IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

 

DATED THE 16TH SEPTEMBER, 2004

 

PRESENT:  HON’BLE JUSTICE DR. PRATIBHA UPASANI

CHAIRPERSON

 

MA-37/2004

(IA-1294/2002 in OA-434/2001-DRT, Hyderabad)

 

BETWEEN:

 

Syndicate Bank,

New Nallakunta Branch,

Hyderabad, A.P.

…  Appellant

            (Counsel:  Mr. A.P.S. Kasthurirangan)

AND

 

1.  Canara Bank,

     R.P. Road,

     Secunderabad.

 

2.  M/s. Galada Power and Telecommunication Ltd.,

     No.12-13-194, Tarnaka,

     Secunderabad.

 

3.  D.C. Galada,

     S/o. M.C. Galada,

     R/o. H.No.427, Road No.20,

     Jubilee Hills, Hyderabad.

 

4.  S.M. Kankaria,

     (Address as in 2 above).

 

5.  Devendra Galada,

     H.No.781/1, Road No.44,

     Jubilee Hills, Hyderabad-33.

 

6.  M.C. Galada,

     S/o. Kishanlal Galada,

     (Address as in 5 above).

 

7.  Deoraj Ranka,

     (Address as in 2 above).

…2/

8.  Industrial Development Bank of India,

     Chapel Road, Hyderabad.

…  Respondents

            (Counsel for R1:  Mr. S. Umapathy)

 

O R D E R

 

1.         This Miscellaneous Appeal is filed by the appellant Syndicate Bank being aggrieved by the Order dated 22.12.2003 passed by the Learned PO of DRT, Hyderabad, in IA No.1294/2002 in OA-434/2001.   By the impugned Order the Ld. PO dismissed the application made by the appellant Bank observing that DRT had no jurisdiction to entertain the application as there was no relationship of creditor and debtor as between the appellant Syndicate Bank and respondent No.1 Canara Bank.

 

2.         Few facts which are required to be stated are as follows.

 

3.         OA No.434/2001 is filed by the appellant Syndicate Bank against defendants No.1 to 6 and defendants No.7 & 8 are added as financial institutions.  Defendant No.7 is Canara Bank and defendant No.8 is IDBI.  The OA is filed to claim Rs.23,73,17,672/- from defendants No.1 to 6.  Defendant No.1 availed certain credit facilities from Syndicate Bank and defendants No.7 & 8 as per the Consortium Agreement between them.  Defendant No.7 Canara Bank is the leader of the consortium.

 

4.         It is averred that defendants No.7 & 8 received payments to the extent of Rs.784 lakhs during February and March, 2000 and out of that a sum of Rs.654 lakhs is adjusted towards the overdue liabilities to it without sharing the same with the appellant Bank in terms of the inter se agreement.  It is also the contention that respondents violated the terms of the inter se agreement and did not oblige the appellant Bank’s request for sharing the recovery sum on 50:50 basis.  It is further stated that complaint was filed by the appellant Bank before the High Power Committee but the said High Power Committee directed the appellants to pursue the matter before the DRT against the respondents.

5.         It is averred by the appellant Bank that respondent No.1 Canara Bank is a nationalised Bank who is expected to act as per the terms of the agreement but has violated the terms of the inter se agreement by non-remitting its share to the extent of Rs.327 lakhs in March, 2000.  It is contended that respondent No.1 Canara Bank is utilising the same for recycling its advances and earning profits and in the said process the appellant Bank has lost opportunity to lend the said amount to the public.  It is averred that the respondent Bank is getting wrongful gain and is causing wrongful loss to the appellant Bank.

 

6.         The respondent No.1 Canara Bank filed reply to the OA contending that the OA was not maintainable.  It was contended that since Canara Bank was the leader of the consortium it had already filed an application being OA No.404/2000 against the defendants No.1 to 6 for recovery of Rs.14,75,75,230.60p and in the said OA the appellant Syndicate Bank was shown as defendant No.7 along with other creditors.  It is averred that the appellant Bank cannot seek direction to deposit the alleged amount by the respondent Bank and that it is not a “debt” as defined under the provisions of the RDDB&FI Act, 1993.  It is also contended that the appellant Bank cannot seek enforcement of the inter se agreement of the financial institutions inter se before the Tribunal and the Tribunal had no jurisdiction to enter into that aspect.  It is, therefore, prayed by respondent No.1 Canara Bank that the OA be dismissed.

 

7.         The Ld. PO of DRT after hearing both the sides and after going through the proceedings came to the conclusion that the 1st respondent Canara Bank was the leader of the consortium which gave loans to M/s. Galada Power and Telecommunication Ltd., i.e. the 1st defendant in the main OA and that the loans were given, based on the inter se agreement between the members of the consortium.  It was also observed by the Ld. PO that the application was filed to direct one of the consortium members i.e. Canara Bank to pay certain portion of the amount received by it as a leader of the consortium and that there was no debtor and creditor relationship between Syndicate Bank and Canara Bank and that in the absence of such a relationship the DRT had no power, much less any authority to decide the application made by the Syndicate Bank seeking direction that Canara Bank be directed to deposit the said amount as per the spirit of the consortium agreement and the application, therefore, was not maintainable.  Observing this, the application IA-1294/2002 filed by the Syndicate Bank came to be dismissed.  Being aggrieved, the Syndicate Bank has filed the present appeal before the Appellate forum.

 

8.         I have heard Mr. A.P.S. Kasthurirangan, Advocate for the appellant Bank and Mr. S. Umapathy, Advocate for the respondent No.1 Canara Bank.  I have also gone through the proceedings as also the relevant provisions of the RDDB&FI Act, 1993, and in my view the Ld. PO has erred in holding that the DRT had no jurisdiction to decide the application as there was no relationship of creditor and debtor between the Syndicate Bank and the Canara Bank.

 

9.         Section-2(g) of the RDDB&FI Act, 1993 has defined the term “debt” :-

           

“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.”

 

 

10.       The case of the appellant Syndicate Bank is that there was an inter se agreement between the Syndicate Bank and Canara Bank, that if any amount is paid by the borrowers to the leader of the consortium namely, Canara Bank towards repayment of their dues lent by Syndicate Bank as well as Canara Bank, then that amount would be shared amongst themselves on 50:50 basis.  This is the case with which Syndicate Bank has approached the Tribunal.  Whether there was such an agreement amongst themselves and whether Syndicate Bank is able to prove its case or not is a different issue.  But the averments made in the OA will have to be seen as they are and the averments are that there was such an agreement to share the repayment amount on 50:50 basis, that the borrowers to whom money was lent by Syndicate Bank as well as by Canara Bank, repaid the amount to Canara Bank and Canara Bank instead of honouring its commitment to pay 50% amount to Syndicate Bank appropriated it, recycled the same for earning profits thereby causing wrongful gain to it and causing wrongful loss to Syndicate Bank.  This is in short the case of the Syndicate Bank.

 

11.       Now, if one carefully reads the definition of “debt” as stated in the RDDB&FI Act, the alleged transaction certainly comes within the four corners of the term “debt”.  Forming of consortium, lending money jointly in certain proportion to the borrowers etc. is a transaction which is done during the course of any business activity undertaken by the Bank or the financial institution or the consortium.  If the money which is payable to the Syndicate Bank is not paid by Canara Bank as per the spirit of the consortium agreement and as per the terms arrived at between themselves, then that amount is certainly a “debt” within the meaning of Section-2(g) of the RDDB&FI Act, for which Syndicate Bank is entitled to file OA in DRT against Canara Bank to realise its money which rightfully belongs to them as per their contention.  To repeat, whether the Syndicate Bank succeeds in proving all these averments or not is another thing.  But it cannot be said that Syndicate Bank is not at all entitled to make such a claim in DRT.  However, this is exactly what the Ld. PO of DRT, Hyderabad, has done.  He has declined to exercise jurisdiction on the ground that the transaction or dealing between these two Banks is not a debt and, therefore, DRT has got no jurisdiction or power to entertain such an application as was made by the Syndicate Bank seeking direction that Canara Bank be directed to deposit the amount to which it was entitled as per the consortium agreement.  Non-exercise of jurisdiction by DRT, Hyderabad, was all the more improper in view of the fact that Syndicate Bank had approached the High Power Committee for resolving the inter se dispute between the two nationalised Banks, but it was the High Power Committee who advised the Syndicate Bank to approach the DRT for resolving the inter se dispute.

 

…6/

12.       In view of the aforesaid discussion, the impugned Order dated 22.12.2003 of the Ld. PO of DRT, Hyderabad, will have to be set aside, the appeal will have to be allowed to that extent and the matter will have to be remanded back to the Ld. PO to hear IA-1294/2002 afresh and decide the same on its own merits.  Needless to say that all contentions are kept open and observations made by this Appellate Tribunal will not come in the way of the DRT while passing Order on IA-1294/2002 while deciding IA-1294/2002 on merits.  Accordingly, following is passed.

 

13.       Miscellaneous Appeal MA No.37/2004 is partly allowed.

 

14.       Impugned Order dated 22.12.2003 passed by the Ld. PO of DRT, Hyderabad, in IA-1294/2002 in OA-434/2001 is hereby set aside and the matter is remanded back to the Ld. PO of DRT, Hyderabad, for deciding the said IA No.1294/2002 on its own merits in accordance with law. 

 

15.       Appeal MA-37/2004 is disposed of in the aforestated terms.

 

(Dictated to PS & the transcript corrected, pronounced & signed by me today the 16th September, 2004).

 

                                                                                                                       

Sd/-

[ JUSTICE  DR. PRATIBHA UPASANI ]

CHAIRPERSON