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2003 DIGILAW 2519 (ALL)

LCL Jewellery Ltd. v. Bank of Baroda

2003-10-23

A.N.VARMA

body2003
( 1 ) THROUGH the instant writ petition under Article 226 of the Constitution of the India the petitioners have assailed the order dated 31-3-2003 and 30-9-2003 passed by opposite party No. 4 as contained in Annexure No. 13 and 15 of the petition. A further relief for issuance of a writ in the nature of prohibition has also been prayed for prohibiting the opposite party No. 4 not to enforce the decision (Annexure No. 13 and ( 2 ) THE factual scenario under which the instant writ petition arises is as follows The petitioner No. 1 which is said to be a company duly incorporated under the Companies Act, 1956 and petitioners No. 2 and 3 being its Directors/with a view to promote a project to manufacture Gold, Jewellery for domestic as well as for International Market in collaboration with M/s. Sisma SPA, italy, approached the Bank of Baroda Narhi branch Lucknow for financial assistance in the nature of Foreign Currency Term Loan for import of plant and machinery and for allied purposes. To secure the said facilities the petitioners executed several documents with opposite party No. 1. Property belonging to the petitioners situate at Lucknow was also hypothecated to secure the said loan. Facility agreement between the petitioners company and the Bank was also executed on 3-11-1997 after completion of all the formalities required to be undergone a Foreign currency Term Loan (FCTL) to the tune of rs. 6. 50 crores was sanctioned in the year 1997 by the opposite party No. 1. Since the amount was to be paid in foreign currency, therefore, the Branch of Bank of Baroda at 31/32, King Street, London was to make available the FCTL. The entire loan amount was to be repaid in five years with moratorium period of 18 months, in seven equal half yearly instalments commencing on completion of moratorium of 18 months from the date of first draw down. Interest was to be paid six monthly, though the FCTL was to be disbursed in foreign currency by the london Branch, the Bank was entitled to recover the equivalent amount of the same in Indian Rupees to be remitted to the Narhi branch. Interest was to be paid six monthly, though the FCTL was to be disbursed in foreign currency by the london Branch, the Bank was entitled to recover the equivalent amount of the same in Indian Rupees to be remitted to the Narhi branch. ( 3 ) AS the petitioners did not make payment of any of the instalments of the loan even after the completion of moratorium period the opposite party No. 1 made an application to the Debts Recovery Tribunal under Section 19 of Recovery Debts due to banks and Financial Institutions Act, 1993 (hereinafter to be referred as an Act) for recovery of the debt from the petitioners. ( 4 ) BEFORE the tribunal i. e. opposite party no. 4 a preliminary objection was raised by the petitioners that it did not have the territorial jurisdiction to adjudicate upon the matter. According to the petitioners, it was only Courts at London which had the jurisdiction to decide the matter/the tribunal after hearing the parties vide judgment and order dated 31-3-2003 (Annexure No. 13)repelled the contention of the petitioners. It held that Courts in India at Lucknow had the Jurisdiction to try this case. Being aggrieved against the said order the petitioners approached the Appellate Tribunal. The order dated 31-3-2003 was, however, not stayed and the appeal remained pending. The tribunal proceeded to decide the case on merits. The opposite party No. 4 after hearing the parties and perusal of the record allowed the application preferred by the opposite party No. 1 and issued the recovery certificate against the petitioners for recovery of sum of Rs. 8,94,06,371 (Eight Crores ninety Four Lacs Six Thousand Three Hundred Seventy One) together with pendente lite and future interest at the contractual rate with quarterly rest till the realization of the said amount. It further ordered that all the hypothecated machinery and moveable and immoveable property which was mortgaged shall remain attached under the jurisdiction of the tribunal. The petitioners have also been restrained from selling of, transfer or alienating mortgaged/hypothecated properties. It is against the said judgment and orders dated i. e. 31-3-2003 (Annexure No. 13) as well as 30-9-2003 (Annexure No. 15) that the petitioners have approached this Court. The petitioners have also been restrained from selling of, transfer or alienating mortgaged/hypothecated properties. It is against the said judgment and orders dated i. e. 31-3-2003 (Annexure No. 13) as well as 30-9-2003 (Annexure No. 15) that the petitioners have approached this Court. ( 5 ) I have heard the learned counsel for the petitioners Sri Brijesh Kumar Saxena as well as Sri Alok Saxena holding brief of Smt. Pushpa Saxena, who has accepted notice on behalf of opposite party No. 1, at some length. ( 6 ) SRI Brijesh Kumar Saxena, learned counsel for the petitioners vehemently, argued that opposite party No. 4 suffered from inherent lack of jurisdiction to entertain any dispute for recovery of any amount payable under the Facility Agreement from the petitioners. According to him, it was only Courts at London under English law which were vested with the jurisdiction to decide the controversy. According to him, the tribunal not only exceeded its jurisdiction but also assumed jurisdiction which power runs contrary and is in contravention of Clause 35 (1)of the Facility Agreement. He further argued that a writ in the nature of certiorari as well as prohibition would lie and will be maintainable where there is a patent lack of jurisdiction. His submission is that since the tribunal did not have the power to entertain and dwell upon the dispute referred to it, therefore, both the judgment and order dated 31-3-2003 as well as order dated 30-9-2003 are liable to be struck down. ( 7 ) SRI Alok Saxena in opposition drew the attention of this Court to Section 20 of the Act which postulates that any person aggrieved by an order made, or deemed to have been made, by a tribunal under this act, may prefer an appeal to an Appellate tribunal having jurisdiction in the matter. According to him, since the order dated 31-3-2003 was not stayed in appeal filed by the petitioners earlier against the said order, therefore, the tribunal did not commit any illegality in deciding the case on merits. He further submitted that now the matter has been decided on merits, liabilities has been fixed by the Tribunal upon petitioners, they ought to have approached the Appellate Tribunal for statutory remedy of appeal provided under the Act instead of rushing to this Court in the present writ petition. He further submitted that now the matter has been decided on merits, liabilities has been fixed by the Tribunal upon petitioners, they ought to have approached the Appellate Tribunal for statutory remedy of appeal provided under the Act instead of rushing to this Court in the present writ petition. His further submission is that since nothing was paid by the petitioners towards the term loan, therefore, the Tribunal was perfectly justified in allowing the application preferred by the Bank. ( 8 ) IN support of his arguments Shri saxeria, learned counsel for the petitioners placed reliance upon decisions reported in air 1989 SC 1239 , A. B. C. Laminart Pvt. Ltd. v. A. P. Agencies, Salem, and (1995) 4 SCC 153 : ( AIR 1995 SC 1766 ) Angile Insulations v. Davy Ashmore India Ltd. On the strength of the said decisions he submitted that since clause 35 (1) of the Facility Agreement laid down that the Courts at England shall have jurisdiction to hear and determine any Suit, action or proceedings, the Courts in India did not possess the power to adjudicate upon the said dispute. The said clause is reproduced herein under : "35. I English Courts each of the parties hereto irrevocably agrees for the benefit of the Bank that the Courts of England shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement (respectively "proceedings" and "disputes") and, for such purposes, irrevocably submits to the jurisdiction of such Courts. " ( 9 ) IN A. B. C. Laminart ( AIR 1995 SC 1766 ) (supra), which has been relied upon and followed in Angel Insulations, supra, the principle laid down by the Apex Court was that where two or more Courts which can entertain the suit consequent upon a part of the cause of action having arisen there within, if the parties to the contract agreed to vest jurisdiction in such Courts to try the dispute which may arise between the parties, the agreement may not be opposed to public policy, but, any dispute arising shall be subject to the jurisdiction, if exclusive words like, exclusive, alone, only can be applied under the facts and circumstances of the case. Clause 35 (1) of the Facility Agreement does not postulate that the English Courts alone, will have the jurisdiction to the exclusion of those Courts where part of cause of action may have arisen. The said clause in the agreement does not oust the jurisdiction at Lucknow where admittedly part of cause of action has arisen. ( 10 ) WHERE two or more Courts have jurisdiction to try a suit or a proceeding, an agreement between the parties that the dispute between them shall be tried in one such courts may not be contrary to the public policy, but to say that the Court, where part of cause of action has arisen, has no jurisdiction runs contrary to the dictum laid down in the said decisions. ( 11 ) IN the case at hand the entire process of documentation was done at Lucknow. The property of the petitioners which was hypothecated to secure the loan is also situate at Lucknow and necessary orders regarding sanction of loan was also made at lucknow. This being so, part of cause of action arose at Lucknow. This Court, therefore, is of the considered opinion that Clause 35 (1) in the Facility Agreement does not oust the jurisdiction at Lucknow. ( 12 ) LEARNED counsel for the petitioner next argued that since there was a patent lack of jurisdiction in exercise of power by opposite party No. 4, therefore, alternative remedy would not be a bar for filing of the instant writ petition. In support of his argument he has also placed reliance upon 2003 supreme Appeals Reporter (Civil) 708 : ( AIR 2003 SC 3044 ) Surya Dev Rai v. Ram chander Rai. The said decision explains the scope of writ of Certiorari. The said writ will issue when a Court has acted without jurisdiction or in excess of its jurisdiction. It may also issue if the Court, or Tribunal though competent has acted in flagrant disregard of the rules or procedure or in violation of the principles of natural justice. ( 13 ) SINCE this Court is of the opinion that opposite party No. 4 had the jurisdiction to decide the dispute and no violation of any rule or procedure or any violation of principles of natural justice has been alleged, therefore, the decision relied upon by the petitioners is of no help. ( 13 ) SINCE this Court is of the opinion that opposite party No. 4 had the jurisdiction to decide the dispute and no violation of any rule or procedure or any violation of principles of natural justice has been alleged, therefore, the decision relied upon by the petitioners is of no help. ( 14 ) AS the matter has been decided on merits and under the Act an appeal lies under Section 22 the petitioners may approach the appellate authority to agitate the matter. The learned counsel further submitted that alternative remedy provided under the Act is not an efficacious remedy inasmuch as, the appeal shall not be entertained unless 75% of the amount of the debt due as determined is deposited with Tribunal. ( 15 ) THIS cannot be a ground for byepassing the alternative remedy as proviso appended to Section 21 lays down that the appellate tribunal may for the reasons to be recorded in writing waive or reduce the amount to be deposited under the said Section. The petitioners may move the Appellate Tribunal for waiver or reduction of the amount, whatever the case may be. ( 16 ) IN view of the reasons herein above and also on the ground of availability of alternative remedy, the writ petition is dismissed. Petition dismissed. . .