2002 (7) TMI 820 - HC - Indian Laws

Summary

Issues Involved:
1. Appointment of receiver and injunction regarding respondents' assets.
2. Injunction against respondents from demanding money related to void Letters of Credits (LCs).
3. Jurisdiction of the High Court versus the Debt Recovery Tribunal (DRT).
4. Validity and enforceability of fraudulent LCs.
5. The extent of the definition of "debt" under the DRT Act.
6. Maintainability of the suit in the High Court.
7. Interim reliefs and injunctions.

Issue-wise Detailed Analysis:

1. Appointment of Receiver and Injunction Regarding Respondents' Assets:
The plaintiff sought the appointment of a receiver for the respondents' assets and an injunction to prevent the respondents from disposing of their assets without making payments due to the plaintiff. The Court found a prima facie case and confirmed the interim order in terms of prayers (a), (b), and (c), granting an order in terms of prayers (e), (j), and (k) against respondents No. 1 to 52.

2. Injunction Against Respondents from Demanding Money Related to Void LCs:
The plaintiff sought an injunction to prevent respondents No. 53 to 57 from demanding money related to void LCs. The Court vacated the interim order staying the proceedings before the DRT initiated by respondents No. 53 to 57, allowing them to proceed with their claims. The plaintiff was given the liberty to file a written statement or counter-claim before the DRT.

3. Jurisdiction of the High Court Versus the Debt Recovery Tribunal (DRT):
The primary issue was whether the High Court had jurisdiction to entertain the suit or if it fell within the exclusive jurisdiction of the DRT under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act). The Court held that the DRT had exclusive jurisdiction over the claims related to debts, including fraudulent debts, as defined under Section 2(g) of the DRT Act. The High Court's jurisdiction was barred by Section 18 of the DRT Act, and the suit against respondents No. 53 to 57 was to be transferred to the DRT.

4. Validity and Enforceability of Fraudulent LCs:
The plaintiff argued that the LCs were void ab initio due to fraud and forgery. The Court noted that the issue of fraud and the validity of the LCs were matters to be decided on merits by the appropriate forum. The Court referred to various precedents and legal principles, including the ostensible authority of employees and the responsibility of negotiating banks to scrutinize LCs. The Court held that even fraudulent debts fall within the jurisdiction of the DRT.

5. The Extent of the Definition of "Debt" Under the DRT Act:
The Court examined the definition of "debt" under Section 2(g) of the DRT Act, which includes any liability claimed by a bank or financial institution during the course of business activity. The Court held that the claims related to the LCs, even if fraudulent, constituted debts within the meaning of the DRT Act, and the DRT had exclusive jurisdiction over such matters.

6. Maintainability of the Suit in the High Court:
The Court held that the suit was not maintainable in the High Court concerning the claims against respondents No. 53 to 57 due to the exclusive jurisdiction of the DRT. However, the claims against respondents No. 1 to 52, involving allegations of fraud and collusion, were tentatively maintainable in the High Court, subject to further determination of jurisdiction and maintainability as an issue in the suit.

7. Interim Reliefs and Injunctions:
The Court granted interim reliefs and injunctions concerning respondents No. 1 to 52 but vacated the interim order staying proceedings before the DRT for respondents No. 53 to 57. The Court emphasized that it could not grant interim relief if it lacked jurisdiction over the subject matter.

Conclusion:
The Court concluded that it had no jurisdiction over the claims against respondents No. 53 to 57, which fell within the exclusive jurisdiction of the DRT. The suit against these respondents was to be transferred to the DRT. The claims against respondents No. 1 to 52 were tentatively maintainable in the High Court, subject to further determination of jurisdiction. The interim reliefs granted against respondents No. 1 to 52 were confirmed, while those against respondents No. 53 to 57 were vacated. The matter was disposed of with directions for appropriate proceedings before the DRT and further consideration of specific prayers by the appropriate Court.