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CASE NO.: Appeal (civil)  10074-10075 of 2003

PETITIONER: Indian Bank

RESPONDENT: ABS Marine Products Pvt. Ltd.

DATE OF JUDGMENT: 18/04/2006

BENCH: Dr. AR. Lakshmanan & R. V. Raveendran

JUDGMENT: J U D G M E N T

RAVEENDRAN, J.

       These appeals by special leave are filed against the judgment dated  10.5.2002 of the Calcutta High Court, dismissing A.P.O. Nos.57-58 of  2001 filed by the appellant-Bank against orders dated 24.1.2001 and  13.3.2001 passed by a learned Single Judge of that court, rejecting an oral  application and a written application respectively, filed by the appellant- Bank for transfer of Civil Suit No.7/1995 (filed by first respondent herein  against the appellant and others and pending on the file of the Calcutta  High Court) to the Debt Recovery Tribunal, Calcutta, for being tried with  O.A. No.170/1995 (filed by the appellant against the first respondent and  its guarantors).

2.      The first respondent (also referred to as the ’borrower’ or  ’company’) approached the appellant-Bank (for short ’the Bank’) for  certain credit facilities. By Sanction Advices dated 12.7.1991 and  6.12.1991, the Bank sanctioned ad hoc packing credit facilities to a limit of  Rs.20 lakhs and Rs.5 lakhs respectively. According to the Bank, the  company utilized the said credit facilities, but committed default in  repaying the amounts advanced. Therefore, the Bank filed O.A.  No.170/1995 on 21.8.1995 before the Debt Recovery Tribunal (for short  ’the Tribunal’) under Section 19 of the Recovery of Debts Due to Banks  and Financial Institutions Act, 1993 (for short ’Debt Recovery Act’)  seeking a certificate to recover Rs.30,67,820/04 with interest from the  company and its four guarantors (Directors), jointly and severally. The said  application is pending and trial therein is yet to commence.

3.      On 19.12.1991, the Bank sanctioned a Middle Term Loan of Rs.90  lakhs and certain other credit facilities to the company. The sanctioned  loans were not released. The company filed C.S. No.7/1995 against the  Bank in the Calcutta High Court in January, 1995, for recovery of  Rs.25,38,58,000/- as damages (for non-disbursal of the loans) with interest.  By the end of 2000, recording of evidence in the suit was completed and  the suit was ripe for arguments.

4.      On 24.1.2001, the Bank made an oral submission that the suit could  not be tried by the High Court and it should be transferred to the Tribunal.  A learned Single Judge rejected the said request by the following order :-

"Though not pleaded in the written statement specifically, the learned  counsel for the defendant contends that in view of the amendment of  section 19 of the Recovery of debts due to Banks and Financial  Institutions Act, 1993, this suit cannot be tried by this court. I have gone  through section 19 of the said act as amended up to date. It appears from

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the said amendment that the debtor/respondent will be entitled to make  counter claims in the same proceeding initiated by the bank. Before  amendment there was no such specific provision. But in this case, the  plaintiff/debtor had filed the suit before the bank could file appropriate  proceeding. It is a separate suit. It is neither a cross suit nor can be termed  as counter-claim. So the suit is perfectly entertainable by this court.  Therefore, the preliminary objection raised by the Bank is hereby  overruled."

5.      Thereafter, the Bank filed an application in writing, praying for  transfer of C.S. No.7/1995 filed by the borrower to the Tribunal on the  ground that the said suit was broadly in the nature of a counter-claim to  Bank’s O.A. No.170/1995 and was integrally connected with its  application. The learned Single Judge rejected the said application by order  dated 13.3.2001, as barred by res judicata, in view of the fact the same  prayer made orally earlier had been rejected on 24.1.2001. The said two  orders dated 24.1.2001 and 13.3.2001 were challenged by the Bank in two  appeals (APO Nos.57-58/2001) before a Division Bench of the High Court.  In support of its contention that C.S. No.7/1995 should be transferred from  the High Court to the Tribunal for being tried with OA No.170/1995,  the  Bank relied on Sections 19(6) to (11) of the Debts Recovery Act and the  following observations of this Court in United Bank of India, Calcutta  v.  Abhijit Tea Co. Pvt. Ltd. [2000 (7) SCC 357] :-

"If a set-off or a counter-claim is to be equated to a cross-suit under  Section 19, a fortiori there can be no difficulty in treating the cross-suit as  one by way of set-off and counter-claim, and as proceedings which ought  to be dealt with simultaneously with the main suit by the Bank\005\005."In  our view, in the context, the word "counter-claim" in Sections 19(8) to  (11) which is equated to a cross-suit, includes a claim even if it is made in  an independent suit filed earlier."

6.      A Division Bench of the Calcutta High Court dismissed the Bank’s  appeals by an order dated 10.5.2002. The High Court held that :

(i)     In the absence of a provision in the Debt Recovery Act enabling a  borrower to file a suit (application) against the bank or a financial  institution, in the Debt Recovery Tribunal, the jurisdiction of the civil  court to entertain a suit filed by the borrower against the bank is not  excluded under Section 18 of the said Act.

(ii)     Section 31 of the Debts Recovery Act providing for transfer of the  pending suits/cases, from courts to tribunals, applies only to those suits or  proceedings which were pending before any court immediately before the  establishment of a Tribunal under the said Act and will not apply to any  suit or proceeding validly initiated in a civil court after the establishment  of the Tribunal.  

(iii)   Sub-section (8) of Section 19 of the Act is merely a provision  enabling a defendant (in a Recovery Application filed by the Bank before  the Tribunal) to raise a counter-claim in his written statement against the  bank, and empowering the Tribunal to try such a counter-claim. Such an  enabling provision cannot be construed as ousting or excluding the  jurisdiction of the civil court to entertain a suit for damages filed by the  borrower against the bank, or enabling the bank to seek transfer of such a  suit, to the Tribunal. The observation in Abhijit (supra) that the borrower’s  suit should be transferred to the Tribunal by treating the independent suit  of the borrower as a counter-claim in the application of the Bank, was in  exercise of the extraordinary power under Article 142 of the Constitution  of India, on the special and peculiar facts of that case. As the High Court  in its jurisdiction as a civil court, did not possess the power available to  the Supreme Court under Article 142, it could not pass any order for   transfer of a suit validly instituted before it, to the Tribunal.  

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(iv)    Even assuming that the High Court could transfer the suit, the  basic requirement for transfer laid down in Abhijit (supra), that is, the  subject-matter of the borrower’s suit pending before the Court, and the  Bank’s application pending before the Tribunal should be inextricably  connected, was not present in this case. Therefore, there could be no  transfer.

(v)     Where a borrower’s suit is deemed to be a counter-claim in respect  of the Bank’s application, and is transferred to the Tribunal,  it would be  open for the Bank, to contend, as enabled by Section 19(11) of the Debts  Recovery Act, that such suit should be tried independently. If such a  contention is accepted by the Tribunal, the suit transferred from the civil  court to the Tribunal will have to be re-transferred from the Tribunal to the  civil court, as the Tribunal has no jurisdiction to entertain or try an  independent suit of the borrower against the bank. That will lead to an  anomalous situation.  

(vi)    The civil court has jurisdiction to try all suits of civil nature, except  those excluded by reason of an express or implied bar in a statute. The  jurisdiction of a civil court can never be contingent upon an order passed  by the Tribunal, and that too on an application by one of the parties to the  proceeding before the Tribunal. Nor will the jurisdiction vested in a civil  court to proceed with a suit, cease on the Bank or financial institution  filing an application for recovery before the Tribunal.

7.      The said decision of the Division Bench of the Calcutta High Court  is challenged by the Bank in these appeals by special leave, on the ground  that the subject matter of the Bank’s application and the first respondent’s  suit were inextricably connected, and though the suit of the borrower was  prior to the Bank’s application before the Tribunal, in view of the law laid  down in Abhijit (supra), the borrower’s suit should be considered as a  counter-claim in the Bank’s application before the Tribunal and  consequently, transferred to the Tribunal. On the contentions raised, the  following questions arise for our consideration :

(a)     Whether the subject-matter of the borrower’s suit before  the High Court and Bank’s application before the  Tribunal were inextricably connected?

(b)     Whether the provisions of Debts Recovery Act mandate  or require the transfer of an independent suit filed by a  borrower against a Bank before a civil court to the  Tribunal, in the event of the Bank filing a recovery  application against the borrower before the Tribunal, to  be tried as a counter-claim in the Bank’s application?

(c)     Whether  the observation in Abhijit (supra) that the suit  filed by the borrower against the Bank has to be  transferred to the Tribunal for being tried as a counter- claim in the applications of the Bank, is to be construed  as a principle laid down by this Court, or as an  observation in exercise of power under Article 142 in  order to do complete justice between the parties? Re : Question No. (i) : 8.      The Bank sanctioned an ad hoc packing credit limit of Rs.20 lacs on  12.7.1991 and an additional ad hoc packing credit limit of Rs.5 lacs on  6.12.1991, subject to the terms contained in the Sanction Advice dated  12.7.1991. In regard to the initial limit of Rs.20 lacs, the company executed  an agreement dated 15.7.1991 and its 4 Directors executed a guarantee  dated 15.7.1991. In regard to the additional amount of Rs.5 lacs, a  promissory note and an agreement were executed on 20.11.1991. Claiming  that the company failed to pay the amounts advanced, the Bank filed an  application before the Tribunal for recovery of Rs.30,67,820.04. The cause  of action for the Bank’s application is the alleged non-payment of the

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amounts advanced to the borrower, in pursuance of ad-hoc limits  sanctioned on 12.7.1991 and 6.12.1991. On the other hand, the subject  matter of the suit filed by the borrower against the Bank and the cause of  action therefor, are totally unconnected with and different from the subject  matter of and cause of action for the Bank’s application. On the request of  the borrower, the Bank by letter dated 19.12.1991 sanctioned several credit  facilities to the borrower, namely, (i) a Medium Term Loan of Rs.90 lacs;  (ii) packing credit loan facilities to a  limit  of Rs.50 lacs; (iii) bridge loan  of Rs.15 lacs; and (iv) guarantee facility to an extent of Rs.85.42 lacs. The  Bank also agreed to absorb the ad hoc packing credit facilities of Rs.25 lacs  already sanctioned within the fresh limits sanctioned. The borrower alleged  that it proceeded to a arrange its affairs and activities on the assumption  that the Bank will be releasing the loans; and that the Bank failed to release  the credit facilities, thereby putting it (the borrower) to huge losses, apart  from denying the profits from the business. Consequently, it filed C.S.  No.7/1995 for recovery of Rs. 25,38,58,000/- made up of  Rs.  11,33,22,000/- towards loss of profits, Rs.10 crores as compensation for  loss of goodwill and reputation, Rs.3.50 croress as damages on account of  the impact of inflation and difference in foreign exchange rates,  Rs.31,36,000/- towards expenditure which became infructuous on account  of the Bank’s failure to release the loans, and Rs.24 lacs towards interest up  to the date of the suit.  The cause of action for the borrower’s suit is the  alleged breach by the Bank, in not releasing the sanctioned loans.

9.      The issues that arose in the Bank’s application was whether the  borrower failed to repay the sums borrowed and whether the Bank was  entitled to the amounts claimed. On the other hand, the issues that arose in  the borrower’s suit were whether the Bank had promised/agreed to advance  certain monies; whether the Bank committed breach in refusing to release  such loans in terms of the sanction letter; whether the borrower failed to  fulfil the terms and conditions of sanction and therefore the Bank’s refusal  to advance, was justified; and even if there was breach, whether the  borrower suffered any loss on account of such non-disbursement and if so  whether the borrower was entitled to the amounts claimed. While the claim  of the Bank was for an ascertained sum due from the borrower, the claim of  the borrower was for damages which required firstly a determination by the  court as to whether the Bank was liable to pay damages and thereafter  assessment of quantum of such damages. Thus there is absolutely no  connection between the subject matter of the two suits and they are no way  connected. A decision in one does not depend on the other. Nor could there  be any apprehension of different and inconsistent results if the suit and the  application are tried and decided separately by different forums. In the  circumstances, it cannot be said that the borrower’s suit and the Bank’s  application were inextricably connected.

Re : Question No. 2 :

 10.     Section 17 of the Debts Recovery Act deals with jurisdiction, powers  and authority of the Tribunals. Sub-section (1) thereof provides that a  tribunal shall exercise, on and from the appointed day, the jurisdiction,  powers and authority to entertain and decide applications from the banks  and financial institutions for recovery of debts due to such banks and  financial institutions. "Debt" is defined under Section 2(g) as follows :

"(g) "debt" means any liability (inclusive of interest) which is claimed as  due from any person by a bank or a financial institution or by a consortium  of banks or financial institutions during the course of any business activity  undertaken by the bank or the financial institution or the consortium under  any law for the time being in force, in cash or otherwise, whether secured  or unsecured, or assigned, or whether payable under a decree or order of  any civil court or any arbitration award or otherwise or under a mortgage  and subsisting on, and legally recoverable on, the date of the application;"

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Section 18 provides that on and from the appointed day, no court or other  authority shall have, or be entitled to exercise, any jurisdiction, powers or  authority (except the Supreme Court, and a High Court exercising  jurisdiction under Article 226 and 227 of the Constitution) in relation to  the matters specified in Section 17.  

11.     Section 19 related to the procedure of Tribunal, in regard to filing of  applications. Section 19, as it originally stood, was substituted in entirety  by Act 1 of 2000. Sub-section (1) of section 19 provides that a Bank or  financial institution can make an application to jurisdictional Debt  Recovery Tribunal. Sub-sections (6) to (11) of new Section 19, relevant for  our purpose, are extracted below :

"(6) Where the defendant claims to set-off against the applicant’s demand  any ascertained sum of money legally recoverable by him from such  applicant, the defendant may, at the first hearing of the application, but not  afterwards unless permitted by the Tribunal, present a written statement  containing the particulars of the debt sought to be set-off.

(7) The written statement shall have the same effect as a plaint in a cross- suit so as to enable the Tribunal to pass a final order in respect both of the  original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of pleading  a set off under sub-section (6), set up, by way of counter-claim against the  claim of the applicant, any right or claim in respect of a cause of action  accruing to the defendant against the applicant either before or after the  filing of the application but before the defendant has delivered his defence  or before the time limited for delivering his defence has expired, whether  such counter-claim is in the nature of a claim for damages or not.

(9) A counter-claim under sub-section (8) shall have the same effect as a  cross-suit so as to enable the Tribunal to pass a final order on the same  application, both on the original claim and on the counter-claim.

(10) The applicant shall be at liberty to file a written statement in answer  to the counter-claim of the defendant within such period as may be fixed  by the Tribunal.

(11) Where a defendant sets up a counter-claim and the applicant contends  that the claim thereby raised ought not to be disposed of by way of  counter-claim but in an independent action, the applicant may, at any time  before issues are settled in relation to the counter-claim, apply to the  Tribunal for an order that such counter-claim may be excluded, and the  Tribunal may, on the hearing of such application make such order as it  thinks fit."

12.     Section 31 of the Debts Recovery Act provides that every suit or  other proceeding pending before any court immediately before the date of  establishment of a Tribunal under the said Act, being a suit or proceeding  the cause of action whereon it is based is such that it would have been, if it  had arisen after such establishment, within the jurisdiction of such  Tribunal, shall stand transferred on that date to such Tribunal.          13.     Section 9 of the Code of Civil Procedure provides that the courts  shall have jurisdiction to try all suits of a civil nature, excepting suits of  which their cognizance is either expressly or impliedly barred.

14.     It is evident from Sections 17 and 18 of the Debts Recovery Act that  civil court’s jurisdiction is barred only in regard to applications by a bank  or a financial institution for recovery of its debts. The jurisdiction of civil  courts is not barred in regard to any suit filed by a borrower or any other

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person against a bank for any relief. It is not disputed that the Calcutta  High Court had jurisdiction to entertain and dispose of C.S. No.7/1995  filed by the borrower when it was filed and continues to have jurisdiction  to entertain and dispose of the said suit. There is no provision in the Act for  transfer of suits and proceedings, except section 31 which relates to  suit/proceeding by a Bank or financial institution for recovery of a debt. It  is evident from Section 31 that only those cases and proceedings (for  recovery of debts due to banks and financial institutions) which were  pending before any court immediately before the date of establishment of a  tribunal under the Debts Recovery Act stood transferred, to the Tribunal. In  this case, there is no dispute that the Debt Recovery Tribunal, Calcutta, was  established long prior to the company filing C.S. No.7/1995 against the  bank. The said suit having been filed long after the date when the tribunal  was established and not being a suit or proceeding instituted by a bank or  financial institution for recovery of a debt, did not attract section 31.  

15.     As far as sub-sections (6) to (11) of section 19 are concerned, they  are merely enabling provisions. The Debts Recovery Act, as it originally  stood, did not contain any provision enabling a defendant in an application  filed by the bank/financial institution to claim any set off or make any  counter claim against the bank/financial institution. On that among other  grounds, the Act was held to be unconstitutional (see Delhi High Court Bar  Association vs. Union of India \026 AIR 1995 Delhi 323). During the  pendency of appeal against the said decision, before this Court, the Act   was amended by Act 1 of 2000 to remove the lacuna by providing for set  off and counter-claims by defendants in the applications filed by  Banks/financial institution before the Tribunal. The provisions of the Act  as amended were upheld by this Court in Union of India vs. Delhi High  Court Bar Association [2002 (4) SCC 275]. The effect of sub-sections (6)  to (11) of Section 19 of the amended Act is that any defendant in a suit or  proceeding initiated by a bank or financial institution can : (a) claim set off  against the demand of a Bank/financial institution, any ascertained sum of  money legally recoverable by him from such bank/financial institution; and  (b) set-up by way of counter-claim against the claim of a Bank/financial  institution, any right or claim in respect of a cause of action accruing to  such defendant against the bank/financial institution, either before or after  filing of the application, but before the defendant has delivered his defence  or before the time for delivering the defence  has expired, whether such a  counter claim is in the nature of a claim for damages or not. What is  significant is that Sections 17 and 18 have not been amended. Jurisdiction  has not been conferred on the Tribunal, even after amendment, to try  independent suits or proceedings initiated by borrowers or others against  banks/financial institutions, nor the jurisdiction of civil courts barred in  regard to such suits or proceedings. The only change that has been made is  to enable defendants to claim set off or make a counter-claim as provided  in sub-sections (6) to (8) of Section 19  in applications already filed by the  bank or financial institutions for recovery of the amounts due to them. In  other words, what is provided and permitted is a cross-action by a  defendant in a pending application by the bank/financial institution, the  intention being to have the claim of the bank/financial institution made in  its application and the counter-claim or claim for set off of the defendant,  as a single unified proceeding, to be disposed of by a common order.  

16.     Making a counter claim in the Bank’s application before the Tribunal  is not the only remedy, but an option available to the borrower/defendant.  He can also file a separate suit or proceeding before a civil court or other  appropriate forum in respect of his claim against the Bank and pursue the  same. Even the Bank, in whose application the counter-claim is made, has  the option to apply to the tribunal to exclude the counter-claim of the  defendant while considering its application. When such application is made  by the Bank, the Tribunal may either refuse to exclude the counter-claim  and proceed to consider the Bank’s application and the counter-claim  together; or exclude the counter-claim as prayed, and proceed only with the  Bank’s application, in which event the counter-claim becomes an  independent claim against a bank/financial institution. The defendant will

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then have to approach the civil court in respect of such excluded counter  claim as the Tribunal does not have jurisdiction to try any independent  claim against a bank/financial institution.  A defendant in an application,  having an independent claim against the Bank, cannot be compelled to  make his claim against the Bank only by way of a counter-claim. Nor can  his claim by way of independent suit in a court having jurisdiction, be  transferred to a Tribunal against his wishes.  

17.     In this case, the first respondent does not wish his case to be  transferred to the Tribunal.  It is, therefore, clear that the suit filed by the  first respondent against the Bank in the High Court for recovery of  damages, being an independent suit, and not a counter-claim made in the  application filed by the bank, the Bank’s application for transfer of the said  suit to the Tribunal was misconceived and not maintainable. The High  Court, where the suit for damages was filed by the company against the  bank, long prior to the bank filing an application before the tribunal against  the company, continues to have jurisdiction in regard to the suit and its  jurisdiction is not excluded or barred under Section 18 or any other  provision of Debts Recovery Act.  

Re : Question No. (iii) :

18.     Let us examine what happened in Abhijit (supra). A suit  (No.410/1985) filed by the Bank in the Calcutta High Court, was disposed  of in terms of an alleged compromise on 29.3.1984. The Tribunal was  established on 27.4.1994. Subsequently, the compromise decree was set  aside by a Division Bench on 11.8.1998 and the said suit stood restored to  file. The debtor company filed an application praying that the Bank’s suit  should be retained on the original side of the Calcutta High Court and  should not be transferred to the tribunal, as the said suit was "not pending"  on 27.4.1994 and therefore Section 31 of the Debts Recovery Act was not  attracted. A learned Single Judge of the Calcutta High Court accepted the  said contention and directed that the Bank’s suit should be retained and  proceeded with before the High Court. That order was challenged by the  Bank before this Court. Before this Court, the debtor company urged an  additional ground for seeking retention of the Bank’s suit in the High Court  by contending that the Bank’s suit was inextricably connected with a suit  filed by it against the Bank (Suit No. 272/1985) and therefore, the Bank’s  suit should not be transferred to the Tribunal. This Court formulated the  following four questions as arising for its consideration :  

"(1) Whether Suit No.410 of 1985 by the Bank which was disposed of by  judgment  dated 29.3.1994 and which judgment was set aside by the  Bench on 11.8.1998 and remanded to the Single Judge, could not be  treated as pending immediately before the commencement of the Act on  27.4.1994 (in West Bengal) and whether it could not be transferred to the  Recovery Tribunal ?

(2) What is the combined effect of Sections 18 and 31 and of the Act on  pending proceedings ?

(3) Whether the pendency of Suit No.272 of 1985 filed by the debtor  Company against the Bank for specific performance and for perpetual and  mandatory injunctions raising common issues between parties in both  these suits was a sufficient reason for retention of the Bank’s suit No.410  of 1985 on the original side of the High Court to be tried along with Suit  No.272 of 1985 filed by the debtor Company ?

(4) Whether Suit No.272 of 1985 filed by the debtor Company was, in  substance, one in the nature of a "counter-claim" against the Bank and was  one which also fell within the special Act by reason of Sections 19(8) to  (11) of the Act (as introduced by amending Act 1 of 2000) and if that be  so, whether it could still be successfully pleaded by the respondent  Company that the pendency of the Company’s Suit No.272 of 1985 was a

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ground for retention of the Bank’s Suit No.410 of 1985 on the original  side of the High Court ?"  

Though the questions raised were four, the issues were only two. The first  was whether suit disposed of on 29.3.1994 and restored on 11.8.1998 could  be deemed to be pending on 27.4.1994, when the Tribunal was established,  for purpose of Section 31. The second was, whether the Bank’s suit, even  though liable to be transferred to the Tribunal under section 31, could be  retained in the High Court on the ground that it was inextricably connected  with an earlier suit filed by the borrower against the Bank. The question  whether a suit filed by the borrower against a Bank in a civil court, could  be transferred to the Tribunal against his wishes, neither arose for decision  nor was considered or decided.  

19.     With reference to the first issue, this Court held that when the appeal  against the compromise decree dated 29.3.1984 was allowed and the  compromise decree was set aside, the suit stood restored and it should be  deemed to be pending from 29.3.1984 itself, and consequently, must be  deemed in the eye of law to be pending on 27.4.1994 when the Tribunal  was constituted at Calcutta, and Sections 18 and 31 of the Debts Recovery  Act would apply to the said suit. There is no dispute that the decision of  this Court on the first issue is the law declared by this Court.  

20.     The second issue, as noticed above, was whether the suit of the Bank  against the borrower should be retained in the High Court, merely because  the borrower’s suit was pending in the High Court. There was no  application or prayer for transfer of the borrower’s suit [OS No.272/1985]  to the Debts Recovery Tribunal. Neither the Bank nor the borrower had  sought transfer of the said suit from the High Court. In fact, before the  High Court, the borrower had not even contended that the Bank’s suit  should be retained in the High Court on the ground that it was inextricably  connected with its suit pending in the High Court. However, the borrower  raised an additional ground in support of its request for retention of the  Bank’s suit in the High Court, for the first time, in this Court by contending  that the subject matter of the Bank’s suit was inextricably connected with  the subject matter of its suit, and therefore, both should be tried together by  the High Court itself. The borrower submitted that as the borrower’s suit  could not be transferred to the Tribunal, having regard to Sections 17, 18  and 31 of the Debts Recovery Act, the Bank’s suit should also not be  transferred to the tribunal. This Court held that having regard to the  mandate contained in Section 31, it was not possible to retain the Bank’s  suit before the civil (High) Court on the ground that it was connected with  another suit filed against the Bank. This answered the second issue. But  this Court thereafter proceeded to consider as an incidental issue whether  the borrower’s suit could be transferred to the Tribunal as the borrower was  insisting that his suit and Bank’s suit should be tried together. It found a  solution by holding that the principle underlying sub-section (8) of Section  19 which enabled the defendant making a counter-claim in an application  filed by the Bank, can broadly be extended and applied to an independent  prior suit of the borrower by considering such suit as a counter-claim, so  that both could be transferred to the Tribunal, instead of transferring only  the Bank’s suit. This Court, however, held so only because of the following  circumstances :-

(i)     The borrower contended that its suit and the Bank’s suit  cannot be tried independently, as the subject-matter of its suit  and the Bank’s suit were inextricably connected;  

(ii)    the Bank also agreed that the borrower’s suit can be tried  along with its suit; and

(iii)   the court on examination found that the two suits were in fact  inextricably connected.

But the confusion is in regard to this ’incidental’ decision/observations

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made while deciding the second issue. While the Appellant contends that  the said incidental observations, made on an issue not arising for decision,  are also in the nature of law declared by this Court, the first Respondent  contends that they are merely observations made on the peculiar facts and  circumstances of that case, in exercise of the power under Article 142 to do  complete justice.

21.     The first Respondent drew our attention to the following  circumstances in support of its contention that the observations relating to  treating a borrower’s independent suit as a counter claim, was in exercise  of power under Article 142 :

(a)     Though there was no prayer for transfer of the borrower’s suit  to Tribunal at any stage, this Court held that borrower’s suit  should be transferred to the Tribunal.  (b)     The four questions that were formulated for consideration  (extracted above) clearly showed that the question as to  whether borrower’s suit should be transferred never arose for  consideration. In fact, no arguments were addressed by either  party on the question whether the borrower’s suit can be or  should be transferred to the Tribunal.  (c)     Sub-section (8) of Section 19 refers only to a counter-claim in  the Bank application, and does not contemplate a separate suit  filed against a Bank, being treated as a counter-claim.  

The first respondent also pointed out that this Court, in the operative  portion, only directly transfer of Bank’s suit, but not the borrower’s suit, to  the Tribunal. The first respondent also relied on the following observations/  directions in paras 42, 43, 44 and 45 of the judgment to demonstrate that  the decision was by exercising power under Article 142 :  

"Our decision in regard to the real nature of Suit No.272 of 1985 has  become necessary in the context of a plea by the debtor Company that  the Company’s Suit No.272 of 1985 is liable to be retained in the civil  court and on account of the plea that the connected suit by the Bank  Suit No.410 of 1985 is also to be retained.

We, therefore, direct the Bank’s Suit No.410 of 1985 to be transferred by  the Registrar, Calcutta High Court to the appropriate Tribunal under the  Act. So far as the debtor Company’s Suit No.272 of 1985 is concerned,  action has to be taken likewise by the Registrar in the light of our finding,  which finding has become necessary in view of the contention on  behalf of the debtor Company before us, as explained above.

The pendency of the Company’s Suit No. 272 of 1985 in the High Court is  no reason for keeping the Bank’s suit No. 410 of 1985 in the High Court.  Suit No. 410 of 1985 is liable to be transferred to the Tribunal.  Incidentally, we also hold that even Suit No. 272 of 1985 is to be tried  only by the Tribunal.  

The appeal is allowed. The order of the learned Single Judge is set aside  and Suit No. 410 of 1985 is directed to be transferred by the Registrar,  High Court to the Tribunal. In the light of our finding as to the real  nature of the Company’s Suit  No. 272 of 1985, it will be for the  Registrar of the High Court to pass appropriate orders. We hope that  appropriate orders will be passed in relation to suit no. 272 of 1985  expeditiously, at any rate, within one month from today."  

                               (Emphasis supplied)           It is further submitted that any direction issued in exercise of power under  Article 142 to do proper justice and the reasons, if any, given for exercising  such power, cannot be considered as law laid down by this Court under  Article 141. It is pointed out that other courts do not have the power similar  to that conferred on this Court under Article 142 and any attempt to follow

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the exercise of such power will lead to incongruous and disastrous results.  

23.     Though there appears to be some merit in the first Respondent’s  submission, we do not propose to examine that aspect. Suffice it to clarify  that the observations in Abhijit that an independent suit of a defendant (in  Bank’s application) can be deemed to be a counter claim and can be  transferred to the Tribunal, will apply only if the following conditions were  satisfied :-  (i)     The subject matter of Bank’s suit, and the suit of the defendant  against the Bank, should be inextricably connected in the  sense that decision in one would affect the decision in the  other.  

(ii)    Both parties (the plaintiff in the suit against the Bank and the  Bank) should agree for the independent suit being considered  as a counter-claim in Bank’s application before the Tribunal,  so that both can be heard and disposed of by the Tribunal.  

In short the decision in Abhijit is distinguishable both on facts and law.  

23.     One word before parting. Many a time, after declaring the law, this  Court in the operative part of the judgment, gives some directions which  may either relax the application of law or exempt the case on hand from the  rigour of the law in view of the peculiar facts or in view of the uncertainty  of law till then, to do complete justice. While doing so, normally it is not  stated that such direction/order is in exercise of power under Article 142. It  is not uncommon to find that courts have followed not the law declared, but  the exemption/relaxation made while moulding the relief in exercise of  power under Article 142. When the High Courts repeatedly follow a  direction issued under Article 142, by treating it as the law declared by this  Court, incongruously the exemption/relaxation granted under Article 142  becomes the law, though at variance with the law declared by this Court.  The courts should therefore be careful to ascertain and follow the ratio  decidendi, and not the relief given on the special facts, exercising power  under Art. 142. One solution to avoid such a situation is for this Court to  clarify that a particular direction or portion of the order is in exercise of  power under Art. 142. Be that as it may.

Conclusion

24.     In view of the above, we find that the order of the High Court does  not call for any interference. These appeals are accordingly dismissed. Parties  to bear their respective costs.