Case Note & Summary
The present appeal arose from an order granting temporary injunction in a suit for declaration and permanent injunction. The appellants, who were the original owners of agricultural land, had entered into a registered development agreement with respondent Nos.14 and 15 (original defendant Nos.1 and 2) on 13 February 2008 for a total consideration of Rs.6.75 crores. Only Rs.25 lakh was paid. The remaining instalments were due by 30 October 2010, but no further payments were made. In the interim, defendant Nos.1 and 2 unilaterally assigned 50% of their rights to defendant Nos.3 and 4 via a supplementary agreement dated 20 November 2008. The appellants, having received no consideration, issued a cancellation notice on 4 November 2009 and subsequently executed a cancellation deed dated 14 January 2010 with defendant Nos.1 to 4, cancelling the development agreement and related documents. The appellants then filed Special Civil Suit No.110/2010 on 22 February 2010, alleging that defendant Nos.1 and 2 were dealing with the property despite the cancellation. That suit was disposed of by consent terms on 16 September 2011, wherein defendant Nos.1 to 4 admitted they had no right, title, or interest, returned the Rs.25 lakh, and surrendered notional possession. In the meantime, defendant No.2 had entered into an agreement dated 25 May 2011 with the plaintiffs (respondent Nos.1-13), purportedly transferring 50% rights for Rs.15 lakh. The plaintiffs filed the present suit, claiming that the consent terms were fraudulent and they had been put in possession by defendant Nos.1 and 2. The trial court granted ex-parte ad-interim injunction on 29 September 2011, which was confirmed on 20 November 2012, restraining the appellants from interfering with the plaintiffs’ possession and creating third-party rights. The appellants challenged that order. The main legal issues were whether the trial court correctly appreciated the material on record and whether the plaintiffs had a prima facie case, balance of convenience, and irreparable injury. The appellants contended that the transaction was sham, no rights could be conveyed after cancellation, and the plaintiffs had no case. The respondents argued that the registered documents in their favour should prevail and that the appellate court’s scope under Order 43 Rule 1(r) CPC was limited. The Bombay High Court noted that the trial court had ignored the glaring facts: the development agreement was cancelled, consideration was never paid, and the plaintiffs claimed through a person who had no subsisting rights. It held that the plaintiffs failed to establish a prima facie case, the trial court’s view was perverse, and the plaintiffs had come with unclean hands. Consequently, the appeal was allowed and the injunction was set aside.
Headnote
A) Civil Procedure – Temporary Injunction – Prima Facie Case, Balance of Convenience, Irreparable Injury – Code of Civil Procedure, 1908, Order 39 Rules 1, 2 – Plaintiffs seeking temporary injunction must establish a prima facie case, balance of convenience, and irreparable injury. In the present matter, the plaintiffs based their claim on an agreement executed by defendant No.2 after the underlying development agreement had been cancelled and after defendant No.2 had relinquished all rights in consent terms. The trial court ignored these facts and granted injunction. The High Court held that the plaintiffs failed to show a prima facie case, and the trial court’s order was perverse. Held, that the injunction was liable to be set aside. (Paras 5, 9) B) Appellate Jurisdiction – Interference under Order 43 Rule 1(r) – Limited Scope unless Trial Court’s View Perverse – Code of Civil Procedure, 1908, Order 43 Rule 1(r) – An appellate court hearing an appeal against an order of temporary injunction must not interfere unless the trial court’s view is perverse or impossible. The trial court in this case ignored crucial evidence of fraud and lack of consideration, making its view perverse. The High Court therefore exercised its jurisdiction to set aside the injunction. (Para 8) C) Equity – Clean Hands Doctrine – Fraudulent Transactions – General Principles of Equity – A party who approaches the court with unclean hands or bases its claim on a fraudulent transaction is not entitled to equitable relief like injunction. The plaintiffs claimed possession through an agreement executed after the cancellation of the original development agreement and after the defendants had surrendered possession, which prima facie indicated fraud and disentitled them to relief. (Paras 4, 9) D) Contract – Cancellation of Agreement – Effect of Consent Terms – Indian Contract Act, 1872, Sections 62, 63 – A development agreement that was cancelled by the owners and all parties (including defendants 1-4) by a cancellation deed, followed by a consent decree in a suit confirming the cancellation and return of consideration, effectively extinguished all rights of defendants 1-4. Any subsequent transfer by defendant No.2 to the plaintiffs was void. The trial court erred in giving credence to the plaintiffs’ registered documents while ignoring the cancellation and consent terms. (Paras 3, 4, 9)
Issue of Consideration
Whether the trial court was justified in granting temporary injunction in favour of the plaintiffs when the material on record indicated a prima facie case of fraud and lack of consideration, and whether the appellate court could interfere under Order 43 Rule 1(r) CPC.
Final Decision
Appeal allowed. The order of the trial court granting temporary injunction is set aside. The Court, finding the trial court's view perverse and that the plaintiffs had no prima facie case and had come with unclean hands, interfered under Order 43 Rule 1(r) CPC.
Law Points
- Scope of appellate court under Order 43 Rule 1(r) CPC – limited interference
- unless trial court's view perverse or impossible
- Prima facie case
- balance of convenience
- irreparable injury are requisites for temporary injunction
- Fraud vitiates all transactions and disentitles equitable relief
- Court may interfere when trial court's order is perverse and ignores fraud.
