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

Citation: [2022] 17 S.C.R. 567 · Decided: 10-11-2022 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Dismissed

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Judgment (excerpt)

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BANK OF RAJASTHAN LTD.
v.
VCK SHARES & STOCK BROKING SERVICES LTD.
(Civil Appeal Nos. 8972-8973 of 2014)
NOVEMBER 10, 2022
[SANJAY KISHAN KAUL, ABHAY S. OKA AND
VIKRAM NATH, JJ.]
Code of Civil Procedure, 1908 : Order VII R.10 - Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 (RDB) – s.
19 – The appellant bank sanctioned a term loan to the respondent
company, however, respondent failed to make the payment –
Appellant filed an application for recovery of the amounts before
the Debts Recovery Tribunal, (DRT) – Respondent entered
appearance to defend the proceedings, but in addition also filed a
Civil Suit in the High Court which was dismissed by the Single Judge
on the finding that the Court lacked jurisdiction as the same
exclusively vested with the DRT – However, on appeal the Division
Bench of the High court restored the suit and held that there is no
provision in the RDB ousting jurisdiction of civil court – There existed
a difference of opinion between several benches of the Supreme
Court and it was considered appropriate to refer it to larger bench
– The following questions were referred : (a) Whether an independent
suit filed by a borrower against a Bank or Financial Institution,
which has applied for recovery of its loan against the plaintiff under
the RDB Act, is liable to be transferred and tried along with the
application under the RDB Act by the DRT ?;(b) If the answer is in
the affirmative, can such transfer be ordered by a court only with
the consent of the plaintiff ?; (c) Is the jurisdiction of a Civil Court
to try a suit filed by a borrower against a Bank or Financial
Institution ousted by virtue of the scheme of the RDB Act in relation
to the proceedings for recovery of debt by a Bank or Financial
Institution ? – Held: There is no specific power to transfer a suit to
the DRT – Only a plaint can be returned u/Or. VII, r.10 – S.151 of
CPC cannot be utilized as a residuary power to achieve transfer –
Absence of any legislative power cannot give a power by implication
to the Civil Court –Also, not appropriate to read such power to
transfer a suit to a DRT u/s. 151 of the CPC, when DRT is a creature
[2022] 17 S.C.R. 567
567
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SUPREME COURT REPORTS
[2022] 17 S.C.R.
of a statute and statute does not provide for such eventuality – (b)
Once its concluded that there is no power with civil court, then
there is no question of transfer of the suit whether by consent or
otherwise – (c) There is no provision in the RDB Act by which the
remedy of a civil suit by a defendant in a claim by the bank is ousted,
but it is a matter of choice of that defendant – Such defendant may
file counterclaim, or may avail procedure establish under Code.
Dismissing the appeals, the Court
Held: 1.1 On a plain reading of the provisions, the
conclusion reached was that Section 17 of the RDB Act bars the
jurisdiction of the Civil Court only in respect of applications filed
by the bank or financial institution. This provision did not bar the
jurisdiction of the Civil Court to try a suit filed by the borrower.
There was also an absence of provisions in the Act for transfer of
suits and proceedings except Section 31, which relates to pending
suit proceedings by a bank or financial institution for recovery of
debt. [Para 39][594-G]
1.2 It was noticed that the significant aspect of Sections 17
and 18 of the RDB Act was that even after establishment of the
DRT, no jurisdiction had been conferred on it to try independent
suits or proceedings initiated by the borrower or others against
banks/financial institutions. What has been permitted is only a
cross-action in the form of a counterclaim by a defendant in the
pending application to facilitate a unified proceeding. [Para
40][594-H; 595-A-B]
1.3 There is no provision in the RDB Act by which the
remedy of a civil suit by a defendant in a claim by the bank is
ousted, but it is the matter of choice of that defendant. Such a
defendant may file a counterclaim, or may be desirous of availing
of the more strenuous procedure established under the Code,
and that is a choice which he takes with the consequences thereof.
[Para 45][596-G; 597-A]
1.4 There is gainsay that there is no specific power to
transfer a suit to the DRT. A plaint can be returned only under
the provisions of Order VII Rule 10 of CPC for the reasons
specified therein. In the absence of such reasons, Section 151 of
the Code cannot be utilised as a residuary power to achieve the
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