State Bank Of Bikaner And Jaipur vs Ballabh Das And Company

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(SC) 1036

1999(8) Supreme 99
Supreme Court of India
(From Rajasthan High Court)
G.T. Nanavati & S.N. Phukan, JJ.
State Bank of Bikaner & Jaipur -Appellants
versus
M/s. Ballabh Das & Co. & Ors. -Respondents
Civil Appeal No. 5069-5070 of 1999
(Arising out of (Civil) Nos. 8506-8507 of 1997)
Decided on 15-9-1999
Counsel for the Parties :
For the Appellants : Dusshyant Dave, Sr. Advocate, Anil Kumar Sangal, Advocate.
For the Respondents : A.K. Sanghi, Sr. Advocate, A.P. Dhamija, Sushil Kumar Jain, Advocates.

Headnote:Recovery of Debts Due to Banks and Financial Institutions Act, 1993 -Sections 2(g) and 31 r/w Section 34-‘Debt’-Meaning of-Transfer of pending cases-Suits for recovery of money due under export credit facility on failure of buyer to pay bills-Defence of defendant that amount was covered by insurance cover taken by Banks from Export Credit Guarantee Corporation-Debt Recovery Tribunal came into existence under Debt Recovery Act in meanwhile-Trial Court transferred suits to Tribunal on application of Bank-High Court holding that application was premature and till Court decides amounts are due still suits cannot be treated as suits for recovery of debts and set aside order transferring suit-Unsustainable-Non-payment of amount by foreign buyer undisputed- Liability of defendant not distinguished-Insurance taken by Bank cannot absolve liability of defendant-High Court’s order set aside.
       Held : According to the definition, the term ‘debt’ in Section 2(g) 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. (Para 7)
       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 has 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. (Para 8)
       The High Court also failed to appreciate that the defence raised by the respondents does not prima 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. 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. (Paras 10 & 11)

Judgment

G.T. Nanavati J. - Leave granted. Heard learned counsel for the parties.

2. 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.

3. 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 or 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 6C 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.

4. 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.

5. 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 been 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 outstandi

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