TaxTMI 
TaxTMI 
2014 (7) TMI 1375
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.... Kingdom; (ii) that during the discussions in this respect, the defendant Bank advised the plaintiff to enter into a 5-year Foreign Exchange Leveraged Derivative Transaction with the defendant Bank, assuring the plaintiff that this was a completely risk-free transaction; (iii) on 8th January, 2008 the defendant Bank made the plaintiff sign "ISDA 2000 Master Agreement" containing general terms and conditions to be signed by every customer entering into the suggested Leveraged Derivative Transactions with the defendant Bank and further representing that the specific terms of the Leveraged Derivative Transaction would be contained in an agreement to be signed by the parties later; on the same day i.e. 8th January, 2008 the defendant Bank also sanctioned a short term credit facility to the plaintiff to the tune of US Dollars One Million for a period of 180 days; the said credit facility was not linked to the Leveraged Derivative Transactions in any manner whatsoever; the two were separate transactions, independent of each other; (iv) on 14th January, 2008 the defendant Bank made the plaintiff sign an "agreement letter" confirming the terms and conditions of L....
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....n that if the defendant Bank sought to enforce its rights under the agreement(s), the plaintiff can approach the Court. 4. The defendant Bank has contested the suit, by filing a written statement, on the grounds:- (a) that the plaintiff was engaged in the business of exports and had considerable export receivables in foreign currency including US Dollars; (b) that the plaintiff with a view to hedge its US Dollars receivables approached the defendant Bank for various Leveraged Derivative Transactions attached thereto; (c) that besides the ISDA 2002 Master Agreement dated 8th January, 2008 the plaintiff also executed a generic risk disclosure statement for swaps and Derivatives, a declaration acknowledging awareness of the contents of regulations issued by Reserve Bank of India (RBI) with respect to foreign exchange forward contracts / derivative transactions and of compliance therewith and a Authority and Declaration-cum-indemnity for foreign exchange forward and derivative contract; (d) that the ISDA 2002 Master Agreement governed all subsequent transactions between the parties; (e) that the plaintiff acted under the aforesaid Agreeme....
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.... it was enquired from the counsel for the plaintiff whether the defendant Bank had initiated any proceedings for recovery of the amounts claimed by the defendant Bank to be due to it from the plaintiff. The counsel for the plaintiff informed that the defendant Bank had initiated proceedings against the plaintiff before the Debt Recovery Tribunal (DRT) and that the plaintiff was contesting the said proceedings also inter alia on the same grounds as taken in the present suit. It was further informed that the plaintiff had also applied to the DRT for stay of proceedings before the DRT owing to the pendency of the present suit but which application had been dismissed; that the plaintiff had preferred an appeal to the Debt Recovery Appellate Tribunal (DRAT) against the said order and which appeal was pending consideration and vide interim order in which appeal the passing of the final order in the recovery proceedings initiated by the defendant Bank had been stayed. 8. In view of the aforesaid, it was enquired from the counsel for the plaintiff that if the same issue had been raised in the proceedings before the DRT and was capable of adjudication by the DRT, how the jurisdiction of ....
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....to prefer an appeal before a higher Court in terms of Sections 96 and 100 of the Code of Civil Procedure, 1908. C. Indian Bank Vs. ABS Marine Products (P) Ltd. (2006) 5 SCC 72 to contend that an independent suit of a defendant in the bank‟s application before the DRT could be deemed to be a counterclaim and can be transferred to the DRT only when the subject matter of the suit of the bank and the suit of the defendant against the bank is inextricably connected in the sense that the decision in one would affect the decision in the other and if both the parties agree to the independent suit being considered as a counterclaim so that the same could be heard and disposed of by the Tribunal. 14. The counsel for the plaintiff also argued that though the question for adjudication in this suit as well as in the recovery proceedings filed by the defendant Bank against the plaintiff before the DRT is the same but the finding returned thereon by this Court, being a Civil Court, will have precedence. 15. It is also contended by the counsel for the plaintiff that the finding on the plea of fraud can be returned by this Court only, being the Civil Court and not by the DRT. 1....
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....for adjudication; XI. reliance is placed on Official Liquidator, U.P. and Uttarakhand Vs. Allahabad Bank AIR 2013 SC 1823 laying down the purpose for which the DRT Act was enacted and it is contended that entertaining suits as the present one would be counterproductive thereto; and, XII. the scope of Section 17 of the DRT Act was not subject matter of Nahar. 17. The counsel for the plaintiff in rejoinder has again referred to Nahar to contend that the Supreme Court was aware, (a) of the possibility of a debtor filing a pre-emptive suit and obtaining orders of injunction but held that the same by itself would not be a ground to oust the jurisdiction of the Civil Court in the teeth of Section 9 of the CPC; (b) as well as the possibility of the disposal of the Civil Suit taking a long time, but held that the remedy of summary and speedy trial itself would not be sufficient to oust the jurisdiction of the Civil Court and that had the intention of the Parliament been so, it could have expressly said so. It is further contended that the present suit was filed before the initiation of the proceedings by the defendant Bank before the DRT and thus on the date of institu....
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....ions (4) and (5) of Section 19 would not have provided for issuance of a notice to show cause to such a defendant or for filing of a written statement / defence by such defendant and passing of an order on the application for recovery only thereafter. Were the DRT to have jurisdiction, power and authority to allow or disallow an application by a bank / financial institution for recovery of debt, by considering only the claim of the bank / financial institution and were to not have jurisdiction, power and authority to rule on the merits of the defence of the defendant to such an application, the provisions aforesaid of Section 19 of the Act would not have provided for issuance of notice and opportunity to such defendant to show cause and of passing of the final order on such application of bank / financial institution only after giving opportunity of hearing not only to the bank / financial institution but also to the defendant to such an application of the bank or financial institution. The use in Section 17 (1) of the Act of the words "decide applications from the banks and financial institutions for recovery of debts due" entails, in the light of the aforesaid provisions of Secti....
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....precedent as the same neither contains a discussion of facts or law nor the reasons which prevailed with the Court for holding the suit to be maintainable. I therefore do not find myself persuaded by the said order to either follow the view taken therein or to refer the matter to a larger Bench. 24. As far as Nahar is concerned, the question therein as set-out in para 2 of the judgment itself was whether the High Court or the Supreme Court has the power to transfer a suit pending in a Civil Court situated in one State to a DRT situated in another State. However from para 7 of the judgment it is found that the suit before the Civil Court in that case also was for declaration that the Foreign Exchange Derivative Contracts entered into with the bank were illegal and violative of Foreign Exchange Management Act, 1999 as well as the circulars and guidelines issued by the RBI and thus against public policy and for permanent injunction. The High Court, in that case, on an application by the bank in exercise of powers under Section 24 of the CPC, transferred the said civil suit to the DRT before which the bank had initiated recovery proceedings on the basis of the same agreements / tran....
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....to pay any amount to the bank / financial institution. If it were to be thus held that both, the Civil Court as well as the DRT would have jurisdiction to decide whether a person against whom a bank / financial institution has a claim as a debtor, is in fact a debtor or not and / or is liable to pay the amount claimed by the bank or not, the possibility of a conflicting finding being rendered by the Civil Court and the DRT cannot be ruled out and in which case the finding of the Civil Court will prevail over the finding of the DRT as has been held at least by this Court in Cofex Exports Ltd. vs Canara Bank AIR 1997 Delhi 355. I have also held so in Sunayana Malhotra Vs. ICICI Bank 163 (2009) DLT 602 though in the context of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 28. I have wondered whether such an interpretation would not set at naught the very reason for the enactment of the DRT Act and establishment of the tribunal and whether not the same would lead to a waste of effort on the part of DRT in adjudication, if the same were not binding. The hard realities of life cannot be overlooked/ignored, where ev....
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.... be barred. 32. Applying the aforesaid principles, the jurisdiction of this Court to entertain this suit has to be necessarily held to be barred. It matters not whether on the date of institution of this suit the bank had initiated any proceedings before the DRT or not and whether not any such proceedings are pending or not. As long as the declaration claimed in the suit is the same as the defence which could be raised by the plaintiff to a claim by the defendant Bank before the DRT, the jurisdiction of the Civil Court would be barred. The consequential relief of permanent injunction against recovery would also be thus barred. 33. Notice in this regard may also be taken of Section 34 of the SARFAESI Act which prohibits a Civil Court from granting any injunction in respect of any action "taken or to be taken" in pursuance to any power conferred by or under, not only the SARFAESI Act, but also the DRT Act. Thus, the grant by this Court, of the relief claimed in suit of permanent injunction restraining the defendant Bank from acting upon or seeking to enforce any transaction under the agreements qua which the relief of declaration as void is claimed, is prohibited. The defendant....