- (1.) Plaintiff has made this application for : (i) appointment of receiver in respect of the assets and properties, books of accounts and records of the respondents No. 1 to 52 including movable assets with appropriate directions; (ii) injunction restraining the respondents No. 1 to 52 from disposing of or parting with possession", transfer, encumbering or dealing with their assets, profits including those mentioned in Annexure "G" to the plaint without making the payments due to the plaintiff/petitioner; (iii) decree on admission against the respective respondents mentioned in prayer (d) and for consequential reliefs; (iv) filing of affidavits, directing disclosure of the amount received by the said respondents from different branches; (v) injunction restraining the respondents No. 53 to 57 from demanding any money from the petitioner in relation to the alleged void Letters of Credits (LCs) purported to have been negotiated by them through unjustified and fraudulent transactions; or (vi) to demand any money or in any way dealing with or to exercise any right, title or interest in respect of any of the LCs issued by the petitioners branches including Bag Bazar Branch; (vii) injunction restraining the respondents No. 53 to 57 from utilizing the money received under any such LCs including those mentioned in Annexure "C-2" of the plaint; (viii) direction upon the respondents No. 53 to 57 to deliverall the invalid LCs including those mentioned in Annexure "C-2" of the plaint, (ix) direction to furnish security of Rs. 117 Crore; (x) injunction restraining them from receiving, crediting or withdrawing or dealing with any of their accounts maintained with and/or fund lying to their credit so far as the respondents No. 1 to 52 are concerned with the respondents No. 53 to 57; and (xi) the respondents No. 53 to 57 be directed to refund and pay the petitioner all amounts realized by way of proceeds of the Bills unauthorizedly collected by them. Facts :
(2.) The case made out in the plaint on the basis whereof the above prayers are made are that one Madhumita Group of Industries and their respective Directors (Respondents Nos. 1 to 44) referred to as MG1, who are interrelated with each other, had been maintaining accounts with the State Bank of India (SBI), particularly) in Bag Bazar Branch. In connivance and collusion with some of the employees of SBI, particularly, of Bag Bazar Branch (Respondents Nos. 45 to 52), MGI got LCs opened in their favour. Those LCs were alleged to have been issued in obsolete forms. The officers, who had issued the LCs, were not authorized to issue those LCs. Those LCs were opened simply by manipulation or jugglery of accounts, in fact, without putting in any fund by those, Madhumita Group of Industries, in connivance with the employees of SBI, amounting to forgery, as spelt out in detail in the application. These LCs were negotiated with the respondents No. 53 to 57, who purported to have obtained confirmation of the LCs from the same officers, who had issued the same, without taking proper care, which they are required to take before negotiating the respective LCs. Fraud has been alleged in respect of these transactions. According to SBI, all these LCs are void. These transactions were kept secret and could not be detected by the Bank. It was quite for some time these transactions continued. Some of the LCs were honoured by SBI, particularly, by Bag Bazar Branch. 2.1. The respondents No. 53 to 57 had approached the Debt Recovery Tribunal (DRT) and had initiated proceedings for recovery of the dues under such LCs as against SBI. By virtue of an interim order granted in this case, the said proceedings before the DRT have since been stayed. Receiver has been appointed. 2.2. On 26th November, 1998 on the present interlocutory application filed by the plaintiff, the learned single Judge passed an interim order directing the respondents No. 53 to 57 to maintain status quo with regard to the impugned LCs. A special officer was also appointed to make inventory of the assets of the defendants No. 1 to 44, namely, Madhumita Group. The defendants No. 54 and 56 preferred an appeal before the Honble Division Bench, which was pleased to set aside the order of status quo. The plaintiff challenged the order of the Division Bench by way of special leave petition before the Apex Court. By an order dated 12th July, 1999, the Apex Court disposed of the said appeal after hearing the plaintiff and the defendants No. 53 to 57, dispensing with service upon the other defendants, excepting the said five banks, setting aside the order of the Division Bench, remitting the matter to the learned single Judge for disposing of the interlocutory application on merit. The proceedings before the DRT initiated by the said five banks (defendants No. 53 to 57), were stayed pending, disposal of the interlocutory application. Submission on behalf of the plaintiff/petitioners :
(3.) Mr. Depankar Ghosh, learned counsel for the plaintiff/petitioner, made elaborate submission pointing out the manner in which the fraud was perpetuated. It is alleged that one of the signatories was computer personnel, who had nothing to do with banking operation. The other officers though functioning in the operation sector of SBI, but none of them were authorized signatories for opening LCs, which is apparent from the banks register of books, which can be verified by any of the banks. But none of the respondents No. 53 to 57 had attempted to verify the same for which there was a hint of collusion as against these respondents as well, only to the extent that they did not take care to ascertain and find out, in normal course of business, as to the validity of LCs negotiated by them. He has elaborated that the entries as made in one account, then it is transacted through series of accounts on the same date in order to make the same, untraceable. That apart, with regard to these LCs, no accounts are available. It is alleged that with the help of computer personnel, the entire accounts have since been wiped out. Therefore, all those LCs are void ab initio on account of its being fraudulently issued. In order to prove his allegation, he had led the Court through various documents annexed with the petition. He had taken many other points and argued in detail. It is not necessary to record those submissions, which mainly related to the merit of the case, at this stage. Admittedly, the merit of the case may be a relevant factor for determining the prima facie case for grant of interim orders. However, those parts of Mr. Ghoshs argument, which would be relevant for our present purpose would be noted in the body of the decision, as and when the relevant points would be considered. 3.1. Mr. Ghosh elaborated on the actual authority and ostensible authority with a view to contend that the basis of issue of the LCs being without authority, the question does not come within the scope and ambit of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 {DRT Act), particularly, in view of the forgery, as spelt out by him. The LCs being result of forgeries, are nullities. It does not confer any right in favour of other banks and no obligation is imposed on the plaintiff by reason thereof. Forgery excludes Rules of Indoor Management. He relied on Ruben & Ladenburg v. Great Fingall Consolidated, 1906 AC 439 : 1904-1907 All ER (Rep) 461; Credit Bank Cassel Gmbu v. Schenkers Limited (1927) 1 KB 826 at 830 : 1927 All ER (Reprint) 421; South London Greyhound Race Course v. Wake, (1931) 1 Ch 496 and Secretary, Naguneri Peace Memorial Co-operative Urban Bank Limited v. Alamelu Ammal, AIR 1961 Mad 419. According to him, those LCs are not LCs at all and as such outside the banking business. He further contended that the said five banks being negligent in their own sphere of performance, they cannot claim the amount out of the LCs as result of banking transaction. These LCs do not constitute debt, which can be recovered through the Debt Recovery Tribunal. Inasmuch as, no money is payable under the said LCs by the plaintiff. Since, in this case, it is the validity of the LCs itself, which is being challenged. It does not fall within the scope and ambit of the decision cited on behalf of the respondents. which are related to the transaction underlying the issue. He seeks to distinguish those decisions on the ground that a debt must arise out of business activities undertaken by bank. Such business activity, if falsified and forged into existence, is not legitimate banking activity undertaken by the bank. 3.2. The question whether it is a debt or not is not required to be definitively decided in the present application since it is a question on merit which should be left open to be decided at the hearing. Therefore, any attempt to recover any money out of such LCs is not a suit for recovery of debt within the meaning of DRT Act. He has pointed out that the expression "debt", which is said to have wide amplitude to include un-liquidated damages, as held by the Apex Court, does not specify as to what kind of suit would be a suit for recovery of debt. He pointed out that the present suit is not a counterclaim or a defence against the suit pending in DRT. Inasmuch as, the forgery and fraud alleged against the defendants No. 1 to 44 and 45 to 53, who are employees of the plaintiff, could not be brought in the suit before the DRT. Therefore, it is this Court, which can try all these comprehensive questions raised in this suit. 3.3. He has also taken the point of convenience in the trial by the High Court instead of by DRT. Since it involves detailed investigation of disputed facts and consideration of massive oral and documentary evidence and examination and cross-examination of witness, which might consume enormous time. Having regard to the inadequacy of infrastructure, procedure or requirement, insufficient space, staffs before the DRT, a pragmatic approach is to be taken so that the basic object of expedition, for which the DRT was set up, would not be defeated. According to him, this suit could not be conveniently heard by DRT along with the suits of the other banks. The DRT is incompetent to try a declaratory suit and grant no monetary relief, which includes delivery of the LCs and cancellation thereof, declaring those to be fraudulent and forged and without effect. All these questions cannot be gone into at this interlocutory stage. Submission on behalf of South Indian Bank & Global Trust Bank :;