Dismissed

PNB v. W.S.Somasekaran & Ors.

DRAT23 Jul 2025REGULAR APPEAL/162/2012

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal affirmed the lower court's rejection of a portion of the appellant bank's claim amounting to approximately Rs.97 lakhs, holding that funds misappropriated by a bank employee cannot constitute a 'debt' under Section 2(g) of the RDB Act and lacks Tribunal jurisdiction.

What did the court decide?

Appeal dismissed; Appellant bank directed to pursue civil suit for recovery of misappropriated funds.

PNB versus W.S.Somasekaran & Ors. — Banking and Recovery | DRAT (2025)

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RA 162/2012

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 23^rd day of July, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN CHAIRPERSON

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RA 162/2012

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(arising out of OA 458/2007 on the file of DRT-III, Chennai) (OA No.126/2005 on the file of DRT-I, Chennai

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Between

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M/s Punjab National Bank Rep. by its Manager, Vellore Branch, Long Bazzar, Vellore 4.

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Now, the account has been transferred to Asset Recovery Management Branch, Rep. by its Chief Manager, No.624, Anna Salai, Chennai 600 006.

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…..Appellant Bank

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And

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1. Mr. W.S. Somasekaran 4. Mr. W.S. Jaishankar (deceased) (deceased) S/o Late W.S. Shanmugham, S/o Late W.S. Shanmugham, 37/1, Seetharama Mudaliar No.37/1, Seetharama Mudaliar Street, Street, Kosapet, Vellore 632 001. Kosapet, Vellore 632 001.

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2. Mr. W.S. Shanmugham (now 5. Mrs. W.S. Geetha, deceased) W/o Mr. K. Raman, S/o Sundaresa Iyer, No.62/1, Braminar Street, No.37/1, Seetharama Mudaliar Agaram Village and Post, Street, Via Madhanoor 635 804. Kosapet, Vellore 632 001. 6. Mr. W.S. Balasubramaniam,

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3. Mrs. C.P. Saraswathi, S/o W.S. Shanmugham, No.37/1, Seetharama Mudaliar New No.10, Old No.22, Street, Sriram Pragathi Apartments, Kosaet, Vellore 632 001. Andavar Street, Anna Main Road, Choolaimedu, Chennai 600 094.

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RA 162/2012

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12. The President, Vanniveedu Village Panchayat, Vanniveedu Village, Walajah Taluk, Vellore District.

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7. Smt. W.S. Lalitha, No.55, Adhithanar Nagar, 4^th Street, Iyyappanthangal, Chennai 600 056.

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8. Mr. M.S. Nagaraja Gurukkal, No.55, Adhithanar Nagar, 4^th Street, Iyyappanthangal, Chennai 600 056.

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13. Mr. M. Loganathan, S/o Manickam, No.91,Thamarakulam Street, Vannivedu Village, Walajah Taluk, Vellore District.

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9. Mr. S. Kumaresan, S/o P. Sargunan, No.80, Avalkara Street, Kosapet, Vellore 632 001.

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Kosapet, Vellore 632 001. 14. Mr. S. Vijayakumar, S/o K.C. Srinivasa Achari, 10. Smt. Devasundari, No.190, B-Setor, V.G. Rao W/o Karikala Cholan, Nagar, Pallikoodam Street, Katpadi, Vellore 632 007. Vaniveedu Village, Wallajah Taluk, Vellore 15. Mr. G. Saddasivam, District. S/o Gopal,

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15. Mr. G. Saddasivam, S/o Gopal, No.4, Ramar Bajanai Koil Street, Velapadi, Vellore 632 001.

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11. Mr. A. Guruswamy, Street, S/o Arunachalam, Velapadi, Vellore 632 001. No.119, Thamarakulam Street, Vanniveedu Village, Walajah Taluk, 16. Selvi P. Anusuya, Vellore District. D/o Panneerselvam, No.31/17, Kamatchi Nagar, Vannivedu Village, Walajah Taluk, Vellore District.

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…..Respondents

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Counsel for Appellant Bank : M/s R. Umasuthan & Co. Counsel for R3, R5 and R7 : Ms. P. Meghana Nair Counsel for 6^th respondent : Mr. R. Gowthamanarayanan

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R8 to R16 remained ex parte .

RA 162/2012

ORDER

This appeal is filed under Section 20 of RDB Act against the order against the

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order dated 4.9.2012 passed by Learned Presiding Officer, DRT-III, Chennai in OA No.458/2007.

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Aforesaid OA was filed against defendants 1 to 16 to pay an aggregate sum of Rs.1,00,90,117/- (Rs.3,76,718/- plus Rs.97,13,399/-). However, there are two prayers in the OA, first prayer was sought against the first defendant to pay a sum of Rs.3,76,718/- with interest at 14.25% per annum with quarterly rests from the date of filing till the date of realization and the second prayer was against defendants 1 to 16 jointly and severally to pay a sum of Rs.97,13,399/- together with further interest at 14.25% p.a. with quarterly rests from the date of filing till the date of realization with costs and for other consequential reliefs.

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Learned Presiding Officer while deciding the OA, allowed the OA in part with reference to first prayer against the first defendant alone for issuance of recovery certificate for Rs.3,76,718/- with future interest at 12% p.a. with yearly rests from the date of filing of the OA till realization. There is no specific order with regard to dismissal of second prayer. Therefore, this appeal is filed.

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RA 162/2012

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Learned Counsel for appellant bank submitted that first

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respondent/defendant was an employee of the appellant bank. He availed the following five loan facilities aggregating to Rs.3,64,070/- and executed necessary loan documents.

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(a) Rs.90,000/- as Staff Housing Loan

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(b) Rs.1,17,000/- as Term Loan

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(d) Rs.50,000/- as additional Housing Loan and

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(e) Rs.75,000/- as Additional Housing Loan

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In respect of the aforesaid facilities availed by the 1^st respondent from the appellant bank, the 1^st respondent is due and liable to pay a sum of Rs.3,76,718/- to the appellant bank.

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During the course employment with the appellant bank, first respondent

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committed various misdeeds and caused a loss to the tune of Rs.97,13,399/the details of which, are averred in the OA from paragraph 10 to paragraph

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The said details, in brief, are as under:

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Para 10

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Loan amount of Rs. 5,00,000 was raised by a deposit of deposit receipts LDR No. 24/01-02 in name of Gayathri Devi , cash paid on 26.11.2001 but no documents on this respect or the actual deposit receipt were found in the branch. The ledger sheet and voucher dated 26.11.1994 shows that the debit slip was prepared and passed by the first defendant.

RA 162/2012

2. Para 11

An LDR for a sum of Rs 76,000/- wasraised on 8.02.2002 and registered in name of S .Pushpa. The Loan Ledger dated 31/01-02 and voucher dated 8.02.2002 shows that the first defendant entered the loan and withdraw the cash against a debit slip without any documents being executed by the depositor or deposit receipt being pledged to the bank. Similarly, LDR for a sum of Rs.4,80,000/- was raised on 20.3.2002 The Loan Ledger dated 39/01-02 and voucher dated 20.02.2002 shows that the first defendant entered the loan and withdraw the cash against a debit slip without any documents being executed by the depositor or deposit receipt being pledged to the bank.

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3. Para 12

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Forgery of specimen signature of Jayavelu Gounder for pay order for Rs 33 176/in cash on 23.5.2002 after preparing a debit slip for FD 44/2001 ( RS 52,500/-) and FD 30/99 (Rs. 21,000/-). Alteration of the maturity dates for FD 44/01 and FD 30/99 from 14. 08 .2002 and 14.09.2002 to 14. 04. 2002.

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4. Para 13

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An amount of Rs 1,06, 286/- was lost by the bank by closure of FD 76/01 and 77/01 each for Rs 53,143/- due on 17.07.2002, as no discharged FD receipts are available and the amount was not posted to SB account of Shri. Dayalan to which it was passed for and also not included in the balancing schedule . The debit voucher dated 31.3.2002 for 1,06,286/- was prepared by the First defendant and the said amount was withdrawn from SB Account No .4336 using withdrawal form 0131468on 23.05.2002.

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5. Para 14

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RID No. 35/2001 for Rupees 20,000/- was registered in the Ledger on 17.5.2001 and issued name of M. A Pandurangan (Depositor) but the amount tendered by him is not entered in the cash book and Day book.

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6. Para 15

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RID No.	AMOUN (IN Rs.)	T Closing Sum (IN Rs.)	Maturity date	PREMATUR CLOSING DAT	Misconduct
19/1998	60,000	89,514	28.10.2001	26.09.2001	Record receipts not surrendered
23/1997	17,500	30,625	10.8.2002		Record receipts not surrendered
6/2001	40,000	41,296	11.07.2002	27.9.2001	Record receipts not surrendered

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RA 162/2012

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5/2001	50,000	51,620	11.07.2001		Record receipts not surrendered Debit Voucher, Ledger sheet and credit voucher of SB 4924 date 29.09.2001 for Rs 92,916 and specimen sign
107/1999	18,400	25,470	30.01.2001	5.10.2001	Record receipts not surrendered Debit Voucher, Ledger sheet and credit voucher of SB 4924 date 05.10.2001 for Rs 25,470 and specimen sign

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7. Para 16

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RID No. 1/200-001 in the name of JayaveluGounder for Rs 22,500/- having mature date 3.7.2003 was closed on 23.5.2002 by set of vouchers prepared by first defendant and pay order No 69/01 was issued for Rs.28,080/- and paid in cash to the depositor on the same day. Signature of payee differs from specimen signature of Depositor and discharge deposit receipt not seen.

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8. Para 17

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First defendant excluded the Sathabdi Variable deposit (SVD) No. 23/2000 of Rs 51,000/- registered in the name of A Sumathi for a period of 91 days maturing on 30.06.2001 in the balancing schedule of 31.3.2001, but entered the account in the Ledger sheet No.SVD 23/2000 and Cash Book dated 31.3.2001.

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9. Para 18.

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SVD account 4/01 for Rs 56,000/- dated 29.5.2001 was entered into SVD ledger by first defendant but only 6000/- was credited and accounted in the day book.

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10. Para 19.

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SVD withdrawal of Rs 1,20,000/- from cash in SVD account 1/2000 of N. Kumar on 11.3.2002by withdrawal slip wrote by 1st Defendant (ledger sheet SVD 1/00), but the specimen signature of N. Kumar on the opening form and withdrawal slip did not match and token number not mentioned in the reverse of instrument.

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11.Para 20

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The First Defendant made scroll Number and initials in withdrawal slip and thereby Rs . 2,50,000/- was withdrawn, using withdrawal slip No.0130998 from

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RA 162/2012

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the SVD account 15/01 of D .Ulaganathan which was not debited to the SVD account. No Authorized Signature, No denomination of cash on form and no initials of paying cashier are found.

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12.Para 21

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The First Defendant made scroll Number and initials in withdrawal from No. 0131609 and thereby Rs . 1,01,460/- was withdrawn from the SVD account 16/01 of S.N. Krishnamurthy which was not debited to the SVD account. The portfolio No. 58 was put on the withdrawal form but on the ledger folio Nos.53,54 and 55 were removed and also the denominations and token number were missing on the instrument.

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13.Para 22

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The First Defendant made scroll Number and payment authorization in withdrawal from No. 0131469 and thereby Rs . 20,210/- was withdrawn from the SVD account 18 of J Ramamurthy which was not debited to the SVD account. The denominations and token number were not noted on the instrument.

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14.Para 23

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The payment authorisation of cheque no. 0362095 for 40,000/- was done by the first defendant and payment from current account No. 976 paid in cash on 17.1.2001 in the name of M/s Computer Care. Cheque not debited to the account and cheque leaf did not belong to the cheque book of the customer. Name of firm handwritten.

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15. Para 24

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The payment authorisation of cheque for 40,000/- was done by the first defendant and payment from current account No. 1160 paid in cash on 22.2.2001 in the name of M/s Sun Electronics .Cheque not debited to the account and cheque leaf did not belong to the cheque book of the customer. Name of firm handwritten.

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16. Para 25

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Current Account No. 1172 opened in the name of an individual from Arakonnam by cash remittance of 3000/-and introduction by account No. 604 but he did not sign the introduction and Account No. 604 not active. Cheque of Rs 15.25 Lakhs tendered on 30.3.2001 and a cheque of Rs 5 lakhs was debited on the next day, following which, a cheque No. 0387877 for 5 Lakhs was also paid 3.4.2001 but only one cheque has been debited on the account. The balance amount after deduction of first cheque is shown as 8,84,047 instead of 10,28,254/-. Handwriting of 1^st defendant is seen in the cheque.

RA 162/2012

17.Para 26

In SB account no. 3423 of M. Vijayalakshmi, ₹20,000 was withdrawn on 9.8.2000 using withdrawal form No. 310216, written and authorized by the first defendant. However, the amount was not debited from the account, and essential details like token number and denomination were missing on the form. The ledger sheet and withdrawal form confirm this.

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18. Para 27

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In SB A/c No. 57 of V.P. Shabeer Ahamed, a credit of ₹95,000 was recorded between 1.10.2000 and 18.10.2000 without supporting vouchers or cash entry in the branch records. The first defendant made the ledger entry. While the ledger showed ₹1,60,000 as balance on 31.12.2000, the balancing schedule only reflected ₹65,000. This mismatch is evident from the ledger and cash book records.

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19.Para 28

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The First defendant entered to 2 credit amounts of Rs 50,000/- each in SB account 4380 of Kumaresan and K.Uma between dates 1.10.2000 and 4.11.2000 and the other on 24.11.2000 the same had no credit vouchers nor any entries in the cash book. Records confirm the irregularity.

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20.Para 29

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In SB Account No. 4573 of O.S. Habibullah, three credit entries of ₹50,000 each were made without proper cash vouchers or entries in the cash book and subsidiary registers. Credit slips were also missing, and the entries were made by Somashekar. Records confirm the irregularity.

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21. Para 30

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An amount of Rs 2,01,140/- was withdrawn in cash using cheque leaf No. 0787161 from the SB account No . 581 of J. Subramaniam which was originally transferred from his FD Account no. 92/2000 maturing on 30.11.2000 & closed prematurely on 10.10.2000. The cash was never credited to party account, cheque leaf not from cheque book issued and signature did not tally with the specimen signature are the irregularities.

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22.Para 31

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An amount of ₹1.00 lakh was withdrawn from SB A/c 602 of K. Venkatesan on 12.10.2000 using a withdrawal form No.190788 filled by the first defendant, but the amount was not debited from the account.

RA 162/2012

23.Para 32

On 4.11.2000, a credit of ₹30,450 was made in SB A/c 4530 of Thirukanmu and Gandhi Ammal by the first defendant without any supporting entry in the cash or day book.

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24.Para 33

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The First Defendant made an entry of 2 lakhs Rson 12.11.2000 in the SB account No. 4566 of G. Vijaya without any credit slip and entry in cash book.

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25.Para 34

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A credit entry of Rs 1. 50 lakhs was posted by the first defendant in the SB account No.4376 of Amritha Gowri between 1.1.2001 and 31.3.2001, for which, there was no funds inflow found in the cash book and register.

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26. Para 35

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The First Defendant prepared and authorised a withdrawal slip form no. 230177 not signed by the account holder and withdrew a sum of Rs 1,25,000/- on 18.01.2001 from SB Account No. 4415 of S.P Kubalakar and J. Kasthuri. Money was not debited to party’s account. Signature and Token number no available on the instrument.

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27.Para 36

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First Defendant prepared and authorized a withdrawal slip form no. 230226 not signed by the account holder and withdrew a sum of Rs 1,00,000/- on 18.01.2001 from SB Account No. 3595 of R. Vasudevan. Money was not debited to party account.

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28.Para 37

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First Defendant prepared and authorized a withdrawal slip form no. 230306 not signed by the account holder and withdrew a sum of Rs 1,00,000/- on 1.02.2001 from SB Account No. 3595 of R. Vasudevan. Money was not debited to party account.

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29.Para 38

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First Defendant prepared and authorized a withdrawal slip form no. 230387 not signed by the account holder and withdrew a sum of Rs 1,00,000/- on 13.02.2001 from SB Account No. 3595 of R. Vasudevan. Money was not debited to party account and the withdrawal Form date was 30.2.2001.

RA 162/2012

30. Para 39

First Defendant prepared and authorized a withdrawal slip form no. 230454 having no token bearing number or denominations at the back and withdrew a sum of Rs 1,00,000/- on 27.02.2001 from SB Account No. 602 of K. Venkadesan.

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31. Para 40

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An amount of Rs 2.00 kakhs was withdrawn in cash using cheque leaf No. 828902 from the SB account No . 4380 of Kumaresanand Uma and cash was paid on 26.05.2001 under the first defendant authorisation .The Instrument made had no denomination of cash, Token Number, and signature did not tally with specimen signature.

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32.Para 41

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A credit entry of Rs 40,000/- made in SB account No. 280 of Peethambaram by the First Defendant between 1.07.2001 and 23.07.2001 but no relevant voucher or entry in the cash book and registry.

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33.Para 42

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A credit entry of 30,000/- in the SB Account No. 1964 of S. Venugopal on 18.07.2001 was made by the first defendant, without funds cashflow or entries in the cash books.

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34.Para 43

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A credit entry of Rs 10,000/- was made in SB account No. 4089 of Lakshmirajan by the First Defendant but no relevant voucher or entry in the cash book or any book for the relevant period.

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35.Para 44

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The First Defendant prepared a credit slip by which a sum of Rs. 90,000/- cash was withdrawn against withdrawal form 0130139 in SB Account No.4308, but since the balance was only Rs.45, 680/- a debit credit of Rs 50,000/- was given as proceeds of FDR 181/2000 . The 1^st defendant had passed the withdrawal form though the credit and debit was not entered in the register of party.

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36.Para 45

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The First Defendant made a pay cash authorization for withdrawal of Rs 2.00 Lakhs from the SB account No. 3313 of D. Murugeshon 8.10.2001, but amount was not debited to the account of the party.

RA 162/2012

37.Para 46

The First Defendant made a credit of Rs.1.00lakh in SB account No. 4924 of Premalatha on 27.10.2001, without corresponding entries in cash Book

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38.Para 47

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An amount of Rs 3.00 Lakhs - was withdrawn in cash using cheque leaf No. 827947 from the SB account No . 4380 of Kumaresan and paid on 30.10.2001 under the first defendant authorisation .

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39.Para 48

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The First Defendant made a credit entry of Sum of RS 20,000/- on 3.11.2001 in the SB account No. 4568 of P. Balagopal without funds inflow and entries in the cash book.

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40.Para 49

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The First Defendant made a credit entry of Rs 50,000/- in the SB account No. 4308 between 5.01.2002 and 9.01.2002 without funds inflow and entries in the cash book to show for.

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41. Para 50

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The First Defendant made acredit entry of Rs 2,10,000/- in the SB account No. 4635 of Vijayakumar and Rama on 24.2.2002 without entries in the cash book and day book to show for.

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42.Para 51

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The First Defendant posted a credit entry of Rs 40,000/- in the SB account No. 4446 of N. Dakshinamoorthyon 2.4.2002 without credit challan and entries in the cash book and day book to show for.

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43.Para 52

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The First Defendant posted an credit entry of Rs.2.00 lakhs in the SB account No.602 of K. Venkatesan on 8.4.2002 without credit challan and entries in the cash book and day book to show for.

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44.Para 53

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On May 8, 2002, the first defendant posted a credit entry of Rs. 50,000 to SB account No. 4556 of Kumarasamy and Lakshmi. This credit lacked any supporting voucher and wasn't recorded in the cash book or day book.

RA 162/2012

45. Para 54

The first defendant authorized the cash payment and Rs. 28,287/- was withdrawn on 15.5.2002 from SB account No. 2042 of A. N. Rajagopalan using withdrawal slip No. 1031426. The amount was not debited to the account holder's account and the authorization lacked the token number and cash denomination details.

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46.Para 55

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Rs.3,98,000/- was withdrawn on 22.5.2002 using cheque leaf 811061 from account SB 4380.The amount was not debited to the account. The cheque leaf did not belong to the customer's issued cheque book. The signature differed from the specimen signature and the payment was authorized by the first defendant.

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47.Para 56

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In SB A/c No.4380, Rs.2.00 lakhs cash cheque No. 829859 was paid on 3.7.2001. The signature didn't match the bank's specimen record. The amount was ‘not debited’to the account holder's account and the token number and cash denomination were missing from the pay slip.

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48.Para 57

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On July 3, 2001, Rs. 80,000/- was withdrawn from SB account 4514 of P. Shanmmugham using slip 0130030, but the amount was not debited to the account. The withdrawal was authorized by the first defendant, evidenced by the withdrawal form and ledger sheet.

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49.Para 58

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On September 4, 2001, Rs. 50,000 was withdrawn from SB account 1935 of A. Devaki using withdrawal slip 139734 on 4.9.2001 butthe amount was not debited to the account. The withdrawal slip lacked the token number and cash denomination, and the payment was authorized by the first defendant. The withdrawal form and ledger sheet serve as evidence.

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50.Para 59

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On September 24.9.2001, Rs.1.00 lakh was withdrawn using slip 0139794 from SB account 4089 of Lakshmiraja, but the amount was not debited to the account. The first defendant authorized the payment, as proven by the withdrawal form and ledger sheet.

RA 162/2012

51.Para 60

On September 27 , 2001 a sum of Rs 1,10,000/- was withdrawn from the SB account 506 of M. Ranganathan vide cheque leaf No. 827801, which was found, not belonging from the cheque book issued to party and cheque was not debited to the account. Payment Authorisation done by First Defendant .

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52.Para 61

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The First defendant authorised the payment for withdrawal of Rs.2.00 Lakhs on 27.9.2001 from SB account 4472 using cheque leaf 829329 but the cheque leaf did not belong to the cheque issued to party and the amount not debited to the account. Token number and cash denominations were not noted.

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Therefore, OA No.458/2007 was filed for recovery of this due amount. Learned Presiding Officer failed to recognize the documents executed by respondents, which establish their liability to pay the loan due to the appellant bank. Dismissal of the part of the claim on the ground that claim does not constitute a ‘debt’ under the definition of Section 2(g) of RDB Act is not correct. All the respondents are liable to pay the claim in the OA. Thus contending, Learned Counsel for the appellant bank prayed the Tribunal to set aside the final order of the Learned Presiding Officer, DRT-III, Chennai dated 4.9.2012 insofar as it relates to the rejection of a portion of the OA claim made by the appellant bank.

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Learned counsel for respondents 3, 5 and 7 submitted that claim of Rs.97,13,399/- against the defendants is with reference to the claim that this amount said to have been misappropriated by the first respondent, who was

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an employee of the appellant bank. On the premise that DRT cannot go into

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the details with regard to the claim arising out of misappropriation, as it does not come under the definition of ‘debt’, Learned Presiding officer chose to negative this claim.

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Learned Counsel further submitted that respondents 3, 5 and 7 are family members of first respondent. Mortgage said to have been created by the respondents was in coercion and by fraud. There is no evidence produced to show misappropriation of a huge amount. It shows total lack of supervision and transparency in the dealings of the appellant bank. These respondents have no connection, whatsoever, in the alleged misappropriation. In the property mortgaged, children of the respondents also have share, since property said to have been mortgaged is an ancestral property. Documents said to have been executed by these respondents had been executed under threat, coercion and compulsion. The alleged misappropriation amount cannot be classified as a ‘debt’. Thus, Learned Presiding Officer rightly dismissed the claim. Learned Counsel further submitted that there are various judicial pronouncement to this aspect. In this regard, he relied on

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the following judgments for the proposition that amount misappropriated cannot be construed as a ‘debt’.

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a) In re, Eureka Forbes Limited Vs. Allahabad Bank and others reported in (2010) 6 SCC 193.

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b) In re, Bank of India Vs. Vijay Ramniklal Kapadia and others reported in 1996 SCC Online Guj 129.

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RA 162/2012

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The said submissions of Learned Counsel for respondents 3, 5 and 7 are adopted by Learned Counsel for 6^th respondent.

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Appeal against R1 and R4 was dismissed, as abated vide orders of this Tribunal dated 20.7.2022 and 16.6.2023 respectively, as steps were not taken to implead the legal heirs of deceased R1 and R4.

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I have considered the rival submissions and perused the record.

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From the pleadings and the case set out by parties, we can gather that appellant bank filed OA No.458/20007 claiming an amount of Rs.1,00,90,117/- with future interest from the respondents. Prayer (a) in the relief column relates to the amount borrowed by the first respondent and prayer (b) deals with the amount said to have been misappropriated by the first respondent.

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Learned Presiding Officer made positive order with regard to prayer (a) by allowing the application. However, there is no express order allowing or declining prayer (b). While deciding the claim made in the prayer (b) viz., Rs.97,13,399/-, Learned Presiding Officer recorded his view that neither the amount defaulted by the employee of the appellant bank in collusion with others can be considered as ‘debt’ or liability arising in the course of the business activity. It was also recorded that fraud committed by the

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employee of the bank cannot or should not be constructed as a ‘debt’.

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Misappropriation of the amount of the bank by its employee and recovery

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thereof, by way of a suit can never be construed as a ‘debt’. His findings

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were recorded on the basis of the following judgments.

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a) In re, Bank of India Vs. Vijay Ramniklal Kapadia and others reported in AIR 1997 Guj 75

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b) In re, Eureka Forbes Limited Vs. Allahabad Bank and others reported in (2010) 6 SCC 193.

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c) 2009 (2) Bankers Journal 493

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Therefore, Learned Presiding Officer accepted the case of the first respondent that amount misappropriated cannot be considered as a ‘debt’. Though there is no express rejection of the claim with regard to prayer (b),

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this finding shows that claim of the appellant bank with regard to prayer (b) was rejected.

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15. In Eureka Forbes Limited case reported in (2010) 6 SCC 193, Hon’ble Supreme Court of India in paragraph 60, reading from the judgment in re, State Bank of Bikaner & Jaipur Vs. Ballabh Das & Co., reproduced paragraph

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7 and 8 to show that “ ‘debt’ should have arisen 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. Liability should have

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arisen during the course of business activity and the said liability should be

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legally recoverable.”

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In paragraph 67, quoting from judgment of Hon’ble High Court of Gujarat in re, Bank of India Vs. Vijay Ramniklal Kapadia, it was observed that “Judgment of Hon’ble High Court of Gujarat is entirely on different facts and in the case of an employee of the Bank had misappropriated the amount of the Bank,

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the Bank instituted an application under the provisions of Recovery Act. Rightly, it was held by Hon’ble High court that it was not a ‘debt’, within the meaning of Section 2(g) of RDB Act, therefore, could not be tried before the Tribunal”.

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This judgment gives an understanding that amount misappropriated by an

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employee of the Bank cannot be construed as a ‘debt’ within the meaning of

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Section 2(g) of RDB Act.

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In the judgment in re Bank of India Vs. Vijay Ramniklal Kapadia and others, it

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is very clearly held that misappropriation of the amount of the bank by its employee and recovery thereof by way of a suit can never be construed as a ‘debt’. Relevant portion is extracted hereunder:

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“5. On the plain reading of the above definition, it is clear that any liability which is alleged and due from any person by a bank during the course of any business activity undertaken by it in cash or otherwise, whether secured or unsecured, or whether payable under a decree or an order of any civil Court or otherwise, and subsisting on and legally recoverable on the date of the application is "debt". Thus any liability due from any person by a bank during the course of any business activity undertaken by the bank will constitute a "debt". Therefore, a

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RA 162/2012

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fraud committed by an employee of the Bank cannot or should not be construed a "debt". In the instant case, it is the allegation of the appellant bank in the plaint that respondent No. 1 being an employee of the appellant-Bank has committed fraud with the Bank to the extent of Rs. 13,86,000/- and the suit is filed to recover the said amount. By no stretch of imagination the said misappropriation of the amount of the Bank by its employee can be construed as a "debt", the learned trial Judge, in the instant case, unfortunately has referred to and reproduced only a limited part of the definition of the word "debt" and has committed an error in holding that the debt is a liability which is alleged as due from any person by a Bank. The later part of the definition of the word "debt" is clear which states that it is the liability due from any person during the course of any business activity undertaken by the bank which can be said to be a "debt", meaning thereby that any transaction between a Bank and its customer with respect to the business activity undertaken by the Bank, i.e. granting of loan etc. Misappropriation of the amount of the Bank by its employee and recovery thereof by way of suit can never be construed as a "debt". In view of this, the appeal is required to be allowed.”

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This judgment also clearly enunciates the fact that amount misappropriated

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by an employee of the Bank cannot be construed as a ‘debt’, within the meaning of the definition of ‘debt’ under Section 2(g) of RDB Act.

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Therefore, this Tribunal is of the view that rejection/not granting a decree in respect of prayer (b) by the Learned Presiding Officer is correct and it needs no interference by this Tribunal.

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Learned Counsel for appellant bank drew the attention of this Tribunal to the dismissal order passed by the Learned Presiding Officer in IA 139/2007 filed by the first respondent, challenging the maintainability of the OA, as amount claimed is not a ‘debt’ within the definition of Section 2(g) of RDB Act. It is true that order was passed in the said IA, dismissing the same stating that claim against the first respondent is maintainable. Merely

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RA 162/2012

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because this application was dismissed, appellant bank cannot seek an order

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in its favour, when the legal pronouncements as referred above, clearly

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indicate that amount misappropriated by an employee of the bank, cannot

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be construed as a ‘debt’.

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In view of the foregoing reasons, this Tribunal confirms the order of Learned Presiding Officer-III, DRT, Chennai dated 4.9.2012 passed in OA No.458/2007 and dismisses this appeal.

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