TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 1322
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....nditions set out therein. The MRA inter alia provided that at the end of the lease period the equipment was to be returned to the Plaintiff. The MRA also provided that in the event of default by Subhiksha in payment of rent the Plaintiff had the right to repossess the equipment. During the subsistence of the MRA, the Plaintiff and Defendant entered into a Sale of Receivables Agreement ('SRA') under which the receivables from Subhiksha were assigned to the Defendant together with all legal, equitable and beneficial right, title and interest thereto at or for a discounted price. Under the SRA, in the event of default by Subhiksha, the Defendant was to exercise the rights of the Plaintiff under the MRA or instruct the Plaintiff to take action against Subhiksha. Along with the SRA, the Plaintiff also executed a Deed of Hypothecation, a Deed of Indemnity, a Tax Undertaking and a Power of Attorney in favour of the Defendant to act against Subhiksha in the event of default by the latter in payment of lease rentals. Terms of some of these documents, which are relevant to the present Notice of Motion, will be discussed later. 2. Subhiksha defaulted in payment of lease rentals. The ....
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....acts of the case, this court ought to stay the proceedings in the OA against the Plaintiff. He relies upon the decisions in the cases of Nahar Industrial Enterprises Ltd. vs. Hong Kong & Shanghai Banking Corporation (2009) 8 SCC 646, Oil and Natural Gas Commission vs. Western Company of North America AIR 1987 SC 674, Kumarappan Chettiar vs. Narayanan Chettiar AIR 1917 Madras 492, and Ramaswami Chettiar vs. Sundara Reddiar AIR 1914 Madras 684. 5. Mr. Punalekar, the learned Counsel appearing for the Defendant, submits that the temporary injunction claimed herein, namely, for stay of the OA, cannot be granted under Order XXXIX Rule 1 or 2 of the Code of Civil Procedure. He submits that there is no inherent power in the court either to stay the proceedings of the OA. The learned Counsel submits that there is no injury to be caused to the Plaintiff, if the OA is heard, since all the submissions advanced here can very well be made before the DRT. The learned Counsel submits that the documents executed by the parties would indicate that Subhiksha was the principal borrower of the Defendant and the Plaintiff was the guarantor of Subhiksha's debt. The Defendant had the right to proceed....
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.... end of the term as follows: 17.1 At the conclusion of the Term, you may either return the Equipment or request us under clause 22 to agree to extend the Term or vary the Equipment rented. You must in either case give us written notice of your intention at least 90 Business Days prior to the expiry of this Agreement. If you do not give us written notice within the above-mentioned period you agree that, unless we otherwise notify you in writing, the Term will be automatically extended for a further term of twelve (12) months. (Note: MRA is a document executed between the Plaintiff and Subhiksha. The Plaintiff is designated as 'we' or its grammatical variations, whereas Subhiksha is referred to as 'you' or its variations.) Sale of Receivable Agreement ('SRA'): 'Receivables' and 'Rental Agreement' were defined as follows: Receivables" means, in relation to a Rental Agreement, all the present and future right, title and interest of the Company in the Rental Payments under that Rental Agreement, including, without any limitation whatsoever, the right, title and interest of the Company to receive Rental Payments. "Rental Agreement" mean....
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....Agreement; (c) All amounts realised by the Company (in its capacity as Servicing and Security Agent) on enforcement of the Underlying Security under and pursuant to this Agreement shall be held in trust for and on behalf of SIDBI and shall immediately and without delay be paid to SIDBI; (d) The Company (in its capacity as the Servicing and Security Agent) may without limitation, take and enforce any action whether by way of suit, petition, application including enforcement of the security in any court of law, tribunal or other authority, as also to initiate proceedings against the Renters for repossession of the rented Equipment and to prefer any appeal, revision or any other proceedings in higher court or tribunal against any other, award or decree or procurement by any court, authority or tribunal or any other authority and to withdraw any suit or other legal proceedings as aforesaid and to settle the same whether in or out of court as SIDBI may consider appropriate, engage any lawyer, counsel or any other professional experts in any court of law or before any arbitrator or authority; (e) The Company (in its capacity as the Servicing and Security Agent) warrants....
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....agrees to sign, execute and deliver in favour of the Financer one or more power(s) of attorney as may be required by the Financer to authorize the Financer to do all or any of the aforesaid acts, deeds and things. 5.4 Right of SIDBI. The company may, in the event of default and after written approval of SIDBI, without prejudice to any other of its other rights thereunder. (a) By notice in writing terminate the Rental agreement and the rental of the Equipment created thereby thereupon, or upon the termination of the hire by effluxion of time, as the case may be, the renter shall forthwith deliver the equipment at its own expense to the Company and in accordance with any directions given by the company, and in default thereof the company repossesses and retake the Equipment; (b) Recover liquidated damages equal to the aggregate amount of all future rental payments under Master Rental Agreement; (c) Recover any early repayment or other break costs incurred by SIDBI with respect to a pre-payment of any funding arrangements in connection with the purchase and renting of the equipment; Neither party is permitted to disclose any confidential information about t....
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....r alia, by a letter of Intent dated 27/09/2007/Sale of Receivables Agreement (with the Underlying Securities) dated 01/11/2007 has agreed to acquire from the Company the Rentals receivable under the Master Rental Agreement, for a consideration of Rs. 750 Lakh (to be paid in on one or more trenches ) together with the underlying securities (being the said receivables and the interest, title and ownership resting with the Company on the Equipment rented by the Company to the Renter) both present and future, or any addition or substitution thereafter as covered under the Master Rental Agreement (hereinafter referred to as "the said assignment Transaction"). The said Letter of Intent, Sale of Receivable Agreement and other transaction documents executed/agreed to be executed by the Company in favour of SIDBI are hereinafter together referred to as the 'Transaction Documents'. 5. One of the conditions of the transaction documents is that the Rentals receivable from the Renter under the Master Rental Agreement/Sale of Receivables Agreement together with interest, further interest, liquidated damages, costs, charges, expenses and all other monies as stipulated in the said Transac....
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....of the property of the Renter or the said assets whatsoever; v) if any person firm or company shall take steps towards applying for or obtaining an order for the appointment of a Receiver of any of the property of the Renter or the said assets whatsoever; or vi) if such Receiver is appointed; or vii) if, an order is made or a resolution is passed for the winding up of the Renter or the company or a petition for such winding up is filed or notice of a meeting to pass such resolution is issued; or viii) if the Renter or the Company ceases or threatens to cease to carry on business or conduct the business to the satisfaction of SIDBI; The decision of SIDBI as to whether any such event or default has occurred shall be final and binding on the Company." (Note: The Plaintiff and the Defendant are respectively referred to as 'Company' and 'SIDBI' in the Deed of Hypothecation.) Deed of Indemnity: The relevant recitals and Indemnity clause in the Deed was in the following terms: AND WHEREAS, the Transaction documents, inter alia, provides that in the event of the Renter/Indemnifier desiring foreclosure/termination of restructuring of the MRA or part thereo....
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....endants. In the OA, the Defendant has applied for a Recovery Certificate for a sum of Rs. 8,49,09,848/- together with interest. The said sum included dues of Subhiksha as per the recall notice and interest calculated upto the date of the OA. In the OA, the Defendant has also applied for recovery of the dues by sale of the goods hypothecated under the Deed of Hypothecation. 9. As far as the Plaintiff is concerned the OA raises inter alia the following issues: (i) Whether, having regard to the terms of the SRA and the Deed of Indemnity, the Defendant can recover the receivables under the MRA from the Plaintiff?; and (ii) Whether the Defendant can have recourse to sale of hypothecated goods towards recovery of the receivables? 10. It is the Plaintiff's case in the present suit that the Defendant cannot have any recourse to the Plaintiff at all under the SRA for recovery of the receivables. It is also the Plaintiff's case that the Plaintiff retains the ownership of the equipment rented by Subhiksha and this equipment cannot be brought to sale by the Defendant for recovery of the receivables. The Plaintiff claims that both the Deed of Indemnity and the Deed of Hy....
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.... (at p. 219 of AIR) thus: The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purposes mentioned in s. 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature. These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in s. 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the Legislature. This restriction, for practical purposes, on the exercise of those powers is not because these powers are controlled by the provisions of the Code but because it should be presumed that the procedure specifically provided by the Legislature for orders in certain circumstances is dictated by the interests of justice. 12. The question then is whether such a temporary injunction should be granted i....
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....y 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. This much is clear from the law laid down by the Supreme Court in Nahar Industrial Enterprises Case (supra). 14. Nahar Industrial Enterprises case does not, however, support the Plaintiff's case for the injunction asked for. According to that case, this Court has jurisdiction to adjudicate the Plaintiff's claim in this suit, but the question is whether the DRT should be asked to stay its hands pending such adjudication by this Court. That the DRT has no jurisdiction to order cancellation of the documents relied upon by the Defendant in its OA is no ground for seeking to stay its hands. After all, it can very well consider all the grounds which can be urged in support of the case for cancellation and accept the defence of the Plaintiff to the OA. 15. But then, submits the learned Counsel ....
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....on or violation of his rights is injuncted from approaching the court set up to grant relief by an action brought by the opposite side against whom he has a claim and which he wanted to enforce through court, he would have first to defend the action establishing that he has a just claim and he cannot be restrained from approaching the court to obtain relief. A person having a legal right and complains of its violation or infringement, can approach the court and seek relief. When such person is injuncted from approaching the court, he has to vindicate the right and then when injunction is vacated, he has to approach the court for relief. In other words, he would have to go through the gamut over again: When defending against a claim of injunction the person vindicates the claim and right to enforce the same. If successful he does not get relief but a door to court which was bolted in his face is opened. Why should he be exposed to multiplicity of proceedings? In order to avoid such a situation the Legislature enacted Section 41(b) and statutorily provided that an injunction cannot be granted to restrain any person from instituting or prosecuting any proceeding in a court not subordi....
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....provision. 17. Prima facie it may well be accepted that there is a case of multiplicity per se if the two proceedings, namely, the present suit and the OA, are allowed to continue. But the question is, whether the DRT is a court subordinate to this Court whilst this Court exercises its ordinary original civil jurisdiction to decide a civil suit. 18. The Key to the answer of that question is to be found in the judgment of Nahar Industrial Enterprises (supra). In that case, the Supreme Court was considering the position of the DRT vis-a-vis the High Court. The court held that the DRT was neither a civil court nor a court subordinate to the High Court exercising its ordinary civil jurisdiction, though the DRT would be a Tribunal subordinate to the High Court exercising its writ jurisdiction under Article 226 or Supervisory jurisdiction under Article 227 of the Constitution of India. The Supreme Court observed as follows: 85. If the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it without having to wait for the Bank or Financial Institution to approach it first. The continuance of its counter-claim is enti....
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....keeping in view the purpose and object thereof thought it fit to create separate tribunal so as to enable the banks and the financial institutions to recover the debts expeditiously where for the provisions contained in the Code of Civil Procedure as also the Evidence Act need not necessarily be resorted to, in our opinion, by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon it so as to enable this Court to transfer the case from the civil court to a tribunal. After holding that the DRT was not a civil court, the Supreme Court considered the question whether the DRT was subordinate to the High Court, in the following words: 92. We have held that the Tribunals are neither civil courts nor courts subordinate to the High Court. The High Court ordinarily can be approached in exercise of its writ jurisdiction under Article 226 or its jurisdiction under Article 227 of the Constitution of India. The High Court exercises such jurisdiction not only over the courts but also over the Tribunals. The Appellate Tribunals have been constituted for determining the appeals from judgments and orders of the Tribunal. 99. The Court would be su....
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....r case the Court in this country may restrain person who has actually recovered judgment in a foreign Court from proceeding to enforce that judgment. The jurisdiction is discretionary and the Court will give credit to foreign Courts for doing justice in their own jurisdiction. This case does not in any way help the Plaintiff in our case. Oil and Natural Gas Commission was decided on a completely different principle as noted above. Besides, in that case, the Supreme Court did not go by the provisions of Section 41(b) or follow the principle enunciated in Cotton Corporation of India (supra), holding as follows: This provision, in our opinion, will be attracted only in a fact-situation where an injunction is sought to restrain a party from instituting or prosecuting any action in a Court in India which is either of co-ordinate jurisdiction or is higher to the Court from which the injunction is sought in the hierarchy of Courts in India. There is nothing in Cotton Corporation's case which supports the proposition that the High Court has no jurisdiction to grant an injunction or a restraint order in exercise of its inherent powers in a situation like the one in the present case. ....
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....y event, which may or may not happen. There is no question of the event being impossible and therefore, the contract of indemnity becoming void. Upon the MRA being terminated by the Defendant, whether the Defendant can enforce the indemnity against the Plaintiff, is a question of performance of the Deed of Indemnity. That question can be considered by the court which has been asked to enforce the indemnity. It is not for this Court to grant an interim restraint on such enforcement on the ground that the document, namely, the Deed of Indemnity has become void. 24. As far as the Defendant's claim to the goods being the subject matter of the MRA is concerned, the Deed of Hypothecation, under which such claim is asserted, is supported by a consideration, namely, the Defendant's agreement under the SRA to acquire from the Plaintiff the rentals receivable under the MRA for a consideration of Rs. 750 Lakh together with the underlying securities. The underlying securities, under the SRA, include the equipment given on hire to the Renter, namely, Subhiksha, under the MRA, the receivables of which were or would be, lawfully due to the Plaintiff from the Renter. Under the SRA, the Pl....