Order XXXIX CPC | Consent Orders Must Reflect Parties' Agreement in Joint Demat Account Disputes: Gauhati HC

The Gauhati High Court recently underscored a fundamental principle of civil procedure: when parties agree on relief, the court must dispose of the matter in accordance with their consent. The judgment in Somnath Chatterjee v. B and A Limited sets aside a trial court order that dismissed an injunction application despite the respondent's explicit consent to restrain share transfers, holding that such consent must be given effect to under Order XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908.

Background & Facts

The Dispute

The dispute revolves around ownership and transfer of 861,918 equity shares of B and A Limited, held in a joint demat account (DP ID IN 301151, client ID 26424547) maintained by HDFC Bank Ltd. (respondent No. 3) in the names of the original plaintiff, Hemendra Prasad Barooah (now deceased), and his daughter, Sharmila Vijay Shetty (respondent No. 2). The plaintiff, who was the Chairman of B and A Limited and held approximately 30.55% of its equity shares, contended that the shares were transferred to the joint account merely for operational convenience and that no beneficial interest was intended to be passed to respondent No. 2.

Key Facts

• 19.03.2009: Plaintiff transferred 830,315 shares from his sole ICICI demat account to the joint demat account with respondent No. 2 at HDFC Bank.
• 22.12.2008 to 26.03.2009: Plaintiff purchased an additional 31,603 shares through open market transactions, bringing the total to 861,918 shares in the joint account.
• 21.11.2011: Plaintiff executed a Trust Deed ("The Hemen Barooah Benevolent and Family Trust"), bequeathing his entire shareholding to the Trust.
• 22.06.2011 to 19.09.2011: Plaintiff sent multiple communications to respondent No. 2, requesting her to sign delivery instruction slips (DIS) to transfer the shares to his sole demat account. Respondent No. 2 refused to comply.
• 22.08.2011: Plaintiff sent an inter-depository DIS to respondent No. 2 via courier, which she refused to sign. The plaintiff inadvertently sent the entire TIDF/DIS booklet (containing slips numbered AA44026920 to 929), which respondent No. 2 withheld.
• 10.09.2011: Plaintiff requested HDFC Bank to issue a duplicate DIS booklet, but the bank refused, citing the absence of respondent No. 2’s signature.
• 14.09.2011: Plaintiff requested B and A Limited (respondent No. 1) to delete respondent No. 2’s name from the Register of Members as a joint holder of the shares.

Procedural History

• August 2012: Original plaintiff (Hemendra Prasad Barooah) filed Title Suit No. 41/2012 before the Civil Judge, Jorhat, seeking declarations, injunctions, and mandatory reliefs regarding the shares.
• 13.08.2012: Trial court passed an ex-parte interim order directing status quo over the shares.
• 31.07.2013: Original plaintiff passed away.
• 17.09.2012: Plaintiff executed a Will, naming the appellant (Somnath Chatterjee, his executor) as the sole executor.
• 2013: Appellant filed Probate Petition No. 316/2013 before the Calcutta High Court, which was later converted into Testamentary Suit No. 27/2016 after respondent No. 2 filed a caveat.
• 13.06.2025: Gauhati High Court passed an order substituting the appellant as plaintiff in Title Suit No. 41/2012.
• 10.07.2025: Trial court recorded the substitution.
• 06.09.2025: Matter listed for hearing before the trial court. Respondent No. 2’s counsel conceded to the injunction relief sought by the appellant, stating she had no objection to restraining her from transferring the shares.
• 15.09.2025: Trial court dismissed the injunction application, holding that the appellant had no prima facie case at the time of filing, as both joint account holders were alive and one joint holder alone could not transfer shares.
• 16.09.2025: Impugned order uploaded, prompting the appellant to file the present appeal.

Relief Sought

The appellant sought:

• Setting aside of the impugned order dated 15.09.2025.
• Grant of temporary injunction restraining respondent No. 2 from transferring the 861,918 shares from the joint demat account.
• Direction to respondent No. 3 (HDFC Bank) to refrain from facilitating any transfer of the shares.

The Legal Issue

The central questions before the Gauhati High Court were:

1. Whether the trial court erred in dismissing the injunction application despite respondent No. 2’s consent to the relief sought?
2. Whether the appellant was entitled to a further relief of transferring the shares to his sole demat account under the given circumstances?

Arguments Presented

For the Appellant

• Consent of Respondent No. 2: The appellant argued that respondent No. 2’s explicit consent to the injunction relief should have been given effect to by the trial court. The refusal to do so was perverse and without jurisdiction.
• NSDL Rules: Under Rule 12.6.1 of NSDL Rules, in case of death of a joint holder, shares can be transferred to the surviving holder’s sole account merely on submission of an application along with a death certificate. The appellant contended that respondent No. 2 could not have transferred the shares without the appellant’s consent, as the injunction would have restrained her.
• Ownership Dispute: The appellant emphasized that the ownership of the shares was the core issue in the suit, and the trial court’s insistence on adhering to a rigid "legal framework" ignored the consent-based resolution proposed by the parties.
• Jurisdictional Error: The trial court’s observations in the impugned order were beyond the scope of the pleadings and not even raised by the parties, rendering the order null and void.

For the Respondents

• Respondent No. 2: While conceding to the injunction relief, respondent No. 2’s counsel argued that the status quo order was vague and required clarification. However, this argument was not pressed during the appeal.
• Respondent No. 1 & 3: Their counsel did not contest the appellant’s submissions on the consent issue but focused on the procedural aspects of share transfer under NSDL Rules.

The Court's Analysis

The Gauhati High Court conducted a narrow but incisive analysis, focusing on the consent of the parties and the scope of the injunction application.

"It is an admitted position that the aforesaid prayer had been conceded to by the defendant/opposite party, which is also reflected in the impugned order... That being the position, the proper course of action on the part of the learned Trial Court would have been to dispose of the application in terms of the aforesaid concession."

The Court observed that:

1. Consent Must Be Honoured: When parties agree on relief, the court must dispose of the matter in accordance with their consent. The trial court’s refusal to do so, despite respondent No. 2’s concession, was legally unsustainable.
2. NSDL Rules Do Not Preclude Consent Orders: The Court noted that Rule 12.6.1 of NSDL Rules permits transfer of shares upon death of a joint holder only upon submission of an application. Since respondent No. 2 had consented to the injunction, she could not have transferred the shares without violating the injunction. Thus, the trial court’s insistence on adhering to a rigid "legal framework" was misconceived.
3. Ownership Dispute Remains Open: The Court clarified that the ownership of the shares was a separate issue to be decided in the main suit. The trial court’s observations on ownership were beyond the scope of the injunction application and not pleaded by any party.
4. Limits of Relief: The Court held that the appellant’s prayer in the injunction application was limited to restraining transfer of shares and did not include a direction for transfer of shares to his sole account. Thus, the extensive arguments on this aspect were not addressed, as they fell outside the scope of the application.

The Verdict

The Gauhati High Court set aside the impugned order dated 15.09.2025 and disposed of the appeal with the following directions:

• Respondent No. 2 is restrained from transferring the 861,918 equity shares lying in the demat account (DP ID IN 301151, client ID 26424547) to any other account.
• Respondent No. 3 (HDFC Bank) is directed not to facilitate any such transfer.
• All prior interim orders, including the status quo order, stand merged into this judgment.
• No further relief beyond the injunction was granted, as it was not sought in the original application.
• All pending interlocutory applications were disposed of.

What This Means For Similar Cases

Consent Orders Must Reflect Parties' Agreement

• Binding Nature of Consent: Courts must give effect to consent between parties unless it violates statutory provisions or public policy. The Gauhati High Court reiterated that consent orders are not discretionary but mandatory when parties agree on relief.
• Procedural Safeguards: While courts retain the power to scrutinize consent orders for legality, they cannot impose their own interpretation of the "legal framework" when parties have expressly agreed to a resolution.

Scope of Injunction Applications

• Strict Interpretation of Prayers: Relief granted in injunction applications cannot exceed the scope of the prayers made. Practitioners must draft prayers meticulously to cover all intended reliefs, as courts will not grant unpleaded reliefs.
• Separation of Issues: Courts will not adjudicate broader disputes (e.g., ownership) in interim applications unless expressly pleaded. The main suit remains the appropriate forum for such determinations.

Practical Implications for Joint Demat Accounts

• Operational Convenience vs. Beneficial Interest: The judgment reinforces that joint demat accounts created for operational convenience do not automatically confer beneficial interest on the joint holder. Parties must document intentions clearly to avoid disputes.
• NSDL Rule 12.6.1: While the rule permits transfer of shares upon death of a joint holder, consent orders can override its application during the lifetime of the joint holders. Practitioners should leverage consent-based resolutions to avoid protracted litigation.
• Risk of Misuse: The judgment highlights the risk of misuse of delivery slips in joint accounts. Account holders should monitor and secure DIS booklets to prevent unauthorized transfers.