M/S JINDAL EXPORTS LTD vs STATE BANK OF INDIA on 31 December 2019

1. This Appeal is. preferred challenging judgment dated 21.03.2006 in Transfer Application (T.A.) No. 808/1995 on the file of Debts Recovery Tribunal, Ahmedabad (the Tribunal below). Brief facts leading to this Appeal are as follows.

2. State Bank of India filed Suit against Appellant herein for recovery of Rs.44,43,312/- together with interest and the said Suit, subsequent to formation of Debts Recovery Tribunals as per the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the RDDB&FI Act), was

transferred to D.R.T., Ahmedabad and was re-numbered as Transfer Application No. 808/1995 and the Tribunal below, on a consideration of contentions and rival contentions of both parties, allowed the T.A. for a sum of Rs.37,63,800/- together with simple interest @ 06% per annum from 01.06.1992 until realization of the entire amount. Aggrieved by the same, present Appeal is preferred.

3. It is not in dispute that Government of India, under the Export Import Policy (EXIM Policy), framed a scheme basically to provide registered exporters by way of import replenishment in the form of EXIM Scrips. Government of India framed rules and modality as to payment of premium on said EXIM Scrips against the surrender of such Scrips and the said scheme was in operation from 23.03.1992 to 31.05.1992. It is also not in dispute that State Bank of India filed Civil Suit No. 35 of 1993 before Civil Judge (Sr. Division), Kutch at Bhuj which was transferred to Tribunal below and was re-numbered as T.A. No. 808/1995 and said T.A. was decreed exparte. The Defendant filed application before Tribunal below to set aside exparte decree, which was dismissed against which Appeal No. 244/2001 was preferred before this Tribunal and this Tribunal by order dated 05.08.2002 while setting aside ex-parte decree remitted the T.A. permitting the Defendant to file Written Statement (W.S.) and to decide the T.A. on merits. Thereafter Appellant herein filed W.S. and contested the said T.A. Defendant raised several pleas in the W.S. and the Tribunal below, on consideration of contentions and rival contentions of both parties

and Claim Affidavit of Bank Manager, allowed claim of Bank. It is not in dispute that Defendant has not filed any Claim Affidavit supporting the contentions of the W.S.

4. Heard both sides.

5. Advocate for Appellant argued the case at length. The gist of the arguments can be categorized as under. First and foremost contention of Advocate for Appellant is that there is no debt, as such Tribunal below has no jurisdiction to entertain claim of the Bank. Second contention is that monies are not paid under any mistake of fact or law, therefore, Section 72 of Indian Contract Act, 1872, is not applicable and the facts of this case are governed by Section 21 of Indian Contract Act. Third submission is that alleged undated Press Release / Circular / Check-list of Reserve Bank of India cannot have retrospective effect. Fourth submission of Ld. Counsel for Appellant is that the claim of the Bank is not sustainable on the basis of alleged Indemnity Clause. Fifth submission is that as there is no privity of contract between Appellant and State Bank of India, the claim is not sustainable and the last submission is that the Suit is bad for non-joinder of necessary and proper parties. In fact, Advocate for Appellant filed Written Arguments, therefore, there is no need to reiterate them again and they can be answered point-wise.

6. On the other hand, Advocate for Respondent Bank submitted that the objection relating to jurisdiction, though not taken in the W.S., was considered by the Tribunal below and rightly rejected and

that there are no grounds to interfere with the finding of the Tribunal below on the first submission. It is further submitted that Section 72 of Contract Act is rightly applied and the objection of Appellant is not tenable. It is further submitted that Appellant gave Undertaking at the time of receiving money and as the money was paid by Bank of Baroda, Undertaking was given to that Bank and the contention of Appellant as to privity of contract is not sustainable. It is further submitted that the objection of not joining of necessary and proper parties is not a ground to dismiss the claim.

7. Both sides relied on some decisions in support of their respective contentions and those will be referred to at appropriate stage while dealing with the respective contentions.

8. First I must take up the objection of Appellant on the point of lack of privity of contract and non-joinder of necessary and proper parties together with. It is the contention of Appellant that there is no privity of contract between Appellant and State Bank of India and the Account of Appellant was debited by Bank of Baroda where Appellant has its Account, therefore, for want of privity of contract, the T.A. is liable to be dismissed. According to Appellant, Bank of Baroda and Reserve Bank of India are proper and necessary parties and as they were not impleaded, the T.A. has to be dismissed. As already referred to above, these Scrips were as per the policy of Government of India and the scheme formulated by it. From the record it is clear that these Scrips have to be surrendered to the designated Bank for claiming the premium. Admittedly,

Appellant has not surrendered them to the designated Bank, but it has submitted those Scrips to its Banker i.e. Bank of Baroda who in turn forwarded and later paid the money. The R.B.I. circular clarifies that Scrips have to be claimed through designated Banks, therefore, contention of Appellant that it has no privity of contract cannot be accepted. With regard to non-joinder of proper and necessary parties, if Appellant felt that they are proper and necessary parties, nothing prevented it to file an application to implead them. Admittedly, no such steps are taken by Appellant. Even as per C.P.C. a Suit cannot be dismissed for want of proper and necessary parties and Court or Tribunal, when feels that presence of a particular party is necessary for adjudicating issues, it is for the Court or Tribunal to insist for impleading them as parties, therefore, these two objections of Appellant are not tenable.

9. Before taking up the first and crucial point raised on behalf of Appellant, it may be relevant to refer to certain important dates. As already referred above, Government of India formulated EXIM Policy under which licenses were issued for export replenishment. These licenses were re-designed as REP Scrips which are known as EXIM Scrips. This was re-designed on 04.07.1991. R.B.I. issued notification dated 01.11.1991 permitting trading EXIM Scrips through designated Financial Institutions or Banks. As already referred to above, Appellant was not customer of State Bank of India which was one of the designated Banks. On 29.02.1992, R.B.I. issued Circular No. 11/1992 through which arrangements were

made for purchase of EXIM Scrips during the months of March and April 1992 at an appropriate premium. It is the contention of Appellant that in this Circular it is not differentiated between General Currency Area Scrips and Rupee Payments Area Scrips. On 16.03.1992, R.B.I. designated certain branches of S.B.I. to purchase the Scrips between 23.03.1992 to 31.05.1992. As per this Circular EXIM Scrips having face value of above Rs.5 Lakhs were required to be sent for authentication by Joint Controller of Exports and Imports and only after such authentication amount of premium is to be paid. On 19.03.1992, Respondent Bank issued a Press Release notifying that they will accept EXIM Scrips from the holders from 23.03.1991 to 31.03.1992 against payment of premium @ 20% of the outstanding face value and requested the Scrips holders to contact their Branches. In between 22.04.1992 and 27.05.1992, Appellant submitted EXIM Scrips in the prescribed format along with necessary declarations to Bank of Baroda, KFTZ Bank, Kandla, claiming premium @ 20% of the face value of EXIM Scrips and the said Bank of Baroda acted as collecting bank. These Scrips were duly verified by Joint Development Commissioner, Kandla Free Trade Zone and thereafter S.B.I. released money to Bank of Baroda and in turn Bank of Baroda credited those monies to the Account of Appellant in between 05.05.1992 and 04.06.1992. On 28.05.1992, R.B.I. decided that Rupee Payment Area Scrips were ineligible. According to Appellant, this decision of R.B.I. was not made known to general public. On 01.07.1992, S.B.I. addressed

a letter to Bank of Baroda informing that Scrips of Appellant have been rejected by R.B.I. as they were not eligible under the Scheme and claimed refund of Rs.37,63,800/-. S.B.I. also informed Bank of Baroda that their Branch was debited for the said amount. On 01.10.1992, Bank of Baroda sent letter to Appellant claiming refund of the money paid as premium and on the same date a sum of Rs.37,63,800/- was debited from the Account of Appellant. On 13.10.1992, Appellant issued Legal Notice to Bank of Baroda for wrongly debiting money and demanded credit of that amount. Bank of Baroda issued reply to that notice on 11.12.1992. On 19.12.1992, S.B.I. issued a letter to Appellant claiming refund of premium amount as they have given credit to Bank of Baroda. Thereafter on 24.02.1993 S.B.I. filed a Civil Suit against Appellant for recovery of a sum of Rs.44,43,312/-. According to Appellant the claim of S.B.I. do not fall under definition of word 'debt' under Section 2 (g) of RDDB&FI Act, as such the Tribunal has no jurisdiction. Advocate for Appellant submitted very same Bank raised plea before the Calcutta High Court that it did not carry business of sale or purchase of EXIM Scrips which was upheld and confirmed by the Hon'ble Supreme Court and as such on their own admission, the purchase or sale of EXIM Scrips do not fall under the business activities, hence the transaction do not attract the word 'debt'. Advocate for Appellant submitted as the claim in the Suit was for refund of premium amount paid to Appellant against surrender of EXIM Scrips and it was one time transaction, therefore, it never

qualified to be a 'debt' to attract provision of Section 2 (g) of RDDB&FI Act. To support his submissions reliance is placed on judgment of Calcutta High Court in State Bank of India (Overseas Branch) & Anr. V/s. Commercial Tax Officer & Ors. reported in 2002 SCC Online Cal 873 : (2003) 132 STC 234 and judgment dated 08.11.2016 of Hon'ble Supreme Court in Commercial and Tax Officers & Ors. V/s. State Bank of India (Civil Appeal No. 1798/2005) and judgment of D.R.A.T. in Punjab National Bank V/s. Tata Infotech Ltd. reported in 2004 SCC Online DRAT 78: (2005) 2 BC 16 (DRAT) and also judgment of D.R.A.T. in Eureka Forbes V/s. Allahabad Bank & Ors. reported in Volume II of 2007 BC 66. The Appellant also relied on decision of Hon'ble Supreme Court in State of Gujarat V/s. Raipur Mfg. Co. Ltd. reported in (1967) I SCR 618 : AIR 1967 SC 1066 and submitted in view of the principle laid down in above referred decisions, the claim of Respondent Bank before the Tribunal is not maintainable as the claim is not a debt.

10. In answer to above, Advocate for Respondent submitted the above decisions are not applicable to the facts of present case. It is submitted that the facts before the Hon'ble Calcutta High Court and Hon'ble Supreme Court were in the context of provisions contained in West Bengal Sales Tax Act and they cannot be relied here for the purpose of Banking Regulation Act and RDDB&FI Act. It is submitted that while examining definition of 'debt' it has to be seen whether liability has arisen out of permissible business

transaction, whether it was a one time transaction or multiple transactions. It is submitted that the judgments have to be read as a whole to interpret the definition of 'debt'. It is further submitted that in decision of D.R.A.T., Mumbai, in Punjab National Bank V/s. Tata Infotech Ltd. (Supra), D.R.A.T. was considering liability arisen out of contract for installing a software which does not fall within the ambit of banking or permissible business transaction under Section 6 of Banking Regulation Act, therefore that decisions has no application to the case on hand. It is further submitted that decision of D.R.A.T., Kolkata is not applicable because it was finally decided by the Hon'ble Supreme Court holding that definition of 'debt' has to be given a wide and liberal meaning. It is further submitted that decision of Hon'ble Supreme Court in State of Gujarat V/s. Raipur Mfg. Co. Ltd. (Supra) is also not applicable since in that case the company carried on business of manufacturing and selling cotton textiles and also sold old containers, cans etc. as bye-products for its survival as an economic unit. These sales were sought to be taxed under Bombay Sales Tax Act, therefore, those decisions are not applicable.

11. As already referred to above, the Bank originally filed its claim before the Civil Court and that Suit was transferred by Civil Court on establishment of D.R.T. Admittedly when such a transfer is made, Appellant has not raised any objection contending that the Tribunal would have no jurisdiction. On the other hand, it is contended that Appellant has no knowledge of said transfer. But

the fact remains that Appellant has approached this Tribunal when their application to set aside exparte decree was dismissed. They were aware of the fact as to the transfer of Suit from Civil Court to D.R.T. If really they were serious on the jurisdiction issue, they ought to have raised this point before this Tribunal in their Appeal and Appellant ought to have prayed for a direction to the Tribunal below to decide the jurisdiction issue first. In fact Appellant filed their Written Statement only after their Misc. Appeal was allowed by this Tribunal and the matter was remitted back to D.R.T. In the W.S. Appellant has not specifically raised this jurisdiction objection. It may be relevant now to extract the exact pleadings that were taken in their W.S. connecting limitation aspect, which is as follows:

"This is a declaratory prayer and such a prayer, in the factual matrix of the present matter, can be adjudicated upon by a Civil Court only. Therefore, in that context, it is very relevant to note that wherever the 'debts' were adjudicated by Civil Court and the amounts are higher than Rs.10 Lac, even such execution applications came to be transferred to the DRTs while applying the same situation, such a suit could not have been transferred at all to the DRT. Besides, it is important to note that the plaintiff-Bank has candidly conceded in its plaint itself that only after the payment was made, on 12-06-1992 or thereabout, the plaintiff-Bank came to know that RPA Exim Scrips were out of the scope of the policy / scheme and no payment was to be made on such scrips. Therefore, if there was any misrepresentation, it was on the part of the Government agencies or Reserve Bank of India, as it has been time and again mentioned that on the request of the Reserve Bank of India for implementation and management of the policy / scheme, the State Bank of India was acting and that is acting as AGENT only. So, if the plaintiff-Bank can be having any claim whatsoever, it can have a claim as against its PRINCIPAL only i.e. either Reserve Bank of India or the concerned Governmental agency, which did not inform / advertise / brought to the notice initially only the fact that RPA Exim

Scripts were to be outside the purview of the scheme / policy. Therefore, the claim of the plaintiff is totally misdirected. In these facts and circumstances, when the defendant did present the all the Exim Scripts and changed its position qua them under a valid, legal and binding contract and acted through its banker and there is no fraud or misrepresentation, there is no question of the plaintiff-Bank instituting the suit for the alleged losses as against the defendant. In fact, if there was any inducement, that was on the part of the agencies, who did not inform anyone, including the plaintiff-Bank that the RPA Exim Scripts were outside the purview of the scheme."

12. From a close reading of above, nowhere it indicates that Appellant is questioning the very jurisdiction of Tribunal below. Normally all the objections regarding territorial jurisdiction, pecuniary jurisdiction or lack of jurisdiction, have to be raised at the inception itself and if a party participates in the proceedings without raising such objections at initial stage, or without perusing, it has be presumed that such party submitted to the jurisdiction of that Court or Tribunal and that aspect cannot be questioned at appellate stage. In fact, at the time of arguments before the Tribunal below this objection was raised and the Tribunal below decided the said objection in para 14 of its judgment by recording that payment made to the Defendant i.e. Appellant herein was in the course of its banking activity and as the word 'debt' has to be given wider meaning, the application is maintainable and the claim falls within the parameters of Section 2 (g) of the RDDB&FI Act.

13. Advocate for Respondent referred to judgment of Hon'ble Supreme Court in United Bank of India V/s. Debts Recovery Tribunal & Ors. reported in 1999 4 SCC 69 wherein Hon'ble Supreme Court held that expression 'debt' has to be given widest

amplitude to mean any liability which is alleged as due from any person by a bank during the course of banking business activity undertaken by the Bank either in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any court or otherwise legally recoverable on the date of the application. In that case United Bank of India filed a Suit before Calcutta High Court against three Defendants for recovery of debt from one of them and for certain ancillary and incidental reliefs against the others. While the Suit was pending RDDB&FI Act came into force and on establishment of Debts Recovery Tribunals, the Suit was transferred to Tribunal which was re-numbered as Transfer Application. The Defendants immediately moved an application before the Tribunal contending that it has no jurisdiction to entertain that Suit in view of the nature of reliefs prayed in the Plaint. Tribunal below dismissed those applications, against which three Defendants filed separate applications before the High Court and the High Court allowed those applications holding that as the Suit is for damages and compensation which is required to be quantified before a decree to be passed and it will not be within the purview of the Tribunal under the RDDB&FI Act. Those orders of the High Court were challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court made above referred observations that widest amplitude is to be given to the word 'debt'. Advocate for Respondent Bank also relied on judgment of Hon'ble Supreme Court in State Bank of Bikaner & Jaipur V/s. Ballabh Das & Co. &

Ors. reported in (1999) 7 SCC 539, judgment of Hon'ble Supreme Court in ICICI Bank Ltd. V/s. Official Liquidator of APS Star Industries Ltd. & Ors. reported in (2010) 10 SCC 1 and judgment of Hon'ble Supreme Court in Eureka Forbes Ltd. V/s. Allahabad Bank & Ors. reported in (2010) 6 SCC 193. In all the above referred decisions, the Hon'ble Supreme Court held that the word 'debt' has to be interpreted liberally and in the case of ICICI Bank Ltd. V/s. Official Liquidator of APS Star Industries Ltd. & Ors (supra), the business activities of banking companies were interpreted and in view of these decisions, objection of Appellant with regard to jurisdiction is not tenable and the Tribunal below rightly negated said objection.

14. The next submission of Ld. Counsel for Appellant is that as the monies are not paid under any mistake of fact or law, Section 72 of the Contract Act is not applicable and the facts are governed by Section 21 of the Contract Act. It is submitted in this case premium was not paid by Bank of Baroda on account of any mistake of fact or law and it was paid under a valid and enforceable contract due to surrender of scrips by Appellant. It is submitted that even if it is admitted that monies under contract were paid on account of erroneous understanding of the policy, the same by itself cannot be a ground to render voidable the said contract. Therefore, money cannot be claimed u/s 72 of the Contract Act. It is further submitted that after the scrips were tendered for encashment they were sent to the Office of Joint Development Commissioner,

Kandla Free Trade Zone for verification of genuineness, and the said Authority after verification returned the said scrips certifying that they are genuine and the Drafts were issued only thereafter. It is submitted that a Telefax message relied on by Bank cannot bind Appellant as it is only internal communication of S.B.I. It is further submitted that S.B.I. did not return the scrips to Bank of Baroda within the validity period and on that ground also Section 72 of Contract Act is totally inapplicable. It is submitted that the Tribunal below wrongly applied judgment of Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh reported in (1989) 4 SCC 1 and the order of the Tribunal below is liable to be set aside. To support his argument, he placed reliance on judgment of Hon'ble Supreme Court in Dhanlaxmi Rice Mills & Ors. V/s. Commissioner of Civil Supplies & Anr. reported in (1976) 4 SCC 723, judgment of Hon'ble Supreme Court in Kalyanpur Lime Works Ltd. V/s. State of Bihar and Dalmia Jain & Co. Ltd. reported in 1954 SCR 958 : AIR 1954 SC 165, judgment of Bombay High Court in The State Industrial & Investment Corporation of Maharashtra Ltd. V/s. Narang Hotels Pvt. Ltd. & Anr. reported in 1995 SCC OnLine Bom 31 : AIR 1995 Bom 275 and judgment of Kerala High Court in Appakannu Muhammed Haneefa & Anr. V/s. Narayani Pilla Thankamma Pilla & Ors. reported in 1966 SCC OnLine Ker 51 : AIR 1967 Ker 190.

15. In reply to this, Advocate for Respondent Bank submitted that the Tribunal below rightly applied Section 72 of the Contract

Act relying on judgment of Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh (Supra). It is submitted that when money was paid under any mistake of fact or law it would amount to unjust enrichment and in this case money was paid to Appellant by mistake as the Rupee Area Scrips are not covered under the notification dated 19.03.1992, it is unjust enrichment, therefore Tribunal below rightly allowed the claim. To support his argument Advocate for Respondent Bank relied on judgment of Hon'ble Supreme Court in Sales Tax Officer, Banaras & Ors. V/s. Kanhaiya Lal Makund Lal Saraf & Ors. reported in 1959 SCR 1350 : AIR 1959 SC 135, judgment of Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh reported in (1989) 4 SCC 1, judgment of Hon'ble Supreme Court in Mafatlal Industries Ltd. & Anr. V/s. Union of India & Ors. reported in (1997) 5 SCC 536, judgment of Hon'ble Supreme Court in State of Kerala V/s. Aluminium Industries Ltd., Kundara, Quilon reported in (1965) 16 STC 689, judgment of Andhra Pradesh High Court in Indian Bank V/s. Macro Electronics & Anr. reported in 2004 SCC OnLine AP 466 : AIR 2005 AP 328, judgment of High Court of Madras in Titan Industries Ltd. & Ors. V/s. State Bank of India & Anr. reported in 2011-2-L.W. 276.

16. From the material on record it is evident that money was paid to Appellant due to oversight which has to be termed as a mistake enumerated in Section 72 of the Contract Act. Added to this Appellant gave a Declaration Undertaking to refund the amount of

premium if it is found that Scrips are defective or title of Scrips is defective etc. Before the Tribunal below Appellant herein referred to judgment of Bombay High Court which is also cited here whereas Respondent Bank relied on judgment of Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh (Supra). Now besides the judgment of Bombay High Court, Appellant also referred to two judgments of Hon'ble Supreme Court and one judgment of Kerala High Court. Both the judgments of Hon'ble Supreme Court are prior to judgment of Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh. Hon'ble Supreme Court in Mahabir Kishore & Ors. V/s. State of Madhya Pradesh judgment held if money is paid under any mistake of fact or law, it amounts to unjust enrichment and the person received such amount is liable to refund the same. Hon'ble Supreme Court followed its earlier decision in Sales Tax Officer, Banaras & Ors. V/s. Kanhaiya Lal Makund Lal Saraf & Ors. (Supra) in Mahabir Kishor's case. As rightly pointed by Advocate for Respondent Bank judgment of Hon'ble Supreme Court in Dhanlaxmi Rice Mills's case is in a case where State levied administrative surcharge and the parties contended that they came to know subsequently that State has no such right. But here the facts are different. Further in view of the principle laid down in subsequent cases, the decisions relied on by Appellants have no application and the Tribunal below rightly applied Mahabir Kishor's case to the facts on hand and there is no wrong in the order of the

Tribunal below in holding that Section 72 of the Contract Act is applicable. Further as seen from the record, there was a Telefax message which clarified the payment under the scheme and the money is paid by oversight and in view of the Undertaking given by Appellant, they are liable to refund the money. Therefore, the objection of the Appellant on this score is not tenable.

17. The next contention of Appellant is that subsequent Press Release after payment did not bind Appellant. But in view of Undertaking of Appellant, that objection is not tenable. Ld. Counsel for Appellant argued at length on this aspect contending that it would amount to promissory estoppel, but as rightly submitted by Advocate for Respondent Bank, in view of Undertaking given by Appellant, the entire argument of Advocate for Appellant and the decisions relied on that point have no force.

18. The next point urged is that there is no privity of contract between Appellant and S.B.I. and even the indemnity clause was given to Bank of Baroda and not to S.B.I. This contention is also not tenable for the simple reason that Scrips are to be encashed only in the designated banks and Bank of Baroda is not a designated Bank and as Appellant submitted those Scrips through their banker (Bank of Baroda) necessary indemnity was taken only in connection with those Scrips, therefore, the objection of Appellant is not tenable.

19. On a overall scrutiny of the entire material and the impugned order dated 21.03.2006 and for the reasons stated above, I am of

the considered view that Tribunal below has not committed any error in allowing the claim of State Bank of India and in fact though the Bank claimed interest @ 22.25% per annum with quarterly rest, the Tribunal below granted only simple interest @ 06% per annum, by which it extended benefit to Appellant under the principle of natural justice, therefore, there are no grounds to interfere in the impugned order dated 21.03.2006.

20. For the reasons stated above, Appeal is dismissed, but under the circumstances without costs.

21. All Miscellaneous Applications, if any, are dismissed as infructuous.

Chairperson

dpi