Misc. Appeal No. 382 of 2015. Case: PSB Industries India (P) Ltd. Vs HDFC Bank Ltd.. Delhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals)
| Case Number | Misc. Appeal No. 382 of 2015 |
| Counsel | For Appellant: A.K. Mata, Sr. Advocate, R.K. Gupta and Swapnil Gupta representing G.M. Akhtar, Advocates and For Respondents: Rajeeve Mehra, Sr. Advocate, Kunal Vajani and Aman Gandhi, Advocates |
| Judges | Ranjit Singh, J. (Chairperson) |
| Issue | Banking Regulation Act, 1949 - Sections 5, 5(b), 6, 6(1), 6(1)(k), 6(1)(n), 8, 9; Code of Civil Procedure, 1908 (CPC) - Order VII Rules 11, 11(a), 11(d); Code of Civil Procedure, 1908 (CPC) - Order XIV Rule 2; Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 - Sections 17, 19(25), 2(g) |
| Judgement Date | March 10, 2016 |
| Court | Delhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals) |
Judgment:
Ranjit Singh, J. (Chairperson)
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The appellant herein filed an I.A. (No. 566/2014) before the Tribunal below under Order 7 Rule 11, CPC read with Sections 17 and 19(25) of the RDDBFI Act for dismissing the O.A. filed by the respondent Bank on the ground that the O.A. did not reveal cause of action and the amount claimed was not a debt and, hence the O.A. filed by the Bank was not maintainable. The Tribunal has rejected the said I.A. filed by the appellant. Aggrieved against the same, the appellant has filed the present appeal to impugn the order passed by the Tribunal below. The respondent Bank has filed an O.A. for recovery of Rs. 67 crore deposited by Bank of Punjab Ltd. with the appellant company as interest-free security in respect of a leased premises situated at Manesar Road, Gurgaon. The case set up by the appellant is that Bank of Punjab Ltd., which is predecessor-in-interest of the respondent Bank, had taken on lease the property measuring an aggregate of 1,23,490 sq. ft. situated at Manesar Road, Gurgaon. As per the memorandum of intent dated 24.3.2001 a security deposit of Rs. 65 crore was paid by Bank of Punjab Ltd. and the balance security deposit of Rs. 2 crore was to become payable upon the commencement of lease. In order to secure the repayment of this Rs. 67 crore, the appellant had created an equitable mortgage of the mortgaged premises by deposit of title deed with Bank of Punjab Ltd.
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On 23.12.2013, the Bank issued lease termination notice to the appellant notifying the appellant that month-to-month lease in respect of leased premises was being terminated with effect from 31.1.2014. The Bank called upon the appellant to depute a person to take possession of the leased property while simultaneously asking for refunding the security deposit. It is alleged that the premises was not vacated and was being used for commercial purpose by the respondent Bank, which fact is also noticed from the valuation report dated 1.2.2014 filed with the O.A. It is in this background that the appellant had raised two questions before the Tribunal below while seeking rejection of the O.A. in terms of Order 7 Rule 11, CPC. The appellant would claim that the claim of refund of security given pursuant to the lease would not amount to debt within the meaning assigned to the term 'debt' in Section 2(g) of the RDDBFI Act. As per the appellant, the respondent Bank had no cause of action for claiming refund of security deposit and as such it could not maintain the O.A. while retaining possession of the premises by making only conditional offer of possession.
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Both sides have addressed elaborate arguments on this simple looking issue. The Counsel for the appellant would refer to the definition of 'debt' as given in Section 2(g) of the RDDBFI Act. While dissecting the definition of the term 'debt', Counsel would contend that the definition has distinct elements like 'any liability'; 'claimed as due from any person'; 'by a Bank or financial institution'; 'during the course of any business activity undertaken by the Bank'; 'in cash or otherwise'; 'subsisting on and legally recoverable on the date of the application'. The essential element of debt is that amount should be due during the course of any business activities undertaken by the Bank. As to what would constitute a business activity of the Bank, the Counsel would rely upon a decision of the DRAT, Mumbai in the case of Citi Bank N.A. v. Lt. Col Anil Bhat & Ors., II (2008) BC 111. The DRAT, Mumbai in this case has held that when Bank enters into certain activities out of necessity, it could not be said that such activities would amount to 'business activity'. It is further observed that as per the averments in the plaint Court had no jurisdiction to entertain plaint and same has to be returned for presentation to proper Court. The suit filed by the Bank was dismissed as not maintainable for want of jurisdiction under the provisions of the RDDBFI Act.
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The plea of the Bank before the Tribunal was that the issue of jurisdiction is to be determined on the basis of averments made in the plaint and if those averments are considered, the suit would be maintainable under the RDDBFI Act. By relying on the wording of the definition of 'debt' given in Section 2(g) of the RDDBFI Act, the Bank had referred to the expression 'business activity undertaken by the Bank' in the said section to contend that the term 'debt' cannot be confined only to the debt arising from Banking activity. As per 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. Reference was made to Section 6 of the Banking Regulation Act to hold that taking premises on licence for the purpose of residence or...
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