IMPORTANT POINTS
(1) Recovery of loan amount – There is no provision in RDB Act by which remedy of a civil suit by a defendant in a claim by bank is ousted, but it is matter of choice of that defendant.
(2) There is no specific power to transfer a suit to DRT – In absence of any such power existing in Civil Court, an independent suit filed by borrower against bank or financial institution cannot be transferred to be tried along with application under RDB Act, as it is a matter of option of defendant in claim under RDB Act.

JUDGMENT :

SANJAY KISHAN KAUL, J.

1. The present reference arises from a question mark over the legal right of the borrower to initiate proceedings before a Civil Court against the bank or financial institution, which seeks to recover a loan amount against it.

The Factual History:

2. The appellant bank, Bank of Rajasthan Ltd. (since amalgamated with ICICI Bank Ltd.), sanctioned a term loan to the respondent company on 28.06.1994 with a limit of Rs.1.50 crores at interest of 19.25% per annum, repayable in twelve quarterly instalments. In order to secure the loan, the guarantors including the respondent, 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 Kolkata High Court against the appellant on 06.03.1998. The respondent inter alia, claimed a decree for sale of the pledged shares, recovery of sale proceeds, and an inquiry into the losses suffered by the respondent along with a decree for payment of money after the same.

5. A crucial development took place on 18.03.1998 when the appellant sold the pledged shares of BFL Software Ltd. for a total sum of Rs.5,77,68,000/-to adjust the amounts against the dues in view of the authorisation available with them as a part of the loan transaction. The respondent, as a sequitur, filed Civil Suit no.129 of 1999 before the High Court of Calcutta on 09.03.1999 praying, inter alia, for the following reliefs:

“i) A declaration that the 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 the term loan dated 27.07.1994 and Overdraft Account dated 19.09.1995 and that the Appellant bank was not entitled to a decree for a sum of Rs. 8,62,41,973.36 from the Respondent.”

6. The appellant, in those proceedings, filed applications, being GA No.4206 of 2000 in C.S. No.77 of 1998 and GA No.4171 of 2000 in C.S. No.129 of 1999 in November 2000, seeking rejection of the plaint and dismissal of the suits filed by the respondent. It was claimed that the suits were not maintainable and that the High Court lacked jurisdiction as the same exclusively vested with the DRT. The learned Single Judge vide order dated 06.09.2022 allowed both the applications of the appellant and directed the suits to be taken off from the file of the High Court. The respondent filed two appeals, being APOT No.691 of 2002 (later APO No.488 of 2002) and APOT No.692 of 2002 (later APO No.489 of 2002), challenging the order dated 06.09.2022 of the learned Single Judge. The Division Bench vide its order dated 27.09.2022 stayed the operation of the order of the learned Single Judge while admitting the appeal.

7. Insofar as the DRT proceedings were concerned, OA No.263 of 1997 was disposed of by the DRT vide order dated 19.05.20