Delhi District Court
Lt. Col. M. P. S. Bhatia vs . M/S Swaraj Overseas on 9 May, 2016
Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas
IN THE COURT OF DR. AJAY GULATI, ADDL. DISTRICT
JUDGE, ROOM NO. 606, SAKET COURTS, SOUTH DISTRICT,
NEW DELHI
In the matter of
Ex.No.111/16
Lt. Col. M. P. S. Bhatia
................Decree Holder
Versus
M/s Swaraj Overseas
.............Judgment Debtor
APPLICATION UNDER ORDER 151 CPC
ORDER
1. Vide this order, I shall be disposing off the application moved by the decree holder under Section 151 of the Code of Civil Procedure, 1908 for taking appropriate action against Indusind Bank and its concerned officials for disobeying the attachment orders passed by Learned Predecessor Court to benefit the judgment debtor.
2. The decree holder filed the present execution petition on 10.02.2010 for recovery of Rs.7,47,513.25/ for which a decree was granted vide judgment dated 19.11.2009 passed by the court Ex. No.111/16 Page 1 of 9 Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas of Ms. Ina Malhotra, ASJ, SouthII, New Delhi in the case titled Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas Ltd. No appeal was preferred by the judgment debtor. The suit was decreed for Rs.6,72,000/ together with costs and interest @ 8% per annum (pendente lite and future). Consequently, the present execution petition came to be filed seeking Rs.7,47,513.25/, as mentioned above.
3. At the stage of preliminary hearing, the decree holder supplied the details of the assets of the judgment debtor which mentioned an FD No.0005F108070036 in the sum of Rs.10,00,000/ which was with the Indusind Bank, Gopal Das Bhawan, Barakhamba Road, New Delhi. Consequently, warrant of possession was issued by the Executing Court with directions to the Manager of the concerned bank to forward the decretal amount in the name of the decree holder on the next date of hearing which was 03.02.2011.
4. Consequently, judgment debtor appeared and filed objections to the execution petition. Directions issued to the Manager of the Indusind Bank were not complied with resulting in issuance of warrant of attachment of FD No.0005F108070036, which was valid upto 20.01.2016. Subsequently, a compromise was entered into between the judgment debtor and the decree holder. Pursuant to the compromise, the judgment debtor agreed Ex. No.111/16 Page 2 of 9 Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas to pay Rs.7,70,000/ in three installments to the decree holder. After the payment of first installment of Rs.2,00,000/ in the court, the judgment debtor defaulted in payment of the agreed amount. Consequently, fresh warrant of attachment were issued to attach the FDR mentioned above. In addition, it was also directed (vide order dated 06.09.2011) that along with the above mentioned FDR, any other amount/fixed deposit in the name of the judgment debtor i.e. M/s Swaraj Overseas lying with the bank, be also attached.
5. On 18.11.2011, the bank appeared through its counsel and informed the court that the FDR mentioned in the attachment order is in fact a bank guarantee issued by the bank at the asking of the judgment debtor in favour of the Government of India. Consequently, the bank also filed objections to the attachment order. It is important to highlight that the bank put in appearance for the first time through its counsel on 18.11.2011, when the aforementioned information was supplied to the court. Consequently, on 07.01.2012, objections were filed by the concerned bank against the attachment order. Subsequently, the matter was adjourned a number of times for decision on the objections filed by the judgment debtor.
6. On 11.02.2013, the then Presiding Officer noted that the bank guarantee issued in favour of the Government of India is Ex. No.111/16 Page 3 of 9 Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas valid upto 21.01.2016 with the claim period upto 21.07.2016. It was also noted down that the fixed deposit, for which in fact the attachment orders were issued, was given by the judgment debtor to the bank as security for the above mentioned bank guarantee. Therefore, directions were issued to the bank to inform the court about the amount available against the fixed deposit in excess of Rs.10,00,000/ including the interest, with directions to the Bank not to release any amount to the judgment debtor. The matter was adjourned to 08.03.2013 on which date it was informed by the counsel for the bank that the bank guarantee issued in favour of the Government of India has been extended up to 26.05.2021 on the instructions of the judgment debtor. Thereafter, Learned counsel for the decree holder sought time to move an appropriate application and that is how the present application came to be filed on 04.10.2013.
7. By way of present application, decree holder contends that the action of the garnishee bank in extending the bank guarantee at the asking of the judgment debtor is clearly an act of frustrating the execution of the present decree in as much as the factum of the pendency of the present execution petition and the attachment order (order of FDR of the judgment debtor lying with the bank) were specifically in the knowledge of the garnishee bank.
Ex. No.111/16 Page 4 of 9Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas
8. The bank (Garnishee) filed reply to the present application in which the preliminary stand of the bank was that the bank guarantee given by the bank is irrevocable and continuing. It was further contended in the reply that FDR of the judgment debtor is under general lien of the bank and the bank has first charge over it since the bank guarantee was issued against 100% cash margin. Thus, the bank contended that it has priority right of set off against the FDR furnished by the judgment debtor to the bank in case any liability of the judgment debtor arises against the bank guarantee given at its behalf by the bank to the Government of India. It is important to highlight that in reply to the application, the garnishee bank has not mentioned a word about why did it extend the bank guarantee till 2021 when it was specifically in the knowledge of the bank that the Executing Court has already issued orders of attachment of FDR of the judgment debtor and that it had even filed its objections to the attachment order by contending that the bank guarantee is valid till 20.01.2016 and hence, the same cannot be attached.
9. Learned counsel for the bank has cited three judgments in support of its contention that the bank has general lien over the FDR of the judgment debtor and the same cannot be attached. In addition, Learned counsel further submits that the court cannot direct either the attachment of the FDR or even direct that the Ex. No.111/16 Page 5 of 9 Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas bank guarantee be revoked.
10. I have carefully gone through the judgments cited by Learned counsel for the bank i.e. Syndicate Bank vs. Vijay Kumar AIR 1992 Supreme Court 1066; Bank of Bihar vs. State of Bihar AIR 1971 Supreme Court 1210; and State Bank of Bikaner & Jaipur vs. Tulsi Ram Jas Raj 1 (2000) BC 222.
11. The first two judgments were delivered by the Hon'ble Supreme Court whereas the third judgment is from the Hon'ble High Court of Punjab & Haryana. In so far as the first judgment is concerned, the same was dealing with whether the bank (Syndicate Bank) had general lien over the FDR given by its borrower for issuance of bank guarantee by the bank on behalf of the borrower, even after the guarantee stood discharged. The Hon'ble Supreme Court, in detail, explained the nature of the banker's lien as well as the meaning and the scope of the bank guarantee. Except for para13 of the judgment, the Hon'ble Supreme Court has very clearly laid down that even after the bank guarantee has been discharged, the bank can continue to have general lien over the FDR in its possession. However, in para13 of the said judgment, the Hon'ble Supreme Court while referring to the judgment of an English Court i.e. (1977) 2 All England Reporter 862 reproduced the observation made in the above said case:
Ex. No.111/16 Page 6 of 9Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas "It was only in exceptional cases that the Courts would interfere with the machinery of irrevocable obligations assumed by banks. They were the life blood of international commerce. The machinery and commitments were on a different level. They must be allowed to be honoured, free from interference by the Courts. Otherwise trust in internal commerce could be irreparably damaged."
12. In para14 of the said judgment, the Hon'ble Supreme Court reiterated the above mentioned decision of the English Court. In other words, in the understanding of the Court, if exceptional circumstances exist, the court can interfere with the irrevocable bank guarantees also. The second judgment relied upon by the Learned counsel for the garnishee bank pertains to the special rights of the pawnee over the goods pledged to it. The third judgment also talks about the right of the bank as a pawnee i.e. when the goods have been pledged with it. In para11 of the said judgment, Hon'ble High Court of Punjab & Haryana held that the bonds, which were pledged with the bank, could not defeat the priority right of the bank even after the same were attached. The first right had to be of the plaintiff bank and in case of sale and encashment thereof, only the excess amount could be paid to the decree holder. However, in the last lines of the said para, the Hon'ble High Court observed as under:
Ex. No.111/16 Page 7 of 9Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas "At this stage, one can hasten to add that if there is any fraud or collusion, position would be different. In this case, since no fraud or collusion has been alleged, therefore, the learned Trial Court must be held to be in error in passing the impugned order."
13. In view of the judgments cited by the Learned counsel for the bank itself and in view of the peculiar facts of the present execution petition, I have no hesitation in holding that the act of the bank in extending the validity of the bank guarantee from January, 2016 to January, 2021 at the request of the judgment debtor without bringing the same to the notice of the Executing Court shows that the action of the bank is malafide and was in furtherance of collusion between the judgment debtor and the bank so as to frustrate the execution of the present decree. What is glaring is that the bank was appearing in the execution petition and had filed objections regarding the attachment orders of the FDR of the judgment debtor. Thus, this is a case of exceptional circumstance and of fraud. Consequently, the bank is directed to revoke the bank guarantee issued by it to the Government of India on behalf of the judgment debtor by writing to the concerned Ministry and seeking its approval for the same, which can be done as per the terms of the bank guarantee itself. The bank should seek the approval of the concerned Ministry within a Ex. No.111/16 Page 8 of 9 Lt. Col. M. P. S. Bhatia vs. M/s Swaraj Overseas period of one month from today. The bank is further directed to attach a copy of this order while writing to the concerned Ministry for seeking its approval for revoking the bank guarantee. Accordingly, the application under Section 151 of the Code of Civil Procedure, 1908 moved by the decree holder is disposed off in the above terms.
ANNOUNCED IN THE OPEN (DR. AJAY GULATI)
COURT ON 09.05.2016 ADDL. DISTRICT JUDGE06
SOUTH, SAKET COURTS,
NEW DELHI
Ex. No.111/16 Page 9 of 9