KISAN MEHTA Vs. UNIVERSAL LUGGAGE MANUFACTURING CO LTD

JUDGEMENT

(1.) While I must compliment the plaintiffs for their very gallant effort in exposing what they consider a public wrong, the constraints of a civil a civil action must necessarily deter me from giving any relief the them, despite invocations from Delhi to a liberal reception at the judicial doorsteps in matters of public interest litigation. The plaintiffs are public spirited citizens, well-known for their public battles to save Bombay and I am afraid that zeal would not do here. Of course, Mr. Cooper for the defendants describes this action as mala fide, though I must say that the plaintiffs herein cannot be considered as "the idle and whimsical plaintiffs" as described elsewhere. Yet, when they choose to tread on wary grounds of civil law, they must show that they have a sure cause of action.

(2.) The plaintiffs say that theirs is a quia timet action. Their case is that the defendants have indulged in fradulent misrepresentations mainly with a view to "hoodwink" the public investors and if the public is lured to accept the offer to subscribe, it would be too late for them to realise that they all have been plain victims of deceit. They also allege that there is a breach of statute in the issue of the prospectus and also in the offer to subscribe by virtue of the order given by defendant No. 2 and, therefore, the public would be misled. They say that our experience should tell us that in such cases, though individual action is possible, it is rarely resorted to, with the result that the defendants will be able to amass money from the public by these means.

(3.) The plaintiffs state in the plaint that the first defendants have issued their prospectus and public statements whereby they have given a very rosy picture of their company. In effect, they have shown various items which are, in fact, liabilities, but in the prospectus and in the statement these have been described as profits. According to them, though the statements show that the company has made profits of Rs. 2.02 crores for the year ending May, 1985, in effect, it is really a loss of Rs. 1.15 crores on proper adjustments being made a required under the law. Similarly, in the year ending May, 1986, though the profits have been shown as Rs. 1.32 crores, it is really a loss of Rs. 2.84 crores on proper adjustments being made. In this connection, the plaintiffs have drawn my attention to certain things which appeared in the prospectus, particularly at pages 9 and 10. Broadly, the representation as contained in these notes is as follows : For example, there is an item showing that the company has received various deposits amounting to a sum of Rs. 74 lakhs odd, which under the note has been shown as profit on the basis that there is hardly any claim for refund of the said deposits. Similarly, there is an item of Rs. 79.44 lakhs being the amount payable to the workmen, and they show the same as profit for the year ending Mar 31, 1986. There are a number of similar other items which are all in the nature of liabilities and/or in the nature of non-recurring profits, but all have been shown as profits for the years ending May 31, 1985, and/or May 31, 1986. On the basis of these allegations, they have submitted in the plaint that the prospectus does not give a fair and true picture of the company with the result that the statements contained in the prospectus would mislead the public and might result in public injury.