CASE NO.: Appeal (civil) 5069-5070 of 1999 PETITIONER: STATE BANK OF BIKANER AND JAIPUR RESPONDENT: BALLABH DAS AND CO. AND ORS. DATE OF JUDGMENT: 15/09/1999 BENCH: G.T. NANAVATI & S.N. PHUKAN JUDGMENT:
JUDGMENT
1999 Supp(2) SCR 465
The Judgment of the Court was delivered by
G.T. NANAVATI, J. Leave granted. Heard learned counsel for the parties.
The appellant bank filed two civil suits – one against Ballabh Das & Sons
and its partners and the other against Ballabh Das & Co. and its partners –
in the Court of District Judge at Jaipur for recovery of its dues of Rs.
75,46,921 and Rs. 56,36,200 on 24.3.83 and 2.7.84 respectively. During the
pendency of the suits, Recovery of Debts due to Banks and Financial
Institutions Ordinance, 1993 was promulgated by the President of India on
24.6.1993. It was replaced by the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (for short referred to as `the Act’).
After Debt Recovery Tribunal was constituted under the Act at Jaipur, the
appellants made two applications on 20.9.94 to the Court for getting the
two suits transferred to the Debt Recovery Tribunal. The Court by two
separate orders allowed the applications and directed transfer of those
suits to the Debt Recovery Tribunal at Jaipur but retained the counter
claim filed by the respondents in Civil Suit No. 152 of 1988.
Feeling aggrieved by those orders the respondents filed two revisions
applications (669 of 1995 and 670 of 1995) before the Rajasthan High Court.
The High Court held that the question whether the amounts claimed in the
suits are legally recoverable of not is a question of fact and can be
adjudicated only after recording evidence. It further held that whether the
amounts claimed fall within the meaning of the term `debt’ as defined by
Section 2 (g) of the Act is also a question of fact and till those facts
are decided by the Court the provisions of the Act cannot be said to have
become applicable to the suits on and from the date on which the Tribunal
at Jaipur was established. It also held that Civil Suit No. 152 of 1988 in
which a counter claim has been filed could not have been transferred to the
Tribunal, as no application was made under Order 8 Rule 6 C of the Code of
Civil Procedure for exclusion of the counter claim and also because no such
application could be made after framing of issues. Taking this view the
High Court allowed both the revisions applications and by a common judgment
set aside the orders passed by the District Court.
Aggrieved by the judgment of the High Court the appellant Bank has filed
these appeals. It was contended by Mr. Dave, learned Senior Counsel for the
Bank, that the High Court has wrongly criticized the District Court by
observing that it had over-looked the provisions of the law. In his
submission it is really the High Court which has over-looked the relevant
provisions of the Act and erroneously allowed the revision applications. He
submitted that the suits being proceedings for recovery of debts alleged to
be due, the Civil Court ceased to have any jurisdiction to deal with them
on merits.
It is not in dispute that the respondents, under the export credit facility
with the appellant bank, was obtaining advances from the appellant-bank
from time to time against pre-shipment and post-shipment exports of
precious stones, jewellery, diamonds etc. It is also not in dispute that
there was non-payment to the bank by the foreign buyers of the bills
mentioned in the two suits. The defence of the respondents is that under
the insurance cover obtained at the instance of the bank from the Export
Credit Guarantee Corporation, the bank is insured against any loss on
account of non-realization of amounts from foreign buyers and on delivery
by the respondents to the bank of documents of export of goods for which
the credit was given or advances were made are to be deemed to be payments
by the respondents to the Bank. The respondents had delivered the documents
in respect of the suit transactions to the bank and, therefore, the amounts
mentioned in those documents should be deemed to have paid to the bank. But
the fact that the amounts claimed under the two suits have not been
received by the bank and are still outstanding is not in dispute as can be
noticed from the admissions made by the respondents in paragraphs 4 and 5
of the counter affidavit.
The question which arises for consideration is whether in view of these
facts the amounts claimed by the bank in the suits can be said to be `debt’
due and recoverable by the bank from the respondents. Section 2(g) of the
Act defines the term `debt’ as under :
” “debt” means any liability which is alleged as due from any person by a
bank…………in cash or otherwise, whether secured or unsecured, or
whether payable under a decree or order of any Civil Court or otherwise and
subsisting on, and legally be recoverably on, the date of the application.”
Section 17 of the Act provides that a Tribunal shall exercise, on and from
the appointed day, the jurisdiction, powers and authority to entertain and
decide applications from the banks and financial institutions for recovery
of debts due to such banks and financial institutions. Section 18 has
created a bar that no Court or other authority can thereafter exercise any
jurisdiction, powers or authority (except the Supreme Court, and a High
Court exercising jurisdiction under Article 226 and 227 of the
Constitution) in relation to the matters specified in Section 17. In
respect of pending cases Section 31 provides as under :
“Transfer of pending cases.-(1) Every suit or other proceeding pending
before any court immediately before the date of establishment of a Tribunal
under this Act, being a suit or proceeding the cause of action whereon it
is based is such that it would have been, if it had arised after such
establishment, within the jurisdiction of such Tribunal, shall stand
transferred on that date to such Tribunal;
Provided that nothing in this sub-section shall apply to any appeal pending
as aforesaid before any court.
(2) Where any suit or other proceedings stands transferred from any court
to a Tribunal under sub-section (1),
(a) the court shall, as soon as may be after such transfer, forward the
records of such suit or other proceeding to the Tribunal; and
(b) the Tribunal may, on receipt of such records, proceed to deal with
such suit or other proceeding, so far as may be, in the same manner as in
the case of an application made under section 19 from the stage which was
reached before such transfer or from any earlier stage of de-novo as the
Tribunal may deem fit.”
Section 34 gives the Act an overriding effect by enacting that the Act
shall have effect nowithstanding anything inconsistent therewith contained
in any other law for the time being in force or in any instrument having
effect by virtue of any law.
According to the definition, the term `debt’ means liability which is
alleged as due from any person by a bank or a financial institution or by a
consortium of banks or financial institutions. It should have arisen 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.
The liability to be discharged may be in cash or otherwise. It would be
immaterial whether the liability is secured or unsecured or whether it is
payable under a decree or an order of any Civil Court or otherwise.
However, it should be subsisting and legally recoverable on the date on
which proceedings are initiated for recovering the same.
The important words in the definition “alleged as due” have been over
looked by the High Court and, therefore, it has erroneously held that
unless the amounts claimed by the bank are determined or decided by a
competent forum they cannot be said to be due and would not amount to
`debt’ under the Act. What was necessary for the High Court to consider was
whether the bank was alleged in the suits that the amounts are due to the
bank from the respondents, that the liability of the respondent has arisen
during the course of its business activity, that the said liability is
still subsisting and legally recoverable.
The High Court should have appreciated that the bank has alleged in the
suits – plaints that the respondents had borrowed money for the goods
exported under the bills referred to in the suits and that the amounts
payable under the bills have not been paid by the foreign buyer to the bank
under the agreement between the parties and, therefore, they have remained
outstanding. This is the cause of action disclosed in the plaints.
Obviously, if this cause of action had arisen after the establishment of
the Tribunal at Jaipur, then in that case the bank would have been required
to file an application for recovery of the outstanding dues before the
Tribunal and not in the Civil Court and the bar created under Section 18
would have also applied. As the suits were filed by the bank before
establishment of the Tribunal and were pending in the Civil Court when the
Tribunal came to be established under the Act, Section 31 became applicable
to those suits and they shall have to be treated as transferred to the
Tribunal on and from that date the Tribunal was established. Section 31 of
the Act makes it clear that the transfer is automatic because of operation
of law and, therefore, the bank was really not required to file
applications. Those applications should have been really treated as
applications for forwarding the records of the suits to the Tribunal. In
our opinion, the trial Court rightly understood the correct position of law
and passed correct orders on those applications. The High Court took an
erroneous view of the law and wrongly set aside the orders passed by the
trial Court.
The High Court also failed to appreciate that the defence raised by the
respondents does not prime facie show that the liabilities stood discharged
either under the insurance cover/guarantee or otherwise. The defence raised
by the respondents is that the insurance cover/guarantee provides that
delivery by the exporter to the insured of documents of export of goods for
which the credit has been given or advance has been made shall be deemed to
be payment by the Exporter to the insured and, therefore, when the
respondents delivered the export documents to the bank they should be
deemed to have paid the amounts due under those exports to the bank. This
defence can be considered only for the limited purpose of finding out
whether the liability of the respondents was subsisting on the dates on
which the suits were filed. Otherwise, it has no relevance for the purpose
of deciding the jurisdiction of the forum. The contract of
insurance/guarantee is between the Export Credit and Guarantee Corporation
of India Ltd. and the appellant – bank and prima facie the term/condition
in the said insurance cover/guarantee referred to above is for the benefit
of the insurer and not for the benefit of the exporter, i.e. the
respondents. It does not absolve the respondents of the liability to repay
the amounts borrowed for the purpose of making exports if the foreign buyer
of those goods does not make payment to the bank of the amounts payable in
respect of those goods. Though the insurer/guarantor under the
insurance/guarantee possibly would stand discharged from its liability to
the insured on the exporters delivering the documents of export of goods to
the insured, prima facie, the principal debtor would still remain
subsisting. Thus, even this pre-requisite for the liability to be called a
debt as contemplated by the Act having been satisfied the suits filed by
the bank should have been treated by the High Court as proceedings for
recovery of the debts.
For the reasons stated above, we are of the view that the High Court was
wrong in holding that the applications made by the bank were pre-mature and
till the Court decides that the amounts are still due and payable to the
bank they cannot be treated as suits for recovery of the debts as
contemplated by the Act and, therefore, they are not required to be
transferred to the Tribunal. We therefore allow these appeals, set aside
the judgment and order passed by the High Court and restore the orders
passed by the trial Court.