1999 (9) TMI 769 - SC - Companies Law

Whether in view of these facts the amounts claimed by the bank in the suits can be said to be debt due and recoverable by the bank from the respondents? Held that - Appeal allowed. The High Court was wrong in holding that the applications made by the bank were premature and till the Court decides that the amounts are still due and payable to the bank they cannot be treated as suits for recovery of the debts as contemplated by the Act and therefore they are not required to be transferred to the Tribunal.

Summary

Issues:
Transfer of civil suits to Debts Recovery Tribunal under Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Analysis:
The appellant-bank filed two civil suits for recovery of dues, seeking transfer to the Debts Recovery Tribunal after the promulgation of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The High Court held that the determination of whether the amounts claimed are legally recoverable is a question of fact requiring evidence. It further stated that until such determination, the Act cannot be applied. The High Court allowed revision applications, setting aside the orders transferring the suits to the Tribunal due to the absence of an application for exclusion of counterclaim and the suits being pending before the establishment of the Tribunal.

The appellant argued that the High Court erred in criticizing the District Court and wrongly applied the Act. The key issue was whether the amounts claimed by the bank can be considered as 'debt' under the Act. The bank alleged that the amounts were due, with the liability arising from non-payment by foreign buyers. The respondents' defense regarding insurance cover did not discharge the liability, as evidenced by the outstanding amounts acknowledged by the respondents.

The Supreme Court analyzed the Act's provisions, emphasizing that the term 'debt' includes any liability due from a person to a bank, whether secured or unsecured, legally recoverable on the application date. The Court highlighted that the High Court overlooked the term 'alleged as due,' erroneously requiring a determination before considering the amounts as debts. The Court clarified that the bank's allegations of due amounts constituted the cause of action, justifying the suits as transferred to the Tribunal automatically upon its establishment.

The Court further explained that the defense raised by the respondents did not discharge the liabilities, as the insurance cover terms primarily benefited the insurer. The Court concluded that the High Court's view that the applications were premature was incorrect. The Court allowed the appeals, setting aside the High Court's judgment, and reinstated the trial court's orders for transferring the suits to the Tribunal.