Civil Court Jurisdiction Barred In NBFC Loan Recovery Disputes; NCLT Has Exclusive Domain U/S 45 QA RBI Act: Allahabad High Court
The Court held that Section 430 of the Companies Act r/w Section 45QA of the RBI Act bars civil suits restraining lenders from recovery through tribunals.
Justice Sandeep Jain, Allahabad High Court
The Allahabad High Court has held that the plenary jurisdiction of the civil courts under Section 9 CPC is effectively superseded when a specialised statutory framework exists for debt recovery involving Non-Banking Financial Companies (NBFCs). The Court further noted that disputes regarding the premature recovery of loans or deposits from an NBFC fall exclusively within the domain of the National Company Law Tribunal (NCLT) under Section 45 QA of the Reserve Bank of India Act, 1934.
Consequently, any attempt to bypass the specialised proceedings by filing a civil suit for permanent injunction is legally impermissible, as Section 430 of the Companies Act, 2013, expressly prohibits civil courts from entertaining matters that the Tribunal is empowered to determine, it noted.
Justice Sandeep Jain observed, “It is apparent from the language of Section 430 of the Companies Act, 2013 that where any matter is to be determined under this Act or any other law, which includes the RBI Act, by the NCLT, then no injunction can be granted by any court or other authority in respect of any action taken or to be taken by the NCLT, in pursuance of any power conferred by the RBI Act. It is clear that under Section 45 QA of the Act only the NCLT had the jurisdiction to decide the dispute of 18 premature repayment of the loan taken by plaintiff from the defendant, hence, the civil court had no jurisdiction in this matter…”.
Advocate Anil Kumar Pandey appeared for the appellant and Advocate Rahul Agarwal appeared for the respondent.
The appellant, Shivam Traders & Hire Purchase Pvt. Ltd., an NBFC, had secured a long-term loan of ₹19.25 crores from the respondent, Madhusudan Vehicles Pvt. Ltd., in 2019. The appellant alleged that although the loan agreement stipulated a nine-year tenure, the respondent began exerting undue pressure for premature repayment after only one year, leading to complaints filed with the RBI.
Seeking to protect its business interests and prevent what it termed frivolous proceedings, the appellant filed an original suit in Agra for a permanent injunction to restrain the respondent from recovering the loan before the maturity period.
Pertinently, the matter involved a rigorous challenge by the respondent through an application under Order VII Rule 11 of the CPC. The respondent argued that the suit was barred by the Specific Relief Act and that the NCLT held exclusive jurisdiction over the matter.
While an initial application was dismissed for non-prosecution, a subsequent identical application was entertained by the trial court. The Civil Judge (Senior Division), Agra, eventually allowed the application, concluding that Section 430 of the Companies Act barred the civil court's jurisdiction since both parties were NBFCs involved in a repayment dispute cognizable by the NCLT.
The Court, thus, noted that the appellant had suppressed the material fact that the respondent had already initiated a petition under Section 45 QA of the RBI Act before the NCLT, Allahabad Bench, prior to the filing of the suit.
“…It is further apparent that no other Court, except the NCLT, had the jurisdiction to deal with this matter and further, no court can grant injunction in this matter, except the NCLT. It is further apparent that the plaintiff has not approached the court with clean hands and has suppressed material facts, which also disentitles him from getting the discretionary relief of injunction from the court”, the Bench noted.
Furthermore, the Court clarified that under Section 45-I(bb) of the RBI Act, "deposit" includes loans, meaning the NCLT is the only judicial authority competent to decide whether a lender is entitled to claim back funds prematurely. The Court found that the trial court's inadvertent error in referring to the dismissed application number did not prejudice the appellant, as the legal bar remained absolute.
Accordingly, the Bench dismissed the appeal with costs, affirming the trial court’s order dated March 1, 2025, which rejected the plaint. The Court vacated all previous interim stay orders and directed the trial court record to be returned, effectively allowing the parties to resume their dispute before the NCLT.
Cause Title: Shivam Traders And Hire Purchase Pvt. Ltd. v. Madhusudan Vehicles Pvt. Ltd. [Neutral Citation: 2026:AHC:67074]
Appearances:
Appellant: Anil Kumar Pandey and Arvind Srivastava, Advocates.
Respondent: Rahul Agarwal and Vedant Agarwal, Advocates.
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