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2009 Supreme(Raj) 1186
HIGH COURT OF RAJASTHAN
GOPAL KRISHAN VYAS, J.
STATE BANK OF INDIA, BHILWARA
VS.
SHARDA SPUNTEX PVT. LTD.
Civil Revn. Petn. No. 212 of 2009
Decided on : OCTOBER 22, 2009
M.C.Bhoot, M.S.SINGHVI
A civil suit filed by a borrower against a Bank for recovery of debt is barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002 and Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Headnote:
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 - SECTION 34 - RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - SECTION 18 - ORDER VII RULE 11 (D), C. P. C. - CIVIL SUIT - JURISDICTION - BAR - BORROWER - DEBT - FORWARD EXCHANGE PURCHASE CONTRACTS - FINANCIAL ASSISTANCE - DEBT RECOVERY TRIBUNAL - APPELLATE TRIBUNAL.
Fact of the Case:
Plaintiff-respondent company filed a suit for declaration and permanent injunction against the petitioner Bank for declaring company's bank accounts as NPA and making debit entries. Along with the suit, an application for temporary injunction was filed. The petitioner Bank filed an application under Order VII Rule 11, C. P. C. on the ground that the suit itself is barred by provisions of Section 34 of the Securitisation and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002 (Act of 2002), so also, by Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act of 1993). The trial Court rejected the application filed by the petitioner Bank and entertained the suit.
Finding of the Court:
The Court held that the respondent-plaintiff company is a borrower of the petitioner Bank and the forward exchange purchase contracts executed by the company fall within the definition of "debt" as provided under Section 2 (ha) of the Act of 2002 and Section 2 (g) of the Act of 1993. The Court further held that as per Section 34 of the Act of 2002, the civil suit itself is barred by law because no civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter for which a Debts Recovery Tribunal or the Appellate tribunal is empowered by or under the Act of 2002 to determine and no injunction can be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act of 2002 or under the Recovery of Debts due to Banks and Financial Institutions Act, 1993.
Issues: 1. Whether the civil suit filed by the respondent-plaintiff company is barred by Section 34 of the Act of 2002 and Section 18 of the Act of 1993? 2. Whether the respondent-plaintiff company is a borrower of the petitioner Bank? 3. Whether the forward exchange purchase contracts executed by the company fall within the definition of "debt" as provided under Section 2 (ha) of the Act of 2002 and Section 2 (g) of the Act of 1993?
Ratio Decidendi: 1. The Court held that the civil suit filed by the respondent-plaintiff company is barred by Section 34 of the Act of 2002 and Section 18 of the Act of 1993 because the respondent-plaintiff company is a borrower of the petitioner Bank and the forward exchange purchase contracts executed by the company fall within the definition of "debt" as provided under Section 2 (ha) of the Act of 2002 and Section 2 (g) of the Act of 1993. 2. The Court held that the respondent-plaintiff company is a borrower of the petitioner Bank because the company is availing financial facilities from the petitioner Bank and the forward exchange purchase contracts executed by the company are a guarantee to the Bank for sanction of the forward contract limit. 3. The Court held that the forward exchange purchase contracts executed by the company fall within the definition of "debt" as provided under Section 2 (ha) of the Act of 2002 and Section 2 (g) of the Act of 1993 because the contracts are a liability which is claimed as due from the company by the Bank.
Final Decision: The Court allowed the revision petition filed by the petitioner Bank and quashed the order passed by the trial Court. The Court also allowed the application filed by the petitioner Bank under Order VII, Rule 11, C. P. C. and dismissed the suit filed by the respondent Company as barred by law.
( 1 ) IN this revision petition, the petitioner State Bank of India, Bhilwara is challenging order dated 29-5-2009 passed by the district Judge, Bhilwara in Civil Original Suit no. 126/2009, by which, the learned District judge dismissed the application filed by the petitioner Bank under Order VII Rule 11, c. P. C.
( 2 ) FACTS of the case indicate that plaintiff respondent filed suit for declaration and permanent injunction against the action of the Bank for declaring company's bank accounts as NPA and making debit entries. Along with the said suit, application for temporary injunction was filed. Upon service of summonses/notices issued in the said suit, petitioner Bank filed application under Order VII Rule 11, C. P. C. on 26-5-2009 in the suit as well as miscellaneous application filed by the respondent-plaintiff. Learned trial Court rejected the said application by order dated 29-5-2009 which is under challenge in this miscellaneous appeal. Learned trial Court rejected the application filed by the petitioner Bank under Order VII Rule 11, C. P. C. and vide order dated 30-5-2009 allowed the application for temporary injunction.
( 3 ) IN the application filed under Order VII rule 11, C. P. C, it is stated by the petitioner bank that the original suit itself is barred by provisions of Section 34 of the Securitisation and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002 (hereinafter, in short, to be called "the Act of 2002"), so also, by Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter, in short, to be called "the Act of 1993"), therefore, learned trial Court has no jurisdiction to entertain the suit but the trial Court rejected the said plea of the petitioner Bank and entertained the suit while rejecting the application filed by the Bank under Order VII Rule 11, C. P. C.
( 4 ) LEARNED counsel for the petitioner Bank vehemently contended that after enactment of the Act of 2002, the Debt Recovery Tribunal has jurisdiction to adjudicate the matter and no civil Court can entertain such disputes. Learned counsel for the petitioner invited my attention towards an important material fact of the case that admittedly the respondent-plaintiff is a Private Ltd. company registered under the Companies Act, 1956 and pursuing business since 1994 of production and trade of yarn while availing financial facilities from the petitioner State Bank of India, Bhilwara. This fact itself is pleaded in the suit.
( 5 ) FURTHER, it is pleaded in the suit that mostly the company is doing business of export and getting payment in foreign currency, therefore, the company has executed Forward exchange Purchase Contract with the Bank to get "forward Contract Limit" of 80 crore rupees; meaning thereby, admittedly, the Bank is providing financial assistance to the respondent-plaintiff company and, for the purpose of granting forward contract limit by the Bank, plaintiff company and petitioner Bank have executed Forward Exchange Purchase Contract. Therefore, for all purposes, the respondent-plaintiff company is "borrower" of the petitioner Bank as defined in the Acts of 2002 and 1993, as such, obviously, when the respondent plaintiff company is borrower while seeking and availing financial assistance from the petitioner Bank including credit facility, then, for all purposes, the plaintiff respondent company is borrower and financial facility is being availed by the company with the financial assistance of the petitioner Bank, therefore, any credit liability in connection with the said financial assistance does fall under the definition of "debt" as provided under Section 2 (ha) of the Act of 2002 and Section 2 (g) of the Act of 1993 and, as per Section 34 of the act of 2002 the civil suit itself is barred by law because as per Section 34 no civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter for which a Debts Recovery Tribunal o
