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Bar under Sec 17 & 18 of RDDB Act only applies to Banks and Financial Institutions

In Amrit Jal Ventures Vs. SREI Infrastructure Finance, the Hon'ble Calcutta High Court while allowing the borrowers application for proceeding under Arbitration Act held that In Indian Bank (supra) the Hon’ble Division Bench considered Sections 31, 17, 18 19(6) to (11) of the RDB Act, 1993 and held that it would be evident from Sections 17 and 18 of the RDB Act that civil courts jurisdiction is barred only in regard to the application filed 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 person against a bank for any other relief.

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.

Sections 19(6) to (11) (as introduced by Act 1 of 2000), are merely enabling provisions. Significantly, 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 had been made was to enable the defendants to claim set-off or make a counterclaim as provided in Sections 19(6) to 19(8) in applications already filed by the banks or financial institutions for recovery of the amounts due to them.

Making a counterclaim in the bank’s application before the Tribunal is not the only remedy, but an option available to the defendant borrower. 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 counterclaim is made, has the option to apply to the Tribunal to exclude the counterclaim of the defendant while considering its application. 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 counterclaim. Nor can his claim by way of independent suit in a court having jurisdiction, be transferred to a tribunal against his wishes.

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