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United Bank Of India v. Debts Recovery Tribunal And Others
Factual and Procedural Background
The United Bank of India filed Suit No. 276 of 1991 in the Calcutta High Court seeking monetary reliefs against three defendants. While the suit was pending, Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“the Act”), which came into force on 24-6-1993. Pursuant to Section 31 of the Act the suit automatically stood transferred to the Debts Recovery Tribunal (DRT) and was renumbered as Transferred Application No. 163 of 1996.
The defendants filed an application before the DRT asserting that the Tribunal lacked jurisdiction because the claim, being one for damages and compensation, did not constitute a “debt” under Section 2(g) of the Act. The DRT rejected that contention. The defendants then invoked Article 227 of the Constitution and obtained an order from the High Court setting aside the DRT’s decision; the High Court ruled that the plaintiff’s claim was not a “debt” as the amount was unascertained and therefore fell outside the Act.
The Bank appealed to the Supreme Court, resulting in the present judgment.
Legal Issues Presented
- Whether the plaintiff-bank’s claim constitutes a “debt” within the meaning of Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
- If so, whether the Debts Recovery Tribunal, rather than the ordinary civil court, has exclusive jurisdiction under Section 17(1) of the Act to adjudicate the claim.
Arguments of the Parties
Appellant (United Bank of India)
- The plaint, read as a whole, discloses a suit for realisation of money due to the Bank in the ordinary course of business, not merely an unliquidated claim for damages.
- Section 2(g) defines “debt” in broad terms; the Court should look at the substance of the claim, which is for recovery of money, and ancillary reliefs do not alter its essential character.
- Denying DRT jurisdiction would defeat the object of the Act, enacted to ensure expeditious recovery of bank dues.
Respondents (Defendants)
- The claim is one for damages and compensation that can only be quantified after enquiry and receipt of information from Defendants 2 and 3; it is therefore outside the scope of “debt” under Section 2(g).
- No sum was ever borrowed by Defendant 1 from the Bank; hence the DRT’s specialised jurisdiction over recovery of bank borrowings is inapplicable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Union of India v. Raman Iron Foundry (1974) 2 SCC 231 | Whether an amount not yet adjudicated can be treated as a “debt” enabling the Government to retain money due to a contractor. | Cited by respondents; the Court held the decision was not directly relevant to the present dispute and offered no assistance in construing the Act. |
| Kesoram Industries & Cotton Mills Ltd. v. CWT, (1966) 2 SCR 688 | General meaning of “debt” under the Wealth Tax Act—sum payable now or in future by reason of a present obligation. | Cited by appellant; Court noted it could be of persuasive value but stressed that “debt” is specifically defined in the 1993 Act and must be interpreted within that framework. |
| Webb v. Stenton, (1883) 11 QBD 518 | Classic formulation: “debitum in praesenti solvendum in futuro.” | Referred to while discussing the general concept of “debt”; supported the view that a present obligation suffices even if payment is future. |
| State of Punjab v. Rattan Singh, (1964) 5 SCR 1098 | Effect of special statute ousting civil court jurisdiction when liability determination is entrusted to a designated authority. | Used illustratively to show that specialised tribunals can have exclusive jurisdiction over defined matters. |
Court's Reasoning and Analysis
The Court began by reiterating the legislative purpose behind the 1993 Act: to create specialised tribunals for expeditious recovery of bank dues and thereby prevent large sums from remaining blocked in litigation. Turning to the text, it emphasised that Section 2(g) gives the word “debt” the “widest amplitude,” covering any liability—secured or unsecured, decreed or undecreed—provided it is legally recoverable on the date of the application.
To determine jurisdiction, the Court examined the plaint in its entirety rather than isolated prayers. On that reading, the claim was “essentially one for recovery of a debt due” to the Bank. The fact that certain ancillary or consequential reliefs were sought against other defendants did not alter the substantive character of the suit.
The High Court’s narrow interpretation—that an unascertained amount claimed as damages could not qualify as a “debt”—was rejected. The Supreme Court reasoned that a present obligation to pay, even if exact quantification awaits enquiry, still falls within Section 2(g). Consequently, under Section 17(1) the DRT has exclusive jurisdiction, and Section 18 bars ordinary civil courts from entertaining such matters.
Holding and Implications
Appeal Allowed. The High Court’s order is set aside. The suit, already transferred to the Debts Recovery Tribunal and registered as Transferred Application No. 163 of 1996, shall be disposed of by the Tribunal in accordance with law. No order as to costs.
Implications: The decision reinforces the broad reach of the term “debt” under the 1993 Act and affirms the exclusive jurisdiction of Debts Recovery Tribunals over such claims, thereby furthering the Act’s objective of speedy recovery of bank dues. It clarifies that even unquantified monetary claims arising from banking transactions can fall within the Tribunal’s competence.
G.B Pattanaik, J.— Leave granted.
2. The appellant-United Bank of India filed a suit in the High Court of Calcutta which was registered as Suit No. 276 of 1991, claiming different reliefs against the three defendants. While the suit was pending, Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as “the Act”) to provide for the establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. The Act came into force on 24-6-1993. By operation of Section 31 of the Act, the suit in question stood transferred to the Debts Recovery Tribunal, established under the Act and was renumbered as Transferred Application No. 163 of 1996. The respondents moved an application before the Tribunal, contending thereunder that the Tribunal had no jurisdiction to entertain the suit in question in view of the nature of the reliefs prayed for and as such, the plaint should be returned to the plaintiff for being filed in the High Court itself. The Tribunal disposed of the applications filed by the defendants holding that the Tribunal has the jurisdiction to decide the claim of the plaintiff. The three defendants thereafter filed three separate applications under Article 227 of the Constitution of India, challenging the orders passed by the Tribunal. By the impugned order, the High Court set aside the order of the Tribunal on a finding that under the Act, the Tribunal gets jurisdiction to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions but the plaintiff's claim in question cannot be held to be a “debt” as defined in Section 2(g) of the Act inasmuch as the claim is of an undetermined sum, which is required to be ascertained upon an enquiry to be conducted by the Tribunal. The High Court was also of the view that the suit as framed is one for damages and compensation which is required to be quantified before a decree to be passed and such a suit will not be within the purview of the provisions of the Act in question. With these conclusions, the applications of the defendants having been allowed, the plaintiff has approached this Court.
3. Mr G.L Sanghi, the learned Senior Counsel appearing for the plaintiff-appellant contends that the plaint read as a whole on the basis of averments made and the reliefs sought for, it cannot be held to be a suit for damages but on the other hand, it is essentially a suit for realisation of money due to a bank which has become due in the course of the business activity undertaken by the Bank and as such it is a suit for recovery of a debt under Section 2(g) of the Act and the High Court committed error in holding that the Tribunal had no jurisdiction. Mr Sanghi further contended that while deciding the question as to whether the claim in question can be adjudicated upon by the Tribunal constituted under the Act, the substance of the matter has to be looked into. According to Mr Sanghi, a suit for recovery of debt from one of the defendants does not cease to become so merely because certain ancillary and incidental relief has been sought for against some other defendants. Mr Sanghi lastly urged that the very purpose and object of the Act will be frustrated if the suit in question is not allowed to be disposed of by the Tribunal constituted under the Act and on the other hand is relegated to the ordinary civil court as has been ordered by the High Court in the impugned judgment. According to Mr Sanghi, the expression “debt” in Section 2(g) is of a wide amplitude and there should be no justification to give a narrower meaning and thereby limiting the jurisdiction of the Tribunal.
4. Mr Gupta, the learned Senior Counsel appearing for the defendants on the other hand contended that the plaintiff's claim is one for damages and compensation which would again be dependent upon the enquiry or receiving information from Defendants 2 and 3 with regard to the refund pay orders and the statement of accounts thereof. According to Mr Gupta, howsoever wide the expression “debt” in Section 2(g) of the Act may be, it will certainly not encompass within itself the claim of the plaintiff-Bank, as there has been no borrowing from the plaintiff-Bank by Defendant 1 and, therefore, the High Court was fully justified in coming to the conclusion that the Tribunal has no jurisdiction to entertain the suit in question.
5. In view of the rival stands of the parties, the short question that arises for consideration is, as to whether the said claim of the plaintiff can be said to be a claim for recovery of debts due to the plaintiff as provided under Section 17(1) of the Act. The answer to this question in turn would depend upon the meaning of the expression “debt” as defined in Section 2(g) of the Act. Before we examine the two provisions referred to above, it is to be borne in mind that the procedure for recovery of debts due to the banks and financial institutions which was being followed, resulted in a significant portion of the funds being blocked. To remedy the locking up of huge funds, the Finance Minister introduced “the Recovery of Debts Due to Banks and Financial Institutions Bill, 1993”, which was passed by Parliament and the Act has come into existence. The Statement of Objects and Reasons of the Act as reflected in the Bill introduced by the Minister in Parliament may be extracted hereunder in extenso:
“Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realised without delay. In 1981, a Committee under the Chairmanship of Shri T. Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfil a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs 5622 crores in dues of public sector banks and about Rs 391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country.
The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill.”
6. The Act and the relevant provisions will have to be construed bearing in mind the objects for which Parliament passed the enactment. The prime object of the enactment appears to be to provide for the establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto.
7. The expression “debt” has been defined in Section 2(g) to mean:
“2. (g) ‘debt’ means any liability (inclusive of interest) which is alleged 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 whether payable under a decree or order of any civil court or otherwise and subsisting on, and legally recoverable on, the date of the application;”
8. Section 3(1) provides for establishment of a tribunal which reads as under:
“3. (1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.”
9. Section 17(1) provides the jurisdiction, powers and authority of a tribunal which reads as under:
“17. (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.”
10. Section 18 bars the jurisdiction of other courts and authorities on and from the appointed day to exercise any jurisdiction in relation to the matters specified in Section 17.
11. Section 31 is the provision for transfer of pending cases which reads as under:
“31. (1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:
Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court.
(2) Where any suit or other proceeding stands transferred from any court to a Tribunal under sub-section (1),—
(a) the court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding to the Tribunal; and
(b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under Section 19 from the stage which was reached before such transfer or from any earlier stage or de novo as the Tribunal may deem fit.”
12. But we are not really very much concerned with the aforesaid provision since the suit in question had in fact been transferred to the Tribunal. At this stage it will be necessary to notice a few authorities cited at the Bar. Mr Gupta, for the respondents relied upon the decision of this Court in Union of India v. Raman Iron Foundry (1974) 2 SCC 231 in support of his contention that the plaintiff's claim cannot be held to be a debt within the meaning of Section 2(g) of the Act. In the aforesaid case, the issue before the Court was whether in view of clause 18 of the General Conditions of Contract contained in standard form of contract, can the Government exercise the right to retain the money due to the contractor even before the claim against the contractor is satisfied. Thus clause 18 of the General Conditions of Contract was for consideration and considering the same, the Court repelled the stand of the Union of India that it can retain the sum of the contractor, even before the claim of the Union against the contractor is adjudicated upon. We do not think that this decision is of any assistance for adjudicating the lis in question in the case in hand.
13. Mr Sanghi, the learned Senior Counsel appearing for the appellant relied upon the decision of this Court in Kesoram Industries & Cotton Mills Ltd. v. CWT (1966) 2 SCR 688, AIR 1966 SC 1370 in support of his contention that the plaintiff's claim would be a debt. In the aforesaid case, the Court was considering as to what is the meaning of the expression “debt” as it was required to ascertain whether a liability to pay income tax and supertax on the income of the accounting year would be a “debt” within the meaning of Section 2(m) of the Wealth Tax Act, 1957. This decision to our mind will be not of much assistance inasmuch as the expression “debt” has been defined in the Act in question though the general meaning of “debt” may be of a persuasive value in interpreting the expression “debt” in the Act but it is too well settled that where an expression in any Act has been defined, the said expression will have the same meaning and is not necessary to find out what is the general meaning of the expression. In the aforesaid case, the Court noticed as to how the word “debt” was interpreted in Webb v. Stenton (1883) 11 QBD 518 wherein it was held a “debt” is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti solvendum in futuro. After noticing a large number of authorities, the Court also held that all the decisions agree that the meaning of the expression “debt” may take colour from the provisions of the Act concerned, it may have different states of meaning, but the following definition is unanimously accepted; a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation.
14. In the case of State of Punjab v. S. Rattan Singh (1964) 5 SCR 1098, AIR 1964 SC 1223 which Mr Sanghi has also relied upon, the question for consideration was whether in view of Sections 4 and 11 of the Patiala Recovery of State Dues Act, a civil court can have jurisdiction to decide if a person is a defaulter or not. After examining the provisions of Sections 4 and 11 of the said Recovery Act, this Court came to hold:
“[I]t is reasonable to conclude that the provisions of Section 4 of the Act empower the head of the department to determine not only the amount of State dues recoverable but also the liability of the alleged defaulter to pay those debts. It follows, therefore, that in view of the provisions of Section 11 of the Act, no civil court can have jurisdiction to determine these two matters, viz., determining the amount of State dues recoverable and the liability of the alleged defaulter to pay the amount.”
15. 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 due 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 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 a tribunal is ousted. With the aforesaid principle in mind, on examining the averments made in the plaint, we have no hesitation to come to the 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. In this view of the matter the High Court was in error to hold that the dispute in question is not entertainable by the Tribunal under Section 17 of the Act. We accordingly set aside the impugned order of the Calcutta High Court and direct that the suit in question which stood transferred to the Tribunal constituted under the Act and was registered as Transferred Application No. 163 of 1996 be disposed of by the Tribunal in accordance with law. These appeals are allowed but in the circumstances, without any order as to costs.
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