Allowed

SBI v. M/s.Owshad amroodh naturaceuticals & Anr.

DRAT4 Jun 2025REGULAR APPEAL/176/2018

Case brief

AI extract

What is this about?

The TRIBUNE allowed the bank's appeal against the lower court's dismissal of the claim against the second respondent. It held that both respondents acted in concert to induce the bank's mistake regarding the payment of export bills and are jointly liable to recover the amount.

What did the court decide?

The appeal was allowed; the order dismissing the claim against the second respondent was set aside; the bank is entitled to recover the amount from both respondents.

SBI versus M/s.Owshad amroodh naturaceuticals… — Contract and Commercial Disputes | DRAT (2025)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 4^th of June, 2025

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

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RA 176/2018

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(OA 117/2013 on the file of DRT-II, Chennai)

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Between

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State Bank of India Represented by its Chief Manager Adyar SME Branch, Kasturba Nagar, Adyar, Chennai 600 020. Now transferred to State Bank of India, Stressed Asset Recovery Branch, Montieth Road, Egmore Chennai.

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… Appellant

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And

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1. M/s OWSHAD AMROODH NATURACEUTICALS Rep, by Proprietrix Mrs. R Meenakshi

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Old No.15, New No2, Second Street,

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3^rd Main Road, CIT Nagar,Nandanam, Chennai 600 035.

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1. M/s OWSHAD AMROODH NATURACEUTICALS Rep, by Proprietor Dr. Ramkumar

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PK 11 Route De Damara Bangui Republique Centrafricaine. and also at Old No.15, New No2, Second Street,

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3^rd Main Road, CIT Nagar, Nandanam, Chennai 600 035.

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…. Respondents

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Counsel for Appellant : M/s. Shivakumar and Suresh Counsel Respondents : Mr. D. Jaganathan

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ORDER

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Against the dismissal of the claim made against Defendant No.2 in OA 117/2013, on 16.12.2016 by Learned Presiding Officer, DRT-II, Chennai, the Appellant Bank filed this Appeal.

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The case of the Applicant in OA 117/2013 against the Defendants is that 1^st Defendant is a Proprietary concern and Mrs. R. Meenakshi is the Proprietrix. Defendant No.2 is a concern owned by Mr. Ram Kumar, who is husband Mrs. R. Meenakshi, in a place called Bangui, Central Africa. First Defendant approached Applicant Bank during November, 2011, for certain credit facilities. Defendants submitted an Export Bill amounting to Euro 3,80,178.50 on 06.02.2012 against an L.C. for Euro 4,57,351.93 opened by Banque Sahelo Saherienne Centre Afrique, Bangui. Export bills were forwarded to Trade Finance Processing Centre at Egmore. The processing centre refused to negotiate the export bill stating that the export for Central Africa was a high risk

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country and the L.C. issuing Bank is also not a correspondent Bank with State Bank of India. It was informed to the Defendants that the documents can be sent for on collection basis. Defendants arranged to send swift message of acceptance from Bangque Sahelo Saherienne Centre Afrique, Bangui back to TFCPC Branch of Applicant Bank. Defendant No.2 persuaded the Trade Finance Processing Centre, and that documents were accepted by the foreign bank and requested the Applicant to negotiate the bill, and thus, the official of the Bank, by mistake negotiated the Export Bill overlooking the fact that the Bank which opened the LC is not a first class Bank as per the extant instruction. After paying the amount, the Applicant Bank by e-mail dated 10.04.2012 called upon the Defendants to deposit the bill proceeds immediately. On 11.06.2012, the Defendants were reminded to remit Rs.2,64,46,167/-. Taking advantage of mistake committed by Applicant Bank, the Defendants walked away with money. The Defendants paid Rs.51,08,564/- against the crystallized liability of Rs.2,64,46,167/-. Applicant Bank asked the Defendants to

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furnish necessary details of documents to take action against foreign Bank, but Defendants have not co-operated. The ECGC categorically stated that they have not covered any political risk. The Defendants converted the amount received from the Bank and purchased the property and settled their other loans. LIC Policy has been taken in the name of Defendant No.2. In the said circumstances, OA was filed.

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The OA was resisted by Defendants by filing separate Reply Statement stating that Defendant No.2 is the extension office of the 1^st Defendant and it is not a separate entity. After discounted the bill and deposited the proceeds to the Respondents’ company account. 1^st Defendant submitted one more bill on 17.03.2012. BSIC Centrafrique responded through the Arab Bank for investment and foreign trade on 04.04.2012 that there was a discrepancy in the documents. The documents were still held by the Applicant Bank without processing. Meanwhile, rebels had taken over Central African Republic. First Defendant is entitled to claim entire amount from ECGC. Due to non co-operative attitude of the

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Applicant Bank, the amount could not be claimed from ECGC. Dr. Ram Kumar is not the Proprietor of Respondent No.1 Company. He is the CEO of the Branch Office at Central African Republic. The property purchased by the Defendants were from their own funds, savings and selling of

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the property as detailed in para 5 of 2^nd Defendant’ Reply Statement. Defendant No.2 invested his money in the 1^st Defendant Company, and therefore, the amount invested by him was returned by 1^st Defendant. The properties were not purchased from the amount deposited by Applicant Bank.

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On considering the evidence produced before the Tribunal, Learned Presiding Officer, DRT-II, Chennai, allowed the OA against the 1^st Defendant and dismissed the OA against the 2^nd Defendant. The reason assigned is that Mr. Ramkumar is not the proprietor of Defendant No.2 concern, and therefore, he cannot be fastened with any liability and his property cannot be attached. In this view of the matter, the OA against the Defendant No.2 was dismissed, therefore, the Applicant Bank filed this Appeal.

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Learned Counsel for Appellant Bank submitted that

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Respondents 1 and 2/Defendants 1 and 2, from the beginning, with an intention to cheat, created documents, and induced the Bank to commit the mistake and deposit the amount by sending a swift message. The amount transferred was utilized by Respondent No.2, for purchasing the property, settling other loans and purchasing of LIC Policy etc. After knowing that the amount was wrongly credited, the Respondents should have returned the money to the Bank, if they are genuine persons, especially, when the counterpart Bank has not processed the transfer of funds. That was not done by the Respondents. The Respondents have produced records to show that both the Respondents are independent entities and that Respondent No.2 is not the branch of the Respondent No.1. Respondent No.2 is an incorporated person of Central Africa State and both Respondents are liable to pay the amount due to the Appellant Bank. Both drawee and acceptor are liable to pay as per Section 30 of Negotiable Instruments Act, 1881. In support of his arguments, Learned Counsel for Appellant

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Bank produced the judgement of Hon’ble Supreme Court in the case on M/s. Bawa Paulines Pvt. Ltd. Vs. UPS Freight Services (India) Pvt. Ltd and Anr., reported in 2022 LiveLaw (SC) 938, for the proposition that letter of credit is used as a mode of ensuring payment and performance of contractual terms.

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Despite giving sufficient opportunity to the Respondents, there was no representation for the

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Respondents. Therefore, the Appeal is disposed of on the basis of the record available and submissions of Learned Counsel appearing for the Appellant Bank.

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From the pleadings filed in the OA 117/2013, it is not in dispute that the Appellant Bank transferred money to the 1^st Respondent. It is also seen from the Reply Statement of the Respondent No.2 that after transfer of money, certain properties had been acquired by Respondent No.2, loans settled, LIC policy was purchased. The ground on which the OA was dismissed against Respondent No.2 is that he is not

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a proprietor of the Respondent No.2 concern, but he is only CEO of 1^st Respondent concern. However, the perusal of the documents marked before the Tribunal, especially, Exhibit A14, Packing List dated 01.02.2012, shows that the consignee, Banque Sahelo Saherriene pour I’investissement Et la commerce notified to the Respondent No.2, Owshad Amroodh Naturaceuticals SA, Bangui/Centrafrique. Mr. Ram Kumar Ganesan, CEO of 1^st Respondent sent a letter dated 21.02.2012 informing that the Bank sent the message of acceptance by swift dated 20^th February, 2012 to SBI and requested it to consider the proposal favourably. It indicates that the Respondents prompted the Bank to act on the swift message. Exhibit A19 shows that, the Respondent No.2 is shown as the Applicant/drawee, Respondent No.1 is shown as customer. The bill amount was EUR 380,178.50. Respondent No.2’s name is shown as Owshad Amroodh Naturaceuticals SAU.

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This Tribunal requested Learned Counsel for Appellant Bank to produce the authorized translation for the letters

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‘SAU’. Accordingly, a Memo was filed by the Counsel for Appellant to show the meaning of the letters ‘SAU’ from an authorized French Translator. The expansion of letters SAU is ‘Societe Anonyme Unipersonnelle’. ‘SAU’ means Singleshareholder Company, i.e., Simplified joint-stock company with a single shareholder. That means, it is a company run by sole partner.

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It is not in dispute that the name of the Respondent No.2 is Owshad Amroodh Naturaceuticals SAU. From the meaning of the letters ‘SAU’, it is clear that it is an independent Sole Proprietorship Concern, established in Central Africa for the purpose of business transaction. Respondent No.2 is not the branch office of the 1^st Respondent, as projected by Respondents and accepted by Learned Presiding Officer, DRT-II, Chennai. Both are independent concerns and they acted in concert to see that the funds are diverted for their business purpose, and

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therefore, this Tribunal finds that both the Respondents are liable to pay the amount due to Appellant Bank.

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In this view of the matter, the order of Learned Presiding Officer, DRT-II, Chennai, dismissing the claim against Respondent No.2, is set aside. The OA is allowed in entirety against both the Respondents. In respect of other points, the order of Tribunal below is confirmed.

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In the result, the following order is passed.

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i. The Appeal in RA 176/2018 is allowed with costs of the Appellant Bank.

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ii. The order of Learned Presiding Officer, DRT-II, Chennai, dismissing the claim against Respondent No.2 is set aside.

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iii. The Appellant Bank is entitled to recover the amount claimed in the OA from both the Respondents.

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iv. Tribunal below shall issue the Recovery Certificate,

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in terms of above.

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All pending IAs, if any, stand closed.

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[Dictated to Athistamani, PS, in open court, transcribed by her, corrected and signed by me this 04 of June, 2025]

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[ Justice G. Chandrasekharan] CHAIRPERSON

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SBI v. M/s.Owshad amroodh naturaceuticals & Anr.

Case brief

What is this about?

What did the court decide?

SBI v. M/s.Owshad amroodh naturaceuticals & Anr.

Case brief

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What did the court decide?

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