant to the Plaintiff to sell its shareholding to the Defendant on the terms and conditions set out therein, was binding on the Defendant. Further, even the Petitioner as well as Respondent Nos.3 and 4 therein, proceeded on that very basis when they submitted to the Court that the Buy Back Arrangement as contemplated under the Letter of Undertaking dated 20th August, 2009 was lawful. We, therefore, have no hesitation in rejecting the first contention of Mr Naphade. At least prima facie, we are of the opinion that the Letter of Undertaking dated 20th August, 2009 is specifically enforceable.To our mind, this is also how the parties understood it. This becomes clear when one refers to the submissions canvassed by FTIL as well as MCX Ltd., before the Division Bench in Writ Petition No.213 ofthis view of the matter, and in view of the specific stand taken by the MCX Group before the Division Bench in Writ Petition No.213 of 2011, at least prima facie we are unable to agree with the submission of Mr Naphade that specifically enforcing the Letter of Undertaking would have the effect of breaching the MIMPS Regulations and/or the SECC Regulations. This, according to us, cannot be a ground at the interim stage to deny the Plaintiff interim reliefs if they are so entitled, otherwise. This contention would also therefore have to be rejected.36. The last contention raised by Mr Naphade was that in any event of the matter, the relief granted by the learned single Judge was in the nature of attachment before judgment and no case whatsoever has been made out for granting such a drastic relief against the Defendant. We must note that the learned single Judge, after discussing the facts of the case, granted an interim injunction in terms of prayer clause (f) of the Notice of Motion. This interim injunction was granted subject to the attachment levied by the EOW and it was clarified that in the event the EOW raises the attachment or releases the assetsthe injunction order would operate pending the hearing and final disposal of the suit, until the Defendant secures the suit claim by deposit of monies or furnishing of such security as may be approved by the Court.Mr Naphade, on reading the impugned order, sought to equate the injunction granted by the learned single Judge to a relief for attachment before judgment. He submitted that in any event of the matter, in a case like the present one, if no case for attachment before judgment was made out, no injunction could be granted. To support this submission, Mr Naphade places heavy reliance on the judgment of this Court in the case of Swan Mills Ltd.(Supra) and more particularly paragraph 14 thereof.38. We are unable to agree with this submission of Mr Naphade. There is a clear distinction between the relief for attachment before judgment, which is governed by the provisions of Order 38 Rule 5, and the grant of temporary injunctions under Order 39 of the Code of Civil Procedure, 1908. The argument of Mr Naphade proceeds on the basis that the powers of the Court are circumscribed by the provisions of Order 38 Rule 5 and Order 39 of the CPC, 1908 and that on the facts and circumstances of the case, the reliefs asked for were not capable of being granted. His submission was that the injunction as prayed for, and granted, would have the same effect as an order passed under Order 38 Rule 5 of the CPC, 1908. This submission, according to us, proceeds on the wrong premise. Firstly, the grant of relief under Order 38 Rule 5 is on different considerations from the grant of relief of temporary injunctions. Secondly, it is now a well settled legal position, that at least with respect to Chartered High Courts, the power to grant temporary injunctions are not confined to the statutory provisions alone. The Chartered High Courts have an inherent power under the general equity jurisdiction to grant temporary injunctions independently of the provisions of the Code. In this regard, it would be useful to refer to a decision of the Supreme Court in the case of Manohar Lal Chopra v/s Rai Bahadur Rao Raja Seth Hiralal.(AIR 1962 SC 527  ) In the said decision, the majority view held that the provisions of the CPC, 1908 are not exhaustive for the simple reason that the Legislature was incapable of contemplating all the possible circumstances which may arise in future litigations, and consequently providing a procedure forIn view of this authoritative pronouncement of the Supreme Court, we are unable to agree with the submission of Mr Naphade that in a money suit, if no case for attachment before judgment is made out, no injunction can also be granted. This is too sweeping a proposition for us tothat extent, we find that the judgment in Swan Mills Ltd.s case(Supra) does not lay down the correct law. In view thereof, the reliance placed by Mr Naphade on the said decision is of no assistance to the Defendant. We must add here that we are not for a moment suggesting that in every case an injunction ought to be granted by resorting to section 151 of the CPC, 1908. The discretion to grant or refuse the grant of injunctions, has to be exercised on well settled principles and would depend on the facts and circumstances of each case.Looking at all this material, and it being a part of the record before the learned single Judge, we do not think that the discretion exercised by him in granting the interim injunction against the Defendant, could be said to be either perverse, capricious, arbitrary or not based on well settled principles, so as to enable us to interfere with the exercise of such discretion.We do not find that in the facts and circumstances of the present case, the learned single Judge has in any way exercised the discretion vested in him either perversely, capriciously, arbitrarily or against the well settled principles of law relating to the grant or refusal of temporary injunctions, for us to interfere in our appellate jurisdiction. Equally, we find the reliance placed by Mr. Naphade on the decision of the Supreme Court in the case of Raman Technical and Process Engineering Co.(Supra) has no application to the present scenario. The Supreme Court held that a relief for attachment before judgment cannot be granted on the basis of bald and vague averments. In the present case, the learned single Judge has not granted any relief of attachment of before judgment, but instead granted an interim injunction. Even otherwise, we do not think that the averments made or the material produced by the Plaintiff, and referred to by us earlier, can be said be bald or vague as sought to be contended by Mr. Naphade. Therefore, this decision of the Supreme Court is wholly inapplicable.