Delhi High Court
Oriental Bank Of Commerce vs Mohan Gupta on 1 March, 1996
Equivalent citations: 1996IIAD(DELHI)368, 62(1996)DLT239
Author: Manmohan Sarin
Bench: Manmohan Sarin
JUDGMENT Manmohan Sarin, J.
(1) This is an appeal 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 plaintiffs 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 properties 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 , 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 perceived by the plaintiff.
(7) The short question that arises for consideration is whether a suit 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 the Act) so as to be transferred to the Tribunal or is liable to be tried by the Civil Court?
(8) Learned Counsel for the defendant/Appellant has assailed the order of Deputy Registrar transferring the suit to the Debt Recovery Tribunal as a mechanical one, which has been passed without considering the merits and the issues involved. Learned Counsel has argued that the suit admittedly and essentially being for recovery of money allegedly embezzled, by an ex-employee it would not fall within recovery of debt as is contemplated under Section 2(g) of the Act. The debt or liability had not arisen during the course of any business activity undertaken by the Bank with the defendant. It would be pertinent to reproduce the definition of debt as it appears in Section 2(g) of the Act : "DEBT"means any liability (inclusive of interest) which is alleged 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 institutions or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any Civil Court or otherwise and subsisting on, and legally recoverable on, the date of the application;
(9) Learned Counsel for the plaintiff/respondent relies on the above definition of "debt" and submits that the definition of debt is a very wide one. He lays emphasis on the words any liability inclusive of interest alleged to be due...... from any person by a bank. The plea being that "any liability" due from any person would include the money due on account of embezzlement by an employee. In the instant case, it is submitted that the approval of vouchers, claims and bills by an employee are part of business activity and banking business. Reliance is also placed on the fact that the expenses are allowable as business expenditure. The plaintiff/respondent relies on definition of "debt" and its meaning as is taken in Wealth Tax Act.
(10) Having considered the rival contentions, I am of the view that the cause of action of the present suit is not one which is liable to be transferred under Section 31 of the Act and which falls within the jurisdiction of the Tribunal under Section 18 of the Act. Although, the definition of debt as given in the Act is a wide one, the controlling words are "means any liability (inclusive of interest) which is alleged as due from any person by a bank or the Financial Institution during the course of any business activity undertaken by the bank or the Financial Institution under any law. I am of the view, that the debt is required to arise during the course of business activity undertaken by the bank qua the said person. It cannot be said that a suit for recovery of embezzled or misappropriated sum is one arising under business undertaken by the bank with the employee. It is immaterial that the embezzled or misappropriated amount is allowable as business expenditure. The same would not alter the character or nature of the liability to one arising during the course of business undertaken by the bank. A reference to the statement of Objects and Reasons of the Act also supports the above view. The same runs as under:- "BANKS and Financial Institutions at present experience considerable difficulties in recovering loss and enforcement of securities charged with them. The existing procedure for recovery of debts due to banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the time......".
The legislation intended to expedite the recovery of loans and enforcement of securities charged with Banks and Financial Institutions given during the course of Banking business.
(11) Learned Counsel for the appellant/defendant, purely on the factual aspect has placed on record a letter dated 13.11.1995, issued by the bank wherein only a sum of Rs. 26,348.00 is sought to be adjusted towards the loss attributable to him due to alleged acts of embezzlement against the gratuity amount. Learned Counsel submits in support of his contention that the total dues being claimed from the defendant in terms of this letter would be in the range of Rs. 1,00,000.00 to Rs. 1,25,000.00 and as such the same would not even otherwise come within the pecuniary jurisdiction of the Debt Recovery Tribunal. It is not necessary to go into this submission as I have otherwise come to the conclusion that a suit for recovery of allegedly embezzled amount by the bank against an employee, is not one which would come within the definition of a "debt" arising during the course of business as contemplated under the Act. In view of the foregoing, the appeal of the appellant/defendant is allowed and the order of Deputy Registrar dated 12.7.1995 transferring Suit No. 550 of 1994 to the Debt Recovery Tribunal is set aside.