State Bank Of India vs Anita Garg And Ors.

The appellant bank had filed Original Application(O.A.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 against the respondents herein for recovery of public money to the tune of Rs. 306,86,742.44. In that O.A. a counter claim for recovery of Rs. 747 crores was filed by the defendants except the principal borrower Company. The applicant bank filed an application under Order VII Rule 11 of the Code of Civil Procedure(C.P.C.) for the rejection of the counter claim. The learned Tribunak below(DRT) however vide impugned order kept that application pending to be decided at the time of final disposal of the bank's O.A. even after observing that the O.A. was at the initial stage when the bank had moved the application under Order VII Rule 11 CPC.

Feeling aggrieved, the bank has filed the present appeal and after giving my thoughtful consideration to the grievance of the bank, submissions made at the bar and going through the material on record I have unhesitatingly come to the conclusion that the decision of the learned DRT in keeping the application under Order VII Rule 11 CPC for the rejection of the counter claim of the respondents-defendants pending for being decided when the matter will be disposed of finally is in the teeth of the decision of the Hon'ble Supreme Court in the case of "R.K.Roja vs U.S. Rayudu and Ors.", reported in (2016) 14 SCC 275. In this judgment the Hon'ble Supreme had held that if an application is filed under Order VII Rule 11 CPC the same cannot be kept pending till the end of the trial. The relevany paragraphs from this judgment are re-produced below:-

"On receipt of notice in the Election Petition, the appellant filed Annexure- P/4-application for rejection of the Petition,under Order VII Rule 11 of the CPC by way of a counter affidavit. It appears that the court declined to consider the same on the ground that there was no formal application and hence proceeded with the trial. At that stage, appellant filed Annexure-P/5-formal application for rejection of the Election Petition on the ground that the Election Petition did not disclose any cause of action. That application as per the impugned order dated 27.04.2016 was posted along with the main petition, and thus, the appeal. The High Court has taken the view that the same "was not filed at the earliest opportunity" and that appellant was not diligent in prosecuting the application. Therefore, the court took the view that ... "this application filed by the first respondent shall be decided at the time of final hearing ...". We are afraid that the stand taken by the High Court in the impugned order cannot be appreciated. An application under Order VII Rule 11 of the CPC can be filed at any stage, as held by this Court in Sopan Sukhdeo Sable and others v. Assistant Charity Commissioner and others[1] ... "The trial court can exercise the power at any stage of the suit - before registering the plaint or after issuing summons to the defendant at any time before the conclusion of the trial. ...". The only restriction is that the consideration of the application for rejection should not be on the basis of the allegations made by the defendant in his written statement or on the basis of the allegations in the application for rejection of the plaint. The court has to consider only the plaint as a whole, and in case, the entire plaint comes under the situations covered by Order VII Rule 11 (a) to (f) of the CPC, the same has to be rejected. Once an application is filed under Order VII Rule 11 of the CPC, the court has to dispose of the same before proceeding with the trial. There is no point or sense in proceeding with the trial of the case, in case the plaint (Election Petition in the present case) is only to be rejected at the threshold. Therefore, the defendant is entitled to file the application for rejection before filing his written statement. In case, the application is rejected, the defendant is entitled to file his written statement thereafter (See Saleem Bhai and others v. State of Maharashtra and others[2]). But once an application for rejection is filed, the court has to dispose of the same before proceeding with the trial court. To quote relevant portion from paragraph-20 of Sopan Sukhdeo Sable case (supra):

"20. ... Rule 11 of Order 7 lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement.

Instead, the word "shall" is used, clearly implying thereby that it casts a duty on the court to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11, even without intervention of the defendant. ..."

In Saleem Bhai case (supra), this Court has also held that ... "A direction to file the written statement without deciding the application under Order VII Rule 11 cannot but be a procedural irregularity touching the exercise of jurisdiction of the trial court."

In the present case the learned DRT made the following observations in para no.9 of the impugned order:-

"9. Since the O.A. is at the threshold and defendants 2 & 3 (deceased) gave their guarantees and executed the requisite Guarantee Agreements and now LRs of D-3 inherited the assets of late D-3, hence D-3 to 6 are also liable to pay the outstanding amount of OA to the applicant bank to the extent of assets inherited by them. Further, counter claimants in the instant case are guarantors/security providers and are not the borrower, which has filed a separate counter claim, in any case. Now the question is whether the defendants are liable under the guarantees is a question of facts which is to be decided after both the parties adduced their evidence and at the time of final arguments. Accordingly, the IA is disposed off."

The decision of the learned DRT not to dispose of the application under Order VII Rule 11 CPC till the stage of final arguments in the case is thus contrary to the aforesaid judgment of the Hon'ble Supreme Court and so cannot be sustained. After giving my thoughtful consideration to the rival submissions and in view of the said judgment of the Hon'ble Supreme Court I have come to the conclusion that the matter is to be sent back to DRT for disposal of the application of the appellant-defendant in the Counter Claim under Order VII Rule 11 CPC before proceeding further with the counter claim of the defendants.

Learned counsel for the respondents though supported the impugned order but his opposition is of no value in view of the said decision of the Apex Court which is binding on everyone.

This appeal is accordingly allowed and the impugned decision of the learned DRT that application filed by the bank for rejection of the counter claim under Order VII Rule 11 CPC will be decided alongwith the main case is set aside. The learned DRT shall now decide the said application of the bank before proceeding further with the Counter Claim. For that purpose the DRT shall now take up the application of the bank under Order VII Rule 11 CPC on 26.04.2021 at 2 p.m. for 'directions' and the application shall be decided within two weeks since for deciding that application no evidence is required to be examined.