P G FOILS LTD Vs. BANK OF RAJASTHAN LTD
DEBTS RECOVERY APPELLATE TRIBUNAL
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(1.) THE appellant (M/s. P.G. Foils Ltd.) is in appeal against the final order dated 12.7.2004 passed by the Tribunal below in O.A. No. 93/1998 filed by the Bank of Rajasthan Ltd.-the respondent herein. THE O.A. has been decreed for the recovery of Rs. 21,20,466/- plus interest @ 13.5% p.a. from 31.12.1995 till the filing of the O.A. and thereafter along with pendente lite and future interest @ 11% p.a. from the date of filing of O.A. subject to the condition that in the event of the defendant making payment of all the O.A. amount in question within a period of three months, interest at a lower rate of interest of 10% p.a. for pendente lite and future interest (till date of payment) would be payable. THE appellant/defendant has also been saddled with costs of the litigation.
(2.) The facts insofar as they are necessary may be stated briefly. The appellant/defendant in the O.A. made a public issue of 2042600 equity shares of Rs. 10/- each at a premium of Rs. 20/- per share aggregating to Rs. 612.78 lakh. The subscription list was closed on 26.12.1994. The issue was over-subscribed 59.12 times. The appellant/defendant requested the respondent-Bank herein to act as a Banker for refund of the oversubscription and the Bank agreed for the same subject to the terms and conditions contained in the letter written by it (Bank) to the defendant and other terms and conditions contained in the agreement for appointment of refund Bankers dated 7.3.1995. Accordingly, 29 branches of the Bank at different centres were designated for the purpose of honouring the refund orders issued by the appellant/defendant company while the entire exercise was controlled by the Bank's branch at E-17, South Extension Part-II, New Delhi. For other places, the Bank made arrangement with the Union Bank of India.
As per the agreement, the appellant/defendant was required to arrange the funds which were to be kept in the fixed deposit for shortest maturity period with the Bank. The Bank was required to make the payment to the Union Bank of India who acted as co-Banker for refund well in advance for making the payment of the refund orders. The Bank agreed to provide 100% overdraft against the fixed deposits which was to be utilized for payment of refund orders. The Bank acted as per the arrangement and made payments to the Union Bank of India. The Bank also provided 100% overdraft in the refund account equivalent to the fixed deposit provided by the defendant company of the refund amount which was kept for the shortest period of term deposit. The Bank paid to the appellant/defendant company Rs. 1,08,20,104/- as interest on the FDRs kept with it. The designated branches of the Bank made payment of refund orders and when received and thereafter sent the refund orders to the Bank's South Extension Branch, New Delhi. The Bank debited the refund account of the appellant/defendant company. However, it was found that the Bank was paying interest to the defendant on the FDRs for the duration of time between the payment on refund orders by designated branches and the day on which the refund account was debited by the Bank's South Extension Branch. On reconciliation of accounts of appellant/defendant company, it was found that it was liable to make the payment of the interest on overdraft which was due for the period between the actual payment by the designated branches and the date of debit by the Bank's South Extension Branch. The total interest calculated was Rs. 21,20,466/- as on/30.12.1995 on account of overdraft facility availed of by the appellant/defendant company. After availing of the overdraft facility, the appellant/defendant company failed to clear the outstanding dues on account of interest payable as stated above despite repeated requests/reminders made by the Bank and despite assurances by the defendant to pay the same. As on the date of filing of the O.A., a total sum of Rs. 32,14,985.02 paise became due and outstanding against the appellant/defendant. Since the due amount of the Bank was not paid and even the legal notice dated 2.1.1998 did not bring any fruitful result, the Bank was obliged to file the O.A.
(3.) THE appellant/defendant opposed the O.A. on diverse grounds chiefly that there was not a relationship of creditor and debtor between the parties and the amount claimed by the Bank was not a 'debt'. THE Tribunal below had no jurisdiction to try and entertain the O.A., because it was a service contract entered into between the parties which clearly stated that it would be enforceable in the jurisdiction of the Court where the registered office of the defendant company was situated i.e. Ahmedabad. THE Bank was not entitled to charge any interest as it was simply a service contract for facilitating payment of refund orders. Even if it was assumed that any interest was due, the Bank was entitled to charge interbst recoverable on the overdraft which was 13.5% and not 22% or 24% as per Bank statement.;
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