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TMI Blog2006 (4) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... rower against a Bank before a civil court to the Tribunal, in the event of the Bank filing a recovery application against the borrower before the Tribunal, to be tried as a counter-claim in the Bank's application? - Held that:- 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. Whether the observation in Abhijit (supra) that the suit filed by the borrower against the Bank has to be transferred to the Tribunal for being tried as a counter- claim in the applications of the Bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the loans) with interest. By the end of 2000, recording of evidence in the suit was completed and the suit was ripe for arguments. 4. On 24.1.2001, the Bank made an oral submission that the suit could not be tried by the High Court and it should be transferred to the Tribunal. A learned Single Judge rejected the said request by the following order :- Though not pleaded in the written statement specifically, the learned counsel for the defendant contends that in view of the amendment of section 19 of the Recovery of debts due to Banks and Financial Institutions Act, 1993, this suit cannot be tried by this court. I have gone through section 19 of the said act as amended up to date. It appears from the said amendment that the debtor/respondent will be entitled to make counter claims in the same proceeding initiated by the bank. Before amendment there was no such specific provision. But in this case, the plaintiff/debtor had filed the suit before the bank could file appropriate proceeding. It is a separate suit. It is neither a cross suit nor can be termed as counter-claim. So the suit is perfectly entertainable by this court. Therefore, the preliminary objection raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 19 of the Act is merely a provision enabling a defendant (in a Recovery Application filed by the Bank before the Tribunal) to raise a counter-claim in his written statement against the bank, and empowering the Tribunal to try such a counter-claim. Such an enabling provision cannot be construed as ousting or excluding the jurisdiction of the civil court to entertain a suit for damages filed by the borrower against the bank, or enabling the bank to seek transfer of such a suit, to the Tribunal. The observation in Abhijit (supra) that the borrower's suit should be transferred to the Tribunal by treating the independent suit of the borrower as a counter-claim in the application of the Bank, was in exercise of the extraordinary power under Article 142 of the Constitution of India, on the special and peculiar facts of that case. As the High Court in its jurisdiction as a civil court, did not possess the power available to the Supreme Court under Article 142, it could not pass any order for transfer of a suit validly instituted before it, to the Tribunal. (iv) Even assuming that the High Court could transfer the suit, the basic requirement for transfer laid down in Abhijit (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a recovery application against the borrower before the Tribunal, to be tried as a counter-claim in the Bank's application? (c) Whether the observation in Abhijit (supra) that the suit filed by the borrower against the Bank has to be transferred to the Tribunal for being tried as a counter- claim in the applications of the Bank, is to be construed as a principle laid down by this Court, or as an observation in exercise of power under Article 142 in order to do complete justice between the parties? Re : Question No. (i) : 8. The Bank sanctioned an ad hoc packing credit limit of Rs.20 lacs on 12.7.1991 and an additional ad hoc packing credit limit of Rs.5 lacs on 6.12.1991, subject to the terms contained in the Sanction Advice dated 12.7.1991. In regard to the initial limit of Rs.20 lacs, the company executed an agreement dated 15.7.1991 and its 4 Directors executed a guarantee dated 15.7.1991. In regard to the additional amount of Rs.5 lacs, a promissory note and an agreement were executed on 20.11.1991. Claiming that the company failed to pay the amounts advanced, the Bank filed an application before the Tribunal for recovery of Rs.30,67,820.04. The cause of action f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of such non-disbursement and if so whether the borrower was entitled to the amounts claimed. While the claim of the Bank was for an ascertained sum due from the borrower, the claim of the borrower was for damages which required firstly a determination by the court as to whether the Bank was liable to pay damages and thereafter assessment of quantum of such damages. Thus there is absolutely no connection between the subject matter of the two suits and they are no way connected. A decision in one does not depend on the other. Nor could there be any apprehension of different and inconsistent results if the suit and the application are tried and decided separately by different forums. In the circumstances, it cannot be said that the borrower's suit and the Bank's application were inextricably connected. Re : Question No. 2 : 10. Section 17 of the Debts Recovery Act deals with jurisdiction, powers and authority of the Tribunals. Sub-section (1) thereof provides that 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as may be fixed by the Tribunal. (11) Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application make such order as it thinks fit. 12. Section 31 of the Debts Recovery Act provides that every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under the said Act, being a suit or proceeding the cause of action whereon i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. Re : Question No. (iii) : 18. Let us examine what happened in Abhijit (supra). A suit (No.410/1985) filed by the Bank in the Calcutta High Court, was disposed of in terms of an alleged compromise on 29.3.1984. The Tribunal was established on 27.4.1994. Subsequently, the compromise decree was set aside by a Division Bench on 11.8.1998 and the said suit stood restored to file. The debtor company filed an application praying that the Bank's suit should be retained on the original side of the Calcutta High Court and should not be transferred to the tribunal, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, for purpose of Section 31. The second was, whether the Bank's suit, even though liable to be transferred to the Tribunal under section 31, could be retained in the High Court on the ground that it was inextricably connected with an earlier suit filed by the borrower against the Bank. The question whether a suit filed by the borrower against a Bank in a civil court, could be transferred to the Tribunal against his wishes, neither arose for decision nor was considered or decided. 19. With reference to the first issue, this Court held that when the appeal against the compromise decree dated 29.3.1984 was allowed and the compromise decree was set aside, the suit stood restored and it should be deemed to be pending from 29.3.1984 itself, and consequently, must be deemed in the eye of law to be pending on 27.4.1994 when the Tribunal was constituted at Calcutta, and Sections 18 and 31 of the Debts Recovery Act would apply to the said suit. There is no dispute that the decision of this Court on the first issue is the law declared by this Court. 20. The second issue, as noticed above, was whether the suit of the Bank against the borrower should be retained in the High Court, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the two suits were in fact inextricably connected. But the confusion is in regard to this 'incidental' decision/observations made while deciding the second issue. While the Appellant contends that the said incidental observations, made on an issue not arising for decision, are also in the nature of law declared by this Court, the first Respondent contends that they are merely observations made on the peculiar facts and circumstances of that case, in exercise of the power under Article 142 to do complete justice. 21. The first Respondent drew our attention to the following circumstances in support of its contention that the observations relating to treating a borrower's independent suit as a counter claim, was in exercise of power under Article 142 : (a) Though there was no prayer for transfer of the borrower's suit to Tribunal at any stage, this Court held that borrower's suit should be transferred to the Tribunal. (b) The four questions that were formulated for consideration (extracted above) clearly showed that the question as to whether borrower's suit should be transferred never arose for consideration. In fact, no arguments were addressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given for exercising such power, cannot be considered as law laid down by this Court under Article 141. It is pointed out that other courts do not have the power similar to that conferred on this Court under Article 142 and any attempt to follow the exercise of such power will lead to incongruous and disastrous results. 23. Though there appears to be some merit in the first Respondent's submission, we do not propose to examine that aspect. Suffice it to clarify that the observations in Abhijit that an independent suit of a defendant (in Bank's application) can be deemed to be a counter claim and can be transferred to the Tribunal, will apply only if the following conditions were satisfied :- (i) The subject matter of 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. (ii) 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 Bank's application before the Tribunal, so that both can be heard and disposed of by the Tribunal. In short the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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