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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 ..... dated 12.7.1991 and 6.12.1991, the Bank sanctioned ad hoc packing credit facilities to a limit of Rs.20 lakhs and Rs.5 lakhs respectively. According to the Bank, the company utilized the said credit facilities, but committed default in repaying the amounts advanced. Therefore, the Bank filed O.A. No.170/1995 on 21.8.1995 before the Debt Recovery Tribunal (for short 'the Tribunal') under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'Debt Recovery Act') seeking a certificate to recover Rs.30,67,820/04 with interest from the company and its four guarantors (Directors), jointly and severally. The said application is pending and trial therein is yet to commence. 3. On 19.12.1991, the Bank sanctioned a Middle Term Loan of Rs.90 lakhs and certain other credit facilities to the company. The sanctioned loans were not released. The company filed C.S. No.7/1995 against the Bank in the Calcutta High Court in January, 1995, for recovery of Rs.25,38,58,000/- as damages (for non-disbursal 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "counter-claim" in Sections 19(8) to (11) which is equated to a cross-suit, includes a claim even if it is made in an independent suit filed earlier." 6. A Division Bench of the Calcutta High Court dismissed the Bank's appeals by an order dated 10.5.2002. The High Court held that : (i) In the absence of a provision in the Debt Recovery Act enabling a borrower to file a suit (application) against the bank or a financial institution, in the Debt Recovery Tribunal, the jurisdiction of the civil court to entertain a suit filed by the borrower against the bank is not excluded under Section 18 of the said Act. (ii) Section 31 of the Debts Recovery Act providing for transfer of the pending suits/cases, from courts to tribunals, applies only to those suits or proceedings which were pending before any court immediately before the establishment of a Tribunal under the said Act and will not apply to any suit or proceeding validly initiated in a civil court after the establishment of the Tribunal. (iii) Sub-section (8) of Section 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 wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. 7. The said decision of the Division Bench of the Calcutta High Court is challenged by the Bank in these appeals by special leave, on the ground that the subject matter of the Bank's application and the first respondent's suit were inextricably connected, and though the suit of the borrower was prior to the Bank's application before the Tribunal, in view of the law laid down in Abhijit (supra), the borrower's suit should be considered as a counter-claim in the Bank's application before the Tribunal and consequently, transferred to the Tribunal. On the contentions raised, the following questions arise for our consideration : (a) Whether the subject-matter of the borrower's suit before the High Court and Bank's application before the Tribunal were inextricably connected? (b) Whether the provisions of Debts Recovery Act mandate or require the transfer of an independent suit filed by a borrower 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? (c) Whether the observation in Abhijit (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as damages on account of the impact of inflation and difference in foreign exchange rates, Rs.31,36,000/- towards expenditure which became infructuous on account of the Bank's failure to release the loans, and Rs.24 lacs towards interest up to the date of the suit. The cause of action for the borrower's suit is the alleged breach by the Bank, in not releasing the sanctioned loans. 9. The issues that arose in the Bank's application was whether the borrower failed to repay the sums borrowed and whether the Bank was entitled to the amounts claimed. On the other hand, the issues that arose in the borrower's suit were whether the Bank had promised/agreed to advance certain monies; whether the Bank committed breach in refusing to release such loans in terms of the sanction letter; whether the borrower failed to fulfil the terms and conditions of sanction and therefore the Bank's refusal to advance, was justified; and even if there was breach, whether the borrower suffered any loss on account 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant for our purpose, are extracted below : "(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 sought to be set-off. (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 of the set-off. (8) A defendant in an application may, in addition to his right of pleading a set off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 31. 15. 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 the applications filed by Banks/financial institution before the Tribunal. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 17. 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween 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 Suit No.272 of 1985 filed by the debtor Company ? (4) Whether 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 Sections 19(8) to (11) of the Act (as introduced by amending Act 1 of 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 No.272 of 1985 was a ground for retention of the Bank's Suit No.410 of 1985 on the original side of the High Court ?" Though the questions raised were four, the issues were only two. The first was whether suit disposed of on 29.3.1994 and restored on 11.8.1998 could be deemed to be pending on 27.4.1994, when the Tribunal was established, 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue whether the borrower's suit could be transferred to the Tribunal as the borrower was insisting that his suit and Bank's suit should be tried together. It found a solution by holding that the principle underlying sub-section (8) of Section 19 which enabled the defendant making a counter-claim in an application filed by the Bank, can broadly be extended and applied to an independent prior suit of the borrower by considering such suit as a counter-claim, so that both could be transferred to the Tribunal, instead of transferring only the Bank's suit. This Court, however, held so only because of the following circumstances :- (i) The borrower contended that its suit and the Bank's suit cannot be tried independently, as the subject-matter of its suit and the Bank's suit were inextricably connected; (ii) the Bank also agreed that the borrower's suit can be tried along with its suit; and (iii) the court on examination found that 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 observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company's Suit No. 272 of 1985 in the High Court is no reason for keeping the Bank's suit No. 410 of 1985 in the High Court. Suit No. 410 of 1985 is liable to be transferred to the Tribunal. Incidentally, we also hold that even Suit No. 272 of 1985 is to be tried only by the Tribunal. The appeal is allowed. The order of the learned Single Judge is set aside and Suit No. 410 of 1985 is directed to be transferred by the Registrar, High Court to the Tribunal. In the light of our finding as to the real nature of the Company's Suit No. 272 of 1985, it will be for the Registrar of the High Court to pass appropriate orders. We hope that appropriate orders will be passed in relation to suit no. 272 of 1985 expeditiously, at any rate, within one month from today." (Emphasis supplied) It is further submitted that any direction issued in exercise of power under Article 142 to do proper justice and the reasons, if any, 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 exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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