Commerzbank Aktiengesellschaft vs. Debt Recovery Tribunal - Ii & Ors.

Held

The High Court held that the impugned judgments of the DRT were not sustainable due to a lack of reasoning. Paragraph 16 of the DRT's judgment, which contained the entire reasoning, was found to be cryptic and did not adequately explain why the petitioner was liable. The Court also noted observations by the DRAT criticizing the DRT for not dealing with cited judgments and evidence. Citing the principle that High Courts can interfere under Article 227 of the Constitution when an order is prejudicial and the decision-making process is faulty, the Court set aside the impugned judgments. The matters were remanded back to the DRT for fresh consideration, with a direction to decide the cases within three months. The Court explicitly stated that it had not expressed any opinion on the merits of the case.

Facts

The petitioner, Commerzbank Aktiengesellschaft, is a defendant in Original Applications (OAs) filed by the respondent bank, State Bank of India (SBI), before the Debt Recovery Tribunal (DRT). The DRT allowed both OAs, directing the respondents, including the petitioner, to jointly and severally pay substantial sums to SBI. The petitioner acted as a reimbursing bank for Letters of Credit (LCs) opened by Commercial Bank of Ethiopia (respondent No.4) in favour of Cobra Instalaciones Y Servicious SA (respondent No.3) for supply of electrical goods. SBI was the negotiating bank. Discrepancies were found in the documents submitted under the LCs, leading to SBI refusing to honour them. Subsequently, respondent No.3 approached SBI for finance against monies receivable from respondent No.4. SBI claims to have paid amounts due after April 2012 and debited them to a Recalled Debts Account, seeking recovery of principal and interest from the petitioner and other respondents.

Key Issues

1. Whether the impugned judgments of the Debt Recovery Tribunal (DRT) are sustainable in law, considering the alleged lack of reasoning and violation of principles of natural justice? (Question of law). The petitioner argued that the DRT's reasoning was cryptic and lacked proper consideration of evidence and cited judgments, as also noted by the Debt Recovery Appellate Tribunal (DRAT). The petitioner relied on the Bombay High Court judgment in Infra Dredge Services Pvt. Limited v. Union of India, which set aside an order due to substantial delay and remanded the matter. The respondent bank argued that the DRT correctly found a debtor-creditor relationship and that the petitioner was liable based on the evidence presented.