Allowed

Hdfc Bank v. Vanaparthi Venkata Naga Mani Kumar

DRAT28 Aug 2024REGULAR APPEAL/72/2024

Case brief

AI extract

What is this about?

The tribunal allowed the bank's appeal against the dismissal of an originating application under the RD&B Act. It held that funds obtained through fraudulent deposits of forged cheques in the course of banking business constitute a "debt" under Section 2(g). The DRT order dismissing the OA on fraud grounds was set aside for being unsustainable in law.

What did the court decide?

Impugned order dated 26.02.2024 set aside; OA restored to file for decision after opportunity of hearing.

Hdfc Bank versus Vanaparthi Venkata Naga Mani Kumar — Banking and Recovery | DRAT (2024)

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Reportable / not reportable

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL - KOLKATA

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HON'BLE Justice Anil Kumar Srivastava, Chairperson

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REGULAR APPEAL/72/2024

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(Arising out of O.A. No. 259 of 2012 – DRT-Visakhapatnam)

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28.08.2024

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HDFC BANK having registered office at Potluri Castle, 1st Floor, Door No.4814-9, Dwarakanagar, Visakhapatnam, PIN 530016.

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... Appellant

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--Vs--

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Vanaparthi Venkata Naga Mani Kumar at Door No.25-39-3, Gangulavari Veedhi, Lakshmi Talkies, Visakhapatnam – 530001.

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2.Doddapaneni Mohan Rao, residing at 74-6/8-3/1, Sivaji Road, Auyappa Nagar, Vijayawada – 520007.

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Sri Kolia Anjayya residing at Krishna Lanka, Sai Dormitory, Opp. Mahatma Gandhi Bus Stand, Vijayawada – 520013.

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Sri Kumili Trinadh, residing at 1- 168, Near Ramalayam, Old Bus Stand area, Vizianagaram – 535001.

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Sri Noor Ahamad, employee Indus Land bank, residing at 44-23-20/4, Railway New Colony, Opp Hara Gopal School, Visakhapatnam – 530016.

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6.Chippada Srinivasa Rao residing at 43-16-22/2, Subbalakshmi Nagar, Railway New Colony, Visakhapatnam – 530016.

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7.IndusInd Bank, Gajuwaka Branch, Visakhapatnam – 530026.

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8.Santosh Santaram Gangan alias Anil Santosh residing at A-3,6/604, Shradda Coop. Housing Society, G.D. Ambedkar Road, Kala Chowki, Mumbai

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– 400033.

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9.Sudhakar Narvekar residing at Sree Mahakali Enterprise, Gr. Floor, BS Road, Opp. Kalifor Khana, Nr. Jain – Temple, Dadar, Mumbai (W) 400028.

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... Respondents

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For Appellant : Mr. M. Ramdas, Ld. Adv. on virtual mode. For Respondent:

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The Appellate Tribunal

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Instant appeal has arisen against the judgement and order dated 26.02.2024 passed by learned DRTVisakhapatnam in O.A. 259 of 2012 [HDFC BANK Ltd. Vs. Sri Vanaparthi Venkata Naga Mani Kumar & Ors.] whereby O.A. was dismissed by the learned DRT.

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Facts, in brief, are that the respondent no.1 namely, Sri Vanaparthi Venkata Naga Mani Kumar opened a current account bearing No. 00502020001288 with the appellant bank on 20.12.2008. On 07.05.2010 respondent no.1 deposited a cheque bearing no. 416497 for a sum of Rs.65.00 lakhs purported to have been issued by Seatek India Ltd, having account with the HDFC bank, Dadar Branch, Mumbai for the purpose of crediting funds to his account. The amount was credited in the account of respondent no.1. On 08.05.2010 respondent no.1 visited the bank and presented a cheque bearing no. 143937 for cash withdrawal of Rs.20.00 lakhs. Cash was paid to

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himin the regular course of banking business. It was confirmed in writing that the money was required for making payments to Iron Ore suppliers. PAN card was also submitted. On 08.05.2010 another cheque no. 143938 for Rs. 43.00 lakh was issued for RTGS to the HDFC bank, Gajuwaka Branch, Visakhaptnam to the credit of current account no. 0081063722050 of M/s. Tirumala Constructions.Respondent no.4 was a partner of M/s. Tirumala Constructions.

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On 11.05.2010 another cheque no. 294320 for Rs.95.00 lakh was deposited by respondent no.1 purported to have been issued by one Keihin Fie Pvt. Ltd., who maintained an account bearing no. 07462320000281 with HDFC Bank at Chakan, Pune. This amount was credited in the account of respondent no.1 after due verification by the bank. On the same day respondent no.1withdrawn a sum of Rs.75.00 lakhs by way of cash.

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Cash deposit for Rs.4.00 lakh on 11.05.2010 and another Rs.4.00 lakh on 12.05.2010into the account no. 00132000016423 pertaining to respondent no.8 were made by respondent no.1. respondent no.1 made RTGS transaction on 12.05.2010 by issuing cheque no.143939 for Rs.75.00 lakh routed to UCO Bank, Gajuwaka Branch to the credit of current account with the fake name of one Ashish Kr. Ladia, respondent no.3.

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Respondent no.8 transferred a sum of Rs.6.00 lakh by cheque no.0038240 into the account no. 11181000002283 of respondent no.9. The bank accounts were seized by the Police department. On 13.05.2010 the Branch Manager, HDFC Bank, Chekan Branch, Pune communicated to the appellant bank that their customer Keihin Fie Pvt. Ltd. has denied issuing of cheque No.294320. Accordingly, appellant bank informed the UCO Bank to withhold transfer of the amount. Likewise, cheque of Rs.65.00 lakhs of HDFC Bank, Dadar Branch, Mumbai was also withheld.

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Respondent no.1 used fabricated and forged cheque of Rs.65.00 lakh and Rs.95.00 lakh and got the amount transferred to his account and then re-transferred to the fictitious account of respondent no.3 and 4. FIR was lodged in the IV Town Police Station. Chargesheet was filed by the Police authority against respondent no. 1,6, 8 and 9. Thereafter, O.A. was filed for issuance of recovery certificate before the learned DRT which was dismissed by the impugned order. Feeling aggrieved by the impugned order, appellant bank preferred the appeal.

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I have heard the learned counsel for the appellant bank and perused the records. The respondents are served, but not represented.

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Learned counsel for the appellant bank submits that learned DRT has erred in holding that DRT has no jurisdiction to decide the issue as it is a matter of fraud. Learned DRT has placed reliance on the judgement of Hon’ble Gujarat High Court in Bank of India Vs. Vijay Ramniklal Kapadia & Ors. [AIR 1997 Guj 75]. Learned counsel further submits that the amount claimed in the O.A. is under the jurisdiction of the Tribunal.

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Sub-section (g) of Section 2of the definition clause of the Recovery of Debts and Bankruptcy Act, 1993 [hereinafter referred to as Act] reads as under :

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“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 security interest is created for the benefit of holders of debt securities or

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(ga)"debt securities" means debt securities listed in accordance with regulations made by the Securities Exchange Board of India under the Securities and Exchange Board of India Act, 1992.”

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As far as facts of the matter are concerned,

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respondent no.1 has deposited two cheques of Rs.65.00 lakhs and Rs.95.00 lakhs with the appellant bank which are forged and on the basis of those fraudulent

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transactions certain verifications were made and certain transactions were put to hold by the bank. Main issue for consideration in this appeal would be whether the amount claimed by the bank is covered under the definition of “debt”.

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In Eureka Forbes Ltd. Vs. Allahabad Bank & Ors. [(2010) 6 SCC 193] Hon’ble Apex Court has dealt with the definition of “debt” u/s 2(g) of the Act wherein it was held that plain reading of the Section suggests that legislature has used a general expression in contradistinction to specific, restricted or limited expression. It was further held that the general expression used by the framers of law in Section 2(g) of the Act are :- (a) any liability, (b) claim as due from any person; (c) during the course of any business activity undertaken by the bank; (d) where secured or unsecured; and lastly (e) legally recoverable.

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In Eureka Forbes Ltd. (supra) Hon’ble Apex Court has further held in Para 52 as under :

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All the above expressions used in the definition in the definition clause clearly suggest that the expression “debt” has to be given general and wider meaning; just to illustrate, the word “any liability” as opposed to the word “determined liability” or “definite liability” or “any person” in contrast to “from the debtor”. The expression “any person” shows that the framers do not wish to restrict the same in its ambit or application. The legislature has not intended to restrict to the relationship of a creditor or debtor alone. General terms, therefore, have been used by the legislature to give the provision a wider and liberal meaning. These are generic or general terms. Therefore, it will be difficult for the Court, even on cumulative reading of the provision, to hold that the

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expression should be given a narrower or restricted meaning. What will be more in consonance with the purpose and object of the Act is t4o give this expression a general meaning on its plain language rather than apply unnecessary emphasis or narrow the scope and interpretation of these provisions, as they are likely to frustrate the very object of the Act.”

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13 . Under Section 2(g) of the Act, a claim has to be raised by the bank against any person which is due to the bank on account of debt in the course of business activity undertaken by the bank.

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14 . In Amit H. Jhaveri Vs. Bank of Baroda & Ors. [AIR 2011 Bombay 11] Hon’ble Bombay High Court has held that a person takes financial benefits for the purpose of business and utilized the bank money for the business, even if such benefits were taken in a fraudulent manner, still such a person can be said to be a debtor of the bank and even so called alleged fraudulent transaction can also be covered under the definition of debt.

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15 . In Lakkavauula S.S.S. Prasad Vs Oriental Bank of Commerce & Ors. [2010(2) Andhra Legal Decisions 188] Division Bench of the Hon’ble Andhra Pradesh High Court at Hyderabad has held that even if any fraudulent deposit is made in the account of the petitioner and later withdraw by him in the course of normal banking business, the same falls within the definition of “debt”.

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16 . Learned DRT has placed reliance upon the Single Bench judgement Hon’ble Gujarat High Court in Vijay Ramniklal Kapadia (supra) wherein it was held that fraud committed by an employee of the Bank cannot or should not be construed a "debt". Facts of the present case are entirely different. Respondent no.1 is not an employee of the bank. Further, fraudulent transactions were made by him resulting lodging of FIR by the bank. As has been held by the Hon’ble Apex Court as well as different Hon’ble High Courts such an amount would be covered under the definition of “debt” as defined u/s 2(g) of the Act.

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17 . Accordingly,I am of the considered view that learned DRT has erred in dismissing the O.A. filed u/s 19 of the Act on the ground that the case is not covered u/s 2(g) of the Act. Accordingly, impugned order suffers from material illegality and irregularity which is liable to be set aside. Appeal deserves to be allowed.

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O R D E R

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Appeal is allowed. Impugned judgement and order dated 26.02.2024 is set aside. Let the O.A. be restored to its file and registered number. O.A. should be decided in accordance with law after affording opportunity of hearing to the parties. Costs easy.

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File be consigned to record room.

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Copy of the order be supplied to the appellant and the respondents and a copy be also forwarded to the concerned DRT.

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Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the

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open Court on this the 28^th day of August, 2024.

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