Debt Recovery Appellate Tribunal - Mumbai
Bajaj Electricals Ltd. vs Canara Bank And Anr. on 8 May, 2006
Equivalent citations: IV(2006)BC144
ORDER
S.S. Parkar, J. (Chairperson)
1. The short but important question, which arises in this appeal for decision is about the appropriation of a sum of Rs. 7,67,821/- which was deposited under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the "RDB Act').
2. The respondent Bank had filed original application for recovery of debt from the appellants, which was decreed by the DRT. Against the said decree, the appellants had come in appeal before this Tribunal, which was dismissed by an order dated 14.1.2005. During the pendency of the appeal, the appellants were directed to deposit a sum of Rs. 7,67,821/- being seventy-five per cent of the debt payable by the appellants to the respondent Bank under Section 21 of the RDB Act. After the said amount was deposited, it was invested in FDR in the name of the Registrar, DRAT, Mumbai with the respondent Bank on 25.2.2004. Now respondent Bank has filed praecipe in the appeal seeking directions for appropriating the amount of deposit along with accrued interest thereon towards the 'debt' due from the appellants to the respondent Bank. Naturally, the Bank wants to give credit for the amount deposited by the appellants along with interest accrued thereon from the date of the order of this Tribunal, which may be passed in respect of the amount.
3. On behalf of the appellants, it is argued that on the amount deposited in FDR, the appellants are entitled to interest only at the rate of 4.75 per cent per annum compounded with quarterly rests, while the respondent Bank is charging interest at the rate of 18 per cent per annum on the loan given to the appellants. It is therefore argued that the amount of FDR should appropriated from the date of the deposit in the account of the appellants.
4. Since the deposit amount is invested in FDR with the respondent Bank, I am of opinion that, it would be unjust to give benefit only of interest which accrued on the amount invested in FDR to the appellants when the amount is invested with the creditor Bank itself. In all probability the amount must have been utilized by the respondent Bank and, therefore, the amount should be shown to have been credited in the appellants' account with the respondent Bank from the date of the fixed deposit, which is 25.2.2004. I, therefore, requested the respondent Bank to give credit of the said amount from the date of deposit in the amount of the appellants and work out the figure of the amount due and payable by the appellants to the respondent Bank towards the decretal amount. Accordingly, the respondent Bank has prepared statement of accounting giving credit of the amount of Rs. 7,67,821/- in the account of the appellants from 25.2.2004 on which date the amount was deposited in the FDR.
5. From the statement of account produced by the respondent Bank, it appears that the Bank has adjusted the amount of Rs. 7,67,821/- towards interest. The learned Advocate for the appellants, however, is not satisfied with this statement of account. According to him, the appellants ought to have been given interest at the rate of 18 per cent per annum on the aforesaid amount from the date of FDR, as if the appellants had given loan to the respondent Bank. This argument is advanced on the ground that, when the respondent Bank is charging 18 per cent interest to the appellants, they should give 18 per cent interest to the appellants on the deposit amount. However, such argument does not stand to reason. The said amount cannot by any fiction deemed to have been given as a loan to the respondent Bank by the appellants which would fetch interest at the rate of 18 per cent per annum.
6. The next argument advanced on behalf of the appellants is that the amount of deposit of Rs. 7,67,821/- should be appropriated towards the principal amount and not towards the interest as shown by the Bank. In this respect, he placed heavy reliance on Sections 59 to 61 of the Indian Contract Act. Accordingly to him, when there is no intimation given by the debtor as to how the amount: should be adjusted or about the application of payment or when the debtor has omitted to indicate how the payment should be adjusted, the resort will have to be made to Section 61 of the Indian Contract Act and payment should be applied to the discharge of some particular debt i.e. the principal amount first.
7. In my view, provisions of Section 61 of the Indian Contract Act cannot be made applicable to the instant case. Section 61 of the Contract Act has to be read with two preceding Sections 59 and 60 as all these three sections come under one heading of "Appropriation of Payments". Under Section 59 when the debtor makes a payment to the creditor with express intimation to the creditor, the creditor will have to give discharge as per the express intimation or instructions on intimation which can be said to be implied, under Section 59 of the said Act. In the absence thereof, the creditor has been given discretion to apply in lawful debts due and payable by the director under Section 60 of the Indian Contract Act. In this case, the amount has been deposited under Section 21 of the RDDBFI Act, which is not a payment by the debtor to the creditor as contemplated by the above provisions. This amount was deposited in FDR in the name of the Registrar, DRAT, Mumbai. In my view, the provisions of Sections 59 to 61 of the Contract Act are applicable when payments are made by the debtor by his own act and not when amount is deposited under a statutory provision like Section 21 of the RDDBFI Act. It was only with a view to see, in the absence of any provision that equitable principle should not be lost sight of, I directed the respondent Bank to give credit of the amount deposited by the appellants in the account of the appellants from the FDR though the amount was deposited in the name of the Registrar, DRAT, Mumbai. This is because all the while the amount was with the creditor Bank and the Bank was not prohibited from utilizing it. If, however, the amount had been invested in other than the creditor Bank, equity would not have been in favour of the appellants.
8. On behalf of the respondent Bank, reliance is placed on the judgment of the Supreme Court in the case of Industrial Credit and Development Syndicate Ltd. v. Smithaben H. Patel and Ors. , wherein it was held that in the absence of direction of the Court and in the absence of agreement to the contrary between the parties, the amount paid to the judgment creditor by the judgment debtor has to be firstly adjusted towards interest as done by the Bank in the instant case and costs and thereafter towards the principal amount. That was a case where the Court had directed the judgment debtor to pay the decretal amount in monthly instalments of Rs. 20,000/- without prescribing any mode of payment towards various heads of the decretal amount. Rejecting the judgment debtor's plea that whatever instalments paid, were in liquidation of the principal amount and not towards the costs and interest, it was held by the Apex Court that the amount had to be adjusted firstly towards the interest and costs and thereafter towards the principal amount.
9. As I said earlier, in the present case no payment is made by the judgment debtor to the judgment creditor, but the question is only about adjusting the amount which was deposited by the judgment debtor under Section 21 of the RDDBFI Act an therefore provisions of Section 61 of the Indian Contract Act would not be applicable. The respondent Bank in fairness has also agreed to give credit of a sum of Rs. 80,237/- which is the amount of interest accrued on the fixed deposit amount of Rs. 7,67,821/-. Accordingly after making all the adjustments the respondent Bank has given figure of Rs. 18,45,329/- as the amount which is due and payable by the appellants to the respondent Bank as on today.
10. Thus, the respondent Bank is directed to give credit of sum of Rs. 7,67,821/- in the account of the appellants from the date of FDR i.e. 25.2.2004. The respondent Bank is permitted to encash the said amount of FDR in the account of the appellants from the date of the FDR i.e. 25.2.2004.
11. After this order is dictated, the learned Advocate appearing for the appellants states that the appellants are going to tender a cheque for a sum of Rs. 18,45,329/- which is the amount shown as due, in their accounts, to the respondent Bank, which the respondent Bank is prepared to accept in full and final settlement of the claim of the respondent Bank. It is agreed between the parties that the cheque in the sum of Rs. 18,45,329/- drawn in the name of the respondent Bank, shall be handed over to the respondent Bank's Advocate Mr. Umesh Shetty. After encashment of the said cheque, the respondent Bank shall file pursis for closure of the recovery proceedings before the Recovery Officer.