BANK OF RAJASTHAN LTD.versusVCK SHARES & STOCK BROKING SERVICES LTD.

                          [2014] 13 S.C.R. 1202


A                    BANK OF RAJASTHAN LTD.
                                     v.
       VCK SHARES & STOCK BROKING SERVICES LTD.
                (Civil Appeal Nos. 8972-8973 of 2014)
B
                         SEPTEMBER 17, 2014
              [RANJAN GOGOi AND S. A. BOBDE, JJ.]
         Recovery of Debts due to Banks and Financial
  Institutions Act, 1993: s. 19- Jurisdiction of civil court to hear
C and try a counterclaim ora set off filed by debtor- In view of
  difference of opinion between the several benches of
  Supreme Court on the issue, the following questions of law
  referred to larger bench - Whether an independent suit filed
  by a borrower against a Bank or Financial Institution, which
D has applied for recovery of its loan against the plaintiff under
  the ROB Act, is liable to be transferred and tried along with.
  the application under the ROB Act by the ORT; If yes, can
  such transfer be ordered by a court only with the consent of
  the plaintiff; Is the jurisdiction of a civil court to try a suit filed
E by a borrower against aBank or Financial Institution ousted
  by virtue of the scheme of the ROB Act in relation to
  proceedings for recovery of debt by a Bank or Financial
  Institution -Reference to tar[Jer bench.
F      .The question which arose for consideration in the
  instant appeals was whether having regard to the
  Recovery of Debts due to Banks and Financial
  Institutions Act, 1993 (ROB Act), a suit containing a
  "counter-claim" or claiming a "set-off" filed by a debtor
G can be heard and tried before the Debt Recovery Tribunal
  (ORT) under the ROB Act or must be tried by a Civil Court
  alone.           ·
          Referring the matter to larger bench, the Court

H
                                   4202
. BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK 1203 '
             BROKING SERVICES LTD.

      HELD: 1. In Indian Bank vs. ABS Marine Products           A
(P) Ltd., 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        B
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 ROB Act, no
jurisdiction is conferred on the Tribunal to try
independent suits or proceedings initiated by                   C
borrowers. Referring to the earlier Judgment in Abhijit's
case, 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: The subject-matter of the bank's suit, and the       D
suit of the defendant against the bank, is inextricably
co.nnected in the sense that the decision in one would
affect the decision in the other. Both parties (the plaintiff
in the suit against the bank and the bank) should agree
for the independent suit being considered as a counter-         E
claim in the bank's application before the Tribunal, so
that both can be heard and disposed of by the Tribunal.
[Para 8, 9][1208-F-G; 1209-A-C]
      2. The two-Judge Bench in Nahar's case observed
that in Indian Bank's case, the Court had come to the F
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. It further directed that the Bench
in Ranjan Chemicals case was bound by the decision in G
the Indian Bank Case 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
1204         SUPREME COURT REPORTS                 [2014] 13 S.C.R.

 A jointly with the application filed by the bank as a cross-
   suit and that too without the consent of parties. 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
 B inextricably connected with the application filed before
   the ORT 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 was in consonance
 c with the observation of the Court in the Indian Bank's
   Case but was at variance with the Judgment in Ranjan
   Chemicals case. [Paras 8, 9, 11 and 12)(1210-B-C;
   1210-0-F; 1211-A-C]
             3. It was contended for the respondent that the
 D     matter did not call for reference as there was complete
       consistency in the views of the Court in Indian Bank case
       and Nahar case since both the judgments took the view
       that the jurisdiction of the civil courts was not ousted
       and a suit filed before the civil court can be transferred
 E     to the ORT only with the consent of both parties and
       Nahar's case was 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. There is a difference of opinion
       between several Benches of this Courton the issue. This
 F     is likely to create a doubt as to the true position in law
       and, therefore, it is held 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
 G     its loan against the plaintiff under the ROB Act, is liable
       to be transferred and tried long with the application
       under the ROB Act by the ORT? (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
 H     jurisdiction of a Civil Court to try a suit filed by a borrower
BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK 1205
           BROKING SERVICES LTD.

against a Bank or Financial Institution ousted by virtue A
of the scheme of the ROB Act in relation to proceedings
for recovery of debt by a Bank or Financial Institution?
[Paras 14, 15][1212-E-G; 1213-A-E]
     United Bank of India, Calcutta v. Abhijit Tea Co.
     Pvt.Ltd. and Ors. (2007) 7 SCC 357; Indian Bank      B
     v. ABS Marine Products (P) Ltd. 2006 (5) SCC 72
     : 2006 (1) Suppl. SCR 52 ; State Bank of India v.
     Ranjan Chemicals Ltd. and Anr. 2007 (1) SCC
     97 : 2006 (7) Suppl. SCR 145 ; Nahar Industrial
     Enterprises Limited v. Hong Kong and Shanghai        c
     Banking Corporation 2009 (8) SCC 646 ; JIT Ram
     v. State of Haryana (1981) 1 SCC 11; Union of
     India v. Godfrey Phillips India Ltd. (1985) 4 SCC
     369 - referred to.
                                                          D
      3. At this stage, the counsel for the appellant prayed
for stay of further proceedings in the two suits pending
between the parties before the High Court. The suits are
apparently pending since the years 1998 & 1999 and due
to various proceedings, which have been taken out by E
the parties, have virtually remained stationary. 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 F
any order which may be passed in the proceedings.
There is no reason to direct stay of the suits. The interim
relief prayed for the same is rejected. [Para 16]
(1213-E-H; 1214-A]
               CASE LAW REFERENCE                         G
2006 (1) Suppl. SCR 52     referred to         Para 8
2000 (3) Suppl. SCR 153 referred to            Para 9
2006 (7) Suppl. SCR 145 referred to            Para 10
2009 (8) sec 646           referred to         Para 11    H
1206         SUPREME COURT REPORTS                [2014] 13 S.C.R.


 A     2006 (5) sec 12            referred to           Para 11
       (1981) 1 sec 11            referred to           Para 13
       (1985) 4 sec 369           referred to           Para 13
       CIVILAPPELLATE JURISDICTION: Civil Appeal No(s).
 B 8972-8973 of 2014.
             From the Judgment and Order dated 19-04-2011 of a
       Division Bench of the High Court at Calcutta in APO Nos. 488
       of 2002 and 489 of 2002.
 c         Shyam Divan, Sr. Adv., Ms. Suruchi Suri, Chanchal
       Kumar Ganguli, Advs. for the Appellant.
            Jaideep Gupta, Sr.Adv., Nirmalya Mohan Bhattacharya,
       Ms. Titash Sen,Abhinav Mukerji,Advs.forthe Respondents.
  .         The Judgment of the Court was delivered by
 D
            S. A. BOBDE, J.
            1. Leave granted.
          2. In these appeals, the question before us is whether
 E having regard to the Recovery of Debts due to Banks and
   Financial Institutions Act, 1993 [hereinafter referred to as 'ROB
   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 'ORT') under the
 F RDB Act or must be tried by a Civil Court alone.
           3. The appellant- Bank filed an application for recovery
   under Section 19 of the ROB 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,
 G it filed Civil Suit No. 77of1998 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. 129of1999
 H praying inter alia for following reliefs:
    BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK 1207
        BROKING SERVICES LTD. [S. A. BOBDE, J.]

       i) A declaration that sale of shares of BFL Software Ltd.       A
       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
                                                                       B
       iii) A declaration that no sum was payable by the
       respondentto the appellant in respect of Term Loan dated
       27. 07. 1994 and overdraftAccount dated 19.09. 1995 and
       that the appellant is not entitled to a decree for a sum of
       Rs. 8,62,41,973.36 from the respondent.                         c
       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 matte~ was within
the exclusive jurisdiction of the DRT. The Single Judge allowed
that application and directed that the suits be taken off from D
the file of the High Court. The Division Bench stayed operation
of the Order of the Single Judge.
       5. Since the ORT 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,           E
the ORT 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 F
ORT order dismissing the appellant's appeal against the ORT
order was dismissed in default. 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 these appeals. G
       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 ROB
Act, jurisdiction was indeed conferred upon the Tribunal to try
(2000) 7 sec 357
1                                                                      H
1208            SUPREME COURT REPORTS             [2014] 13 S.C.R.


 A "counter-claim" and "set-off" by Section 19 of the RDBAct 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
 B 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 ROB Act had not come into force when the suit
   was filed by the Bank, the debtor-company had filed the
 c 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.
          8. In a later decision in Indian Bank vs. ABS Marine
 D Produets (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
 E 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
   ORB Act, no jurisdiction is conferred on the Tribunal to try
   independent suits or proceedings initiated by borrowers.
 F       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
 G earlier Judgment in Abhijit's3 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) s sec 72
 H     3
           (2000J 7 sec 357
    BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK                      1209
        BROKING SERVICES LTD. [S. A. BOBDE, J.]

      (i) The subject-matter of the bank's suit, and the suit of      A
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             B
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.           c
and Another", 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 ORT and another
before the Civil Court. The two-Judge Bench referred to
Abhijit's!i. case (supra) and observed that though a borrower-        0
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 of the Court to order a joint trial by
introducing a restriction that it can be done only if there was       E
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 ROB Act. In such an
eventuality the only question was whether in the interest of
justice, convenience of parties and avoidance of multiplicity,        F
the suit should be transferred to the ORT 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 ORT was not necessary, as held in the Indian Bank Case
(supra).
                                                                      G
     11. In a subsequent decision of this Court by another two-
J udge Bench in Nahar Industrial Enterprises Limited vs.

'(2007) 1 sec 97
5
 (2000) 7 sec 357
                                                                      H
1210         SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A Hong Kong and Shanghai Banking Corporation6 , 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. 6 and State Bank of India vs.
 B Ranjan Chemicals Ltd. and Anothe~. 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
 c     can only be on the basis of the consent of the partles. 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
 D
             (ii)   The agreement of both parties that the suit should
                    be transferred to the Tribunal.
        12. It further directed that the Bench in Ranjan
   Chemicals 10 case was bound by the decision in the Indian
 E Bank Case 11 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 jointl{with the application filed by the
   bank as a cross-suit and that too without the consent of parties.
 F The Bench, vide para 60, held as under:
             "We are in agreement with all the above observations of
             this Court. Ranjan Chemica/s 12 was bound by the
             decision rendered in Indian Bank13 being a coordinate
             Bench. It could not have taken a contrary view."
 G
       6
          (2009) a sec 646
       1
         (2000) 1 sec 357
       8 (2006) 5 sec 12
       9
         (2007) 1 sec 97
 H     10
          (2001) 1 sec 97
  BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK 1211
      BROKING SERVICES LTD. [S. A. BOBDE, J.]

         Though having so observed, the Bench apparently did A
  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 ORT by the Bank
  are transferred, the same would amount to ousting the
  jurisdiction of the civil court indirectly and consent ofthe plaintiff B
  is necessary for transferring the suits. This finding is in
  consonance with the observation of the Court in the Indian
  Bank's Case 14 but is at variance with the Judgment in Ranjan
  Chemicals 15 case. According to the last judgment i.e. Nahar's
  case 16 , the Bench deciding Ranjan Chemicals case could c
  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
   h~s been highlighted.                                                 D
       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. 16 , where in para§raph 12, this Court
 observed as follows:                                            E
            ", .......... We find it difficultto 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 case 19• If the Bench of two F
           ~udges in Jit Ram case found themselves unable to
           agree with the law laid down in Moti/al Sugar Mills case,
         . they could have referred Jit Ram case to a larger Bench,
 11
    (2006) 5sec12
 12
    (2001) 1 sec 97
 13
    (2006) 5 sec 72                                                    G
 14
    (2006) 5 sec 12
 15
    (2007) 1 sec 97
 16
      (2009) asec 646
 11
    (1981) 1sec11
 10
    (1985) 4 sec 369
 19
    (1979) 2 sec 409                                                    H
1212         SUPREME COURT REPORTS                  [2014] 13 S.C.R.


 A          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
 B          are clearly of the view that what has been laid down in
            Motilal Sugar Mills case represents 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
 c          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."
            Sh ri Divan submitted that the Bench deciding Ranjan
   Chemical's Case 20 had decided at variance with the Judgment
 D in Indian Bank case 21 . 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 Ben.ch in Nahar's case22 which did not also
 E consider it appropriate to refer the is.sues 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
 F 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 transferred to the ORT only
   with the consent of both parties. According to the learned
 G 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.
       20
          (2007) 1 sec 97
       21
          (2006) 5 sec 72
 H     22
          (2009) asec 646
BANK OF RAJASTHAN LTD. v. VCK SHARES & STOCK                           1213
    BROKING SERVICES LTD. [S. A. BOBDE, J.]

      15. It is not possible to accede to the submissions made         A
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:                           B
     (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 ORB Act, is liable to be transferred and
         tried along with the application under the ROB Act C
         by the ORT?
     (b) If the answer is in the affirmative, can such transfer
         be ordered by a court only with the consent of the
         plaintiff?                                                     o
     (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 ROB Act in
         relation to proceedings for recovery of debt by a
         Bank or Financial Institution?                                 E
      16. At this stage, ShriDiwan, 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 F
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 jt to G
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
                                                                 H
1214          SUPREME COURT REPORTS                [2014] 13 S.C.R.


 A 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.
        17. In view of above, the Registry is directed to place the
   papers before the.Hon'ble Chief Justice of India for taking
 B appropriate action in accordance with law.

       Devika Gujral                      Matter referred to larger bench.