Principles Of Balance Of Convenience, Irreparable Injury Should Guide Courts While Passing Injunction Order- SC

The Supreme Court has observed that the Courts should be guided by the principles of balance of convenience and irreparable injury while passing an order of injunction.

The Bench of Justice B.R. Gavai and Justice Vikram Nath observed, "While passing an order of injunction, the Courts are required to be guided by the principles of prima facie case, balance of convenience and irreparable injury."

The Court also held, “a blanket order directing maintenance of status quo in respect of the all 11 properties ad measuring 115 acres is not justified. If such an order is allowed to continue, it will cause irreparable injury to the appellant and the respondent No.4 in asmuch as the entire development would be stalled.”

The Bench further directed that in order to protect the interests of respondent no.1 and 2, the appellants and the respondent no. 4 should be directed to file an undertaking that they would not create any third-party rights in respect of the properties.

Senior Advocate C.A. Sundaram appeared for the appellants, Senior Advocate Vivek Kohli appeared for the respondents No. 1 and 2 and Senior Advocate Atmaram Nadkarni appeared for the respondent no. 4.

In this case, the appellant was a 100% FDI company with investors based in Singapore and Japan. In the year 2014, a development and management agreement was entered into between the appellants and a consortium of six land owning companies for exclusive developmental rights over 11 properties extending to 115 acres of land in a real estate project launched by the consortium of six companies for a consideration of Rs. 43 crores.

The respondents no 1 and 2 had invested in a commercial project called Festival City Mall at G.T. Road (National Highway No. 1), Ludhiana, Punjab, which was being launched by respondent No. 3 Company. In furtherance of the project, a term loan of Rs. 100 Crore was also availed from a consortium of banks. The project, however, ran into trouble and the construction was stalled.

It was the case of the appellants and respondent no. 4 that the respondent no. 3 Company had siphoned off the monies of investors to four intermediate companies, who, in turn, further transferred the money to the consortium of six land owning companies and that these six land-owning companies were, allegedly, related party Companies of respondent No. 3 and that these six land owning companies purchased the land for Project Mall.

However, Single Judge passed interim orders restraining the six companies from alienating or transferring any right to third parties. Thereafter, Application was preferred by the appellants and respondent 4 for vacating the interim orders, which was allowed.

Aggrieved by the vacation of the interim orders, respondent no. 1 and 2 preferred a Company Appeal which was allowed by the Division Bench of High Court and once again the six companies were restrained from alienating the properties. Against this order of Delhi High Court, appeal was preferred before the Apex Court.

It was submitted that the properties in question were all bought from the funds invested in the respondent No.3 Company in a surreptitious manner and that if an order of status quo was not passed, it would result in fait accompli. 

The Court observed that even if respondent no. 1 and 2 along with other claimants had a claim of Rs. 31 crores, the entire project in an area of 115 acres could not be stalled.

“If the Division Bench of the High Court found that, there was a prima facie case in favour of the respondent Nos. 1 and 2, they could have passed an appropriate order to protect the interests of the said respondents rather than stalling the entire project.” said the Court.

Therefore, the Court had set aside the impugned judgment of the Division Bench of the High Court and further directed the Single Judge to decide the issue regarding final orders with regard to the said properties expeditiously.

Accordingly, the appeal was partly allowed

Cause Title- Developer Group India Pvt. Ltd. V. Surinder Singh Marwah and Ors. 

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