TaxTMI 
TaxTMI 
2021 (5) TMI 1097
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....der dated 28th August 2020 passed by the learned Judge of the Commercial Court at Bengaluru. By the said judgment and order, I.A.Nos.I and II filed by the plaintiff Bank in Commercial Suit being Commercial Original Suit No.1 of 2020 have been partly allowed. The appeal takes an exception to that part of the impugned judgment and order by which a part of the relief claimed on I.A.Nos.I and II was rejected. Commercial Appeal Nos.27 and 28 of 2020 have been preferred by the appellants therein who are the original defendants for challenging the same judgment and order. For the sake of convenience, the parties are hereafter referred by their status before the Trial Court, that is to say, plaintiff and defendants 2. The first defendant is a businessman who is stated to have multiple businesses spread over the world including India, United Arab Emirates, United Kingdom and United States of America etc. The second defendant is the wife of the first defendant and both the defendants are the residents of City of Bengaluru. It is pleaded in the plaint that the first defendant controls various companies/entities, having their branches at Abu Dhabi, Oman and Mumbai etc. It is stated in the p....
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....ess and are under investigation by multiple Authorities including the agencies abroad. The details of the proceedings taken against the first defendant have been set out in the plaint. 6. Apart from the personal guarantees which are referred above, reliance is placed on Minutes of a Meeting held on 18th of March 2020 in the plaintiff's office at Bengaluru when the first defendant acknowledged the liability to pay to the plaintiff and agreed to provide an "all-out comfort" and secure his liability by providing several immovable properties available to him. Accordingly, he executed a letter of undertaking with Negative Lien and creation of mortgage dated 21st April, 2020 (for short "the Negative Lien Letter") in respect of his and second defendant's sixteen immovable properties situated in Bengaluru and Mangaluru etc., along with other assets in favour of the plaintiff. The detailed description of the said properties has been incorporated in paragraph 23 of the plaint. The second defendant also joined the first defendant in execution of the Negative Lien Letter which has been registered with the Central Registry of Securitization Asset Reconstruction and Security Interest of India....
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....ts, or any person acting under or through him, from, in any manner whatsoever, directly or indirectly, alienating, selling, transferring, encumbering, dissipating, mortgaging, pledging, creating a lien, creating any third-party rights or otherwise dealing with any of his assets or properties, movable or immovable, tangible or intangible, including without limitation, shares, mutual funds, monies deposited in bank accounts and fixed deposits." 8. The payer made in I.A.No.I filed by the plaintiff before the Commercial Court was for following interim relief; "For the reasons sworn to in the accompanying affidavit, it is most humbly prayed that this Hon'ble Court may be pleased to pass an order of temporary injunction restraining Defendant No.1, his agents, or any person acting under or through him, from, in any manner whatsoever, directly or indirectly, alienating, selling, transferring, encumbering, dissipating, mortgaging, pledging, creating a lien, creating any third party rights or otherwise dealing with any of his assets or properties, movable or immovable, tangible or intangible, including without limitation, the immovable properties specified in the Schedule to the ....
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....here is no schedule incorporated in the pleadings and the details of the shares, mutual funds, fixed deposits held in the name of the defendants were not mentioned. He submitted that the Rule 11 of Karnataka Civil Rules of Practice could not have come in the way of considering the prayer in both the applications. He submitted that the learned Judge of the Commercial Court has appreciated that a sum of Rs. 1912 Crores of public exchequer was at stake. He submitted that the first defendant had refused to comply with his obligations under the guarantees and the Negative Lien Letter. He urged that even the second defendant did not comply with the Negative Lien Letter by executing a mortgage. He submitted that the learned Trial Judge ignored that a separate interlocutory application was filed by the plaintiff directing the first defendant to disclose his assets and properties. He submitted that even after recording a prima facie finding that the defendants have not complied with their undertakings under the Negative Lien Letter, the learned Trial Judge has rejected a part of the prayers for interim relief. 11. The learned Senior Counsel for the plaintiff has relied upon the decision ....
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....mercial Courts Act, 2005. He submitted that the Commercial Court has exercised discretionary jurisdiction by denying a part of the relief for cogent reasons. He relied upon various decisions including the decision of the Bombay High Court in the case of Yaswantrao Martandrao Mukane deceased through legal representatives Digvijaysingrao and others v Khushal R. Bhatia [1986 SCC OnLine Bom 10]. He also relied upon a decision of the Apex Court in the case of Seema Arshad Zaheer and Others v Municipal Corporation of Greater Mumbai and Others [(2006) 5 SCC 282] Relying upon the said decision, he submitted that this Court being an appellate Court should not ordinarily interfere with the discretion exercised by the Trial Court in the matter of grant of temporary injunction. CONSIDERATION OF SUBMISSIONS: 14. We have given careful consideration to the submissions. Firstly, it is necessary to refer the decision of the Court of Appeal in the case of Mareva Compania (supra). The principles governing grant of an injunction which subsequently became known as "Mareva injunction" have been laid down in the said decision by Lord Denning MR. The relevant portion of the said judgment reads thus:....
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.... to restrain the defendant from removing assets from the jurisdiction pending the trial of action whenever it was just and convenient to do so. This power was originally exercised when the defendant was out of the jurisdiction but has subsequently been extended so as to be available against a defendant even though he is based within the jurisdiction. This extension of power has its due statutory recognition in the Supreme Court Act, 1981 and in particular, reference may be made to section 37." (Underline supplied) 16. We may also make a useful reference to a decision of Bombay High Court in the case of Liverpool and London Steamship Protection and Indemnity Association Limited vs. M.T. Symphony and Others [2003 SCC OnLine Bom 73] In paragraph 5, the High Court held thus: 5. We then come to the second contention as to whether an action in rem can be maintained only for security. Again this issue was in issue before another appellate bench of this court in the case of Islamic Republic of Iran v. M.V. Mehrab, 2002 (4) Mh.L.J. 584 : AIR 2002 Bom. 517. The learned appellate bench has taken a view that action only for security is maintainable. Apart from that there is clea....
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....rty is to be retained or dealt with so as to ensure that the property will be available to satisfy any judgement in the action. It may be noted that to obtain a Mareva injunction there must first be an action properly commenced within jurisdiction of the court. Courts have extended their jurisdiction also to action in rem to restrain the property from leaving jurisdiction. See The Rena K., (1979) QB 377. The following paragraph is relevant: "The Mareva injunction is granted in a case where a plaintiff has brought an action here against a foreign defendant, and the latter has moneys or chattels within the jurisdiction which, if he were not prevented from doing so, he would be free to remove out of the jurisdiction before the plaintiff could bring the action to trial, and, if successful, obtain and enforce a judgment against him. The injunction takes the form of an order restraining the defendant, by himself, his servants or agents, from selling, disposing of or otherwise dealing with such moneys or chattels or from removing them out of the jurisdiction, usually until further order. Its purpose is to ensure that, if the plaintiff succeeds in the action, there will b....
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....in the suit. 22. To understand the true implication of Order 39 Rule 1(b) of the Civil Procedure Code, it will be profitable for us to set out the said prevision hereunder which runs as follows:- "Where in any suit it is proved by affidavit or otherwise that the defendant threatens, or intends to remove or dispose of his property with a view to defraud his creditor, the Court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property or dispossessing of the plaintiff or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit as the Court thinks fit, until the disposal of the suit or until further orders". 23. If we consider the provision contained in Order 39 Rule 1 of Civil Procedure Code as a whole which is the source of grant of temporary injunction then it appears to us that though passing of an order of temporary injunction is respect of non-suit property is not permissible under order 39 Rule 1(a) and 1(c) of the Civil Procedure Code but the Court's power to p....
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....te is raised before the Court which the Court is required to resolve ultimately in the suit. A prima facie case is distinguishable from a full-proof case. When the Court finds that a prima facie case is made out by the plaintiff then the Court passes an order of injunction so that the ultimate relief which is claimed by the plaintiff in this suit is not frustrated and the decree which may be passed in the suit will remain unexecutable." (Underline supplied) 20. The learned counsel appearing for the defendants relied upon the well settled principle that interim relief can be granted only in the aid of final relief and in this case, there is no relief prayed for recovery of money. He relied upon well known decision of the Apex Court on this aspect in the case of Cotton Corporation of India Limited v. United Industrial Bank Limited and Others [(1983) 4 SCC 625] He also relied upon a decision of the Apex Court in the case of Haryana Financial Corporation v. Gurcharan Singh and Another [(2014) 16 SCC 722] In the said decision, the Apex Court held that a mere undertaking to create a mortgage is not sufficient to create an interest in any immoveable property. The Apex Court observed....
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....k will have a lien on all securities belonging to him. In the plaint, reliance is placed on a personal guarantee executed by the first defendant in favour of the plaintiff on 14th September, 2017. Clauses No.4.2.1 and 4.2.2 are material for reconsideration which read thus: "4.2.1 The Guarantor has carefully reviewed each of the undertakings of the Borrower under the Facility Agreement (the Borrower Undertakings) and the Guarantor hereby undertakes to comply in all respects, throughout the Security period, with all of the Borrower Undertakings, which relate to them as if such Borrower Undertakings were given by them hereunder. 4.2.2 The Guarantor hereby agrees that the Bank has an absolute right to call upon the Guarantor to declare on oath the details of all his/her/its assets and when called upon, the Guarantor will unconditionally, within a period of three (3) days, declare on oath, the details of all his/her/its assets (whether moveable or immoveable, whether tangible or intangible), whether held solely or jointly, and, whether constitutes Security for this Guarantee or not, in a form and manner satisfactory to the Bank. The Guarantor agrees and undertakes that....
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.... Shri Shetty has indicated to offer the immovable properties situated at various places viz Assam Tea Company; Property at Mukka, Suratkal Taluq, Mangalore; Property at B R Meadows, Ajjarkad, Udupi; Property at Udeshi Development, Bangalore; 03 open plots situated near Vijaya Cooperative Society, Vijaya Bank Layout, Bilekahalli, Bangalore, to secure the aggregate exposure of the Group. In response, Shri Murali Ramaswamy suggested that full details/photo copies of the documents of above mentioned properties be handed over to a representative of the Bank to complete required formalities to enable the Bank to create a charge." (Underline supplied) 26. Now, we come to the Negative Lien Letter. This letter is signed by both the defendants. In the said letter, the defendants have stated thus: "Now, I/ we the Promoter/Guarantors in the account is/are offering the additional immoveable Assets situated in State of Karnataka - India, particularly mentioned/specified in the Schedule I hereunder, as security/ and purpose to create Negative Lien Charge of the Bank over the said Assets. It is agreed by me/ us that I/we shall convert the Negative Lien Charge of the Bank over the sa....
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.... must refer to the correspondence exchanged between the parties before filing the suit. The plaintiff through his Advocate issued a notice dated 3rd May 2020 to the first defendant. The notice refers to all the documents executed by the defendants including the Negative Lien Letter executed by the defendants. By the said notice, the first defendant was called upon to provide list of his assets (whether movable or immovable) across the world along with all documents of ownership, right, title and interest and was called upon solemnly undertake that he will not encumber or dispose of the said assets without prior approval of the plaintiff. The first defendant was called upon to hand over original title deeds of sixteen immovable properties specified in the schedule to the Negative Lien Letter and execute a mortgage by deposit of title deeds in favour of the plaintiff. The first respondent was called upon to secure outstanding debt equivalent to Indian Rs. 1,742,04,53,503.56 (Rupees One Thousand Seven Hundred Forty Two Crore Four Lakh Fifty Three Thousand Five Hundred and Three Rupees and Paise Fifty Six only) as on 22nd April 2020. A similar notice was sent by the same Advocate for t....
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.... of either parties. It is contended that as the loan has been disbursed and is repayable in United Arab Emirates, all the rights and obligations arise at United Arab Emirates. It was contended that the said letter is not enforceable. Further it was contended that the letter has not been signed by the principal barrower. It is further contended that on the said letter which was a blank document, the signatures of the defendants were fraudulently obtained. It is contended that in the lockdown, the defendants have been forced to sign the said letter. There are the usual defences of borrowers of a Bank which are taken by way of an afterthought. In the statement of objections, the defendants have not denied the meeting held on 18th March 2020. About the advance of various amounts by the plaintiff to the first defendant and other entities/companies controlled by him, there is a general denial. However, in paragraph 8, the first defendant has accepted that the amount as pleaded by the plaintiff was advanced to him. 31. Now, coming to the impugned order, in paragraph No.25, the learned Trial Judge has held that a prima facie case has been established by the plaintiff. He has also dealt ....
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.... and on hearing both the sides, it is pertinent to note that huge money has to be recovered by the plaintiff bank from the principal borrower and also 1st defendant as the guarantor with respect to the said loan transactions and if the petition schedule properties were to be alienated by the defendants, the plaintiff bank would be put to hardship and thus there is balance of convenience lies in favour of the plaintiff bank in granting such interim relief as prayed in both the applications till disposal of suit. Under these circumstances, I answer points No.2 and 3 in favour of the plaintiff bank." 32. We have already quoted prayers made in I.A.No.I against the first defendant. Similar prayer has been made in I.A.No.II against the second defendant except for the fact that an injunction against her was confined to item Nos 14 and 15 in the Schedule in the plaint. The temporary injunction was prayed for in respect of item Nos.1 to 13 and 16 (owned by the first defendant) in the plaint schedule in I.A.No.I and item Nos.14 and 15 (owned by the second defendant) in the plaint schedule in I.A.No.II. This part of the injunction has been granted under the impugned order in respect of ite....
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.... be used to defeat the substantive rights. Though the defendants were called upon to do so by a notice, they refused to furnish any details of their other properties. Therefore, the description of the said properties could not be incorporated in the plaint. That was no ground to deny the relief. The first defendant cannot be allowed to take an advantage of his wrong by relying upon the procedural Rules. 33. The first prayer in the plaint is for specific performance of the terms of the Negative Lien Letter. Prayer (3) is for permanent injunction restraining the defendants from alienating, selling or transferring the sixteen properties mentioned in the schedule to the Negative Lien Letter. Prayer (5) which we have quoted above, seeks injunction restraining the defendants from alienating or creating third party rights in respect of the assets of the first defendant, his properties, movable or immovable, shares, mutual funds, money deposited in the bank accounts and fixed deposits are concerned. As noted earlier, the first defendant has agreed under the guarantee documents not to alienate, transfer or sell any of his properties and investments without prior consent of the plaintiff ....
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.... "12A. Pre-Institution Mediation and Settlement.- (1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of preinstitution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government." Considering the nature of the present suit, it does contemplate urgent interim relief and therefore, Sub Section 1 of Section 12A is not at all applicable in the present case. 39. The submission of the learned senior counsel appearing for the defendants was that by relying upon examples of certain businessmen who have fled abroad with a view to avoid their liabilities, defendants are being targeted. He submitted that even look out notices have been issued against them. All this is irrelevant to decide the issues involved in the appeal. 40. The first defendant by his reply dated 6th May 2020 virtually declined to comply with the requisitions in the legal notice sent on 3rd May 2020. Prima facie, it is the obligation of the first defendant to disclose the details of all other movable and immovable properties held by him. He is under an ....