Debt Recovery Appellate Tribunal - Delhi
Bank Of Baroda vs Teg'S Musrado Ltd. And Ors. on 29 November, 2005
Equivalent citations: I(2006)BC120, [2006]129COMPCAS275(NULL)
ORDER
Motilal B. Naik, J. (Chairman)
1. The appellant-bank instituted suit in O. A. No. 511 of 2000 before the Debts Recovery Tribunal (DRT), Chandigarh, for recovery of certain amounts. On the basis of pleadings and evidence, the Tribunal by order dated January 13, 2005, dismissed the suit claim of Rs. 2,33,59,138 in TL-I, Rs. 1,14,29,922 in TL-II and Rs. 1,07,18,243 holding that these claims are barred by limitation. However, by the same order, the Tribunal directed to proceed for recovery of Rs. 3,87,50,236 claimed as interest on the bank guarantee invoked and further directed for fixing the case on February 28, 2005, for arguments for recovery of aforesaid amount. It is this order which is under challenge before this Tribunal.
2. Mr. Ashok Jagga, learned Counsel for the appellant-bank mainly contended that the Tribunal has committed an error in dismissing the suit on three counts. According to learned Counsel, the claim of the applicant-bank is secured by equitable mortgage of four properties of the defendants. Initially, a consortium of three banks, namely, Bank of Baroda, Syndicate Bank and UCO Bank had advanced loan facilities to the defendants. The claim of the Syndicate Bank and UCO Bank have been satisfied in toto whereas the claim of the appellant-bank, i.e., the Bank of Baroda was not accepted. Counsel stated the finding recorded by the Tribunal is contrary to the pleadings of the defendants and drew my attention to paras. Nos. 1 and 2 of the plain pleadings. Counsel also drew my attention to the corresponding reply in the written statement filed by the defendants. It is alleged that the letter dated April 3, 1995, written by the defendants had not been taken into consideration by the Tribunal for the purpose of considering limitation in the claims of the appellant-bank. He also drew my attention to Section 19 of the Limitation Act, 1963, and stated, the last correspondence dated April 3, 1995, is material for the purpose of counting the period of limitation. Counsel also stated as per the agreement in terms of letter dated March 29, 1995, though the appellant-bank did not receive any amount, but however, by letter dated April 3, 1995, the defendants deposited certain amounts which are kept in "no lien account" and as such, this letter should have been taken into consideration for the purpose of limitation. Counsel further stated that as per the provision of Order XXXIV, Rule 2 of the Code of Civil Procedure, in a suit for enforcement of mortgage, the period of recovery is 12 years and as such, since the properties are mortgaged, the Tribunal could not have held that the period of limitation is of three years and the suit is hit by limitation. Counsel also stated, in their statement of account submitted as evidence, when a few entries dated December 12, 1994, December 13, 1994 and March 31, 1994, had been placed before the Tribunal, the Tribunal should not have ignored these entries in examining whether the suit claim is within limitation. The suit is filed in the month of March, 1997, and each of these entries in the statement of account, would bring the suit within limitation and therefore, stated this factor has also been ignored by the Tribunal. Counsel finally contended that the Tribunal has committed a great error in rejecting the suit on the ground of limitation and pleaded allowing the appeal.
3. Though there are ten respondents in the appeal, however, Mr. Kamaljeet Singh appears on behalf of respondents Nos. 1 to 8 who are the contesting parties. Respondents Nos. 9 and 10 are only pro forma parties and none appeared on their behalf. According to learned Counsel for the respondents, the letter dated November 25, 1994 is the offer by the appellant and was accepted. However, by letter dated April 19, 1995, new conditions are imposed and as such, the Tribunal having regard to the facts of the case held that the suit is hit by limitation. Counsel also stated that in the pleadings by the appellant-bank, the entries in the statement of account which are referred to by the appellant are not found as a ground on which basis the cause of action against these respondents could be invoked nor was there any whisper before the Tribunal at the time of making submissions on this aspect. Counsel stated even though the appellant filed the statement of accounts, it is for them to pinpoint to the court and bring to the notice of the court the entry which brings the suit within limitation. Mere marking of documents would not help the appellant to say that the suit is not barred by limitation. Exhibiting documents is subject to relevancy and proof. As long as these entries are not proved by way of evidence, the appellant cannot now raise new grounds before this Appellate Tnbunal. Counsel also drew my attention to the written statement filed by these defendants where a specific stand has been taken about the suit being hit by limitation and stated, the suit is only for recovery of money and not a suit for enforcement of mortgage and therefore, the plea of period of limitation of 12 years cannot be accepted. While making this submission, counsel also drew my attention to a decision of the Debts Recovery Appellate Tribunal, Mumbai, in Kishor Kumar Agarwal v. State Bank of India [2000] II BC 97 (DRAT) wherein the Presiding Officer of the Debts Recovery Appellate Tribunal, Mumbai, has discussed the scope of Sections 17 and 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the provisions appearing under Order XXXIV of the Code of Civil Procedure. Counsel pleaded dismissal of the appeal on all these counts.
4. On the basis of submissions by both counsel, the point for consideration is whether the impugned order is sustainable. The Tribunal has considered the facets of contentions and recorded the findings in the following manner. In para. 3 of the order, the Tribunal recorded that the applicant-bank sanctioned certain credit facilities to the defendants on January 11, 1990, which are cash credit hypothecation of Rs. 45 lakhs, sub limit (BP clean) for Rs. 6 lakhs, sub limit (BP documents) for Rs. 6 lakhs and term loan of Rs. 58 lakhs. Thereafter, the limits were enhanced on October 5, 1990, which are as follows :
(i) Term loan : enhanced from Rs. 58 lakhs to Rs. 396 lakhs.
(ii) CC hypothecation : enhanced from Rs. 45 lakhs to Rs. 72 lakhs.
(iii) Sub limit--
(a) Packing credit-cum-foreign bill purchase Rs. 55 lakhs ;
(b) Bill documents (inland) for Rs. 5 lakhs (fresh) ;
(c) Bills documents (letter of credit for import of raw material) Rs. 15 lakhs (fresh) ;
(d) Foreign letter of credit for import of plant and machinery DFL Rs. 19.72 lakhs Dutch guilders.
5. In para. 5 of the judgment, it is recorded though the credit facilities were availed of by the defendants, since they failed to pay as per agreement, one-time settlement offer was made by the defendants for consideration and the appellant-bank considered and accepted it vide letter dated April 19, 1995, for an amount of Rs. 454.70 lakhs. The defendants deposited Rs. 2,27,35,000 on April 5, 1995, with the applicant-bank under the settlement. This amount was appropriated on April 5, 1995, in the CC account by crediting Rs. 59.86 lakhs in the term loan-I account by crediting Rs. 1,03,38,500 and in term loan-II Rs. 64,10,500.
6. Thereafter, a suit for recovery of Rs. 8,42,57,538 was filed which includes outstanding in the CC account as Rs. 2,33,59,138, in TL-I Rs. 1,14,29,992, in TL-II Rs. 1,07,18,243 and Rs. 3,87,50,235 as interest on the bank guarantee invoked. The defendants have also filed a counter-claim against the bank for a sum of Rs. 2,927.25 lakhs. As per the version of the appellant, the cause of action arose for the first time in the matter on September 20, 1990, when the defendants in consideration of loan/advance facilities had executed various documents, agreements, deeds of agreements, hypothecations, deed of guarantees, etc. The cause of action again arose in favour of the applicant-bank on October 20, 1990, when fresh facilities were granted by the applicant-bank to defendant No. 1 for which necessary documents were executed by the defendants accordingly. The cause of action again arose on June 12, 1991, when defendant No. 1 executed the demand promissory note for Rs. 72 lakhs in favour of the applicant-bank. The cause of action further arose on December 17, 1992, when defendants Nos. 1 to 8 acknowledged the outstanding in term loans account. The cause of action also arose on March 3, 1993, when the defendants had executed the documents for credit facilities. The cause of action had been arising time and again when the defendants had been operating the various accounts of the term loan and credit facilities. The cause of action also arose on March 29, 1995, when defendant No. 1 had acknowledged the debts and in consideration of the same and in terms of compromising offer, paid a sum of Rs. 2,27,35,000. The cause of action still persists in favour of the applicant-bank as defendant No. 1 has not paid the amount of the dues of the outstanding till date.
7. However, the stand of the defendants has been that they have neither paid nor acknowledged any payment of Rs. 2,27,35,000 on March 29, 1995. According to these respondents/defendants, in the compromise proposal there was one condition that the defendants have to deposit Rs. 2,27,35,000 "in a no lien account" in Sector 17/B, Chandigarh branch of the applicant-bank and accordingly, this amount was deposited vide Indian Bank cheque No. 385195. It is also denied in the written statement that the respondents have never consented or allowed the applicant-bank to deposit the said amount in their loan accounts. The applicant-bank on its own, on April 5, 1995, appropriated this amount in cash credit, term loan-I and term loan-II accounts for the purpose of extending the period of limitation. This amount, so appropriated, is not an acknowledgment of the liabilities as pleaded. It is also averred in the written statement that the O. A. was filed in March, 1997, the cause of action arose on March 3, 1993, when the defendants executed the documents of supplementary agreement and not on March 29, 1995, when the applicant-bank on its own, appropriated the amount deposited in "no lien account" in various accounts of the defendants without any authority or consent.
8. The Tribunal having examined the crux of the issue, at para. 11 of the judgment, framed an issue as to whether the amount of Rs. 2,27,35,000 deposited by the defendants under settlement is under "no lien account" and whether this amount could not be appropriated without the consent and authority of the defendants and paid in their loan accounts ? The Tribunal recorded that annexure D-13 which has been filed by the defendants along with the counter claim is a letter dated March 20, 1995, addressed by the applicant-bank to the defendant-company which factor is not disputed. In the letter, it has been advised to the defendants to deposit the funds in "no lien account" with Sector 17/B, Chandigarh Branch of the applicant-bank. In response to this letter, on March 29, 1995, the defendants deposited an Indian Bank cheque No. 585195 dated March 29, 1995, for Rs. 2,27,35,000 being 50 per cent, of the settled amount. It was clarified in this letter that the proceeds of the above cheque will only be realised after final settlement. The Tribunal after considering these two letters dated March 20, 1995 and March 29, 1995, held that the amount of Rs. 2,27,35,000 was given to the applicant-bank for keeping this amount in "no lien account" and as such, this letter cannot be construed as if it is extension of their liability in terms of Section 19 of the Limitation Act. The Tribunal has also recorded that the applicant-bank has no right to appropriate or credit the amount in the cash credit account or TL-I account or TL-II account. Thus, the appropriation of the amount on April 5, 1995, by the applicant-bank in their account was unauthorised and cannot be accepted as a deposit, so as to extend the period of limitation.
9. The Tribunal has also considered the contention of the applicant-bank that the suit being a mortgage suit, the period of limitation is 12 years, by extracting the reliefs sought in the O. A. The Tribunal has held at para. 15 that from the reliefs sought, it is clear that the applicant-bank is seeking relief for payment of an amount of Rs. 8,42,57,538 making all the defendants jointly and severally liable. The first relief is for recovery of the above amount and the other reliefs are incidental and therefore, rejected the alternative contention that the suit could be construed as a suit for enforcement of mortgage for which the period of limitation is 12 years.
10. In the light of the submissions made before this Tribunal and on the basis of the finding recorded by the Tribunal below, the controversy in my view hinges on the letter dated March 20, 1995 (exhibit D13), which was addressed by the applicant-bank to the defendants whereby the defendants are advised to deposit the funds in "no lien account" with Sector 17/B, Chandigarh Branch of the applicant-bank. In response thereto, the defendants on March 29, 1995, deposited an amount of Rs. 2,27,35,000 being 50 per cent, of the settled amount to be kept in a "no lien account" as per the intention of the applicant-bank itself. It is also clarified this amount cannot be realised till final settlement is arrived at. Learned Counsel for the appellant-bank contended the deposit of the amounts on March 29, 1995, is in the nature of a step which falls within the ambit of Section 19 of the Limitation Act, for the purpose of limitation to maintain the suit. In order to appreciate this contention, Section 19 of the Limitation Act is abstracted hereunder :
Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.
11. A reading of the provisions of Section 19 of the Limitation Act implies that where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period, the period of limitation stands extended. As per letter dated March 20, 1995, addressed by the applicant-bank to the defendant-company, it is advised to the defendants to deposit certain amount in "no lien account" with Sector 17/B, Chandigarh Branch of the applicant-bank. In response thereto, by letter dated March 29, 1995, the defendants deposited an Indian Bank cheque No. 585195, dated March 29, 1995, for Rs. 2,27,35,000 to be kept in a separate "no lien account". It is noticed that the appellant-bank later on April 5, 1995, has withdrawn the amount which was kept in "no lien account" and debited it to the loan account of the defendants without any authority of the defendants. The Tribunal noticing this aspect held when the appellant has withdrawn the amount kept in "no lien account" and debited to the defendant's account on its own, such action cannot itself give cause of action for the appellant to sue the defendants as if this appropriation is in terms of the provisions under Section 19 of the Limitation Act. The Tribunal found that in the absence of any approval or consent by the respondents for withdrawing the amount kept in "no lien account" and debiting in the loan accounts of the respondents, no cause of action accrued to the appellant on April 5, 1995, for instituting the suit. It is not disputed that for such a withdrawal of the amount kept in "no lien account", the appellant-bank had no authority. As per the letter dated March 29, 1995, the amount of Rs. 2,27,35,000 is to be kept in "no lien account" which is as per the advice of the appellant-bank and shall not be appropriated unless final settlement is made. The claim of the appellant-bank that the amount appropriated on April 5, 1995, is in terms of the settlement and falls within the ambit of Section 19 of the Limitation Act cannot be accepted. Had the defendants consented to such a recourse, certainly the bank shall be entitled to claim shelter under the provisions of Section 19 of the Limitation Act. In view of the above discussion, I hold the appellant's action debiting Rs. 2,27,35,000 which was kept in "no lien account" will not be a ground for the purpose of counting the period of limitation.
12. Though learned Counsel for the appellant stated the statement of account was filed in evidence and the Tribunal should have noticed each entry appearing in the statement of account, I do not appreciate this submission. In the written statement, the defendants have categorically denied the cause of action and have taken a definite stand that the claim is barred by limitation. An effort should have been made by the appellant to draw the attention of the court about such entries appearing in the statement of account to prove their stand that these entries would give them cause of action. The tenor of learned Counsel for the appellant appears to be that when a document is exhibited, it is enough and need not be proved. Law is well settled, mere exhibiting a document is not sufficient, such exhibiting is always subject to proof and relevancy. Had the appellant taken aid of these so-called entries found in the statement of accounts for the purpose of cause of action, the other side would have definitely reacted to the correctness of these debit entries. However, no such plea was taken before the Tribunal nor were efforts made to prove the correctness of these entries. It is, therefore, difficult at this stage of the proceedings to accept such a submission on behalf of the appellant-bank.
13. In so far as the last limb of submission that the suit filed by the appellant need not be considered as a suit for recovery of money, but it shall be construed as suit for enforcement of mortgage as per provisions of Order XXXIV of the Code of Civil Procedure, at the outset, I must reject this proposition. The relief sought in the O. A. is for a money decree. Incidentally, consequent reliefs are also sought. That cannot be a ground to say the suit is for enforcement of mortgage. This issue has been examined by the Debts Recovery Appellate Tribunal, Mumbai, in Kishor Kumar Agarwal v. State Bank of India [2000] II BC 97 (DRAT). The Chairman of the Tribunal while examining the provisions under Section s 17 and 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the relevant provisions under Order XXXIV of the Code Civil Procedure has held thus :
The provisions of Order XXXIV are intended to prevent the mortgagor's equity of redemption being lost at the instance of mortgagee. The provisions of Order XXXIV do not apply to the enforcement of the security. By no stretch of imagination, the mortgaged property given as a security for payment of money can be excluded from the definition of debt. If the mortgagee obtains a decree for the payment of money in satisfaction of a claim arising under the mortgage, then only he is not entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage. The suit of the present form with which we are concerned is not a claim arising under the mortgage and a suit for sale in enforcement of the mortgage within the meaning of Order XXXIV of the Code of Civil Procedure. The suit is the simple suit for recovery of debt and the prayer Clauses (c) and (d) are consequential and incidental for the recovery of the said debt. The mortgage is created as a security for the payment of money and as such these submissions that in the suit for enforcement of mortgage, the period of limitation is 12 years shall stand rejected.
14. In the light of above discussion, I do not find any merit in the appeal and the appeal is, accordingly, dismissed. No costs.