BANK OF RAJASTHAN LTD. versus VCK SHARES & STOCK BROKING SERVICES LTD.

Citation: [2014] 13 S.C.R. 1202 · Decided: 17-09-2014 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Matter referred to larger bench

Judgment (excerpt)

A 
B 
[2014] 13 S.C.R. 1202 
BANK OF RAJASTHAN LTD. 
v. 
VCK SHARES & STOCK BROKING SERVICES LTD. 
(Civil Appeal Nos. 8972-8973 of 2014) 
SEPTEMBER 17, 2014 
[RANJAN GOGOi AND S. A. BOBDE, JJ.] 
Recovery of Debts due to Banks and Financial 
Institutions Act, 1993: s. 19- Jurisdiction of civil court to hear 
C and try a counterclaim ora set off filed by debtor- In view of 
difference of opinion between the several benches of 
Supreme Court on the issue, the following questions of law 
referred to larger bench - Whether an independent suit filed 
by a borrower against a Bank or Financial Institution, which 
D has applied for recovery of its loan against the plaintiff under 
the ROB Act, is liable to be transferred and tried along with. 
the application under the ROB Act by the ORT; If yes, can 
such transfer be ordered by a court only with the consent of 
the plaintiff; Is the jurisdiction of a civil court to try a suit filed 
E by a borrower against a Bank or Financial Institution ousted 
by virtue of the scheme of the ROB Act in relation to 
proceedings for recovery of debt by a Bank or Financial 
Institution -Reference to tar[Jer bench. 
F 
.The question which arose for consideration in the 
instant appeals was whether having regard to the 
Recovery of Debts due to Banks and Financial 
Institutions Act, 1993 (ROB Act), a suit containing a 
"counter-claim" or claiming a "set-off" filed by a debtor 
G can be heard and tried before the Debt Recovery Tribunal 
(ORT) under the ROB Act or must be tried by a Civil Court 
alone. 
· 
Referring the matter to larger bench, the Court 
H 
4202 
. BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK 1203 ' 
BROKING SERVICES LTD. 
HELD: 1. In Indian Bank vs. ABS Marine Products A 
(P) Ltd., a Bench of two Judges of this Court took the 
view that the jurisdiction of the Civil Courts is not barred 
in regard to any suit filed by a borrower against a bank 
for any relief. That jurisdiction is barred only in regard 
to applications by a bank or a financial institution for B 
recovery of its debt. The Bench also held that though a 
'counter-claim' and 'set off' may be made under sub-
sections (6) and (11) of Section 19 of the ROB Act, no 
jurisdiction is conferred on the Tribunal to try 
independent suits or proceedings initiated by C 
borrowers. Referring to the earlier Judgment in Abhijit's 
case, the Bench observed that an independent suit can 
be deemed to be a counter-claim and can be transferred 
to the Tribunal only if the following conditions are 
satisfied: The subject-matter of the bank's suit, and the D 
suit of the defendant against the bank, is inextricably 
co.nnected in the sense that the decision in one would 
affect the decision in the other. Both parties (the plaintiff 
in the suit against the bank and the bank) should agree 
for the independent suit being considered as a counter-
E 
claim in the bank's application before the Tribunal, so 
that both can be heard and disposed of by the Tribunal. 
[Para 8, 9][1208-F-G; 1209-A-C] 
2. The two-Judge Bench in Nahar's case observed 
that in Indian Bank's case, the Court had come to the F 
conclusion that the respective claims of the parties were 
not inextricably connected and therefore the transfer of 
a suit to the Tribunal can only be on the basis of the 
consent of the parties. It further directed that the Bench 
in Ranjan Chemicals case was bound by the decision in G 
the Indian Bank Case being a co-ordinate Bench, and 
therefore, could not have taken a contrary view by 
holding that the Court can consider a suit to be a claim 
of 'set-off' and transferred to the Tribunal for being tried 
1204 
SUPREME COURT REPORTS 
[2014] 13 S.C.R. 
A jointly with the application filed by the bank as a cross-
suit and that too without the consent of parties. Though 
having so observed, the Bench apparently did not 
consider it appropriate to have the matter decided by a 
larger Bench. It was held that if all suits whether 
B inextricably connected with the application filed before 
the ORT by the Bank are transferred, the same would 
amount to ousting the jurisdiction of the civil court 
indirectly and consent of the plaintiff is necessary for 
transferring the suits. This finding was in consonance 
c with the observation of the Court in the Indian Bank's 
Case but was at variance with the Judgment in Ranjan 
Chemicals case. [Paras 8, 9, 11 and 12)(1210-B-C; 
1210-0-F; 1211-A-C] 
3. It was contended for the respondent that the 
D matter did n

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