Holding

A prospective investor is not a consumer under the Consumer Protection Act, shares before allotment are not goods, and therefore the Consumer Disputes Redressal Forum lacks jurisdiction to grant an injunction, which must be denied.

Summary

Morgan Stanley Mutual Fund, a SEBI‑registered domestic mutual fund, sought to issue a public fund scheme after obtaining SEBI approval for its draft scheme and advertising the issue. A prospective investor filed a petition before the Calcutta District Consumer Disputes Redressal Forum seeking an ex‑parte injunction restraining the issue, alleging that the offering circular was not SEBI‑approved and that the allotment method was unfair. The Forum granted an interim injunction, which the Fund appealed to the Supreme Court. The Court held that shares before allotment are not "goods" under the Consumer Protection Act, 1986, and that a prospective investor is not a "consumer"; consequently, the Consumer Forum lacks jurisdiction to grant any injunction, especially interim relief, and the principles for ex‑parte injunctions were not satisfied. The Court allowed the appeal challenging the Consumer Forum order and dismissed the separate appeal against the dismissal of the writ petition, awarding costs to the Fund.

Issues considered

Whether a prospective investor in a public issue qualifies as a consumer under the Consumer Protection Act, 1986
Whether shares before allotment constitute "goods" within the meaning of the Act
Whether the mutual fund "trades" in shares for the purposes of the Act
Whether the Consumer Disputes Redressal Forum has jurisdiction to entertain the complaint and grant injunctions
Whether the Forum can grant interim or ad‑interim relief under Section 14 of the Act
Whether SEBI Regulation 27 was violated and the disclaimer clause amounts to non‑approval
Principles governing the grant of ex‑parte injunctions in capital‑market matters and the need for venue restrictions

Legislation cited

Code of Civil Procedure, 1908s. Order 39 Rules 1-5
Companies Act, 1956s. 55, s. 63, s. 68
Constitution of Indias. Article 226
Consumer Protection Act, 1986s. 14, s. 2(1)(d)(i), s. 2(1)(i), s. 2(c)
Sale of Goods Act, 1930s. 2(7)
SEBI (Mutual Funds) Regulations, 1993s. Regulation 23, s. Regulation 27, s. Regulation 28
Securities and Exchange Board of India Act, 1992s. 11(2)(e), s. 30

Subjects

consumer protectionconsumer definitiongoodssharesjurisdictioninterim injunctionex‑parte injunctionSEBI regulationsmutual fundpublic issuevenue restrictioncapital marketfrivolous litigation

Judgment

A MORGAN STANLEY MUTUAL FUND
v.
KARTICKDAS

MAY 20, 1994
B [M.N. VENKATACHALIAH, CJ., S. MOHAN AND
DR. A.S. ANAND, JJ.]

Consumer Protection Act 1986, Secs. 2(1}(i), 2(1}(d}(i); 2(J)(i);
2(J}(c), 2(1)(c)(i), 14: 26:
c
Shares before allotment, held are not ''goods "-:f'rospective investor,
held, not a "Consumer'-Forum under Act, held, has no power to grant interim
or ad-interim relief

Code of Civil Procedure, 1908-0rder 39 Rules, 1,2,3 & 5 Constitution
D of India, A11icle 226-Factors for grant of injunction in public issues laid
down-Need for venue restrictions specified.

Securities and &change Board of India (Mutual Funds) Legislation,
1993-Regulation 27-Disclaimer clause, held, does not amount to non-ap-
E proval-''First. come first served" under the Scheme of allotment, held, does
not deceive investors.

Practice and procedure-Costs-Vexatious litigation Penal Costs of Rs.
25,000 awarded-Constitution of India, Article 142.

F The Appellant in C.A. No. 4384 of 1994 is a domestic mutual fund
registered with the SEBI along with its investment management agency.
The Memorandum and Articles of Association of the appellant along with
the draft scheme were approved by SEBI after due scrutiny and examina-
tion. SEBI also approved in writing all advertisements and publicity
G material. While approving the scheme, SEBI also put in a disclaimer
clause which Is a standard requirement in all issues. The appellant started
advertising the public Issue on 13-12-1993.

One P, filed a suit before the Sub-Judge at Delhi for injunction
restraining the public issue from being floated. An interim order was
H passed by, the Sub-Judge but the High Court on being moved by the
136
MORGAN STANLEY MUTUAL FUND v. K. DAS 137

appellant stayed the same on 4-1-1994. One A, filed a Writ Petition (W.P. A
No. 14 of 1994) before the Delhi High Court against the SEBI, seeking inter
a/ia a stay of the public issue, which was dismissed in limine. Civil Appeal
4587 of 1994 at the instance of the unsuccessful writ petitioner arises from
this proceeding. Seeking the same relief as were sought in the writ petition,
one K, moved the Calcutta District Consumer Disputes Redressal Forum B
allei:ing inter alia that the Fund's Offering areolar was not approved by
SEBI and that the basis of allotment was arbitrary and unfair. The Forum
passed an exparte interim order dated 4-1-1994 restraining the Fund from
proceeding with the fuctber issue against which the Fund appealed before
the Supreme Court by Special Leave (Civil Appeal No. 4587 of 1994).
c
The appellants contended that shares that are to be allotted In future
are not goods under s.2(1)(i) of the Consumer Protection Act, 1986 and
that even assuming that shares are goods, prospective shareholders are
not consumers and are therefore not entitled to file a complaint. The
respondents on the other band submitted that when SEBI regulations
(R.27) are violated, a prospective applicant would be entitled to seek an D
injunction.

Allowing C.A.No. 4587 of 1994 and dismissing C.A. No. 4548 of 1994,
this Court

Held : 1. As per the 4efinltlon under Section 2(l)(d)(i) of the
E
Consumer Protection Act, 1986, 'Consumer' is the one who purchases
goods for private use or consumption. In order to satisfy the requirement
of the definition, there must be a transaction of buying goods for con-
sideration. The definition contemplates the pre existence of a completed
transaction of a sale and purchase of goods. In view of Section 2(1)(i) of F
the Consumer Protection Act, the meaning of 'goods' is the same as
defined In Section 2(7) of the Sale of Goods Act, 1930. All actionable claims
and money are thus excluded from the definition. Till the allotment of
shares takes place 'the shares do not exist.' Therefore, till then they can
never be called goods. At the stage of application, an applicant is onl:' a G
prospective investor in future goods. If regard be had to the definition of
"complaint' under the Act, it will be clear that no prospective Investor
could fall under the Act. [153-E, 155E, 153-G, 155-E]

2. The expression "unfair trade practice' as per Section 2(1)(r) has
the same meaning as defined under Section 36-A of Monopolies and H
•

138 SUPREME COURT REPORTS [1994] SUPP. 1 S.C.R.

A Restrictive Trade Practices Act, 1969. That again cannot apply because the
company is not trading in shares. "Share' means a share in the Capital.
The object of issuing the same is for building up capital. To raise capital
means making arrangements for carrying on the trade. It is not a practice
relating to the carrying of any trade. Creaiion of share capital without
allotment of shares does not bring shares into existence. In view of the
B
above position the question of the appellant company trading in shares
does not arise. Therefore, a prospective investor is not a nconsumern under
the Act. It follows that the Consumer Disputes Redressal Forum has no
jurisdiction whatsoever. (156-C, D, E, Fl

C 3. As principle, ex pane injunction could be granted only under
exceptional circumstances. The factors which should weigh with the court
In the grant of ex pane injunction are - (156-Hl

(a) Whether irreparable or serious mischief will ensue to the
plaintiff;
D
(b) whether the refusal of ex parte injunction would involve
greater injustice than the grant of it would involve;

(c) the court will also consider the time at which the plaintiff first
bad notice of the act complained so that the making of im-
E proper order against a party in his absence is prevented;

(d) The court will consider whether the plaintiff had acquiesced
for sometime. In such circumstances it will not grant ex parte
injunction;

F (e) the court would expect a party applying for ex parte injunction
to show utmost good faith iu making the application;

(f) eveu if granted, the ex parte injunction would be for a limited
period of time;

G (g) general principles like prima facie case, balance of convenience
and irreparable loss would also be considered by the court.
(157-A to El
In this case, the public advertisement was given on 13- 12-1993, the
petition was filed on 4·1-1994 and the impugned order of Consumer Forum
H came to be passed on the following day. As to why the respondent chose to
MORGAN STAN LEY MUTUAL FUND v. K. DAS 139

come at the eleventh hour and where was the need to pass an urgent order A
of injunction are matters which are not discernible. Besides, tested in the
light of the decreed cases the impugned order which is bereft of reason
and laconic cannot stand a moment's scrutiny. [159-G]

4. Today the Corporate sector is expanding. To prevent disgruntled
litigants from indulging in adventurism, it has become necessary to evolve B
certain venue restrictions. In India, the residence of the Company is where
the registered office of the Company is located. Normally cases should be
tiled only where the registered office of the company is situate. Courts
outside the place where the registered office is located, if approached, must
have regard to the fact that invariably suits are filed seeking to injunct c
either the allotment of shares or the meetings of the Board of Directors or
again the meeting of the general body. The Court is approached at the last
minute. If injunction is granted even without notice to the respondent it
will cause immense hardship and administrative inconvenience. It may be
some times difficult even to undo the damage by snch an interim order. D
Therefore, the Court must ensure that the plaintiff comes to court well in
· time so that notice may be served on the defendant and he may have his
say before any interim order is passed. [160-A, 160-G, H; 161-A]

5. There is no power under the Act to grant any interim relief or even
an ad interim relief. Only a final relief could be granted. If jurisdiction of E
the Forum to grant relief is confined to the four clauses mentioned under
section 14, no interim injunction could never be granted disregarding even
the balance of convenience. [162-A)

6. The argument that SEBI should have acted in accordance with F
Section 11(2) (e) of the SEBI Act 1992 to prohibit "Fraudulent and unfair
trade practices" related to the securities market is without substance. The
disclaimer clause required to be incorporated at the beginning of the
offering circular by SEBI while approving the scheme is a standard
requirement and nothing peculiar to the present case. The object of this G
is to bring to the notice of the investors that they should take the firm
decision on the basis of the disclosures made in the documents. It Is meant
for the investor's protection. In fact by such a cour.se the SEBI informs
the investors that they have approved the scheme but they did not recom·
mend to the investors whether such investment is good or not and leave it
to their discretion. Therefore, the allegation that the SEBI has not ap· H
140 SUPREME COURT REPORTS [1994] SUPP. 1 S.C.R.

A proved the other documents is totally baseless. (146-B, 150-F, G]
7. The challenge to the method or allotment is without force. The "first
come first served" scheme was an invitation to the subscribers lo apply
early so that the scheme be closed quickly. The appellants had made It very
clear that those who applied during the opening period or the scheme would
B be given full allotment. [152-E, FJ

8. There Is an increasing tendency on the part or some litigants to
Indulge In speculative and vexatious litigation and adventurism which the
· fora seem readily to oblige. Such a tendency should be curbed. Having
regard to the frivolous nature or the complaint, It Is a fit case for award or
C costs, more so, when the appellant has suffered heavily. Therefore, costs or
Rs. 25,000 are awarded In favour or the appellant. (162-EJ
Maneckji Pestonji Bharucha v. Wadi/a/ Sarabhai & Co., AIR (1926) PC
38-53 IA 92 = 28 Born L R 777; Madho/a/ Sindu of Bombay v. Official
D Assignee of Bombay, AIR (1950) FC 21 = 1959 FCR 441 and State of West
Bengal v.Swapan Kumar Guha and Sanchita Investments, (1982] 1SCC561,
referred to.

CIT v. Standard Vacuum Oil Co., AIR (1966) SC 1393 and United
Commercial Bank v. Bank of India, (1981] 2 SCC 766, relied on.
E CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4584 of
1994.

From the Judgment and Order dated 4.1.94 of the Calcutta District
Consumer Disputes Redressal Forum in C.D.F. Case No. 35 of 1994.
F WITH

Civil Appeal No. 4587 of 1994.

From the Judgment and Order dated 5.1.94 of the Delhi High Court
in W.P. No. 14 of 1994.
G
Ashok H. Desai, Aron Jaitley, R.Karanjawala, Ms. Dina Wadia, Ms.
Nandini Gore and Mrs. M. Karanjawala for the Appellants.

In-person in Pertr. No. 321/94.

H K.V. Vishwanathan and L.P. Agrawala for the Respondents.
MORGAN STANLEY MUTIJALFUND v. K. DAS [MOHAN,J.] 141

The Judgment of the Court was delivered by A

MOHAN, J. Leave granted.

2. The appellant is a domestic mutual fund registered with Securities
and Exchange Board of India (hereinafter referred to as 'SEBI') under
Registration No. MF/005/93/1, dated 5.11.93. The appellant is managed by B
a Board of Trustees. Pursuant to the SEBI (Mutual Fund) Regulations, the
investment management company of the appellant, Morgan Stanley Asset
Management India Private Limited was registered with SEBI on 5.11.93.
Under such registration Morgan Stanley Asset Management India Private
Limited is constituted as the asset management company of the appellant. C
Morgan Stanley Asset Management India Private Limited is a subsidiary
of Morgan Stanley Group Inc. which holds 75% of equity, the balance
being held by Indian shareholders such as Housing Development Finance
Corporation (HDFC), Stock Holding Corporation of India etc. Morgan
Stanley Asset Management India Private Limited was granted certificate
of incorporation on 18th October, 1993 by the Registrar of Companies, D
Bombay. Its Memorandum and Article of Association have also been
approved by the SEBI as per the provisions of the said Regulations.·

3. The draft scheme of the appellant was approved by the Board of
Trustees by Circular Resolution dated 8.11.93. This was forwarded to SEBI E
. for its approval on 10.11.93. The scheme was duly scrutinised and examined
by the SEBI and SEBI gave its approval and certain amendments were
suggested.

Upon receipt of such approval for the scheme, the appellant and the
Investment Manager took necessary steps to begin marketing the scheme ·F
by issue of advertisements. All advertisements and publicity material were
approved by SEBI in writing before publication as required by the Regula
tions. Pursuant to such approval the appellant commenced advertising the
public issue.

4. On 18th December, 1993 the advertisements and hoardings were
G
released. One Piyush Aggarwal filed a suit before the learned Sub-Judge,
Tees Hazari Courts, Delhi for injuction restraining the public issue from
being floated by the appellant. On 24th December, 1993 an interim order
was passed. Aggrieved by the same, the appellant moved the High Court
m C.M. (M) No. 543 of 1993. On 3rd January, 1994 the said order passed H .
142 SUPREMECOURTREPORTS (1994] SUPP. lS.C.R.

A . by the learned Sub Judge - was stayed. That was subsequently confirmed
on 4th January, 1994. One Dr. Arvind Gupta filed W!it Petition No. 14 of
1994 against SEBI. In effect, he sought to stay the public issue from being
floated. That writ petition was rejected.

5. On the same grounds, as were urged in the writ petition, the
B respondent moved the Calcutta District Consumer Disputes Redressal
Forum seeking to restrain the public issue from being floated. The prin
cipal grounds taken were that the appellant's Offering Circular was not
approved by the SEBI. There are several irregularities in the same. The
basis of allotment is arbitrary, unfair and unjust. The appellant was seeking .

C to collect money by misleading the public.

The following order was passed on 4.1.1994 by the Calcutta District
Consumer Disputes Redressal Forum :

"Petitioner files the complaint today. Register. Issue notice of
D show cause against OPs.

Considering the utmost urgency of the case as cited by the Ld. '
Lawyer for the petitioner we are inclined to pass an interim order
otherwise the application would be frustrated.

E Accordingly we direct OP 1 and OP 2 and its men, agent,
•1i11" coitectihg Banks not to proceed any further with the issue of 30
., ..m
•l't:rores Morgan Stanley Growth Fund units due to be opened on
6th January, 1994 till proper clarification is made in its prospectus
and with the leave of this Ld. Forum. OP 3 i.e. SEBI is also directed
'0' bn"
·

riot to issue clearan�s until Regulation 28 of Schedule V of SEBI
H �m�rf'.Ja ·d• .;, "

.. Regulations is complied by the OP 1 and OP 2.
1 /, I

OP4 & OPS i.e. The Bankers to the offer are specifically
restrained from accepting any application form of Morgan Stanley
Growth Fund from anybody until further orders from this Ld.

G Forum.

'_.di"
OPs are at liberty to apply for vacation/variation of this order.
'"·Next'date fixed on 19.1.94.'

Aggrieved by this order, civil appeal arising out of SLP(C) No. 272

H of 1994 has come to be preferred.
MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN, J.] 143

Against the dismissal of Writ Petition No. 14 of 1994 by the High A
Court of Delhi civil appeal arising out of SLP No. 321 of 1994 has come
to be preferred.

6. Mr. Ashok Desai learned counsel for the appellant (Morgan
Stanley Mutual fund) urges the follol\'ing :
B
(a) A prospective investor is not a consumer to prefer a complaint
under the Consumer Protection Act, 1986 (hereinafter referred to as 'the
Act'). If that be so, a voluntary consumer association cannot complain
about the issue of shares. The shares are not goods as defined under
Section 2(i) of the Act. Even otherwise, there can be no consumer associa- c
tion of prospective applicants for future properties. The issue of shares was
to open on 27th April, 1993. The so called consumer has yet to apply for
allotment of final shares and make payments in respect thereof. Therefore,
it is submitted that no member of this association could be held to be a
consumer of future shares within the meaning of the definition (supra).
D
(b) In law, a prospective investor does not become a consumer as
denined under the Act. Even assuming that shares could be goods before
allotment, the so-called consumer has neither purchased the goods for a
consideration nor hired the services of the company for consideration.
Hence, he is not entitled to make any complaint. E
( c) There being no transaction of buying goods for consideration the
requirement of section 2(1)(d)(i) of the Act defining consumer is not
satisfied.

( d) No member of the public has a right or entitlement to a share of F
the company making an issue of capital for the first time. A prospective
investor has no say in the val~ation of shares issued. That is determined by
the general body of share holders. Should a prospective investor have any .
legal right and if the issue of capital is not to his desire, he may not opt to
subscribe. He cannot intentionally with the objection of which he is per- G
sonally aware, subscribe into the issue and challenge its very terms.

(c) Under the scheme of the Consumer Protection Act, a consumer
forum is competent to deal with the complaint if it relates to goods bought
or services rendered. Thus the District Consumer Forum has no jurisdic-
·tion whatsoever to deal with this case. H
144 SUPREME COURT REPORTS [1994) SUPP.1 S.C.R.

A (!) Section 2(c) of the Act defines a complaint and lists four cases
where investigation, inquiry and relief could be granted. The complaint in
relation to public issue of shares namely future goods does not fall within
any one of four categories of which a complaint can be filed under the
provisions of the Act.

B (g) Section 14 of the Act deals with the nature of relief that can be
granted. This Section does not envisage grant of any interim relief of an
ad-interimielief. The Section contemplates only a final relief. In the instant
•
case, the grant of injunction against the public issue of the appellant
company is a relief not provided for under the statute.
c
(h) The principles relating to grant of injunction including the
balance of convenience have not been borne in mind. Even assuming that
the Forum is conferred with the power to grant injunction it has not
examined whether there were overwhelming reasons for urgency and why
the grievance could not have been made earlier. In this case, the party had
D gone to the Forum on the last date when the issue was about to open after
the issue had been advertised. The public advertisement was issued on
13.12.93; the petition was filed on 4.1.1994, the orders were passed on the
following day. The Calcutta District Consumer Disputes .Redressal Forum
was approached on the last day, obviously with unclean motives. There is

E also suppression of material facts on the part of the respondent. In matters
of this kind there must be an undertaking as to the damages on the part
of the party seeking the injunction.

For these reasons, it is prayed that the impugned order may be
set-aside. In this case, since the appellant has suffered very much in that
F not even the copy of the injunction was served on the appellant which copy
came to be obtained only through the bankers, it is a fit case in which the
appellant should be Compensated with exemplary costs.

7. Mr. KG. Vishwanathan, learned counsel for the respondent urges
that there are well-known principles for the grant of ex-parte injunction.
G Should the court he satisfied that there is a prima facie case, on balance of
convenience, it can always grant. Where the issue of public share is nothing
but an attempt to gain an undue advantage, the Court is not powerless.
This is- a case to which the Regulations would apply. Therefore, if those
Regulations are not conformed to, a prospective applicant would be en·

H tit\ed on to seek an injunction. There has been a violation of Regulation
MORGAN STANLEY MUTUAL FUND v. KDAS [MGHAN,J.] 145

27 and that the appellant did not have any approval as is clear from their A
own document Only a letter from SEBI seeking the clarification from the
appellant is produced. This does not, it is urged, amount to an approval in
law.

It is further urged by Mr. Vishwanathan that the bankers to the issue
at Calcutta were really non-existent. The brochure indicates that the ap- B
plication forms could be received in Calcutta at the Bank of Broda, Old
Court House Street and Corporation Bank. Cappling Street. Both these
branches, it is urged, are non-existent while there is no branch of Bank of
Baroda at Old Court House Street. There is no street called Cappling
Street at Calcutta. c
The basis of allotment what is styled 'first come, first served' was, it
is urged, intended to confuse and designed to deceive the innocent inves-
tors. The applications were received in 45 centres simultaneously. No
priority number was given. Hence, the appellant would be in a position to
deny to each one of the investors on the ground that he had not come or D
approached the appellant first. As a result, the appellant will be able to
amass enormous sums of money by way of interest and thereafter return
the amount to the respective investors.

The failure to stipulate the period before which the refund would be E
effective is, it is further urg~d, a serious irregularity violating Regulation
23.

The Calcutta District Forum has, it is claimed power to issued the
restraint order under the Act.· Such injunctions are not unknown to law as
seen from the Financial Services Act, 1986 of the United Kingdom. There- F
fore, no interference is calfed for.

In S.L.P. (c) 321/94, the appellant would urge that the High Court
has dismissed the writ petition without a speaking order. There were
important points raised in the writ petition. The announcement of the
impugned scheme of public issue of units by the appellant is, it is con- G
tended, without the approval of SEBI and is illegal and that by proposing
the allotment of units based on first come first served basis, fair treatment
is not meted out to small investors. There is contravention of Sections 55,
63 and 68 of the Indian Companies Act, 1956. To hold out, as the appellant
has done, that the allotment of units will be based on firm allotment basis H
146 SUPREME COURT REPOR'fS [1994] SUPP. 1 S.C.R.

A and with a charged sponsor in the advertisement is, it is contended, illegal
in law, apart from it being violative of the norms and practices in the capital
market. In such a case, the impending disaster could be avoided only by a
quia-timet interference of the Court. It is also urged that by piercing the
corporate veil, it could be easily seen that the real sponsor is no other than
the Morgan Stanley Group, New York. Therefore, SEBI Should have acted
B
in accordance with Section 11(2)(e) of the SEBI Act, 1992 for prohibiting
fraudulent and unfair trade practices relating to securities market. It is also
urged that the writ petition came to be filed and dismissed without con-
sideration of these aspects. So, it requires interference of this Court.

C 8. We have already extracted the impugned order. The correctness
of the same can be determined with reference to the following questions :

(i) Whether the prospective investor could be a consumer within
the meaning of Consumer Protection Act, 1986?

D (ii) Whether the appellant company 'trades' in shar~s?

(iii) Does the Consumer Protection Forum have jurisdiction in ·
matters of this kind?

(iv) What are the guiding principles in relation. to the grant of an
E ad-interim injunctions in such areas of the functioning of the
capital-market and public issues of the corporate sectors and
whether certain 'venue restriction clauses' would require to be
. evolved judicially as has been done in cases such as State of West
Bengal & Ors. v. Swapan Kumar Guha and others and Sanchaita
Investments and others, [1982] 1 SCC 561 etc.?
F
(v) What is the scope of Section 14 of the Act?

The answers to these questions will d.ecide not only the fate of this
civil appeal but also the appeal arising out of SLP (C) No . 321/94.
G 9. In order to decide these questions, it will be necessary to set out
the factual matrix. On 11.4.1988, Government of India by a.'l administrative
circular constituted the Securities and Exchange Board of India (SEBI) for
investors protection. On 30.1.1992, an Ordinance known as SEBI' Or-
dinance was promulgated. On 21.2.1992, a bill was introduced namely the
H SEBI Bill of 1992 which became the Act on 4th April, 1992. It came into
MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN. J.] 147

force on 13.1.1992 as stated in Section l(iii) of the SEBI Act. A
On 29.5."1992, the Capital Issues Control Act, 1947 was repealed.

10. Mutual funds in India are regulated by SEBI pursuant to the
Securities & Exchange Board of India (Mutual Funds) Regulations, 1993.
Under the said Regulations, all mutual funds in India as also the asset B
management companies and the custodians of the mutual funds assets are
required to be registered with the SEBI. No mutual fund in India can
approach the market with a scheme unless scheme has been fully approved
by SEBI which is the sole authority for granting approval to such funds.
The SEBI examines the scheme and suggests modifications, if any, and C
allows the scheme to be advertised and published.

11. The appellant is a domestic mutual fund registered with SEBI.
Its registration number is MF/005/93/1 dated 5.11.1993. The certificate of
registration is as under :
D
'SECURITIES AND EXCHANGE BOARD OF INDIA
/ (MUTUAL FUND) REGULATIONS, 1993
(Regulation 9)
CERTIFICATE OF REGISTRATION

1. In exercise of the powers conferred by Section 30 of the E
Securities and Exchange Board of India Act, 1992 ( 15 of 1992)
read with Securities and Exchange Board of India (Mutual Fund)
Regulations, 1993 made thereunder the Board hereby grants a
certificate of registration to
F
MORGAN STANLEY MUTUAL FUND

as a Mutual Fund.

ii) Registration code for the Mutual Fund is MF/005/93/1
11
G
By order.

The appellant company is managed by a board of Trustees. In
accordance with the said Regulations, the investment management com-
pany of the appellant Morgan Stanley Asset Management India Pvt. Ltd.
is also registered with SEBI. The certificate to this effect is as under : H
148 SUPREME COURT REPORTS [1994] SUPP. I S.C.R.

A SECURITIES AND
EXCHANGE BOARD OF INDIA

Little & Co.

Central Bank Building
B Bombay 400 023

II MARP/22996/93
November 5, 1993.

Dear Sir,
c RE: Morgan Stanley Mutual Fund

This has reference to the application made by Morgan & Stanley
Grup, Inc., to sponsor a Mutual Fund.

D In terms of Regulation 20 of the Securities and Exchange Board
of India (Mutual Funds) Regulations 1993, we hereby grant our
approval to "Morgan Stanley Asset Management India Pvt. Ltd.",
to act as the Asset Management Company for Morgan Stanley
Mutual Fund.

E ,,We also grant registration to "Morgan Stanley Mutual Fund" in
terms of Regulation 9 of the Regulations subject to the execution
, of the Custodian Agreement between the Board of Trustees and
Stock Holding Corporation of .India Ltd. The certificate of
Registration in form B is enclosed. Please quote the Registration
F number in your future correspondence with us.

Your faithfully.,

Sd/-
J B Ram."
G Morgan Stanley Asset Management India Pvt. Ltd. is a subsidiary
Morgan Stanley Group incorporated which holds 75% of the equity, the
balance being held by Indian shares holders such as HDFC, Stock Holding
Corporation of India etc. Morgan Stanley Asset Management India Pvt.
Ltd. was granted the certificate of incorporation on 12.10.1993 by the
H Registrar of Companies, Bombay and its Memorandum and Article of
MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN,J.] 149

Association has also been approved by the SEBI as per the provisions of A
the said Regulations.

Regulation 27 of the said Regulations provides that no mutl!al fund
shall announce the scheme unless such scheme has been approved by the
Trustees of the Mutual Fund and by SEBI. On 8.11.1993, the Board of
Trustees, by a circular Resolution approved the draft scheme, the same B
was forwarded to SEBI on 10.11.1993. The scheme was duly scrutinised
and examined by the SEBI. By its letter dated 23.11.1993, addressed to
Eliarn Financial Consultants Pvt. Ltd., one of the join Lead Managers,
SEBI gave its approval. It is stated that the scheme has been examined by
them in terms of the provisions of the Regulations. It suggested certain C
amendments as detailed in enclosures thereto. SEBI also advised the said
Enam Financial Consultants Pvt. Ltd. to submit three copies of the printed
offering circular and the abridged offering circular of the scheme and the
new schemes return in the prescribed format This requirement of SEBI
was complied with. It is after this the appellant took the necessary steps D
and began marketing the scheme by issuing advertisements in the press,
holding presentations with brokers etc. All advertisements and publicity
material have been approved by SEBI as under :

"Securities and Exchange
Board of India. E

Enarn Financial Consultants Pvt. Ltd.
24 BD Rajabahadur Compound,
Ambalal Doshi Marg,
Bombay- 400 001 F
II MARP/24655/93
November 25, 1993.

Dear Sir,
G
Re : Advertisement campaign of Morgan Stanley
Group Inc.

With reference to your letter dated 22nd November, 1993, we
advise that the enclosed revised set of advertisement of the
proposed advertising campaign of Morgan St_anley Inc., are in H
150 SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A order.

Yours faithfully,

K. Ravikanth''.

B 'December 20th, 1993.

Mr. Ronan Basu
Fortune Communication Ltd.
Bombay.

c Sub : MORGAN STANLEY GROWTH FUND

Dear Sir,

I enclose a copy of letter received from SEBI in regard to the
changes suggested 'in the 'Scheme Campaign'. Please carry out the
D changes as required by SEBI and get the approval of Morgan
Stanley Assest Management before its release.

Thanking you,
'
Your faithfully,
E for Enam Financial Consultant Pvt. Ltd.

N.G.N. ~anik'.

It has to be carefully noted that the disclaimer clause required to be
incorporated at the beginning of offering circular by SEBI while approving
F the scheme is a standard requirement and nothing peculiar to the present
case. The object of this is to bring to the notice of the investors that they
should take the firm decision on the basis of the disclosures made in the
documents. It is meant for the investors protection in fact by such a course
the SEBI informs the investors that they have approved the scheme but
G they did not recommend to the investors whether such investment is good
or not and leave it to their discretion. In view of this, it will be clear that
the allegations of respondents that the SEBI has not approved the other
documents is totally baseless.

12. There is also a challenge to the method of allotment. The relevant
H clause pertaining to the method of allotment is as under :
MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN, J.] 151

"The offer : The targeted amount to be issued is Rs. 300 crores. A
Units are to be issued at a price of Rs. 10 per unit, payable in fuJJ
upon application. The offer will be open for subscription com-
mencing 6th January, 1994 and will remain open until one day
after notice of the date of closure is given through advertisement
in major national daily newspapers, with the latest date of closure B
being twelve working days after the opening date. If subscriptions
for at least 18 crores units have not been received by the closure
date, the offering will be terminated and all subscriptions will be
returned within 78 days from the closure date. In the event that
the issue is over subscribed, allotments will be made on a "first
come first served" basis. However, MSMF reserves the right to C
accept or reject any subscriptions, including subscriptions in excess
of the targeted amount. See "Terms of the issue." Date of closure:
The issue will be kept open for a minimum of three working days
and a maximum of twelve working days. The Board will proceed
to close the issue by giving one day's notice of the date of closure D
through advertisements in the major national daily newspapers
when approximately 75% of the targeted amount is collected. Only
those subscriptions which are received before the expiry of the
notice period will be retained. If subscriptions for at least 18 crore
units have not been received by the closure date of the issue, the
offering will terminate and the board will return the entire amount E
received within 78 days from such closure date. "Basis of Allotment
& Despatch of Unit Certificate" The arrangements for closure of
the issue and allotment have been designed with the objective of
making allotments on a "first come first served" basis. It is hoped,
however, that all applicants will received their full allotment. Ac- F
cordingly, MSMF reserves the right to accept or reject any sub-
scription, including accepting subscription in excess of the targeted
amount. Allotment of MSMF Units and despatch of certificate will
be made within ten weeks after the closure of the date of the issue.

G
The above clauses indicate the following :

(i) the Petitioners clearly have a desire to retain over subscrip-
tion and the offering circular (and the SEBI Guidelines)
empower them to ilo so. H
152 SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A (ii) that there is a minimum period for which the issue will be
kept open namely 3 days;

(iii) that those who apply for the units before the closure of the
issue would have the same priority and would be allotted units
to the extent ,applied for;
B ''
(iv) that there is a provision for a closure notice, which provision
\,
has been discussed with and examined by SEBI. This par-
ticular method of closure of the scheme and allotment was
chosen to break away from the system followed by other
c mutual funds.

(v) By encouraging prospective investors to apply early the
scheme can be closed quickly, allotments can be finalised
earlier (thereby blocking the money of the first applicants for
a shorter period of time) and most important of all the
D proceeds can be invested quickly to benefit from the market
opportunities. This reduces the cost of collection that the
investor has to bear. In this manner by adopting the "First
come first served basis "the scheme becomes more investor
friendly.
E "
13.' The respondent entertained a misconception - whether honestly
or confused the concept of the "First come first served" scheme. As stated,
it is an invitation to the subscribers to apply early and the scheme be closed
quickly. The appellants have made it very clear that those who applied
during the opening period of scheme would be given full allotment. This
F was clarified by the appellant at a press conference held at Calcutta 16th
December, 1993. Regular clarifications were issued in this regard by the
appellant. The scheme came to be advertised by the appellant on 13th
December, 1993. The respondents chose to make an application to the
Consumer Forum on the eve of opening of the Scheme. It was on that
G application, the impugned order came to be passed. In this factual back-
ground, we will take up the questions set out for determination.

14. Q. 1. Whether a prospective investor could be a consumer within
the meaning of Consumer Protection Act, 1986?
I

H The definition of consumer is contained under Section 2( d) of the
MORGANSTANLEYMUTUALFUND v.K.DAS(MOHAN,J.] 153

Act which read as under : A

"2(d)(i) buys any goods for a consideration which has been paid-
or promised or partly paid and partly promised, or under any
system of deferred payment and includes any user of such goods
other than the person who buys such goods for consideration paid
or promised or partly paid or partly promised, or under any B
system of deferred payment when such use is made with the·
approval of such person, but does not include a person who obtains
such goods for resal. e or for any commercial
.
purpose ; or
• . ' t . ·.

(ii) hires any services for a consideration which has been paid C
1
or promised or partly paid and partly promised, or under any
system of deferred payment and includes any benefidary of such
services other than the person who hires the services for considera
tion paid or promised, or partly paid and partly promised, or under
any system of deferred payment when such services are availed of
D
with the approval of the first mentioned person;".

The meaning of goods is same as defined under Sale of Goods Act,
1930. It is so stated in Section 2(i) of the said Act.

The consumer as the term implies is one who consumes. As per the E
definition, consumer is the orie who purchases goods for private use or
consumption. The meaning cifthe word 'consumer' is broadly stated in the
above definition so as 'to include anyone who consumes goods or services
at the end of the chain of production. The comprehensive defini\ion aims
at covering every man who pays money as the price or cost of goods and p
services. The consumer deserves to get what he pays for in real quantity
and true quality. In every society, consumer remains the centre of gravity
of all business and industrial activity. He needs protection from the
manufacture, producer, supplier, wholeseller and retailer.

In the light°of this, w.e will have to examine whether the "shares" for G
which an application is made for ·allotment would be "goods". Till the
'
allotment of shares takes place, "the shares do 'not exist". The.refore, they
can never be called goods. Under the Sale of Goods Act, all actionable
claims and money are excluded from the definition of goods since Section
2(7) of the Sale of Goods Act, 1930 is as under : H
154 SUPREME COURT REPORTS [1994) SUPP. 1 S.C.R.

A '"goods' means every kind of movable property other than
actionable claims and money; and includes stock and shares, grow-
ing crops, grass, and things attached to or forming part of the land
which are agreed to be served before sale or under the contract
of sale".

B It will be useful to refer to clause (6) of Section 2 of the Sale of
Goods Act, 1930. That reads :

"'further goods' means goods to be manufactured or produced
or acquired by the seller after the making of the contract of sale."
c As to the scope of this clause, reference. may be made to Maneckji
Pestonji Bhamcha & Ors. v. Wadi Lal Sarabhai & Com., AIR (1926) PC 38
at page 40. It was observed thus :

"The Company is entitled to deal with the share-holder who is
D on the register, and only a person who is on the register is in the
full sense of the word owner of the share. But the title to get on
the register consists in the possession of a certificate together with
a transfer signed by. the registered holder. This is what ilharucha
had. He had the certificates and blank transfers, signed by the
registered holders. It would be an upset of all Stock Exchange
E
.transactions if it were suggested that a broker who sold shares by
general description did not implement his bargain by supplying the
buyer with the certificate and blank transfers, signed by the
registered holders of the shares described. Bharucha solcl what he
had got. He could sell no more. He sold what in England would
F have been choses in action and he delivered choses in action. But
in India, by the terms 'of the Contract Act, these choses in action
are goods. By the definition of goods as every kind of moveable
property it is clear that, not only registered shares, but also this
class of choses in action, are goods. Hence equitable considera-
tions not applicable to goods do not apply to shares in India."
G
Again in Madho Lal Sindhu of Bombay v. Official Assignee of Bom-
bay & Ors, AIR (1950) FC 21 at page 26, it was held thus :

"A sale according to the Sale of Goods Act (and in India goods
H include shares of joint stock companies) takes place when the
MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN;J.] 155

property passes from the seller to the buyer." A
Therefore, at the stage of application it will not be goods. After
allotment different considerations may prevail.

A fortiori, an application for allotment of shares cannot constitute
goods. In other words, before allotment of shares whether the applicant B
for such shares could be called a consumer? In Commissioner of Income-
tax (Central) Calcutta v. Standard Vacuum Oil Co., AIR (1966) SC 1393 at
1397 while defining shares, this Court observed :

nA share is not a sum of money; it represents an interest C
measured by a sum of money and made up of diverse rights
contained in the contact evidenced by the articles of association
of the company."

15. Therefore, it is after allotment, rights may arise as per the
contract (Article of Association of Company). But certainly not before D
allotment. At that stage, he is only a prospective investor of future goods.
The issue was yet to open on 27.4.1993. There is not purchase of goods for
a consideration nor again could he be called the hirer of the services of
the company for a consideration. In order to satisfy the requirement of
above definition of consumer, it is clear that there must be a transaction
of buying goods for consideration under clause 2(i) of the said Act. The E
definition contemplates the pre-existence of a completed transaction of a
sale and purchase. If regard is had to the definition of complaint under the
Act, it will be clear that no prospective investor could fall under the Act.

What is that he could complain of under the Act? This takes us to F
the definition of complaint under section 2( c) which reads as follows :

"2(c) "complaint" means any allegation in writing made by a
complainant that -

(i) as a result of any unfair trade practice adopted by any trader, G
the complainant has suffered loss or damage;

(ii) the goods mentioned in the complaint suffer from one or
more defects;

(iii) the services mentioned m the complaint suffer from H
156 SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A deficiency in any respect;

(iv) a trade has charged for the goods mentioned in the com
plaint a price in excess of the price fixed by or under any law for
the time being in force or displayed on the goods or any package
containing such goods, with a view to obtaining any relief provided
B by or under this Act.11

16. Certainly, clauses Z(iii) & (iv) of the Act do not arise in this case.
Therefore, what requries to be examined is, whether any unfair trade
practice has been adopted. The expression trade practice as per rules shall
have the same meaning as defined under Section 369(a) of Monoplies and
C
Restrictive Trade Practices Act of, 1969. That again cannot apply because
the company is not trading in shares. The share means a share in the
capital. The object of issuing the same is for building up capital. To r�se
capital, means making arrangements for carrying on the trade. It is not a
practice relating to the carrying of any trade. Creation of share capital without
D allotment of shares does not bring shares into existence. Therefore, our
answer is that a prospective investor like the respondent or the association
is not a consumer under the Act.

17. Q. No. 2 : Whether the appellant company trades in shares?

E For the above discussion, it is clear that the question of the appellant
company trading in shares does not arise.

18. Q. No. 3 : Does the Consumer Protection Forum has jurisdiction
in matters of this kind?

F In view of our answers to questions No. 1 & 2, it follows that the
Consumer Protection Forum has no jurisdiction whatsoever.

19. Q. No. 4: What are the guiding principles in relation to the grant
of an ad-interim injunction in such areas of the functioning of the capital
market and public issues of the corporate sectors and whether certain
G
'venue restriction clauses' would require to be evolved judicially as has
been done in cases such as Sanchaita's case (supra) etc.?

As a principle, ex-parte injunction could be granted only under
exceptional circumstances. The factors which should weigh with the Court
H in the grant of ex·partc injunction are ;
MORGAN STANLEY MlITUALFUND v. K. DAS [MOHAN,J.J 157

"(a) where irreparable or serious mischief will ensure to the A
plaintiff;

(b) whether the refusal of ex-parte injunction would involve
greater injustice than the grant of it would involve;

(c) the court will also consider the time at which the plaintiff
B
first had notice of the act complained so that the making of
im?roper order against a party in his absence is prevented;

(d) the court will consider whether the plaintiff had acquiesced
for some time and in such circumstances it will not grant ex parte C
irijunction;

( e) the court would expect a party applying for ex parte injunction
to show utmost good faith in making the application.

(t) even if granted, the ex parte injunction would be for a limited D
period of time.

(g) General principles like prima facie case, balance of convenience
and irreparable loss would also be considered by the court.
E
In United Commercial Bank v. Bank of India, [1981] 2 SCC 766, this
Court observed :

l
• "No injunction could be granted under Order 39, Rules l & 2 of
the Code unless the plaintiffs establish that they had a prima facie
case, meaning thereby that there was a bona fide contention be- F
tween the parties or a serious question to be tried. The question
that must necessarily arise is whether in the facts and circumstan-
ces of the case there is a prima facie case and, if so, as between
\ whom? In view of the legal principles applicable, it js difficult for
us to say on the material on record that the plaintiffs have a prima G
facie case. It cannot be disputed that if the suit were to be brought
by the Bank of India, the High Court would not have gianted any
injunction as it was bound by the terms of the contract. What could
not be done directly cannot be achieved indirectly in a suit brought
by the plaintiffs. H
158 SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A Even if there was a serious question to be tried, the High Court
had to consider the balance of convenience. We have no doubt
that there is no reason to prevent the appellant from recalling the
amount of Rs. 85,84,456. The fact remains that the payment of Rs.
36,52,960 against the first lot of 20 documents made by the appel-
lant to the Bank of India was a payment under reserve while that
B
of Rs. 49,31,496 was also made under reserve as well as against
the letter of guarantee or indemnity executed by it. A payment
'under reserve' is understood in banking transactions to mean that
the recipient of money may not deem it as his own but must be
. prepared to return it on demand. The balance of convenience
c clearly lies in allowing the normal banking transactions to go
forward. Furthermore, the plaintiffs have failed to establish that
they would be put to an irreparable loss unless an interim injunc-
tion was granted.

D 20. This Court had occasion to emphasise the need to give reasons
before passing ex-parte orders of injunction. In Shiv Kumar Chadha v.
Municipal Corporation of Delhi, [1993] 3 SCC 161 at 176, it is stated as
under:

"The Court shall record the reasons why an ex-pane order
E injunction was being passed in the facts and circumstances of a ·
particular case. In this background, the requirement for recording
the reasons for grant of ex parte injunction cannot be held to be
a mere formality. This requirement is consistent_with the principle,

F
that a party to a suit, who is being restrained from exercising a
right which such party claims to exercise either under a statute or
under the common law, must be informed why instead of following
the requirement of Rule 3, the procedure prescribed under the
-
proviso has been followed. The party which invokes the jurisdiction
of the court for grant of an order of restrain against a party, without
affording an opportunity to him of being heard, must satisfy the
G court about the gravity of the situation and court has to consider
briefly these factors in the ex-parte order. We are quite conscious
of the fact that there are other statutes which contain similar
provisions requiring the court of the authority concerned to record
reasons before exercising power vested in them. In respect of some
H of such provisions it has been held that they are required to be
MORGANSTANLEYMUTIJALFUND v.K.DAS[MOHAN,J.] 159

complied with but non-compliance therewith will not vitiate the A
order so pass~d. But same caonot be said in respect of the proviso
to Rule 3 of order 39. The Parliament has prescribed a particular
procedure for passing of an order of injunction without notice to
the other side, under exception circumstaoces. Such ex-parte or-
ders have far-reaching effect, as such a condition has been imposed
B
that court must record reasons before passing such order. If it is
held that the compliaoce with the proviso aforesaid is optional aod
not obligatory, then the introduction of the proviso by the Parlia-
ment shall be a futile exercise aod that part of Rule 3 will be a
surplusage for all practical purposes. Proviso to Rule 3 of order
39 of the Codr., attracts the principle, that if a statue requires a C
thing to be done in a particular manner, it should be done in that
maoner or not all. This principle was approved and accepted in
well-known cases of Taylor v. Taylor, (1875) i CH D 426 and Nazir
Ahmed v. Empror, AIR (1936) PC 253 (2). This Court has also
expressed the same view in respect of procedural requirement of D
the Bombay Tenaocy aod Agricultural Laods Act in the case of
Ramchandra Keshav Adke v. Govind Joli Chavare, [1975] 1 SCC
915.

As such whenever a court considers it necessary in the facts
aod circumstances of a particular case to pass ao order of injunc- E
tion without notice to other side, it must re.cord the reasons for
doing so aod should take into consideration, while passing an order
of injnnction, all relevaot factors, including as to how the object
of graoting injunction itself shall be defeated .if an ex-parte order
is not passed." F

21. In this case, the public advertisement was given as seen above, on
13.12.1993; the petition was filed on 4.1.1994 aod the impugned order of
Consumer Forum came to be passed on the following day. As to why the
respondent chose to come at the eleventh hour aod where was the need to
pass ao urgent order of injunction, are matters which are not discernible. G
Besides tested in the light of the case law set out above, the impugned
order which is bereft of reason and laconic cannot stand a moment's
scrutiny.

22. Today the corporate sector is expaoding. The disgruntled litigants H
160 SUPREME COURT REPORTS (1994] SUPP. l S.C.R.

A indulge in adventurism. ThOugh, in this case we have come to the coll·
clusion that the District Consumer Forum will have no power to grant
injunction yet in general cases it becomes necessary to evolve certain venue
restrictions.

As to the effect of incorporation it is stated in Halsbury's Law of
B England (4th Edition, Volume 7, Page 55, para 83) as under :

"When incorporated, the company is a legal entity or persona
distinct from its members, and its property is not the property of
the members. The nationality and domicile of a company is deter·
c mined by its place of registration. A company incorporated in the
United Kingdom will normally have both British nationality and
English or Scottish domicile, depending upon its place of registra·
, lion, and it will be unable tci change that domicile .....

The residence of a company is of great importance in revenue
D law, and the place of incorporation is not conclusive on this
question. In general, residence depends upon the place where the
central control and management of the company is located. It
follows that if such central control is divided, the company may
have more than one residence. The locality of the shares of a
company is that of the register of shares. The head office of ·a
E
company is not, however, necessarily the registered office of the
company, but is the place where the substantial business of the
company is carried on and its negotiations conducted. Like an
individual or a firm, a company can, for the purposes of the Rules
of the Supreme Court, carry on business in more places than one."
F
As far as India is concerned, the residence of the company is where
the registered office is located. Normally, cases should be filed only where
the registered office of the company is situate. Courts outside the place
where the registered office is located, if approached, must have regard to
G the following :

Invariably, suits are filed seeking to injunct either the allotment of
shares or the meetings of the Board of Directors or again the meeting of
general body. The court is approached at the last minute. Could injunction
be granted even without notice to the respondent which will cause immense
H hardship and administrative inconvenience. It may be sometimes difficult
. MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN, J.] 161

even to undo the damage by such an interim order. Therefore, the court A
must ensure that the plaintiff comes to Court well in time so that notice
may be served on the defendant and he may have his say before any interim
order is passed. The reasons set out in the preceding paragraphs of our
judgment in relation to the fact which should weigh with the court in the
grant of ex-parte injunction and the rulings of this Court must be borne in
B
mind.

23. Q. No. 5: What is the scope of Section 14 of the Act?

The said Section reads as under :

"(1) If, after the proceeding conducted under Section 13, the
c
District Forum is satisfied that the goods complained against suffer
from any of the defects specified in the complaint or that any of
the allegations contained in the complaint about the services are
proved, it shall issue an order to the opposite party directing him
to take one or more of the following things, namely : D.
(a) to remove the defect pointed out by the appropriate
laboratory from the goods in question ;

(b) to replace the goods with new goods of similar description
which shall be free from any defect; E
(c) to return to the complainant the price, or, as the case may
be, the charges paid by the complainant;

( d) to pay such amount as may be awarded by it as compensa-
tion to the consumer for any loss or injury suffered by the consumer F
due to the negligence of the opposite party.

(2) Every order made by the District Forum under sub-section
(1) shall be signed by all the members constituting if and, if there
is any difference of opinion, the order of the majority of the G
members constituting it shall be the order of the District Forum.

(3) Subject to the foregoing provisions, the procedure relating
to the conduct of the meetings of the District Forum, its sittings
and other matters shall be such as may be prescribed by the State
Government. 11 H
162 SUPREME COURT REPORTS [1994] SUPP. l S.C.R.

A 24. A careful reading of the above discloses that there is no power
under the act to grant any interim relief of even an ad-interim relief. Only
a final relief could be granted. If the jurisdiction of the Forum to grant
relief is confined to the four clauses mentioned under Section 14, it passes
our comprehension as to how an interim injunction could ever be granted
disregarding even the balance of convenience.
B
25. We have dealt with in the preceding paragraphs as to the ap-
proval of SEBI and the compliance with the Regulation 27 of the Regula-
tions, 1993. We have also explained what exactly is a concept of 'first come
first served' basis. On these two aspects, the respondent is suffering under
c a labyrinth of confusion. Therefore, we hold the grounds urged by the
respondent seeking to support the impugned order, are untenable.

The appellant has suffered immensely because it has not even been
served with copy of order of injunction. The application of the respondent
is clearly actuated by mala fides. The Forum should have examined whether
D ex-parte injunction without ·notice to the opposite side could ever be
granted at all. The grounds urged in the injunction application were
insufficient for the grant of such a relief.

26. There is an increasing tendency on the part of litigants to indulge
E in speculative and vexatious litigation and adventurism which the fora seem
readily to oblige. We think such a tendancy should be curbed. Having
regard to the frivolous nature of the complaint, we think it is a fit case for
·award of costs, more so, when the appellant has suffered heavily. There-
fore, we award costs of Rs. 25,000 in favour of the appellant. It shall be
recovered from the first respondent. C.A 4584/94 arising out of SLP (C)
F No. 272/94 is allowed accordingly.

CIVIL APPEAL NO. 4587 OF 1994 (Arisi11g out of S.L.P. No. 321194) :-
<:
27. Jn view of what we have observed above, the writ petition has I.
G rightly come to be rejected though in our view, it would have been better
had the High Court given reasons instead of dismissing it summarily.
Hence, CA. No. 4587/94 arising out of S.L.P. (C) No. 321/94 is dismissed.
No costs.

R.R. CA No. 4587 of 97 allowed.
CA No. 4548 of 97 dismissed.