Disposed

Major Gandikote Ramanna Nagabhushana v. M/S Erin Consultants Pvt. Ltd.

Karnataka HC12 Aug 2024COMAP/57/2024

Case brief

AI extract

What is this about?

This appeal challenged the dismissal of an application for temporary injunction. The High Court held that granting an injunction was inappropriate due to technical grounds, but to meet the ends of justice, it directed the trial court to create a charge on the respondents' property for the claimed amount of Rs.1.55 crore.

What did the court decide?

Direction to the trial court to create a charge over the suit schedule property for Rs.1.55 crore.

Major Gandikote Ramanna Nagabhushana Vs… — Contract and Commercial Disputes | Karnataka HC (2024)

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COMAP No. 57 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12^TH DAY OF AUGUST, 2024

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PRESENT

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THE HON'BLE MRS JUSTICE ANU SIVARAMAN

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AND

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THE HON'BLE MR JUSTICE G BASAVARAJA COMMERCIAL APPEAL NO. 57 OF 2024

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BETWEEN:

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MAJOR GANDIKOTE RAMANNA NAGABHUSHANA AGE 60 YEARS PROPRIETOR OF M/S. ASHWINI ELECTRONICS HAVING OFFICE AT 2^ND FLOOR, NO.C-304, BLOCK-3 KSSIDC COMPLEX, ELECTRONIC CITY, PHASE-1, ELECTRONIC CITY BENGALURU 560 100

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…APPELLANT

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(BY SRI. ANIRUDH SURESH, ADVOCATE)

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AND:

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Digitally signed by NANDINI D Location: High Court of Karnataka

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M/S. ERIN CONSULTANTS PVT LTD A COMPANY REGISTRED UNDER COMPANIES ACT, 1956 BEARING CIN U85110KA1984PTC006256 HAVING ITS REGISTERED OFFICE AT NO.B2, KINGSTON MANOR RICHMOND TOWN, KINGSTON ROAD BANGALORE - 560 025

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MR. SAI PRAKASH MANAGING DIRECTOR OF M/S. ERIN CONSULTANTS PVT. LTD. SY. NO.176/50 & 51, KHATHA NO.1 MUTHOOR VIA LAKSHMIPURA

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COMAP No. 57 of 2024

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THAMMANAYAKANAHALLI POST ANEKAL, BANGALORE URBAN DISTRICT BANGALORE - 562 106

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…RESPONDENTS

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(BY SRI. RAJESWARA P.N., ADVOCATE FOR R1 AND R2)

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THIS COMAP IS FILED UNDER SECTION 13(1-A) OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE THE ORDER DATED 16.01.2024 PASSED BY X ADDITIONAL DISTRICT AND SESSIONS JUDGE AT BANGALORE IN IA.NO.1 IN COM.O.S. NO.332 OF 2023 PRODUCED AT ANNEXURE-A ETC.

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THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 07.08.2024 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, BASAVARAJA J., PRONOUNCED THE FOLLOWING:

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CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN and

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HON'BLE MR JUSTICE G BASAVARAJA

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CAV JUDGMENT

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(PER: HON'BLE MR JUSTICE G BASAVARAJA)

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Appellant/plaintiff has preferred this appeal

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against the order dated 16^th January, 2024 passed on IA.1

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filed under Order XXXIX Rules 1 and 2 read with Section

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151 of Code of Civil Procedure in OS No.322 of 2024 on

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the file of X Additional District and Sessions Judge (Dedicated Commercial Court), Bengaluru Rural District,

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COMAP No. 57 of 2024

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Bengaluru (for brevity, hereinafter referred to as "trial Court").

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For the sake of convenience, the parties herein are

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referred to their status and rank before the trial Court.

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Brief facts leading to the present appeal are that

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the appellant/plaintiff had filed a suit for recovery of amount of Rs.1.55 crore along with interest at 9% per annum. Along with the suit, plaintiff had filed IA.No.1 under Order XXXIX Rules 1 and 2 read with Section 151 of the Code of Civil Procedure seeking grating of ad-interim order of temporary injunction against the defendants restraining them or any of their officers, agents, servants and subordinates from alienating or creating any encumbrance or rights during the pendency of the suit in respect of suit schedule property bearing Survey No.176/50, measuring 4 acre 8 guntas, Survey No.176/51 and katha No.1/93-94 measuring about 4 acre 19 guntas satiate at Thammanayakanahalli (Muthooru) Village, Indlavadi Panchayat, Anekal Taluk, Bengaluru Rural District.

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Defendants appeared and filed statement of

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objections to the said IA.1 by way of counter affidavit of one Sri Sai Prakash, who is defendant No.2 in the suit, wherein it is stated that the suit of plaintiff is not maintainable. It is stated that the plaintiff has sought for temporary injunction restraining defendants from alienating or creating any encumbrance or rights over the schedule property during the pendency of the suit. The relief sought for in the suit is with respect to a monetary claim and therefore the plaintiff cannot seek temporary injunction in respect of immoveable property. It is further contended that the schedule property is not the property in dispute. Therefore, the question of preventing the defendant No.1 from alienating the property does not arise. Hence, the request for grant of temporary injunction under Order XXXIX Rule 1 of Code of Civil Procedure under any one of the clauses (a), (b) and (c) does not arise. It is further contended that Order XXXIX Rule 2 of Code of Civil Procedure also has no application in the present case, as no case of injunction is sought to

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COMAP No. 57 of 2024

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prevent further breach of contract. It is the case of defendant that Preliminary Memorandum of Understanding (for brevity, hereinafter referred to as "PMOU") dated 14^th August, 2015 is already terminated by notice dated 10^th October, 2017, which was duly served on the contracting party on 12^th October, 2017. Therefore, invoking Rule 2 of Order XXXIX of Code of Civil Procedure does not arise and hence the relief sought for is not grantable at all. Furthermore, it is contended that the plaintiff has not even made any averments with respect to prima facie case, balance of convenience and irreparable loss and injury in support of his application for temporary injunction. Since three concomitant pre-requisites for passing an order of temporary injunction are absent in the affidavit filed in support of the application, the question of granting an order of temporary injunction does not arise. The plaintiff has not disclosed as to why the suit schedule property should not be alienated. The defendant No.1 being the owner of the property, is entitled to deal with the property in the manner it chooses. The plaintiff has no right over

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COMAP No. 57 of 2024

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the immovable property as the PMOU dated 14^th August, 2015 did not create any right, title or interest in the suit schedule property and as such, the plaintiff is not entitled for any injunction. It is further contended that there is no privity of contract between the plaintiff and defendants. It is further contended that the PMOU was only with Impact Solution Group and later there was incorporation of two companies viz. M/s. Impact Tech-Craft Marketing Solutions Private Limited and M/s. Impact Academy of Human Excellence Private Limited and as per documents 6 and 7 filed along with the written statement, the PMOU has been terminated vide notice dated 10^th October, 2017 which was duly served on 12^th October, 2017 on Impact Academy of Human Excellence Private Limited and the said company has not challenged the termination of the said PMOU. The termination has thus attained finality. Even in the present case, plaintiff has not challenged the termination and the plaintiff has suppressed the material fact. On all these ground sought to dismiss the application.

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COMAP No. 57 of 2024

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Having heard the arguments on both sides, the trial Court dismissed IA.1 filed under Order XXXIX Rules 1 and 2 of Code of Civil Procedure. Being aggrieved by the dismissal of the application, the plaintiff is before this Court in this appeal.

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Contention of learned counsel for the appellant:

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Sri Anirudh Suresh, learned counsel appearing for the appellant/plaintiff submitted that the trial Court has erred in law in considering the payment of Rs.1.55 crore made by the plaintiff to defendant No.1. He would submit that plaintiff has filed a summary suit for recovery of money under Order XXXVII of Code of Civil Procedure contending that in lieu of PMOU and Letter of Intent for (for brevity, hereinafter referred to as "LOI"), the plaintiff has transferred a sum of Rs.1.55 crore to defendant No.1 and the same was made for execution of sale to go through. The PMOU and LOI are not primary documents but only the corroborative documents to bring the effect of transaction into place. Hence, the trial Court failed to appreciate and take into consideration the evidence and

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proof of the Bank statements provided which depict the transfer of the said amounts from the plaintiff to defendant No.1 as sufficient to show the cause and action of the occurrence of a transaction and the same being liable to be recovered by the plaintiff due to the default of defendant No.2. It is submitted that the trial Court has committed an error in observing that the alleged transaction had not taken place between the plaintiff and defendants but between different parties on the basis of the change in the name of the party in the PMOU and LOI.

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The trial Court also committed an error in observing that the plaintiff has failed to place prima facie material before the Court to show that the alleged money transaction had taken place between the plaintiff and the defendants, which is highly misconceived, baseless. Therefore, he submitted that the conclusion arrived at by the trial Court in the said matter that the payment did not occur between the parties, merely because the names of the parties to the transaction were named differently, is baseless, as the payments were made by the plaintiff from the personal

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COMAP No. 57 of 2024

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bank account and both the individual account and his proprietorship concern are single entity in the eye of law. The plaintiff has produced the bank statements which are the proof of transfer of money by the plaintiff to defendant No.1. If the temporary injunction is not granted as sought for and if the plaintiff succeeds in the suit after trail, he will be left only with the paper decree since the defendant No.1 has no business, operation or assets other than the suit schedule property. The learned counsel further submitted that the Court has failed to look into the matter that defendant No.1 in whose name the schedule property is registered, is the land owned by defendant No.1 in its official capacity and the company is owned by the Shareholders and till date there is no approval or resolution passed by these shareholders to sell the suit schedule property. Therefore, the trial Court has failed to perceive the underlying issue that in order for the execution of sale to be carried out in favour of the plaintiff, the approval of the Board of Directors vide a Board resolution ought to be granted to defendant No.2 to sell

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COMAP No. 57 of 2024

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the suit schedule property to the plaintiff and due to nonperformance and lack of diligence of defendant No.2, the plaintiff has waited far too long for litigation after litigation

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to attain finality and now the plaintiff only wants to recover the money paid by him to defendant No.2. Hence, the learned counsel submits that the order passed by the trial Court is without application of mind and opposed to law and the same is cryptic, non-speaking and prejudicial. On all these grounds he sought to allow the appeal.

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Submission of learned Cousnel for the respondents:

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Sri P.N. Rajeshwara, learned counsel appearing for the respondents supports the order passed by the trial Court and submits that the plaintiff has not made out any the prima facie case with respect to balance of convenience and irreparable loss and injury as required, to grant equitable relief of temporary injunction. He submitted that the plaintiff ought to have filed the application for attachment, but he has not done so. Hence, there is no ground to interfere with the order

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COMAP No. 57 of 2024

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passed by the trial Court and hence sought for dismissal of the appeal.

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Having hearing the learned counsel for the parties,

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the following points would arise for our consideration:

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Whether the appellant has made out a ground to grant temporary injunction as sought for in IA.1 or for any other relief?

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What order?

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Our answer to the above points are as under: Point No.1: partly in the affirmative; Point No.2: as per final order.

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Regarding Point No.1:

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We have examined the material placed before this Court. The plaintiff, being the proprietor of M/s. Ashwini Electronics, has filed a suit for recovery of an amount of Rs.1.55 crore with interest at 9% per annum against the defendant No.1 M/s. Erin Consultants Private Limited, Bengaluru and also defendant No.2 who is the Managing Director of the defendant No.1-Company. The defendant had mortgaged the suit property to obtain loan from Dhanalakshmi Bank and when he failed to repay the loan, the said Bank had initiated proceedings against the

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COMAP No. 57 of 2024

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defendants under Section 19 of Recovery of Debts and Bankruptcy Act and filed application before the Debt Recovery Tribunal, Bengaluru and as such, the defendants were in need of funds to discharge the said debt. At that time, the defendant No.2 got in touch with the plaintiff and expressed his interest in developing the suit schedule property and it was decided that the defendants execute a lease-cum-sale agreement for leasing the suit schedule property and later on acquiring the same from defendant No.1 for a sum of Rs.8.05 crore to be paid to defendant No.1 in tranches and in pursuance of the same, a Letter of Intent dated 16^th July, 2015 was issued by the plaintiff. It is further contended by the plaintiff that subsequent to issuance of said LOI, the defendants have acknowledged the receipt of such LOI and sent an e-mail to him and thereafter, the defendants have conveyed their acknowledgement through a LOI dated 16^th July, 2015 accepting the frame-work with respect to the execution of lease-cum-sale agreement in respect of the petition schedule property. It is also contended that the plaintiff,

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upon exchange of LOI and to take things forward, had entered into a PMOU dated 14^th August, 2015 in respect of the schedule property and therefore, as per the contents of LOI and PMOU he has transferred a sum of Rs.1.55 crore which include the token advance amount of Rs.5.00 lakh to defendant No.1 and the remaining sum was transferred in tranches. As per the terms and conditions of PMOU and LOI, the Board of the Directors of defendant No.1 were supposed to conduct due diligence in respect of the suit schedule property and after completion of the same, issue a formal approval for sale of the suit schedule property. However, after disposal of the matter by the Debt Recovery Tribunal and also by the Karnataka Administrative Tribunal, and in spite of the repeated requests and demands, the defendant No.2 has not come forward to execute the registered sale deed in respect of the suit schedule property in favour of the plaintiff, but on the other hand, defendant No.2 is intending to dupe the amount of Rs.1.55 crore and is trying to alienate the suit schedule property and hence prayed for allowing the

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COMAP No. 57 of 2024

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application with an interest to safeguard the interest of the plaintiff.

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It is the contention of defendants that the suit

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schedule property is not the subject matter of the suit and hence the present application is not maintainable in law. It is contended that the relief sought for in the suit is with respect to monetary claim and as such plaintiff has not made out a prima facie case for relief of temporary injunction in respect of the immoveable property, as the PMOU dated 14^th August, 2015 did not create any right, title or interest to the plaintiff in respect of the suit schedule property, so also, there is no privity of contract between the plaintiff and defendants as the alleged PMOU came into existence between M/s. Impact Solutions Group and the defendants and later there was incorporation of

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two companies viz. M/s. Impact Tech-Craft Marketing Solutions Private Limited and M/s. Impact Academy of Human Excellence Private Limited and in spite of that, the plaintiff suppressed the material fact and as such is not entitled for relief of temporary injunction.

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COMAP No. 57 of 2024

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Trial Court has observed in the impugned order

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that, to prove the transaction between the plaintiff and the defendants as to the alleged transaction of Rs.1.55 crore, the plaintiff has produced the LOI dated 16^th November, 2015 which prima facie shows that M/s. Impact Solutions Group has sent the said LOI to the defendant No.2 in respect of the lease-cum-sale of the Training Centre of the defendant No.2 situated in an extent of land over 8 acre 27 guntas near Pearl Valley, Anekal Taluk. The plaintiff has also produced the LOI/acknowledgement which prima facie shows that the Managing Director of defendant No.2 has sent LOI/acknowledgement to the Managing Director of M/s. Impact Solutions Group, Bangalore. The plaintiff has also produced the copy of the PMOU dated 14^th August, 2015 which shows that the document came into existence between M/s. Impact Solutions Group and defendant No.1 in respect of the property situate at Muthoor village, Thammanayakanahalli, Anekal Taluk, Bengaluru Rural District, i.e. the suit schedule property. On the contrary, the defendants have produced copy of e-

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COMAP No. 57 of 2024

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mail dated 29^th November, 2016 which was sent by one Nagabhushan to defendant No.2. Defendants have also produced copy of legal notice dated 10^th October, 2017 which reveals that the defendant No.1 got issued the said legal notice not to disturb or to interfere with the possession of the defendant No.1 over the suit schedule property. The defendants have also produced another copy of legal notice dated 15^th March, 2019 which reveals that defendant No.1 has got issued the said notice to M/s. Impact Solutions Group through the counsel stating that the company is a stranger to the land bearing Survey No.176/50 and 176/51 measuring 8 acre 27 guntas situated in Muthoor village, Anekal Taluk, Bengaluru Rural District, which belong to defendant No.1.

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On perusal of the material placed before us, it can

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be said that there is no dispute between the parties that defendant No.1 is the owner of the suit schedule property. It is also not in dispute that the subject matter of the suit schedule property is not the subject matter of the suit. However, the plaintiff has filed a suit for recovery of

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amount of Rs.1.55 crore with interest at 9% per annum. The defendants have taken the contention that they are not liable to pay any amount to the plaintiff. On perusal of material placed before this Court, at this stage, we cannot express any opinion as to the alleged transaction between the plaintiff and the defendants. Admittedly, the plaintiff has filed suit for recovery of amount of Rs.1.55 crore with interest at the rate of 9% per annum from the defendants. Whether the defendants are liable to pay the said amount or not, has to be adjudicated before the trial Court, only after full-fledged trial.

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Now the question for our consideration is whether the Court can protect the rights of the plaintiff in the event of decree passed in his favour. It is vehemently submitted by the plaintiff that if the plaintiff succeeds in the suit after trial, he will be left only with a paper decree, since the defendant No.1 has no business, operation or assets other than the suit schedule property. The defendants have not produced any material before the trial Court that the defendants have got sufficient means to pay the decreetal

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COMAP No. 57 of 2024

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amount, if the Court decrees the suit except the suit schedule property. The worth of the suit schedule property may be more than the claimed amount of Rs.1.55 crore. In such circumstances, it is not appropriate to curtail the rights of alienating the property by the defendants. At the same time, it is also necessary to protect the rights of the plaintiff as he has filed suit for recovery of amount. In this regard, the trial Court has rejected the application only the technical ground that the schedule property is not the subject matter of the suit and refused to grant temporary injunction. On re-appreciation of material on record, we are also not inclined to grant temporary injunction as sought for by the plaintiff. However, in order to do complete justice, this Court can mould the relief depending upon the facts and circumstances of the case by exercising power under Order VII Rule 7 and Section 94(e) read with Section 151 of the Code of Civil Procedure. Accordingly, we are of the considered view that if the charge is created over the suit schedule property for an amount of Rs.1.55 crore, the

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COMAP No. 57 of 2024

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ends of justice would be met. Accordingly, we answer

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Point No.1, partly in the affirmative.

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Regarding Point No.2

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For the aforestated reasons and discussions, we proceed to pass the following:

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O R D E R

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i. Charge shall be created in respect of the suit schedule property as shown in IA.1 filed under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure for the value of Rs.1.55 crore;

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ii. The trial Court is directed to send intimation to the concerned authority to create charge over the schedule property for an amount of Rs.1.55 crore;

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Appeal accordingly stands disposed of.

Sd/-

(ANU SIVARAMAN)

JUDGE

Sd/(G BASAVARAJA) JUDGE

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lnn

Major Gandikote Ramanna Nagabhushana v. M/S Erin Consultants Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Major Gandikote Ramanna Nagabhushana v. M/S Erin Consultants Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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