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Madhya Pradesh High Court · body

2006 DIGILAW 1035 (MP)

State Bank of India v. Jagdish Talkies

2006-08-31

A.M.NAIK

body2006
JUDGMENT This judgment decides FA No.259/90 and the cross-objections submitted therein as well as CR No.46/93. 1. Short facts relevant for the purposes of the matter under conroversy are that Civil Suit No.1-A/75 was instituted in the Court of Civil Judge, Class-I, Damoh, by one Shiv Kumar against M/s. Jagdish Talkies Kasturchand Singhai was appointed as receiver in the said civil suit by the aforesaid Court. The building, furniture and machinery of Jagdish Talkies were used to be let out to third persons and the receiver was invested with a power to realise and recover the rent payable by such third persons. Kasturchand Singhai, in the capacity of receiver, decided to keep the money so received by him in the State Bank of India, Damoh Branch. Accordingly, he opened a savings bank account in his own name and started depositing the money therein, He was assured by the bank that he will be paid the interest as per the rules of banking, This account bearing SB A/c,No.201 4918 was opened by the plaintiff on 29.4.1982 with the defendant Bank in the City Branch at Damoh. The bank used to pay the interest by crediting it in the same savings bank account. On 28.5.1986, the defendant informed the plaintiff that it would not pay interest to the plaintiff. The defendant, despite opposition by the plaintiff, debited the amount of Rs.23,785.45 ps. from the said account. 2. Kasturchand Singhai, the original plaintiff in the capacity of receiver instituted Civil Suit No. 7-B/88 for the recovery ofRs.23,785.45 ps. with interest pendente lite on the ground that the defendant has no right or power to debit his account and is liable to pay the same with interest from the date of institution of the suit. 3. The defendant-appellant submitted its written statement denying the claim of the plaintiff. It has been contended in the written statement that M/s. Jagdish Talkies is a commercial concern and the plaintiff was holding the capacity of merely a receiver. The said savings bank account was opened with the money belonging to M/s. Jagdish Talkies, although no savings bank account could have legally been opened by it. It has been contended in the written statement that M/s. Jagdish Talkies is a commercial concern and the plaintiff was holding the capacity of merely a receiver. The said savings bank account was opened with the money belonging to M/s. Jagdish Talkies, although no savings bank account could have legally been opened by it. As per the rules and instructions of the Reserve Bank of India, only current account could have been opened with the aid of the money received from the assets of M/s. Jagdish Talkies and the same could have been opened legally only as a current account in the name of M/s. Jagdish Talkies and the same would not have attracted any interest in the current account at all. It is denied that the plaintiff was assured that he would be paid the interest as per the savings account. It is specifically contended in the light of the aforesaid facts that the interest was wrongly credited in the subject account and the same has been debited in pursuance of the directions issued by the Reserve Bank of India. It is further contended that the money was deposited with the defendant Bank only to ensure its safety and no interest was payable on it. Thus, it is further contended that the amount was credited in the plaintiff's account in a mistaken manner which has been rightly debited and the plaintiff has no right to seek its refund. 4. Learned trial Judge granted decree in favour of the plaintiff on 23.8.1990 for the principal sum of Rs.23,785.45 ps. However, the learned trial Court did not grant a decree for pendente lite interest and costs of litigation without assigning any reason therefor. 5. Aggrieved by the aforesaid, the defendant-appellant preferred FA No.259/90 mainly on the grounds that the regulations/instructions of the Reserve Bank of India are having statutory force and are binding on the plaintiff as well as defendant; that in case of a business concern, only a current account could have been opened which does not attract interest at all. In view of this, the plaintiff was not entitled to interest on the money received by him in the capacity of receiver for M/s. Jagdish Talkies. Since the interest was paid to the plaintiff mistakenly in his account, the same was rightly debited and the suit of the plaintiff for recovery of the same ought to have been dismissed. In view of this, the plaintiff was not entitled to interest on the money received by him in the capacity of receiver for M/s. Jagdish Talkies. Since the interest was paid to the plaintiff mistakenly in his account, the same was rightly debited and the suit of the plaintiff for recovery of the same ought to have been dismissed. Thus, according to the defendant-appellant, 4 the learned trial Judge has committed an illegality in granting the decree in favour of the plaintiff in contravention of the specific regulations and instructions of the Reserve Bank of India. Accordingly, it has been prayed that the appeal be allowed and the suit of the plaintiff be dismissed with costs. 6. FA No. 259/90 was admitted on 2.1.1991 and notice of this appeal was served on the respondent on 25.4.1997. The plaintiff submitted his cross-objections under O.41 R.22 of Civil Procedure Code on the opening day after summer vacation of the High Court of the year 1991, and prayed for interest pendente Lite on the suit amount and costs. Court-fees of merely Rs.4/- was affixed on the cross-objections which were submitted after serving its copy on the learned counsel for the appellant. During pendency of the appeal Kasturchand Singhai, the original plaintiff, was removed from receivership and M/s. Jagdish Talkies has been substituted by virtue of order of this Court passed on 3.11.2003 with its partners. 7. It will not be out of place to mention here that the case came up for hearing on various dates in the year 2005, when Shri J.P. Sanghi learned Senior Advocate prayed for sometime to place on record circular No.27/81 which was referred to in EX.D-5. Again on 18.7.2005 further arguments were advanced when an objection was taken by Shri Sanghi that court fees paid on the cross objections was not sufficient. Shri Verma, learned counsel for the plaintiff-respondent undertook to pay the deficit court-fees. Accordingly, the court-fees of Rs.1,012/- was submitted on 22.7.2005 which was taken on record despite objection by Shri Sanghi about limitation with regard to payment of court-fees with an observation that the same will be considered at the time of final hearing. The plaintiff respondent thereafter, submitted an application under O.6 R.17 read with section 151 of Code of Civil Procedure for incorporating the valuation and court-fees and for specifying the amount of claim. The plaintiff respondent thereafter, submitted an application under O.6 R.17 read with section 151 of Code of Civil Procedure for incorporating the valuation and court-fees and for specifying the amount of claim. This application has been opposed seriously by the appellant vide its reply dated 28.10.2005. 8. Now, it is appropriate to refer little about Civil Revision No.46/93. The decree granted in Civil Suit No.7-B/88 was put into execution. The appellant-judgment debtor submitted an application that the execution application was submitted by the receiver without obtaining leave from the Court which appointed him a receiver. It has been further stated in the application that Kasturchand Singhai was already relieved from the post of receivership and was not competent to proceed with the execution case. This application was dismissed on 19.1.1993. Aggrieved by the same, Civil Revision No.46/93 has been preferred by the State Bank of India. 9. Shri J.P. Sanghi, learned Senior Advocate and Shri Virendra P. Verma made exhaustive submissions in support of rival contentions. Shri J.P. Sanghi learned Senior Advocate mainly contended: (i) Plaintiff has played fraud with the defendant Bank inasmuch as he did not disclose that the subject account was being opened with the aid of money received by him out of the assets of M/s. Jagdish Talkies. The plaintiff has, thus, suppressed material facts contrary to instructions issued by the Reserve Bank of India. Accordingly, the interest was mistakenly credited in his saving bank account which has been rightly debited and the suit of the plaintiff being based on fraud and suppression of material facts, the same ought to have been dismissed. (ii) Interest in the saving bank account was mistakenly paid which has been rightly recovered by the bank and the claim of the plaintiff for recovery of the same is not sustainable in law. (iii) Cross-objections are in the nature of appeal and the same are not entertain able for want of sufficient court-fees. Deficit amount of court-fees has been offered after about 15 years and the same being barred by law of limitation, is not acceptable. The amendment in cross objections cannot be legally permitted after an inordinate delay of about 15 years without any cogent reason. Per contra, Shri Virendra P. Verma, learned counsel for the plaintiff respondent contended: (i) Plaintiff-respondent did not commit any fraud with the State Bank of India. He did not suppress any material fact. The amendment in cross objections cannot be legally permitted after an inordinate delay of about 15 years without any cogent reason. Per contra, Shri Virendra P. Verma, learned counsel for the plaintiff respondent contended: (i) Plaintiff-respondent did not commit any fraud with the State Bank of India. He did not suppress any material fact. The suit has been, thus, rightly decreed by the learned trial Judge in favour of the plaintiff. (ii) Interest was rightly paid by the defendant Bank as per the Banking Rules governing a savings bank account. Accordingly, bank had no right to debit his account since no mistake was committed by the bank in making payment of interest at the rate admissible in saving bank account. (iii) Cross-objections are confined to interest pendente lite and no court-fees was required to be paid on it. The same was paid by way of precaution, however, it being not payable, refund of the same has been, sought by the plaintiff-respondent. (iv) In the alternative, it is contended that the application for amendment (IA No.6977/05) has been submitted as a precautionary measure and the same deserves to be allowed in the facts and circumstances of the case, moreso, in the ends of justice. 10. Consideration the submissions and perused the record. 11. Shri Sanghi, learned senior counsel strongly canvassed that the plaintiff opened his saving bank account with the aid of the money which he was in receipt in the capacity of a receiver for M/s. Jagdish Talkies. Since the money with which the saving bank account was opened with the State Bank of India belonged to M/s. Jagdish Talkies, the saving bank account could not be opened and instead, a current account ought to have been opened which would not have attracted any interest at all. It has been contended by the learned senior counsel that it was on account of the mistake committed by the officials of the bank who permitted the plaintiff to open the savings bank account instead of current account and paid interest in the savings bank account mistakenly. Reliance has been placed on various authorities which will be dealt with hereinafter. 12. Before entering into the contentions of the learned senior counsel for the appellant, it is necessary to consider the provisions pertaining to the Banking. Reliance has been placed on various authorities which will be dealt with hereinafter. 12. Before entering into the contentions of the learned senior counsel for the appellant, it is necessary to consider the provisions pertaining to the Banking. Savings account and current account have been defined as per EX.D-2 in the following manner: "Savings deposit" shall mean a form of demand deposit which is a deposit account whether designated as "Savings Account". "Savings Bank Account", "Savings Deposit Account" or other account by whatever name called which is subject to the restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the bank during any specified period. "Current Account" shall mean a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or upto a particular agreed amount and shall also be deemed to include other deposit accounts which are neither savings deposit or "Term Deposit". According to the aforesaid definition, a customer while opening saving account was under no obligation to make a disclosure about the nature of money and/or its source. The only rider is with respect to the number of withdrawals as also the amount of withdrawals permitted by the bank at the relevant time. Nothing has been placed on record to establish that a customer while opening a saving bank account was under any kind of obligation to disclose that he is holder of the money in his own capacity or otherwise. Basing his contention on the case of Shiba Prasad Singh v. Shrish Chandra [AIR 1949 Privy Council 297], it has been contended by the learned senior advocate that if a party acting under mistake of law pays to another party money which is not due by contract or otherwise, that money was to be repaid. Accordingly, it has been contended that the interest was mistakenly paid which has been rightly debited from the savings account held by the plaintiff. Strength has been derived from section 72 of the Indian Contract Act, 1872, which lay down that the person to whom money has been paid, or anything delivered by mistake or under coercion must make repayment. Accordingly, it has been contended that the interest was mistakenly paid which has been rightly debited from the savings account held by the plaintiff. Strength has been derived from section 72 of the Indian Contract Act, 1872, which lay down that the person to whom money has been paid, or anything delivered by mistake or under coercion must make repayment. It is further submitted by the learned senior advocate for the appellant that the plaintiff-respondent misrepresented before the Bank, inasmuch as it was not disclosed while opening the saving bank account that the money infact did not belong to the plaintiff. In view of the aforesaid, the important question in the present case is that whether a fraud and/or misrepresentation was committed by the plaintiff at the time of opening of the savings bank account or whether the said savings bank account was opened under a mistake of fact and law. 13."Fraud' and "Misrepresentation" are defined under section 17 of the Indian Cojrtact Act, 1872, in the following manner: "Fraud: "Fraud" means and includes any of the following acts " committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract: (1) the suggestion, as a fact, of that whish is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent. "Misrepresentation": "Misrepresentation" means and includes: (1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; (2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him; (3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement." 14. It has been further laid down in section 20 of the Indian Contract Act, 1872 that where both are under a mistake as to matter of fact essential to the agreement, the agreement is void. From the perusal of the record, it is clear that it was not disclosed at any point of time that the money in question did not belong to the plaintiff personally. Had there been an obligation on the part of the customer to disclose about the nature and/or source of money with which the account was to be opened, it could have been successfully said that the plaintiff having failed to discharge his obligation has committed fraud or misrepresentation. Admittedly the money was not disclosed by the plaintiff as his own. Thus, it cannot he said that the plaintiff made a suggestion as a fact which was not true. In order to constitute fraud, there should not be merely a concealment of fact but simultaneously, it should be active one. We may be guided by the provision contained in section 17 of the Contract Act which clearly lays down that mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak.. Even under the Banking practice, any person may open a savings bank account on allowing by the bank to do the same. There is no proof on record that any enquiry was made by the Bank with the plaintiff about the nature and/or source of money with which the savings bank account was to be opened. The banker was obviously in a position to demand such information from the plaintiff himself. This having not been done, the plaintiff cannot be said to have made active concealment of facts. 15. As regards the alleged misrepresetation stated to have been committed by the plaintiff, it may be observed that the principal difference between fraud and misrepresetation is that in case of fraud, the person making the suggestion does not believe it to be true whereas in the case of misrepresentation, the same is believed to be true. 15. As regards the alleged misrepresetation stated to have been committed by the plaintiff, it may be observed that the principal difference between fraud and misrepresetation is that in case of fraud, the person making the suggestion does not believe it to be true whereas in the case of misrepresentation, the same is believed to be true. Again from the record, it is clear that the plaintiff, at no point of time, made the bank to believe that the money was owned by him personally. Thus, the plaintiff who opened a savings bank account is obviously entitled to the interest as per the rules and he cannot be said to have entertained any element of section 17 of Contract Act vis-a-vis the Bank. The plaintiff simply opened a savings bank account with the rnoney which he possessed in the capacity of receiver in order to first protect it and secondly to earn interest on it. Even in the plaintiff the plaintiff has disclosed his capacity as that of a receiver. He is not found to have made any positive assertion in order to gain interest. On the contrary, it has been the case throughout of the plaintiff that he was acting as a receiver for M/s. Jagdish Talkies. The bank having retained the money of the plaintiff in the savings bank account in the name of the plaintiff himself, it is not opened for it to contend that the plaintiff has committed any fraud or misrepresentation by not disclosing the source nature of money. 16. The fact that the money deposited in the savings bank account belonged to M/s. Jagdish Talkies was not a material fact while depositing the same in the personal name of the receiver. The particulars of source or nature of money were not liable to be disclosed at the time of opening of savings bank account under any provision of law. Admittedly, the savings bank account was opened by the plaintiff with the defendant-appellant which attracted interest at the permissible rate. Thus, the contract of opening the savings bank account by the appellant Bank in favour of the plaintiff-respondent is not found to have been vitiated due to fraud mispresentation and/or mistake. 17. Admittedly, the savings bank account was opened by the plaintiff with the defendant-appellant which attracted interest at the permissible rate. Thus, the contract of opening the savings bank account by the appellant Bank in favour of the plaintiff-respondent is not found to have been vitiated due to fraud mispresentation and/or mistake. 17. Relying upon the apex Court decision in State of Rajasthan v. Harphool Singh [ (2000)5 SCC 652 ], learned senior counsel for the appellant contended that this Court is required to make a critical analysis of the material on record and cannot mechanically affirm findings of the trial Court without due and proper application of mind. Shri Sanghi, learned senior advocate, has failed to point out any discrepancy in the impugned judgment with regard to appreciation of material on record as well as of I law. Reliance on B.R. Chowdhary v. Indian Oil Corportion Ltd. and others [ (2004)2 SCC 177 ], is of no help since in that case retail petrol pump was to be given to an unemployed youth. Suppression in that case about employment was held to be fatal because it could have dislodged such person from obtaining a petrol pump. In the present case, there being no compulsion to the plaintiff to disclose the nature and/or source of money, he is not found to have committed any fraud, misrepresentation and/or mistake of fact or law. 18. The decision of this Court reported as Caltex (India) Ltd. v. Assistant Commissioner of Sales Tax [ 1971 JLJ 505 = AIR 1971 MP 162 ], is distinguishable on facts and the preposition of law laid down in the said ruling does not get attracted. 19. Under order 6 rule 4 of Code of Civil Procedure, the party relying on any fraud or misrepresentation is required to provide particulars. The defendant-appellant has nowhere pleaded with exactness about the fraud or misrepresentation as required under law. In this view of the matter, fraud/misrepresentation and/or mistake of fact is not found to have been committed by the plaintiff by opening the savings bank account. 20. Shri Sanghi, learned senior counsel relying on S.P Chengalvaraya Naidu v. Jagannath [ AIR 1994 SC 853 ], contended that the plaintiff by opening savings bank account withheld the information that the same was being opened with the money belonging to M/s. Jagdish Talkies. 20. Shri Sanghi, learned senior counsel relying on S.P Chengalvaraya Naidu v. Jagannath [ AIR 1994 SC 853 ], contended that the plaintiff by opening savings bank account withheld the information that the same was being opened with the money belonging to M/s. Jagdish Talkies. Since there was no compulsion on the part of the plaintiff to open the savings bank account after making disclosure about the nature of money, he cannot be said to have committed a fraud and is found entitled to the amount of interest. 21. Much reliance has been placed by the learned senior counsel on section 72 of the Indian Contract Act, 1872 for opposing the claim of the plaintiff. It is true that this section recognizes that a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. In order to invoke section 72, the refund is required to be made on payment having been made under a mistake. In the present case, the savings bank account was opened by the plaintiff with the appellant Bank and the amount of interest was paid to him by crediting the same in his account as per the Bank's practice applied to all the savings bank accounts. Thus, it cannot be said to be a payment by mistake and section 72 of the said Act has no application. 22. Shri Sanghi, learned senior advocate, further contended that the learned trial Court has found while deciding issue No.3 that the instructions of the Reserve Bank of India are binding on the parties to the suit. It has been further contended that the amount has been rightly debited pursuant to the Reserve Bank of India's letter dated 8.10.1985, contained in EX.D-1. This contention is also not helpful to the defendant-appellant. EX.D-1 is merely a letter which being not in the form of circular is binding on the defendant bank alone. The instructions of the Reserve Bank of India are definitely binding on the banks. A bank if allows a customer to open an account in violation of such instructions, it may expose itself to an action against it by RBI. So, it is true that a customer cannot insist a bank to allow him to open an account in contravention of the instrnctions of Reserve Bank of India. A bank if allows a customer to open an account in violation of such instructions, it may expose itself to an action against it by RBI. So, it is true that a customer cannot insist a bank to allow him to open an account in contravention of the instrnctions of Reserve Bank of India. It is equally true that if a bank allows a customer to open an account with it in contravention of instructions and enriches itself by retaining the money of the customer in such account, the bank cannot be permitted to deprive the customer of the interest admissible according to the nature of the account. This would be the binding efficacy in the present case of the instructions of Reserve Bank of India. Since the defendant-appellant has allowed the plaintiff to open the savings bank account and retained the money in the said account, the interest accruing thereon is obviously liable to be paid to the plaintiff which was, infact, paid by crediting the same in the savings bank account. There will be no justification in depriving the plaintiff of the amount of interest which accrued to the savings bank account. 23. In there sult, the appeal has no force and the learned trial Judge is not found to have committed any infirmity in the impugned judgment. 24. As regards the cross-objections, the same are found to have been filed in respect of the interest pendente lite which was not granted by the learned trial Judge without assigning any reason. The defendant appellant raised an objection that no court-fees has been paid on the cross objections. The plaintiff-respondent offered court-fees of Rs.1012/- after valuing the cross-objection at Rs.8,560/-. An application under order 6 rule 17 of Code of Civil Procedure (IA No.6977 105) has also been filed for incorporating the amendment in the nature of valuation and court-fees. This too has been opposed by the learned counsel for the appellant on the ground of inordinate delay. The plaintiff-respondent offered court-fees of Rs.1012/- after valuing the cross-objection at Rs.8,560/-. An application under order 6 rule 17 of Code of Civil Procedure (IA No.6977 105) has also been filed for incorporating the amendment in the nature of valuation and court-fees. This too has been opposed by the learned counsel for the appellant on the ground of inordinate delay. However, it is found that the amount of interest pendente lite, is not to be included in the amount of the value of the subject matter in dispute in appeal for the purpose of Article 1 of Schedule I of the Court-fees Act unless correctness of the decree for the amount of interest pendente lite independently with a claim, is challenged, as held by the apex Court in State of Maharasthra v. Mishrilal Tarachand Lodha [ AIR 1964 SC 457 ]. Accordingly, it is held that the cross-objections submitted on 24.6.199 J. did not require the court-fees offered by the plaintiff-respondent and the same having been offered mistakenly, is directed to be refunded, in view of the law laid down in Punjab and Sindh Bank v. Ramji Dass Khanna [AIR 202 Delhi 305]. In this view of the matter, IA No.6977/05 in hereby, dismissed as infructuous. 25. As regards the interest pendente lite, it may be seen that the trial Court has already decreed the suit in favour of the plaintiff who has been held entitled to a sum of Rs.23,785.45 ps. This amount has been retained by the plaintiff-bank for a considerable period whereas, no reason has been assigned to deprive the plaintiff of the interest as per the rate applicable to savings bank account at the relevant time. There can be no justification to deny interest pendente lite in such cases. Thus, the trial Court is not found to have acted legally in depriving the plaintiff of interest pendente lite. 26. Accordingly, it is directed that the defendant-appellant shall pay interest on the suit amount to the plaintiff @ admissible to savings bank account at the relevant time from the date of filing of the suit till its realisation. Accordingly, the cross-objections are allowed and the appeal is, hereby, dismissed. The decree be modified for interest pendente lite accordingly. Defendant-appellant shall bear the costs of litigation throughout of itself and that of the plaintiff-respondent. Counsel's fee as per the Schedule, if, already certified. 27. Accordingly, the cross-objections are allowed and the appeal is, hereby, dismissed. The decree be modified for interest pendente lite accordingly. Defendant-appellant shall bear the costs of litigation throughout of itself and that of the plaintiff-respondent. Counsel's fee as per the Schedule, if, already certified. 27. As regards Civil Revision No.46/93, it may be seen that the appellant has challenged the execution on the ground that after removal from receivership, Kasturchand Singhai is not competent to continue with the execution of the decree. This Court has already maintained the decree against State Bank of India with modification about interest pendente lite and costs of litigation. In FA No.259/90, M/s. Jagdish Talkies with its partner has been substituted in place of Kasturchand Singhai which would enure to the benefit of the decree holder in execution proceedings. In this view of the matter, I do not find any substance in Civil Revision No.46/93 and the same is, dismissed hereby, however, without costs.