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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos.8972-8973 OF 2014 (Arising out of Special Leave Petition (C) Nos. 975-976 of  

2012)

Bank of Rajasthan Ltd.               …. Appellant

Versus

VCK Shares & Stock Broking Services Ltd.      …. Respondent

JUDGMENT

S. A. BOBDE, J.

1.  Leave granted.

2. In these appeals, the question before us is whether having  

regard  to  the  Recovery  of  Debts  due  to  Banks  and  

Financial Institutions Act, 1993 [hereinafter referred to as  

‘RDB Act’], a suit containing a “counter-claim” or claiming  

a “set-off” filed by a debtor can be heard and tried before  

the  Debt  Recovery  Tribunal  (hereinafter  referred  to  as  

‘DRT’) under the RDB Act or must be tried by a Civil Court  

alone.

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3. The  appellant  –  Bank  filed  an  application  for  recovery  

under  Section 19 of  the RDB Act  before the DRT for  a  

recovery  certificate  against  the  respondent  for  Rs.  

8,62,41,973.36/-.   Though  the  respondent  entered  

appearance before the DRT,  it  filed Civil  Suit No. 77 of  

1998 before the Calcutta High Court against the appellant  

claiming a decree for sale of pledged shares and payment  

of sale proceeds to the respondent.  After the appellant  

sold pledged shares for a total sum of Rs. 5,77,68,000/-,  

the respondent filed Civil  Suit  No. 129 of 1999 praying  

inter alia for following reliefs:

i) A declaration that sale of shares of BFL Software  

Ltd. was void;

ii) A decree for return of pledged shares in respect  

of overdraft facility account and in default to pay  

Rs. 48.95 crores; and

iii) A declaration that no sum was payable by the  

respondent to the appellant in respect of Term  

Loan  dated  27.07.1994  and  overdraft  Account  

dated 19.09.1995 and that the appellant is not  

entitled  to  a  decree  for  a  sum  of  Rs.

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8,62,41,973.36 from the respondent.

4. The appellant filed an application in C.S. No. 129 of 1999  

for rejecting the suit on the ground that the High Court  

did  not  have  jurisdiction  since  the  subject  matter  was  

within the exclusive jurisdiction of the DRT.  The Single  

Judge allowed that application and directed that the suits  

be taken off from the file of the High Court.  The Division  

Bench stayed operation of the Order of the Single Judge.

5. Since  the  DRT  held  that  the  appellant’s  claim  for  Rs.  

6,04,17,777.36  was  satisfied,  it  directed  inter  alia to  

return  the  title  deeds  of  the  pledged  shares.   On  the  

counter  claim,  the  DRT  held  that  the  respondent  was  

entitled to recover                        Rs. 6,88,187.49 from  

the appellant within 4 weeks.  

6. The  appellant’s  petition  under  Article  227  of  the  

Constitution before the High Court of Calcutta challenging  

the DRT order dismissing the appellant’s  appeal against  

the DRT order was dismissed in default,  admittedly the  

same was restored later on.   The Division Bench allowed  

the appeal filed by the respondent against the order of the  

Single Judge taking off the suits from the file of the High  

Court.  This Judgment of the High Court is questioned in

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these appeals.

7. In United Bank of India, Calcutta vs. Abhijit Tea Co.  

Pvt. Ltd. and Others  1  , a two-Judge Bench of this Court  

took the view that as per the legislative scheme of the  

RDB  Act,  jurisdiction  was  indeed  conferred  upon  the  

Tribunal to try “counter-claim” and “set-off” by Section 19  

of the RDB Act and that all such counter-claims and set-

offs, including a cross suit filed independently should be  

tried  by  a  Debt  Recovery  Tribunal.   The  Court  was  

considering a case where the borrower-company had filed  

an application that suit filed by the Bank should remain on  

the  Original  Side  of  the  Calcutta  High  Court.   That  

application was allowed by the Single Judge.  Against this  

order the Bank had preferred the Special Leave Petition.  

Though the RDB Act had not come into force when the  

suit was filed by the Bank, the debtor-company had filed  

the application and resisted the transfer of the suit.  This  

Court took the view that the above pleas raised by the  

respondent-company  are  all  inextricably  connected  with  

the amount claimed by the Bank and therefore directed  

transfer of the suit.

1  (2000) 7 SCC 357

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8. In  a  later  decision  in  Indian  Bank vs.  ABS  Marine  

Products (P) Ltd  .  2  , 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 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 RDB Act, no  

jurisdiction is conferred on the Tribunal to try independent  

suits or proceedings initiated by borrowers.

9. It  held that what is  provided and permitted is  a cross-

action by the respondent in a pending application filed by  

a bank.  It was held that the borrower had the option to  

file a separate suit before the Civil Court and the counter-

claim  before  the  Tribunal  was  not  the  only  remedy.  

Referring  to  the  earlier  Judgment  in  Abhijit’s  3   case  

(supra), 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:

2  (2006) 5 SCC 72

3  (2000) 7 SCC 357

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(i) The subject-matter of the bank’s suit, and the suit of  

the  defendant  against  the  bank,  is  inextricably  

connected in the sense that the 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  the  bank’s  

application  before  the  Tribunal,  so  that  both  can  be  

heard and disposed of by the Tribunal.

10. In  State Bank of India vs.  Ranjan Chemicals Ltd.  

and Another  4  , a two-Judge Bench considered the matter  

from the perspective of whether it was just and proper to  

order a joint trial of two cases i.e. one before the DRT and  

another  before  the  Civil  Court.  The  two-Judge  Bench  

referred  to  Abhijit’s  5   case  (supra)  and  observed  that  

though a borrower-company always had an option to sue  

the bank in a civil court, it does not in any manner affect  

the  power  of  the  Court  to  order  a  joint  trial  of  the  

applications.  There was no warrant of curtailing the power  

4  (2007) 1 SCC 97

5  (2000) 7 SCC 357

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of  the  Court  to  order  a  joint  trial  by  introducing  a  

restriction that it can be done only if there was consent by  

both sides, though a claim in an independent suit could be  

considered  as  a  claim  for  set-off  and  a  counter-claim  

within the meaning of Section 19 of the RDB Act. In such  

an  eventuality  the  only  question  was  whether  in  the  

interest of justice, convenience of parties and avoidance of  

multiplicity, the suit should be transferred to the DRT to  

be tried as a cross-suit. Thus the Bench leaving  Ranjan  

Chemicals Case held in effect that the consent of  the  

parties  for  transfer  of  the  suit  to  the  DRT  was  not  

necessary, as held in the Indian Bank Case (supra).   

11. In a subsequent decision of this Court by another two-

Judge Bench in  Nahar Industrial Enterprises Limited  

vs.  Hong Kong and Shanghai Banking Corporation  6  ,  

the issue cropped up again.   The Court  considered the  

three authorities referred to above i.e.  United Bank of  

India,  Calcutta  vs.  Abhijit  Tea  Co.  Pvt.  Ltd.  and  

Others7;  Indian Bank vs. ABS Marine Products (P)  

Ltd.8 and  State Bank of India vs. Ranjan Chemicals   

6   (2009) 8 SCC 646

7  (2000) 7 SCC 357

8  (2006) 5 SCC 72

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Ltd. and Another9. The two-Judge Bench in this case i.e.  

Nahar’s  case (supra)  observed  that  in  the  Indian  

Bank’s case, the Court had come to the 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.   The Bench in  Indian Bank case had held that  

the  claims  can  be transferred  only  if  the  following  two  

conditions exists:

(i) Inextricable connection of the subject matter of the  

two proceedings; and

(ii) The agreement of both parties that the suit should  

be transferred to the Tribunal.

12. It  further  directed  that  the  Bench  in  Ranjan  

Chemicals10 case  was  bound  by  the  decision  in  the  

Indian  Bank  Case11 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 jointly with  

9  (2007) 1 SCC 97

10  (2007) 1 SCC 97

11  (2006) 5 SCC 72

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the application filed by the bank as a cross-suit and that  

too without the consent of parties.  The Bench, vide para  

60, held as under:

“We  are  in  agreement  with  all  the  above  

observations of this Court.  Ranjan Chemicals12  

was bound by the decision rendered in  Indian  

Bank13 being a coordinate Bench.  It could not  

have taken a contrary view.”

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 inextricably  

connected with the application filed before the DRT 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 is  

in  consonance  with  the  observation  of  the  Court  in  the  

Indian Bank’s Case14 but is at variance with the Judgment  

in  Ranjan  Chemicals15 case.    According  to  the  last  

12  (2007) 1 SCC 97

13  (2006) 5 SCC 72

14  (2006) 5 SCC 72

15  (2007) 1 SCC 97

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judgment i.e.  Nahar’s case16, the Bench deciding  Ranjan  

Chemicals case could not have taken a contrary view but  

was bound by the decision rendered  in  the  Indian Bank  

case.  Many other aspects of variance and consonance have  

been pointed out to us but we have not dealt with them in  

view of the one aspect alone, which has been highlighted.

13. Mr. Shyam Divan, learned senior counsel  appearing for  

the appellant relied upon the decision of this Court in Jit  

Ram v.  State  of  Haryana  17   and  Union  of  India v.  

Godfrey  Philips  India  Ltd.18,  where  in  paragraph  12,  

this Court observed as follows:

“………..We find it difficult to understand how a  Bench  of  two  Judges  in  Jit  Ram  case could  possibly  overturn  or  disagree  with  what  was  said by another Bench of two Judges in Motilal  Sugar Mills case19. If the Bench of two Judges in  Jit Ram case found themselves unable to agree  with  the  law laid  down in  Motilal  Sugar  Mills  case, they could have referred Jit Ram case to a  larger Bench, but we do not think it was right  on their part to express their disagreement with  the  enunciation  of  the  law  by  a  coordinate  Bench of the same Court in Motilal Sugar Mills.  We have carefully considered both the decisions  in Motilal Sugar Mills case and Jit Ram case and  we are clearly of the view that what has been  laid down in Motilal Sugar Mills case represents  

16  (2009) 8 SCC 646

17   (1981) 1 SCC 11  

18  (1985) 4 SCC 369

19  (1979) 2 SCC 409

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the  correct  law  in  regard  to  the  doctrine  of  promissory  estoppel  and  we  express  our  disagreement with the observations in  Jit Ram  case to the extent that they conflict  with  the  statement of the law in Motilal Sugar Mills case  and introduce reservations cutting down the full  width and amplitude of the propositions of law  laid down in that case.”

      Shri  Divan  submitted  that  the  Bench  deciding  Ranjan  

Chemical’s Case20 had decided at variance with the Judgment  

in  Indian  Bank  case21.   They  were  Benches  of  coordinate  

strength and the latter ought to have referred the matter to a  

larger Bench instead of taking a contrary view.  The learned  

senior counsel also pointed out that this, in fact is the exact  

observation of the Bench in  Nahar’s case22 which did not  

also consider it  appropriate to refer the issues to a larger  

Bench.

14. Mr. Jaideep Gupta, learned senior counsel appearing for  

the respondent submitted that the matter does not call for  

a reference as there is complete consistency in the views  

of  the Court  in  Indian Bank case (supra) and  Nahar  

case (supra)  since both the judgments  have taken the  

view that the jurisdiction of the civil courts has not been  

ousted  and  a  suit  filed  before  the  civil  court  can  be  

20  (2007) 1 SCC 97

21  (2006) 5 SCC 72

22  (2009) 8 SCC 646

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transferred  to  the  DRT  only  with  the  consent  of  both  

parties.  According to the learned counsel, Nahar’s case  

(supra) is the last word on the point and it must be taken  

to lay down the correct law, and in any case the law which  

is binding.

15. It is not possible to accede to the submissions made on  

behalf of the respondent as pointed out above.  There is a  

difference  of  opinion  between  several  Benches  of  this  

Court on the issue.  This is likely to create a doubt as to  

the true position in law, hence we consider it appropriate  

to refer the following questions of law to a larger Bench:

(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?

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(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  

proceedings for recovery of debt by a Bank or Financial  

Institution?

16. At this stage, Shri Diwan, learned senior counsel for the  

appellant prayed for stay of further proceedings in the two  

suits being Civil Suit No. 77 of 1998 and Civil Suit No. 129  

of 1999, both titled “VCK Shares & Stock Broking Services  

Ltd.   Vs.  Bank  of  Rajasthan”  pending  before  the  High  

Court of Calcutta.  The suits are apparently pending since  

the years 1998 & 1999 and due to various proceedings,  

which have been taken out by the parties, have virtually  

remained stationary.  We are informed that the suits are  

at the stage of amendment of the pleadings, which have  

not  been  carried  out.   Suffice  it  to  say  that  there  is  

virtually no progress in the suits and much progress is not  

likely  to  take  place  for  a  long  time.   Moreover,  the  

respondent  – plaintiff  has  made a  monetary  claim,  the  

satisfaction of which can be appropriately ensured by any  

order which may be passed in the proceedings.  We thus  

see no reason to  direct  stay of  the suits.   The interim  

relief prayed for the same is rejected.

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17. In view of above, the Registry is directed to place the  

papers before the Hon'ble Chief Justice of India for taking  

appropriate action in accordance with law.

................……………….J.                                                  

                      [RANJAN GOGOI]

……....……….………………J.                    [S.A. BOBDE]

New Delhi, September 17, 2014    

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ITEM NO.1A               COURT NO.2               SECTION XVI                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Civil Appeals Nos......... of 2014 @ Petition(s) for Special Leave to Appeal (C)  No(s).  975-976/2012 BANK OF RAJASTHAN LTD.                             Petitioner(s)                                 VERSUS VCK SHARES & STOCK BROKING SERVICES LTD.           Respondent(s)

Date : 17/09/2014 These appeals were called on for Judgment today.

For Appellant(s)  Mr.Shyam Divan, Sr.Adv.  Ms.Suruchi Suri, Adv.

                    Mr. Chanchal Kumar Ganguli,Adv.                       For Respondent(s)  Mr.Jaideep Gupta, Sr.Adv.

Mr. Abhinav Mukerji,Adv.  Ms.Purnima Krishna, Adv.

Hon'ble Mr.Justice S.A.Bobde pronounced the Judgment of  the Bench comprising Hon'ble Mr.Justice Ranjan Gogoi and His  Lordship.

Leave granted. The  appeals  are  referred  to  a  larger  Bench  for  

consideration of the questions of law as framed thereunder with a  further direction to the Registry to place the papers before the  Hon'ble Chief Justice of India for taking appropriate action in  accordance with law.

(G.V.Ramana) (Vinod Kulvi) Court Master Asstt.Registrar

(Signed reportable judgment is placed on the file)