Case Note & Summary
The case involved an appeal from the Bank of India challenging an order passed by the 3rd Joint Civil Judge (S.D.) in Surat, which directed the bank to submit its plaint to the Debt Recovery Tribunal. The bank sought recovery of Rs.13,86,000 from the respondents, alleging that respondent No.1, an employee, committed fraud in collusion with other respondents, resulting in financial loss. The suit was initially filed in the Civil Court but was transferred to the Debt Recovery Tribunal, which returned the plaint, stating that the Civil Court could not accept it as it did not constitute a 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The bank contended that the amount sought was not a 'debt' as defined in the Act, leading to the rejection of their application by the trial judge. The court analyzed the definition of 'debt' under Section 2(g) of the Act, concluding that a fraud committed by an employee cannot be construed as a 'debt'. The appeal was allowed, the trial court's order was set aside, and the court directed that the suit be heard on merits expeditiously. No costs were awarded, and the writ was to be issued forthwith.
Headnote
A) Banking Law - Definition of Debt - Interpretation of 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The court clarified that a fraud committed by an employee of a bank does not constitute a 'debt' as defined in the Act. The learned trial judge erred in interpreting the definition of 'debt' by not considering the complete context, leading to the appeal being allowed and the order set aside. Held that the suit must be decided on merits by the trial court (Paras 1-12).
Issue of Consideration
Whether the suit for recovery of amount due to fraud committed by a bank employee constitutes a 'debt' under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Final Decision
The appeal was allowed, the order dated 8th January 1996 was set aside, and the trial court was directed to hear and decide the suit on merits expeditiously, preferably within one year.
Law Points
- Interpretation of 'debt'
- jurisdiction of Civil Court vs. Debt Recovery Tribunal
- fraud by bank employee
