AI Drafter 
TaxTMI 
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2022 (11) TMI 1325
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....espondent, inter alia offered title deeds of immovable properties as security. By mutual agreement, a further credit overdraft facility was granted on 19.09.1995, up to a limit of Rs.5 crores. This additional credit was secured by the deposit of shares, stocks, and securities of various companies. The respondent did not adhere to financial discipline, resulting in the appellant issuing a notice on 01.07.1997, calling upon the respondent to settle the term loan account and overdraft facility account within three days of the receipt of the notice. 3. Since the respondent failed to make the payment, the appellant filed an application, being OA No.263 of 1997, for recovery of the amounts due under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'RDB Act') before the Debts Recovery Tribunal, Kolkata (hereinafter referred to as 'the DRT') on 21.11.1997. The appellant sought a recovery certificate against the respondent for Rs.8,62,41,973.36 including interest at the rate of 20.88% per annum. 4. The respondent entered appearance to defend the proceedings but in addition also filed a Civil Suit No.77 of 1998 before the....
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....mount actually due under the proceedings stood settled and paid. The appellant was directed to return the title deeds of the pledged shares and other securities to respondent. On the counter claim filed by the respondent, the DRT held that the respondent was entitled to recover Rs.6,88,187.49 from the appellant within four weeks of the order. The respondent was also granted liberty to file appropriate proceedings for recovery of dividends on the pledged shares except the sum of Rs.20,11,337.35 for which set off was allowed in the proceedings. 8. The appellant, feeling aggrieved, proceeded to file an appeal before the Debts Recovery Appellate Tribunal, Kolkata (hereinafter referred to as 'the DRAT') with M.A. No.31 of 2003, which was dismissed vide an order dated 14.11.2003 opining that the appellant should have sold the shares in 1996 and, thus was not entitled to claim interest. The appellant still not being satisfied moved C.O. No.2777 of 2003 under Article 227 of the Constitution of India before the Kolkata High Court on 17.11.2003 which was, however, dismissed in default vide High Court order dated 11.02.2004 but restored later before a Single Judge vide order dated 16.01.20....
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....ong and Shanghai Banking Corporation, (2009) 8 SCC 646. a suit filed by a borrower against the bank was not barred before the Civil Court, although a suit filed by the bank against the borrower was barred. This judgment was found to be the authority on the point as it came subsequent to the other decisions of the Supreme Court on this issue. Proceedings before this Court: 13. The reference in the present proceedings arose out of an order dated 17.09.2014 noticing an apparent conflict of views. It was observed that a two-Judges Bench of this Court in United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. And Others (2000) 7 SCC 357 had taken a view that as per the legislative scheme of the RDB Act, jurisdiction was conferred upon the DRT to try a counterclaim and set-off under 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 the DRT. 14. In a later decision in Indian Bank v. ABS Marine Products (P) Ltd. (2006) 5 SCC 72. a Division Bench of this Court took the view that the jurisdiction of the Civil Courts was not barred in regard to any su....
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....endent 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?" 17. We are thus to opine on the aforesaid questions referred to us. Plea of the Appellant: Question No.1 18. The Supreme Court of India in Indian Bank case (supra), Ranjan Chemicals Ltd. case (supra) and Nahar Industrial Enterprises Ltd. case (supra) has had no cleavage of opinion regarding the first question referred to a larger bench as they held that an independent suit by a borrower can be transferred and tried along with the original application by the bank under the RDB Act. The difference of opinion arose only with respect to conse....
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....d (20) regarding filing of counter-claim/set-off, verification of counter-claim/set-off in a manner similar to the pleadings before Civil Court, evidence by way of affidavit and provisions regarding crossexamination in rules; demonstrate that sufficient powers have been vested in the DRT to try claims raised by the borrower inextricably connected with the claim of the bank. These provisions are enacted to guard against multiplicity of proceedings in relation to similar subject matters, once before the DRT and another before the Civil Court. Thus, even Question no.3 was sought for to be answered in the affirmative. Submissions on behalf of the respondent: 24. It is contended by Mr. Jaideep Gupta, learned senior counsel for the respondent, that the RDB Act was enacted with the objective of providing a summary procedure to enable banks and financial institutions to recover debts due to them in a speedy manner and it did not oust the jurisdiction of Civil Courts. The purpose of the statute would be defeated if there was an influx of civil suits filed by the borrowers against the lenders before the DRT. It was also pointed out that there were no provisions in the RDB Act to permit....
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....r in terms of providing the methodology towards the said objective. 30. In this regard, it would be apposite to note the Statement of Objects and Reasons for enacting the RDB Act: "Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realised without delay. In 1981, a Committee under the chairmanship of Shri T. Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes....
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....y order made, or deemed to have been made, by a Tribunal under this Act. [(2A) Without prejudice to sub-section (2), the Appellate Tribunal shall exercise, on and from the date to be appointed by the Central Government, the jurisdiction, powers and authority to entertain appeals against the order made by the Adjudicating Authority under Part III of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).]" 34. The expression 'debt', as used in Section 17, is defined under Section 2(g) of the RDB Act: "2. Definitions.-In this Act, unless the context otherwise requires,- [(g) "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the appli....
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....fore or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (30 of 2004) for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act: Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.] [(1A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2, may, at its option, opt to initiate proceedings under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, whether due before or after the date of commencement of the Enforcement of the Secu....
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....o any of the defendants and the estimated value of such securities; (b) if the estimated value of securities is not sufficient to satisfy the debt claimed, state particulars of any other properties or assets owned by any of the defendants, if any; and (c) if the estimated value of such other assets is not sufficient to recover the debt, seek an order directing the defendant to disclose to the Tribunal particulars of other properties or assets owned by the defendants.] [(3B)] If any application filed before the Tribunal for recovery of any debt is settled prior to the commencement of the hearing before that Tribunal or at any stage of the proceedings before the final order is passed, the applicant may be granted refund to the fees paid by him at such rates as may be prescribed.] [(4) On receipt of application under sub-section (1) or subsection (2), the Tribunal shall issue summons with following directions to the defendant- (i) to show cause within thirty days of the service of summons as to why relief prayed for should not be granted; (ii) direct the defendant to disclose particulars of properties or assets other than propertie....
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....r officer who is in default, be detained in civil prison for a term not exceeding three months unless in the meantime the Presiding Officer directs his release: Provided that the Presiding Officer shall not pass an order under this clause without giving an opportunity of being heard to such person or officer. Explanation.-For the purpose of this section, the expression 'officer who is in default' shall mean such officer as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013).] [(5A) On receipt of the written statement of defendant or on expiry of time granted by the Tribunal to file the written statement, the Tribunal shall fix a date of hearing for admission or denial of documents produced by the parties to the proceedings and also for continuation or vacation of the interim order passed under sub-section (4). (5B) Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission within a period of thirty days from the date of such order failing which the Tribunal may issue a certif....
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....e: Provided that if there is any evidence of witnesses to be led by any party, the affidavits of such witnesses shall be filed simultaneously by the party with the application or written statement or replies filed under sub-section (10A). (10B) If any of the facts or pleadings in the application or written statement are not verified in the manner provided under subsection (10A), a party to the proceedings shall not be allowed to rely on such facts or pleadings as evidence or any of the matters set out therein.] [(11) Where a defendant sets up a counter-claim in the written statement and in reply to such claim the applicant contends that the claim thereby raised ought not to be disposed of by way of counterclaim but in an independent action, the Tribunal shall decide such issue along with the claim of the applicant for recovery of the debt.] * * * * * (13)(A) Where, at any stage of the proceedings, 3 [the Tribunal on an application made by the applicant along with particulars of property to be attached and estimated value thereof, or otherwise is satisfied], that the defendant, with intent to obstruct or delay or frustrate the execution o....
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....r management of the receiver; (d) confer upon the receiver all such powers, as to bringing and defending suits in the courts or filing and defending applications before the Tribunal and for the realisation, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and (e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. [(19) Where a certificate of recovery is issued against a company as defined under the Companies Act, 2013 (18 of 2013) and such company is under liquidation, the Tribunal may by an order direct that the sale proceeds of secured assets of such company be distributed in the same manner as provided in section 326 of the Companies Act, 2013 or under any other law for the time being in force.] [(20) The Tribunal may, after giving the applicant and the defendant, an opportunity of being heard, in respect of all claims, setoff or counter-claim, if an....
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....very Officer for recovery of the amount of debt specified in the certificate.] [(22A) Any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court for the purposes of initiation of winding up proceedings against a company registered under the Companies Act, 2013 (18 of 2013) or Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009) or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be.] (23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated: Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. (24) The application made to th....
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....act the paragraphs which deal with this aspect: "15. It is evident from Sections 17 and 18 of the Debts Recovery Act that civil court's jurisdiction is barred only in regard to applications by a bank or a financial institution for recovery of its debts. The jurisdiction of civil courts is not barred in regard to any suit filed by a borrower or any other person against a bank for any relief. It is not disputed that the Calcutta High Court had jurisdiction to entertain and dispose of C.S. No.7/1995 filed by the borrower when it was filed and continues to have jurisdiction to entertain and dispose of the said suit. There is no provision in the Act for transfer of suits and proceedings, except section 31 which relates to suit/proceeding by a Bank or financial institution for recovery of a debt. It is evident from Section 31 that only those cases and proceedings (for recovery of debts due to banks and financial institutions) which were pending before any court immediately before the date of establishment of a tribunal under the Debts Recovery Act stood transferred, to the Tribunal. In this case, there is no dispute that the Debt Recovery Tribunal, Calcutta, was established ....
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....unter-claim as provided in sub-sections (6) to (8) of Section 19 in applications already filed by the bank or financial institutions for recovery of the amounts due to them. In other words, what is provided and permitted is a cross-action by a defendant in a pending application by the bank/financial institution, the intention being to have the claim of the bank/financial institution made in its application and the counter-claim or claim for set off of the defendant, as a single unified proceeding, to be disposed of by a common order. 17. Making a counter claim in the Bank's application before the Tribunal is not the only remedy, but an option available to the borrower/defendant. He can also file a separate suit or proceeding before a civil court or other appropriate forum in respect of his claim against the Bank and pursue the same. Even the Bank, in whose application the counter-claim is made, has the option to apply to the tribunal to exclude the counter-claim of the defendant while considering its application. When such application is made by the Bank, the Tribunal may either refuse to exclude the counter-claim and proceed to consider the Bank's application and ....
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....in the pending application to facilitate a unified proceeding. The most significant aspect considered in this behalf is set out in para 17 extracted above - that a counterclaim in a bank's application before the DRT was not the only remedy, but an option available to the defendant borrower. The borrower was not precluded from filing a separate suit or proceeding before a Civil Court or other appropriate forum. Not only that, even the bank, in whose application a counterclaim is made, has the option to apply to the DRT to exclude the counterclaim of the defendant while considering its application. If the DRT were to find in the bank's favour, the defendant would have to approach the Civil Court in respect of such excluded counterclaim, as the DRT does not have jurisdiction to try an independent claim against the bank/financial institution. 41. The question thus arises as to whether the view expressed in Indian Bank (supra) is the correct legal proposition in view of certain earlier judgments as well as latter judgments. We may however notice that the earlier judgment in the case of Abhijit Tea Co. Pvt. Ltd. (supra), where an independent suit of a defendant was deemed to be a coun....
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.... of the same may not be impeded by the elaborate procedure of the Code. The defendant has a right to defend the claim and file a counterclaim in view of sub-Sections (6) and (8) of Section 19 of the RDB Act. In case of pending proceedings to be transferred to the DRT, Section 31 of the RDB Act took care of the issue of mere transfer of the Bank's claim, albeit without transfer of the counterclaim. Thus, if the debtor desires to institute a counterclaim, that can be filed before the DRT and will be tried along with the case. However, it is subject to a caveat that the bank may move for segregation of that counterclaim to be relegated to a proceeding before a Civil Court under Section 19(11) of the RDB Act, though such determination is to take place along with the determination of the claim for recovery of debt. 45. We are thus of the view that 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 w....
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....o transfer a suit to a DRT under Section 151 of the Code when the DRT is a creature of a statute and that statute does not provide for such eventuality. 50. We must also notice an important aspect that even where a defendant is to invoke the jurisdiction of the DRT by filing a counterclaim, the bank has a right to seek a relegation of that claim to the Civil Court and the DRT has been empowered to do so, albeit, at the final adjudication stage. This is so in view of the summary nature of remedy provided before the DRT and thus, if certain inquiries beyond the contours of what the DRT does are envisaged, a Civil Court remedy may be considered as appropriate. 51. Now coming to the question whether consent is required for the transfer of a suit. We do believe that once we have opined that there is no power of transfer in the Civil Court, the consent or absence of it is not something which would lend such power to the Civil Court. The option before the defendant, who has instituted the suit, is clear - either he could file a counterclaim before the DRT or he could institute separate civil proceedings. 52. We however have a word of caution keeping in mind the nature of powers e....
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....rst and is answered in the negative. (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? In the absence of any such power existing in the Civil Court, an independent suit filed by the borrower against the bank or financial institution cannot be transferred to be tried along with application under the RDB Act, as it is a matter of option of the defendant in the claim under the RDB Act. However, the proceedings under the RDB Act will not be impeded in any manner by filing of a separate suit before the Civil Court. (b) If the answer is in the affirmative, can such transfer be ordered by a court only with the consent of the plaintiff? Since there is no such power with the Civil Court, there is no question of transfer of the suit whether by consent or otherwise. 57. The aforesaid takes care of the reference. 58. Now coming to the factual scenario of the case. The fact is that the proceedings under the RDB Act in any case ha....