M/S. G.V Films Limit... v. Unit Trust Of India,...

C. Shivappa, J.

1. The appellant herein has questioned the order dated 25.3.1997 on Transfer Application No. 1140 of 1997 in C.S No. 253 of 1993. The appellant was arrayed as the defendant No. 1 in the suit. The respondent No. 1 has filed a suit for recovery of a sum of Rs. 51,75,155 together with interest at 24% per annum. The case of respondent No. 1 is that the dividend had been paid to the appellant wrongly though the same was due to the respondent No. 2 here in. The suit was transferred under Section 31 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (herein after referred to as ‘The Act’ in short) to the Tribunal established under the Act. The section provides for transfer of all the pending cases from the High Courts to the concerned Tribunals. Only those cases are required to be transferred from the Courts where the amount of debt due to be recovered is Rs. 10 lakhs or more. All other cases involving amount of less than Rs. 10 lakhs would continue to be heard and decided by the respective Courts where the suits for recovery are pending. Sub-Section (1) of Section 31 of the Act, inter alia states “shall stand transferred on that date to such Tribunal”. The transfer of pending cases is an automatic process, an event which takes place on the date when the Tribunal having the jurisdiction is established. No application or any request for transfer of cases is envisaged by the Act. Once the Tribunal is established in a particular region then ipso-facto the cases pending in the Courts within the jurisdiction of that Tribunal are presumed to be transferred to the said Tribunal. As the Tribunals are being established on different dates in various regions of the country, the date for transfer of pending cases will mean the date of the respective Tribunal. Sub-section (2) provides that the concerned Courts have to transfer the records relating to the suits/proceedings to the Tribunal. This is required to be done as soon as possible after the establishment of the Tribunal and consequent transfer of pending suits/proceedings. Once the records are received by the Tribunal, then it is for the Tribunal to decide whether it can continue to hear the matter from the stage when it was transferred to it or from any earlier date or even start the same de novo. The decision of the Tribunal will depend upon the facts and circumstances of each case. However, this provision is restricted only to pending cases as explained above but does not include any pending appeals. In other words according to the proviso to sub-section (1) of Section 31, all the pending appeals will continue to be heard and decided by the respective courts where the appeals have been pending.

2. The appellant/defendant No. 1 after receipt of the notice from the Debts Recovery Tribunal at Chennai, moved an application questioning the jurisdiction of the Tribunal, inter alia contending that from the very definition “debt”. a transaction of the nature covered in the present suit is not covered under the said definition. If the cause of action relating to the present suit had arisen after the establishment of the Tribunal, the suit would still have to be filed only before this Court since the transaction does not relate to debt under the Act and hence, transfer of the suit to the Debts Recovery Tribunal is not justified and proper.

3. The learned Judge by the impugned order rejected the application keeping in view the object if the enactment and held that it is a liability on the respondent No. 1 and the plaintiff has mistakenly paid the dividend to him, inter alia, the plaintiff is entitled to collect the same and pay to the Defendant No. 2.

4. The appellant herein has challenged the order contending that the definition of “debt” under the Act would include any liability which is alleged as due and such liability should be subsisting and legally recoverable on the date of application. Since these two conditions which are the essential ingredients of the definition have been ignored, a mistaken payment insofar as that, is the very issue to be decided in a suit and not by the Tribunal. It is also urged that the dividend has been paid to the appellant on the terms relating to the units and the transfer thereof by the appellant to the respondent No. 2. This is an issue relating to the contract between the parties and not related to any debt due by the appellant to the respondent No. 1. Lastly, he contended that whether the dividend has been correctly paid to the appellant or not is a contentitious issue, which requires evidence to be taken and the documents examined in addition to the consideration of the provisions of the Unit Trust of India Act, the procedure and practice in regard to and the rights connected with the units and various others issues which cannot be tried or decided by the Debts Recovery Tribunal, which issues do not fall within their jurisdiction and which involve a civil dispute not relating to a debt and not covered by the object of the aforesaid enactment.

5. The questions for consideration in this appeal are (i) whether the nature of demand made amounts to liability which partakes the character of a “debt” under the Act? and (ii) having regard to the nature of the demand whether the Tribunal has got the jurisdiction?

6. In order to determine these questions, it is appropriate to refer the definition of “debt” under Section 2(g) and “financial institution” under Section 2(h)- of the Act, which reads thus: “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 a bank or financial institution or by a 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”. In Stroud's Judicial Dictionary, ‘debt’ is defined as “a sum payable in respect of a liquidated money demand recoverable by action. One of the essentials of a debt is an ascertained amount or a readily calculable amount”. In Law Lexicon by P. Ramanatha Aiyar (1997 Edn) at page ‘483, ‘debt’ is defined as “a sum of money due under an express or implied agreement as a bond or bill or note; amount due or payable from one person another in return for money, services, goods or other obligation. A debt is a sum payable in respect of a money demand, recoverable by action (AIR 1932 Lah 212). In common parlance it is a sum of money due from one person to another. The word debt is of large import, including not only debts of record or judgment, and debts by speciality, but also obligations arising under simple contract, to a very wide extent, and in its popular sense includes all that is due to a man under any form of obligation of promise. A dividend declared by a company is after its due date a debt from the company to the shareholder. Debt is defined as meaning any pecuniary liability. The words ‘pecuniary liability’ will cover any liability which is of a monetary nature”.

7. In Ramanathan v. Ramanathan, AIR 1968 SC 1047, the Apex Court has held that “it is a liability to pay in praesenti or in futuro an ascertainable sum of money-Deposit of money-Depositee incurs a liability although time for repayment would come only when demand is made-such a liability is a debt”. Kesoram Industries v. Weath Tax Commissioner (Central), A.I.R 1966 SC 1370; Narayanan Chettiar v. Annamallai Chettiar, AIR 1959 SC 275. The question whether it is a debt owed at that point of time depends upon the arrangement between the parties. “Whether it is owed” regard cannot be had to payability on a particular date. The total amount is undoubtedly payable, though on certain future dates. It nevertheless is a debt which is owed though the whole or part of it may be payable only at a future date. In Commissioner of Wealth-Tax v. Pierce Leslie & Co., Ltd., AIR 1963 Mad. 356, a Bench of this Court pointed out that the essential requisites of a debt are (i) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to that amount with the obligation to pay forthwith or in future within a time certain; and (3) the obligation must have accrued and must be subsisting and should not be that which is merely accruing. Broadly stated, the debt is a liquidated money obligation for the recovery of which an action will lie. It is an ascertained, liquidated and quantified obligation enforceable in praesenti or in futuro. The fact that the time for payment will arise in future does not make it any the less a debt. Debtium is praesenti solvendum in futuro;- this is not repugnant to the conception of a debt, because the obligation is crystallised, and it is only the payability that is in abeyance.

8. In Black's Law Dictionary, the meaning of the word, “debt” is explained as “a sum of money due by certain and express agreement. A specified sum of money owing to one person from another, including not only obligation of debtor to pay but right of creditor to receive and enforce payment”. Debt shall also include every obligation by a person or legal entity to pay money to another. As the various definitions and judicial pronouncements indicate, debt usually involves “money” or an obligation or liability expressed in terms of money. Hence, “debt” in its simple form would comprise of money owed but not necessarily restricted to money alone. Thus in order to constitute a debt, there should be present two persons, the debtor, from whom the money is receivable and the creditor, to whom the money is payable. Such money payable is called ‘debt’;. Thus the presence of a liability which is owned by the debtor to the creditor is an absolute attribute of the term' ‘debt’. In view of the usage of the word, any liability (inclusive of interest) which is alleged as due from any person during the course of any business activity undertaken by the Bank or otherwise and subsisting on, and legally recoverable, becomes a debt.

9. Having regard to the transaction between the parties and on the materials that may be produced either oral or documentary regarding mistaken credit in the account of respondent No. 1 by the Bank, it has to be decided whether the person who utilises the amount is bound to repay the same with interest, In view of section 72 of the Indian Contract Act, 1872 and whether a constructive trust can arise over a wide variety of situations. A similar question of mistaken credit in the account of a person by a Bank arose for consideration in Kotrabasappa v. Indian Bank*, AIR 1987 Kar. 236, and the Karnataka High Court has held thus: “According to Cardozo, J., “a constructive trust is a formula through which the conscience of equity finds expression.” Snell has defined it as a ‘Trust’ which is raised by the construction of equity in order to satisfy the demands of justice without reference to any presumable intention of parties, either expressed or implied”. In United States, the concept of a constructive trust has been said to be ‘one of the instrumentalities which a Court of equity at the expenses of another’. But the American doctrine regards a constructive trust, not as a substantive trust, but as a ‘remedial institution’, an equitable remedy of a proprietary nature, available to prevent unjust enrichment whenever the personal remedy is inadequate. Statements in recent English cases, as will be seen, go beyond that; they have suggested the recognition of a constructive trust “of a new model”, which will be imposed “Whenever justice and good conscience required it …, as an equitable remedy “by which the Court can enable an aggrieved party to obtain restitution”.— vide Modern Equity by Jill E. Martin 12th Edn., 70, Constructive Trusts are also called trusts ex malefico, trusts ex delicto, trusts in invitum, or involuntary trusts. Story on Equity Jurisprudence has explained ‘Constructive Trust’ thus:- “One of the most common cases in which a Court of equity acts upon the ground of implied trusts in invitum, is where a party has received money which he cannot conscientiously withhold from another party. It has been well remarked, that the receiving of money which consistently with conscience cannot be retained is, in equity, sufficient to raise a trust in favour of the party for whom or on whose account it was received. This is the governing principle in all such cases. And, therefore, whenever any controversy arises, the true question is, not whether money has been received by a party of which he could not have compelled the payment, but whether he can now, with a safe conscience, ex aequo et bono, retain it. Illustrations of this doctrine are familiar in cases of money paid by accident, or mistake, or fraud. And the difference between the payment of money under a mistake of fact, and a payment under a mistake of law, in its operation upon the conscience of the party, presents the equitable qualifications of the doctrine in a striking manner. It is ‘true that Courts of Law now entertain jurisdiction in many cases of this sort where formerly the remedy was solely in Equity; as for example, in an action assumpsit for money had and received, where the money cannot conscientiously be withheld by the party; following out the rule of the Civil Law; Quod condictio indebiti non datur ultra, quam locupletior factus est, qui accepit. But this does not oust the general jurisdiction of Courts of Equity over the subject-matter, which had for many ages before been in full exercise, although it renders a resort to them for relief less common, as well as less necessary, than it formerly was. Still, however, there are many cases of this sort where it is indispensable to resort to Courts of Equity for adequate relief and especially where the transactions are complicated, and a discovery from the defendant is requisite”. Prof. A.W Scott in his book on Trusts has explained the ‘Constructive trust’ as follows:- “Similarly where chattels are conveyed or money is paid by mistake, so that the person making the conveyance or payment is entitled to restitution, the transferee or payee holds the chattels or money upon a constructive trust. In such a case, it is true, the remedy at law for the value of the chattels or for the amount of paid may be an adequate remedy, in which case a Court of equity will not ordinarily given specific restitution. If the chattels are of a unique character, however, or if the person to whom the chattels are conveyed or to whom the money is paid is insolvent, the remedy at law is not adequate and a Court of equity will enforce the constructive trust by decreeing specific restitution. The beneficial interest remains in the persons who conveyed the chattel or who paid the money, since the conveyance or payment was made under a mistake…..

The beneficial interest in the property is from the beginning in the person who has been wronged. The constructive trust arises from the situation in which he is entitled to the remedy of restitution, and it arises assoon as that situation is created. For this reason, the person who is wronged is entitled to specific restitution from the wrongdoer even though the wrongdoer becomes insolvent before suit is brought, and he is entitled to specific restitutions from a person to whom the wrongdoer has transferred the property, if the transferee is not a bona fide purchaser, even though the transfer is made before suit is brought for restitution. It would seem that there is no foundation whatever for the notion that a constructive trust does not arise until it is decreed by a Court. It arises when the duty to make restitution arises, not when that duty is subsequently enforced”. (Italics supplied)

In Chanse Manhattan Bank v. Israel British Bank, 1979 (3) All E.R 1025 after referring to the decisions in Sinclair v. Brougham, 1914-15 All E.R 622 and In re. Diplock's Estate, 1948 (2) All. E.R 318, it is stated:- “In the same way, I would suppose, a person who pays money to another under a factual mistake retains an equitable property in it and the conscience of that other is subjected to a fiduciary duty to respect his proprietary right”. (Italics supplied)

and further it is held:- “Fiduciary relationship need not necessarily, ‘originate in a consensual’ transaction”. This decision in turn has accepted the dictum if Coxe, J., in Re Berry, (1906) 147 F 208 to the effect: -

“When the money was paid under a plain mistake of fact equity impressed upon it a constructive trust which followed it through the bank and into the hands of the trustees”. (Italics supplied)

Section 90 of the Trusts Act states that if there is a person in a fiduciary relation to another, he cannot take advantage of that position so as to gain something exclusively for himself which he otherwise would not have obtained but for his position which he held. Section 94 of the Trusts Act reads thus:

“94. Constructive trusts in case not expressly provided for-In any case not coming within the scope of any of the preceding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property for the benefit of the persons having such interest, or the residue thereof (as the case may be), to the extent necessary to satisfy their just demands”.

This section has incorporated the same principles referred to above. Though S. 95 states that a person holding property shall perform the same duties and be subject to the same liabilities and disabilities as if he were a trustee of the property for the person for whose benefit he holds it, authorities have tried to distinguish between an ‘express trust’ and a ‘constructive trust’.

10. From the above discussion, we have no doubt in coming to the conclusion that there exists a fiduciary relationship between the appellant and respondent No. 1 wherein a liability has to be ascertained. Since the basic object of the Act is to provide machinery for expeditious recovery of debts due to Banks and Financial Institutions, when a forum is created by an enactment, the natural consequence of something done under the enactment cannot be faulted or resisted on the ground that the Tribunal has no jurisdiction.

11. The learned Judge while declining to accept the contention of respondent No. 1 touching jurisdiction, has observed that the Act has been provided for the establishment of Tribunal for expeditious adjudication and recovery of debts due to Banks and Financial Institution and for matters connected therewith or incidental thereto. The next aspect to be considered is, whether the Debts Recovery Tribunal is empowered to deal with contentitious, issues alleged to be based on contracts other than those relating to advance of moneys by Banks or financial institution preferably, for the money advanced by the banks and requires liability to be subsisting and legally recoverable on the date of the application.

12. Having regard to the view we have taken as to what constitute “debt” and “liability”, when money paid by respondent No. 1 mistakenly, but received by the appellant consciously, having knowledge that shares were sold, makes the liability subsisting and legally recoverable. Regarding the claim by financial institution, sub-section (h) of Section 2 of the Act defines “financial institution” as “(i) a public financial institution within the meaning of Section 4-A of the Companies Act, 1956; and (ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India by notification, specify”. The Unit Trust of India established under Section 3 of the Unit Trust of India Act, 1963, is treated as a public Financial Institution under sub-section (1) of section 4 of the Companies Act. To declare any institution as a financial institution, the Central Government has to notify under clause (ii) of Section 2(h) of the Act as public financial institution. The respondent No. 1 has the right to bring the claim for adjudication before the Tribunal. Therefore, it cannot be said that only if the debt is admitted by a bank, the Tribunal will have jurisdiction and not in any other cases. The contention does not merit any consideration. Section 19 of the Act prescribes the procedure which empowers the Tribunal to hear both the parties and to pass such orders as it thinks fit to meet the ends of justice, in which event, it also empowers the Tribunal to determine the liability only after adjudication. Having regard to the nature of the power, the procedure provided for and the expansive definition of the word “debt”, we are of the view that the Tribunal has got jurisdiction to try all questions which come within the definition of debt. As has already been indicated the dictionary meaning of the word “debt” with reference to the judicial pronouncements, we are of the view that the question of liability of the appellant is a matter where the Tribunal has got jurisdiction to decide. Thus the entire main claim in the suit comes within the adjudicatory power of the Tribunal. While deciding the question of jurisdiction, what has to be looked into is the averments made in the plaint and not the defence. Therefore, while transferring the case to the jurisdictional Tribunal, it is all the more necessary to keep in view the plaint's averments and the claim than the defence. If looked at from this angle, the claim made imputing liability comes within the jurisdiction of the Tribunal constituted under the Act. Thus we hold that the impugned order is just and proper and does not call for interference. Both questions are answered in the affirmative.

13. Since the appellant contended that the claim is neither a debt nor a liability, we have expressed our view as to what constitutes ‘debt’ and what constitutes ‘liability’ and also about the jurisdiction and how it comes within the purview of the Tribunal. But the Tribunal, uninfluenced by the view we have expressed, has to decide or adjudicate the nature of the claim or liability or the entitlement or otherwise, with reference to the transaction and surrounding circumstances in respect of the claim or the dispute between the parties.

14. For reasons aforestated, the appeal is dismissed. Parties to bear their own costs. Consequently, the connected miscellaneous petitions are also dismissed.