DRT injunction limits and enforceability of indemnity and hypothecation deeds rejected in receivables dispute.

A High Court declined to restrain a defendant from prosecuting its DRT original application, holding that the DRT is not subordinate to the High Court in its ordinary original civil jurisdiction and that an injunction against such proceedings was barred by Section 41 of the Specific Relief Act. It also refused to restrain reliance on the Deed of Indemnity and Deed of Hypothecation, finding both instruments were supported by lawful consideration under the underlying receivables transaction and were not void ab initio. The court held that objections to enforceability could be raised before the DRT in answer to the defendant's claim. The notice of motion was dismissed.

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Issues: (i) Whether a temporary injunction could be granted to restrain the defendant from prosecuting the pending proceeding before the Debts Recovery Tribunal. (ii) Whether the defendant could be restrained from relying upon the deed of indemnity and deed of hypothecation pending the suit for their cancellation.

Issue (i): Whether a temporary injunction could be granted to restrain the defendant from prosecuting the pending proceeding before the Debts Recovery Tribunal.

Analysis: The relief sought did not fall within the ordinary ambit of Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, but the court's inherent power under Section 151 could be invoked only subject to statutory limits. Section 41(b) of the Specific Relief Act bars injunctions restraining proceedings in a court not subordinate to the court granting injunction, except in narrowly confined circumstances to prevent multiplicity of proceedings. The Debts Recovery Tribunal was held not to be subordinate to the High Court exercising ordinary original civil jurisdiction. The tribunal could consider the plaintiff's defences to enforcement, even if it could not itself grant declaratory or cancellation reliefs.

Conclusion: The injunction to restrain prosecution of the proceeding before the Debts Recovery Tribunal was not permissible and the relief was rightly refused.

Issue (ii): Whether the defendant could be restrained from relying upon the deed of indemnity and deed of hypothecation pending the suit for their cancellation.

Analysis: The deed of indemnity was found, prima facie, to be supported by consideration arising from the sale of receivables arrangement, and there was no basis at the interlocutory stage to treat it as void ab initio or rendered void by impossibility. The deed of hypothecation was likewise found, prima facie, to be supported by consideration under the overall transaction structure, including assignment of receivables and the security arrangement. The enforceability and true effect of the transaction documents were held to be matters for the tribunal seized of the recovery claim, and the plaintiff could raise all objections there.

Conclusion: No interim restraint could be granted against reliance on the transaction documents, and the requested protection was refused.

Final Conclusion: The notice of motion failed in entirety and was dismissed, leaving the parties to work out their rights and defences in the appropriate proceedings.

Ratio Decidendi: An injunction cannot be granted to restrain prosecution of a proceeding in a forum not subordinate to the court, and interlocutory restraint on reliance upon transaction documents will not lie where the documents are prima facie supported by consideration and their enforceability can be adjudicated in the pending recovery proceeding.

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