Calcutta High Court
State Bank Of India vs Madhumita Construction Pvt. Ltd. & Ors on 31 August, 2009
Equivalent citations: AIR 2010 (NOC) 162 (CAL.), 2010 (1) AKAR (NOC) 121 (CAL.) 2010 AIHC (NOC) 344 (CAL.), 2010 AIHC (NOC) 344 (CAL.), 2010 AIHC (NOC) 344 (CAL.) 2010 (1) AKAR (NOC) 121 (CAL.), 2010 (1) AKAR (NOC) 121 (CAL.)
Author: Surinder Singh Nijjar
Bench: S.S. Nijjar, Indira Banerjee
IN THE HIGH COURT AT CALCUTTA
APPELLATE SIDE/ORIGINAL SIDE
No. APO No.508 of 2002
G.A. No. 3254 of 2002
APOT No.580 of 2002
G.A. No.4160 of 1998
Suit No.445 of 1998
STATE BANK OF INDIA
Vs.
MADHUMITA CONSTRUCTION PVT. LTD. & ORS.
DATE OF JUDGMENT: 31.08.09
For the approval of:
Hon'ble Mr. S.S. Nijjar, Chief Justice
Hon'ble Justice Indira Banerjee
Whether the order/judgment should be sent to the
Reporters for reporting?
(Yes/No)
Whether the reporters be allowed to see the judgment?
(Yes/No)
APO No.508 of 2002
G.A. No. 3254 of 2002
APOT No.580 of 2002
G.A. No.4160 of 1998
Suit No.445 of 1998
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
In the matter of:
STATE BANK OF INDIA
Vs.
MADHUMITA CONSTRUCTION PVT. LTD. & ORS.
BEFORE:
The Hon'ble CHIEF JUSTICE S.S. NIJJAR
And
The Hon'ble JUSTICE INDIRA BANERJEE
Appearance:
For Appellants: Mr. Hirak Mitter, Mr. A.K. Bhattacharya, Mr.K. Sen
Mr. S. Sen, Mr. Jishnu Chowdhury
For Respondent No.53: Mr. Gautam Chakraborty, Mr. Atis Dipankar Roy,
Mr. Asit De For Respondent No.54 & 55: Mr. R.S. Mantha For Respondent No.56: Mr. Dilip Kundu, Mr. Chanchal Kr. Dutta For Respondent No.57: Mr. D. Basak, Mr. D.N. Mishra, Mr. A. Roy, Mr. R.K. Rai For Respondent No.1: Mr. Alok Banerjee, Mrs. Anupa Banerjee For Respondent No.22-25 & 27-44: Mr. Durbadal Sen Heard On: 21.02.08, 10.03.08, 19.03.08, 25.03.08, 31.03.08 Date : 31.08.2009 INDIRA BANERJEE, J.: This appeal is against an order dated 16th July, 2002 of the learned Single Judge, refusing the prayer of the plaintiff-appellant for interim orders that would, in effect restrain the defendant Nos.53 to 57 from proceeding with their applications under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and further dismissing the suit being Suit No.445 of 1998 filed by the plaintiff-appellant as against the said defendants.
The plaintiff-appellant filed the said suit being Suit No.445 of 1998 impleading 57 defendants of whom defendant Nos.1 to 44 were constituents of the plaintiff-appellant, defendant Nos.45 to 52 were employees of the plaintiff- appellant and defendant Nos.53 to 57 were banks who had negotiated letters of credit issued by the plaintiff-appellant.
In the suit it was alleged that the defendant Nos.1 to 44, hereinafter referred to as the Madhumita group, in collusion with the defendant Nos.45 to 52, being the employees of the plaintiff-appellant, fraudulently caused letters of credit in question, which were negotiated by the defendant banks, to be issued through the Baghbazar Branch of the plaintiff-appellant.
According to the plaintiff-appellant, there were no letters of credit at all as there was no genuine transaction for which any letter of credit could have been issued and the persons who had signed the letters of credit on behalf of the plaintiff-appellant were not authorized under the Official Gazette published under Regulation 76(1) of the SBI Regulations, 1955.
According to the plaintiff-appellant, the SBI Regulations are a public document and as such known to everyone including the defendant Nos.53 to 57. It is further contended that the purported letters of credit were not in standard form and the defendant Nos.53 to 57 were negligent and reckless in negotiating the same. The letters of credit were, according to the plaintiff-appellant, in contravention of the Uniform Customs and Practice of Documentary Credit (UCPDC).
In the suit, the plaintiff-appellant has claimed the following reliefs:
"a) Decree for Rs.22,08,48,908.79 against the defendants Nos.1, 2, 3, 4 and 5 jointly and severally;
b) Decree for Rs.5,98,10,532.35 against the defendants Nos.6,7, jointly and severally;
c) Decree for Rs.35,69,45,369.62 against the defendants Nos.8,9,10,11,12,13, 19 and other jointly and severally;
d) Decree for Rs.79,92,663.01 against the defendants Nos.14,15,16,17,2,4,5,7,9,12 and 13 jointly and severally;
e) Decree for Rs.112.00 crores against the defendants Nos.18,24,38,40,11,12,13 and 19 jointly and severally;
f) Decree for Rs.30,11,61,658.95 against the defendant No.20;
g) Decree for Rs.1,82,82,106.00 against the defendant No.21;
h) Decree for Rs.5,98,46,370.00 against the defendants No.22 and 25 jointly and severally;
i) Decree for Rs.18,29,48,199.79p against the defendants Nos.23, 24 and 25 jointly and severally;
j) Decree for Rs.38,547.95 against the defendants No.26;
k) Decree for Rs.8,45,01,677.00 against the defendants No.27;
l) Decree for Rs.2,86,97,494.01 against the defendants No.28;
m) Decree for Rs.18,12,04,754.11 against the defendants Nos.29,30,31 and 32 jointly and severally;
n) Decree for Rs.7,78,04,240.00 against the defendants Nos.33 to 36 jointly and severally;
o) Decree for Rs.8,52,74,400.00 against the defendants Nos.37,38,39 and 40 jointly and severally;
p) Decree for Rs.4,63,86,377.74 against the defendants Nos.41 and 42 jointly and severally;
q) Decree for Rs.27,633.00 against the defendants No.43;
r) Decree for Rs.4,33,646.50 against the defendants Nos.5 and 44 jointly and severally;
s) Decree for Rs.112.00 crores against the defendants Nos.45 to 52 jointly and severally;
t) Decree for Rs.3,47,15,890.00 against the defendants No.53;
u) Decree for Rs.4,25,94,540.00 against the defendants No.54;
v) Decree for Rs.94,17,990.00 against the defendants No.55;
w) Decree for Rs.6,43,18,330.00 against the defendants No.56.
x) Decree for Rs.3,90,08,870.00 against the defendants No.57;
y) Decree for Rs.1,76,22,04,608.82 against the defendants jointly and severally;
z) Interest at 20.10% per annum from October 1, 1998 till realization in respect of each decree;
aa) Enquiry into the losses and damages suffered by the plaintiff due to wrongful acts of the defendants and/or each one or more of them and a decree or decrees for the sum or sums found due on such enquiry.
bb) Enquiry into the respective liability of each of the defendants for wrongful acts committed by it and/or moneys obtained from the plaintiff and a decree for the sum so found due on such enquiry against each of such defendants;
cc) Declaration that the assets mentioned in a schedule annexed hereto marked "G" remain hypothecated and/or charged to the plaintiff for payment of the plaintiff's claims herein; dd) Decree for sale and realization of the hypothecated assets mentioned in the annexures "G" hereof by public auction or private contract with liberty to the plaintiff to appropriate the net proceeds thereof in pro tanto satisfaction of the plaintiff's claims herein;
ee) Declaration that the Letters of Credit issued by the Baghbazar Branch of the plaintiff and negotiated by and or held by each of the defendants Nos.53 to 57 including those mentioned in annexure "C-2" hereof are void and nullity and of no effect and none of the defendants Nos.53 to 57, has acquired any right, title or interest in any of such Letters of Credit or documents negotiated or payments receive thereunder;
ff) Decree for delivery of all Letters of Credit still held by each of the defendants Nos.53 to 57 including those mentioned in Annexure "C-2" hereof for cancellation.
gg) Permanent Injunction restraining each of the defendants Nos.53 to 57 from giving any effect or further effect or claiming any money or acting upon or further acting upon any of the Letters of Credit issued by and/or confirmed by Baghbazar Branch of the plaintiff and purported to have been negotiated by any one or more of the defendants Nos.53 to 57 including those mentioned in Annexure "C-2" hereof.
hh) Declaration that none of the defendants Nos.53 to 57 was entitled to any payment from the plaintiff under or in relation to the purported Letters of Credit including those mentioned in Annexure "C-2" hereof fraudulently issued by Baghbazar Branch of the plaintiff and negotiated by defendants Nos.53 to 57 or either or them and any payment received thereunder from the plaintiff is liable to be refunded;
ii) Realization of proceeds of bills unauthorizedly collected by other banks e.g. defendants No.53 to 57 and appropriation thereof towards protanto satisfaction of the plaintiff's claims;
jj) Judgment upon admission;
kk) Attachment before Judgment;
ll) Receiver;
mm) Injunction;
nn) Costs;
oo) Further and other reliefs."
An interlocutory application being G.A. No.4160 of 1998 was moved in the said suit inter alia praying for the following reliefs:
"f) Injunction restraining the respondents Nos.53 to 57 from demanding any money from the petitioner in relation to the void Letters of Credit purported to have been negotiated by them through unjustified and fraudulent transactions or to demand any money or in any way to deal with or to exercise any right, title or interest in relation of any of Letters of Credit issued by the petitioner's branches including the Bagh Bazar Branch;
g) Injunction restraining the respondents Nos.53 to 57 from utilizing the moneys received from the petitioner and/or in relation to any of the Letters of Credit including those mentioned in Annexure "C-2" of the plaint issued by the petitioner's Bagh Bazar Branch except keeping the same in a lien-free Fixed Deposit until disposal of the suit;
h) Respondents Nos.53 to 57 be directed to deliver the invalid Letters of Credit including those mentioned in Annexure "C-2" of the plaint purported to have been issued by Bagh Bazar Branch of the petitioner to this Hon'ble Court to be kept deposited with the Registrar, Original Side until the decision on the pending suit;
i) Respondents Nos. 53 to 57 be directed to file affidavits stating as to which one or some of the respondents or their customers have dealt in the transactions, nature and quantum thereof and as to what enquiries were made in relation to each of such customers, position of the accounts of each of them;
j) They should not be directed to furnish security for Rs.177 crores within the time to in specified by the Hon'ble Court and in default of showing cause of showing insufficient cause to direct them to furnish security for Rs.177 crores within 3 weeks and in default of furnishing such security within the said period to attach and kept attached till disposal of the suit their assets and properties particulars whereof shall be furnished by the petitioner;
l) The respondent Nos.53 to 57 be directed to refund and pay to the petitioner all amounts realized by way of proceeds of Bills unauthorizedly collected by them with liberty to petitioner to appropriate the same towards pro tanto satisfaction of the petitioner's claim.
m) Ad-interim Orders in terms of prayers above;"
Initially an order of injunction was passed in the said interlocutory application, restraining the defendant Nos.53 to 57 from proceeding with their applications under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, hereinafter referred to as the Debts Recovery Act.
On appeal, the order of injunction was vacated, whereupon the plaintiff- appellant filed a Special Leave Petition in the Supreme Court. The Supreme Court by its order dated 12th July, 1999 directed the High Court to decide the application on merits.
Mr. Hirak Mitter appearing on behalf of the plaintiff-appellant submitted that by use of the phrase merit, the Supreme Court could only have meant that the High Court was to decide whether the stay of the proceedings before the Debt Recovery Tribunal should continue. This was evident from the fact that the Supreme Court itself granted a stay of the proceedings before the Debt Recovery Tribunal.
Mr. Mitter referred to the Dictionary of English Law by Jowitt (Vol.2) where the meaning of the expression merit is "shorn of technicalities". The illustration given is "A person is said to have a good cause of action or defence on the merits when his claim or defence is based on the real matters in question and not on any technical ground".
Mr. Mitter next referred to Black's law Dictionary (5th Edn.), according to which, "the word merit as a legal term is to be regarded as referring to the strict legal rights of the parties." The meaning ascribed to the expression merit in Mitra's Legal and Commercial Dictionary (5th Edn.) is "the real matter in question as opposed to technicalities. It is a matter of substance as distinguished from a matter of form."
Mr. Mitter submitted that even though the Supreme Court had, by its order dated 12th July, 1999 directed the High Court to decide the application on merits, the learned Single Judge had not decided the application on merits, but rejected the same on the ground of want of jurisdiction.
Mr. Mitter argued that the learned Single Judge cursorily discussed the questions of merit and did not give any judgment on the various points made by Counsel appearing on behalf of the plaintiff-appellant. In particular, the learned Single Judge did not decide the question of involvement of fraud between the defendants, the question of recklessness and negligence in negotiating the letters of credit and the effect of lack of authority to sign a letter of credit.
Mr. Mitter submitted that the learned Single Judge committed an error in holding that the suit could not have been entertained in this Court, in so far as the defendant Nos.53 to 57 are concerned since the Debt Recovery Tribunal alone was competent to entertain and decide the questions involved. The suit against them has wrongly been dismissed.
Mr. Mitter further submitted that the conclusion of the learned Single Judge that the suit of the plaintiff-appellant could have been filed in the Debt Recovery Tribunal was patently wrong because recovery of damages for money wrongfully collected or cancellation of the purported letters of credit or injunction restraining enforcement thereof could not be considered to be recovery of debt within the meaning of Section 2 (g) of the Debt Recovery Act.
Mr. Mitter argued that the cause of action of the plaintiff-appellant in the suit was based on acts of conspiracy and fraud between three sets of defendants including employees of the plaintiff-appellant, who were necessary parties. There could be no question of initiating proceedings against employees of the bank in the Debt Recovery Tribunal.
Mr. Mitter submitted that the plaintiff-appellant had in its written statement before the Debt Recovery Tribunal taken the point of collusion, conspiracy and fraud, which could not obviously be decided in the absence of the defendant Nos.1 to 44 and defendant Nos.45 to 52.
According to Mr. Mitter, the learned Single Judge erred in law in not continuing the interim order of stay of proceedings initiated by the defendant banks against the plaintiff-appellant for recovery of their dues in connection with the letters of credit negotiated through the defendant banks.
Mr. Mitter submitted that the learned Single Judge had misapplied the law relating to orders of injunction and in particular confused the principles for grant of an interim order of injunction under the Civil Procedure Code, 1908 with grant of a final order of injunction under the Specific Relief Act, 1963.
Mr. Mitter submitted that while the Civil Procedure Code was applicable for interim relief which was in aid of final relief, the Specific Relief Act provided for final relief. In this context Mr. Mitter referred to Sections 37 and 38 of the Specific Relief Act.
Mr. Mitter submitted that the learned Judge erred in dismissing the suit of the plaintiff-appellant against the defendant Nos.53 to 57. Mr. Mitter referred to the judgment of the Supreme Court in Indian Bank vs. ABS Marine Products Ltd. reported in 2006 (5) SCC 72 affirming a Division Bench judgment of this Court that held that a civil suit for damages against a bank was separate from and independent of recovery proceedings initiated by that bank in the Debt Recovery Tribunal.
Mr. Mitter submitted that prayers (ee), (ff) and (gg) of the suit are for declaration that the letters of credit in question are void, a direction that the same be delivered up, cancelled and for perpetual injunction restraining the defendant banks from enforcing the impugned letters of credit. These were, according to Mr. Mitter, reliefs under Section 36 of the Specific Relief Act. The plaint, according to Mr. Mitter, contained the requisite averments.
Mr. Mitter submitted that there might have been some prayers claiming money decrees. However, there were other prayers including prayers for a declaration that the letters of credit in question were void, liable to be delivered up and cancelled and for perpetual injunction restraining the defendant banks from giving effect and/or further effect to the letters of credit in question or from claiming money thereunder. These reliefs could not have been granted by the Debt Recovery Tribunal.
Mr. Mitter submitted that the Debt Recovery Tribunal had no power to decide a declaratory suit. In the suit the plaintiff-appellant has sought reliefs other than monetary reliefs. Mr. Mitter argued that in view of the definition of debt in Section 2(g) of the Debt Recovery Act, a debt had to arise out of business activity undertaken by the plaintiff-appellant. The claim of the plaintiff-appellant for compensation is not 'debt'. Moreover, the plaintiff-appellant could not have initiated proceedings against its employee in the Debt Recovery Tribunal.
Mr. Mitter submitted that the scope of the word 'debt' need not be decided by this Court at this stage. Mr. Mitter, however, emphatically argued that the Debt Recovery Tribunal was not competent to grant all the reliefs claimed in this suit.
Mr. Mitter submitted that even if the present suit were to be treated as a counter-claim, the same could not conveniently be heard since the Debt Recovery Tribunal was not competent to grant the reliefs claimed in the suit. Moreover, in any case, even under the amended Section 19, the entertaining of a counter- claim was discretionary.
Mr. Mitter cited the judgment of the Supreme Court in Cotton Corporation of India Ltd. vs. United Industrial Bank Ltd. & Ors. reported in AIR 1983 SC 1272 in support of his submission that the Court had inherent powers to restrain a party from proceeding with any litigation in any Court.
The aforesaid judgment of the Supreme Court, with respect, does not lend support to the proposition that the Court has inherent power to restrain a party from proceeding with any litigation in any Court.
On the other hand, the Supreme Court has, in the aforesaid case held that the Court cannot grant an order of injunction restraining a person from initiating proceedings in a Court of superior or coordinate jurisdiction in view of the bar of Section 41 (b) of the Specific Relief Act, 1963. The Court cannot in exercise of its inherent jurisdiction to grant interim relief, nullify the said section.
Mr. Mitter placed reliance on the following observation of the Supreme Court:
"Taking the most favourable view of the decision of the Appellant Bench and assuming that the Bench had in its mind the inherent power of the Court to grant injunction despite statutory inhibition and consistent with the view taken by the courts in England, it had then in order to do justice between the parties, first reach an affirmative finding that the winding up petition as and when presented by the Corporation, the creditor would be frivolous and would constitute an abuse of the process of court or a device to pressurize the bank to submit to an unjust and dishonest claim. It must also reach an affirmative conclusion that the data bank is sufficiently solvent to satisfy the claim as and when established....."
The aforesaid observation of the Supreme Court is obiter. In any case, even for grant of stay of proceedings the Court would necessarily have to arrive at the finding that the proceedings would be frivolous, in abuse of process and a device to pressurize a party to submit to an unjust and dishonest claim.
Having regard to the pleadings and materials on record, it is impossible to hold, even prima facie, that the proceedings initiated by the defendant banks for recovery of the amounts expended by them to honour Letters of Credit issued by the plaintiff-appellant could be frivolous or harassive or in abuse of process or a device to pressurize the plaintiff-appellant to submit to an unjust or dishonest claim.
Mr. Mitter also cited Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal reported in AIR 1962 SC 527 where the Supreme Court held as follows:
"We are of the opinion that the latter view is correct and that the Courts have inherent jurisdiction to issue temporary injunctions in circumstances which are not covered by the provisions of Order XXXIX, C.P.C. There is no such expression in S.94 which expressly prohibits the issue of a temporary injunction in circumstances not covered by Order XXXIX or by any rules made under the Code. It is well-settled that the provisions of the Code are not exhaustive,...."
Mr. Gautam Chakraborty appearing on behalf of the defendant No.53, UTI Bank Ltd., now known as Axis Bank Ltd., submitted that the allegations of fraud, collusion and conspiracy were totally vague and devoid of any material particulars whatsoever.
Mr. Chakraborty submitted that it was the practice of UTI Bank Ltd. to forward all letters of credit along with corresponding documents to the opening bank for approval, and on each occasion, approval was given by a senior officer of the State Bank of India.
Mr. Chakrabory referred to Federal Bank Ltd. Vs. V.M. Jog Engineering Ltd. reported in AIR 2000 SC 3167 and submitted that in similar circumstances, the contention of fraud and/or collusion was not accepted by the Supreme Court.
Mr. Chakraborty pointed out that after the judgment of 16th July, 2002, the appellant moved the Appeal Court on 9th October, 2002 for stay, but no stay was granted. The Supreme Court by its order dated 9th October, 2002 granted leave to the plaintiff-appellant to file its written statement before the Debt Recovery Tribunal without prejudice to its rights and contentions.
The plaintiff-appellant filed its written statement in the Debt Recovery Tribunal on 26th February, 2003. Thereafter the defendant No.3 filed its evidence by way of affidavit.
Mr. Chakraborty submitted that the plaintiff-appellant has, in its written statement made a counter-claim under Section 19(8) and 19(9) of the Debt Recovery Act. The counter-claim is to have the same effect as a cross-suit. The Tribunal has jurisdiction to pass orders on the original claim and the counter- claim.
Mr. Chakraborty submitted that in the counter-claim, the plaintiff- appellant had alleged that the letters of credit, on the basis of which Defendant No.53 had claims against the plaintiff-appellant, were null and void and were of no effect and had sought permanent injunction restraining the defendant No.53 from claiming money or acting upon the letters of credit apart from enquiry into the alleged loss and damage suffered by the plaintiff-appellant.
Mr. Chakraborty argued that the Debt Recovery Tribunal had power and jurisdiction to determine the issues raised in the counter-claim. Mr. Chakraborty submitted that the only question for determination of this Court was, whether the learned Single Judge fell into error in holding that this Court had no jurisdiction to entertain the suit against the defendant No.53 and other banks in view of Section 2(g), 17, 18 and 34 of the Debt Recovery Act.
Mr. Chakraborty submitted that the interlocutory Court could not restrain the proceedings in the Debt Recovery Tribunal in view of the bar of Section 18 of the Debt Recovery Act. Supervisory control could not be exercised except under Articles 226 and 227 of the Constitution of India.
Mr. Chakraborty further submitted that the contention of the plaintiff- appellant that questions of fraud or collusion could not be decided by the Tribunal was not correct.
In support of his submission, Mr. Chakrabroty cited the following judgments:
1. United Bank of India vs. Debt Recovery Tribunal reported in AIR 1999 SC 1381.
2. State Bank of Bikaner and Jaipur vs. M/s. Ballabh Das & Co. reported in AIR 1999 SC 3408.
3. Hira Lall and Sons vs. Lakshmi Commercial Bank reported in 2002 (6) SCC 389.
4. J.U. Mansukhani vs. Presiding Officer & Ors. reported in AIR 2000 Del
103.
5. Cotton Corporation of India Ltd. vs. United Industrial Bank Ltd.
reported in AIR 1983 SC 1272 and
6. United Bank of India vs. Abhijit Tea Co. Pvt. Ltd. reported in AIR 2000 SC 2957.
Mr. Chakraborty concluded that the learned Single Judge had rightly held that this Court had no jurisdiction to entertain the civil suit against the defendant banks. The suit against the defendant Nos.1 to 52 is pending and the same may be proceeded with. There could also be no question of stay of proceedings in the Debt Recovery Tribunal by this Court in exercise of its inherent powers.
In United Bank of India vs. Debt Recovery Tribunal (supra) the Supreme Court held that the expression debt has to be given the widest amplitude to mean any liability which is alleged as due from any person to a bank.
In State Bank of Bikaner and Jaipur vs. M/s. Ballabh Das & Co. (supra) the Supreme Court held as follows:
"According to the definition, the term 'debt' means liability which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions. It should have arisen during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force. The liability to be discharged may be in cash or otherwise. It would be immaterial whether the liability is secured or unsecured or whether it is payable under a decree or an order of any civil Court or otherwise. However, it should be subsisting an legally recoverable on the date on which proceedings are initiated for recovering the same."
In Hira Lall and Sons vs. Lakshmi Commercial Bank (supra) the Supreme Court upheld transfer to the Debt Recovery Tribunal of a suit based on a letter of credit filed by the concerned Bank.
In J.U. Mansukhani vs. Presiding Officer & Ors. (supra) the High Court was of the view that application of Bank in the Debt Recovery Tribunal to enforce the claim of the bank in connection with drafts alleged to have been fraudulently obtained in collusion with bank officials, was maintainable.
In Cotton Corporation of India Ltd. (supra) the Supreme Court held that the Court cannot grant an injunction restraining the person from initiating proceedings in a Court of coordinate or superior jurisdiction in view of the bar of Section 41(b) of the Specific Relief Act, 1963 and that the inherent power of Court to grant interim injunction could not be invoked to nullify the said provision.
In United Bank of India vs. Abhijit Tea Co. Pvt. Ltd. (supra) the Supreme Court held that the prior suit of a constituent in the Civil Court seeking specific performance of an agreement not to charge interest could be transferred to the Debt Recovery Tribunal, treating the same as counter-claim in the subsequent suit instituted by the bank for recovery of its dues.
The judgment was, however, rendered in the context of resistance to the transfer of a bank's suit filed before enactment and/or enforcement of the Debt Recovery Act, on the ground of the issues being inextricably linked with the issues in the earlier suit of the constituent in the Original Side of this Court.
Mr. Rajsekhar Mantha appearing on behalf of the South Indian Bank Ltd. and the Global Trust Bank Ltd. (now known as Oriental Bank of Commerce) being the defendant Nos.54 and 55, adopted the submissions of Mr. Chakraborty.
Mr. Mantha added that the learned Single Judge had considered the case in its entirety, both on the issue of jurisdiction and on merits and had held that injunction restraining the defendant Nos.53 to 57 from proceeding with their application before the Debt Recovery Tribunal could not be sustained.
Mr. Mantha pointed out that the attention of this Court had not been drawn to an important fact that two other branches of the plaintiff-appellant, namely, the Bhupen Bose Road and the Shyambazar branch also negotiated the same series of letters of credit issued by the same employees of the Bagbazar branch of the plaintiff-appellant during the same period of time. Even after lodging the FIR and after refusing to honour the letters of credit negotiated by the defendant Nos.53 to 57, the plaintiff-appellant honoured the same series of letters of credit negotiated by its own branches. The appellant cannot be allowed to approbate and reprobate.
The learned Single Judge has allowed the application in part. The orders in terms of prayers (a), (b) and (c) have been confirmed. Further orders in terms of prayers (e), (j) and (k) have also been passed against the defendant Nos.1 to 52.
The prayers (f), (g), (h), (i) and (l) have been rejected. Prayer (f) is for an order of injunction restraining the defendant banks from demanding money from the petitioner in relation to the letters of credit. The plaintiff-appellant has indirectly sought to achieve what cannot be achieved directly, that is, stay of proceedings before the Debt Recovery Tribunal for all practical purposes.
Prayer (g) is for an order of injunction restraining the defendant banks from utilizing the money received from the plaintiff-appellant in respect of the letters of credit. No case was made out in the petition for such an order. There could be no justification in restraining the defendant banks from utilizing the money. If ultimately, the plaintiff-appellant succeeds, the money would necessarily have to be refunded.
Prayer (h), which is for a direction to deliver the letters of credit to this Court, so that the same can be deposited with the Registrar, Original Side till decision in the pending suit, is also designed to obtain indirectly that which cannot directly be obtained, that is, effective stay of proceedings before the Debt Recovery Tribunal.
Prayer (i) for a direction on the defendant Nos 53 to 57 to file affidavits disclosing the facts required in the said prayer, is vague, not supported by any provision of law and in any event premature. The grant of prayer (l) that is return of money received in respect of the letters of credit would amount to grant of the final reliefs in the suit.
The Supreme Court by its order dated 12th July, 1999, directed the High Court to hear the application of the petitioner for interim relief on merits. The learned Single Judge has considered the matter at length, both on the issue of jurisdiction and on merits and held that the injunction restraining the defendant Nos.53 to 57 from proceeding with their application before the Debt Recovery Tribunal could not be sustained.
Decision on merits includes decision on both factual and legal questions including the question of the jurisdiction of the Court to pass orders that are prayed for in an application.
As rightly argued by Mr. Mitter, upon reference to the dictionaries referred to above, the word 'merit' refers to the strict legal rights of the parties. Adjudication on merits means adjudication of the real controversy in question, shorn off technicalities. It is a matter of substance as distinguished from a matter of form.
Adjudication of the real controversies in the interlocutory application would necessarily involve adjudication of the right of the petitioner to obtain from Court, the orders prayed for in the interlocutory application.
The learned Single Judge has, in effect and in substance held that the petitioner had no right to obtain stay of proceedings initiated by the concerned defendants in the Debt Recovery Tribunal by making an interlocutory application in a suit filed by the plaintiff-appellant in this Court.
Prima facie, the application of the defendant No.53 in the Debt Recovery Tribunal, for recovery of its alleged dues in respect of the letters of credit negotiated and honoured by the Defendant No.53, is an application for recovery of 'debt' within the meaning of Section 2(g) of the Debt Recovery Act, which only the Debt Recovery Tribunal has jurisdiction to entertain and decide.
The Interlocutory Court cannot exercise any jurisdiction, power or authority in respect of an application for recovery of debt in view of the bar of Section 18 of the Debt Recovery Act. The Interlocutory Court cannot, therefore, pass orders that would, in effect, stay proceedings in the Debt Recovery Tribunal.
Even otherwise, the Civil Court has no power to issue such interim orders in a suit, as would restrain the respondents from proceeding with their application in the Debt Recovery Tribunal, which does not exercise jurisdiction inferior to that of this Court hearing suits and/or interlocutory applications, in view of the bar of Section 41(b) of the Specific Relief Act, 1963.
We are unable to accept the submission of Mr. Mitter that the learned Judge confused the principles for grant of interim relief under the Civil Procedure Code with the grant of final relief of injunction under the Civil Procedure Code. Interim relief is in aid of the final reliefs. If final relief of injunction cannot be granted, the Court might not grant interim relief of injunction.
For exercise of the power and/or authority to pass any specific order it is essential that a Court should have jurisdiction. Jurisdiction of the Court goes to the root of any claim to seek relief from that Court. Rejection of a relief on the ground of want of jurisdiction of the Court to grant that relief does not tantamount to rejection on a technical ground.
A simple direction of the Supreme Court, to hear an application on merits, cannot be construed as a finding of the Supreme Court on the question of jurisdiction of this Court, hearing an interlocutory application in a suit, to stay proceedings before the Debt Recovery Tribunal.
It is true that the Supreme Court passed an interim order of stay of proceedings before the Debt Recovery Tribunal pending decision on the application of plaintiff-appellant for stay of the proceedings before the Tribunal, as otherwise the direction of the Supreme Court to hear out the application for stay of the plaintiff-appellant on merits would become infructuous. The Supreme Court has power under Article 142 of the Constitution to pass any order to do complete justice between the parties, which this Court lacks.
The Supreme Court not having decided the question of the jurisdiction of the High Court to pass an interim order in a suit, staying proceedings before the Debt Recovery Tribunal, the direction of the Supreme Court to decide the application on merits has to be construed as a direction to consider and adjudicate the merits of the contentions of the respective parties, legal and factual, including the merits of the contentions with regard to the jurisdiction of this Court to stay proceedings before the Debt Recovery Tribunal.
The allegations of negligence of the defendant Nos.53 to 57 in negotiating the letters of credit are devoid of material particulars. The plaintiff-appellant has not been able to make out a strong prima facie case of contravention of the Uniform Customs and Practice in relation to Documentary Credits or of negligence otherwise on the part of the said defendants.
Whether the Letters of Credit were in format or not, whether the negotiating banks could have found out whether the Letters of Credit were in format or not, whether the defendant banks discharged their duty of scrutiny and/or care are issues that have to be decided upon evidence. Proceedings in the Debt Recovery Tribunal cannot, in effect, be stayed for the asking on the basis of bald allegations. It is not the case of the plaintiff-appellant that the concerned defendant banks were put to notice of fraud.
No case of fraud was made out in the plaint or in the interlocutory application. The plaintiff-appellant cannot make out a new case in its Affidavit- in-Reply. An Affidavit-in-Reply cannot enlarge the scope of an application.
In any case, the learned Single Judge could not have decided the question of involvement of fraud between the defendants at the interlocutory stage. The learned Judge, however, in effect held that the plaintiff-appellant had failed to make out a strong prima facie case of involvement of fraud. There is no case of involvement of the defendant Nos.53 to 57 in any fraud.
The learned Single Judge was only required to see whether there was a prima facie case. Determination of the various points made by Counsel would, in effect, result in the prejudging of the suit.
In Federal Bank Ltd. Vs. V.M. Jog Engineering Ltd. (supra), cited by Mr. Chakraborty, the Supreme Court held as follows:
"It is, therefore, clear that under Article 11(d), it is sufficient if the Negotiating Bank is satisfied that the documents which appear on their face to be in accordance with the terms and conditions of the credit. If the Negotiating Bank then pays, the Issuing Bank is bound to reimburse the negotiating Bank.
We have to refer to another important Article, i.e. Article 15, which concerns the 'reasonable care' with which documents have to be examined. This Article has relevance on the question of 'fraud'. It refers to the safe-grounds to be taken by the Bank. It states:
"Article 15: Bank must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in accordance with the terms and conditions of the credit".
At common law, the position is no different. The principle of reasonable care has been applied by Lord Diplock in Gian Singh & Co. Ltd. v. Banque de L'indochine (1974) 1 WLR 1234. The Bank has to examine with reasonable care to ascertain if they appear on their face to be in accordance with the terms and conditions of credit. In that case, the reference was made to Article 7 of the UCP (1962). It was observed that the said Article did no more than restate the duty of the bank at common law.
If the Issuing Bank does not return them within reasonable time, it may be deemed that it has ratified the genuineness of the documents. These clauses are based on principles of common law." Prima facie the plaintiff-appellant did not draw the attention of the negotiating banks to any discrepancy, irregularity or fraud, but on the other hand approved the honouring of the Letters of Credit. For the wrong, if any, of the employees of the plaintiff-appellant, banks which have made payments cannot suffer.
In any case, as pointed out by Mr. Mantha, the plaintiff-appellant has honoured letters of credit of the same series negotiated by two other branches of the plaintiff-appellant. This in itself weakens the case sought to be made out by the plaintiff-appellant with regard to fraud, at least prima facie. The interim orders sought, have in our view, rightly been declined.
We, however, agree with Mr. Mitter that the learned Single Judge erred in dismissing the suit as against the defendant Nos.53 to 57. The suit has been dismissed as against the defendant Nos.53 to 57 on the application of the plaintiff-appellant for interlocutory reliefs. There was no formal application of the defendant Nos.53 to 57 for dismissal of the suit against them. In the absence of any application for dismissal of the suit the learned Single Judge was not required to consider the maintainability of the claims of the plaintiff-appellant in the suit against the defendant Nos.53 to 57 except to the extent necessary for grant of the interim order prayed for by the plaintiff-appellant.
We do not deem it necessary to decide whether all the reliefs claimed by the plaintiff-appellant against the defendant Nos.53 to 57, in the suit, could have been claimed in the Debt Recovery Tribunal, either by way of counter-claim or by initiation of independent proceedings.
In ABS Marine (supra), the Supreme Court affirmed the Division Bench judgment of this Court holding that the prior suit for damages against the bank in that case, was not so inextricably linked with proceedings initiated by the bank for recovery of the debt, to warrant transfer of the said prior suit to the Tribunal. A judgment is a precedent for what it decides. ABS Marine (supra) is neither an authority for the proposition that damages against the bank can never be claimed in proceedings before the Debt Recovery Tribunal, by way of counter- claim, nor an authority for the proposition that proceedings in the Debt Recovery Tribunal should not be proceeded with until suits against the applicants in Civil Courts are disposed of.
The learned Single Judge was only required to decide whether interim orders as prayed for by the plaintiff-appellant could be passed. In other words, the learned Single Judge had to decide whether proceedings in the Debt Recovery Tribunal could, in effect, be stayed in an interlocutory application, in a suit filed before this Court. Even assuming that some of the reliefs claimed in the suit could be claimed in proceedings before the Debt Recovery Tribunal, the dismissal of the suit as against the defendant Nos.53 to 57, at the interlocutory stage, cannot be sustained.
We, therefore, set aside the judgment and order under appeal only to the extent that the suit filed by the plaintiff-appellant has been dismissed as against the defendant Nos.53 to 57.
SURINDER SINGH NIJJAR, CJ.
I agree.
(SURINDER SINGH NIJJAR, CJ.) (INDIRA BANERJEE, J.)