EUREKA FORBES LIMITED versus ALLAHABAD BANK AND ORS.

Citation: [2010] 5 S.C.R. 990 · Decided: 03-05-2010 · Supreme Court of India · Bench: B. SUDERSHAN REDDY · Disposal: Case Partly allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2010] 5 S.C.R. 990 
EUREKA FORBES LIMITED 
v. 
ALLAHABAD BANK AND ORS. 
(Civil Appeal No. 4029 of 2010) 
MAY 03, 2010 
[B. SUDERSHAN REDDY AND SWATANTER KUMAR, 
JJ.] 
Recovery of Debts Due to Banks and Financial 
C Institutions Act, 1993: 
Object of the Act - Discussed. 
s.2(g) and 17 - 'debt' - Meaning of- Jurisdiction of Debt 
Recovery Tribunal - Respondent nos.2 and 3 had obtained 
D licence from appellant company to use their factory premises 
- They failed to pay the licence fee - Appellant sold the goods 
lying in the premises and adjusted the sale proceeds thereof 
towards the arrears of licence fee, without the consent of 
respondent no.1-bank, though said goods were hypothecated 
E by respondent nos.2 and 3 in favour of respondent no.1 -
Claim by respondent no.1-Bank against appellant before 
Debt Recovery Tribunal - Plea of appellant that the Tribunal 
lacked inherent jurisdiction to entertain and decide the claim 
since appellant was neither a borrower nor was there any kind 
F of privity of contract between it and respondent no. 1; and as 
such, money claimed from them was not a 'debt' - Further 
plea that there was lack of knowledge on the part of appellant 
that the goods in stock were hypothecated to respondent no. 1 
- Held: Appellant took no remedial or bonafide steps even 
G after it admittedly came to know that the goods in question 
were hypothecated to the Bank - Even if certain amounts were 
due to appellant from respondent nos.2 and 3 on account of 
licence fee, still they could not have brushed aside the charge 
of respondent no. 1 over the goods in question - The goods 
H 
990 
EUREKA FORBES LIMITED v. ALLAHABAD BANK 
991 
AND ORS. 
in question were disposed off by appellant either in collusion 
A 
with respondent nos. 2 and 3 or at its own but with the 
knowledge that the goods were hypothecated to the Bank -
The word 'debt' under s.2(g) is incapable of being given a 
restricted or narrow meaning - Claim raised by respondent 
no.1 fell well within the ambit and scope of s.2(g) and wa.c:; we!! 
B 
within the jurisdiction of the Tribunal exercising its power under 
s. 17 - However, the entire suit could not have been decreed 
against the appellant -
The cause of action in favour of 
respondent no. 1 and against appellant, at best, could be 
limited to the hypothecated goods. 
c 
Maxims - Maxim "Nullus commodum capere potest de 
injuria sua propria" - Applicability of 
Doctrines/Principles: 
Doctrine of full faith and credit - Applicability of 
Principle. of public accountability and transparency in 
State action - Applicability of 
Respondent nos.2 and 3, who had obtained licence 
from appellant company to use their factory premises, 
failed to pay the licence fee. The appellant sold the goods 
lying in the premises and adjusted the sale proceeds 
thereof towards the arrears of licence fee, without the 
consent of respondent no.1-bank, though the said goods 
were hypothecated by respondent nos. 2 and 3 in favour 
of respondent no.1. 
Respondent no.1 claimed that it had a charge over 
the movable assets disposed off by the appellant and filed 
D 
E 
F 
a civil suit against the appellant and respondent nos.2 & 
G 
3 claiming a sum of Rs.22.11 Lakhs. 
The suit was transferred to the Debt Recovery 
Tribunal. The appellant did not appear before the Tribunal 
and finally an ex-parte decree was passed against it, and 
H 
992 
SUPREME COURT REPORTS 
[2010] 5 S.C.R. 
A a recovery certificate was issued by the competent 
authority under the provisions of the Recovery of Debts 
Due to Banks and Financial Institutions Act, 1993. The 
prayer of appellant for setting aside ex-parte decree was 
rejected consistently by all the courts. 
B 
After having lost upto this Court, the appellant 
initiated another round of litigation. The matter came up 
before the appellate Tribunal which set aside the said ex-
parte decree on the reasoning that, the claim in question 
was for damages in tort and not a debt, and also that it 
C was beyond the scope of the jurisdiction vested in the 
Debt Recovery Tribunal under s.17(1) of the Act. 
The High Court, however, held that, even claim for 
damages would fall well within the jurisdiction of the Debt 
o Recovery Tribunal in the facts of the case, and set aside 
the judgment of the appellate Tribunal. 
In appeal to this Court the main stand of the 
appellant was in relation to the jurisdiction and lack of 
knowledge of the fact that the goods in stock were 
E hypotheca

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