1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU R DATED THIS THE21T DAY OF APRIL, 2023 BEFORE THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.14733 OF2021(GM-DRT) BETWEEN: SRI R.RANGANATHA, S/O. LATE RAMADAS, AGED ABOUT61YEARS, RESIDING AT NO.912/A, 9TH CROSS, 10TH ‘A’ MAIN, SRINAGAR, BENGALURU – 560 050. ... PETITIONER (BY SRI. SUHAS C.S., ADVOCATE) AND: INDIAN BANK, A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKING) ACT, 1970, HAVING ITS HEAD OFFICE AT No.254-260, ROYAPETTAH, CHENNAI – 600 014. 2 ALSO AT: SADASHIVANAGAR BRANCH, NO.9/19, SANKEY ROAD, BENGALURU – 560 003. REPRESENTED BY ITS AUTHORIZED OFFICER/ CHIEF MANAGER. ... RESPONDENT (BY SRI T.P. MUTHANNA., ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES226AND227OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR RECORDS IN O.A.NO.487/2014 PENDING ON THE FILES OF THE LEARNED DEBTS RECOVERY TRIBUNAL-I AT BENGALURU; QUASH THE ENTIRE PROCEEDINGS IN O.A.487/2014 PENDING ON THE FILE OF THE LEARNED DEBTS RECOVERY TRIBUNAL-I AT BENGALURU VIDE ANNX-A AND ETC., THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON2202.2023, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDERThe petitioner is before this Court calling in question proceedings before the Debts Recovery Tribunal-I at Bengaluru (‘the Tribunal’ for short) in O.A.No.487 of 2014 initiated by the respondent/Indian Bank (‘the Bank’ for short) invoking the provisions of The Recovery of Debts and Bankruptcy Act, 1993 (‘the 3 Act’ for short) and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short).
2. Brief facts that leads the petitioner to this Court in the subject petition, as borne out from the pleadings, are as follows:- The petitioner joined the service of the respondent/Bank as a Clerk in the 1980 and was from time to time promoted to higher echelons of office, first, in the year 1985 as Junior Management Grade Scale-I; later in the years 1996 as Middle Management Grade Scale-II, and in the year 2005 as Middle Management Grade Scale-III. After his promotion to Scale-III, the petitioner was posted as Branch Manager of the respondent/Bank at Shivajinagar Branch, Bengaluru. Long after his entry to the Shivajinagar Branch, on allegations of omissions and commissions, disciplinary proceedings come to be initiated against the petitioner alleging gross irregularities committed by the petitioner in disbursement of loans during the tenure when he was the Branch Manager in Shivajinagar Branch. The result of the departmental inquiry was that the petitioner was imposed a penalty of compulsory retirement 4 in terms of the order of the Disciplinary Authority dated 02-04-2011. The petitioner files an appeal against the order of compulsory retirement which also comes to be affirmed by the Appellate Authority. The respondent /Bank on the ground that acts of the petitioner have resulted in financial loss to the Bank to the tune of `156.06 lakhs, forfeits his gratuity. A review petition filed against the order of compulsory retirement, also did not yield any order in favour of the petitioner. Challenging the orders passed by the Disciplinary Authority, the Appellate Authority and the Reviewing Authority, the petitioner preferred Writ Petition No.28289 of 2013 before this Court and the same is pending consideration.
3. During the service of the petitioner, he had availed a loan to construct a residential house in a site purchased by him and his wife in Bengaluru City. The site was purchased on 19.05.1999 and an application was made for sanction of housing loan on 05-10-1999. An amount of `4,72,348/- was sanctioned in favour of the petitioner by creating an equitable mortgage of the property purchased by him as aforesaid. The petitioner appears to have 5 approached the Bank again for additional housing loan and was granted such loan on 31-10-2001 in a sum of `2,50,000/- by extending the already created equitable mortgage. The petitioner cleared entire dues of the housing loan on 22-12-2011. The Bank did not return original documents of the property that was mortgaged with the Bank against the said loan.
4. Thereafter what the Bank would do is invoke the jurisdiction of the Tribunal by filing an original application in O.A.No.487 of 2014 under Section 19 of the Act before the Tribunal seeking issuance of a recovery certificate against the petitioner and a direction to pay a sum of `2,36,24,032/- together with interest which was the alleged financial loss suffered by the respondent/Bank on account of alleged acts of the petitioner in disbursement of loans in his official capacity. The Tribunal admits the application, issues notice/summons to the petitioner and grants an order in favour of the respondent/Bank attaching the schedule property therein i.e., the property in respect of which the petitioner had cleared all the dues to its last pie. The petitioner files detailed objections before the Tribunal clearly bringing out that the 6 proceedings before the Tribunal is without jurisdiction. The Tribunal proceeds further without answering the issue of jurisdiction. It is then, the petitioner knocks at the doors of this Court in the subject petition calling in question the entire proceedings before the Tribunal and seeking a mandamus to the respondent/Bank to hand over original title deeds of the schedule property to the petitioner.
5. Heard Sri C.S. Suhas, learned counsel appearing for the petitioner and Sri T.P.Muthanna, learned counsel appearing for the respondent/Bank.
6. The learned counsel appearing for the petitioner would contend with vehemence that the Tribunal does not get jurisdiction to entertain the petition against the petitioner who is not a borrower and the issue before the Tribunal would not amount to a debt. The ground on which the Bank preferred original application is that acts of the petitioner have resulted in loss to the Bank. This would not amount to a debt is his emphatic submission and therefore, the jurisdiction of the Tribunal is erroneously invoked by the Bank. He would contend for the alleged acts of the petitioner he has been penalized by imposition of compulsory retirement and 7 forfeiture of gratuity. The penalty of compulsory retirement is challenged before this Court and the matter is pending consideration. On these facts, the Tribunal could not have entertained a petition of this kind and issued summons to the petitioner, much less attaching the property of the petitioner which was never the subject matter of any debt. He would seek to place reliance upon the following judgments: (i) EUREKA FORBES LIMITED v. ALLAHABAD BANK AND OTHERS1; (ii) ORIENTAL BANK OF COMMERCE v. MOHAN GUPTA2; (iii) HDFC BANK LIMITED v. VASUDEO SHRIPAD BELVALKAR AND OTHERS3; and (iv) AMIT H. JHAVERI AND ANOTHER v. BANK OF BARODA, MUMBAI4 to buttress his submission that the Tribunal has no jurisdiction, as the loss caused by an employee during the course of discharge of his official duty would not amount to a debt.
7. On the other hand, the learned counsel appearing for the respondent/Bank taking this Court through the statement of objections would seek to contend that due to the acts of the 1 (2010) 6 SCC1932 (1996) 62 DLT2393 2018 SCC OnLine Bom 3645 4 2011(1) Mh.L.J.55 8 petitioner the Bank suffered huge losses, as most of the loans disbursed during the tenure of the petitioner have become sticky and the Bank is suffering without any adequate security to recover the said amount. He would admit that the charge sheet was issued against the petitioner on the same set of facts of certain loans becoming sticky and was imposed with the penalty of compulsory retirement and forfeiture of gratuity. Insofar as invocation of jurisdiction of the Tribunal is concerned, he would justify the said action on the strength of judgment of the Division Bench of this Court in the case of SRINIVASA DESAI v. M/s. CANARA BANK AND OTHERS5 and would seek dismissal of the petition and permit the Tribunal to take the proceedings to its logical conclusion.
8. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. In furtherance whereof, the issue that falls for my consideration is: “Whether the act of the petitioner, in discharge of his official duty, on disbursement of loans and those loans 5 ILR2015KAR10299 becoming non-performing assets at a later point in time, would amount to a debt under the Act or under the SARFAESI Act against the petitioner, for initiation of proceedings before the Tribunal?.
9. The afore-narrated facts are not in dispute. The petitioner during his tenure as Branch Manager had disbursed several loans. Alleging certain omissions and commissions which would amount to misconduct under the Indian Bank Officer Employees (Conduct) Regulations 1976, a departmental inquiry was held against the petitioner. The result of departmental inquiry was that the Inquiry Officer held the charges to be proved and the Disciplinary Authority imposes penalty of compulsory retirement upon the petitioner. The order of compulsory retirement dated 02-04-2011 is as follows: “Summary: From the above, it is thus proved that CSO is guilty of gross dereliction of duty. Although the irregularities committed by him and his failures as discussed above do warrant a severe punishment on the CSO, taking into consideration his past track record and the partial recovery effected, I take a lenient view and impose on Mr. R. Ranganatha, SR No.18864, Senior Manager, M.G.Road Branch the Major penalty of “Compulsory Retirement” under Regulation 4(h) of Indian Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976 10 and as per amendments conveyed in HO/Personnel Department Circular 002/99-2000 dated 07-04-1999.”
(Emphasis added)The Disciplinary Authority observes that the acts committed by the petitioner warrant severe punishment. But, taking into account his past track record and partial recovery effected, a lenient view is taken and penalty of compulsory retirement is imposed in terms of the Indian Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976. Therefore, what is imposed upon the petitioner is not an extreme penalty of dismissal or removal from service. It is a penalty of compulsory retirement for which an officer employee would be entitled to terminal benefits and two-thirds of pension. The issue in the lis is not with regard to the effect of penalty of compulsory retirement that is imposed for the alleged loss or the forfeiture of entire gratuity on account of the said loss, but its aftermath.
10. The petitioner during his service purchases a site in Site No.912/A, Block No.I, 10 ‘A’ Main Road, Srinagar, Banashankari I Stage, Bengaluru by way of a registered sale deed on 19.05.1999. 11 To construct a house on the said site, the petitioner applies for a staff housing loan before the respondent/Bank. The Bank sanctions loan of `4,72,348/- to the petitioner by creating an equitable mortgage over the aforesaid site on 05-10-1999. The petitioner finding shortage of funds while constructing the house applies for additional loan of `2,50,000/- which is also sanctioned on 31-10-2001. On 22-12-2011 the petitioner cleared the entire loan that he had availed of along with interest to its last pie. The Bank, contrary to the agreement entered into while creating the mortgage, did not return the documents of the property to the petitioner. The reason was, by then the charge sheet had been issued against the petitioner and finally the charge sheet had ended in imposition of penalty of compulsory retirement. The penalty of compulsory retirement was challenged by the petitioner before this Court in Writ Petition No.28289 of 2013 which is pending consideration.
11. The Bank would resort to a strange process. It invokes the jurisdiction of the Tribunal by filing original application under Section 19 of the Act in O.A.No.487 of 2014. It is germane to notice 12 the cause of action, inter alia pleaded by the Bank before the Tribunal to initiate the aforesaid original application and it reads as follows: “4. LIMITATION The applicant submits that the cause of action arose to this application on 2.4.2011, the date on which disciplinary action was taken against he defendant, on 05.12.2011, the date on which Corporate Office Indian bank Chennai has estimated the loss caused by the defendant to the applicant bank and subsequently on 23.07.2013, the date on which legal notice was issued to defendant at Bangalore within the territorial jurisdiction of this Hon’ble Court. Hence, the application is within the period of limitation as prescribed under section 24 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993. …. …. …. 5.15 The applicant further submits that the HRM Department, Corporate Office, Indian Bank, Chennai has issued ‘Form M’ dated 05.12.2011 to the effect that the charges proved against the defendant in the course of his employment with the Indian bank involved moral turpitude and that the bank has sustained financial loss of Rs.156.06 lakhs on account of misconduct committed by the defendant as Branch Manager of Sadashivangar Branh. A copy of ‘Form M’ dated 05.12.2011 is produced herewith, which may kindly be read as part of this application. 5.16 As already submitted, the applicant bank is a nationalized bank, which is dealing with public money. Being the Branch Manager of the applicant bank, the defendant was expected to act as a trustee of the public funds with utmost care and caution. Unfortunately, the defendant instead of rendering justice to his duties, involved 13 in illegal and unethical practices as aforesaid and thereby caused loss to the public exchequer, which will ultimately be shifted to the tax payers. Joining hands with certain group of people, the defendant has sanctioned loans beyond his powers by flouting all the norms and procedures and thereby caused financial loss to the Bank. Hence, the loss caused to the applicant bank is liable to be recovered from and reimbursed by the defendant. Hence this application for recovery of financial loss caused by the defendant to the applicant bank in terms of money from the defendant. 5.17 The applicant estimates the loss caused to the applicant bank on account of illegal and immoral practices and conduct of the defendant at a sum of Rs.1,56,06,000/- (Rupees One Crore Fifty Six Lakhs and six thousand only) as estimated by the Bank through ‘Form M’ dated 05.12.2011. the defendant is also liable to pay current and future interest the rate of 18% p.a. compounded monthly on said sum of Rs.1,56,06,000/- (Rupees One Crore Fifty Six Lakhs and six thousand only) from 05.12.2011 till realization.”
(Emphasis added)The cause of action, according to the Bank, arose when disciplinary action was taken against the petitioner and estimated loss caused by the acts of the petitioner. Therefore, the cause of action to approach the Tribunal was the result of a disciplinary action. The Tribunal issues notice/summons to the petitioner while ordering attachment of the property in which the petitioner was staying which was mortgaged to the Bank for a loan availed by him which had been cleared to its last pie. The petitioner then files a detailed 14 written statement before the Tribunal bringing it to the notice of the Tribunal that the Tribunal had no jurisdiction to entertain the petition, as it was not a debt under the Act or even under the SARFAESI Act. The proceedings before the Tribunal have gone on and the petitioner has filed the subject petition on 09-08-2021 seven years after the Bank instituted proceedings before the Tribunal.
12. The issue is, whether the Tribunal did have jurisdiction on the aforesaid cause of action, to entertain the application, notwithstanding the fact that the cause of action never arose against any debt and the petitioner was not a borrower. The Bank has invoked the jurisdiction of the Tribunal under Section 19 of the Act. Section 19 of the Act reads as follows: “19. Application to the Tribunal.—(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction— (a) the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being; or (aa) the defendant, or each of the defendants where there are more than one, at the time of making the 15 application, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business, or personally works for gain; or (c) the cause of action, wholly or in part, arises: Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act: Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor. (1-A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of Section 2, may, at its option, opt to initiate proceedings under the Multi-State Co- operative Societies Act, 2002 (39 of 2002) to recover debts, whether due before or after the date of commencement of the Enforcement of the Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 from any person instead of making an application under this Chapter. 16 (1-B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of Section 2 has filed an application under this Chapter and subsequently opts to withdraw the application for the purpose of initiating proceeding under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, it may do so with the permission of the Tribunal and every such application seeking permission from the Tribunal to withdraw the application made under sub-section (1- A) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided that in case the Tribunal refuses to grant permission for withdrawal of the application filed under this sub- section, it shall pass such orders after recording the reasons therefor. (2) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under sub-section (1) and against the same person another bank or financial institution also has a claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that Tribunal. (Emphasis supplied) Section 19 of the Act permits a Bank or a financial institution to recover any debt from any person by an application filed before the Tribunal within the local limits of whose jurisdiction the Bank exists. Therefore, the application before the Tribunal can be made for recovery of debt from any person. ‘Debt’ is defined under Section 2(g) of the Act which reads as follows:
17. “(g) “debt” means any liability (inclusive of interest) which is claimed as due from any person or a pooled investment vehicle as defined in clause (da) of Section 2 of the Securities Contracts (Regulation) Act, 1956,]. 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 and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;“ (Emphasis supplied) In terms of the definition, ‘debt’ would mean any liability which is claimed as due from any person by a Bank or firms of financial institutions as is defined, in cash or otherwise, whether secured or un-secured loan during the course of business activity undertaken by the Bank which is subsisting as on the date of filing the application and is legally recoverable on the date of filing the application. I am afraid, none of these ingredients are even present in the case at hand for the Bank to invoke the jurisdiction of the Tribunal. 18
13. The Bank has not lent any money to the petitioner for it to be called a debt and an application under Section 19 can be filed only to recover any amount. If Section 19 and the definition under 2(g) are read in tandem, the very application before the Tribunal could not have been filed and the Tribunal had no jurisdiction to entertain the said application filed by the Bank. There was no secured interest created in favour of the Bank for it to become a secured creditor qua any property from the hands of the petitioner. The alleged acts of the petitioner could have resulted in loss caused to the Bank. The allegation of causing loss has resulted in a departmental inquiry and the department inquiry ended in imposition of penalty of compulsory retirement, which is also under challenge before this Court. Therefore, the act of the Tribunal in entertaining the application itself was, on the face of it, erroneous.
14. The learned counsel appearing for the respondent/Bank places much reliance upon the Division Bench judgment of this Court in SRINIVASA DESAI (supra) contending that on identical set of facts this Court has permitted proceedings before the 19 Tribunal. Therefore, it becomes necessary to notice the judgment of the Division which reads as follows: “The Canara Bank, Benson Town Branch of Bengaluru, filed an application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, hereinafter referred to as the ‘Act’), for recovery of Rs. 22,28,260/- with interest accrued thereon at 16.25% p.a to be compounded quarterly inclusive of 2% penal interest from the date of filing of the application till the date of realization of the entire claim amount and to issue a Debt Recovery Certificate against defendants 1 to 5. The appellant herein was defendant No.4. … … … 10. Having heard the Learned Counsel for the parties, the only point arises for our consideration is, “whether the petitioner can be considered as a debtor within the meaning of Section 2(g) of the Act, and when he is primarily responsible for processing of the loan papers and if a person has wrongly processed the papers in respect of non-existing property, whether the Bank can file an application for recovery of debt against its employee's along with principal borrower?.
11. In order to appreciate the rival contention, it would be proper for us to consider the word ‘debt’ as defined under Section 2(g) of the Act, which reads as hereunder: “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.” 20 12. Admittedly, the first defendant had approached the Bank for sanctioning the housing loan. The papers have been processed by the writ petitioner and also the writ petitioner in the connected petition and later third defendant has sanctioned the loan. In the usual practice, if the writ petitioner in both the writ petitions had inspected the property and verified about the existence of such property and verified the title deeds and if they have acted bona fide and there is no negligence on their part in processing the papers and based on such bona fide acts, if the loan had been sanctioned in the usual course we would have certainly accepted the contention of Mr. Kulkarni that such employees of the Bank cannot be construed as debtors but if the Bank employees fraudulently and knowing fully well that they are processing the papers for sanctioning the loan in respect of a non-existing property and has no title, and are parties to the fraud with an intention to sanction the loan to favour the borrower and they are also beneficiaries directly or indirectly, then it has to be construed that such debts are legally recoverable debt from the employees of the Bank. In such circumstances, if the Bank has filed an application before the DRAT along with the borrower, this Court cannot find fault with the order of the DRAT because it is the writ petitioner's and the third defendant alone are responsible for causing loss to the Bank and since the fraud has been committed by defendants 3 to 5 on the Bank in disbursing the loan in favour of defendant No.1 in respect of a non-existing property, such employees are also liable to be treated as debtors under the meaning of Section 2(g) of the Act. The writ petitioner has been dismissed from the service and on the same allegations, he has also been convicted by the Court; for criminal offence and these two aspects are not in dispute in this case. Therefore, we would like to refrain ourselves from discussing anything about the Judgment of conviction since the same may prejudice interest of the writ petitioner in the criminal appeal. It is no doubt true that the Gujarat High Court in the Bank of India v. Vijay Ramniklal Kapadia (supra), has taken a view that the mis-appropriation of amount by the bank employee cannot be construed as a debt and therefore, came to the conclusion that recovery of amount does not lie before the Tribunal under the Act. While coming to such a conclusion, with respect to the Gujarat High Court, the definition of Section 2(g) has not been fully interpreted. 21
13. The said judgment has also been referred to by the Hon'ble Supreme Court in Eureka Forbes Ltd. v. Allahabad Bank (supra), under a different context. Their Lordships have held that the judgment of Gujarat High Court was not applicable to the facts therein. In a similar circumstances, the Hon'ble Supreme Court in Union Bank of India v. Debts Recovery Tribunal (supra), has ruled that the entire averments made in the plaint has to be looked into while deciding whether the claim can be adjudicated upon by Tribunal constituted under the Act. It is held as under: “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 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 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”. 22
14. In the instant case, we have perused the pleadings of the Bank filed before the DRT. In the application, it is clearly stated by the Bank, the manner in which fraud has been committed by the Bank employees including the writ petitioner and how the papers have been processed to sanction a housing loan in respect of a non-existing property and without even verifying the title deeds and existence of the property. The Bank has also stated that the employees of the Bank by hand in glove with the original borrower/first defendant has played fraud on the Bank. In such circumstances, relying upon the decision of the Hon'ble Supreme Court in UNION BANK OF INDIA case, we are of the view that the manner in which loan is extended, considering the background of each case we have to hold that such person need not be a direct borrower to bring such persons under the definition of debtor. In the result, we do not see any merits in this petition. Accordingly, the writ petition is dismissed.” (Emphasis supplied) The aforesaid judgment of the Division Bench is distinguishable without much ado. In the said case the Bank had initiated proceedings before the Debts Recovery Tribunal. In those proceedings, the Bank Officer Srinivasa Desai was made a co- defendant/respondent and therefore, he was treated as a co- borrower by the Tribunal. At paragraph 10 of the judgment the question that is posed, is whether the Bank can file an application under Section 19 against its employees along with the principal borrower. At paragraph 12 the Division Bench holds that if the Bank employees are beneficiaries directly or indirectly they can be 23 construed as debtors. A reference is made at paragraph 12 that the proceeding initiated against the Bank Officer was along with the borrower. Therefore, the Division Bench upheld the decision of the Tribunal which had entertained such an application. In the case at hand, no borrower has arrayed the petitioner as a party in any proceeding. The basis of the claim of the respondent/Bank in the case at hand is that the alleged loss stated to have been caused on account of illegal practices of the petitioner. Therefore, the sheet anchor of the submission of the learned counsel appearing for the respondent/Bank becomes, unacceptable as it is inapplicable to the facts of the case at hand.
15. It becomes germane to notice the judgments rendered by several High Courts, dealing with the very issue, as also the judgment of the Apex Court in the case of EUREKHA FORBES supra. The line of law as laid down by various High Courts are as follows: (i) The High Court of Gujarat in the case of BANK OF INDIA V. VIJAY RAMNIKLAL KAPADIA6 has held as follows:
6. 1996 SCC OnLine Guj 129 24 5. On the plain reading of the above definition, it is clear that any liability which is alleged and due from any person by a bank during the course of any business activity undertaken by it in cash or otherwise, whether secured or unsecured, or whether payable under a decree or an order of any civil Court or otherwise, and subsisting on and legally recoverable on the date of the application is “debt”. Thus any liability due from any person by a bank during the course of any business activity undertaken by the bank will constitute a “debt”. Therefore, a fraud committed by an employee of the Bank cannot or should not be construed a “debt”. In the instant case, it is the allegation of the appellant bank in the plaint that respondent No.1 being an employee of the appellant- Bank has committed fraud with the Bank to the extent of Rs. 13,86,000/- and the suit is filed to recover the said amount. By no stretch of imagination the said misappropriation of the amount of the Bank by its employee can be construed as a “debt”, the learned trial Judge, in the instant case, unfortunately has referred to and reproduced only a limited part of the definition of the word “debt” and has committed an error in holding that the debt is a liability which is alleged as due from any person by a Bank. The later part of the definition of the word “debt” is clear which states that it is the liability due from any person during the course of any business activity undertaken by the bank which can be said to be a “debt”, meaning thereby that any transaction between a Bank and its customer with respect to the business activity undertaken by the Bank, i.e. granting of loan etc. Misappropriation of the amount of the Bank by its employee and recovery thereof by way of suit can never be construed as a “debt”. In view of this, the appeal is required to be allowed. (Emphasis supplied) The High Court of Gujarat clearly holds that a fraud committed by an employee cannot be construed to be a debt and the learned trial Judge therein had only referred to a limited part of the definition of 25 the word debt and had committed an error in holding that the debt is a liability which is alleged as due from any person by a Bank. The learned Judge further holds that granting of loan etc., misappropriation of amount of the Bank by its employee and recovery thereof by way of a suit can never be construed as a ‘debt’. (ii) The Delhi High Court in the case of MOHAN GUPTA (supra) has held as follows: “11. Having considered the rival contentions, I am of the view that the cause of action of the present suit is not one which is liable to be transferred under Section 31 of the Act and which falls within the jurisdiction of the Tribunal under Section 18 of the Act. Although, the definition of debt as given in the Act is a wide one, the controlling words are “means any liability (inclusive of interest) which is alleged as due from any person by a bank or the Financial Institution during the course of any business activity undertaken by the bank or the Financial Institution under any law. (emphasis supplied) I am of the view, that the debt is required to arise during the course of business activity undertaken by the bank qua the said person. It cannot be said that a suit for recovery of embezzled or misappropriated sum is one arising under business undertaken by the bank with the employee. It is immaterial that the embezzled or misappropriated amount is allowable as business expenditure. The same would not alter the character or nature of the liability to one arising during the course of business undertaken by the bank. A reference to the statement of Objects and Reasons of the Act also supports the above view. The same runs as under:— 26 “Banks and Financial Institutions at present experience considerable difficulties in recovering loss and enforcement of securities charged with them. The existing procedure for recovery of debts due to banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the time……”.
12. The legislation intended to expedite the recovery of loans and enforcement of securities charged with Banks and Financial Institutions given during the course of Banking business.” (Emphasis supplied) The High Court of Delhi holds that debt under the Act would mean any liability which is alleged as due from any person by a Bank during the course of any business activity and it cannot be said that a suit for recovery of embezzled or misappropriate sum is one arising under business undertaken by the Bank with the employee. (iii) The Delhi High Court just prior to the judgment in the case of MOHAN GUPTA (supra) in the case of STATE BANK OF INDIA V. VIJAY KUMAR TAYAL7 has held as follows: “9. As regards suits instituted by the Banks and Financial Institutions against employees for amount misappropriated or embezzled, reference may be invited to OA795 in Suit No.550/94 titled Oriental Bank of Commerce v. Sh. Mohan Gupta. I have held that suit for recovery of misappropriated or embezzled amounts by 7 1996 SCC OnLine DEL46327 the Banks or Financial Institutions against the employee, would not be one which would come within the definition of a “debt arising during the course of business” as contemplated under the Act. Hence the said suits would not be liable to be transferred to the Debt Recoverv Tribunal. (Emphasis supplied) The Delhi High Court again holds that debt during the course of business cannot cover amounts allegedly misappropriated or embezzled as they cannot be held to be arising during the course of business. (iv) The Division Bench of the High Court of Bombay in the case of AMIT H. JHAVERI (supra) has held as follows: “13. On a plain reading of the aforesaid definition, in our view, it can be said that the petitioners are the debtors of the respondent-Bank and the transaction in question can be said to be falling within the definition of debt under the said Act. So far as the employees of the Bank are concerned, they stand on a different footing, as ultimately they are subjected to service regulation of the bank and the bank is required to take disciplinary proceedings against them as per the rules. At the most, it can be said that the employees are guilty of malpractices and has acted in a particular manner illegally by taking some monetary benefits out of the said transaction and guilty of taking illegal gratification. However, in our view, so far as the petitioners are concerned, it cannot be disputed that by virtue of alleged illegal and fraudulent transaction, they got financial benefits in the matter of business, the case of the petitioners squarely falls within the purview of the said Act. It is not in dispute that the 28 amount in question is due and payable by the petitioners to the respondent-Bank. The petitioners took the advantage of the alleged financial assistance, may be in a wrongful manner by not executing the documents, in connivance with the bank officers. However, when it is not in dispute that the said financial benefit was taken by the petitioners, it cannot be said that the petitioners are not liable to pay back the amount to the respondent-Bank and it cannot be said that the said amount is not due and payable by the petitioners. Therefore, it is not possible to accept the submissions of the learned counsel for the petitioners that unless there is a genuine banking transaction, the amount payable to the bank by virtue of fraudulent transaction, cannot be given effect to under the said Act.
14. In order to substantiate his say, Mr. Kamdar, learned counsel appearing for the petitioners, has relied upon a judgment of the Single Judge of the Gujarat High Court in the case of Bank of India v. Ramniklal Kapadia, II (1997) BC543 wherein it has been observed that “if any amount is misappropriated by the employee of a Bank, such recovery cannot be said to be recovery under the Act and the DRT has no jurisdiction and the remedy is available to file a civil suit.
15. However, as pointed out earlier, misappropriation or theft by a bank employee, stands on a different footing, as the employees can be subjected to disciplinary proceedings, but the principle laid down in the above referred case, cannot be made applicable so far as the person who has taken benefits of financial assistance, may be in a fraudulent manner for the purpose of his business is concerned. He can surely said to be a debtor of the bank so far as the amount payable to the bank is concerned.
16. So far as the employees of the bank are concerned, they might have assisted the petitioners for giving financial assistance in an improper and illegal manner. But, as pointed out earlier, they are not the direct beneficiaries of receiving the amount from the bank. There is nothing on record to show that they had taken financial benefits and assistance from the transaction in question. At the most, they can be said to be guilty of fraudulent conduct under the Service Rules 29 and acted in a dishonest manner. However, so far as the petitioners are concerned, their case stands on a different footing.
17. The learned counsel for the petitioner placed reliance on a judgment of a Single Judge of the Delhi High Court in the case of State Bank of India v. Vijay KR. Tayal, II (1996) BC589 In this case, it was held that suit for recovery of misappropriated or embezzled amounts by the Banks or Financial Institutions against the employee, would not be one which would come within the definition of a “debt arising during the course of business” as contemplated under the Act. Hence, the said suits would not be liable to be transferred to the Debt Recovery Tribunal.” (Emphasis supplied) The issue before the Bombay high Court was whether the suits filed by the Bank for recovery of misappropriated or embezzled amounts against the employee could be transferred to the Debts Recovery Tribunal for it to become a debt. The Division Bench holds that it is not a debt under the Act for the proceedings to be transferred to the Debts Recovery Tribunal. (v) A Division Bench of the Bombay High Court in the case of HDFC BANK LIMITED (supra) has held as follows: “23. Before we deal with the contentions of Learned Counsel Mr. Tulzapurkar, it would be appropriate to refer to and read the definition of “debt” under the said Act in the context of the Statute and the purpose for which it is 30 enacted. The Statement of Objects and Reasons of the said Act is; “STATEMENT OF OBJECTS AND REASONS 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 fulfill a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on September 30, 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. 5,622 crores in dues of public sector banks and about Rs. 391 crores of dues of 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.
24. It is settled law that the definition clause must be read in the context of subject matter and scheme of the Act and 31 consistently with the objects and other provisions of the Act. It is well settled that, words of a statute when there is a doubt about their meaning, are to be understood in the sense in which they best harmonise with the subject of enactment and the object which the Legislature has in view. Their meaning is not much found in strictly grammatical language.
25. Therefore, the expression “debt” is to be assigned meaning and understood in reference to the object and subject matter of scheme of the Act and further it is to be interpreted consistently with the objects and other provisions of the Act. Undisputedly, the Recovery Act was enacted primarily for the reasons that, the Banks and financial institutions should be able to recover their dues without unnecessary delay, so as to avoid any adverse consequences in relation to the public funds. The Statement of Objects and Reasons of this Act clearly state that Banks and financial institutions were experiencing considerable difficulties in recovering loans and enforcements of securities charged with them. The then existing procedure for recovery of dues of the Bank and the financial institutions blocked significant portion of their funds in un-productive assets, the value of which deteriorated with the passage of time. The Act provided for the establishment of Tribunals and Appellate Tribunals and modes for expeditious recovery of dues to the Banks and financial institutions.
26. That even otherwise, the Apex Court in the case of Eureka Forbes (supra) in para-50 has clarified that a larger area of jurisdiction was intended to be covered under this provision so as to ensure attainment of legislative object i.e. expeditious recovery and providing provisions for taking such measures which would prevent wastage of securities available with the Banks and Financial institutions, (emphasis supplied).
27. It is to be seen and noted that, the expression “debt” has been interpreted by the Apex Court in Eureka Forbes (supra) in the context of facts of that case. In Eureka Forbes (supra) case, the petitioner-Company was not a debtor but a third person, who had given its premises on leave and 32 license basis to the Borrower. The borrower had hypothecated goods to the Bank. Borrower then permitted the petitioner- Company to sell the goods lying in the said premises and adjust the sale consideration against the outstanding lease rent payable by him to the petitioner-Eureka Forbes. In the given set of facts, the Apex Court in para-69 of the said judgment observed thus:— “69. In the case in hand, the goods were hypothecated to the Bank and the appellant admittedly had knowledge prior to the sale of the goods, that they were hypothecated to the Bank. If the contention of the appellant is accepted, it will amount to giving advantage or premium to the wrong doers. It would also further perpetuate the mischief intended to be suppressed by the enactment. This could completely defeat the very object and purpose of the Act. A party which had pledged or mortgaged properties in favour of the Bank, then would transfer such properties in favour of a third party. In the event, the Bank takes action under the 47 provisions of the Recovery Act, they would take the objection like the present appellant. This would tantamount to travesty of justice and would frustrate the very legislative object and intent behind the provisions of the Recovery Act. Therefore, such an approach or interpretation would be impermissible.
28. Thus, in the case of Eureka Forbes (supra), as well, as, in United Bank of India (supra), liability as ‘due’ arose in course of core banking business. It is in this context of the facts in the given cases, expression “Debt” has been interpreted which is in tune with object and scheme of the Act. In the case in hand, if petitioner's contention is accepted, then, every liability claimed as ‘due’ in the course of business activity in the terms of section 6(1) of the Banking Regulation Act has to be adjudged in the proceedings under section 17 of the said Act. To test the arguments of the petitioners, let us take a hypothetical case, where a Bank in the course of its business activity acquires right or agrees to acquires rights in immovable property. May the ‘right’ be proprietary in nature or otherwise for consideration and Bank has paid substantial amount to the owner in terms 33 of the Agreement. Say, if the dispute arises and if the Bank seeks to recover the amount, question would arise, where proceedings would lie ?. If we uphold the contention of Learned Senior Counsel, Mr. Tulzapurkar then the consideration or part consideration, paid to the owner would constitute a ‘debt’ and for its refund, claim has to be filed under section 17 of the said Act before the DRT. In our view, this would run counter to the object and scheme of the said Act. The object and scheme of the said Act, is to ensure attainment of legislative object i.e. expeditious recovery and provisions of taking such measures, which would prevent wastage of securities available with Banks and Financial Institutions (emphasis supplied). This proposition, if accepted, would invest the Tribunal with all powers of Civil Court, which is not intended by the Legislature.
29. The expeditious recovery; Providing provisions for taking such measures which would prevent wastage of securities available with the Bank and enforcement of such securities is the object of the Act. Thus, whole object of the said Act is to recover debts by enforcing available security by a mechanism provided under the Act.
30. In our view, if we uphold petitioner's contention, it may not attain the object of the said act. This, may also, enlarge the jurisdiction of the Tribunal.” (Emphasis supplied) The Division Bench amplifies the consideration of the definition of the word debt and again holds that the debt cannot be given such a meaning, that it would invest the Tribunal with all powers of a civil Court which was not intended by the legislature, if given would mean enlarging the jurisdiction of the Tribunal. 34 (vi) After all the aforesaid judgments, a Division Bench of High Court of Jharkhand following a few of the afore-quoted judgments in the case of NIRANJANKUMAR PANDEY v. STATE OF JHARKHAND has held as follows: “…. …. ….
18. In our considered view, both the aforesaid submissions raised on behalf of the respondent-Bank are noted only to be rejected for the reason that it is well- settled proposition of law that so far exercise of power under Article 226 of the Constitution of India i.e., the issue of jurisdiction is concerned, even though there is alternative remedy there would be rule of discretion and not the rule of jurisdiction. The Hon'ble Apex Court in Balkrishna Ram v. Union of India and another, has held that the principle that the High Court should not exercise its extraordinary writ jurisdiction when an efficacious alternative remedy is available, is a rule of prudence and not a rule of law. Since the issue raised before the Writ Court was touching the jurisdiction of the Debt Recovery Tribunal, Single Bench's decision to entertain the writ petition cannot be faulted with. So far as the another question as to whether the suit which was instituted before the Civil Court with an allegation that the employee of Bank has misappropriated the money of Bank would be within the ambit of definition of "debt as laid down under section 2(g) of the Act, 1993 or not, would be pure question of law and would vitiate the entire proceedings if the issue is decided in favour of the appellant as it would take away the jurisdiction of the Debt Recovery Tribunal to deal with the concerned petition. As such, we are of the opinion that the concerned issue being the question of law can be raised at any stage.
19. Now coming to the issue concerned as raised, it would be apt to quote the relevant provision which is section 2(g) of the Act, 1993:
35. "2(g). "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 and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour securing interest is created for the benefit of holders of debt securities or.” (Emphasis is ours) From bare perusal of the aforesaid provision, it would be apparent that, for considering the liability as “debt” due to a Bank or any Financial Institution or by consortium of Banks etc., there has to be a business activity undertaken by the Bank or such Financial Institution alongwith such person who would be liable to pay back the debt, i.e., there should be a business activity between such person and the Bank under which such person becomes liable to pay back the Bank a sum alongwith interest.
20. Learned Counsel for the respondent-Bank has placed reliance on the decision of the Hon'ble Apex Court rendered in United Bank of India v. Debts Recovery Tribunal and others, MANU/SC/0250/1999: AIR1999SC1321in which the Hon'ble Apex Court has held 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. The Hon'ble Apex Court has further held that for ascertaining the question whether the claim of any other Bank or Financial Institution would come within the purview of the 36 Tribunal created under the Act, it would be imperative that the entire averments made by the plaintiff in the plaint have to be looked into. …. …. ….
22. Learned Single Judge of Delhi High Court in State Bank of India v. Vijay Kr. Tayal (supra) has also dealt with such situation in paragraph-9 which reads as under:
"9. As regards suits instituted by the Banks and Financial Institutions against employees for amount misappropriated or embezzled, reference may be invited to OA No.7/95 in Suit No.550/94 titled Oriental Bank of Commerce v. Sh. Mohan Gupta. I have held that suit for recovery of misappropriated or embezzled amounts by the Banks or Financial Institutions against the employee, would not be one which would come within the definition of a "debt arising during the course of business" as contemplated under the Act. Hence the said suits would not be liable to be transferred to the Debt Recovery Tribunal."
From perusal of the above, it appears that the learned Single Judge in clear terms has held that the suit for recovery of embezzled amount by the Banks or Financial Institutions against the employee, would not be one which would come within the ambit of “debt arising during the course of business" as contemplated under the Act.
23. A Division Bench of Delhi High Court in M/s. J.U. Mansukhani and Co. and another v. Presiding Officer and others, MANU/DE/0298/1999: AIR2000Delhi 103 has of course held that in case in which drafts were allegedly and fraudulently obtained in direct or indirect collusion with the Bank Officials, it is clearly a business activity of a Bank and, therefore, taking help of the decision of the Hon'ble Apex Court rendered in MANU/SC/0250/1999: AIR1999SC1381 it has been held that it would come within the jurisdiction of Tribunal. However, the said case is clearly distinguishable on facts as in the aforesaid case a customer had fraudulently obtained the amount by tendering fraudulent draft, may be in direct of indirect collusion with the Bank Officials, but the suit for recovery Was not initiated against the employee of the Bank rather the same was instituted against M/s. 37 J.U. Mansukhani and Co. and another who, being customers, were of course in business activity with the Bank whereas in the Case in hand, allegation is against a Bank employee who had misappropriated the amount of the Bank in fraudulent manner, thus, he cannot be said to be in "business activity" with the Bank. …. …. ….
25. After giving careful consideration to the submissions raised on behalf of the parties and the materials available on record, we are in full agreement with the views expressed by the Gujarat High Court in Bank of India v. Vijay Ramniklal Kapadia and others (supra) and Delhi High Court in State Bank of India v. Vijay Kr. Tayal (supra) so far as the present issue is concerned and we have no hesitation in holding that the money suit, which was filed for recovery of the amount, fraudulently misappropriated by an employee of the Bank, who was not in the business activity with the Bank, would not come within the definition of "debt" as envisaged under section 2(g) of the Act, 1993 and, as such, we are of the opinion that the execution proceeding before the Tribunal was wholly without jurisdiction.” (Emphasis supplied) The Division Bench in NIRANJANKUMAR PANDEY (supra) and the Division Bench in HDFC BANK LIMITED have followed the judgment of the Apex Court in the case of EUREKA FORBES (supra) wherein the Apex Court considered the word debt under Section 2(g) of the Act. The Apex Court has held as follows: “64. On a plain analysis of the above-stated judgment of this Court, it is clear that the word “debt” under Section 2(g) of the Recovery Act is incapable of being given a restricted or narrow meaning. The legislature has used general terms which must be given 38 appropriate, plain and simple meaning. There is no occasion for the Court to restrict the meaning of the word “any liability”, “any person” and particularly the words “in cash or otherwise”. Under Section 2(g), a claim has to be raised by the Bank against any person which is due to the Bank on account of/in the course of any business activity undertaken by the Bank. In the present case, the Bank had admittedly granted financial assistance to Respondents 2 and 3, who in turn had hypothecated the goods, plants and machinery in favour of the Bank. There cannot be any dispute before us that the goods in question have been sold by the appellant without the consent of the Bank. Respondents 2 and 3 have hardly raised any dispute and resistance to the claim of the Bank. In fact, even before this Court there is no representation on their behalf. The documentary and oral evidence on record clearly established that the Bank has raised a financial claim upon the principal debtor, as well as upon the person who had intermeddled and/or at least dealt with the charged goods without any authority in law. Not only this, the appellant had sold the hypothecated goods and stocks by public auction, despite the fact the appellant had due knowledge of the fact that the goods were charged in favour of the Bank. …. …. ….
67. The learned counsel for the appellant also relied upon the judgment of the Gujarat High Court in Bank of India v. Vijay Ramniklal Kapadia [AIR1997Guj 75]. , in support of the contention, that claim of the Bank was not “debt” within the meaning of Section 2(g) of the Act so as to give jurisdiction to the Tribunal. We are not impressed by this argument. Firstly, the judgment of the Gujarat High Court is entirely on different facts and in that case an employee of the Bank had misappropriated the amount of the Bank, the Bank had instituted an application under the provisions of the Recovery Act. Rightly so it was held by the High Court, that it was not a “debt” within the meaning of Section 2(g) and therefore, could not be tried before the Tribunal. 39
68. We may state another illustration to demonstrate the case where the Tribunal may not have jurisdiction. Some persons commit a theft in a bank and take away the money and/or the goods hypothecated to the bank or the goods in the custody of the bank. Upon the bank's lodging a first information report (FIR) to the police, those persons are traced, arrested and tried in accordance with law for theft. In such a case, the Tribunal may not have jurisdiction to entertain and decide an application for recovery of money or value of goods in terms of Section 17 of the Recovery Act. That is neither the case here nor in any of the judgments which have been relied upon by the parties before us, except in the case of the Gujarat High Court.” (Emphasis supplied) 16. On a coalesce of the judgments rendered by the Apex Court in the case of EUREKA FORBES LIMITED and the law as laid down by other High Courts as quoted (supra), what would unmistakably emerge is that the alleged loss caused by an employee during the course of banking business cannot be termed as ‘debt’ under Section 2(g) of the Act, as the loss so caused cannot amount to a debt and an employee cannot be termed to be a borrower. If the Bank is permitted to invoke the jurisdiction of the Tribunal in every case where loans being disbursed become non- performing assets for manifold reasons, it would have chilling effect on the officers of the Bank in performing their duties of banking 40 business without fear. Being employees of the Bank, the officers would have definitely availed staff loan against equitable mortgage created. The Bank has not acted fair in using the equitable mortgage created by the petitioner for a housing loan availed by him. The housing loan is repaid to its last pie by the petitioner. The documents that were held by the Bank for the said loan are being used now to generate proceedings before the Tribunal. This shocks the conscience of the Court, as the Bank which is a State under Article 12 of the Constitution of India cannot display such unfairness.
17. The learned counsel for the respondent/Bank has made his submission with regard to the conduct of the petitioner in approaching this Court after 7 years of registration of proceedings before the Tribunal. It is his submission that the petitioner has acquiesced in the proceedings before the Tribunal and, therefore cannot raise a contention that it is without jurisdiction after having so acquiesced. I decline to accept the said submission for the reason that the petitioner has in his written statement clearly indicated that the Tribunal had no jurisdiction. Even otherwise, 41 consent of parties cannot clothe any forum or fora with the jurisdiction which it does not possess, as by mere consent of parties jurisdiction on any Court or Tribunal cannot be conferred. The issue on the jurisdiction will always cut at the root of the matter. If the application itself was not entertainable by the Tribunal, its acceptance or issuance of summons or any order passed thereon, are all acts without jurisdiction and a nullity in law, as answer to an issue of jurisdiction is always only one; either yes or a no and can never be a ‘may be’.
18. For the aforesaid reasons, I pass the following:
ORDER(i) Writ Petition is allowed. (ii) Proceedings in O.A.No.487 of 2014 before the Debts Recovery Tribunal-I at Bengaluru stands quashed. (iii) The petitioner is held entitled to all consequential benefits that would flow from quashment of proceedings before the Tribunal. 42 (iv) A mandamus issues to the Bank to handover the original title deeds of his property, which are withheld within two weeks from the date of receipt of a copy of this order. Sd/- JUDGE bkp CT:MJ