Jurisdiction of Civil Courts Barred in Matters Adjudicable by NCLT Under Companies and RBI Acts
In a significant judgment, the Allahabad High Court has dismissed an appeal by Shivam Traders and Hire Purchase Pvt. Ltd., a non-banking financial company (NBFC), challenging the order of the Agra Civil Court, which had rejected its suit seeking to prevent Madhusudan Vehicles Pvt. Ltd. from prematurely recovering a substantial loan amount. The High Court reiterated that civil courts lack jurisdiction in disputes exclusively adjudicable by the National Company Law Tribunal (NCLT) under the Companies Act, 2013, and the Reserve Bank of India Act, 1934.
The case involved a long-term loan of Rs. 19.25 crores extended by Madhusudan Vehicles Pvt. Ltd. to Shivam Traders, which allegedly violated the agreed-upon terms by seeking early repayment. Shivam Traders sought a permanent injunction to restrain Madhusudan Vehicles from recovering the loan prematurely. However, the trial court had dismissed the suit, citing lack of jurisdiction as the matter fell under the purview of the NCLT.
Justice Sandeep Jain, presiding over the appeal, affirmed the trial court's order, emphasizing that Section 430 of the Companies Act, 2013, bars civil courts from entertaining suits in matters determinable by the NCLT. The Court noted that the loan in question qualified as a "deposit" under Section 45-I(bb) of the RBI Act, and disputes concerning its repayment fell exclusively within the NCLT's jurisdiction.
The judgment further highlighted that Shivam Traders had suppressed material facts, including ongoing proceedings initiated by Madhusudan Vehicles before the NCLT for loan recovery. This suppression undermined the plaintiff's claim for equitable relief. The Court stressed that the plaintiff must approach the court with clean hands, particularly when seeking an injunction.
The High Court's decision underscores the specialized role of the NCLT in handling disputes involving NBFCs and reiterates the importance of exhausting statutory remedies before approaching civil courts. This judgment is a reminder of the legal framework governing financial disputes and the limits of civil court jurisdiction in such matters.
Bottom Line:
Civil courts do not have jurisdiction to entertain suits or grant injunctions in matters exclusively adjudicable by the National Company Law Tribunal (NCLT) under section 430 of the Companies Act, 2013, including disputes arising under Section 45QA of the Reserve Bank of India Act, 1934.
Statutory provision(s): Section 430 of the Companies Act, 2013, Section 45 QA of the RBI Act, 1934, Order VII Rule 11 CPC, Section 41(b) of the Specific Relief Act, 1963.
