2000 (9) TMI 928 - SC - Companies Law

Whether the suit No. 410 of 1985 by the Bank which was disposed by judgment dated 29-3-1994 and which judgment was set aside by the Bench on 11-8-1998 and remanded to the Single Judge, could not be treated as pending immediately before the commencement of the Act on 27-4-1994 (in West Bengal) and whether it could not be transferred to the Recovery Tribunal ? What is the combined effect of sections 18 and 31 and of the Act on pending proceedings ? Whether the pendency of suit No. 272 of 1985 filed by the debtor- company against the Bank for specific performance and for perpetual and mandatory injunctions raising common issues between parties in both these suits was a sufficient reason for retention of the Bank s suit No. 410 of 1985 on the original side of the High Court to be tried along with the Suit No. 272 of 1985 filed by the debtor- company ? Whether the suit No. 272 of 1985 filed by the debtor-company was, in substance, one in the nature of a counter-claim against the Bank and was one which also fell within the special Act by reason of section 19(8) to (11) of the Act (as introduced by Amending Act 1/2000) and if that be so, whether it could still be successfully pleaded by the respondent-company that the pendency of the company s suit 272 of 1985 was a ground for retention of Bank s Suit No. 410 of 1985 on the original side of the High Court ? Held that - Both the suits, the one by the Bank against the respondent (suit 410 of 1985) and the other by the debtor-against the Bank (suit 272 of 1985) which raises claims or pleas in the nature of set-off or counter-claim are interconnected. Direct the Bank s suit 410 of 1985 to be transferred by the Registrar, Calcutta High Court to the appropriate Tribunal under the Act. So far as the debtor-company s suit 272 of 1985 is concerned, action has to be taken likewise by the Registrar in the light of our finding which finding has become necessary in view of the contention on behalf of the debtor-company before us and that appropriate orders will be passed in relation to suit 272 of 1985 expeditiously, at any rate, within one month from today.

Issues Involved:
1. Whether the suit No. 410 of 1985 by the Bank could be treated as pending immediately before the commencement of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and whether it could be transferred to the Recovery Tribunal.
2. The combined effect of sections 18 and 31 of the Act on pending proceedings.
3. Whether the pendency of suit No. 272 of 1985 filed by the debtor-company against the Bank was a sufficient reason for retention of the Bank's suit No. 410 of 1985 on the original side of the High Court.
4. Whether the suit No. 272 of 1985 filed by the debtor-company was in the nature of a "counter-claim" against the Bank and fell within the purview of the Act.

Detailed Analysis:

Points 1 and 2:
The primary question was whether the Bank's suit No. 410 of 1985, which was remanded by the Appellate Court on 11-8-1998, could be considered pending before the Single Judge on 27-4-1994, the crucial date of the Act's commencement in West Bengal. The interpretation of sections 18, 31, and 34 of the Act was crucial.

The judgment clarified that an order of remand by the Appellate Court revives the suit in full, except for matters finally decided by the Appellate Court. Therefore, the suit must be deemed pending from its original institution date. The suit's disposal by the Single Judge on 29-3-1994 was set aside, and the continuity of the suit in the Trial Court was restored. Thus, the Bank's suit was pending on 27-4-1994 and should be transferred to the Tribunal.

Section 18 of the Act bars the jurisdiction of Civil Courts in matters specified in section 17, and section 34 gives the Act overriding effect. The Court must take judicial notice of the change in law affecting pending actions. The Act of 1993 intended to provide a speedy remedy for recovery of debts due to banks, and accepting the respondent's contention would result in a stalemate, contrary to the Act's purpose.

Points 3 and 4:
The respondent-company argued that its suit No. 272 of 1985 for specific performance and perpetual and mandatory injunctions was integrally connected with the Bank's suit and could not be tried by the Tribunal. However, the Court examined the substance of the company's suit and found it to be in the nature of a counter-claim under sub-sections (8) to (11) of section 19 of the Act. The claims for specific performance, perpetual and mandatory injunctions, and damages were connected to the amount claimed by the Bank and were essentially counter-claims or set-offs.

The Court held that both suits, the Bank's suit No. 410 of 1985 and the debtor-company's suit No. 272 of 1985, fell within the purview of the Act and should be tried by the Tribunal. The pendency of the company's suit was not a valid reason for retaining the Bank's suit in the High Court.

Conclusion:
The appeal was allowed, and the order of the learned Single Judge was set aside. The Bank's suit No. 410 of 1985 was directed to be transferred to the Tribunal. The Registrar of the High Court was instructed to pass appropriate orders regarding the debtor-company's suit No. 272 of 1985. The respondent-company was directed to file its written statement in suit No. 410 of 1985 within one month, and the Tribunal was instructed to dispose of both suits within six months. No order as to costs was made.

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