1982 (7) TMI 266 - SC - Indian Laws

Summary

Issues Involved:
1. Maintainability of suits by the Custodian for recovery of loans.
2. Distinction between the Head Office and Branches of Banco Nacional Ultramarino.
3. Production of Promissory Notes and Bills of Exchange.
4. Entitlement to set-off claims by the appellants.

Issue-Wise Detailed Analysis:

1. Maintainability of Suits by the Custodian for Recovery of Loans:

The appeals arose from suits for the recovery of loans made to the appellants at various branches of Banco Nacional Ultramarino in Goa during Portuguese rule. The key contention was whether the Custodian, appointed under the Goa, Daman and Diu (Banks Reconstruction) Regulation, 1962, was entitled to maintain these suits. The court held that the Regulation reconstructed the branches in Goa, Daman, and Diu of Banco Nacional Ultramarino, and the rights and obligations of these branches were understood to mean the rights acquired and obligations undertaken by the Banco Nacional Ultramarino through those branches. Therefore, the Custodian was entitled to maintain the suits and sue for the realization of debts arising out of transactions entered into through those branches.

2. Distinction Between the Head Office and Branches of Banco Nacional Ultramarino:

The appellants contended that the loans were granted by the Head Office of Banco Nacional Ultramarino, not by the branches in Goa, and thus the Custodian could not sue for recovery of loans granted by the Head Office. The court noted that while generally a corporate body and its branches are not distinct entities, in banking transactions, branches are often regarded as separate entities for many purposes. The Regulation treated the branches as distinct entities for the purpose of winding up their affairs, and the loans in question were executed and managed by the branches, making the Custodian's suits maintainable.

3. Production of Promissory Notes and Bills of Exchange:

The appellants argued that the suits could not be decreed because the Custodian did not produce the Promissory Notes and Bills of Exchange. The court acknowledged that the documents had been removed to Portugal and were no longer in possession of the branches. However, sub-section (1) of Section 8 of the Regulation allowed the court to base its decree on the books of account of the branches and other evidence. The court held that it was permissible to rely on the books of account and other evidence, and no indemnity was required from the Custodian since the Regulation vested the entire right to recover the debt in the Custodian.

4. Entitlement to Set-off Claims by the Appellants:

The appellants claimed entitlement to set-offs due to certain credits in their favor. The Additional Judicial Commissioner had held that the trial court was justified in declining to enter into these claims. However, the Supreme Court found that the trial court should examine these claims on their merits to do complete justice between the parties. The court directed the trial court to take up the suits again solely for the purpose of examining the validity of the set-off claims made by the appellants.

Conclusion:

The appeals were dismissed, but the trial court was directed to re-examine the set-off claims made by the appellants. No orders were made as to the costs of the appeals.