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Civil ProcedureSupreme Court of India

M/s Empee Distilleries Limited & Ors. v. M/s Gimpex Private Ltd. & Anr.

Civil Appeal · 2018 INSC 857Decided 24 Sept 2018
Civil Appeal No. 9865 of 2018
Justice Abhay Manohar Sapre · Justice Mohan M. Shantanagoudar

Background

A commercial dispute arose over coal-supply transactions, with the plaintiff suing the defendant distillery companies for recovery of about Rs. 19.5 crore. The plaintiff obtained an ex-parte interim prohibitory order restraining a third party (TASMAC, which allegedly owed the defendants about Rs. 24 crore) from paying the defendants, to secure the plaintiff's claim amount. The defendants' attempt to vacate this order failed before both the Single Judge and the Division Bench of the Madras High Court, leading them to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court declined to rule on whether the prohibitory order itself satisfied the legal requirements of Order 37 Rule 5 of the Civil Procedure Code, since the underlying suit was still at an early stage (no written statement filed, trial not begun) and any factual observations could prejudice the parties. Instead, it accepted the defendants' alternative request to convert the restraint into a security arrangement: the appeal was disposed of by directing the defendants to furnish a bank guarantee of Rs. 10 crore and solvent security for the balance of the suit amount within three months, on compliance with which the prohibitory order would stand set aside. The trial court was asked to decide the underlying suit on its merits as expeditiously as possible, preferably within a year, uninfluenced by the Supreme Court's order.

Lesson Learnt

When a dispute is only at the interim-relief stage and the main suit hasn't gone to trial, courts often prefer a practical middle path, like converting a freezing/prohibitory order into a bank guarantee or security deposit, rather than deciding disputed facts or legal questions prematurely, which protects both the claimant's interest and the defendant's ability to access funds.

M/s Empee Distilleries Limited & Ors. v. M/s Gimpex Private Ltd. & Anr. – Legal Case Shots | LegalAware