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Code of Civil Procedure, 1908-Order XXXIX Rules 1 and 2-Interim Injunction-Contractual transaction-Money advanced to second party and third party secured the loan by hypothecation and charge-Notice by lender to the securing party seeking repayment of the amount-Suit by securing party against the lender for mandatory injunction and application for interim injunction-Claim of lender before Debt Recovery Tribunal-Interim injunction granted and execution of any order by Tribunal restrained-Held: In the facts and circumstances of the case, the court below could not exercise its discretion to grant any interim injunction-Injunction against enforcement of orders of Tribunal also not correct-Such injunctions against 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. Appellant-defendant No. 1 issued a notice to respondent No. 1 – plaintiff and defendant No. 2, seeking repayment of the amounts advanced by it to defendant No. 2, the repayment of which was secured by hypothecation and charge created by the plaintiff. Pursuant thereto respondent No. 1 – plaintiff filed a suit against defendant Nos. 1 and 2 for mandatory injunction restraining the defendants from interfering with certain capacitor banks systems allegedly supplied by the plaintiff and installed at various substations of Transmission Corporation of Andhra Pradesh. Plaintiff also filed application for interim injunction. Trial Court granted interim injunction. In the meanwhile appellant filed its claim for recovery of the amounts due, before Debts Recovery Tribunal. It also filed application for vacating the interim order and the same was vacated by Single Judge of High Court. Plaintiff’s appeal thereagainst was allowed by Division Bench of High Court on the ground that since the suit was filed earlier to the claim before Debt Recovery Tribunal, the court was competent to entertain the suit and granted interim injunction. It permitted the proceedings before the Tribunal, but restrained the execution of any order that might be passed by the Tribunal. Hence the present appeal. Citation: 2006(8 )Suppl.SCR698 ,2007(1 )SCC106 ,2006(11 )SCALE585 ,2006(10 )JT366 Allowing the appeal, the Court HELD: 1. On the facts and in the circumstances of the case, the court is 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. 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. 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 this court to be a case of prohibitory injunction – and whether the balance of convenience is in favour of the grant of an interim order of injunction. [702-B-F] 2. 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. [702-F-H; 703-A-C] 3. 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. [703-E-F] State Bank of India v. M/s Ranjan Chemicals Ltd. and Anr., (2006) 10 SCALE 150, referred to. K.K. Mani for the Appellant. L. Nageshwar Rao, T.G. Narayanan Nair, Nandakumar K.P. Venugopal, and E. Venukumar, K.J. John & Co. for the Respondents.

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English: Law and legal affairs in 15th century...

English: Law and legal affairs in 15th century Normandy, France: duel with swords between plaintiff and defendant. Hand-painted color miniatures with ornate borders. Illustration in: The Costumes de Normandie, ca. 1450-1470 (folio 89). (Photo credit: Wikipedia)

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 http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3
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 http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3
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 26 appellant, would
be entitled to its costs in this Court.

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