High Court Has Duty To Protect Honest Businessmen From Those Who Use Unscrupulous Means To Cheat : Calcutta HC [Read Order]

The Calcutta High Court has held that the inherent powers of the Court should be used in appropriate cases to meet the ends of justice.

While granting interim order in a commercial suit, Justice Shekhar B Saraf observed that the Court has the duty to protect honest businessmen from those who use unscrupulous means to cheat.

"... I am of the view that the High Court has a duty to use its inherent powers, in appropriate cases for the ends of justice, equity and good conscience. Furthermore, in the commercial world of today, it is the duty of the High Court to protect the honest businessman against persons who use unscrupulous means to cheat such a businessman. Failure to do so, would amount to eroding the confidence of the citizens in the High Court:, Justice Saraf said in the order.

The Court was dealing with the case filed by a chemicals company named Tata Paras which alleged that its distributors had colluded with a former employee to avail excess "credit notes", by which they had been given discounts and rebates. The company filed a suit against two of the distributors for recovery of money obtained through excess credit notes.

The company sought an interim injunction under Order 39 Rule 1(b) of CPC to prevent the distributors from alienating their property pending the trial.

Allowing the prayer, the Court noted that the petitioner had established a prima facie case of fraud committed against it.

"The question I ask to myself is whether the court is required to restrain itself in spite of the plaintiff having demonstrated a prima facie case of fraud having been committed by the defendants? Is the plaintiff entitled to no security and/or protection till the completion of trial and passing of a decree when the past conduct of the defendants clearly point to fraud and collusion?

I am of the view that in the commercial world as exists today, the citizens have a right to expect that the judiciary shall come to their rescue at the very first instance when a fraud is committed on them. The law cannot be so narrow-minded that it shall wait for umpteen years to give relief to a plaintiff that approaches the court and prima facie proves that fraud has been committed on him."

It was observed that if a case prima facie involves fraud, the threshold for proving that the defendant is likely to dispose of property to defraud creditors, as required under Order 39 Rule 1(b), would be reduced.

"The petitioner in the present case has clearly demonstrated the prima facie case of fraud having been committed on him by the defendants. The petitioner has also averred and made pleadings in the plaint and the interlocutory applications with regard to the grave apprehension of disposal of the properties by the defendants in continuation of the fraud that has been committed on the petitioner. In my view, in a case of fraud the threshold to be crossed to come to a subjective finding of the above threat to alienate property is significantly reduced".

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