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1996 Supreme(Del) 253
High Court Of Delhi
ORIENTAL BANK OF COMMERCE - Appellant
Versus
MOHAN GUPTA - Respondent
Decided On : 03/01/1996
A suit for recovery of allegedly embezzled amount by the bank against an employee is not a "debt" arising during the course of business as contemplated under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and is therefore not transferable to the Debt Recovery Tribunal.
Headnote:
DEBT RECOVERY TRIBUNAL - JURISDICTION - SUIT FOR RECOVERY OF EMBEZZLED AMOUNT - NOT A DEBT ARISING DURING COURSE OF BUSINESS - NOT TRANSFERABLE TO TRIBUNAL - RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993, SECTION 2(G).
Fact of the Case:
A bank filed a suit against an ex-employee for recovery of Rs. 18,26,014.22, alleging that the defendant had embezzled the money by abusing his fiduciary position as an officer at the bank's head office. The defendant denied the allegations and claimed that the suit was not maintainable as a mortgage suit since the bulk of the claim related to embezzled money and not to a loan.
Finding of the Court:
The court held that the suit was not liable to be transferred to the Debt Recovery Tribunal under Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, as the cause of action did not fall within the definition of "debt" under Section 2(g) of the Act. The court interpreted the definition of "debt" to mean a liability arising during the course of business activity undertaken by the bank qua the said person, and held that a suit for recovery of embezzled or misappropriated sum is not one arising under business undertaken by the bank with the employee.
Issues: Whether a suit by a bank for recovery of amounts allegedly embezzled by an employee falls within the ambit of "debt" as contemplated under Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, so as to be transferred to the Debt Recovery Tribunal.
Ratio Decidendi: The court relied on the definition of "debt" under Section 2(g) of the Act, which includes any liability alleged as due from any person by a bank during the course of any business activity undertaken by the bank. The court interpreted this definition to mean that the debt must arise during the course of business activity undertaken by the bank qua the said person. The court held that a suit for recovery of embezzled or misappropriated sum is not one arising under business undertaken by the bank with the employee, and therefore does not fall within the definition of "debt" under the Act.
Final Decision: The court allowed the appeal of the defendant and set aside the order of the Deputy Registrar transferring the suit to the Debt Recovery Tribunal.
( 1 ) THIS is anappeal preferred by the defendant for setting aside the order dated 12. 7. 1995 passed by Deputy Registrar (Original Side) transferring the Suit No. 550/94 to the Debt Recovery Tribunal.
( 2 ) THE present suit had been filed by the plaintiff bank against defendant Sh. Mohan Gupta for recovery of Rs. 18,26,014. 22 (Rs. Eighteen lacs twenty six thousand fourteen and twenty two paise ). The suit was titled as a mortgage suit under Order 34 CPC. The defendant was an officer in the establishment department, processing the vouchers of travel expense and allowance, claims for medical/hospitalisation and cases for grant of medical aid. The defendant was also holding authorization for passing voucher for payment, issuance of payment orders and allowing cash payments. The defendant was accused of forgery and falsification of records and embezzlement of lacs of rupees. It was averred that the defendant opened fictitious accounts, drew cheques and got them encashed and embezzled the amounts. The details of amounts embezzled were set out and as given in para 6 of the plaint total Rs. 16,47,356. 29 (Rs. Sixteen lacs fourty seven thousand three hundred fifty six and twenty-nine paise ).
( 3 ) THE defendant it appears had also obtained a loan for construction of a house as well as a car loan for Rs. 1,49,700. 00 approx. The allegation in the plaint was that he had created an equitable mortgage of the plot in question namely 230, Bodala Residential Scheme.
( 4 ) WRITTEN statement was filed by the defendant denying the several allegations claiming that it was not permissible for the defendant to file a mortgage suit for recovery of the amount for which the mortgage had not been created. In another words, the plaintiff could not in a mortgage suit recover amounts which it claimed had been embezzled.
( 5 ) THE plaintiff filed an amendment application (I. A. 9038/1994) wherein the plaintiff sought amendments to the effect that suit was not a mortgage suit under Order 34 CPC. Impleadment of another person operating the locker jointly with defendant was sought. Para 2 of the said application runs as under :- The suit is for the recovery of Rs. 18. 26 lacs. The title of the suit has been giver as "mortgage suit under Order 34 CPC. " The bulk of the claim of the plaintifs namely about Rs. 16. 50 lacs relates to the money embezzled by the defendant by abusing his fiduciary position of being an officer at the Head Office of the plaintiff-Bank. The claim of the plaintiff against the housing loan is only R? 1,05,372. 43 for which the property mortgaged is the Collateral security. Generally in most of the Bank s suits, where there is a mortgage, a mortgage suit is invariably filed because the property/ies mortgaged cover different facilities granted to borrowers. The present suit is of a totally different nature because it is not a suit for recovery against a brrower. It is a suit which relates to the plaintiffs money embezzled by the defendant and the mortgaged property does not cover the said amount, because it is not a loan as such.
( 6 ) IT appears that this amendment application was sought when it was not certain whether mortgage suits were liable to be transferred or not. This matter is any way now settled with judgment of R. C. Lahoti,j - reported at 1995 35 DRJ 485, wherein it has been held that a debt under Section 2 (g) includes a debt covered by mortgage and mortgage suits were liable to be transferred to the Debt Recovery Tribunal. The amendment application, however, becomes relevant to the extent that it discloses the nature of the suit as percieved by the plaintiff.
( 7 ) THE short question that arises for consideration is whether asuit by a Bank that is essentially for recovery of amounts allegedly embezzled by an employee, would fall within the ambit of "debt" as is contemplated within the meaning of Section 2 (g) of the Recovery of Debts Due to Banks and Financial Institutions Act (hereinafter referred to as t
