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2008 DIGILAW 159 (CAL)

Basudeo Khaitan v. Madan Lal Periwal

2008-02-05

SANJIB BANERJEE

body2008
Judgment : SANJIB BANERJEE, J. (1.) THE plaintiffs seek refund of the balance money remaining with the escrow agent appointed to mediate in their disputes with the proforma defendants over family assets. The plaintiffs found their prayer for final judgment and decree under Chapter XIII A of the Rules on the Original side of this court on a memorandum of understanding said to be executed on May 16,1994 that was entered into to sort out differences in the family over joint assets that apparently required the first defendant, with consultation with another, to give a verdict by December 31,1994. (2.) THE plaintiffs are the six individuals and a company said to belong to the plaintiffs branch. The plaint says that the various groups of the Khaitan family sold their shares in Selimbong Tea Company Ltd. and Seeyok Tea Company Ltd. and deposited the sale proceeds with the second defendant, a firm that the first defendant claimed was under his control. According to the plaintiffs, the money was put in on the understanding that it would be refunded in the event the mediation was not fruitful and that 15% interest per annum would be payable on the deposit. The third to sixth defendants are the partners of the second defendant firm. (3.) FOLLOWING the memorandum of understanding, the plaintiffs claim, the six individual plaintiffs put in a sum of Rs. 77 lakh with the firm of the first defendant and the proforma defendants deposited an aggregate sum of Rs. 2. 25 crore. The plaintiff-company put in Rs. 10 lakh on May 22, 1998 to replace the sum repaid by the defendant firm to the individual plaintiffs. The plaintiffs suggest that the rate of interest was reduced to 12% per annum from April 1, 2001 and the defendant firm confirmed the rate of interest by issuing confirmations of accounts as at March 31, 2002. The plaintiffs have relied on the balance confirmation statements issued by the defendant firm to the plaintiffs. (4.) THE mediation has failed, allege the plaintiffs, and there is no further use of the money being retained by the first defendants firm. The plaintiffs claim that a sum of Rs. 56,12,250/- is due and payable by the second defendant and/or by the defendant Nos. (4.) THE mediation has failed, allege the plaintiffs, and there is no further use of the money being retained by the first defendants firm. The plaintiffs claim that a sum of Rs. 56,12,250/- is due and payable by the second defendant and/or by the defendant Nos. 1 to 6 in the following proportion :- (5.) AS the claim includes interest upto March 31, 2002, the plaintiffs have sought interest at what the plaintiffs claim was agreed interest at the rate of 12% per annum from April 1,2002. The plaintiffs have sought final judgment upon swearing positively to the facts verifying their cause of action and on their assertion that the defendants have no valid defence. The proforma defendants have notice of the suit but have not appeared. The proforma defendants have not been given notice of the present application, but no decree is sought against the proforma defendants. (6.) THE first defendant and his firm have resisted the decree sought on divers grounds. The defendants suggest that even though the second defendants application for dismissal of the suit on the grounds of multifariousness and misjoinder of parties and causes of action has been dismissed, and such order affirmed in appeal, they are entitled to take the same grounds to resist final judgment. In addition, the defendants submit that the suit is not maintainable or no relief may be granted to the plaintiffs in view of provisions of the Bengal money Lenders Act, 1940. On merits, the defendants urge that the plaintiffs are wrongdoers having usurped family assets beyond their entitlement and should not be permitted to seek refund of the deposit. The defendant firms demurrer on the count of misjoinder of plaintiffs did not find favour with this court on the courts interpretation of the expression "any right to relief in respect of" appearing in Order 1 Rule 1 of the Code, to mean that the act or transaction must be relevant to the relief and need not form part of the basis of the relief. The defendant firms argument that the suit was liable be thrown out for misjoinder of causes of action was repelled on the court finding that the individual claims of each plaintiff was not distinct as the transaction with the defendant firm had a common root and the deposits had been made to give effect to a common understanding between the parties. (7.) THE defendants have urged an additional ground now. They say that the fifth plaintiff and the plaintiff company were not parties to the memorandum of understanding and there can be no communality that such plaintiffs can claim with the other plaintiffs. (8.) IT appears that the points urged by the second defendant on its application for dismissal of the suit were all negatived including the argument that the seventh plaintiff could not maintain the action. There is no occasion to revisit the premise on which the second defendants application was dismissed and the order was upheld in appeal. While it is true that the second defendant had made the argument in support of its prayer for dismissal of the suit and now urges the points to resist the decree, the reasons found in the order of November 21, 2006 remain unaffected by the subtle distinction in the scopes of the same argument made at that stage and at the present. If only to repeat, the plaintiffs cause of action is founded on the fundamental premise that a branch of the Khaitan family deposited money with the second defendant, which is an instrumentality through which the first defendant functioned, for the money to remain in escrow pending disputes between such branch and the other branches of the family to be resolved. The deposit was subject to the terms of the memorandum, the cutoff date for the verdict indicated therein and the period by which the settlement or the verdict had to be implemented, albeit such period being capable of being enlarged. The several plaintiffs made deposits in furtherance of the memorandum of understanding and not only would common questions of fact and law arise if separate suits were brought, it would lead to undesirable multiplicity of proceedings. (9.) THE defendants have used two affidavits, one by the first defendant and another by the sixth defendant on behalf of the defendant firm. The first document that is appended to both affidavits, is a chart where the names of the seven plaintiffs appear under "group A" in the first column. The second column records that a sum of Rs. 87,00,000/-was received in aggregate from the plaintiffs. The third, fourth and fifth columns record the repayments made by the second defendant to the plaintiffs during the years 1996, 1999 and 2000. The second column records that a sum of Rs. 87,00,000/-was received in aggregate from the plaintiffs. The third, fourth and fifth columns record the repayments made by the second defendant to the plaintiffs during the years 1996, 1999 and 2000. If such chart were to be accepted, despite the plaintiffs protest, it appears a total sum of Rs. 53,38,683/- was paid out to the plaintiffs in the year 1996, a sum of rs. 13,25,000/-repaid in 1999 and an amount of Rs. 4,18,491/-made over in 2000. The aggregate of the third, fourth and fifth columns is Rs. 70,82,174/ -. (10.) THUS, on the defendants showing, a sum of Rs. 16,17,826/- still remains deposited with the second defendant, without taking into account the interest claimed on the deposit. (11.) THE first defendant suggests in his affidavit that it was agreed by the khaitan family members or entities who would deposit money, that the second defendant would show the amounts received as loan without being liable for payment of any interest. The first defendant says that the amount of Rs. 70,82,174/-disbursed to the plaintiffs was with the consent and concurrence of all members of Khaitan family as, in the absence of consensus all around, the first defendant could not have refunded any part of the deposit. Apart from the technical grounds urged, the sheetanchor of the first defendants resistance is, in his words, the conduct of the plaintiffs: -"6. l). However, the entire atmosphere has been vitiated by the acts and conduct of plaintiff nos. 1 and 3 particularly the plaintiff no. 3. It has been agreed that all parties would maintain statue-quo with regard to the business properties, assets and funds, which understanding has been breached by the plaintiffs particularly the plaintiff no. 3 repeatedly leading to complaints by all other parties. In particular, the plaintiff no. 3 in breach of the order of status quo wrongfully and without authority trespassed upon and obtained control of various parts of the joint residence at premises no. 12/1, Keyatola Road, Kolkata (hereinafter referred to as the said premises) and the office at 19, R. N. Mukherjee Road, kolkata (hereinafter referred to as the said office). After repeated complaints and upon my direction to restore the status quo, the plaintiffs and their family members agreed that the same would be returned to the parties entitled thereto. Not only has the plaintiff no. After repeated complaints and upon my direction to restore the status quo, the plaintiffs and their family members agreed that the same would be returned to the parties entitled thereto. Not only has the plaintiff no. 3 failed to do so despite repeated requests but he has also wrongfully, illegally and in breach of agreement purported to construct garage at the same premises for is own use. He has been repeatedly directed to remove the said garage and had agreed to do so but failed and neglected to do so till date. In this connection it is material that plaintiff no. 3 and his family members are in possession of an area well in excess of the area they are entitled to both in respect of the said residential premises and said office space without any entitlement thereto. The plaintiff no. 3 is also in possession of office space at 19, R. N. Mukherjee Road. These had been agreed to be given and allotted to the defendant nos. 8 and 10 but the plaintiff no. 3 has refused to make over possession thereof to the said defendants." (12.) ON multifariousness and misjoinder, the defendants rely on the judgment at reported at 2007 (2) SCC 551 (Prem Lala Nahata vs. Chandi Prasad Sikaria). Such Supreme Court judgment was noticed by the appellate court in the appeal arising out the second defendants application for dismissal of the suit. It is of some significance that a Division Bench judgment of this court from which the special leave petition arose in the Supreme Court judgment, was cited by the second defendant in support of its contentions in its application for dismissal of the suit. Another Division Bench judgment in the case of Margo Trading and Ors vs. Own Credits Private Ltd. was also relied upon by the second defendant. In the Supreme Court judgment cited now the Margo Trading view has been held to not lay down the correct law. The Supreme Court held on facts that the appellants before it claimed payments which also formed the basis of the claims of the respondent against the respective appellants in the respondents individual suits. In the Supreme Court judgment cited now the Margo Trading view has been held to not lay down the correct law. The Supreme Court held on facts that the appellants before it claimed payments which also formed the basis of the claims of the respondent against the respective appellants in the respondents individual suits. The Supreme Court found that in the last suit the appellants had combined all the claims and the Supreme Court thought it was inappropriate to require the appellants before it to elect between the claims being subject matter of the last suit. (13.) THERE would be no undue embarrassment or inconvenience here if the claims of the individual plaintiffs were taken up together. Indeed, the form of action cannot be faulted but lauded. If at all, rather than seven suits being brought for seven claims, the one that the plaintiffs have brought is best-suited for adjudication of the matters in, or likely to be in, issue. In the Supreme Court case, the mother and daughter plaintiffs had sued the defendant for transactions entered into by the husband and father, respectively, of the plaintiffs with the defendant. Such plaintiffs applied for transfer of two suits that the defendant had earlier instituted in a lower court against the two plaintiffs in the High Court suit. A learned Single Judge directed that the defendants suits be transferred to this court for all three matters to be tried together. The defendant then brought an application for dismissal of the High Court suit on the contention that the causes of action of the plaintiffs were distinct. Such application was rejected and the order was taken in appeal where the Division Bench did not reject the plaint, but gave the High Court plaintiffs an opportunity to elect to proceed with one of the two claims. The Supreme Court restored the order of the Single Judge and opined that the three suits would have to be jointly tried since the evidence would be common. The Supreme Court restored the order of the Single Judge and opined that the three suits would have to be jointly tried since the evidence would be common. (14.) TO take a cue from the Supreme Court judgment that the defendants have relied on, it appears that each of the plaintiffs here would need to rely on the same memorandum of understanding as the basis for the individual deposits and the defendants would rely on the same defence on merits and the point urged under the Bengal Money Lenders Act, to resist the separate claims if several suits were filed. It would be unwise for such common matters to be sent to separate trials and the attendant risks. There do not appear to be distinct claims by the several plaintiffs in the sense that their causes of action can be said to be disparate. Viewed from the other aspect, if the individual claims of the seven plaintiffs were each to be made the basis of separate suits, the court would club the matters together for a joint or analogous trial. (15.) IN furtherance of the ground of multifariousness and misjoinder, the defendants rely on the judgment reported at AIR 1952 Cal 222 (The Corporation of Calcutta vs. Radhakrishna Dev and Ors) and AIR 1953 Cal 185 ( Nagendra Bala debi and Ors vs. Provash Chandra and Ors). In the first case the Municipal corporation had brought a single suit against the defendants for recovery of arrears of rates for the same period. It was an admitted position that though the defendants had the same address the premises had been subdivided into 12 and the corporation records showed 12 several holdings. It was in such context that the court felt that though certain facts would be similar if separate suits were brought, there would be no common question of law or fact for the plaintiff to invoke order 1 Rule 3 of the Code. (16.) IN the Nagendra Bala case the plaintiffs and the defendants were proprietors in a touzi and each of them held a separate account. There was default in payment of revenue in respect of the separate accounts and the plaintiff deposited the entire amount due and brought a suit for reimbursement and contribution against the several defendants. (16.) IN the Nagendra Bala case the plaintiffs and the defendants were proprietors in a touzi and each of them held a separate account. There was default in payment of revenue in respect of the separate accounts and the plaintiff deposited the entire amount due and brought a suit for reimbursement and contribution against the several defendants. On grounds similar to the earlier case, a Division Bench of this court held that merely because the separate accounts related to the parent touza, that would not be sufficient to supply the requisite nexus between the payments made by the plaintiff for a single suit to be brought. (17.) THE defendants rely on the bar under Section 13 (1) of the Bengal Money lenders Act and exhort that a license under the Act enjoins upon a moneylender to discharge the duties envisaged, inter alia, by Sections 24, 25 and 27 of the act. The defendants argue that though the extreme view earlier expressed by a learned Single Judge of this court on the interpretation of Section 13 (1) of the Act has been disapproved by a Division Bench in the judgment reported at 2000 (2)CLJ 185 (Swaika Vanaspati vs. Canbank Financial), a plaintiff had still to obtain a license under the Act before it could seek repayment of the money lent. (18.) IT is not necessary to notice the requirement of the Bengal Money Lenders act as it is not the defendants case that the plaintiffs are habitual moneylenders. On the contrary, it is the defendants positive case that the deposit was made pursuant to the memorandum. It is an entirely different matter that the parties realized that the deposit would not remain fallow and incidentally provided for a return on the deposit by way of interest with full knowledge that the second defendant firm would make use of the money during the period that it retained it. On the defendants case run in the two affidavits, there is no merit in the bar they seek to assert under the 1940 Act. (19.) THE defendants finally rely on the triability of their defence and cite AIR 2002 SC 1993 for the purpose. In this case, the Supreme Court reiterated the principles recognized in the Mechalec case ( AIR 1977 SC 577 ) which in turn had reproduced the tests in an application for summary judgment formulated decades ago by this court. (19.) THE defendants finally rely on the triability of their defence and cite AIR 2002 SC 1993 for the purpose. In this case, the Supreme Court reiterated the principles recognized in the Mechalec case ( AIR 1977 SC 577 ) which in turn had reproduced the tests in an application for summary judgment formulated decades ago by this court. These defendants submit that even if the defence is found to be not good enough, an order may be made for furnishing security at the very least. (20.) THE distinction between when a plaintiff is entitled to leave to sign judgment and the defendant is required to furnish security, is rather thin. In either case the defence has to be found to be without basis. In the one case the court will allow the plaintiff to his decree immediately and in the other, the court, in its discretion, may require the defendant to furnish security for the luxury of urging its seemingly unmeritorious defence at the trial. (21.) IN the present case, the defendants ought to have no interest in the matter as the first defendant is the named mediator and the second defendant is merely the repository of the deposits. The other Khaitans, despite having notice of the suit, have not jumped in to thwart the plaintiffs claim. The other Khaitans have not urged the alleged ill-conduct of the plaintiffs, that these defendants seek to espouse for them. The defendants have no entrenched right to retain the deposit. (22.) IT is common ground that the money was deposited into an escrow account. Blacks Law Dictionary (5thed, Pg 283) says an escrow account is generally a bank account held in the name of the depositor and an escrow agent which is returnable to the depositor or payable to a third person on the fulfillment of the escrow condition. The escrow agent has fiduciary responsibility both to the depositor and the third person. The escrow agent cannot have any interest in the deposit. It is not the first defendants case that the deposit is payable to the proforma defendants. The first defendant or his firm cannot seek to indefinitely retain the deposit. (23.) THERE is no defence that the defendants have indicated, save a line that notwithstanding the deposit being shown as loan there was no interest payable. It is not the first defendants case that the deposit is payable to the proforma defendants. The first defendant or his firm cannot seek to indefinitely retain the deposit. (23.) THERE is no defence that the defendants have indicated, save a line that notwithstanding the deposit being shown as loan there was no interest payable. In such suggestion, the defendants seek to demonstrate a state of things contrary to the second defendants written acknowledgement of the loan and the interest in the balance confirmation documents made over to the plaintiffs. Not only has the second defendant provided for interest in such documents, but the second defendant has debited tax at source to boot. Against the backdrop of such undisputed documents, it would be difficult to accept the defendants contention that no interest was payable on the deposit. The defence against the interest claim is as almost brittle as the defence against the claim of refund; the only difference being in degrees. The defence as to the refund of the sum of rs. 16,17,826. 00 is covered by the fourth of the Mechalec tests and the plaintiff is entitled to leave to sign judgment. The defence as to the interest is as illusory and sham, but the defendants will have leave to defend on condition of securing the claim. (24.) THE result is that there will be final judgment and decree in favour of the plaintiffs for the sum of Rs. 16,17,826.00 which the plaintiffs are left to apportion among themselves but upon full discharge in respect thereof to the defendants on payment. The defendants are given to liberty to carry the remaining claim to trial subject to deposit of the balance of Rs. 39,94,424. 00 (Rs. 56,12,250.00 less than Rs. 16,17,826. 00) in cash in favour of the Registrar, Original Side. In the event such security is not furnished within four weeks from date, the plaintiffs will be entitled to a decree for such further sum together interest on the entire sum of Rs. 56,12,250. 00 at the rate of 12% per annum from April 1, 2002 till payment.