Barclays Bank Plc vs Sat Industries Ltd

Raj Mani Chauhan, J

This Appeal, under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the RDDBFI Act), has been directed by the original applicant against the impugned order dated 5th March, 2013 passed by Shri A. Vijay Kumar, the learned In-charge Presiding Officer (learned P.O.), Debts Recovery Tribunal (DRT) No. 1, Mumbai, on Interim Application (I.A.) No. 414/2012 filed by the defendant in Original Application (O.A.) No. 118/2012, Barclays Bank PLC v. SAT Indus tires Ltd., where-by the learned Presiding Officer has allowed the aforesaid I.A. and thereby has dismissed the Original Application on the ground of lack of territorial jurisdiction. The relevant facts giving rise to the present Appeal may be briefly stated as under:

The appellant is a Banking Company incorporated in the United Kingdom and registered in England and is said to be a scheduled commercial Bank in India carrying on its Banking business across the world. The principal borrower, SAT Middle east FZC, Dubai, is the wholly owned subsidiary Company of the defendant, SAT Industries Ltd., which carried on its business in Dubai. The principal borrower availed certain credit facilities sanctioned by the appellant. The respondent, SAT Industries Ltd., stood guarantor to the credit facilities availed by the principal borrower and executed a limited corporate guarantee on 1st August, 2009 in favour of the appellant. The principal borrower indisputedly committed default in repayment of the amount of the credit facilities availed by it. The appellant, therefore, filed Original Application No. 118/2012 against the defendant i.e., the guarantor Company for recovery of amount of AED 2,672,974.31 i.e. equivalent to Rs. 4,09,23,236.68 due as on 31st March, 2012 together with interest @ 15.31 % from the date of filing of the Original Application till final realization.

The defendant in pursuant to the summons issued by the DRT appeared and filed the aforesaid I.A. No. 414/2012 contending that the applicant is not a scheduled Commercial Bank within the meaning of Section 2(d) of the RDDBFI Act. The applicant has given its address of London and Dubai. The applicant is also not a Banking Company within the meaning of the Banking Regulation Act, 1949. It has also not filed any Banking licence which can show that it carries on business in India. From a perusal of the Original Application filed by the appellant it will appear that the entire transaction took placed in Dubai, UAE and not in Mumbai. All the security documents annexed to the Original Application disclosed that the entire cause of action has arisen in Dubai UAE. The limited guarantee annexed to the Original Application clearly provide that the Courts of Dubai will have exclusive jurisdiction to settle any dispute arising out of or in connection with agreement of alleged guarantee given by the defendants. The appellant nowhere in the Original Application has alleged that any part of cause of action has arisen in Mumbai. The appellant has not specifically alleged that the defendant is guarantor which carried on its business within the jurisdiction of DRT-I, Mumbai, therefore D.R.T.-I, Mumbai has got no territorial jurisdiction to entertain the Original Application. The appellant in the aforesaid I.A. has prayed as follows:

"(a) This Hon'ble Tribunal be pleased to hold and declare that it does not have territorial jurisdiction to try and entertain the Original Application No. 118 of 2012 filed by the applicant before this Hon'ble Tribunal;

(b) This Hon'ble Tribunal be pleased to dismiss the Original Application No. 118 of 2012 filed by the applicant before this Hon'ble Tribunal for want of territorial jurisdiction and directing filing thereof in the appropriate Tribunal;

(c) Pending the hearing and final disposal of the present Application this Hon'ble Tribunal be pleased to stay the further proceedings of Original Application No. 118 of 2012;

(d) For interim and ad interim reliefs in terms of prayer(c) above;

(e) Any other just and equitable orders in favour of the defendant, in the interest of justice, may also kindly be passed to meet ends of justice;

(f) Costs of present application may kindly be awarded in favour of the defendant from the applicant."

The aforesaid I.A. was opposed the appellant by filing affidavit of Mr. Pradnayesh Sabnis, its Constituted Attorney, in reply. The deponent has denied the contentions raised by the defendants in the aforesaid I.A. The deponent has stated that defendant had executed limited corporate guarantee for AED 3,50,000/- on 1st August, 2009 thereby guaranteeing the due repayment of all the amounts which are due and payable by the principal borrower i.e. SAT Middle east Limited EZC, situated at Dubai, in favour of the applicant. The corporate guarantee executed by the defendant on 22nd July, 2009 which was pre-signed by two officials of the applicant in Dubai on the same date and thereupon the said corporate guarantee was sent to the defendant in Mumbai for execution which was executed on 1st August, 2009 in accordance with normal Banking practices/norms. The whole time Director of the defendant, Mrs. Shehnaz D. Ali, has executed the said corporate guarantee on 1st August, 2009 in favour of the applicant thereby irrevocably and unconditionally guaranteeing to repay on demand all the amounts due and payable by the principal borrower under the facility. Since the principal borrower is the wholly owned subsidiary of the defendant in Dubai. The defendant has its registered office in Mumbai and it carries on its business for gain in Mumbai. The instrument/document i.e. corporate guarantee was executed by the defendant in Mumbai, therefore, DRT-I Mumbai, has got territorial jurisdiction to entering and dispose of the Original Application filed by the applicant Bank.

The deponent has further stated that the defendant with dishonest intention and with a view to mislead the DRT has filed the aforesaid I.A. which has got no merit. The deponent has further alleged that in Clause 18 of the guarantee agreement it is provided that the Bank may, if it so desires, take proceedings under the guarantee in the Courts at Dubai or any other Courts having jurisdiction in the matter. Part of cause of act on arisen within the territorial jurisdiction of the DRT-I Mumbai, therefore, DRT-I, Mumbai, has got territorial jurisdiction to entertain that Original Application. The dependent has sought for dismissal of the I.A., filed by the defendants.

The learned Presiding Officer after hearing the learned Counsel for the parties observed that as provided under Section 19(1) of the RDDBFI Act read with Rule 6 of the Debts Recovery Tribunal (Procedure) Rules, 1993 (for short the Rules) as well as in view of Clause 18 of the guarantee agreement the DRT-I, Mumbai, has got no jurisdiction to entertain and dispose of the Original Application filed by the applicant Bank. Consequently the learned Presiding Officer vide impugned order dated 5th March, 2013 has allowed the aforesaid I.A. No. 414/2012 filed by the defendant.

The applicant Bank being aggrieved by the aforesaid impugned order passed by the learned Presiding Officer, DRT, has filed the present appeal.

Heard the rival submissions advanced by the learned Counsel for the parties and perused the materials available on record.

The learned Counsel for the appellant contended that Section 19(1) of the RDDBFI Act provides for territorial jurisdiction of the DRT where the Bank or Financial Institution can file Original Application for recovery of its dues. The learned Counsel contended that as provided under Section 19(1)(a), (b) and (c) the Bank or Financial Institution can file application for recovery of its dues in DRT within whose local jurisdiction, (i) the defendant, or each of the defendants where they are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain, or (ii) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain or (iii) the cause of action, wholly or in part has arisen. The learned Counsel contended that Section 20 of the Code of Civil Procedure (for short the Code) also provides the provision about territorial jurisdiction of the Court where the suit can be instituted by the Plaintiff. The provision under Section 19(1) of the RDDBFI Act and Section 20 of the Code regarding territorial jurisdiction of the Court are almost identical.

The learned Counsel contended that the learned Presiding Officer relying on Rule 6(a) of the Rules has held that the applicant has failed to prove that it is functioning within the territorial jurisdiction of the DRT-I, Mumbai, therefore, DRT-I, Mumbai, has got no jurisdiction to entertain and dispose of the Original Application filed by the applicant but the learned Presiding Officer did not consider other provision under Rule 6(b), (c) and (d) of the Rules. Rule 6(a), (b), (c) and (d) of the Rules provide for territorial jurisdiction where the Bank and Financial Institution can file Original Application for recovery of its dues; The Bank and Financial Institution can choose one of the four places where it can file the Original Application. The learned Presiding Officer has interpreted Rule 6 in the impugned order in such a way the applicant has no option except to file application for recovery of its dues as provided under Rule 6(a) of the Rules. The learned Presiding Officer has overlooked that Bank and Financial Institution can file Original Application in any of the DRTs as provided under Rule 6 of the Rules. The observation of the learned Presiding Officer is, therefore, based on mis-interpretation of Rule 6 of the Rules. The finding of the Presiding Officer is, therefore, bad in the eyes of law and is liable to be quashed.

The learned Counsel further contended that although Clause 18 of the guarantee deed provides about the jurisdiction of the Court where the Bank can file proceeding. It is provided therein that guarantee is governed by and construed in accordance with laws of the Emirates in which the Bank branch detailed below is located and applicable federal laws of the United Arab Emirates and the guarantor hereby submits to the jurisdiction of the Courts of the Emirate in which the Bank branch detailed below is located, provided always that the Bank may, if it so desires, take proceedings under the guarantee in the Courts of any other jurisdiction.

The learned Counsel contended that the learned Presiding Officer has relied on the first part of the Clause 18 of the guarantee. He did not properly appreciate later part of the aforesaid clause which provides that the Bank, if so desire, take proceedings under the guarantee in the Courts of any other jurisdiction. The part of the aforesaid Clause 18 entitles the Bank to file Original Application against the guarantor in any other Court/DRT which has got territorial jurisdiction over the matter. In this case, the appellant has specifically alleged that the defendant carried on business within the local limit of DRT-I, Mumbai, as well the part of cause of action has also arisen within the territorial jurisdiction of DRT Mumbai, therefore, DRT-I, Mumbai, has got territorial jurisdiction. The learned Presiding Officer while considering the point of territorial jurisdiction considered the place of business of the applicant alone which could not be the determining factor about the territorial jurisdiction of the Court. The learned Presiding Officer was required be determine the jurisdiction of DRT in accordance with provisions under Section 19(1)(a) and (b) as well as under Rule 6(b) and (c) of the Rules. Moreover, the guarantee deed was signed by the authorized officer of the respondent in Mumbai, therefore, the part of cause of action had arisen with the territorial jurisdiction of D.R.T., Mumbai, DRT-I, Mumbai, therefore has got territorial jurisdiction to entertain and decide the Original Application filed by the appellant Bank. The learned Presiding Officer did not properly appreciate the provision under Section 19(1) of the RDDBFI Act and Rule 6 of the Rules as well as Clause 18 of the guarantee agreement. The finding of the learned Presiding Officer that DRT-I, Mumbai, has got no territorial jurisdiction, is contrary to the law as well as contrary to facts too which is liable to be quashed.

Per contra, the learned Counsel for the respondent supporting the impugned order passed by the learned Presiding Officer contended that admittedly the appellant dos not carry on its business in India, therefore, the learned Presiding Officer relying on provision contained under Rule 6(a) of the Rules has held that the DRT-I, Mumbai, has got no territorial jurisdiction to entertain the Original Application filed by the appellant.

The learned Counsel further contended that the Clause 18 of the guarantee agreement provides that, if any, dispute arises between the Bank and the guarantor the same will be governed by the law of United Arab Emirates and the Courts in U.A.E. will have jurisdiction in the matter. The learned Counsel contended that although the later part of the Clause 18 of the guarantee agreement provides that the Bank, if so desires, take proceedings, under the guarantee in the Courts of any other jurisdiction. But this provision will not entitle the Bank to file a Suit in India which has got no jurisdiction as provided in Clause 18 of the guarantee agreement as the law of U.A.E. will not be applicable in India. The dispute between the Bank and the guarantor will be adjudicated according to the law of U.A.E. The words "Courts of any other jurisdiction" as used in the later part of the Clause 18 of guarantee agreement indicates the Courts where the law of U.A.E. are applicable and not in Courts in India where the law of U.A.E. cannot be applied to adjudicate the dispute between parties i.e. Bank and guarantors. The parties to the guarantee agreement have submitted themselves to the Court having jurisdiction in the matter where the law of U.A.E. will be applicable. Therefore, the learned Presiding Officer has rightly held that the DRT-I, Mumbai, has got no territorial jurisdiction to entertain and dispose off the Original Application filed by the appellant.

The learned Counsel further contended that in this case credit facilities were sanctioned by the appellant to the principal borrower in Dubai. All the documents relating to credit facility agreement including the guarantee agreement were executed in Dubai which were also signed in Dubai. From a perusal of the guarantee deed it appears that just to give the jurisdiction to the DRT-I, Mumbai, the guarantee deed has given stamped on 15th February, 2012 in Mumbai. In fact the entire transaction regarding the sanction of the credit facilities to the principal borrower and execution of the guarantee agreement and other documents were executed in Dubai, therefore, no whole or any part of cause of action had arisen within the territorial jurisdiction of the DRT-I, Mumbai. The DRT-I, Mumbai, therefore has got no territorial jurisdiction to entertain and dispose of the Original Application. The impugned order passed by the learned Presiding Officer does not suffer from any illegality which does not call for any interference.

Considered the rival submissions advanced by the learned Counsel for the parties and perused the materials available on record.

At this stage it will be relevant to refer to the provision under Section 19(1) of the RDDBFI Act and Rules which provide for the territorial jurisdiction of the DRT where the Bank and Financial Institution can file the Original Application for recovery of its dues. The Section 19(1) of the RDDBFI Act reads as under:

"19. Application to the Tribunal--(1) Where a Bank or a Financial Institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction--

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(c) the cause of cause, wholly or in part, arises."

The Rule 6 of the Rules reads as under:

"6. Place of filing applications--The application shall be filed by the applicant with the Registrar within whose jurisdiction--

(a) the applicant is functioning as a Bank or Financial Institution, as the case may be, for the time being; or

(b) the defendant, or each of the defendants where there are more than one, at the time of making application, actually or voluntarily resides, or carries on business, or personally works for gain; or

(c) any of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business or personally works for gain; or

(d) the cause of action, wholly or in part, arises."

From a perusal of the impugned order it appears that the learned Presiding Officer relying on the Rule 6(a) of the Rules has observed that the applicant was required to show that it is functioning as a Bank within the territorial jurisdiction of the DRT-I, Mumbai, but the appellant has failed to show that it is functioning in Mumbai, therefore, D.R.T., Mumbai has got no territorial jurisdiction to entertain the Original Application. The learned Presiding Officer has applied Rule 6(a) of the Rules in complete isolation to the other provision under the Rule 6(b), (c) and (d) of the Rules. However, if Rule 6(b), (c) and (d) are applied for determining the jurisdiction of the DRT even then the DRT-I, Mumbai, has got no territorial jurisdiction to entertain and dispose of the Original Application as the parties submitted themselves to particular class of Courts having jurisdiction in the matter.

The appellant has filed the Original Application against the defendant in the capacity as guarantor. The Clause 18 of the guarantee agreement governs the jurisdiction of the Court. Of course, the parties to the contract cannot confer the jurisdiction to a Court which lacks inherent or the territorial jurisdiction on the subject-matter but where more than one Court have got territorial jurisdiction over the same subject-matter, the parties in that situation by agreement can choose the Court where the Suit or any proceeding could be filed by any of the parties to the contract. In this case, from a perusal of the guarantee agreement it appears that the parties have agreed about the jurisdiction of the Court. The Clause 18 of the guarantee agreement reads as under:

"18. Governing law and Jurisdiction--This guarantee is governed by and construed in accordance with the laws of the Emirates in which the Bank branch detailed below is located and applicable federal laws of the United Arab Emirates and the guarantor hereby submits to the jurisdiction of the Courts of the Emirate in which the Bank branch detailed below is located, provided always that the Bank may, if it so desires, take proceedings under the guarantee in the Courts of any other jurisdiction."

From a perusal of the first part of the aforesaid clause it appears that the parties have agreed that the guarantee will be governed by and construed in accordance with the laws of the Emirates in which the Bank branch detailed below is located and applicable federal laws of the U.A.E. and the guarantor thereby submits to the jurisdiction of the Courts of the Emirates in which the Bank branch detailed below is located. This provision clearly indicates that the parties have submitted themselves to the jurisdiction of Courts in Emirates as well as to the laws applicable in U.A.E. Although the later part of the aforesaid clause provides that the Bank may, if it desires, take proceeding under this guarantee in the Courts of any other jurisdiction. This clause entitles the Bank to choose the other Courts having jurisdiction in the matter. On harmonious interpretation of the entire Clause 18 of the guarantee agreement it appears that the parties have submitted themselves to the jurisdiction of the Courts in Emirates and they will be governed by the laws of U.A.E. If any dispute arises between the parties regarding to the guarantee agreement the Court in U.A.E. will have jurisdiction. Although the Bank is at liberty to choose other Court which has jurisdiction over the subject-matter but the law of U.A.E. should be applicable there. If it is held that the Courts of other jurisdiction may be any Court other than in U.A.E. the provision in the first part of the Clause 18 that they will be governed by the laws of U.A.E., will become redundant, therefore, if Clause 18 is read as a whole it will appear that the Bank is at liberty to choose any other Court having jurisdiction in the matter to file claim of recovery of its dues where the laws of U.A.E. may be applicable but not any other Court where the laws of U.A.E. may not be applicable. In view of the above, I am of the considered view that in view of the Clause 18 of the guarantee agreement, the DRT-I, Mumbai, has got no territorial jurisdiction to entertain and dispose of the Original Application. The learned Presiding Officer has held that the DRT-I, Mumbai, has got no territorial jurisdiction to entertain the Original Application which in my opinion does not suffer from any illegality especially with reference to the Clause 18 of the guarantee agreement. The impugned order passed by the learned Presiding Officer does not call for any interference. The Appeal is devoid of merit and is liable to be dismissed.

ORDER

The Appeal is dismissed with no order as to cost.