Appeal No. 132 of 2004. Case: Citi Bank N.A. Vs Lt. Col. Anil Bhat and Ors.. Mumbai DRAT DRAT (Mumbai Debt Recovery Appellate Tribunals)

Case NumberAppeal No. 132 of 2004
Party NameCiti Bank N.A. Vs Lt. Col. Anil Bhat and Ors.
JudgesS. S. Parkar, J. (Chairperson)
IssueBanking Regulation Act, 1949 - Sections 5(b), 5(c), 6, 6(1)(g), 6(1)(k); Constitution of India - Article 227; Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 2(g)
Judgement DateNovember 26, 2007
CourtMumbai DRAT DRAT (Mumbai Debt Recovery Appellate Tribunals)

Judgment:

S. S. Parkar, J. (Chairperson)

  1. A short but important question which arises for consideration in this appeal is whether the liability to refund the security deposit given by a bank for taking premises on leave and licence would amount to 'debt' within the meaning of Sec. 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'RDDBFI' Act) so as to confer jurisdiction on the D.R.T. under the said Act for recovery thereof. The factual matrix under which the point arises for decision, briefly stated, is as follows: A flat situated at Bandra, Bombay was taken on leave and licence by the appellant bank from the respondents under an agreement dated 25th August, 1998 for a period of three years commencing from 1st August, 1998. The parties had entered into a separate agreement in respect of security deposit on 25th August, 1998 whereby a sum of Rs. 21 lacs was deposited by the appellant bank with the licensors by way of security which was refundable at the time of returning the possession of the flat in question. The said agreement was terminated by the licensee bank before the date of expiry of three years some time in September 2000. By the security deposit agreement a charge was created in favour of the bank to secure the refund of security deposit and the bank was allowed to hold on to the possession of the flat until refund of the security deposit even after the expiry of the licence or termination of licence agreement. It is not in dispute that the possession of the flat in question was handed over by the appellant bank to the respondents but there is dispute about the date when the possession of the flat was handed over and also whether the security deposit amount was refunded or not, which is not required to be decided at this stage.

  2. The appellant bank filed original application under the provisions of the RDDBFI Act in the D.R.T. for recovery of the security deposit of Rs. 21 lacs with interest thereon. The respondents by their written statement inter alia raised a contention that the suit or the proceeding filed for recovery of the security deposit by the appellant bank was not maintainable for want of jurisdiction of the D.R.T. to entertain such suit as the liability to refund the security deposit did not amount to 'debt' within the meaning of Sec. 2(g) of the RDDBFI Act. As the said contention pertained to the jurisdiction of the D.R.T. to entertain the suit and maintainability thereof it was dealt with as a preliminary issue by the D.R.T. After considering the rival arguments of the parties, the provisions of the RDDBFI Act and some decisions cited before the D.R.T., the Presiding Officer by the impugned order dated 2nd April, 2004 held that the claim of the bank did not amount to 'debt' and therefore, the suit was not maintainable and consequently the same was dismissed. The said order is under challenge in this appeal filed by the appellant bank.

  3. On behalf of the appellant bank it is contended that the issue of jurisdiction has to be determined on the basis of the averments made in the plaint and if those averments are considered the suit would be maintainable under the provisions of the RDDBFI Act. Secondly, relying on the wording of the definition of 'debt' given in Sec. 2(g) of the RDDBFI Act and referring to the expression 'business activity undertaken by the bank' in the said section it is contended that the term 'debt" cannot be confined only to a debt arising from the banking activity. According to the counsel wide meaning has to be given to the phrase 'business activity' as held by the Bombay High Court in some cases on which reliance was placed. Thirdly, it is argued that by virtue of Sec. 6 of the Banking Regulation Act taking premises on licence for the purpose of residence or occupation of the officers of the bank is part of the 'business activity' undertaken by the bank. It is then argued that taking premises on licence for occupation of the officers of the bank is an incidental activity which amounts to 'business activity' of the bank. As against this on behalf of the respondents an endeavour is made to counter the arguments advanced on behalf of the appellant bank by contending that taking premises on licence for occupation of the officers of the bank cannot amount to banking activity of the appellant bank which would attract the provisions of the RDDBFI Act.

  4. To consider and appreciate the rival arguments advanced on behalf of the parties it would be imperative to peruse and analyse the definition of the word 'debt' given in Sec. 2(g) of the RDDBFI Act. Section 2(g) of the Act reads 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 order of 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.

    (underlining supplied)

  5. As per the aforesaid definition a 'debt' means any liability which is claimed by a bank as due from any person during the course of any business activity undertaken by the bank. As the definition of word 'debt' refers to any liability incurred by a person during the course of business activity undertaken by the bank it is vehemently argued that use of the phrase "any liability which is claimed as due from any person by a bank during the course of any business activity undertaken by the bank.." would attract wider interpretation of the word 'debt'. The argument is that if the Legislature had intended to confine the meaning of the word 'debt', only to a debt arising from any banking activity undertaken by the bank, the phrase used would have been "banking activity" and not "business activity". In support of this contention reference is made to the decision of the Supreme Court in the case of United Bank of India v. Debts Recovery Tribunal, reported in A.I.R. 1999 S.C. 1381. That was a case where the bank had filed a suit in the High Court of Calcutta which on coming into force of the RDDBFI Act, was transferred to D.R.T., Calcutta where the defendants had raised a contention that the suit would not lie under the provisions of the RDDBFI Act as the suit was not for the recovery of 'debt' as defined under Sec. 2(g) of the RDDBFI Act. The Tribunal rejected the contention raised on behalf of the defendants. The matter was taken to the Calcutta High Court in a writ petition under Art. 227 of the Constitution of India. The High Court upheld the jurisdiction of the Tribunal but held that the claim of the bank being of an undetermined sum as the suit was one for damages and compensation which is required to be ascertained and quantified before a decree is passed it is not a debt under Sec. 2(g) of the Act. Consequently, the defendants' application was allowed. Allowing the appeal filed by the bank the Supreme Court took the view that the expression 'debt' has to be given the widest amplitude to mean any liability which is alleged by a bank as due from any person during the course of any business activity undertaken by the bank. It is further observed that 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 RDDBFI Act it is imperative that the entire averments made by the plaintiff in the plaint have to be looked into to find out whether the averments are such that it is possible to hold that the jurisdiction of such Tribunal is ousted. On facts the Supreme Court found that the claim made by the bank was essentially one for recovery of the debt due to it from the defendants and, therefore, held that the Tribunal had exclusive jurisdiction...

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