BANK OF RAJASTHAN LTD. Versus VCK SHARES & STOCK BROKING SERVICES LTD

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.8972-8973 OF 2014

BANK OF RAJASTHAN LTD. …APPELLANT

Versus

VCK SHARES & STOCK

BROKING SERVICES LTD. …RESPONDENT

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. The present reference arises from a question mark over the legal right

of the borrower to initiate proceedings before a Civil Court against the bank

or financial institution, which seeks to recover a loan amount against it.

The Factual History:

2. The appellant bank, Bank of Rajasthan Ltd. (since amalgamated with

ICICI Bank Ltd.), sanctioned a term loan to the respondent company on

28.06.1994 with a limit of Rs.1.50 crores at interest of 19.25% per annum,

repayable in twelve quarterly instalments. In order to secure the loan, the

guarantors including the respondent, inter alia offered title deeds of

immovable properties as security. By mutual agreement, a further credit

overdraft facility was granted on 19.09.1995, up to a limit of Rs.5 crores.

This additional credit was secured by the deposit of shares, stocks, and

securities of various companies. The respondent did not adhere to financial

discipline, resulting in the appellant issuing a notice on 01.07.1997, calling

upon the respondent to settle the term loan account and overdraft facility

account within three days of the receipt of the notice.

3. Since the respondent failed to make the payment, the appellant filed

an application, being OA No.263 of 1997, for recovery of the amounts due

under Section 19 of the Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 (hereinafter referred to as ‘RDB Act’) before the Debts

Recovery Tribunal, Kolkata (hereinafter referred to as ‘the DRT’) on

21.11.1997. The appellant sought a recovery certificate against the

respondent for Rs.8,62,41,973.36 including interest at the rate of 20.88% per

annum.

4. The respondent entered appearance to defend the proceedings but in

addition also filed a Civil Suit No.77 of 1998 before the Kolkata High Court

against the appellant on 06.03.1998. The respondent inter alia, claimed a

decree for sale of the pledged shares, recovery of sale proceeds, and an

inquiry into the losses suffered by the respondent along with a decree for

payment of money after the same.

5. A crucial development took place on 18.03.1998 when the appellant

sold the pledged shares of BFL Software Ltd. for a total sum of

Rs.5,77,68,000/- to adjust the amounts against the dues in view of the

authorisation available with them as a part of the loan transaction. The

respondent, as a sequitur, filed Civil Suit no.129 of 1999 before the High

Court of Calcutta on 09.03.1999 praying, inter alia, for the following reliefs:

“i) A declaration that the sale of shares of BFL Software Ltd. was

void;

ii) a decree for return of pledged shares in respect of overdraft facility

account, and in default to pay Rs. 48.95 crores; and

iii) a declaration that no sum was payable by the Respondent to the

Appellant in respect of the term loan dated 27.07.1994 and Overdraft

Account dated 19.09.1995 and that the Appellant bank was not

entitled to a decree for a sum of Rs. 8,62,41,973.36 from the

Respondent.”

6. The appellant, in those proceedings, filed applications, being GA

No.4206 of 2000 in C.S. No.77 of 1998 and GA No.4171 of 2000 in C.S.

No.129 of 1999 in November 2000, seeking rejection of the plaint and

dismissal of the suits filed by the respondent. It was claimed that the suits

were not maintainable and that the High Court lacked jurisdiction as the

same exclusively vested with the DRT. The learned Single Judge vide order

dated 06.09.2022 allowed both the applications of the appellant and directed

the suits to be taken off from the file of the High Court. The respondent filed

two appeals, being APOT No.691 of 2002 (later APO No.488 of 2002) and

APOT No.692 of 2002 (later APO No.489 of 2002), challenging the order

dated 06.09.2022 of the learned Single Judge. The Division Bench vide its

order dated 27.09.2022 stayed the operation of the order of the learned

Single Judge while admitting the appeal.

7. Insofar as the DRT proceedings were concerned, OA No.263 of 1997

was disposed of by the DRT vide order dated 19.05.2003 predicated on a

reasoning that the appellant bank’s claim of Rs.6,04,17,777.36 was satisfied

through sale of pledged shares. It found that the amount actually due under

the proceedings stood settled and paid. The appellant was directed to return

the title deeds of the pledged shares and other securities to respondent. On

the counter claim filed by the respondent, the DRT held that the respondent

was entitled to recover Rs.6,88,187.49 from the appellant within four weeks

of the order. The respondent was also granted liberty to file appropriate

proceedings for recovery of dividends on the pledged shares except the sum

of Rs.20,11,337.35 for which set off was allowed in the proceedings.

8. The appellant, feeling aggrieved, proceeded to file an appeal before

the Debts Recovery Appellate Tribunal, Kolkata (hereinafter referred to as

‘the DRAT’) with M.A. No.31 of 2003, which was dismissed vide an order

dated 14.11.2003 opining that the appellant should have sold the shares in

1996 and, thus was not entitled to claim interest. The appellant still not

being satisfied moved C.O. No.2777 of 2003 under Article 227 of the

Constitution of India before the Kolkata High Court on 17.11.2003 which

was, however, dismissed in default vide High Court order dated 11.02.2004

but restored later before a Single Judge vide order dated 16.01.2013. We are

informed that these proceedings also stand dismissed on 26.08.2019 and,

thus, there appears to be a quietus to the extent of claim of the bank. The

respondent, in terms of the decree, has also received the amounts due to it

and thus nothing survives qua that aspect.

9. Now, coming back to the suit instituted by the respondent, which was

dismissed by the learned Single Judge on the finding that the Court lacked

jurisdiction; the Division Bench allowed the appeals filed by the respondent

against the orders of the learned Single Judge in two cases, and it is the

decision in the two appeals permitting continuation of suits which have been

assailed before this Court.

Rationale of the Division Bench in restoring the suits:

10. The respondent successfully contended before the High Court that

there was no provision under the RDB Act for ousting the jurisdiction of the

Civil Court and to entertain a suit against banks and financial institutions.

There was also no provision to allow for transfer of suits against banks and

the financial institutions which were pending before the Civil Court. It was

thus submitted that the jurisdiction of the Civil Court would remain intact

even after the amendment to the RDB Act effected in the year 2000,

whereby the provisions for set-off and counterclaims were included under

Section 19 of the RDB Act. The newly inserted sub-Sections (7) and (9)

under Section 19 provided that a set-off/counterclaim filed by the borrower

would have the same effect as a plaint in a cross-suit to be determined by the

DRT.

11. The case of the appellant was that the proceedings before the DRT

were already pending when the suits were filed by the respondent. Thus, the

issue ought to have been raised in the statement of defence either by way of

set-off or a counterclaim before the DRT. It was pointed out that the

respondent had initially not raised such a counterclaim in the proceedings

before the DRT, but later this issue (subject matter of subsequent suit, being

CS No.129 of 1999) had been added by way of amendment. The respondent

pointed out that under the RDB Act, banks and financial institutions were

placed in an unequal position as they were barred from raising a

counterclaim before the Civil Court.

12. The Division Bench of the High Court opined that as per the view of

this Court in Nahar Industrial Enterprises Ltd. v. Hong Kong and

Shanghai Banking Corporation,

a suit filed by a borrower against the bank

was not barred before the Civil Court, although a suit filed by the bank

against the borrower was barred. This judgment was found to be the

authority on the point as it came subsequent to the other decisions of the

Supreme Court on this issue.

(2009) 8 SCC 646.

Proceedings before this Court:

13. The reference in the present proceedings arose out of an order dated

17.09.2014 noticing an apparent conflict of views. It was observed that a

two-Judges Bench of this Court in United Bank of India, Calcutta v.

Abhijit Tea Co. Pvt. Ltd. And Others2

had taken a view that as per the

legislative scheme of the RDB Act, jurisdiction was conferred upon the DRT

to try a counterclaim and set-off under Section 19 of the RDB Act and that

all such counter-claims and set-offs, including a cross-suit filed

independently, should be tried by the DRT.

14. In a later decision in Indian Bank v. ABS Marine Products (P) Ltd.3

a Division Bench of this Court took the view that the jurisdiction of the Civil

Courts was not barred in regard to any suit filed by the borrower against a

bank for any relief. Jurisdiction was barred only in regard to applications by

a bank or a financial institution for recovery of its debts. It was held that

although a counterclaim and set-off may be made under sub-Sections (6) and

(11) of Section 19 of the RDB Act, no jurisdiction was conferred on the

DRT to try independent suits or proceedings initiated by the borrowers. It

was thus held that the borrower had the option to file a separate suit before

(2000) 7 SCC 357.

(2006) 5 SCC 72.

the Civil Court and the counterclaim before the DRT was not the only

remedy. Referring to the earlier judgment in Abhijit Tea Co. Pvt. Ltd. &

Others (supra), the Bench in the Indian Bank (supra) observed that an

independent suit can be deemed to be a counterclaim and can be transferred

to DRT only if the following conditions are satisfied:

“a. The subject matter of the bank’s suit, and the suit of the

defendant against the bank, should be inextricably connected in

the sense that decision in one would affect the decision in the

other.

b. Both parties (the plaintiff in the suit against the bank and the

bank) should agree for the independent suit being considered as

a counter-claim in the bank’s application before the Tribunal, so

that both can be heard and disposed of by the Tribunal.”

15. Another Co-ordinate Bench of this Court in State Bank of India

vs. Ranjan Chemicals Ltd. and Another4

held that there was no need to

restrict the power of the Civil Court to order joint trial by introducing a

condition that a joint trial could be ordered only with the consent of

both parties. It was observed on the basis of Abhijit Tea Co.’s case that

a claim in an independent suit could be considered as a claim for set-off

and counterclaim within the meaning of Section 19 of the RDB Act.

(2007) 1 SCC 97.

16. Thus, in the reference order, it was mentioned that subsequent to

the Ranjan Chemicals Ltd. case (supra), another Division Bench in

Nahar Industrial Enterprises Ltd. case (supra) held that the decision in

Ranjan Chemicals Ltd. (supra) could not have departed from the

decision in Indian Bank case (supra), both being Coordinate Benches.

It was thus concluded that there existed a difference of opinion between

several benches of this Court on this issue and it was considered

appropriate to refer the following questions to a larger Bench.

“(a). Whether an independent suit filed by a borrower against a

Bank or Financial Institution, which has applied for recovery of

its loan against the plaintiff under the RDB Act, is liable to be

transferred and tried along with the application under the RDB

Act by the DRT ?

(b). If the answer is in the affirmative, can such transfer be

ordered by a court only with the consent of the plaintiff?

(c). Is the jurisdiction of a Civil Court to try a suit filed by a

borrower against a Bank or Financial Institution ousted by

virtue of the scheme of the RDB Act in relation to the

proceedings for recovery of debt by a Bank or Financial

Institution?”

17. We are thus to opine on the aforesaid questions referred to us.

Plea of the Appellant:

Question No.1

18. The Supreme Court of India in Indian Bank case (supra), Ranjan

Chemicals Ltd. case (supra) and Nahar Industrial Enterprises Ltd. case

(supra) has had no cleavage of opinion regarding the first question referred

to a larger bench as they held that an independent suit by a borrower can be

transferred and tried along with the original application by the bank under

the RDB Act. The difference of opinion arose only with respect to consent of

the parties. These decisions have set no bar in law regarding the transfer of

independent suit filed by the borrower against the bank to be decided as a

counterclaim/set-off by the DRT in an original application filed by the bank.

19. The appellant contended that non-consolidation of actions may lead to

multiplicity of actions and conflicting decisions between the same parties on

the same cause of action and, thus, sought answer in the affirmative to the

first question.

Question no.2

20. Mr.V.V. Giri, learned senior counsel for the appellant, while

conceding that consolidation of suits is not superficially provided for under

the Civil Procedure Code, 1908 (hereinafter referred to as ‘the Code’),

contended this Court on multiple occasions has held that the absence of

specific provisions governing consolidation of suits provided for in the

Code, the Court may exercise its inherent powers under Section 151 of the

Code directing consolidation.5

21. The only cavil to the proposition is that Section 151 of the Code

cannot be utilised to pass orders contrary to the express provisions of the

Code. In view of this legal position, it was contended that no consent of

parties is required for exercise of the inherent powers of the Court and, thus,

the opinion in Indian Bank’s case (supra) followed in Nahar Industrial

Enterprises case (supra) putting such a consent as a pre-condition to direct

consolidation of suits by the borrowers is contrary to the permissible

exercise of inherent powers of the Court under Section 151 of the Code.

Thus, question no.2 was requested to be answered in the negative.

Question no.3

22. The provisions of RDB Act provide for a complete scheme to try a

counterclaim/set-off filed by the borrower along with a written statement to

an OA filed by the bank as a cross-suit. This was stated to be quite evident

from a plain reading of Section 19(7) and Section 19(9) of the RDB Act. The

overall scheme of Sections 17, 18 and 19 of the RDB Act was contended to

form a bar for the purposes of Section 9 of the Code.

5 Mahalaxmi Co-operative Housing Society Ltd. v. AshabhaiAtmaram Patel, (2013) 4 SCC 404 (Paras

45-46); Chitivasala Jute Mills v. Jaypee Rewa Cement, (2004) 3 SCC 85 (Para 12); and KK Velusamy v.

N. Palanisamy, (2011) 11 SCC 275, (Para 12).

23. The extensive provisions i.e. Sections 19(5), (6), (8), (10-A), (10-B),

(13) and (20) regarding filing of counter-claim/set-off, verification of

counter-claim/set-off in a manner similar to the pleadings before Civil

Court, evidence by way of affidavit and provisions regarding crossexamination in rules; demonstrate that sufficient powers have been vested in

the DRT to try claims raised by the borrower inextricably connected with the

claim of the bank. These provisions are enacted to guard against multiplicity

of proceedings in relation to similar subject matters, once before the DRT

and another before the Civil Court. Thus, even Question no.3 was sought for

to be answered in the affirmative.

Submissions on behalf of the respondent:

24. It is contended by Mr. Jaideep Gupta, learned senior counsel for the

respondent, that the RDB Act was enacted with the objective of providing a

summary procedure to enable banks and financial institutions to recover

debts due to them in a speedy manner and it did not oust the jurisdiction of

Civil Courts. The purpose of the statute would be defeated if there was an

influx of civil suits filed by the borrowers against the lenders before the

DRT. It was also pointed out that there were no provisions in the RDB Act

to permit a counterclaim to be adjudicated independently even if the suit of

the plaintiff failed.

25. Learned senior counsel for the respondent submitted that as per

Transcore v. Union of India6

the DRT is a creature of statute and has no

inherent power, which exists in Civil Courts. In Swarka Prasad Agarwal v.

Ramesh Chander Agarwal7

it was held that a provision seeking to

circumscribe the jurisdiction of a Civil Court would require strict

interpretation and the Court ordinarily leans toward upholding the

jurisdiction of the Civil Courts. Learned senior counsel also sought to rely

on Nagri Pracharini Sabha v. Vth Additional District and Sessions Judge8

and Ramesh Chand Arwaitya v. Anil Panjwani9

to submit that a litigant

having a grievance of a civil nature has an independent right to institute a

civil suit; and that Civil Court can entertain a civil suit even where a special

Tribunal conferred with the exclusive jurisdiction to try a particular class of

cases exists.

26. It was, thus, urged that the judgment of this Court in Indian Bank

case (supra) and Nahar Industrial Enterprises case (supra) had correctly

declared the law on the subject.

(2008) 1 SCC 125

(2003) 6 SCC 220

(1991) Supp 2 SCC 36

(2003) 7 SCC 350

The scheme of the RDB Act

27. Banks and financial institutions lend public money to assist

entrepreneurs in their business. Thus, on one hand, there is the interest of

public, whose funds are utilised, while on the other hand are the business

establishments which need funds for their business. Banks and financial

institutions in a sense are intermediaries in the process.

28. Litigation instituted by banks and financial institutions became

coloured by gross delays in the civil proceedings, as a result of which

defaulters were at a premium. Borrowers who maintained financial

discipline were the ones at a disadvantage. The borrowing process was being

misused and a large amount of public funds were stuck in litigation.

29. In order to expedite the recovery of dues, the RDB Act was enacted

by Parliament on 27.08.1993 and brought into force w.e.f. 24.06.1993. The

RDB Act provided for the establishment of a tribunal for expeditious

adjudication and recovery of debts due to banks and financial institutions

and for all matters connected therewith. The RDB Act is comprehensive in

character in terms of providing the methodology towards the said objective.

30. In this regard, it would be apposite to note the Statement of Objects

and Reasons for enacting the RDB Act:

“Banks and financial institutions at present experience

considerable difficulties in recovering loans and enforcement of

securities charged with them. The existing procedure for

recovery of debts due to the banks and financial institutions has

blocked a significant portion of their funds in unproductive

assets, the value of which deteriorates with the passage of time.

The Committee on the Financial System headed by Shri M.

Narasimham has considered the setting up of the Special

Tribunals with special powers for adjudication of such matters

and speedy recovery as critical to the successful

implementation of the financial sector reforms. An urgent need

was, therefore, felt to work out a suitable mechanism through

which the dues to the banks and financial institutions could be

realised without delay. In 1981, a Committee under the

chairmanship of Shri T. Tiwari had examined the legal and

other difficulties faced by banks and financial institutions and

suggested remedial measures including changes in law. The

Tiwari Committee had also suggested setting up of Special

Tribunals for recovery of dues of the banks and financial

institutions by following a summary procedure. The setting up

of Special Tribunals will not only fulfil a long-felt need, but

also will be an important step in the implementation of the

report of Narasimham Committee. Whereas on 30-9-1990 more

than fifteen lakhs of cases filed by the public sector banks and

about 304 cases filed by the financial institutions were pending

in various courts, recovery of debts involved more than Rs

5622 crores in dues of public sector banks and about Rs 391

crores of dues of the financial institutions. The locking up of

such huge amount of public money in litigation prevents proper

utilisation and recycling of the funds for the development of the

country.”

31. It is pertinent to note that a challenge was laid to the RDB Act as it

originally did not contain any provisions allowing a defendant in an

application filed by a bank to claim any setoff or counterclaim against them.

This issue received consideration in Union of India and Another vs. Delhi

High Court Bar Association and Others10

. By the time the judgment was

made, the RDB Act was suitably amended by Act 1 of 2000 to include such

provisions, and consequently the same were upheld.

The Statutory Framework

32. Chapter III of the RDB Act has the heading ‘Jurisdiction, Powers and

Authority of Tribunals’.

33. Section 17 of the RDB Act delineates the jurisdiction of the DRT as

follows:

“17. Jurisdiction, powers and authority of Tribunals.— (1)

A Tribunal shall exercise, on and from the appointed day, the

jurisdiction, powers and authority to entertain and decide

applications from the banks and financial institutions for

recovery of debts due to such banks and financial institutions.

[(1A) Without prejudice to sub-section (1),—

(a) the Tribunal shall exercise, on and from the date to be

appointed by the Central Government, the jurisdiction,

powers and authority to entertain and decide applications

10 (2002) 4 SCC 275.

under Part III of Insolvency and Bankruptcy Code, 2016

(31 of 2016).

(b) the Tribunal shall have circuit sittings in all district

headquarters.]

(2) An Appellate Tribunal shall exercise, on and from the

appointed day, the jurisdiction, powers and authority to

entertain appeals against any order made, or deemed to have

been made, by a Tribunal under this Act.

[(2A) Without prejudice to sub-section (2), the Appellate

Tribunal shall exercise, on and from the date to be

appointed by the Central Government, the jurisdiction,

powers and authority to entertain appeals against the

order made by the Adjudicating Authority under Part III

of the Insolvency and Bankruptcy Code, 2016 (31 of

2016).]”

34. The expression ‘debt’, as used in Section 17, is defined under Section

2(g) of the RDB Act:

“2. Definitions.—In this Act, unless the context otherwise

requires,—

[(g) “debt” means any liability (inclusive of interest) which is

claimed as due from any person by a bank or a financial

institution or by a consortium of banks or financial institutions

during the course of any business activity undertaken by the

bank or the financial institution or the consortium under any

law for the time being in force, in cash or otherwise, whether

secured or unsecured, or assigned, or whether payable under a

decree or order of any civil court or any arbitration award or

otherwise or under a mortgage and subsisting on, and legally

recoverable on, the date of the application 1 [and includes any

liability towards debt securities which remains unpaid in full or

part after notice of ninety days served upon the borrower by the

debenture trustee or any other authority in whose favour

security interest is created for the benefit of holders of debt

securities or;]]"

35. Section 18 creates a bar for the Civil Court in relation to matters

specified under Section 17 of the RDB Act. It provides as under:

“18. Bar of jurisdiction.—On and from the appointed day, no court

or other authority shall have, or be entitled to exercise, any

jurisdiction, powers or authority (except the Supreme Court, and a

High Court exercising jurisdiction under articles 226 and 227 of the

Constitution) in relation to the matters specified in section 17:

[Provided that any proceedings in relation to the recovery of debts due

to any multi-State co-operative bank pending before the date of

commencement of the Enforcement of Security Interest and Recovery

of Debts Laws (Amendment) Act, 2012 (1 of 2013) under the MultiState Co-operative Societies Act, 2002 (39 of 2002) shall be

continued and nothing contained in this section shall, after such

commencement, apply to such proceedings.]”

36. Section 19 relates to the procedure before the DRT for the making of

applications for recovery. It provides as follows:

“[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 branch or any other office of the bank or financial

institution is maintaining an account in which debt claimed is

outstanding, for the time being; or]

[(aa)] 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

[Provided that the bank or financial institution may, with the

permission of the Debts Recovery Tribunal, on an application made

by it, withdraw the application, whether made before or after the

Enforcement of Security Interest and Recovery of Debts Laws

(Amendment) Act, 2004 (30 of 2004) for the purpose of taking action

under the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (54 of 2002), if no such

action had been taken earlier under that Act:

Provided further that any application made under the first

proviso for seeking permission from the Debts Recovery Tribunal to

withdraw the application made under sub-section (1) shall be dealt

with by it as expeditiously as possible and disposed of within thirty

days from the date of such application:

Provided also that in case the Debts Recovery Tribunal refuses

to grant permission for withdrawal of the application filed under this

sub-section, it shall pass such orders after recording the reasons

therefor.]

[(1A) Every bank being, multi-State co-operative bank referred

to in sub-clause (vi) of clause (d) of section 2, may, at its option, opt

to initiate proceedings under the Multi-State Co-operative Societies

Act, 2002 (39 of 2002) to recover debts, whether due before or after

the date of commencement of the Enforcement of the Security Interest

and Recovery of Debts Laws (Amendment) Act, 2012 (1 of 2013)

from any person instead of making an application under this Chapter.

(1B) In case, a bank being, multi-State co-operative bank

referred to in sub-clause (vi) of clause (d) of section 2 has filed an

application under this Chapter and subsequently opts to withdraw the

application for the purpose of initiating proceeding under the MultiState Co-operative Societies Act, 2002 (39 of 2002) to recover debts,

it may do so with the permission of the Tribunal and every such

application seeking permission from the Tribunal to withdraw the

application made under sub-section (1A) shall be dealt with by it as

expeditiously as possible and disposed of within thirty days from the

date of such application:

Provided that in case the Tribunal refuses to grant permission

for withdrawal of the application filed under this sub-section, it shall

pass such orders after recording the reasons therefor.]

(2) Where a bank or a financial institution, which has to recover

its debt from any person, has filed an application to the Tribunal under

sub-section (1) and against the same person another bank or financial

institution also has claim to recover its debt, then, the later bank or

financial institution may join the applicant bank or financial

institution at any stage of the proceedings, before the final order is

passed, by making an application to that Tribunal.

[(3) Every application under sub-section (1) or sub-section (2)

shall be in such form, and shall be accompanied with true copies of all

documents relied on in support of the claim along with such fee, as

may be prescribed:]

Provided that the fee may be prescribed having regard to the

amount of debt to be recovered:

Provided further that nothing contained in this sub-section

relating to fee shall apply to cases transferred to the Tribunal under

sub-section (1) of section 31.

[Explanation.—For the purposes of this section, documents

includes statement of account or any entry in banker’s book duly

certified under the Bankers’ Books Evidence Act, 1891 (18 of 1891).]

[(3A) Every applicant in the application filed under subsection (1) or sub-section (2) for recovery of debt, shall—

(a) state particulars of the debt secured by security

interest over properties or assets belonging to any of the

defendants and the estimated value of such securities;

(b) if the estimated value of securities is not sufficient to

satisfy the debt claimed, state particulars of any other properties

or assets owned by any of the defendants, if any; and

sufficient to recover the debt, seek an order directing the

defendant to disclose to the Tribunal particulars of other

properties or assets owned by the defendants.]

[(3B)] If any application filed before the Tribunal for recovery

of any debt is settled prior to the commencement of the hearing before

that Tribunal or at any stage of the proceedings before the final order

is passed, the applicant may be granted refund to the fees paid by him

at such rates as may be prescribed.]

[(4) On receipt of application under sub-section (1) or subsection (2), the Tribunal shall issue summons with following

directions to the defendant—

(i) to show cause within thirty days of the service of

summons as to why relief prayed for should not be granted;

(ii) direct the defendant to disclose particulars of

properties or assets other than properties and assets specified by

the applicant under clauses (a) and (b) of sub-section (3A); and

(iii) to restrain the defendant from dealing with or

disposing of such assets and properties disclosed under clause

application for attachment of properties.]

[(4A) Notwithstanding anything contained in section 65A of the

Transfer of Property Act, 1882 (4 of 1882), the defendant, on service

of summons, shall not transfer by way of sale, lease or otherwise

except in the ordinary course of his business any of the assets over

which security interest is created and other properties and assets

specified or disclosed under sub-section (3A), without the prior

approval of the Tribunal:

Provided that the Tribunal shall not grant such approval without

giving notice to the applicant bank or financial institution to show

cause as to why approval prayed for should not be granted:

Provided further that defendant shall be liable to account for the

sale proceeds realised by sale of secured assets in the ordinary course

of business and deposit such sale proceeds in the account maintained

with the bank or financial institution holding security interest over

such assets.]

[(5) (i) the defendant shall within a period of thirty days from

the date of service of summons, present a written statement of his

defence including claim for set-off under sub-section (6) or a counterclaim under sub-section (8), if any, and such written statement shall

be accompanied with original documents or true copies thereof with

the leave of the Tribunal, relied on by the defendant in his defence:

Provided that where the defendant fails to file the written

statement within the said period of thirty days, the Presiding Officer

may, in exceptional cases and in special circumstances to be recorded

in writing, extend the said period by such further period not exceeding

fifteen days to file the written statement of his defence;

(ii) where the defendant makes a disclosure of any property or

asset pursuant to orders passed by the Tribunal, the provisions of subsection (4A) of this section shall apply to such property or asset;

(iii) in case of non-compliance of any order made under clause

(ii) of sub-section (4), the Presiding Officer may, by an order, direct

that the person or officer who is in default, be detained in civil prison

for a term not exceeding three months unless in the meantime the

Presiding Officer directs his release:

Provided that the Presiding Officer shall not pass an order

under this clause without giving an opportunity of being heard to such

person or officer.

Explanation.—For the purpose of this section, the expression

‘officer who is in default’ shall mean such officer as defined in clause

(60) of section 2 of the Companies Act, 2013 (18 of 2013).]

[(5A) On receipt of the written statement of defendant or on

expiry of time granted by the Tribunal to file the written statement,

the Tribunal shall fix a date of hearing for admission or denial of

documents produced by the parties to the proceedings and also for

continuation or vacation of the interim order passed under sub-section

(4).

(5B) Where a defendant makes an admission of the full or part

of the amount of debt due to a bank or financial institution, the

Tribunal shall order such defendant to pay the amount, to the extent of

the admission within a period of thirty days from the date of such

order failing which the Tribunal may issue a certificate in accordance

with the provisions of sub-section (22) to the extent of the amount of

debt due admitted by the defendant.]

(6) Where the defendant claims to set-off against the applicant’s

demand any ascertained sum of money legally recoverable by him

from such applicant, the defendant may, at the first hearing of the

application, but not afterwards unless permitted by the Tribunal,

present a written statement containing the particulars of the debt 2

[the debt sought to be set-off along with original documents and other

evidence relied on in support of claim of set-off in relation to any

ascertained sum of money, against the applicant].

(7) The written statement shall have the same effect as a plaint

in a cross-suit so as to enable the Tribunal to pass a final order in

respect both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of

pleading a set-off under sub-section (6), set up, by way of counterclaim against the claim of the applicant, any right or claim in respect

of a cause of action accruing to the defendant against the applicant

either before or after the filing of the application but before the

defendant has delivered his defence or before the time limited for

delivering his defence has expired, whether such counter-claim is in

the nature of a claim for damages or not.

(9) A counter-claim under sub-section (8) shall have the same

effect as a cross-suit so as to enable the Tribunal to pass a final order

on the same application, both on the original claim and on the

counter-claim.

(10) The applicant shall be at liberty to file a written statement

in answer to the counter-claim of the defendant within such period 3

[as may be prescribed].

[(10A) Every application under sub-section (3) or written

statement of defendant under sub-section (5) or claim of set-off under

sub-section (6) or a counter-claim under sub-section (8) by the

defendant, or written statement by the applicant in reply to the

counter-claim, under sub-section (10) or any other pleading

whatsoever, shall be supported by an affidavit sworn in by the

applicant or defendant verifying all the facts and pleadings, the

statements pleading documents and other documentary evidence

annexed to the application or written statement or reply to set-off or

counter-claim, as the case may be:

Provided that if there is any evidence of witnesses to be led by

any party, the affidavits of such witnesses shall be filed

simultaneously by the party with the application or written statement

or replies filed under sub-section (10A).

(10B) If any of the facts or pleadings in the application or

written statement are not verified in the manner provided under subsection (10A), a party to the proceedings shall not be allowed to rely

on such facts or pleadings as evidence or any of the matters set out

therein.]

[(11) Where a defendant sets up a counter-claim in the written

statement and in reply to such claim the applicant contends that the

claim thereby raised ought not to be disposed of by way of counterclaim but in an independent action, the Tribunal shall decide such

issue along with the claim of the applicant for recovery of the debt.]

* * * * *

(13)(A) Where, at any stage of the proceedings, 3 [the Tribunal on an

application made by the applicant along with particulars of property to

be attached and estimated value thereof, or otherwise is satisfied], that

the defendant, with intent to obstruct or delay or frustrate the

execution of any order for the recovery of debt that may be passed

against him,—

(i) is about to dispose of the whole or any part of his

property; or

(ii) is about to remove the whole or any part of his property

from the local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property

or affect its value by misuse or creating third party

interest,

the Tribunal may direct the defendant, within a time to be fixed by it,

either to furnish security, in such sum as may be specified in the order,

to produce and place at the disposal of the Tribunal, when required,

the said property or the value of the same, or such portion thereof as

may be sufficient to satisfy the certificate for the recovery of the debt,

or to appear and show cause why he should not furnish security.

(B) Where the defendant fails to show cause why he should not

furnish security, or fails to furnish the security required, within the

time fixed by the Tribunal, the Tribunal may order the attachment of

the whole or such portion of the properties claimed by the applicant as

the properties secured in his favour or otherwise owned by the

defendant as appears sufficient to satisfy any certificate for the

recovery of debt.

* * * * *

(15) The Tribunal may also in the order direct the conditional

attachment of the whole or any portion of the property specified under

5 [sub-section (13)].

(16) If an order of attachment is made without complying with the

provisions of sub-section (13), such attachment shall be void.

(17) In the case of disobedience of an order made by the Tribunal

under sub-sections (12), (13) and (18) or breach of any of the terms on

which the order was made, the Tribunal may order the properties of

the person guilty of such disobedience or breach to be attached and

may also order such person to be detained in the civil prison for a

term not exceeding three months, unless in the meantime the Tribunal

directs his release.

(18) Where it appears to the Tribunal to be just and convenient, the

Tribunal may, by order—

(a) appoint a receiver of any property, whether before or after

grant of certificate for recovery of debt;

(b) remove any person from the possession or custody of the

property;

of the receiver;

(d) confer upon the receiver all such powers, as to bringing and

defending suits in the courts or filing and defending applications

before the Tribunal and for the realisation, management, protection,

preservation and improvement of the property, the collection of the

rents and profits thereof, the application and disposal of such rents

and profits, and the execution of documents as the owner himself has,

or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of

the properties of the defendant or for the sale thereof.

[(19) Where a certificate of recovery is issued against a

company as defined under the Companies Act, 2013 (18 of 2013) and

such company is under liquidation, the Tribunal may by an order

direct that the sale proceeds of secured assets of such company be

distributed in the same manner as provided in section 326 of the

Companies Act, 2013 or under any other law for the time being in

force.]

[(20) The Tribunal may, after giving the applicant and the

defendant, an opportunity of being heard, in respect of all claims, setoff or counter-claim, if any, and interest on such claims, within thirty

days from the date of conclusion of the hearings, pass interim or final

order as it deems fit which may include order for payment of interest

from the date on which payment of the amount is found due up to the

date of realisation or actual payment.]

[(20A) Where it is proved to the satisfaction of the Tribunal

that the claim of the applicant has been adjusted wholly or in part by

any lawful agreement or compromise in writing and signed by the

parties or where the defendant has repaid or agreed to repay the claim

of the applicant, the Tribunal shall pass orders recording such

agreement, compromise or satisfaction of the claim.]

(20AA) While passing the final order under sub-section (20),

the Tribunal shall clearly specify the assets of the borrower which

security interest is created in favour of any bank or financial

institution and direct the Recovery Officers to distribute the sale

proceeds of such assets as provided in sub-section (20AB).

(20AB) Notwithstanding anything to the contrary contained in

any law for the time being in force, the proceeds from sale of secured

assets shall be distributed in the following orders of priority, namely:

—

(i) the costs incurred for preservation and protection

of secured assets, the costs of valuation, public notice for

possession and auction and other expenses for sale of assets

shall be paid in full;

(ii) debts owed to the bank or financial institution.

Explanation.—For the purposes of this sub-section, it is hereby

clarified that on or after the commencement of the Insolvency and

Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency and

bankruptcy proceedings are pending in respect of secured assets of the

borrower, the distribution of proceeds from the sale of secured assets

shall be subject to the order of priority as provided in that Code.]

[(21) (i) The Tribunal shall send a copy of its final order and the

recovery certificate, to the applicant applicant and defendant.

(ii) The applicant and the defendant may obtain copy of any

order passed by the Tribunal on payment on such fee as may be

prescribed.]

[(22) The Presiding Officer shall issue a certificate of recovery

along with the final order, under sub-section (20), for payment of debt

with interest under his signature to the Recovery Officer for recovery

of the amount of debt specified in the certificate.]

[(22A) Any recovery certificate issued by the Presiding Officer

under sub-section (22) shall be deemed to be decree or order of the

Court for the purposes of initiation of winding up proceedings against

a company registered under the Companies Act, 2013 (18 of 2013) or

Limited Liability Partnership registered under the Limited Liability

Partnership Act, 2008 (6 of 2009) or insolvency proceedings against

any individual or partnership firm under any law for the time being in

force, as the case may be.]

(23) Where the Tribunal, which has issued a certificate of

recovery, is satisfied that the property is situated within the local

limits of the jurisdiction of two or more Tribunals, it may send the

copies of the certificate of recovery for execution to such other

Tribunals where the property is situated:

Provided that in a case where the Tribunal to which the

certificate of recovery is sent for execution finds that it has no

jurisdiction to comply with the certificate of recovery, it shall return

the same to the Tribunal which has issued it.

(24) The application made to the Tribunal under sub-section (1)

or sub-section (2) shall be dealt with by it as expeditiously as possible

and 1 [every effort shall be made by it to complete the proceedings in

two hearings, and] to dispose of the application finally within one

hundred and eighty days from the date of receipt of the application.

(25) The Tribunal may made such orders and give such

directions as may be necessary or expedient to give effect to its orders

or to prevent abuse of its process or to secure the ends of justice.]”

37. Section 31 provides for the transfer of pending cases before courts to

the DRT on the date of establishment of the same:

“31. Transfer of pending cases.—(1) Every suit or other proceeding

pending before any court immediately before the date of

establishment of a Tribunal under this Act, being a suit or proceeding

the cause of action whereon it is based is such that it would have

been, if it had arisen after such establishment, within the jurisdiction

of such Tribunal, shall stand transferred on that date to such Tribunal:

Provided that nothing in this sub-section shall apply to any

appeal pending as aforesaid before any court:

[Provided further that any recovery proceedings in relation to

the recovery of debts due to any multi-State co-operative bank

pending before the date of commencement of the Enforcement of

Security Interest and Recovery of Debts Laws (Amendment) Act,

2012 (1 of 2013) under the Multi-State Co-operative Societies Act,

2002 (39 of 2002), shall be continued and nothing contained in this

section shall apply to such proceedings.]

(2) Where any suit or other proceeding stands transferred from

any court to a Tribunal under sub-section (1),—

(a) the court shall, as soon as may be after such transfer,

forward the records of such suit or other proceeding to the

Tribunal; and

(b) the Tribunal may, on receipt of such records, proceed

to deal with such suit or other proceeding, so far as may be, in

the same manner as in the case of an application made under

section 19 from the stage which was reached before such

transfer or from any earlier stage 2 *** as the Tribunal may

deed fit.”

The reference before us

38. The interplay of the provisions of the RDB Act and the Code has been

discussed in the aforesaid judgment in Indian Bank’s case (supra). We find

it appropriate to extract the paragraphs which deal with this aspect:

“15. It is evident from Sections 17 and 18 of the Debts Recovery Act

that civil court's jurisdiction is barred only in regard to applications by

a bank or a financial institution for recovery of its debts. The

jurisdiction of civil courts is not barred in regard to any suit filed by a

borrower or any other person against a bank for any relief. It is not

disputed that the Calcutta High Court had jurisdiction to entertain and

dispose of C.S. No.7/1995 filed by the borrower when it was filed and

continues to have jurisdiction to entertain and dispose of the said suit.

There is no provision in the Act for transfer of suits and proceedings,

except section 31 which relates to suit/proceeding by a Bank or

financial institution for recovery of a debt. It is evident from Section

31 that only those cases and proceedings (for recovery of debts due to

banks and financial institutions) which were pending before any court

immediately before the date of establishment of a tribunal under

the Debts Recovery Act stood transferred, to the Tribunal. In this case,

there is no dispute that the Debt Recovery Tribunal, Calcutta, was

established long prior to the company filing C.S. No.7/1995 against

the bank. The said suit having been filed long after the date when the

tribunal was established and not being a suit or proceeding instituted

by a bank or financial institution for recovery of a debt, did not

attract section 31.

16. As far as sub-sections (6) to (11) of section 19 are concerned, they

are merely enabling provisions. The Debts Recovery Act, as it

originally stood, did not contain any provision enabling a defendant in

an application filed by the bank/financial institution to claim any set

off or make any counter claim against the bank/financial institution.

On that among other grounds, the Act was held to be unconstitutional

(see Delhi High Court Bar Association vs. Union of India AIR 1995

Delhi 323). During the pendency of appeal against the said decision,

before this Court, the Act was amended by Act 1 of 2000 to remove

the lacuna by providing for set off and counter-claims by defendants

in the applications filed by Banks/financial institution before the

Tribunal. The provisions of the Act as amended were upheld by this

Court in Union of India vs. Delhi High Court Bar Association [2002

(4) SCC 275]. The effect of sub-sections (6) to (11) of Section 19 of

the amended Act is that any defendant in a suit or proceeding initiated

by a bank or financial institution can : (a) claim set off against the

demand of a Bank/financial institution, any ascertained sum of money

legally recoverable by him from such bank/financial institution; and

(b) set-up by way of counter-claim against the claim of a

Bank/financial institution, any right or claim in respect of a cause of

action accruing to such defendant against the bank/financial

institution, either before or after filing of the application, but before

the defendant has delivered his defence or before the time for

delivering the defence has expired, whether such a counter claim is in

the nature of a claim for damages or not. What is significant is

that Sections 17 and 18 have not been amended. Jurisdiction has not

been conferred on the Tribunal, even after amendment, to try

independent suits or proceedings initiated by borrowers or others

against banks/financial institutions, nor the jurisdiction of civil courts

barred in regard to such suits or proceedings. The only change that

has been made is to enable defendants to claim set off or make a

counter-claim as provided in sub-sections (6) to (8) of Section 19 in

applications already filed by the bank or financial institutions for

recovery of the amounts due to them. In other words, what is provided

and permitted is a cross-action by a defendant in a pending

application by the bank/financial institution, the intention being to

have the claim of the bank/financial institution made in its application

and the counter-claim or claim for set off of the defendant, as a single

unified proceeding, to be disposed of by a common order.

17. Making a counter claim in the Bank's application before the

Tribunal is not the only remedy, but an option available to the

borrower/defendant. He can also file a separate suit or proceeding

before a civil court or other appropriate forum in respect of his claim

against the Bank and pursue the same. Even the Bank, in whose

application the counter-claim is made, has the option to apply to the

tribunal to exclude the counter-claim of the defendant while

considering its application. When such application is made by the

Bank, the Tribunal may either refuse to exclude the counter-claim and

proceed to consider the Bank's application and the counter-claim

together; or exclude the counter-claim as prayed, and proceed only

with the Bank's application, in which event the counter-claim

becomes an independent claim against a bank/financial institution.

The defendant will then have to approach the civil court in respect of

such excluded counter claim as the Tribunal does not have jurisdiction

to try any independent claim against a bank/financial institution. A

defendant in an application, having an independent claim against the

Bank, cannot be compelled to make his claim against the Bank only

by way of a counter-claim. Nor can his claim by way of independent

suit in a court having jurisdiction, be transferred to a Tribunal against

his wishes.

18. In this case, the first respondent does not wish his case to be

transferred to the Tribunal. It is, therefore, clear that the suit filed by

the first respondent against the Bank in the High Court for recovery of

damages, being an independent suit, and not a counter-claim made in

the application filed by the bank, the Bank's application for transfer of

the said suit to the Tribunal was misconceived and not maintainable.

The High Court, where the suit for damages was filed by the company

against the bank, long prior to the bank filing an application before

the tribunal against the company, continues to have jurisdiction in

regard to the suit and its jurisdiction is not excluded or barred

under Section 18 or any other provision of Debts Recovery Act.”

39. On a plain reading of the provisions, the conclusion reached was that

Section 17 of the RDB Act bars the jurisdiction of the Civil Court only in

respect of applications filed by the bank or financial institution. This

provision did not bar the jurisdiction of the Civil Court to try a suit filed by

the borrower. There was also an absence of provisions in the Act for transfer

of suits and proceedings except Section 31, which relates to pending suit

proceedings by a bank or financial institution for recovery of debt.

40. It was noticed that the significant aspect of Sections 17 and 18 of the

RDB Act was that even after establishment of the DRT, no jurisdiction had

been conferred on it to try independent suits or proceedings initiated by the

borrower or others against banks/financial institutions. What has been

permitted is only a cross-action in the form of a counterclaim by a defendant

in the pending application to facilitate a unified proceeding. The most

significant aspect considered in this behalf is set out in para 17 extracted

above - that a counterclaim in a bank’s application before the DRT was not

the only remedy, but an option available to the defendant borrower. The

borrower was not precluded from filing a separate suit or proceeding before

a Civil Court or other appropriate forum. Not only that, even the bank, in

whose application a counterclaim is made, has the option to apply to the

DRT to exclude the counterclaim of the defendant while considering its

application. If the DRT were to find in the bank’s favour, the defendant

would have to approach the Civil Court in respect of such excluded

counterclaim, as the DRT does not have jurisdiction to try an independent

claim against the bank/financial institution.

41. The question thus arises as to whether the view expressed in Indian

Bank (supra) is the correct legal proposition in view of certain earlier

judgments as well as latter judgments. We may however notice that the

earlier judgment in the case of Abhijit Tea Co. Pvt. Ltd. (supra), where an

independent suit of a defendant was deemed to be a counterclaim and

transferred to the DRT, was considered and differentiated in the Indian

Bank case (supra). Although both were judgments of Coordinate Benches of

this Court, Indian Bank’s case (supra) opined that the transfer would only

be possible if the subject-matter of the two suits was inextricably connected

and where both parties consented to such transfer.

42. In the subsequent judgment in Ranjan Chemicals Ltd. And Another

(supra), the Court went as far as to say that the transfer could be made of the

civil proceedings to the DRT without consent of both the parties and that a

claim in an independent suit could be considered as the claim for set-off or a

counterclaim. This flip-flop-flip continued depending on the view that the

Bench of two Judges wanted to take as thereafter in Nahar Industrial

Enterprises Ltd. (supra), it was found that there was no reason to depart

from the view taken in Indian Bank case (supra), as was sought to be done

in Ranjan Chemicals Ltd. And Another case (supra), and that is how the

reference arose.

Our view:

43. We must note at the threshold itself that there are no restrictions on

the power of a Civil Court under Section 9 of the Code unless expressly or

impliedly excluded. This was also reiterated by a Constitution Bench of this

Court in Dhulabhai vs. State of Madhya Pradesh11. Thus, it is in the

conspectus of the aforesaid proposition that we will have to analyse the rival

contentions of the parties set out above. Our line of thinking is also

influenced by a Three-Judges Bench of this Court in Dwarka Prasad

11 1968 SCR (3) 660.

Agarwal (D) By LRs and Anr. v. Ramesh Chander Agarwal and Ors.12

where it was opined that Section 9 of the Code confers jurisdiction upon

Civil Courts to determine all disputes of civil nature unless the same is

barred under statute either expressly or by necessary implication and such a

bar is not to be readily inferred. The provision seeking to bar jurisdiction of

a Civil Court requires strict interpretation and the Court would normally

lean in favour of construction which would uphold the jurisdiction of the

Civil Court.

44. Now, if we turn to the objective of the RDB Act read with the scheme

and provisions thereof; it is abundantly clear that a summary remedy is

provided in respect of claims of banks and financial institutions so that

recovery of the same may not be impeded by the elaborate procedure of the

Code. The defendant has a right to defend the claim and file a counterclaim

in view of sub-Sections (6) and (8) of Section 19 of the RDB Act. In case of

pending proceedings to be transferred to the DRT, Section 31 of the RDB

Act took care of the issue of mere transfer of the Bank’s claim, albeit

without transfer of the counterclaim. Thus, if the debtor desires to institute a

counterclaim, that can be filed before the DRT and will be tried along with

12 (2003) 6 SCC 220.

the case. However, it is subject to a caveat that the bank may move for

segregation of that counterclaim to be relegated to a proceeding before a

Civil Court under Section 19(11) of the RDB Act, though such

determination is to take place along with the determination of the claim for

recovery of debt.

45. We are thus of the view that there is no provision in the RDB Act by

which the remedy of a civil suit by a defendant in a claim by the bank is

ousted, but it is the matter of choice of that defendant. Such a defendant may

file a counterclaim, or may be desirous of availing of the more strenuous

procedure established under the Code, and that is a choice which he takes

with the consequences thereof.

46. We may notice that the RDB Act was amended from time to time,

including by amendments made under Act 1 of 2000, Act 30 of 2004, Act 1

of 2013 and Act 44 of 2016. The anomaly, inter alia, initially sought to be

cured was on account of the non-availability of provisions on counterclaim

and set-off. It is to get over such a scenario that amendment through Act 1

of 2000 was made by the Legislature itself to cure the problem. The

Legislature did not, at any stage, make any further amendment for excluding

the jurisdiction of the Civil Court in respect of a claim of a defendant in

such a proceeding being filed along with the suit. The Legislature in its

wisdom has also not considered it appropriate to bring any amendment to

enhance the powers of the DRT in this respect.

47. We may also refer to the judgment of this Court in Transcore (supra)

opining that the DRT, being a Tribunal and a creature of the Statute, does not

have any inherent power which inheres in Civil Courts such as Section 151

of the Code.

48. We now draw our attention to Chapter 5 of the RDB Act, which deals

with recovery of debt determined by the DRT. Section 25 of the RDB Act

prescribes the mode of recovery of debts, which takes place pursuant to a

certificate issued under sub-Section (7) of Section 19 to recover the amount

of debt specified in the certificate by any of the modes specified therein.

The expanse of the reliefs the defendant may claim in the suit proceeding

can certainly go beyond mere adjustments of the amounts of claim, for

which the DRT would not have any power.

49. Now, turning to the issue of the power of the Civil Court to transfer an

independent proceeding instituted by a defendant to be tried alongside a

recovery proceeding before the DRT. There is gainsay that there is no

specific power to transfer a suit to the DRT. A plaint can be returned only

under the provisions of Order VII Rule 10 of the Code for the reasons

specified therein. In the absence of such reasons, Section 151 of the Code

cannot be utilised as a residuary power to achieve the transfer, which is

really a consequence of return of the plaint when the grounds under Order

VII Rule 10 of the Code are not satisfied. The absence of any legislative

power cannot give a power by implication to the Civil Court. We believe

that it would not be appropriate to read such power to transfer a suit to a

DRT under Section 151 of the Code when the DRT is a creature of a statute

and that statute does not provide for such eventuality.

50. We must also notice an important aspect that even where a defendant

is to invoke the jurisdiction of the DRT by filing a counterclaim, the bank

has a right to seek a relegation of that claim to the Civil Court and the DRT

has been empowered to do so, albeit, at the final adjudication stage. This is

so in view of the summary nature of remedy provided before the DRT and

thus, if certain inquiries beyond the contours of what the DRT does are

envisaged, a Civil Court remedy may be considered as appropriate.

51. Now coming to the question whether consent is required for the

transfer of a suit. We do believe that once we have opined that there is no

power of transfer in the Civil Court, the consent or absence of it is not

something which would lend such power to the Civil Court. The option

before the defendant, who has instituted the suit, is clear - either he could

file a counterclaim before the DRT or he could institute separate civil

proceedings.

52. We however have a word of caution keeping in mind the nature of

powers exercised by the DRT and the objective of its creation. The

interpretations in Abhijit Tea Co. and Ranjan Chemicals (supra), seeking to

give power of transfer to the Civil Court, whether by consent or otherwise,

were apparently predicated on an apprehension that a defendant may launch

a suit before the Civil Court in order to delay the proceedings before the

DRT.

53. We certainly would not like that the process envisaged under the RDB

Act be impeded in any manner by filing of a separate suit if a defendant

chooses to do so. A claim petition before the DRT has to proceed in a

particular manner and would so proceed. There can be no question of stay

of those proceedings by way of a civil proceeding instituted by a defendant

before the Civil Court. The suit would take its own course while a petition

before the DRT would take its own course. We appreciate that this may be in

the nature of parallel proceedings but then it is the defendant’s own option.

We see no problem with the same as long as the objective of having

expeditious disposal of the claim before the DRT under the RDB Act is not

impeded by filing a civil suit. Thus, it is not open to a defendant, who may

have taken recourse to the Civil Court, to seek a stay on the decision of the

DRT awaiting the verdict of his suit before the Civil Court as it is a matter of

his choice.

54. We thus make it abundantly clear that in case of such an option

exercised by the defendant who filed an independent suit, whatever be the

nature of reliefs, the claim petition under the RDB Act would continue to

proceed expeditiously in terms of the procedure established therein to come

to a conclusion whether a debt is due to a bank and/or financial institution

and whether a recovery certificate ought to be issued in that behalf.

55. We may say that if the Legislature were to think otherwise, nothing

prevented the Legislature nor prevents it now from making suitable

amendments in the RDB Act to meet such a scenario.

56. In view of the discussion aforesaid, the questions framed above are to

be answered as under:

against a Bank or Financial Institution ousted by virtue of the scheme

of the RDB Act in relation to the proceedings for recovery of debt by

a Bank or Financial Institution?

The aforesaid question ought to be answered first and is answered in

the negative.

(a) Whether an independent suit filed by a borrower against a Bank or

Financial Institution, which has applied for recovery of its loan

against the plaintiff under the RDB Act, is liable to be transferred and

tried along with the application under the RDB Act by the DRT?

In the absence of any such power existing in the Civil Court, an

independent suit filed by the borrower against the bank or financial

institution cannot be transferred to be tried along with application

under the RDB Act, as it is a matter of option of the defendant in the

claim under the RDB Act. However, the proceedings under the RDB

Act will not be impeded in any manner by filing of a separate suit

before the Civil Court.

(b) If the answer is in the affirmative, can such transfer be ordered by

a court only with the consent of the plaintiff?

Since there is no such power with the Civil Court, there is no question

of transfer of the suit whether by consent or otherwise.

57. The aforesaid takes care of the reference.

58. Now coming to the factual scenario of the case. The fact is that the

proceedings under the RDB Act in any case have reached a culmination with

satisfaction of the claim and, thus, no proceedings instituted by the appellant

are pending before the DRT. As for the suit, there is no question of a

counterclaim or a transfer or any other manner other than trial of the suit

instituted by the respondent. In fact, some part of the claim of the bank was

not even allowed and some adjustments were directed to be made. Even

thereafter so far as any other claims of the respondent are concerned, the

DRT in terms of the order dated 19.05.2003 permitted the respondent to

pursue the remedy in accordance with law - which can only mean the civil

proceedings. Thus, the suit is liable to proceed accordingly.

Conclusion:

59. The civil appeals are accordingly dismissed leaving the parties to bear

their own costs.

60. The judgments in Abhijit Tea Co. (supra) and Ranjan Chemicals Ltd.

(supra) are held not to be laying down the correct legal proposition. The

judgments in Indian Bank (supra) and Nahar Industrial Enterprises

(supra) are affirmed except to the extent that they allow the transfer of a suit

from the Civil Court to the DRT.

...................……………………J.

[Sanjay Kishan Kaul]

...................……………………J.

[Abhay S. Oka]

...................……………………J.

[Vikram Nath]

New Delhi.

November 10, 2022.

Search This Blog

Indian Constitution

BANK OF RAJASTHAN LTD. Versus VCK SHARES & STOCK BROKING SERVICES LTD

Comments

Post a Comment

Popular posts from this blog

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India