FELIX PINTO Vs. SATYAM COMPUTER SERVICES LIMITED

JUDGEMENT

(1.) HEARD forthwith. This Motion raises the following important question of law :---Can an injunction be dissolved at the instance of a party not a party to the suit or as a corollary, can the Court dissolve an injunction granted in favour of the plaintiff, after satisfying itself that the subject matter of the dispute has to be protected, by dissolving the injunction and restricting the final reliefs sought for by the plaintiff, at the instance of a stranger, to whom it cannot finally issue any direction as a part of the decree, which could be executed.

(2.) PLAINTIFFS as the owners of shares of defendant No. 1 company, have filed the suit seeking various reliefs. It is the case of the plaintiffs that plaintiff No. 1 was holding 2900 shares and plaintiff No. 2 was holding 1800 shares under Folio No. 148934. Out of these shares 1500 shares belonging to plaintiff No. 1 and 600 shares belonging to defendant No. 2 had been transferred from the name of the plaintiffs to the defendant Nos. 6 and 7. The plaintiff No. 1 had pledged the suit shares with defendant No. 2 for a period of one year for consideration equivalent to the then market price of the suit shares and by way of collateral security signed blank transfer deeds and handed the same over to defendant No. 2. An agreement relating to the pledge of the suit shares containing the terms and conditions was executed between the plaintiff No. 1 and defendant No. 2 on 1st September, 1997. Plaintiffs have not received the dividend on the shares pledged with defendant No. 2 from defendant No. 1. In September, 1997 on making enquiries they were shocked to learn that defendant No. 1 had transferred some of the shares in the name of defendant Nos. 6 and 7 without the knowledge, consent and approval of the plaintiffs. The plaintiffs on the very same day contacted defendant No. 2 and sought explanation for such illegal transfer. Defendant No. 2 assured the plaintiff, that plaintiffs investment was safe under the agreement. The defendant Nos. 2 to 5 assured 60% loan to the plaintiffs on the aggregate market value of the suit shares. They also informed that the said amount would be reinvested with the defendant No. 2 again for a period of two years with interest at 2. 5% per month. Plaintiffs neither received any loan amount nor interest from the defendant No. 2 for the value of the suit shares. The plaintiffs in January, 1998 came to know on making enquiries that defendant Nos. 2 to 5 were indulging in malpractice of dealing in shares. Plaintiffs thereafter immediately tried to contact defendant Nos. 3 to 5. They got no information as office of the defendant No. 2 was found locked and whereabouts of defendant Nos. 3 to 5 were not known. A complaint was, therefore, lodged with the General Branch, Crime Branch Economic Offence Wing. The plaintiff No. 2 through an Advocate also issued stop transfer instructions of shares to defendant No. 1. On 3rd February, 1998 plaintiff No. 1 received a reply from the defendant No. 1 that the suit shares have already been transferred to defendant Nos. 6 and 7 and requested the plaintiffs to obtain injunction from appropriate Court. On 12th March, 1998 the General Branch, C. I. D. lodged a F. I. R. being No. 12 of 1998 against defendant Nos. 3 to 5. It is in these circumstances that the plaintiffs had come to file the suit. They have also taken out a Notice of Motion being Notice of Motion No. 2362 of 1998. On 9th July, 1998 by way of ad-interim order as defendants though served did not appear, the Court was pleased to direct that the defendant No. 1 shall not effect further transfer of the shares in dispute till the Motion is heard. The principal contention on behalf of the plaintiffs in support of the final reliefs are :-- (a) the shares were pledged with defendant Nos. 2 to 5, without any authority to sell. (b) The sale if any is without consideration. (c) The signatures on the blank forms for transfer of shares, was only as a collateral security for the loan to be advanced by defendant Nos. 2 to 5.

(3.) ON 13th August, 2000 the applicant has moved this Court on an application, to vacate the order granted by this Court on 9th July, 1998. They have also prayed that the order of 9th July, 1998 be stayed. In support of the Motion defendants have filed an affidavit. It is their case that they are the member of the National Stock Exchange. On M/s. R. R. and Co. , appointed the applicant as their broker. The said R. R. and Co. , placed an order for sale of several shares including 4500 shares of defendant No. 1 company. The applicant through their main broker of the Mumbai Stock Exchange sold 3000 shares on behalf of M/s. R. R. and Co. and 1500 shares through the National Stock Exchange. The applicant executed the said orders and accordingly issued contract note and bill for the same in favour of R. R. and Co. It is contended that the sale transaction on behalf of R. R. and Company was entered into and accordingly credit for the sale price was given by the applicant to R. R. and Co. The amounts were paid by cheque on 10th September, 1997. The applicants have also paid the amount towards the sale of 3000 shares done in the Stock Exchange, Mumbai. It is contended that the plaintiffs herein had filed a suit before the Bombay City Civil Court with regard to 2600 shares of defendant No. 1 company. An order of injunction had been passed by the Bombay City Civil Court regarding the subject matter of the said shares. As injunction was operating the same shares came under objection as and by way of bad delivery before the Stock Exchange, Mumbai. The applicant filed Chamber Summons in the Bombay City Civil Court. By order dated 4th February, 1999 the Bombay City Civil Court was pleased to vacate the earlier injunction. An appeal was preferred against the said order. The learned Single Judge of this Court by order dated 22nd May, 2000 was pleased to stay the order dated 4th February, 1999. Thereafter some of the shares forming subject matter of the suit filed by the plaintiff in the Bombay City Civil Court came under objection. The main broker of the applicant M/s. P. R. Shah and Co. , filed a Civil Application in this Court in Appeal From Order No. 141 of 1999. By order dated 10th July, 2000 the learned Judge hearing the Appeal was pleased to dispose of the same. By that order M/s. P. R. Shah and Co. , Brokers Pvt. Ltd. , were directed to deposit Rs. 20. 00 lacs in the trial Court, which was the value, the shares would have fetched in March, 1998 if the suit was decreed at that point of time. Mr. Jain appearing for P. R. Shah and Co. agreed to deposit the amount. The Court then observed that Rs. 10. 00 lacs if deposited in the trial Court no injunction would survive. Some other directions were given. The arrangement was without prejudice to the rights and contentions of the plaintiffs and other parties. With some other observations the Appeal was disposed of. The plaintiffs had preferred Special Leave Petition to the Supreme Court, which has been dismissed.