Bombay High Court
Visiona India Fund vs Icici Bank Limited And 3 Ors on 21 June, 2022
Author: Gs Patel
Bench: G.S.Patel, Madhav J Jamdar
ICICI BANK LTD VS SREI MULTIPLE ASSET
INVESTMENT TRUST AND VISION INDIA
937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc
Shephali
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL APPELLATE DIVISION
INTERIM APPLICATION (L) NO. 8534 OF 2022
IN
COMMERCIAL SUIT (L) NO. 8530 OF 2022
ICICI Bank Ltd,
A company registered under the Companies
Act 1956 and having its corporate office at
ICICI Bank Towers, Bandra Kurla Complex,
Bandra (East), Mumbai - 400 051
Maharashtra, India ...Applicant
in the matter between
ICICI Bank Ltd,
A company registered under the Companies
Act 1956 and having its corporate office at
SHEPHALI
SANJAY ICICI Bank Towers, Bandra Kurla Complex,
MORMARE
Bandra (East), Mumbai - 400 051
Maharashtra, India ...Plaintiff
Digitally signed
by SHEPHALI
SANJAY
MORMARE
Date: 2022.06.27
17:10:51 +0530
~ versus ~
1. SREI Multiple Asset
Investment Trust,
an Alternative investment fund,
registered with Securities Exchange
Board of India and having its registered
Page 1 of 30
21st June 2022
ICICI BANK LTD VS SREI MULTIPLE ASSET
INVESTMENT TRUST AND VISION INDIA
937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc
office at Vishwakarma, 86,C, Topsia
Road (South), Kolkata - 700004
2. Raghunath Ghose,
Trustee of SREI Multiple Asset
Investment Trust, Having its office at:
10, Old Post Office Street, Room No.
36A, 1st Floor, Kolkatta - 700001
3. Vision India Fund,
Having its address at:
Office No. 6, 4th Floor, Trinity Tower,
Topsia Road (South), Kolkata-700046
West Bengal, India
4. Trinity Alternate
Investment Managers Ltd,
a company registered under the
Companies Act 1956 and having its
registered office at: Office No. 6,
4th Floor, Trinity Tower, Topsia Road
(South), Kolkata, West Bengal - 70046 ...Defendants
WITH
COMMERCIAL APPEAL (L) NO. 16775 OF 2022
IN
INTERIM APPLICATION (L) NO. 8534 OF 2022
IN
COMMERCIAL SUIT (L) NO. 8530 OF 2022
AND
INTERIM APPLICATION (L) NO. 16790 OF 2022
IN
COMMERCIAL APPEAL (L) NO. 16775 OF 2022
Page 2 of 30
21st June 2022
ICICI BANK LTD VS SREI MULTIPLE ASSET
INVESTMENT TRUST AND VISION INDIA
937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc
Vision India Fund,
Having office at:
Office No. 6, 4th Floor, ...Appellant
Trinity Tower, Topsia Road, Kolkata Orig. Defendant No.3
~ versus ~
1. ICICI Bank Ltd,
Having Corporate Office at:
ICICI Bank Towers,
Bandra Kurla Complex,
Bandra (East),
Mumbai - 400 051 ...Orig. Plaintiff
2. SREI Multiple Asset
Investment Trust,
Having Registered office at:
Vishwakarma, 86C,
Topsia Road (South),
Kolkata - 700004 ...Orig. Defendant No.3
3. Raghunath Ghose,
Trustee of SREI Multiple Asset
Investment Trust, Having its office at:
10, Old Post Office Street, Room No.
36A, 1st Floor, Kolkatta - 700001 ...Orig. Defendant No.2
4. Trinity Alternate
Investment Managers Ltd,
Having Registered office at:
Office No. 6, 4th Floor, Trinity Tower,
...Respondents
Topsia Road, Kolkata. ...Orig. Defendant No.4
WITH
COMMERCIAL APPEAL (L) NO. 16773 OF 2022
Page 3 of 30
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ICICI BANK LTD VS SREI MULTIPLE ASSET
INVESTMENT TRUST AND VISION INDIA
937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc
IN
INTERIM APPLICATION (L) NO. 8534 OF 2022
IN
COMMERCIAL SUIT (L) NO. 8530 OF 2022
AND
INTERIM APPLICATION (L) NO. 16784 OF 2022
IN
COMMERCIAL APPEAL (L) NO. 16773 OF 2022
SREI Multiple Asset
Investment Trust,
an alternate Investment Fund registered
with SEBI, having its registered office at
Vishwakarma, 86C, Topsia Road (South), ...Appellant/
Kolkata - 700046 Orig. Defendant No.1
~ versus ~
1. ICICI Bank Ltd,
Having Corporate Office at:
ICICI Bank Towers, Bandra Kurla
Complex, Bandra (East), Mumbai - 400
051 ...Orig. Plaintiff
2. Raghunath Ghose,
Trustee of SREI Multiple Asset
Investment Trust, Having its office at:
10, Old Post Office Street, Room No.
36A, 1st Floor, Kolkatta - 700001 ...Orig. Defendant No.2
3. Vision India Fund,
Having office at:
Office No. 6, 4th Floor, Trinity Tower,
Topsia Road, Kolkata ...Orig. Defendant No.3
Page 4 of 30
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ICICI BANK LTD VS SREI MULTIPLE ASSET
INVESTMENT TRUST AND VISION INDIA
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COMAPL-16773-2022-J.doc
4. Trinity Alternate
Investment Managers Ltd,
Having Registered office at:
Office No. 6, 4th Floor, Trinity Tower,
...Respondents
Topsia Road, Kolkata. ...Orig. Defendant No.4
A PPEAR ANCES
For Vision India Mr Navroz Seervai, Senior
Fund Advocate, with Ashish Kamat,
Ashutosh Thipsay, Komal
Khushalani, SS Jan, Yash
Tembe & Prerana Wagh, i/b M/s
Crawford Bayley & Co.
For SREI Mr Ashish Kamat, with Ashutosh
Thipsay, Komal Khushalani, SS
Jan, Yash Tembe & Prerana
Wagh, i/b M/s Crawford Bayley
& Co.
For ICICI Bank Ltd Dr Birendra Saraf, Senior
Advocate, with Ayush
Agarwala, Suvaaankoor Das &
Swati Khinvasara, i/b M/s
Krishnamurthy & Co.
CORAM : G.S.Patel &
Madhav J Jamdar, JJ
DATED : 21st June 2022
ORAL JUDGMENT (Per GS Patel J):-
1. This order is made on the Plaintiff's original Interim Application (L) No. 8534 of 2022 in Commercial Suit (L) No. 8530 Page 5 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc of 2022 in the following circumstances. The Plaintiffs moved that Interim Application first before the learned Single Judge on 2nd May 2022. By that order, the learned Single Judge did not examine the plea of want of jurisdiction raised by the contesting Defendants Nos. 1, 3 and 4. He took a prima facie view and made an order inter alia directing the Defendants to deposit, within four weeks with the Prothonotary & Senior Master, a sum of approximately Rs. 87.60 crores. He also granted an injunction against the Defendants from using the sale proceeds of Rs. 17.64 cores shares that were until then unsold. There were certain additional directions as well. Two Defendants filed separate Appeals. Commercial Appeal (L) No. 16775 of 2022 is by Vision India Fund ("Vision India"), originally Defendant No. 3 in the Suit. Commercial Appeal (L) No. 16773 of 2022 is by the SREI Multiple Asset Investment Trust ("SREI"), original Defendant No. 1. The Appeals were moved before us on 7th June 2022. After some hearing, we asked if the two contesting sides were agreeable to the main Interim Application in the Suit being withdrawn to and decided directly by this Division Bench, chiefly to save time, and to avoid having to make a request to hear the matter on priority at an early date. Both sides sought time to take instructions. We had at that time made it clear that the agreement of both sides would be necessary, but cautioned that should they agree to this course of action, they would lose the opportunity of an intra- court appeal. On taking instructions, Mr Seervai for Vision India and Dr Saraf for the contesting 1st Respondent, the original Plaintiff, ICICI Bank Ltd ("ICICI") communicated to this Court that they were agreeable to the proposal, i.e., that the main Interim Application in the Suit itself be taken up by this Division Bench. The matter was stood over to 17th June 2022. The Court was Page 6 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc unavailable on that day and the next. The parties agreed to a listing today. We have heard both sides fully today.
2. For good order, and in view of the parties agreeing to our deciding the principal IA, the impugned order is by consent set aside. We clarify that this is without any assessment of the correctness or otherwise of the impugned order.
3. Mr Seervai for Vision India raises a point of jurisdiction based on section 18 of the Recovery of Debts and Bankruptcy Act 1993 ("RDDB Act") (originally known as the Recovery of Debts Due to Banks and Financial Institutions Act 1993). He says that on a fair reading of the plaint, the Suit is nothing but one by the ICICI for a recovery of a debt. Paragraphs 1, 5, 6, 8, 10, 14 to 17, 20, 24, 34, 37 and 40 put this beyond the pale. Dr Saraf for ICICI in an attempt to curtail the scope of controversy submitted that he accepted that the suit is for recovery of a debt. However, he did not accept that Mr Seervai's contention that this Court's jurisdiction was ousted by Section 18.
4. On the matter of the pleadings, and we need not labour this any further, there is no doubt that in paragraph 5 of the Affidavit in Reply at page 173, Vision India and other Defendants raised the plea of an ouster of this Court's jurisdiction. Only to understand how parties respectively positioned themselves on the question of jurisdiction, it is worth reproducing a few select paragraphs from the Reply and then the Rejoinder. Paragraphs 5.1 to 5.4 of the Affidavit in Reply read thus:
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"5.1 The Plaintiff has filed the present suit for recovery of its purported "debt" of Rs. 167,25,04,665.26/- allegedly "due" to these Defendants during the course of "business activity" undertaken by the Plaintiff, a "banking company". 5.2 The Plaintiff is a "bank" as defined under the Section 2 (d)(i) read with Section 2(e) of the RDB Act, 1993. As such, the alleged suit claim falls within the scope of "debt" under Section 2(g) under RDB Act. 5.3 It is settled position in law that as per Section 18 of the RDB Act, there shall be a bar of jurisdiction on any civil court to try and entertain such dispute, that can only be adjudicated by the Debts Recovery Tribunal ("DRT") under Section 19 of RDB Act by filing of Original Application by the Plaintiffs herein.
5.4 The Courts in its catena of judgments have upheld that there is explicit bar on Civil courts as per Section 18 of the RDB Act to adjudicate the cases that would only lie before he appropriate DRT. Therefore, it is humbly submitted that this Hon'ble Court lacks the jurisdiction to adjudicate upon the issues raised in the present suit."
5. The traverse in the Affidavit in Rejoinder is to be found at in paragraphs 8.3, 8.4 and 8.5 at pages 230 and 231:
"8.3 I say in any event, the Agreement is not a loan agreement and does not relate to a lending/borrowing transaction. It is trite law that a claim petition filed by a bank under the RDB Act must relate to lending/borrowing transaction between a bank and the borrower. In the present case, the Applicant has transferred and assigned its rights in one such transaction and the Defendant Nos. 1 and 3 have assumed and acquired all rights and obligations to the extent of Assigned Outstandings (as defined in the Plaint). The transaction Page 8 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc between the Applicant and Defendant Nos. 1 and 3 is not a lending/borrowing transaction. The same will not qualify as a business activity for the purposes of the RDB Act. The captioned Suit arises out of a case of straight jacket case of egregious breach of the Agreement between the Applicant and Defendant Nos. 1 and 3. 8.4 Further, I say that the Debts Recovery Tribunal ("Tribunal") under the RDB Act can issue a certificate only for recovery of its dues from a lending/borrowing transaction. It cannot pass a decree and certainly cannot pass a decree in the nature of the reliefs sought for in the present Suit. The reliefs sought by the Applicant travel beyond the scope of the reliefs which may be granted by the Tribunal.
8.5 Accordingly, I submit that there is no bar on this Hon'ble Court to adjudicate the present case as the same does not fall under the ambit of the RDB Act."
(Emphasis added)
6. Section 18 of the RDDB Act reads as follows:
"18. Bar of Jurisdiction.-- On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17:
Provided that any proceedings in relation to the recovery of debts due to any multi-State co-operative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts laws (Amendment) Act, 2012 under the Multi-State Co- operative Societies Act, 2002 (39 of 2002) shall be Page 9 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc continued and nothing contained in this section shall , after such commencement, apply to such proceedings."
7. This will have to be read with Section 2(g), a definition of 'debt' that was amended from its original wording. It now reads: 1
(g) "debt" means any liability (inclusive of interest) which is claimed as due from any person or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;
(Emphasis added)
8. Given the position taken in the Affidavit in Reply and Affidavit in Rejoinder, we believe that we are only called upon to decide whether the claim in this particular case before us is or is not covered by Section 2(g) of the RDDB Act. If it is, there will be a 1 This is the definition as amended in 2000, 2016 and now in 2021.
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COMAPL-16773-2022-J.doc exclusion of jurisdiction of this Court. If it is not, then this Court is jurisdictionally competent.
9. We also accept as a general principle that the question of jurisdiction is one of the factors that has to be addressed by a court while taking a prima facie view on an Interim Application. Section 18, as Mr Seervai correctly points out, deals with subject matter jurisdiction. It is his submission that the question of jurisdiction must be decided at the threshold -- at least prima facie. We believe when it comes to subject matter jurisdiction, this is correct, because that goes to the root of a Court's jurisdiction. Jurisdictional ouster clauses are not to be construed in such a manner as to allow them to be constantly bypassed. This is not, in our view, a question of "finally deciding" jurisdiction within the meaning of Order XIV of the Code of Civil Procedure 1908 ("CPC"). Rather, it is the requirement of making at least a prima facie determination of the nature of the claim and whether the claim of that kind is or is not excluded by the statutory jurisdictional ouster clause. We do not think that it is possible to accept Dr Saraf's submission that we should not venture into the question of jurisdiction at this interim stage but only to see whether the Plaintiff has made out a case for interim protection. The reason is plain. To do otherwise would be to wholly negate the jurisdiction ouster provisions we find in Section 18 of the RDDB Act.
10. At this stage, we note one other dimension to this matter. Mr Seervai for his part and Dr Saraf for his have both, each in their own way, endeavoured to tempt us into making a larger pronouncement Page 11 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc in regard to the various kinds of matters that may be covered under Section 2(g) of the RDDB Act read with the provisions of the Banking Regulation Act, 1949. We do not believe we are called upon to decide any larger principle of universal applicability. We are only to see whether the transaction in this case falls within the definition of a debt under Section 2(g) or not. What happens in other cases is not our concern.
11. Mr Seervai is correct that Section 2(g) has several components and is of the widest possible amplitude. We will come to the nature of the transaction itself a little later. For the present, we look at a few decisions of the Supreme Court and two decisions of this Court as also certain provisions of the Banking Regulation Act to trace the jurisprudential contours of Section 2(g). The first decision relied on by Mr Seervai is of the Supreme Court in Eureka Forbes Ltd vs Allahabad Bank & Ors.2 Mr Seervai drew out attention to paragraphs 46 to 52, 64, 66 and 70. The Supreme Court said that the expressed 'debt' in Section 2(g) must receive a general and wide meaning. All liabilities are included. All persons are included. There is no restriction to a determined or definite liability, nor only a confinement to a debtor. The legislature has deliberately used wide terms to give a broad and liberal meaning. That is evident from the use of generic and general terms. In paragraph 64, the Supreme Court reiterated this position but worded it in the negative, and this is important, for it said that Section 2(g) of the Recovery Act is incapable of being given a narrow or restricted meaning. The Eureka Forbes Court said that the legislature used general terms which must 2 (2010) 6 SCC 193.
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COMAPL-16773-2022-J.doc be given appropriate plain and simple meaning. It is not for the Court to restrict the meaning of the words or any of the words in Section 2(g). This is emphasized once again in paragraph 70 where there is an even broader ratio returned that the words in 2(g) have to be construed widely in their common parlance. We note this because Dr Saraf's endeavour before us today is precisely to narrow the scope of Section 2(g) and to limit to borrowing and lending transactions.
12. Mr Seervai therefore submits -- in our view, correctly -- that once ICICI bank accepts that its claim is a 'debt', then it is covered by Section 2(g) and the jurisdictional ouster under Section 18 applies.
13. On the strength of the decision of the Supreme Court in United Bank of India vs Debts Recovery Tribunal & Ors, 3 paragraph 15, Mr Seervai submits that it is for the Plaintiff to establish how the jurisdictional ouster clause in Section 18 is not applicable. The averments in the Plaint must be looked at and it must be shown by the Plaintiffs that its averments are such that it is possible to hold that the jurisdiction of the present court or tribunal is not ousted; i.e., that a statute that confers exclusive jurisdiction is inapplicable.
14. The jurisdictional averments in the Plaint are in paragraph 41 at page 294. We find no mention here at all of how Section 18 is inapplicable to the present case.
3 (1999) 4 SCC 69; 1999 SCC OnLine SC 412.
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15. Mr Seervai takes this argument one step further. He submits that the only activity that a bank can do is banking activity. But banking activity is not limited to merely borrowing and lending. It is every activity permitted under the Banking Regulation Act 1949. Indeed a bank can do nothing other than banking activity. If it attempts to do so it runs afoul of the specific prohibition under the Banking Regulation Act itself. He draws attention to Section 6 of the Banking Regulation Act. This is in Part II and it speaks of the "Business of Banking Companies". We believe it would be prudent to reproduce the whole of Section 6. It reads thus:
Part II Business of Banking Companies
6. Form of business in which banking companies may engage.-- (1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely:--
(a) the borrowing, raising, or taking up of money;
the lending or advancing of money either upon or without security; the drawing, making, accepting discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveller's cheques and circular notes; the buying, selling and dealing in bullion and species; the buying and selling of foreign exchange including foreign bank notes; the acquiring holding, issuing on commission, underwriting and dealing in stocks, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others, the Page 14 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc negotiating of loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities;
(b) acting as agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a managing agent or secretary and treasurer of a company;
(c) contracting for public and private loans and negotiating and issuing the same;
(d) the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures, or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue;
(e) carrying on and transacting every kind of guarantee and indemnity business;
(f ) managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;
(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;
(h) undertaking and executing trusts;
(i) undertaking the administration of estates as executor, trustee or otherwise;
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(j) establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the company or the dependants or connections of such persons; granting pensions and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object;
(k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company;
(l) selling, improving, managing, developing, exchanging, leasing mortgaging disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;
(m) acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub- section;
(n) doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company:
(o) any other form of business which the Central Government may by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage.
(2) No banking company shall engage in any form of business other than those referred to in subsection (1)."
(Emphasis added) Page 16 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
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16. Section 5(b) of the Banking Regulation Act defines "banking":
"5. Interpretation.-- In this Act, unless there is anything repugnant in the subject or context,
(b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise."
17. For the purposes of the Banking Regulation Act, therefore, 'banking' has a certain definition, but a banking company, defined in Section 2(c) as any company which transacts the business of banking in India, may do all or any of the activities specified in Section 6(1) and its various sub-clauses. Conversely, it cannot engage in any form of businesses other than those referred to in sub-Section (1). It is for this proposition that Mr Seervai relies on the decision of the Supreme Court in ICICI Bank Ltd vs Official Liquidator of APS Star Industries Ltd & Ors.4 He draws attention to paragraphs 30 to 33 and 36 to 38 and 44 to say that the business of a banking company and banking activities includes assignments (specifically paragraph 38). It also extends to restructuring and management of non performing assets (paragraph 44).
18. Finally Mr Seervai refers to the decision of a learned Single Judge of this Court (DG Karnik, J) in The Solapur Social Urban Cooperative Bank Ltd vs Nigam A Mannan Beskar & Ors. 5 This is for the proposition that while making an application for interim relief a 4 (2010) 10 SCC 1; (2010) 4 SCC (Civ) 1; 2010 SCC OnLine 1102. 5 2006 SCC OnLine Bom 277; (2006) 4 Bom CR 217.
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COMAPL-16773-2022-J.doc plaintiff must satisfy the court about the maintainability of the suit. If the plaintiff cannot do that, the court is bound to reject the application for interim relief. A prima facie finding on jurisdiction of the Court and maintainability of the suit is an essential component of an evaluation of the strength of a plaintiff's case. We are in full agreement with the view taken by the learned Single Judge.
19. In response to this delineation of the law under the RDDB Act and the Banking Regulation Act, Dr Saraf submits that for the purposes of Section 2(g) of the RDDB Act, the linkage must be with the definition of banking under Section 5(b) of the Banking Regulation Act. In other words, for the exclusive jurisdiction Section 18 of the RDDB Act to apply, the transaction in question must be one of borrowing and lending alone. The larger canvass of Section 6(1) of the Banking Regulation Act cannot be read into Section 2(g) of the RDDB Act to include various other permissible banking activities that constitute the business of banking companies. We have the greatest reluctance in accepting a proposition of such width. It seems to us to be in the teeth of the decisions of the Supreme Court certainly in APS Star Industries. Paragraphs 37, 38 and 44 of APS Star Industries do not permit us to accept such an overbroad proposition. It also appears to us to run counter to the unambiguous wording of the Supreme Court in Eureka Forbes in regard to the amplitude of Section 2(g) of the RDDB Act. Again and again the Eureka Forbes Court said Section 2(g) is of the widest amplitude, does not admit of confinement to any particular form of transaction, liability or entity and must be receive its plain meaning. The legislature has consciously used ordinary words of wide import.
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20. But Dr Saraf says that his submission is bolstered by decision of a Division Bench of this Court in HDFC Bank Ltd vs Vasudeo Shripad Belvalkar though his Legal Heir & Anr.6 Here the Division Bench considered all these judgments including Eureka Forbes Ltd and APS Star Industries. The Division Bench seems to have held that these decisions of the Supreme Court were all in the context of a 'due' that arose in the course of a core banking business; and, therefore, both decisions must be read to be limited to a core banking business. But in paragraph 34 of that very same decision the Division Bench accepted that one or more of that activities under Section 6(1) of the Banking Regulation Act may well fall within the definition of Section 2(g) of the RDDB Act.
21. The Division Bench in HDFC Bank Ltd attempted to limit the decisions of the Supreme Court to the facts of that case. We are not convinced that this is either prudent or permissible. Even the obiter of the Supreme Court is binding. On a careful consideration, we believe the decision of the Division Bench in HDFC Bank Ltd must be read as being confined to the facts of that case. This is clear because what was before the Court in HDFC Bank Ltd was a matter of recovery of a security deposit under a leave and license agreement. That was its context. The Division Bench had no call or occasion to venture any further. It is possible that the other observations in the Division Bench decision regarding the amplitude (or, rather, the lack of it) in Section 2(g) of the RDDB Act is either not good law in view of the Supreme Court decision in Eureka Forbes, or is obiter and constitutes no binding precedent.
6 2019 (3) Mh.L.J 755.
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22. Speaking for ourselves today and being mindful of our own caution, we circumscribe our decision in this matter to the facts of this particular case. We have only noted the conspectus of the law as it stands. We do not venture to make any larger or broader pronouncement of universal applicability of Section 2(g) in regard to all debts or claims.
23. Dr Saraf's next submission seems to us to be rather clutching at the proverbial straw. He frames it like this. Banking is Entry 45 of List I of the VIIth Schedule of the Constitution of India. Rustom Cavasjee Cooper vs Union of India7 says, in his submission, in paragraphs 28 to 36 that only banking activity is covered by that Entry. If the RDDB Act is covered in Entry 45, then it can only be restricted to bank or banking activity as defined Section 5(b) of the Banking Regulation Act. Otherwise, the RDDB Act would be unconstitutional. We must, he urges, do our utmost to uphold the constitutionality of the RDDB Act. If we accept a broader definition of Section 2(g) -- no matter what Eureka Forbes says -- we would render the RDDB Act unconstitutional.
24. We do not think it is necessary to enter into any such controversy. We believe that this submission is only to be stated to be rejected. To accept it would effectively mean to hold that the Supreme Court in Eureka Forbes, APS Star Industries and United Bank of India was wholly unmindful of this constitutional catastrophe.
7 (1970) 1 SCC 248.
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25. What emerges therefore this. If on a prima facie evaluation, the claim of the Plaintiff is a debt within Section 2(g) of the RDDB Act, the jurisdiction of this Court will stand excluded. Then no question of any protective relief arises. For this we need to turn to the document in question. This has a background that is narrated in the document itself. ICICI Bank was a lender to 3i Infotech Limited in a very substantial amount of several hundred crores of rupees. That company was in financial difficulties. A consortium of lenders met with the company an agreed on Debt Realignment Scheme, itself the result of what seems to have been fairly protracted attempts to rehabilitate the company. There was a Master Restructuring Agreement on 30th March 2012 along with several other documents. One of the proposals from the company was that its debt should be converted to equity. Citing certain regulatory restrictions, ICICI Bank felt that it could not itself subscribe to the equity of 3i Infotech. It therefore assigned its debt, i.e. the amount recoverable by it from 3i Infotech to Vision India Fund and SREI Multiple Assets. This was the result of what are called the transfer agreements. The one with Vision India is dated 30th June 2016. A copy is at page 784. The three recitals (A), (B) and (C) read thus:
"(A) The Original Lender has, pursuant to certain credit facility agreements entered into between the Original Lender and the Borrower, provided various credit facilities with Principal Outstanding to the Borrower subject to the terms and conditions contained therein.
The Original lender, along with various other lenders, has also entered into a Master Restructuring Agreement with the Borrower dated March 30, 2012 (the "MRA" as amended and restated from time to time) including the Additional Foreign Currency Facility Agreements dated Page 21 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc October 29, 2013 and November 29, 2013 ("Additional Foreign currency Facility Agreements"), Conversion Agreements dated December 30, 2015 along with other CDR Documents for the purpose of restructuring the existing credit facilities of the Borrower, extending additional facilities, as more particularly set out in Part A of Schedule I hereto (the "Facilities") and setting out the terms of the restructuring package.
(B) The Original Lender has now agreed to transfer and assign, and the New Lender has agreed to assume and acquire all the rights and Obligations, to the extent of the Assigned Outstandings (as defined below) of the Facilities along with the rights, titles, risk and interests thereof under the Transaction Documents, including all security interests in relation thereto corresponding to the Assigned Outstandings.
(C) The Parties have also agreed to sign the novation and transfer notices as per the requirements under the MRA and Additional Foreign Currency Facility Agreements and the Original Lender has agreed to forward the said notices to the Monitoring Institution, Borrower and the Security Trustee to enable the New Lender ot accede to the MRA and other CDR Documents in addition to the Original Lender to the extent of Assigned Outstandings. The Parties are desirous of entering into this Agreement to record the terms and conditions of the transfer of the Facilities to the extent of Assigned Outstandings. Pursuant thereto, the Parties intending to be legally bound, hereby agree as follows: ... ...
26. A few definitions are important.
"1.4 "Borrower" shall mean 3i Infotech Limited, a company within the meaning of Companies Act 2013 having its registered office at Tower 5, 3rd to 6th floor, Page 22 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc International Infotech Park, Vashi, Navi Mumbai - 4007003, India.
1.5 "DRS Scheme" shall mean the debt realignment scheme as annexed hereto as Schedule VI and includes all amendments and modifications made thereto from time to time under the corporate debt restructuring and/or joint lenders forum.
1.6 "Deductions" shall mean the aggregate of the following:
(a) a sum of 5% of the Gross Deferred Consideration being the management fees towards the administrative expenses of the New Lender.
(b) any tax liability nor exceeding INR 200 crores (Indian Rupees Two Hundred Crores only) relating to the Assigned Outstandings (irrespective of whether the Original Lender/ Borrower is able to avail any tax credit in respect thereof or not) and any Assigned Securities to the extent the tax liability pertains to the Gross Deferred Consideration but shall not include any tax pertaining to the dividends and interest component retained by the New Lender.
(c) any costs, expenses incurred by the New Lender in connection with the Assigned Outstanding or recovery thereof as provided in Clauses 6.3 of this Agreement to the extent the said costs, expenses incurred pertains to the Gross Deferred Consideration but shall not include expenses included under (a) above.
1.7 "Gross Deferred Consideration" shall be Page 23 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
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(a) entire amount realised by the New Lender on sale during the Relevant Period of any listed equity shares or any other listed securities allotted to the New Lender pursuant to the DRS Scheme and such realisation is more than INR 296,40,04,665.26 (Indian rupees Two Hundred Ninety Six Crores Forty Lakhs Four Thousand Six Hundred Sixty Five and Paise Twenty Six Only)
(b) INR 296,40,04,665.26 (Indian rupees Two Hundred Ninety Six Crores Forty Lakhs Four Thousand Six Hundred Sixty Five and Paise Twenty Six Only) 1.8 "Net Deferred Consideration" shall mean the Gross Deferred Consideration as reduced by the Deductions to be paid in accordance with Clause 2.4. 1.11 "Outstandings" or "Principal Outstanding" shall mean principal amount of INR 635,68,88,729.08 (Indian Rupees Six Hundred Thirty Five Crores Sixty Eight Lakhs Eighty Eight Thousand Seven Hundred Twenty Nine and Paise Eight only) as more particularly set out in Part A of Schedule I herein, owed as on date of this Agreement, by Borrower to the Original Lender in terms of the Transaction Documents.
1.12 "Realisations" shall mean the payments set out in paragraph (a) below to the extent they are received in cash or realised cheques or remittance facility by the New lender as reduced by the aggregate of amounts set out in paragraph
(b) below:
(a) (i) repayment of a part or whole of the Assigned Outstandings by the Borrower/ Obligors including interest payable under the Transaction Documents and/or any repayments with respect to the Assigned Page 24 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc Outstanding recovered through exercise of any rights available under Applicable laws and/or the Transactions Documents including but not limited to any legal action, recovery proceedings, settlements or otherwise,
(ii) in the event a part or whole of the Assigned Outstandings are converted into equity or any other securities by the Borrower/Obligor, the dividends distribution received in cash with respect to such equity and/or any other securities and any cash received by the New Lender on sale of redemption of such equity and/or any other securities.
(b) (i) the dividends/distribution received in cash with respect to equity and/or any other securities in the event a part or whole of the Assigned Outstandings are converted into equity or any other securities by the Borrower/Obligor
(ii) Interest received by the New Lender only in the event the Assigned Outstandings are converted as debt and such debt does not exceed 10 crores pursuant to DRS Scheme.
1.18 "Transfer Price" shall mean a sum of INR 189,74,00,000 (Indian Rupees One Hundred Eighty Nine Crore and Seventy Four Lakhs Only).
27. Clause 2 including clauses 2.1 to 2.6 reads thus:
"2. CONSIDERATION 2.1 The Original Lender hereby confirms and declares that, as of the date hereof:Page 25 of 30
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(a) The total Outstandings payable by the Borrower to the Original Lender under the Transaction Documents in relation to the Facilities is INR 6,356,888,729.08 (Indian Rupees Six Hundred Thirty Five Crores Sixty Eight Lakhs Eighty Eight Thousand Seven Hundred Twenty Nine and paise Eight only);
(b) The assigned Outstanding which are assigned to the New Lender under the Transaction Documents in relation to Facilities is INR 4,864,004,665.26 (Indian Rupees Four Hundred and Eighty Six Crores Forty Lakhs Four Thousand Six Hundred Sixty Five and Paise Twenty Six only);
2.2 The New Lender hereby agrees to pay the Transfer Price to the Original Lender.
2.3 The parties hereby agree that this Agreement shall be effective on and from the date of receipt of the Transfer Price ("Effective Date") which shall be evidenced by a confirmation letter issued by the Original Lender no later than the date of receipt of the Transfer Price from New Lender.
2.4 Notwithstanding anything contained herein or in any other agreement, the Original Lender and the new Lender agree that the Net Deferred Consideration shall be paid on receipt by the New Lender of the Realisations and it being agreed that if the New Lender does not receive any Realisations there is no obligation to pay to the Original Lender. The Parties agree that:
(a) The New Lender shall hold the Realisations to the extent of Net Deferred Consideration in trust and for the benefit of the Original Lender and shall be liable to pay the Net Deferred Consideration from the Page 26 of 30 21st June 2022 ICICI BANK LTD VS SREI MULTIPLE ASSET INVESTMENT TRUST AND VISION INDIA 937-938-IAL-8534-2022-IN-COMAPL-16775-AND-
COMAPL-16773-2022-J.doc Realisations within 7 (seven) days of receipt. It is clarified for the avoidance of doubt that it is the New Lender who shall be entitled to receive the aggregate amounts set out in paragraph (b) of the definition of the terms "Realisations".
(b) Apart from the payment of the Transfer Price under Clause 2.2 the total amount payable to the Original Lender under this Clause shall not exceed the Net Deferred Consideration and upon payment thereof the financial obligations of the New Lender under this Agreement shall come to an end but the New Lender shall extend reasonable support as requested by the Original Lender at the cost of the Original Lender.
(c) Any part payment of the Net Deferred Consideration shall not absolve the New Lender from the obligation to pay the balance of the Net Deferred Consideration in accordance with this Clause to the extent the New Lender has received the corresponding Realisations.
(d) The Parties have agreed that the Deductions shall be borne by the Original Lender and accordingly the Original Lender will be paid only the Net Deferred Consideration. Upon receipt of the Net Deferred Consideration by the Original lender, the Original Lender shall be deemed to have received the Gross Deferred Consideration and will thereafter have no claims whatsoever against the New Lender.
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(e) The Parties hereby agree that, following the Effective Date, the Original Lender has no other rights with respect to the Assigned Outstandings other than (i) to receive the New Deferred Consideration and (ii) any other rights included in this Agreement.
2.5 Notwithstanding, anything contained in this Agreement, the Original lender hereby agrees that the transfer and/or assignment of Assigned Outstanding by it to the New Lender has been accepted by the new lender on the terms and conditions that there shall be no payment obligation upon the New Lender other than the payment of the Realisations in terms of this Agreement and further declares that neither the New Lender nor any of its directors/sponsor shall have any liability or obligation towards the Original Lender for repayment of the Net Deferred Consideration or otherwise howsoever in connection with the said Net Deferred Consideration in term of this Agreement.
2.6 The Parties hereby agree that, in case the Assigned Outstanding is converted into any listed equity shares or any other listed securities pursuant to the DRS Scheme and the New Lender effects the sale of the said listed equity shares or any other listed securities with Relevant Period, the entire amount received by the New Lender on such sale shall be paid to the Original Lender after reducing the Deductions."
28. Thus the transfer consideration had two portions. Apart from the money that was payable upfront, there were two sets of equity, preference and regular equity shares. There is no dispute as regards the preference shares. The only dispute is as regards the equity shares. This takes the colour of the net deferred consideration.
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COMAPL-16773-2022-J.doc What this tells us is that when Vision India/SREI liquidates its holdings in 3i Infotech, tax liability has to be worked out followed by a balancing of capital gain versus capital loss. The net consideration arrived at the end of this is payable to ICICI.
29. In its Affidavit in Reply, Vision India Fund said that it holds its immediate sale proceeds (on which no adjustments have yet been made) in trust and says that it has invested this safely. Rs. 70 crores are said to have been placed in the form of debentures with a private limited company (page 253). ICICI claims that this is unsafe. It says that there is siphoning of.
30. These and other matters will not detain us today because the agreement itself clearly demonstrate inter alia from the three recitals mentioned above that what ICICI is seeking to recover is nothing but a debt fully within the meaning of Section 2(g) of the RDDB Act. If this be so, then the objection that Mr Seervai takes is correct and Section 18 will begin to apply. This will preclude any evaluation by this Court of any arguments that ICICI may have to make on equity or otherwise for protection of that asset. Those submissions are best made to the Court that does have jurisdiction namely the Debt Recovery Tribunal ("DRT").
31. Resultantly, we hold that this Court does not have the jurisdiction to entertain the suit and, therefore, to grant any interim relief.
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32. We clarify that we have not expressed any view on the merits of the Interim Application. We have taken the prima facie view that this Court does not have jurisdiction. We say prima facie because this is an order made on the Interim Application that parties have agreed will be disposed of by us. There is no application before us for return of the plaint to the proper Court, and so we are making no directions in that regard either. We leave it to both sides to adopt suitable proceedings. We clarify that the Plaintiffs are at liberty to move an application for a withdrawal of the suit or a return of the plaint for presentation to the proper Court.
33. The Interim Application (L) No. 8534 of 2022 is disposed of in these terms. There will be no order as to costs.
34. In view of this, both Appeals and the Interim Applications therein are also disposed of.
(Madhav J Jamdar, J) (G. S. Patel, J)
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