IMPORTANT POINT
Once DRT held to have jurisdiction, power and authority to decide on defence to application for recovery of debt filed, jurisdiction of Civil Court to declare existence of state of affairs, which is defence to claim before DRT, necessarily held to be barred.

Rajiv Sahai Endlaw, J.—The plaintiff, a partnership firm has instituted this suit for declaration that the “Structured Currency Option” Agreements dated 14th January, 2008 and 1st February, 2008 entered into between the plaintiff and the defendant Bank are agreements by way of wagers hit by the bar of Section 30 of the Indian Contract Act, 1872 and are consequently void and unenforceable and for permanent injunction restraining the defendant Bank from in any manner acting upon or seeking to enforce any transaction under the said agreements, pleading:-

(i) that the defendant Bank approached the plaintiff to provide credit facilities for the business of exports by the plaintiff firm to United 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 Leveraged Derivative Transaction between them called the “Structured Currency Option” bearing reference 4875280 - 4875387;

(v) on 1st February, 2008 another similarly worded agreement called “Structured Currency Option” bearing reference 4997540- 4997647 was also entered into between the parties;

(vi) between 11th February, 2008 to 28th April, 2009 the defendant Bank paid to the plaintiff a total sum of Rs.9,46,000/-under both the aforesaid agreements taken together;

(vii) between 6th February, 2009 to 28th April, 2009 the plaintiff firm paid to the defendant Bank a total sum of Rs.1,45,61,000/- under both the agreements taken together;

(viii) in or around mid 2009 the plaintiff sought legal advice on the aforesaid Leveraged Derivative Transactions and was advised that the same being in the nature of wagering contracts, were hit by the bar of Section 30 of the Contract Act and were void and unenforceable;

(ix) accordingly, on 22nd May, 2009 the plaintiff wrote to the defendant Bank asking it to resolve the matter and castigating the defendant Bank for misleading and inducing the plaintiff”s General Manager (Finance) into executing the agreements without either explaining the ramifications of the same or trying to meet any of the partners of the plaintiff firm;

(x) on 10th November, 2009 the defendant Bank issued notice to the plaintiff calling upon the plaintiff to pay amounts under the two Agreements dated 14th January, 2008 and 1st February, 2008;

(xi) the defendant Bank thereafter issued a notice dated 24th November, 2009 to the plaintiff of termination of the ISDA 2002 Master Agreement dated 8th January, 2008 owing to the plaintiff having failed to make payment demanded vide notice dated 10th November, 2009; and,

(xii) the plaintiff responded to the said notices pleading that the transactions were void and unenforceable.

2. It may be mentioned that the plaintiff, in the plaint, has also made detailed pleadings as to the nature of the agreements and the transaction thereunder and as to how the same are by way of wager within the meaning of Section 30 of the Contract