BANK OF INDIA Vs. UNITED WESTERN BANK LTD.
LAWS(DR)-2006-5-14
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on May 02,2006

Appellant
VERSUS
Respondents

JUDGEMENT

P.K.Deb, J. (Chairperson) - (1.) BOTH the appeals have been heard analogous as they arise out of the same impugned judgment passed by the learned Presiding Officer, D.R.T., Jabalpur in T.A. No. 312/98, whereby and whereunder the claim of the United Western Bank Limited (appellant in Appeal No. R -432/04 and the respondent No. 1 in Appeal No. 385/04) to the tune of Rs. 21.12,848.84 together with interest and cost has been allowed against the defendant Nos. 5 to 7 i.e. the appellants in appeal No. 385/04 and respondent Nos. 5 to 7 in appeal No. 432/04 leaving aside the other defendant -respondents from the liability. Before going into the merit of the appeal, the brief facts of the case are required to be reiterated.
(2.) SONU Cotton Traders is a proprietary firm and is engaged in business of cotton and having dealings with the applicant Bank i.e. United Western Bank Limited for long. On the request of the firm i.e. defendant No. 1 the applicant Bank granted the Bill Purchase Limit of Rs. 14 lakh to the firm for the business of pressed cotton bales. The firm Sonu Cotton Traders wanted to sell the cotton bales to the defendant No. 4 Anant Roto Spinning Ltd., Kolhapur. At the instance of defendant No. 4, defendant No. 6 Bank of India had granted letter of credit limit to the extent of Rs. 14 lakh as per the agreement stands. Defendant No. 1 Sonu Cotton Traders was the beneficiary of the limit and the defendant No. 4 Anant Roto Spinning Ltd. were to purchase on opening of irrecoverable L.O.C., which was created by the defendant No. 6 and preferably said to be defendant Nos. 5 to 7 on 12th February, 2003 vide Exhibit A -1. In the year 1992 -93 defendant No. 1 presented six bills to the applicant Bank i.e. United Western Bank Ltd., which have been marked as Exhibit Nos. A -5 to A -10. Six hundis were also drawn along with those bills for negotiating with the Bank. On 25th February, 1993 by collection of proceeds in respect of value of 50 bundles of cotton bales from the defendant No. 4 under L.O.C. issued by the defendant No. 6 Bank of India, the cotton was sent through C.C. Transport Company, Calcutta. The United Western Bank i.e. the applicant in the case had averred that the defendant No. 1 on 5th March, 1993 executed an agreement in respect of the purchase limit of Rs. 14 lakh vide Exhibit No. A -23. Defendant No. 2 and defendant No. 3 stood as guarantors for the aforesaid facility granted to defendant No. 1 vide exhibit No. A -24. The defendant No. 1 for the purpose of security had also mortgaged its immovable properties and also D.P. Note for extent of limit granted. It is further case of the applicant Bank that the defendant No. 6 Bank of India had accepted the responsibility to make payment in respect of cotton bales supplied by defendant No. 1 to defendant No. 4 by the L.O.C. The assurances given by the defendant No. 7 Bank authority of Bank of India on the L.O.C. the applicant Bank presented the bills and hundis together with motor transport receipt on 4th March, 1993, but after several correspondences defendant No. 6 refused to make the payment. According to the applicant Bank, it had paid defendant No. 1 Rs. 13,87,824.87 in view of the L.O.C. granted by the defendant No. 6. The accounts are at Exhibit No. A -26. When the defendant No. 6 refused to make payment, the applicant Bank i.e. United Western Bank Ltd. requested the defendant No. 6 to direct the defendant No. 7 the Branch Manager of Janbad to make the payment. Defendant No. 6 confirmed such payment and asked the applicant Bank to contact defendant No. 7, but defendant No. 7 did not respond and then it was informed to the applicant Bank that such confirmation was made by the defendant No. 6 subject to collection of the amount and when the same had not been collected, they are unable to make the payment. Ultimately after making several correspondences, the applicant Bank filed the suit for recovery of the amount as mentioned above before the Civil Court and on setting up of the Tribunal it was transferred to D.R.T., Jabalpur, wherein it was registered as T.A. No. 312/98. Defendants have contested the suit by filing separate written statements. The plea of defendant No. 1 was that they have complied with all the formalities of the Bank and on the basis, of L.O.C. being issued payment was made to them by the applicant Bank and there remained no liability of the defendant No. 1, if the L.O.C. is now being ignored by the Bank of India. Similar was the plea made by the guarantors -defendant Nos. 2 and 3. The main contestants were defendant Nos. 5 to 7 and their pica was that although L.O.C. was issued at the instance of the defendant No. 4 purchaser, but as defendant No. 4 informed that he had not been supplied with the cotton bales of proper specification, then at the request of defendant No. 4, the payment was withheld.
(3.) IT was further submitted that the bills suffered from several defects, which were enumerated specifically in the written statement itself and in that way when the conditions of the L.O.C. had not been fulfilled, the Bank of India i.e. defendant Nos. 5 to 7 had no liability towards the applicant Bank. The legal plea was also taken to the effect that as the dispute is in between two financial institutions, then the matter ought to have been referred to the High Power Committee and the Civil Court or the Tribunal had no jurisdiction to entertain such dispute between two Banks. Another plea was taken to the effect that as the Bank of India is neither a borrower nor the guarantor, recovery claim cannot be made against the defendant Nos. 5 to 7 as they do not come within the definition of the debt as per the RDDBFI Act.;


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