Holding

A remanded suit is deemed pending as of the Act’s commencement and must be transferred to the Debt Recovery Tribunal; the debtor’s suit is a counter‑claim under Section 19 and also falls within the Act.

Summary

The United Bank of India filed suit No. 410/85 against Abhijit Tea Co. in 1985. The suit was disposed by a compromise decree on 29‑Mar‑1994, but the decree was set aside on appeal and the suit was remanded to the trial judge on 11‑Aug‑1998. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (effective 27‑Apr‑1994) bars civil courts from deciding such suits and mandates their transfer to a Debt Recovery Tribunal under Sections 18, 31 and 34. The key issue was whether the remanded suit was “pending” on the crucial date and thus subject to transfer, and whether the debtor’s separate suit (No. 272/85) for specific performance and injunctions constituted a counter‑claim under Section 19, also bringing it within the Act. The Supreme Court held that a remand revives the suit with continuity, so it was pending on 27‑Apr‑1994 and must be transferred to the Tribunal; the debtor’s suit is a counter‑claim/set‑off under Section 19 and likewise falls within the Act. Consequently, the High Court order retaining the suit was set aside and the appeal was allowed.

Issues considered

The suit remanded after appeal – is it deemed pending on the date of commencement of the Recovery Act for purposes of Section 31(1)?
The combined effect of Sections 18, 31 and 34 of the Recovery Act on suits and appeals pending at the time of the Act's commencement.
Whether the debtor’s suit for specific performance and injunctions is a ‘counter‑claim’ under Section 19 and therefore covered by the Act.
Whether the pendency of the debtor’s suit can justify keeping the bank’s suit in the civil court.

Legislation cited

Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. 18, s. 19, s. 31, s. 34

Subjects

Recovery Act 1993Debt Recovery Tribunalremand of suitpending suitpurposive constructioncounter‑claimset‑offjurisdictiontransfer of casesSection 31Section 18Section 19

Judgment

UNITED BANK OF INDIA, CALCUTTA A
v.
ABHIJIT TEA CO. PVT. LTD. AND ORS.

SEPTEMBER 5, 2000

[M. JAGANNADHA RAO AND DORAISWAMY RAJU, JJ.] B

Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
Sections 18, 19, 31 and 34.

Bank-Suit against Debtor-company in High Court-Disposed on C
29.3.1994 by single Judge-Appeal-Disposed by Division Bench on
11. 8. I 998-Consequently suit remanded to single Judge-Enforcement of
1993 Act w.e.f 27.4. 1994 i.e. during pendency of appeal-Jurisdiction of
Court-Held ousted-Held suit was pending on the date of commencement
of A.ct-1'herefore liable lo be transfe"ed I<> the Tribunal under the 1993 Act. V

Debtor company-Suit fikd against banlc-Suit in the nature of a
counter-c/aim:-Issues in debtor-company's suit integrally connecUld with
issues in suit filed-by bank-Held suit fUe.d by debtcF-company has to be tried
by Tribunal. .
E
Court-Changes in law affecting pending actions-Duty of Court to
take judicial notice of changes in Jaw.

Statutory interpretation-Principle of purposive c<JflStruction-- 'Ca11Sus
omissus '-Statute-Gap-Power of court to JUI.
F
Suit-Disposal-Appeal-Remand of suit by appellate court-Effect of

Judicial notice-Applicability of

The Appellant-bank filed a suit on the original side of the Calcutta High G
Court against the RSpondent-debtor. The said suit was disposed on 29.3.1994.
Appeal preferred before the Division Bench was allowed on 11.8.1998 and
consequently the suit stood restored before Single Judge of the High Court.
In the mean time, the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 came into force in West Bengal w.e.f. 27.4.1994.
153
H
154 SUPREME COURT REPORTS [2000) SUPP. 3 S.C.R.

A The respondent-company filed an application praying that the suit filed
by the Bank should remain on the original side of the Calcutta High Court
and be not transferred to the Tribunal under the Act. The contention raised
on behalf of the company was that on the date when the Act came into force
the suit was not pending on the original side but the appeal was pending before
the Division Bench and that under Section 31(1) appeals did not stand
B transferred to the Tribunal. This application was allowed by order dated
3.9.1999 and the Bank's suit was directed to be retained in the High Court
on the basis that the 1993 Act did not apply.

Against the order dated 3.9.1999 Bank preferred appeal before this
C Court. In this appeal an additional point was raised on behalf of the respondent-
. company that .the respondent had earlier filed a suit against the Bank in the
High Court for specific performance and perpetual and mandatory injunction
and as the issues arising in this suit were integrally connected with Bank's
suit the same should be retained in the High Court.

D It was also contended on behalf of the respondent-company that (i) the
proviso to section 31 retained appeals in the Civil Court, hence the suit
remanded in appeal would also get retained; and (ii) there was no specific
provision regarding remanded suits and this was a case of a 'causus omissus'
and the said omission in the statute could not be filled by judicial
interpretation. Otherwise, it would amount to judicial legislation.
E
Allowing the appeal, and setting aside the impugned order, the Court

HELD : 1. Both the suits, the one by the Bank against the respondent >
and the other by the debtor-company against the Bank which raises claims
F or pleas in the nature of set-off or counter-claim are interconnected. Both
the suits are falling with the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993. [169-D-EJ

2. The suit filed by the Bank in 1985, even though it was disposed of by
judgment dated 29.3.94, it stood revived with continuity by the remand order
G passed by the Division Bench on 11.8.98, and cannot be treated as freshly
instituted on 11.8.98 before the Single Judge but must, in the eye of law, be
treated as pending on the crucial day i.e. 27.4.94. (161-E)

3. An order of remand by the appellate Court to the trial Court which
had disposed of the suit revives the suit in full except as to matters, if any,
R decided finally by the appellate Court. Once the suit is revived, it must, in the
UNITED BANK OF INDIA v. ABHIJIT TEA CO. PVT. LTD. 155
eye of law, be deemed to be pending-from the beginning when it was instituted. A
The suit cannot b~ treated as one freshly instituted on the date of the remand
order. Otherwise serious questions as to limitation would arise. In the case
ofa remand, it is as if the suit was never disposed of(subject to any adjudication
which has become final, in the appellate judgment). The position could have
been different if the appeal was disposed of once and for all and the ~'1it was B
not remanded. [161-B-D]

4. The pendency of appeal before the appellate Court may be the de facto
position. But once the appeal is allowed, the intermediate events-of disposal
of the suit and the appeal-vanish into the air and the continuity of the suit
before the trial Court is restored. (161-G] C
5. If the principle of purposive construction is applied, it is clear that
the provision in section 31 must be construed in such a manner that, after
the Act, no suit by the Bank is decided by the Civil Court and all such suits
are decided by the Tribunal. The principle of purposive interpretation is to be
applied to sections 18 and 31 of the Act and that suit filed by the Bank in D
1985 and which stood remanded by the appellate Court on 11.8.98 must in
the eye of law be deemed pending before the Single Judge and that it would
stand transferred to the Tribunal. The High Court was, therefore, in error in
retaining the same on the original side. [163-G; 165-C]

Allahabad Bank v. Canara Bank, JT (2000) 4 SC 411, referred to. E
6. Even assuming that the suit was not pending 'immediately' before
the establishment of the Tribunal before the single Judge but came before
him on remand after 27.4.94, the crucial date, and even assuming that the
Registrar of the High Court could not have transferred the suit to the Tribunal
on 27.4.94 as the appeal was pending before the Division Bench, it would, in F
view of the prohibition in ·section 18, be necessary for the High Court to
transfer the Bank's suit under Article 227 of the Constitution of India to the
Tribunal. [1657A-B]

7. In some statutes the legislature no doubt says that no suit shall be G
'entertained' or 'instituted' in regard to a particular·subject matter. Such a
law will not affect pending actions and the law is only prospective. But, the
position is different if the law states .that after its commencement, no suit
shall be "disposed or' or "no decree shall be passed" or "no court shall
' exercise powers or jurisdiction". In this class of cases, the Act applies even
to pending proceedings and has to be taken judicial notice of, by the civil H
156 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A Courts. [162-E]
"
Shah Bhojraj Kuverji Oil Mills & Conning Factory v. Subhash Chandra
Yograj Sinha, [1962] 2 SCR 159, AIR (1961) SC 1590 and Mst. Rafiguennessa
and Anr. v. Lal Bahadur Chetri and Ors., [1964] 6 SCR 876 =AIR (1964) SC
1511, referred to.
B o
8. It is the duty of a Court, whether it is trying original proceedings or
hearing an appeal, to take notice of the change in law affecting pending actions
and to give effect to the same. If, while a suit is pending, a law like the 1993
Act that the Civil Court shall not decide the suit, is passed, the Civil Court is
C bound to take judicial notice of the statute and hold that the suit - even after
its remand - cannot be disposed of by it. [162-C-D)

G.P. Singh, Interpretation of Statutes., 7th Ed. P. 406, referred to.

9. The remanded suit cannot remain in the Civil Court with no chance
of disposal. The decision that the restoration of the suit is with continuity
D from the date of original institution of the suit does not amount to legislation
but is the result of the application of a fundamental principle of law applicable
to the civil procedure. It cannot therefore be said that Court encroacb'edupon
the jurisdiction of the legislature. Though the powen ofinterpretation ofthe
Courts are narrow, yet they can fill up gaps. In the presentcaseCourtdo not
E have to legislate, even interstitially. [164-E-H]

Southern Pacific Co. v. Jensen 244 U.S. 2-05 at 221, referred to.

B. Cargozo, the Nature ofthe Judicial Process, (1921) p. 131., referred
to.
F 10. The pendency of the company's suit in the High Court is not a
ground for retaining the Bank's suit in the Calcutta· High Court. The suit
filed by the debtor company is also a suit to be necessarily tried only by the
Tribunal [169-G]

G 11. The Company's suit in so far as it claims a relief for specific
performance, perpetual and mandatory injunctions, is in substance in the
nature of a counter-claim under sub-clauses (8) to (10) of section 19 and are
in the nature of a counter-claim. [168-F]

The plea for deduction of damages is in the nature of a set-off falling
H within section 19(6) and (7). Both are equated to cross-suits. If a set-off or a
UNITED BANK OF INDIA"· ABHIJITTEA CO. PVT. LTD. [M. JAGANNADHA RAO, J.] 157

- counter claim is to be equated to a cross suit under section 19, afortiori there
can be no difficulty in treating the cross-suit as one by way of set-off and
counter claim and as proceedings which ought to be dealt with simultaneously
A

with the main suit by the Bank. In fact, the Bank has not objected to such a

... course. In the context, the word 'counter-claim' in section 19(8) to (11) which
is equated to a cross-suit, includes a claim even if it is made in an independent B
suit filed earlier. An agreement not to charge interest, the specific
performance of which is claimed is nothing but a plea that the Bank could
not charge interest. A permanent injunction directing the Bank not to charge
interest because of an alleged agreement in that behalf is likewise a plea that
no interest is chargeable. So far as the plea for further financial assistance
is concerned, it is also, broadly, in the nature ofa 'counter-claim'. All these C
fall under section 19(8) to (10). Again, the plea for deducting 'damages' though
raised in the suit is indeed broadly a plea of"set ofr' falling under sub-clause
(6)and (7) of section 19. (168-G-H; 169-A-C)

CIVIL APPELLATE JURlSDICTION : Civil Appeal No. 4897 of 2000.
D
From the Judgment and Order dated 3.9.99 of the Calcutta High Court
in T. No. 78/99 in G.A. No. 276/99 C.C.S. No. 410of1985.

Shanti Bhushan, Dr. Rajeev Dhavan, Dhruv Mehta, S.K. Mehta, Ms.
• Shobha, R.K. Maheshwari, Sushil Kumar Jain, Pradeep Aggarwal and A.P.
Dhamija for the appearing parties. E
The Judgment of the Court was delivered by

M. JAGANNADHA RAO, J. Leave granted.

The appellant Bank is the plaintiff in Suit No. 410/85 which is pending F
on the file of the Calcutta High Court. The respondent-debtor is yet to file
its written statement. By 31.12.98, an amount of Rs. 31.13 crores is said to be
due to the Bank. Initially, in lbe above suit, a compromise decree was passed
by Ajit Kumar Sen Gupta, J. on 29.3.94. It was contended by the Bank that
the compromise was based upon a non-existent agreement. On appeal, the G
said judgment was set aside by a Division Bench of the High Court on 11. 8. 98
consisting of Ajoy Nath Ray and Dipak Prakas Kundu, JJ. describing the said
judgment as "shocking". The Bench also observed:

"It was as if a contract was being made attempted to be made out
for the parties. It is no part of the duty of the Court to make an H
158 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A agreement for the parties".

The Bench allowed appeal, awarding costs in a sum of Rs. 75,000.
-
As part bf the compromise, the learned Single Judge had stayed another
suit on mortgage ( O.C. (Mortgage) suit No. 77 of 1991) filed by the Bank. ...
B But the Division Bench set aside the entire compromise decree.

Thereafter, the suit No.410 of 1985 filed by the appellant Bank stood ..
,•
restored before the learned Single Judge. In the meantime, the 'Recovery of
Debts Due to Banks and Financial Institutions Act, 1993' (hereinafter called
the Recovery Act, 1993) came into force in West Bengal. It is stated that it
C came into force in West Bengal on 27.4.1994. The debtor Company th.en filed
an application T. No. 276 of 1999 that this suit by the Bank should remain on
the original side of the Calcutta High Court and be not transferred to the
Tribunal under the Act. The contention was that on the crucial date, 27.4.1994,
the suit was not pending on the original side but the appeal was pending
D before the Division Bench and that under section 31 (I), appeals did not stand
transferred to the Tribunal. It was pleaded that even though the appeal was
later allowed on 11.8.98 and the suit was remanded to the Single Judge, it was
not a suit "immediately pending" on the original side of the High Court before
the crucial date i.e. 27.4.94, in the High Court, as required by Section 31 of
the Act. Therefore, it was not covered by Section 31 of the Act. This was
E the contention in the application filed by the respondent-company seeking
retention of the suit on the original side of the H_igh Court of Calcutta.

The above application filed by the respondent- company was allowed
by another learned Single Judge on 3.9.99 and the Bank's suit was directed
F to be retained in the High Court on the basis that the Act did not apply. By
the same order, the Registrar of the High Court was restrained from transferring
the suit to the Tribunal.

Against the above order dated 3.9.99, the Bank has preferred the present
appeal by special leave.
G
In this appeal, Sri Dhruv Mehta appeared for the appellant-Bank and
contended that the High Court erred in not transferring the Bank's suit 410/
85 to the Tribunal.

Elaborate arguments were addressed before us by Sri Shanti Bhushan,
H learned Senior counsel for the respondent-company and Dr. Rajeev Dhawan, ..
UNITED BANK OF INDIA''- ABHIJIT TEA CO. PVT. LTD. (M. JAGANNADHA RAO, J.) 159

learned Senior counsel for the guarantor. We shall deal with these contentions. A
An additional point has been raised before us by the learned senior
counsel for the respondent company, Sri Shanti Bhushan that the debtor
company had earher filed suit No.272 of 1985 against the Bank in the High
Court for specific perfonnance of an agreement with the Bank and for perpetual
and mandatory injunctions and that that suit was integrally connected with
~
B
the Bank's suit. It was argued that inasmuch as a suit for specific perfonnance
and mandatory injunction could not be transferred to the Debt Recovery
Tribunal, this suit filed oy the Bank, namely, suit No. 410/1985 must also
remain in the High Court. We asked learned senior counsel for the Company
and the learned senior counsel for the guarantor as to whether the said suit C
by the company (suit No. 272/1985) was or was not a suit, in substance, in
the nature of a 'counter-claim' and if so, why sub-sections (8) to (11) of
section 19 (as introduced by Act l/2000 by Parliament) could not apply and
as to why we should not hold that that suit also fell within the purview of
the Act. Counsel submitted that that suit did not fall within the provisions
of the Act. D
The points that arise for consideration in the appeal are as follows:

(1) Whether the suit No. 410/1985 by the Bank w'hich was disposed by
- judgment dated 29.3.94 and which judgment was set aside by the Bench on
11.8.98 and remanded to the Single Judge, could not be treated as pending E
immediately before the commencement of the Act on 27.4.94 (in West Bengal)
and whether it could not be transferred to the Recovery Tribunal?

(2) What is the combined effect of Sections 18 and 31 and of the Act
on pending proceedings?
F
(3) Whether the pendency of suit No. 272/1985 filed by the debtor
company against the Bank for specific perfonnance and for perpetual and
mandatory injunctions raising common issues between parties in both these
suits was a sufficient reason for retention of the Bank's suit No. 410/85 on
the original. side of the High Court to be tried alongwith the Suit No. 272/85 G
filed by the debtor company?

(4) Whether the suit No. 272/85 filed by the debtor company was, in
substance, one in the nature of a "counter-claim" against the Bank and was
one which also fell within the special Act by reason of section 19(8) to (11)
of the Act ( as introduced by Amending Act 112000) and if that be so, whether H
'160 SUPREME COURT REPORTS (2000] SUPP. 3 S.C.R.

A it could still be successfully pleaded by the respondent-company that the
pendency of the company's suit 272/85 was a ground for retention of Bank's
suit No. 410/85 on the original side of the High Court?

Points I and 2:

B Was the Suit 410/85 filed by the Bank pending before the Single Judge
on 27.4.94? That is the crucial question. That depends on the interpretation
of Sections 18, 31 and 34 of the Act.

In the judgment of the High Court now under appeal before us, the
learned Single Judge held that when the Act came into force on 27.4.94, the
C suit was not pending before the Single Judge as the compromise decree was
passed on 29.3.94 and in fact the appeal against the said decree was pending
before the Division Bench till 11.8.98 and therefore the suit would not stand
transferred to the Tribunal. It was assumed that the suit would not get revived
from its institution and that therefore it was not a suit pending "immediately
D before the date of establishment of a Tribunal under this Act" i.e. 27.4 ..94, as
required by section 31(1). It was also observed that the proviso to section
31(1) permitted only appeals pending on that date to be retained· in the Civil
Court (here the High Court) and that a remanded suit was not so saved by
the proviso to section 3) ( l ). A similar argument was advanced before us by

E
the learned senior counsel appearing for the respondent-company, Sri Shanti
Bhushan and for the guarantors, by Dr. Rajeev Dhawan. -
Now Section 31 {I) of the Act reads as follows:

Section 31: Transfer of pending cases:

(1) Every suit or other proceedings pending before any court
F immediately before the date of establishment of a Tribunal under this
Act, being a suit or proceeding the cause of action whereon it is
based is such that it would have been, if it had arisen after such
· establishment, within the jurisdiction of such Tribunal, shall stand
transferred on that date to such Tribunal:
G Provided that nothing in this sub- section shall apply to any appeal
pending as aforesaid before any Court.

(2) .................................. "

It is true that under sub-clause (c) of Section 31, every suit or proceeding
H "pending before any Court immediately before the date of establishment of
UNITED BANK OF INDIA 1•. ABHIJIT TEA CO. PVT. LTD. [M. JAGANNADHA RAO, J .] 161

the Tribunal under the Act" shall stand transferred to the Tribunal. It is also A
true that under the proviso to section 31(1), appeals pending on the date do
not stand transferred. The suit of the Bank was in fact, pending in appeal on
~
27.4.94. and it is clear that this provision for transfer does not apply to an
appeal pending as aforesaid before any Court.

But, it is now well settled that an order of remand by the appellate Court B
to the trial Court which had disposed of the suit revives the suit in full except
as to matters, if any, decided finally by the appellate Court. Once the suit is
revived, it must, in the eye of the law, be deemed to be pending - from the
beginning when it was instituted. The judgment disposing of the suit passed
by the Single Judge which is set aside gets effaced altogether and the c
continuity of the suit in the trial court is restored, as a matter of law. The suit
~not be treated as one freshly instituted on the date of the remand order.
Otherwise serious questions as to limitation would arise. In fact, if any
evidence was recorded before its earlier disposal, it would be evidence in the
remanded suit and if any interlocutory orders were passed earlier, they would
revive. In the case of a remand, it is as if the suit was never disposed of D
(subject to any adjudication which has become final, in the appellate judgment).
The position could have been different if the appeal was disposed of once
and for all and the suit was not remanded.

Applying the above principle, we are of the view that the suit 410/85 E
filed by the Bank in 1985, even though it was disposed of by judgment dated
29.3.94, it stood revived with continuity by the remand order passed by the
Division Bench on 11.8.98, and cannot be treated as a freshly instituted on
11.8.98 before the Single Judge but must, in the eye of the law, be treated as
pending on the crucial day i.e. 27.4.94.
F
It was argued that on 27.4.94, the crucial date, ifthe appeal was pending
before the Division Bench, the suit could not have also been pending
simultaneously. The pendency of appeal before the appellate Court may be
' the de facto position. But, we are concerned here with the position in law, and
as to the effect of the remand order. Once the appeal is allowed, the intermediate
G
events - of disposal of the suit and the appeal - vanish into the air and the
continuity of the suit before the trial Court is restored.

There is yet another important reason as to why the suit must be held
'-
as one falling within the Act. This reason flows from Section 18 of the Act,
• H
which reads as follows:
162 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A "Section 18: Bar of Jurisdiction:

On and from the appointed day, no court or other authority shall
have, or be entitled to exercise, any jurisdictiqn, powers or authority
(except the Supreme Court, and a High Court exercising jurisdiction
under Arti_cles 226 and 227 of the Constitution) in relation to the
B matters specified in Section 17 ."

The bar of the said section, as we shall elaborate, applies and, in fact, Section
34 of the Act gives overriding effect to the provisions of the Act.

Now, it is well settled that it is the duty of a Court, whether it is trying
C original proceedings or hearing an appeal, to take notice of the change in Jaw
affecting pending actions and to give effect to the same. (See G.P. Singh,
Interpretation of Statutes, 7th Ed.p. 406). If, while a suit is pending, a law like
the 1993 Act that the Civil Court shall not decide the suit, is passed, the Civil
Court is bound to take judicial notice of the statute and hold that the suit -
D even after its remand - cannot be disposed of by it.

In some statutes the legislature no doubt says that no suit shall be
'entertained' or 'instituted' in regard to a particular subject matter. It has been
held by this Court that such a law will not affect pending actions and the law
is only prospective. But, the position is different if the law states that after
E its commencement, no suit shall be "disposed of' or "no decree shall be
passed" or "no court shall exercise powers or jurisdiction". In this class of
cases, the Act applies even to pending proceedings and has to be taken
judicial notice of by the Civil Courts.

A Constitution Bench of this Court in Shah Bhojraj Kuverji Oil Mills
F & Ginning Factory v. Subhash Chandra Yograj Sinha, [1962] 2 SCR 159 AIR
{1961) SC 1590 was considering a situation where a Jaw was made ousting the
jurisdiction of the Civil Court where a suit was pending. The words used in
the statute were 'a landlord shall not be entitled to the recovery of possession
of any premises ... .' These words were contained in the B0mbay Rent, Hotel
G and Lodging House Rates Control Act, 194 7. It was held that the provision
barring a decree to be passed applied to pending suits and applied at the time
the decree was to be passed. Anoth~r Constitution Bench in Mst.
Rafiquennessa and Anr. v. Lal Bahadur Chetri and Ors., [1964] 6 SCR 876
= AIR ( 1964) SC 1511 held that the prohibition against passing a decree for
possession would apply even at the appellate stage, unless of course, appeals
H were kept outside the impact of the new Act, as in the proviso to Section 31
UNITED BANK OF INDIA"· ABHIJIT TEA CO. PVT. LTD. [M. JAGANNADHA RAO, J .) 163
of the Act. Even the appellate Court has to apply the law ousting its A
jurisdiction.

If indeed the contention of the learned senior counsel for the
respondents, Sri Shanti Bhushan and Dr. Rajeev Dhawan is to be accepted,
a strange result would follow inasmuch as, on a combined reading of Sections
18 and 34 of the Act, the suit can neither be transferred to the Tribunal nor B
can it be decided by the learned Single Judge in view of the clear prohibition
in Section 18 of the Act. If it is not to be transferred to the Tribunal and if
it is to be retained in the Civil Court, without disposal as contended, then
there will be a stalemate. It has to be kept perpetually pending in the Civil
Court and necessarily the file has to be consigned to the record room. Or the C
plaint will have to be returned for presentation before the proper court or
Tribunal. That was surely not the intendment of the Act of 1993. When this
aspect was put to the learned senior counsel for the respondents, there was
practically no answer. It was, no doubt, faintly sugges~ed by Dr: Rajeev
Dhawan that the bar in Section 18 does not apply to remanded suits but we
are unable to agree. A.s stated earlier, they stand revived in law with continuity D
and therefore the bar under Section 18 clearly applies.

The above result is ~lso reached by the application of the principle of
purposive construction.

In regard to purposive interpretation, Justice Frankfurter observed as E
follows:
, )

"Legislation has an aim, it seeks to obviate some mischief, to supply
an inadequacy, to effect a change of policy, to formulate a plan of
government. That aim, that policy is not drawn, like nitrogen, out of
the air; it is evidenced in the language of the statute, as read in the F
light of other external man4festations of purpose ("Some Reflections
on the Reading of Statutes) 47 Columbia LR 527 at 538 (1947)"

That principle has been applied to this very Act by this Court recently
in Allahabad Bank v. Canara Bank, JT (2000) 4 SC 411. If the said principle G
is applied, it is clear that the provision in section 31 must be construed in
such a manner that, after the Act, no suit by the Bank is decided by the civil
Court and all such suits are decided by the Tribunal.

Today, it is said that Rs. 52,000 crores of monies are due to Banks and
.. A financial institutions from the borrowers. The Act of 1993 was indeed enacted H
164 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A to provide a speedy remedy for the recovery of these monies and for taking
these suits out of the purview of the civil Courts. If speedy disposal is the
purpose of the Act, then if the respondent's contention is accepted, this suit
410185 instead of getting transferred to the Tribunal for expeditious disposal,
·would perpetually remain pending on the original side of the Calcutta High
B Court because of the prohibition in section 18 of the Act. Sur~ly, that would
place the Bank in a worse position after the 1993 Act than before inasmuch
as before the Act, there was at least the possibility of the Bank's suit being
decided by the civil Court on some future day, however, remote.

An argument was advanced by Dr. Rajeev Dhawan that the proviso to
C section 31 retained appeals in the civil Court and hence the suit remanded in
appeal would also get retained. It was also argued that there was no specific
provision regarding remanded suits and this was a case of a 'causus omissu.s'
and the said omission in the statute could not be filled by judicial interpretation.
Otherwise, it would amount to judicial legislation. That was the argument.

D We cannot agree with either contentions. The remanded suit cannot
remain in the Civil Court with no chance of disposal. Again, our decision that
the restoration of the suit is with continuity from the date of original institutions
of the suit does not amount to legislation but is the result of the application
of a fundamental principle of law applicable to the civil procedure. It cannot
E therefore be said that we have encroached upon the jurisdiction of the
legislature.

In this context the following words of Justice Holmes are apposite. He
said:

"I recognise without hesitation that Judges do and must legislate,
F but they do so only interstitially; they are confined from molar to
molecular motion" (1917) (Southern Pacific Co. v. Jensen, 244 U.S. 205
at 221).

Again, Justice Cardozo said that though. the pcwers of interpretation of
G the Courts are narrow, yet they can fill up gaps. He said:
"No doubt, the limits for the Judge are narrower. He legislates only
between gaps. He fills the open spaces in the law" (B. Cargozo, The
Nature of the Judicial Process (1921) at p. 131).

H In the present case, we do not have to legislate, even interstitially.
UNITED BANK OF INDIA"· ABHIJIT TEA CO. PVT. LTD. [M. JAGANNADHA RAO, J.) 165

There is yet another aspect of the matter. Even assuming that the suit A
was not pending 'immediately' before the establishment of the Tribunal before
the Single Judge but came before him on remand after 27.4.94, the crucial date,
and even assuming that the Registrar of the High Court could not have
transferred the suit to the Tribunal on 27.4.94 as the appeal was pending
... before the Division Bench, it would, in view of the prohibition in section 18, B
be necessary for the High Court to transfer the Bank's suit under Article 227
of the Constitution of India to the Tribunal.

For the aforesaid reasons, we hold that the principle of purposive
interpretation is to be applied to sections 18 and 31 of the Act and that suit
410/1985 filed by the Bank in 1985 and which stood remanded by the appellate C
Court on 11.8.98 must in the eye of the law be deemed pending before the
Single Judge and that it would stand transferred to the Tribunal. The High
Court was, therefore, in error in retaining the same on the original side. Points
1 and 2 decided in favour of the appellant.

Points 3 and 4: D
As stated earlier, learned senior counsel for the respondents contended
that the issues arising in the suit 410/55 filed by the Bank are integrally

- connected with the issues arising in the other Suit No.272 of 1985 filed by
the respondent company against the Bank and that the said suit being one
for specific performance, and perpetual and mandatory injunctions could not E
be tried by the Tribunal and that consequently, the suit by the Bank 410/85,
which contains some common issues must be retained in the civil Court (i.e.
the High Court).

Learned senior counsel was then asked by us as to what in reality was
the "substance" of the suit 272of1985 filed by the Company against the Bank F
and whether, it was indeed one falling within the purview of the 1993 Act as
amended by Act 1 of 2000? The answer by the counsel was that it was not.
We shall therefore consider this aspect in some detail.

We shall first refer to the averments of the 1st respondent in its suit G
272 of 1985 filed against the Bank. The plaint states that the plaintiff acquired
the Tea estate from Kamini Tea Co. {Pvt.) Ltd. in or about April, 1979, under
a registered deed, that initially the shares in the plaintiffs company were held
by 1st and 2nd plaintiffs, that at the instance of this Bank, the plaintiff 3
purchased the shares on 13.1.82, that in or about December 1981 and January
1982, it was "duly agreed" between the Bank and the Tea Company and the H
166 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A plaintiffs 3 and 4 and by plaintiff 2 that (i) 'defendant would not charge
interest on its outstanding upto the season 1981-82 since July 1, 1981, (ii) that
the said outstanding dues would be paid by plaintiff company at Rs. 75,000
p.m., (iii) that the Bank would extend credit facilities according to its needs
from the season 1982-83, which advance interest would be recovered out of
B the proceeds of sale of Tea. It was also alleged that these terms would appear
from the records and correspondence between the parties and also from the
course of conduct and/or dealings. A .dispute is also raised about the
correctness of the amount claimed by the Bank as per its accounts. It was
pleaded that a certain amount of Rs. 1,55,951 paid by the Bank to workmen
for 81-82 season had to be adjusted for 1981-82 which was a free-interest
C period, that similarly credit had to be given for Rs. 64,083.10 for the season
1982-83, that the sum of Rs. 7 lakhs sanctioned for 1983-84 at 13% interest
was repayable by annual instalment of Rs. 1 lakh from June 1984 and that
excess interest at rate 3% was charged, that interest for 1984-85 on Rs. 7 lakhs
was to be at 15% p.a. and not 18% p.a., that for the year 1985- 86, the Bank
advanced Rs. 5 .22 lakhs and was charging 15% and it illegally stopped or
D suspended advances. It was contended that the correct position of the
amounts due was shown in Schedule D of the plaint and that on the arrears

..
due upto 81-82, no interest was to be charged, the moratorium was unilaterally
withdrawn on 8.4.85 by the Bank, that interest could not have been charged
from 1.7.81 to 31.3.85, that the letter 'E' of the plaintiff company agreeing to
E pay interest ~as void/voidable, that the dem~nd by letter dated 11112-4- 85
for Rs. 3,31,25,054.27 inclusive of interest upto 31.3.1985 was wrong, malafide
and· inflated. It was contended that the Bank guarantee for Rs. 72,330 could
not be encashed, that the defendant promised to render financial assistance
and could not have stopped it and that the principle of promissory estoppel
applied. Plaintiff 4 was a shareholder Director and plaintiffs 3 and 4 stood
F guarantee only for lawful dues, it was said. The plaint then referred to certain
payments by the plaintiff upto a sum of Rs. 14,25,000. It was said that the
plaintiff was entitled to specific performance of the agreement as pleaded in
para 4 ·of the plaint and to a perpetual injunction that the Bank should not
charge interest upto 1981-82 and that with effect from 1. 7 .81, that only Rs.
G 75,000 per month could be recovered. A mandatory injunction was sought for
further financial assistance at less than Rs. 10 per Kg. per season w .e.f. 1985-
86 season, for damages allegedly suffered by plaintiff and for rectification of
accounts and to declare the letter of demand 'D' dated 8.4.85 as void.

From the above, it will be noticed that the plea of the Company is that
H there is an agreement not to charge interest and that that agreeme.nt is to be
UNITED BANK OF INDIA"· ABHIJIT TEA CO. PVT.LTD. [M. JAGANNADHA RAO, J .) 167
enforced, that interest is not liable to be charged on arrears or interest cannot A
be charged at a higher rate, that only Rs. 75,000 is to be recovered per month
and that the damages suffered by plaintiff are to be deducted and further
financial assistance is to be given in future.

In our view, the above pleas raised by the respondent company are all
inextricably connected with the amount claimed by the Bank. The plea of the B
company is that interest is not to be charged or is to be charged at a lesser
rate, that instalments are to be permitted and more monies should have been
advanced. In our view, these claims made by the Company in its suit 272/85
against the Bank amount to 'counter claim' and fail within sub-clauses (8) to
(11) of section 19 of the Act (as introduced by Act 112000). The plea for C
deduction of damages is in the nature of a 'set off falling under sub-clauses
(6) and (7) of section 19.

Sub-clauses (6) to (l 1) of section 19 read as follows:

"(6) Where the defendant claims to set-off against the applicant's D
demand any ascertained sum of money legally recoverable by him
from such applicant, the defendant may, at the first hearing of the
epplication, but not afterwards unless permitted by the Tribunal,
present a written statement containing the particulars of the debt
sought to be set-off.
E
(7) The written statement shall have the same effect as a plaint in a
cross- suit so as to enable the Tribunal to pass a final order in respect
both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of F
pleading a set-off under sub-section (6), set up, by way of counter-
claim against the claim of the applicant, any right or claim in respect
of a cause of action accruing to the defendant against the applicant
either before or after the fihng of the application but before the
defendant has delivered his defence or before the time limited for
delivering his defence has expired, whether such counter-claim is in G
the nature of a claim for damages or not.

(9) A counter-claim under sub-section (8) shall have the same effect
as a cross-suit so as to enable the Tribunal to pass a final order on
the same application, both on the original claim and on the counter-
~ H
168 SUPREME COURT REPORTS [2000] SUPP. 3 S.C.R.

A (I 0) The applicant shall be at liberty to file a written statement in
answer to the counter-claim of the defendant within such period as
may be fixed by the. Tribunal.

(11) Where a defendant sets up a counter-claim and the applicant
contends that the claim thereby raised ought not to be disposed of
B by way of counter-claim but in an independent action, the applicant
may, at any time before issues are settled in relation to the counter-
claim, apply to the Tribunal for an order that such counter-claim may
be excluded, and the Tribunal may, on the hearing of such application
make such order as it thinks fit."
c Sub-clause (6) says that a 'set-off, if claimed, can be adjudicated by the
Tribunal. Sub-clause (7) states that the written statement. pleading a set-off
shall have the same effect as a plaint in a cross-suit to be adjudicated by the
Tribunal. Similarly, sub- clause (8) of section 19 permits a defendant to make
a 'counter-claim' by way of an application and sub-clause (9) of section 19
D states that such a 'counter-claim' shall have the same effect as a 'cross-suit'
so as to enable the Tribunal to pass a final order on the same application,
both on the original claim and on the counter claim as a 'cross-suit'. Sub-
clause (11) of section 19 is important and it permits the Bank or financial
institution to apply to the Tribunal that particular claim raised by the debtor
E against the Bank or financial institution, as the case may be, ought not to be
disposed of by way of a counter-claim but that the debtor must be directed
to file an independent action. The Tribunal would then consider whether the
debtor shouid be directed to file an independent action in regard to any part
of the debtor's claim.

F In our view, the Company's suit 272/85 in so far claims a relief for
specific performance, perpetual and mandatory injunctions, it is in substance
in the nature of a counter-claim under sub-clauses (8) to (I 0) of section 19
and are in the nature of a counter-claim. The plea for deduction of damages
is in the nature of a set-off falling within section 19(6) and (7). Both are
G equated to cross-suits. If a set-off or a counter claim is to be equated to a
cross suit under section 19, afortiori there can be no difficulty in treating the
cross-suit as one by way of set-off and counter claim, and as proceedings
which ought to be dealt with simultaneously with the main suit by the Bank.
In fact, the Bank has not objected to such a course. Indeed, section 19(11)
says that if any particular counter-claim raised in the suit 272/85 cannot be
H decided by the Tribunal while deciding the Bank's suit, the defendant may
UNITED BANK OF INDIA v. ABHIJIT TEA CO. PVT.LTD. [M. JAGANNADHA RAO, J .] 169

apply to the Tribunal for exclusion of such a counter-claim. But such a A
question does not arise in this case. In our view, in. the context, the word
'counter-claim' in section 19(8) to (11) which is equated to a cross-suit,
includes a claim even if it is made in an independent suit filed earlier. An
agreement not to charge interest, the specific performance of which is claimed
is nothing but a plea that the Bank could not charge interest. A permanent
injunction directing the Bank not to charge interest because of an alleged B
agreement in that behalf is likewise a plea that no interest is chargeable. So
far as the plea for further financial assistance is concerned, it is also, broadly,
in the nature of a 'counter-claim'. All these fall under section 19(8) to (I 0).
Again, the plea for deducting 'damages' though raised in the suit is indeed
broadly a plea of"set off' falling under sub-clause (6) and (7) ofsectiori 19. C
Both the suits, the one by the Bank against the respondent (suit 410/
85) and the other by the debtor against the Bank (suit 272/85) which raises
claims or pleas in the nature of set-off or counter-claim are interconnected.
The respondent's suit falls under sub-clauses (6), (7) and (8) to (11) of section
19, as stated above. Our decision in regard to the real nature of suit 272/85 D
has become necessary in the context of a plea by the debtor-company that
the company's suit 272/85 is liable to be retained in the civil Court and on
account· of the plea that the connected suit by the Bank 410/85 is also to be
retained. Such a plea, as shown above, cannot be accepted. Thus, both the
suits are suits falling within the Act.
E
We, therefore, direct the Bank's suit 410/85 to be transferred by the
Registrar, Calcutta High Court to the appropriate Tribunal under the Act. So
far as the debtor-company's suit 272/85 is concerned, action has to be taken
likewise by the Registrar in the light of our finding which finding has become
necessary in view of the contention on behalf of the debtor company before F
us, as explained above.

For the aforesaid reasons, we hold under Point 3 that the pendency of
the company's suit 272/85 in the High Court is not a ground for retaining the
Bank's suit 410/85 in the Calcutta High Court. The suit 272/85 filed by the
debtor company is also a suit to be necessarily tried only by the Tribunal. G
The pendency of the Company's suit 272/85 in the High Court is no reason
for keeping the Bank's suit 410/85 in the High Court. The suit 410/85 is liable
to be transferred to the Tribunal. Incidentally, we also hold that even suit 272/
85 is to be tried only by the Tribunal.

The appeal is allowed. The order of the learned Single Judge is set aside H
170 SUPREME COURT REPORTS (2000) SUPP. 3 S.C.R.

A and suit 410/85 is directed to be transferred by the Registrar, High Court to
the Tribunal. In the light of our finding as to the real nature of the company's
suit 272/85, it will be for the Registrar of the High Court to pass appropriate
orders. We hope that appropriate orders will be passed in relation to suit 272/
85 expeditiously, at any rate, within one month from today.

B We direct the respondent-company to file its written statement in suit
410/85 within one month from today. We also direct the Tribunal to dispose
of both the suits within a period of six months from today, the suits being
very old suits of 1985. There will be no order as to costs.

T.N.A. ).
Appeal allowed.