Calcutta High Court
State Bank Of India vs Visa Steel Limited & Ors on 28 March, 2018
Equivalent citations: AIRONLINE 2018 CAL 1509
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
GA 2385 of 2016
WITH
CS 202 of 2016
STATE BANK OF INDIA
Versus
VISA STEEL LIMITED & ORS.
For the Plaintiff : Mr. Pratap Chatterjee, Sr. Adv.,
Mr. Ranjan Bachwat, Sr. Adv.,
Mr. Jishnu Saha, Sr. Adv.,
Mr. Debnath Ghosh, Adv.
Ms. Pubali Sinha Chowdhury, Adv.
For the Defendant Nos.1 to 4 : Mr. Sabyasachi Chowdhury, Adv.
Ms. Manju Bhattacharya, Adv.
Mr. Sachida Nanda Pandey, Adv.
Mr. V.V.V. Sastry, Adv.
Hearing Concluded On : 05.02.2018
Judgment On : 28th March, 2018
Soumen Sen, J.:- This is an application by defendant nos. 1 to 4 for
rejection of the plaint on the ground that this Court has no jurisdiction over
the subject matter of the suit.
The applicants contend that the suit is essentially for recovery of debt
within the meaning of Section 2(g) of the Recovery of Debts due to Banks
and Financial Institution Act, 1993 (hereinafter referred to as the RDB Act)
and the cause of action has been camouflaged in such a manner so as to
create an illustration of jurisdiction of this Court, which otherwise it does
not have.
The applicants have also prayed for revocation of leave under Clause
12 of the Letter Patent on the ground that the Master Restructuring
Agreement (MRA) and other loan documents have been executed outside
the territorial jurisdiction of this Court at 8/10 Alipore Road, Kolkata - 700
027. However, this objection has not been seriously pursued during
argument.
Mr. Sabyasachi Chowdhury, the learned Counsel appearing on behalf
of the applicants, has submitted that a proper and meaningful reading of
the plaint would show that the plaintiff is essentially seeking realization of
debt. The plaintiff has alleged breaches of agreements entered into between
the plaintiff and the said defendants. Mr. Chowdhury has specifically
referred to paragraphs 16, 18, 31, 35, 37, 38 and 43 of the plaint and
submits that the said paragraphs would unmistakably show that the suit is
essentially for realization of debt.
In paragraph 16 of the plaint, the plaintiff has mentioned the
outstanding sums due from the defendant no.1 to the lenders as on 1st
August, 2016. In paragraph 18 of the plaint, it is alleged that the
defendant nos. 1 to 3 were obliged to ensure that the shareholding of the
defendant nos. 2 and 3 in the defendant no. 1 is not altered without prior
approval of the lenders. The said defendants have failed to create a pledge
over 51% of the total equity share capital of the defendant no.1 within 31st
March, 2016. In paragraph 31 of the plaint, the plaintiff has alleged that
the various defaults and breaches committed by the defendant nos.1 to 4 of
the terms of the Master Restructuring Agreement (MRA), Deed of Guarantee
and Letter of Undertaking. It is specifically alleged that the defendant nos.2
and 3 have defaulted in infusing Rs.325.00 crores in the defendant no.1
within the stipulated deadline on 31st March, 2015 as per the Letter of
Approval and the MRA. The defendant no.1 has also defaulted in payment
of interest and installments as well as payments under various Letters of
Credit issued and executed by the lenders. In paragraph 35 of the plaint, it
is alleged that the amount payable by the defendant no.1 as on 30th June,
2016 is Rs.712.23 crores and an aggregate sum of Rs.3038.17 crores is
payable by the defendant no.1 to all the other lender banks and in such
circumstances the lender banks and the plaintiff are entitled to exercise
lien over the said equity shares as security for the amount lent and
advanced to the defendant no.1. In paragraph 37 of the plaint, the plaintiff
has sought for a declaration as to its legal rights in respect of the shares
required to be pledged in its favour for the benefit of the lenders under the
MRA. In paragraph 38 the plaintiff has alleged that the plaintiff and the
other lenders have lien over all forms of securities deposited and/or created
by the defendant nos. 1 to 4 in the ordinary course of banking business
and the plaintiff is entitled to retain such securities to ensure payment of
all sums due and payable by the defendant no.1 to the plaintiff under the
MRA.
Mr. Chowdhury has also referred to prayer (h) of the plaint in which
the plaintiff has prayed for an enquiry into the loss and damages suffered
on account of wrongful acts, conduct and omission and breaches
committed by the defendants and their failure to abide by the terms of the
MRA dated 19th December, 2012 and a decree for such sum as may be
found due by this Court.
Mr. Chowdhury has submitted that the prayers for perpetual and
mandatory injunction are, in effect, modes of recovery of debts as envisaged
in Section 25 and 28 of the Recovery of Debts Due to Banks and Financial
Institution Act, 1993. Even such reliefs could have been claimed in an
application under Section 19 of the RBD Act in view of Section 19(13)(A)
and 19(13)(B) of the said Act.
Mr. Chowdhury has referred to two decisions of the Hon'ble Supreme
Court namely, United Bank of India vs. Debts Recovery Tribunal and
Others reported at (1999) 4 S.C.C. 69 and State Bank of Bikaner &
Jaipur vs. Ballabh Das & Co. and Others reported at (1999) 7 S.C.C.
539, in order to show that the definition of "debt" under Section 2(g) of the
RDB Act is wide enough to include the claims made in the plaint. It is
submitted that the cause of action for filing the suit is failure to discharge
liability under several agreements. The plaintiff in prayer 'h' of the plaint
has categorically prayed for a decree for amount which may be found to be
due and payable on enquiry into the loss and damages suffered by the
plaintiff on account of the wrongful acts and breaches under various
agreements. In terms of the expansive definition of 'debt', the claim for
recovery of damages would squarely come within such definitions and
accordingly Civil Court has no jurisdiction.
Mr. Chowdhury further submits that even under unamended
definition of 'debt' the Hon'ble Supreme Court in United Bank of India
(supra) has interpreted debt to include the claim for damages and
compensation which requires quantification before a decree could be
passed. Mr. Chowdhury submits that the word 'otherwise' in the definition
of the debt has brought into its fold any claim that may arise in view of
breaches of a contract. In other words, the prayer for specific performance
of the several agreements in effect is an action for enforcement of a debt
and for realization of debt alleged to be due from the defendant nos.1 to 4
by the plaintiff and such adjudication can only be done in an application in
Section 19 of the RDB Act. The jurisdiction of the Civil Court is excluded
under Section 34 of the RDB Act. Mr. Chowdhury has submitted that in
United Bank of India (supra), the Apex Court has accepted the proposition
that a debt is a sum of money which is now payable or will become payable
in future by reason of a present obligation. Mr. Chowdhury argues that a
bare reading of the plaint would show that the plaintiff has asserted that "a
sum of money is now payable" in Paragraph 16 and hence the suit is to be
transferred to the Debt Recovery Tribunal contended under the RDB Act.
Mr. Chowdhury submits that the plaintiff has created an illusion of a
cause of action in the form of specific performance of the several
agreements although in effect it is essentially a suit for enforcement of debt
and discharge of a liability. Mr. Chowdhury in this regard has relied upon
Paragraph 15 of United Bank of India (supra) and the decision of the
Hon'ble Supreme Court in I.T.C. Limited vs. Debts Recovery Appellate
Tribunal and Others reported at (1998) 2 SCC 70 Paragraphs 233, 26
and 27. Mr. Chowdhury submits that clever drafting creating illusion of
cause of action of fraud in ITC Limited (supra) did not find favour with the
Apex Court when an objection of this kind is raised the endeavour of the
court would be to find out whether the real purpose of the suit is something
else than what canvassed.
Mr. Pratap Chatterjee, learned Senior Counsel appearing on behalf of
the plaintiff submits that the suit is for specific performance of several
agreements. Although there are breaches of several agreements but the
plaintiff does not want recovery of money but required the defendant nos. 1
to 4 to perform their obligations under several agreements. Mr. Chatterjee
has referred to few paragraphs of the plaint to show that the defendants
under the agreements could not dilute its shareholding without prior
permission of the lenders. Mr. Chatterjee submits that since the said
defendants have enjoyed the facilities under several agreements and the
lenders have preferred their obligation, it is now necessary for borrowers to
create further securities in discharge of their obligation so as to insulate
and secure the exposures already made by the plaintiff and several other
lenders under various agreements. The defendants have not pledged
shares and/or created securities in terms of Article 3 clause 3.1(B) of the
MRA. The MRA requires the borrower to furnish additional security in the
event the lenders are of the opinion that the security provided by the
borrower has become inadequate to cover the balance of the lends than
outstanding. Mr. Chatterjee submits that the tribunal in a proceeding
under Section 19 of the RDB Act can only issue a certificate for recovery of
the amount of debt specified in the certificate. It is submitted that in the
instant case the tribunal is not competent to issue a certificate allowing
prayer (a) or any other prayer of the plaints save and except perhaps prayer
'h'. Mr. Chatterjee submits that the plaintiff is not seeking an adjudication
in terms of prayer 'h' and the said prayer is given a go-by.
Mr. Chatterjee submits that default does not necessarily lead to
realization of debt inasmuch as the plaintiff has not demanded any amount
from the defendant nos. 1 to 4. The suit is essentially for specific
performance of the several agreements to create securities for loans
advanced. The frame of the suit cannot be said to be a suit for recovery of
any debt.
Mr. Chatterjee has, accordingly, prayed for dismissal of the petition.
The plaintiff has instituted a suit praying, inter alia, for specific
performance compelling the defendant Nos.1 to 3 to perform and /or
comply with the terms and conditions of the Master Restructuring
Agreement dated 19th December, 2012, Deed of Guarantee dated 19th
December, 2012 and Letter of Undertaking dated 23rd March, 2013; the
shareholding of the defendant No.1; mandatory injunction directing the
defendant Nos.2 to 3 to pledge their shareholding in the defendant No.1
with the plaintiff in terms of and/or in accordance with the Master
Restructuring Agreement dated 19th December, 2012/22nd January, 2013;
mandatory injunction directing the defendant Nos.1 to 3 to execute
necessary documents recording pledge of shares held by the defendant
Nos.2 and 3 in the defendant No.1 in favour of the plaintiff with immediate
effect in terms of the aforesaid agreement; mandatory injunction directing
the defendant Nos.1 to 3 to execute necessary documents and issue all
instructions for effecting pledge of 2,61,00,000 equity shares of and in the
defendant No.1 held by the defendant Nos.2 and 3 in favour of the plaintiff;
an enquiry into the loss and damages suffered by the plaintiff on account of
the wrongful acts and conduct and omission and breaches committed by
the defendants and their failure to abide by the terms of the Master
Restructuring Agreement dated 19th December, 2012 and a decree for such
sum as may be found due by this declaration that 2,61,00,000 equity
shares in the defendant No.1 are held by the defendant No.6 for and on
behalf of and/or on account of the plaintiff being the present pledge of the
said shares.
Shorn of details, it appears that the defendant No.1 had availed of
several credit facilities from a consortium of lenders headed by the plaintiff.
The defendant No.1 failed to service and/or repays the debts and large
amounts remained due and owing from the defendant No.1 to its various
lenders. Subsequently, at the request of the defendant No.1, the
consortium of lenders agreed to restructure the credit facilities under the
aegis of the Corporate Debt Restructuring mechanism (hereinafter referred
to as "CDR"), which resulted in approval for grant of additional assistance
by a Letter of Approval dated 27th September, 2012 (hereinafter referred to
as "the LOA").
A Master Restructuring Agreement (MRA) was executed by the
plaintiff and the defendant No.1 on 19th December, 2012/22nd January,
2013 and also by the proforma defendant Nos.7 to 24. The total sum of the
restructured credit facilities, both fund based and non fund base, under the
MRA was Rs.3,053.26 Crores. The credit facilities under the MRA were
secured inter alia by a Deed of Guarantee dated 19th December, 2012
executed by the defendant No.2 in favour of the Lenders. The defendant
No.2 also issued a Letter of Undertaking dated 23rd March, 2013 to the
plaintiff, confirming, inter alia, that it shall pledge the shares held by it in
the defendant No.1 in favour of the Lenders, in accordance with the terms
of the LOA and the MRA. The defendant Nos.1 to 4 also executed other
documents from time to time in favour of the Lenders in relation to the MRA
and the credit facilities covered thereby. The credit facilities granted to the
defendant No.1 under the MRA were secured, inter alia, by a pledge of 24
per cent of the total equity share capital of the defendant No.1 held by the
defendant Nos.2 and 3 out of the total 74 per cent equity share capital held
by the defendant Nos.2 and 3 at the material time.
The defendant Nos.1 to 3 were to ensure that the shareholding of the
defendant Nos.2 and 3 in the defendant No.1 is not altered without prior
approval of the Lenders and 51 percent of the total equity share capital held
by the promoters of the defendant No.1, that is, the defendant Nos.2 and 3
is pledged with the Lenders at the earliest and not later than 31st March,
2016.
The defendant No.2, however, in alleged breach of the terms and
conditions of the MRA, has reduced its shareholding in the defendant No.1
from 53.37 per cent to 40.35 per cent, by way of sale of its shareholding
without prior approval of the Lenders. Further, the defendant Nos.2 and 3
alleged to have also failed to create pledge of 51 per cent of the total equity
share capital of the defendant No.1 with the lenders by 31st March, 2016,
as required under the MRA.
At the request of the defendant No.4, the defendant No.6 had also
granted credit facilities to the extent of Rs.25,00,00,000 and a loan
agreement dated 4th April, 2015 was duly executed between the defendant
NO.4 and the defendant No.6. Such credit facility was inter alia secured by
pledge of 2,61,00,000 equity shares held by the defendant No.2 in the
defendant No.1 in favour of the defendant No.6 as evidenced by a Pledge
Agreement dated 4th April, 2015. In terms thereof, the defendant No.6 was
entitled to assign all its rights, interests and benefits to any person without
requiring any consent from the defendant Nos.2 and 4. An irrevocable
Power of Attorney dated 7th April, 2015 was also executed by the defendant
Nos.2 and 4 severally in favour of the defendant No.6.
The defendant No.1 alleged to have defaulted in its commitments to
the defendant No.6. The defendant No.1 also sought extension of credit
facilities for an uncertain period from the defendant No.6. The acts and
conduct of the defendant No.1 created a bonafide apprehension in the
minds of the plaintiff that the defendant Nos.1, 2 and 3 would not fulfill
their obligations under the aforesaid documents and shall not pledge
sufficient equity shares of the defendant No.1 upto the agreed level of 51
per cent of the total equity share capital. The said defendants were already
in breach of their several obligations inter alia under the MRA, the said
guarantees and the said undertakings.
In such circumstances, the plaintiff to safeguard and protect its
interest and those of the other Lenders, pursuant to negotiations obtained
assignment of the security held by the defendant No.6 whereby all rights
and entitlements of the defendant No.6 in respect of the credit facilities
granted to the defendant Nos.1, 2, 4 and Visa Bao Ltd. stood assigned in
favour of the plaintiff. Such assignments inter alia included 2,61,00,000
equity shares held by the defendant No.2 in the defendant No.1. Four
Deeds of Assignment all dated 9th September, 2015 were duly executed
between the plaintiff and the defendant No.6.
In view of such assignment in favour of the plaintiff, the plaintiff
acquired rights, title and interest in the pledged securities and/or
shareholding of the defendant No.1 and the plaintiff became entitled to
exercise its rights in relation to the assigned shares and securities. By
virtue of the assignments dated 9th September, 2015, the plaintiff is in law
and/or should be deemed to be the pledgee in possession of the said
2,61,00,000 equity shares in the defendant No.1 and the assignor, being
the defendant No.6, is obliged to act solely on the instructions of the
plaintiff in respect of the said 2,61,00,000 equity shares in the defendant
No.1. The Lenders may also consider initiating recovery proceedings post
an exit from the ongoing CDR scheme. However, the proposed action would
need internal approvals from each of the respective Lenders. This is likely
to be a time consuming exercise and it is for this reason that though the
Lenders are entitled to seek a money decree against the defendant Nos.1 to
4 as also seek appropriate declaratory reliefs for creation, perfection and
enforcement of security interests which were created or liable to be created
under the MRA due to the urgent need to seek protections of the securities
against the defendant Nos.1 to 3, the plaintiff is presently not seeking such
other reliefs. The plaintiff has prayed for leave under Order 2 Rule 2 of the
Code of Civil Procedure, 1908 in respect of reliefs for money decree and
enforcement of security interests against the defendants Nos.1 to 4.
In this background, the arguments of the respective parties are
required to be considered.
Section 2(g) of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 defines debts as follows:-
"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 under 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."
The said definition of debt has undergone an amendment in the year
2000 subsequent to a decision of the Hon'ble Supreme Court in United
Bank of India Vs. Debts Recovery Tribunal and Ors. reported at (1999)
4 SCC 69 where notwithstanding the unamended definition, the Apex
Court has given an extended meaning to the definition of 'debt'. The
Hon'ble Supreme Court has interpreted the expression 'debt' of the
unamended 2(g) to include any liability which is alleged as dues from any
person by a bank during the course of any business activity undertaken by
the bank either in cash or otherwise, whether secured or unsecured,
whether payable under a decree or order of any court or otherwise and
legally recoverable on the date of the application. This judgment of the
Hon'ble Supreme Court has been relied upon by Mr. Sabyasachi
Chowdhury, the learned Counsel appearing on behalf of the applicants to
argue that the expression 'debt' was given a widest amplitude and in the
said decision it was held that a claim in the nature of damages would also
come within the purview of the expression 'debt'. In UBI (Supra), the United
Bank of India filed a suit against Avery India Ltd. & Ors. in the High Court
at Calcutta being Suit No.276 of 1991 praying for the following reliefs:-
"a) Decree for Rs.1,75,26,638.55p against the defendant No.1 with
further interest from 1st April, 1991 till realization at the rate of
18% per annum.
b) Decree against the defendant No.2 for delivery of List of
Encashed Refund pay orders, encashed Refund Pay orders and
computerized Tabulations of the encashed Refund Pay orders
and Accounts and in default a decree for Rs.1,75,26,638.55p
with further interest from 1st April, 1991 till realization at the rate
of 18% per annum.
c) Decree against the defendant No.3 for delivery of List of
Encashed Refund Pay orders, encashed Refund Pay orders and
computerized Tabulations of the encashed Refund Pay Orders
and Accounts and in default a decree for Rs.1,75,26,638.55p
with further interest from 1st April, 1991 till realization at the rate
of 18% per annum.
d) Enquiry into the respective liabilities of the defendants Nos.1,2
and 3 and decree against each of them for the sum due on such
enquiry.
e) Decree for Accounts against each of the defendants Nos.1,2 and
3.
f) Receiver.
g) Injunction.
h) Costs.
i) Further and other reliefs."
During the pendency of the suit, the RDB Act was enacted and came
into force on 24th June, 1993, and under Section 31 thereof the said suit
was transferred to the Debts Recovery Tribunal and was renumbered as
T.A. No.163 of 1996.
The facts relating to the filing of the suit are that Avery India Ltd. was
a constituent of the plaintiff and obtained banking and credit facilities from
the plaintiff, inter alia, in Account No.A-139. In respect of such banking
and credit facilities, Avery India Ltd. (in short "Avery) is liable to pay the
plaintiff's claims. Andrew Yule & Company Ltd. (in short "Andrew Yule)
obtained from the plaintiff certain paid Refund Pay Orders being the
properties of the plaintiff on an undertaking to prepare proper statements
and reconcile the accounts and return the same. In breach of its
undertakings Andrew Yule has failed to return the said paid Refund Pay
Orders and to render any account in respect thereof thereby causing loss
and prejudice to the United Bank of India (in short "UBI). The UBI claimed
return of the paid Refund Pay Orders and complete accounts in default a
money decree. The Choksey Bhargava & Company (in short "Choksey") has
admitted and acknowledged that certain paid Refund Pay Orders and
statements of accounts in relation to the transactions by and between the
plaintiff and the first defendant are in its possession and custody. The paid
Refund Pay Orders are the properties of the plaintiff and the Choksey has
wrongfully detained such orders. Choksey is liable to deliver the said
documents along with proper accounts in relation thereto to the UBI and in
default the Choksey is liable to compensate the UBI in respect thereof to
the extent of the UBI's claims herein. Both Andrew Yule and Choksey in
breach of their duty committed wrongful acts and omissions in relation to
the Refund Pay Orders account, knowing that such wrongful acts would
cause and has caused loss and prejudice to the UBI. The UBI is, therefore,
entitled to and claims damages by way of compensation from each of the
Andrew Yule and Choksey.
On 7th December, 1979, the Avery India Ltd. requested the United
Bank of India to act as its banker for payment of Refund Orders in
connection with the public issue of shares made by the Avery. Avery
proposed to issue Refund Orders drawn on the UBI in favour of those who
had applied for shares in the Avery and in consideration of the UBI agreeing
to pay the Refund Orders, the Avery undertook to indemnify the UBI in
respect of such payments.
By two letters dated 7th November and 20th November, 1979, the
Andrew Yule informed the UBI that about two lakhs Refund Orders would
be issued and the number will begin from 1 to 195155.
By a letter dated 11th December, 1979 the Avery India Ltd. confirmed
that approximately two lakhs Refund Orders would be posted from 17th
December, 1979. The Avery further informed that it made arrangement for
making payment to the plaintiff of Rs.11,59,90,372/- at Bombay. The total
amount to be refunded was stated as Rs.19,48,26,441/-.
The UBI debited the said amount with the amounts paid against
Refund Orders produced by the payees thereof. At the request of the Avery,
the UBI transferred to State Bank of India a sum of Rs.25,00,500/- for the
purpose of making payment of Refund Pay Orders at the places where the
United Bank of India did not have its Branches. Ultimately it turned out
that the payees in those specified places instead of eacashing with State
Bank of India got their Refund Pay Orders collected through their Bankers
from the UBI via the Clearing House.
The State Bank of India had Refund Pay Orders to the extent of
Rs.1,29,143/- only and the balance amount was utilized by the Avery India
Ltd. for other purposes.
According to the instructions of the Avery, the UBI through its
different branches paid the Refund Pay Orders issued by the Avery India
Ltd. The Avery India Ltd. did not deposit sufficient funds to meet such
payments which as on 1st February, 1983 amounted to about
Rs.34,39,000/-. The UBI debited the said Account No.A-139 with
Rs.14,25,000/- leaving a credit balance of Rs.2,572.25p. therein. After the
adjustments the outstanding claim of the plaintiff in respect of the
payments of the Refund Pay Orders was Rs.20,04,500/- with interest and
bank charges as on 21st April, 1988, which was debited to the said Account
No.A-139.
The UBI has, from time to time, requested the Avery India Ltd. to pay
the claims of the UBI. The Avery acknowledged its liability to the plaintiff
but on some pretext or other has been deferring but never refused payment
of the plaintiff's claims.
By a letter dated 2nd April, 1980, the Avery and/or the Andrew Yule
requested the UBI to make over the paid Refund Pay Orders to the Andrew
Yule. The Avery and/or the Andrew Yule also undertook to produce or
return such paid Refund Pay Orders to the UBI whenever asked for and
that they undertook to keep the UBI fully indemnified against any loss or
misuse of the said paid Refund Pay Orders.
At the request of the Avery and/or the Andrew Yule, the UBI delivered
to the Avery and/or the Andrew Yule the paid Refund Pay Orders. The
Andrew Yule had and/or has in its possession and custody the Paid Refund
Pay Orders taken from the plaintiff on trust, a list of such paid Pay Orders
and computerized Tabulation of the encashed Refunds Pay Orders and is
wrongfully detaining the same. The UBI claims return and delivery of the
said list of and the encashed Refund Pay Orders and the computerized
Tabulations of the encashed Refund Pay Orders and in default of such
return and delivery a decree for Rs.1,75,26,638.55P. being the
compensation for the damages and loss suffered by the UBI for the
wrongful acts of the Andrew Yule.
By a letter dated 13th April, 1989, the Avery India Ltd requested the
United Bank of India to hand over encashed Refund Pay Orders to the
Choksey. The Choksey on the undertaking return or deliver to the United
Bank of India and on trust obtained certain encashed Refund Pay Orders.
Without prejudice to the statements and contentions in the aforesaid
paragraphs, the United Bank of India states that the list of encashed
Refund Pay Orders, the encashed Refund Pay Orders and the computerized
Tabulations of the encashed Refund Pay Orders are with the Choksey for
the UBI and on which the Choksey is liable to deliver to the UBI but is
wrongfully detaining the same. The UBI claims delivery of the said
documents and in default a decree for Rs.1,75,26,638.55p. being the
compensation for damages and loss suffered by the UBI due to wrongful
acts of the Choksey.
Each of the defendants upon transfer of the suit to DRT raised
objections before the DRT that it has no power or authority or jurisdiction
to adjudicate the claim of UBI or direct delivery of list of encashed refund
pay orders and computerized tabulations of the encashed refund pay orders
and accounts against Andrew Yule and Choksey nor the claim of UBI for
enquiring into the respective liabilities of the defendants can be adjudicated
by the Tribunal. The Claim of UBI could be justified only on the basis of
the Refund Orders submitted to it by the unsuccessful applicants for
shares and since such claim was not a defined claim but was dependent
upon an enquiry into the purported liabilities of the defendants such claim
could not be said to be 'debt' within the meaning of RDB Act, 1993. It is
not a 'debt' within the meaning of Section 2(g) of the DRT Act as it stood
prior to 2000. The Tribunal rejected the said application by an order dated
20th February, 1997. Against the said order of the Tribunal, three
defendants filed three separate applications under Article 226 of the
Constitution of India before the High Court at Calcutta.
The High Court expressed an opinion that the suit as framed is one
for damages and compensation which is required to be quantified before a
decree to be passed and such a suit will not be within the purview of the
provisions of the said Act. The relevant observations are:-
"The question of jurisdiction raised by the defendants before the
Tribunal goes to the very root of the Tribunal's competence to entertain
the suit despite its transfer from this Court to the Tribunal under
Section 31 of the 1993 Act. In such perspective, instead of deferring
the decision in respect thereof, the Tribunal, in my view, should have
decided the question as to whether it was competent to hear the suit as
a Transferred Application. Since the Tribunal did choose to dispose of
the petitioner's application for return of the plaint by its separate order
No.4 dated 20th February, 1997, it could have also disposed of the
applications filed by the other defendants on the same lines.
Having regard to the frame of the suit and the reliefs prayed for
therein, the objection raised by the defendants/petitioners regarding
the Tribunal's competence to hear the suit is of great relevance and
cannot be taken lightly. The Tribunal, being a creature of statute, will
have to exercise its jurisdiction and function within the confines of the
statute. If the statute does not empower it to adjudicate on a claim for
the purpose of quantification of such claim and recovery thereof, then,
in such event, the Tribunal cannot assume jurisdiction to do so.
Admittedly, the scope and ambit of the 1993 Act is confined to
the recovery of debts due to Banks and financial institutions. Sub-
sections (1) and (4) of Section 19 of the said Act provides that where a
Bank or financial institution has to recover a debt from any person, it
may make an application to the Tribunal in the manner indicated and
the Tribunal may after giving the applicant and the defendant an
opportunity of being heard pass such orders on the application as it
thinks fit to meet the ends of justice.
"Debt" has been defined in clause (g) of Section 2 of the 1993 Act
as follows:-
"2(g) "debt" means any liability (inclusive of interest) which is alleged
as due from any person by a bank or 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
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."
If the aforesaid definition of "debt" is read with the provisions of
Section 19 and more particularly Sub-section (7) of Section 19 of the
aforesaid Act, it is difficult to escape the conclusion that the said
expression can only be related to a specific and quantified amount for
the purposes of the said Act and not in respect of an undermined sum
which is required to be ascertained upon an enquiry to be conducted
by the Tribunal which is also dependent on documents to be filed by
the defendants. For the same reason I am also unable to accept Mr.
Dutta's contention that a debt within the ambit of the 1993 Act would
not only include cash but also a list of encashed Refund Pay Orders or
tabulated accounts. In my view, the scheme of the 1993 Act does not
envisage that the Tribunal should launch on an investigation to
quantify a claim, but to ensure quick recovery of a claim already
quantified.
In the instant suit, although, a decree for a quantified amount
has been sought for against Avery India Ltd., a prayer has also been
made for an enquiry into the respective liabilities of all the defendants,
including Avery India Ltd., and decree against each of them for the
sum found due on such enquiry. Such enquiry is again dependent on
the other prayers for delivery of the list of Encashed Refund Pay
Orders, Encashed Refund Pay Orders and computerised tabulations of
the encashed Refund Pay Orders and Accounts.
Notwithstanding Mr. Dutta's submissions that the default
clauses in prayers (b) and (c) of the plaint would bring the suit within
the ambit of the 1993 Act, I am unable to bring myself to agree with Mr.
Dutta in view of the other prayers in the plaint.
There is little doubt that the instant suit has been framed as one
for damages and compensation which is required to be quantified
before decrees, as prayed for, can be granted and, in my view, the
same is sufficient to take the suit out of the ambit of the 1993 Act
which deals with the recovery of specified amounts."
The Bank preferred a Special Leave Petition. The Hon'ble Supreme
Court reversed the findings of the High Court. Mr. Chowdhury draws
inspiration from Paragraphs 13 and 15 of the said judgment in view of relief
claimed in prayer (h) of the plaint. The said Paragraphs read:-
"13. Mr. Sanghi, the learned Senior Counsel, appearing for the
appellant relied upon the decision of this court in Kesoram
Industries & Cottton Mills Ltd. vs. Commissioner of Wealth Tax
(Central) Calcutta, reported in 1966(2) SCR 688, in support of his
contention that the plaintiff's claim would be a debt. In the
aforesaid case, the court was considering as to what is the
meaning of the expression 'debt' as it was required to ascertain
whether a liability to pay income tax and super tax on the
income of the accounting year would be a 'debt' within the
meaning of Section 2(m) of the Wealth Tax Act. This decision to
our mind will be not of much assistance inasmuch as the
expression 'debt' has been defined in the Act in question though
the general meaning of 'debt' may be of a persuasive value in
interpreting the expression 'debt' in the Act but it is too well
settled that where an expression in any Act has been defined,
the said expression will have the same meaning and is not
necessary to find out what is the general meaning of the
expression. In the aforesaid case, the court noticed as to how the
word 'debt' was interpreted in Webb vs. Stenton (1883) 11
Q.B.D.,518,527, wherein it was held a 'debt' is a sum of money
which is now payable or will become payable in the future by
reason of a present obligation, debitum in praesenti, solvendum
in futuro. After noticing a large number of authorities, the court
also held that all the decisions agree that the meaning of the
expression 'debt' may take colour from the provisions of the
concerned Act; it may have different states of meaning, but the
following definition is unanimously accepted; a debt is a sum of
money which is now payable or will become payable in future by
reason of a present obligation.
15. In the case in hand, there cannot be any dispute that the
expression 'debt' has to be given the widest amplitude to mean
any liability which is alleged as dues from any person by a bank
during the course of any business activity undertaken by the
bank either in cash or otherwise, whether secured or unsecured,
whether payable under a decree or order of any court or
otherwise and legally recoverable on the date of the application.
In ascertaining the question whether any particular claim of any
bank or financial institution would come within the purview of
the tribunal created under the Act, it is imperative that the entire
averments made by the plaintiff in the plaint have to be looked
into and then find out whether notwithstanding the specially
created tribunal having been constituted, the averments are such
that it is possible to hold that the jurisdiction of such tribunal is
ousted. With the aforesaid principle in mind, on examining the
averments made in the plaint, we have no hesitation to come to
the conclusion that the claim in question made by the plaintiff is
essentially one for recovery of a debt due to it from the
defendants and, 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."
In State Bank of Bikaner & Jaipur (supra), relied upon by Mr.
Chowdhury, the Hon'ble Supreme Court was considering whether on
account of non-payment of the amounts due under the bills by foreign
buyers would come within the purview of Section 2(g) of the DRT Act. The
State Bank of Bikaner & Jaipur filed two civil suits, one against Ballabh
Das & Sons and its partners and the other against Ballabh Das & Co. and
its partners in the Court of the District Judge at Jaipur for recovery of its
dues. During the pendency of the suits, DRT Act came into force. The
proceedings were transferred to the DRT. The order transferring the
proceedings before the DRT challenged by the respondents by filing two
revisions applications before the Rajasthan High Court. The High Court held that the question whether the amounts claimed in the suits are legally recoverable or not is a question of fact and can be adjudicated only after recording the evidence. It further held that whether the amounts claimed fall within the meaning of the term "debt" as defined by Section 2(g) of the Act is also a question of fact and till those facts are decided by the Court, the provisions of the Act cannot be said to have become applicable to the suits on and from the date on which the Tribunal at Jaipur was established. The facts of the case appear to be that the respondents were enjoying export credit facility with the bank. Under such facility, the respondents obtained advances from the bank from time to time against the pre-shipment and post-shipment exports of precious stones, jewellery, diamonds etc. There was non-payment to the bank by foreign buyers of the bills mentioned in the two suits. The defence of the respondents was that under the insurance cover obtained at the instance of the Bank from the Export Credit Guarantee Corporation, the bank is insured against any loss on account of non-realization of amounts from foreign buyers and on delivery by the respondents to the bank of documents of export of goods for which the credit was given or advances were made are to be deemed to be payments by the respondents to the bank. The respondents had delivered the documents in respect of the suit transactions to the bank and, therefore, the amounts mentioned in those documents should be deemed to have been paid to the bank. But the fact remains that the amounts claimed under the two suits have not been received by the Bank and were still outstanding at the time of filing of the suit were not in dispute. On such facts, in Paragraphs 7, 8 and 10, the Apex Court examined the definition of "debt" in the following words:-
"7. According to the definition, the term `debt' means liability which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions. It should have arisen 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. The liability to be discharged may be in cash or otherwise. It would be immaterial whether the liability is secured or unsecured or whether it is payable under a decree or an order of any Civil Court or otherwise. However, it should be subsisting and legally recoverable on the date on which proceedings are initiated for recovering the same.
8. The important words in the definition "alleged as due" have been over looked by the High Court and, therefore, it has erroneously held that unless the amounts claimed by the bank are determined or decided by a competent forum they cannot be said to be due and would not amount to `debt' under the Act. What was necessary for the High Court to consider was whether the bank was alleged in the suits that the amounts are due to the bank from the respondents, that the liability of the respondent has arisen during the course of its business activity, that the said liability is still subsisting and legally recoverable.
10. The High Court also failed to appreciate that the defence raised by the respondents does not prime facie show that the liabilities stood discharged either under the insurance cover/guarantee or otherwise. The defence raised by the respondents is that the insurance cover/guarantee provides that delivery by the exporter to the insured of documents of export of goods for which the credit has been given or advance has been made shall be deemed to be payment by the Exporter to the insured and, therefore, when the respondents delivered the export documents to the bank they should be deemed to have paid the amounts due under those exports to the bank. This defence can be considered only for the limited purpose of finding out whether the liability of the respondents was subsisting on the dates on which the suits were filed. Otherwise, it has no relevance for the purpose of deciding the jurisdiction of the forum. The contract of insurance/guarantee is between the Export Credit and Guarantee Corporation of India Ltd. and the appellant - bank and prima facie the term/condition in the said insurance cover/guarantee referred to above is for the benefit of the insurer and not for the benefit of the exporter, i.e. the respondents. It does not absolve the respondents of the liability to repay the amounts borrowed for the purpose of making exports if the foreign buyer of those goods does not make payment to the bank of the amounts payable in respect of those goods. Though the insurer/guarantor under the insurance/guarantee possibly would stand discharged from its liability to the insured on the exporters delivering the documents of export of goods to the insured, prima facie, the principal debtor would still remain subsisting. Thus, even this pre-requisite for the liability to be called a debt as contemplated by the Act having been satisfied the suits filed by the bank should have been treated by the High Court as proceedings for recovery of the debts."
In deciding an application of this nature, the Court has to examine the frame of the suit in order to ascertain whether the reliefs claimed in the suit could be granted by the tribunal. In examining the nature of the suit, the Court may also look into the purpose behind filing the suit in the civil court with a view to find out if by a clever drafting an illusion of a cause of action has been created in order to attract the jurisdiction of this Court. The Court is not expected to give unnecessary emphasis or restricted and narrow the scope and interpretation of the word 'debt' as it may likely to frustrate the very object of the Act. The Court is required to ascertain on a reading of the plaint the primary object of the suit.
If the Court is of the view that the tribunal is unable to decide the issues raised in the suit due to lack of jurisdiction, the task of the Court is easier. The jurisdiction of the civil court is plenary as opposed to the jurisdiction of tribunals whose jurisdictions are restricted and confined to the powers given to such tribunal by the statute. A particular cause of action may give rise to diverse reliefs but all the reliefs may not be granted by the Tribunal due to lack of jurisdiction. Where bifurcation of relief is possible and some of the reliefs could not be granted by the tribunal as the tribunal can only decide issues falling within its jurisdiction and not the other issues by reason of limitations on its power and jurisdiction, a party cannot be precluded from seeking an adjudication on such other issues. The jurisdiction of the civil court to decide such other related issues which may be declaratory or of specific performance as claimed in the present suit has been recognized in ICICI Banks Limited Vs. Coventry Coil-O-Matic (Haryana) Limited & Ors. reported at 2005 (1) CHN 341 (HC).
In ICICI Banks (supra), similar objection raised by the defendants was rejected upon consideration of the essential averments of the plaint and the prayers made by the plaintiff in the suit. The ratio of the decision appears to be that where the disputes arise from general law of contract and the reliefs are claimed on the general law of contract, a suit filed in the Civil Court cannot be said to be not maintainable. Similarly, if the money has been advanced by the bank and the debtor has agreed to create a mortgage, the lender bank can always file a suit in a Civil Court for specific performance of the agreement to mortgage.
The instant suit is essentially a suit for declaration, injunction and specific performance and not for recovery of a debt. In none of the cases, the Supreme Court of India observes that even a suit for declaration and specific performance of contract instituted by the bank or the financial institution against their borrowers has to be instituted before the Tribunal by enlarging the scope of the Act of 1993.
The plaintiff wants to enforce specifically a covenant. Even the expanded definition of debt, in my mind, does not completely oust the jurisdiction of the Civil Court. The scope of the Act cannot be expanded to indicate complete ouster of jurisdiction of the Civil Courts. The plaintiff is not seeking recovery of any debt. The plaintiff wants to secure the loan already advance. The plaintiff admits that the defendants/applicants are in breach of several agreements. The defendants are wrongly refusing to perform its obligations. The plaintiff has an option. The plaintiff may either accept the breach and determine the contract and sue for damages or the plaintiff may ignore such breach and require the defendants to perform its obligation by affirming its continued existence. The plaintiff in the instant case has performed its obligations and requiring the defendants to fulfil and perform their obligations. The securities furnished are inadequate to cover the credit facilities extended to the defendant Nos.1 to 4.
A bare reading of the plaint would show that the suit has been filed to enforce MRA and corresponding agreements and a declaration that the Lender Banks and/or the plaintiff are entitled to exercise lien over the equity shares as also in respect of the shares required to be pledged in its favour for the benefit of the lenders under the MRA. The grievance of the plaintiff appears to be that although the plaintiff has performed its obligation under the MRA including providing a sum in excess of Rs.3,000 crores to the defendant No.1, the said defendants have not discharged and/or performed their corresponding obligation. The defendant Nos.1 to 4 have acted in breach of their obligations and have failed and/or neglected and/or would attempt to neglect and/or refuse to pledge the shares as contemplated in the MRA. The plaintiff and the other lenders have lien over all forms of securities deposited and a declaratory relief has been claimed in the plaint including a mandatory injunction compelling the defendant Nos.1 to 3 to execute necessary documents recording pledge of the equity shares of the defendant No.1 in favour of the plaintiff.
The present definition of 'debt' is of wider amplitude and the word "any liability" is used as opposed to "determined liability or definite liability"
and precisely for this reason the prayer (h) of the Plaint cannot be adjudicated by this Court.
The present suit is not for payment on account of debt or for recovery of debt. The suit is simplicitor for specific performance and declaration, although, prayer (h) in view of the amended Section 2(g) of the RDB Act, 1993, becomes debt. The dominant purpose of the suit is not for recovery of debt. It is true that a suit for damages arising out of banking transaction may attract Section 2(g) of the RDB Act, 1993 and would automatically oust the jurisdiction of the Civil Court to decide such dispute but all civil suits which are not for recovery of debt but arise out of general law of contract in which bank is involved, does not automatically oust the jurisdiction of the Civil Court. The body and soul of the suit are for specific performance and declaration. That is the central theme of the suit.
In so far as a revocation of clause 12 of the Letters Patent is concerned, the plaintiff has stated in paragraph 49 that the Master Restructuring Agreement has been executed within the jurisdiction of this Court and the rights of the plaintiff and other lenders have been invaded by the defendants and such invasion has taken place at 34, Chowringhee Road, Kolkata-700001. The said averments should be taken as true and correct for the purpose of deciding this application. In fact, no argument as such has been advanced for revocation of leave under Clause 12 of the Letters Patent.
In view of the aforesaid, this application fails.
Mr. Sachida Nanda Pandey, Advocate representing the defendant nos.
1 to 4 waives service of the writ of summons. A copy of the plaint along with the writ of summons shall be served upon Mr. Pandey within a week from date.
In view of such dismissal, the defendant nos. 1 to 4 shall file written statement within six weeks from the date of service of the plaint along with writ of summons.
(SOUMEN SEN, J.)