Bombay High Court
The Metal (Excluding Iron And Seetl) And ... vs The State Bank Of India And 3 Ors on 14 December, 2018
Author: A.K. Menon
Bench: A.K. Menon
hcs
sj43.2018-1.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO.43 OF 2018
IN
COMMERCIAL SUMMARY SUIT NO.218 OF 2018
The Metal (excluding iron and steel) & Paper
Markets and Shops Mathadi Labour Board .. Plaintiff.
Vs.
The State Bank of India
Branch - Four Bunglow,
Shri Hari CHS Ltd.
Opp. Karmavir Sports Complex,
RTO Galli, Four Bunglow
Andheri (W), Mumbai 400 053. .. Defendant,
Mr.Ashutosh Kumbhakoni, Advocate General i/b Sanjay P. Shinde for the
plaintiff.
Mr.Hiralal Thakkar, Senior Advocate with Ms.Lopa Munim and Mr.J.B.
Navlani i/b Kusumakar Kaushik for the defendant.
CORAM : A.K. MENON, J.
DATED : 14TH DECEMBER, 2018 P.C :
1. By this Summons for Judgment, the plaintiff seeks a decree in a sum of Rs.19,30,57,383.73 along with interest thereon at the rate of 7.5% per annum from the date of fixed deposit i.e. 20th April, 2016 till payment or realisation. Perusal of the particulars of claim at Exhibit "V" to the plaint 1/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt reveal that a principal sum is Rs.17,95,48,621.73 Ps. is claimed along with interest thereon at 7.5% per annum for the period from 20th April, 2016. The claim arises pursuant to non payment of the amount of Rs.20 crores invested by the Plaintiff in a fixed deposit with the defendant bank.
2. A few facts may be narrated prior to dealing with rival contentions.
The plaintiff is a labour board established pursuant to the Maharashtra Mathadi, Hamal and Other Manual Workers (Regulation of Employments and Welfare Act), 1969 ("the Mathadi Act"). The defendant is the State Bank of India, arguably the largest commercial nationalised bank. The suit initially impleaded executives of the State Bank of India separately as the defendants. These executives have since been deleted from the array of parties by amendment permitted on 29th October, 2018. It is the plaintiff's case that the Government of Maharashtra had formulated a scheme by exercising its powers under the Mathadi Act empowering the plaintiff Board to manage its own funds from monies received from the State Government, Wages and Fees and levies were receivable by the Board from the registered employers and under the scheme the plaintiff board was entitled to invest its funds in securities and deposits only with nationalised banks. The funds were to be used for achieving of the purpose and objects of the said scheme and the Mathadi Act and essentially for welfare of the workers including their Provident fund, gratuity and other benefits.
3. The plaintiff receives money by way of interest on investment and has 2/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt savings bank accounts in various banks. Clause 6.4 of the scheme reportedly provides that the funds may be kept in State Bank of India or in any other Nationalised Bank. The plaintiff has annexed a copy of the scheme at Exhibit- A and clause 6(4) reads as under :
"6(4) All monies forming part of the fund shall be kept in current or deposit acount with the State Bank of India or the Reserve Bank of India or in any nationalised Scheduled Bank or any Scheduled Bank or any Co-operative Bank of invested in such securities as may be approved by the Board. Such Accounts shall be operated by such officers of the board as may be authorized by it."
4. It is the case of the plaintiff and as canvassed by the learned Advocate General that the defendant no.1 had vide letter dated 12th April, 2016 requested the plaintiff to place fixed deposits with it. The plaintiff enquired with other banks, compared rates of interest offered by various banks and found that the defendant no.1 had offered more attractive rates of interest than others and as a result on 13th April, 2016 the plaintiff informed the defendant bank of its intention to invest sum of Rs.20 crores in a fixed deposit and forwarded a cheque for the said amount favouring the defendant bank apparently along with a resolution. This can be seen from 3/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt annexures mentioned in the letter dated 13th April, 2016. The letter interalia highlights the fact that the board was exempted from payment of tax deductible at source and therefore no tax was to be deducted till the date of maturity. Further instructions were to the effect that the account would be operated jointly by the Chairman and the Secretary of the Board and in no event any individual or the board itself would be empowered to raise any loan on the basis of this deposit or offer this deposit as security for any loan. It was further specified that no request for loan or overdraft should be entertained.
5. It is the case of the plaintiff that on 18th April, 2016 an amount of Rs.20 crores was debited from the plaintiff's Bank of India Account, Mandvi branch. On 22nd April, 2016, pursuant to the aforesaid remittance, the defendant bank issued a Term Deposit Advice bearing Account No. 35725152611. The deposit was made for a term of two years with maturity value of Rs.23,20,44,335/- earning interest at 7.5% per annum. The receipt did not mention the mode of operation of the said fixed deposit account as joint, despite instructions to do so and accordingly, the plaintiff informed the Manager of defendant bank, who issued another F.D. receipt which described the operation of account as "Others" which is why the fixed deposit receipt reportedly bears the endorsement "Printed two times" at the bottom. Under the term deposit, the defendant was obliged to pay interest at 7.5% per annum. According to the plaintiff, after receipt of the said fixed deposit 4/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt receipts, the particulars of fixed deposit were duly entered in its register of investments.
6. On or about 5th August, 2016, the plaintiff received a telephonic call from the defendant's then manager informing the Plaintiff that some overdraft had been granted against the said term deposit and that some amounts were outstanding. The plaintiff's officials were reportedly surprised to hear the overdraft facility and on 6th August, 2016 the plaintiff's Chairman along with its Secretary, Accountant and Cashier personally visited the Manager of defendant no.1 and enquired about alleged overdraft loan which according to the Plaintiff was fraudulently availed of without the authorisation or consent of the Board. The Plaintiff sought refund of entire amount of term deposit. The defendant's Manager apparently called one Mr.Sakhare who was the Manager of the defendant bank at the time when deposit was made and enquired about the said overdraft facility. The plaintiff contended that Mr.Sakhare reportedly spoke to some unknown persons on phone and conversing with the said person, assured the Manager that the overdraft account would be settled by Monday 8th August, 2016. Thereupon the Branch Manager assured the plaintiff's officials that after settling the overdraft account, the amount of fixed deposit amount would be refunded with interest on 8th August, 2016. The plaintiff's officials once again visited the branch but the amount was not paid or restored to their account.
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7. According to the plaintiff, the defendant no.1's earlier manager Mr.Rajan Sakhare with other officers and some unknown person, acting in collusion have misappropriated funds and siphoned amounts from the fixed deposit by illegally noting a lien on the said fixed deposit. According to the plaintiff, the defendant's Manager and officials have concealed the said information of overdraft account from the board and have committed a fraud upon the board. On 9th August, 2016 defendant no.1 reportedly sent an email to the plaintiff confirming that the term deposit of Rs.20 crores was made and contended that an overdraft facility has been availed of and therefore the bank had noted lien on the term deposit of Rs.20 crores. According to the plaintiff, no one on their behalf had consented to grant the overdraft facility or had signed on the proposal of availing the overdraft facility against the term deposit. None of the officers of the plaintiff were involved in opening the overdraft account and that such account is bogus and appears to have been created by the officers of the bank in furtherance of siphoning of the monies of the plaintiff.
8. On 9th August, 2016 the plaintiff sought confirmation of the term deposit of Rs.20 crores certifying that there was no lien against the said fixed deposit. The plaintiff also sought confirmation that the said fixed deposit stands in the name of the board, is outstanding and repayable and that the deposit is free of encumbrances. On the following day the board filed a criminal complaint with Economic Offences Wing, Mumbai Police against the 6/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt defendant and its manager Mr.Rajan Sakhare and other officers. In the complaint the facts leading up to investment have been narrated.
9. Mr.Kumbhakoni, learned Advocate General relied upon the scheme of the Industrial and Labour Department, Government of Maharashtra which interalia provides for investment and submitted that the funds of the Board remained to be utilised for welfare of the employees of the Board and therefore there were appropriate restrictions on usage of funds. Specific instructions were given that no lien should be created to ensure that no loan was allowed to be taken on the basis of security of the term deposit and on this behalf, he made appropriate references to instructions in the letter dated 29th April, 2016 recording that the plaintiff was shocked at the communication and the telephone call received from the bank to the effect that an overdraft facility has been availed of. He submitted that there is no defence to the claim. Mr.Kumbhakoni submitted that on account of failure of the bank to restore the amount of the term deposit, a demand notice dated 6th March, 2017 was sent to the bank demanding payment of Rs.19,19,27,929.73 along with interest at 7.5% per annum despite which no payments were forthcoming.
10. An affidavit in reply has been filed on behalf of the bank in which the defendant has taken up the contention that the suit is not maintainable as a summary suit since the defendant has not admitted liability. There are various triable issues involved and that investigation was pending before the 7/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt Economic Offences Wing. The affidavit filed by one Mrs.Sneha Ambekar, Branch Manager sets out the manner in which the term deposit was created. According to the defendant, upon receipt of the cheque for Rs.20 crores, a Cumulative Fixed Deposit was made for a period of two years. The deponent acknowledges the fact that in the letter forwarding the cheque the plaintiff had clearly instructed the bank that no individual or board is empowered to raise a loan on the term deposit or offer the deposit as security for any loan and no such request should be entertained.
11. The affidavit sets out that the deposit receipt in original was handed over to the Chairman of the plaintiff on 22nd April, 2016 and that soon after issuance of receipt, the plaintiff's board passed a resolution dated 25th April, 2016 to avail the overdraft facility. The extract of resolution is said to have been forwarded by the plaintiff to the defendant on 29th April, 2016 along with an undated letter said to have been signed by the Chairman and the Secretary of the plaintiff. The letter purportedly stated that "due to sanction development Project approved from Government, board requires immediate fund to purchase goods". Pursuant thereto the defendant bank had sanctioned an overdraft facility to the tune of Rs.18 crores and amount was reportedly released in the overdraft account of the plaintiff. That in order to avail the said overdraft facility, the Chairman and Secretary of the plaintiff executed loan documents comprising of loan application, demand promissory note and delivery letter on 29th April, 2016 for Rs.18 8/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt crores. The bank relied upon copies of these documents, thereafter diverse payments were made by RTGS in favour of various persons.
12. Apparently, the deposit of overdraft account was handled on behalf of the bank by Deputy Manager Mr.Rajan Chandrabhan Sakhare, who reportedly retired from service on 30th April, 2016. It is contended that after the overdraft facility was availed, the bank had regularly followed up on the phone with the authorised signatories of the plaintiff about KYC compliance. The overdraft facility was reportedly being operated within the "limits granted" and on 9th August, 2016 the defendant no.1 reportedly received an email, purportedly from the plaintiff, seeking confirmation that no lien had been recorded on the deposits. The plaintiff meanwhile learnt that the Railway Board Clearing and Forwarding Establishment Labour Board, Mumbai had also made some deposit against which an overdraft facility was allegedly availed by the Railway Board.
13. According to the defendant although it had informed the plaintiff that the overdraft facility was provided and disbursed on written instructions of the Chairman and the Secretary, no action has been taken by the plaintiff and no internal enquiry has been initiated. On the contrary the plaintiff had filed a false police complaint. The deponent further states that during the internal enquiry, the defendant learnt of an instance of misappropriation by outsiders by siphoning part of the amount meant to be invested for the term deposit through RTGS from the account of the Railway Goods Clearing 9/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:08 ::: sj43.2018-1.odt and Forwarding Establishment Labour Board maintained with Koparkhairne branch of the defendant bank in November/December 2014 and this led to registration of FIR under sections 465, 468, 471, 406, 420 read with 34 of Indian Penal Code and it appears that a similar modus operandi has been adopted by the officers of the plaintiff in the present case to siphon out the monies. It is further contended that the defendant not having admitted liability the plaintiff could not maintain a summary suit. There is no acknowledgment of debt and it is submitted that unconditional leave to defend may be granted.
14. Mr.Kumbhakoni submitted that the defendant bank has forged and fabricated documents. This is evidenced from the fact that there were no process entries. The KYC requirements were also not complied and the defendant's Branch Manager one Mr.Sakhare had retired on the very next day after disbursement of the amounts. The mandate given to the bank was clear to the effect that no loan or lien was permissible but this mandate had been violated. It was submitted that the scheme was statutory in nature and was created pursuant to the notification dated 22nd August, 1993 issued under the Mathadi Act. He submitted that the regulations empower the Board to borrow money from the open market or otherwise with previous permission of the State Government and as such the overdraft facility could not have been taken in view of the provisions of clause 6(5) of the Act. Clause 6(5) read as under :
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sj43.2018-1.odt "6(5) The Board may with the previous permission of the State Government borrow money from open market or otherwise with a view to provide itself with adequate resources."
15. The learned Advocate General then submitted that no funds were required by the plaintiff during relevant period between 5th March, 2016 and 30th March, 2016. The plaintiff Board had invested funds in other banks and there was no need to avail of the overdraft facility. While, I am unable to accept the plaintiff's contention that the defence should be disbelieved as the plaintiff's own funds were available, that by itself cannot be a bar against borrowing, if the plaintiff in its wisdom felt it appropriate and to that extent the plaintiff cannot rely upon the fact that it had funds in other banks and therefore the overdraft would not have been sought. The question that really arises is whether the overdraft facility was sought by the plaintiff and if so, it was legitimately sanctioned. This aspect would arise for consideration while deciding this summons for judgment. Mr.Kumbhakoni therefore submitted that the plaintiff is entitled to a decree.
16. On behalf of the defendant bank, Mr.Thakkar, the learned Senior Counsel contended that the suit was not maintainable since the plaintiff is a statutory board and the plaintiff had not "invested" money. The defendant has disputed the plaintiff's claim. He further submitted that the Chairman of the 11/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt plaintiff's Board had no authority to deal with bank in this manner. In this behalf he relied upon a letter dated 13th April, 2016 Exhibit-C to the plaint to submit that it was the Chairman along with the Secretary who could operate the account jointly whereas the present suit is filed only by the Chairman who had no authority to act on his own and therefore, the suit was not maintainable. He submitted that the suit transaction was initiated by the Chairman and the Secretary.
17. Apropos this contention of Mr.Thakkar, it would be appropriate to consider the scheme itself which in my view sufficiently empowers the Chairman to safeguard interest of the plaintiff. Reference may be made to responsibility, duties and powers of the Chairman under clause 8 and which includes sub-clause (d) which empowers the Chairman to take suitable steps, if any, irregularities are detected by him or brought to his notice. Considering the provisions of scheme I have no doubt in my mind that the Chairman was empowered to file the present suit. I am therefore unable to accept the contention of the defendant that the suit filed by the Chairman was without any authority.
18. Mr.Thakkar then submitted that there was no resolution of the Board and in the absence of such resolution, the Chairman had no authority. He submitted that this contention was specifically taken up by the defendant in paragraph 70 of the affidavit in reply and there is no traverse in the affidavit in rejoinder. Mr.Thakkar contended the fact the Chairman had no authority 12/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt was established and this was not a technical defence.
19. According to Mr.Thakkar, the Branch Manager promptly responded to the email dated 9th August, 2016 and informed the plaintiff that the overdraft facility has been availed of. The affidavit further sets out that on 12th August, 2016 the plaintiff addressed one more email to the defendant attaching a signed letter dated 11th August, 2016 wherein the plaintiff sought details of the documents in relation to the overdraft account remittance and a statement of fixed deposit account maintained by the defendant. The affidavit records that the email dated 12th August, 2016 aroused the suspicions of the defendant and they called upon the plaintiff to comply with KYC requirements within two days failing which the defendant would be constrained to set off the account outstanding in the overdraft account against the term deposit. The affidavit further records that on account of the plaintiff's failure to comply with formalities, the defendant was constrained to appropriate the proceeds of term deposit against outstanding in the overdraft account and thereafter issued a cheque for Rs.2,04,58,378.27 towards residual proceeds of term deposit. It is contended that the plaintiff had incorrectly denied having availed of the overdraft facility. The defendant has contended that being alarmed by the developments, it had filed a criminal complaint with the Deputy Commissioner of Police, Economic Offences Wing seeking investigation in the case and since the plaintiff had also filed a complaint triable issues arise 13/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt for determination. It is contended that instead of participating in the investigation the plaintiff has addressed various letters making false allegations against the officers of the defendant which are sought to be denied.
20. Mr.Thakkar then submitted that under Order 37 Rule 2 the present suit is not maintainable. He submitted that under the provisions of Rule 2 only a specific class of suits could be filed and the present suit does not fall within the specified classes since the cause of action as pleaded in the plaint is that the defendant bank had illegally and fraudulently appropriated the amount of the term deposit towards bogus overdraft account and that the plaintiff had sought refund of amount of Rs.19,19,27,929.73. He submitted that the suit is essentially one claiming damages and therefore cannot be filed as a summary suit. He therefore submitted that based on very pleadings in the plaint unconditional leave to defend the suit be granted. He invited my attention to Exhibit A-5 to the affidavit in reply which is a loan application form dated 29th April, 2016. He submitted that a loan account number has been allotted pursuant to the loan application which sought Rs.18 crores by way of demand loan/overdraft limit. He submitted that the loan application was signed on behalf of the plaintiff by two persons who appear to be the Chairman and the Secretary. A demand promissory note for Rs.18 crores was also signed by the Chairman and the Secretary on same day as also a demand promissory note delivery letter. To a specific 14/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt query from the Court whether loan had been sanctioned, Mr.Thakkar fairly admitted that no specific sanction seems to have been accorded but a recommendation made was very much evident from the second page of the loan application. According to Mr.Thakkar sanction could have been obtained post facto and disbursal may have preceded such sanction. According to Mr.Thakkar there was no protection against the facility being availed of.
21. In support of his contentions Mr.Thakkar relied upon the fact that there were numerous signatures of the Chairman on record and all of which are admitted signatures and all of which are identical but which are now sought to be denied. The signatures on the demand promissory note, delivery letter and correspondence including applications for RTGS and NEFT remittances and comparison of these signatures would in no uncertain terms establish the fact that these were indeed signed by the plaintiff's Chairman and the Secretary. Mr.Thakkar submitted that for every RTGS transaction on behalf of the Board, forms had been signed, request letters for transfer of funds were also given on behalf of the Board addressed to the Manager of the defendant all of which were signed by the Chairman and the Secretary. He submitted that the plaintiff has now dishonestly denied the same.
22. It is not in dispute and as evident from various RTGS remittances and applications, these remittances were authorised by the Branch Manager, 15/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt Mr.Sakhare. This is seen from numerous vouchers, copies of which are annexed as part of Exhibit A-7 to the affidavit in reply. The Branch Manager's signature appears in each of these cases and surprisingly all remittances are made on or about 29th and 30th April, 2016 and the fact that the said Branch Manager retired on the following day is telling.
23. Mr.Thakkar submitted that it is not possible to accept the contention that none of the signatures were of the plaintiff. He further submitted that the Railway Goods Clearing and Forwarding Establishments Labour Board, Mumbai is plaintiff in Summary Suit No.254 of 2018 had also written a letter in September 2016, the contents of which are similar to letter dated 9th August, 2016 Exhibit-G to the plaint. He submitted that it is not be possible that identical letters be issued unless the plaintiff in two suits were aware of goings on. He submitted that the defence is a plausible one and the overdraft facility had been granted pursuant to the application. The defendant, he submitted has a general banker's lien and in exercise thereof, the defendant bank had acted to protect its own interest and appropriated the balance due in the overdraft account for the deposit account. He submitted that cause of action, if any, of the plaintiff is only to recover damages said to have resulted from funds misappropriated and not based on the term deposit. Mr.Thakkar submitted that the Secretary of the plaintiff had not disputed the signature although the Secretary of the plaintiff was co-signatory. Since the Secretary is also person instrumental in making 16/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt deposit has not denied the signature on the loan application and there are documents relied upon by the defendant in the affidavit in reply, it was submitted that these are all issues which are require to be tried.
24. Mr.Thakkar relied upon the following judgments :
(i) Jashbhai Motibhai Patel vs Hasmukhbhai Ravjibhai Patel AIR 1992 Guj 115;
(ii) State Bank of Travancore vs. Kingston Computers India Pvt. Ltd. (2011) 11 Supreme Court Cases 524;
(ii)i Mrs.Raj Duggal vs. Ramesh Kumar Bansal AIR 1990 SC 2218;
(iiv State Bank of Hyderabad vs. Rabo Bank AIR 2015 SC 5820;
(v) Bank of Maharashtra vs. United Construction Company and Others (1986) Company Cases (Bom.) 163;
(vi) Syndicate Bank vs. Vijay Kumar and Others AIR 1992 SC 1066;
(vii) SICOM Ltd. vs. Prashant S. Tanna and Others AIR 2004 Bombay 186;
25. In Jashbhai Motibhai Patel (supra) unconditional leave was granted, there being a challenge to signature of the defendant appearing on the promissory note which was disputed because the signature on the Vakalatnama was undisputed signature and it was different from the one on the promissory note. That decision was however an exparte decision. The Gujarat High Court relied upon principles in M/s.Mechalec Engineers & Manufacturers vs. M/s. Basic Equipment Corporation reported in AIR 1977 17/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt SC 577 wherein it was held that if the defendant satisfies the court that he has a good defence to the claim on merits, the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend. I am of the view that the conditions set out in the case of M/s.Mechalec Engineers & Manufacturers (supra) are not attracted in the facts of the present case.
26. In Mrs.Raj Duggal (supra) leave was declined since the Court was of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one. It is further observed that where the defendant shows that even on a fair probability he has a bonafide defence, he ought to be granted leave to defend.
27. In State Bank of Hyderabad (supra), the Supreme Court considered a challenge to an order of the Bombay High Court dismissing an appeal preferred by the appellant bank. The Supreme Court found that triable issues arose for adjudication and further observed that the High Court ought to have taken into consideration the factual matrix of the case before recording its finding. Taking into consideration totality of the facts and circumstances of the case, the Court was of opinion that the original defendant - appellant has made out a prima facie case and therefore unconditional leave was granted.
28. In Bank of Maharashtra (supra) the Division Bench of this Court laid 18/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt down that there need not be an express oral agreement regarding the grant of the overdraft facility to a customer having a current account with the bank. Even in the absence of an express agreement, there can be an implied agreement for grant of overdraft or loan facility, if the customer issues cheques without there being sufficient balance in the account and the bank honours the cheques and the customer does not dispute the correctness of the entries relating to those payments.
29. In Syndicate Bank (supra), Mr.Thakkar relied upon the quotation from Halsbury's Laws of England in support of "banker's lien". A banker's lien on negotiable securities has been judicially defined as "an implied pledge" and a banker has, in the absence of agreement to the contrary, a lien on all bills received from a customer in the ordinary course of banking business in respect of any balance that may be due from such customer. By mercantile custom the banker has a general lien over all forms of commercial paper deposited by or on behalf of a customer. It was therefore sought to be contended that in the instant case the bank had exercised this lien and appropriated the amounts outstanding in the overdraft account from the term deposit.
30. In SICOM Ltd. (supra) this Court held that if the suit is falling within one of classes of suits enumerated in Order 37 it was maintainable even if claim made therein was not properly quantified or was in excess of what the plaintiff was entitled to. In a summary suit filed under Order 37 the plaintiff 19/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt is entitled at any time, to abandon or give up a part of the claim unilaterally and the plaintiff may do by making a statement to be recorded by the Court and without the necessity of the plaintiff making a made formal application for the same by withdrawing the summons for judgment, amending the plaint and thereafter taking out a fresh summons for judgment or otherwise. At the hearing of the summons for judgment, the Court could grant a decree for a part of the claim and grant unconditional leave to defend the suit in respect of rest of the claim. I do not see how this judgment could be of assistance to the defendant.
31. In State Bank of Travancore (supra) the Court held that under the Companies Act considering section 291 and 632 a suit filed by person not duly authorised by the company is not maintainable and it would depend on the resolution passed by the Board of Directors of the Company delegating its powers to authorise another person to file a suit on behalf of the company. That the suit could be filed only by authorised signatory and it is a preliminary issue that needs to be decided.
32. The decisions cited by Mr. Thakkar deal with different facets of Summary procedure under Order XXXVII but none of these judgments assist Mr. Thakkar's case on facts. Whereas Mr. Kumbhakoni's reliance IDBI Trusteeship Services Ltd. vs. Hubtown Ltd. (2017) 1 SCC 569 is relevant. Mr. Thakkar has no answers to the effect of principles culled out in Hubtown.
33. In the course of submissions I found that certain facts are undisputed 20/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt viz. (a) a sum of Rs.20 crores was deposited with the defendant bank; (b) A term deposit receipt in sum of Rs.20 crores was issued on 22nd April, 2016 bearing interest at 7.5% per annum; (c) The cheque in a sum of Rs.20 crores, a copy of which is at Exhibit -A-3 of the affidavit in reply was issued by the plaintiff from its account in Bank of India; (d) The cheque was signed by the plaintiff's Chairman and Secretary; (e) The forwarding letter of the cheque is on the letter head of the plaintiff with a Sub script which indicates that Mathadi Board was (For Mumbai, Thane and Raigad District). Mr.Kumbhakoni rightly pointed out that reference to Raigad was missing in other correspondence relied upon by the bank such as Exhibit A-4 being undated letter by which the Board purportedly sought transfer of funds by RTGS.
34. In my view signatures appearing thereon also prima facie do not match with the signatures of the Chairman Mr.Jadhav in the plaint and the affidavit in support of the summons for judgment. There is a marked difference in the signatures of Mr.Jadhav as appearing in other documents when compared to the signature in the plaint. The letter-head used in Exhibit A-4 seems to be fabricated. One of the submissions vociferously urged by Mr.Thakkar is that the Secretary of the plaintiff has not denied the signatures appearing at Exhibit-A-4 to Exhibit A-7 (Colly.). The fact that the Secretary has not disputed signatures on these documents is a factor that requires to be considered, however, the law does not mandate that the 21/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt signatory to the original application for making fixed deposit, must also make a statement on oath. It will always be possible for the Court to draw adverse inference at the appropriate time. The fact remains that the fixed deposit was made with a specific condition that no individual or the board itself was empowered to take a loan thereon or offer the same as security. The bank is bound by that condition. If we analyse the reasons given for seeking the overdraft in the undated letter, one will notice that the application purporting to be written by the plaintiff has referred to the fact that the fixed deposit has been made in the "branch for a period of two years but due to Sanctioned Development Project" approved from Government Board required immediate fund to purchase goods and the Board had decided to avail an Overdraft facility for short period of time" and therefore a request was made to transfer funds by RTGS. This undated letter is followed by Exhibit A-5 which is loan application form. It is not addressed to any branch. It is dated 29th April, 2016 and bears two signatures. The copy produced in the Court appears to have an account number written in hand. Interestingly and as highlighted by the learned Advocate General, the section providing for "Particulars of Security/Deposit" is blank. The form is thus seen to be signed in blank. The names of plaintiff or the signatories are not mentioned. Two signatures appearing thereon are allegedly of the plaintiff's Chairman and Secretary. The said signature is said to be of Mr.Sakhare. The signature of Mr.Sakhare is alongside the endorsement 22/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt "Recommended". Particulars of marking of lien, security created in System, sanctioned granted are not filled in. Even after the "recommendation", the officer-in-charge of sanctioning the facility has not signed at the foot of the document. Thus, no sanction has been accorded for disbursement. It is not the defendant's case nor has it been urged by Mr.Thakkar that sanction was granted post facto. The bank's conduct is also strange inasmuch as when a demand was made for restoration of status quo ante, instead of crediting that amount to the plaintiff's fixed deposit account, the fixed deposit has been closed and the balance of Rs.2,04,51,378.27 Ps. has been repaid by the cheque.
35. Admittedly, there was no demand for payment of the balance after adjusting the aforesaid amount. All along the plaintiff has demanded restoration of fixed deposit, but on 29th August, 2016 vide Exhibit-A-14 to affidavit in reply, the Branch Manager has informed the plaintiff that no reply was received to the bank's letter dated 22nd August, 2016 by which the bank had called upon the plaintiff to complete KYC formalities, submit permission to borrow from the regulators of the board, sanction of the plaintiff's board to borrow as per the Bye Laws and a Board Resolution for availing loan and giving authority to signatories/officers to sign the documents. These are fundamental to any banking transaction and vide letter dated 29th August, 2016 all that the Advocate for the bank says is that due to non compliance of requisition contained in the letter dated 22nd 23/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt August, 2016 Exhibit A-13 since no reply has been received, the bank has decided to appropriate proceeds of the fixed deposit account and the balance of Rs.2,04,51,378.27 Ps. was being paid over by banker's cheque as "residual proceeds of the fixed deposit account" No doubt this pay order was accepted by the plaintiff, however, it is material to note that although the Plaintiff had sought documents from the defendant including sanction, if any, of the plaintiff Board for grant of the overdraft facility, the defendant has failed to comply. Obviously because the overdraft facility was not sanctioned the record indicates that there was no sanction accorded for grant of overdraft facility. The so called recommendation of the Branch Manager/Deposit Incharge was given even before collecting the "Know Your Customer"
documents, submitting permission/sanction of the plaintiff Board to borrow as per the Bye Laws, resolution of the board for availing loan and authorising the signatories to sign the documents.
36. The demand for compliance of this provision was made on 22nd August, 2016. The first communication from the bank after the fixed deposit was issued is an email dated 9th August, 2016 Exhibit A-11 which for the first time stated that an overdraft had been availed by the plaintiff against lien marked on the deposit. In my view such lien would have been marked at the time of granting the overdraft facility. Nothing on record shows that the overdraft facility was sanctioned. Even assuming banks the contention that an opportunity was granted in anticipation of post facto compliance to 24/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt be correct, it is evident that the bank paid out diverse amounts by way of RTGS remittances on two days based on written request of two persons claiming to be the Chairman and Secretary of the plaintiff without any verification of their credentials, their identity or their authority to seek overdraft. In the light of the fact that the fixed deposit receipts clearly mention that they could not be offered as security for any loan and that no person had authority to seek such loan the defence does not have merit. It is true that an investigation initiated pursuant to FIRs are still to reach fruition but that alone cannot make it triable issue and as held in the case of Hubtown (supra) by the Supreme Court, while considering grant of leave the principles culled out in M/s.Mechalec Engineers & Manufacturers (supra) stand superseded in view of amendment to order 37 Rule 3 and the binding decision of Milkhiram (India) (P) Ltd. vs. Chamanlal Brothers AIR 1965 SC 1698, Amongst various principles culled out in Hubtown Ltd. (supra) I am of the view that the facts of the present case clearly fall under clause 17.4 which reads as follows:
"17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both 25/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt can extend to the entire principal sum together with such interest as the court feels the justice of the case requires."
37. The defence in my view appears to be plausible but is improbable and the plaintiff which is a Mathadi board set up for purpose of protecting the interests of unprotected labour needs to be safe guarded. In the course of submissions made over two different days, I had by the order dated 27th August, 2018 directed the defendant to file an additional affidavit specifically disclosing whether the overdraft facility was "sanctioned" by the bank. In response to this direction, an affidavit of one Mrs.Suchitra Vijaykumar Nair, the Deputy Branch Manager of the defendant has been filed in which she has deposed that she was the Branch Manager at the material time when the deposit was made by the plaintiff. She deposed that she is aware that overdraft facility was availed by the plaintiff and that at the material time Mr.Rajan Sakhare was the Deputy Manager, Officer-in-charge, Deposits and was handling fix deposits section. The deponent states that on 29th April, 2016, the loan application form was submitted by the plaintiff to Mr.Rajan Sakhare which he accepted and he recommended the loan. On the same day Mr.Rajan Sakhare had opened an overdraft account in favour of the plaintiff Board on execution of demand promissory note by the Chairman and the Secretary of the plaintiff. On written instructions of the plaintiff, Mr.Sakhare transferred the funds on 29th April, 2016 and 30th April, 2016 26/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt to the beneficiaries but Mr.Sakhare did not submit the documents for sanction before the Sanctioning Authority and on 30th April, 2016 he retired. It is after his retirement it was noticed that necessary relevant documents were not on record at which time the deponent had asked Mr.Sakhare to take steps to complete requirements for post facto sanction. Since Mr.Sakhare had retired he did not attend branch and therefore deponent herself prepared documentation for submission before the Regional Business Office Controller, and advised the branch to call for the KYC and other documents and that is how vide letter dated 22nd August, 2016 the plaintiff was called upon to submit the KYC and other documents.
38. From the deponent's affidavit two things are clear, as far as paragraph 2 is concerned she has no personal knowledge of the transactions. She does not appear to have personal knowledge of the plaintiff's Chairman and the Secretary having approached Mr.Sakhare. All that is submitted is that Mr.Sakhare did not submit documents for sanction and that is crucial and material. The contents of affidavit of paragraph 2 therefore, cannot be accepted. The deponent has not stated that the fact that Mr.Sakhare was approached by the Chairman and the Secretary of the plaintiff board seeking the overdraft facility. The grant of overdraft facility was therefore not to her personal knowledge. She does not appear to be involved with deposit handling section as otherwise affidavit would have said so.
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39. The contention that sanction could have been granted at later date is also lacking in merit since no sanction has been granted even today. The sanction, if any, granted could also have been made subject to compliance of KYC and other documents, however, that is not case of the bank. The fact that no sanction is accorded subsequently, clearly indicates that the bank has considered this as an irregular transaction.
40. According to the bank, the overdraft facility was granted in the "regular course". Nothing has been stated as to authority of the Branch Manager/Officer-in-charge to grant overdraft and the mandatory steps to be followed prior to disbursing funds. The disbursal of funds a day prior to retirement of Mr.Sakhare is also a telling factor. Apropos Mr.Thakkar's contention that the claim does not fall within the classes of suits contemplated by order 37 Rule 2, in my view paragraph 54 sufficiently clarifies that the suit is based on a fixed deposit receipt. Perusal of paragraph 54 makes it evident that amounts are due under the fixed deposit which in no uncertain terms clarify that the suit is based on a written contract, apart from the fact that the suit seeks to recover debt with interest under Rule 2(b)(i) of Order XXXVII.
41. In the circumstances following the principles of Hubtown (supra) I am of the view that the amount of deposit and claim along with interest must be secured. Ordinarily it would be appropriate that the amount be deposited in this Court to be invested in a nationalised bank by the 28/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 ::: sj43.2018-1.odt Prothonotary and Senior Master, however, in the instant case since the defendant is the State Bank of India and arguably believed to be the country's largest Bank, it would be appropriate that the amount be secured by the defendant in the name of the plaintiff pending disposal of the suit. In the circumstances I pass the following order :
(i) The defendant shall create a fixed deposit in a sum of Rs.19,30,57,383.73 Ps. in the name of "Prothonotary and Senior Master, Bombay High Court Account Summary Suit No.218 of 2018" in the defendant bank initially for a period of one year at the rate available as on date of deposit and to be renewed each year till further orders.
(ii) The deposit shall be made within a period of four weeks. The original deposit receipt shall thereafter be filed with the Prothonotary and Senior Master within one week of the deposit. A copy of the receipt shall also be furnished to the plaintiff's Advocate.
(iii) If the amount is deposited, the written statement shall be filed within a period of eight weeks from today.
(iv) Hearing of the suit is expedited.
(v) Summons for Judgment is disposed in the above terms.
(A.K. MENON,J.) 29/29 ::: Uploaded on - 15/12/2018 ::: Downloaded on - 27/12/2018 07:42:09 :::