CORNEL PERERA v. SUREN WICKREMASINGHE AND OTHERS

009-SLLR-SLLR-1999-V-3-CORNEL-PERERA-v.-SUREN-WICKREMASINGHE-AND-OTHERS.pdf


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CORNEL PERERA
v.SUREN WICKREMASINGHE AND OTHERS
COURT OF APPEALGUNAWARDANA, J.
A. NO. 785/97.
CA/LA NO. 187/97.
C. COLOMBO NO. 4413/SPL.
OCTOBER 9, 10. 27, 1997.
NOVEMBER 10, 13, 17, 21, 1997.
DECEMBER 8, 9, 11, 12, 19, 1997.
JANUARY 27, 1998.
FEBRUARY 3, 11, 13, 26, 1998.
Injunction – Interim Injunction – Exercising rights and performing as ManagingDirector – Appointment of Managing Director for life – Article 120 of the Articlesof Association – Interpretation – Object of an Interim Injunction – Proceduralunfairness – Procedural impropriety.
The learned District Judge refused the application for an interim injunctionrestraining the defendants-respondents from interfering with or preventing theplaintiff-petitioner from exercising his rights and performing his functions as theManaging Director of the Company.
The plaintiff-petitioner challenged the appointment of the 1st defendant-respondent as the Managing Director of the Company on the grounds that –
the removal of the plaintiff-petitioner from the office of Managing Directoroffended against the preliminary Agreement.
the meeting of the Board of Directors, at which the said acts were donehad not been duly convened.
Held:
1. Article 120 states that The Directors may, from time to time, appoint oneor more of their body to the office of Managing Director for such period■ on such terms . . . subject to the terms of any agreement’.
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It is seen that the provision in the preliminary agreement stops short ofsaying that Cornel Perera is appointed for life, nor is it said so in theArticles. Further, Article 120 provide for the appointment of a ManagingDirector “from time to time" and also provides for the appointment of morethan one Director to the Office of Managing Director and the revocationof such appointment.
Thus, the appointment of the 1st respondent-respondent as the ManagingDirector is prima facie valid for it had been done as provided for by thesaid Articles of Association.
2. Insufficiency of the Notice (if any) would not make the Court inclined toinvalidate an appointment when there is no material to even remotelysuggest, let alone show that the quality or the substance of the appointmentor decision to appoint or revoke the appointment of the plaintiff-petitionerhad been in the slightest degree affected thereby.
Per Gunawardana, J.
"The grounds of procedural fairness relied upon would not themselvespersuade the Court to invalidate an appointment or a decision when the Courtknows that prima facie the case is lost on its merits and the procedural pointswere being pursued as a last ditch means of invalidating the appointment.
The crucial question is "Had the alleged grounds of procedural unfairnessresulted in serious injustice or prejudice for the plaintiff petitioner or wouldpreventing by an interim injunction the operation of the decision to appointthe 1st defendant-respondent till the final determination of the action may wellcause injustice greater than leaving the said appointment in place."
APPLICATION in Revision from the Order of the District Court of Colombo.
Cases referred to:
Challendar v. Royle – 36 ch. D 425.
Pishora Singh v. Smt. Lajo Bai – 1975 – 77 PLR 30.
Raman Hosiery Factory v. J. K. Synthetic Ltd. – AIR 1974 Delhi.
Abubucker v. Kunhamoo – AIR 1958 Mad. 287.
State of Bihar v. Ganesh – 1969 Pat LJR 177.
American Cyanamid Co. v. Ethicon Ltd. 1975 – AC 396, 1975. 2 WLR316, 1975 1 ALL ER 504.
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S. Sivarasa, PC with S. L Gunasekera, S. Mahenthiran, Nihal Fernando andN. Ft. Sivendran for plaintiff-petitioner.
I. S. de Silva with M. A. Sumanthiran for 2nd. 4th, 5th, 6th and 12th respondents.M. A. Sumanthiran for 7th and 8th respondents.
/. S. de Silva with Harsha Cabraal for 10th and 11th respondents.
Cur. adv. vult.
April 03, 1998.
GUNAWARDANA, J.
This is an application in revision in respect of an order made by thelearned District Judge dated 03.10.1997 refusing an application foran interim injunction (to be operative until the final determination ofthe action) restraining 1 st – 8th defendant-respondents from interferingwith or preventing the plaintiff-petitioner from exercising his rights andperforming his functions as the Managing Director of the HotelDevelopers (Lanka) Ltd. which is a limited liability Company.
The background facts relevant to the aforesaid application are asfollows:
The plaintiff-petitioner had been the Managing Director of the HotelDevelopers Lanka Ltd. and has been voted out of or removed fromthe said office at a meeting of the Board of Directors held on 28thJune, 1995, which board had appointed the 1st defendant-respondent(Suren Wickremasinghe) to the said office.
It was admitted at the hearing before me, or, at least, it must betaken to have been so admitted, that there were altogether 11 Directorsand that all 8 of them who were present voted in favour of the 1stdefendant-respondent at the aforesaid meeting – for the tenor of thesubmissions of the plaintiff-petitioner's counsel, which submissionswere as follows, couldn't have meant anything else:.. that purporting
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to appoint the 1st defendant-respondent as the Managing Director,8 Directors had acted in collusion and there could not have beencollusion, had the 8 Directors who were present not acted in concert. .. the 8 Directors who were present obviously had acted in unanimity
ii
In this action that has been filed in the District Court seeking apermanent injunction as the ultimate relief, the plaintiff-petitioner hasimpugned or mounted a challenge to the appointment of the 1stdefendant-respondent on the following 03 grounds but the counsel forthe plaintiff-petitioner on 08.12.97 intimated to Court (at the hearingof this application in revision) that he would not be pressing or relyingon the ground (c) mentioned below for the purpose of supporting thisapplication (in revision):
that the removal of the plaintiff-petitioner from the office ofmanaging director and the appointment of the 1st defendant-respondent thereto offended against the preliminary agreement(P6) wherein it is provided that the plaintiff-petitioner (CornelPerera) shall be the managing director;
that the said removal of the plaintiff-petitioner and consequentappointment of the 1st defendant-respondent were bad inas-much as the meeting of the Board of Directors, at which thesaid acts were done, had not been duly convened;
that the Board of Directors who removed the plaintiff-petitionerand appointed the 1st defendant-respondent had not been validlyconstituted.
The fact that the 3 Directors who chose to keep away or claimedthat they were prevented from attending the meeting, on the relevantdate, due to such factors as inadequacy or the shortness of the noticeand the like were the plaintiff-petitioner, his wife and another.
It is a trite observation to make that an interim injunction, suchas had been prayed for by the plaintiff-petitioner, is a preventiveremedy which is discretionary and the claimant for such relief must
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show that he has superior equity in his favour entitling him to thegrant of such interim relief by way of temporary injunction. The objectof an interim or temporary injunction is to maintain the status quoso that if plaintiff in the action ultimately gets judgment in his favour,that judgment would not be rendered nugatory or ineffectual. But, theparty who seeks the intervention of Court by way of an interiminjunction must, as a general rule, show 3 things:
that he has a prima facie case which means that it is moreprobable than not that he is entitled to the ultimate relief prayedfor in the action;
that in the event of withholding the interim injunction the partyseeking it, ie the plaintiff-petitioner in this case, will suffer anirreparable injury;
that the balance of convenience is in his favour, ie the plaintiff-petitioner, in this case, has to show that inconvenience that hewill suffer in consequence of his being denied the relief by wayof an interim injunction will outweigh the inconvenience that thedefendant-respondents will undergo as a result of the grant ofthe interim relief by way of an injunction.
From the above one clear principle emerges that is that when asin this case, the case sought to be set up by the plaintiff is basicallyimprobable in that there is no fair chance or probability of the plaintiff-petitioner being entitled to the relief asked for by him in the actionor of the action being ultimately decided in his (plaintiff's) favour thereis neither the basis nor reason for preserving the status quo until thefinal determination of the action – because it is more likely rather thanunlikely that the ultimate decision will be against him, ie (the plaintiff-petitioner) as would be clear from the sequel. As pointed out above,in considering whether an interim injunction ought to be granted ornot, the first point that traditionally demands consideration is this: hasthe plaintiff-petitioner made out, a prima facie case in order to satisfythe Court that he has a fair question to raise as to the existenceof the legal right which he has set up or seeks to establish inthe action.
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The plaintiff-petitioner, in the circumstances of this case, can dothat, ie show that he has a fair question to raise as to his (plaintiff-petitioner's) legal right to the ultimate relief he has claimed in the actiononly if he can show, on the material before or available to the Court,as at this stage, that it is more probable than not that the removalof himself from the office of the Managing Director, and the appoint-ment of the 1st defendant-respondent thereto, is prima facie invalidor that the case of the party, ie that of the plaintiff-petitioner, seekingthe interim injunction is more probable than not. The argument of thelearned President's Counsel for the plaintiff-petitioner, calling in ques-tion the validity of the said removal of the plaintiff-petitioner and hisreplacement with the 1st defendant-petitioner is basically two-fold: (1)that the said acts, ie the removal and appointment complained of wereinvalid primarily, if not solely, due to the fact that such acts offended"against the preliminary agreement, one of the terms of which (agree-ment) was as follows: "The Managing Director of the new companyshall be Cornel L. Perera" – who is the plaintiff-petitioner; (ii) that theremoval of the plaintiff-petitioner and the appointment of the 1stdefendant-respondent were invalid by reason of the fact that themeeting of the Directors at which the said acts were done was "notduly convened."
I shall consider the above points in order, to consider whether onthe material before me, as at this stage, one can say that there isa probability of the plaintiff being held entitled to a permanent injunctionrestraining the 1st-8th defendants-respondents from preventing theplaintiff-petitioner from exercising his rights and performing his func-tions as the managing director – that being the ultimate or final reliefprayed for in the action. If that is so, that is, if there be such aprobability or if there be a serious, as opposed to being frivolous orvexatious question or if there is a prima facie case on the point whichis essential to entitle the plaintiff to complain of the "defendants1proposed activities" – then there is good reason why the status quoie the position prior to the removal of the plaintiff-petitioner from theoffice of managing director should be preserved; if not, as Russel,LJ. had said: "that is the end of the claim to interlocutory relief." (1974- F.S.R. 333).
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Expanding on the point, viz that the said removal and appointmentin question are bad inasmuch as it violates the preliminary agreement(P6) the learned President's Counsel for the plaintiff-petitioner at firstsubmitted that the directors as provided for in article 120, had theright, from time to time, to appoint a managing director but at everyturn or on every occasion that right was exercised – the directorsmust necessarily appoint the plaintiff-petitioner, and no one else, forthe Preliminary Agreement had provided that the plaintiff-petitionershall be the managing director. But, at a later point of time, in thecourse of his submissions, the learned President's Counsel introducedsomewhat of an elegant variation to his earlier submission and tookup the position that as the board of directors could not remove theplaintiff-petitioner at all from the office of managing director as he (theplaintiff-petitioner) had not been appointed by the directors, the questionof making an appointment of a managing director did not arise untilthe plaintiff-petitioner Cornel Perera relinquished the office, of his ownaccord, or so long as the plaintiff-petitioner remained in that office(vide the submissions made on 12.12.1997). But, even the lattersubmission unmistakably carries with it the suggestion or the impli-cation that the preliminary agreement (P6) is the source of theappointment of plaintiff-petitioner as the managing director and thatin terms of the preliminary agreement (P6) the duration of thatappointment is unlimited in point of time. In fact, the learned President'sCounsel went to the length of saying thus : “Long and short of mysubmission is that article 120 is inoperative till Mr. Cornel Pererachooses to remain in office". The submission of the learned PresidentCounsel for the plaintiff-petitioner that the board of directors had noright to remove the plaintiff-petitioner from the office of the managingdirector inasmuch as the plaintiff-petitioner had not been elected orappointed to that office by the directors seems to be belied, strangelyenough, by the averment at paragraph 25 (c) of the plaint itself whichis as follows :
"… The board of directors elected the plaintiff as its first chairmanand managing director in conformity with the provisions in the saidpreliminary agreement …"
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The position of the plaintiff-petitioner is that the appointment of the1st respondent to the office of managing director is void inasmuchas that appointment offends against the preliminary agreement dated30.01.1983 wherein it is stated : "The managing director of the newcompany shall be Mr. Cornel L. Perera".
The argument of the learned President's Counsel for the plaintiff-petitioner is that no one else other than plaintiff-petitioner (CornelPerera) can be appointed to the office of managing director duringthe lifetime of Cornel Perera or so long as, to use the very wordsof the learned President's Counsel, "Cornel Perera does not disqualifyhimself or till he is removed by Court". One of the ways, enumeratedby the learned President's Counsel for the plaintiff-petitioner, in whichCornel Perera would be disqualified was by becoming insane althoughthe learned President's Counsel, to my recollection, stopped short ofspelling out precisely the cirumstances in which Cornel Perera couldbe removed by the Court. But, it is to be observed that article 120which provides for the appointment, amongst others, of the managingdirector reads thus : "Directors may, from time to time, appoint oneor more of their body to the office of managing director for such periodand on such terms as they think fit. . .". As is well-known it is mostly,if not, solely, by the articles that the internal management of anycompany is governed.
The argument put forward at the beginning, on behalf of the plaintiff-petitioner, was that although article 120 clearly contemplated oneappointment or even more than one appointment being made con-currently, from time to time, from amongst the directors, to the officeof the managing director, so that there can be in terms of the articlesmore than even one managing director, at any given time, if thedirectors so decide – yet during the lifetime of Cornel Perera therecan be only one managing director, that is, Cornel Perera himself andno one else. The learned President's Counsel for the plaintiff-petitioneradded, in the early stages of the argument that if directors, actingin pursuance of the said article 120 (reproduced above) appointed"from time to time" a managing director it must necessarily be noone else other than Cornel Perera, if the plaintiff-petitioner (CornelPerera) chooses to remain in office in which case, I am afraid, the
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appointment to the office of managing director is not, or ceases tobe an appointment by the directors, as provided for in Article 120,but a self-appointment. This argument rested mainly on the basis thatthe article 120 which provides for the appointment of the managingdirector operates – in the argument of the learned President's Counselfor the plaintiff-petitioner subject to the preliminary argument, whichas pointed out above, states thus : "The managing director of thenew company shall be Mr. Cornel Perera". In the argument of thelearned President's Counsel for the plaintiff-petitioner, the article 120operates subject to the above mentioned provision or condition in thepreliminary agreement (P6), viz that Cornel Perera shall be the managingdirector but it is stated in the article 120 thus: "The directors may,from time to time, appoint one or more of their body to the officeof managing director for such period and on such terms as they thinkfit and subject to the terms of any agreement . . ." The learnedPresident's Counsel had submitted that in the matter of the appoint-ment of the managing director in terms of the Article 120, the conditionthat is operative or that has the principal relevance is that the ap-pointment has to be made "subject to the terms of any agreement"- as had been stated in the aforesaid article 120 which means thatthe appointment has to be in conformity with the provisions in thepreliminary agreement wherein it is stated that Cornel Perera shallbe the managing director. In this context itself it would be germaneto point out that this provision in the preliminary agreement stops shortof saying that Cornel Perera is appointed for life; nor is it said soin the articles of the association, which, be it noted, were formulatedsubsequent to the preliminary agreement. If Cornel Perera is irre-movable by the directors, as argued by the learned President's counsel,who appeared for the plaintiff-petitioner then article 120 which articlewas formulated subsequent to the preliminary agreement, wouldn'thave provided, as in fact it had done, for even the revocation of theappointment of the managing director by the board of directors. If,as argued by the learned President's Counsel for the plaintiff-petitioner,the plaintiff-petitioner had been appointed for life and if no one elsecould be appointed during his lifetime or till he is disqualified orrelinquished office of his own accord, or till the plaintiff-petitioner wasremoved by the Court provision wouldn't have been made, as in factit had been done, in article 120 in the following manner: "The directors
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may, from time to time, appoint one or more of their body to the officeof managing director. . which is exactly what the directors did whenthey appointed the 1st defendant-respondent thereby ousting theplaintiff-petitioner.
And, if the plaintiff-petitioner is to be the sole managing directorfor life or so long as he chooses to remain in office as the managingdirector, which was the pith and substance of the argument of thelearned President's counsel who appeared for him – one cannot divinenor explain why the relevant article 120 (reproduced above) governingthe appointment of the managing director had not only provided inthe said article, as pointed out above as well, for the appointmentof a managing director "from time to time" but even provided for theappointment of more than one director to the office of managingdirector and the revocation of such appointment of managing director/directors.
Thus, it is clear that the appointment at a meeting by 8 of directors
the other 3 being absent – of the 1st defendant-respondent as themanaging director is, to say the least, prima facie valid for it had beendone as provided for by the relevant article, ie article 120 of theassociation.
The initial argument of the learned President's counsel for theplaintiff-petitioner that although the said article 120 provided for theappointment of a managing director/directors "FROM TIME TO TIME"
yet directors had no choice, but at every time to appoint the plaintiff-petitioner (Cornel Perera) as the managing director only – savoursof legerdemain – for if the plaintiff-petitioner had necessarily to beappointed at every turn although appointment was made, from timeto time – then the appointment “from time to time" as provided inarticle 120, would border on ritualism, if in fact, it is not veritably so.
However, inasmuch as the appointment of the 1st respondent ischallenged on the basis of what may be termed, "procedural impro-priety" as well, it is incumbent on the Court to consider whether suchalleged impropriety had affected the quality, if not the substance, ofthe appointment in question which appointment, as explained above,
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is quite regular when tested with reference to the article applicableto or governing the matter. It is to be recalled, as pointed out at page09 hereof, a submission was also made by the learned President'sCounsel to the effect that section 120 of the articles of the associationwhich provides for the appointment of a managing director “isinoperative till Cornel Perera chooses to remain in office". But, thisargument is wholly unacceptable not only because it is invariably bythe articles of the association that a matter such as the appointmentof a managing director has to be dealt with or is governed but alsobecause the investment agreement (P12) itself, on which the Presi-dent's Counsel for the plaintiff-petitioner too placed much reliance, hadin Article 10.01 provided thus: "The company shall be managed bythe board of directors pursuant and subject to the provisions of thepreliminary agreement, this agreement, the memorandum and articlesof the association of the company and applicable laws and regulationsof Sri Lanka".
So that, to say the least, it is impossible to wholly overlook theeffect of the operation of article 120, as the President's Counsel forthe plaintiff-petitioner had invited the Court to do, in the matter of thejudging of the validity of the appointment of the managing directorbecause, to repeat what has been stated above, the argument of thelearned President's Counsel was that "article 120 is wholly inoperativetill Cornel Perera chooses to remain in office".
Next to deal with alleged procedural irregularties in the matter ofthe appointment concerned which are enumerated in the plaint asfollows:
the said board meeting was convened by giving less than 24hours' notice,
was held at a place where the board meetings had never beenheld,
was held at a place other than a place where all directors couldfreely attend,
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no notice that the meeting was being summoned to remove theplaintiff from being the chairman and managing director wasgiven,
no cause was stated showing urgency,
no agenda whatsoever for the board of directors meeting wasgiven for the meeting convened at such short notice.
Of the above alleged irregularities one that merits any or the mostattention is the complaint that the length of the notice convening themeeting at which the 1st defendant-respondent was appointeddisplacing the plaintiff-petitioner was not adequate for inherent in thatcomplaint is the suggestion that the plaintiff-petitioner was preventedfrom attending the meeting owing to the shortness of the notice. Theplaintiff-petitioner resides at No. 16, Alfred Place, Colombo 03.
The meeting was also held in Colombo. It is interesting and eveninstructive to note that of the 11 directors only 3 directors had foundthe length of the notice to be inadequate and two of them were theplaintiff-petitioner and his wife (who was also a director). Of course,the counsel for the plaintiff-petitioner submitted that the other directorwho did not attend coudn't do so because of his professional engage-ments. In this regard, it is worth considering the submission madeby the learned President's Counsel for the plaintiff-petitioner whenquestioned by the Court as to whether the appointment of the 1strespondent could have been prevented or avoided had the plaintiff-petitioner been given "sufficient" notice. In response, the learnedPresident's Counsel submitted that had the length of the notice conveningthe meeting been longer or "adequate" – the appointment of the 1stdefendant-respondent could have been prevented by an injunctionfrom Court which submission inexorably carried with it the necessaryimplication that the plaintiff-petitioner couldn't have mustered the supportof the majority of the directors to continue in office even if he (theplaintiff-petitioner) had attended the meeting irrespective of the lengthof the notice or couldn't have prevented the appointment of the 1stdefendant-respondent and his own displacement by the majority vote
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or support of the majority of directors – for there was no need toresort to an injunction from Court if he (the plaintiff-petitioner) hadthe support of the majority of the directors.
Insufficiency of the notice, assuming for the sake of argument, thatit was so, would not make the Court feel inclined to invalidate anappointment when there is no material to even remotely suggest, letalone show, that the quality or the substance of the appointment ordecision to appoint or revoke the appointment of the plaintiff-petitionerhad been in the slightest degree affected thereby. Yet, even if longerperiod of notice had been given there is no reason to suppose thatthe decision of 8 directors out of 11 directors would have been anydifferent as had been so vividly demonstrated not so much by thecounsel for the defendant-respondents' but by the submission madeby the learned President's Counsel, for the plaintiff-petitioner himself,for his above-mentioned submission betrayed, if not, highlighted thefact that the appointment of the 1st defendant-respondent and therevocation of the appointment of the plaintiff-petitioner could have beenprevented only through intervention of the Court, ie by means of aninjunction.
The 5 grounds of procedural unfairness (set out above) which arerelied upon by the plaintiff-petitioner wouldn't in themselves persuadethe Court to invalidate an appointment or a decision when the Courtknows that, prima facie, the case is lost on its merits and thatprocedural points were being pursued as a lastditch means of invali-dating the appointment – (if possible). In assessing or judging of thequality of a decision to make an appointment regard must be hadto the basic principles of fairness. The crucial question is this: Hadthe alleged grounds of procedural unfairness resulted in serious injusticeor prejudice to the plaintiff-petitioner or would preventing by an interiminjunction the operation of the decision to appoint 1st defendant-respondent till (in the circumstances of this case) the final determi-nation of the action, may well cause, injustice greater than leavingthe said appointment in place. It is manifest that even if a longer periodof notice had been given and the venue of the meeting of the boardof directors had been some place other than the auditorium of the
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Ministry of Finance where the meeting had, in fact, been held, still,
I feel assured, on facts of this case, that the plaintiff-petitioner wouldn'thave attended the meeting of the board of directors at which he wasremoved from the office of chairman and managing director and evenif he had attended he would have been powerless to have preventedhis removal inasmuch as 8 of the 11 directors were in favour of hisremoval. When one examines the letter (P36) sent by the plaintiff-petitioner to the 1st defendant-respondent (Suren Wickremasinghe) itbecomes clear, to say the least, that the plaintiff-petitioner has hada forewarning of his impending removal and that the points that hadbeen raised regarding the insufficiency of the notice of the meetingof directors, unsuitability of the appointed meeting place and so on,are a smoke screen to conceal the real reason which caused himto boycott the meeting which reason strangely enough, is apparenton the face of the letter P36 itself which was sent by the plaintiff-petitioner himself stating his inability to attend or explaining that he•was "not obliged to attend" the meeting at which the 1st defendant-’respondent was appointed in place of the plaintiff-petitioner. To quotefrom the said letter: "I am advised that in view of the foregoing anyattempt on your part to act to my detriment . . . would not only bewrongful and unlawful but be of no force or avail in law". It is notdifficult to put two and two together and infer that the plaintiff-petitionerhad refrained from attending the meeting at which he was removedfrom the office of the managing-director, not for any other reason butthat he had been "advised not to attend". Even the phraseology ofthe solitary paragraph from (P36) quoted above betrays the hand ofthe lawyer or the legal adviser in drafting the letter. Upon a perusalof P36 protesting so to speak, against the holding of the meeting (atwhich the removal and appointment complained of were made) theimpression is irresistible that the plaintiff-petitioner was conscious ofor knew for certain that something was afoot to his "detriment" andthat he did not attend because he would be overwhelmed by superiornumbers. The fact that only 3 directors were absent at that relevantmeeting and 2 of them were the plaintiff-petitioner and his wife callsfor repetition. Such excuses as that given in the letter (P36), viz tocite just one example: "that only the six directors nominated by thegovernment would feel invited and comfortable", at the suggestedvenue for the meeting, and by implication that he (the plaintiff-peti-
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tioner) would "feel uncomfortable" at the venue where the meetingof directors was held are manifestly lacking in candour and were merelytrotted out for want of something better to say. One cannot boycotta meeting on advice, as the plaintiff-petitioner had evidently done, ordeliberately refrain from doing so and complain of insufficiency of noticeto attend. Such a view, ie that the plaintiff-petitioner advisedly keptaway from the meeting is vindicated by the fact that the plaintiff-petitioner had virtually said so, in so many words, in his letter (P36)addressed to the 1st defendant-respondent. To quote the relevantexcerpt of P36: “This is to inform you firstly that in all the circumstancesthe two purported notices are both invalid in law and cannot obligeme to be present". The plaintiff-petitioner had in his letter clearly saidthat he was "not obliged" to attend which meant that he couldn't becompelled to attend. This serves to show that he could have verywell attended the meeting only if he chose to do so. The plaintiff-petitioner had found that the notice that the plaintiff-petitioner hadreceived was long enough to enable him to have sufficient time toget advice as to whether he ought to attend or not and even senda communication to the 1st defendant-respondent purport of whichcommunication was that he (the plaintiff-petitioner) had been "advisedthat he was not obliged to attend". It is instructive and even interestingto note that all the directors except 3 of them found the length ofthe notice was long enough to enable them to attend and 2 of suchdirectors as found the notice inadequate, as pointed out above aswell, were the plaintiff-petitioner and his wife. It is also to be pointedout that there is no legal requirement as such that directors ought-to be apprised of the agenda for the meeting in advance. Anyhow,there is no such requirement in the relevant articles of the association.It is to be recalled that the fact that no agenda had accompaniedthe notice of the meeting was one of the points raised in proof ofthe fact that the "meeting of the board of directors had not been dulyconvened".
Facts considered above would serve to show, that the plaintiff-petitioner, as was his duty to have done being the party applying foran interim injunction, has failed to establish probability of ultimatesuccess in the action. He has failed to establish a prima facie casewhich means that he has failed to show that, “if the evidence remains
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as it is (as now) it is probable that at the hearing of the action hewill get a decree in his favour" – Challendar v. f?oyfe(,) per Cotton,LJ. A prima facie case can be said to have been established in favourof the plaintiff-petitioner only if "the case were to stop at this pointthe tribunal of fact could find for the plaintiff without being reversedin appeal for legal insufficiency of evidence". Vide "Practical Approachto Evidence" – Peter Murphy. The Court has to make this decisioneven in a criminal trial when a submission of no case to answeris made, very often at the end of the prosecution case. Of course,in the 2 types of case, ie Civil and Criminal, the required standardof proof varies. In a civil case prima facie proof connotes prima facieproof on a balance of probability whereas in a criminal trial thepersuasive burden or the standard of proof required of the prosecutionis prima facie proof beyond reasonable doubt although when thedefence (in a criminal trial) bears a legal burden in respect of anyfact or matter – the standard required is proof on the balance ofprobabilities. So that for the Court to hold that the plaintiff-petitionerhas established a prima facie case, on the facts available to Court,as at this stage or point of time, the Court must be in a positionto say that it is more probable than not that the plaintiff-petitioner willreally suffer an injury to his right or rights if the application for aninterim injunction is refused. As had been held in Pishora Singh v.Smt. Lajo BaP] per Muni Lai Verma, J. : "the lawful exercise of rightvesting in a person cannot be said to be an injury and as such thesame cannot furnish a ground for granting an injunction restrainingsuch person from exercising it". It is not to be forgotten that the 1stdefendant-respondent, is exercising the functions of the managingdirector, since the appointment of the 1st defendant-respondent to theoffice of managing director, displacing the plaintiff-petitioner, whichappointment is, to say the least, prima facie valid inasmuch as thesaid appointment had been made by the majority of 8 directors outof the entire body of 11 in terms article 120 of the association asexplained above and it is, to all intents and purposes – to restrainhim (the 1st defendant-respondent) from functioning in the office ofthe managing director that this application is made for an interiminjunction as against him and the other defendant-respondents. It isto be observed that an interim injunction is granted in aid of a legal
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right and not in violation of it and to grant an interim injunction tothe plaintiff-petitioner, against the background of matters explainedabove – would be tantamount to conferring or according a right tothe plaintiff-petitioner to function in the office of managing directorwhen, in fact, he is not prima facie entitled to any such right. Interestor right of the defendant-respondents, particularly that of the 1stdefendant-respondent who has been appointed as the managing director
be it noted by 8 of the entire body of 11 directors – is as relevantand important as the interest of the party seeking the interim injunction.
To say the least, probabilities are not that the plaintiff-petitionerwill succeed in getting the ultimate relief prayed for in plaint but ratherthat he will not. In fact, the nature of this case, rather of the evidencemade available to Court by plaintiff-petitioner as at this stage, is suchthat one need not be backward in saying for certain that the plaintiff-petitioner will fail to' obtain the ultimate relief, ie the permanent in-junctions prayed for in the plaint, because one cannot possibly visu-alise the plaintiff-petitioner adducing any more evidence at the trialthan he has already done at this stage. In fact, the learned President'sCounsel on being directly questioned by the Court in that regard, atthe hearing before me, expressly stated that he too cannot see whatother evidence could possibly be led, as supplementary to what ison record, right now, in the form of affidavits and so on, but addedthat the plaintiff-petitioner, at the trial, would perhaps adduce evidenceto show bias on the part of the directors against the plaintiff-petitioner
that being the solitary additional piece of evidence tentatively – inthe contemplation of the learned President's Counsel for the plaintiff-petitioner.
It is an observation worn out by constant repetition that the Court,in making an interlocutory order as to whether an interim injunctionought to be granted or not should refrain from embarking on a detailedinvestigation on the relative merits of the case of either party for that,so it is sometimes said, would entail something like prejudging a case
a phrase which is often repeated parrot-like and had been muchin vogue in the not too distant past. It is too well-known to need anyemphasis that the rights of parties can be decided only at the trialand in the ordinary run of cases the Court, as at this stage, ie at
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the stage of deciding an application for an interim injunction in factdoes not have the means of forming any definite or firm opinion -apart from a tentative one – as to such rights because the wholeof the relevant evidence, which would be forthcoming only at the stageof trial, would not be before the Court and it is upon the whole bodyof that relevant evidence that the determination has to be made asto rights in issue. But, this case, as remarked above, is somewhatof an exception to the generality of cases for in this case there isno further evidence in prospect – even at the trial. The learnedPresident's Counsel, as pointed out above as well, gave a tentativeindication that he may, at the trial, possibly adduce evidence in proofof bias on the part of 8 directors who acting in unison appointed the1st defendant-respondent as the managing director thereby oustingthe plaintiff-petitioner from that office. But, preconceived opinions orprejudice on the part of directors who are the electors, in a contextsuch as this, cannot in the smallest degree affect the validity of theappointment of the 1st defendant-respondent. If prejudice on the partof electors will vitiate an election, then, election of all sorts willdisappear from the face of this earth. The point I am seeking to makeis this: as the Court, in the peculiar circumstances of this case, hasaccess to virtually the entire body of evidence that would ordinarilybe available to Court at the close of the trial, the Court can makethe decision as to the improbability of ultimate success of the plaintiff-petitioner in this case with greater precision or assurance than if theevidence had been inconclusive or incomplete. No Court can be faultedfor making this observation for it is an inescapable duty that devolveson any Court to make a pronouncement or assessment with regardto the degree of probability of success or otherwise (failure) of theparty applying for an interim injunction. And when, as on the factsof this case, it is, for all practical purposes, almost certain that it isimprobable that the plaintiff would get judgment as prayed for in theplaint – it would be an exercise in futility to preserve the status quoby means of an interim injunction for it is to prevent a threatenedinjury, as opposed to one that is imagined, to a right that a temporaryinjunction is granted and one cannot conceive of any such threatenedinjury when in fact, it cannot reasonably be anticipated that any suchright will be established by the plaintiff-petitioner at the trial of the
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action. Interim injunction should be refused when it is plain that thefinal relief cannot be granted as was held in Raman Hosiery Factoryv. J. K. Synthetics Ltd01; Abubucker v. KunhamodA). The reason whyit has become plain or evident that the final relief cannot be grantedin this case is that the whole of the relevant evidence that would beavailable to the trial Court (at the conclusion of the stage of adductionof evidence at the trial) is already before the Court even as at thisstage and it has been explained above why on the whole body ofthat evidence, a permanent injunction cannot be issued restrainingthe 1 st defendant-petitioner from functioning in the office of managingdirector which is the ultimate relief prayed for in the plaint. No doubt,it is an accepted rule that the Court at the stage of dealing with anapplication for an interim injunction ought to adopt somewhat of agingerly approach without delving into matters too deeply and avoidreaching firm findings and make pronouncements with qualificationsand mental reservations, so to say. But, every rule has an exceptionand principle valid within certain limits becomes false when it is appliedbeyond those limits and the Court, has to avoid the falsehood ofextremes scrupulously particularly when it is exercising an equitablejurisdiction, as it does now, when considering the question whetheror not to grant an interim injunction. The rule forbidding expressionof definite opinions as to the outcome of the trial will not apply inall its rigour and the rationale of that rule will disappear when theentire body of evidence that can possibly be led at the trial is alreadybefore the Court even at the stage of dealing with the applicationfor an interim injunction. In fact, it is impossible to express firm opinionsand come to definite findings when there are serious issues to betried in regard to which the available evidence as at the stage ofdealing with an application for an interim injunction would be "incom-plete, conflicting and untested" and it is mainly to avoid embarrassingthe trial judge that one should refrain from expressing firm opinionson such inconclusive material as to the prospects of success of eitherparty. But, in this case, the evidence as at stage of considerationof the application for an interim injunction, is almost complete ascomplete can be even at the conclusion of the trial which promptsand facilitates the Court to make a decision with greater certainty withregard to the prospect of success or otherwise of the plaintiff's action.
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In any event, even if a party applying for an interim injunctionsucceeds in proving a prima facie case, which the plaintiff-petitionerin this case has signally failed to do – still a prima facie case ofitself would not suffice or entitle the plaintiff-petitioner to the grant ofan interim injunction. Further, it must be established that the plaintiff-petitioner would suffer irrevocable or irreparable injury. One wonderswhether it can even be said that there is even a remote possibilityof the plaintiff-petitioner suffering an irreparable injury when he hasfailed to establish, on the material on record, that he has prima faciea good right to the office of the managing director. Ordinarily any injurywhich would be a substantial one and which cannot be adequatelyatoned for by damages would come within the designation of anirreparable one. I think it is safe to conclude that damages would notbe adequate when the plaintiff (the injured party) cannot be put instatus quo in the event of his succeeding in the action. There aresome injuries which in the very nature of things cannot be repairedby monetary consideration and it is obvious that interim relief by wayof an interim injunction would be particularly appropriate in thosecircumstances. If, for example, a decision has been taken that willresult in a person being deported, a TV or radio programme beingbroadcast, for instance of a defamatory nature or a building or somethingwhich is the subject-matter of the pending litigation being demolishedor destroyed it will be too late to prevent irrevocable damage beingdone once the action is taken. Having regard to the circumstances,the interim injunction in such contexts would serve to prevent theexecution of the decision until a full hearing has taken place. Aspointed out above, damages would not be adequate and the injuryought to be treated as irreparable when the plaintiff cannot be putin the status quo, ie in the position he occupied previously. But, thenature of the case in hand is such that if the plaintiff-petitioner (CornelPerera) succeeds in establishing a right to function in the office ofthe managing director he can be easily restored to that office andplaced in that very position in which he formerly stood for the officeis extant or still existing. In this context, perhaps, it is instructive torefer to an Indian case, where it was held that it was an illegal exerciseof jurisdiction to grant an interim injunction to restrain the removalof a temporary servant as it amounted to granting the whole of therelief which the plaintiff-servant would be entitled to get in the event
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of his success in the suit before its decision. Vide State of Bihar v.GanesttS|. In this case, ie the one before me, there is no scope toargue that the ultimate judgment which the plaintiff-petitioner (CornelPerera) would get, in case he succeeds, is an inherently ineffectivelegal remedy as it would be possible to argue with greater conviction,or which greater prospect of acceptance for instance, in a case wherethere is a real threat of destruction of the subject-matter of the action,say a land or house, in which case the injury, in its very characteris immeasurably, if not wholly irreparable. Several Indian cases arereferred to in the Row's Law of Injunctions (6th edition) at page 277where it had been held that where there was no difficulty ofreimbursement or restoration in the event of a favourable decree -injunction should not be granted.
Final aspect that the Court has to go on to consider is as to whetherthe plaintiff-petitioner has made out a case that it is comparativelymore inconvenient to him, than for the defendant-respondents, if theinterim injunction is not issued or withheld thereby entitling him to theintervention of the Court to maintain the status quo through grant ofinterim or temporary injunction.
Even the balance of convenience as between the parties demandthat the 1st defendant-respondent's continuity in office ought not tobe broken or interfered with for the reason that the plaintiff-petitionerhad failed to satisfy the Court that, on the balance of probabilities,the 1st defendant-respondent continuing to function in the office ofmanaging director would involve any violation of any legal rights ofthe plaintiff-petitioner. That being so, in the end, ie at the conclusionof the trial there is no prospect or probability of the plaintiff-petitionerbeing reinstated in office consequent upon a permanent injunctionbeing granted in his favour as prayed for in the plaint. When, on thematerial before the Court at this stage, the assured expectation is that,after trial of the action, no declaration will be granted by- the Courtto the effect that appointment of the 1 st defendant-respondent is invalid
to grant an interim injunction restraining the 1st defendant-respondentfrom continuing to function as the managing director to which office
be it noted – the 1st defendant-respondent had been appointed by
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8 of the entire body of 11 directors – would be such an act or order(on the part of the Court) as not showing commonsense let alonewisdom.
Disutility or lack of value of such an order restraining the 1stdefendant-petitioner lies in the fact that it would for certain result increating a state of things in which majority of the directors would beworking at cross purposes with the managing director for the resto-ration of the plaintiff-petitioner would be contrary to the wishes of themajority which majority is irresistible, as explained above, by forceof numbers – although more probably than not (for reasons statedabove) the permanent injunction will be refused at the end of the trialthereby ousting the plaintiff-petitioner and reinstating the 1st defendant-respondent once again. Thus, the granting of an interim injunction,in the peculiar circumstances of this case would be to needlesslysubvert the flow and continuity in the management and administrationof affairs of the company and the granting of interim injunction, atthis stage, restraining the 1st defendant-respondent from functioningin the office of managing director would be such an order as wouldbe devoid of good practical sense. The granting of an interim injunctionwould have been beneficial and advantageous only if it is moreprobable than not that the plaintiff-petitioner would ultimately succeedin the action and not vice versa as it would be productive of incon-venience to the great majority of directors and mischief and harm tothe company concerned as a whole. In the celebrated AmericanCyanamid case'6’ Lord Diplock considering where the balance ofconvenience lay had this to say: "whereas to interrupt him in theconduct of an established enterprise would cause greater inconven-ience to him since he would have to start again to establish it in theevent of his succeeding at the trial”. In the case in hand, too, onecan say with the greatest assurance that it is overwhelmingly improb-able that the plaintiff-petitioner, who is applying for an interim injunc-tion, will ever succeed in the action. In short, when the Court isconsidering the question of the probability or otherwise of the plaintiff-petitioner eventually succeeding in the action, no Court can be blamedfor striving to aim at and in fact, arriving at the most accurateassessment of probability or improbability of the success at the trialof the party applying for an interim injunction for that is the first test,
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so to speak, that applying for an interim injunction has to pass orsatisfy – particularly when the COURT IS ENABLED TO DO SO,ie to form an opinion with certainty BY THE AVAILABILITY OF THEWHOLE EVIDENCE THAT WOULD ORDINARILY BE BEFORE THECOURT ONLY AT THE CONCLUSION OF THE TRIAL. Against thisbackground, it would be, as had been observed in American Cyanamidcase (supra) a needless and vexations interruption to grant an interiminjunction restraining the 1st defendant and thereby enabling theplaintiff-petitioner to function in the office of the managing directorwhen the latter (plaintiff-petitioner) has no fair chance or no chancein the smallest degree of retaining the said office, at the conclusionof the trial, by means of a permanent injunction – that being theultimate relief prayed for in the plaint.
The question of irreparable damage and the question of balanceof convenience are, more or less, inextricably interwoven. In consid-ering the question of balance of convenience the Court invariably takesinto account what means it (the Court) has of putting the successfulparty (at the conclusion of the action) in status quo, that is, the positionin which he would have stood had his rights not been interfered with.And, the Court, as a general rule, will go on to hold that the damageis irreparable if the final judgment cannot be enforced or given effectto. If, as in this case, as explained above, the plaintiff-petitioner canbe easily restored to the office of managing director in event of hisbeing successful in the action which, as illustrated above, is indeeda remote contingency, it is difficult if not impossible to take the viewthat the plaintiff-petitioner will suffer greater injury by the interiminjunction being refused.
For the foregoing reasons I do hereby affirm the order of the learnedDistrict Judge dated 03.10.1997 refusing the application made by theplaintiff-petitioner for an interim injunction – although for somewhatdifferent reasons – dictated, perhaps, by the difference in approachto the solution of the problem adopted at the two different levels.
Application refused.