Radnik Exports vs Standard Chartered Bank
2014 Latest Caselaw 2854 Del

           *IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                              Date of decision: 1st July, 2014

+      CS(OS) 2296/2009, IAs No.15685/2009 (u/O 39 R-1&2 CPC),
       12375/2010 (u/O XI R-2 CPC) & 16711/2013 (u/O VI R-17 CPC)
       (all of the plaintiff)

       RADNIK EXPORTS                                        ..... Plaintiff
                   Through:             Mr. S.L. Gupta with Mr. Amitabh
                                        Krishan, Advs.
                                     versus

    STANDARD CHARTERED BANK                     ..... Defendant
                 Through: Mr. Sumit Bansal, Mr. Ateev Mathur,
                           Ms. Richa Oberoi & Ms. Jagriti Ahuja,
                           Advs.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.

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 Act; however for the present purpose it is not

necessary to dilate on the said aspect.

3. Summons of the suit and notice of the application for interim relief

were issued to the defendant Bank with the observation 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 Agreements;

(f) that the plaintiff received Rs.9,46,000/- from the defendant Bank

owing to the US Dollar then being at below Rs.41/-;

(g) however thereafter on account of adverse movement of US

Dollar vis-à-vis Indian Rupee the plaintiff started making losses;

(h) though the plaintiff paid Rs.1,45,61,000/- towards loss incurred

till April, 2009 but subsequently started raising false and

frivolous objections;

(i) denying that the Agreements were entered into without

explaining the ramifications thereof to the partners of the

plaintiff;

(j) knowledge of the plaintiff of the said transactions is also evident

from the letter dated 12th June, 2009 of the plaintiff admitting

that 80% of their export orders were hedged with Citi Bank or

Canara Bank;

(k) the plaintiff was thereafter under the Agreements aforesaid

required to make payment of US Dollars 4,000,000 to the

defendant Bank which it failed to make and which compelled the

defendant Bank to invoke early termination clause of the ISDA

2002 Master Agreement;

(l) a total sum of Rs.21,62,27,811/- is due from the plaintiff to the

defendant Bank along with interest w.e.f. 4th December, 2009 till

the date of payment; and,

(m) denying that the Agreements or the transactions thereunder are

by way of wager within the meaning of Section 30 supra or void.

I may record that the defendant Bank also in its written statement has

made elaborate pleadings as to how the Agreements and transactions

thereunder are not by way of wager.

5. The plaintiff has filed replication to the written statement aforesaid of

the defendant Bank but need is not felt to refer thereto.

6. The suit languished for admission / denial of documents and for

completion of pleadings on applications including the application filed by the

plaintiff for furnishing interrogatories to the defendant Bank. The plaintiff at

that stage filed IA No.16711/2013 for amendment of the plaint to also take a

plea that the defendant Bank in its dealing with the plaintiff had violated the

RBI Guidelines and the agreements and the transactions between the parties

were also hit by the provisions of Section 23 of the Contract Act being

opposed to public policy.

7. The said application of the plaintiff for amendment of the plaint was

listed first on 5th March, 2014 when during the hearing thereof 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 this

Court to decide the said issue was not barred by Section 18 of the Recovery of

Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act).

9. The counsel for the plaintiff on 5th March, 2014 contended that the suit

having been entertained and having remained pending since the year 2009, the

question of maintainability thereof at that stage be not raised; it was further

contended that the summons of the suit were issued only after this Court was

satisfied of the maintainability thereof.

10. However not finding any order on the file recording such satisfaction,

the aforesaid contention of the counsel for the plaintiff was rejected.

11. The counsel for the plaintiff then sought time to address on the aspect

of maintainability and the matter was adjourned for the said purpose.

12. The counsels have been heard on the aforesaid aspect of

maintainability.

13. The counsel for the plaintiff has referred to:-

A. the order dated 24th October, 2013 of this Court in CS(OS)

No.2230/2009 titled India Glycols Limited Vs. Standard

Chartered Bank holding that suit to be maintainable in the light

of paragraphs 96, 97, 105 and 110 of Nahar Industrial

Enterprises Ltd. Vs. Hong Kong & Shanghai Banking

Corporation (2009) 8 SCC 646 and has contended that the said

suit was / is the same as the present suit. (However the order

dated 24th October, 2013 neither records the facts of that suit nor

contains any discussions save for recording that the suit was

found to be maintainable and deciding the preliminary issue

"Whether in view of RDDBFI Act, the present suit is

maintainable before this Hon‟ble Court?" in favour of the

plaintiff therein);

B. Nahar Industrial Enterprises Ltd. (Nahar) supra laying down:-

(i) that a plaintiff is the dominus litus; he may institute a suit

having regard to the provisions contained in Sections 16 to 20 of

the Code of Civil Procedure (CPC) in any Civil Court;

(ii) if the jurisdiction of the Civil is not barred or if he, having regard

to common law principle is entitled to maintain an action in two

different forums, he may choose one of them;

(iii) a debtor, having regard to the provisions of the DRT Act would

not be entitled to maintain an action before the DRT; and,

(iv) if a suit is to be transferred from a Civil Court to the DRT, he

would lose some rights including the right 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.

16. Per contra, the counsel for the defendant Bank has argued:-

I. that there is no plea of fraud in the plaint filed by the plaintiff;

II. that the jurisdiction of the DRT under Section 17 of the DRT Act

to decide the claim of the bank includes the power to adjudicate

the defence thereto;

III. that the defence to the claim of a bank before the DRT cannot be

subject matter of adjudication in a separate proceeding before the

Civil Court;

IV. no concurrent proceedings on the same issue are permissible;

V. the Supreme Court in Nahar supra was concerned with the

power of transfer of proceedings under Section 24 of the CPC

and held that the said power could not be exercised to transfer

proceedings to the DRT because it was not a Civil Court;

VI. that Nahar even otherwise was concerned with a counterclaim

against the bank and was not concerned with a defence to a claim

of the bank (it is clarified that though from the reading of the

judgment, the civil suit in Nahar also was only for the relief of

declaration but the findings have been rendered treating the same

to be a counter claim);

VII. the suit in India Glycols Limited supra, besides for the relief of

declaration was / is also for the relief of recovery of monies from

the bank; in the present suit only the reliefs of declaration and

permanent injunction have been claimed and there is no claim for

any money recovery against the defendant bank;

VIII. that the contents of the plaint in the present suit are identical to

the written statement of the plaintiff before the DRT;

IX. reliance is placed on paras 105 to 108 of Nahar to contend that

the jurisdiction of the Civil Court is ousted in respect of matters

contained in Section 18 which have a direct co-relation with

Section 17, i.e. to say that the matter must relate to a debt

payable to a bank or financial institution;

X. though the suit, in India Glycols Limited, was held to be

maintainable by a non-speaking order but the DRT nevertheless,

in view of the pendency of the civil suit before this Court stayed

the proceedings before it and which order of the DRT was upheld

by the DRAT and the writ petition preferred by the bank against

the said order of the DRAT is pending consideration before this

Court; thus the issue cannot be said to have stood closed and is

very much open 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 institution was maintainable before this Court as

there was no proceeding before the DRT on that date.

18. I have considered the rival contentions.

19. The preamble to the DRT Act describes the same as "an Act to provide

for the establishment of tribunals for expeditious adjudication and recovery of

debts due to banks and financial institutions and for matters connected

therewith or incidental thereto"; Section 3 thereof provides for establishment

of tribunals to be known as DRTs, to exercise the jurisdiction, power and

authority conferred thereon by the Act. Section 17 provides that such a

tribunal shall exercise the jurisdiction, power and authority to entertain and

„decide‟ applications from the banks and financial institutions for recovery of

debts due to such banks and financial institutions. Section 18 provides that no

Court or other authority shall have or be entitled to exercise any jurisdiction,

powers or authority in relation to the matters specified in Section 17. Section

19, while laying down the procedure to be followed by the DRTs, in sub

section (1) thereof provides for filing of an application by the bank or the

financial institution which has to recover any debt from any person; in sub

section (4) thereof provides for issuance of notice to show cause by the DRT

to the person from whom recovery is sought, as to why the relief of recovery

prayed for should not be granted; sub section (5) thereof provides for such

person from whom recovery is sought to present a written statement of his

defence; sub section(20) thereof provides for passing of a final order by the

DRT on such application of the bank for recovery, after giving the applicant

bank and the defendant an opportunity of being heard.

20. From the procedure prescribed in Section 19 supra, to be followed by

the DRT, it is evident that the DRT, in adjudication / decision of the

applications of the bank / financial institution for recovery of debts, while

deciding on the entitlement of the bank / financial institution to such debt is to

also adjudicate / decide the cause shown by the defendant in such application,

of the bank / financial institution being not entitled to the relief of recovery

sought. If the DRT were to be not authorized, or to not have jurisdiction or

power or authority to decide on such defence of the defendant to an

application for recovery filed before it, sub sections (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 Section 19 a decision also on the defence raised to such

applications. This is further re-enforced from sub sections (6) and (8) of

Section 19 which permit a defendant to such an application, to besides

presenting his defence, also claim a set-off or make a counterclaim and from

sub sections (7) and (9) which provide for such set-off and counterclaim to be

having the same effect as a cross suit and which require the DRT to pass a

final order not only on the claim of the bank but also on the set-off or

counterclaim of the defendant to such an application. This is yet further

fortified from Section 20 providing for appeals to the DRAT not only by the

bank but also by any person aggrieved from the order of the DRT. If the DRT

were not to adjudicate and decide of the defence of the defendant to the

application for recovery of debt, there would have been no need to provide for

an appeal to the DRAT by such a defendant. Similarly Sections 22 and 23

while providing for powers of the DRT and DRAT and the right to legal

representation, treat the applicant bank / financial institution and the

defendant equally, by providing for examination of witnesses as well as legal

representation, by both. Had the DRT no jurisdiction, power and authority to

adjudicate on the defence of the defendant, there would have been no need to

provide for legal representation by the defendant or for the defendant to

examine witnesses.

21. I thus conclude that the DRT vide Section 17 supra has the jurisdiction,

power and authority to decide on the defence to an application for recovery of

debt filed before it. Once the DRT is held to have such a power, the

jurisdiction of the Civil Court to declare existence of a state of affairs which is

a defence to a claim before the DRT, has to be necessarily held to be barred.

22. That brings me to the judgments cited by the counsel for the plaintiff.

23. As far as India Glycols Limited is concerned, though from a copy of

the plaint in that suit handed over after the close of hearing it is found that the

relief of declaration claimed therein is identical to the claim in the present suit

and similar relief of injunction as claimed in the present suit has also been

claimed therein also but in addition thereto relief of recovery of

Rs.18,52,44,000/- was also claimed therein. Not only so, the order dated 24th

October, 2013 therein cannot be said to be a 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 / transactions. A

reading of the judgment shows that the question, whether such a suit per se

was maintainable or not and / or of the maintainability thereof before the Civil

Court being barred by Section 18 of the DRT Act was not raised and

accordingly not decided. It is the settled principle of law (See Bhavnagar

University Vs. Palitana Sugar Mill Pvt. Ltd. (2003) 2 SCC 11, Bharat Forge

Co. Ltd. Vs. Uttam Manohar Nakate (2005) 2 SCC 489 and Inderpreet

Singh Kahlon Vs. State of Punjab AIR 2006 SC 2571) that a judgment is a

precedent on what falls for decision therein and not what may be logically

deduced therefrom. I therefore humbly opine that the question, as has arisen

here, cannot be said to be not res-integra owing to Nahar.

25. Similarly in Indian Bank also the Supreme Court was concerned with

the transfer of civil suit to the DRT.

26. Though in deciding the different issue which arose for adjudication in

Nahar and in Indian Bank certain observations came to be made but the

same have to be read in the context of what was for decision in the said

judgment and cannot even be termed as obiter of the Supreme Court qua the

matter at hand.

27. Section 34 of the Specific Relief Act, 1963 enables any person entitled

to any legal character or to any right as to any property to institute a suit,

against a person denying or interested to deny his title to such character or

right, for a declaration that he is so entitled. It has been held in Lachhman

Das Vs. Arjan Singh MANU/PH/0477/1962 and Narhar Raj Vs.

Tirupathybibi MANU/AP/1380/2002 that under the said provision negative

declaration can also be claimed. It is thus possible, under the said Section 34

to sue for a declaration that the plaintiff is free of debt. Moreover it has been

held in V. Ramaraghava Reddy Vs. K. Seshu Reddy AIR 196 7 SC 436,

Supreme General Films Exchange Ltd. Vs. His Highness Maharaja Sir

Brijnath Singhji Deo of Maihar (1975) 2 SCC 530 that Section 34 is not the

sole repository for the relief of declaration. That being the legal position, it

would be open to every person against whom a bank or financial institution

may have a claim for recovery of a debt, to sue in a Civil Court on the same

grounds on which he may have a defence before the DRT to such claim of a

bank / financial institution, for declaration that he is not a debtor of the bank /

financial institution and is not liable 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 every person against whom the bank or

financial institution would have a claim before the DRT would be interested

in stalling the same and with the said intent approach the Civil Court for

declaration aforesaid, as the decision before the Civil Court takes time as has

already been noticed by the Supreme Court in Nahar.

29. I find the same to be not permissible.

30. The Supreme Court recently in Standard Chartered Bank Vs.

Dharminder Bhohi MANU/SC/1004/2013 has reiterated that the intendment

of the DRT Act is speedy recovery of dues to the bank and the DRTs and

DRATs are expected to see to it that an ingenious litigant does not take

recourse to dilatory tactics. It was further held that any delay would

fundamentally frustrate the purpose of the legislation. The Supreme Court

with the said observations set aside the part of the order of the DRAT giving

liberty to the auction purchaser of a property to file a civil suit.

31. Notice may also be taken of another recent judgment of the Supreme

Court in Jagdish Singh v. Heeralal (2014) 1 SCC 479 which was concerned

with the maintainability of a civil suit for declaration of title, partition and

permanent injunction with respect to a property auctioned under the

provisions of the SARFAESI Act vis-à-vis the provision of an appeal under

Section 34 thereof. The Supreme Court, after examining the judgments inter

alia in Nahar and Indian Bank held that irrespective of the question whether

the civil suit is maintainable or not, once a remedy has been provided under

the SARFAESI Act, the jurisdiction of the Civil Court would be barred.

Reliance was placed on the judgment of the Constitution Bench in Mardia

Chemicals Ltd. Vs. Union Of India (2004) 4 SCC 311 laying down, in the

context of the SARFAESI Act that the prohibition to the jurisdiction of the

Civil Court covers matters which can be taken cognizance of by the DRT and

that the bar of jurisdiction is in respect of a proceeding which may be taken to

the tribunal and that a matter, in respect of which an action may be taken even

later on, the Civil Court shall have no jurisdiction to entertain any proceeding

thereof. The Supreme Court held that the Civil Court in such circumstances

has no jurisdiction to entertain any suit or proceeding in respect of those

matters which fall within the jurisdiction of the DRT and held the jurisdiction

of the Civil Court to 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 Bank, before the DRT is enforcing its claim against

the plaintiff under the said agreements / transactions. The claim of the

defendant Bank against the plaintiff, before the DRT, is "an action taken in

pursuance of a power under the DRT Act". Section 34 supra, prohibits this

Court from injuncting the defendant Bank from agitating its claim against the

plaintiff before the DRT.

34. I have wondered that if the jurisdiction of this Court to grant the

consequential relief of injunction is barred, can this Court have jurisdiction to

grant the relief of declaration and / or should this Court grant the relief of

declaration, which, without the consequential relief of injunction, would be a

toothless declaration, incapable of saving the plaintiff from the claim of the

defendant Bank if the DRT was to conclude otherwise and thus, but a mere

scrap of paper. I am, (without foraying into the aspect of whether the

jurisdiction to grant declaration would also be barred) of the view that in these

circumstances this Court ought to refuse to grant the relief of declaration also,

which is but a discretionary relief. It cannot be forgotten that grant of every

injunction entails declaration of rights and no injunction can be granted

without adjudicating conflicting rights of the parties. Thus, where grant of

injunction is prohibited, such prohibition cannot be circumvented by instead

granting declaration. This follows from Section 34 of the Specific Relief Act

also which bars making of such a declaration where the plaintiff, able to seek

further relief, omits to do so. The only difference here is that though the

plaintiff has claimed further relief, such further relief is barred by Section 34

of the SARFAESI Act.

35. I would be failing in my duty if do not record that I have in Sunayana

Malhotra supra taken a view that a Civil Court will have jurisdiction, if no

proceeding before DRT is initiated. However, the same cannot be said to be

good law in view of the subsequent dicta of the Supreme Court in Jagdish

Singh supra. In the same vein, reference may also be made to Richa

Industries Ltd. Vs. ICICI Bank Ltd. 190 (2012) DLT 500 where another

single Judge, though held the suit for declaration, injunction and damages to

be maintainable, refused interim relief. However I do not consider myself

bound thereby because the suit was so held maintainable on a prima facie

view of the matter and also because FAO(OS) No.577/ 2011 preferred

thereagainst was disposed off as compromised on 28th February, 2013.

36. The suit is thus found to be not maintainable. The amendment claimed

to the plaint does not affect its maintainability. Thus, the suit is dismissed and

resultantly the pending applications are infructuous. The plaintiff is also

burdened with costs of the suit. Counsel‟s fee assessed at Rs.20,000/-.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J

JULY 01, 2014 pp