What is meaning of debt?

 The term 'liability' has been defined as obligation, debt, etc. In First National Bank v. Sant Lal, MANU/PH/0102/1959 : AIR 1959 Punjab 328 it is said that term 'liability' is of large and comprehensive significance, and when construed in its usual and ordinary sense, it expresses a state of being under obligation in law or in justice.

 In Hindustan Laminators (P) Ltd. v. Central Bank of India, 2000 (27) SCL 571Calcutta High Court has observed that word 'liability' obviously means obligation. Then it should be a liability which is alleged as 'due'.

The term 'due' has different meanings. In State of Kerala v. V.S. Kalliyanikutty, MANU/SC/0226/1999 : JT 1999 (2) SC 540 the Supreme Court observed that 'due' means anything owing; that which one contracts to pay to another. It was in the context of Kerala Revenue Recovery Act, 1968.

In the context of Companies Act, 1956, in Raymond Synthetics Ltd. v. Union of India, MANU/SC/0162/1992 : JT 1992 (1) SC 463 the Court said that a debt is often said to be 'due' from a person where he is the party owing it; or primarily bound to pay, whether the time for payment has or has not arrived.

 In the context of Income Tax Act, 1961, in CIT v. Southern Roadways Ltd., MANU/TN/1843/2003 : 2004 (266) ITR 135 the Madras High Court said that the word 'due' is used to refer to the debt or obligation which has become immediately payable. In CIT v. United Provinces Electric Supply Co., MANU/SC/3005/2000 : 2000 (244) ITR 764 the Apex Court while affirming above view of Madras High Court observed that the initial determination is a pre-requisite for regarding that amount as having become 'due'.

 In Harshad Shantilal Mehta v. Custodian, MANU/SC/0368/1998 : 1998 (231) ITR 871 the Apex Court observed that 'due' means "payable, justly owed".

 In Munsif Jahan v. Rajendra Prasad, MANU/OU/0099/1946 : AIR 1946 Oudh 226 the terms 'due' and 'payable' came to be considered. The Court said that they are not convertible terms. A 'debt' is said to be 'due' as soon as it has existence as a debt, though it may be payable on a future date.

Therefore, a liability so as to become due it must exist in presenti to be the immediate obligation of petitioners so as to satisfy the definition of 'debt' under section 2(g) of Act, 1993.
IN THE HIGH COURT OF ALLAHABAD

C.M.W.P. No. 49062 of 2009

Decided On: 06.08.2014

Appellants: B.K. Jewellers
Vs.
Respondent: State Bank of India and Ors.

Hon'ble Judges/Coram:Sudhir Agarwal, J.
Citation:2016 (116) ALR 791.

1. Heard Sri Vikram D. Chauhan, Advocate for petitioners and Sri Satish Chaturvedi, Advocate for respondent-Bank. Petitioner No. 1, M/s. B.K. Jewellers, (hereinafter referred to as the "Firm") is a Proprietorship Firm having its office/showroom at Mukesh Palace, Kinari Bazar, Agra and petitioner No. 2 is the Proprietor of aforesaid Firm. The Firm is carrying on business of Jewellery and sale and purchase of Gold and Silver ornaments.

2. A current account was opened by petitioners in the name of Firm with State Bank of India Seo Ka Bazar, Agra being Current Account No. 11/1797. On 5.11.1998 demand draft No. 191529 dated 3.11.1998 for a sum of ` 6,55,000/- drawn at Main Branch at Chipitola, Agra payable in favour of Firm was deposited in aforesaid current account by petitioner No. 2. It was sent for collection through local clearing to main Branch of Bank and the amount of ` 6,55,000/- was credited in the Firm's account on 7.11.1998 being the proceeds of said draft. The draft amount ` 6,55,000 was withdrawn from current account on 12.11.1998 through Cheque No. 863707 dated 12.11.1998. Thereafter on 19.11.1999 the Draft Reconciliation Department of the Bank at Mumbai sent a fax message to Zonal office at Agra advising that aforesaid draft was procured without consideration. It was one of the stolen draft and has been encashed/cleared from Bank. Having discovered that draft was drawn without consideration and was not a legal tender and its amount was credited in current account of petitioner No. 1 wrongly, the Bank advised the Firm to refund ` 6,55,000/- vide letter dated 8.12.1999. Since amount was not refunded, the Bank filed application under section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the "Act, 1993"), before Debts Recovery Tribunal (hereinafter referred to as the "Tribunal"), registered as O.A. No. 14 of 2002 for recovery of a total sum of ` 10,51,631/- (` 6,55,000/- principal amount + ` 3,96,631/- interest from 12.11.1998 to 31.10.2001 at the rate of 16.25% per annum with quarterly rest and future interest on aforesaid amount at the same rate and cost etc.).

3. The application was contested by petitioners and several preliminary objections were raised by them including that there is no privity of contract between Bank and defendants and issue of fraud cannot be looked into by Tribunal etc. It was also pleaded that since principal amount of draft was only ` 6,55,000/-, therefore, application was not maintainable under section 1(4) of Act, 1993. It is also said that aforesaid amount does not satisfy the definition of "debt" as defined under section 2(g) of Act, 1993 and, therefore, it is not recoverable under Act, 1993.

4. The preliminary objection regarding definition of 'debt' as also applicability of Act, 1993 by virtue of section 1(4) was considered as preliminary issues and decided against defendants vide order dated 21.5.2008. There against petitioners preferred appeal under section 20 of Act, 1993, registered as Appeal No. 984 of 2008 before the Debts Recovery Appellate Tribunal, Allahabad (hereinafter referred to as the "Appellate Tribunal"), which has been rejected vide impugned judgment dated 21.5.2009 (Annexure-16 to the writ petition).

5. Sri Vikram D. Chauhan, learned Counsel appearing for petitioners, contended that the amount withdrawn by petitioners from Bank as a result of encashment of draft cannot be treated to be a "debt" under section 2(g) of Act, 1993. He further contended that the total amount of draft was less than ` 10 lacs, therefore, also the Tribunal has no jurisdiction in the matter. He thirdly contended that if the amount was paid by Bank on account of some fraud played by a third person, such proceedings could not have been initiated under Act, 1993 and on the contrary the remedy lies in common law.

6. Sri Satish Chaturvedi, learned Counsel appearing for respondent-Bank, sought to support the impugned judgment for the reasons stated therein and also contended that so far as Bank is concerned the draft was deposited by petitioner No. 2 himself and amount of draft was credited in the account of Firm, therefore, Bank was entitled to realize amount from petitioners and it has nothing to do with third person. When draft is a forged one the petitioners have to settle their score with third person from whom they got the said draft and thereafter deposited in their account in Bank. He said that proceedings have rightly been initiated before Tribunal.

7. The question up for consideration is, whether recovery of principal amount and interest in the case in hand can satisfy the definition of 'debt' under Act, 1993.

8. The definition of 'debt' under section 2(g) of Act, 1993, reads as under:

"2(g) "debt" means any liability (inclusive of interest) which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any Civil Court or otherwise and subsisting on, and legally recoverable on, the date of the application."

9. The petitioner deposited draft with Bank and encashing the same, amount of `6,55,000/- was deposited in the current account of Firm. There was no immediate liability of petitioners to refund ` 6,55,000/- to Bank with or without interest at any point of time after withdrawal thereof from its current account. The Bank claimed that since draft itself was forged and not a legal tender, therefore, this amount withdrawn by petitioners from Bank would satisfy the term 'liability'.

10. The term 'liability' has been defined as obligation, debt, etc. In First National Bank v. Sant Lal, MANU/PH/0102/1959 : AIR 1959 Punjab 328 it is said that term 'liability' is of large and comprehensive significance, and when construed in its usual and ordinary sense, it expresses a state of being under obligation in law or in justice.

11. In Hindustan Laminators (P) Ltd. v. Central Bank of India, 2000 (27) SCL 571Calcutta High Court has observed that word 'liability' obviously means obligation. Then it should be a liability which is alleged as 'due'.

12. The term 'due' has different meanings. In State of Kerala v. V.S. Kalliyanikutty, MANU/SC/0226/1999 : JT 1999 (2) SC 540 the Supreme Court observed that 'due' means anything owing; that which one contracts to pay to another. It was in the context of Kerala Revenue Recovery Act, 1968.

13. In the context of Companies Act, 1956, in Raymond Synthetics Ltd. v. Union of India, MANU/SC/0162/1992 : JT 1992 (1) SC 463 the Court said that a debt is often said to be 'due' from a person where he is the party owing it; or primarily bound to pay, whether the time for payment has or has not arrived.

14. In the context of Income Tax Act, 1961, in CIT v. Southern Roadways Ltd., MANU/TN/1843/2003 : 2004 (266) ITR 135 the Madras High Court said that the word 'due' is used to refer to the debt or obligation which has become immediately payable. In CIT v. United Provinces Electric Supply Co., MANU/SC/3005/2000 : 2000 (244) ITR 764 the Apex Court while affirming above view of Madras High Court observed that the initial determination is a pre-requisite for regarding that amount as having become 'due'.

15. In Harshad Shantilal Mehta v. Custodian, MANU/SC/0368/1998 : 1998 (231) ITR 871 the Apex Court observed that 'due' means "payable, justly owed".

16. In Munsif Jahan v. Rajendra Prasad, MANU/OU/0099/1946 : AIR 1946 Oudh 226 the terms 'due' and 'payable' came to be considered. The Court said that they are not convertible terms. A 'debt' is said to be 'due' as soon as it has existence as a debt, though it may be payable on a future date.

17. Therefore, a liability so as to become due it must exist in presenti to be the immediate obligation of petitioners so as to satisfy the definition of 'debt' under section 2(g) of Act, 1993.

18. In the present case the Bank has proceeded that since the draft is forged, therefore, amount withdrawn by petitioners' Firm becomes a liability due to Bank. Unless the forgery of draft is proved, it cannot be said that the amount was a liability due on the part of petitioners. There is a fine distinction but sufficient to take away this case from the definition of 'debt' under section 2(g) of Act, 1993 and, therefore, in my view proceedings before Tribunal are not maintainable. It was open to Bank to initiate appropriate proceedings in common law for recovery of aforesaid amount. In view of above, the writ petition is allowed. Impugned judgment dated 21.5.2009 is hereby quashed. The original application also being not maintainable before Tribunal is hereby quashed. However, the Bank shall be at liberty to take recourse of recovery of aforesaid amount in common law, if so advised.