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TMI Blog2010 (5) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... he first blush, appears to be sound and acceptable. But, once it is examined in some depth and following the settled canons of law, one has to arrive only at a conclusion that the contention is without any substance and merit. At the very outset, as a guiding principle we may refer to the maxim 'a verbis legis non est recedendum' but before we proceed to examine the merit or otherwise of the principal contention raised before us, it will be necessary for us to refer to the basic facts giving rise to the present appeal, particularly, in view of the fact that it has a wretched and long history which began in the year 1988. Facts 3. Appellant is a company duly incorporated under the provisions of the Companies Act, 1956, while respondent No. 1, Allahabad Bank is a body constituted under the Banking Companies (Acquisition and Transport of Undertakings) Act, 1976. Respondent No. 3 in the present appeal is a proprietorship firm of respondent No. 2. The appellant company is stated to have entered into an agreement on 16-8-1983 with respondent Nos. 2 and 3, granting licence in their favour to use premises at Jainkunj at Goragachha Road, Kolkata (hereinafter referred to as 'the premises') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck statement forwarded to us as enclosure that there are good amount of stock still lying at the factory." 4. To the above letter, the appellant responded vide its reply dated 23-9-1987 saying that the factory belongs to them and they had given the same on licence to respondent No. 3 and when the possession was handed over back to them certain stocks and machinery belonging to the respondent No. 3 were lying in the factory. They had made a specific request that these should be sold and adjusted towards the licence fee and the surplus money, if any, should be refunded to them. The respondent Bank claimed that they had a charge over the movable assets, in particular, the CTC machine which appellant had disposed of. For the sale of CTC machine, they had issued an advertisement on 12-3-1988 and the same was sold for Rs. 1,48,975. 5. The Bank filed a suit in the District Court at Alipore against the present appellant and respondent Nos. 2 and 3 claiming a sum of Rs. 22,11,618.62. In this suit, the present appellant filed a written statement making a preliminary objection that there was no privity of contract between the Bank and the present appellant. That it was not a borrower of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not to take any further action. During the pendency of these proceedings, the Recovery Officer upon further application by the respondent Bank, directed the receiver to make inventory of all the properties vide its Order dated 17-8-1996. This order was challenged by the appellant before the Calcutta High Court which stayed further proceedings. 6. According to the appellant, it was advised to initiate proceedings to set aside the ex parte decree and Recovery Certificate and, hence, an application was filed before the Tribunal for recalling the ex parte order. Along with this, an application for condonation of delay was also filed. Consequent upon the dismissal of the application for condonation of delay, the appellant filed an appeal before the Debt Recovery Appellate Tribunal (for short the 'Appellate Tribunal') against the order dated 19-8-1999, passed by the Tribunal. The same was also dismissed by the Appellate Tribunal vide its judgment dated 1-6-2001. This again was assailed before the High Court under Article 227 of the Constitution of India. The same was also dismissed by the High Court of Kolkata vide Order dated 28-11-2001. Still unsatisfied, the appellant filed a Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decree in question passed against the appellant, Eureka Forbes Ltd. by the Debts Recovery Tribunal, Calcutta, is without jurisdiction and, therefore, the appeal must succeed. Consequently, the entire sum of money appropriated by the respondent-bank as per Orders of the Hon'ble Court in CO. No. 1568 of 2004 will be refundable together with interest at the lending rate also as per the said Orders of the Hon'ble Court. Accordingly, the decree in question dated 15th June, 1995 in T.A. 15 of 1994 passed by the Debts Recovery Tribunal, Calcutta, and certificate in pursuance thereof as against the appellant, Eureka Forbes Ltd., is hereby set aside. The entire sum appropriated by the respondent bank in terms of the Orders of the Hon'ble Court in CO. No. 1568 of 2004 be refunded to the appellant by the bank together with interest at the lending rate within a period of three months from date. There shall be no orders as to costs." 8. Respondent Bank challenged the Order of the Appellate Tribunal under Article 227 of the Constitution of India being CO. No. 554 of 2007, before the learned Single Judge of the Kolkata High Court which vide its judgment dated 12-10-2007, restored the judgment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The main stand of the appellant was in relation to the jurisdiction and lack of knowledge of the fact that the goods in stock were hypothecated to the Bank along with the plant and machinery. The two important documents, dated 16-8-1983 and 28-2-1987, which have been placed on record, are of some significance. The agreement dated 16-8-1983 states the conditions of the leave and licence agreement between respondent Nos. 2 and 3 and the appellant. It was indicated therein that they could use the plant and machine in the premises and it was for a period of three years with a deposit of Rs. 1,00,000 and Rs. 12,000 per month as fee. Under clause 6, the stocks at the relevant time were to be sold for a consideration of 0.75 lakhs and they were entitled to use the trade mark. However, vide letter dated 28-2-1987, which is after the expiry of a period of more than three years, it was indicated by respondent Nos. 2 and 3 to the appellant that, they wanted to give back possession of factory and there were stocks of about Rs. 7,00,000 which included raw material, semi-finished and finished goods, lathe worth Rs. 1,15,000 which could be sold to a subsequent licencee. Relevant paragraphs of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g possession of the premises, had not come to know about the goods being hypothecated to the Bank. Advertisement for the sale of machinery was issued as late as on 12-8-1988. In other words, they had sold goods, even machines, like CTC at a throw away price, even after having complete knowledge about the hypothecated goods. Thereafter, an ex parte decree was passed, however, they did not take any steps to get the same set aside, except when a recovery certificate had been issued by the competent authority. Thereafter, their prayer for setting aside ex parte decree was rejected consistently by all the courts. When the High Court of Kolkata was dealing with the Revision Petition filed against the Order dated 1st June, 2001, passed by the Appellate Tribunal, the Court had specifically noticed the conduct of the appellant and had observed as under :- "After hearing Mr. Mitra appearing on behalf of the petitioner and after going through the material on record I fully agree with the Tribunal below that the present proceedings have been initiated by the petitioner Balu: 10 with the sole object of delaying the execution of a decree passed in the year 1995. It has been rightly pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant along with an application for condonation of delay in filing the said application. However, the application for condonation of delay was rejected and, subsequently, the ex parte decree was not set aside. This order of the Tribunal was neither interfered by the High Court nor by this Court in a Special Leave Petition preferred by the appellant. In view of the observations made by the High Court in the order, the appellant filed another application for setting aside the decree on the ground that the Tribunal had no jurisdiction. The said application came to be allowed by the Appellate Tribunal which accepted the contention raised on behalf of the appellant. The reasoning recorded in the judgment of the Tribunal was that, it was a claim for damages in tort and was not a debt, and also that it was beyond the scope of the jurisdiction vested in the Tribunal under section 17(1) of the Recovery Act, as there were insufficient allegations or evidence. No liability in terms of the debt can be fastened on the appellant. This reasoning of the Tribunal was set aside by the High Court of Kolkata in the impugned judgment and observed that, even claim for damages would fall well within the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of the leave and licence agreement dated 16-8-1983. It is obvious from the facts appearing on record that the loan has been sanctioned in a most casual and undesirable manner without even verifying the basic securities of respondent Nos. 2 and 3. 14. Besides the fact that the present appellant had earlier raised all the pleas in their application for setting aside the ex parte decree which was rejected by the Tribunal, High Court as well as this Court, it also needs to be noticed that except making vague denials in the written statement, which they had filed before the Tribunal at the relevant point of time, they had raised no specific or concrete defence in regard to the sale of hypothecated goods by them. The fact, as already noticed, cannot be disputed that the goods in question which were hypothecated or were under the charge of the Bank have been sold by the appellant. The advertisement issued by them clearly shows that they had invited offers for sale of CTC machines and spares, which itself demonstrates that a number of machines and other goods have been sold by them. It is an accepted precept of appreciation of evidence that a party which withholds from the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification was done to the appraisal report has been left to imagination. The conduct of the appellant further creates some suspicion in the mind of the Court. The appellant took no remedial or bona fide steps even after it had admittedly come to know that the goods in question were hypothe-cated to the Bank. On the contrary, it issued advertisement in March, 1988 for sale of hypothecated goods. On the face of this fact, they had no preferential right to sell the goods. In the letter dated 21-8-1987, they had been informed that possession of the property as well as the goods have been taken unauthorizedly. Even if it is assumed that certain amounts were due to the appellant from respondent Nos. 2 and 3 on account of licence fee, still they could not have brushed aside the charge of the Bank over the goods and machinery in question. Also in the alleged leave and licence agreement, dated 16th August, 1983, there was no clause, at least none has been brought to our notice, that the appellant would have charge over the goods and machinery, in the event of default in the payment of licence fee. In other words, the charge of the Bank was binding upon the appellant. The inventory of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods in question had been hypothecated to the Bank. The appellant had complete knowledge of this fact, still it went on to sell the goods. The Bank had been negligent and, to some extent, irresponsible, in invoking its rights and taking appropriate remedy in accordance with law. Mere irresponsibility, on the part of the Bank, would not wipe out the rights of the Bank in law. Without the consent of the Bank, no person can utilize the hypothecated goods for his own benefit or sale by the borrower or any person connected thereto. It is nobody's case that the Bank had consented to such sale. This Court in case of Indian Oil Corpn. v. NEPC India Ltd. [2006] 6 SCC 736 described the meaning of 'entrustment' in relation to hypothecation as follows :- "****** The creditor may also have the right to claim payment from the sale proceeds (if such proceeds are identifiable and available). The following definitions of the term 'hypothecation' in P. Ramanatha Aiyar's Advanced Law Lexicon [3rd Edn. (2005), Vol. 2 pp. 2179 and 2180] are relevant : Hypothecation-It is the act of pledging an asset as security for borrowing, without parting with its possession or ownership. The borrowers ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse consequences in relation to the public funds. The Statement of Objects and Reasons of this Act clearly state that Banks and financial institutions at present, experience considerable difficulties in recovering loans and enforcements of securities charged with them. The existing procedure for recovery of dues of the Bank and the financial institutions block significant portion of their funds in un-productive assets, the value of which deteriorates with the passage of time. Introduction of similar procedure was suggested by the Tiwari Committee. The Act provided for the establishment of Tribunals and Appellate Tribunals and modes for expeditious recovery of dues to the Banks and financial institutions. 23. In this background, let us read the language of section 2(g) of the Recovery Act. The plain reading of the section suggests that Legislature has used a general expression in contradistinction to specific, restricted or limited expression. This obviously means that, the Legislature intended to give wider meaning to the provisions. Larger area of jurisdiction was intended to be covered under this provision so as to ensure attainment of the legislative object, i.e., expediti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus be given a broad and comprehensive interpretation. In order to see whether a particular legislative provision falls within the jurisdiction of the Legislature which has passed it, the Court must consider what constitutes in pith and substance the true subject-matter of the legislation and whether such subject-matter is covered by the topics enumerated in the legislative list pertaining to that Legislature." 27. Again in the of case of Ramanlal Bhailal Patel v. State of Gujarat [2008] 5 SCC 449, this Court was dealing with the word 'person' appearing in the provisions of Gujarat Agricultural Land Ceiling Act, 1960. The expression 'person' was defined with the inclusive definition that a person includes a joint family. The Court held that, where the definition is inclusively defining the word, there, the legislative intention is clear that it wishes to enlarge the meaning of the word used in the statute and that such word must be given comprehensive meaning. In law, the word 'person' was stated to be having a slightly different connotation and refers to any entity that is recognized by law as having rights and duties of human beings. 28. In the case of Greater Bombay Co-op. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "'Debt' has been defined in section 3(iii) of the Act as meaning "any liability" in Cash or kind, whether secured or unsecured, due from an agriculturist, whether payable under a decree or order of a civil or revenue court or otherwise, but does not include rent as defined in clause (iv), or 'Kanartham' as defined in section 3(1)(1) of the Malabar Tenancy Act, 1929." In the case of Union of India v. Raman Iron Foundry [1974] 2 SCC 231, this Court quoted as under: "The classical definition of 'debt', is to be found in Webb v. Stenton where Lindley, L.J. said: "... a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation". There must be debitum in praesenti; solvendum may be in praesenti or in future - that is immaterial. There must be an existing obligation to pay a sum of money now or in future." 32. Still, in another case titled as State Bank of Bikaner Jaipur v. Ballabh Das & Co. [1999] 7 SCC 5392, the Court was concerned with the un-amended provisions of section 2(g) of the Recovery Act. The Court while setting aside the order of the High Court, while dealing with the word 'debt' followed by the words 'alleged as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and the amount payable to the Bank does not have to be a determined sum under the provisions of the Recovery Act. 34. Similar contention had been raised before us on the strength of the judgment of this Court in the case of United Bank of India (supra) on behalf of the appellant. Firstly, we fail to understand as to what advantage the learned counsel appearing for the appellant wishes to draw from this judgment and secondly, this judgment has clearly returned the finding, even on the facts of that case, that application under the provisions of the Recovery Act was maintainable within the scope of section 2(g) of the Act. The Court held as under : "In view of the rival stands of the parties, the short question that arises for consideration is, as to whether the said claim of the plaintiff can be said to be a claim for recovery of debts due to the plaintiff as provided under section 17(1) of the Act. The answer of this question in turn would depend upon the meaning of the expression "debt" as defined in section 2(g) of the Act. Before we examine the two provisions referred to above, it is to be borne in mind that the procedure for recovery of debts due to the banks and financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the Bank was covered under the provisions of the Act. The suit, as instituted in the year 1991, had claimed various reliefs including the claim for damages. The objection raised was that, there was undetermined amount and other relief could not be referred to the Tribunal for adjudication. The suit was subsequently transferred to the Tribunal under the provisions of the Act and the Court while giving wide meaning to the expression 'debt', clearly held that, this expression was of liberal amplitude and there was occasion for the Court to grant a restricted meaning. Thus, in our view, even the case of United Bank of India ( supra) no way supports the submissions made on behalf of the appellant. 36. On the plain analysis of the above stated judgment of this Court, it is clear that the word 'debt' under section 2(g) of the Recovery Act is incapable of being given a restricted or narrow meaning. The Legislature has used general terms which must be given appropriate plain and simple meaning. There is no occasion for the Court to restrict the meaning of the word 'any liability', 'any person' and particularly the words 'in cash or otherwise'. Under section 2(g), a claim has to be rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Ashok Kapil v. Sana Ullah [1996] 6 SCC 342, referred to rule of mischief and while explaining the word 'building', held as under:- "Stroud's Judicial Dictionary (Vol. I of the 5th Edition) states that 'what is a building must always be a question of degree and circumstances'. Quoting from Victoria City Corpn. v. Biship of Vancover Island (AC at p. 390), the celebrated lexicographe commented that 'ordinary and natural meaning of the word building includes the fabric and the ground on which it stands". In Black's Law Dictionary (5th Edn.) the meaning of the building is given as " A structure or edifice enclosing a space within its walls, and usually, but no necessarily, covered with a roof". [emphasis supplied]. The said description is a recognition of the fact that roof is not a necessary and indispensable adjunct for a building because there can be roofless buildings. So a building, even after losing the roof, can continue to be a building in its general meaning. Taking recourse to such meaning in the present context would help to prevent a mischief." 38. The learned counsel for the appellant also relied upon the judgment of the Gujarat High Court in the case of Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictive or definite nature. It has intentionally made use of the expressions which are quite general and can be construed widely in their common parlance. There is no occasion for this Court to read the word other than the one intended by the Legislature in the provisions of section 2(g) of the Recovery Act. Wherever the Legislature requires, it uses the expressions of definite connotations and consequences, for example, in the Interest Act, 1978, the word 'debt' has been defined under section 2(c ) of that Act by using specific terms of restricted character. It means 'any liability for an 'ascertained sum' of money and includes a debt payable in any kind but does not include a 'judgment debt'. In this definition, the 'ascertained sum' obviously means a sum which has been determined under any methods of the adjudicative process while, on the other hand, the expression 'payable in kind' is a general expression, again the excluding clause in relation to 'judgment debt' is specific. Such is not the language or the purport of section 2(g) of the Recovery Act. Mr. R.F. Nariman, the learned senior counsel appearing for the appellant, while referring to the provisions of section 19(8) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 3 have a leave and license agreement with the appellant. Despite that, and without proper verification, as it appears from the record, heavy loan was sanctioned and disbursed to the above respondents. Even thereafter, the Bank and its officers/officials appear to have taken no serious steps to ensure that the goods hypothecated to the Bank are not disposed of without its consent. The officers/officials of the Bank, even after knowing about the handing over of the possession of the property including the hypothecated goods to the appellant and having communicated the same to the appellant vide their letter dated 24-8-1987, made no serious efforts to recover its debt and ensure that the goods are not disposed of, as the suit itself was filed for recovery of the amount on 1-2-1989 after serious delay. These facts, to a great extent, are even conformed in the affidavit which was filed on behalf of the Bank by one Shri Kamal Kumar Kapoor as late as on 22-8-2009 before this Court. There is no doubt in our mind that the Bank could have protected its interest and ensured recovery while taking due caution and acting with expeditiousness. There is definite negligence on the part of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of State of Bihar v. Subhash Singh [1997] 4 SCC 430, this Court, in exercise of the powers of judicial review stated that, the doctrine of full faith and credit applies to the acts done by officers in the hierarchy of the State. They have to faithfully discharge their duties to elongate public purpose. 44. Inaction, arbitrary action or irresponsible action would normally result in dual hardship. Firstly, it jeopardizes the interest of the Bank and public funds are wasted and secondly, it even affects the borrower's interest adversely provided such person was acting bona fide. Both these adverse consequences can easily be avoided by the authorities concerned by timely and coordinated action. The authorities are required to have a more practical and pragmatic approach to provide solution to such matters. The concept of public accountability and performance of functions takes in its ambit proper and timely action in accordance with law. Public duty and public obligation both are essentials of good administration whether by the State instrumentalities and/or by the financial institutions. In the case of Centre for Public Interest Litigation v. Union of India [2005] 8 SCC 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumscribed by the inbuilt commercial principles/restrictions as well as that such decisions should be free from arbitrariness, unreasonableness and should protect the interest of the Bank in all events. We are neither competent nor do we wish to venture to examine this aspect, it is for the appropriate authorities in the Bank to examine the matter from all quarters and then to take appropriate action against the erring officers/officials involved in the present case, that too, in accordance with law. 46. For the reasons afore-recorded, we partially allow this appeal and while modifying the order of the High Court to the extent that, the appellants would be liable to pay to the respondent Bank a sum of Rs. 9,63,975. (approximate value of the hypothecated stock sold by the appellants) with interest at the rate of 6 per cent per annum on the above sum during the period from 14-3-1988, the date of filing of the plaint, to the date of actual realization as originally allowed by the Tribunal. 47. We further direct the Chairman of the Allahabad Bank to examine this case in light of our discussion supra and take appropriate action against erring officers/officials in accordance with law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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