BANK OF RAJASTHAN LTD. Vs VCK SHARES
Bench: RANJAN GOGOI,S.A. BOBDE
Case number: C.A. No.-008972-008973 / 2014
Diary number: 37973 / 2011
Advocates: ARJUN GARG Vs
ABHINAV MUKERJI
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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)