Summary
A bank applied to the DRT to recover dues from a borrower. While that application was pending, the borrower sued the bank in the Calcutta High Court over pledged shares it had sold. On a reference, a three-Judge Bench held that the RDB Act does not oust a civil court's jurisdiction over a borrower's suit against a bank. The borrower may choose between a counter-claim before the DRT and a separate suit. A civil court has no power, by consent or under Section 151 CPC, to transfer such a suit to the DRT. The suit cannot be used to stall the DRT proceedings. Abhijit Tea and Ranjan Chemicals were held wrong, and Indian Bank and Nahar were affirmed except on transfer.
Issues
- Whether the jurisdiction of a civil court to try a suit filed by a borrower against a bank or financial institution is ousted by the scheme of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
- Whether such an independent suit can be transferred to the DRT to be tried with the bank's recovery application and, if so, whether only with the plaintiff's consent.
Provisions considered
- Sections 17 and 18, Recovery of Debts Due to Banks and Financial Institutions Act, 1993The bar applies only to applications by banks and financial institutions for recovery of debts; it does not reach suits by borrowers against banks. (¶¶ 38, 39, 40, 56)
- Section 19(6) to (11), Recovery of Debts Due to Banks and Financial Institutions Act, 1993Set-off and counter-claim are enabling options for a defendant, and the bank may seek to have a counter-claim relegated to an independent action under sub-section (11). (¶¶ 44, 45, 50)
- Section 31, Recovery of Debts Due to Banks and Financial Institutions Act, 1993Provides only for transfer of pending recovery proceedings by banks on establishment of the Tribunal, not of borrowers' suits. (¶¶ 37, 39, 44)
- Sections 9 and 151; Order VII Rule 10, Code of Civil Procedure, 1908Civil court jurisdiction is excluded only expressly or by necessary implication; there is no power to transfer a suit to the DRT, and Section 151 cannot supply one outside Order VII Rule 10. (¶¶ 43, 49, 51)
Held
- Section 9 CPC confers jurisdiction over all civil disputes unless barred expressly or by necessary implication, and such bars are strictly construed; the RDB Act provides a summary remedy for banks' claims and contains no provision ousting a borrower's civil suit, Parliament having added only set-off and counter-claim by Act 1 of 2000 without enlarging the DRT's jurisdiction. (¶¶ 43, 44, 45, 46)
- Whether to file a counter-claim before the DRT or a separate suit is the defendant's choice; the DRT, a creature of statute without inherent powers, cannot grant reliefs beyond adjusting claims, and the bank may seek to relegate a counter-claim to the civil court. (¶¶ 45, 47, 48, 50)
- A civil court has no power to transfer a borrower's suit to the DRT, since a plaint can be returned only under Order VII Rule 10 and Section 151 cannot create such power; consent cannot confer a power that does not exist. (¶¶ 49, 51, 56)
- The borrower's suit cannot impede the DRT proceedings, which must continue expeditiously, and the borrower cannot seek a stay of the DRT's decision pending the suit; Abhijit Tea and Ranjan Chemicals do not lay down correct law, and Indian Bank and Nahar Industrial Enterprises are affirmed except insofar as they allow transfer; on the facts the DRT proceedings had concluded and the suits must proceed. (¶¶ 52, 53, 54, 58, 60)
Result
Reference answered; Civil Appeal Nos. 8972-8973 of 2014 against the Calcutta High Court's judgment dated 19.04.2011 in A.P.O. Nos. 488 and 489 of 2002 dismissed; parties to bear own costs.