M/S. Morgan Stanley Mutual Fund vs Piyush Aggarwal And Another
1994 Latest Caselaw 7 Del

ORDER

1. Morgan Stanley Mutual Fund (hereinafter called MSMF) published advertisements on 13th December, 1993 for public issue commencing on 6-1-94. The respondent No. 1, a practicing Chartered Accountant and respondent No. 2, a practicing Advocate felt aggrieved by the said advertisement regarding public issue hence filed a suit for permanent injunction on 23-12-93. With the said suit an application under Order 39, Rules 1 & 2 read with Section 151, CPC was filed seeking ad interim injunction thereby restraining the petitioner from floating its public issue of 30 crores units of Rs. 10/- per unit on 6-1-94. The main grievance of the respondents as per the plaint can be summarised thus, namely, that the public issue has been floated without the permission of the Securities and Exchange Board of India (hereinafter called the SEBI) and further that the units being offered for public subscription have not been approved or disapproved by the SEBI and that SEBI has neither certified on the accuracy nor on adequacy of the offering circulars. According to respondents on account of these facts presumption can be drawn that there was no approval by the SEBI and that the public issue is without any authority of the Board. The second grievance pointed out in the plaint is with regard to the allotment of units. It would be made on "first come first served basis". This according to the respondents is against the SEBI (Mutual Funds) Regulation, 1993. The "first come first served basis" shows that the MSMF will not refuse to accept the application money on achieving the target amount, but will allot the units on "first come first served basis" without disclosing or making arrangements for ascertaining the fact who came first. Moreover, it has not been mentioned in the public issue whether it was authorises by the board of directors/trustees by a Resolution nor any declaration has been mentioned in the circular regarding the compliance of the Indian Trust Act and the guidelines issued by the Govt. of India, Thus the sole object of the petitioner/MSMF, in advertising the public issue is to collect money from the public at large including the respondents by misleading and misinformation. It is in this background that the suit was filed Along with the Interlocutory Application.

2. The learned trial court on the basis of these allegations issued notice to the present petitioner for 14-1-94 and in the meanwhile passed the ad-interim order thereby restraining petitioner from floating the public issue of 30 crores units of Rs. 10/- per unit on the stipulated date i.e. 6-1-94.

3. Aggrieved by this order of interim injunction the petitioner invoked the jurisdiction of this Court under Article 227 of the Constitution of India. The petitioner by the present petition has assailed the impugned order on the ground that the learned subordinate Court has not exercised the jurisdiction properly. He having restrained the petitioner from floating the public issue on 6-1-94 ought not have adjourned the case to 14-1-94. This tantamounts to decreeing the suit. Even otherwise no reason has been assigned for granting the ex-parte ad-interim order. The learned trial court has not exercised the jurisdiction properly. Since the impugned order was passed on the last working day in the lower court hence the petitioner had no opportunity to invoke the provision of Order 39, Rule 4, CPC, or file the appeal as the courts were closed. Even the Additional District Judge on vacation could not have heard the appeal. Hence in the compelling facts and circumstances of this case present recourse has been adopted under Article 227 of the Constitution of India.

4. Respondents filed reply and were represented by Mr. R. P. Bansal, Sr. Advocate, and Mr. Arvind Jain, Advocate.

Mr. Bansal took preliminary objection regarding the maintainability of this petition, under Art. 227 of the Constitution of India. According to him, the order under challenge is appealable. Petitioner had a right to move under Order 39, Rule 4, C.P.C., or file appeal instead of invoking the extraordinary discretionary jurisdiction of judicial superintendence of this Court.

5. Admittedly order passed under Order 39, Rules 1 and 2, C.P.C., is an appealable order or an application for revocation of that order under O. 39, R. 4, C.P.C., could also be filed. The power under Art. 227 of the Constitution of India can only be invoked if the Court below has acted without jurisdiction or did not exercise the jurisdiction vested in him or acted illegally or improperly in exercise of his jurisdiction causing grave miscarriage of justice.

6. In the light of this well settled principle of law, we have to see whether the trial court in passing the impugned order acted without jurisdiction or illegally or improperly or that on account of exercising his jurisdiction any miscarriage of justice has been done. Facts have already been enumerated above. The public issue has to remain open for three days unless extended. In spite of these facts on record the trial court after granting restraint order fixed the case on 14-1-94, i.e. beyond the date of commencement of public issue. The impugned order was passed on 24-12-93 i.e. the last working day. Thereafter the Civil Courts closed for winter vacation till 2nd January, 1994. Hence the petitioner had no opportunity to move the trial court under Order 39, Rule 4, C.P.C., or could prefer an appeal earlier than 3-1-94. It is in this background that he invoked the discretionary jurisdiction of this Court. The facts on record show that the trial court was aware of the date when Public issue has to commence i.e. 6-1-94 and it has to remain open for three days. By fixing 14-1-94 the trial court virtually decreed the suit of the respondents for permanent injunction. The public issue would have become infructuous. There would riot be left anything for the Court to decide thereafter. The act of the trial court, to my mind, amounts to exercising the jurisdiction improperly. By giving the date beyond the date of public issue amounts to miscarriage of justice. To my mind, the circumstances of this case show that the trial court improperly exercised his powers. And if in a case like this, this Court does not exercise its extraordinary discretionary jurisdiction then it would amount to perpetuating the wrong. It would have serious consequences if not remedied at this stage. Even otherwise also there are no limits, fetters or restrictions placed on the power of judicial superintendence of this Court. In fact the power of superintendence under Art. 227 of the Constitution have been given to the High Court for the purpose of seeing that justice is meted out fairly and properly. As is apparent from the facts of this case, if this Court instead of exercising its power under Art. 227 remand the case or direct the petitioner to move under O.39, R.4, C.P.C., or file appeal at this stage it would be an act in futility. The date for commencement of the public issue is 6-1-94 i.e. hardly two days after, therefore, no useful purpose will be served in giving said directions. No doubt where an appeal is provided this Court should not interfere by any peremptory order with the ordinary course of jurisdiction. But at the same time we cannot loose sight of the fact that in cases wherein grave wrong is manifest and if allowed to continue it may cause irreparable loss by following regular procedure, in such an eventuality, this court must exercise its discretionary jurisdiction, and I see no reason why the same in the facts and circumstances of this case be not exercised by this Court. I hold that in the peculiar facts of this case, this petition is maintainable.

7. As the public issue is to commence on 6-1-94 it was considered that instead of remanding the case or directing the petitioner to invoke the provision of appeal, the petition on merits may also be heard as the reply by respondents is on record.

8. In the plaint, it was the case of the respondents that public issue was advertised without the permission of the SEBI. The units offered for public subscriptions had not been approved or disapproved by SEBI nor certified on the accuracy or adequacy. This contention, of the respondents raised in the plaint is contrary to the stand taken before this Court in the reply filed by them. In reply it has not been denied that the SEBI has accorded approval of the scheme on 23-11-93. Only objection taken in reply is with regard to non carrying of amendments as suggested by SEBI in letter and spirit. This shows that there was approval of the Scheme by SEBI and further documents placed on record show that the amendment as suggested have been carried out. Merely because disclaimer has not been printed in bold letter would not entitle the respondents to seek restraint order nor the public issue can be stopped on this ground. My attention has been drawn to a public issue published by ICICI Premier a public undertaking in which also disclaimer has not been printed in bold letters. As regards other amendments those have been incorporated. Mr. Bansal, however, pointed out that under the heading "Inspection of documents" it is the investor who is to be allowed inspection whereas the petitioner has permitted inspection to unit holder only. To this Mr. Jaitley clarified that all those investors whose application will be received within three days would become automatically unitholder. No one will be deprived of the unit. Hence in this case investor and unit holder is one and the same thing. Moreover after amendment, the printed form was submitted to SEBI for approval and after the approval of the printed form, every time when the advertisement has to be issued the same has to be got approved by the SEBI. The printed form Ex. D has been approved by the SEBI and so is the advertisement as is apparent from the letter issued by the SEBI dated 25-11-1983, Ex. G. Therefore, prima facie the petitioner has been able to bring home the fact that the ex parte injunction granted by the trial court cannot be sustained.

9. It is stated at Bar, by Mr. Jaitley, that the word "unit holders" mentioned in the heading "Inspection of Documents" stands for investors. In fact all those persons who will apply within three days of 6th January, 1994, will automatically become unit holders.

Petitioner Company has not made any distinction between investor and the unit-holder, therefore, "first come first served basis" in this sense would mean all those persons who will invest within three days of the commencement of the public issue. Therefore, the inspection will be allowed to every person who will apply. This format is approved by the SEBI.

10. For the reasons stated above, I find that prima facie no case is made out for grant of interim injunction. Even otherwise the balance of convenience is also not in favor of the respondents, on the contrary, if injunction is allowed it would cause irreparable loss to the petitioner. In this view of the matter, present petition is allowed and the ex parte restraining order passed by the trial court is hereby set aside. Any observation made in this order will have no bearing on the merits of the case.

11. Petition allowed.