Debt Recovery Appellate Tribunal - Mumbai
Punjab National Bank vs Tata Infotech Ltd. on 2 November, 2004
Equivalent citations: II(2005)BC16
ORDER
Pratibha Upasani, J. (Chairperson)
1. This Misc. Appeal is filed by the appellant/original applicant Punjab National Bank being aggrieved by the order dated 21.10.2003 passed by the learned Presiding Officer of the Debts Recovery Tribunal-I, Mumbai on Exhibit No. 7 in Original Application No. 65/2003. By the impugned order, the learned Presiding Officer held that the amount which was sought to be recovered by the applicant Bank from the defendants, did not amount to "Debt" within the meaning of Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and, therefore, the Tribunal did not have jurisdiction to entertain and try the original application filed by the Bank. Holding this, he ordered the original application to be returned to the applicant Bank for being presented before appropriate forum. Being aggrieved, the present appeal is filed by the bank.
2. I have heard Mr. D'lima for the appellant Bank and Mr. Purohit for the respondent. I have also gone through the proceedings including the impugned order and in my view, the learned Presiding Officer has not committed any error in passing the impugned order.
3. Few facts, which are required to be stated, are as follows:
Case of the applicant Bank is that they were desirous of installing a software solution which would be a complete solution enabling the Bank to complete all tasks relating to the Foreign Exchange Offices at Delhi and Mumbai. The respondents/Tata Infotech Ltd. had offered to provide such solution. Detailed discussions were held between the parties and the applicant Bank vide its letter dated 19.12.1998 placed an order with the respondents for the said software solution at the cost of Rs. 50 lacs. The respondents had accepted the terms and conditions recorded in the said letter. Subsequently a sum of Rs. 10 lacs was also paid to the respondents after deducting T.D.S. However, in spite of the advance payment, the respondents did not perform their part of contract. The applicant Bank therefore called upon the respondents to refund a sum of Rs. 10 lacs with interest at the rate of 16% per annum with quarterly rests and liquidated damages of Rs. 5 lacs. The respondents, however, did not comply with the said notice. Therefore, the Bank filed the original application against the respondents in the DRT for recovery of the said amount.
4. The case of the respondents is that the original application filed by the Bank is based on an action in tort namely a claim arising out of an alleged breach of contract and for consequential damages. Their contention is that the claim for damages for the alleged failure of the respondents in providing software solution to the Bank would not amount to "Debt" as contemplated under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It is contended by them that there is no Banker-Customer relationship between the applicant bank and the defendants/respondents nor does the claim of the Bank is arising out of any financial/lending transaction. According to them, the claim for return of money paid under the contract for the development and installation of a software solution and damages for alleged breach of contract is essentially an action for unliquidated damages and therefore cannot be said to be a "Debt" as defined by the DRT Act in Section 2(g).
5. The Learned Presiding Officer after hearing both the sides and discussing meaning and the scope of the word "Debt" as given in the Section 2(g) of the RDB Act, upheld the contention of the appellant and ordered the original application to be returned to the applicant Bank for being presented before appropriate forum and in my view, rightly so.
6. Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 defines the "Debt" as follows:
"Section 2(g) 'Debt' means any liability (inclusive of interest) which is claimed as due from any person by a Bank or a financial institution or by a consortium of Banks or financial institutions 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 in cash or otherwise whether secured or unsecured or assigned or whether payable under a decree or order of any Civil Court or any arbitration award or otherwise or under a mortgage and subsisting on and legally recoverable on the date of the application".
This definition of "debt" has to be considered keeping in view the objects of the Act, which are given in the preamble. The said pre-amble states as follows:
"An Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to Banks and financial institutions and for matters connected therewith or incidental thereto".
No doubt, the Supreme Court in United Bank of India v. Debts Recovery Tribunal, III (1999) SLT 482=III (1999) CLT 47=I (2000) BC 662 (SC)=(1999) 4 Supreme Court Cases 1969 has held that expression "Debt" has to be given the widest amplitude and the objects of the Act have to be taken into consideration to interpret the provisions of the Act. It is also held in the said case that the applications for damages and compensation would also be triable by the Debts Recovery Tribunal. Emphasizing this, Mr. D'lima, the learned Advocate appearing for the appellant Bank strenuously argued that the impugned order was wrong and Debts Recovery Tribunal has jurisdiction to entertain and decide the original application filed by the Bank for recovery of the said amount from the respondents. It is to be kept in mind that the necessity for enacting the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for the purpose of recovering the loans and enforcement of securities charged with the Bank. All and sundry money-claims of the Bank from anywhere and everywhere arising from whatever claims cannot be branded as "Debt". Definition of "Debt" as given in Section 2(g) makes it clear that the subject matter of recovery must be arising "during the course of any business activity undertaken by the Bank" and "subsisting on and legally recoverable on the date of the application."
7. In the present case at hand, the amount which is sought to be recovered was not advanced by the applicant Bank to the defendants/respondents by way of loan or under credit facility. It was paid under a contract for availing software solution from the defendants which according to the applicant Bank, the defendants failed to supply, and the claim is for unliquidated damages. Observations made by the Supreme Court in the case of United Bank of India v. Debts Recovery Tribunal (supra), indeed cannot be read in isolation, but shall have to be read in context with the facts of that particular case. The claim arising in the case (supra) was in respect of refund of pay-orders and statement of accounts thereof. Issuing pay-orders undoubtedly and undisputedly is the business activity of a Bank and the claim for compensation or damages arising out of such pay orders would certainly be incidental to the business activity of the applicant Bank and claim of such unliquidated damages would certainly be triable by the Debts Recovery Tribunal, But it would be preposterous to say that the claim for damages in tort also would be triable by Debts Recovery Tribunal. In the present case at hand, a single transaction or solitary instance of giving contract for software solution for facilitating better working in the office Would not amount to business activity of the Bank and any claim to recover this amount in case of breach of contract would not give in the definition of "Debt" as defined in the RDB Act.
8. Another angle to this issue in addition to whatsoever has been observed earlier is that in view of the definition of "Debt", the claim should not only be arising during the course of any business activity undertaken by the Bank, but it should also be "subsisting on" and "legally recoverable on the date of the application". In the present case at hand, unless it is held that the applicant Bank was ready and willing to perform its part of contract and that the defendants had without any reasonable cause, failed and neglected to provide the software solution, no decree can be passed. The liability to pay the damages, if at all any, would, therefore, arise only on the determination of these issues. Therefore, it cannot be said that the liability to pay the amount of damages was "subsisting" on the date of the application. For this reason also the amount of claim made by the applicant cannot be said to be "Debt" within the meaning of Section 2(g) of the Act.
9. In view of the aforesaid discussion, since amount which is sought to be claimed by the Bank, does not amount to "Debt" within the meaning of the Act. The Debts Recovery Tribunal shall have no jurisdiction to entertain and try the original application. Therefore, the learned Presiding Officer was right in ordering the original application to be returned to the applicant Bank for being presented before appropriate forum. No interference is therefore warranted. The appeal is without any substance, which deserves dismissal. Accordingly, following order is passed.
ORDER
10. Misc. Appeal No. 127/2004 is dismissed.
11. In view of above order, Misc. Application Nos. 612/03 and 831/04 do not survive and are disposed of accordingly.