Bank of Rajasthan Ltd. vs Vck Shares & Stock Broking Services Ltd.

19 – The appellant bank sanctioned a term loan to the respondent company, however, respondent failed to make the payment – Appellant filed an application for recovery of the amounts before the Debts Recovery Tribunal, (DRT) – Respondent entered appearance to defend the proceedings, but in addition also filed a Civil Suit in the High Court which was dismissed by the Single Judge on the finding that the Court lacked jurisdiction as the same exclusively vested with the DRT – However, on appeal the Division Bench of the High court restored the suit and held that there is no provision in the RDB ousting jurisdiction of civil court – There existed a difference of opinion between several benches of the Supreme Court and it was considered appropriate to refer it to larger bench – The following questions were referred : (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 ? – Held: There is no specific power to transfer a suit to the DRT – Only a plaint can be returned u/Or. VII, r.10 – S.151 of CPC cannot be utilized as a residuary power to achieve transfer – Absence of any legislative power cannot give a power by implication to the Civil Court –Also, not appropriate to read such power to transfer a suit to a DRT u/s. 151 of the CPC, when DRT is a creature of a statute and statute does not provide for such eventuality – (b) Once its concluded that there is no power with civil court, then there is no question of transfer of the suit whether by consent or otherwise – (c) 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 a matter of choice of that defendant – Such defendant may file counterclaim, or may avail procedure establish under Code. Dismissing the appeals, the Court

Held: 1.1 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. [Para 39][594-G]

1.2 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. [Para 40][594-H; 595-A-B]

1.3 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. [Para 45][596-G; 597-A]

1.4 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 CPC 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. 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. [Para 49][597-FH; 598-A]

1.5 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. [Para 51][598-C-D]

United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. And Others (2000) 7 SCC 357 : [2000] 3

Suppl. SCR 153; State Bank of India v. Ranjan

Chemicals Ltd. and Another (2007) 1 SCC 97 : [2006]

7 Suppl. SCR 145 – held not correct law.

Indian Bank v. ABS Marine Products (P) Ltd.

(2006) 5 SCC 72 : [2006] 1 Suppl. SCR 52; Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corporation (2009) 8 SCC 646 : [2009]

12 SCR 54 – partly affirmed.

Transcore v. Union of India (2008) 1 SCC 125 : [2006]

9 Suppl. SCR 785; Swarka Prasad Agarwal v. Ramesh Chander Agarwal (2003) 6 SCC 220; Nagri Pracharini Sabha v. Vth Additional District and Sessions Judge (1991) 2 Supp SCC 36; Ramesh Chand Arwaitya v. Anil Panjwani (2003) 7 SCC 350 : [2003] 3 SCR 1149; Union of India and Another v. Delhi High Court Bar Association and Others (2002) 4 SCC 275 : [2002] 2 SCR 450; Dhulabhai v. State of Madhya Pradesh [1968]

3 SCR 3 660; Dwarka Prasad Agarwal (D) By LRs and Anr. v. Ramesh Chander Agarwal and Ors. (2003)

6 SCC 220 : [2003] 1 Suppl. SCR 376 – referred to.