STATE BANK OF BIKANER AND JAIPUR versus M/S. BALLABH DAS AND CO. AND ORS.

Citation: [1999] SUPP. 2 S.C.R. 465 · Decided: 15-09-1999 · Supreme Court of India · Bench: G.T. NANAVATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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ST A TE BANK OF BIKANER AND JAIPUR 
A 
v. 
M/S. BALLABH DAS AND CO. AND ORS. 
SEPTEMBER 15, 1999 
[G.T. NANAVATI AND S.N. PHUKAN, JJ.] 
B 
Recovery of Debts Due to Banks and Financial Institutions. Act, 1993. 
Ss.2(a), 17,18,31 and 34-Recovery of debts due-Money borrowed 
from Bank for export of goods-Insurance cover in favour of bank against C 
any loss-Delivery of export documents to the bank-Insurance cover 
stipulating that delivery of export document to the bank, would be deemed 
to be payments by the exporter-Default in payment by foreign buyer-
Liability of exporter-Whether stood discharged? Held, No, despite the 
delivery of export document, exporters liability as principle debtor continues D 
to subsist. 
Ss.17, 18, 31 and 3 4--Suit for recovery of debts due-Constitution of 
Debts Recovery Tribunal-Transfer of pending cases-Scope of-Held, transfer 
is automatic by operation of /aw-Any application for transfer to be treated 
as application for forwarding records of the suits of the Tribunal. 
E 
Words & Phrases 
'Debt '-Meaning and scope of in the context of S. 2 ( g) of the Recovery 
of Debts Due to Banks and Financial Institutions Act, 1993. 
F 
The respondent-company under the export credit facility was obtaining 
advances from appellant bank from time to time against pre-shipment and 
port-shipment export of certam goods. The bank was insured against any 
loss on account of non-payment by foreign buyers. The insurance cover 
stipulating that delivery of export documents would be deemed to be payments G 
by the respondents to the Bank. On default in payment from the buyer, the 
appellant bank filed suits against respondent for recovery of dues. During 
the pendency of suits, by a Presidential promulgation the Recovery of Debts 
Due to Banks and Financial Institutions Act, 1993 came into force and Debt 
Recovery Tribunal was constituted under the Act. The Trial Court allowed 
465 
H 
466 
SUPREME COURT REPORTS [1999) SUPP. 2 S.C.R. 
A the application for transferring the suits to the Debts Recovery Tribunal. 
However, on revision, the High Court set aside the order of Trial Court 
holding that the facts whether the amounts claimed fall within the meaning 
of term 'debt' under S.2(g) of the Act and whether the amounts claimed are 
legally recoverable or not was a question of facts to be decided after recording 
B evidence and till those facts are decided, the Act cannot be said to have 
become applicable to the suits. Hence the present appeals. 
Allowing the appeals, and setting aside the order of the High Court, 
the Court 
C 
HELD : 1.1. The High Court erred in holding that the applications 
D 
made by the bank were pre-mature and till the Court decides that the 
amounts are still due and payable to the bank they cannot be treated as suits 
for recovery of the debts as contemplated by the Recovery of Debts Due to 
Banks and Financial Institutions Act, 1993 and therefore, they are not 
required to be transferred to the Tribunal. [472-C-D] 
1.2. The term 'debt' under S.2(g) of the Act means liability which is 
alleged as due from any person by a bank or a financial institution or by a 
consortium of banks of financial institutions. It should have arisen during 
the course of any business activity undertaken by the bank or the financial 
E institutions or the consortium under any law for the time being in force. The 
liability to be discharged may be in cash or otherwise. It would be immaterial 
whether the· liability is secured or unsecured or whether it is payable under 
a decree or an order of any Civil Court or otherwise. However, it should be 
subsisting and legally recoverable on the date on which proceedings are 
initiated for recovering the same. The important words in the definition 
F "alleged as due" have been overlooke.d by the High Court and, therefore, it 
has erroneously held that unless the amounts claimed by the bank are 
determined or decided by a competent forum they cannot be said to be due 
and would not amount to 'debt' under the Act. [470-E-F-G) 
G 
2. RespondentS were not absolved from the liability to repay the amount 
borrowed for the purpose of making exports if the foreign buyer of those 
goods does not make payment to the bank of the amounts payable in respect 
of those goods. Though the insurer/guarantor under the insurance/guarantee 
possibly would stand discharged from its liability to the insured on the. 
exporters delivering the documents of export of goods to the insured, 

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