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2024 Supreme(Online)(MAD) 22206
HIGH COURT OF MADRAS
Honourable Mr Justice M. SUNDAR
THE CITY UNION BANK LTD – Appellant
Versus
M/S.MAHALAKSHMI INN PVT LTD – Respondent
Civil suits against banks are permissible despite ongoing debt recovery proceedings, affirming borrowers' rights to contest unilateral cancellations of settlements.
Headnote:
Settlement - Original Side Appeals - Commercial Courts Act, 2015 (Sections 12-A), Recovery of Debts and Bankruptcy Act, 1993 (Sections 18, 31) - The court examined the validity of a negotiated settlement and the jurisdiction of civil courts in relation to debt recovery, concluding that such civil suits are not barred by the RDB Act, affirming the lower court's order for discharge of mortgage upon a deposit being made.
Fact of the Case:
The dispute arose from a negotiated one-time settlement (OTS) between a group of borrowers and a bank, which the bank unilaterally canceled. The borrower company sought to declare the cancellation as void and secure the release of mortgage documents pending the trial.
Issues: Whether the unilateral cancellation of the OTS by the bank was valid and the extent of the civil court's jurisdiction in light of parallel proceedings under the Recovery of Debts and Bankruptcy Act.
Ratio Decidendi: The court emphasized that civil courts retain jurisdiction in cases concerning claims against banks, citing the VCK Shares principles confirming that jurisdiction under the RDB Act does not bar civil jurisdiction for suits filed by borrowers.
Final Decision: The original side appeals were disposed of, upholding the lower court's order, with specific directives for expedited proceedings in the trial.
COMMON JUDGMENT
(Judgment of the Court was delivered by M.Sundar, J.)
This common judgment will now govern the captioned two main 'Original Side Appeals' ['OSAs' in plural and 'OSA' in singular for the sake of brevity and convenience] and captioned two 'Civil Miscellaneous Petitions' ['CMPs' in plural and 'CMP' in singular for the sake of brevity, convenience and clarity].
2. Captioned matters are in the Admission Board before this Bench and captioned OSAs are directed against a common order dated 29.01.2024 made by a Hon'ble single Judge on the Original Side of this Court in two applications namely A.No.3497 of 2023 [taken out by the plaintiff Company along with the suit] and A.No.6465 of 2023 [taken out by Defendants 1 and 2 pending suit].
3. This order has to be read in conjunction with and in continuation of earlier proceedings made in the previous listings on 27.02.2024, 14.03.2024, 19.03.2024 and 22.03.2024, which read as follows:
'Proceedings made on 27.02.2024 Captioned matters are in the Admission Board i.e., Motion List today.
2. Captioned 'Original Side Appeals' [hereinafter 'OSA' in singular and 'OSAs' in plural for the sake of ease of reference] arise out of a common order dated 29.01.2024 made by a Hon'ble single Judge of this Court in A.Nos.3497 and 6645 of 2023 in C.S.(Comm.Div.)No.178 of 2023. This '29.01.2024 common order' shall hereinafter be referred to as 'impugned common order' for the sake of convenience and clarity. 3. Mr.M.S.Krishnan, learned Senior counsel instructed by Ms.K.R.Ananda Gomathy, counsel on record for appellants / petitioners in captioned OSAs / CMPs and Mr.K.Manoj Menon, learned counsel representing Ms.Aruna Ganesh, counsel for caveator (R1) are before this Court.
4. The epicentre of the captioned litigation is what is described as 'negotiated one time settlement' ['OTS' for the sake of brevity] being 'OTS dated 29.12.2021' which is plaint document No.8 [hereinafter 'said OTS' for the sake of convenience and clarity].
5. 'Mahalakshmi Inn Pvt. Limited' ['MIPL' for the sake of brevity], 'Vinitha Associates Limited' ['VIAL' for the sake of brevity], 'Shoppers Spot (Chennai) Limited' ['SSCL' for the sake of brevity] and 'M/s.Mahalakshmi & Sons' ['M/s.M & S' for the sake of brevity] are three entities i.e., three companies and one firm. The three entities and this firm shall hereinafter be collectively referred to as 'borrowers' solely for the sake of convenience and ease of reference. 'City Union Bank Limited' is the lender bank and the same will be referred to as 'CUBL' for the sake of convenience and clarity.
6. Short facts are that the borrowers availed credit facilities from CUBL; that the transaction between borrowers and CUBL turned sour culminating in said OTS dated 29.12.2021; that CUBL alleging breach inter alia cancelled said OTS and approached 'Debts Recovery Tribunal, Chennai {DRT- III}' [hereinafter 'said DRT' for the sake of convenience and clarity]
vide O.A.No.163 of 2023 dated 03.02.2023; that pending proceedings before said DRT, MIPL resorted to 'Pre-Institution Mediation and Settlement' ['PIMS'] vide Section 12-A of 'the Commercial Courts Act, 2015 (4 of 2016)' [hereinafter 'CC Act' for the sake of convenience and clarity] which resulted in a non- starter report dated 19.01.2023 as CUBL did not respond to the mediation notice; that thereafter MIPL filed a suit (plaint dated 12.06.2023) in the Commercial Division of this Court being C.S.(Comm.Div.)No.178 of 2023; that multi-limbed prayer in the suit inter alia includes prayers to declare the alleged unilateral cancellation of said OTS by CUBL as null and void, a declaration that said OTS is binding, a mandatory injunction qua CUBL for release of documents and title deeds as regards suit property (to be noted, suit property is land and superstructure thereat at Door No.112, Plot No.144, Chamiers Road, Nandanam, Chennai-600 035, admeasuring an extent of 2 grounds and 1920 sq.ft thereabouts), a further prayer claiming One Crore and On
