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2014 Supreme(Bom) 462
High Court of Judicature at Bombay
S.C. GUPTE, J.
Rentworks India Pvt. Ltd.
Versus
Small Industries Development Bank of India
Notice of Motion No. 2010 of 2011 in Suit No.647 of 2011
Decided On: 21-02-2014
For the Plaintiff:Janak Dwarkadas Sr. Counsel with Astad Randeria, Girish Dave, Hussain Somji i/b Dave & Girish & Co., Advocates.
For the Defendants:Sanjay Punalekar, Madhur Rai i/b PRS Legal, Advocates.
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, whilst hearing a suit in its ordinary original civil jurisdiction, injunct any bank from prosecuting a proceeding before the DRT.
Headnote:
NOTICE OF MOTION - SUIT FOR CANCELLATION OF DEED OF INDEMNITY, DEED OF HYPOTHECATION AND TAX UNDERTAKING - RESTRAINING DEFENDANT FROM PROSECUTING OA PENDING IN DRT - TEMPORARY INJUNCTION - JURISDICTION OF COURT - INHERENT POWER OF COURT - MULTIPLICITY OF PROCEEDINGS - SECTION 41 OF SPECIFIC RELIEF ACT - SUBORDINATE COURT - SECTION 151 OF CODE OF CIVIL PROCEDURE - SECTION 17 AND 18 OF RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT - SECTION 10 OF CODE OF CIVIL PROCEDURE - SECTION 2(D) OF CONTRACT ACT - DEBTS RECOVERY TRIBUNAL ACT - WHETHER TEMPORARY INJUNCTION CAN BE GRANTED - WHETHER DRT IS SUBORDINATE TO THIS COURT - WHETHER THE DOCUMENTS ARE VOID OR VOIDABLE - WHETHER THE PLAINTIFF CAN RESIST ANY RECOURSE TO IT BY THE DEFENDANT IN ENFORCEMENT OF THESE DOCUMENTS BEFORE THE DRT.
Fact of the Case:
Plaintiff provided equipment on lease to Subhiksha Trading Services Pvt. Ltd. (Subhiksha) under a Master Rental Agreement (MRA) for a lease rent and on terms and conditions set out therein. 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. 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. Subhiksha defaulted in payment of lease rentals. The Defendant sent notices to Subhiksha and the Plaintiff demanding payment of unpaid lease rentals. The Defendant filed an Original Application (being O.A. No. 101 of 2011) in the Debts Recovery Tribunal (OA) against Subhiksha and the Plaintiff for recovery of unpaid lease rentals amounting to approximately Rs.8,49,09,848/- together with interest. In February 2011, the Plaintiff filed the present Suit praying inter alia for cancellation of the Deed of Indemnity, Deed of Hypothecation and Tax Undertaking. The present Notice of Motion is taken out in the suit for restraining the Defendant from (i) relying on the documents of which cancellation in sought in the suit and (ii) prosecuting the OA against the Plaintiff.
Finding of the Court:
1. The court held that the DRT is not a court subordinate to this court when the latter exercises its ordinary original civil jurisdiction. 2. The court held that the Deed of Indemnity is supported by a consideration and is not void abinitio. 3. The court held that the Deed of Hypothecation is supported by a consideration and is not void abinitio. 4. The court held that the Plaintiff can resist any recourse to it by the Defendant in enforcement of these documents before the DRT.
Issues: 1. Whether a temporary injunction can be granted to restrain the Defendant from prosecuting the OA pending in the DRT. 2. Whether the DRT is subordinate to this Court. 3. Whether the documents are void or voidable.
Ratio Decidendi: 1. The court held that the DRT is not a court subordinate to this court when the latter exercises its ordinary original civil jurisdiction. Therefore, this court cannot, whilst hearing a suit in its ordinary original civil jurisdiction, injunct any bank from prosecuting a proceeding before the DRT. 2. The court held that the Deed of Indemnity is supported by a consideration and is not void abinitio. Therefore, the Plaintiff's prayer for a temporary injunction restraining the Defendant from relying upon the Deed of Indemnity cannot be granted. 3. The court held that the Deed of Hypothecation is supported by a consideration and is not void abinitio. Therefore, the Plaintiff's prayer for a temporary injunction restraining the Defendant from relying upon the Deed of Hypothecation cannot be granted.
Final Decision: The Notice of Motion is dismissed with no order as to costs.
1. The question in the present Notice of Motion is, 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.
2. The Plaintiff provided some equipment on lease to Subhiksha Trading Services Pvt. Ltd. (‘Subhiksha’) under a Master Rental Agreement (‘MRA’) for a lease rent and on terms and conditions 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.
3. Subhiksha defaulted in payment of lease rentals. The Defendant sent notices to Subhiksha and the Plaintiff demanding payment of unpaid lease rentals. The Defendant filed an Original Application (being O.A. No. 101 of 2011) in the Debts Recovery Tribunal (‘OA’) against Subhiksha and the Plaintiff for recovery of unpaid lease rentals amounting to approximately Rs.8,49,09,848/- together with interest. The OA was filed in December 2010, but the Summons was served on the Plaintiff in June 2011.
4. In February 2011, the Plaintiff filed the present Suit praying inter alia for cancellation of the Deed of Indemnity, Deed of Hypothecation and Tax Undertaking. The present Notice of Motion is taken out in the suit for restraining the Defendant from (i) relying on the documents of which cancellation in sought in the suit and (ii) prosecuting the OA against the Plaintiff. The orders of a learned Single Judge of this court refusing the ad-interim relief claimed and of the Division Bench in appeal directing the Plaintiff to seek appropriate reliefs from the DRT, were carried in an SLP before the Supreme Court. The Supreme Court, by its order dated 20 November 2012, directed the Single Judge of this court to decide the Notice of Motion expeditiously and uninfluenced by the observations of the Division Bench. That is how the Motion has been argued before me.
5. Mr Dwarkadas, the learned Senior Counsel appearing for the Plaintiff, submits that upon assignment of the receivables from Subhiksha, the Defendant has no recourse to the Plaintiff for recovery of the receivables. The Deed of Indemnity executed by the Plaintiff indemnifies the Defendant in certain contingencies which have not arisen. It is contended by Mr Dwarkadas that the Defendant having already terminated the MRA by reason of the default of Subhiksha, the Deed of Indemnity has become infructuous and cannot be enforced. Mr Dwarkadas submits that the Deed of Hypothecation is not supported by consideration since there is no debt owed by the Plaintiff to the Defendant. It is the case of the Plaintiff that in the premises, the Deeds of Indemnity and Hypothecation are liable to be cancelled. It is contended by
