Rajdhani Cold Storage Pvt. Ltd. vs Punjab And Sind Bank
2007 Latest Caselaw 1429 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. This is an application filed on behalf of the defendant/Bank under Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'Said Act') seeking transfer of the present suit to the Debt Recovery Tribunal. The contention of the defendant/applicant is that the present suit is concerned with the return of title deed of the property which has been mortgaged with the bank and the mortgage itself is the subject matter of the pending application (OA 677/2000) before the Debt Recovery Tribunal for recovery of money based upon the mortgage. Another application, being O.A. 24/2004, in respect of the same transaction is also pending before the Debt Recovery Tribunal. The plaintiff is a party in both the applications either in the capacity of a mortgager or principal borrower.

2. The learned Counsel for the defendant Bank referred to the provisions of Section 31(1) of the said Act which reads as under:

31. Transfer of pending cases - (1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action where on it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:

Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court.

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He submitted that since the Tribunal has jurisdiction in respect of the subject matter of the present suit, the same ought to be transferred to the Tribunal and ought not to be continued before this Court. The learned Counsel also referred to the provisions of Section 19 (6) to 19 (11) which read as under:

19. Application to the Tribunal.-

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(6) Where the defendant claims to set-off against the applicant's demand any ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off.

(7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of pleading a set-off under Sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defense or before the time limited for delivering his defense has expired, whether such counter-claim is in the nature of a claim for damages or not.

(9) A. counter-claim under Sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim.

(10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal.

(11) Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter- claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application, make such order as it think fit.

The aforesaid provisions clearly demonstrate that they relate to set off and counter-claims and empower the Tribunal to pass final orders in respect of both, a set-off as well as a counter claim.

3. After referring to the aforesaid provisions, the learned Counsel for the defendant/applicant referred to the decision in the case of United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. and Ors. and, in particular, he placed reliance on paragraph 38 of the said decision which reads as under:

38. In our view, the above pleas raised by the respondent Company are all inextricably connected with the amount claimed by the Bank. The plea of the Company is that interest is not to be charged or is to be charged at a lesser rate, that Installments are to be permitted and more monies should have been advanced. In our view, these claims made by the Company in its Suit No. 272 of 1985 against the bank amount to 'counter-claim' and fall within Sub-sections (8) to (11) of Section 19 of the Act (as introduced by Act 1 of 2000). The plea for deduction of damages is in the nature of a 'set-off' falling under Sub-sections (6) and (7) of Section 19.

The aforesaid paragraph indicates that the suit which was in question before the Supreme Court was 'inextricably connected' with the application pending before the Debt Recovery Tribunal and, therefore, the same could be construed to be a set-off / counter-claim falling within the provisions of Section 19 (6) to 19 (11) of the said Act. It is in this context that the learned Counsel submits that the present suit should also be transferred under Section 31 of the said Act to the Tribunal to be treated as a counter claim and be adjudicated upon by the Tribunal along with the applications of the bank referred to above.

4. Mr Midha, the learned Counsel appearing on behalf of the plaintiff, submits that the position has been made very clear by a subsequent decision of the Supreme Court in the case of Indian Bank v. ABS Marine Products Pvt. Ltd. 2006 IV AD (SC) 315. The decision of the Supreme Court in Indian Bank (supra) was concerned with the following three questions:

(a) Whether the subject-matter of the borrower's suit before the High Court and Bank's application before the Tribunal were inextricably connected?

(b) Whether the provisions of Debts Recovery Act mandate or require the transfer of an independent suit filed by a borrower against a Bank before a civil court to the Tribunal, in the event of the Bank filing a recovery application against the borrower before the Tribunal, to be tried as a counter- claim in the Bank's application?

(c) Whether the observation in Abhijit (supra) that the suit filed by the borrower against the Bank has to be transferred to the Tribunal for being tried as a counter-claim in the applications of the Bank, is to be construed as a principle laid down by this Court, or as an observation in exercise of power under Article 142 in order to do complete justice between the parties

Insofar as question No. 1 was concerned, on the facts of the case before the Supreme Court, it was held that the matter before the Court and the Bank's application before the Tribunal were not inextricably connected. Insofar as question No. 2 was concerned, the Supreme Court observed that it is evident from Sections 17 and 18 of the said Act that a civil court's jurisdiction is barred only in regard to an application 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. The Supreme Court further observed that 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. It was noted that as far as Sub-sections (6) to (11) of Section 19 are concerned, they are merely enabling provisions. The court also made it clear that the effect of Sub-sections (6) to

(11) of Section 19 of the said Act was that any defendant in a suit or proceeding initiated by a bank or financial institution could: (a) claim set off against the demand of a Bank/financial institution in respect of any ascertained sum of money legally recoverable by him from such bank/financial institution; and (b) set-up by way of counter-claim against the claim of a Bank/financial institution, any right or claim in respect of a cause of action accruing to such defendant against the bank/financial institution, either before or after filing of the application, but before the defendant has delivered his defense or before the time for delivering the defense has expired, whether such a counter-claim is in the nature of a claim for damages or not. It was observed that what is provided and permitted by the said provision 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 being treated as a single unified proceeding, to be disposed of by a common order. In conclusion to its answer to question No. 2, the Supreme Court observed as under:

16. 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 the counter-claim together; or exclude the counter-claim as prayed, and proceed only with the Bank's application, in which event the counter-claim becomes an independent claim against a bank/financial institution. The defendant will then have to approach the civil court in respect of such excluded counter claim as the Tribunal does not have jurisdiction to try any independent claim against the bank/financial institution. A defendant in an application, having an independent claim against the Bank, cannot be compelled to make his claim against the Bank only by way of a counter-claim. Nor can his claim by way of independent suit in a court having jurisdiction, be transferred to a Tribunal against his wishes.

5. With regard to the third question posed by the Supreme Court, the following is the conclusion arrived at:

22. Though there appears to be some merit in the first Respondent's submission, we do not propose to examine that aspect. Suffice it to clarify that the observations in Abhijit that an independent suit of a defendant (in Bank's application) can be deemed to be a counter claim and can be transferred to the Tribunal, will apply only if the following conditions were satisfied:

(i) The subject matter of Bank's suit, and the suit of the defendant against the Bank, should be inextricably connected in the sense that 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 Bank's application before the Tribunal, so that both can be heard and disposed of by the Tribunal.

In short the decision in Abhijit is distinguishable both on facts and law.

6. From the aforesaid examination of the decision of the Supreme Court in the Indian Bank (supra) it is apparent that the decision cited by the learned Counsel for the defendant Bank has been considered in Indian Bank (supra). The Supreme Court came to the clear conclusion that the observations in Abhijit (supra) would apply only if two conditions mentioned above are satisfied. Even if it is assumed, as a matter of argument, that the present suit and the application filed by the bank before the Debt Recovery Tribunal are inextricably connected, the second condition is not satisfied. This is so because the plaintiff is not agreeable for the present suit being considered as a counter- claim in the bank's application before the Tribunal. As such, the second condition is not satisfied and, therefore, the observations in Abhijit (supra) would not be applicable. That being the case, the present suit cannot be transferred to the Debt Recovery Tribunal.

This application is dismissed.