Back
Supreme Court of India
THE HONOURABLE MR. JUSTICE S.B. SINHA & THE HONOURABLE MR. JUSTICE ASOK KUMAR GANGULY
Nahar Industrial Enterprises Ltd. & Others
Versus
Hong Kong & Shanghai Banking Corporation & Others
CIVIL APPEAL NO.4796 OF 2009 (Arising out of SLP (C) No.24715 of 2008) WITH TRANSFER PETITION (C) No. 1195 OF 2008 WITH TRANSFER PETITION (C) No. 1196 OF 2008 AND TRANSFER PETITION (C) Nos. 1207-1209 OF 2008
Decided on : 29-07-2009
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Sections 3, 17 and 18 - DRT has jurisdiction to determine claims of set off and counter claims - Bank or financial institution in terms of Section 19(9), despite such counter claim being treated to be a cross suits, would be entitled to raise a contention that same should not be determined by Tribunal - In the event such a contention has not been raised. Tribunal will have jurisdiction to pass a final judgment both on claim of bank or financial institution on one hand and cross objections of borrower on other. (Para 48)
Judicial Discipline - Binding Precedent - Pronouncement of law by a Division Bench of Apex Court is binding on a Divisional Bench of same or a smaller number of Judges - In order that such decision be binding, it is not necessary that it should be a decision rendered by Full Court or a Constitution Bench of Supreme Court. (Paras 65 to 68)
(1985) 4 SCC 369; (1989) 2 SCC 754; (1992) 4 SCC 97; (2005) 2 SCC 673-Relied upon.
Code of Civil Procedure, 1908 - Section 9 read with Section 3 of Indian Evidence Act, 1872 and Section 29(2) of Limitation Act, 1963 - All courts are Tribunals but all Tribunals are not Courts - Similarly all Civil Courts are Courts but all Courts are not Civil Courts - broad distinction between a Court and a Tribunal is whereas decision of Court is final decision of Tribunal may not be - Jurisdiction of a Court must be determined having regard to purpose and object of the Act. (Paras 75 to 82)
1950 SCR 459; (2000) 5 SCC 355; (2008) 7 SCC 487 - Relied upon.
Law Reports Act, 1875 - Section 3 - Head notes by editors of a reports are not a conclusive guide to text of judgment reported - They are made only for convenience of readers as a short summary to text and for easy reference and at times they are misleading. (Para 93)
200 US 321, 337; (2004) 7 SCC 779 - Relied upon.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 19 and 31 read with Section 24, 96 and 100 of Code of Civil Procedure, 1908 - A civil suit cannot be transferred to DRT - Such transfer would deprive plaintiff of his rights in relation to procedure as also curtail his right to appeal - A suitor has right to maintain a first appeal -A second appeal also is maintainable before a High Court, subject to effect that questions of law must be there for Court's consideration - Only civil suits are subject matter of inter State transfer from one Civil Court to another Civil Court. (Paras 148, 149 and 151)
(1905) AC 369 (PC); 1957 SCR 488; (2007) 6 SCC 528; (2005) 4 SCC 1; (2009) 2 SC 426; (2004) 5 SCC 551-Relied upon.
Constitution of India - Articles 139 - A and 142 - Powers of Supreme Court under Articles 139-A and 142 is wide and extensive - Court may resort thereto to do complete justice - When adequate remedy is available in law ordinarily same should be directed to be followed - A case of very exceptional nature must be made out for invoking extraordinary constitutional jurisdiction of a Court. (Paras 164 and 166)
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 22(2) -Remedy of summary and speedy trial by itself would not be sufficient to oust jurisdiction of Civil Court – Casus omissus cannot be supplied. (Para 144)
Interpretation of Statute - Doctrine of purposive construction - It is a salutary principle -Same cannot be extended to a case which would lead to an anomaly - It can inter alia be resorted to only when difficulty or doubt arises on account of ambiguity - It is to be preferred when object and purpose of Act is required to be promoted. (Paras 109 and 110)
JT 2004(9) SC 136:2004; 11 SCC 947: 1970 (3) All ER 97-Relied upon.
(2008) 3 SCC 279; (2007) 6 SCC 528; (2006) 6 SCC 340; (2008) 5 SCC 257 -Distinguished.
Administration of Justice - Transfer of a case - By reason thereof substantive right of a party cannot be taken away. (Paras 161 and 162)
AIR 1959 SC 422; AIR 1968 SC 488; (2007) 1 SCC 106; (2007) 5 SCC 120 - Relied upon.
AIR 1966 SC 1899; (2006) 5 SCC 72; (2007) 1 SCC 97; (2008) 9 SCC 648; AIR 1995; Del 323; (2002) 4 SCC 275; (2000) 7 SCC 357; (2007) 2 SCC 230; (2008) 7 SCC 487; 1983 ACJ 123; (2005) 12 SCC 358; (1997) 6 SCC 100; (2001) 9 SCC 723; (2004) 13; SCC 564; (JT) 2000 (8) SC 323; AIR 1952 SC 159; (2005) 12 Comp Cas 176 (Ker); (2009) 3 Scale 685; (1999) 4 SCC 710; AIR 1997 Kerala 89; AIR 2001 AP 526; AIR (2003) Gujarat 141; AIR 2003 Cal 7; (2007) 6 SCC 236; (1968) 3 SCR 662; (2003)6 SCC 220; 1991 Supp (2) SCC 36; (2003) 7 SCC 350; (2005) 7 SCC 447; (1990) 2 SCC 562; (2002) 4 SCC 275; (2004) 4 SCC 311 - Referred to.
Key Points: - Suits involving foreign exchange derivative contracts between banks and debtors fall within the jurisdiction of civil courts, not Debt Recovery Tribunals (!) (!) (!) . - Debt Recovery Tribunals have limited jurisdiction to determine claims of set-off and counter-claims only when initiated by the bank, and only as part of the bank's application (!) (!) (!) . - High Courts cannot transfer suits from Civil Courts to Debt Recovery Tribunals because there is no statutory provision allowing such transfer (!) (!) (!) . - Debtors retain the right to file independent suits and defenses, including set-off or counter-claims, in civil courts (!) (!) (!) . - The principle of exhausting statutory remedies requires that civil court jurisdiction be presumed unless expressly ousted by law (!) (!) (!) . - Any transfer of a suit to a Tribunal would deprive the plaintiff of procedural rights, including the right to appeal, which cannot be indirectly ousted (!) (!) (!) . - Tribunals are not courts and do not have the full attributes of civil courts, including the power to pass decrees (!) (!) (!) . - The doctrine of purposive construction cannot be extended to convert a Tribunal into a civil court where it would create anomalies or override legislative intent (!) (!) (!) . - Judicial precedents from coordinate benches are binding, and deviations by smaller benches are not permissible (!) (!) . - The right of appeal is a substantive, vested right that can only be taken away by clear statutory provision and not indirectly through case transfer (!) (!) .
Judgment :-
S.B. Sinha, J.
Leave granted.
INTRODUCTION
Whether the High Court and/or this Court has the power to transfer a suit pending in a Civil Court situated in one State to a Debt Recovery Tribunal situated in another is the question involved herein.
BACKGROUND FACTS
We may notice the facts of the matter from Civil Appeal @ SLP (C) No.24715 of 2008. It arises out of a judgment and order dated 15th September, 2008 passed by a learned Single Judge of the High Court of Punjab and Haryana at Chandigarh in Transfer Application No.186 of 2008 whereby and whereunder the suit filed by the appellant and pending before the Civil Judge (Junior Division), Ludhiana was transferred to the Debt Recovery Tribunal-III at Mumbai.
Some of the parties to the lis before us are the banks or financial institutions within the purview of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (1993 Act). The others are debtors of such banks or financial institutions. The parties hereto entered into diverse agreements in terms whereof banks or the financial institutions lent money to the debtors.
Appellant entered into International Swaps and Derivatives Agreement with the respondent. On 1.11.2006, the appellant and the respondent entered into globally used market standard Master Agreement and Schedule published by ISDA (ISDA Master Agreement) (hereinafter referred to as "Master Agreement") wherein the respondent undertook derivative transactions for hedging or transformation of risk exposure.
Under the said Master agreement i.e. the ISDA Agreement including the Schedule thereto, the appellant had entered into ten transactions with the respondent and out of those ten transactions, appellant has unwound (closed at the instance of the appellant at a mutually agreed value) four transactions; one transaction got matured and one expired due to occurrence of a contingent event. In all the six transactions, appellant had received an aggregate sum of about Rs.1,87,00,000/-(Rupees one crore eighty seven lakhs only) from the respondent. In respect of 2 transactions Swap Reference: NCW072009996 and Swap Reference: NCW 072009997 both dated 13th July, 2007, the appellant has till date received Rs.13,00,000 (Rupees Thirteen Lakhs Only) from the respondent.
As on 02.04.2008, four foreign exchange derivative transactions were outstanding between the appellant and the respondent, dated 13.07.2007, 13.07.2007, 26.07.2007 and 30.07.2007.
Appellant vide his letter of 03.04.2008 purported to disclaim, repudiate and reject only two out of those four transactions, i.e., the transactions with trade dates 26th July 2007 and 30th July, 2007.
Appellant filed a suit in the Civil Court at Ludhiana seeking a declaration that foreign exchange derivative contracts dated 26.7.2007 and 30.7.2007, entered into by and between them were void as being illegal and violative of Foreign Exchange Management Act, 2000 as well as the Circulars and Guidelines issued by the Reserve Bank of India, and, thus, against public policy. The said suit was marked as Civil Suit No.108 of 2008.
An application for grant of injunction was also filed. By reason of an order dated 5.4.2008, the learned Civil Judge directed both the parties to maintain status quo in regard to the said two contracts, directing:
"Lest the purpose be not defeated by delay, both the parties are directed to maintain status quo (as on today) regarding the contracts involving the present cases till 16.4.2008. Compliance U/O 39 R.3 CPC be made as per rules. Plaintiffs shall also be duty bound to get the service effected on defendants for date fixed Summons be also given dasti."
The said order of status quo is said to have been communicated to the respondent on or about 8.4.2008.
Respondent issued a notice dated 12.4.2008 upon the appellant terminating the pending derivative transaction. Appellant contends that termination of the said derivative transaction is in violation of the order of status quo passed by the learn
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
