2006 (11) TMI 616 - SC - Companies Law

Whether on the facts and in the circumstances of the case and the nature of the suit filed by the plaintiff an interim order of injunction was warranted or justified? Held that - The claims sought to be put forward by the plaintiff in the present suit is something that is really in the nature of a defence to the action initiated by the first defendant before the Debts Recovery Tribunal or which could be put forward by way of a counter claim, if necessary. This aspect also had to be borne in mind before deciding whether a case for passing of an interim order of injunction has been made out or not. This aspect has also been ignored by the Division Bench. Allow the appeal and setting aside the order of the Division Bench, restore the order of the learned single judge dismissing the application for interim injunction. We make it clear that it is open to the plaintiff to put forward all its contentions before the Debts Recovery Tribunal and if it is thought appropriate, to get the suit filed by it transferred to the Debts Recovery Tribunal to be tried as a cross suit or counter claim against the claim of the first defendant before the Debts Recovery Tribunal. The first defendant appellant, would be entitled to its costs in this Court.

Summary

Issues:
Grant of interim injunction by Division Bench of High Court, Validity of charge or hypothecation, Enforcement of rights before Debts Recovery Tribunal, Competency of Civil Court to grant injunction, Nature of relief claimed in suit, Balance of convenience, Legality of restraining orders of Debts Recovery Tribunal, Scope of raising counter claim before Debts Recovery Tribunal.

Grant of Interim Injunction:
The plaintiff filed a suit seeking a mandatory injunction against defendants restraining interference with capacitor banks systems. An interim injunction was granted by the trial court but later vacated by the single judge, allowing the first defendant's claim for recovery before the Debts Recovery Tribunal. The Division Bench of the High Court granted an injunction, which the Supreme Court found to be improper as the nature of the relief claimed and balance of convenience did not warrant it. The court held that the Division Bench did not consider whether the injunction was justified, leading to the appeal being allowed, and the single judge's order being restored.

Validity of Charge or Hypothecation:
The plaintiff claimed no valid charge or hypothecation existed in favor of the first defendant, challenging the enforcement of the charge. The Supreme Court noted that the plaintiff had executed a hypothecation and created a charge to secure a loan advanced to the second defendant. The court found that the plaintiff's rush to the Civil Court to thwart enforcement did not justify the grant of an interim injunction, especially when the matter was within the jurisdiction of the Debts Recovery Tribunal. The court emphasized that defenses against the claims should be raised before the Tribunal, not the Civil Court.

Enforcement of Rights before Debts Recovery Tribunal:
The first defendant initiated proceedings before the Debts Recovery Tribunal to recover amounts due, claiming a legally enforceable charge and hypothecation. The Supreme Court held that the plaintiff's defenses should be presented before the Tribunal, and rushing to the Civil Court to avoid enforcement did not justify an interim injunction. The court emphasized the special jurisdiction of the Tribunal for such claims and the need for the plaintiff to address its contentions there.

Competency of Civil Court to Grant Injunction:
The Supreme Court observed that the Division Bench did not properly consider whether the Civil Court should intervene with an interim injunction when the matter fell within the jurisdiction of the Debts Recovery Tribunal. The court reinstated the single judge's decision to dismiss the application for interim injunction, emphasizing that the plaintiff should address its defenses before the Tribunal.

Nature of Relief Claimed in Suit and Balance of Convenience:
The court noted that the Division Bench did not assess whether the relief claimed warranted an injunction or if the balance of convenience favored it. The Supreme Court found that the case was not suitable for the grant of an interim injunction as sought by the plaintiff, emphasizing that the nature of the case did not justify such relief.

Legality of Restraining Orders of Debts Recovery Tribunal:
The Supreme Court found the Division Bench acted illegally by restraining the enforcement of orders that may be passed by the Debts Recovery Tribunal. The court emphasized that defenses against the claims should be raised before the Tribunal and that the Civil Court should not interfere with the Tribunal's jurisdiction unless in exceptional cases.

Scope of Raising Counter Claim before Debts Recovery Tribunal:
The court highlighted that the plaintiff's claims could be considered as a defense or counter claim before the Debts Recovery Tribunal. The Division Bench's failure to address this aspect was noted, and the Supreme Court emphasized the need to consider such defenses before deciding on the grant of an interim injunction.

In conclusion, the Supreme Court allowed the appeal, setting aside the Division Bench's order, and restored the single judge's decision to dismiss the application for interim injunction. The plaintiff was directed to address its contentions before the Debts Recovery Tribunal, and the first defendant was awarded costs in the Supreme Court.