HDFC Bank Limited vs M/s. VKA Constructions & Ors.

Instant appeal is preferred against the order dated 18.05.2026 passed by the Learned DRT-II, Hyderabad, dismissing the O.A. 531 of 2024 (HDFC Bank -vs- Indian VKA Constructions & Others) whereby the Bank was directed to release the securities and other documents of payment of outstanding dues and costs title of Rs. 72,13,760.99/- by the defendants in the O.A.

As per pleadings of the parties O.A. No. 531 of 2024 [HDFC Bank -vs- Indian VKA Constructions & Others] filed by the bank for recovery of its dues against the defendants. Pending proceeding, bank was directed to place on record the outstanding dues and costs along with estimated costs. Bank along with statement of account filed a memo showing the outstanding dues as Rs. 70,33,760.99/- and estimated costs of Rs. 50,00,000/- subject to a condition that filing of the statement of account does not amount to consent for release of the securities by the bank. As per the master facility agreement, bank cannot release the securities until and unless the defendants withdraw the counterclaim in its entirety or till the counterclaim is adjudicated.

Learned DRT held that there is no dispute about the outstanding dues of Rs. 70,33,760.99/-. There is no dispute regarding costs accordingly, Learned DRT passed the impugned order directing the defendants to remit the amount of Rs. 70,33,760.99/- with cost of Rs. 1,80,000/- to the bank within two weeks with a further direction to the bank to release all securities, collateral securities, personal guarantees and title documents including issuance of necessary discharge and mortgage release documents, subject to the right of parties in respect of pending counterclaim. Learned DRT held that the counterclaim is an independent proceeding and merely pendency of the same does not entitle the bank to indefinitely retain the securities even after the receipt of the admitted dues. It would amount to an unjust enrichment. Further when the outstanding liability is not under dispute, there is no occasion for the bank to retain the securities waiting for the outcome of counterclaim filed by the defendants.

Learned Senior Advocate for the bank would submit that the impugned order cannot be sustained in the eyes of law. It is a jurisdictional issue wherein, if the securities are released pending counterclaim and if the counterclaim is decided against the bank, there would be no security with the bank to protect its interest. Learned Counsel would place reliance upon Section 19(6) and 19(7) of the Recovery of Debt and Bankruptcy (RDB) Act, 1993. It is submitted that only a plea of set-off can be made by the defendants, no counterclaim is maintainable under the Recovery of Debt and Bankruptcy Act, 1993. It is further submitted that the memo filed by the defendants was not in accordance with the provisions of Order XXIII of the Code of Civil Procedure, 1908. A compromise is to be filed in accordance with the provisions of Order XXIII of the Code of Civil Procedure, 1908 wherein as per the Order XXIII of the Code of Civil Procedure, 1908 adjustment should always be as a whole or in part but adjustment should be final in nature. Learned Counsel would further submit that the memo itself reflects contingent compromise which is not permissible. Learned Counsel has placed reliance upon [Pushpa Devi Bhagat(dead) through LR. Sadhna Rai (SMT) -vs- Rajinder Singh and others (2006) 5 SCC 566.]. Learned Senior Advocate vehemently argued that no doubt upon settlement of the amount due by the bank, securities can be released by the bank but in that case counterclaim cannot continue.

Learned Counsel for the Respondents would submit that the I.A. No. 2937 of 2025 was filed by the defendants before the Learned DRT seeking direction to the bank to retain only one property No. 7 of O.A. Schedule-B and release the other securities. Application was dismissed by Learned DRT holding that it is a prerogative of the secured creditor to decide as to from what secured assets, secured debts could be released. A review petition being I.A. No. 798 of 2026 is filed before the Learned DRT which is still pending. It is further submitted that pending review petition, the memo was filed for a direction to release all the securities as the demanded dues have already been paid to the bank. Reply to the same was filed by the bank. Thereafter, impugned order was passed. It is submitted that review petition is still pending. Provisions of Section 19(6) and Section 19(7) of the Recovery of Debt and Bankruptcy (RDB) Act, 1993 would not be applicable in this case, further, the provisions of Order XXIII of the Code of Civil Procedure, 1908 will also not apply. Counterclaim is filed by the respondents which is also pending. Hence, the impugned order was passed in accordance with law.

Hon'ble Apex Court in the case of Ashok Kumar Kalra -vs- Wing CDR Surendra Agnihotri & Others (2020) 2 SCC 394 has placed reliance upon Order 8 Rule 6A C.P.C. which reads as under:

It is held by the Hon'ble Apex Court in Ashok Kumar Kalra (supra) that the counter claim shall be treated as a plaint and governed by the rules applicable to plaints. Hon'ble Apex Court held in paragraph 17 that :

Further it was held by the Hon'ble Apex Court in paragraph 21 that :

Hon'ble Apex Court has specifically held that the rules of plaint would be applicable to the counter-claim as counter-claim is treated to be a plaint. Generally, all the rules of the plaint must be complied with. Limitation is provided under the Limitation Act of 1963 as the time barred suits cannot be entertained under the guise of counter-claim just because of the fact that cause of action arose as per the parameters of the Order 8 Rule 6A of the C.P.C., 1908.

Undisputedly, outstanding amount of the defendant as on date 05.04.2026 is Rs. 70,02,756.71ps. A Cost of Rs. 1,80,000/- was also added by the Learned DRT totaling Rs. 72,13,760.99/-. This outstanding amount was directed to be paid to the bank, by the Learned DRT in the objections filed before the Learned DRT. Only issue raised was that since the counterclaim is pending, the total obligations are not yet determined because the bank is incurring legal costs to defend the counterclaim and the security also covers these unliquidated legal costs. Appellants have placed reliance upon Section 19(6) and Section 19(7) of the Recovery of Debt and Bankruptcy Act, 1993 which reads as under:

Admittedly, the defendants filed the counterclaim. They did not set any set-off in their written statements. The provisions of Section 19(6) of the Act related to set-off while Section 19(7) of the RDB Act, 1993 relates to counterclaim. The counterclaim shall have the effect of a civil suit, accordingly, even if the original application is disposed of by the Learned DRT, counterclaim can proceed as an independent proceeding as the same shall have the effect of cross suit as per the provisions of Section 19(9) of the RDB Act.

Settlement of original application does not debar the counterclaim to be proceeded upon. Further even if the counter claim is disposed of or dismissed, bank would be at liberty to realise its cost of litigation from the borrower, subject to some indemnity bond to be filed by the borrower, but when the borrower has already paid the demanded dues along with the charges and costs as imposed by the Learned DRT, mere pendency of the counterclaim does not entitle the bank to retain the security documents. Reliance is placed upon the judgment of Pushpa Devi Bhagat (Supra) which relates to the provisions of Order XXIII Code of Civil Procedure. In the present case, since undisputedly, demanded dues have been paid by the borrower to the bank which fact even was not disputed or denied in the objection filed before the Learned DRT, hence, it was not a case wherein parties arrived at a compromise in the O.A. rather as per the demand of the bank, borrower paid the demanded dues, thereafter, he is seeking for release of the security documents. Hence, the case law of Pushpa Devi Bhagat (Supra) would not be applicable to the facts of the present case.

In the restructure master facility agreement, there is a clause 7 of the indemnity which can be put to service for any legal cost, if any, be incurred by the bank, but in no case the bank would be entitled to retain the documents of security after depositing all the demanded dues.

Accordingly, we are of the considered view that Learned DRT has rightly directed the bank and rightly passed the impugned order which does not require any interference. Appeal lacks merit and is liable to be dismissed.

Appeal is dismissed. Judgment and order dated 18.05.2026 passed by Learned DRT-II Hyderabad in O.A. No. 531 of 2024 (HDFC bank -vs- VKA Constructions & Others) is confirmed. However, all the documents as per orders of the Learned DRT, be released after respondents files an indemnity bond for Rs. 5 Lacs, in respect of cost, if any of counterclaim, to the satisfaction of Learned Presiding Officer, DRT-II Hyderabad.

File be consigned to Record room.

Copy of the Judgment/Final Order be uploaded in the Tribunal's Website.

Order signed, dated and pronounced in open Court.