Paragraph numbers below are the court’s original numbering, recovered from the source text.
14. Q. 1. Whether a prospective investor could be a consumer within the meaning of Consumer Protection Act, 1986? The definition of consumer is contained under Section 2( d) of the MORGANSTANLEYMUTUALFUND v.K.DAS(MOHAN,J.] Act which read as under : "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 B or promised or partly paid or partly promised, or under any 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 resa.le 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 : c '"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". 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." 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 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 .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 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." 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 include shares of joint stock companies) takes place when the MORGAN STANLEY MUTUAL FUND v. K. DAS [MOHAN;J.] property passes from the seller to the buyer." 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 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 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 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 rse 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? 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? 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 G 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 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 ; l MORGAN STANLEY MlITUALFUND v. K. DAS [MOHAN,J.J "(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 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. In United Commercial Bank v. Bank of India, [1981] 2 SCC 766, this Court observed : "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- 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. c 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 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 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.
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 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, 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 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 of such provisions it has been held that they are required to be MORGANSTANLEYMUTIJALFUND v.K.DAS[MOHAN,J.] 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 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- 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."
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 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. c As to the effect of incorporation it is stated in Halsbury's Law of 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· 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 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 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." 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.] 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 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 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 : (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 c which shall be free from any defect; (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 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. c
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.
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 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 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) 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 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.