Skip to content


Nicco Corporation Ltd. Vs. Cethar Vessels Ltd. and Another - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberC.R.P. No. 345 of 1997 and C.M.P. No. 1948 of 1997
Judge
Reported in[1998]92CompCas748(Mad)
ActsCode of Civil Procedure (CPC), 1908 - Order 9, Rule 6 - Order 39, Rule 3A
AppellantNicco Corporation Ltd.
RespondentCethar Vessels Ltd. and Another
Appellant AdvocateMrs. Ammu Balachandran, Adv.
Respondent Advocate N.P.K. Menon and ;A. Muthukrishnan, Advs.
Cases ReferredDwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works
Excerpt:
company - interim injunction - order 9 rule 6 and order 39 rule 3a of code of civil procedure, 1908 and article 227 of constitution of india - when summons were served on defendants but not in sufficient time to enable him to appear and answer on day fixed in summon it follows that party was prevented from appearing and thereby compelled to face ex parte decree - before any person is called upon to appear before court he must be made known for what reason he is asked to appear and defend action - records of lower court showed that defendant not served with copy of plaint along with summon which were served only one day before hearing - whole procedure illegal - plea of availability of alternative remedy is no bar for exercising power under article 227 if very provisions of statute are.....s.s. subramani, j.1. this revision is by the first defendant in o.s. no. 376 of 1996, on the file of the subordinate judge, tiruchirappalli. in this revision, the petitioner has sought for setting aside the ex parte decree of permanent injunction passed on august 5, 1996, by the subordinate judge, tiruchy, and to permit the petitioner to invoke and enforce the b' bank guarantees referred to therein and also to recover costs. 2. in the grounds of revision, it is said that the first respondent herein entered into an agreement with the revision petitioner for manufacturing and supply of waste heat recovery boiler for a twin hearth furnace. these furnaces were meant for durgapur steel plant. the petitioner had given an advance of rs. 29 lakhs to the first respondent herein for part execution.....
Judgment:

S.S. Subramani, J.

1. This revision is by the first defendant in O.S. No. 376 of 1996, on the file of the Subordinate Judge, Tiruchirappalli. In this revision, the petitioner has sought for setting aside the ex parte decree of permanent injunction passed on August 5, 1996, by the Subordinate Judge, Tiruchy, and to permit the petitioner to invoke and enforce the B' bank guarantees referred to therein and also to recover costs.

2. In the grounds of revision, it is said that the first respondent herein entered into an agreement with the revision petitioner for manufacturing and supply of waste heat recovery boiler for a twin hearth furnace. These furnaces were meant for Durgapur Steel Plant. The petitioner had given an advance of Rs. 29 lakhs to the first respondent herein for part execution of the contract, and in order to guarantee the execution of the work, the second respondent-Canara Bank stood as guarantor for the first respondent. As per the terms of the guarantee, the petitioner was to have recourse to enforce the guarantee without demur, and the guarantee could not be revoked by notice or otherwise, and it is unconditional. The guarantee was extended two times, and the last period was to expire by September 30, 1996. At that time, the first respondent rushed to the court and got an ex parte order of injunction. It is alleged that even the ex parte order of injunction was not in accordance with law and the petitioner was not given any time to pursue his remedy in court. The suit itself is one for bare injunction and the interim application was also for the same. It is alleged that while granting the ex parte order of interim injunction, the court has granted the final relief itself, without notice to the affected person. It is alleged that the order is invalid for the very reason that the papers have not been served as required under Order 39, rule 3 of the Civil Procedure Code. It is further alleged that by accepting the suit, the court has done an irretrievable and irremediable damage to the petitioner. The bank guarantee was an unconditional one, and by granting an injunction, the court has violated all the settled principles of law declared by the Supreme Court and High Courts. It is further said that the lower court has neglected to apply the statutory rules laid down in the Civil Procedure Code, with regard to summons and the law regarding injunction. These rules are to protect the interest of the opposite party and are in consonance with the rules of natural justice. It is said that the case was posted on August 1, 1996, when no notice was served by any officer of the court. The petitioner-Corporation is having its office at Calcutta, outside the jurisdiction of the Trichy Sub-Court, and even the summons was not served on the person authorised to receive the same. It is said that there was no valid service of summons. It is further said that on August 1, 1996, itself, the petitioner was declared ex parte and a decree was passed on August 5, 1996. It is further said that the copy of the summons has to be served on the petitioner or his agent, and receipt of summons must also be acknowledged. None of these procedures was followed. It is said that after the passing of the ex parte order of injunction, the main case itself was proceeded with when no service was effected by an officer of the court. But the lower court proceeded on a memo filed by counsel for the plaintiff and no notice has been given regarding the suit and there is no valid service of summons. It is said that there was no service of summons and when no opportunity was given to the petitioner to contest the suit, the court has no jurisdiction to set the petitioner ex parte and also to proceed with the suit ex parte. The decree is, therefore, violative of the principles of natural justice, and it is also one passed against the settled legal position, and, even on the evidence adduced, a decree should not have been granted.

3. The first respondent/plaintiff filed a counter-affidavit stating that along with the plaint, an interlocutory application was filed as I.A. No. 506 of 1996, and the learned Subordinate Judge, Tiruchy, granted an interim injunction up to July 10, 1996, and it was extended till July 19, 1996. The bank remained ex parte. Therefore, a notice was issued to the petitioner on August 1, 1996. On that date, after noting that service was effected, the learned Subordinate Judge made the injunction absolute and set the petitioner ex parte. The case was posted to August 5, 1996, on which date, evidence was recorded, exhibits A-1 to A-7 were marked, and the suit was decreed as prayed for with costs.

4. It is further contended that on August 27, 1996, the petitioner filed C.R.P. No. 2200 of 1996, under section 115 of the Code of Civil Procedure, to have the ex parte injunction set aside. This court took note of the representation made by the first respondent that the suit itself has been disposed of on August 5,1996, and in that view of the matter, the civil revision petition was not entertained. Even though the petitioner came to know that the suit has been declared ex parte, an objection was filed to set aside the ex parte order. It is said that the petitioner was aware of the suit when the orders were passed on August 1, 1996, and August 5, 1996. If he had knowledge of the suit and the ex parte order, the normal remedy is to file an application for setting aside the ex parte decree and not to prefer a revision petition under article 227 of the Constitution of India. It is said that sufficient opportunity was given to the petitioner to contest the suit. There is no question of law involved in this case. Service of summons was also proper. Therefore, the first respondent/plaintiff prayed for dismissal of the revision petition.

A reply-affidavit was also filed by the manager of the petitioner corporation reiterating the contentions raised in the revision petition.

5. When the matter came for admission, taking into consideration the averments in the petition, I directed that the original records in O.S. No. 376 of 1996 be called for from the file of the Sub-Court, Trichy. Pursuant to my direction, the entire records have been placed before the court, for perusal.

6. On going through the records of the case, I find that the suit was filed on July 1, 1996. On the same date, an ex parte order of injunction was passed to be effective till July 10, 1996. The first respondent was directed to comply with the provisions, of Order 39, rule 3A of the Civil Procedure Code. Pursuant to the same, an affidavit appears to have been filed on July 2, 1996, in which a postal receipt is also pasted. The suit was called on July 10, 1996. It was noted that the notice of injunction could not be served due to lack of time and, therefore, the suit was adjourned to July 19, 1996, and the interim injunction already granted was also extended. On July 19, 1996, the bank, which is the second respondent/second defendant was stated as served. The first respondent was said to be not served. The second respondent was called absent and set ex parte. Fresh notice by post to the first respondent was ordered, returnable by August 1, 1996. On August 1, 1996, learned counsel for the plaintiff filed a memo stating that notice has been served. The petitioner herein was called, and since it was absent, the court set it (corporation) ex parte. The court made an order, making the interim injunction absolute, and the petition was closed.

7. In the meanwhile, the plaintiff also took steps through the court to serve the injunction order along with an affidavit. It is seen that steps were taken on July 4, 1996. By the time it reached the Sub-Court, Calcutta, the period of injunction had already expired, and it was received by that court only on July 11, 1996. Therefore, the bailiff of that court returned the process unserved. In the meanwhile, summons was served on the second defendant. So far as the summons to be served on the petitioner was concerned, the plaintiff took steps on July 2, 1996. The date for first hearing was fixed as August 1, 1996. It was received by the Calcutta court on July 30, 1996, and on the same date, at about 11.15 a.m., it was served on an office assistant (no details of the officer are available in any of the first respondent record) the Corporation (revision petitioner herein), who signed the original summons. After service on the so-called office assistant, the bailiff returned the summons before the Senior Superintendent of the Sub-Court, Calcutta, who received the same on July 31, 1996. We must note that the posting was no August 1, 1996. On August 1, 1996, when the suit was called on for hearing, it was noted in the diary that the first defendant/petitioner's summons was not served, nor was it returned, and the second defendant was served. On the basis of the memo filed by learned counsel for the plaintiff, both the defendants were called, and they were set ex parte. The suit was posted to August 5, 1996, for recording ex parte evidence. On that date, PW-1 was examined, and exhibits 'A-1 to A-7' were marked. The court said that the claim stands proved, and the suit was decreed.

8. I have extracted the entire proceedings in the order in which it had taken place before the court below, on the basis of the records which are placed before this court. It is clear therefrom that on July 1, 1996, a suit was filed. Notice of injunction as well as notice of suit seem to have been served on July 30, 1996. Even though summons were not returned after service, learned counsel for the plaintiff filed a memo stating 'Herewith served acknowledgment on D-1 is filed'. The postal acknowledgment addressed to counsel was filed. On the basis of the alleged signed postal acknowledgment, the first defendant (the petitioner herein) was declared ex parte, and an ex parte decree was also passed on August 5, 1996. That is, the petitioner was not given even one clear day to go over to the Trichy Court, whereas its registered office is at Calcutta. I have already said that the endorsement on the summons also says that the summons were served on an office assistant, which is not the procedure contemplated under the law.

9. In Shalimar Rope Works Ltd. v. Abdul Hussain H. M. Hasan Bhai B Rassiwala : [1980]3SCR1028 , their Lordships considered a similar question and held that service on an office assistant of a registered company is no service at all. It was held in that case thus :

'Order 29 of the Code is headed SUITS BY OR AGAINST CORPORATIONS. There are only three rules in it. We are concerned with rule 2 which reads as follows :

'Subject to any statutory provision regulating service of process, where the suit is against a corporation, the summons may be served -

(a) on the secretary, or on any director, or other principal officer of the corporation, or

(b) by leaving it or sending it by post addressed to the corporation at the registered office, or if there is no registered office then at the place where the corporation carries on business.'

10. Rule 2 is not an exhaustive provision providing for all modes of service on the company in the sense as to what is meant by service of summons on the secretary, director or principal officer. In Jute and Gunny Brokers Ltd. v. Union of India, : [1961]3SCR820 , it was held that the words 'principal officer' in clause (a) of rule 2 would include managing agents and it can, under this rule, be on a juristic person. Accordingly, service on managing agents who are a corporation is valid under clause (a).

11. The meaning of clause (b) has got to be understood in the background of the provisions of the Code in Order 5, which is meant for issue and service of summons on natural persons. Sending a summons by post to the registered office of the company, unless the contrary is shown, will be presumed to be service on the company itself. But the first part of clause (b) has got to be understood with reference to the other provisions of the Code. In rule 17 of Order 5, it has been provided :

'Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person On whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.'

12. Sending summons to a corporation by post addressed to it at its registered office may be a good mode of service either by itself, or preferably by way of an additional mode of service. But leaving the summons at the registered office of the corporation if it is literally interpreted to say that the summons can be left anywhere uncared for in the registered office of the company, then it will lead to anomalous and absurd results. It has to be read in the background of the provision contained in Order 5, rule 17 of the Code In other words, if the serving peon or bailiff is not able to serve the summons on the secretary or any director or any other principal officer of the corporation because either he refuses to sign the summons or is not to be found by the serving person even after due diligence then he can leave the summons at the registered office of the company and make a report to that effect. In the instant case, nothing of the kind was done.'

13. There is one more procedure, which requires consideration, i.e., Order 9, rule 6 of the Civil Procedure Code. Sub-rule (1)(c) of rule 6 says 'If it is proved that the summons was served on the defendant, but not in sufficient time to enable him to appear and answer on the day fixed in the summons, the court shall postpone the hearing of the suit to a future day to be fixed by the court, and shall direct notice of such day to be given to the defendant.'

14. Even if we accept the memo, it cannot be evidence of service of summons. For service of summons, Order 5, rule 10 of the Civil Procedure Code, says 'Service of the summons shall be made by delivering or tendering a copy thereof signed by the judge or such officer, as he appoints in this behalf, and sealed with the seal of the court'. It means that summons can be sent only by the court, and the memo filed by counsel is only evidence that he is serving the order of injunction under Order 39, rule 3A of the Civil Procedure Code. As said already, the only evidence that is filed before the court on August 1, 1996, is the alleged signed postal acknowledgment and returned to the plaintiff's counsel, evidencing service. It is not signed either by the managing director or any person connected with the company, the petitioner herein. There is not even a postal seal of any post office in Calcutta, except for a rubber stamp and a date July 10, 1996, and nobody could decipher the letters in the rubber stamp. In fact, the doubt is more strengthened in view of the affidavit filed on behalf of the plaintiff on July 2, 1996. In the affidavit, there is no statement that the injunction order and affidavit have been sent by registered post with acknowledgment due though a postal receipt is pasted in the affidavit. Even the postal receipt does not disclose that the papers were sent by registered post acknowledgment due. At any rate, the postal acknowledgment returned to the plaintiff's counsel cannot be construed as summons for the suit. It is on that basis, the lower court has acted as if, it is a proper service and set the petitioner herein ex parte. The lower court should have at least verified whether summons had been served on the petitioner when the office has made an endorsement that it is not served or returned. By filing a memo, along with a postal acknowledgement, asking the court to rely on the same as though there was service of summons, a fraud has been played on the court, by which it was made to pass an ex parte order. The lower court also did not look into the provisions of law and allowed a decree to be passed.

15. When it is said that there was no service of summons at all and there is no material before court to satisfy itself that summons had been served, it gets no jurisdiction to declare the defendant ex parte. Therefore, in the instant case, the procedure adopted by the court below is without jurisdiction. The court gets jurisdiction only when summons are served, or when the defendant evades service or some other mode is ordered and complied with. There must be satisfaction by the court that summons have been properly served and the rules have been complied with. On the materials before this court on August 1, 1996, the court did not have any material to show that the summons was served. If that be so, declaring the petitioner as an ex parte defendant was illegal.

16. Even if we take the memo as a piece of evidence, what is the legal consequence At the most, it could be said that injunction notice was served. While narrating the facts, I have already said that the original summons were given to the office assistant on July 30, 1996, when the case stood posted on August 1, 1996. There was no 'sufficient time' for the defendant to appear under Order 9, rule 6 of the Civil Procedure Code. When there is no 'sufficient time' to appear, it follows that the party was prevented from appearing, and thereby he was compelled to face an ex parte decree.

17. In Works Manager, Carriage and Wagon Shops v. Ghanshyam Dass, , a similar question came up for consideration under the Payment of Wages Act, 1936. In that case, on an application by a railway employee, notice was ordered on the undertaking. The case was posted for appearance of the Railways on March 23, 1961, and the notice was served on March 20, 1961, i.e., about three days before the date fixed for appearance. On the day fixed for appearance, a clerk from the office of the employer who was deputed, sought for adjournment, stating that he did not have reasonable time to put forward his defence. The authority dismissed the application and posted the case for ex parte proceedings on April 6, 1961. On that day, even though the employer's representative was present and sought for setting aside the ex parte proceedings, the same was dismissed and an ex parte decree was passed. That was challenged under article 227 of the Constitution. Their Lordships of the Punjab High Court took into consideration the procedure under Order 5, rule 6 of the Civil Procedure Code, and Order 9, rule 6 of the Civil Procedure Code, and held thus in paragraph 8 (Page 123) :

'One of the guiding factors for the authority to come to a just and satisfactory decision, whether or not to grant adjournment, was to determine if the Department had sufficient time to prepare the defence. For this purpose, one may legitimately turn to the Code of Civil Procedure for instructive and helpful assistance. Order 5, rule 6, which deals with the subject of fixing the day for appearance of defendants, lays down inter alia that the day for such appearance should be so fixed as to allow the defendant sufficient time to enable him to appear and answer on such day ...'

18. Little down, the learned judge has further said that (page 123) 'Order 9, rule 6(1)(c) also contains a guiding principle; it lays down that if it is proved that the summons was served on the defendant, but not in sufficient time to enable him to appear and answer on the day fixed in the summons, the court shall postpone the hearing of the suit to a future day to be fixed by the court and shall direct notice of such day to be given to the defendant'.

19. The learned judge further went on and said thus (page 124) :

'... In the present instance, the authority has obviously acted in a manner which is neither calculated to promote the cause of justice nor is it in consonance with the well-recognised basic principles underlying the law of procedure laid down for the guidance of civil courts, which affords a very healthy and helpful analogy. The authority, it may be stated, should always endeavour to avoid snap decisions and afford the parties before it a real and effective opportunity of fighting out their cases fairly and squarely ....'

20. In Ahmed v. Abdul AIR 1953 TC 126 the learned judge of that High Court said that the defendant is entitled to insist on sufficient time to appear in court. It is only in the event of this number of days intervening that the defendant is under an obligation to appear on the day fixed in the summons for the hearing of the case. If sufficient time is not given, the defendant is under no obligation to appear and no consequence adverse to him would ensue on account of his non-appearance, and the court is also bound to postpone the hearing and, for the adjourned date, he shall be given notice. It was held that the rule is mandatory and it is the basis of the principle of natural justice.

21. Since I do not find any reported decision of this court on the scope of Order 9, rule 6(1)(c) of the Civil Procedure Code. I have to resort to another decision of the Kerala High Court in Joseph v. Kunjan [1961] KLT 376 where a learned judge of that High Court considered the scope of the said rule and held thus :

'The provisions of Order 9, rule 6(1)(c) and the provision for sufficient time to be provided for the appearance of the defendant are mandatory. If the provisions are mandatory then it follows that the court has absolutely no jurisdiction to adopt a course contrary to such service in all respects giving the party not only sufficient opportunity but also necessary time which is enjoined upon by the rules ...'

22. In the case in Grindlays Bank Ltd. v. Central Government Industrial Tribunal [1980] Suppl. SCC 420, ; [1981] 58 FJR 140 (SC)(at page 144 of 58 FJR) :

'When sub-section (1) of section 11 expressly and in clear terms confers power upon the Tribunal to regulate its own procedure, it must necessarily be endowed with all powers which bring about an adjudication of an existing industrial dispute, after affording all the parties an opportunity of hearing. We are inclined to the view that where a party prevented from appearing at the hearing due to a sufficient cause, and is faced with an ex parte award, it is as if the party is visited with an award without a notice of the proceedings. It is needless to stress that where the Tribunal proceeds to make an award without notice to a party, the award is nothing but a nullity ...'

23. The said decision was followed by the Andhra Pradesh High Court in the decision in M. Varalakshmi (Smt.) v. A. P. State Consumer Disputes Redressal Commission [1997] 89 Comp Cas 586. That is a case coming under the Consumer Protection Act, 1986, where an ex parte order was passed, and the question raised was, whether the provisions of article 227 of the Constitution could be invoked without availing of an application before the Consumer Forum. While considering that question, a Division Bench of the Andhra Pradesh High Court held thus (page 588) :

'... where an order has been passed without notice to the parties, it is nothing but a nullity in law and an action taken without jurisdiction.'

24. In P. Ramanatha Iyer's Law Lexicon, 1997 edition, the meaning of 'summons' is given thus :

'A 'summons' is a process issued from the office of a court of justice requiring the persons to whom it is addressed to attend the court for the purpose therein stated .... 'Summons' is the name of a writ, commanding the sheriff, or other authorised officer, to notify the party to appear in court to answer a complaint made against him and in writ specified, on a day therein mentioned.'

25. In Wharton's Law Lexicon, 14th edition, 'summons' is defined as 'the means by which one party brings the other before a judge (for a measter) to settle matters of details in the procedure of a suit'.

26. From the above definitions, it is clear that before a person is called upon to appear before the court, he must be made known for what purpose he is asked to appear and defend the action. Such procedure was never taken note of by the lower court, and, on August 1, 1996, when the first defendant was set ex parte, there were no materials before the court to declare it as such. Thereafter, on August 5, 1996 also, the court did not have any material to pass an ex parte decree though the summons with the endorsement of the bailiff at Calcutta had reached the Subordinate Judge on August 3, 1996. There is also no statement in the summons that the copy of the plaint was also sent to the petitioner. The endorsement made by the bailiff on July 30, 1996, did not say that the copy of the plaint was also served on the so-called office assistant. The entire procedure adopted by the lower court is, therefore, illegal. At least before August 5, 1996, when the case was taken up, the lower court should have seen that there was no sufficient time for the defendant to appear and the case should have been adjourned to another date.

27. Learned counsel for the first respondent contended that when a civil court has passed a decree treating the petitioner ex parte, there is an effective alternative remedy and article 227 of the Constitution of India cannot be invoked. Learned counsel further submitted that the power of superintendence under article 227 of the Constitution of India, shall not be invoked ordinarily, and no except on has been made out in this case. It is further contended that on an earlier occasion, the very same petitioner has challenged an ex parte order of injunction in C.R.P. No. 2200 of 1996, and even on that date, the petitioner was informed that an ex parte decree was passed on August 5, 1996. Having known of such an ex parte decree and having remained silent till November 24, 1996, the petitioner herein has come to the court with no good faith. The petitioner ought to have filed an application to set aside the ex parte order or preferred an appeal against the ex parte decree, which is also an effective remedy under law.

28. I do not think any of these contentions could be countenanced.

29. In a recent decision of the Calcutta High Court in Bata India Ltd. v. Deputy CIT : [1996]217ITR871(Cal) the Division Bench of the Calcutta High Court held thus (page 875 of 217 ITR) :

'The other objection, as raised by the respondent relates to the jurisdiction of this court to grant relief under article 227 of the Constitution of India. The barriers to the grant of such relief have been well-settled by the decisions of the apex court but it is equally well-settled that for preventing grave and serious miscarriage of justice including one resulting from following a patently erroneous procedure or contravention of basic principles of justice and fair play, the supervisory and superintending jurisdiction conferred on courts by the said article remains always available. (vide Trimbak Gangadhar Telang v. Ramchandra Ganesh Bhide, : AIR1977SC1222 , also followed in Chandavarkar Sita Ratna Rao v. Ashalata S. Guram, : [1986]3SCR866 ).'

30. In one of the earlier decisions of the Supreme Court in D. N. Banerji v. P. R. Mukharjee : [1953]4SCR302 , their Lordships said thus :

'... Unless there was any grave miscarriage of justice or flagrant violation of law calling for intervention, it is not for the High Court under articles 226 and 227 of the Constitution to interfere.'

31. In Satyanaranyan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, : [1960]1SCR890 , their Lordships considered the scope of article 227 of the Constitution of India and the circumstances under which the court can invoke the said provision wherein it was held thus (page 142) :

'... However wide it may be than the provisions of section 115 of the Code of Civil Procedure, it is well established that the High Court cannot in exercise of its power under that section, assume appellate powers to correct every mistake of law. Where there is no question of assumption of excessive jurisdiction or refusal to exercise jurisdiction or any irregularity or illegality in the procedure or any breach of any rule of natural justice, but if anything it may merely be an erroneous decision which error, not being apparent on the face of the record, cannot be corrected by the High Court in revision under section 115 of the Code of Civil Procedure or under article 227 of the Constitution.'

32. In Maneck Custodji Surjarji v. Sarafazali Nawabali Mirza, : AIR1976SC2446 , their Lordships held that despite the existence of an alternative legal remedy, the High Court may interfere in favour of an applicant under article 227 of the Constitution.

33. The question that has to be considered is, whether the case on hand is an extraordinary case. I will deal with this question later.

34. In Trimbak Gangadhar Telang Ramchandra Ganesh Bhide, : AIR1977SC1222 , it was held thus (headnote) :

'It is a well-settled rule of practice not to interfere with the exercise of discretionary power under articles 226 and 227 of the Constitution merely because two views are possible on the facts of the case. It is also well-established that it is only when an order of a Tribunal is violative of the fundamental basic principles of justice and fair play or where a patent or flagrant error in procedure or law has crept in or where the order passed results in manifest injustice, that a court can justifiably intervene under article 227 of the Constitution.'

35. In Chandavarkar Sita Ratna Rao v. Ashalata S. Guram : [1986]3SCR866 , their Lordships considered the scope of jurisdiction under article 227 of the Constitution of India, wherein it was held thus (headnote of SCC) :

'In exercise of jurisdiction under article 227 the High Court can go into the question of facts or look into the evidence if justice so requires it. But the High Court should decline to exercise its jurisdiction under articles 226 and 227 to look into the facts in the absence of clear and cut down reasons where the question depends upon the appreciation of evidence. The High Court should not interfere with the finding within the jurisdiction of the inferior tribunal or court except where the finding is perverse in law in the sense that no reasonable person properly instructed in law could have come to such a finding or there is misdirection in law or a view of fact has been taken in the teeth of preponderance of evidence or the finding is not based on any material evidence or it resulted in manifest injustice. Except to the limited extent indicated above, the High Court has no jurisdiction.'

36. In a very recent decision of the Supreme Court in Achutananda Baidya v. Prafullya Kumar Gayen : [1997]3SCR709 , it was held in paragraphs 10 and 11 thus :

'The power of superintendence of the High Court under article 227 of the Constitution is not confined to administrative superintendence only but such power includes within its sweep the power of judicial review. The power and duty of the High Court under article 227 is essentially to ensure that the courts and Tribunals, inferior to the High Court, have done what they were required to do. Law is well settled by various decisions of this court that the High Court can interfere under article 227 of the Constitution in cases of erroneous assumption or acting beyond its jurisdiction, refusal to exercise jurisdiction, error of law apparent on record as distinguished from a mere mistake of law, arbitrary or capricious exercise of authority or discretion, a patent error in procedure, arriving at a finding which is perverse or based on no material, or resulting in manifest injustice. As regards finding of fact of the inferior court, the High Court should not quash the judgment of the subordinate court merely on the ground that its finding of fact was erroneous but it will be open to the High Court in exercise of the powers under article 227 to interfere with the finding of fact if the subordinate court came to the conclusion without any evidence or upon manifest misreading of the evidence thereby indulging in improper exercise of jurisdiction or if its conclusions are perverse. If the evidence on record in respect of a question of fact is not at all taken into consideration and without reference to such evidence, the finding of fact is arrived at by inferior court or Tribunal, such finding must be held to be perverse and lacking in factual basis. In such circumstances, in exercise of the jurisdiction under article 227, the High Court will be competent to quash such perverse finding of fact.'

37. Our High Court also had occasion to consider a similar question in one of the earliest decisions in Annamalai Mudaliar, In re. : AIR1953Mad362 and a learned judge of this court held thus (headnote) :

'The extraordinary powers conferred on the High Court under article 227 enable the High Court to ensure that the Tribunals are kept within the bounds of their authority and that they do what their duty requires and that they do it in a legal manner.'

38. While considering the case, the learned judge further went on and said in paragraph 11 (page 365) thus :

'The substance of all these decisions can be summed up in three propositions, viz., it does not involve a responsibility of the superintending tribunal for the correctness of the decisions of the inferior courts, either in fact or law. If the inferior court, after hearing the parties, comes to an erroneous decision on a matter within its jurisdiction, the court having power of superintendence never interferes. The only mode of questioning the propriety of such a decision is by appeal. Nor can this power be invoked to get round any express provision of the Code of Criminal Procedure or any other law. Secondly, the general superintendence conferred by this constitutional provision over all jurisdictions subject to appeal involves a duty to keep them within the bounds of their authority, to see that they do what their duty requires and that they do it in a legal manner. Therefore, the interference under article 227 would naturally be in cases where there is a grave dereliction of duty : Shitab Singh v. Suraj Bali [1952] ALJ 283, or there is a flagrant abuse of fundamental principles of law of natural justice or there is in existence no other remedy for remedying the wrong : Madhusudhan v. Shyam Doss, ; Basant Lal v. Arjundas AIR 1952 V P. 4, or prevent miscarriage of justice : Jagannath v. Mt. Puniya AIR 1952 M B 51 : Mani Ram v. Jharmu, : Mitra v. Datta Gupta : Union of workmen of R.S.N. and I.G.N. and Railway Co. Ltd. v. River Steam Navigation Co. Ltd. AIR 1951 Ass 96; Abdul Rahim v. Abdul Jabbar : AIR1950Cal379 ; Nor is article 227 meant for correcting slight errors : Dalmia Jain Airways Ltd. v. Sukumar Mukherjee, : AIR1951Cal193 ; State of west Bengal v. Durga Devi (Smt.) AIR 1951 Cal 100, or to interfere in cases of mere failure to appreciate evidence on the part of a final tribunal. - Bavalal v. Jivanlal AIR 1951 Sau 43; Israil Khan v. State AIR 1951 Ass106.'

39. A Division Bench of the Calcutta High Court in the decision in Abanindra Kumar Maity v. A. K. Biswas, : AIR1954Cal355 :

'... the existence of an alternative remedy like a suit does not, preclude the High Court from exercising the powers under article 227, Constitution of India, provided that alternative remedy is not as speedy or effective as an application under article 227.'

In India Exports House Pvt. Ltd. v. J. R. Vohra, : AIR1983Delhi167 , a learned judge of that High Court held thus (page 168) :

'... It is true that the party should first exhaust the alternative remedies available to it, but it is not an inexorable rule and the court can exercise its power of superintendence even where the party has not exhausted alternative remedy.'

40. Now, I will come to the arguments of learned counsel for the first respondent that the existence of an alternative remedy is a bar under article 227 of the Constitution of India.

41. The procedure, according to learned counsel for the first respondent/plaintiff is that the petitioner should have moved an application under Order 9, rule 13 of the Civil Procedure Code, or should have preferred an appeal. This according to learned counsel, is an effective alternative.

42. When an application under Order 9, rule 13 of the Civil Procedure Code, is filed, or an appeal against an ex parte decree is preferred, naturally, it presupposes that there is a valid ex parte decree and the same is liable to be set aside if sufficient cause is shown. If the court had no jurisdiction to pass an ex parte decree, and if it is found that the court has not applied its mind and the entire procedure was in violation of the Code of Civil Procedure, the court exercised power not enjoined on a court of law. The very fundamental principle of court of law is to act in accordance with fair play, complying with the principles of natural justice. If the very provisions of the statute are violated, I do not think that the alleged alternative remedy is a bar for exercising the power under article 227 of the Constitution of India.

43. Basu in Shorter Constitution of India, 1996 edition, commenting on article 227 (page 739) has said thus :

'... unless the alternative remedy is as speedy and effective as the remedy by way of application under article 227, ... the mere existence of an alternative remedy cannot preclude the High Court from exercising its power under article 227 to interfere with an order in flagrant violation of the law.'

44. Again, the rule of alternative remedy is only a consideration for exercise of discretion and does not exclude the jurisdiction of the High Court in exceptional cases. The exceptional cases, according to the learned author, arise in the following cases : (1) absence of excess of jurisdiction; (2) infringement of a fundamental right; (3) where the law which gives jurisdiction to the Tribunal is ultra vires or unconstitutional; (4) violation of the principles of natural justice.

45. In the present case, there is flagrant violation of the principles of natural justice. The petitioner was not given any opportunity, and a decree has been passed against him even without service of summons. The very purpose of the Code of Civil Procedure is to comply with the principles of natural justice. The procedure was basically violated and this is also an exceptional case. There was grave dereliction of duty by the lower court.

46. Even the ex parte judgment is perverse. The lower court seems to think that if the defendant has not entered appearance or is absent when the suit is called on for hearing, it is its duty to pass an ex parte decree. The said approach of the subordinate courts is an abdication of their duties. When the defendant is absent, it is all the more the duty of the court to see whether the suit before it could be entertained and whether the relief, at least on a reading of the plaint, could be granted. A mechanical way of passing a decree in favour of the plaintiff is to be deprecated. V. R. Krishna Iyer J., as he then was, in the decision in N. Krishna Iyer v. Lakshmi Ammal [1971] KLT 182, has held thus :

'... The absence of a party or his failure to give evidence does not mean that the court can abdicate its duty to give consideration to the ensemble of circumstances in a case and follow the mechanical rule of decreeing what the plaintiff has asked for or her evidence formally warrants.'

47. The same principle was followed in the decision in Varada Reddiar v. Jayachandran [1996] 1 LW 559 (Mad). In paragraph 8, it has been held thus (page 560) :

'Even though the defendant was ex parte in the suit, there was a duty on the part of the court below to apply its mind before granting the decree.'

48. As held in Achutananda Baidya v. Prafullya Kumar Gayen : [1997]3SCR709 , while exercising the power under article 227 of the Constitution, if the evidence on record in respect of a question of fact is not at all taken into consideration and without reference to such evidence, the finding of fact is arrived at by an inferior court or tribunal, such finding must be held to be perverse and lacking in factual basis. In such circumstances, in exercise of the jurisdiction under article 227, the court will be competent to quash such perverse finding of fact.

49. In this case, the plaintiff/first respondent wanted to restrain the petitioner herein from invoking the bank guarantee. Exhibits A-2 and A-3 are the advance bank guarantees. When that evidence is before court, even though the defendant is ex parte, the lower court should have taken into consideration the wording in those documents. If it is an unconditional and irrevocable bank guarantee, the court has no power to grant an injunction unless fraud is alleged and proved. The lower court should also have gone into the allegations in the plaint, whether there is any fraud alleged, and whether the damage that might be caused if injunction prayed for is not granted, will be irretrievable. Unless these facts are shown to exist, the subordinate court has no jurisdiction to pass a decree restraining the petitioner from enforcing the bank guarantees. In a very recent decision of the Supreme Court in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P.) Ltd. [1997] 89 Comp Cas 619 [1997] 5 Sup 291 their Lordships considered the earlier decisions on that point and said how far the subordinate courts are acting in violation of the said principles of law. In paragraph 22 of the reports, their Lordships have summarised the earlier decisions and have also laid down the principles on the basis of which only, injunction could be granted from invoking bank guarantee. The said paragraph reads thus (page 629) :

'Numerous decisions of this court rendered over a span of nearly two decades have laid down and reiterated the principles which the courts must apply while considering the question whether to grant an injunction which has the effect of restraining the encashment of a bank guarantee. We do not think it necessary to burden this judgment by referring to all of them. Some of the more recent pronouncements on this point where the earlier decisions have been considered and reiterated are Svenska Handelsbanken v. Indian Charge Chrome : AIR1994SC626 , Larsen and Toubro Ltd. v. Maharashtra State Electricity Board : AIR1996SC334 , Hindustan Steel Works Construction Ltd. v. G. S. Atwal and Co. (Engineers) Pvt. Ltd. : AIR1996SC131 , U. P. State Sugar Corporation Ltd. v. Sumac International Ltd. : AIR1997SC1644 . The general principle which has been laid down by this court has been summarised in U. P. State Sugar Corporation Ltd. v. Sumac International Ltd. : AIR1997SC1644 as follows :

'The law relating to invocation of such bank guarantees is by now well-settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realise such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realisation of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence, if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases, payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country.'

50. Dealing with the question of fraud it has been held that fraud has to be an established fraud. The following observations of Sir John Donaldson M.R. in Bolivinter Oil SA Chase Manhattan Bank NA [1984] 1 AER 351 (CA), are apposite (page 352) :

'The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged.'

51. The aforesaid passage was approved and followed by the court in U. P. Co-operative Federation Ltd. Singh Consultants and Engineers (P.) Ltd. [1989] 65 Comp Cas 283 (SC).

52. The second exception to the rule of granting injunction, i.e., the resulting of irretrievable injury, has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if he ultimately succeeds. This will have to be decisively established and it must be proved to the satisfaction of the court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary, by way of restitution.

53. In the plaint, I do not find any allegation of fraud. The entire allegation is only regarding the inter se dispute between the revision petitioner (first defendant) and the first respondent (plaintiff) herein. The plaintiff has no case of fraud while asking the second defendant to provide the bank guarantee. If that will not give jurisdiction to the court to grant injunction, preventing the petitioner herein from invoking the bank guarantee is nothing but a violation of law.

54. The plaintiff's agent has been examined as PW-1. Even in his examination, except for marking various documents, there is no case of fraud anywhere spoken to by him. The lower court has failed to take note of the settled principles of law only because the defendants happened to be ex parte. Merely because the defendants are set ex parte, it does not mean that the court can also violate the law and pass a decree. In a decision of our High Court, rendered by Srinivasan J., as he then was, in Annapoorni v. Janaki [1995] 1 LW 141 (Mad), it was held thus (page 146) :

'When this court finds that a decree suffers from an error of law apparent on the face of the record owing to non-application of mind of the court, to the relevant principles of law, this court cannot keep silent and allow the decree to be in force, particularly, when it causes grave injustice ...'

55. The said principle was reiterated and followed by me in the decision in Varada Reddiar v. Jayachandran [1996] 1 LW 559 (Mad).

56. Learned counsel for the first respondent submitted that in the earlier C.R.P. No. 2200 of 1996, the ex parte decree was brought to the notice of the petitioner, but it (corporation) remained silent. Therefore, there are laches on the part of the petitioner in not coming before court earlier. This court refused to entertain that revision petition on the ground that the decree has already been passed. When the question whether the court can proceed ex parte itself is in issue, I do not think the order in C.R.P. No. 2200 of 1996 is in any way prejudicial to the rights of the revision petitioner. This court only said that since a decree is passed, revision against the ex parte order of injunction is not maintainable. Learned counsel also brought to the notice of this court that the reliefs in the suit as well as in the interlocutory applications are one and the same. Under the normal circumstances, the court will not grant the main relief itself in an interlocutory application. I find force in the said contention. By granting an ex parte order of injunction, virtually the court below has passed a decree. Even. the satisfaction that is contemplated under Order 39, rule 1 of the Civil Procedure Code, has not been entered, and what is the irreparable injury that would be caused to the plaintiff if injunction is not granted, is also not stated in the order. By the decree, it cannot be doubted that there is a great miscarriage of justice, for, the only security of the petitioner is now taken away from it, without affording it an opportunity of hearing. The entire procedure has been set at naught and no opportunity was given to the petitioner to defend its case. While passing a decree, the lower court also violated all the settled legal principles in granting a decree for injunction from invoking the irrevocable and unconditional bank guarantee.

57. As was held in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P.) Ltd. 1971 89 Comp Cas 619 [1997] 5 Sup 291, if the decision is allowed to stand, it will amount to judicial impropriety. In para. 32 of the judgment, their Lordships have held thus (page 634) :

'When a position, in law, is well-settled as a result of judicial pronouncement of this court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.'

58. In the case on hand, if the decree is allowed to stand, that will be a different law so far as the plaintiff is concerned, and the same will be illegal.

59. Since I am invoking the powers under article 227 of the Constitution of India and the entire records are also placed before this court, I do not think that I will be exceeding in my jurisdiction in passing orders even on the injunction application. As I have said earlier, the main relief as well as the relief prayed for in the interlocutory application are the same. If the relief could not be granted in the main suit, on the available materials, naturally it follows that the prayer in the interlocutory application should also be negatived for the very same reason. Even at the time when the interim relief was granted in the interlocutory application, it was the very same documents that were stated in the affidavit filed in court. It is true that the petitioner moved a revision in C.R.P. No. 2200 of 1996, for setting aside the order of injunction. But this court refused to entertain the same in view of the submission that the interim order has now merged with the decree. This court did not go into the merits of the case, and the civil revision petition was dismissed as not maintainable. In that view of the matter, I do not think there will be any bar in taking into consideration the interlocutory application also. For the reasons stated in this order the injunction application in I.A. No. 506 of 1996, in O.S. No. 376 of 1996, Sub-Court, Trichy, is liable to be dismissed, and is accordingly dismissed.

60. In the result, I am constrained to set aside the ex parte decree by invoking the powers under article 227 of the Constitution of India. Since the ex parte injunction was also granted violating the settled legal principles, the said order also has to be set aside. The injunction application (mentioned above) will stand dismissed. The trial court is directed to restore O.S. No. 376 of 1996, to its file and proceed with the same in accordance with law. The civil revision petition is allowed with costs. C.M.P. No. 1948 of 1997, for stay is dismissed consequently. On receipt of a copy of this judgment, the court below shall restore the suit and issue summons to the first defendant and will see that the procedural law is complied with fully.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //