Source: Supreme Court 

Why in News? 

Recently, the Supreme Court in the matter of Ramakant Ambala Choksi v. Harish Ambala Choksi & Othrs.  has held that interlocutory orders passed by the trial court can only be vacated by the Appellate Court if found perverse or arbitrary and not otherwise. 

What was the Background of Ramakant Ambala Choksi v. Harish Ambala Choksi & Othrs. Case?  

• Property Ownership and Initial Arrangement: 
  • The case involves a family property dispute between brothers in Vadodara, Gujarat. 
  • In 1991, the plaintiffs (three brothers) and one defendant (another brother) jointly purchased property in the Navrang Co-operative Housing Society.  
  • The first floor was purchased jointly with the defendant's wife. 
  • They initially planned to run a jewellery showroom together on this property, called "Narayan Jewellers". 
• Business Relationship Breakdown: 
  • Around 2012, tensions arose within the family business. The defendant (brother) expressed a desire to retire and withdraw from the family business. 
  • The other brothers did not accept his proposal to part ways. Subsequently, the defendant stopped participating actively in the business. 
  • In November 2013, the jewellery showroom was shut down. Business records, ornaments, and stock remained in the showroom. 
• Disputed Property Transfer: 
  • In March 2018, the defendant executed a sale deed transferring the property to his son (another defendant) for Rs. 1.70 crore. 
  • The plaintiffs claim this transfer was improper, asserting that: 
    • The original power of attorney was only for administrative purposes, not for selling the property 
    • The sale consideration was significantly below the property's market value (estimated at over Rs. 20 crore) 
    • The transfer was done without their consent 
  • The plaintiffs filed a civil suit seeking: 
    • Declaration of the sale deed as invalid 
    • Cancellation of the registered sale deed 
    • Permanent injunction against the defendants 
• Legal Proceedings: 
  • The plaintiffs initially obtained a temporary injunction from the trial court preventing the defendants from dealing with the property.  
    • The sale deed executed by defendant no. 1 in favor of defendant no. 3 did not bear the signatures of any of the plaintiffs. 
    • The plaintiffs had produced the original sale deed from 1991, which showed that the plaintiffs and defendant nos. 1 and 2 were joint owners of the suit property. 
    • The trial court found that the plaintiffs were able to establish a prima facie case demonstrating their right, title, and interest in the suit property. 
    • The trial court held that the balance of convenience was in favor of the plaintiffs. 
    • The court believed that if a temporary injunction was not granted, the plaintiffs may suffer a loss that cannot be compensated in monetary terms. 
  • The defendants appealed this injunction at the High Court of Gujarat.  
    • The High Court set aside the injunction, which prompted the plaintiffs to appeal to the Supreme Court. 

What were the Court’s Observations? 

• The Supreme Court observed that: 
  • High Court Overstepped its Authority: 
    • The Supreme Court found that the High Court improperly interfered with the trial court's original order granting a temporary injunction.  
    • The High Court essentially substituted its own view without demonstrating any clear legal error or "perversity" in the trial court's original decision. 
  • Inappropriate Consideration of Extraneous Matters: 
    • The Supreme Court criticized the High Court for considering irrelevant factors like pending litigation and allegations of political influence, instead of focusing strictly on the legal principles governing temporary injunctions. 
  • Lack of Reasoned Decision: 
    • Despite the High Court's long order, the Supreme Court noted that it failed to address the core issues raised by the plaintiffs and seemed to accept the defendants' arguments without providing substantive reasoning. 
  • Problematic Timing of Order: 
    • The Court was particularly concerned that immediately after setting aside the injunction, the defendants transferred the property to a third party.  
    • The Supreme Court questioned why the High Court was so quick to remove the status quo, especially when the original suit was still pending. 
  • Importance of Preserving Property Status: 
    • The Supreme Court emphasized that courts should be cautious about allowing property transfers during ongoing litigation.  
    • While the doctrine of lis pendens (pending lawsuit) provides some protection, an injunction can be crucial in preventing complications that might arise from transfers. 
  • Appellate Jurisdiction Limitations: 
    • The Court reminded the High Courts that they should not lightly set aside a trial court's discretionary orders.  
    • Interference is only justified if the original order is demonstrably arbitrary, capricious, or fundamentally wrong in law. 
• The Supreme Court after making all the above observations set aside the order of the High Court and held that: 
  • The respondents must maintain the status quo regarding the property 
  • Any further transfers of the property will be subject to lis pendens (the legal principle that a property transfer during a lawsuit is subject to the lawsuit's outcome) 
  • The Supreme Court essentially reinstated the trial court's original injunction and cautioned against hasty or poorly reasoned interference with lower court orders. 

What are Interlocutory Orders? 

About: 

• Interlocutory orders are defined as orders that do not finally determine the rights of the parties but are made to facilitate the progress of the case.  
• They are distinct from final orders, which conclude the litigation on the merits of the case.  
• Interlocutory orders can address various procedural matters, including but not limited to: 
  • Granting or refusing interim relief 
  • Issuing temporary injunctions 
  • Appointing receivers 
  • Allowing amendments to pleadings 
  • Staying proceedings 

Types of Interlocutory Orders: 

• Interlocutory orders can be classified into several categories based on their purpose and effect: 
  • Interim Injunctions: These are temporary orders that prevent a party from taking specific actions until the case is resolved. 
  • Stay Orders: These orders suspend the proceedings or the enforcement of a judgment pending the outcome of an appeal or further proceedings. 
  • Orders for Discovery: These orders compel a party to disclose documents or information relevant to the case. 
  • Orders for Amendment: These allow parties to amend their pleadings to correct errors or include new facts. 

Legal Provisions Governing Interlocutory Orders: 

• The Code of Civil Procedure 1908, (CPC) contains several provisions that govern interlocutory orders.  
• Key sections include: 

Section 94: General Powers of Court: 

• Section 94 empowers the court to make various interlocutory orders as it deems necessary for the ends of justice or to prevent abuse of the process of the court. 
• This section provides the court with broad discretion to issue orders that facilitate the smooth conduct of proceedings. 

Order XXXIX: Rules Regarding Temporary Injunctions & Interlocutory Orders: 

• Order XXXIX of the CPC specifically deals with temporary injunctions.  
• It outlines the conditions under which a court may grant an injunction to restrain a party from doing a particular act or to compel a party to do a specific act.  
• The key considerations include: 
  • The likelihood of success on the merits of the case. 
  • The possibility of irreparable harm to the applicant. 
  • The balance of convenience between the parties.
• Power of Appellate Court: 
  • Appealable Orders: Order XLIII specifies the orders that can be appealed. These include, but are not limited to:  
    • Orders under Rule 1 of Order XXXIX (temporary injunctions). 
    • Orders under Rule 4 of Order XXXIX (orders refusing to grant temporary injunctions). 
    • Orders under Rule 1 of Order XL (appointment of a receiver). 
    • Orders under Rule 2 of Order XLI (orders relating to the execution of decrees).