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Eureka Forbes Limited Vs Allahabad Bank

 Nullus Commodum Capere Potest De Injuria Sua Propria – No man can take advantage of  his own wrong/ No person can claim any right arising out of his own wrong doing.

The maxim nullus commodum capere potest de injuria sua propria has a clear mandate of law that, a person who by manipulation of a process frustrates the legal rights of others, should not be permitted to take advantage of his wrong or manipulations.

Case Law - Eureka Forbes Limited Vs Allahabad Bank.

The Supreme Court has recently ruled that banks and financial institutions can recover debt that has accrued against any person during the course of its business activities, and in doing so they do not have to establish a creditor-debtor relationship with the person. Delivering its judgment on 3 May 2010, in Eureka Forbes Ltd v Allahabad Bank the court said that the term “debt”, as used in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, has to be given “general and wider meaning”.

Eureka Forbes appealed to the Supreme Court after several rounds of litigation against Allahabad Bank before the civil courts and the Debt Recovery Tribunal.

The bank was attempting to recover a loan made to two companies against their stock. The companies, in turn, had a leave and licence agreement with Eureka Forbes, but had defaulted on the licence fees and handed over their unsold stock to Eureka Forbes in lieu of the outstanding fees. Eureka Forbes had then sold the stock claiming it did not know that it was hypothecated to the bank and was being pursued by the bank for repayment of the loan.

Eureka Forbes argued that it had no relationship with the bank and had not borrowed from it. As such, the money claimed against them by the bank was not a “debt” and, therefore, “the rigours” of the recovery procedure provided by the act could not be enforced against them and the tribunal did not have jurisdiction to entertain and decide the claim.

The Supreme Court rejected the arguments made by Eureka Forbes, but went on to partly allow the appeal as Allahabad Bank had failed to take proper and appropriate action to safeguard its own interests.

The court, while castigating the bank for sanctioning the loan when they knew of the leave and licence agreement with Eureka Forbes, directed the chairman of Allahabad Bank to take appropriate action against the erring bank officials who were involved.

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