Case: Hdfc Bank Limited Vs. Vasudeo Shripad Belvalkar (Deceased), Through His Legal Heir Vidyanand Vasudeo Belvalkar

speedier mechanism for the recovery.32. Learned Senior Counsel Mr. Tulzapurkar, has relied on the judgment of the Supreme Court in the case of ICICI Bank Limited Versus. Official Liquidator of APS Star Industries Limited and Others, reported in (2010) 10 Supreme Court Cases page 1.33. Mr. Tulzapurkar, Learned Senior Counsel has cited this judgment in support of the argument that acquiring/taking premises on leave and license basis is one of the forms of business contemplated under Section 6 of the Banking Regulation Act. Senior Counsel Mr. Tulzapurkar, has relied on Section 6(1)(n) of the Banking Regulation Act and submitted that taking licensed premises for starting the branch is an activity incidental or conducive to promotion or advancement of the business of the Bank. He submitted that, Section 6(1) enables Banking Companies to carry on different forms of businesses. Reliance is placed on para-37 of the said judgment which reads as under :37. The point we are trying to make is that apart from the principal business of accepting deposits and lending the said 1949 Act leaves ample scope for the banking companies to venture into new businesses subject to such businesses being subject to the control of the Regulator, viz. RBI. In other words, the 1949 Act allows banking companies to undertake activities and businesses as long as they do not attract prohibitions and restrictions like those contained in Sections 8 and 9. In this connection we need to emphasize that Section 6(1)(n) enables a banking company to do all things as are incidental or conducive to promotion or advancement of the business of the company. Section 6(1) enables banking companies to carry on different types of businesses. Under Section 6(1), these different types of businesses are in addition to business of banking, viz., core banking. The importance of the words "in addition to" in Section 6(1) is that even if different businesses under clauses (a) to (o) are shut down, the company would still be a banking company as long as it is in the core banking of accepting deposits and lending so that its main income is from the spread or what is called as "interest income". Thus, we may broadly categorise the functions of the banking company into two parts, viz., core banking of accepting deposits and lending and miscellaneous functions and services. Section 6 of the BR Act, 1949 provides for the form of business in which banking companies may engage. Thus, RBI is empowered to enact a policy which would enable banking companies to engage in activities in addition to core banking and in the process it defines as to what constitutes "banking business"..It is therefore submitted by Mr. Tulzapurkar, Learned Senior Counsel, that the security deposit was given to the respondent for obtaining the premises on leave and license basis and therefore it is one of the forms of business in terms of Section 6 of the Banking Regulation Act. He would therefore contend that, since the respondent declined to refund the security amount, which was given to him in the course of the Banking business, it is a debt within the meaning of Section 2(g) of the Act and therefore the proceedings filed under Section 17 of the said Act were maintainable.34. In the case of ICICI Bank (supra), the Apex Court was dealing with the issue as to whether, inter-se transfer of Non-Performing Assets by a Bank is legal under the Banking Regulation Act. Thus, has examined the provisions of the Banking Regulation Act and scope of Sections 5(1)(a) and Section 6 of the Banking Regulation Act. Issue therein was, whether assignment of Debt is Banking activity within the meaning of Banking Regulation Act. In the case in hand, the issue is altogether different which we have dealt with in the foregoing paras. Mr. Tulzapurkar, Senior Counsel may be right in saying that, acquiring the premises on leave and license basis for the temporary period is one of the forms of businesses contemplated under Section 6 of the Banking Regulation Act but unpaid security amount for acquiring Licensed premises is certainly not a debt within the meaning of Section 2(g) of the said Act for the reasons stated hereinabove.35. Learned Senior Counsel Mr. Tulzapuarkar, has also relied on a judgment in the case of Vijaya Bank V/s. A.N. Tewari reported in (1995) 60 DLT 454. In this case, the Bank was a tenant and in the dispute was pending in the Court. The Bank had engaged the services of the Lawyer. The grievance of the Bank was that, the cheque in the sum of Rs.4,13,483/- was issued in the name of Lawyer for depositing the said amount in the Court as arrears of rent. However, it appears the Lawyer did not deposit the entire amount in the Court. It is in these facts of the case, the Bank had filed a suit before the Debt Recovery Tribunal for recovery of the balance amount due from the lawyer. The lawyer was a defendant in the said suit, wherein an application was moved by the defendant-lawyer contending that the amount claimed was not on account of or as a result of any business activity undertaken by Bank as stipulated under Section 2(g) of the said Act and therefore the Tribunal constituted under the Act would have no jurisdiction to try the suit.36. In the said proceedings, the application was rejected by the Tribunal and held that the subject amount constitutes a debt within the meaning of Section 2(g) of the said Act. We respectfully do not agree with the findings recorded by the Learned Judge of the Tribunal. We have recorded the reasons as to why it would not be a debt.37. That for the reasons aforesaid, we hold and conclude that the unpaid security deposit is not a debt within the meaning of Section 2(g) of the said Act and therefore the proceedings instituted under Section 17 of the said Act by the Bank for recovery of the said amount were not maintainable.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]25. Therefore, the expression debt is to be assigned meaning and understood in reference to the object and subject matter of scheme of the Act and further it is to be interpreted consistently with the objects and other provisions of the Act. Undisputedly, the Recovery Act was enacted primarily for the reasons that, the Banks and financial institutions should be able to recover their dues without unnecessary delay, so as to avoid any adverse consequences in relation to the public funds. The Statement of Objects and Reasons of this Act clearly state that Banks and financial institutions were experiencing considerable difficulties in recovering loans and enforcements of securities charged with them. The then existing procedure for recovery of dues of the Bank and the financial institutions blocked significant portion of their funds in un-productive assets, the value of which deteriorated with the passage of time. The Act provided for the establishment of Tribunals and Appellate Tribunals and modes for expeditious recovery of dues to the Banks and financial institutions.Thus, in the case of Eureka Forbes (supra), as well as, in United Bank of India (supra), liability as due arose in course of core banking business. It is in this context of the facts in the given cases, expression Debt has been interpreted which is in tune with object and scheme of the Act. In the case in hand, if petitioners contention is accepted, then, every liability claimed as due in the course of business activity in the terms of Section 6(1) of the Banking Regulation Act has to be adjudged in the proceedings under Section 17 of the said Act. To test the arguments of the petitioners, let us take a hypothetical case, where a Bank in the course of its business activity acquires right or agrees to acquires rights in immovable property. May the right be proprietary in nature or otherwise for consideration and Bank has paid substantial amount to the owner in terms of the Agreement. Say, if the dispute arises and if the Bank seeks to recover the amount, question would arise, where proceedings would lie  If we uphold the contention of Learned Senior Counsel, Mr. Tulzapurkar then the consideration or part consideration, paid to the owner would constitute a debt and for its refund, claim has to be filed under Section 17 of the said Act before the DRT. In our view, this would run counter to the object and scheme of the said Act. The object and scheme of the said Act, is to ensure attainment of legislative object i.e. expeditious recovery and provisions of taking such measures, which would prevent wastage of securities available with Banks and Financial Institutions (emphasis supplied). This proposition, if accepted, would invest the Tribunal with all powers of Civil Court, which is not intended by the Legislature.29. The expeditious recovery; Providing provisions for taking such measures which would prevent wastage of securities available with the Bank and enforcement of such securities is the object of the Act. Thus, whole object of the said Act is to recover debts by enforcing available security by a mechanism provided under the Act.30. In our view, if we uphold petitioners contention, it may not attain the object of the said act. This, may also, enlarge the jurisdiction of thethe case in hand, the issue is altogether different which we have dealt with in the foregoing paras. Mr. Tulzapurkar, Senior Counsel may be right in saying that, acquiring the premises on leave and license basis for the temporary period is one of the forms of businesses contemplated under Section 6 of the Banking Regulation Act but unpaid security amount for acquiring Licensed premises is certainly not a debt within the meaning of Section 2(g) of the said Act for the reasons stated hereinabove.In the said proceedings, the application was rejected by the Tribunal and held that the subject amount constitutes a debt within the meaning of Section 2(g) of the said Act. We respectfully do not agree with the findings recorded by the Learned Judge of the Tribunal. We have recorded the reasons as to why it would not be a debt.37. That for the reasons aforesaid, we hold and conclude that the unpaid security deposit is not a debt within the meaning of Section 2(g) of the said Act and therefore the proceedings instituted under Section 17 of the said Act by the Bank for recovery of the said amount were not maintainable.