PYRAMID SAIMIRA THEATRE LTD Vs. S MURUGAN

JUDGEMENT

(1.) I have gone through the judgment so meticulously prepared by my learned Brother Kannan, J and I agree with the same. However, I would like to supplement (not supplant) by observing as follows :-There is no dispute about the right of the Bank to recover the amount borrowed from such Bank along with interest as per the transaction. There is also no dispute that the Bank has right to sell the property concerned, namely, the Theatre complex. The Company and its shareholders, who have been impleaded as interveners, unanimously agree that one time settlement with the Bank is beneficial for the Company and its shareholders. However, either individually or collectively they are not in a position to arrange for the huge fund required to complete the one time settlement. In other words, even though all of them are impugning the transactions with fourth and fifth defendants by the second defendant, they have unanimously submitted that one time settlement should not be allowed to fall-through. They are also not in a position to repay the amount received from fourth and fifth defendants. Senior Counsel appearing for the Bank has unequivocally stated that if the Bank is forced to wait indefinitely, it will not be in a position to honour the one time settlement and it will be forced to pursue its statutory remedy by completing the proceedings under the SARFAESI Act and realize the amount due to it along with the normal rate of interest by selling the property in question. Senior counsels appearing for fourth and fifth defendants have also submitted that in case they are not able to enjoy the benefit of the transactions for which they had advanced huge amount, they would be forced to pursue their right by availing legal remedy for refund of the amount paid by them with interest.In such a scenario, not only the benefit of the one time settlement would not be available to the Company and its shareholders, but also the Company would be embroiled in further litigations and the ultimate result would either be same or even more disastrous. In order to avoid such disastrous consequence, the Board of Directors of the Company, which is the plaintiff in one of the cases, has passed a resolution subject, of course, to the approval of the appropriate authorities so that the Theatre complex can be sold off and the amount payable either to the bank or the fourth and the fifth defendants, as the case may be, can be repaid. The overwhelming majority of the shareholders through their Counsels have also submitted that the best possible solution would be to sell-off the property so that the surplus amount can be distributed among all the shareholders after meeting all the liabilities. The only objection has emanated from some of the shareholders, who represent comparatively much less shares. As a matter of fact, the Senior Counsels, representing such shareholders who are far less in number, have only suggested that any alternative property should be sold and not the Theatre complex. Of course, Defendant No.2 has raised vehement objection to such proposals and suggestions by raising various technical objections.Even though prima facie conclusion of the learned single Judge raises doubt regarding the bona fide of the conduct of Defendant No.2, the fact remains that the amount received from Defendant No.4 and Defendant No.5 have been utilized to make the one time settlement possible. In other words, the company and all the shareholders are the beneficiaries. The Defendant Nos.4 and 5, instead of pursuing their appeals, are prepared to take return of the amount with reasonable interest. The Company and the overwhelming majority of shareholders have suggested that the Theatre complex can be auctioned so that the Defendant Nos.4 and 5 can be repaid and the surplus amount can be distributed. In such a scenario, instead of wading through the maze of legal hurdles and technicalities, the best possible and equitable solution would be to auction the property. In order to protect the ultimate interest of the Company as well as the overwhelming majority of its shareholders and keeping in view the equitable principles, it is felt just and proper in the peculiar facts and circumstances of the case to adopt a novel method of finalising the dispute by permitting sale of the property.K. Kannan, JI. Disposition by Court of first instance:1. All the appeals have arisen out of the common order passed on 4.1.2008 in O.A.No.1169 to 1172 of 2007 and Application Nos.6926 to 6930,6935, 6936 of 2007 in C.S.No.937 of 2007 and O.A.NO.1040 and 1041 OF 2007 in C.S.No.980 of 2007. The array of parties are as described in the first suit C.S.No.937 of 2007. C.S.No.937 of 2007 has been filed by an individual shareholder of 7th defendant company impugning certain transactions relating to the indebtedness of the 7th defendant and the 8th defendant company through the creation of mortgages, assignment of mortgages, lease and sub-mortgage. C.S.No.980 of 2007 has been subsequently instituted containing similar prayers as found in C.S.No.937 of 2007 by the 7th defendant company. A common order was passed on 4.1.2008 which found that the plaintiff had established a prima facie case by showing that all the four impugned transactions were not free from doubt in its opinion and that there were serious questions of allegations of fraud to be tried in the suit. The learned Single Judge took notice of the fact that the Receiver was able to generate income of Rs.29 to 30 lakhs per month and being assured by counsel representing the Receiver that the income could be further increased by proper management and refixing the rates of tickets, the Court found that the balance of convenience lay in favour of the plaintiffs and other shareholders, who, if the interim orders were not issued would be subject to great hardship and inconvenience. Consequently, the Court passed the restraint orders against the respective defendants from acting on the four impugned documents dated 9.10.2007 In the application for removal of the Receiver, the Court found that the Receiver should continue in possession. Consequently, O.A.Nos.1169,1170,1171,1172 for grant of injunction were allowed. Applications 6926,6927, 6028,6929,6930 ,6935 and 6936 for vacating the orders of injunction at the instance of the various defendants were dismissed. Applications for impleadment of the parties filed in the injunction applications were allowed. Curiously, applications for impleadment do not appear to have been filed in the suit, but only in the applications in 7660 to 7678 in C.S.No.937 of 2007 . They were allowed. O.A.No.1240 and 1241 of 2007 filed in C.S.No.980 of 2007 were allowed granting injunction as prayed for. It is this common order passed in the above applications that is assailed in the appeals filed by affected the parties.

(2.) M/s Pyramid Saimeera has filed OSA.NO.44 to 47 of 2008 against O.A.NO.1169,1172 OF 2007 IN C.S.No.937 OF 2007, OSA.NoS.101 TO 110 have been filed by the second defendant Paramasiva Pillai in so far as the orders were against him in various applications OSA.188 of 2008 has been filed by the Bank in so far as there are certain observations against the bonafides of the transactions involving the bank and the assignments in favour of the second defendant.II. The nature of business and the genesis of disputes:

(3.) THE second defendant, Paramasivsm Pillai, one of the founder Directors had a strong sentiment to preserve the THEatre premises which was the principal asset of the THEatre Company from the prospect of distress sale. THE sale seemed imminent, especially after the Bank had issued notice under Section 13(2) of SARFAESI ACT on 29.1.2003 and issued a further notice for taking over the symbolic possession under Section 13(4) on 24.3.2003. THE transition of the cinema theatre business from out of the hands of the theatre company materialised by the action of the Debt Recovery Tribunal in appointing the Receiver on 17.2.2005. Upon a further resolution of the Board of Directors of the Cinema theatre company, the cinema theatre building complex was physically taken over possession by the Receiver on 19.6.2006. After the appointment of Receiver by Debt Recovery Tribunal, the family members knew that holding back benefited no one, especially when the persons who were in management did not properly account for the incomes and the Receiver's possession guaranteed staving off immediate sale and further ensured prevention of pocketing the sizeable income from the cinema theatre business only by the persons in actual management to the exclusion of others.III. Immediate cause for further litigations: