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TMI Blog2014 (2) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... financial institution to approach it first. Though such a person may approach the DRT with his claim by way of a defence of set off or a counter-claim upon being made a defendant in the Bank's OA, the continuance of his claim for set off or counterclaim, as the case may be, is entirely dependent on the application filed by the bank. At any rate, even in such a case the DRT cannot grant any declaratory relief to the claimant or even a decree of cancellation of any document. It is, therefore, clear that this Court has jurisdiction to entertain the Plaintiff's suit and the Plaintiff cannot be compelled to go to the DRT for redressal of its grievances. The power to restrain a person from prosecuting a pending proceeding can only be exercised (i) for preventing multiplicity of proceedings and (ii) by a court superior to the court in which such proceeding is pending. The Notice of Motion is, accordingly, dismissed with no order as to costs. - Notice of Motion No. 2010 of 2011 and Suit No. 647 of 2011 - - - Dated:- 21-2-2014 - S.C. Gupte, J. For Appellant: Mr. Janak Dwarkadas Sr. Counsel, Mr. Astad Randeria, Mr. Girish Dave, Mr. Hussain Somji i/b and Dave Girish Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Summons was served on the Plaintiff in June 2011. 3. In February 2011, the Plaintiff filed the present Suit praying inter alia for cancellation of the Deed of Indemnity, Deed of Hypothecation and Tax Undertaking. The present Notice of Motion is taken out in the suit for restraining the Defendant from (i) relying on the documents of which cancellation in sought in the suit and (ii) prosecuting the OA against the Plaintiff. The orders of a learned Single Judge of this court refusing the ad-interim relief claimed and of the Division Bench in appeal directing the Plaintiff to seek appropriate reliefs from the DRT, were carried in an SLP before the Supreme Court. The Supreme Court, by its order dated 20 November 2012, directed the Single Judge of this court to decide the Notice of Motion expeditiously and uninfluenced by the observations of the Division Bench. That is how the Motion has been argued before me. 4. Mr. Dwarkadas, the learned Senior Counsel appearing for the Plaintiff, submits that upon assignment of the receivables from Subhiksha, the Defendant has no recourse to the Plaintiff for recovery of the receivables. The Deed of Indemnity executed by the Plaintiff indemn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;MRA'): Clause 2 of the MRA provided for renting of equipment by Subhiksha based on a Rental Schedule. Under Clause 3, the rental term commenced on the first payment date as specified and continued for the number of months specified in the applicable Rental Schedule. Subhiksha's obligation to pay rent was provided in clause 4. Under clause 9, payment of all rental installments on time was a fundamental and essential term of the MRA. Clause 11 provided that if there was a breach of any essential term provided in clause 9, the Plaintiff could give notice to terminate the renting of all equipment then being rented under the MRA or in its sole discretion only with respect to the equipment rented in terms of the particular Rental Schedule (for which breach is committed). The consequence of such termination was provided under Clause 11.3 as follows: 11.3 If we terminate the renting of any Equipment under clause 11.1 or 11.2, you must immediately: (a) return the Equipment to us at a place specified by us; (b) pay to us all moneys then due and payable under this Agreement; (c) pay to us as liquidated damages equal to the aggregate amount of all future rentals p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king payment of the Purchase Price to the Company at the time of execution of deed (due receipt of which the Company hereby acknowledges) and in consideration of the mutual covenants hereinafter stated, the Company, does hereby grant, transfer and assign unto and to the use of SIDBI all the legal, equitable and beneficial right, title and interest in the Receivables together with the Underlying Security, being the Equipment given on hire to the Renter under the Rental Agreement, the Receivables of which are, or in future would be, lawfully due and owing to the Company from the Renter, together with all interest due thereon and all other amounts payable to the Company under the Rental Agreement and together with the documents and papers evidencing the Rental Agreement, the Receivables and the Underlying Security in favour of SIDBI and to have and to receive and appropriate them for the SIDBI's absolute use and benefit with absolute power, authority and liberty to SIDBI to enforce payment thereof by suit or otherwise. (b) It is the express understanding of the Parties that the Purchase Price is sufficient, adequate and the only consideration for this Sale of Receivables. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y specifically appropriated to this security: Clause 3.2 provided as follows: 3.2 No Recourse to the Company. Without prejudice to the obligations of the Company expressed in this Agreement/Letter of Intent/Deed of Indemnity and other Transaction Documents or as constructive trustee of any Receivables, the Company will not be liable to compensate SIDBI by way of damages or on any other basis for any loss or costs incurred by SIDBI; (a) In collecting or attempting to collect or in failing to receive, any Rental Payments sold to SIDBI; and (b) In enforcing or attempting to enforce any Receivables sold to SIDBI Clause 5 provided further contingency of an default by the Renter. Clauses 5.2, 5.3, 5.4 and 5.5, which are relevant for our purposes are as follows: 5.2 SIDBI's Remedies Without prejudice to any other rights of SIDBI, on the occurrence of a default or an event of default (howsoever described) under a Rental Agreement in respect of the Receivables which have been sold to SIDBI, the SIDBI may in its absolute discretion; (a) (SIDBI exercises remedies) exercise any one or more of the Company's powers or remedies by which the Company can recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company's Remedies On the occurrence of an event of default under a Rental Agreement other than in relation to the obligation of the Renter to return the equipment, the Company may not exercise any of its rights and remedies under a Rental Agreement or any Collateral Security without the prior written consent of SIDBI, which consent must not be unreasonably withheld Clause 8 provided for the Plaintiff's right of assignment in the following terms: 8. Assignment. 8.1 The Company may, with the prior approval of SIDBI in writing, assign or otherwise transfer to a third party and/or to a related corporation (as defined in the Corporation Law) all or any of its rights and obligations vis-a-vis the ownership and/or any other residual rights available to the company, other than the rights assigned to SIDBI on the Equipment rented to any Renter. In such an event the company shall ensure that the said assignment/transfer of such rights and obligations shall step into the shoes of the Company and shall strictly adhere and abide by the obligation and duties which the company had agreed to with SIDBI as if the said assignee/transferee had been a party to the agreement and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the said transaction documents and for the consideration aforesaid, all the Equipments including all its tools and accessories, office equipment, computers, furniture and fixtures and other movable, rented/to be rented to the renter (including the receivables from the Renter in terms of the transaction: both present and future, whether installed or not and whether now lying loose or in cases or which are now lying or stored in or about or shall hereafter from time to time during the continuance of these presents be brought into or upon or be stored or be in or about all the Company's Renter's premises and godowns or wherever else the same may be or course of transit or on high seas or on other or delivery (hereinafter collectively referred to as the said assets ) short particulars whereof are given in the Schedule-1 hereunder written, are hereby hypothecated as and by way of a Exclusive/First Charge to SIDBI as a continuing security for and be charged with the repayment to SIDBI of the Rentals receivable from the Renter under the Master Rental Agreement/Transaction documents and repayment or payment of other moneys including interest, further interest, liquidated dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt shall be to the account of the indemnifier. Indemnifier would execute an Indemnity in favour of SIDBI in this regard. NOW, the Indenture, in consideration of SIDBI having entered into the said Transaction and in terms of the Transaction Documents executed/to be executed by the Indemnifier in favour of SIDBI, agrees and undertakes from time to time and at all times hereafter to effectively save, defend, keep harmless and indemnified from any against all loss, actions, liabilities and expenses, which may be made or taken or incurred by SIDBI by the reason of Renter/Indemnifier foreclosing/terminating or restructuring the MRA or part thereof, for any reason whatsoever, including default by the Renter, without prior written consent of SIDBI (Note: In the Deed of Indemnity, the Plaintiff, the Defendant and Subhiksha are respectively referred to as 'Indemnifier', 'Renter' and 'SIDBI'.) 7. As noted above, Subhiksha admittedly committed default in payment of the lease rentals. A recall notice was thereupon issued to Subhiksha by the Defendant. The Defendant also issued a notice to the Plaintiff calling upon the latter to repossess the equipment, arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d either under Rule 1 or rule 2 of Order XXXIX. Rule 1 of Order XXXIX provides for power of the Court to grant a temporary injunction to restrain acts of a defendant of waste, damage etc. to, or dispossession or any other injury to the plaintiff in respect of, any property in dispute in the suit, or removal or disposal of any property by the defendant with a view to defrauding creditors. Rule 2, on the other hand, is for restraining any breach of contract or injury of any other kind. It is true that the injunction asked for in the present case does not fall under either of the provisions. But then, the court has an inherent power to issue temporary injunctions in cases which are not covered by the provisions of Order XXXIX of the Code of Civil Procedure. The Supreme Court in the case of Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal AIR 1962 SC 527 held (per Raghubar Dayal J speaking for the majority) that the court has such inherent power, observing as follows: 19. There is nothing in O. XXXIX, rules 1 and 2, which provide specifically that a temporary injunction is not to be issued in cases which are not mentioned in those rules. The rules only provide that in circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) and argues that the subject matter of the present suit cannot be taken up by the DRT. The learned counsel submits that since the present suit cannot go before the DRT whilst the DRT is seized of the same issue in the Defendant's OA, the injunction applied for is necessary to prevent multiplicity of judicial proceedings. He relies on clause (a) of Section 41 of the Specific Relief Act. On the other hand, it is submitted by the learned Counsel appearing for the Defendant that even if the DRT has no jurisdiction to grant the relief of declaration or cancellation of documents, the DRT can very well accept the Plaintiff's defence in the OA that the Deeds invoked by the Defendant in support of its claim in the OA are void or inoperative. Secondly, it is submitted that the multiplicity of proceedings contemplated by clause (a) of Section 41 of the Specific Relief Act does not cover the present case. The learned Counsel further submits that DRT is not sub-ordinate to this Court within the meaning of clause (b) of Section 41 of the Specific Relief Act and an injunction to restrain the Defendant from prosecuting the OA pending in the DRT cannot be issued by this Court. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from multiplicity of proceedings between the same parties by stay of the suit instituted later subject of course to the conditions provided in that Section. Our case, admittedly, does not fall within Section 10. But apart from the provision of Section 10, there is also a jurisdiction with the Court to restrain a litigant from prosecuting a judicial proceeding. This jurisdiction may be called inherent jurisdiction vesting in the Court and it is expressly saved by Section 151 of the Code of Civil Procedure. This jurisdiction is, however, subject to limitations. These are provided by Clauses (a) and (b) of Section 41 of the Specific Relief Act, which are noted below. 41. Injunction when refused.-An injunction cannot be granted- (a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings; (b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought. The net result of these provisions is that the power to restrain a person from prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituting or prosecuting an action in a subordinate court with a view to regulating the proceeding before the subordinate courts. At any rate the court is precluded by a statutory provision from granting an injunction restraining a person from instituting or prosecuting a proceeding in a court of coordinate jurisdiction or superior jurisdiction. In Cotton Corporation of India (supra), the Supreme Court also rejected the argument that the court had inherent power to issue an injunction restraining prosecution of a proceeding even if such a course was not permissible under Section 41(b), observing as follows: 21. Mr. Sen, learned Counsel for the respondent-Bank however, contended that even if the respondent-Bank is not entitled to injunction, temporary or perpetual, under Section 41(b) or under Order 39 of the Code of Civil Procedure, yet the court had inherent power to grant injunction and therefore this Court should not interfere with the decision of the High Court at this stage. Reliance was placed on Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal (1962 Supp 1 SCR 450 : Air 1962 SC 527). Raghubar Dayal, J. speaking for the majority in terms held that the court has in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly recovery certificates. [See Sections 19(2) and 19(22) of the Act]. The power of the Tribunal to grant interim order is attenuated with circumspection. [See Dataware Design Labs. (P) v. SBI (2005) 127 CC. 176 (Ker), Comp Cas at pg. 184] Concededly in the proceeding before the Debts Recovery Tribunal detailed examination; cross-examinations, provisions of the Evidence Act as also application of other provisions of the Code of Civil Procedure like interrogatories, discoveries of documents and admission need not be gone into. Taking recourse to such proceedings would be an exception. Entire focus of the proceedings before the Debts Recovery Tribunal centers round the legally recoverable dues of the bank. 87. Should we adopt the principle of purposive interpretation so as to hold that the DRT would be a Civil Court? 88. We have noticed hereinbefore that civil courts are created under different Acts. They have their own hierarchy. They necessarily are subordinate to the High Court. The appeals from their judgment will lie before a superior court. The High Court is entitled to exercise its power of revision as also superintendence over the said courts. For the aforementioned pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till then it would not be a court subordinate to the High Court. A court while adjudicating a dispute under the Employees State Insurance Act or a Reference Court under the Land Acquisition Act, Election Tribunal or a tribunal acting as a Motor Accidents Claims Tribunal, while exercising revisional jurisdiction from an order passed by the Executive Magistrate under the Code or exercising an appellate power under special statutes like Municipal Acts would still be a court subordinate to the High Court. However, for the aforementioned purpose the Presiding Officer must be holding a Court which would otherwise come within the purview of the hierarchy of the courts. 19. It is, thus, clear that the DRT is not a court subordinate to this court when the latter exercises its ordinary original civil jurisdiction. If that is so, this court cannot, whilst hearing a suit in its ordinary original civil jurisdiction, injunct any bank from prosecuting a proceeding before the DRT. Mr. Dwarkadas, the learned Senior Counsel appearing for the Plaintiff, however, relied upon the case of Oil and Natural Gas Commission (supra) to get over the dicta of Cotton Corporation of India (supra) quoted above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. In this view of the matter, prayer (b) of the Notice of Motion cannot be granted. 22. As regards prayer (a), which seeks temporary injunction restraining the Defendant from relying upon the documents of which cancellation is sought in the present suit, it needs to be noted at the outset that the documents are sought to be relied upon by the Defendant for two purposes. One, for claiming enforcement of an indemnity clause under the Deed of Indemnity read with the SRA, and two, for bringing the goods covered by the Deed of Hypothecation to sale. The salient provisions of these documents, which are relevant for these purposes, are already reproduced above. Their effect prima facie will now be considered. 23. It is claimed by the Plaintiff that the Deed of Indemnity is void ab initio and unenforceable for want of consideration. Without prejudice to this, it is claimed that since the occurrence of the condition upon which the Deed of Indemnity is premised, has become impossible, the Deed is void. The Plaintiff has, in these premises, prayed for cancellation of the Deed. The Deed of Indemnity is supported by a consideration, namely, the Defendant having entered into the SRA w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y given by the Defendant to the Plaintiff on 4 December 2009.) One of the conditions of the transaction documents between the parties was that the receivables under the MRA/SRA shall be secured by an exclusive/first charge in favour of the Defendant by way of hypothecation of all equipment rented/to be rented to Subhiksha. In pursuance of the consideration and of the condition of the transaction documents, as noted above, the Deed of Hypothecation was executed by the Plaintiff as owner of the equipment in favour of the Defendant. There is no merit prima facie in the Plaintiff's contention that there is no consideration for the Deed of Hypothecation. 25. The Deed of Hypothecation prima facie places the Plaintiff in the position of a guarantor for Subhiksha's debt, the discharge of Subhiksha's liability being secured by means of hypothecation and sale of the goods owned by the Plaintiff and rented to Subhiksha. The learned Counsel for the Plaintiff relied upon Section 2(d) of the Contract Act and argued that in the present case, the promisor was Subhiksha, its promise being to pay rentals; and that the Deed of Hypothecation does not disclose that it is executed at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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