A Transaction Between a Banker and Customer is Undeniably Commercial: Bombay High Court Rejects SBI’s Plea

The Bombay High Court has dismissed the State Bank of India’s (SBI) application seeking the rejection of a plaint filed by the Bombay Iron and Steel Labour Board. The court affirmed that the dispute, which involves the non-repayment of fixed deposits, constitutes a commercial dispute under the Commercial Courts Act, 2015. Justice Abhay Ahuja delivered the judgment on June 10, 2024, emphasizing that the transaction falls squarely within the realm of commercial dealings.
The case centers on fixed deposits amounting to Rs. 45 crore that the Bombay Iron and Steel Labour Board (the Plaintiff) had placed with SBI (the Defendant). Allegations arose that a bank manager, Mr. Nikhil Roy, had fraudulently and without authorization withdrawn Rs. 36 crore of these deposits. Following the discovery of the fraud, the Plaintiff filed a suit seeking recovery of the remaining fixed deposits along with interest.
The core of SBI’s argument was that the alleged fraud and misappropriation of funds should exclude the dispute from being classified as a commercial dispute under the Commercial Courts Act. SBI contended that the plaint’s focus on fraud invalidated the claim of a commercial transaction.
Justice Ahuja, however, observed, “The transaction of placing fixed deposits is inherently a commercial transaction. The Plaintiff’s suit is based on the enforcement of fixed deposit receipts, which are mercantile documents, and thus falls within the definition of a commercial dispute under Section 2(1)©(i) of the Commercial Courts Act.”
The court further elaborated that fixed deposit receipts constitute mercantile documents, emphasizing their role in commercial banking transactions. “The relationship between a banker and customer, especially involving deposits, is that of debtor and creditor. Such transactions are undeniably commercial in nature,” Justice Ahuja stated.
The judgment underscored the inclusive definition of a commercial dispute as outlined in Section 2(1)© of the Commercial Courts Act, which covers disputes arising from ordinary transactions of merchants and bankers. Justice Ahuja noted that the plaintiff’s claim for the recovery of fixed deposits, despite allegations of fraud, remains a commercial dispute.
“The cause of action arises from the Defendant’s failure to repay the fixed deposit amounts with interest, which are due as per the fixed deposit receipts. Mention of fraud in the plaint does not alter the nature of the underlying commercial transaction,” the judgment read.
Justice Ahuja highlighted, “A transaction between a banker and customer is inherently commercial. The enforcement of fixed deposit receipts clearly falls within the ambit of commercial disputes as defined by the Commercial Courts Act.”
The dismissal of SBI’s application by the Bombay High Court reinforces the broad interpretation of what constitutes a commercial dispute under the Commercial Courts Act. This ruling underscores the judiciary’s recognition of banking transactions, including the enforcement of fixed deposits, as commercial in nature. The judgment sets a significant precedent, affirming that allegations of fraud do not necessarily alter the commercial character of banking transactions.
 

Date of Decision: June 10, 2024