Holding

Section 41(b) of the Specific Relief Act, 1963, unequivocally prohibits any injunction restraining a person from instituting or prosecuting a proceeding in a court not subordinate to the court granting the injunction, and therefore the appellate injunction is invalid.

Summary

The United Industrial Bank sued the Cotton Corporation of India seeking a declaration that the bank’s branch manager lacked authority to co‑accept usance bills and also obtained an interim injunction restraining the corporation from filing a winding‑up petition against the bank. The Bombay High Court’s Division Bench upheld the injunction, but the Supreme Court was asked to consider whether, under Section 41(b) of the Specific Relief Act, 1963, a court can restrain a person from instituting or prosecuting a proceeding in a court not subordinate to the one granting the injunction. The Court held that the clear language of Section 41(b) bars any injunction—temporary or perpetual—preventing a party from initiating proceedings in a court of equal or superior jurisdiction. Consequently, the appellate order granting the injunction was set aside and the single judge’s order refusing the injunction was restored. The decision reaffirmed the principle that access to justice cannot be impeded by injunctions contrary to statutory provision.

Issues considered

Whether Section 41(b) of the Specific Relief Act, 1963, deprives a court of jurisdiction to grant an injunction restraining a person from instituting or prosecuting a proceeding in a court not subordinate to the court granting the injunction.
Whether a temporary or interim injunction can be granted notwithstanding the bar in Section 41(b) by invoking the court's inherent powers.

Legislation cited

Banking Regulation Act, 1949
Code of Civil Procedure, 1908s. Order 39, s. Section 37
Companies Act, 1956s. 433, s. 434
Companies (Court) Rules, 1959s. Rule 96
Specific Relief Act, 1887s. 56(b)
Specific Relief Act, 1963s. 41(b)

Subjects

Specific Relief ActInjunctionWinding‑up petitionJurisdictionTemporary injunctionInherent powers of courtCompanies ActAccess to justice

Judgment

COTTON CORPORATION OF INDIA
A
v.
UNITED INDUSTRIAL BANK

September 19, 1983
B
(D. A. DESAI AND V. BALAKRISHNA ERADI, JJ.]

Specific Relief Act. 1963-S. 41(b)-Whether court has jurisdiction' t•
trant injunction restraining any person from in~tituting any proceeding in a court
not iubo!dinate to that from which injunction is sought?
c
A Branch Manager of the respondent-Bank C(_)·accepted 16 usance bills
of the aggregate value of over Rs. 45 lakhs relating lo purchases of cotton made \ .
by a textile mill from the appellant-Corporation. When the usaii.ce bi,lls
inatured, the Corporation called upon the Bank to make payn1ent. The Bank
filed a suit against the Corporation praying inter alia for a declai"ation that
the co-acceptance of the usance bills by its Branch Manager was null and void
D as he did not have the requisite authority to co-accept the bills on beha1 f of
the Bank and alsO for an interim injunction restraining the Corporation from
presenting a winding-up petition under the Companies_Act, 1956. Th.e prayer
for injunction was turned down by a Single Judge of the High Court but the
' ..
same was granted by a Division Bench which heard the appeal agains·t the
order of the Sjngle Judge. The narrow question examined in this appeal was: ·
E Whether in view of the provision contained in s. 41(b) of the Specific Relief
Act, 1963, the court will have jurisdiction to grant an injunction restraining
any person from instituting any proceeding in a court not subordinate to that"
ftom which the injunction is sought ?

Allowing the appeal,
F
HELD: From the language used ins. 56(b) of the Specific Relier Act,
1887 (which was the predecessor provision of s. 4I(b) of the 1963 Act) it was
clear that the court could not stay a proceeding in a court superior in hier-
3.rchy to the court from .which injUnction waS sought; but by a process of
judicial interpretation a consensus had been reached that a court could bY an
,injunction restrain a party befo_re it_ from .further prosecuting the proceeding
G in other courts, superior or inferior. To some extent this approach had not
only effectively circumvented the provision contained in s. 56(b) of the repealed
Act but also denuded- it of its content The legislature took notice of this
judicial interpretation and materia1ly altered the language of the succeeding
Provision. It manifestly expressed its mind by enacting s. 4l(b) in such clear
and on-ambiguous language that an injunction cannot be granted to restrain
H 8.ny person-the language takes care of injunction acting in personum-from
instituting or prosecuting any procee4ing in a .Court not subordinate to that
from which injunction is sought. This change in language deliberately adopted
~y the legislature has to be given full effect. [970 F-H; 971 A-B; DJ
CoTTON CORPN, V, U.1. BANK 963
(i) Anyone having a right, that is a legally protected interest, complains
of its infringement and seeks relief through Court must have an unhindered, A
uninterrupted access to Jaw courts. Access to court in search of justice
according to Jaw is the right of a person who complains of infringement of
his legally protected interest and a fortiori therefor~. no other court can by its·
actlon impede access to justice. This principle is deducible from the Consti·
tution which see~s to set up a society governed by rule of law. As a corollary
it must yield to another principle that a superior court can injunct a person by
restraining him from instituting or prosecuting a proceeding before a subordi· B
nate court. Save this specific carving Out of the area where access to justice
Iilay be impeded by an injunction of the court, the legislature desired that
courts ordinarily should not impede access to justice through court. This is
the equitable principle underlying s. 41(b). Accordingly, it must receive such
interpretation as would advance the intendment and thwart the mischief it was
·enacted to supress and to keep the pat_h of access to justice through court
unobstructed. [971 F-H; 972 A-BJ c
(ii) The legal systen1 in our country envisages obtaining redressal of a
wrong or relief against unju~t denial thereof by approaching the court set up
for the purpose. If a person complaining of invasion of his rights is injuncted
from approaching the court set up to grant relief by an action brciught by the D
opposite side against whom he has a clai,n and which he wanted to enforce
through court, he would have to first defend that action and vindicate his '
right and thereafter,. when the injunction is vacated, he has to approach the
court for: relief1 In order to avoid such multiplicity of proceedings, the legis~
iature enacted s. 41(b) and statutorily provided that an injunction cannot be
granted by a court with a view to· restraining any person from instituting or
prosecuting any proceeding in a court not subordinate to that from which the E
·injunction is sought. [972 C-F; G]

. (iii) Th~ ~onte.~tion thats. 41 (b).is not/attracted because it deals only
with perpetual lDJunctton cannot be accepted. The expression 'injunction• in
s. 4l(b) is not qualified by an adjective and ther¢fore it would compfehend
both interim and perpetual injunction. It is true that s. 37 specifically provides F
that temporary injunctions which have to continue until a specified time or
until further order of the court are regulated by the Code of Civil Procedure.
But if a dichotomy is introduced by confining s. 41 to perpetual injunction
only ands. 37 read with 0. 39 C.P.C. being confined to temporary injunction,
an unnecessary grey area will develop. It is indisputable that ten1porary
injunction is granted during the peqdency of the; proceeding so that while
granting final relief the Court is not faced with a Situation that the· relief G
. becomes infructuous or that during' the .pendeacy of the proce~ding an unfair
a_dva?tage is taken by the party in default or against whom temporary injunc-
tion is sought. But power to grant temporary injunction was conferred in aid
of or as auxiliary to· the final· relief that may be granted. If the" final relief
cannot be granted in terms as. prayed for, temporary relief in the same terms
can hardly if ever be granted. [973 C-FJ H

State of Orissa v. Madan Gopal Rungta, [195 2] S.C.R. 28 referred to,
964 SUPREME ColJRT REPORTS [1983] 3s.c.R.

Udyog Mandir v. Messrs. Contessa Knit Wear and Ors., A.I.R. [1975]
Bcim. 158; and Krishnadevi P. Gupta & Anr. v. Banwari/al Hanuman Prasad
Tibrewala, A.I.R. [1976] Bom. 233 approved.

In the instant case the Bank seeks to restrain the Corporation by an
injunction of the court from instituting a proceeding for winding-up oT t11e
Bank. There is a clear bar ins. 41(b) against granting this relief. The court
has no jurisdiction to grant a prepetual injunction restraining a person from
B instituting a proceeding in a court not subordinate to it as a relief, and
thei'efore; ipso facto tempqrary relief cannot be granted in the same terms.
[974 B-C]

(iv) One cannot bodily import English decisions into our system to
develop a hybrid legal system and one .cannot be so hypnotised by·Englisl)
_c decisions to overlook legislative changes introduced in Indiah Law .. Whfrc
provisions are in pari n1ateria between the English Act and the Indian Act and
where local conditions do not materially differ from the conditions in U.K ..
one may, keeping in view the conditions in our country, look at the view taken
by the English Courts and if consistent with our Jurisprudence, our social
conditions and our chalked out path in which the law mu.st move, one can
profitably take help of the decision. [97; D-E]

Cadiz Waterworks Co. v. Hamett, [1874-75], 19 Equity Cases 182; Circle
Restaurant Castiglione Co. v. Lavery, [188)) 18 Ch. Div. 555; and New
•
Travellers Chambers Ltd. v. Messrs Cheese & Green, [1894] 17- Law Times ;1
.Reports 171-plea to take notice of, declined.

Buckley: Companies Act, 14th Edn., footnotes 7, 8 and 9, P. 524; and
E Palmer's Company Precedents, Part !I, 17th Ed. p. 45-i>lea to take notice ·
of· declined.

Hungerford Investment Trust Ltd. v.. Harldas .Mundhra & Ors., [1972] 3
S.C.R. 690, at 701; Cha/es Forte Investments Ltd. v. Amanda, (1963] 2 All E.R. ..
940; Bryans/on Finance Ltd. v. De Vries, [1976] I All E.R. 25; and Stonegate
F ·Securities Ltd. v. Gregory, [1980] I All E.R. 241; referred to.

(v) The Court can in appropriate caseS grant temporary injunction in
exercise of its inherent power in cases not Covered by 0. 39, C.P.C, Bl.it the
inherent poWer of the Court cannot be invoked to nullify or stultify a statutory
Provision. While exercising inherent power, the court should not overlook
G the statutory provision in s. 41(b) wh.ich clearly indicates that injunction to-
restrain initiation of proteedi1_1g cannot be granted. (980 C-D]

Manoharla/ Chopra v. Rai .Bahadur Rilo Raja Seth Hira/al, [1962] Supp.
I S.C.R. 450; and Padam Sen v. State of U.P.; [1961] I S.C.R. 884; referred to.

H In the instant case, the appellate Judgment does not contain the slightes·t
reference to the invocation of the inherent power of the court in granting the
order of injunction now under challenge. Not only that, but the court has
not held that the contention of the Corporation is frivolous or untenable or
COTTON CORPN. V. U.I. BANI<i 965
the claim is mala fide. This becomes clear from the observation of the court
tbat the order passed by it is not founded on the merits of the Bank's case or A
Jack of inerit in any claim which the Corporation may have against the plaintiff-
Bank and it Would be open to the Corporatiqn to file a regular suit or summary
suit against the plaintiff-Bank in which appropriate orders would be passed by
the court seized of the matter as and when the occasion arises for the same.
(980 D-FJ

(vi) Th~ contention that the presentatiOn of wjnding-up petition coupled
8
with advertisement thereof in newspaper as required by law has certain serious
consequences on the status, standing, financial viability stability and opera-
tional efficiency of the company, and where the debt is bona fide disputed, a
petition for Winding-up, which is not an alternative to the suit to recover the
same, may be a pressure tactic to obtain an unfair adv-antage, ·and therefor~,
the court must, despite the provision in s. 41(b), spell out a power in. appro-
priate cases to injunct a person from filing a winding-up petition, cannot be
c
, I
accepted. This contention overlookS the various statutors safeguards against
admission, advertising and publication of winding-up petitions. There is
sufficient built-in safeguard in the provisions of the Companies Act and the
Rules framed thereunder which would save the company from any adverse
consequences, if a petitioner actuated by an ulterior motive presents the
petition. According to rule 96 of the Companies (Court) Rules, 1959 a petition
for winding-up has to come' up in Chambers before the Company Judge
and not in open court, and the rule confers a discretionary [,power on the
judge not to give any directions at that stage but merely issue a nOtice to
the company before giving directions. If Uoon receipt of such notice the
company appears and satisfies the judge that the debt is bona fide disputed
Or the presentiition of the petition is n1ala fide, or actuated by an ulterior E
motive, or abuse of the process of the co~rt, the Judge may decline to admit
the petition and may direct and party presenting the winding-Up petition to
prove its claim by a suit or in any other manner. This is the jurisdiction of
the Company Court and it cannot be restrained from .exercising the same. by
some other court restraining the creditor from presenting a winding-up
petition. (981 B-H; 982 A; DJ
F
National Conduits Pvt. Ltd. v. S. S. Arora, [1968] I S.C.R, 430,
referred to.

George v. The Athimattam Rubber Co. Ltd., A.I.R. 1964 Kerala 212,
approved.
G
In the instant case, even assuming that the Appellate Bench had in its
mind the inherent power of the court to grant injunction despite, statutory
inhibition and consistent with the view taken by the.courts in England, it had
then in order to do justice between the parties first reach an affirmative finding
that the winding-up petition as and when preSep.ted by the Corporation would
be frivolous and would constitute· an abuse of the· process of the court or H
· would be a device to pressurise the Bank to submit to an unjust and dishonest
claim. It must also reach an affirmative conclusion that the debtor-Bank is
sufficiently solvent to satisfy the f;;:lailll as a~d when established. It has also
966 SUPREME COURT REPORTS (1983] 3 s.c.R.
to record an affirmative finding that the Corporation is not seeking bona fide
A to present a petition for winding-up but is actuated by an ulterior motive in
prerenting the petiHon. However, the decision of the Appellate Bench is
conspicuously silent on these relevant points. [983 E-H; 984 A]

CIVIL APPELLATE JuRJSDICTION : Civil Appeal No. 7348 of
1983.
B
Appeal by Special leave from the judgment and ·order dated
the 19th March;l982 of the Bombay High Court in Appeal No. 527
of 1981 in notice of motion No. 1156/81 in Suit No. 1508/81.

Sankar Ghose, Miss Radha Rangaswamy and Rangaswamy for
c the Appellant.

A. K. Sen, R. C. Nag, Rameshwar Nath and A. K. Sil for
\
the Respondents.

D The Judgment of the Court was delivered by

DESAI, J. First respondent United .Industrial Bank Limited
(Bank for short') having its r~gistered office at 7, Red Cross Place,
Calcutta filed Suit No. 1508 of 1981 on the original side of the
E Bombay High Court against the appellant-The Cotton Corporation
of India Limited ('Corporation' for short) and one Tapan Kumar
Ghosh, who. at the relevant time was the Chief Branch Manager of
the Worli Branch of the Bank and defendant No. 3-Bradbury Mills
Limited, an exi5ting Company within the meaning of the Companies
Act, 1956 carrying on business at Maulana Azad Road, Jacob Circle,
F Bombay praying for a declaration that the acceptance and or co-
acceptance of the bill of exchange and/or hundies listed in Exhibit 'K'
by second defendant Tapan Kumar· Ghosh for and on behalf of the
Bank was null and void and ·not binding on the Bank and calling
upon the Corporation to deliver up to the Court the disputed bills. of
G exchange and/or hundies for the purpose of_.cancellation and for 11
direction cancelling the same. In this s\iit the Bank took out a notice
of motion No. 1156 of 1981 seeking to restrain by an interim injunc-
tion the Corporation from enforcing any claim whatever in any form
or from relying on or giving effect to the bills of exchange or hundies
R involved in the dispute for the purpose of any .suit or other proceed-
ings including winding-up proceedings under the Companies Act, 1956 ·
and/or the Banking Regulation Act, 1949 against the Bank. Notice of
motion also included a prayer for an interim injunction restraining
COTTON CORPN. v. U.J. BANK (Desai, J.) 967
'
the defendants in any manner whatsoever either endorsing or
negotiating or transferring the said bills of exchange or hundies and A
for appointment of a receiver to take custody of the bills of exchange
and hundies listed in Exh. 'K'. An ex-parte ad-interim injunction was
granted as prayed for. When the notice of motion came up fot
hearing, the learned judge made the following order:
B
" ... Mr. Cbagla confines prayer (a} o1lly to the filing_
of winding up petition by Defendant No. I and 3. He
presses prayer (b) in full. Notice of motion as against
the Defendant No. I dismissed. The Notice of Motion
made absolute in terms of prayer (a) in so far winding up
is concerned as against the defendant No. 3, so far as c
, prayer (b) is concerned, the bills are in the possession of
the 1st Defendants arid there is no question of other defen-
dants negotiating the same.

Notice of Motion dismissed as regards prayer (b) also D
against Defendants 2 and 3... "
. '
The. Bank having been dissatisfied with the rejection of the
Notice of Motion against the Corporation preferred Appeal from an
order No. 527 of 1981. A Division Bench of the Bombay High
Court allowed the appeal and issued interim injunction restraining E
the Corporation from presenting a winding. up petition, the order
being in the same terms as made against the 3rd defendant by the -
learned Single judge. The co(rectness and validity of this order is
impugned in this !lppeal.
F
As the suit is pending awaiting adjudication on merits, every
attempt would be made by us to avoid any expression of opinion on
the. merits ofthe suit. The few facts which we propose to set out
.are for the purpose of understanding and appreciating the contention
only, the correctness or otherwise of the allegation of facts being
immaterial for the present purpose. G

The Corporation is engaged in th_e bussiness of purchasing and
selling cotton to textile mills in India. The policy of the Corporation
appears to be to sell cotton against cash payment, but in some cases
to accommodate the textile .mills the sale is effected on credit against H
acceptance of usance bills co-acceped by the bankers of the textile
mills guaranteeing payment on due d~tes. 3rd defendant ·Bradbury
968. SUPREME €0URT REPORTS [1983] 3 s.c.R.

Mills Limited is alleged to have purchased cotton of the aggregate
A value of Rs. 45, 75, 000 and in payment of the price issued t"6 usance
bills. The 3rd defedant by Its letter dated May 21, 1981 had informed
the Corporation that the Bank has given an undertaking, to Govern-
ment of Maharashtra to monitor the cash flow of the 3rd defendant ·
and hence it had to operate account with that Bank only, and it
B requested the Corporation to accept usance bills co-accepted by the
Bank. The Corporation asserts that the Bank through defendant No.
2 its Chief Branch Manager at Worli co-accepted the 16 usance bills
and according to the Corporation the acceptance was. evidenced by
four letters issued by the Bank. When the usance bills matured and
became due for payment, the Bank of Baroda on behalf of the
c Corporation called upon the Bank to make the payment of the
amounts covered by the various usance bills. Simultaneously, the
3rd defendant was asked to direct its bankers, the plaintiff-bank in
·• .
this case; to discharge the usance bills and make the necessary
payment. The Solicitors of the Bank informed the Corporation
that they were awaiting instruction from the head office of the Bank
D at Calcutta. .Thereafter, the Solicitors of the Corporation served a
notice .dated August 5, 1981 on the Bank calling upon it to make the
payment under the usance bills co-accepted by the Bank within 4 days
from the receipt of the notice. Soon thereafter the Bank filed a suit
against the Corporation and 2 others as stated hereinbefore. The
main contention of the Bank in the suit is that the Chief Branch
E Manager defendant No. 2 had not the requisite authority to co·accept
the bills on behalf of the Bank and therefore, the Bank had incurred
no liability under the usance bills. There is some allegation of fraud
but it is not relevant for the present purpose. The suit is pending on
the Original Side of the Bombay High Court.
F
A very narrow question which we propose to examine in this
appeal is : Whether in view of the provision contained in Sec. 41 (b)
of the Specific Relief Act, 1963 ('Act' for short), the Court will have·
jurisdiction to grant an injunction restraining any person from insti-
G
tuting any proceeding in a court not subordinate to that from which
the injunction is sought ? The contention may be elaborated thus :
Can a person be restrained by.an injunction of the Court from institut-
ing any proceeding which such person is otherwise entitled to institute
ff in a court not subordinate to that from which the injunction is
sought? In the facts of the present case, the narrow question is whether
the Corporation can be restrained by an injunction of the court from
presenting a winding·up petition a8ainst the Bank ? The liigh Court
CoTTON CORPN. v. U.I. BANK (Desai, J.)

seems to hold that the Court has such powers in view of the provi-
sions contained in 0.39 of the Code of Civil Procedure read with Sec. A
37 of the Specific Relief Act, 1963 or in exercise of the inherent·
powers of the Court under Sec. 151 of the Code of Civil procedure.
Thfs position is seriously contested by the appellant in this appeal.

The reliefs which the Bank as plaintiff is seeking in the suit B
filed by it are a declaration that Bank is not liable'to honour and·
discharge the usance biIIs co-accepted in its name by its Chief Branch
Manager-defendant 2 as envisaged by Sec. 34 and a further relief
that the disputed bills of exchange and hundies be delivered to the
Court for cancellation and be cancelled as envisaged. by Sec. 31: It is
in this suit that the Bank has obtained an interim injunction restrain· c
ing the Corporation from presenting a winding-up petition against
the Bank.

·Part III of the Act bears the heading 'Preventive Relief' and
fasciculus of sections therein included. provido for injunctions generally. D
Sec. 36 provides that preventive relief is granted at the discretion of
the Court by injunction, temporary or prepetual. Sec. 37 specifies
r the nature and character of temporary and prepetual injunGtions.
Temporary injunctions are such as are to continue until a specified
time, or until the further order of the Court, and they may be granted
at any stage of a suit, and are regulated by the Code of Civil E
Procedure, 1908. Permanent injunctions can only be granted by the
decree made at the hearing and upon merits of the suit and thereby
defendant in th~ suit is perpetually enjoined from assertion of a right
or from commission of an act, which would be contrary to the rights
of the plaintiffs. Section 38 sets out situations in which the court I'
can grant a perpetual injunction to the plaintiff to prevent the breach
of an obligation existing in its favour, whether expressly or by impli•
cation. Sec. 38 is thus an enabling section which confers power on
the court to grant perpetual injunction in situations and circumstances
therein enumerated. Sec. 41 caters to the opposite situation. It
provides that an injunction cannot be granted in the situation and G
.,. circumstances therein set out. The Corporation relies on Sec. 41 (b)
in support of its· contention that the court had no jurisdiction to
grant temporary injunction because perpetual injunction could not
have been granted by the Court in terms in which temporary or
interim injunction was sought. Sec. 41 (b) reads as under : H

"41. An injunction cannot be granted:-
970 SUPREME COURT REPORTS (1983)-3 s.c.R.
(a) ............ _................ - ........ ..
A
(b) to restrain any person from instituting or
prosecnting any proceeding in a court not
subordinate to that from which the injunction
is sought ;
B
···············---···················"
· The predecessor of Sec. 41 (b)~ Sec. 56 (b) of the Specific Relief Act
of 1887 repealed by 1963 Act read as under :

C "56. Injunction cannot be granted :-

(a) ······-·· .. - - ............ - ... .

(b) to stay proceeding in a ·court not subordinate
to that from which the injunction is sought,"
D.
A glance at the two provisions, the existing and the repealed would
reveal the legislative response to judicial interpretation. Under Sec.
56 (b) of the repealed Act, the Court was precluded by its injunction
to grant stay of proceeding in a court not subordinate to that from
E which the injunction was sought. In other words, the Court ·could
stay by its injunction a proceeding in a court subordinate to the
court granting injunction.· The injunction granting stay of proceeding
was directed to the Court and the Court has to be the Court subordi-
nate to the one granting the injunction. This is postulated on the
F . well recognised principle that the superior court can regulate pro-
ceedings in a court subordinate to it. It is implicit in this assumption
and the language used in Sec. 56 (b) that the court could not grant
injunction under Sec. 56 (b) of the repealed Act to stay proceeding
- in a court superior in heirarchy to the Court from which injunction is
G sought. But by judicial interpretation, a consensus was reached that
· as injunction acts in personum while the Court by its injunction can-
not stay .Proceedings in a Court of superior jurisdiction ; it could
certainly by an injunction restrain a party before it· from further
prosecuting the proceeding in other courts may be superior or inferior
in the heirarchy of courts. To some extent this approach not only
H effectively circumvented the provision contained in Sec. 56 of the
repealed Act but denuded . it of its content. The Legislature took
notice of this judicial interpretation and materially altered .the
COTTON CORPN. v. u.1. BANK (Desai, J.) 971

language of the succeeding provision enacted in Sec. 41 (b) replacing
Sec. 56 (b) of the repealed Act while enacting Specific Relief Act of
A
1963. The Legislature manifestly expressed its mind by enacting
Sec. 41 (b} in such clear and unambiguous language that an injunc-
tion cannot be granted to restrain any person, the language takes
. care of. injunction acting in personnm, from instituting or prosecuting
any proceeding in a court not subordinate to that from which B
injunction is sought. Sec. 4l(b} denies.to the court the jurisdiction to
·grant an injunction restraining any person from instituting or prose-
cuting any proceeding in a court which is not subordinate to the court
from which the injunction is sought. In other words, the court can still
grant an injunction restraining a person from instituting or prosecu-
ting any proceeding in a court which is subordinate to the court from c
which the injunction is sought. As a necessary corollary, it would
follow that the court is precluded from granting an injunction
restraining any person from instituting or prosecuting any proceeding
in a court of co-ordinate or surerior jurisdiction. This change in
language deliberaiely adopted by the Legislature after taking note of D
judicial
. .
vacillation has to be given full effect. '

It is, t'herefore, necessary to unravel the underlying intendment
of the provision contained in Sec. 41 (b). It must at once be E
conceded that Sec. 41 deals with perpetual injunction and it may as
well be conceded that it has nothing to do with interim or temporary .
injunction which as provided by Sec. 37 are dealt with by the Code
of Civil Procedure. To begin with, it can be said without fear of
contradiction that anyone having a right that is · a legally. protected
interest complains of its infringement and seeks relief through court F
must have an unhindered_, uninterrupted access to law courts. The
expression 'court' here is used in its widest amplitude comprehendiug
every forutn where relief can be obtained in ·accordance with law.
Access to justice must not be hampered even at the hands of
judiciary. Power to grant injunction vests in the court unless the
Legislature.confers specifically such power on some other forum.
G
:Now ,access to court in search of justice according to law is the right
of a person who complains of infringement of his legally protected
interest and a fortiori therefor, no other court can by its action
impede access to justice. This principle is deducible from the
,\ .
Constitution which seeks to set up a society governed by rule of law.
H
As a corrolary, it must yield to another principle that the superior
court can injunct a person by restraining him from instituting or
SUPilEMB COURT ilEPORTS [I983j 3 s.c.R.
prosecuting a proceeding before a subordinate court. Save this
A specific carving out of the area where ·access to justice may be impe-
ded by an injunction of the court, the Legislature desired that the
courts ordinarily should not impede access to justice through court.
This appears to us to be the equitable principle underlying sec. 41 (b).
Accordingly, it must receive such interpretation as would advance the
B intendment, and thwart the mischief it was enacted to suppress,
and to keep the path . of access to justice through court
unobstructed.

Viewed from a slightly different ·angle, it would appear that the
c legal system in our country envisages obtaining of redressal of wrong
or relief against unjust denial there of by approaching ·the court set
up for the purpose and invested with power both substantive and
procedural to do justice that is to grant relief against invasion or
violation of legally protected interests which are jurisprudentially
called rights. If a person complaining of invasion or violation of
D his rights, is injuncted from approaching the court set up to grant
relief.by an action brought by the opposite side against whom he
has a claim and which he wanted to enforce through court, he would
have first to defend the action establishing that he has a just claim
and he cannot be restrained from approaching the couh to obtain
E relief. A person having a legal right and complains of its violation
or infringement, can approach the court and seek relief. When such
person is injuncted from approaching the court, he has to vindicate
the right and then when injunction is vacated, he has to approach the
court for relief. In other words; he would have to go through the
gamut over again : W.hen defending against a claim of injunction the
F person vindicates the claim and right to enforce the same. If success-
ful he does not get relief but a door to court which was bolted in bis
face is opened. Why should he be expqsed to multiplicity of
proceedings ? . Jn· order to avoid such a situation the Legislature
enacted sec. 41 (b) and statutorily provided that an injunction cannot
/
be granted to restrain any person from instituting or prosecuting any
proceeding in a court not subordinate to that from which the
injunction is sought. Ordinarily a preventive relief by way of
prohibitory injunction cannot be granted by a court with a view to
restraining any person from instituting or prosecuiing any proceeding ·
H .and this is subject to one exception enacted in larger public interest,
a
namely, superior court can injunct a person from instituting or
prosecuting an action in a subordinate court with a view to regulating
the proceeding before the subordinate courts. At any rate the court
COTTON CORPN. v. u.1. BANK (Desai. J.) 973

is precluded by a statutory provision from granting an injunction
restraining a person from instituting or prosecuting a proceeding in · A
' a court of coordinate jurisdiction or superior jurisdiction. There is
an· unresolved controversy whether a court can grant an injunction
against a person from instituting or prosecuting a proceeding before
itself but that is not relevant in the present circumstances and we do
not propose to enlarge the area of controversy. B
Mr. Se.n, learned coutisel for the respondent-Bank, contended
that sec. 41 (b) is not at all attracted because it deals with perpetual
injunction and the temporary or interim injunction is regulated by
the Code of Civil Procedure specially so provided in Sec. 37 of the
Act. Expression 'injunction' in sec. 41 (b) is not qualified by an c
adjective and therefore, it would comprehend both interim and
perpetual injunction .. It is, however, true that Sec. 37 specifically
provides that temporary injunctions which have to continue until a
specified time or until further order of the court are regulated by the
Code of Civil Procedure. But if a ·dichotomy is introduced by D
confining Sec. 41 to perpetual injunctio~ only and Sec. 37 read with
0. 39 of the Code of Civil Procedure being confined to temporary
injunction, an unnecessary grey area will develop. It is indisputable.
that temporary injunction is granted during the pendency of the
proceeding so that while granting final relief the court is not faced
with a situation that the relief becomes infructuous or that during the E
pendency of the proceeding an unfair advantage is not taken by the
party in default or against whom te~porary injunction is sought.
But power to grant temporary injunction was conferred in aid or as
auxiliary to the final relief that may be granted. · It the final relief
cannot be granted in terms as prayed for, temporary relief in the F
same terms can hardly if ever be granted.

In The State of O~issa v. Madan Gopa/ Rungta(') a Constitution
. Bench of this Court clearly spelt out .the contours within which
interim relief can be granted. The Court said that 'an interim relief
can be granted only in aid of, and as ancillary to, the main relief G
whieh may be available to the party on final determination of his
rii:hts in a suit or proceedings. If this be the purpose to achieve
which power to grant temporary relief is conferred, it is inconceivable
that where the final relief cannot be granted in the terms sought for
because the statute bars granting such a relief ipso facto the H

(I) (1952J S.C,R. 28.
974 SUPREME COURT REPORTS (!983) 3 S.C.R,

temporary relief of the same nature cannot be granted. To illustrate
A this point, let us take the relief which the Bank seeks. in its suit. The
prayer is that the Corporation be restrained by au injunction of the
Court from presenting a winding-up petition under the Companies ·
Act, 1956 or under the Banking Regulation Act, 1949. In other
words, the Bank seeks to restrain the Corporation by an injunction
B of the c~mrt from instituting a proceeding for winding-up of the
Bank. There is a clear bar in Sec. 41 (b) against granting this relief.
The Court has no jurisdiction to grant a perpetual injunction restrain-
ing a p~rson from instituting a proceeding in a court not subordinate
to it, as a relief, ipso facto temporary relief cannot be granted in the
same terms.
,C
The interim relief can obviously be not granted also because the
obj~ct behind granting interim relief is tomaintain status quo ante
so that the final relief can be appropriately ·moulded without the
party's position being altered during· the pendency of the
D proceedings.

Mr. Seu, however, urged that even though the Legislature has
materially altered the language of the corresponding provision iit
sec. 56(b) of 1877 Act while enacting Sec. 41(b), yet the change in
E language would have no impact on the. view of law taken by the
courts while interpreting sec; 56(b) of the repealed Act. proceeding
along this line, Mr. Sen urged that under sec. 56(b) of the 187.7 Act
even though injunction could not be granted to stay proceedings tn a
court not subordinate to that from which injunction is sought, the
Court by an interpretative process spelt out a power to grant injunc-
F tion 'in personum against a party from instituting a proceediqg. It is
true that giving a· literal meaning to the provision contained in
sec. 56(b) which denied the power to the Court to grant injunction .to
stay proceedings in a court ·not subordinate to that from which
injunction is sought, the cou<t demarcated the unoccupied area by -
holding that even if the court cannot grant injunction to stay the
G
proceeding, it can certainly iujunct a party from ins.tituting_ or
prosecuting a proceeding in a court not subordinate to that from
which the injunction was sought But it is this very interpretatipn
which attr~cted the aitention of the Legislature, and it respondent by
H specific change in language to nullify the interpretation so that it
becomes crystal clear that an injunction cannot be granted to restrain
any person from instituting or prosecuting any proceeding in a court
not subordinate to that from which the injunction was sought. The
' COTTON CORPN. v. u.1. BANK (Desai, J.) 975

power to grant injunction ill personum was thus legislatively curtailed.
Legislative response to court's interpretation has to be noticed and A
in our opinion the alteration in the language provides the legislative
response to the judicial interpretation, and cannot be wished away,
but must be given effect.

Mr. Sen, however, urged that the Specific Relief Act, 1877 was
founded on English equity jurisprudence and therefore, it was B
permissible to refer to English law on the subject wherever the Act
. did not deal specifically with any topic. (See Hungerford Investment ,,,.
Trust Limited v. Haridas Mundhra & Ors.)( 1) It was further sub-
mitted that 1963 Act is equally based on the experience derived from
the working of the 1877 Act and the English equity jurisprudence
aild therefore, where light is shed by decisions in England, the same
c
must illumine our path. Where _provisions. are in pari materia
between the English Act and the Indian Act and where local condi-
tions do not materially differ from the conditions in U.K., one may
keeping in vi~w the conditions in our country look at the view taken ·
by the English courts and if consistent with our· jurisprudence, our D
·social conditions, our chalked out path in which the law must move,
one can profitably take help of the decision. There would be nothing
wrong in referring to the same. But ignoring all the relevant consi-
derations, one cannot bodily import English decisions in our system
to develop a hybrid legal system and one cannot be so hypnotised by
E
English decisions to overlock legislative changes introduced in Indian
Law.
With this caution, let us refer to one or two decisions relied on
by Mr. Sen to el<pand the sweep of the language of Sec. 41\b), sci
that the court can still injunct a person from instituting a proceeding F
which the person is otherwise entitled to institute in a co-urt of
coordinate or superior jurisdiction, in the teeth of express
'prohibition' enacted in sec·. 41(b).
To start with, it wonld be advantageous first to notice Sec.
24(') of the Supreme Court of Judicature Act of 1873 now reenacted G
as Supreme Court of Judicature (Consolidation) Act 1925, which
reads as tinder :
"No case or proceeding at any time pending in the
High Court of Judicature or before the Court of Appeal H
shall be restrained by prohibition ,or injunction."

(1) [1972] 3 S.C.R. 699 at 701.
I
91.6 SUPREME COURT REPORTS (1983] 3 S.C.R.

It would appear at a glance that an injunction cannot be issued to
A stay_ a ·pending proeeeding in the High Court of Judicature or before·
the Court of Appeal. The section does.not refer to initiation or institu-
tion of proceeding. On a grammatical interpretation oftbe section it
would be open to the court to spell out a power to grant injunctfon
to restrain a person from ·.instituting a proceeding because what is
barre4 by the statute is injunction from prosecuting a ·pending
B
proceeding. Compare this language 1Yith Section 41(b) which specifi-
cally provides that an-injunction cannot be granted to restrain a
'-person from instituting aud prosecuting any proceeding. The rele-
vant provision in our country covers both the situations while in
England it covers only one situ~tion. This clear distinction in law
c bas to be kept in view before applying English decisions to which
our attention was drawn.

And now to the decisions: In Cadiz Waterworks Company v.
Barnett('), the court on being satisfied that the Company was sqlvent
and that the debt was bona fide disputed' and that· the object of the
defendant in the case was not the bona fide purpose of honestly
compelling the payment of bis debt but for the purpose of making an
unjust attempt to compel them to submit to an unjust demand, res-
trained the respondent from presenting a petition for winding-up the
the Company in the Court. In reaching this conclusion it was
E observed that if a winding-up petition is presented and advertised, it
would inflict irreparable injury on the -plantiffs, while at the ·same
moment it could not possibly do the defendant slightest good. Let
it be definitely made clear that not a whisper was raised. challenging
the jurisdiction of the Court to grant such an injunction and obviously
could not be raised in view of the provision in Supreme Court of
F Judicature Act of 1873 extracted hereinbefore which did not deny to
the Court the power to grant an injunction restraining a person from
_ instituting a proceeding. Similarly in Circle Restaurant Castiglione
Company v. Lavery(') the court by its short order restrained defen-
dant Lavery from presenting any petition to wind-up the company in
G respect of any debt then due or alleged to have been due to him on
certain- conditions. In giving the short order, Jessel and followed
the decision in Cadiz Waterworks Company. One more decision to
which onr attention was drawn was the New Traoeiters' Chambe;s Ltd.
v. Messrs. Che~se and Gree1r(') in which the defendant was restrained
H
(I) (1874-75] 19 Equity Cases 182.
(2) [18811 18 Ch.Div. 555.
(3) {1894] Law Times Reports 171.
co'rroN CORPN. v. U.I. BANKi (Desai, J.) 977
by an injunction -or the court from presenting a winding-up
petition. In the last two mentioned cases also, no contention was A
raised, because obviously it could not be raised, that the court had
no jurisdiction to giant the injunction. In our opinion these decisions -
· are not at all helpful for two reasons : one that the Supreme Court
of Judicature Act clearly provided that injunction cannot be granted
restraining prosecuting a pendin·g proceeding and the provision was
silent on the question of granting an injunction restraning instituting
B
a proceeding and in respect of which the 1963 Act is more specific,
clear and unambiguous·; and secondly, at no time in all the three
decisions, the defendant against whom the injunction was sought' ever
questioned the jurisdiction of the court to issue an injunction restrain-
ing it from presenting a winding-up petition thereby inviiing the c
court to give a specific ruling on the subject. We are, t)lerefore,
disposed to take no notice of these decisions.

_ However, in the course of further investigation 011 ihe point, we
tumbled across Clza/es Forte Investments Ltd. v. Amanda.(1) The
Court of Appeal in that case unanimously held that the presentl!tion
D
of a winding-up petitio~ could be restrained by an injunction, granted
under the inherent jurisdiction of the court to stay proceedings which
were vaxatious or an abuse of the ·process of the court, for amongst·
others the principal -reason thai a winding tip petition was not the
proper remedy in the circumstances of the particular case. In t]lat E
case a minority share-holder was sought to be restrained by an in-
junction of the court at the instance'of tJie company from presentin_g
a winding-up petition· on the ground that it was just and equitable
to wind up the company. Pennycuick, J. declined to grant the
interim injunction and the company appealed. The Court of Appeal
while reversing the decision held that in the circumstances of the
F
case winding-up pe_tition was. not a proper remedy and granted the
injunction. The power to grant injunction· in such circumstances
was not shown to be referable to any ·statutory provision nor was it
pointed out that there was any statutory inhibition against granting
it and the source of power was traced to .the inherent powers of the G
Court. ·

One more decision we came across and which to some extent
deviates from the consistent view taken in all- the aforementioned
decisions, is the one Bryanston Finance Ltd.\ v. De Vries.(') While H
(1) [19631 2 All E.R. 940.
(2) [197611 All E.R, 251.
'\

9'78 SUPREME COURT REPORTS [I 9S3J 3 S.C.R.
vacating the injunction granted in broad terms, the Court of Appeal
A held tbat the presentation of a petition in the circumstances discussed
in the judgment, would not be an abuse on the ground' that it could
>
not possibly succeed. In a concurring judgment, Sir John Pennycuick
observed as under :

"I should like to add that where a company seeks •
B
relief of this kind the procedure by way of writ claiming
an injunction to restrain presentation of a petition.
followed immediately by a motion expressed to claim an
interlocutory injunction in the same terms, appears clumsy
and inapposite. In occurs to me that it should be possible
c to devise some more apt form of procedure for instance an
originating motion in the Companies Court."

One more decision which we would like to refer is the one in
Stonegate Securities Ltd. v. Gregory.(') In that case an injunction
was granted restraining a creditor from presenting a winding-up
D petition on the ground that he was at best a contigent creditor and
the· company had sought an injunction to restrain the creditor from
presenting a petition on any other basis than as the contigent credi-
tor. For the same reasons for which we could not persuade
ourselves to accept the earlier decisions as being helpful, these
E decisions would not be of any assistance.

And it may be clarified that the reliance placed by Mr. Sen on
foot-note 7, 8 and 9 in Companies Act by Buckley, Fourteenth-
Edition, page 524 and Palmer's Company Prededents, Part II Seven-
teenth Edition at page 45 would not take his ·case further because
F these notes are based on the aforementioned decisions.

Canvassing for the contrary view Mr. Ghosh, learned counsel
for the appellant referred to Udyog Mandir v. M/s. Contessa Knit
Wear and Ors.(') wherein the late Vaidya, J. set aside an interim
G injunction.granted by the judge of Small Causes Court restraining a
a
defendant in suit before him from proceeding with the Arbitration
case initiated under the Maharashtra· Co-operative Societies Act.
The learned judge held that the Arbitrator functioning under the
.
Maharashtra Co-operative Societies Act is not a court subordinate ~

H
(I) [1980] 1 All E.R. 241.
(2) A.l.R. 1975 Boru. 158.
COTTON CORPN. v, U.I. BANK (Desai, i.) . 979
·_.l..

to the Small {:auses Court and in that case sec. 41 (b) would deny
jurisdiction to the court to grant an injunction because a court can- A
not even do temporarily what it has been prohibited by law to do
finally or perpetually. Though it is not made clear, the learned judge
was nbt impressed the contention that sec. 41 (b) deals with perpetual
injunction and the grant or refusal of temporary injunction is governed
by Order 39 C~de of Civil Procedure ~nd there is well-recognised -B
dichotomy between the two. The learned judge appeared to be of
the-opinion that where the final relief cannot be granted, temporary
relief in aid can as well not be granted because that would also be con-
trary to the provision of Sec. 41 (b). This view was reiterated by the
same learned judge in Krishnadevi P. Gupta and Anr. v. Banwari/a.l
Hanumanprasad Tibrewala and Ors.( 1) He also took note of the fact c,
that the Chief justice of the same High Court had affirmed the view
in another proceeding before him. Therefore, as far as Bombay
High Court is concerned, there appeared to be a near unanimous
·view that the court had no jurisdiction to grant interim injunction
restraining a person from instituting any proceeding in a Court not
subordinate to that from which the injunction is sought 'in view of
D
the pr.ovision contained in Sec. 41 (b) of the Act. Surprisingly, the
' Division Bench of the Bombay High Court against whose' decision
the present appeal is heard did not even choose to refer or to over-
rule any of these decisions and proceeded to dispose of the conten-
tion in respect of provision contained in Sec, 41 (b) in the following E
terms, the meaning of which we ·find difficult to unravel. Says the
Court: ·

"Our attention was also drawn io the provlSions
contained in the Specific Relief Act and in particular to
sec. 41 thereof. It appears to us that in an appropriate F
case particularly in a suit where cancellation of certain
negotiable instruments had been sought, it would be open
to the Court to restrain further action being taken on the
said negotiable instrument particularly the action of the
limited type which is sought to be restrained in the insant G
case yiz.· winding· up proceedings. The position may be·
different if a to.ta! bar was sought which perhaps may not
be granted."

Mr. Sen, learned counsel for the respondent-Bank however, H
contended that even if the respondent-Bank is not entitled to injunc-

(I) A.l.R. 1976 Born, 233.
\
980 SUPREME COURT REPORTS [19$3) 3s.c.li.
i. .
tion, temporary or perpetual, under sec. 41 (b) or under 0·39 of the
A Code of Civil Procedure, yet the court had inherent power to grant . >
injunction and therefore this Court should. not interfere with tbe
decision of the High Court at this stage. Reliance was placed on
Manohar Lal Chopra v. Rai Bahadur ·Rao Raja Seth Hita/a/.(1)
Raghubar Dayal, J. _speaking for the majority in terms held that the
B court has inherent power to issue temporary injunction in cases which
were not covered by the provisions of 0·39 of the Code of Civil
Procedure. Shah, J. in his dissenting judgment took the contrary
view and relied upon Padam Sen v. State of U. P.( 1 ) In view
of the majority decision, it must be conceded that the court can
in appropriate cases grant temporary injunction in exercise of its
c inherent power in cases not covered by 0.39 C.P'.C. But while
exercising this inherent power, the court ·should not overlook the
statutory provision which clearly indicates that injunction to restrain
initiation of proceeding cannot be granted. Sec. 41 (b) is one such
provision. Aud it must be remembered that inherent power of the
D court cannot be invoked to nullify or stultify a statutory provision.
We have meticulously gone through the appellate judgment and
we find not the· slightest reference to the invocation of the ~
inherent power of the court in granting the order of injunction now
under challenge. Not only that, but the court has not held that the
contention of the Corporation is frivolous or untenable or the claim
E is malafide. This becomes clear from the· obseryation of the court
that the order passed by it is rrot founded oti the merits of the Bank's·
case or lack of merit in any claim which. the Corporation may have ·
against the plaintiff-Bank and it wonld be open to the Corporation
to file a regular suit or summary stiit against plaintiff-Bank in which
appropriate orders would be passed by the court seized of the matter
F as'and when the occasion arises for the same. We find it very difficult
to appreciate this approach of the · Court because the Court has not
rejected even at the stage of the consideration of prima facie case or
on balance of conviction that the claim of the Corporotion is frivolous
or untenable or not prima facie substantiated. On the contary the
G Court leaves open to the Corporation to file a suit if it is so advised.
The High Court only ~estrains the Corporation from presenting a
winding-up petition. We again see no justification for this dichotomy
introduced by the Court in respect of various proceedings which were
open to the Corporation to be taken against the Bank leaving some
H
(1) [19621 Supp. 1 S.C.R, 450.
(2)_ [19611.1 $.C.R. 884.
COTTON CORPN. v.u.1. BANK (Desai, .J.) 981

open and some restrained by injunction. Neither in statute law nor in
enquity, we find any justification for this dichotomy. A

Mr; Sen, however, urged that the presentation of winding-up
petition coupled with advertisement thereof in newspaper as required
by law has certain serious consequences on the status, standing,
financial viability and stability and operational efficiency of the B
company. Mr. Sen further urged that where the. debt is bona fide
disputed, a petition for winding-up is not an alternative to the suit
to recovenhe same but may· be a pressure tactic to obtain an unfair
advantage and therefore, despite the provision contained in sec. 411.b)
the court must spell out a power in appropriate cases to injunct a
person from filing a winding-up petition. Most of the decisions in
c
England hereinabove discussed a length have been influenced by this
aspect. This approach, however, clearly overlooks various statutory
safeguards against admission, advertising and publication of winding·
up petitions. Sec. 433 of the Companies Act, 1956 sets out circum·
stances in which a company may be wound-up by the Court, one D
such being where the company is unable to pay its debts. Sec. 434
sets out the circumstances and situations in which a company may be
deemed to be unable to pay its debts. Such a deeming fiction would
\
arise where a notice is served upon the company making a demand
of a debt exceeding Rs. 500 then due and requiring the company to
Ill
pay the same and the company has for a period of 3 weeks neglected
to pay the sum, or to secure or compound for it to the reasonable
satisfaction of the creditor. Rule 95 of the Companies (Court) Rules,
\ 1959 provides that the petition for winding-up a company shall be
· presented in the Registry. Then comes Rule 96 which is very
• material. It provides that : upon the filing of the ·petision, it shall F
be posted before the Judge in Chambe" for admission of the petition
and fixing a date for the hearing thereof and for the direetions as to
the. advertisements to be published and the persons, if any, upo11
whom copies of the petition are to be served. The Judge may, if he
thinks fit, direct notice to be given to the Company be(ore giving
directions as to the advertisement of the petition.' It would appear G
at a glance that the petition has to come·up in Chambers before the
compauy Judge and not in· open Court, and the Rule confers a·
discretionary power on the judge not to give any directions at that
stage but merely issue a notice to the company before giving direc·
tions. If upon receipt of such notice the company appears and H
satisfies the judge that the debt is bona fide disputed or the
presentation of the petition is ma/a fide. actuated by an ulterior.
•

982· SU~REME COURT REPORTS [1983] 3 s.c.R.

motive, or abuse of the process of the Court certainly the judge may
A decline to admit the petition and may direct the party presenting
winding-up petition to prove its claim by a suit or any other manner. ,
It is undoubtedly true that winding~up petition is not a recognised
mode for recovery of bebt and if the company is shown to be solvent
and the debt is bona fide disputed, the Court generally is ·reluctant
to admit the petition. Therefore, the power is conferred on the judge
B
before whoin the petition comes-up for admission to issue pre-
admission notice to the company so that the company is .not taken
unaware and may appear and point out to the judge that. the
,petitioner is actuated by an ulterior motive and presentation of the
petition is a device to pressurise the company to submit to an unjtist
c claim. This is a sufficient safeguard against mala fide action and the
company would not suffer any consequences as apprehended, and the
company can as well appear and ask for stay of further· proceeding
till the petitioner-creditor proves his debt by a regular suit. This is
the jurisdiction of the Company Court and it cannot be restrained.
from exercising the same by some other court restraining the
D creditor from presenting a winding-up petition. There is sufficient
built-in safeguard in the . provisions of the Companies Act and the
Rules framed thereunder which would save the company from auy
adverse consequences,' if a petitioner actuated by an ulterior motive
/ presents the petition. This was taken notice: of by this Courtin
E National Conduits'(P) Ltd. v. S.S. Arora.(i) wherein· this Court set
aside the order of the High Court of Delhi. was of the opinion that
once a petition for winding-up is admitted to the file, _the Court is
bound to fourth with advertise the petition, This Court held that
the High Court was in error in holding that a petition for winding• .
. up must be advertised even before the application filed by the com-
\
.
F pany for staying the proceeding for the ends of justice or to prevent
abuse of the process of the ·court. This court held that the view
· taken by th~ High Court that the court must as soon tlie petition is
admitted, advertise the petition is contrary to the plain terms of Rule
96 and such a view if accepted, would make the court an instrument/
G in possible cases, of harrassment and even of blackmail, for once a
petition is advertised, the liusinesss of the company is bound to suffer
serious loss and injury. This legal position effectively answers the
.....
apprehension voiced by Mr. Sen, and even entertained by the High
Court as also ·it can be said with confidence that this must be the
H procedure, Pennycuick J. was in search of when in Brya"ston

(1) [1968] I S.C.R. 430.
COTTON CORPN. v. U.1. BANK (Desai, J) 983
Finance Ltd.. case he said that it should be possible to devise some
more apt form of procedure than to injunct a person from initiating A
the proceeding. In fact, the Kerala High Court in George v. The
Athimattam Rubber Co. Ltd. Thodupuzha( 2 } went to the extent of
showing that-when 'a pre-admission notice is issued to the company
under Rule 96, it would be open to the company to appear and ask
• for stay of proceedings or even revoke the admission on the ground
that the petitioner was not acting bona fide in filing the petition and in B
the facts before the Kerala High Court it allowed the application of
the company and the winding-up petition was dismissed. We are,
therefore, not disposed to accept the contention of Mr. Sen that the
power to grant injunction restraining one from presenting a winding-
up.petition must either be spelt out for the protection of the company c
or as held by decisions herein above quoted kept intact and should
not be tinkered with to save the company from being harrassed by
persons actuated by ill-will towards the company from presenting
the petition.

Turning to the facts of this case, let it be recalled that the D
learned Single Judge had declined to grant any temporary injunction
against the present appellant, the Corporation, and in our opinion
rightly. The Appellate Bench interfered with the order for the reasons
which are far from convincing and it overlooked the provision con-
tained in sec. 41 (b} and effect thereof. Taking the most fa-:ourable
view of the de.cision of the Appellate Bench and assuming that the
E
Bench had in its mind the inherent power of the court to grant
injunction despite statutory inhibition and consistent with the view
taken by the courts in England, it had_ then in order to ·do justice
• between the parties first reach an affirmative finding that the winding-
up petition as and when presented by the Corporation-the creditor F
would be frivolous and would constitute an abuse of the process of
the court or a device to pressurise the Bank to submit to an unjust
and dishonest clai1n. It must also,reach an affirmative conclusion
that the debtor-Bank is sufficiently solvent to satisfy the claim as and
when established. It has also to record ·an affirll'.Ji'tive finding that
G
•• the Corporation-the creditor is not seeking bonfi fide to present a
petition for winding-up but is actuated by an ulterior motive in pre" .
senting the petition. Decisions in New Travellers' Chambers Ltd.,
Cha/es Forte Investments Ltd. and Bryanston Finance Ltd. (supra)
would require these findings to be recorded before an interim injunc-
H
tion can be granted. The decision of the Appellate ~ench is

(I) A.I.R,. 1964 Kera)a 2q. ·
I

984 ·SUPREME COURT REPORTS (1983) 3 s,c.R,

conspicuously silent on these relevant points and for this .additional
A reason also the appeal must.succeed.
I
The appeal is accordingly allowed and the order of the Appellate
Bench is set aside and the one made by the learned Single Judge
Modi, J. is restored with costs.
B
H.L.C. Appea/ allowed.

•