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Praful Steels and anr. Vs. State Bank of India - Court Judgment

LegalCrystal Citation
CourtDRAT Allahabad
Decided On
Reported inIV(2007)BC1
AppellantPraful Steels and anr.
RespondentState Bank of India
.....firm of appellant no. 1 and they wanted to purchase iron and steel goods against payment through bank drafts. the bank drafts, details of which are as under:___________________________________________________________________ series/d.d. no. date amount (rs.) date of payment___________________________________________________________________ mol/a/17/272151 21.2 1994 98,000/- 22.2.1994 mol/a/17/272157 26.2.1994 97,000/- 28.2.1994 mol/a/17/272159 26.2.1994 97,000/- 28.2.1994 mol/a/17/272158 15.3.1994 98,000/- 16.3.1994 mol/a/17/272169 15.3.1994 98,000/- 16.3.1994 mol/a/17/272174 23.3.1994 98,000/- 24.3.1994 mol/a/17/272175 23.3.1994 98,000/- 24.3.1994 mol/a/17/272155 29.3.1994 98,000/- 31.3.1994 mol/a/17/272156 29.3.1994 98,000/- 31.3.1994 mol/a/17/272162 2.4.1994 97,000/- 4.4.1994.....
1. These are two appeals wherein the same point of law is involved and their facts are almost the same, therefore, both these appeals are being disposed of by this common judgment.

2. The Appeal No. 589/2005 has been filed by its appellants Praful Steels and another against a judgment dated 11th August, 2005 passed in T.A. No. 565/2000 by D.R.T., Allahabad, whereas the Appeal No. 591/2005 arises out of a judgment dated 11th August, 2005 passed in T.A. No.532/2000 by D.R.T., Allahabad.

3. Brief history giving rise to Appeal No. 589/2005 is that its appellant No. 1 was a proprietorship firm doing its iron and steel trading business at Kanpur. This firm approached respondent No. 1 -Bank in the year 1990 for providing cash credit facility which was sanctioned with a limit of Rs. 3 lacs. An agreement of hypothecation of stock as usual was executed in favour of the respondent Bank. In March, 1994 one person posing himself to be Moolchand Jaiswal along with one other Harish Chand laiswal approached the appellant firm for the purchase of Iron and Steel goods, against the value of eight demand drafts worth Rs. 7,70,000/- The appellant firm agreed to provide them Iron and Steel goods for the amount of five drafts worth Rs. 4.90 lacs, which was credited in the cash credit account of the appellants after due verification of drafts from the Bank, the supply of iron and steel was made to Moolchand Jaiswal and his companion, who took away the articles through transport agency. The remaining drafts were also credited by the respondent Bank in favour of the appellants, but for the amount of these drafts, the goods were not delivered because in the meantime it was found that the above drafts which were given to the appellants were forged. The above named person Moolchand Jaiswal was apprehended and handed over to the police by Ganga Sagar Rakesh Kumar by lodging a report on 9th April, 1994. Subsequently the respondent Bank is said to have issued a letter dated 13th April, 1994 to the appellants for depositing amount, which was credited in their C.C.Account on the ground that the drafts were forged. The Bank reversed the entries relating to above drafts made in the appellants' account and sent another letter dated 26th April, 1994 directing the appellants to pay entire dues of their above Cash Credit account. The appellants sent replies to the Bank on 27th April, 1994 and 16th January, 1996 stating therein that the value of drafts were credited in their C.C.account after due verification by the Bank and the appellants have parted with the goods of the value of the drafts to the person, who had given the drafts, therefore, they were not liable to pay any amount.

Suit for recovery of Rs. 11,63,490.04 was filed before the Civil Court, Kanpur, which was subsequently transferred to D.R.T., Jabalpur and thereafter to D.R.T., Allahabad, where the appellants contested the suit by filing their written statement. After filing of suit in an inquiry held by the Bank it was found that the aforesaid Moolchand Jaiswal had impersonated himself and his real name was Awadhesh Kumar Srivastava and he along with Harish Chand Jaiswal whose real name was Anand Mohan Srivastava had cheated by accepting the goods for the above drafts. The above two persons were related with each other. The D.R.T.after considering the evidence passed a judgment on 11th August. 2005 against the appellants who feeling aggrieved with this judgment have filed present appeal.

4. In Appeal No. R-591/2005 the factors were almost similar. The appellant Ganga Sagar Rakesh Kumar firm was also doing business in iron and steel at Kanpur and they had a cash credit account with a limit of Rs. 4 lacs in the respondent Bank at its Phoolbagh Branch, Kanpur and the defendant Nos. 3 to 6 stood guarantors for the aforesaid cash credit facility. Proprietor Ganga Sagar Mishra of above firm executed a promissory note on 14th November, 1992 in favour of the respondent Bank for a sum of Rs. 4 lacs payable by way of interest 8.5% above State Bank of India advance rate with a minimum of 16.5%. The aforesaid Ganga Sagar Mishra executed D.P. note delivery letter, an agreement of loan for over-all limit and another agreement for hypothecation of goods kept as stock in favour of the respondent Bank. In the year 1994 it is said that two persons claiming themselves to be Moolchand Jaiswal and Harish Chand Jaiswal turned up at firm of appellant No. 1 and they wanted to purchase iron and steel goods against payment through Bank drafts. The Bank drafts, details of which are as under:___________________________________________________________________ Series/D.D. No. Date Amount (Rs.) Date of payment___________________________________________________________________ MOL/A/17/272151 21.2 1994 98,000/- 22.2.1994 MOL/A/17/272157 26.2.1994 97,000/- 28.2.1994 MOL/A/17/272159 26.2.1994 97,000/- 28.2.1994 MOL/A/17/272158 15.3.1994 98,000/- 16.3.1994 MOL/A/17/272169 15.3.1994 98,000/- 16.3.1994 MOL/A/17/272174 23.3.1994 98,000/- 24.3.1994 MOL/A/17/272175 23.3.1994 98,000/- 24.3.1994 MOL/A/17/272155 29.3.1994 98,000/- 31.3.1994 MOL/A/17/272156 29.3.1994 98,000/- 31.3.1994 MOL/A/17/272162 2.4.1994 97,000/- 4.4.1994 MOL/A/17/272163 2.4.1994 97,000/- 4.4.1994___________________________________________________________________ were given to the firm by above two persons, but goods were supplied only after the drafts were encashed after due verification by the Bank on their deposit. After encashment of the drafts it is said that the goods were given to above two persons, vho subsequently turned up again with demand draft of Rs. 95,000/- with them for he purchase of iron and steel goods. The above draft was dated 8th April, 1994 given by above two persons created a doubt as on 8th April, 1994 the Banks were closed due to strike of the employees of the Banks. Accordingly after inquiry it was found that the above draft of Rs. 95,000/- dated 8th April, 1994 was forged one. Mr. Moolchand Jaiswal was apprehended and was handed over to the Police by the appellants after lodging an F.I.R. for above forgery and thereafter before Police Moolchand Jaiswal disclosed his name as Awadhesh Kumar Srivastava whereas Harish Chand Jaiswal was in fact Anand Mohan Srivastava who was an employee of the State Bank of India, Branch Babaganj, District Pratapgarh. The respondent Bank filed a suit for recovery of the amount, when it was found that the drafts were forged. The entries of the C.C. account of the appellants were reversed. The Bank also filed a Civil Suit No. 272/1997 before the Civil Judge, Senior Division, Kanpur Nagar against Anand Mohan Srivastava and other including appellants, who were impleaded as defendant Nos. 7 and 8, a case before Consumer Forum, Lucknow was also filed by the appellants. The civil suit was subsequently transferred from Kanpur to D.R.T., Allahabad. The appellants contested the claim of the Bank, but vide judgment dated 11th August, 2005, a recovery certificate for Rs. 16,67,319/- along with pendente lite and future interest has been ordered to be issued against appellants. Feeling aggrieved against this judgment, the present appeal has been filed.

5. In T.A. No. 589/2005 the appellants by filing their written statement contended that they had neither taken any loans nor stood surety, therefore, the matter in controversy did not come within the ambit of RDDBFI Act, 1993 and the Tribunal had no jurisdiction to decide it. They further pleaded that the Bank drafts in question were presented to the Bank but after their due verification Bank itself encashed them, therefore, there was no fault on their part. It was pleaded on behalf of the appellants before the D.R.T. that the appellants were neither conspirators nor the alleged forged drafts were got prepared at their instance and after encashment of these drafts by the Bank, they had to supply the goods in lieu thereof but when drafts were found to be forged, the debit entries were reversed. The State Commission of Consumer Forum was also approached by the appellants defendants by filing a case against the Bank, in which the Commission granted compensation to the tune of Rs. 1 lakh. According to the appellants defendants, the respondent-plaintiff-Bank had filed a separate Suit No. 547/1997 for recovery impleading above Anand Mohan Srivastava and Ors. including the appellants and that suit is still pending before the Court. They further contended that the person, who posed himself to be Moolchand Jaiswal was Awadhesh Kumar Srivastava and close relation of Anand Mohan Srivastava, who was working as Cashier in S.B.I., Babaganj branch in district Pratapgarh and managed to get prepared forged Bank drafts, therefore, if the official of the plaintiff Bank had committed fraud, how the appellants defendants can be held liable particularly when the goods have been sold after encashment of the drafts. In T.A. No. 591/2005 the written statement was filed by the appellant-defendants reiterating almost the same pleadings, which were advanced from the side of other defendants. In above noted other case, for this reason it is not necessary to re-produce these pleadings in detail.

6. Having heard learned Counsel for the appellants in both the appeals and learned Counsel for the respondent-Bank, this Tribunal has carefully gone through the record as well as impugned judgments. It is argued from the side of the appellants that the forgery in preparation of the drafts was unearthed by the appellants Ganga Sagar Rakesh Kumar.

The F.I.R. was lodged by this firm itself after coming to know about the forgery and not by the Bank. The Bank has not been able to establish that both these appellants had any role in the forgery of the drafts, although it has been pleaded from the side of the Bank against them that there was complicity of the appellants in preparation of above forged drafts. It is argued that the person who presented above forged drafts were neither known to the appellants nor they had any kind of relationship with the appellants, therefore, in absence of any proof of complicity, the appellants cannot be fastened with any liability. It is vehemently argued that the Bank itself encashed the amounts of drafts and only after the entries of credit of the amounts of drafts in their account, the goods were supplied whereas these goods were hypothecated to the Bank. Attention of this Tribunal has been drawn towards the affidavit of Rakesh Srivastava, Chief Manager of State Bank of India, Phoolbagh Branch. Kanpur with regard to his affidavit filed in T.A. No. 532/ 2000 to point out that in paragraph Nos. 19,20,21 and 22 the narration of facts does not reveal any role of the appellants.

7. In Appeal No. 589/2005 apart from above submissions advanced on behalf of the appellants, it is argued that the fraud was committed by an official of the respondent Bank itself, therefore, this case does not fall within the jurisdiction of RDDBFI Act, 1993 i.e. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 as the amount claimed cannot be taken to be debt. Both Counsel appearing on behalf of the appellants have laid emphasis that the entire story set up by the Bank with regard to forgery in preparation of drafts by its own employee does not make out a case to take the amount within the meaning of debt defined under Section 2(g) of the RDDBFI Act, 1993, therefore, the Tribunal has no jurisdiction to adjudicate this matter against the appellants and the appellants are not liable to pay any amount.

Attention of this Tribunal has also been drawn towards the definition of debt given in Section 2(g) of the said Act. The learned Counsel for the Bank repelling above arguments has contended that simply because the appellants have supplied the goods against forged drafts, they cannot be absolved of their liability because according to him above drafts were got prepared without any consideration. He has also argued that the drafts were forged is not in dispute, therefore, as per the provisions of the Contract Act the appellants are liable to make good loss to the Bank. Further submission is that the cash credit facility with lock and key was provided to the appellants and the Bank after detection of fraudulent drafts rightly reversed the entries with regard to amount of above drafts made in the account of cash credit facility of the appellants. He has also drawn the attention of this Tribunal towards definition of debt provided in the aforesaid RDDBFI Act, 1993 to argue that the present controversy comes within the meaning of "debt" giving jurisdiction to the Tribunal to adjudicate. It is also submitted from the side of the Bank that the original civil suit filed before the Civil Court has nothing to do with the present case as in that suit the appellants are only proforma defendants.

8. Having heard the Counsel for both the sides, let us examine the definition of debt provided under Section 2(g) of the Act. This definition is as under: "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.

In the aforesaid definition the words any liability (inclusive of interest), during the course of any business activity undertaken by the Bank or...or 'in case or otherwise'...and legally recoverable on the date of application are crucial and important. Interpreting this definition, the Hon'ble Apex Court in the case reported as United Bank of India v. Debts Recovery Tribunal III (1999) CLT 47 (SC) : J.T.1999(2) SC 367, has observed that "A debt is a sum of money which is now payable or will become payable in future by reason of present obligation". In the same ruling it has also been observed that: In the case in hand, there cannot be any dispute that the expression 'debt' has to be given the widest amplitude to mean any liability which is alleged as dues from any person by a Bank during the course of any business activity undertaken by the Bank either in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any Court or otherwise and legally recoverable on the date of the application. 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 Act, it is imperative that the entire averments made by the plaintiff in the plaint have to be looked into and then find out whether notwithstanding the specially created Tribunal having been constituted, the averments are such, that it is possible to hold that the jurisdiction of such Tribunal is ousted. With the aforesaid principle in mind, on examining the averments made in the plaint, we have no hesitation to come to conclusion that the claim in question made by the plaintiff is essentially one for recovery of a debt due to it from the defendants and, therefore, it is the Tribunal which has the exclusive jurisdiction to decide the dispute and not the ordinary Civil Court.

9. In the light of above discussions, when we go through the observations made by the Hon'ble High Court of Delhi in the ruling reported as J.U. Mansukhani and Co. v. The Presiding Officer , it is noteworthy that the Hon'ble Delhi High Court in the case like present one where also the facts were similar regarding preparation and encashment of fraudulent drafts relying upon the various other rulings noted in it including the observations of Hon'ble Apex Court in the aforesaid ruling, United Bank of India v.Debts Recovery Tribunal, The use of the expression 'any liability' or 'any person' and otherwise throughout the section shows the legislative intent to provide the word "debt" with widest possible meaning. Issuance of the Bank drafts is clearly the business activity of the Bank. The essence of the definition of "Debt" in Section 2(g) of the RDDBFI Act is the existence of any liability founded on the allegation as due from any person; the creditor being a Bank or a financial institution or a consortium of the two; the liability may be in cash or otherwise; it may be secured or unsecured; it may be payable under a decree or order of any Civil Court or otherwise; the only rider being that the liability must be legally recoverable. The question whether the Tribunal has jurisdiction or not, at this stage, will have to be decided on the basis of the allegations made in the Original Application. In the said application, as noticed above there are allegations made on the basis of which, in view of what has been held in Union Bank of India's case (supra) by the Supreme Court, there is no manner of doubt that the same is triable by the Tribunal and for that reason there is no need to consider the other decisions cited at the bar.

10. From above all discussions, this Tribunal is of the opinion that the appellants had their cash credit facilities with the respondent Bank and the so called forged drafts which were prepared without any consideration and were deposited in the accounts of the appellants, the present case undoubtedly falls within the ambit of "debt" and the Tribunal has got jurisdiction to decide the same. The filing of criminal case on the basis of F.I.R. and civil suit against Anand Mohan Srivastava have nothing to do with the present proceedings of recovery.

There is nothing on the record to show that the appellants are not liable to make payment of the amount said to be due from them. The rulings United Bank of India Ltd. v. A.T. Ali Hussain and Co. a firm , which deals with liability for the payment made under mistake, Sri Sri Shiva Prasad Singh (deceased), now represented by Kali Prasad Singha v. Maharaja Srish Chandra Nandi AIR (36) 1949 P.C. 297, deal with Section 72 of the Contract Act. Both have no application in the instant case. Learned Counsel for both the parties have cited Jammu and Kashmir Bank Ltd. v. Attar-Ul-Nisa , which deals with the Section 72 of Contract Act.

Ruling Bank of Baroda v. Indochem and Varnish Industries II (2006) B.C.56 (D.R.A.T./D.R.T.), decided by this Tribunal, Sowdra Bai v.Saraswathi Ammal AIR (29) 1942 Mad. 590 and S. Kotrabasappa v. The Indian Bank AIR 1987 Kant. 236; Anirudh Kumar v. Lachhmi Chand AIR 1928 All. 500, have also been cited all have nothing to do with the case like present one, therefore these are not of any help.Bank of India v. Vijay Ramnik Kapadia where there was misappropriation of amount by Bank employee, therefore, the suit for recovery of such amount was held to be not within the jurisdiction of the Tribunal under the RDDBFI Act, 1993. The question of pecuniary jurisdiction has also been raised, but as the controversy is for payment of more than Rs. 10 lacs, the Tribunal has got jurisdiction. No other factual or legal point has been raised from the side of the appellants.

12. The result of all above discussions is that the D.R.T has considered the entire factual and legal points involved in this case in proper perspective and the judgments under these appeals do not require any interference. Accordingly, these appeals have to be dismissed.

Both the appeal Nos. R-589/2005 and R-591/2005 are hereby dismissed with costs.

Judgment pronounced in open Court. A copy of this judgment be sent to the parties as well as D.R.T. along with original records, if summoned earlier.

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