TMI Blog2022 (11) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... recluded 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. 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 - 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ijit Tea Co. Pvt. Ltd. And Others (2000) 7 SCC 357 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. (2006) 5 SCC 72. 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 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 (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf 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 India (2008) 1 SCC 125 the DRT is a creature of statute and has no inherent power, which exists in Civil Courts. In Swarka Prasad Agarwal v. Ramesh Chander Agarwal (2003) 6 SCC 220 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 Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers 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 amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial 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 Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (c) of sub-section (3A) pending the hearing and disposal of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erim 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery 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 defendan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame 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 Recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal 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 establishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
