1 226 r r 2 4 e r CU2590 of 2009 INTHE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CR2590 of 2009 Decided onl Octobero920090 ICICIBank Limited m Petitioner 0 VERSUS C3 Mls GargAcrylics Limited and others Respondents Z k R 31 t CORAM HONBLE MRJUSTICE MMBEDI At Z 08 PRESENT MrAshok Aggarwal Senior Advocate with MrKirat NagraAdvocate for the petitioner e e MrArun Palli Senior Advocate with Z MrAkshayBhan Advocate for the respondents v MMS BEDI J The has preferredthis reviSion petitionunder Anicle 227 of the Constitution of India aggrievedby the order dated 271009 lnexure Pll passedby the Civil Judge Divn Ludhiana dismissingthe appiicationof the defendantoetitioner under Order 7 Rules 10 S 11 CPC n a suit filed bythe Brief which is necessary for the of the presentrevISIon petitionIS that the plaintif 1 e Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document rlJ 227 S r C2590 of 2009 Mls GargAcrylicsLimited and others have filed a suit for declaration that the International Swabs and Derivatives Association for short ISDAI Master dated l072006 and Ol 92007 executed between the and the Bank are illegal violative of Reserve Bank of India RBl1 1 Q notification and not bindingor enforceable againstthe plaintiff 0 and for relief of permanent to restrain the C I defendantoetitioner e its directors or officers or agentsfrom actingin pursuance of orin furtherance ofthe said contract orfor I any amount from the the or from Z the personalguaranteefrom No2 andlor 3 tt The bank filed an I under Order 7 Rules 10 S 11 CPC prayingthat it is the HighCourt 08 of Bombaywhich has got to consider the claim of the and that the suit from the statement in the Z r 1 plaintis barred by provisionsof Sections 38 8 41 of the SpeciOc r41 Relief Act and that the plaintshould be rejectedor returned to be presentedin appropriateCourt at BombayThetrial Coun vide impugnedorder 64nnexurePl l has dismissed the applicationfiled bythe inter alia on the followinggroundsl 11 The plaintiffbank as Corporationhas got a subordinate office at Ludhiana where the cause of action has ansen and that the also carries on business at Ludhiana 21 It is not the Mumbai Court has the 2 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 228 0 a 1 P C2590 of 2009 0 territorial to enteItain the suit filed bythe the plaintiffespondentsand the partiescannot confer jurisdictionon a Court where has its principaloffice 31 In view of the provisionsof Section 17 of the e Recoveryof Debts Due to Banks and Financial C InstitutionsAct 1993 or shott the ActI providing 0 that onlyDebt RecoveryTribunal DRT1 will have C3 the jurisdictionand Section 18 debarringthe I jurisdictionof the Civil Court the defendanta petitionerbank will be debarred to go to civil Court and not the the Z 41 DRT has got no power to declare the contracts as illegalnull and void as claimed by the I the c M 51 l Iit is not properlyvalued for the am purposeof affixationof stamp The real value f1 Z of the suit would be decided on the basis of the r evidence 6 It is not the Mumbai Courts but the Ludhiana court which will have the jurisdictionto entertain the suit and in the circumstances of the case partiescannot on a Court where the Corporation has its principaloffice ShAshok AggarwalSenior Advocate appearing on behalf of the bank has urgedhat the petitionerbank being a financial institution has entered into ISDA Master 3 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 229 1 P C2590 of 2009 with the the plaintiffespondents and Clause 13ol of the Master Agreementreads as follow 13Iol With respect to any suit action or proceeding relating to this agreement ProceedingsIeach pattyirrevocablyl W t il submits to thejurisdiction of the Higt Court of 0 0 Mumbai in India and I iil waives any objectionwhich it may have at I any time to the Iayingof the venue of any Z proceedingsbroughtin any such Court and waives the right to object with respect to such proceedings that such court does not have jurisdiction over such party 08 Nothingin this agreementprecludespartyB mmeo from bringingproceedingsin any other Court Z tribunal or appropriateforum in India nor will bringingof proceedingsin any one or more jurisdictionsprecludethe bringingofproceedings in any Il He has drawn my attention to the ISDA Master ovdl 0 I lll agreementdated 247006 tL A highlight that 4 W the Corporateoffice of the petitioner is situated in Mumbai within the jurisdiction of HighCouit of transactions executed inter se the partiesexpresslynote that the oHice of the petitionerwas to ot 1 be in the office iM Mumbai and that service of all the notices and 4 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 111 230 V CN2590 of 2009 other correspondence were to be effected on the petitionerthroughl its Mumbai office ISDA Master Agreements were executed by the at Mumbai office all paymentsdue to the from the petitionerunder the transactions andlor the ISDA Master Agreements were made to the respondents from the petitioner office 1Q in Mumba all orders of to the petitioner with regardto 0 transactions were executed in Mumbai all C I pertainingto the transactions was exchanged between the petitionerand the respondentsfrom the petitioners I office at Mumba and that the cause of action for the suit arose in Z Mumbai He arguedthat in terms of Section 20 CPC 0 and the specifictransfer clause in ISDA Master Agreementthe Civil Court at Ludhiana does not have to entertain or trythe 08 was urgedbyMrAggarwal that it is clear from the terms and 7 conditionsof ISDA Master Agreement that paitiesto the agreement Z 1 have agreedto oust the jurisdictionof other places and have irrevocablyagreedto submit to the jurisdictionof High Coun of rJ Mumbai each partyhas waived any objectionto the jurisdiction of courts at was highlighted that controversy to the jurisdictionclause in the agreementreserves the rightof the ICICI Bank referred to as partyBl to bringany proceedingsin any other Court Tribunal or appropriateforum to stipulatethat in case of bringingany in anyone of more such the same would not precludeICICI Bank from bringing the proceedings Ill adsIany the main grievanceof MrAggarwalis that 5 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document S 231 r CRIl2590 of 2009 the trial Court had grantedan ex parteinjunctionorder dated 2032008 directing the to maintain status quo regarding transactionstill further orders without givingany to the which had caused great Ioss to the petitionerbank he arguedthat the trial Court has wronglyheld that panies cannot m C confer of a Court where the Corporationhas 0 its office MrAggarwat urgedthat the Civil C Court at Ludhiana Iacks territorial as cause of action for filingthe suit did not arise at Ludhian Existence of subordinate I office of petitionerin Ludhiana was immaterialand irrelevant He Z placedreliance on Hakam Sinqh Vs Gammon Ilndial Ltd 119711 1 SCC 2861BCaminarPl Ltd VslPAqencies 1198912 SCC 163 Anqile Insulations V Davv Ashmore India Ltd 119951 08 4 SCC 153 to contend that there may be two or more Courts 7 I l competentto entertain a suit consequenton a pai1of cause of Z action havingansen therein Ifthe paniesto the contract agree to ev1 vest in any one of such Coults to try the disputewhich mightarise 1Wbetween themselves such agreementwould be valid and bindingand would be contraryto either the principle of publicpolicyor provisionsof Section 28 of the Indian Contract Act Counsel for the petitionerals6 urgedthat the Iower Coutt has not appreciatedthe fact that amount has become due and payableby the respondentto the petitionerThe transaction constitute a debt under the provisionsof Section 2 of the Recovery of Debts Due to Banks and Financial InstitutionAct 1993 6 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 232 1 C12590 of 2009 Itesubmittedthat if seen in context to the Section 4511of ReseTve Bank of India Act Amendmentl2006 derivative transactions are j Derivativecontract means an instrumentto be settledat a futuredate whose value is derivedfrom the changein interest rate foreignexchangerate etc transaction with respondentbeing 1 Q derivativethe petitioner bank is within its rightunder Iaw to initiate 0 IegaIproceedingso as to recover the said debt from C I the byfiling applicationunder Section 19 of the Recoveryof Debts Due to Banks and Financial InstitutionAct 1993 Z MrArun Palli Senior Advocate for the the C has argued that it is on Iy the civil Court at I Ludhianawhich will have the in the matter and that prima 08 facie the Master Agreementdated 24072006 entered into 2 between the the and defendantoetitioner IS Zl null and void He relied upon Hanil Era Textiles Ltd Vs It Puromatic Filters IPI Ltd l200414 SCC 671 LeSrned counsel for the the submitted in the Iightof Section 90f Civil Procedure Code CPCI that Iaw confers on every person an inherent rightto bringa suit of On5 0 41p civil nature on e8ee choice od once peril claim may be unless it is barred by a statute In supportof his contention he relied upon Abdul Gafur and another VState of Uttrakhand and others 12008110 SCC 97 have heard the Iearned counsel for the paniesand 7 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document V3 2 233 C C2590 of 2009 gone throughthe facts and circumstances of the case So far as the rightof the petitionerbank under Section19 of the Act is concerned it is alwaysopen to the bank to file a petitionunder Section 19 of the Act before the DRT to seek the recovery with interestpnyamount which it claims to be due to C the Bank In Nahar Industrial Enterprises Ltd Vs Honq Konq S 0 Shanqhai Bankinq Corporation 12009110 SCALE 360 in which C the provisionsof the Recoveryof Debts Due to Banks and Financial 5 InstitutionAct 1993 came up for consideration before the Honble I ApexCourt in a matter where the questionarose was if HighCouit Z or SupremeCourt has got power to transfer a suit pendingin a Civil CouIt situated in one State to a Debt RecoveryTribunal situated In GLl1 I In the questioninvolved therein it was held that the 08 of the civil Coutl will be barred under the Banks and Financial Institution Act 1993 It was held in the said case that High Coutt cOlnot transfer a suit from the CiviI Coun to DRT as by said J transfer jurisdictionof the civil Court cannot be taken away or tke 1othetwiseconferred Takinginto consideration the various provisionsof the Act it was held that DRT is not a civil Court In said Nahar Industrial Enterprises Ltd Case Isupral it was held that provisionsof seteoffof counter claim bydefendants inan application filed by banklfinancial institutions the Tribunal was permittedby Amendment Act N1 of 2000 in another case Indian Bank Il VsA4arten ProductsIPILtd1200615 SCC 72 8 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 234 1 1073 CN2590 of 2009 Takinginto consideration the provisions of 1961and 19111 as introduced by Act N1 of 2000 it was observed that these are enablingprovisionsIt was observed that Sections 17 8 18 have not been amendecJrisdiction has not been conferred on the Tribunal even after amendmentto tryand entertain C suits or proceedingsinitiated by borrowers or others against 0 bankslofficialinstitutionsnor the of Civil Courts barred Itl C I regardto such suits or proceedingsThe onlychangethat had been made was to enable the defendants to claim set off or make a 4r counter claim as providedunder Sections 1961 to 19 in the Z 5r applicationsalreadyfiled by the banks or financial institutionsfor C2 recovery of the amounts due to them In Indian Bank Case Isupral 4r I the respondenthad filed a suit for damagesagainstthe bank priorto 08 the bank filed an application before the DRT againstthe Companyit was held as followsl m Z 0 1 1 7 Makinga counterclaim in the bank applicationbefore the Tribunal IS not the only remedybut an optionavailable to the defendant borrower He can also file a separate suit or proceeding before a civil Court or other appropriate forum in respectof his claim againstthe bank and pursue the same Even the bank in whose applicationthe counterclaim IS made has the optionto apply to the Tnbunal to exclude the counterclaim of the defendant while consideringits applicatiorWhen such application by the 1 bank the Tribunalmay either refuse or exclude the 9 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 235 1 1 1 C2590 of 2009 counterclaimand proceedto consider the banks and the counterclaim togetheror excludethe counterclaim as prayedand proceed onlywith the banks applicationin which event the counterclaim becomes an independentclaim against a banklfinancial institution The defendant 1 will then have to approach the civil Coun in respect C of such excluded counterclaim as the Tribunal 0 does not have to try any independent C claim against a banklfinancial institution A I defendant in an applicationhavingan independent claim againstthe bank cannot be compelledto make his claim againstthe bank onlyby way of a Z counterclain Nor can his claim by way of m independentsuit in a Court havingjurisdictionbe r transferredto a tribunal againsthis wishes 1 I 08 18 In this case the first respondentdoes OO not wish his case to be transferredto the TribunaI em It is therefore clear that the suit filed by the first Z P respondentagainstthe Bank in the HighCoutt for IL recoveryof damagesbeingan independentsuit Ill and not a counterclaim made ltheapplicationfiled by the Bank the Banks applicationfor transfer of the said suit to the TribunaI was misconceived and not maintainable The HighCourt where the suit for damageswas filed by the Companyagainstthe Bank Iongprior to the Bank filingan application before the Tribunal against the Company continues to have jurisdictionin regardto the suit and its jurisdictionis not excluded or barred under Section 18 or any other provisionsof the Debts RecoveryAct 10 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 236 1 C12590 of 2009 the above said judgmentit is thus thatthe rightof the bank to file a claim under Section 19 of the Act will not debarthe other partyto file an claim againstthe bank byfilinga separatesuit An additionalrighthas been givento the said partyalso to raise the counter claim in banks application m beforethe Tribunal In United Bank ofIndia Calcutta VsAbhiiit 0 Tea Co Pvt Ltd S Ors 1200017 SCC 357 it was observed that C I an independentsuit of a defendant n the banks applicationlcould be deemed to be a counter claim and could be transferred to the Tribunal will applyonlyif the following conditionswere satisfied Z i The subjectmatterof the banks suit and the suit of the defendant againstthe bank should be I inextricablyconnected in the sense that the 08 decision in one would affect the decision in the other 7 Z Il iil Both parties he plaintiffin the suit against 1 the bank and the bankl should agree for the independent suit being considered as a counterclaim in the banks applicationbefore the Tribunal So that both could be heard and disposed of by the Tribunal Takinginto considerationthe ratio of the above said judgmentsthe petitionerbank has got an independentrightto file applicationunder Section 19 of the Act before the DRT or any other suit or proceedingsbefore the HighCourt of Mumbai on the basis of 11 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 237 b c4 C2590 of 2009 the Master entered into between the paniesAt the time the plaintiffsespondents have also got a Iegalrightto bringa suit of civil nature on its own choice at its own peril howsoever frivolousthe claim may be unless it is barred by a statute There is no of Iawwhich debars the the to Ole Im a suit for declaration and injunctionas per the provisions under 0 Sections 34 8 38 of the SpecificRelief Act In case the suit for 0 is Iiableto be dismissed under Section 41ol the said suit I will be dismissed on merits at the time of final Whether m the plaintiffsespondents can be grantedan injunctionrestraining Z the defendantoetitioner from or any in accordance with Iaw on the basis of their civil rights I accruingin pursuantto the Master agreementcannot be determined 08 at this stage by this Couit or by a Coutt while decidingthe under Order7eRules 10 8 11 CPC Since it has been 7 Z held bythis Court that the the have gota Iegal 1 rightto file a civil Suit at a placewhere it is runningbusiness or e where there exists a branch of the petitionerbank at the same time it is held that the observations of the trial Coun that the Mumbai Courts do not have jurisdictionto entertain the suit is not sustainable The suit filed by the the IS maintainable at Ludhiana as well as at Mumbai but it has wrongly been held by the trial Court that DRT has got no power to declare the contract as illegaland void The trial Coutt has wronglyheld that it is onlythe civil Court which can declare the contracts in question 12 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 238 1 019 1 V t CN2590 of 2009 as and voicl The findingof the trial court that the subject mattercan be upon onlybythe Courts at Ludhiana and V that it is onlyLudhiana Court which will have to entenain the suit is hereby set aside and it is held that the pleasraised bythe can also be upon by DRT in case 1 Q any under Section 90f the Act is filed before the DRT or 0 beforea Court at Mumbai as per the Master AgreementIt is funher C held that the order dated 271 2009 will not prejudice the I cr rightsof the bank to avail the Iegalremedy 22 mm availableto it in accordance with Iaw either by DRT or Z byfiling a petitionbefore the Mumbai Courts as per the agreement So far as the order of the trial Court dismissingthe applicationunder Order 7 Rules 10 8 11 CPC is concerned no fault can be found in 08 the order dismissingthe The application has been rightly dismissed but the two adverse observations made againstthe 7 Z r in the order mentioned hereinbeforeare hereby Ute set aside It will be open to the the plaintiffsespondents to raise the pleasin their defence or as counter claim in case any proceedings are initiated by the the before the DRT or at Mumbai Coutt which Courts will certainlyhave Whether ehtt the suit of the could be transferred is dependi leef on the circumstances existingIll or to any other Court Z has not been adjudicatedupon at this stage as it will be premature to express any opinionin that respect In view of the above ci rcumstances the revision 13 e Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 239 CU2590 of 2009 petitionIS paltlyallowed and partlydismissed and the adverse observations as mentioned hereinabove against the defendante petitionerpertaining to territorialjurisdiction are herebyset aside Paies throughcounsel are directed to appear beforethe trial Court on 31 l o e240 1 0 C JUDGE I Octobero 2009 rka J Z d1 Il Q I o8 m7 Z 1 J 14 5 Batra Amit 2012.12.15 11: 08 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document