Case Note & Summary
The petitioner, Punjab National Bank, filed a writ petition challenging the order of the Debt Recovery Appellate Tribunal (DRAT) which allowed the appeal of respondent No.2, Ulhas Narayan Deosthale, and held that the Debt Recovery Tribunal (DRT) had no jurisdiction to entertain the bank's claim against him. The bank had filed a suit in 1998 against four respondents, alleging that respondent Nos.1 and 3 had overdraft and other accounts with the bank, and that respondent No.2, in collusion with them, cleared the liability and transferred the amount to the account of respondent No.4, after which respondent No.1 closed the overdraft facility. The suit was transferred to the DRT and numbered as Original Application No.1368 of 2000 under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Respondent No.2 filed a written statement challenging the jurisdiction of the DRT on the ground that the claim against him was not covered by the definition of 'debt' under the Act. The DRT rejected his application on 10-12-2003, but the DRAT allowed his appeal. The bank then filed the present writ petition. The court considered the definition of 'debt' under Section 2(g) of the Act and the decision of the Supreme Court in United Bank of India v. Debts Recovery Tribunal and Ors., AIR 1999 SC 1381. The court held that the definition of 'debt' contemplates a liability which is claimed as due from any person by a bank or financial institution, arising out of a loan or advance or any financial transaction. The claim against respondent No.2 was based on an allegation of conspiracy and fraud, which is a tortious claim and not a 'debt' under the Act. Therefore, the DRT had no jurisdiction to entertain the claim against respondent No.2. The court dismissed the writ petition, upholding the order of the DRAT.
Headnote
A) Banking Law - Recovery of Debts - Definition of Debt - Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The term 'debt' under the Act refers to a liability which is claimed as due from any person by a bank or financial institution, arising out of a loan or advance or any financial transaction. It does not include a claim based on tort, conspiracy, or fraud against a person who is not a debtor. The court held that the claim against respondent No.2, who was not a debtor but allegedly conspired with the debtors, is not a 'debt' under the Act, and therefore the DRT lacks jurisdiction. (Paras 1-4)
Issue of Consideration
Whether a claim against a person who is not a debtor but is alleged to have conspired with the debtor to defraud the bank falls within the definition of 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and whether the Debt Recovery Tribunal has jurisdiction to entertain such a claim.
Final Decision
The court dismissed the writ petition, upholding the order of the Debt Recovery Appellate Tribunal that the Debt Recovery Tribunal had no jurisdiction to entertain the claim against respondent No.2.
Law Points
- Definition of debt under Section 2(g) of the Recovery of Debts Due to Banks and Financial Institutions Act
- 1993
- Jurisdiction of Debt Recovery Tribunal
- Liability of guarantor
- Tortious claims for conspiracy and fraud
