Cavunal Rubber Estate Pvt. Ltd. v. Jose Thomas

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE MR. JUSTICE K.M.JOSEPH THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS THURSDAY, THE 7TH JULY 2011 / 16TH ASHADHA 1933 FAO.No. 201 of 2010() --------------------AGAINST THE ORDER IN IA 914/2010 IN OS.172/2010 of SUB COURT, PATHANAMTHITTA .................... ## APPELLANTS/PLAINTIFFS: --------------------------------------- 1. CAVUNAL RUBBER ESTATE PVT.LTD., REGD.OFFICE AT ST.MARY'S. GROUP TOWERS, RAMANCHIRA, MUTHOOR P.O., THIRUVALLA, REPRESENTED BY ITS MANAGING DIRECTOR. 2. T.O.ABRAHAM, S/O.LATE KURUVILA UNNITHAN, THOTTATHIL MALIYEKKAL, THURUTHIKKADU, MALLAPPALLY. BY ADV. SRI.BECHU KURIAN THOMAS SRI.PAUL JACOB (P) SRI.ROSHEN.D.ALEXANDER SMT.INDU SUSAN JACOB SMT.NISHA JOHN SRI.ENOCH DAVID SIMON JOEL ## RESPONDENT/DEFENDANT. ------------------------------------ JOSE THOMAS, S/O.P.O.THOMAS, PADINJARE PUTHEN VEEDU, KANNANKODU MURI, ADOOR VILLAGE-689642 ADV. SRI.T.KRISHNAN UNNI, SENIOR ADVOCATE THIS FIRST APPEAL FROM ORDERS HAVING BEEN FINALLY HEARD ON 07/07/2011, THE COURT ON THE SAME DAY PASSED THE ## **K. M. JOSEPH & M.L.JOSEPH FRANCIS JJ.,** **- - - - - - - - - - - - - - - - - - - - - - - - - - - -** F.A.O. No. 201 of 2010 **- - - - - - - - - - - - - - - - - - - - - - - - - - - - -** Dated this the 7[th] day of July, 2011 ## **JUDGMENT** ## K.M. Joseph J., The appellants call in question the order passed by the Sub Court, Pathanamthitta, by which the interlocutory application seeking interim injunction restrained the respondent/defendant and all persons under him from felling or removing and taking yield from trees standing in his property has been rejected. The first appellant is a private limited company. The second appellant is the shareholder of that company. 2. Briefly put the case of appellants is as follows. The scheduled property admeasuring 57 acres of rubber plantation belongs to first appellant company. The shares of the company are held by the 2[nd] appellant along with T.O.Aleyas, Abraham Baby, F.A.O. No. 201 of 2010 :2: Gigi Kuriakose and Biju Zachariah. On 10.6.2009 the shareholders entered into an agreement with the respondent and they agreed to convey their respective shares in the first appellant company to the respondent for a total consideration of Rs.3,40,00,000/- (Rs.Three crores forty lakhs). It is stated that an amount of Rs.1,50,00,000/(Rs.one crore fifty lakhs) was received as advance sale consideration. It is further case of the appellants that the respondent has agreed and assured to pay the balance amount within a period of two months. The shareholders allowed the respondent on the strength of assurance to occupy the scheduled property and to take yield therefrom and also to fell the rubber trees. It is further stated in the agreement that if the agreement could not be executed on account of any breach, the advance sale consideration will be repaid to the respondent with 12% interest less the value of the trees felled and sold by the respondent. It is further case of the appellants that there is a dispute between three shareholders. These three shareholders filed a company petition as C.P. NO.65 of 2007 before the Company Law Board, Chennai. The shareholders were restrained from cutting or felling the rubber trees F.A.O. No. 201 of 2010 **==> picture [14 x 9] intentionally omitted <==** standing in the suit property. It is case of the appellants that the scheduled property is the exclusive property of the first appellant company and not of the share holders and the share holders or any of them were competent to transfer their respective shares in the first appellant company. It was beyond the competency or any of the shareholders to enter into any agreement relating to the assets of the first appellant company. It is also case of the appellant that the respondent committed breach of the terms of the agreement by refusing to pay the balance sale consideration. Instead the respondent has solicited and canvassed few of the other share holders to collude with him to defeat the interests of the first appellant company and 2[nd] appellant. The respondent is presently felling and removing the rubber trees standing in the suit property. At the current market value the rubber trees standing in the suit property is worth over Rs.3.5 crores. That apart the respondent has been slaughter tapping the rubber trees standing in the suit property and he has recovered a substantial amount by the sale of latex. It is also averred that the agreement is null and void. On the basis of these, the appellants instituted a suit for prohibitory injunction in F.A.O. No. 201 of 2010 :4: which they raised the essential averments. 3. Objections were filed. It is inter alia stated therein that for the payment of the balance sale consideration of Rs.1,90,00,000/the respondent arranged necessary funds in the form of Bank Demand Draft in the name of the five shares as stated by them. The required papers were prepared in five seperate files for each shares. 4.8.2009 was fixed for effecting the transfer by paying the balance sale consideration. Except the 2[nd] appellant, all other parties were present to complete the deal. According to the respondent he was ready and willing to perform his part of contract. 4. The Sub Court after considering the matter has rejected the prayer. It is inter-alia stated that the 2[nd] appellant has not got a prima facie case. It is also stated that Ext.B5 agreement was produced by the respondent to show that he has agreed to sell 4400 rubber trees with another person and amounts fixed therein at Rs.10,00,000/-. It is pointed out by the learned counsel that actually the amount is Rs.60,00,000/- and Rs.10,00,000/- is the advance. The 2[nd] appellant can be compensated for removal and taking of rubber trees. F.A.O. No. 201 of 2010 :5: 5. We heard learned counsel for the appellants and the learned senior counsel appearing on behalf of the respondent. 6. Learned counsel for the appellants would, in this context, refer to the decision of the Division Bench reported in **P. Muthukoya v. M. Muthukoya** (1988(1) KLT 664. He would further contend that it is a case where there are 12,000 rubber trees and valued at Rs.5,000/- per tree. Prima facie the Court should not have granted interim relief. He would further contend that apparently property belongs to the company. Therefore it is the company alone which can transfer its assets. It may be another matter that the shareholders could decide to sell their respective shares. Even then he points out that the agreement is actually void on the basis that there is uncertainty on its essential terms. He would point out that as per the original share pattern the second appellant was entitled to 135 shares and all the shareholders together will be entitled to 649 shares. He would further contend that there was a subsequent allotment of 1236 shares and this according to him has increased as 1885. As per the increased shares of the 2[nd] appellant he would get 771 shares. He would point F.A.O. No. 201 of 2010 **==> picture [14 x 9] intentionally omitted <==** out that Clause 16 of Contract contemplates to withdraw all the company petitions filed. The other shareholders who filed petition have not honoured their obligation under Clause 16. The resultant position is according to him one which contemplated under Clause 13 under which the respondent would be entitled to return all money. Next he would point out that it is a contingency of contract and draws attention to Clause 16, for according to him, in view of the other shares which were not withdrawn under the contract must fall through and the contract becomes void. He would submit that the actual 649 shares are deposited to income tax department in connection with defreezing of the assets of another firm. He would further point out that fraud is committed as the brother of the 2[nd] appellant continues to reign as Director of the Company. According to him actually this arrangement is sufficient to get control of the company by the brother of the 2[nd] appellant. 7. Per contra learned senior counsel for the respondent would content that there is no merit in the appeal. He would point out that the contemplated agreement, the shareholders of the company were actually proceeded by a resolution passed by the company to avoid F.A.O. No. 201 of 2010 **==> picture [14 x 9] intentionally omitted <==** sale of the shares of the company and to maintain a seperate agreement. He would submit that it is on the strength of the same that the agreement is entered into. As per the agreement it is submitted that the consideration value was fixed Rs.3,40,00,000/-. The respondent has already paid Rs.3,20,00,000/-. Initially Rs.1,50,00,000/- was paid. There is no dispute also. But Rs.50,000/- was divided into 5 shares and the 2[nd] appellant was paid Rs.30,000/- and he is in receipt of it also. As per the balance of Rs.1,90,00,000/- is concerned, it is their case that they were ready to pay the shares at Rs.38,00,000/- to the second appellant. The balance amount due to the other shareholders have already been paid and they have received it. Therefore the main contention mentioned in the suit about their breach was committed by the respondent and it cannot be true. He would point out that on the strength of the agreement he entered into agreement relating with the cutting and removal of the trees for Rs.60,00,000/-. He would further submit that the second appellant could be entitled to 40% shares. They have admitted the share is 20%. Whatever he would submit is, he is prepared to pay Rs.38,00,000/- more to the 2[nd] F.A.O. No. 201 of 2010 **==> picture [14 x 9] intentionally omitted <==** appellant which would make 20% of the total consideration and they are prepared to deposit other Rs.68,00,000/- which represent 20% plus securing the interest of the 2[nd] appellant, if it is ultimately found that he has 40% shares and they have no objection the amount being withdrawn if it is ultimately found that the respondent has 40% shares. He would also point out that there is a resolution by the company to institute the suit itself under Sec.291 of the Companies Act and when there is no board of Directors to take a decision. He would submit that in the suit for injunction the question which were raised were not considered. No reliefs declared as prayed for. 8. Clause 1 of agreement reads as follows: “The vendors/shares of the company shall sell and the vendee shall purchase the entire shares of the company and thus its entire assets i.e., the schedule property for a total consideration of Rs.3,40,000/-.” 9. Interlocutory order of injunction passed by the Trial Court is not to be interfered as the matter of refusal of interim relief certainly involves exercise of discretion. Of course the learned F.A.O. No. 201 of 2010 **==> picture [14 x 9] intentionally omitted <==** counsel for the appellant is correct in pointing out that what is meant by primafacie case is only that permissible materials which has a bonafide dispute and materials in support of the appellants case. 10. In this case there is no dispute that there were 57 share holders in the first appellant company. The shareholders apparently decided to sell all the shares they have. Apparently the shareholders were not inclined to enter into a contract in question with the respondent as he offered Rs.3,40,00,000/- under Clause 11. 11. Clause 11 of the Agreement reads as follows: “As the vendors have paid a good portion of the sale consideration they have agreed to allow the vendee to occupy the schedule property and to effect improvements thereon and to take all yields from their including tapping and taking yields from the rubber trees fell down trees and to sell and remove such trees and timbers from the schedule property as required and to receive all such incomes and to make use of it by the vendee as his absolute property. It is also agreed by the vendors that they or any of their agents shall not cause any manner of obstruction to the vendee in F.A.O. No. 201 of 2010 **==> picture [20 x 9] intentionally omitted <==** his above said enjoyment of the schedule property.” 12. Therefore the respondent was put in possession of (according to the appellants 'occupy) the share properties. Therefore the possession and occupation of the respondent cannot prima facie be found to be illegal. He has empowered under the contract to carry on various stages as cutting and removal of trees and taking yields of trees. Therefore prima facie it cannot be stated that the appellants have a legal right to prevent the respondent from doing the activities which as stated to be prevented by the interlocutory relief sought. Then the question raises one relief to breach committed. The breach commits on not paying the balance amount to him also is the case of the respondent is that out of Rs.3,40,00,000/- only Rs.3,20,00,000/- has already been paid and the balance amount could not be paid. It is not received by the second appellant. Apparently, at any rate, Rs.1,50,00,000/- has paid . Rs.30,00,000/- has been received by the second appellant. Of course the second appellant has the case that it is Rs.25,00,000/-. The 2[nd] appellant, going by the schedule points out that he is F.A.O. No. 201 of 2010 **==> picture [20 x 9] intentionally omitted <==** entitled to get much more and that he received Rs.25,00,000/- only. It is understanding that the amount represents that the correct schedule will be dispersed at the 2[nd] instalment. Therefore it is a case where we must notice another aspect from these facts. The other shareholders are not before us and much of the blame is sought to be put by the learned counsel for the appellant against the shareholders, in the matter of averments of the contract in particular clause 16 of the Contract. We do not under the argument of the learned counsel for the appellant in assigning the blame on the other shareholders or no blames on their part and it is seeking out to wriggle out of the contract. Primafacie we are of the view that in the circumstances of the case, in particular, where a substantial sum of the amount as per the contract have been paid by the respondent and where he offers to pay the balance amount and to even the deposit the value of their shares of 40% in favour of the second appellant, we do not intend to interfere with the matter. We are not much impressed by the contention on the basis of Sec.30 and 35 of the Contract Act to effect that it is a contingent contract and that it is to be treated as a void contract. F.A.O. No. 201 of 2010 **==> picture [20 x 9] intentionally omitted <==** 13. We must notice as far as the other shareholders, apparently they have hold their part of the consideration and in view of the contention that the respondent is prepared to pay the entire amount. We must also notice that effect in the agreement that the parties actually contemplates to transfer of all the shares and the total consideration was fixed 3,40,00,000/- for the same. No doubt they have also provided for the transfer of shares. 14. On the whole, we would think that it will not be just on our part to interfere with the impugned order. The appeal will stand dismissed. We confirm the order passed by the learned Judge of Sub Court. We, however, make it clear that the Court will proceed to dispose of the suit completely untrammeled by any of the observations made in its order and also by any observations made by us in our order. The Trial Court shall make endeavour to dispose of the matter finally, at any rate, on or before 31.12.2011. 15. Learned counsel for the appellants would pray that the interlocutory order which was held, may be continued for some more time as he intends to pursue the matter further. We direct that the interlocutory order passed by this court will stand in force for a F.A.O. No. 201 of 2010 :13: period of three weeks more. **K.M.JOSEPH, (JUDGE)** **M. L. JOSEPH FRANCIS, (JUDGE)** dl/