Bank of Rajasthan Ltd. vs. VCK Shares & Stock Broking Services Ltd.
Background
Bank of Rajasthan had sanctioned a term loan and later an overdraft facility to the respondent company, secured by pledged shares and title deeds. When the respondent defaulted, the bank sold the pledged shares to recover dues and also filed a recovery application before the Debts Recovery Tribunal (DRT), Kolkata. The respondent separately filed civil suits in the Calcutta High Court challenging the sale of shares as void and disputing the bank's claim. The bank sought to have these independent civil suits transferred to and tried along with its DRT recovery proceedings, leading to conflicting earlier Supreme Court precedents on whether such transfer was permissible, which is why this three-judge bench reference arose.
Decision Breakdown
The Supreme Court held that Section 17 of the RDB Act only ousts civil court jurisdiction over recovery applications filed by banks. It does not bar a borrower from filing an independent civil suit against the bank, and there is no statutory power under the RDB Act (or under Section 151 CPC) for a civil court to transfer such an independently filed suit to the DRT, whether or not the parties consent. A borrower/defendant has a choice: raise a counterclaim before the DRT (which the bank can then ask to be segregated back to a civil court) or pursue a wholly separate civil suit, but either way, the DRT recovery proceedings must continue on their own expeditious track without being stayed or delayed by the parallel civil suit. Applying this to the facts, since the bank's DRT recovery claim had already been finally satisfied and settled, there was nothing left for it to press, and the respondent's suit was directed to proceed in the ordinary civil court; the appeals were accordingly dismissed, and two prior conflicting judgments (Abhijit Tea Co. and Ranjan Chemicals) were overruled on this point, while Indian Bank and Nahar Industrial Enterprises were affirmed (except regarding transfer power).
Lesson Learnt
A borrower sued by a bank before the Debts Recovery Tribunal is not compelled to raise all grievances only as a counterclaim there. They retain the independent right to sue the bank in a regular civil court, and courts cannot transfer such independent suits into the DRT process even with mutual consent, since that power simply does not exist in the statute.