BANK OF INDIA Vs. VIDHI CREATIONS
LAWS(DR)-2004-11-11
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on November 30,2004

Appellant
VERSUS
Respondents

JUDGEMENT

K.J.Paratwar, - (1.) THIS common judgment disposes of two cross Original Applications (O.As.). The Bank's O.A. is for recovery of US $ 40976 (equivalent to Rs. 29,60,316.16) with interest @ 18% p.a. The amount sought to be recovered in the other O.A. (filed in Hon'ble High Court of Judicature at Bombay first in point of time and transferred to this Tribunal being in the nature of cross suit) is for recovery of money under following 3 heads: Rs.7,61,579.13 being the amount inclusive of interest of deductions made by the Bank from export remittances with interest @24% p.a. from the date of filing the Original Application till full realization; Rs. 1,74,000/- being the amount inclusive of interest of margin money lying with the Bank with interest as above; Rs. 10,74,014.91 being the amount inclusive of interest of fixed deposits lying with the Bank with interest as above.
(2.) For the sake of convenience, the Bank would be referred as the 'applicant' even in the other matter while the applicant in the other O.A. (defendant No. 1 in the Bank's O.A.) would be referred as defendant No. 1 even while referring to the O.A. filed by the Bank. Exhibit numbers, unless indicated otherwise, shall be from O.A. No. 2128 of 2000. 3. The defendant No. 1-Partnership Firm (defendant Nos. 2 and 3 being its partners)--carries business of export of readymade garments. It is Banking with the applicant having current account (No. 11270) since 1989-90. The defendant No. 1 used to hand over to the applicant export bills for collection and/or negotiation who upon receipt of payment the (through Banking channel) from foreign party used to credit in the defendant No. 1 's current account and issue foreign inward remittance certificate. 4. In or about 25.2.1994, defendant No. 1 approached the applicant through its partner with a copy of letter dated 22.2.1994 received from one M/s. Pitt & Company, Hong Kong in which (the letter) there was direction to remit suit of US $ 40996 to the credit of the applicant. The defendant No. 2 requested the applicant to urgently give credit for the amount in the account even while the authenticated payment order was not received though required to be received before giving the credit. Due to good relations and mutual faith and trust, the applicant credited the account of defendant No. 1 a sum of US $ 40976. Subsequently i.e., in or about 17.3.1994 the applicant received in respect of the above transaction Swift Message FM 100 dated 23.2.1994 which was an authenticated payment order for US $ 40976 (minus US $ 20 being commission) from the Bankers Trust. The Swift Message however did not mention the branch of the applicant where because the Bank sought for clarification. Accordingly on 8.3.1994 the Bankers Trust Company in New York by FM 999 clarified that the payment pertained to Mahalaxmi Branch at Bhulabhai Desai Road, Mumbai of the applicant. However, the applicant through oversight and due to bona fide mistake once again gave credit in the defendant No. 1's account of said sum of US $ 40956 on 17.3.1994 forgetting that credit of said amount was already given on 25.2.1994 in anticipation of the receipt of authenticated payment order. The double payment however came to be the light only during reconciliation of the amount on or about August 1997. Immediately thereafter i.e. on or about 30.8.1997 the Bank informed the defendant No. 1 about the same and called upon to refund excess payment of US $ 40976. The defendants however feigned ignorance of the receipt of the double payment. By reply dated 3.9.1997 they denied the same and contended that the two amounts were appropriated towards the below noted invoices: JUDGEMENT_666_TLDR0_20040.htm 5. While handing over the aforesaid letter, the defendant No. 2 had discussion with the applicant's Branch Manager after which he was convinced of the double payment. Therefore, the defendant No. 2 at the bottom of letter wrote as below: "In the meanwhile to signify our intention to resolve the matter amicably. We request you to hold back 5% of all our export remittance in an E-E-F-C A/c, until the matter is resolved to the mutual satisfaction of all parties." The applicant started deducting 5% from future export remittances of the defendants on the basis of aforesaid acknowledgement. The amount so deducted in the aggregate is US $ 11962 (equivalent to Rs. 5,19,629/-) as on 16.4.2000. The applicant vide letters dated 16.2.1998, 19.3.1998 and 20.4.1998 repeatedly requested the defendant No. 1 to refund US $ 40976 but without ally use. By subsequent letter dated 12.4.1999 the applicant informed the defendant that invoices referred to in the defendant No. 1's letter dated 3.9.1997 had in fact been settled against some other remittances received in April, 1994. Thereafter, the applicant vide letter dated 26.3.1999 informed the defendant No. 1 that US $ 11000 has been transferred to E-E-F-C/DA A/c. The defendant No. 1 by reply dated 30.4.1998 instead of making payment called upon the applicant to repay US $ 11445. The applicant gave reply again placing on record correct factual position and denied its liability. Since payment was not made, this Original Application is filed for recovery of the aforesaid amount. 6. The defendants vide Written Statement at Exh. 20 have disputed the claim At the outset, the O.A. is said to be barred by limitation. They have admitted that there is current account in the name of defendant No. 1 with the applicant in which the defendant No. 1 used to hand over export bills for collection and/or negotiation and that upon receipt of such payment, due credit was being given in the current account. In fact, the defendants have annexed to the Written Statement long list of such bills presented for collection and/or negotiation. They have denied that defendant No. 2 had approached the applicant with a copy of fax letter dated 22.2.1994 M/s. Pitt & Co. and that he had requested for release of the money in anticipation of authenticated copy of pay order. The defendants have expressed ignorance about authenticity and validity of the fax as also of Swift Messages. The defendants have pleaded ignorance regarding the Bank making inquiry about the branch with respect to which FM 100 pertained. It is denied that through oversight second credit was given on the basis of Swift Message FM 100 read with Swift Message FM 999. In the paragraph-wise replies, thee are only denials. In the prefactory paragraphs, the defendants have denied that second credit was incorrectly/wrongly given. It is contended that the Bank had issued necessary certificates [i.e. Foreign Inward Remittance (FIR)] in respect of both the payments. About the writing at the foot of the letter dated 3.9.1997 (Exh. 34) the contention is thus: a payment of US $ 1,09,596 was received by the Bank on or about 26.8.1997. The Bank refused to part with the amount pending resolution of the issue of the double payment, the defendant No. 2, in order to get the money, was compelled to give the writing under coercion and threat that the money would not be released. Anyway that writing is not tantamount to admission. The amount of US $ 11,456 by the applicant Bank is said to be wrongly withheld. It is stated that since there was no double payment, said deduction is wrongful. The O.A. of the defendant No. 1's is inter, alia for recovery of US $ 11,494 as on 9.9.1997 being the amount deducted from the export remittances. The second claim is in respect of the margin money of Rs. 1,50,000/- lying with the Bank having been deposited by defendant No. 1 for the issuance of Bank guarantee dated 10.1.1998 in favour of Apparel Export Promotion Council (AEPC). The Bank guarantee since discharged and cancelled on 18.3.1999, the amount of margin money with interest should have been refunded by the Bank, say the defendants. The applicant had also kept following Fixed Deposits (FD) with the Bank for issuance of Bank guarantee in favour of AEPC: JUDGEMENT_666_TLDR0_20041.htm None of the Bank guarantee are now outstanding. The Bank therefore is obliged to refund the amount lying in the FD. As the Bank did not return the money and illegally withheld the documents of title this Original Application is filed. 7. The Bank vide written statement at Exh. 9 has resisted the O.A. on the same grounds on which it has filed O.A. There is no point in reiterating the same contention. The Bank has also claimed that the defendant No. 1's claim is barred by limitation. It has sought for dismissal of the O.A. 8. In order to prove their cases, the Bank and defendant No. 1 have filed Claim Affidavits respectively of Mr. D.S. Kotian (Exhs. 83, 90, 99, 104) and Mr. Jasmin N. Shah (Exhs. 92, 101, 110). Several documents have also been filed material from amongst which I would refer at the relevant place. 9. Exhaustive arguments spread over many sittings were advanced by the learned Counsel representing the rival parties. The learned defence Counsel also placed on record written submission. 10. Having regard to the pleadings, evidence on record and submission advanced at the Bar, I feel that the controversy revolves around the following issues which I discuss one after another. Limitation : 11. The Original Application of the Bank is for recovery of the amount allegedly paid double to the defendant No. 1. There is unanimity amongst the parties that the Article 113 of the Limitation Act, 1963 (reproduced below) is the proper provision: JUDGEMENT_666_TLDR0_20042.htm As is evident, the limitation of 3 years starts from when the right to sue accrues. According to the Bank, the right to sue accrued when the mistake of giving double credit in February/ March 1994 came to its notice in or around August 1997. The defendant No. 1 has seriously contested said contention. Now, under Section 17(1)(c) of Limitation Act (Relevant portion of which quoted below for ready reference) the time begins to run on the applicant's actual discovery of the mistake or from when it could have with reasonable diligence discovered the same: "17. Effect of fraud or mistake--(1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act-- (a) ... (b) ... (c) the suit or application is for relief from the consequences of a mistake; or (d) ... the period of limitation shall not being to run until the plaintiff or applicant has discovered ... the mistake or could, with reasonable diligence, have discovered it; JUDGEMENT_666_TLDR0_20043.htm 12. As would be pointed out at the appropriate place, the theory of mistake is unsustainable. But, even if the mistake is assumed to have occurred, the applicant in view of the categorical denial by the other side ought to have at least discharged initial burden that it came to know the mistake in August 1997, if not that the same could not have been discovered with due diligence at earlier point of time. The Bank however has observed complete silence on the aspect. It has bald to averred that the mistake was noticed in August 1997 in the reconciliation. I think, the Bank ought to have pleaded and proved as to how it came to know it. It could have done this by placing on the record the reconciliation record in which the mistake was known. In fact, it should have also tendered some evidence to show that the mistake could not have been ordinarily known either through reconciliation or some other mode earlier in point of time. But, it did nothing. In the absence of any iota of evidence, it is impossible to endorse mere statement that the mistake was known for the first time in the reconciliation in August 1997. 13. Mr. Shetye, learned Counsel representing the Bank has submitted that in those years the reconciliation was not done normally which is why it took years. He has drawn my attention to R.B.I.'s circular No. Ref: DBS.CO.SMC.BC.No.45/22.2.2001(A)/98-99 in which the R.B.I. had allowed the Banks to do reconciliation up to 31.3.1996. This circular at best shows that generally the exercise of reconciliation was not regularly done. But that does not by itself mean that the reconciliation in this case was also not done. In my view, judicial notice cannot be taken by reconcilation was not being done regularly in all the matters. That the reconciliation in this matter was not done before August 1997 is a question of fact required to be pleaded and proved. But, the Bank chose to remain omnibus. The Bank's O.A. therefore will have held to be barred by limitation. I would yet deal with the Bank's case on merit keeping aside my above conclusion. 14. The other O.A. however is clearly within limitation. Said O.A. falls under Article 22 of the Limitation Act, 1963 which prescribed 3 years limitation starting from the demand. The first item of the recovery (Rs. 7,61,579.13) is the money retained by deducting 5% of export remittances and interest thereupon. The deduction was done pursuant to writting at the foot of defendant No. 1's letter dated 3.9.1997 (Exh. 34). Both the learned Counsel stated that deduction was made within 3 months of said letter i.e. by the end of December 1997. The O.A. has been filed within 2 years. The second item of Rs. 1,74,000/- and interest thereupon is regarding margin money of Rs. 1,50,000/- deposited by the defendant No. 1 with the Bank for giving Bank guarantee dated 10.1.1998. Irrespective of whether the defendant No. 1's contention that Bank guarantee has been discharged on 18.3.1999, the claim under said head is clearly within limitation. The 3rd item (introduced by amendment dated 12.5.2003 of Rs. 10,74,014.91 is in respect of unilateral appropriation by the Bank of margin money (lying in FDs) for issuance of Bank guarantee AEPC. The appropriations were admittedly made on 10.6.2000, 22.5.204 and 11.2.2004 which means that the claim is within limitation. Double payment : 15. There is no controversy as of now that on 25,2.1994 credit of Rs. 12,81,729/- (See voucher at Exh. 29) minus commission, etc. of Rs. 75/- was given by the Bank in defendant No. 1 's account against inward remittance of US $ 40,996/-. Said credit has been given in respect of M/s. Pitt & Co. Ltd., Hong Kong, importer with whom defendant No. 1 exporter had not only business relationship but numerous export transactions between them had taken place. There is also unanimity amongst the parties that credit of other sum of Rs. 12,81,104/- (See voucher at Exh. 32) was given by the Bank in defendant No. 1's account on 17.3.1994. The Bank's case that foreign remittance received vide Swift Message dated 22.2.1994 at FM 100 (Exh. 30) received on 25.2.1994 for US $ 40,976/- read with FM 999 dated 8.7.1994 (Exh. 31) in connection with M/s. Pitt & Co. Ltd. is not disputed. However, the defendants have seriously denied that the Bank received only this payment. According to them, the Bank had earlier on or about 25.2.1991 also received payment of US $ 40,996/-from M/s. Pitt & Co. through Bankers Trust Company. 16. It is the Bank's case that first credit on 25.2.1994 was given merely on the advice by M/s. Pitt & Co. Ltd. (Exh. 28) without receiving authenticated Swift Message contending the defendant's request to release the payment. Except the similarity in the amounts in the two payments, there is however no iota of evidence to believe in said Bank's case. The Bank has not filed affidavit of the concerned officer to whom defendant No. 1 (through defendant No. 2) had allegedly orally requested for release of the payment in anticipation of receipt of authenticated Swift Message. Mr. Kalian admittedly joined the branch in 2000 i.e. much after events had accrued. He therefore cannot have personal knowledge. There is nothing on the record on the basis of which his aforesaid statement in the affidavit can be believed. Had the Bank obtained according written request from defendant No. 1 or had the Bank got executed indemnity letter from defendant No. 1 before making the payment, the statement on otah in the affidavit of Mr. D.S. Kotian could have been said to have been made on the basis of the official record coming from lawful custody. But, apart from bald statement in the pleadings and bare averment in the affidavit, there is nothing on the record to believe in the theory of the first payment made in anticipation of receipt of the authenticated swift message. 17. On the other hand, thee is cogent evidence tendered by the defendants showing that defendant No. 1 had made two exports referable to the two payments. The Bank itself had given (i) certificates of Foreign Inward Remittance (FIR) Exh. 57 dated 20.4.1994 and Exh. 81 dated 25.2.1994, (ii) Bank's certificate on export and realisation (Form No. 1) Exh. 60 dated 25.4.1994 and Exh. 79 dated 25.2.1994, (iii) the GRs. The defendant No. 1 has also produced Invoice No. 39 (Exhs. 59 and 61) short shipment notice (Exh. 93) and Invoice No. 40 (Exhs. 61, 62 and 94) pertaining to FIR, Bank Certificate dated 20.4.1994 apart from documents of export with reference in Invoice Nos. 25, 26 and 31 (as mentioned in advice at Exh. 28) at Exhs. 72 to 79. Mr. D.S. Kotian in his subsequent affidavit has tried to suggest that the second payment did not pertain to Voucher No. 39. In my view, after having given all the necessary certificates including to the effect that the export was made, it is not open for the Bank to contend that the export was not twice made. Apart from above, a telex message of the Bank has been filed on the record by the defendants at Exh. 95 in which the Bank has clearly stated that the two payments were received. 18. The Bank has heavily relied on the writing by the defendant No. 1 below its letter dated 3.9.1997 (Exh. 34) reproduced below for better appropriation: "In the meantime to signify our intention to resolve the matter amicably, we request you hold back 5% of all an Export remittance in an E.E.F.C. A/c. until the matter is resolved to the mutual satisfaction of all the parties." According to the applicant, the above writing constitutes admission by the defendant No. 1 of the double payment. A bare reading of the writing and the circumstances on which it was made, would clearly refute this suggestion. In Exh. 34, the defendant No. 1 had pointed out the correctness in the two payments credited in the account with reference to the vouchers of the export and the certificates pertaining thereto issued by the Bank. It is a common ground that above said writing was given when the defendant No. 2 had gone to the Bank for submitting the letter and convincing the Bank Officials inter alia for releasing the export remittances of sumptuous amount received at that time. The defendant's case is that since the Bank was not releasing foreign remittances, without giving some writing he had to give that does stand to reason. Judicial notice can be taken that in such situation a Banker does not have upper hand and is in dominating position. Therefore, the circumstances under which the writing was given are only plausible. That apart, in the writing what the defendant No. 1 had done is to allow the Bank to deduct 5% of export remittance and keep in E.E.F.C. A/c. to signify its intimation so long as the matter is not amicably and mutually resolved. There is nothing in the writing about admission of the double payments. Therefore this writing does not anyway advance the Bank's case. In the above view of the matter it cannot be held that the Bank made double payment. As the basis of its case has arisen, the Bank's Original Application must fail. The defendant No. 1's claim : 19. The defendant No. 1's entitlement in the O.A. No. 124 of 2002, it may be realled, is under 3 heads the first one being of deduction in foreign remittance @ 5%. There is unanimity amongst the parties that sum of US $ 11,494/- was deducted pursuant to Exh. 34 within about 3 months of the writing. It was pointed out on behalf of the Bank that sum of US $ Rs. 6,000/- (from out of above sum) was at the request of defendant No. 1 converted into Indian rupees @ 45.48 on 22.8.2000. The defendants have stoutly denied that any such request was made. Considering that the controversy between the parties had begun (both the O. As. having been filed), it appears improbable that defendant No. 1 would request the Bank to do so or the Bank would act upon oral request. It is then stated that the proceeds were kept in FDRs from out of which Rs. 19,116/- were given to AEPC, about which I would deal a little later on. The steps taken by the Bank during the pendency of the suit are in my view not sustainable. In fact, the Bank ought not to have indulged into such exercise. Be that as it may, as the defendant No. 1's claim is in the Indian rupees, the unauthorized conversion into Indian rupees is inconsequential. The defendant No. 1's entitlement to said amount as converted into Indian Rs. 4,99,069.48 as on 1.1.1998 is liable to be allowed. Thus, the claim under that head is liable to be allowed as above instead of Rs. 7,61,597.13. The interest on that sum will have to be allowed from 1.1.1998 and not from 9.9.1997 as claimed in the O.A. Admittedly, there could not be any agreement about the rate of interest. The claimed rate of interest (Exh. 24) is apparently high. No case has been made out for granting that rate of interest. In view of provisions of Section 34 of CPC, interest can be granted @ 6% p.a. 20. The second item of the claim is the amount of margin money kept for giving Bank guarantee in favour of AEPC. At the time of filing the O.A., said amount was admittedly lying with the Bank, who however has come out with a case that during the pendency of the O.A. it has paid the amount of Bank Guarantee Nos. 34, 35 and 36 to the beneficiary (AEPC). The defendant No. 1 on the other hand has come out with a case that the Bank guarantee had lapsed as informed by the applicant Bank itself by letter dated 27.5.2000, the Xerox copy of which is annexed as Exh. 101. That letter has clear recital that all the 3 guarantees have expired on 31.10.1998 and that the Bank has cancelled the guarantees and have reversed in the account books the guarantee liability. The applicant Bank has not bothered to clarify that letter but still maintains the payment having been lawfully made. Copies of certain letters dated 15.4.1999, 30.9.1997 are annexed in the list of documents at Exh. 105 for pointing out that the defendant No. 1 had obtained stay from Textile Commissioner against the invocation of the guarantee. The learned defence Counsel however has rightly pointed out that the Bank's letter dated 27.5.2000 subsequent in point of time has clear and unequivocal statement that the Bank guarantees were invoked. The learned defence Counsel has also submitted that the Bank did not make payment of the guarantees since it was obliged to make the payment but the payment was made in view of threat (Exh. 108) given by AEPC stating that in case the Bank does not make payment of certain Bank guarantees including the one in question, it would stop honouring the applicant Bank's guarantees. There appears to be some force in the same. In any case, the Bank did not amend its Written Statement introducing the lawful payment of the Bank guarantee made in 2001 even while at the flange of the arguments, certain other amendment was introduced. Even if aforesaid aspect is overlooked, it is not possible to upheld legality and validity in the payment of the Bank guarantee. This means that the defendant No. 1 is entitled to second item i.e. margin money of Rs. 1,50,000/- with interest @ 6% p.a. and not at the claimed rate (@ 24%) from 18.3.1999. 21. The Bank has not denied that the amounts are lying in the FDRs which have been appropriated on 10.6.2000, 22.5.2001 and 11.2.2004. It cannot be said that the appropriation was legal. The defendant No. 1 is therefore entitled to the said amounts along with interest @ 6% p.a. 22. In view of the above, the O.A. of the Bank deserves to be disallowed while the defendant No. 1 is liable to allowed. Having regard to the facts of the case, it would be proper to direct both the parties to bear the costs. ORDER (A) The O.A. No. 2128 of 2000 is disallowed while O.A. No. 124 of 2004 is allowed, both with no order as to costs. (B) The Bank shall pay to the applicant-- (i) Rs. 4,99,069.48 (Rs. four lacs ninety-nine thousand sixty-nine and paise forty-eight only) with interest @ 6% p.a. from 1.1.1998 till full payment; (ii) Rs. 1,50,000/- (Rs. one lac fifty thousand only) with interest at the above said rate from 18.3.1999 till full payment; (iii) Rs. 3,37,221/- (Rs. three lacs thirty-seven thousand two hundred twenty-one only) with interest at the above said rate from 11.6.2000 till full payment; (iv) Rs. 3,52,248/- (Rs. three lacs fifty-two thousand two hundred forty-eight only) with interest at the above said rate from 23.5.2001 till full payment; (v) Rs. 2,74,641.85 (Rs. two lacs seventy-four thousand six hundred forty-one and paise eighty-five only) with interest at the above said rate from 12.2.2004 till full payment. (C) Issue Recovery certificate accordingly.;


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