TMI Blog2010 (10) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the appeal filed by the petitioners and confirmed the order passed by the Debt Recovery Tribunal, Mumbai. 4. The respondent No. 1 Bank instituted a Suit bearing No. 194 of 1997 against the petitioners for recovery of the amount before the Original Side of this Court. In view of the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for the sake of brevity, hereinafter referred to as the Act), the said suit was subsequently transferred to Debts Recovery Tribunal, Mumbai. The Debts Recovery Tribunal, II, Mumbai, by its order dated 27-03-2006, allowed the Original Application filed by respondent No. 1 Bank and passed an order of recovery of Rs. 8,09,58,000/- with interest @ 18% p.a. from 27-12-1993 till full realization. Subsequently, the said order was reviewed by Debts Recovery Tribunal, II, Mumbai, in Review Application No. 14 of 2006 and the amount of recovery was modified to Rs. 11,20,14,000/- with interest @ 18% p.a. from 27-12-1993 till full realization. The original order as well as the order passed in review application, both were challenged by the petitioners by preferring an appeal bearing No. 336 of 2006 before the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant No. 2/defendant No. 2 was the sole proprietorship firm of appellant No. 1, which operated Overdraft Account No. 50070 with the same Branch of respondent No. 1 Bank. In para No. 4 of the plaint, it is averred as under: 4. The 1st defendant used to procure deposits from various third parties for investment as short term deposits with the plaintiffs Walkeshwar Branch. The 1st defendant representing himself and as Sole Proprietor of defendant No. 2 herein would request the plaintiffs to prepay the amount of deposit without depositing duly discharged receipts with the plaintiffs and would have the amounts of deposit receipts credited to his account. The 1st defendants was given unauthorized Overdraft or Credit Balance to his account, which the 1st defendant would clear by ostensible premature repayment of some Time Deposits belonging to some Third Parties. The original time deposit receipts would remain with the parties whose funds were placed in the accounts of Defendant Nos. 1 and 2. On the due dates of time deposit receipts, the 1st defendant would provide funds in his current accounts and to the debit of such current account. Bankers' cheques were issued to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respondent No. 1 Bank. All this was done with the help of Officers of the Bank. The deposit of FDRs aggregating to Rs. 15.20 crores between 04-12-1993 and 27-12-1993 including FDR of Rs. 5 crores, is admitted. The Debt Recovery Tribunal, after considering the evidence on record, allowed the Original Application filed by the respondent Bank, which order was subsequently reviewed, as pointed out earlier. 11. The Learned Counsel appearing for the petitioners submits that it is true that the petitioners have availed monetary benefits out of the alleged transaction, but since the said transaction cannot be said to be a lawful transaction as no documents were executed by the petitioners, the proceedings before the DRT is not maintainable under the said Act in case of a fraudulent business transaction. The Learned Counsel for the petitioners further submitted that the transaction in question cannot be said to be a business transaction and therefore, it cannot be said that the present case falls within the ambit of definition of 'Debt' as prescribed under Section 2(g) of the Act. He further submitted that since it cannot be said that the petitioners are the debtors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid definition, in our view, it can be said that the petitioners are the debtors of the respondent Bank and the transaction in question can be said to be falling within the definition of debt under the said Act. So far as the employees of the Bank are concerned, they stand on a different footing, as ultimately they are subjected to service regulation of the bank and the bank is required to take disciplinary proceedings against them as per the rules. At the most, it can be said that the employees are guilty of malpractices and has acted in a particular manner illegally by taking some monetary benefits out of the said transaction and guilty of taking illegal gratification. However, in our view, so far as the petitioners are concerned, it cannot be disputed that by virtue of alleged illegal and fraudulent transaction, they got financial benefits in the matter of business, the case of the petitioners squarely falls within the purview of the said Act. It is not in dispute that the amount in question is due and payable by the petitioners to the respondent bank. The petitioners took the advantage of the alleged financial assistance, may be in a wrongful manner by not executing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it was held that suit for recovery of mis-appropriated or embezzled amounts by the Banks or Financial Institutions against the employee, would not be one which would come within the definition of a debt arising during the course of business as contemplated under the Act. Hence, the said suits would not be liable to be transferred to the Debt Recovery Tribunal. 18. As pointed out above, in the present case, the suit was transferred long back from this Court to the Tribunal. The petitioners were the direct beneficiaries of the aforesaid so-called fraudulent transaction and the money was utilized by the petitioners for their business. It is required to be noted that the petitioners have categorically admitted the aspect about taking benefits arising out of the said transaction at the time when the proceedings are pending before the Magistrate. Considering the facts and circumstances of the case, we are not in a position to accept the submission of the Learned Counsel for the petitioners that the debt which arises only out of a transaction carried out in a lawful manner and by executing appropriate documents, that the same should be construed as debt. In our view, when a pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, it is the Tribunal which has the exclusive jurisdiction to decide the dispute and not the ordinary civil court. In this view of the matter, the High Court was in error to hold that the dispute in question is not entertainable by the Tribunal under Section 17 of the Act. We accordingly set aside the impugned order of the Calcutta High Court and direct that the suit in question which stood transferred to the Tribunal constituted under the Act, and was registered as Transferred Application No. 163 of 1996 be disposed of by the Tribunal in accordance with law. These appeals are allowed but in the circumstances, without any order as to costs. 20. Reliance is also sought to be placed on behalf of the respondents on a ruling of the Supreme Court in the case of Allahabad Bank v. Canara Bank and Anr. (2000) 4 SCC 406. Para 20 of the said judgment, reads as under: We shall refer to Sections 17 and 18 in Chapter III of the RDB Act, which deal with adjudication of the debt. 17. Jurisdiction, powers and authority of Tribunals (1) A tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat at least there is no justification in awarding interest @ 18% p.a. and the provisions of the Negotiable Instruments Act, cannot be said to be applicable, especially when in this case, no document was executed by the petitioners in favour of the respondent Bank. The Learned Counsel for the respondent No. 1 Bank submitted that if appropriate documents were executed at the time of giving financial assistance to the petitioners, the bank was entitled to charge interest @ 20.75% p.a. and in fact, the bank had lodged claim on that basis. However, the Tribunal took a liberal view of the matter and awarded interest @ 18% p.a. by resorting to the provisions of the Negotiable Instruments Act. The Tribunal has given cogent reasons in this behalf by holding that it is not in dispute that the entire transaction was not a normal one. The petitioners were drawing money from the respondent Bank and there was no question of any stipulation to be provided in documents regarding interest in connection with the transaction in question. In such circumstances, the Presiding Officer was perfectly justified in applying the principle of Section 80 of the N.I. Act, by awarding interest @ 18% p.a. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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