Civil courts can initiate a countersuit by the borrower against the lenders: Supreme Court

A civil court is not barred from hearing a countersuit by a borrower against a lending bank or financial institution that pursues separate collection proceedings against him in a debt collection court (DRT) in under a special law, the Supreme Court ruled Thursday.

The trial court was dealing with the contentious legal issue of whether a borrower, faced with collection proceedings by a lending bank under the Recovery of Debts Due to Banks and Financial Institutions (RDB) Act 1993 before the DRT, can file a counterclaim in civil court against the lending financial institutions instead of filing it with the DRT itself.

“There is no provision in the RDB Act whereby the remedy of a civil suit by a defendant in a claim by the bank is ousted,” said a bench of judges Sanjay Kishan Kaul, Abhay S Oka and Vikram Nath. .

“Is the jurisdiction of a civil court to hear an action brought by a borrower against a bank or a financial institution excluded by virtue of the structure of the RDB law relating to the procedure for debt collection by a bank? or a financial institution? the question must be answered first and the answer is negative,” Judge Kaul said, writing the 45-page judgment.

The court also held that the Code of Civil Procedure did not have the power to transfer to the DRT the independent action brought by a borrower against a bank or a financial institution, which sought the recovery of its loan against the plaintiff in under the RDB law.

“As there is no such power with the civil court, there is no question of transferring the action whether by consent or otherwise to the DRT,” he ruled.

“We are therefore of the view that there is no provision in the RDB Act whereby the remedy of a civil suit by a defendant in a claim by the bank is ousted, but that is the matter of the choice of Such a defendant may file a counterclaim, or may wish to take advantage of the more onerous procedure established under the Code, and it is a choice that he makes with the consequences that flow therefrom,” he added. he declares.

The panel says it has a caveat, however, bearing in mind the nature of the powers exercised by the DRT and the purpose of its creation.

“We certainly would not want the process contemplated under the RDB Act to be impeded in any way by the filing of a separate complaint if a defendant chooses to do so. ‘a particular way and would do so. There can be no question of a stay of proceedings by way of a civil action brought by a defendant in the civil court…”, he declared.

He said that the DRT was created under the RDB special law to quickly deal with the claim of banks before it and that it should not be hindered by filing a civil action.

“Thus, it is not open to a defendant, who would have seized the civil judge, to seek a stay of the decision of the DRT pending the verdict of his action before the civil judge since it is a question of his choice,” It said.

The high court then ruled that its two judgments in “Indian Bank and Nahar Industrial Enterprises are affirmed except insofar as they authorize the transfer of an action from the civil court to the DRT”.

The judgment came on a plea by Bank of Rajasthan against a borrower who had moved a civil court against the lending bank.

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