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TMI Blog1997 (5) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 25,21,556.98. The Suit was filed on 24.8.92. The transactions entered into between the parties are banking and loan facilities, packaging credit facility and loan on pledge and hypothecation. In the written statement filed on 22.11.94, the defendants 1 and 2 have preferred counter-claim, wherein the pleas raised are that the plaintiff bank has charged excessive rate of interest in breach of agreement between the parties and has also adjusted more amounts then due in the discounting of foreign bills. It is submitted that if the statements of account are correctly drawn up consistently with the agreements between the parties and the plaintiff gives due credit to all the amounts set out in the written statement then nothing would be found due and payable by the defendants; instead the plaintiff bank may be found liable to pay something to the defendants. 3.1 The reliefs prayed for are : (a) pass a decree of mandatory injunction in favor of the defendant and against the plaintiff directing the plaintiff to correct, draw and recast the entire account maintained by the defendant with the plaintiff since 12.11.1986 in accordance with the terms of agreement between the parties, inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiff in this suit is seeking adjustment of the claim in suit No. 2812/93 said to have been instituted by the State Bank of India against the plaintiff for ₹ 1,48,38,922.75 and has sought in addition a decree in the sum of ₹ 10 lacs as damages apart from the relief and declaration. (ii) Suit No. 493/94 titled Sh Geeta Ram Gupta v. State Bank of India. This is a suit for recovery of ₹ 4 lacs, for declaration with consequential relief and for injunction. The plaintiff in this suit is seeking a sum of ₹ 4 lacs after adjustment of the defendant/banks claim in suit No. 2808/93., (iii) Suit No. 711/94 M/S M.T. Plywood Traders Pvt Ltd v. State Bank of India. (iv) Suit No. 837/94 M/S Sandeep Plywood Pvt Ltd v. State Bank of India. (v) Suit No. 2085/94 M/S. Tayal Plywood Industries Pvt Ltd v. State Bank of India. All the civil suits stated hereinabove, were filed on the Original Side of the High Court. With the coming into force of the Recovery of Debts Due to Banks and Financial Institutions Act 1893 ( Act No. 51 of 1993) (hereinafter the Act, for short) the suits filed by the Banks were sought to be transferred and the records transmitted to the Debt Recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms to the Tribunal as are not entertainable by it nor the Tribunal is supposed to try, hear and decide such claims as do not lie within its jurisdiction. The questions arising for decision are :- Can a civil court refuse to transfer a civil suit to the Tribunal lying within latter's jurisdictional competence merely because a cross suit or a counter-claim has been filed or preferred ? (4) 2. If a civil suit instituted before a civil court is liable to be transferred to Tribunal on account of latter's exclusive jurisdictional competence to try it whether the civil court should transfer the cross suit or cross claim also to the tribunal along with the suit with which it is associated ? (5) Whether a plea of set-off raised in a suit filed by a bank or financial institution would be triable by Tribunal or would enable the suit being retained by civil court before it ? (6) A defendant has a right to defend himself by raising all possible pleas permitted by law. No court fee is livable on a written statement. The nature of the several pleas which can be taken by a defendant faced with a suit for recovery of a debt, in so far as relevant for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss complaint consists of a money claim, to deduct from the amount paid to A a sum representing his cross-complaint. (2) B's right to raise legitimately and successfully such a cross-complaint in a claim brought by A, so as to reduce or extinguish A's claim and to establish any right of B to an excess over A's claim; and (3) B's right to raise a non-pecuniary cross-complaint in a claim brought by A. Whilst much of the jurisprudence applicable to this title appears to bear a procedural hallmark, the substantial advantage which B derives from the relevant doctrines is that he may defer meeting A's claim, wholly or in part, until a court has adjudicated on his own cross-complaint. (10) Typically, the doctrine of set-off, counterclaim and abatement are concerned with deductions made by B. If these are permissible and B has a triable cross-complaint, then B is entitled to withhold payment, wholly or protanto, until his cross- complaint has been resolved by the court. If the deductions are impermissible , B may at best have to meet A's claim at once, the trial of his cross-complaint being deferred to a later hearing. (11) Vide para 410 (at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the original action. ( Halsbury, supra, para 491, p.270 (17) )IN Corpus Jurisdiction Vol 57 ( Edn 1932) the subject as to set-off and counter-claim has been dealt with. We may extract and reproduce the relevant statements there from as under : A set-off is a counter demand which a defendant holds against a plaintiff, arising out of a transaction extrinsic of plaintiff's cause of action. It is in the nature of a cross action. (pp. 359-360) Statutory set-off - The right or remedy of set off in actions at law is purely statutory; it was unknown at common law according to which mutual debts were distinct and inextinguishable, except by actual payment, release, or agreement, and a defendant who had a demand against a plaintiff was compelled to resort either to his cross action or a bill in chancery, except in the few instances in which the limited right of recoupment was available. This condition of the law led to the enactment by statute of the remedy of set-off, which was designed by allowing set-offs in actions at law to supersede, or obviate the necessity of a resort to, bills in equity for that purpose (Pg 360) Equitable set-off- A court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, set up by way of counter-claim against the claim of the plaintiff, and right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filing of the suit but before the defendant has delivered his defense or before the time limited for delivering his defense has expired, whether such counter-claim is in the nature of a claim for damages or not : Provided that such counter-claim shall not exceed the pecuniary limits of the jurisdiction of the Court. (2) Such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counter-claim. (3) The plaintiff 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 Court. (4) The counter-claim shall be treated as a plaint and governed by the rules applicable to plaints. 20.2 Rule 6C provides for counter-claim being excluded on a plea being raised in that regard by the plaintiff and the court being satisfied that the counter claim ought not be disposed of in the suit but in an independent suit. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intainability of a counter-claim. It is a pre 1976 amendment case. Their Lordships held that a right to make a counter claim has to be conferred by statute though a counter-claim preferred without statutory sanction does not preclude a court from treating a counter claim as a claim in cross-suit. The law laid down by their Lordships is an authority to develop a proposition that whether it be a counter claim or a set-off, the court must have sanction in law to entertain and try the same; else the court could not have tried it. For want of statutory provision the court could have precluded the plea and could have with justification adopted the procedure of treating the plea as a plaint in cross-suit. (22) Thus, a plea in the nature of payment, adjustment and the like can be raised in defense as of right. The plea if upheld, has the effect of mitigating or wiping out the plaintiff's claim on the date of the suit itself. The plea is not a claim made by the defendant. A counter-claim or a plea of set-off is a claim made by defendant. It does not extinguish the plaintiff's claim; it exonerates the defendant from honouring plaintiff's claim through upheld. Such plea i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of mere convenience. page 613. (underlined by us ) Their Lordships held that as the Exchequer Court had no jurisdiction to try the plea raised in the defense, it should be left to be settled by a cross-action in a court having jurisdiction to entertain it. (25) In Sri Vasudevandra v. Sridhara Sivarama Moorthy AIR1949Mad630 it was held that a counter claim may be entertained if the court has jurisdiction to entertain the same as a separate suit. To quote : A counter-claim may be set up only in respect of claims as to which the party could bring an independent action in the Court in which the counter-claim is brought . Because the plaintiff has brought an action which he was entitled to do, it does not mean that the defendant's right to put forward a counter-claim became limitless, e.g. to put forward a claim which nobody else could put forward as a plaintiff, and for which there is no justification in the Letters Patent or in the Civil Procedure Code. (26) In Ratna Ram v. Union of India, 1983 Raj Lw 623, in a motor accident claim petition the defendant-owner of truck causing accident- sought to raise a counter-claim as regards the damages caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready noticed, provides for legal set-off and counter-claim being entertained by civil courts. A plea in the nature of equitable set-off though not contemplated by the Civil Procedure Code is yet entertainable under the common law. However, the plea cannot be raised as a matter of right.( See Gulla v. Premsukhdas 954 Raj Lw 749 It stands on a lower pedestal than the plea of legal set-off. If raised the court on being satisfied that trial of the plea may result in protracting or delaying the trial, may refuse to entertain it, leaving it open to the defendant to raise the same in an independent action. (Munshi Ram vs Radha Krishan, , Sankara Pillei v. Pameshwaran Pillei, AIR1959Ker352a . The Muslim Bank vs Hassan Shiraza, Air 1951 Hyd 57. Girdhari Lal v. Suraj Mal, Bhagwati Prasad V. Hukamchand Mills Ltd 1961 Mplj 272.In Bhagwati Prasad's case the High Court of Madhya Pradesh has held : In case of an equitable set-off the principle contained in Order 8 rule 6 applies not strictly but only by analogy. Therefore, the Court's discretion in this regard is wider than in a case falling within the terms of that rule. That does not mean that the ?Court can do what it likes. It shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to provide for the establishment of the Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters conducted therewith or incidental thereto. The Act came into force on 24.6.93. Its applicability is attracted when the amount of debt due to any bank or financial institution or to a consortium of banks or financial institution is ₹ 10 lakhs or above. The term debt has been assigned a wide meaning vide clause (g) of the interpretation clause. Debt means any liability ( inclusive of interest) which is alleged as due from any person by a bank or financial institution or by a consortium of banks and financial institutions during the course of any business activity undertaken by the bank etc. under any law for the time being in force, in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any civil court or otherwise and subsisting on, and legally recoverable on the date of the application. 35.1 Section 3 speaks of establishment of Tribunal by notification by the Central Govt. Section 17 confers jurisdiction, power and authority to entertain and decide applications from the banks and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in force if it be inconsistent with the provisions of the Act. (35) A few features of significance may be noted. The Debt Recovery Tribunal is a tribunal and not a Court. The proceedings before it are initiated on an application and hence are not suits. Only bank or a financial institution has the locus to invoke the jurisdiction of the Tribunal. The Tribunal does not pass a decree. It issues a certificate to the recovery officer for recovery of the amount of debt specified therein. Its procedure is not prescribed nor detailed; the principles of natural justice alone have to be followed. The procedure is summary. Ordinarily the Tribunal shall spend a term of six months merely between the date of the application and decision thereon The definition of debt shows that the jurisdiction of the Tribunal is attracted on the allegation of debt being due made in the application and is not dependent on its being so found. (36) The Act was preceded by an ordinance promulgated on 26.4.93 which has been repealed by Drt Act. Why the Act was enacted, is set out in the Statement of Object and Reasons. In State Bank of India Vs. Samneel Engineering Company and Ors. 1995(35) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s case (supra). (37) For reasons more than one, we are of the opinion that a set-off or a counter claim cannot be entertained by a Debt Recovery Tribunal. A Debt Recovery Tribunal is a tribunal and not a court. It is a creature of statute vested with a special jurisdiction to try only applications by bank or financial institutions to recover any debt from any person. It does not exercise any `common law jurisdiction'. It is only a bank or a financial institution or a consortium of the two which can enter the Tribunal for enforcement of its claim for recovery. Any one other than those cannot be entertained invoking jurisdiction of the Tribunal for enforcement of its claim as a claimant. What cannot be done directly can also not be allowed to be done indirectly. If claim by a person other than bank or financial institution is not entertainable before Tribunal it does not become entertainable merely because it is set out in the written statement or preferred by way of set-off or counter claim. An obligation to comply with the principles of natural justice obliges the Tribunal to entertain such pleas (e.g. denial, payment, adjustment) as would have the effect of abating, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit was filed or the cross claim, counter-claim or plea of set-off was preferred cannot complain of prejudice inasmuch as he can always approach the civil court for decree in respect of the claims forming subject matter of set-off or counter claims. The law has provided separate forums for the adjudication of claims by banks and financial institutions and by persons other than these. Each has a right to invoke the jurisdiction of the forum meant for it and each forum shall try the claim within its jurisdictional competence. Finality shall attach to the findings arrived at and reached by each of the two within its respective jurisdictional competence. Issues heard and decided by the Tribunal shall operate as res judicata and shall bind the parties in the suit before the civil court by virtue of Explanation Viii to S. 11 Civil Procedure Code . However, the civil court shall be free to decide such issues as lie within its jurisdictional competence. If the civil court must decide an issue seized by it and within its competence and if there be an unavoidable conflict between the findings recorded by the civil court and by the Tribunal, the finding of Civil Court would obviously override ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause a cross suit or a counter claim has been filed or preferred before the civil court. 2. A cross suit or cross claim or a plea in the nature of set-off cannot be transferred to the Tribunal along with the suit with which it is associated and which is liable to be transferred to the Tribunal. 3. A plea of set-off raised in a suit filed by a bank or financial institution cannot be tried by Tribunal nor would it enable the suit being retained by civil court before it if the subject matter of suit lies within the jurisdictional competence of tribunal otherwise. (42) In the light of the above said discussion we may now proceed to dispose of the appeals before us. 44. So far as the appeals preferred by Tayal Group and registered as Fao (OS) 314 to 319/96 are concerned they present no difficulty. (43) The suits filed by the bank must be transferred to the Tribunal to honour the mandate of Section 31 read with Section 17 and 18 of the Drt Act. The cross suits shall continue to be tried on the Original Side of the High Court. (44) Fao (OS) 266/95 has a disturbing feature. The counter-claim preferred by defendants No.1 and 2 in the written statement is a misnom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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