Bank funds used for business may still constitute recoverable debt under the DRT Act, with interest upheld.

Amounts taken from bank funds for business purposes can fall within the wide definition of "debt" under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 even if the transaction was allegedly fraudulent and unsupported by formal documents. The Court emphasised that jurisdiction turns on the substance of the bank's legally recoverable claim, not the form of the transaction, and upheld recovery before the Debts Recovery Tribunal. It also sustained interest at 18% per annum, accepting the Tribunal's approach where the transaction was non-routine and no standard contractual interest stipulation existed.

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Issues: (i) Whether amounts obtained through an alleged fraudulent business transaction, without execution of formal documents, fall within the definition of "debt" under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and are recoverable before the Debts Recovery Tribunal; (ii) Whether the award of interest at 18% per annum could be sustained.

Issue (i): Whether amounts obtained through an alleged fraudulent business transaction, without execution of formal documents, fall within the definition of "debt" under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and are recoverable before the Debts Recovery Tribunal.

Analysis: The petitioners had admittedly derived financial benefit from the bank funds for their business, though the manner of obtaining such benefit was alleged to be fraudulent and without formal documentation. The Court held that the definition of "debt" in Section 2(g) of the Act is of wide amplitude and covers liability claimed as due by a bank if it is legally recoverable. The substance of the claim, rather than the form of the transaction, governs jurisdiction. The Court distinguished cases involving mere bank employee misappropriation, and held that where the borrower or beneficiary has taken and used bank money for business, the liability remains recoverable under the Act. The transfer of the original suit to the Tribunal was also treated as validly within the statutory framework.

Conclusion: The claim was maintainable before the Debts Recovery Tribunal and the petitioners were treated as debtors liable to repay the bank.

Issue (ii): Whether the award of interest at 18% per annum could be sustained.

Analysis: The transaction was found to be non-routine and no formal stipulation for interest existed in the usual contractual form. In that context, the Tribunal applied the principle underlying Section 80 of the Negotiable Instruments Act and awarded interest at 18% per annum. The Court found no infirmity in that approach and accepted the Tribunal's reasoning.

Conclusion: The award of interest at 18% per annum was upheld.

Final Conclusion: The writ petition was liable to fail because the bank's claim remained enforceable before the Tribunal notwithstanding the fraudulent character alleged by the petitioners, and the interest component did not warrant interference.

Ratio Decidendi: A person who has obtained and used bank funds for business remains liable as a debtor under the Act even if the benefit was procured fraudulently and without formal documentation, and the Tribunal's jurisdiction is determined by the substance of the bank's recoverable claim.

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