Case Note & Summary
The dispute arose between a bank and a stock broking service regarding the jurisdiction of the Debt Recovery Tribunal (DRT) under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act). The Bank of Rajasthan Ltd. filed an application for recovery against VCK Shares & Stock Broking Services Ltd. for a substantial amount. In response, the respondent filed civil suits in the Calcutta High Court, claiming various reliefs including the return of pledged shares. The High Court initially ruled that the suits should be removed from its jurisdiction, but this was stayed by a Division Bench. The DRT later ruled in favor of the bank regarding part of the claim but also allowed a counter-claim from the respondent. The bank challenged the High Court's decision, leading to the current appeals. The Supreme Court examined previous judgments regarding the jurisdiction of the DRT and Civil Courts, noting inconsistencies in the application of the law. It highlighted that while counter-claims can be adjudicated by the DRT, independent suits filed by borrowers against banks must be tried in Civil Courts unless both parties consent to a transfer. The court ultimately decided to refer several questions of law to a larger bench for clarification on these issues, emphasizing the need for consistency in judicial interpretation. The request for a stay on the ongoing civil suits was denied, as the court found no justification for such an order given the lack of progress in the cases. The judgment was pronounced on September 17, 2014.
Headnote
A) Banking Law - Jurisdiction of Debt Recovery Tribunal - Counter-claims and Set-offs - Recovery of Debts due to Banks and Financial Institutions Act, 1993, Section 19 - The court considered whether counter-claims or set-offs by debtors can be adjudicated by the DRT or if such matters must be heard by Civil Courts. It was held that the jurisdiction of the DRT includes counter-claims and set-offs as per Section 19, but independent suits must be tried in Civil Courts unless specific conditions are met (Paras 2-15).
Issue of Consideration
Whether a suit containing a counter-claim or claiming a set-off filed by a debtor can be heard before the Debt Recovery Tribunal under the RDB Act or must be tried by a Civil Court alone.
Final Decision
The Supreme Court referred the questions of law regarding the jurisdiction of the DRT and Civil Courts to a larger bench for consideration, rejecting the request for a stay on the ongoing civil suits.
Law Points
- jurisdiction of Debt Recovery Tribunal
- counter-claim
- set-off
- Recovery of Debts due to Banks and Financial Institutions Act
- 1993
