Safiya Malik

The High Court of Bombay at Aurangabad, Single Bench of Justice Rohit W. Joshi, has upheld the transfer of a commercial suit to the Debts Recovery Tribunal (DRT) following the amalgamation of the original non-banking plaintiff with a banking company. The Court held that after such amalgamation, the DRT has jurisdiction over the subject matter and that the jurisdiction of other courts is barred under Section 18 of the Recovery of Debts and Bankruptcy Act, 1993. Consequently, the petition challenging the transfer was dismissed, and the interim order was continued for six weeks.

The dispute arose from a suit filed by a non-banking financial entity seeking recovery of Rs. 3,14,85,223 against multiple defendants, including the petitioner. The loan amounts were advanced in two separate accounts with outstanding sums of Rs. 2,32,28,013 and Rs. 82,62,210 at the time of filing. Originally instituted as Special Civil Suit No. 46 of 2007 before the civil court, the matter was later transferred to the Commercial Court under the Commercial Courts Act, 2015, and registered as Commercial Suit No. 12 of 2019.

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While the suit was pending, the plaintiff company, HDFC Limited, amalgamated with HDFC Bank Limited pursuant to an order dated 17 March 2023 by the National Company Law Tribunal, Mumbai, in Company Scheme Petition No. 240/2022. As a banking company under the Banking Regulation Act, 1949, HDFC Bank Limited inherited all assets, liabilities, and litigation rights of HDFC Limited. Consequently, HDFC Bank Limited was impleaded as the plaintiff.

Following the amalgamation, HDFC Bank filed an application (Exhibit 230) seeking transfer of the suit to the DRT, Aurangabad, under Sections 17 and 18 of the RDB Act. The petitioner, defendant no. 11, opposed the application, arguing that the DRT lacked jurisdiction because the original lender was not a bank at the time of advancing the loans and filing the suit. It was contended that Section 31 of the RDB Act allowed transfers only where the DRT would have had jurisdiction at the time of filing, which was not the case here.

The petitioner relied on judicial precedents interpreting the definition of "debt" under Section 2(g) and the scope of assignment, asserting that subsequent amalgamation should not alter the forum. In response, the respondent bank argued that the amalgamation made the plaintiff a bank entitled to invoke DRT jurisdiction, with Sections 17 and 18 barring the civil court's jurisdiction. The bank relied on precedents, including Kotak Mahindra Bank Ltd. v. Stiefel Und Schuh India Ltd., to argue that once a claim is held by a bank, the matter must be heard by the DRT.

Justice Rohit W. Joshi examined the interplay between Sections 17, 18, and 31 of the RDB Act. The Court recorded that "after amalgamation, the suit answers description of the term 'application' as defined under Section 2(b) of the Act and is of the nature of a proceeding referred under Section 19 of the Act", and therefore the DRT has jurisdiction.

On the definition of "debt," the Court stated: "The provision does not contemplate that the Bank must claim amount due which is advanced by it during the course of any business. Recovery of amount claimed as due during the course of banking business will also meet the parameters of definition of the term debt."

Regarding Section 31, the Court noted that while the present case did not fall squarely within its literal scope, a purposive interpretation was necessary: "Section 31 must submit to a mandate of Section 18 read with Sections 17, 2(d) and 19 of the Act. It will be appropriate to honour the scheme of the Act, which clearly bars jurisdiction of all Courts to exercise jurisdiction with respect to matters which fall within jurisdiction of DRT."

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The Court distinguished assignment from amalgamation, noting: "The present case is a case of amalgamation where the erstwhile plaintiff has completely merged with the present plaintiff (HDFC Bank Limited) ... the corporate entity of the transferor Company ceases to exist with effect from the date the amalgamation is made effective."

The Court dismissed the writ petition challenging the transfer, holding: "After amalgamation of original plaintiff (HDFC Limited) with the present plaintiff (HDFC Bank Limited), the DRT has jurisdiction over the subject matter of the suit and the suit is rightly transferred by the learned Commercial Court to DRT." No order as to costs was made.

Upon the petitioner's request, the Court continued the interim order for six weeks despite respondent no. 1’s objection, noting that "the impugned order is operating since 09.07.2024".

Advocates Representing the Parties:

For the Petitioner: Mr. S.P. Shah, Advocate

For the Respondents: Mr. S.V. Adwant, Advocate with Mr. H.S. Adwant and Mr. Aarya Deshpande

Case Title: M/s Ashwini Trading Co. v. Housing Bank Limited & Ors.

Neutral Citation: 2025: BHC-AUG:21712

Case Number: Writ Petition No. 7008 of 2024

Bench: Justice Rohit W. Joshi