2014 (2) TMI 1322 - HC - Indian Laws

Court Denies Injunction to Restrain Defendant; Deed Valid; Plaintiff's Motion Dismissed

Rentworks India Pvt. Ltd. Versus Small Industries Development Bank of India

The court dismissed the Notice of Motion, denying the Plaintiff's request for a temporary injunction to restrain the Defendant from prosecuting its ... Whether, having regard to the Plaintiff's case in the suit herein as noted below, the Defendant should be restrained by a temporary injunction (a) from prosecuting its Original Application pending in the DRT at the date of the present suit against the Plaintiff and (b) from taking any step under and/or relying upon the Deed of Indemnity and the Deed of Hypothecation, of which cancellation is sought by the Plaintiff in the present suit? Held that: - In Nahar Industrial Enterprises case [2009 (7) TMI 1193 - SUPREME COURT], the Supreme Court, relying upon the decision in Indian Bank Vs. ABS Marine Products (P) Ltd. [2006 (4) TMI 472 - SUPREME COURT OF INDIA], held that Sections 17 and 18 of the RDDB Act bar the Civil Court's jurisdiction only in regard to applications by a bank or a financial institution for recovery of its debts. The jurisdiction of Civil Courts is not barred in regard to any suit filed by a borrower or any other person against a bank for any relief. No one has any independent right to approach the DRT without having to wait for the bank or 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. Issues Involved:1. Whether the Defendant should be restrained by a temporary injunction from prosecuting its Original Application in the DRT against the Plaintiff.2. Whether the Defendant should be restrained from taking any step under and/or relying upon the Deed of Indemnity and the Deed of Hypothecation.Detailed Analysis:Issue 1: Temporary Injunction from Prosecuting Original Application in the DRTThe Plaintiff sought a temporary injunction to restrain the Defendant from prosecuting its Original Application (OA) in the Debts Recovery Tribunal (DRT) for recovery of unpaid lease rentals. The Plaintiff argued that the DRT lacks jurisdiction to grant the relief of declaration and cancellation of documents, which is sought in the present suit. The Plaintiff contended that allowing the DRT to proceed would lead to multiplicity of judicial proceedings and conflicting findings. The Plaintiff relied on the Supreme Court's decision in Nahar Industrial Enterprises Ltd. vs. Hong Kong & Shanghai Banking Corporation, which held that the DRT cannot grant declaratory relief or cancel documents.The Defendant argued that the temporary injunction cannot be granted under Order XXXIX Rule 1 or 2 of the Code of Civil Procedure, as there is no inherent power in the court to stay the proceedings of the OA. The Defendant contended that the DRT can accept the Plaintiff's defense that the Deeds invoked by the Defendant are void or inoperative. The Defendant also argued that the DRT is not subordinate to the High Court, and thus, an injunction cannot be issued by the High Court to restrain the Defendant from prosecuting the OA.The court held that the DRT is not a court subordinate to the High Court when the latter exercises its ordinary original civil jurisdiction. Therefore, the High Court cannot injunct the Defendant from prosecuting a proceeding before the DRT. The court also noted that the inherent jurisdiction to restrain a litigant from prosecuting a judicial proceeding is subject to limitations provided by Clauses (a) and (b) of Section 41 of the Specific Relief Act, which were not met in this case. Consequently, prayer (b) of the Notice of Motion was denied.Issue 2: Temporary Injunction from Relying on Deed of Indemnity and Deed of HypothecationThe Plaintiff sought a temporary injunction to restrain the Defendant from relying upon the Deed of Indemnity and the Deed of Hypothecation. The Plaintiff argued that the Deed of Indemnity is void ab initio and unenforceable for want of consideration. The Plaintiff also contended that the Deed of Hypothecation is not supported by consideration since there is no debt owed by the Plaintiff to the Defendant.The court examined the relevant terms of the Master Rental Agreement (MRA), Sale of Receivables Agreement (SRA), Deed of Hypothecation, and Deed of Indemnity. The court found that the Deed of Indemnity is supported by a lawful consideration, namely, the Defendant's agreement under the SRA to acquire the Plaintiff's receivables from Subhiksha. The court held that the Deed of Indemnity is not void at its inception, and the question of its enforcement is a matter for the court to decide in the context of the Defendant's claim.Regarding the Deed of Hypothecation, the court found that it is supported by consideration, as the Defendant agreed to acquire the Plaintiff's receivables for a consideration of Rs. 750 Lakh together with the underlying securities. The court held that the Deed of Hypothecation prima facie places the Plaintiff in the position of a guarantor for Subhiksha's debt, and the Defendant has the right to enforce the hypothecation.The court concluded that the Plaintiff's arguments for cancellation of the Deed of Indemnity and Deed of Hypothecation lack merit. The court emphasized that these grounds can be raised by the Plaintiff before the DRT to resist the Defendant's claims. Consequently, prayer (a) of the Notice of Motion was also denied.Conclusion:The Notice of Motion was dismissed with no order as to costs. The court clarified that the observations made in the order reflect the prima facie view for deciding the Plaintiff's interlocutory application and should not influence the DRT's independent assessment of the merits of the case. The ad-interim order was continued for three weeks from the date of the judgment.