Absence of any Legislative Power cannot give Power by Implication to Civil Court: Supreme Court 

Absence of any Legislative Power cannot give Power by Implication to Civil Court: Supreme Court 

The Supreme Court ruled that absence of any legislative power cannot give power by implication to the Civil Court.

Background 

The appellant bank, Bank of Rajasthan Ltd. (since amalgamated with ICICI Bank Ltd.), sanctioned a term loan to the respondent company with a limit of Rs.1.50 crores at interest of 19.25% per annum, repayable in twelve quarterly installments. 

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, 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, calling upon the respondent to settle the term loan account and overdraft facility account within three days of the receipt of the notice.

Arguments 

Senior Advocate V.V. Giri, appearing for the appellant, while conceding that consolidation of suits is not superficially provided for under the Civil Procedure Code, 1908, contended that the Court on multiple occasions held that the absence of specific provisions governing consolidation of suits provided for in the Code, the Court may exercise its inherent powers under Section 151 of the Code directing consolidation.

Senior Advocate Jaideep Gupta, appearing for the respondent, submitted that the RDB Act was enacted with the objective of providing a summary procedure to enable banks and financial institutions to recover debts due to them in a speedy manner and it did not oust the jurisdiction of Civil Courts.

He further submitted that as per Transcore v. Union of India, the DRT is a creature of statute and has no inherent power, which exists in Civil Courts. 

Decision 

The three judges bench of Justice Sanjay Kishan Kaul, Justice Abhay S. Oka and Justice Vikram Nath observed that the expanse of the reliefs the defendant may claim in the suit proceeding can certainly go beyond mere adjustments of the amounts of claim, for which the DRT would not have any power.

It was stated by the court that it would not be appropriate to read such power to transfer a suit to a DRT under Section 151 of the Code when the DRT is a creature of a statute and that statute does not provide for such eventuality. 

The court noted that even where a defendant is to invoke the jurisdiction of the DRT by filing a counterclaim, the bank has a right to seek a relegation of that claim to the Civil Court and the DRT has been empowered to do so, albeit, at the final adjudication stage.

The court said that the option before the defendant, who has instituted the suit, is clear – either he could file a counterclaim before the DRT or he could institute separate civil proceedings.

The court held that judgments in Abhijit Tea Co. and Ranjan Chemicals Ltd. are not to be laying down the correct legal proposition. 

“The judgments in Indian Bank and Nahar Industrial Enterprises are affirmed except to the extent that they allow the transfer of a suit from the Civil Court to the DRT” the court said.    

Case title: Bank of Rajasthan Ltd. v/s VCK Shares & Stock Broking Services Ltd.

Citation: Civil appeal nos.8972-8973 of 2014

Click here to read the Order/Judgment

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