State Bank Of India vs Ranjan Chemicals Ltd. And Anr - In United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. and Ors., [2000] 7 SCC 357, this Court interpreted the expression counter claim in sub Sections 8 to 11 of Section 19 as including even a claim made in an independent suit and a claim for damages based on the same transaction as being broadly a plea of set off falling under sub Sections 6 and 7 of Section 19 of the Act.

 Supreme Court (2006.10.11) in State Bank Of India vs Ranjan Chemicals Ltd. And Anr [Appeal (civil) 4443 of 2006] held that;

• It is clear from sub sections 6 to 11 of Section 19 of the Act that the Recovery Tribunal has the jurisdiction to entertain a claim of set off or a counter claim arising out of the same cause of action and has also the power to treat the counter claim as a cross suit. Therefore, if the claim of the company in the suit partakes the character of a cross action founded on the same cause of action, the same could be tried by the Debt Recovery Tribunal. 

• In United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. and Ors., [2000] 7 SCC 357, this Court interpreted the expression counter claim in sub Sections 8 to 11 of Section 19 as including even a claim made in an independent suit and a claim for damages based on the same transaction as being broadly a plea of set off falling under sub Sections 6 and 7 of Section 19 of the Act. 

Excerpts of the Order;    

1. Leave granted.

# 2. This appeal is filed by the State Bank of India (hereinafter referred to as the `bank') challenging the order of the High Court of Patna affirming an order of Subordinate Judge- I, Patna in Suit No. 168 of 2001 refusing to transfer the suit for being tried jointly with O.A. No. 18 of 2002 filed by the bank before the Debt Recovery Tribunal, Patna. The bank sought the transfer on the basis that the suit was in the nature of a counter claim to its claim and arose out of the same cause of action as the one put in suit by the bank before the Tribunal. The bank originally granted a term loan to M/s. Ranjan Chemicals Ltd. (hereinafter referred to as the `company') of Rs.30 lakhs. The bank further extended a cash credit facility to the company. The company failed to meet its obligations under the account. Thereupon the bank issued a notice calling upon the company to repay the amounts due under the loan transactions and to close its accounts. On receipt of that notice, the company filed a suit before the Court of Subordinate Judge -I, of Patna as Suit No. 168 of 2001 claiming that the bank had failed to fulfil its obligations while making available the cash credit facility and has not honoured its commitments in time to release the working capital which was agreed to as part of a rehabilitation process of the company and because of the delay on the part of the bank in fulfilling its obligations, the company had suffered losses leading to the Board of Industrial and Financial Reconstruction, recommending its winding up and in view of the fact that the losses were incurred because of the failure of the bank to fulfil its obligations, the company was entitled to recover a sum of Rs. 1739.15 lacs as damages with interest thereon. The bank in its turn approached the Debt Recovery Tribunal constituted under The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 by way of O.A. No. 18 of 2002 filed under Section 19(1) of that Act.

# 3. In the suit, the bank moved an application praying that the said suit be transferred to the Debt Recovery Tribunal for being tried jointly with O.A. No. 18 of 2002 pending before the Tribunal, since both proceedings arose out of the same cause of action, namely, the grant of a loan and the providing of a cash credit facility by the bank to the company and that the suit by the company was really in the nature of a counter claim or set off, as against the claim of the bank for recovery of a sum of Rs. 833.06 lakhs on the loan account. The prayer of the bank was resisted by the company contending that the cause of action for its suit was different from the cause of action put in action by the bank in the Recovery Tribunal, that the suit for damages was not in the nature of a counter claim or set off, but that it was an independent action that the Civil Court alone had jurisdiction to try and that the transfer prayed for was not liable to be granted. The Trial Court took the view that the suit filed by the company did not come with the purview of Section 19(9) of the Recovery of Debts Act and it could not be treated as a counter claim in O.A. No. 18 of 2002 and hence the prayer was liable to be rejected. On a challenge by the bank of the above said order before the High Court of Patna, that Court held that there was no bar created by the Recovery of Debts Act or any other law, which could prevent a person from filing a suit in the civil Court or making any claim, much less, one for damages which was even otherwise, completely alien to the claim based on the loan made by the bank before the Tribunal. Since the suit was not thit by Section 18 of the Recovery of Debts Act, the jurisdiction of the civil Court was not affected and the Court had full authority to proceed with the suit for damages which was filed earlier and which was unconnected with the loan transaction. The Revision was thus dismissed. This order is challenged in this appeal.

# 4. It appears to us that the High Court and the Trial Court asked themselves the wrong question. The question was not whether the civil Court had jurisdiction to entertain the suit or to continue with the suit. The question was whether in the nature of the respective claims arising out of the loan transaction, it was just and proper to order a joint trial of the two causes and whether there was anything in the Recovery of Debts Act which prevented the Debt Recovery Tribunal from entertaining the claim made by the plaintiff in the suit. A question of joint trial arises when the rival parties file independent actions but'. based on the same cause of action; for enforcement of rights or obligations springing out of that cause of action. Here, the bank had approached the Recovery Tribunal for recovery of amounts paid on the basis of the loan transaction and the cash credit facility extended to the company. The company had gone to the Civil Court claiming that it had suffered damages because the bank had failed to fulfil its obligations based on the cash credit facilities and the rehabilitation package extended to it. The question, therefore, was whether it could be said that both claims arose out of the same cause of action giving rise to different rights of action. The elements of a cause of action are: first, the breach of duty owing by one person to another and; second, the damage resulting to the other from the breach, or the fact of combination of facts which gives rise to a right to sue. Viewed thus, it cannot but be said that both claims have arisen out of the same transaction or out of the same relationship that came into existence between the bank and the company and the alleged breach of obligations by one or the other. We have, therefore, no hesitation in holding that the two actions have sprung out of the same cause of action.

# 5. Then the question is whether the cause of action put in suit by the company could be considered to be one in the nature of a set off or a counter claim within the meaning of Section 19 of the Recovery of Debts Act. It is clear from sub sections 6 to 11 of Section 19 of the Act that the Recovery Tribunal has the jurisdiction to entertain a claim of set off or a counter claim arising out of the same cause of action and has also the power to treat the counter claim as a cross suit. Therefore, if the claim of the company in the suit partakes the character of a cross action founded on the same cause of action, the same could be tried by the Debt Recovery Tribunal. In United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd. and Ors., [2000] 7 SCC 357, this Court interpreted the expression counter claim in sub Sections 8 to 11 of Section 19 as including even a claim made in an independent suit and a claim for damages based on the same transaction as being broadly a plea of set off falling under sub Sections 6 and 7 of Section 19 of the Act. With respect, we see no reason to differ from the reasoning and conclusion therein in that regard. It is therefore clear that the claim made by the company in the suit filed by it could be considered as a claim for set off and/or as a counter claim within the meaning of Section 19 of the Act.

# 6. Even otherwise, after the amendment of Order VIII Rule 6A of the Code of Civil Procedure by Act 104 of 1976, for maintaining a counter-claim, the cross action need not even arise out of the same cause of action or be intrinsically connected with the cause of action sued upon. Any right or claim in respect of a cause of action accruing to the defendant against the plaintiff can be made the subject matter of a counter-claim. Section 19(8) of the Act is also on the same lines. Therefore, there can be no objection to treating a claim in favour of the Company arising out of the Loan transaction and/or rehabilitation package as a counter-claim in the application filed by the Bank before the Debt Recovery Tribunal.

# 7. Learned Senior Counsel for the company, relied on the decision in Indian Bank v. ABS Marine Products (P) Ltd., [2006] 5 SCC 72 in support of the preposition that the Civil Court continued to have jurisdiction to try the suit filed by the company and it could not be said that the subject matter of the bank's claim before; the Recovery Tribunal and the suit filed by the company against the bank are inextricably connected, in that the decision in one, would affect the decision in the other. He also urged that unless both the parties agreed for the independent suit being considered as a counter claim in the-bank's application before the Tribunal, the suit could not be transferred to the Tribunal. Counsel particularly relied upon the discussion in paragraph 9 of the judgment suggesting that when the claim of the bank was for an ascertained sum due from the borrower and the claim of the borrower was for damages, it could not be said that there was any connection between the subject matter of the two actions and that a decision in one would depend on the other. Nor could there be any apprehension of different and inconsistent results if the application and the suit are tried and decided separately by different fora.

# 8. Their Lordships have held that the subject matter of the suit and the proceeding before the Tribunal were in no way connected, but it appears to us that the two litigations arise out of the same transaction or series of transactions between the Bank and the Company. Even if, as observed by their Lordships, a counter claim in the application by the Bank before the Tribunal was not the only remedy available to the Company but an option was available to the Company to sue, and the Company has exercised that option by filing a suit, it does not in any manner affect the power of the Court to order a joint trial of the application and the suit in the Debt Recovery Tribunal provided the Debt Recovery Tribunal has jurisdiction to entertain the action of the Company. What is relevant to note is that the claim of the Company in the suit could have been maintained as a counter-claim in the application of the bank, even if it did not arise out of the same cause of action. There is no warrant for curtailing the power of the Court to order joint trial by introducing a restriction to the effect that a joint trial can be ordered only if there was consent by both sides. The power inherent in the Court on well accepted principles to order a joint trial, does not depend upon the volition of the parties but it depends upon the convenience of trial, saving of time and expenses and the avoidance of duplicating at least a part of the evidence leading to saving of time and money.

# 9. On going through the application filed by the bank and the plaint filed by the company in the present case, we find that both causes of action arise out of a cash credit facility extended by the bank to the company and while the claim by the bank is for recovery of amounts due under that account, the suit of the company is for recovery of compensation based on the alleged failure of the bank to fulfil its obligations under the cash credit facility in time and in a meaningful manner. Obviously, if the company is able to establish its claim, the amount that may be awarded to it by way of damages has necessarily to be set off against any amount that may be found due to the bank on the basis of the loan transaction including the cash credit facility extended by it to the company. The decree to the one or the other would depend upon an ascertainment of the rights and obligations arising out of the loan transaction and the state of the loan account. We are therefore of the view that the two claims are inextricably inter linked. The consequences arising out of the respective claims are referable to the cause of action arising out of the vary transactions between the bank and the company. We have already indicated that the claim of the company is in essence a claim for set off and/or a counter claim, which could be tried by the Debt Recovery Tribunal in view of the amended Section 19 of the Act.

# 10. A joint trial can be ordered by the court if it appears to it that some common question of law or fact arises in both proceedings or that the right to relief claimed in them are in respect of or arise out of the same transaction or series of transactions or that for some other reason it is desirable to make an order for joint trial. Where the plaintiff in one action is the same person as the defendant in another action, if one action can be ordered to stand as a counter claim in the consolidated action, a joint trial can be ordered. An order for joint trial is considered to be useful in that, it will save the expenses of two attendance by counsel and witnesses and the trial judge will be enabled to try the two actions at the same time and take common evidence in respect of both the claims. If therefore `the claim made by the Company can be tried as a counter claim by the Debt Recovery Tribunal, the Court can order joint trial on the basis of the above considerations. It does not appear to be necessary that all the questions or issues that arise should be common to both actions before a joint trial can be ordered. It will be sufficient if some of the issues are common and some of the evidence to be let in is also common, especially when the two actions arise out of the same transaction or series of transactions.

# 11. A joint trial is ordered when a Court finds that the ordering of such a trial, would avoid separate overlapping evidence being taken in the two causes put in suit and it will be more convenient to try them together in the interests of the parties and in the interests of an effective trial of the causes. This power inheres in the Court as an inherent power. It is not possible to accept the argument that every time the Court transfers a suit to another court or orders a joint trial, it has to have the consent of the parties. A Court has the power in an appropriate case to transfer a suit for being tried with another if the circumstances warranted and justified it. In the light of our conclusion that the claim of the company in the suit could be considered to be a claim for set off and a counter claim within the meaning of Section 19 of the Act, the only question is whether in the interests of justice, convenience of parties and avoidance of multiplicity of proceedings, the suit should be transferred to the Debt Recovery Tribunal for being tried jointly with the application filed by the bank as a cross suit. Obviously, the proceedings before the Debt Recovery Tribunal could not be transferred to the civil Court since that is a proceeding before a Tribunal specially constituted by the Act and the same has to be tried only in the manner provided by that Act and by the Tribunal created by that Act. Therefore, the only other alternative would be to transfer the suit to the Tribunal in case that is found warranted or justified.

# 12. It is clear that in both proceedings what are involved are, the nature of the loan transaction and the cash credit facility extended, the relationship that has spring out of the transactions, the right and obligations arising out of them, their breach if any, who is responsible for the breach and its extent. The same basic evidence will have to be taken in both the proceedings. The accounts of the bank will have to be scrutinized not only to ascertain the sum, if any, due to the bank but also to ascertain as to when and in what manner the cash credit facility was permitted to be availed of by the company. Of course, evidence will have to be taken on whether there was any violation of conditions or laches on the part of the bank in fulfilling its obligations causing damage to the company. At least a part of the evidence will be common. Duplication of evidence could be avoided if the two actions are tried together. If a decree is granted to the bank on the basis of its accounts, and the damages, if any, is decreed in favour of the company, a set off could be directed and an ultimate order or decree passed in favour of the bank or the company. In such a situation, we are of the view that this is a fit case where the two actions should be ordered to be tried together.

# 13. In this view, we are satisfied that the trial court and the High Court have failed to exercise the jurisdiction vested in them by law in refusing to transfer the suit to the Debt Recovery Tribunal, Patna. They have not considered the question whether it will be fit and proper to order a joint trial of the two actions. We find that it is not only fit and proper but also just and necessary to have the two causes tried together. Hence, we allow this appeal and setting aside the order of the High Court and that of the trial Court, transfer Money Suit No. 168 of 2001 from the file of Subordinate Judge -I, Patna to the Debt Recovery Tribunal, Patna for being treated as a counter-claim by way of a cross suit and for being jointly tried and disposed of with OA No. 18 of 2002 pending on its file.

# 14. In the circumstances, we direct the parties to suffer their respective costs.

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M/s Durga Hotel Complex vs Reserve Bank Of India & Ors - The expression 'counter-claim' in sub-Sections (8) to (11) of Section 19 of the Recovery of Debts Act will take in even a claim for damages based on the same transaction and would include even an independent claim the respondent before the Debts Recovery Tribunal may have against the claimant Financial Institution.

 Supreme Court (2007.03.15) M/s Durga Hotel Complex vs Reserve Bank Of India & Ors [Appeal (civil) 1389 of 2007] held that;

• The expression 'counter-claim' in sub-Sections (8) to (11) of Section 19 of the Recovery of Debts Act will take in even a claim for damages based on the same transaction and would include even an independent claim the respondent before the Debts Recovery Tribunal may have against the claimant  Financial Institution.

• It has thus been held that a counter- claim in a wide sense will lie before the Debts Recovery Tribunal and the respondent will be entitled to raise a comprehensive counter-claim.

Excerpts of the Order;    

Leave granted.

# 1. The appellant, a partnership firm, sought a loan from the third respondent  Bank for putting up a hotel. In April 1997, a loan of Rs. 15 lakhs was sanctioned by the Bank. The Bank disbursed a sum of Rs. 11,58,750/-. The appellant sought an additional advance. The proposal in that behalf was not accepted by the Bank. The Bank recalled the loan after crediting Rs. 3,41,250/- out of the original loan sanctioned.

# 2. The appellant made a complaint before the Banking Ombudsman for the State of Bihar at Patna under clause 16 of the Banking Ombudsman Scheme, 1995. Clause 16 enabled any person, who had a grievance against the Bank, to make a complaint in writing to the Banking Ombudsman. The complaint had to be in writing and it had to be accompanied by supporting documents, if any, relied on by the complainant. It had also to set out the nature and extent of the loss caused to the complainant and the relief sought from the Banking Ombudsman and a statement about the compliance of the conditions referred to in that clause. The appellant made the complaint about what it called the unauthorised or fraudulent withdrawal from the account of the appellant and the non credit of proceeds to the account of the appellant. It was contended that the crediting of Rs. 3,41,250/- or withdrawal thereof from the account of the appellant was unauthorised, and that the appellant had suffered considerable loss because of the delay on the part of the respondent  Bank in advancing the loan and in not permitting the higher credit facility recommended in the Technical Cell Report binding on the Bank. By way of relief it was claimed that the Bank should further credit the remaining sanctioned loan to the account of the appellant. The total interest for the period should be exempted and there should be a direction to pay towards loss of the appellant a sum of Rs. 16.9 lakhs. The respondent  Bank opposed the complaint. The respondent  Bank questioned the jurisdiction of the Banking Ombudsman to entertain such a complaint. It contended that the jurisdiction of the Banking Ombudsman was confined to certain matters specified in that behalf and the claims of the appellant were not within the purview of the Banking Ombudsman.

# 3. On 1.11.2000, the respondent  Bank approached the Debts Recovery Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, "the Recovery of Debts Act") for recovery of amounts alleged to be due from the appellant. The complaint of the Bank was numbered as O.A. No. 157 of 2000 and was being dealt with by the Tribunal.

# 4. Before the Banking Ombudsman, the Bank, inter alia, contended that the complaint of the appellant before him had ceased to be maintainable in view of the pendency of the proceedings before the Debts Recovery Tribunal and that, even otherwise, the claims raised by the appellant did not come within the purview of the Banking Ombudsman under the Banking Ombudsman Scheme, 1995. It was contended that the jurisdiction of the Banking Ombudsman was a limited one and the claims of the appellant were not those that could be entertained by him. The Banking Ombudsman brushed aside these contentions. He found that his jurisdiction was invoked by the appellant before the respondent  Bank approached the Debts Recovery Tribunal with its claim and hence he was not precluded from adjudicating on the complaint of the appellant before him. He also brushed aside the objection of the respondent regarding his jurisdiction to entertain the complaint made by the appellant. The Banking Ombudsman is seen to have made some suggestions or recommendations to settle the dispute between the parties. They were not acceptable to the Bank. The Banking Ombudsman thereupon proceeded to pass an award directing disbursal of the sum of Rs. 3,41,250/- to the complainant and directing the Bank to make further advances in terms of the recommendations of the concerned Cell of the State Bank of India maintaining financing ratio of 75:25 between the Bank and the complainant. The Banking Ombudsman further directed that the period of repayment should be fixed as seven years exclusive of one year of moratorium and in view of non- disbursement of the loan, the period of moratorium had to be enhanced according to the Rules and the interest be charged strictly in accordance with the guidelines of the Reserve Bank of India. This award was passed on 30.3.2002.

# 5. The respondent  Bank sought the permission of the Reserve Bank of India to challenge the award passed by the Banking Ombudsman in a court of law. Meanwhile, the appellant found that the respondent  Bank was not complying with the directions in the award of the Banking Ombudsman. The appellant therefore filed C.W.J.C. No. 10756 of 2002 before the High Court of Patna under Article 226 of the Constitution of India praying for the issue of a writ of mandamus directing the respondent  Bank to implement the award of the Banking Ombudsman. The respondent  Bank, in its turn, filed C.W.J.C. 1882 of 2003 challenging the award of the Banking Ombudsman essentially on the ground that it was one without jurisdiction, both on the basis that the matter was pending before the Debts Recovery Tribunal when he rendered his award and on the further ground that the subject matter of adjudication by him in the present case was beyond his ken under the Banking Ombudsman Scheme, 1995. The learned single judge of the High Court upheld the contentions of the respondent  Bank and held that on the claim being filed by the respondent  Bank before the Debts Recovery Tribunal as O.A. No. 157 of 2000, the jurisdiction of the Banking Ombudsman to deal with the complaint of the appellant had come to an end and on the further ground that the Banking Ombudsman had exceeded his jurisdiction in rendering the award since the disputes raised were beyond his purview. As a consequence, the learned single judge allowed the Writ Petition filed by the respondent  Bank and quashed the award passed by the Banking Ombudsman leaving the appellant to raise all his claims before the Debts Recovery Tribunal, by way of a counter-claim. Resultantly, the High Court also dismissed the Writ Petition of the appellant seeking enforcement of the award of the Banking Ombudsman. Being aggrieved by the decision of the learned single judge, the appellant filed two Letters Patent Appeals in the High Court as L.P.A. Nos. 309 and 313 of 2004. The Division Bench of the High Court agreed with the conclusions of the learned single judge and dismissed the appeals filed by the appellant. Feeling aggrieved thereby, the appellant filed these Petitions for Special Leave to Appeal before this Court. On 10.5.2005, this Court while not entertaining the Petition of the appellant on the merits of its claim, issued notice confined to the questions of law arising in the case, clarifying at the same time that the proceedings before the Debts Recovery Tribunal could proceed. Thus, what is involved in this appeal is only the question of the jurisdiction of the Banking Ombudsman and not the merits of the claims of the appellant in the case on hand. Learned counsel also argued the appeal before us consistent with the notice issued by this Court earlier.

# 6. Therefore, the two questions that arise are, whether the subsequent filing of the claim by the Bank before the Debts Recovery Tribunal would oust the jurisdiction of the Banking Ombudsman in a complaint earlier instituted before him and whether the claims put forward before the Banking Ombudsman in its complaint by the appellant fell within the jurisdiction of the Ombudsman under the Scheme and consequently whether the directions issued by him were within his province under the Scheme.

# 7. Before we proceed to deal with the arguments, we will notice the relevant provisions. Under Section 35A of the Banking Regulation Act, 1949, the Reserve Bank of India has the power to issue directions to banking companies generally or to any banking company in particular, as it deems fit, and the banking companies shall be bound to comply with such directions. The Reserve Bank of India could, on its own motion or on representation made to it also modify or cancel any direction it had earlier issued. In consonance with this power, on 14.6.1995, the Reserve Bank of India notified the Banking Ombudsman Scheme, 1995. We think it profitable to extract the relevant Notification herein: 

" NOTIFICATION 

Ref. RCPC No. 1070/BOS-94-95 14th June, 1995 

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (10 of 1949), Reserve Bank being satisfied that it is necessary in public interest and in the interest of banking policy to provide for a system of Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and advances and other specified matters hereby directs that all commercial banks should comply with the Banking Ombudsman Scheme, 1995 annexed hereto.

Sd/-

(R.V. Gupta) Deputy Governor"

By a notification dated 15.6.1995, the Scheme was also extended to Scheduled Primary Cooperative Banks. Admittedly, the Scheme so notified, was in force at the relevant time. As per clause 2, the object of the Scheme was to enable resolution of complaints relating to provision of banking services and to facilitate the satisfaction, or settlement of such complaints. Under clause 4 of Chapter II, the Reserve Bank of India could appoint a Banking Ombudsman to carry out the functions entrusted to him by or under the Scheme. The Banking Ombudsman was to hold office during the pleasure of the Governor of the Reserve Bank of India. Chapter III dealt with the jurisdiction, powers and duties of the Banking Ombudsman. Clause 12 provided that the Banking Ombudsman had the power and duty to receive complaints relating to the provision of banking services and to consider such complaints and facilitate their satisfaction, or settlement by agreement, by making a recommendation, or Award in accordance with the Scheme. Clause 13 specified that as regards banking services, the authority of the Banking Ombudsman would include all complaints concerning deficiency in service such as, non-payment/inordinate delay in the payment or collection of cheques, drafts/bills etc. The other deficiencies that could be looked into on a complaint are enumerated in clauses (ii) to (ix) to sub-clause (a) of Clause 13. We are not concerned with them in the present case. Since we are concerned with a complaint regarding loan and advances, we may extract the Clause with particular reference to clause 13(b), which has relevance thereto:

• "13. SPECIFIC AMBIT OF AUTHORITY As regards banking services, the Banking Ombudsman's authority will include:-

• (a)

• (b) Complaints concerning loans and advances only insofar as they relate to:-

• i) non-observance of Reserve Bank Directives on interest rates,

• ii) delays in sanction/non-

• observance of prescribed time schedule for disposal of loan applications, and

• iii) non-observance of any other directions or instructions of the Reserve Bank, as may be specified for this purpose, from time to time."

Under clause 14, the Banking Ombudsman had general superintendence and control over his office and he had power to incur expenditure on behalf of his office. Chapter IV dealt with the procedure for redressal of grievance. Clause 16 provided for making a complaint. Since what is involved is an interpretation of the scope of the power of the Ombudsman on a complaint, we think it proper to extract Clause 16 hereunder:

• "16. COMPLAINT (1) Any person who has a grievance against a bank, may himself or through an authorised representative make a complaint in writing to the Banking Ombudsman within whose jurisdiction the branch or office of the bank complained against is located.

• (2) The complaint shall be in writing duly signed by the complainant or his authorised representative and shall state clearly the name and address of the complainant, the name and address of the branch or officer of the bank against which the complaint is made, the facts giving rise to the complaint supported by documents, if any, relied on by the complainant, the nature and extent of the loss caused to the complainant and the relief sought from the Banking Ombudsman and a statement about the compliance of the conditions referred to in sub- clause (3) of this clause.

• (3) No complaint to the Banking Ombudsman shall lie unless,-

• (a) The complainant had before making a complaint to the Banking Ombudsman made a written representation to the bank named in the complaint and either the bank had rejected the complaint or the complainant had not received any reply within a period of two months after the bank concerned received his representation or the complainant is not satisfied with the reply given to him by the bank;

• (b) The complaint is made not later than one year after the bank had rejected the representation or sent its final reply on the representation of the complainant;

• (c) The complaint is not in respect of the same subject matter which was settled through the office of the Banking Ombudsman in any previous proceedings whether received from the same complainant or any one or more of the parties concerned with the subject matter;

• (d) The complaint is not the same subject matter, for which any proceedings before any Court, Tribunal or Arbitrator or any other forum is pending or a decree or Award or order of dismissal has already been passed by any such Court, Tribunal, Arbitrator or forum;

• (e) The complaint is not frivolous or vexatious in nature."

# 8. As regards the first aspect as to whether the Banking Ombudsman had lost his jurisdiction in view of the approach made by the respondent  Bank to the Debts Recovery Tribunal, what is relevant is clause 16(3)(d) quoted above and as regards the question whether the Banking Ombudsman had jurisdiction to entertain the claims made by the appellant, what is involved is the understanding of the scope of clause 13(b), quoted above.

# 9. It is clear that when the appellant invoked the jurisdiction of the Banking Ombudsman, the respondent  Bank had not approached the Debts Recovery Tribunal with its application for recovery of the amounts due under the loan transaction. Therefore, this was a case where on the day the complaint was filed, no proceeding before any Tribunal on the subject matter was pending or in which a final order had been passed or decision rendered. At the stage of initiation, there was no impediment in the way of the Ombudsman in entertaining the complaint or in proceeding with it. The impediment, if any, was caused by the Bank's subsequent filing of O.A. No. 157 of 2000 before the Debts Recovery Tribunal. The High Court has taken the view that since by the time the Ombudsman rendered his award, the Bank had already approached the Debts Recovery Tribunal with its claim under the Recovery of Debts Act, the Banking Ombudsman did not have jurisdiction to render the award, or has lost his jurisdiction to render the award. Clause 16 of the Scheme in sub-clause (1) speaks of a person making a complaint in writing to the Banking Ombudsman. Clause (3) read in conjunction with sub-clause (d) indicates that no complaint to the Banking Ombudsman shall lie if on the subject matter that is put forward before the Ombudsman, there is a proceeding pending before a Court, Arbitrator, Tribunal or forum or a decree or final adjudication had earlier been made by any one of them. This would suggest that the bar is attracted only when on the date of the filing of the complaint before the Ombudsman, a claim on the subject matter is pending before, say, the Debts Recovery Tribunal. Here admittedly, on the day the jurisdiction of the Banking Ombudsman was invoked, no such claim was pending before any Court, Arbitrator, the Debts Recovery Tribunal or any other forum. To that extent, prima facie, there is merit in the contention that Clause 16(3) may not be attracted to the case on hand.

# 10. Clause 16(3) of the Scheme says, "No complaint to the Banking Ombudsman shall lie". According to Black's Law Dictionary "lie" means, "to have foundation in the law; to be legally supportable, sustainable or proper". In the context of the power conferred on the Ombudsman by the Scheme read in the light of Section 35A of the Banking Regulation Act, it would be appropriate to understand the expression as having a foundation in law in the sense that the claim must have a foundation in law. A Banking Ombudsman, though might have initially jurisdiction to entertain a complaint on the basis that it has a legal foundation, here in terms of the Scheme, he may be divested of that jurisdiction or the foundation in law might be lost on either of the parties approaching the Court, the Arbitrator or the Debts Recovery Tribunal in respect of the same subject matter. Dealing with the expression 'entertain' this Court held in LAKSHMI RATTAN ENGINEERING WORKS LTD. VS. ASSTT. COMMR. SALES TAXN KANPUR & ANR. [(1968) 1 S.C.R. 505] that it means to deal with or admit to consideration. The Court approved the views expressed by some of the High Courts that the word 'entertain' meant not 'receive' or 'accept' but 'proceed to consider on merits' or adjudicate upon. The Court also accepted the Dictionary meaning of the word as 'admit to consider'. This was also the view that was subsequently taken by this Court in Hindustan Commercial Bank Ltd. Vs. Punnu Sahu (Dead) Through Legal Representatives [(1971) 3 S.C.C. 124]. It was held therein that the expression "entertain" in Order XXI Rule 90 of the Code meant, to 'adjudicate upon' or to 'proceed to consider on merits' and not 'initiation of proceeding' alone. Drawing an analogy, it is possible to say that the complaint must continue to have a foundation in law at the time the Ombudsman takes up the claim for his consideration and renders his decision or award. The foundation would be lost when a Court, Arbitrator, Tribunal or any other competent forum is moved on the same subject matter. When the subject matter of the complaint is taken to any other competent forum, the complaint loses its foundation in law. In other words, the subject matter of the complaint should not be pending in any other Tribunal, or Court or before an Arbitrator not merely when it is filed but also when it is taken up for consideration and disposal.

# 11. There is a more fundamental aspect. The Ombudsman, at best, is an Authority or Tribunal of limited jurisdiction constituted under the Scheme. It is a jurisdiction conferred by the Scheme. The exercise of jurisdiction or power by the Ombudsman would depend on his having jurisdiction not only to entertain a claim but also to bring it to an end. The continued exercise of power by him would depend on his continuing to have jurisdiction. Once he is deprived of his jurisdiction or gets deprived of his jurisdiction over the subject matter, he could no more proceed with a complaint which was earlier filed. In other words, to render an Award valid in terms of the Scheme, the Ombudsman must continue to retain jurisdiction over the subject matter of the concerned complaint. A complaint goes out of his purview when the subject matter of it is taken to a Court, Arbitrator, Tribunal or forum. The relief that can be granted by the Ombudsman are limited and confined to the matters coming within clause 13 of the Scheme. The intention behind incorporating clause 16(3)(d) appears to be to ensure that the relief an Ombudsman may give, may not conflict with a more comprehensive adjudication by a Court, Arbitrator, Tribunal or forum with wider powers. When there is conferment of a power on an authority or Tribunal with limited jurisdiction, that conferred power must continue to exist, when the decision is rendered by that authority or Tribunal. Once the conferred authority or power is taken away or impeded, the Authority or Tribunal can no more exercise it. This will be the position when one of the parties in a complaint before the Ombudsman takes the subject matter to a Court, Arbitrator, Tribunal or forum. In other words, when ultimately he is about to pronounce his Award, the Ombudsman finds that the subject matter of the dispute has been taken to the Debts Recovery Tribunal or a Civil Court or an Arbitrator or to any other competent forum, he gets divested of his jurisdiction, on a harmonious reading of clause 16(1) with clause 16(3)(d) of the Scheme. It is not, as if, a bar of jurisdiction can occur only at the stage of initially entertaining a claim. It could also occur at a subsequent stage either in view of the jurisdiction being taken away or in view of any other impediment created by the very Legislation, Rule or Scheme that conferred the initial jurisdiction. Thus, having lost his jurisdiction over the complaint in view of clause 16(3)(d) of the Scheme, the Ombudsman will have to decline jurisdiction to pass any order or award on the complaint. This, we think would be the proper way of understanding the bar created by clause 16(3)(d) of the Scheme.

# 12. Conceptually, an Ombudsman is only a non- adversarial adjudicator of disputes. An Ombudsman by definition is only an official appointed to receive, investigate, and report on private citizen's complaints about the government; a similar appointee in a non-governmental organisation (such as a company or university). (See Black's Law Dictionary). He serves as an alternative to the adversary system for resolving disputes, especially between citizens and government agencies. He is an independent and non-partisan officer who deals with specific complaints from the public against the administrative injustice and mal-administration. (See 4 American Jurisprudence 2d). Therefore, by its very nature, an Ombudsman is an alternative to an adversary system for resolution of disputes. When the subject matter of a complaint before the Ombudsman under the Scheme is taken to a Court, Tribunal, Arbitrator or other competent forum, the subject matter is takwn away from the purview of the Ombudsman to an adjudicatory forum under an adversarial system. It is therefore logical to understand clause 16 of the Scheme with particular reference to sub-clause 3(d) thereof, that on one of the parties approaching an adjudicatory forum on an adversarial system, the non-adversarial adjudicator, the Ombudsman must lose his power or authority to bring about a resolution of the complaint by way of a non adversarial adjudication. An Ombudsman is not defined in the Banking Regulation Act, 1949 or in the Banking Ombudsman Scheme 1995 constituting him as adversarial adjudicator. Clause 12 of the Scheme constitutes him a facilitator to bring about a satisfaction of the complaint, in one of the modes referred to therein. An adversarial adjudication necessarily stands on a higher plane than a settlement of a complaint at the instance of an Ombudsman. When such a forum for adversarial adjudication of disputes takes seisin of the subject matter of a complaint, it will be logical to postulate, on an interpretation of clause 16 of the Scheme, that the Ombudsman loses his jurisdiction over the subject matter of the complaint and consequently the complaint itself.

# 13. Thus we are of the view that the High Court was justified in interfering with the Award of the Banking Ombudsman on the ground that he could not have passed the Award in view of the divestiture of his jurisdiction.

# 14. After all, a complainant before the Ombudsman like the appellant will not be prejudiced by this interpretation. It has now been clarified in United Bank of India, Calcutta Vs. Abhijit Tea Co. Pvt. Ltd. & ors. [(2000) Supp 3 S.C.R 153] that the expression 'counter-claim' in sub-Sections (8) to (11) of Section 19 of the Recovery of Debts Act will take in even a claim for damages based on the same transaction and would include even an independent claim the respondent before the Debts Recovery Tribunal may have against the claimant  Financial Institution. It has thus been held that a counter- claim in a wide sense will lie before the Debts Recovery Tribunal and the respondent will be entitled to raise a comprehensive counter-claim. This ratio has also been accepted subsequently in State Bank of India Vs. Ranjan Chemicals Ltd. & Anr. [(2007) 1 S.C.C. 97]. It is therefore obvious that the appellant can make all his claims before the Debts Recovery Tribunal while defending the claim of the Bank, including the ones he has put forward before the Banking Ombudsman.

# 15. Then the question is whether the subject matter of the complaint came within the purview of the Banking Ombudsman. Clause 13(b) of the Scheme indicates the jurisdiction of the Ombudsman. Clause (b) provides that he could entertain complaints concerning loans and advances only insofar as they relate to non-observance of the directives of the Reserve Bank of India on interest rates, delays in sanction/non-observance of prescribed time schedule for disposal of loan applications and non-observance of any other directions or instructions of the Reserve Bank of India, as may be specified for the purpose of the Scheme from time to time. It is seen, as found by the High Court, that there was no claim that the respondent  Bank was guilty of non-observance of any directive of the Reserve Bank of India on interest rates. There is also no case that any other direction or instruction of the Reserve Bank of India made for the purpose of the Scheme had not been observed by the respondent  Bank. At best, the appellant can claim that it was complaining of delay in sanction/non-observance of prescribed time schedule for disposal of its loan application for additional finance. Even here, the case of the respondent  Bank is that there was no time schedule prescribed for enhancing the limit of the loan or for granting additional loan to a hotel industry like the one for which the appellant was claiming a loan from the Bank and hence there was no question of any of the complaints of the appellant coming within the purview of the Banking Ombudsman. A reading of the Award of the Banking Ombudsman shows that the directions issued by him regarding the advancing of the balance amount of Rs.3,41,250/- out of the original loan of Rs. 15 lakhs sanctioned, his direction to the Bank to make available additional finances merely on the basis of the recommendation of the Committee in that behalf and his directing the maintaining the financing ratio of 75:25 and his fixing a repayment schedule as seven years exclusive of one year of moratorium and the enhancement of the period of moratorium consequent on non-disbursement of the loan amount by the respondent  Bank, are all outside Clause 13(b) of the Scheme and consequently outside the jurisdiction of the Banking Ombudsman. The Banking Ombudsman has no authority to compel the Bank to make further advances which as a prudent banker it might not find feasible. Nor can the Banking Ombudsman interfere with the agreement regarding the repayment schedule fixed by the parties or the financing ratio that may be maintained between the Bank and the borrower. Nor can the Ombudsman direct the increase of the period of moratorium or fix a schedule of repayment of the loan. As we have indicated, there is no case that any of the directives of the Reserve Bank of India in respect of any of these matters had been violated by the respondent  Bank. The High Court, in our view, was correct in finding that the Banking Ombudsman had exceeded his jurisdiction in passing the Award that he has passed. None of the directions come within the purview of Clause 13(b) of the Scheme. The jurisdiction of the Banking Ombudsman under the Scheme is cribbed, confined and cabined by clause 13 of the Scheme. Therefore, in any event, the directions issued by the Banking Ombudsman are outside his jurisdiction. In this context, we do not think it necessary to consider whether there can be a specific performance of an agreement to lend or the issuance of a direction to lend more money than the Bank was willing to lend considering the creditworthiness of the borrower and his prior conduct in respect of the repayment of the loan which the Bank had already granted.

# 16. We thus find that the High Court was justified in interfering with the award of the Banking Ombudsman. We therefore answer both the questions raised on behalf of the appellant against the appellant and in favour of the respondent  Bank. The questions of law thus stand answered.

# 17. We dismiss the appeal.

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