By Taking Recourse to the Doctrine of Purposive Construction, another Jurisdiction of ‘Granting a Declaratory Relief to the Debtor’ Could Not Be Conferred Upon DRT

Hon’ble Supreme Court in Nahar Industrial Enterprises Ltd vs Hongkong & Shanghai Banking Corp. {2009 (8) SCC 646; 2009 (2) DRTC 273 (SC); Decided on 29 July, 2009} observed that by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon the Debts Recovery Tribunal-III, Mumbai so as to enable this Court to transfer the case from the civil court to a tribunal.

BACKGROUND FACTS: Appellant entered into International Swaps and Derivatives Agreement with the respondent. Appellant filed a suit in the Civil Court at Ludhiana seeking a declaration that foreign exchange derivative contracts dated 26.7.2007 and 30.7.2007, entered into by and between them were void as being illegal and violative of Foreign Exchange Management Act, 2000 as well as the Circulars and Guidelines issued by the Reserve Bank of India, and, thus, against public policy. The said suit was marked as Civil Suit No.108 of 2008. Respondent, however, filed transfer application before the High Court of Punjab & Haryana on or about 27.5.2008 seeking transfer of proceedings pending before the Civil Judge, Ludhiana to the Debts Recovery Tribunal, III, Mumbai. By reason of the impugned order, the High Court of Punjab & Haryana allowed the said application transferring the suit filed by the appellant in the Ludhiana court to the DRT-III, Mumbai in the form of a counter claim.

The Supreme Court, inter alia, held as follows.

“If the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it without having to wait for the Bank or Financial Institution to approach it first. The continuance of its counter-claim is entirely dependant on the continuance of the applications filed by the Bank. Before it no declaratory relief can be sought for by the debtor.

“If the Parliament, keeping in view the purpose and object thereof thought it fit to create separate tribunal so as to enable the banks and the financial institutions to recover the debts expeditiously wherefor the provisions contained in the Code of Civil Procedure as also the Evidence Act need not necessarily be resorted to, in our opinion, by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon it so as to enable this Court to transfer the case from the civil court to a tribunal.” (Emphasis supplied)

Thus, in the year 2009 the Appellant filed a suit in the Civil Court at Ludhiana seeking a declaration that foreign exchange derivative contracts dated 26.7.2007 and 30.7.2007, entered into by and between them were void. Hon’ble Supreme Court inter alia, held that before DRT no declaratory relief can be sought for by the debtor. Further, in Court’s opinion, by taking recourse to the doctrine of purposive construction, another jurisdiction cannot be conferred upon DRT (i.e. jurisdiction to issue a declaration that foreign exchange derivative contracts entered into by and between them were void) so as to enable this Court to transfer the case from the civil court to a tribunal.

Substantively, the Court agreed with the reasoning that a DRT is incapable of adjudicating complex issues of law and fact. It noted that a Tribunal that has the “trappings” of a court is not necessarily a court, and approved decisions that had held that the DRT is not a court. Moreover, the DRT cannot issue a decree, but only a recovery certificate. Although a DRT is empowered to take evidence in a detailed manner, the Court observed that its function is intended to make this the exception and not the rule.


DRT Has No Jurisdiction

























 hh

 

 

About Us

Narendra has around 26 years of rich experience in the domain of Companies Act, Arbitration and Conciliation Act, Consumer Protection Act, SICA, 1985,

more about us
get in touch
  • 199, Alkapuri,Dewas-455001 (MP) India

  • (07272) 421309

  •  
  •  9424858767

Subscription

Get subscribed with us!!!!!