Morgan Stanley Mutual Fund vs Piyush Aggarwal And Another
1994 Latest Caselaw 8 Del

JUDGMENT

Usha Mehra, J.

1. Morgan Stanley Mutual Fund (hereinafter called "MSMF") published advertisements on December 13, 1993, for public issue commencing on January 6, 1994. Respondent No. 1, 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 December 23, 1993. With the said suit an application under Order 39, rules 1 and 2 read with section 151 of the Civil Procedure Code, 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 January 6, 1994. 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 the SEBI has neither certified on the accuracy nor on adequacy of the offering circulars. According to the respondents, on account of these facts, a 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 a "first come first served basis". This according to the respondents is against the SEBI (Mutual Funds) Regulations, 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 not allot the units on a "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 authorised by the board of directors/trustees by a resolution nor has any declaration been mentioned in the circular regarding the compliance with the Indian Trusts Act and the guidelines issued by the Government 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 January 14, 1994, and in the meanwhile passed the ad interim order thereby restraining the petitioner from floating the public issue of 30 crores units of Rs. 10 per unit on the stipulated date, i.e. January 6, 1994.

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 January 6, 1994, ought to have adjourned the case to January 14, 1994. 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 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 of the Civil Procedure Code or file an 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, the present recourse has been adopted under article 227 of the Constitution of India.

4. The respondents filed replies and were represented by Mr. R. P. Bansal, Senior Advocate, and Mr. Arvind Jain, Advocate. Mr. Bansal took petition under article 227 of the Constitution of India. According to him, the order under challenge is appealable. The petitioner had a right to move under Order 39, rule 4 of the Civil Procedure Code or file an appeal instead of invoking the extraordinary discretionary jurisdiction of judicial superintendence of this court.

5. Admittedly an order passed under Order 39, rules 1 and 2 of the Civil Procedure Code, is an appealable order or an application for revocation of that order under Order 39, rule 4 of the Civil Procedure Code would also be filed. The power under article 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 its jurisdiction any miscarriage of justice has been done. The facts have already been enumerated above. The public issue has to remain open for three days unless extended. In spite these facts on record the trial court, after granting the restraint order, fixed the case on January 14, 1994, i.e. beyond the date of commencement of public issue. The impugned order was passed on December 24, 1993, i.e., the last working day. Thereafter the civil courts closed for the winter vacation till January 2, 1994. Hence, the petitioner had no opportunity to move the trial court under Order 39, rule 4 of the Civil Procedure Code, not could it prefer an appeal earlier than January 3, 1994. 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 the public issue has to commence, i.e., January 6, 1994, and it has to remain open for three days. By fixing January 14, 1994, the trial court virtually decreed the suit of the respondents for permanent injunction. The public issue would have become infructuous. There would not be left anything for the court to decide thereafter. This act of the trial court, to my mind, amounts to exercising the jurisdiction improperly. 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 place on the power of judicial superintendence of this court. In fact the power of superintendence under article 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 article 227 remands the case or directs the petitioner to move under Order 39, rule 4 of the Civil Procedure Code or file an appeal at this stage it would be an act in futility. The date for commencement of the public issue is January 6, 1994, i.e., hardly two days after, therefore, no useful purpose will be served in giving the 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 lose 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 January 6, 1994, it was considered that instead of remanding the case or directing the petitioner to invoke the provision of appeal, the petition may also be heard on the merits as the reply by the 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 subscription had not been approved or disapproved by the SEBI not certified for 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 to the scheme on November 23, 1993. The only objection taken in reply is with regard to non-carrying out of amendments as suggested by the SEBI in letter and spirit. This shows that there was approval of the scheme by SEBI and further documents place on record show that the amendments as suggested have been carried out. Merely because the disclaimer has not been printed in bold letters it would not entitle the respondents to seek a restraint order not can the public issue 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 holders only. To this Mr. Jaitley clarified that all those investors whose applications are received within three days would become automatically unit holders. No one will be deprived of units. Hence, in this case, investor and unitholder is one and the same thing. Moreover, after amendment, the printed form was submitted to the SEBI for approval and after the approval of the printed form, every time 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 November 25, 1983, Ex. D 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 the 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 apply within three days of January 6, 1994, will automatically become unit holders. The petitioner-company has not made any distinction between the investor and the unitholder, therefore, "first come first served basis" in this sense would mean all those persons who invest within three days of the commencement of the public issue. Therefore, inspection will be allowed to every person who applies. 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, the present petition is allowed and the ex parte restraining order passed by trial court is hereby set aside. Any observation made in this order will have no bearing on the merits of the case.