Civil Court Cannot Grant Injunction Against NBFC Loan Recovery When NCLT Has Exclusive Jurisdiction: Allahabad High Court

"It is clear that under Section 45 QA of the Act only the NCLT had the jurisdiction to decide the dispute of premature repayment of the loan taken by plaintiff from the defendant, hence, the civil court had no jurisdiction in this matter." Allahabad High Court, in a significant ruling, held that a civil court lacks the jurisdiction to entertain a suit or grant an injunction restraining a Non-Banking Financial Company (NBFC) from recovering a loan.

A single-judge bench of Justice Sandeep Jain observed that Section 430 of the Companies Act, 2013, read with Section 45QA of the Reserve Bank of India Act, vests exclusive adjudicatory jurisdiction over such financial disputes with the National Company Law Tribunal (NCLT).

The plaintiff, an NBFC, had obtained a long-term loan of ₹19.25 crores from the defendant company for an agreed tenure of nine years. A dispute arose when the defendant allegedly demanded premature repayment after just one year and initiated recovery proceedings before the NCLT, Allahabad Bench, under Section 45QA of the RBI Act. The plaintiff subsequently filed a civil suit seeking a permanent injunction to restrain the defendant from recovering the amount, which the trial court rejected under Order VII Rule 11 of the Civil Procedure Code, prompting the present first appeal.

The primary question before the High Court was whether a civil court could entertain a dispute regarding the premature recovery of a loan between two NBFCs, or whether the suit was statutorily barred by Section 430 of the Companies Act, 2013 and the RBI Act. The court was also called upon to determine whether the plaintiff's active suppression of the pending NCLT proceedings disentitled it from claiming equitable relief.

High Court examines statutory bar, NCLT's exclusive domain, and suppression of facts

The High Court first examined the parameters of rejecting a plaint under Order VII Rule 11 of the Code of Civil Procedure. Relying on the Supreme Court's pronouncements in Vinod Infra Developers Ltd. v. Mahaveer Lunia and Keshav Sood v. Kirti Pradeep Sood, the court reiterated that at this preliminary stage, a judicial officer must confine their examination strictly to the averments made in the plaint and the annexed documents. The court emphasised that the defence raised by the defendant cannot be looked into, nor can the suit be summarily rejected if triable issues arise.

"The court has not to examine the written statement of the defendant or the documents submitted by it. Further, the court has also not to examine the plaintiffs case on merit to determine whether he is going to succeed or not," the bench observed.

Addressing the appellant's core contention that the money advanced as a loan was not covered under the ambit of the Reserve Bank of India Act, the court turned to the statutory definitions. The bench highlighted that under Section 45-I(bb) of the RBI Act, the term "deposit" expressly includes any receipt of money by way of a loan. Consequently, the court ruled that if an NBFC commits a default in repayment, the entity that advanced the loan is fully entitled to invoke Section 45QA of the RBI Act before the NCLT.

"The contention of the learned counsel for the appellant that under section 45 QA the money advanced as loan to the NBFC is not covered, is fallacious, which is liable to be rejected since Section 45-I(bb) expressly mentions that deposit also includes money advanced as a loan," the court noted.

The court then delved into the strict statutory bar imposed on civil courts under Section 430 of the Companies Act, 2013. Citing a catena of decisions, including the Supreme Court's ruling in Shashi Prakash Khemka v. NEPC Micon Ltd., the bench established that matters falling within the adjudicatory power of the NCLT are completely outside the purview of ordinary civil courts. The court reasoned that the NCLT is the sole judicial authority competent to decide whether depositors are entitled to claim back their loans prematurely and how the interests of the companies should be safeguarded.

"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," the judgment stated.

"It is evident that the plaintiff has not approached the court with clean hands and has suppressed material facts, disentitling him from getting any relief from the court."

Taking strong exception to the plaintiff's conduct, the High Court observed that the NBFC had deliberately concealed the fact that the defendant had already instituted proceedings before the NCLT months before the civil suit was filed. Placing reliance on the Supreme Court's judgment in Ramjas Foundation v. Union of India, the bench invoked the doctrine of clean hands, noting that a party seeking the equitable relief of an injunction must make an honest disclosure of all material facts. The court found that the plaintiff's primary aim was to bypass the NCLT and pre-empt any adverse orders through a parallel civil suit.

"It is apparent that since the defendant had already initiated proceeding under Section 45QA by filing company petition before the NCLT, the plaintiff had no cause of action to file the instant suit for restraining the defendant from recovery of the loan," the judge remarked.

Expanding on the equitable bars, the court held that the suit was also hit by the provisions of the Specific Relief Act, 1963. The bench noted that Section 41(b) of the Specific Relief Act expressly prohibits the granting of an injunction to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought. The court observed that the plaintiff would have had ample opportunity to contest the premature recovery claims and present its defence within the ongoing NCLT proceedings. "It is apparent that the defendant cannot be restrained from initiating proceedings for premature repayment of the loan advanced by it to the plaintiff, in any manner whatsoever," the court affirmed.

Finally, the High Court addressed the appellant's argument that the trial court had inadvertently referred to a previously dismissed application number instead of the subsequent identical application in its impugned order. The bench dismissed this as a mere procedural irregularity that did not prejudice the plaintiff, as both parties had fully argued the correct application and were thoroughly aware of the legal controversy being decided.

"Due to mere mentioning of incorrect number of application, due to inadvertent error by the court, in the impugned order, does not entitle the plaintiff to claim that he has been prejudiced due to this error," the bench concluded.

Dismissing the appeal with costs, the High Court affirmed the trial court's order rejecting the plaint under Order VII Rule 11 of the CPC. The court concluded that the adjudication of the loan recovery dispute between the NBFCs fell exclusively within the domain of the NCLT, and the plaintiff's suppression of pending proceedings further stripped it of any right to equitable relief.

Date of Decision: 31 March 2026