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CASE NO.: Appeal (civil)  4728 of 2006

PETITIONER: Industrial Investment Bank of India Ltd

RESPONDENT: Marshal’s Power & Telecom (I) Ltd.& Anr

DATE OF JUDGMENT: 08/11/2006

BENCH: H.K. SEMA & P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T  (Arising out of SLP(C) No.2962 of 2005)

P.K. BALASUBRAMANYAN, J.

               Leave granted.                 Heard both sides.  

1.      Defendant No.1 in C.S. No. 644 of 2003 filed on the  Original Side of the High Court of Madras is the appellant.   The appeal challenges the grant of an interim injunction  by the Division Bench of the High Court in favour of the  plaintiff, respondent No.1 herein, pending the suit.  The  suit was filed by the plaintiff for a mandatory injunction  restraining defendants 1 and 2 jointly or severally from  taking possession of or interfering with the use of or  exercising any right of lien, charge or from issuing notice  in any form or from creating any kind of disturbance or  from attaching otherwise or raising a claim in respect of  certain capacitor banks systems allegedly supplied by the  plaintiff and installed at various substations of  Transmission Corporation for Andhra Pradesh (for short,  ’APTRANSCO’) and for award of the costs of the suit.  In  that suit, the plaintiff filed O.A. No. 806 of 2003 under  Order XXXIX Rules 1 and 2 of the Code of Civil Procedure  seeking an interim injunction along the same lines to  enure during the suit.  The suit was filed when defendant  No. 1 issued a notice to the plaintiff and defendant No. 2  in the suit seeking repayment of the amounts advanced by  the first defendant to the second defendant, the  repayment of which was secured by hypothecation and  charge created by the plaintiff.  2.              According to the plaint, no valid charge or  hypothecation was created in favour of the first defendant  and the first defendant was not entitled to claim any  amount as against the plaintiff and was not entitled to  enforce the charge or hypothecation as against the  plaintiff.  

3.              The trial court granted an ad interim ex parte  order of injunction after entertaining the suit.  Meanwhile,  the first defendant filed its claim for recovery of the  amounts allegedly due to it from defendants 1 and 2  before the Debts Recovery Tribunal.  The first defendant  also appeared in the suit filed by the plaintiff and in  addition to filing an objection to the interim application for  injunction also filed Application No. 4726 of 2003 praying  for vacating the interim order of injunction granted by the  court.  The first defendant pleaded that substantial

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amounts were due to it; that certain assets had been  hypothecated to it and a charge created for securing the  loan by the plaintiff and that the charge and the  hypothecation were legally enforceable and there was no  ground for granting an interim order of injunction as  sought for.  It was also submitted that the plaintiff had no  cause of action for filing such a suit and it was for the  plaintiff to put forward its case or its defence before the  Debts Recovery Tribunal.

4.              The learned single judge after hearing both sides  vacated the interim order of injunction earlier granted.   Thus, he allowed the application filed by the first  defendant for vacating the injunction and dismissed the  application filed by the plaintiff for interim injunction.   The learned single judge essentially took the view that  since the first defendant had initiated a proper proceeding  for enforcement of its rights before a Tribunal exclusively  competent to deal with such a claim, it was not for the  Civil Court to intervene with an interim order of injunction  as sought for by the plaintiff.  The plaintiff filed an appeal  before the Division Bench.  The Division Bench of the High  Court allowed the appeal taking the view that the suit in  the Civil Court was maintainable and since the suit was  filed earlier, the court was competent to entertain the suit  and grant an interim order of injunction. Without properly  considering whether on the facts and in the circumstances  of the case and the nature of the suit filed by the plaintiff  an interim order of injunction was warranted or justified,  it granted an order of injunction presumably as prayed for  by the plaintiff but clarifying that the deed of  hypothecation executed on the subject matter in question  shall be in force and the proceedings before the Debts  Recovery Tribunal may go on, but restraining the  execution of any order that may be passed by the Debts  Recovery Tribunal.  Feeling aggrieved, the first defendant  has filed this appeal.   

5.              We think that the Division Bench has not  properly adverted to or considered the question whether in  the nature of the pleadings in the case and the nature of  the relief claimed in the suit, an order of injunction as the  one granted by it should be granted.  Prima facie, it  appears that the plaintiff had executed a hypothecation  and created a charge to secure the loan advanced by the  first defendant to the second defendant.  The loan was  advanced to enable the second defendant to fulfil the  terms of a contract it had entered into with APTRANSCO.   The second defendant had sub-contracted a part of the  work to the plaintiff.  The first defendant had advanced  monies to the second defendant for the work and the  plaintiff had prima facie secured the loan by  hypothecation and a charge.  An order has been claimed  against the plaintiff before the Debts Recovery Tribunal in  enforcement of its rights by the first defendant.  The  Division Bench did not ask itself the question whether it  was open to it on the facts and in the circumstances of the  case, to issue an order of injunction restraining one of the  contracting parties from enforcing as against the other  contracting party, the obligations arising out of that  contract.  The Division Bench also did not ask itself the  question whether the plaintiff had made out a prima facie  case for the grant of what it called an interim mandatory  injunction --- though it appears to us to be a case of  prohibitory injunction --- and whether the balance of

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convenience is in favour of the grant of an interim order of  injunction.  On the facts and in the circumstances of the  case, we are prima facie satisfied that this is not a fit case  for exercise of discretion by the court to grant any interim  injunction as sought for by the plaintiff.  

6.              We also find that the Division Bench has clearly  acted illegally in purporting to pass an interim order of  injunction restraining the enforcement of any order that  may be passed by the Debts Recovery Tribunal.  The  Debts Recovery Tribunal is a special forum created by a  special enactment for the purpose of enforcement of  special types of claims arising in favour of financial  institutions.  Thus, competent proceedings are instituted  before such a Tribunal by a financial institution seeking to  enforce its claimed rights.  Whatever defences the plaintiff  herein may have against the claims of the first defendant  before the Debts Recovery Tribunal, have to be put  forward by the plaintiff before the Debts Recovery  Tribunal.  The mere fact that the plaintiff chose to rush to  the Civil Court on receipt of a notice from the first  defendant in an attempt to thwart the enforcement of the  obligations it has allegedly incurred, does not justify the  grant of an interim order of injunction restraining the  enforcement of the rights arising out of an alleged  hypothecation and a charge created by the plaintiff in  favour of the first defendant.  That apart, to grant an  injunction restraining the enforcement of orders passed by  the Tribunal having jurisdiction to pass such orders  cannot normally be granted unless it is a case of fraud or  the existence of some such vitiating factor is established  or prima facie made out.  Even then, the order of  injunction as now granted could be granted only in  exceptional cases.   

7.              We had recently occasion to consider the scope  of the raising of a counter claim before the Debts Recovery  Tribunal in State Bank of India Vs. M/s Ranjan  Chemicals Ltd. & Anr. [2006 (10) SCALE 150].  It  appears to us that the claims sought to be put forward by  the plaintiff in the present suit is something that is really  in the nature of a defence to the action initiated by the  first defendant before the Debts Recovery Tribunal or  which could be put forward by way of a counter claim, if  necessary.  This aspect also had to be borne in mind  before deciding whether a case for passing of an interim  order of injunction has been made out or not.  This aspect  has also been ignored by the Division Bench.  

8.              In the result, we allow the appeal and setting  aside the order of the Division Bench, restore the order of  the learned single judge dismissing the application for  interim injunction.  We make it clear that it is open to the  plaintiff to put forward all its contentions before the Debts  Recovery Tribunal and if it is thought appropriate, to get  the suit filed by it transferred to the Debts Recovery  Tribunal to be tried as a cross suit or counter claim  against the claim of the first defendant before the Debts  Recovery Tribunal.  The first defendant \026 appellant, would  be entitled to its costs in this Court.