Company Law Board
Anandarama Reddy vs Page Investments And Financial ... on 28 April, 1998
Equivalent citations: [1999]95COMPCAS451(CLB)
ORDER
K.K. Balu, Member
1. The applicant hereinabove has made the application under Section 58A(9) of the Companies Act, 1956, against Page Investments and Financial Services Limited (hereinafter referred to as "the company") for failure on its part to repay the deposits with interest thereon as per the details given in the application. The application has been considered and disposed of under Section 45QA of the Reserve Bank of India Act, 1934 (hereinafter referred to as "the Act"), in view of the fact that the company is a non-banking financial company.
2. According to the applicant-depositor, he deposited with the company a sum of Rs. 20 lakhs for a period of 12 months and Rs. 1 lakh by way of short-term deposit, carrying interest at 14 per cent, per annum. Both the deposits have already matured. In spite of repeated demands and the legal notice dated December 23, 1996, the company failed to repay the deposits. Hence, this application.
3. According to the company, the amount of Rs. 21 lakhs was deposited by Angel Merchants Limited with the company in the name of the applicant on account of land transaction, among the applicant, his two brothers (Shri H. N. Venkatesha Reddy and Shri H. N. Keshava Reddy) and Angel Merchants Limited. The applicant and his two brothers are entitled to Rs. 7 lakhs each out of the deposit amount. At the request of the applicant, a sum of Rs. 19 lakhs was disbursed by the company out of the deposit amount in the following manner :
(a) Rs. 2 lakhs by way of a cheque dated April 5, 1996, in favour of Shri H. S. Anandarama Reddy.
(b) Rs. 1 lakh each in favour of Mrs. Vani, Mrs. Manjula and Mrs. Ranjitha by way of cheques dated April 5, 1996.
(c) Rs. 7 lakhs each to Shri H. N. Venkatesha Reddy and Shri H. N. Keshava Reddy.
4. The company is holding the balance deposit amount of Rs. 2 lakhs payable to the applicant, out of which a sum of Rs. 50,000 is kept apart for the funeral expenses and construction of Samadhi for the applicant's mother on the request of the applicant and his brothers. Thus, only a sum of Rs. 1,50,000 represents the remaining deposit payable to the applicant for which he has been collecting interest by way of account payee cheque till September, 1996. In the meanwhile, the company was instructed by Angel Merchants Limited, by letter dated November 5, 1997, not to pay either any interest or the principal amount of deposit to the applicant. The applicant has taken a loan from the company which remains outstanding, for which the company has a lien on the monies of the applicant. In the circumstances, the company prays for dismissal of the application.
5. The applicant in his rejoinder, while admitting the land transaction, among the applicant, his two brothers and Angel Merchants Limited reiterated that the deposit amount is the money of the applicant. The applicant never authorised the company to repay the deposit amount to his brothers and daughters. The applicant further denied execution of the note dated November 9, 1995, which, according to him, is a concocted and fabricated document. The company is responsible for the payments made to the applicant's brothers and daughters.
6. Shri S. V. Venugopal, counsel for the applicant, while reiterating the averments made in the application submitted that the company shall repay the deposits in accordance with the agreed terms and conditions. The company being a borrower is bound to discharge its liability satisfying claim of the applicant. He denied any agreement either written or oral between the applicant and the company for disbursement of any part of the deposit amount to the applicant's brothers and daughters. None of the documents produced by the company would establish any such understanding. He further pointed out the contradicting stand taken by the company by its replies dated December 10, 1996, and January 10, 1997, addressed to the applicant. As per the letter dated January 10, 1997, the company had repaid Rs. 19 lakhs out of the deposit amount. But the letter dated December 10, 1996, goes to show that the entire deposit amount was repaid to the applicant's brothers and daughters. He disputed the note dated November 9, 1995, as fabricated document and denied the signature of the applicant therein. The declarations dated September 8, 1997, by the applicant's brothers regarding the arrangement among the applicant, his two brothers and Angel Merchants Limited are not binding upon the applicant. The letter dated November 5, 1996, of Angel Merchants addressed to the company is equally not binding on the applicant, especially when the applicant is not party to the said letter. According to him, the said letter is a fabricated document and the signature of the managing director of Angel Merchants Limited is forged by the company to suit its convenience. The signature of the applicant at page No. 1 of the memorandum of understanding dated August 9, 1995, is disputed on the ground that it is not the signature of the applicant. Copy of the stamped agreement dated December 21, 1995, produced by the company was not signed by all the parties and that the signature of the applicant in the agreement is forged. The stamp paper does not contain the seal of the issuing authority. Counsel for the applicant cited the example of a bank account where credit can be made by anyone but it shall be operated only by the account holder. On the same analogy, the company is bound to repay the deposit amount to the applicant-depositor in accordance with the agreed terms and conditions. The company had not produced extracts from the books of account to substantiate its plea of discharge. Counsel for the applicant contended that the company shall prove repayment of the deposits to third parties and the onus lies on the company. In this connection, he relied upon the following cases :
(a) Muhammad Khaleef Shirazi and Sons v. Les Tanneries Lyonnaises , AIR 1926 PC 34, to state that (headnote) -
"It is elementary law that when a creditor sues the debtor for the payment of a debt and the defence is that the debtor paid the debt to another person, it is for the debtor to prove that the other person had or had been held out to the debtor by the creditor as having had the authority of the creditor to receive payment of the debt on behalf of the creditor."
(b) Bhairomal v. Jagir Singh, AIR 1955 NUC (Ajmer) 4771, to state that-
"when a defendant does not deny the advance of money to him but pleads that the money was paid back the burden of proving the fact of repayment is on the defendant."
7. In view of the foregoing, counsel for the applicant submitted that the company may be directed to repay the deposits with up-to-date interest to the applicant.
8. Shri Vaidyanathan, counsel for the company, while reiterating the submissions made in the counter-statement stated that the company had repaid Rs. 19 lakhs to the applicant's two brothers and daughters as stated in the company's reply dated January 10, 1997, which gives the factual position. He relied upon the agreement dated December 21, 1995, signed by the applicant for disbursing the deposit amount among his brothers and daughters. According to him, the beneficiaries need not sign the agreement. However, the applicant having signed the agreement is bound by it. He further submitted that it involves complicated questions of fact relating to title to the deposits partial discharge of the deposits, etc. The applicant is disputing many of the documents produced by the company as forged. The applicant's two brothers, three daughters and Angel Merchants Limited must be heard before disposing of the application. These aspects cannot be gone into by this Bench in summary proceedings. For these reasons the application is liable to be dismissed.
9. I have considered the pleadings and arguments of both counsel for the applicant and company. While it is the contention of the applicant that the company failed to repay the deposit amount, it is contended by the company that Rs. 19 lakhs had already been repaid as instructed by the applicant. It is the case of the company that the deposit amount was received from Angel Merchants Limited on account of land transaction among the applicant, his brothers and Angel Merchants Limited. Even though counsel for the applicant denied any land transaction, such transaction has been in fact admitted in para. 1 at page 2 of the rejoinder. The various payments aggregating to Rs. 19 lakhs in favour of the applicant's two brothers and daughters by the company are not disputed in the rejoinder by the applicant. On the other hand, the applicant is categorical that "the applicant is not responsible for the payment made by the respondent to the applicants' brothers and daughters". The memorandum of understanding dated August 9, 1995, regarding the land transaction is disputed by the applicant on the ground that his signature at page 1 of the memorandum is forged. The note dated November 9, 1995, which according to the company is the authority given by the applicant to make payment in favour of his brothers is denied on the plea that the applicant's signature is forged. The letter dated November 5, 1996, said to have been sent by Angel Merchants Limited is disputed by the applicant on the ground that the signature of the managing director of Angel Merchants Limited is forged. The agreement dated December 21, 1995, produced by the company is disputed by the applicant as a fabricated document. The declarations dated September 8, 1997, by the applicant's brothers are questioned by the applicant as not binding on him. The applicant's brothers, daughters and Angel Merchants Limited are not before this Bench to ascertain the factual position. While the company is questioning title to the deposits, the applicant is disputing the payments made by the company and challenges the various documents produced by the company as fabricated ones. Therefore, the question that arises is whether in the circumstances of the case jurisdiction of this Bench under Section 45QA of the Act could be exercised for resolving the above disputes. Section 45QA(2) of the Act is on the lines of Section 58A(9) of the Companies Act, 1956. By virtue of Section 58A(9) of the Companies Act, the Company Law Board may order non-banking non-financial companies to repay the deposits for failure on their part in repaying the deposits in accordance with the terms and conditions of such deposits. Section 58A(9) is not applicable to non-banking financial companies. As a measure of protecting the interests of depositors of non-banking financial companies, the Reserve Bank of India Act, 1934, has been amended, inserting Section 45QA, to empower the Company Law Board, with effect from January 9, 1997, to take cognizance of any case of non-repayment of deposits on maturity and to direct such companies to make repayment of such deposits. Both under Section 58A(9) of the Companies Act and Section 45QA(2) of the Act, the Company Law Board may order repayment of deposits provided companies have accepted deposits and defaulted in repayment of deposits in accordance with the agreed terms and conditions. In the event of any dispute either regarding acceptance or repayment of deposits, the Company Law Board cannot go into such disputes. I find that the contradicting stand taken by the applicant on the one hand and the company on the other relating to title to the deposits, partial discharge of the deposit amount, the arrangement among the applicant, his brothers and Angel Merchants Limited and the assertion of the parties relating to the genuineness or otherwise of the documents, cannot be adjudicated in Section 45QA proceedings, but only in a civil suit. Accordingly, I dismiss the application without going into the merits of the contentions of both the counsel. The applicant may move the civil court, if so advised.
No order as to costs.