Orissa State Commercial Transport Corporation Limited Represented By Its Secretary Sri C.b.s. Ramchandra Rao v. Sri Satyanarayan Singh And Another

G.K. Misra, C.J.

1. Sri Satyanarayan Singh, Managing Director; Orissa State Commercial Transport Corporation Ltd. (opposite party No. 1) filed Title Suit No. 132 of 1973 on 24-8-1973 in the Court of the Subordinate Judge, Cuttack, impleading State of Orissa through the Secretary, Commerce Department (opposite party No. 2) as Defendant No. 1 and the Orissa State Commercial Transport Corporation Ltd. (Petitioner)(hereinafter to be referred to as the Corporation) as Defendant No. 2.

All the averments in the plaint are not material in connection with the order of ad-interim injunction. Facts relevant for disposal of the ad-interim injunction may only be stated. A fact which was omitted in the plaint but has been admitted in course of hearing of this revision petition is Notification No. 1926-PD Bhubaneswar, 24th November, 1970. It runs thus;

The Governor of Orissa has been pleased to nominate Sri S.N. Singh at present working as the Mechanical Engineer, Orissa State Commercial Transport Corporation Ltd. as Director of the said corporation

In its meeting dated 2nd December, 1970 the Corporation resolved appointing the Plaintiff as the Managing Director in place of Sri R.N. Das, IAS. Plaintiff assumed charge as Managing Director with effect from 22nd of January, 1971. Defendant No. 1 approved the scale of pay of Rs. 1050-50-1500 recommended by the Board of Directors for the Plaintiff with effect from the date he assumed charge as Managing Director. The rules of the Orissa Government regarding service conditions of its employees were made applicable to the Plaintiff. The Orissa Civil Services (Classification, Control and Appeal) Rules, 1962 framed under Article 309 of the Constitution are applicable to him. Plaintiff averred that he performed very good service and his character roll was good. In course of time there was a conspiracy amongst the IAS Officers, mainly engineered at the instance of Sri R.N. Das, IAS, to oust the Plaintiff from the post of Managing Director. His character roll was not made available to the Governor and without any disciplinary proceeding being drawn against him, his nomination as a Director was withdrawn by Notification No. 3081-,PD. Bhubaneswar 22nd August 1973 (hereinafter to be referred to as the impugned notification). The notification runs thus:

The Governor of Orissa has been pleased to cancel the nomination of Sri S.N. Singh as Director of the Orissa State Commercial Transport Corporation Ltd. under Article 75 of the Memorandum and Articles of Association (hereinafter to be referred to as the Memorandum) of the said Corporation with immediate effect.

The impugned notification is challenged as being illegal and mala fide and not binding on the Plaintiff. On the basis of the withdrawal of nomination Defendant No. 2 is about to prevent the Plaintiff from discharging his official duties as the Managing Director. Any attempt by the Directors of the second Defendant in preventing the Plaintiff in due discharge of his duties is illegal and invalid. Unless Defendant No. 1 is permanently injuncted from enforcing the impugned notification and Defendant No. 2 is injuncted from passing any resolution to remove the Plaintiff he will sustain irreparable loss.

In paragraph 18 of the plaint there was an averment to the effect that the Plaintiff apprehending Government action served a notice under Section 80, Code of Civil Procedure on Defendant No. 1 on 3rd May, 1973 and two months time has elapsed since the receipt of the notice by Defendant No. 1.

The Plaintiff asked for the following reliefs:

(a) for a declaration that the impugned notification of the State Government is illegal and invalid or alternatively for a declaration that the Plaintiff validly continues as the Managing Director of the second Defendant;

(b) to issue a permanent injunction restraining Defendant No. 1, its agents and servants from enforcing the impugned notification and restraining Defendant No. 2, its agents and Directors from interfering in any manner with the Plaintiffs due discharge of his office as the managing Director of the second Defendant;

(c) to issue a permanent injunction restraining Defendant No. 2 from passing any resolution in terms of the impugned notification.

In paragraph 20 of the plaint the date of accrual of the cause of action was given in the following terms:

That the cause of action for the suit arose, within the jurisdiction of this Court on 22-8-1973 when the Government order dated 22-8-1973 was served on the Plaintiff purporting to terminate his service withdrawing his nomination.

For the purpose of Court-fee and jurisdiction the suit was valued at Rs. 2, 100/-.

On the date of filing of the plaint a petition supported by an affidavit for an ad-interim injunction under Order 39, Rules 1 and 2, Code of Civil Procedure was filed which was registered as Misc. Case No. 252 of 1973 on 25-8-1973. The learned Subordinate Judge passed an ex-parte ad-interim injunction on 28-8-1973 restraining the Defendants from enforcing the impugned notification in any manner whatsoever and from passing any resolution interims thereof or for preventing the Plaintiff to discharge his duties as the Managing Director of Defendant No. 2 (Corporation).

Notices were issued to the Defendants to show cause by 21.9-1973 as to why the order of ad-interim injunction shall not be made absolute till the disposal of the suit.

2. Defendants 1 and 2 respectively filed their counter on 4-9-1973 and 3-9-1973. They prayed that the ad-interim injunction should be expeditiously heard.

3. In the counters filed by the Defendants in the miscellaneous case several pleas assailing the order of ad-interim injunction were taken. The main pleas were that the suit was not maintainable as there was no service of notice under Section 80, Code of Civil Procedure on Defendant No. 1 in respect of the cause of action mentioned in paragraph 18 of the plaint; the Governor had unrestricted power to cancel the nomination of the Plaintiff as a Director under Article 75 of the Memorandum; the Plaintiff having ceased to be a Director on 22-8-1973 by the impugned notification automatically ceased to be the Managing Director of Defendant No. 2; the order of ad-interim injunction was invalid as it was issued at a time when the Plaintiff was no loner the Managing Director; the Plaintiff suffered no irreparable injury; he had no prima facie case and the balance of convenience was in favour of the Defendants; continuance of the employment of the Plaintiff after his removal from service on 22nd of August, 1973 was not capable of specific performance and as such any order of interim injunction is contrary to law; the action of the Defendants was not actuated by any mala fides.

4. After hearing the parties on 7th, 8th and 10th of September, 1973 the learned Subordinate Judge made the ad-interim injunction absolute on 17-9-1973.

The learned Subordinate Judge recorded the following findings:

(i) Prima facie, mala fide on the part of the State Government is apparent on the face of the record.

(ii) Notice served on Defendant No. 1 under Section 80, Code of Civil Procedure on 30-4-1973 is a valid notice in respect of the cause of action involved in the suit in the facts and circumstances of this case.

(iii) Since mala fide is patent on the face of the record; the impugned notification appears to be a void one and the question of giving effect to it does not deserve any consideration at this stage.

(iv) Breach of employment in this case is capable of specific performance.

(v) Plaintiff has a prima facie case and the balance of convenience is in his favour.

5. Against the order of the learned Subordinate Judge dated 17-9-1973 Defendant No. 2 filed Misc. Appeal No. 84 of 1973 in the Court of the District Judge, Cuttack, under Order 43, Rule 1(r), Code of Civil Procedure. Along with the memorandum of appeal an application for stay of the operation of the order dated 17-9-1973 passed by the learned Subordinate Judge was filed. The application or stay was ultimately heard by the learned Additional District Judge. By an order dated 22-9-1973 he rejected the application for stay.

The said application was rejected by the learned Addl. District Judge on the following reasons:

(i) The Plaintiff was still continuing to function as the Managing Director of Defendant No. 2 and Shri B.B. Das, the new Managing Director, had not taken over actual charge of the seat though he might have assumed office as such on 22-8-1973.

(ii) The question of Plaintiffs continuance as the Director being illegal would be decided in the suit itself.

(iii) The appointment of Shri B.B. Das as the new Managing Director of the Corporation is not final as it is subject to the approval in the General Meeting of Government of Orissa in the Commerce Department and the Company Law Board of the Government of India.

(iv) As the Plaintiff had obtained a favourable order from the Subordinate Judge there is no special equity in favour of the Defendants to stay the operation of the order under appeal as the stay petition contains no allegations of mala fide or any act of waste or damage against the Plaintiff.

(v) There can be no question of the working of Defendant No. 2 coming to a standstill on refusal of the prayer for stay of the operation of the order. The learned Additional District Judge after rejecting the prayer for stay directed expeditious hearing of the appeal which was pending with him.

6. It is against the order dated 22-9-1973 of the learned Additional District Judge refusing stay of the operation of the order dated 17-9-1973 passed by the learned Subordinate Judge making the ad interim injunction absolute that the civil revision has been filed by Defendant No. 2.

On 25th of September, 1973 notice was issued on the question of admission and hearing and ad interim stay of the operation of the order of ad interim injuction was granted by this Court.

All the parties appeared and the case was listed on 28th of September, 1973. At the opening of the case Mr. B.M. Patnaik raised certain objections regarding the maintainability of the civil revision. It was made clear to him that I would like to hear the civil revision both on merits and maintainability. Mr. Patnaik said that he would argue only on maintainability and not on merits. Though I was prepared to adjourn the case to a subsequent date he did not want any time. He filed a memorandum stating all the points on which he advanced arguments. Mr. Rath was heard both on merits and on the question of maintainability.

7. Mr. Patnaik raised the following contentions:

(i) The civil revision is not maintainable under Section 115, Code of Civil Procedure as the order date 17-9-1973 of the Sub-Judge has merged in the order dated 22.9-1973 of the Additional District Judge before whom M.A. No. 84 of 1973 under Order 43, Rule (1), Code of Civil Procedure is still pending and the order of-the Additional District Judge refusing the stay of the operation of the order of the Sub-Judge has not been challenged in revision.

(ii) Notice under Section 80, Code of Civil Procedure is not necessary against the Corporation. The notice dated 30A-1973 served on Defendant No. 1 on 3-5-1973 is valid in law.

8. On the contentions raised by the learned Advocates on either side the following questions arise for consideration:

(i) Has the Plaintiff proved existence of a prima facie case, irreparable injury and balance of convenience in his favour so as to invoke the jurisdiction of the Court to obtain an order of ad interim injunction

(ii) Is the notice under Section 80, Code of Civil Procedure dated 30-4-1973 alleged to have been served on Defendant No. 1 on 3-5-1973 as referred to in paragraph 18 of the plaint valid in law in respect of the cause of action referred to in paragraph 20 of the plaint

(iii) (a) Has the Court any jurisdiction to issue interim injunction against the Defendants to continue the Plaintiff in service after he was ousted therefrom by the impugned notification

(b) Is the impugned notification void as being acted by mala fides

(iv) Is the civil revision not maintainable under Section 115, Code of Civil Procedure as the order dated 17-9-1973 of the Subordinate Judge merged in the order dated 22-9-1973 of the Additional District Judge before whom M.A. 84 of 1973 is still pending

(v) Is it correct to say that the order of the Additional District Judge refusing the stay of the operation of the order dated 17-9-1973 of the Subordinate Judge has not been challenged in revision

9. The essentials to be proved in granting ad interim injunction are well settled. The leading authority which has been consistently followed by this Court is the decision of Das and Ray, J. in Brajendra Nath Ghosh and Ors. v. Sm. Kashi Bai and Ors. : A.I.R. 1946 Pat. 177 [LQ/PatHC/1945/105] .

The following propositions are to be established in order to invoke the jurisdiction of the Court to get an interlocutory order of injunction under Order 39, Rules 1 and 2, Code of Civil Procedure.

(i) Plaintiff has a prima facie case.

(ii) If interim injunction is refused he will suffer an irreparable injury.

(iii) The balance of convenience is in his favour. Each of these constituents may be analysed.

10. In establishing a prima facie case, Plaintiff need not establish his title. It would be sufficient for him to show that he has a fair question to raise as to the existence of his right and that till the question is ripe for trial a case is made out for preservation of the property in status quo.

Articles 75, 83 and 87(k) of the Memorandum run thus:

75. The Governor of Orissa shall have the right to nominate one-third of the Directors to the Board who shall not be liable to retire by rotation and their appointment shall not be subject to the approval of the Company in general meeting. The Governor shall have the right to withdraw or cancel his nomination in favour of any or all the Directors nominated by him at any time and to nominate substitute Directors in their place.

83. Subject to the approval of the Central Government the Company in general meeting may from time to time appoint one or more of the Directors to the office of Managing Director or, Managing Directors or Manager or Managers of the Company, for such term and at such remuneration (whether by way of salary or commission or participation in the profits or otherwise or partly in one way and partly in another) as it may think fit, and may from time to time remove him or them from office and appoint another or others in his or their place or places, in accordance with the provisions of the Act and these articles, provided however that not more than one of the aforesaid categories of managerial personnel shall be appointed by the Company at the same time.

87. The Office of a Director shall be vacated if:

(k) being a Director nominated by the Governor ceases to hold the office by withdrawal or cancellation of the nomination under Article 75.

The Governors right to nominate one-third of the Directors is unrestricted. Those Directors shall not be liable to retire by rotation like other Directors not nominated by the Governor. Their appointment shall not be subject to the approval of the Company. The Governor has the right to withdraw or cancel at any time the appointment of any Director nominated by him. He can substitute another Director in place of the one whose nomination has been cancelled.

Article 87(k) prescribes that the office of the Director shall be vacated if being a Director nominated by the Governor he ceases to hold the office by withdrawal or cancellation of the nomination under Article 75. Thus, by the impugned notification opposite party No. 1 ceased to hold office as Director.

Under Article 83 the Managing Director is to be appointed from amongst the Directors subject to approval of the appropriate authority as prescribed in that Article. The moment the impugned notification was issued under Article 75 cancelling the appointment d opposite party No. 1 as a Director he ceased to be a Director. Thereafter he automatically ceased to be the Managing Director of Defendant No. 2. All these Articles read together lead to the irresistible conclusion that no person can continue as a Managing Director unless he is a Director.

The service conditions of the Plaintiff prescribing that rules applicable to employees of the State Government are applicable to employees of the Corporation do not restrict the power of the Governor to cancel the appointment of a Director nominated by him under Article 75. Even if the rules applicable to Government employees are mutatis mutandis applicable to the employees of the Corporation opposite parties No. 1 cannot be treated as a person holding a civil post. The protections under Article 311 of the Constitution cannot be invoked by the Plaintiff.

On the aforesaid analysis, prima facie Plaintiff has no fair question to raise in support of his continuance in service.

Even assuming that the principles of Article 311 apply to his case, at best it can be said that Plaintiff has a prima facie case. He must still fulfil the other two conditions before he is entitled to get an ad interim injunction.

11. "Irreparable injury" means such injury which cannot be adequately remedied by damages. The remedy by damages would be inadequate if the compensation ultimately payable to the Plaintiff in case of success in the suit would not place him in the position in which he was before injunction was refused.

In this case in the event of success in the suit Plaintiff would have no irreparable injury. He used to get emoluments as Managing Director in the scale of Rs. 1050-50-1500. If the alternative relief in paragraph 19(a) of the plaint that the Plaintiff continues validly as the Managing Director of Defendant No. 2 is decreed the Plaintiff would be entitled to the entire salary and service benefits from the date of removal from service till the date of reinstatement. He would thus be fully compensated. There will be no injury to him much less irreparable injury.

12. "Balance of convenience" means the comparative mischief or inconvenience to the parties. The inconvenience to the Plaintiff if temporary injunction is refused would be balanced and compared with that to the Defendant if it is granted. If the scale of inconvenience leans to the side of the Plaintiff, then alone interlocutory injunction should be granted.

In this case the balance of convenience is against the Plaintiff. If the suit is ultimately decreed the Plaintiff would get his entire salary and service benefits. On the other hand if the Plaintiff is allowed to continue in service despite the order of removal and the suit is ultimately dismissed, then the Plaintiff would be in usurpation of the office to which he is not legally entitled. Defendant No. 2 cannot maintain a suit for getting back the emoluments appropriated by the Plaintiff during the period of illegal occupation of the office as in fact the Plaintiff performed official function during that period under orders of the Court granting interim injunction. Whether the suit is ultimately decreed or dismissed, in either case Plaintiff along would be gainer and Defendants would be at a disadvantage. The balance of convenience is thus in favour of rejecting the prayer for interlocutory injunction.

13. The learned Subordinate Judge discussed this aspect of the matter in paragraph 9 of his order. He death with prima facie case and balance of convenience. He exercised his jurisdiction illegally in ignoring the aspect of irreparable injury. Even in discussing two of the essentials he exercised his jurisdiction illegally in not keeping the correct law in view.

The learned Subordinate Judge has recorded a curious conclusion which may be quoted in his own words thus:

As it seems the real force in the argument appears to be that unless the prestige of the opposite parties is maintained by upholding their latest action they are going to lose much.

The learned Additional District Judge failed to exercise jurisdiction in not at all adverting to these aspects of the case.

14. To sum up, all the three essentials to be kept in view while granting temporary injunction are against the Plaintiffs case. All the three conditions must be fulfilled together. If any one of these essentials is found against the Plaintiff interlocutory injunction is to be refused.

This conclusion by itself is enough to set aside the impugned order of the learned Subordinate Judge granting interlocutory injunction and the order of the learned Additional District Judge refusing to stay the operation of that order.

15. The next question for consideration is whether the finding of the learned Subordinate Judge that the impugned notification is void as being actuated by mala fides is correct.

The learned Subordinate Judge observed:

It would thus seem that allegations of mala fides have not been specifically denied by the opposite parties.

This statement is not factually correct. In paragraph 5 of the counter filed by opposite party No. 2 in the Court of the Subordinate Judge it was clearly stated : "That the various allegations made by the Plaintiff in the plaint as when as in the injunction petition are not admitted by this opposite party and the Plaintiff is put to strict proof of the same." By this averment the allegation of mala facie is dearly denied. It escapes ones comprehension that a senior Subordinate Judge would construe the counter as not denying the factum of mala fides.

It is to be noted that no evidence has yet been led on either side. No reasonable person, can take the view merely on the pleadings that the allegation of mala fide has been established. The onus is on the Plaintiff to plead and prove mala fides on the part of the Defendants. Until facts are gone into and materials are brought on record in proof of the allegation no such conclusion can be drawn. The learned Subordinate Judge got himself confused by the citation of The State of Punjab v. Ramji Lal and Ors. : A.I.R. 1971 S.C. 1228, G.S. Rowjee v. State of Anhdra Pradesh : A.I.R. 1964 S.C. 962, Messrs, Pannalal Binjraj and Ors. v. Union of India and Ors. A.I.R. 197 S.C. 397 and Ram Manohar Lohia v. The State of Bihar and Ors. : A.I.R. 1966 S.C. 740, as to the effect of mala fides on the validity of an act. He extracted several passages from those decisions without understanding the implication thereof in the context where evidence has not been led.

There can be no dispute that if any act is vitiated by mala fides then the act is void.

But the real question is whether mala fides have been established. In this case there are only pleadings on either side and evidence has not been led. La w is well settled that pleadings do not constitute evidence. The finding of the learned Subordinate Judge that the impugned notification is vitiated by mala fides has no factual basis. The learned Subordinate Judge exercised his jurisdiction illegally in recording such finding on no evidence.

The impugned notification until otherwise proved is valid and not vitiated by mala fides.

16. Opposite party No. 1 ceased to be a Director on 22-8-1973 on the issue of the impugned notification. As has already been stated, he ceased to be the Managing Director ipso facto from the very moment he ceased to be the Director on 22-8-1973. The ad interim injunction was issued on 28-8-1973. By then the Plaintiff was no longer in service as the Managing Director. It is immaterial whether his successor had taken over charge and had been appointed subject to the approval as prescribed in Article 83 of the Memorandum. Once the Plaintiff was not in service the Court had no jurisdiction to issue an injunction prohibiting the Defendants not to remove him from service and directing them to continue the Plaintiff in service. The initial order of interim injuction was without jurisdiction and the impugned order making it absolute is equally without jurisdiction. The learned Additional District Judge failed to exercise jurisdiction vested in him in refusing to vacate the impugned order.

17. It is not necessary to examine the validity of the notice dated 30-4-1973 under Section 80, Code of Civil Procedure. relieve this matter to be examined in the suit itself.

18. Mr. Patnaik contended that the civil revision is not maintainable against the impugned order dated 17-9-1973 as the same had merged in the order of the Additional District Judge dated 22-9-1973 before whom M.A. No. 84 of 1973 is still pending and the revision has not been filed against the order of the Additional District Judge refusing the stay of the operation of the order of the Subordinate Judge.

19. The contention is without any substance.

The interim injunction order against the Defendants was made absolute by the Subordinate Judge and the same was not vacated by the Additional District Judge. Rightly the Petitioner prayed for setting aside the order of injunction dated 17th September, 1973. Misc. Appeal No. 84 of 1973 against that order is still pending before the Additional District Judge and the impugned order has not yet been confirmed. The Petitioner has only made an application for stay of the operation of the impugned order which was rejected. The revision has been filed for quashing the impugned order which substantively granted the interlocutory injunction.

20. That apart, factually the order of the Additional District Judge has also been assailed in revision. The certified copy of the order has been filed along with the revision petition. Reference to the order of the Additional District Judge has been made in paragraph 12 of the revision petition. The material portion may be extracted:

x x x x In the said misc. appeal the petition for stay of the operation of the injunction order was also prayed for but the Additional District Judge has rejected the application of stay by his order dated 22nd September, 1973.

Being aggrieved by the order dated 22nd September, 1973 of the Additional District Judge, Cuttack, in Misc. Appeal No. 84 of 1973 temporarily confirming the order of injunction issued by the Subordinate Judge, Cuttack, dared 17.9-1973 in Misc. Case No. 252 of 1973 arising out of T.S. No. 132 of 1973 the Petitioner begs to move your Lordships on the following amongst other.

Paragraph 2 and 17 of the grounds run thus:

2. x x x x and the learned Additional District Judge has failed to exercise his jurisdiction in rejecting the said petition.

17. For that in view of the peculiar facts and circumstances the learned Additional District Judge failed to exercise jurisdiction in rejecting the application for stay.

The aforesaid averments in the Civil revision petition clearly show that the order of the Additional District Judge dated 22-9-1973 was assailed in revision.

Even assuming that the interim order of the Additional District Judge was not assailed, it does not affect the jurisdiction of this Court to interfere with the impugned order. The real order by which the Petitioner was aggrieved is the impugned order and not the order of the Additional District Judge refusing to stay the operation of that order. The Petitioner has challenged the substantive order in revision. This Court can exercise its jurisdiction to set aside that order provided the learned Subordinate Judge exercised his jurisdiction illegally in passing such an order.

21. Mr. Patnaik further contended that no civil revision lies to this Court against the impugned order as an appeal lies to the District Judge against that order. The contention is misconceived.

Section 115, Code of Civil Procedure runs thus:

115. The High Court may call for the record of any case which has been decided by any Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears

(a) to have exercised a jurisdiction not vested in it by law, or

(b) to have failed to exercise a jurisdiction so vested, or

(c) to have acted in the exercise of its jurisdiction illegally or with material irregularity, the High Court may make such order in the case as it thinks fit.

It is now well settled that the High Court will not interfere in revision in cases in which appeal lies to it either by way of first or second appeal. The expression thereto refers to the High Court.

As has already been stated, the suit was valued at Rs. 2,100/-. Against the impugned order granting interim injunction a miscellaneous first appeal lies to the District Judge under Order 43, Rule (i), Code of Civil Procedure had no appeal lies to the High Court either by way of first or second appeal. Even against the final order of the Additional District Judge either confirming or setting aside the impugned order no second appeal lies to the High Court. Only a revision lies. The matter is concluded by Major S.S. Khanna v. Brig. F.J. Dhillon : A.I.R. 1964 S.C. 497. It is not necessary to multiply authorities.

22. Mr. Patnaik cited Shri M.L. Sethi v. Shri B.P. Kapur A.I.R. 1972 S.C. 2579, as to the scope of the powers of this Court under Section 115, Code of Civil Procedure. The limits within which the jurisdiction of this Court under Section 115 is to be exercised are well known. This decision merely enunciates those propositions. What I have said in connection with each of the contentions is not beyond the ambit of the jurisdiction of this Court under Section 115. This decision does not stand in the way of my interference with the impugned order.

23. On the aforesaid analysis, the order of the learned Additional-District Judge dated 22nd September, 1973 and the order of the learned Subordinate Judge dated 17th September, 1973 are set aside and the civil revision is allowed. In the circumstances, there will be no order as to costs. The Subordinate Judge is directed to dispose of the suit within three months from today with intimation to this Court. Records be sent back at once.