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2007 DIGILAW 1758 (BOM)

GULF AIR v. CANARA BANK

2007-12-20

D.G.KARNIK, R.M.S.KHANDEPARKAR

body2007
ORAL JUDGMENT D.G. KARNIK, J.:- This appeal is directed against the judgment and order dated 1st March, 2000 passed by the learned Single Judge of this Court transferring Motion No. 2838 of 1999 in Suit No. 4751 of 1994 filed by respondent No. 1 to the Debt Recovery Tribunal. 2. The appellant (original defendant No.5) is an Airline Company to whom the goods in question were given for transportation. Respondent No. 1 is a nationalised bank and the original plaintiff. It filed a suit, bearing Suit No. 4751 of 1999, for recovery of money on the original side of this Court. The respondent No.2 is the original defendant No.1. It is a partnership firm of which respondent Nos. 3 to 5 (original defendant Nos. 2 to 4) are partners. Respondent Nos. 6 and 7 (original defendant Nos. 5 and 6) are the agents of the appellant. For the sake of convenience, the parties are hereinafter referred with reference to their original status (plaintiff or defendants) in the suit. 3. The relevant facts are that the defendant No. 1 firm was granted a foreign bill discounting facility by the plaintiff bank. The defendant No.1, inter alia, executed in favour of the plaintiff a counter indemnity letter whereby it undertook to indemnify the plaintiff in case the foreign bills of exchange drawn and discounted by it with the plaintiff were dishonoured by the foreign purchaser by non-acceptance or non-payment. The defendant No. 1 agreed to sell printed polyester fabric (for short "goods") to one M/s. Surin Fashion Ltd., London. The defendant No.1 dispatched the goods to the purchaser under an Airway bill No. 072 2360 8922 issued by the defendant No. 5 Airline. The goods were booked through the defendant Nos. 6 and 7 who were the agents/business associates of defendant No.5. The Airway bill showed the name of the defendant No.1 as the shipper and the Barclays Bank a/c Surin Fashion Ltd. as the consignee. The Barclays Bank was acting as a collecting agent of the plaintiff bank. The defendant No. 1 drew two foreign bills of exchanges in the sum of pounds 30,842 and pounds 15,319 on the purchaser M/s. Surin Fashion Ltd. for the price of the goods dispatched. The Barclays Bank was acting as a collecting agent of the plaintiff bank. The defendant No. 1 drew two foreign bills of exchanges in the sum of pounds 30,842 and pounds 15,319 on the purchaser M/s. Surin Fashion Ltd. for the price of the goods dispatched. The two foreign bills of exchange were discounted before their acceptance by the drawer (purchaser) by the defendant No.1 with the plaintiff bank The drawee did not accept the two foreign bills of exchange and a communication to that effect being sent by the Barclays Bank to the plaintiff bank who decided to rebook the goods to India. In the meanwhile, according to the plaintiff, the defendants, on the basis of a forged letter of the plaintiff bank, delivered the goods to the purchaser. According to the plaintiff, the defendants were acting in collusion and had wrongfully delivered the goods to purchaser which act amounts to criminal breach of trust and fraud. The plaintiff therefore filed a suit (Suit No. 4751 of 1994) against the defendants for recovery reserving itself the right to take criminal action for criminal breach of trust and fraud. In the suit, the plaintiff bank claimed from defendant Nos. 1 to 4 the money lent to it by discounting two foreign bills of exchanges. The plaintiff also claimed from defendant Nos. 5 to 7 the equivalent sum of money of the bills of exchange. The suit was filed on the Original Side of this Court on 23rd November, 1994. 4. During the pendency of the suit, on 4th September, 1999 the defendant No.5, with the leave of the Court obtained under Rules 147 - 148 of the Original Side Rules took out a motion (Notice of Motion No. 2838 of 1999) in the Suit No. 4751 of 1994), inter alia praying that the plaint insofar as it was against defendant No.5 be rejected and/or the name of the defendant No.5 be struck out/expunged from the plaint together with all references to the defendant No.5 in the plaint. The defendant No.5 also annexed to the motion a schedule giving the references which were required to be struck out from the plaint. The deletion of its name was prayed on the ground that there was no privity of contract between the plaintiff and defendant No.5. The plaintiff was neither the shipper nor was it the consignee under the airway bill. The deletion of its name was prayed on the ground that there was no privity of contract between the plaintiff and defendant No.5. The plaintiff was neither the shipper nor was it the consignee under the airway bill. The consignee was the Barclays Bank and therefore, the plaintiff had no right to sue the defendant No.5 for non delivery of the goods. It was further alleged that assuming that any contractual relationship existed between the plaintiff and defendant No.5, the claim was time barred. As per Rule 30 of Schedule II to the Carriage by Air Act, 1972, which incorporates Article 29 of the Warsaw Convention of 1929, as amended, to which India is a signatory, the right to recover damages from the carrier is extinguished if an action is not brought within two years from the date of arrival at the destination. As the present suit was filed after the expiry of two years, it was barred by limitation, qua the defendant No.5. 5. When the motion taken out by defendant No.5 for rejection of the plaint came up for hearing, a preliminary objection was raised by the plaintiff for hearing of the Notice of Motion. The objection was that because of the coming into force of the Recovery of Debts. Due to Banks and Financial Institutions Act 1993 (for short "the DRT Act"), the High Court on the Original Side had ceased to have jurisdiction to entertain the suit and the suit filed by the plaintiff stood transferred to the Debt Recovery Tribunal (for short 'the Tribunal') under the provisions of section 31 of the DRT Act. A learned Single Judge of this Court heard the said preliminary objection and came to the conclusion that the entire suit (being Suit No. 4751 of 1994) stood transferred to the Tribunal and the motion which was a part of proceedings of the suit also stood transferred to the Tribunal. He accordingly ordered that the suit and the motion be transferred to the Tribunal. That order is impugned in this appeal. 6. Learned counsel for the defendant No. 5 who is the appellant herein submitted that the suit was not for recovery of a "debt" as defined under section 2(g) of the DRT Act, so far as the defendant No.5 was concerned and therefore the entire suit cannot be said to have been transferred to the Tribunal. 6. Learned counsel for the defendant No. 5 who is the appellant herein submitted that the suit was not for recovery of a "debt" as defined under section 2(g) of the DRT Act, so far as the defendant No.5 was concerned and therefore the entire suit cannot be said to have been transferred to the Tribunal. The suit may be for recovery of a "debt" from defendant Nos. 1 to 4 who had borrowed money from the plaintiff bank However, so far as defendant No.5, which was only an airline who had transported the goods and issued an airway bill was concerned it was not a suit for recovery of any debt. It had not borrowed any money from the plaintiff nor had it entered into any contract with the plaintiff. The liability of the defendant No.5, if at all there by any, arose out of the alleged non-delivery of the goods to a consignee who was third party and therefore, its liability, if any, was not in the nature of a "debt". The suit, therefore, was not in respect of a recovery of a "debt". Consequently, the suit so far as the defendant No.5 was concerned did not stand transferred to the Tribunal. The High Court on the Original Side, therefore had the jurisdiction to entertain the suit qua the defendant No.5 and therefore it should have entertained and decided the motion for striking out the name of the defendant No.5 and/or rejecting the plaint and the defendant No.5. 7. Section 17 of the DRT Act says that the Tribunal shall on and from the appointed date exercise the jurisdiction and powers and authority to entertain and decide applications from the banks and financial institutions for recovery of the debts due to such banks and financial institutions. Section 18 of the DRT Act says that on and from the appointed date, no Court or other authority shall have or be entitled to exercise any jurisdiction, powers or authority in relation to the matters specified in section 17. Section 18 of the DRT Act says that on and from the appointed date, no Court or other authority shall have or be entitled to exercise any jurisdiction, powers or authority in relation to the matters specified in section 17. Section 31 of the DRT Act says that every suit or other proceeding pending before any Court immediately before the date of establishment of the Tribunal under the Act, being a suit or proceedings, the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal. The combined effect of section 17, 18 and 31 for the DRT Act is that if any proceeding is to be filed by a bank or a financial institution as defined under section 2(d) and 2(h) of the DRT Act after the appointed date (i.e. after the establishment of the Tribunal) for recovery of any debt due to such bank or financial institution such proceeding would have to be instituted only before the Tribunal. All suits which have been instituted before the appointed date by a bank or a financial institution as defined under section 2(d) and 2(h) of the DRT Act for recovery of a debt due to it, and which are pending on the appointed date, before any Court shall stand transferred to the Tribunal. 8. The short question which arises for our consideration is whether the suit No. 4751 of 1994 filed by the plaintiff bank was for recovery of the debt qua the defendant No.5. 9. Debt has been defined under section 2(g) of the DRT Act as follows:- "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 pf 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. The defense taken in the written statement by the defendant as to the jurisdiction of the Court is not relevant at the preliminary stage. Of course at the trial, the plaintiff would be required to prove the jurisdictional facts pleaded in the plaint in order to succeed. If the plaintiff fails to prove the jurisdictional facts i.e. to say the facts which are required to be proved to enable a Court to assume jurisdiction, the plaintiff would fail. But at the preliminary stage when no evidence has been adduct-d and the question of jurisdiction is raised at the preliminary- stage the Court can, in the absence of any material to the contrary before it, proceed on the assumption that the jurisdictional facts pleaded in the plaint are true and correct. 10. In paragraph Nos. 15 to 22 of the plaint, the plaintiff has pleaded collusion between defendant No.1 to 4 and defendant Nos. 5 to 7. The plaintiff has pleaded that the consignment covered by the airway bill issued by the defendant No. 5 was wrongfully diverted by the defendant Nos. 5 to 7 in collusion with defendant Nos. 1 to 4. The plaintiff has further averred that the defendants acted in collusion in diverting the consignment and therefore all the defendants are jointly and severally bound to pay to the plaintiff the value of the consignment. 11. The debt as defined under section 2(g) of the Act, means any liability which is claimed as due from any person by a bank or a financial institution or a consortium or banks or financial institutions arising during the course of any business activity undertaken by the bank, financial institution or the consortium under any law for the time being in force. Admittedly, the plaintiff bank is entitled to and does carry on the business of lending. The plaintiff lent money to the defendant No. 1 on the foreign bill of exchange. The plaint discloses that the defendant No. 1 executed in favour of the plaintiff a counter indemnity letter whereby it undertook to indemnify the plaintiff against all losses damages or actions arising out of non-acceptance or non-payment of any bill of exchange. The plaintiff lent money to the defendant No. 1 on the foreign bill of exchange. The plaint discloses that the defendant No. 1 executed in favour of the plaintiff a counter indemnity letter whereby it undertook to indemnify the plaintiff against all losses damages or actions arising out of non-acceptance or non-payment of any bill of exchange. The defendant No. 1 also gave in favour of the plaintiff a power of attorney appointing the plaintiff as a true or lawful attorney of defendant No. 1 to do various acts including right to sell the goods exported or to be exported by the defendant No. 1 under various bills of lading and to appropriate the money so recovered towards its dues. The plaintiff bank in the usual course of its banking business was allowed not only to discount the foreign bills of exchange but was also authorised to sell the goods in respect of which the bills of exchanges were drawn. The plaintiff bank therefore had a right to sell the goods which were booked by the defendant No. 1 through the defendant No. 5 in the event the bill of exchange was not accepted or not paid by the purchaser. Such recovery was a part of the banking business of the plaintiff, as per the allegations in the plaint. There is a collusion between defendant Nos. 1 to 4 and defendant Nos. 5 to 7. The defendant No.5 colluded with defendant Nos. 1 to 4 and wrongly delivered the goods to defendant No. 7 without being paid for. The plaintiff therefore, as alleged in the plaint, has right to recover the money being the write of the goods covered under the airway bill and the bill of exchange not, only from defendant Nos. 1 to 4 but defendant No.5 also. As the liability arose during the course of banking business it is a suit for recovery of debt (as defined under section 2(g) of the DRT Act) even qua the defendant No.5 also. It therefore cannot be said that the suit against defendant No.5 would not be transferred to the Tribunal. 12. As the entire suit stands transferred to the Tribunal the motion, which is the part of the proceeding in the suit, also stands transferred to the Tribunal. It therefore cannot be said that the suit against defendant No.5 would not be transferred to the Tribunal. 12. As the entire suit stands transferred to the Tribunal the motion, which is the part of the proceeding in the suit, also stands transferred to the Tribunal. The learned Single Judge was therefore right in holding that the suit as well as the motion stood transferred to the Tribunal and the motion could not have been entertained by him. We see no error in the decision of the learned Single Judge. The appeal consequently fails and is dismissed with costs. Appeal dismissed.