JUDGMENT S.K. Agarwal, J.
1. This order will dispose of three applications moved by defendants under Order 39 Rule 4 read with Section151 of the Code of Civil Procedure, 1908 (for short "CPC")for vacating ex-parte interim injunction dated 15th May,2002, as well as the application of the plaintiff wherebystatus quo was ordered to be maintained with regard to sharesof defendant No. 2.
2. Facts in brief are that plaintiffs filed a suitfor declaration, perpetual and mandatory injunction, againstdefendants pleading therein as under:
(i) Plaintiff No. 1 (First International) is acompany incorporated on 14.2.1995 under the laws ofMauritius; plaintiff No. 2 (Arun Duggal) is the principalofficer and duly constituted attorney of plaintiff No. 1.The defendant No. 1, Industrial Finance CorporationLimited (for short, "IFCL"); defendant No. 2 (Bank ofAmerica Overseas Corporation) formerly known as Nations bank Overseas Corporation (for short, "NBOC")incorporated under the laws of USA; and defendant No. 3(for short, "Mohan Group") is also a registered company.
(ii) The shareholders of Mohan Group,incorporated a public limited company under the name andstyle of Foremost Factors Limited (For short "FFL"), on14.12.1995, having its registered office at Delhi andHaryana. The NBOC agreed to participate as theshareholder in FFL, and for that purpose Mohan Group &NBOC executed an agreement on 16.5.1996 (hereinafter,referred to as the "Main Agreement"). In March, 1999,IFCL (defendant No. 1), decided to acquire equity andarranged debt for FFL. Consequently on 16.4.1999, a Supplementary Agreement was executed amongst Mohan Group,NBOC and IFCL setting-forth their new shareholding arrangement adopting all terms and conditions of the Main Agreement.
(iii) In December, 2000, NBOC decided to exitfrom factoring business and to sell its shares in FFL.In January, 2000, NBOC approached Mr. Puri (Chairman ofMohan Group) and Mr. Narsiman (Chairman of IFCL), toacquire NBOC's share in FFL; both of them advised NBOCthat notwithstanding their right of First Refusal,contained in Article 5.2 of the Main Agreement, they werenot interested in acquiring NBOC's shares in FFL and thatNBOC was free to find suitable buyer for its shares.Thereafter, NBOC requested plaintiff No. 2 (Arun Duggal)to acquire its shareholding in the FFL; he evaluated thevalidity of the offer and decided to accept the same. IT is pleaded that on 29th March, 2001 at a meeting of theBoard of Directors of FFL, IFCI and Mohan Group accordedtheir no objection to the transfer of NBOC equity shareholder in FFL (26.25%). It was decided that the Main Agreement itself would need not be replaced. Plaintiff No. 2, Mr. Duggal, who was an employee, set up anew company under the name and style of FirstInternational Investment Corporation (plaintiff No. 1). Memorandum of Understanding between the NBOC and Mr. Duggal was signed on 11.5.2001 (for short, "MOU"). On1.12.2001, another Board meeting of FFL was held and infurtherance of their approval on 29.3.2001, FFL receiveda letter and draft notice, proposed to be published inthe Press, as per the requirement of the Reserve Bank ofIndia from NBOC, indicating their intention to transfertheir shares in favor of the First Plaintiff and aresolution was passed to that effect.
(iv) Mr. Arun Duggal received a letter dated4.1.2002 from IFCI, whereby NBOC was asked to serve First Option notice on the Principal Shareholders of FFL as perArticle 5.2 of the Main Agreement. By letters dated 17thJanuary, 2002 and 22nd February, 2002 IFCL refused the proposed transfer of shares from NBOC to the FirstPlaintiff. It is further pleaded that Mr. Duggal resignedfrom service with NBOC and set up plaintiff No. 1 atMauritius, at considerable expense only after FFL Boardof Directors meeting held on 29th March, 2001 and on 1stDecember, 2001 conveying their no objection and consent irrespective of the right of First Option conferred under Article 5 of the Main Agreement and that IFCI was boundby its no objection consent and are estopped by theirconduct from asserting the right of First Refusal underthe Main Agreement.
3. On the above facts, the plaintiffs have sought declaration to the effect that NBOC has made sufficient compliance of the provisions of the Main Agreement and theSupplementary Agreement and had taken requisite stepsnecessary to be undertaken by them, for the purposes ofeffecting and executing the proposed transfer of their entireshareholding comprising of 26.25% in FFL, to the firstPlaintiff a decree of perpetual and prohibitory injunctionrestraining IFCL from exercising the right of First Refusalstipulated in Article 5.2 of the Main Agreement; other appropriate injunction against defendants directing them to convey their consent and approval to the proposed transfer infavor of First Plaintiff; to carry out necessaryformalities of signing documents required to by NBOC, RBI andSEBI, to acknowledge First Plaintiff as shareholder of FFLstepping into the shoes of NBOC and to execute a new Shareholders' Agreement.
4. By an order dated 15th May, 2002 passed in IA No. 4685/2002 ad-interim injunction was granted to the plaintiffs directing that status quo be maintained by NBOC-defendant No. 2 with regard to sale of its shares. Thedefendants are seeking revocation of this order, inter alia,on the ground that the ex parte order was obtained byplaintiffs by concealing material facts and by making falsestatements. The defendants while denying the allegations made in the plaint specifically denied the averment thatMr. Narsiman, then Chairman-cum-Managing Director of IFCL(defendant No. 1) and Mr. Puri of Mohan Group (defendant No. 3)advised the plaintiff that notwithstanding the right of FirstRefusal as contained in Article 5.2 of the Main Agreement,Mohan Group and IFCL were not interested in acquiring sharesof NBOC (defendant No. 2) and that the NBOC was free to findany other buyer for purchase of its shares. The plaintiffs filed rejoinder reiterating the averments made in the plaint.
5. I have heard learned counsel for the parties andhave been taken through the record.
6. Learned Senior Advocate appearing on behalf of defendant No. 1 argued that Article 5.2 of the Main Agreement dated 16th May, 1996 between the Principle Shareholder andthe Supplementary Agreement provide that no Principal Shareholder would transfer any or all the shares owned by it,otherwise then pursuant to the terms of this agreement. It further provides that if the Principal Shareholder desires toeffect a transfer or sale of any or all of its shares thenselling Principal Shareholder, shall give notice to th enon-selling Principal Shareholder(s) as well as the companyof the proposed transfer in the manner and in accordance withthe procedure prescribed in this Article Learned counselfurther argued that Principal Shareholder(s) by Article 13 ofthe Main Agreement also agreed that any amendment, variation,modification or waiver of any of its terms would be validonly if it is in writing and signed by the Principal Shareholders and the NBOC and that these conditions havingnot been fulfillled, the claim of the plaintiffs that therewas an implied waiver of conditions contained in the agreement is not sustainable and that even a prima facie case in favor of plaintiff is made out. Therefore, ex parte interim order is liable to be vacated. Learned counsel appearing on behalf of defendants 2 and 3 while supporting the submissions on behalf of defendant No. 1 also made additional submissions.
7. Learned counsel for plaintiff argued to the contrary and submitted that in the meeting of the Board of Directors of FFL held on 29th March, 2000 and 1st December, 2001, the nominees of Principal Shareholders were present, they did not record any objection on behalf of the non-selling Principal Shareholders. Thus, it was an implied waiver of their right of First Option under the Main Agreement. He further argued that plaintiff No. 2 was an employee of NBOC; on the basis of declaration made by representatives of defendant No. 1 and defendant No. 3 in the said Board Meeting, he resigned from the job, set up another company (plaintiff No. 1) at a lot of expense, therefore, defendants are estopped from pleading otherwise. In support of his submissions, learned counsel referred to some commentaries on the Law of Contract, dealing with implied waiver of terms of the contract required by law to be evidence in writing, and "promissory estoppel" based onrepresentation.
8. In order to appreciate the rival contentions, it would be useful to refer to Articles 5.1 & 5.2 of the Main Agreement dated 16th May, 1996 which run as under:-
"ARTICLE 5 RESTRICTIONS ON TRANSFER OF SHARES 5.1 Restrictions on share Transfer:During the Term of this Agreement, no Principal Shareholder may Transfer any orall of its shares, now or hereafter ownedby it, other than pursuant to the termsof this Agreement.
5.2 Right of First Refusal: (a) If any Principal Shareholder shall otherwise desire to effect a Transfer or any or allof its shares, then it ( the "SellingPrincipal Shareholder") shall give noticeto the non-selling PrincipalShareholder(s) and the Company of suchproposed Transfer (the "Option Notice").The Option Notice shall describe the proposed transferee (the "Third PartyTransferee") the number of sharesproposed to be transferred (the " (OfferedShares") the price per share (the "OfferPrice") evidence of the Third-PartyTransferee's financial ability to pay theprice per share of the Offered Shares andall other material terms and conditions of the proposed Transfer, and also shallbe accompanied by a copy of the firmoffer of the Third-Party Transferee topurchase the Offered Shares at the OfferPrice, stating that such offer shall beirrevocable for a period of thirty (30)days.
5.2 (b) to (f) xxx xxx 5.3 xxx xxx xxx
9. There is no dispute that Article 5.1 of the Main Agreement puts restrictions on the Principal Shareholders to transfer any or all of its shares. Article 5.2, inter alia,provides (a) that selling Principal Shareholder shall givenotice to the non-selling Principal Shareholder (s) And theCompany of the proposed transfer called Option Notice; (b)the Option Notice is required to describe the proposedtransferee, number of shares sought to be transferred oroffered for sale, the price per share offered, by theproposed transferee and evidence of proposed transferee'sfinancial ability to pay the price and (c) it is required tobe accompanied by a copy of the firm offer of the third partytransferee, stating that such offer is irrevocable for aperiod of thirty days. Further Article 13 of Main Agreementprovides that the amendment, variation, modification orwaiver of any of the terms and conditions of this agreementshall only be valid and effective if signed in writing by allthe Principal Shareholders.
10. The argument raised by learned counsel for plaintiff is not sustainable for more than one reason. torepeat. The Option Notice, envisaged by Article 5.2 of theMain Agreement is required to be given, to the non-sellingShareholders as well as to the Company. Here admittedlyOption Notice was not given to IFCL (defendant No. 1) or MohanGroup (defendant No. 3), who are the non-selling PrincipalShareholders, therefore, the question of their giving consent could not arise at the meeting of the Board of Directors ofFFL, even if it is assumed that the representative of thePrincipal Shareholders had waived the Option Notice in theBoard Meeting of the FFL held on 29th March, 2001, as allegedby plaintiff, although the same is specifically denied by thedefendants. The alleged consent cannot be termed as a noticeto the Principal Shareholders of the FFL. Such a decisioncould only be taken at Board Meeting of defendant No. 1 anddefendant No. 3 Secondly, perusal of Resolution dated 29thMarch, 2001 reveals that this matter was no t in the agenda. As envisaged by Article 5.2 of the Main Agreement, before such offer could be termed as an Option Notice it was required to describe the proposed transferee, number ofshares which were sought to be transferred or offered forsale, the price per share offered and the evidence of theproposed transferee's financial ability to pay the price.These essential conditions of Option Notice were notfulfilled. Perusal of document further reveals that in facta need was felt to replace the Main Shareholders' Agreementwhich was not done. The Board of Directors of the FFL (notthe defendants) could not alter the rights of defendants 1and 3 under Article 5.2 of the Main Agreement.
11. Apart from the above, meeting dated 29th March, 2001 and 1st December, 2001 were prescribed over by Mr. Arun Duggal, plaintiff No. 2, who was the Chairman of the FFL andalso the Promoter and Chairman of First InternationalInvestment (plaintiff No. 1), who intended to buy the shares.Mr. Arun Duggal having substantial interest in the purportedsale of the shares by the NBOC in FFL, should not presideover the meeting on the proposed sale or transfer of sharesof the NBOC to plaintiff No. 1. Further MOU dated 11th May,2001 between plaintiff and defendant No. 2 was valid uptil31.12.2001. Under the MOU, responsibility for satisfying conditions of the Main Agreement was of the plaintiff. Novalid or binding agreement exists between the plaintiff andthe bank, therefore, the bank cannot be restrained fromexercising its right to sell its shares to the non-sellingPrincipal Shareholders in FFL, as per the Main Agreement.The bank cannot be compelled to sell its shareholding only tothe plaintiff. In Black's Law Dictionary, while explaining the meaning of the words "Implied waiver", it is further stated:
"To make out a case of implied "waiverof a legal right, there must be a clear, unequivocal and decisive act of the party showing such purpose, or acts amountingto an estoppel on his part."
12. As noticed above, the material relied upon by the plaintiffs in support of their contentions that the defendants had impliedly waived their right of First Optionprovided under Article 5.2 of the Main Agreement of that theyare estopped from pleading otherwise (SIC) allacceptable. This contention is thus rejected.
13. Law with regard to the grant of interlocutory injunctions during pendency of proceedings is well settled byseveral authoritative pronouncements of the Apex Courtincluding Gujarat Bottling Co. Ltd. and Ors. v. Coca Cola Co.and Ors., . The plaintiffs have failed to showa prima facie case, the balance of convenience in theirfavor and that they will suffer irreparable loss of injury. Therefore, no case for continuation of interlocutory injunction is made out.
14. For the foregoing reasons, applications being I.As. 5511/2002, 5513/2002 and 5662/2002 under Order 39 Rule 4CPC are allowed. Order dated 15th May, 2002 is recalled andthe interim order is hereby vacated. Plaintiff's IANo. 4685/2002, whereupon the said interim orders were obtainedis dismissed. However, it is made clear that any observation made herein shall not affect the merits of the case or other proceedings between the parties.