Calcutta High Court (Appellete Side)
Kahm Industries Pvt. Ltd vs Punalur Paper Mills Ltd. & Ors on 5 April, 2022
1
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
Present:
The Hon'ble Justice Soumen Sen
And
The Hon'ble Justice Ajoy Mukherjee
FMAT 612 of 2021
with
I.A No. CAN 1 of 2021
KAHM Industries Pvt. Ltd.
Vs.
Punalur Paper Mills Ltd. & Ors.
with
FMA 752 of 2021
Punalur Paper Mills Ltd.
Vs.
M/s. Lindsey Towers Pvt. Ltd. & Ors.
with
FMA 753 of 2021
Punalur Paper Mills Ltd.
Vs.
M/s. Lindsey Towers Pvt. Ltd. & Ors.
with
FMAT 698 of 2021
with
CAN 1 of 2021
Punalur Paper Mills Ltd.
Vs.
M/s. Lindsey Towers Pvt. Ltd. & Ors.
with
FMAT 699 of 2021
with
CAN 1 of 2021
Punalur Paper Mills Ltd.
Vs.
IndusInd Bank Ltd. & Ors.
For the Appellant : Mr. Jishnu Saha, Sr. Adv
Mr. Ratnanko Banerjee, Sr. Adv
Mr. Sakya Sen, Adv.
Mr. Sumanta Ganguly, Adv.
Mr. Souradipta Banerjee, Adv.
2
Ms. Fatima Hassan, Adv.
For the Respondents : Mr. Arnab Basu Mallick, Adv.
Mr. Sakya Sen, Adv.
Mr. S.R. Kakrania, Add.
Mr. Tanuj Kakrania, Adv.
Mr. Aviroop Mitra, Adv
Hearing concluded on : 24th February, 2022
Judgment Date : 5th April, 2022
Soumen Sen, J.: In view of the similarities and commonalities of the
issues involved, the appeal, cross-appeal and all connected applications, by
consent of the parties, are taken up together and disposed of by this
common order.
The dispute is concerning the right to receive compensation in respect
of premises situated at 13 Nellie Sengupta Sarani, Kolkata 700087, (in
short, 'said premises').
KAHM Industries Private Limited (formerly known as 'Lindsay Tower
Private Limited') (in short 'the KAHM') is claiming to be the owner of the said
property purchased under a deed of conveyance dated 5th April, 2003 from
Punalur Paper Mills Limited, in short, 'the Punalur'.
The deed of conveyance refers to three schedules. The First Schedule
describes the land together with structure. The Second Schedule has two
parts: Part I gives the detailed description and particulars of the portions
under the possession of different occupiers and Part II gives the details of
writ applications and other legal proceedings pending before the Hon'ble
High Court at Calcutta in relation to the said property. The third schedule
gives the list of tenants.
Presently, we are concerned with the compensation received in
connection with the acquisition proceedings which are described in Part II of
the second schedule. It provides particulars of the proceedings initiated by
Punalur against the State of West Bengal in respect of the Notification
issued under Section 4 and Declaration under Section 6 of the Land
Acquisition Act in concerning the basement, ground-floor, second-floor and
a portion of the fifth floor amongst others of the premises in question.
The deed of conveyance also refers to a compromise decree dated 24th
March, 2003 passed in C.S. No.59 of 2003 by the Hon'ble High Court at
Calcutta in a suit for specific performance of the Agreement for sale dated
4th March, 2002 and for other reliefs, whereby Punalur was directed to
complete the sale and/or transfer of the "said premises" in favour of the
KAHM at a total consideration of Rs. 4.50 crores and Punalur was required
to take appropriate steps within six months from the date of execution of the
Deed of Conveyance, to recover the vacant and peaceful possession of the
"said portions in possession of the occupiers", described in Part I of the
Second Schedule. The said deed of conveyance has clearly stated that
KAHM shall be solely and exclusively be entitled to receive an appropriate
amount of compensation pending before the Court at the time or as may
hereafter become payable on account of and in respect of the "said portions
in possession of the occupiers" as more fully described in Part I of the Second
Schedule, which at the relevant time were subject matter of writ applications
filed against the State Government concerning acquisition and requisition of
the said portions of the property.
After the said agreement on 15th May, 2010, Mr. Kunal Dalmia and his
associates representing about 52.76 per cent of the equity of Punalur
decided to sell their shareholdings in favour of third parties. Accordingly an
agreement was entered into on 15th May, 2010 between Punalur and KAHM
which not only acknowledges that the third parties became the majority
shareholder of Punalur but also reaffirms and reiterates that KAHM would
have the right to prosecute and/or defend all litigations and/or proceedings
concerning the acquisition proceedings and would have the exclusive right
to receive and recover the compensation amount in respect of portions of the
suit property which were the subject matter of litigations in the name of
Punalur but at its cost, and for such purposes KAHM would be entitled to
operate a separate Bank account being No.0015-608737-060 (previous
account no. 200001818875) with M/s. IndusInd Bank Limited situated at
3A Upper Wood Street Branch, Kolkata 700017, albeit in the name of
Punalur for the purpose of depositing, realizing and encashing the amount
of such compensation and any other amount as may be received and/or
realized in respect of the portions of the suit property. The said agreement
also provided that Punalur would execute an irrevocable power of attorney
in favour of KAHM or its nominee/s authorizing him/them to represent
Punalur in all the litigations. The said agreement was signed by the majority
shareholders of Punalur including Mr. T K Sundaresan, chairman and
whole-time director of Punalur and one of the plaintiff in suit no. 613 of
2021.
KAHM in the proceeding has disclosed documents, showing that the
reconstituted board of Punalur confirmed that Mr. T K Sundaresan had the
authority to execute a power of attorney in favour of Mr. Kunal Dalmia and
Mr. Ronoj Roy Chowdhury as the lawful attorney of Punalur in terms of the
resolution dated 19th October, 2011.
KAHM claims that by virtue of the deed of conveyance dated 5th April,
2003 followed by the agreement dated 15th May, 2010 and the power of
attorney executed in favour of the two aforesaid persons, compensation
proceedings were pursued and out of several proceedings initiated, in one of
such land acquisition proceedings concerning acquisition of the basement
and ground floor of the property in question, a decree was passed on 6th
December, 2018 by the learned District Judge, Alipur in respect of L.A. case
no. 38 of 2007 for an amount in excess of Rs. 27 crores.
The State of West Bengal preferred an appeal against the said award
being FAT no.473 of 2019 by a Co-ordinate Bench on 19th October, 2020.
The learned Appellate Court after taking into consideration the submission
made on behalf of the State of West Bengal, that on a calculation made on
the basis of the impugned judgment and order, Punalur would be entitled to
receive more than Rs.27 crores as compensation, the State of West Bengal,
was directed to deposit the said sum on 20th November, 2020 with the
learned Registrar General of this court. The State of West Bengal as well as
the learned Registrar General was directed to notify Punalur about such
deposit. Within seven days of receiving of such deposit, the learned Registrar
General was directed to make payment of 25 per cent of the said amount to
Punalur and invest the balance amount in a short term fixed deposit
earning the highest rate of interest in a nationalized bank upon intimation
to the parties. The appeal was adjourned till 2nd December, 2020 for further
consideration as to what further amount could be directed to be disbursed
to Punalur pending appeal. Thereafter on 4th January, 2021 on the basis of
the submission made by the State of West Bengal that there was a mistake
in calculation, instead of Rs.27 crores the figure should be
Rs.18,l1,40,003/-, the Co-ordinate Bench permitted Punalur to withdraw 50
percent of Rs.18,11,40,003/- on the basis of the judgment of Hon'ble
Supreme Court in Baburao v State of Maharashtra, reported in 2017 (11)
SCC 334, without security and the prayer for release of balance 50 percent
of Rs. 18,11,40,003/- upon furnishing security was left open to be decided if
any formal application is made in this behalf by Punalur.
In terms of the aforesaid order, Mr. Ranoj Roy Chowdhury, one of the
power of attorney holders of Punalur received a demand draft being
No.120984 dated 31st May, 2021 for Rs.9,05,70,001.50/- drawn on Central
Bank of India in favour of Punalur Paper Mills Limited on June 1, 2021 and
deposited the said amount in the designated bank account.
The dispute started after the Order dated 4th January, 2021, and
escalated when the said amount was withdrawn after depositing the said
amount in the designated account.
The plaintiff/KAHM alleged that after the aforesaid order Punalur in
collusion with the other defendants were threatening to close the designated
M/s IndusInd Bank account maintained with IndusInd Bank, Wood Street
Branch, Kolkata so that KAHM would be unable to deposit the
compensation amount in the said Bank Account and thereafter withdrawing
the said amount. Punalur instructed the IndusInd Bank to close the said
Bank Account with a view to deprive KAHM to receive and use the said fund
to which they were otherwise entitled under the said agreement.
In view of the aforesaid, in March, 2021 KAHM filed a suit being Title
Suit No.314 of 2021 praying inter alia, for declaration that the said
agreement dated 15th May, 2010 is still in force and the subsisting and
binding upon the defendant no.1 including rest of the defendants. The
defendants have no right to close the said account mentioned in Schedule-B
of the plaint and further, KAHM also prayed for permanent injunction
restraining the defendants and their men and agents from closing the said
account. Simultaneously, KAHM filed an application for injunction
restraining Punalur and the other defendants from closing the designated
bank account and restraining them from creating any obstruction in the
operation of the said bank account. In the said application the learned Trial
Court passed an ad-interim order of injunction on 6th March, 2021 whereby
Punalur and other defendants were restrained from closing the bank
account till 6th April, 2021. The said interim order continued for some time.
Soon thereafter on 11th May, 2021, Punalur revoked power of attorney
granted earlier in favour of Kunal Dalmia and Ranoj Roy Chowdhury on 15th
May, 2010 and 19th October, 2011.
In or about 11th May, 2021 Punalur filed a suit before the City Civil
Court being Title Suit no. 613 of 2021 praying inter alia, for declaration that
Punalur alone is entitled to operate the said bank account standing in the
name of Punalur through its authorised signatory Shri T.K. Sundaresan, the
chairman and managing director of Punalur in respect of the said bank
account being No.0015-608-737-060 (previous account no. 200001818875)
with M/s IndusInd Bank and a further declaration that the defendant bank
has no authority to permit persons who are not representative of the plaintiff
company to operate the said bank account. Punalur also prayed for a decree
for permanent injunction restraining the bank from permitting any person
other than the plaintiff represented by T.K. Sundaresan to operate the Bank
account in accordance with the resolution of the Board of Directors of
Punalur dated 25th February, 2021 and all the subsequent resolutions of
Punalur in respect of this aforesaid bank account.
Punalur also filed an application for injunction on 21st May, 2021,
under order 39 Rule 1 and 2 of the Code of Civil Procedure in which an
order was passed on 21st May, 2021 whereby the IndusInd Bank was
restrained from permitting any person to withdraw, encash and/or transfer
any amount from the said bank account till 19th June, 2021. It was further
observed that for proper adjudication, T.S. No.314 of 2021 would be heard
analogously with Title Suit No.613 of 2021. Punalur was directed to add
M/s Lindsay Power Private Limited as defendant no.3.
In view of the aforesaid order dated 21st May, 2021, IndusInd Bank
refused KAHM to operate the said Bank account and disallowed withdrawal
of any compensation amount. KAHM after being aware of the said ex-parte
ad-interim order dated 21st May, 2021, preferred an appeal before the Co-
ordinate Bench of this Court being FMAT No. 377 of 2021. The appeal was
allowed on 17th June, 2021 by setting aside the ex-parte ad-interim order
dated 21st May, 2021. The learned Trial Court was directed to hear the
injunction application filed by Punalur afresh in the presence of the parties.
Whether KAHM was to be added as a party in the suit was left open to be
decided by the learned Trial Court. In view of the fact that the injunction
application filed by Punalur was made returnable before the learned Trial
Judge on 19th June, 2021, the Hon'ble Division Bench observed that during
this intervening period neither party "will act in such a manner so as to make
the interim application before the court below infructuous".
KAHM appears to have made a communication dated 18th June, 2021,
to the IndusInd Bank requesting the said Bank to honour the cheque
bearing No.439199 drawn on 2nd June, 2021 duly signed by Kunal Dalmia
and deposited the sum in the designated bank account maintained with the
IndusInd Bank. On the basis of the aforesaid request IndusInd Bank on 23rd
June, 2021 encashed the said cheque of Rs.9.05,70,001/- to be credited to
an account of KAHM.
The application filed by Punalur for addition of KAHM as defendant
No.3 in T.S. No. 613 of 2021 was allowed by Order No.5 dated 30th June,
2021. By the said order, the learned Trial Court observed that neither party
would be allowed to operate the bank account in any manner, whatsoever
till the injunction application as well as the application filed under Section
151 of the Code of Civil Procedure are disposed of on merits.
The learned Trial Court in a subsequent order dated 23rd July, 2021
passed in T.S. No.613 of 2021 observed that IndusInd Bank exceeded its
jurisdiction in allowing KAHM to withdraw the aforesaid money and in
violation of the order passed by the Hon'ble High Court earlier. It was
observed that KAHM committed criminal breach of trust and therefore
KAHM was directed to revert the said transaction. KAHM was directed to
refund the money in the account where the compensation money was
originally deposited within a period of one week. KAHM being aggrieved by
the said order preferred a Civil Revision before the learned Single Judge of
this court being C.O. No.1339 of 2021.
The said application was disposed of on 7th September, 2021 whereby
the learned Trial Judge was directed to dispose of the application filed by
Punalur positively within a period of two weeks from date without granting
any unnecessary adjournment to either of the parties. It was further
observed that in the event Punalur succeeds in the pending application for
injunction, KAHM would be obliged to return the said sum of Rs. 9 crores to
the account where it was lying earlier.
On the basis of the aforesaid direction the learned 6th Bench, City Civil
Court at Calcutta by Order No.18 dated 22nd September, 2021, was pleased
to dispose of the said injunction application filed by Punalur holding, inter
alia,
"It appears that the entire proceeding initiated by the Plaintiff
[Punalur] is a deceitful action on the part of the Plaintiff and the
same Director who has taken part in Conveyance and Agreement, as
well as Power of attorney, came before this court for the relief which
he is not entitled and this case has no leg to stand upon. It is a futile
attempt by Plaintiff, and this injunction application must be ended
into dismissal. Hence, as an interim measure, to preserve the
amount desposited in bank, it was ordered that neither party was
allowed to operate the bank account in any manner whatsoever till
the disposal of this case and well as TS No. 314 of 2021."
This order has resulted in an appeal and cross-appeal by the parties.
Interestingly, Punalur filed the cross-appeal after KAHM filed an
appeal.
Mr. Jishnu Saha, learned Counsel appearing on behalf of KAHM
submitted that once the Learned Court has arrived at a finding that the
entire proceeding initiated by Punalur is a deceitful action and the director
who had taken active role in the execution of the conveyance and agreement
as well as power of attorney approached the trial Court for the relief to
which Punalur is not entitled to, the Trial Court could not have prevented
KAHM from operating the said bank account and/or to use or utilize the
compensation amount and from receiving further compensation amount.
The said impugned order having recognized that Punalur does not have any
right to any of the reliefs in the suit ought to have restored its earlier order
and permitted KAHM to operate the said bank account and realise the
compensation amount, if required, upon conditions as may be deemed fit
and proper.
Mr. Saha had drawn our attention to several pages of the Deed of
Conveyance dated 5th April, 2003 more particularly internal pages at 72, 78,
105-113 and 132-134 of the FMAT No.612 of 2021 and submitted that the
recitals in the deed of conveyance mentioned at those pages would clearly
show that the right to receive the compensation was transferred by the said
recitals in favour of KAHM which was in the nature of chose in action as it
includes all forms of beneficial interest be it "existent, accruing, conditional or
contingent" as defined in Section 3 of the Transfer of Property Act, 1882 and
that the transfer of such right by way of and/or under the conveyance
together with the transfer in interest in the immovable property is in
accordance with Section 130 of the Transfer of Property Act, 1882.
The actionable claim was already transferred by the Deed of
Conveyance in 2003 and the Agreement of 2010 only recognized and
reiterated the transfer of the actionable claim besides allowing the
designated Bank Account in the name of Punalur to be operated by KAHM
and/or its nominees only for the purpose of realizing, receiving and
encashing the compensation amounts, mesne profit and other amounts as
may be hereafter received and/or realized on account and in respect of the
portions of the said 'Property', from the proceedings and as would be evident
from clause 5 of the said Agreement dated 15th May, 2010.
Mr. Saha submitted that Punalur in its plaint has admitted to have the
knowledge of deed of conveyance dated 5th April, 2003 but has made
unfounded and baseless allegation that "the same was brought into existence
by undue influence, fraud for which, the plaintiff is initiating separate
proceedings for cancellation."
However, subsequent facts and conduct of the parties in relation to the
said agreement dated 5th April, 2003 and the agreement dated 15th May,
2010 would clearly show and establish beyond any doubt that the parties
were ad idem with regard to the entitlement of KAHM to the compensation
amount arising out of the acquisition proceedings. It was submitted that
initially Punalur challenged the validity of the agreement dated 15th May,
2010 without, however, challenging the deed of conveyance dated 5th April,
2003. Such challenge to the Agreement without challenging the conveyance
would be clearly meaningless, as the Agreement only ratifies the transfer of
the actionable claim made by the conveyance.
The challenge to the agreement, in any event, as on date, would not be
maintainable in view of Article 59 of the Limitation Act, 1963 and also
barred by the principles of Order II Rule 2 of the Code of Civil Procedure.
The learned Senior Counsel has submitted that in the plaint filed by
Punalur being Title Suit No. 613 of 2021 no particulars of fraud or undue
influence have been furnished as mandatorily required under Order VI Rule
IV of the Code of Civil Procedure. Merely because Mr. Kunal Dalmia was a
director of both Punalur and KAHM at the time of the execution of the
conveyance, it does not necessarily follow that the conveyance or the
subsequent agreement of 2010 was vitiated by or fraud, undue influence
and, thus it was submitted that in absence of full particulars of fraud or
undue influence the suit itself is liable to be dismissed. In this regard Mr.
Saha has relied upon the decision of the Hon'ble Supreme Court
Sangramsinh P. Gaekwad and Ors. v Shantadevi P. Gaekwad (Dead)
thr. Lrs. and Ors. reported in 2005 11 SCC 314 paragraphs 182, 208,
210 and 212.
It was submitted that the necessity of the 2010 Agreement in spite of
there being express clauses in the Deed of Conveyance of 2003 conferring
the right upon the KAHM to receive compensation as would appear from
recital "F" at internal page 6 of the said Agreement clearly implying that
there was change in management of Punalur and the members of the new
management controlling about 52.76% now decided to enter into the said
Agreement to confirm the rights already vested upon the KAHM by the
Conveyance and to give effect to the same. T.K. Sundaresan, Managing
Director of the Plaintiff, who has affirmed the Plaint and the Injunction
Application himself had signed the agreement of 2010 along with others who
had purchased shares representing 52.76%. In view thereof Punalur is now
estopped from raising any challenge as regards the said agreement.
Per contra, Mr. Souradipta Banerjee the learned Senior Counsel
appearing on behalf of Punalur submitted that Mr. Kunal Dalmia who
happened to be one of the Directors of Punalur played a pivotal role in
getting the said property transferred in favour of his another company
Lindsey Towers Private Limited which has been subsequently renamed as
KAHM Industries Private Limited. The approximate value of the said
property was about 80 crores to 100 crores.
Mr. Banerjee submitted that in view of the abominable conduct of
KAHM in withdrawing a part of the compensation amount disregarding the
order passed by the learned Trial Court as well as by the Co-ordinate Bench,
the proceeds of the acquisition proceeding required to be secured and
preserved till the disposal of both the suits and an appropriate order might
be passed directing KAHM to deposit the said sum of Rs.9 crore to the said
bank account till the disposal of the suit. Mr. Banerjee further submitted
that none of the parties should be allowed to utilize the compensation
amount till both the suits are decided on merits.
It was submitted that from the Schedule of the said Deed of
Conveyance dated 5th April, 2003 it would be evident that only the property
in question being premises no.13, Nellie Sengupta Sarani was transferred
along with the arrears of acquisition amounts, interest thereon and/or
actionable claim. In the recital and body of the said deed the mentioning of
arrear interest and/or compensation amount that accrued to the appellant
could not have been transferred without separate deed of assignment.
Mr. Banerjee by way of illustration submitted that if a property 'A' is
transferred and in the recital portion of the said deed, it is surreptitiously
mentioned that the property 'B' is also transferred along with 'A' property
without any mention of property 'B' in the Schedule of the Deed, the said
transfer would never tantamount to transfer of property 'B' in favour of the
transferee.
According to Mr. Banerjee reference to Section 3 of the Transfer of
Property Act, 1882 by Mr. Saha would not apply as the said provision does
not include any previously accrued interest or actionable claim as envisaged
in Section 8 of the Transfer of Property Act, 1882. In this regard Mr.
Banerjee had relied upon the decision of the Hon'ble Supreme Court in
Sheikh Noor and Ors., v. Sheikh Ibrahim (dead) by Lrs reported in
(2003) 7 SCC 321 (paragraph 18), where it has been held that arrears of
rent for the property cannot be claimed unless separately assigned or
conveyed to the transferee owner.
Mr. Banerjee strenuously argued that KAHM could not give any
satisfactory reply as to why after more than 28 years of transfer of the
aforesaid property the Bank account still remained in the name of Punalur
Paper Mills Limited and the name of KAHM Industries does not appear in
the municipal records.
It was further contended that in the balance sheet and the auditors'
report of KAHM for the year 31st March, 2020 the suit property was not
shown under the head Property, Plant and Equipment, Tangible Assets and
therefore the suit property i.e. 13, Nellie Sengupta Sarani, was never
declared to be a property of KAHM.
Mr. Banerjee further submitted that even if it is assumed that KAHM
was entitled to receive the compensation amount on behalf of Punalur the
obligations on the part of KAHM to pay the Municipal rates and taxes and
Income Tax dues that became payable on the compensation amount
received by KAHM which however, were conveniently avoided.
Mr. Banerjee tried to impress upon the Court that in the given facts
and circumstances, the parties to both the suits should be restrained to
operate the bank accounts and the compensation amount present and
future should be secured and preserved till the disposal of both the suits.
KAHM should be directed to deposit Rs. 9,00,00,000/- wrongfully
withdrawn from IndusInd bank in violation of court order.
We have heard both the parties at length.
The interlocutory injunction is an equitable remedy, made necessary by
the delays before actions come to court, designed to ensure that no
irreparable harm is caused to the respective rights of the parties before the
trial and to preserve the effectiveness of any judgment in the final action.
Lord Diplock in American Cyanamid Co v Ethicon Ltd reported in
[1975] 1 All E.R. 504, had observed, that; "It is no part of the court's
functions at this stage of the litigation to try to resolve conflicts of evidence on
affidavit as to facts on which the claims of either party may ultimately depend
nor to decide difficult questions of law which call for detailed argument and
mature consideration."
Roskill L.J. discussed that the mere existence of a prospect of success
should not be conclusive so far as the award of an interlocutory injunction
is concerned in Tetrosyl Ltd. v. Silver Paint and Lacquer Co. Ltd.
reported in [1980] F.S.R. 68. Here the plaintiff had argued that if there is a
serious issue to be tried it ought to follow automatically that an
interlocutory injunction would be given, because otherwise there would be
an offence against the basic principle laid down in Cyanamid that the court
must not ask itself whether or not a plaintiff is likely to succeed at the trial.
Roskill L.J., with the agreement of Lawton L.J., rejected this saying that,
"It cannot be that in every case where the plaintiff can show that he has
a claim which is not frivolous, an interlocutory injunction should automatically
follow as a matter almost of right. The court must always have discretion
whether or not it will grant an interlocutory injunction." (See Interlocutory
Injunctions Since Cyanamid (supra)).
Historically, it is an equitable remedy, since it derives from the former
courts of Chancery, and accordingly it has a discretionary character. Now,
even in England, it is statutory. In India, it is statutory in nature.
The remedy of injunction was undoubtedly borrowed by the
Chancellors from the "interdicts" of the Roman Law.
The need for such protection, however, has to be judged against the
corresponding need of the defendant to be protected against injury resulting
from exercising his own legal rights. The court must weigh one need against
another and determine where the balance of convenience lies and may pass
an appropriate order in exercise of its discretionary power. (See. Colgate
Palmolive (India) Ltd. v. Hindustan Lever Ltd. reported in (1999) 7 SCC
1: AIR 1999 SC 3105).
At the stage of deciding the application for temporary injunction, the
Court is not required to go into the merits of the case in detail and hold a
mini trial. What the Court has to examine is (i) the plaintiff has a prima facie
case to go for trial; (ii) the protection is necessary from that species of
injuries known as irreparable before his legal right can be established; and
(iii) that the mischief of inconvenience likely to arise from withholding
injunction will be greater than what is likely to arise from granting it.
Lord Diplock put it broadly in NWL v Woods [1979]3 All E.R. 614 at 624:
'In assessing whether what is compendiously called the balance of
convenience lies in granting or refusing interlocutory injunctions in
actions between parties of undoubted solvency the judge is engaged
in weighing the respective risks that injustice may result from his
deciding one way rather than the other at a stage when the
evidence is incomplete.'
The hearing of an application for an interim injunction is not a trial on
the merits. There is usually no oral evidence and no opportunity for cross-
examination. The full pre-trial processes of disclosure and inspection of
documents have not occurred; indeed the statements of each side's case
may not yet have been served. The criteria applied must inevitably be
different, because neither side's case can be "proved" as at a final hearing.
The function of an interim injunction is often described as a process which
is designed to "hold the ring" (see e.g. United States of America v Abacha
reported in [2015] 1 W.L.R. 1917) pending final determination of the merits
or other disposal of the dispute.
KAHM has contended that right to receive compensation is an
actionable claim. An actionable claim must be a claim either to a debt or to
a beneficial interest in movable property. The beneficial interest is not the
movable property itself, and may be existent, accruing conditional or
contingent. The movable property in which such beneficial interest is
claimed, must not be in the possession of the claimant. An actionable claim
is therefore an incorporeal right. (See: TATA Consultancy vs. State of AP
reported in 2005 (1) SCC 308).
The right to claim compensation in favour of KAHM arises from the
deed of conveyance read with the agreement dated 15th May, 2010. The deed
of conveyance is required to be read as a whole in order to find out the
intention of the parties. The recitals in the deed of conveyance clearly shows
that KAHM would solely and exclusively be entitled to receive an appropriate
amounts of compensation now pending or as may hereafter become payable
on account of and in respect of the acquisition proceedings. It clearly refers
to the present and the future right of the KAHM to receive the said
compensation and gives power to KAHM to continue such proceedings in the
name of Punalur but at the expense of KAHM.
This was reiterated after there was a change of shareholding in Punalur
on 15th May, 2010. In fact, an irrevocable power of attorney was executed in
favour of Kunal and Ranoj. The said power of attorney holders pursued the
proceedings on behalf of Punalur that had ultimately resulted in a decree
being passed in favour of Punalur being L.A. case no. 38 of 2007 for an
amount in excess of Rs. 27 crores.
Punalur was unable to demonstrate before us that they had pursued
the aforesaid proceedings at their own cost and expenses. Punalur has not
denied the execution of the deed of conveyance, the agreement dated 15th
May, 2010 and the power of attorney which was revoked only on May 11,
2021. It is interesting to note that the power of attorney holders represented
Punalur in the writ petition filed by the State of West Bengal being FAT
no.473 of 2019 in which an order was passed for the release of part of the
compensation amount to Punalur. These facts conclusively prove for the
purpose of the interlocutory application that the power of attorney was acted
upon and KAHM has conducted such proceeding for and on behalf of
Punalur.
The question arises whether this money should exclusively belong to
KAHM or Punalur could have a claim on the said money. The learned Trial
Judge noticing that Mr. T.K. Sundaresan, the Managing Director of Punalur,
who was one of the signatories to the agreement dated 15th May, 2010,
power of attorney dated 15th May, 2010 and 21st November, 2011, signed the
plaint on behalf of Punalur had taken a completely contrary stand in the
proceeding with a view to defeat the right of KAHM observed that the
proceedings initiated by Punalur was deceitful and frivolous.
Initially Punalur did not file a suit for cancellation of the deed of
conveyance dated 5th April, 2003. It is difficult for Punalur at this stage to
contend that they were not aware of the execution of the deed of conveyance
or subsequent documents giving exclusive rights to KAHM to receive and
deal with the compensation amount.
An argument has been advanced that Kunal Dalmia took an active part
in the deed of conveyance and the said property was sold at a meagre
consideration. However, nothing prevented the majority shareholders after
assuming control of Punalur to raise the issue and sue KAHM in
cancellation of the deed of conveyance.
On the contrary the majority shareholder have agreed to execute an
irrevocable power of attorney in favour of Kunal and Ranoj and required the
power of attorney holder to prosecute and defend all actions against Punalur
concerning the property in question at the cost of KAHM.
This clearly establishes that the cancellation of the power of attorney is
prima facie illegal as it is an agency coupled with interest. Even if one may
be persuaded to ignore the other claims of KAHM, the right that accrued in
favour of KAHM by reason of acts done in pursuance of the power of
attorney needs to be preserved.
At the same time Punalur cannot be made to suffer for Income Tax
payable on the compensation amount as Punalur is not receiving the money
and accordingly it cannot be treated as their income on which any tax can
be levied.
Mr. Saha, learned Senior Counsel appearing on behalf of KAHM has
submitted that no demand so far has been raised by Punalur for payment of
Income Tax dues and KAHM is willing to reimburse Punalur for any amount
payable towards Income Tax in respect of the suit property.
The KAHM had in the meantime realised a sum of Rs.9,05,70,001.50/-
on the basis of the order passed by the Co-ordinate Bench on 4th January,
2021 in FAT No.473 of 2019. It is undisputed that the power of attorney was
revoked much later on 11th May, 2021 and at that time KAHM was entitled
to the said amount. A suit filed subsequently cannot deny the payment of
such compensation amount without Punalur establishing their right to
receive the said compensation amount on revocation of the power of
attorney. However, the learned Trial Court did not permit the parties to
utilize the compensation amount till the disposal of the suit.
With a view to hold the ring pending final adjudication we permit KAHM
to retain and utilize the said amount upon furnishing security to the
satisfaction of the learned trial Court. In so far as the balance sum of
Rs.9,05,70,001.50/- deposited in connection with LA case no.38 of 2007 we
are not inclined to direct the Registrar General to release the said amount at
this stage, on consideration of the decision of the Hon'ble Supreme Court in
Baburao vs. State of Maharashtra, reported in 2017(11) SCC 333.
Since we are of the prima facie view that the cancellation of the power of
attorney was illegal and the documents executed in favour of KAHM are
establishing a clear right to receive the compensation, at this stage we do
not direct KAHM to return the said sum of Rs.9,05,70,001.50/- to Punalur.
Mr. Jishnu Saha, learned Senior Counsel appearing on behalf of the
KAHM has strenuously argued that the suit filed by Punalur Paper Mills
Limited is not maintainable in law and expressly barred by limitation under
Order II Rule 2 of the Code of Civil Procedure. It is submitted that the
application for rejection of the plaint is pending before the learned trial
Court; we request the learned trial Judge to dispose of the said application
expeditiously, without being influenced by any observations made in this
judgment.
The impugned order is modified to the aforesaid extent.
The appeals and cross appeals along with all the connected
applications are accordingly disposed of.
The department is directed to send down LCR at the earliest. The
Registrar Administration (L & OM) is to ensure compliance.
However, there shall be no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given
to the parties on an usual undertaking.
I agree (Soumen Sen J.)
(Ajoy Kumar Mukherjee J.)
Later:
After the judgment is pronounced Mr. Souradipta Banerjee, learned
Senior Counsel appearing on behalf of the Punalur Paper Mills Limited has
prayed for stay of the operation of the order, in so far as our observation
with regard to the power of attorney is concerned.
The said prayer is considered and rejected.
(Ajoy Kumar Mukherjee J.) (Soumen Sen J.)
