Introduction:

The case of Shivam Traders and Hire Purchase Pvt. Ltd. v. Madhusudan Vehicles Pvt. Ltd. (2026 LiveLaw (AB) 183) came before the Allahabad High Court in a First Appeal challenging the rejection of a plaint by the Trial Court. The dispute arose out of a loan agreement executed between the plaintiff and the defendant in the year 2019, wherein the plaintiff had availed a long-term loan with a tenure of nine years. As per the terms of the agreement, the defendant was restrained from demanding repayment before the completion of the majority of the agreed tenure.

However, within a year of the execution of the agreement, the defendant allegedly began demanding premature repayment of the loan along with interest. This led to friction between the parties, with the plaintiff alleging harassment and unlawful pressure tactics. The situation escalated when the defendant approached the Reserve Bank of India seeking intervention for repayment.

In response, the plaintiff instituted a civil suit seeking declaratory relief and protection against alleged infringement of its contractual and legal rights. The core grievance of the plaintiff was that the defendant’s demand for premature repayment was contrary to the terms of the loan agreement and therefore illegal.

The defendant, on the other hand, challenged the maintainability of the suit itself by filing an application under Order VII Rule 11 of the Code of Civil Procedure, contending that the civil court lacked jurisdiction to entertain the matter. It argued that disputes relating to repayment of loans involving Non-Banking Financial Companies (NBFCs) fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) under the provisions of the Reserve Bank of India Act, 1934, read with the Companies Act, 2013.

The Trial Court accepted the contention of the defendant and rejected the plaint, holding that the civil court was barred from entertaining the suit in light of Section 430 of the Companies Act, 2013. Aggrieved by this decision, the plaintiff approached the High Court in appeal.

The matter was heard by Justice Sandeep Jain, who examined the interplay between the statutory provisions and the jurisdictional limits of civil courts, ultimately rendering a significant judgment clarifying the exclusive domain of the NCLT in such disputes.

Arguments by the Appellant (Plaintiff):

The plaintiff-appellant advanced a series of arguments challenging the rejection of the plaint and asserting the jurisdiction of the civil court.

Violation of Contractual Terms:

The plaintiff argued that the loan agreement clearly stipulated that the defendant could not demand repayment before a substantial portion of the nine-year term had elapsed. The premature demand, therefore, constituted a breach of contract.

Right to Civil Remedies:

It was contended that the plaintiff had approached the civil court seeking declaratory relief and protection against illegal actions of the defendant. Such reliefs, according to the plaintiff, fall squarely within the jurisdiction of civil courts under general law.

Absence of Default:

The plaintiff maintained that there was no default on its part in repayment of the loan. Consequently, the invocation of statutory provisions relating to repayment disputes was unwarranted.

Misuse of Statutory Mechanism:

It was argued that the defendant’s attempt to approach regulatory authorities and seek premature repayment was an abuse of process and intended to exert undue pressure on the plaintiff.

Improper Rejection under Order VII Rule 11 CPC:

The plaintiff submitted that the Trial Court had erred in rejecting the plaint at the threshold without properly appreciating the nature of the dispute. It was argued that the question of jurisdiction required detailed examination and could not be decided summarily.

Distinction Between Contractual Dispute and Statutory Jurisdiction:

The appellant attempted to distinguish the present dispute as a purely contractual issue rather than one falling within the statutory domain of the NCLT.

Arguments by the Respondent (Defendant):

The defendant-respondent strongly opposed the appeal and supported the decision of the Trial Court.

Bar under Section 430 of the Companies Act, 2013:

The defendant argued that Section 430 explicitly bars civil courts from entertaining matters that fall within the jurisdiction of the NCLT or NCLAT. Since the dispute pertained to repayment of a loan governed by statutory provisions, the civil court lacked jurisdiction.

Applicability of Section 45QA of the RBI Act, 1934:

It was submitted that Section 45QA empowers the Company Law Board (now NCLT) to adjudicate issues relating to repayment of deposits or loans by NBFCs. Therefore, the appropriate forum for the dispute was the NCLT.

Definition of Deposit under Section 45-I(bb):

The defendant pointed out that the RBI Act includes loans within the definition of “deposit,” thereby bringing such transactions within the purview of Section 45QA.

Pending Proceedings before NCLT:

A crucial argument raised was that the defendant had already initiated proceedings before the NCLT prior to the filing of the civil suit. This fact was allegedly concealed by the plaintiff.

Suppression of Material Facts:

The defendant contended that the plaintiff had approached the Court with unclean hands by deliberately suppressing the existence of pending NCLT proceedings.

Violation of Section 41(b) of the Specific Relief Act:

It was argued that the relief sought by the plaintiff effectively sought to restrain proceedings before a competent statutory authority, which is prohibited under Section 41(b) of the Specific Relief Act.

Proper Exercise of Power under Order VII Rule 11 CPC:

The defendant maintained that the Trial Court had rightly exercised its power to reject the plaint, as the suit was barred by law.

Court’s Observations and Judgment:

Justice Sandeep Jain undertook a detailed analysis of the statutory framework governing the dispute and the jurisdictional limitations of civil courts.

1. Interpretation of Section 430 of the Companies Act, 2013

The Court observed that Section 430 creates an express bar on the jurisdiction of civil courts in respect of matters that are required to be determined by the NCLT or NCLAT under the Companies Act or any other law.

The provision was interpreted broadly to include disputes arising under the RBI Act as well, where such disputes are assigned to the NCLT.

2. Scope of Section 45QA of the RBI Act, 1934

The Court examined Section 45QA and noted that it empowers the Company Law Board (now NCLT) to adjudicate disputes relating to repayment of deposits or loans by NBFCs.

It held that the provision confers exclusive jurisdiction on the NCLT to determine:

Whether a depositor is entitled to repayment

Whether there has been a default

The manner and timeline of repayment

Safeguards for both parties

3. Inclusion of Loans within “Deposit”

Referring to Section 45-I(bb) of the RBI Act, the Court noted that loans are included within the definition of deposits. This interpretation brought the present dispute squarely within the ambit of Section 45QA.

4. Exclusive Jurisdiction of NCLT

The Court categorically held that only the NCLT has the authority to decide disputes relating to premature repayment of loans involving NBFCs.

It observed:

“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… hence, the civil court had no jurisdiction in this matter.”

5. Suppression of Material Facts

A significant factor influencing the Court’s decision was the conduct of the plaintiff.

The Court found that the plaintiff had concealed the fact that proceedings under Section 45QA had already been initiated by the defendant before the NCLT. This suppression was viewed seriously and amounted to approaching the Court with unclean hands.

6. Bar under Section 41(b) of the Specific Relief Act

The Court held that the relief sought by the plaintiff effectively aimed to restrain proceedings before the NCLT, which is expressly barred under Section 41(b) of the Specific Relief Act.

7. Justification for Rejection of Plaint

The Court upheld the Trial Court’s decision to reject the plaint under Order VII Rule 11 CPC, noting that:

• The suit was barred by statutory provisions
• The appropriate forum was the NCLT
• The plaintiff had suppressed material facts

8. Dismissal of Appeal with Costs

In light of the above findings, the High Court dismissed the appeal and imposed costs in favor of the defendant, reinforcing the principle that litigants must approach courts with candour and within the bounds of jurisdiction.