Dismissed

Canara Bank v. M/s. Orient Vision Ltd. & Ors.

DRAT6 Feb 2025REGULAR APPEAL/15/2018

Case brief

AI extract

What is this about?

Appeal against DRT order dismissing recovery claim against fourth respondent. DRTA held Bank failed to prove liability as original bills were not produced, merely a statement of account was submitted. Bench affirmed lower order as per Evidence Act principles.

What did the court decide?

Appeal dismissed, confirming the order of the Learned Presiding Officer. The claim against fourth respondent remains dismissed.

Canara Bank versus M/s. Orient Vision Ltd. & Ors. — Contract and Commercial Disputes | DRAT (2025)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 6^th of February, 2025

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PRESENT: Hon’ble Mr. Justice G. Chandrasekharan CHAIRPERSON

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R.A 15/2018

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( OA No. 695/1998 on the file of DRT-I, Chennai)

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Between

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Canara Bank,

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Nungambakkam Branch, Chennai-34.

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Now transferred to ARM Branch, Spencer Towers, 3^rd Floor, No.770-A, Anna Salai, Chennai – 600 002.

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… Appellant

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And

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M/s. Orient Vision Limited,

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Represented by its Managing Director,

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Registered Office:

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No. 6, Wallace Garden,

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III Street, Chennai – 600 006,

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Factory Address: Plot No. 15 & 16 SIPCOT, Industrial Complex, Hosur, Dharmapuri District.

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Mr. G.K Saxena,

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No. 68, I Main, II Cross Hal, 3^rd Stage, Bangalore – 560 075.

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M/s. Emmar Plastics Limited, Represented by its Managing Director, No.6, Third Street, Wallace Garden, Chennai – 600 006. 4. M/s. Philips India Limited, Represented by its Managing Director, Corporate Office, Shivagar Estate, Block A, Dr. Annie Besant Road, Post Box No. 6598, Mumbai – 400 218. 5. M/s. Daewoo Anchor Electronics Limited, FB Centre, Bake House, 22, Maharashtra Chamber of Commerce Lane, Fort, Mumbai – 400 023. 6. The Official Liquidator, High Court, Madras. … Respondents Counsel for Appellant : M/s. K.R.A.Muthukrishnan Counsel for R4 : M/s. S. Ramasubramaniam & Associates

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O R D E R

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Challenging the dismissal of the claim against the Defendant No.4 in OA 695/1998 of DRT-I, Chennai, the Bank has filed the present Appeal.

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The Appellant, as an Applicant, filed OA 695/1998 for issuance of Recovery Certificate:

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i) For a sum of Rs.4,30,82,508.84p together

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with future interest at 20.40% per annum compounded quarterly against Respondents 1, 2 and 3 jointly and severally;

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ii) For a sum of Rs.1,98,12,709.51p, being the amount due in respect of supply bills which constitutes a part of the total amount of Rs.4,30,82,508.84p, with future interest at the rate of 20.40% p.a. compounded quarterly, against 4^th Respondent to pay jointly and severally with Respondents 1, 2 and 3; and

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iii) For a sum of Rs.1,87,160.74p, being the amount due in respect of supply bills which constitutes a part of the total amount of Rs.4,30,82,508.84p, with future interest at 20.40% per annum compounded quarterly, against the 5^th Respondent to pay jointly and severally with Respondents 1, 2 and 3.

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The case of the Appellant Bank in brief is that, the 1^st Respondent approached Appellant Bank for financial assistance for the purpose of procuring raw materials and manufacturing the TV sets. On 01.08.1986, the Appellant Bank sanctioned a sum of Rs.2.45 Crores by way of Open Cash Credit Limit. This credit facility was secured among others by way of equitable mortgage of factory land and building of the 1^st Respondent described in the Schedule ‘A’ to OA.

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3.1 First Respondent had also executed the following loan documents, on 01.08.1986, in respect of Appellant Bank;

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i) Promissory Note;

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ii) Request of Overdraft,

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iii) Letter of Undertaking and

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iv) Agreement for Open Cash Credit.

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By letter dated 23.11.1987, 1^st Respondent created an equitable mortgage by deposit of title deeds in respect of Schedule ‘A’ property and also executed hypothecation deed for machinery, on 23.11.1997.

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3.2 On the request of 1^st Respondent, the credit limit was enhanced on 31.08.1988, as follows:

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i. Open Cash Credit limit of Rs.245 Lakhs was maintained;

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ii. Combined Bills Limit of Rs.230 Lakhs;

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iii. Letter of credit for the purpose of import/purchase of components to the tune of Rs.250 Lakhs and

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iv. A fresh guarantee limit of Rs.50 Lakhs.

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Loan documents such as Promissory Note; Agreement for bills and acknowledgment of debt had also been executed by

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1^st Respondent.

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3.3 At request of 1^st Respondent, the loan limit was again enhanced on 31.08.1990, 04.05.1993 and on 09.11.1994, by executing necessary loan documents. First Respondent executed a Power of Attorney dated 22.02.1995 in favour of the Appellant Bank for realizing any sum due by Respondent

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No. 4 to Respondent No.1. On 22.02.1995, the 4^th Respondent, taking note of the Power of Attorney executed by 1^st Respondent in favour of Bank, agreed to issue Cheques in favour of the account of the 1^st Respondent for the amount which are due and payable to 1st Respondent, which is followed by a letter dated 24.09.1996 informing the Appellant that not to discount the invoices of the 1^st Respondent for the supplies made to Respondent No.4 with effect from 01.10.1996. By letter dated 13.12.1996, the 4^th Respondent informed the Appellant that it would make payments directly

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to the Appellant against bills raised on the Respondent No.4

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by 1^st Respondent and discounted with the Bank. Against the bills discounted, Respondent No.4 had not paid a sum of Rs.1,49,03.696.54p. The Appellant came to know that it was adjusted towards the trade advance, which was contrary to the undertaking given by Respondent No.4. Despite sending reminder, the amounts have not been paid. Therefore, the Appellant filed OA 695/1998 for recovery of amounts against all the Defendants.

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This case of the Appellant was denied by Respondent No.4 on the grounds that the challenge was made against the Power of Attorney executed by 1^st Respondent in favour of Appellant Bank. 4^th Respondent paid its dues of the 1^st Respondent to the supplier of the 1^st Respondent for the supply of picture tubes used in the manufacture of Black/While TV sets covered by bills. By that payment, the amount due from the Respondent No.4 is effectively set off. Appellant had not proved that the payment was due for the supply of the TV by the 1^st Respondent to 4^th Respondent.

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On a consideration of contentions and rival contentions

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of both parties and the material produced before the Tribunal, Learned Presiding Officer proceeded to allow the OA partly directing that the Appellant Bank is entitled to recover a sum of Rs.4,30,82,508.84p from the Respondents 1, 2 and 3, jointly and severally together with future interest at 20.40% p.a. compounded quarterly and also a sum of Rs.1,87,160.74p, being the amount due in respect of supply bills which constitutes a part of total amount of Rs.4,30,82,508.84p from Respondent No.5, together with future interest at 20.40 % p.a. compounded quarterly from 27.05.1998. The claim against Respondent No.4 was dismissed. Against the dismissal of claim against Respondent No.4, this Appeal is filed.

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Learned Counsel for Appellant Bank submitted that the grounds raised by Appellant before the Tribunal below had been rejected by Learned Presiding Officer, and he accepted

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the contention of the Respondent No.4 that the Appellant is

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not entitled to recover the sum claimed against Respondent No.4 unless the Appellant prove the supply of goods.

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It is further submitted that only a cryptic reply was given by Respondent No.4 against the notice of demand of debt due. No detailed reply was sent. In a Reply Statement filed initially, there was no mention about non supply of goods. When the matter was heard fully, an Application was filed for amending the Reply Statement and a new paragraph was introduced denying the supply of goods and amount due. It is clearly an afterthought and it should not have been entertained by the Tribunal below. Learned Presiding Officer had failed to note that the statement of account filed by the Bank is an evidence to prove the claim. It is not necessary to produce other documents in support of the claim. The borrowers have not disputed the supply of goods and the amount due from them. Since the OA was filed in the year 1998, and due to the passage of time, the Bank was not able to trace out the original bills and produce before the Tribunal below. So saying, Learned Counsel for Appellant

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Bank submitted that, the Bank has proved the claim against all the Respondents. Therefore, the claim should have been allowed against Respondent No.4 as well. Thus, he prayed for setting aside the order passed by Learned Presiding Officer in so far as the dismissal of the claim against the Respondent No.4 and for allowing the OA claim against all the Respondents in tota .

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In support of his arguments, Learned Counsel for Appellant Bank relied on the judgement of Hon’ble Supreme Court in the case on Bharat Nidhi Ltd. Vs. Takhatmal (dead) by his LRs and Anr. , reported in AIR 1969 SC 313 , for the proposition that an actionable claim may be transferred under Section 130 of the Transfer of Property Act. In this case, the actionable claim was transferred to the Appellant Bank by 1^st Respondent by executing the Power of Attorney dated 22.02.1995, and thus, the Bank is entitled to recover the amount against all the Respondents.

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In reply, Learned Counsel for 4^th Respondent submitted

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that on the payments made to the supplier of the 1^st Respondent, the 4^th Respondent is entitled to claim the same as set off. Though it was initially had not been pleaded about the non production of original bills, by filing necessary Application for amending the Reply Statement, appropriate amendment was made in the Reply Statement denying the supply of the goods for the amount claimed. Even if the Appellant is entitled to claim the amount due from the Respondent No.4 to Respondent No.1, that amount can be recovered only if the Appellant is able to prove the supplies made by the 1^st Respondent and that amount was due against the supplies made. Despite a specific denial in the Reply Statement, after amendment, the Appellant has not produced any documentary evidence to show that the supplies were made to the 1^st Respondent, and that amount was due. The Appellant filed its claim against Respondent No.4, only on the basis of statement of account. Statement

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of account, without support of documents, will not form a basis for ordering the claim of the Appellant. In support of

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his arguments, Learned Counsel for R4 relied on the

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judgments i) Chandradhar Goswami & Ors Vs. Gauhati Bank Ltd reported in AIR 1967 SC 1058 and ii ) Union of India (UOI) Vs. The Registrar, Debts Recovery Appellant

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Tribunal and Ors., reported in MANU/TN/9323/2007 .

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9.1 It is further submitted by Learned Counsel for Respondent No.4 that Respondent No.4 is liable to pay only the amount due and payable and not the amount which is not due. Learned Presiding Officer, exhaustively considered all the aspects raised by the parties and rightly came to a conclusion by dismissing the claim against Respondent No.4, and thus, he seeks to confirm the order passed by Learned Presiding Officer, and prayed for dismissal of this Appeal.

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Considered the rival submissions and perused the

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records.

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A reading of the impugned Order in OA 695/1998 shows that the Learned Presiding Officer framed the following points for consideration:-

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i. Whether Ex. A-69 Power of Attorney dated 22.02.1995 in favour of the Applicant is an equitable assignment of the amounts due and payable by the 4^th defendant in the 1^st defendant? If so, whether the applicant bank is required under law to establish the liability of the 4^th defendant towards the 1^st defendant, lest is it not entitled to recover the amount from the 4^th defendant despite assignment of debt?

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ii. Whether the applicant bank has established its claim? If so, against which of the defendants, and for what amount? And

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iii. Whether the applicant is entitled for pendente lite and future interest? If so, at what rate?

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While answering the point No.(i), Learned Presiding Officer found that “it is hereby held that Ex.69 power of attorney is an equitable assignment of debt enabling the applicant to receive the amount due and payable by the 4^th defendant to the applicant and it is an actionable claim, consequently, the contention of the 4^th defendant that Ex. A69 power of attorney does not amount to an equitable assignment of debt, is hereby rejected. ” While rejecting the claim of the Respondent No.4 on plea of set off, Learned Presiding Officer found that “the Applicant failed to place any material confirming supplies by the 1^st defendant to the 4^th defendant and also regarding the acknowledgement of supplies by the 4^th defendant. Mere filing of a list of bills/invoices without filing the bills/invoices, in the opinion of the Tribunal is not enough to fasten the liability on the 4^th defendant in respect of the amount mentioned in the said bills/invoices .”

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It is seen from the findings of Learned Presiding Officer, DRT-I, Chennai, that it was observed, “ in fact, the Learned Senior Counsel for the 4^th defendant, Sri Ramasubramaniam, during the course of his oral submissions fairly submitted that that if the original bills/invoices mentioned in the list annexed

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to the OA claim containing the endorsement of the 4^th defendant are submitted, he would advise his client to discharge the liability under the said bills/invoices. ” It appears that the disputed bills/invoices had not been produced before the Tribunal below. Even before this Appellate Tribunal the disputed bills/invoices have not been produced.

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The judgement of Hon’ble Supreme Court relied on by the Learned Counsel for Respondent No.4, in the case of

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Chandradhar Goswami & Ors Vs. Gauhati Bank Ltd reported in AIR 1967 SC 1058, makes it clear that, when the entries of account is not admitted, it is the duty of the Bank

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to produce the evidence in support of the entries. The

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relevant part of the judgement is extracted hereunder:-

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6. The main question urged before us is that there is no evidence besides the certified copy of the account to prove that a sum of Rs.10,000/- was advanced to the appellants and therefore in view of s. 34 of the Evidence Act the appellants cannot be saddled with liability for that amount. Section 34 is in these terms:-

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"Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability."

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It is clear from a bare perusal of the section that no person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them. In the present case, however, the appellants did not accept the correctness of the books of account. We have already indicated that they went to the. length of saying that the accounts were not correctly kept, and were fraudulent. They also said that no money had been taken by them after March, 1, 1947. This being their pleading, the trial court rightly framed the third issue relating to the total amount due from the appellants to the bank. But unfortunately it overlooked to go into that issue specifically and we have already indicated how it made a mistake in arriving at the amount due when considering the issue relating to relief. In any case as the appellants had not admitted the correctness of the

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accounts filed by the bank, particularly after March 1, 1947, the bank had to prove payment of Rs. 10,000/- on March 19,1947 if it wanted to charge the appellants, with liability for that amount, but all that the bank did was to produce a certified copy of account under s. 4 of the Bankers' Books Evidence Act, No. 18 of 1891. Section 4 of that Act reads thus -

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"Subject to the provisions of this Act, a certified copy of any entry in a banker's book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise".

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It will be clear that s. 4 gives a special privilege to banks and allows certified copies of their accounts to be produced by them and those certified copies become prima facie evidence of the existence of the original entries in the accounts and are admitted as evidence of matters, transactions and accounts therein, but such admission is only where, and to the same extent as, the original entry itself would be admissible by law and not further or otherwise. Original entries alone under s. 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced under s. 4 of the Bankers' Books Evidence Act obviously cannot charge any person with liability. Therefore, where the entries are not admitted it is the duty of the bank if it relies on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no person can be charged with liability on

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the basis of mere entries whether the entries produced are the original entries or copies under s. 4 of the Banker's Books Evidence Act. We cannot 'agree with the High Court that the mere fact that the appellants did not specifically mention the sum of Rs. 10,000/- as not having been advanced to them in their written statement would make any difference on the facts of the present case. We have already pointed out that the appellants did not admit the correctness of the accounts produced specially after March 1, 1947. We have also pointed out that it was stated on their behalf that nothing was borrowed after March 1, 1947. The main appellant in whose name the account was, appeared as a witness and stated that so far as he remembered he only borrowed Rs. 8,000/- from the bank and nothing thereafter. He also stated that he did not remember to have borrowed any sum from the bank after the execution of the mortgage deed. In the face -of this pleading of the appellants and the statement of one of them, the bank had to prove that the sum of Rs. 10,000/- was in fact advanced on March, 19,1947 and could not rely on mere entries in the books of account for that purpose. This is clear from the provision in s. 34 of the Evidence Act. No attempt was made on behalf of the bank to prove by any evidence whatsoever that a sum of Rs. 10,000/- was advanced on March 19, 1947. The entry in the account books in that connection is to the effect: "To amount paid to Gauhati branch as per D/advice, dated 6th March, 1947". If this amount of Rs. 10,000/was paid by the bank on the order of the appellants or any one of them that order should have been produced in support of the entry, and then the entry would have been helpful to the bank as a corroborative piece of evidence. But the bank did nothing of the kind. The only witness produced on behalf of the bank was an officer who had nothing to do with the Tezpur branch where the transactions were entered into. We are therefore of opinion that in view of s. 34 of the Evidence Act the appellants cannot be saddled with liability for the

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sum of Rs. 10,000/- said to have been advanced on March, 19,1947 on the basis of a mere entry in the amount. Section 34 says that such entry alone shall not be sufficient evidence, and so some independent evidence had to be given by the bank to show that this sum was advanced. What would be the nature of such independent evidence would certainly depend upon the facts of each case; but there can be no doubt that some independent evidence to show that advance had been made has to be given. Further, as in this, case the dispute was with respect to one entry of Rs. 10,000/- it should not have been difficult for the bank to produce evidence with respect thereto. We cannot therefore agree with the High Court that the advance of Rs. 10,000/- on March 19, 1947 has been proved in this case.”

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The same proposition is reiterated in the judgement, in

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the case of Union of India (UOI) Vs. The Registrar, Debts Recovery Appellant Tribunal and Ors., reported in MANU/TN/9323/2007 , the relevant paras are extracted hereunder:-

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“9. The facts in this writ petition are not very much in dispute. The sanction of loan to the third respondent by the second respondent Bank, execution of power of attorney to receive the sums payable to the third respondent from the petitioner by the second respondent are admitted. It is also an admitted fact that except the four bills, which were withheld by the petitioner due to the sub-standard quality and the goods supplied are not according to the specifications

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of the Indian Railway Standard Conditions of Contract, the petitioner has not released a sum of Rs.90,055.74 and withheld the same. Admittedly there is a contract entered into between the third respondent and the writ petitioner to supply the goods as per the Indian Railway Standard Conditions of Contract. As rightly contended by the learned counsel for the petitioner, clause 3 of the special conditions of contract empowers the administration to reject the goods supplied not according to the standard and supply the goods at the risk and cost of the supplier. Clause 19 enable the administration to retain the amount payable to the supplier in case of defective supply. The said contract is binding on the third respondent, who is admittedly the supplier. The power of attorney executed on 29.9.1984 between the third respondent and the second respondent also clearly states that the bank is authorised to directly receive the money due under such bills from the purchasers, who are liable to pay under the bills. It is also stated therein that the amount that is due to the third respondent and become payable to the third respondent shall be receivable by the second respondent bank.

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10. In the light of the specific clause contained in the contract entered between the third respondent and the writ petitioner and the power of attorney executed between the third respondent and the second respondent, we are of the view that unless and until the amount is due and payable to the third respondent, the second respondent is not entitled to claim the said amount from the petitioner. Merely because the petitioner agreed to pay the amount due to the second respondent Bank, it cannot be said that the amount not payable to the third respondent and not due to the third respondent is bound to be paid by the petitioner to the second respondent. If such an interpretation is given to the said power of attorney deed, it will lead to unreasonable interpretation and the petitioner, who

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has no connection with the second respondent Bank, except to pay the amount payable to the third respondent will be forced to pay the same. The privity of contract between the third respondent and the petitioner is bound to be honoured. The learned counsel for the second respondent is not in a position to dispute the proposition that the third respondent is bound by the contract and supply the goods according to the specifications and if the goods supplied are not according to the specifications, the petitioner can reject the same and withhold the bill.

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11. The decision cited by the learned counsel for the second respondent reported in (1969) 1 SCR 595 (Bharat Nidhi Ltd v. Takhatmal & Others) do not support the contention of the second respondent Bank, since it is held therein that a person owing money or holding funds belonging to the giver of the order is bound to pay the same to the power of attorney holder. In this case, we have specifically found that the petitioner is not bound to pay the amount claimed in the four bills to the tune of Rs.90,055.74 to the third respondent and the said amount having not payable to the third respondent, the second respondent Bank cannot claim the same from the petitioner merely on the ground of the power of attorney executed on 29.9.1985.

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12. The reasoning given by the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal that the special standard goods supplied by the third respondent to the petitioner can be agitated only by the supplier and the petitioner is unsustainable as the said finding is contrary to the clause in the power of attorney, stated supra. The second respondent Bank is entitled to receive the money due and payable to the third respondent by the petitioner and once it is found that the petitioner is not bound to pay the said amount

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to the third respondent, the second respondent Bank cannot compel the petitioner to pay the said amount and recover the same from the third respondent.”

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The reading of all these judgements clearly shows that mere production of account is not enough if it is disputed. It is for the Bank to substantiate the statement of account by producing necessary documents.

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Section 4 of the Bankers’ Books Evidence Act, 1891, reads as follows:-

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“4. Mode of proof of entries in bankers’ books.— Subject to the provisions of this Act, a certified copy of any entry in a banker’s book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.”

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The reading and understanding of this Section is that a certified copy of any entry in a banker’s book shall in all legal proceedings be received as prima facie evidence of the existence of such entry. It will be admitted in evidence, as if

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the original entry itself is now by law admissible, but not further or otherwise. This section says that the entries are only a prima facie evidence of the existence of such entry, but when the entries are disputed, it is for the Bank to prove the entries by producing the necessary evidence. That has not happen in this case, either before the DRT or before this Appellate Tribunal.

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In the said circumstances, this Tribunal has no other option but to come to a conclusion in tune with the conclusion arrived at by Learned Presiding Officer, DRT-I, Chennai that the Appellant has miserably failed to prove the entries made in the statement of account by producing the original bills/invoices.

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In this view of the matter, this Tribunal finds no reason to take a different view of the matter that was taken by Learned Presiding Officer, DRT-I, Chennai, and accordingly, the Appeal is liable to be dismissed, confirming the order of Learned Presiding Officer.

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