M/s Diastar & Anr vs State Bank of India

Ashok Menon, Chairperson

The defendant in the Original Application (OA) No. 290/2002 on the files of Debts Recovery Tribunal-II, Ahmedabad (‘DRT’ for short) is the Appellant who is aggrieved by the Judgment dated 20/10/2009 allowing the OA directing the defendant 1/2 to jointly and severally pay a sum of ₹24,88,395/-(equivalent to US $ 51,044/-) together with interest at the rate of 7% per annum with effect from 18/07/2002 till realisation. The State Bank of India branch in Antwerp, Belgium is the Original Applicant in the aforesaid OA filed under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘RDDB&FI Act’ for short) for the realisation of the above-mentioned amount from the Appellant.

The facts and brief are that the 1st defendant namely M/s Diastar is a proprietorship of which the 2nd defendant is the sole proprietor. M/s Exim Diamond Company BVBA situated in Antwerp has been having a banking relationship with the Applicant Bank since October 1983 and was granted a working capital facility for trading in purchase and sale of rough and polished diamonds. They raised a Bill of Exchange vide invoice No. 00/0258-R dated 19/09/2000 for US $ 57,730/-on their client the 1st defendant payable by 14/12/2000. Documents were presented through the Applicant’s branch at Surat. The defendants enjoyed a credit facility from the said branch of the Applicant bank. Despite the payment date getting over, the defendant did not pay the amount. Notice was issued to the defendant on 14/06/2001 demanding payment of the export Bill. The defendant in the reply dated 22/06/2001 acknowledged the receipt of the demand letter dated 14/06/2001 and requested some time to pay the amount. On being constantly contacted by the Applicant bank through the branch at Surat, the defendant made part payment of US $ 15,000/-together with a letter dated 13/07/2001. The balance amount was never paid though the defendant sought time to pay it. Notice was also sent by the Notary to M/s Exim Diamond Company BVBA on 22/01/2002. There is thus an outstanding amount of US $42,730/-due and payable from the defendant towards the Bill amount together with interest at the rate of 10% per annum with quarterly rests as of 14/12/2000. On the date of filing of the OA, a sum of ₹24,88, 395/-(equivalent to US $51,044/-calculated at the exchange rate of ₹48.75 per US $) is due from the defendants. The Applicant claims the aforesaid amount together with interest at the rate of 10% per annum with quarterly rests from the defendants 1/2 jointly and severally.

The defendant appeared and filed a reply to the OA raising various grounds. It is stated that the claim is false and frivolous and that the OA is barred by limitation. It is further contended that the DRT has no territorial jurisdiction to adjudicate the matter for the reason that the amount was advanced by the Applicant’s branch at Antwerp. It is further contended that there is no privity of contract between the Applicant and the defendant. The plea of non-joinder and misjoinder of parties is also raised by the defendant in the written statement. It is pointed out that M/s Exim Diamond Company, Antwerp was granted working capital and therefore, the principal borrower with regard to the claim. The recovery is to be made from the said company and not from the defendant. US $ 15,000 was paid by the defendant not in acknowledgement of the dues but only as a good gesture to maintain cordial relationships with the Applicant and M/s Exim Diamond Company.

After considering the materials placed before the DRT and on appreciation of the evidence, the Ld. Presiding Officer decreed the OA and issued a Recovery Certificate to realise the amount from the  defendants 1/2 jointly and severally. This is the judgment that stands challenged.

The Appeal has been filed mainly on the ground that the D.R.T. has no jurisdiction to entertain the application because the Appellant is not a ‘borrower’ and that the amount claimed is not a ‘debt’ as contemplated under the RDDB&FI Act. Secondly, the application is bad for the non-joinder of M/s Exim Diamond Company, the original borrower as a party to the proceedings. Thirdly, the Ld. Presiding Officer went wrong in construing the payment of US $ 15,000 by the Appellant as an acceptance of the debt. The issuance of a notice through a notary to M/s Exim Diamond Company indicates that they are solely liable to pay the amount. Lastly, it is argued that the O.A. is barred by limitation.

Heard Advocate Mr Rahul Motkari, Ld. Counsel for the Appellant and Mr D. S. Pranjape, the Ld. Counsel for the Respondent. Records perused.

The Ld. Counsel Mr Motkari argues in terms of the ground raised in the Appeal Memorandum and submits that the original application ought to have been dismissed for the reasons stated above. Mr Motkari also relies on the decision reported in S.K. Saldi vs. General Manager, UP State Sugar Corporation Ltd. & Ano AIR 1997 SC 2182 in support of his argument that non-joinder of the necessary party should entail the dismissal of the suit.

Per contra Mr Pranjape appearing for the Respondent Bank submits that there is no specific denial of the liability by the Appellant. The Bill of Exchange was drawn in favour of the Appellant and the payment for the transaction was made by the Bank under Uniform Rules for Collections No. 522. Regarding the liability coming under the definition of ‘debt’ falling within the ambit and scope of Sec. 2(g) of the RDDB&FI Act, the Ld. Counsel relies on the decision of the Hon’ble Supreme Court in Eureka Forbes Ltd vs. Allahabad Bank & Ors 2010 AIR (SCW) 3429 wherein the scope of Sec. 2(g) has been discussed and it is observed that a plain reading of the section suggests that legislature has used a general expression in contradistinction to specific, restricted or limited expression. This obviously means that the legislature intended to give wider meaning to the provisions. The expressions like, ‘any liability’, ‘claim as due from any person’, ‘during the course of any business activity undertaken by the Bank’, ‘whether secured or unsecured’ and lastly, ‘legally recoverable’; suggest that the framers of the provision did not wish to restrict the same in its ambit or application.

After due consideration of the evidence on record and the arguments advanced by the Ld. Counsel appearing for the parties supported by the precedents relied upon, I am of the opinion that the contentions raised by the Appellant are not sustainable and the O.A. was rightly decreed. The Bill of Exchange was payable by the Appellant as the goods were received by the Appellant. That is the reason why the Appellant had paid US$ 15,000 in the first instance. The contention that M/s Exim Diamond Company was not impleaded as a party and therefore, the suit must fail, is not acceptable. The suit is also not barred by limitation as contended. The transaction was during the course of the business activity undertaken by the Bank and is undoubtedly a ‘debt’ falling within the ambit and scope of Sec. 2 (g) of the RDDB&FI Act. The Bill of Exchange was issued clearly as the business activity of the Bank and the liability was upon the Appellant to clear it. Hence, the Appellant cannot be heard to say that there is no liability to honour the Bill of Exchange. I find no reason to interfere with the findings of the Ld. Presiding Officer in the impugned judgment.

Resultantly, the Appeal is dismissed with all its consequences regarding costs quantified at ₹25,000/-.