Supreme Court of India · 18 April 2006
Indian Bank v. ABS Marine Products (P) Ltd
(2006) 5 SCC 72
Court
Supreme Court of India
Bench
Division Bench
Date
18 April 2006
Citation
(2006) 5 SCC 72
Background & Facts
ABS Marine Products (P) Ltd, a borrower, instituted an independent civil suit against Indian Bank claiming damages, alleging that the bank had failed to disburse or release credit facilities it had sanctioned. Separately, the bank had its own proceeding pending before the Debts Recovery Tribunal (DRT) to recover the dues owed to it. The bank applied to have the borrower's civil suit transferred to the DRT so that both matters could be decided together, contending that the suit was inextricably connected with its pending Original Application (OA).
The borrower resisted the transfer. The dispute therefore was not about the quantum of recovery or interest at all — it was about whether a suit filed by the borrower against the bank falls within the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the RDB / RDDB Act), and whether such a suit can be shifted out of the ordinary civil court and into the DRT against the borrower's wishes.
The Supreme Court (per R.V. Raveendran, J.) examined the scheme of the RDB Act — in particular the Tribunal's jurisdiction and the bar in Sections 17 and 18, the counter-claim and set-off mechanism in Section 19, and the transfer provision in Section 31 — alongside Section 24 of the Code of Civil Procedure (CPC) dealing with the power of transfer.
Key Issues Before the Court
Holdings of the Court
Holding 1 — A Borrower's Suit Is Not an RDB Act Claim
The Supreme Court held that an independent civil suit filed by a borrower against a bank — here, a suit for damages for non-disbursal / non-release of sanctioned loan facilities — is not a "claim for recovery of a debt due to a bank or financial institution". It therefore does not attract the RDB Act, 1993. The Act's jurisdiction and the bar in Sections 17 and 18 are directed at applications made by banks and financial institutions to recover their debts; they do not capture a suit brought by the borrower.
Holding 2 — No Transfer to the DRT Without the Borrower's Consent
Such a suit cannot be transferred to the DRT without the borrower's consent, even if it is inextricably connected with the bank's pending Original Application. The borrower has a right to have its own suit tried by the ordinary civil court. The connection between the two proceedings does not, by itself, justify moving the borrower's suit into a forum created for the banks' recovery claims.
Holding 3 — The RDB Bar and Section 19 Operate on Banks' Applications
The bar in the RDB Act and the counter-claim / set-off mechanism under Section 19(6)–(11) operate on applications made by banks, not on independent suits brought by borrowers. A borrower with a grievance against the bank is not compelled to convert that grievance into a counter-claim before the DRT; the borrower may pursue its own civil suit. Section 31 governs the transfer to the DRT of suits and proceedings that were pending and that had been filed by the banks.
Later Clarification — A DRT Is Not a "Civil Court" for Transfer
This position was affirmed in Nahar Industrial Enterprises Ltd v. Hongkong & Shanghai Banking Corpn, (2009) 8 SCC 646, which went further and held that a civil suit cannot be transferred to a DRT at all, because a DRT is not a "civil court" for the purpose of transfer under Section 24 of the CPC. The two decisions together place borrowers' independent suits squarely outside the DRT's transfer reach.
Practical Implications
The decision draws a clear line between the two directions of litigation in banking disputes. A bank's recovery proceeding belongs before the DRT; a borrower's independent grievance against the bank — for example, a claim for damages arising from the bank's own conduct — remains a matter for the ordinary civil court unless the borrower consents to the DRT deciding it. Banks cannot use the connection between the proceedings to compel a borrower's suit into the Tribunal.
For lenders, the practical takeaway is that a borrower's counter-narrative cannot be neutralised simply by seeking a transfer; the bank must either contest the civil suit on its merits in the civil court or persuade the borrower to consolidate. For borrowers, the case confirms a meaningful procedural right: a genuine, independent claim against the bank can be litigated before the civil court rather than the recovery-focused forum of the DRT. The framing of the original suit — whether it is truly an independent claim or merely a defensive device against recovery — is therefore decisive, and is a matter requiring careful, case-specific advice.
Relevant Statutory Provisions
Practical Application Note
Whether a borrower's suit against a bank can be kept in the civil court — or whether a bank can resist a transfer it does not want — turns on how the suit is framed and on the facts of each matter. The points above are general legal information about Indian Bank v. ABS Marine Products and are not legal advice. Our partner-led team advises banks, NBFCs, ARCs and borrowers on DRT proceedings, jurisdiction and transfer questions under the RDB Act and the CPC. For advice on a specific matter, speak with our advocates.