Delhi District Court
Superior Electric Company vs Hdfc Bank Ltd on 28 July, 2010
IN THE COURT OF Ms. MONIKA SAROHA, CIVIL JUDGE,
CENTRAL-01, DELHI
Suit No. 792/06
Superior Electric Company,
Through its Partner Sh. Savinder Singh Vohra,
17, Netaji Subhash Marg,
New Delhi - 110002. ........Plaintiff
VERSUS
1. HDFC Bank Ltd.,
through its Chairman, & Managing Director,
Narayan Properties,
26-A, Chandivilli Off. Saki Vihar Road,
Saki Naka, Andheri (E),
Mumbai - 400072.
2. The Branch Manager,
HDFC Bank Ltd.,
Surya Kiran,
Kasturba Gandhi Marg,
New Delhi-110001.
3. Merchant Services Department,
HDFC Bank Ltd.,
D-1, Shopping Centre-II,
Vasant Vihar, New Delhi-110057.
Through its Principal Officer .......Defendants
Date of Institution : 23.03.2004
Date of Judgment : 28.07.2010
Suit No. 792/06 Page no.1/16
JUDGMENT
Brief Facts The material facts of the suit as culled out from the pleadings are as follows:
1. That the plaintiff is a businessman who entered into an agreement with defendant no.1, through defendant no.3 for installation of an Electronic Data Capture (EDC) machine for processing credit card payments made by his customers. In this regard an account bearing No. 0032290000421 was also opened with the defendant. That on 23.01.03, a transaction for a sum of Rs. 8,240/- was made by one of plaintiff's customers through his credit card. After requisite formalities, on 24.02.03, the defendant bank credited account of the plaintiff with the said payment of Rs.8,240/- besides other payments due to the plaintiff. The grievance of the plaintiff is that however later this amount of Rs.8,240/- was again debited from his account without any reasonable notice on the pretext that the card holder has raised a dispute regarding the said payment. The plaintiff has prayed in this suit that this amount of Rs.8,240/- be returned to him by the defendants.
2. Yet another cause of action agitated in the present suit is that while the dispute regarding the payment of Rs.8,240/- was pending between the parties, at that time the defendant had issued three cheques from his account being maintained with the defendant and all these cheques were dishonoured by the defendant despite their being sufficient funds in the account of the plaintiff. The plaintiff has alleged that this act of the defendants of not honouring his cheques despite their being funds in his account have caused great loss of reputation to the plaintiff for which he is entitled to damages of Rs.20,000/- from defendants. Besides this, the plaintiff has also prayed that the amount of Rs.21,244.49/- which was in his account at the time the account was illegally withheld by the bank be also released to him. Hence, the present suit seeking recovery of the above mentioned amount besides interest.
3. In the written statement, the defendants have denied any liability to Suit No. 792/06 Page no.2/16 pay any amount to the plaintiff. The factum of the plaintiff entering into an agreement regarding installation of EDC machine and opening of account no. 0032290000421 is not disputed. The defendant has stated that the amount of Rs.8,240/- was credited from the account of the plaintiff as the card holder had raised a dispute regarding the transaction and therefore amount was initially debited. Further, the defendants state that prior to the filing of this suit, the defendants have already credited the account of the plaintiff with the said sum of Rs.8,240/- as the dispute has been settled with the card holder.
4. Regarding the second claim of the plaintiff, the defendants have not denied the fact that they have dishonoured three cheques of the plaintiff and the defense taken by them is that, by virtue of the general lien that they had upon the account of the plaintiff, the defendants were well within their rights to withhold the amount of this account and not honour any cheque issued against this account. The defendants have stated that the account was marked and money was withheld qua the plaintiff as the plaintiff had threatened to destroy the EDC machine of the defendant and the defendant wanted to secure itself against any such loss. Issues
5. On the basis of the pleadings mentioned above, the following issues were framed by my Ld. Predecessor on 26.08.04 :-
1) Whether this court has no territorial jurisdiction to try this suit? (OPD)
2) Whether there is no cause of action to file the present suit? (OPD)
3) Whether the plaintiff is entitled for recovery of Rs. 49,674/- along with interest @ 18% per annum as prayed in the suit? (OPP)
4) Relief.
Findings Issue-wise findings arrived at after the perusing the material available on record and hearing arguments as advanced by counsel for the plaintiff and defendant are as follows :-
Suit No. 792/06 Page no.3/16Issue no. 1 - Whether this court has no territorial jurisdiction to try this suit? (OPD)
6. This issue has already been decided by my Ld. Predecessor vide order dated 07.10.2004. This order has not been appealed against and has therefore become final. It has been held that the claim of Rs. 8,240/- raised by the plaintiff with respect to the amount charged back by the defendant shall not be adjudicated by this court as the jurisdiction of this court with respect to the said dispute is barred on account of the agreement entered into between the parties. To quote the order, "In my considered opinion after considering the agreement the claim of Rs.8,240/- of the plaintiff only shall not be adjudicated in view of the agreement and in respect of the said amount, the jurisdiction of this court is barred. In view of my above findings, issue no.1 is disposed off."
This issue accordingly stands decided by my Ld. Predecessor order quoted above wherein it has been held that this court does not have the territorial jurisdiction to determine over part of the relief claimed in the plaint.
7. Thus, this court shall only determine the dispute as raised by the plaintiff with respect to the alleged illegal withholding of the account of the plaintiff by the defendant bank and consequent dishonouring of the cheques of the plaintiff. In the remaining issues, this court shall give findings as if the only dispute raised before it is with respect to the said withholding by the defendant and the prayer is only for the sum of Rs.20,000/- prayed for as damages for loss of goodwill and Rs 21,433.49/- which were in the said account of the plaintiff. Towards this dispute, the plaintiff has claimed Rs.41,433.49/- only.
Issue no. 2 - Whether there is no cause of action to file the present suit? (OPD) The onus to prove this issue was upon the defendant.
8. It is settled law that to determine whether a cause of action exists, Suit No. 792/06 Page no.4/16 only contents of the plaint need to be perused. Cause of action is nothing but a bundle of facts which give the plaintiff a right to agitate upon. It has been held by the Hon'ble Apex court in Sopan Sukhdeo Saple v. Assistant Charity Commissioner, AIR 2004 SC 1801 that for the purpose of deciding lack of disclosure of cause of action, only the averments made in the plaint are germane and the plea taken by the defendant in the written statement are totally irrelevant. Further, it has been held in Crescent Petroleum Ltd. v. 'Monchegorsk' AIR 2000 Bom 161 that the term 'does not disclose a cause of action' must be narrowly construed and a suit must be rejected on this ground only if the court is absolutely sure that the plaintiff does not have a arguable case at all. In the present plaint, in view of already decided issue no 1, it only needs to be determined whether a cause of action exists to seek Rs.20,000/- as damages from the defendant bank besides the amount of Rs. 21,433.49/- claimed by the plaintiff.
9. The grievance of the plaintiff is that the defendant in an illegal manner withheld the amount lying in the account of the plaintiff maintained with the defendant bank. The allegation of the plaintiff is that although there was sufficient amount in his account, still the bank caused great loss to his reputation by dishonouring the cheques issued by him upon his account. This allegation in itself gives rise to a cause of action to seek damages from the defendant bank. Whether or not the plaintiff is able to establish that the amount was illegally withheld by the defendant is another issue and cannot be determined while deciding whether a cause of action exists in favour of the plaintiff or not. At this stage, it is sufficient to observe that the averments in the plaint are such as to show that a valuable right of the plaintiff has been intruded upon by the defendant bank and hence this suit has been filed.
Thus, it is clear from a reading of the plaint that a clear cause of action is made out in favour of the plaintiff.
Thus, this issue is decided against the defendant and in favour Suit No. 792/06 Page no.5/16 of the the plaintiff.
Issue no. 3 - Whether the plaintiff is entitled for recovery of Rs. 49,674/- along with interest @ 18% per annum as prayed in the suit? (OPP)
10. It has already been held by my Ld. Predecessor that the dispute as regards Rs.8,240/- cannot be determined by this court as this court lacks the territorial jurisdiction to do so. Thus, vide this issue, this court shall determine whether the plaintiff is entitled to the remaining amount of Rs.41,433.40/- along with interest. Further, it is clarified that although the plaintiff has relied upon a number of documents in his testimony including Ex.PW-1/1 to Ex.PW-1/8 these documents are not being discussed in detail. This is so as these documents are correspondence between the plaintiff and the defendant bank pertaining to the dispute of Rs.8,240/- regarding the charge back carried out by the defendant bank and the dispute pertaining to the said charge back is not to be decided by this court as already held by my Predecessor. Coming now to the remaining claim to be decided in this issue.
The plaintiff has claimed a sum of Rs.20,000/- out of the above mentioned amount on the ground that he had to suffer loss of goodwill and reputation and even the apprehension of criminal proceedings because the defendant, did not honour the cheques issued by the plaintiff on 23.08.03, 27.07.03 and 29.08.03 despite sufficient amount being available in the account maintained by the plaintiff with the defendant bank. In their defence, the defendants have stated that they were justified in dishonouring the cheques of the plaintiff as they had a right to withhold the amount lying in the account of the plaintiff since the plaintiff refused to allow the defendant bank to take the EDC machine back.
11. Thus the defendants have admitted that despite their being sufficient funds in the account of the plaintiff, they dishonoured the cheques issued by him. Needless to say that the onus was thus, upon the defendants to establish that they had a valid legal justification for this act of theirs as in Suit No. 792/06 Page no.6/16 the absence of such a justification, the defendants shall no doubt be liable to pay damages to the plaintiff.
So now the pleadings and subsequently the evidence of the defendant needs to be examined to determine the strength and validity of the defence taken by the defendant.
12. It is in Para 13 of the written statement that the defendants have stated their explanation in this regard. The defendants have stated that they exercised their ' lien' over the account of the plaintiff as the plaintiff had threatened to destroy the EDC machine lying at his premises and refused to return it when asked to do so by agents of the defendants. Quoting the exact words of the written statement would make for an interesting reading. "The defendants intended to terminate the contract of the plaintiff and requested the plaintiff to return the EDC machine." and further " ... at this, the plaintiff started misbehaving with the officials of the bank and threatened to destroy the EDC machine"
Thus the defendants rely upon the principle of banker's lien to justify their act, for which damages are being sought against them. The concept of banker'slien must therefore be discussed in brief in order to ascertain the merits of this defence.
13. Lien has been described in Halsbury's law of England1, in the following words..
"Lien is in its primary sense is a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In this premiary sense it is given by law and not by contract."
To the above definition of general lien, the concept of bankers lien has been added. In Chalmers on Bill of Exchange2, the meaning of "Banker's lien" is given as follows:
"A banker's lien on negotiable securities has been judicially 1 Vol.20, 2nd Edn.p.552, para 695, 2 Thirteenth Edition, Page 91 Suit No. 792/06 Page no.7/16 defined as "an implied pledge." 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."
14. The Hon'ble Supreme Court of India has also devolved upon this concept in great length in the various judgments delivered by it. In Syndicate Bank Vs. Vijay Kumar and others, AIR 1992 (SC)1066, this concept has been elaborated upon in great detail. It has been held in this judgment that "Banker has lien over securities received from customer in ordinary course of banking business and has right to use proceeds in respect of balance that may be due from customer by way of reduction of customer's debit balance"
The Hon'ble high Court of J&K also also explained concept of Banker's lien in Jammu and Kashmir Bank Limited Vs. Abdul Samad Chaloo. AIR (2008) J&K 1 in the following words :-
"banker has a lien on all securities which would come into his hands unless there is an express contract or circumstances to the contrary"
15. To sum the above discussion, it can be said that a bankers' lien is the right of the bank to retain things delivered to it so long as the person delivering the goods is indebted to the bank on balance of account between them and this right of the bank exists over all the goods delivered to it unless a contrary intention appears from a contract. In this regard provision of Section 171 Indian Contract Act are also relevant. Section 171 Contract Act provides as follows :
"Bankers, factors, wharfingers, attorneys of High Court and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account any goods bailed to them; but no other persons have a right to retain, as a security for a general balance of account, any Suit No. 792/06 Page no.8/16 goods bailed to them, unless there is an express contract to that effect."
Thus the concept of banker's lien is well elaborated and accepted in the Indian law. Coming now to the facts of the present suit.
16. The defendants have stated that they exercised their right of lien to withhold the amount in the account of the plaintiff. It is now clear from the above discussion of the concept of lien that following must be established before a right to lien can be said to have accrued. ;
(i) Firstly that the creditor is in possession of the goods, securities etc., and has come in possession thereof in the ordinary course of business;
(ii)Secondly, that the owner of the goods, securities etc., has a lawful debt to pay to the person in possession thereof; and
(iii)Thirdly, that there is no contract, express or implied, to the contrary.
We shall now analyse whether these three ingredients are available in the facts of the present suit.
17. As the plaintiff had opened an account with defendant bank for the purposes of receiving payments which became due to him on account of sales made through credit cards, therefore it is clear that the bank was in possession of the money in the account of the plaintiff in the ordinary course of business. Thus the first essential for creation of a lien is fulfilled between the parties.
18. Coming now to the second condition. Before the bank could have exercised the right to lien, the defendant was required to establish that the plaintiff had a lawful debt to pay to it on the date the bank exercised its right to lien. The defendants have no where mentioned any amount for which the plaintiff was indebted to them. The defendants have merely tried to build the defence that since the plaintiff refused to return EDC machine, which is admittedly the property of the bank, therefore in fear of damage to the said machine the money was withheld. Thus, it is clear that no liquidated debt was admittedly due upon the plaintiff. Coming now to whether any unliquidated debt was due upon the plaintiff.
Suit No. 792/06 Page no.9/1619. The defendants have nowhere mentioned any reason as to why they apprehended damage to their EDC machine. No evidence of such a threat has appeared on record, except for in the bald testimony of the DW where he says without any documentary evidence that the plaintiff misbehaved with bank official. This witness in the same breath concedes that no such misbehaviour was reported in any records of the bank or to the law enforcement agencies. Thus, the defendants have failed to substantiate with evidence, their theory of 'threat to EDC machine''. The defendant has not even mentioned the date or place where such a threat was allegedly given. The perceived threat of the defendant thus appears to be clearly without any basis. Therefore it can not be said that the plaintiff became indebted to the defendant for the amount of the EDC machine and no such debt existed. Moreover, the defendant has nowhere mentioned what was the value of the said EDC machine. Even assuming arguendo, that the plaintiff was indebted to the defendant for the cost of the EDC machine, in that situation also the bank could not have exercised it's right to lien in a disproportionate manner. The defendant bank could at best, have marked hold on such amount lying in the account of the plaintiff as was equivalent to the loss likely to be suffered by the bank in case of loss of machine. The bank can not indiscriminately block the funds of its client on the slightest of pretext. The bank after all stands in a fiduciary relation with its clients and has to exercise extra care and caution while dealing with the money of its clients. Thus, even if the issue is approached from another angle, the act of the defendant in withholding the funds of the plaintiff can not be justified. Thus the second requirement of existence of debt has not been met in the facts of the present suit and therefore the bank had no right to excersie lien over the account of the plaintiff.
20. The argument of the defendant that the plaintiff did not return the EDC machine upon being asked to do so and therefore the bank could hold the account as lien also does not appear to be reasonable. Para 11, Clause (iv) of the MEA Agreement (Document Mark B but admitted by both Suit No. 792/06 Page no.10/16 the parties hence being considered as proved) between the parties clearly provides that upon termination, the plaintiff was forthwith required to return to the bank the equipment and all related documentation.
To quote the relevant clause:
"(iv) Upon termination, ME shall forthwith and at the ME's expenses returned to the bank, the equipment and all related documentation."
Thus, the EDC equipment was to be returned to the bank only after the contract was terminated. As per their own submission, the defendant terminated the contract only w.e.f. 06.09.03 as stated in doc ex. PW1/X1. Even assuming this date to be the date of termination, it is clear that prior to this date, the plaintiff was under no obligation to return the EDC machine and therefore, it cannot be said that a debt had accrued in favour of the defendant bank for non-return of the said machine, for the simple reason that no occasion for return of this machine has arisen prior to 06.09.03. Further there is nothing on record to show that this letter was received by the plaintiff in time, before his cheques were dishonored. The plaintiff has contended that he received this letter only on 27.09.2003. The onus was thus upon the defendant to establish that this letter was received on time, which has not been done by the defendant. There is no document which would show that the defendants asked back for their machine any time before 06.09.03 Thus it is clear that before the defendant terminated the contract they had no right to exercise any lien over the account of the plaintiff on the ground that the plaintiff is not returning the EDC machine.
21. Further, there is no communication between the plaintiff and the defendant which would show that the defendant had asked back for their machine any time before terminating the contract. Although this argument has not been taken by the defendant, however, perusal of document Ex.PW-1/X1 reveals that the defendant had a right even before termination of contract to ask for return of its machine.
22. The relevant clause in this regard is Clause 4 of the MEA Agreement. In Sub-clause (a) oft this clause it has been mentioned that Suit No. 792/06 Page no.11/16 the EDC machine shall be surrendered to bank on demand, even before termination of agreement. There is no evidence which would show that the defendant bank ever reasonably demanded the plaintiff to return back the EDC machine before they exercise lien over his account and the defendant illegally refused to do so. It is clear that the demand of the bank for the machine had to be a reasonable demand made at an appropriate time in an appropriate manner. The defendant bank has failed to show any such demand having been made to the plaintiff. The only reference to any demand having been made by the plaintiff bank, finds mention in the cross examination of the plaintiff witness himself. This witness has stated when the bank asked him to return the EDC hand he replied that as a legal notice dated 25.09.2003 (Ex. PW1/13) has already been sent by him, he shall return the machine after consultation with his counsel. Merely on the basis of this one statement, the defendant can not possibly establish that the plaintiff illegally refused to return the EDC machine. Even if this statement is found to be correct, it would at best show that much after the date on which the cheques were dishonured (in August 2003) and after a legal notice stood served upon the defendants (in September 2003), the defendant had made one demand for return of their machine. This demand made at this time and refusal thereupon would not justify the act of the bank in having marked a lien over the account way back in August 2003 itself.
23. No evidence has been brought by the defendant to show that the plaintiff had in any manner jeopardized the right of the defendant bank to repossess the EDC machine. It is nothing but high headedness on behalf of the defendant to mark its lien over the account of the plaintiff merely on a misconceived threat to its machine. The defendant never gave any notice to the plaintiff asking for the return of its machine. Neither has the defendant stated the details of any person authorized by them to collect the machine who was refused the delivery by the plaintiff. To say vaguely that the plaintiff did not allow the return of machine, does not inspire any Suit No. 792/06 Page no.12/16 confidence in the absence of evidence to substantiate the defendant. The defendant being a bank is excepted to follow procedure in each of their acts and therefore it is not sufficient for the bank to show that in a casual manner they made a vague request for return of machine orally.
24. Thus, the defendant has failed to prove that any debt existed upon the plaintiff either in monetary terms or in lieu of the EDC machine. Thus, the defendants have miserably failed to establish that they were justified in retaining the amount lying in the account of the plaintiff.
25. Coming now to the injury caused to the plaintiff on account of the said illegal act of the defendant. The plaintiff is a businessman dealing in electric and mechanical goods, running its business from a highly commercialized area in Delhi. It is clear that the plaintiff had substantial business dealings and sales which explains the requirement of an EDC machine for its use, way back in 2003 itself. For a businessman his goodwill and reputation in the market is an important asset and dishonouring of cheques, no doubt causes a dent in the same. The plaintiff a partnership firm, had issued cheques of various denomination dishonoured by the defendant. First such cheque was issued on 27.07.03 itself (Ex. PW1/10, admitted document). This cheque was for a petty amount of Rs.700/-. Dishonouring of this cheque on account of lack of funds no doubt caused great embarrassment to the plaintiff and the plaintiff would have had to cut a sorry figure before the person to whom the cheque was addressed. This embarrassment certainly amounts to injury to reputation and the defendant is no doubt liable to compensate the plaintiff for the same.
26. Thereafter, yet another cheque to the tune of Rs.20,000/- issued on 23.08.03 (Ex.PW1/9, admitted document) was also dishonored on the ground of lack of funds. The cheque was presented for encashment only on 27.08.03, on which date the addressee of the cheque would have give to know of the date of dishonour. This cheque was to the tune of Rs.20,000/- and as stated above dishonouring of the same would have Suit No. 792/06 Page no.13/16 caused great embarrassment to the plaintiff besides loss of goodwill in the business. Not only this, the dishonouring of the cheque by the defendant bank also made the plaintiff susceptible to criminal proceedings u/s 138 of Negotiable Instrument Act. Whether or not such proceedings were initiated, is another issue and even assuming that no such proceedings were initiated, the fact that because of the conduct of the defendant, the plaintiff even became vulnerable to any criminal action being initiated against him is sufficient reasons for the defendant bank to be held liable to compensate the plaintiff.
27. Yet another cheque dated 29.08.03 was also issued by the plaintiff from this account for Rs.10,500/- (Ex. PW 1/11 admitted document) which was also dishonoured. It is important to mention here that all the above mentioned three cheques were represented for payment only after 27.08.03 including the one issued in July 2003. Thus, it is clear that the plaintiff had no reason to come to know of dishonouring of his cheques prior to 28.08.03, which is not to say that on 28.08.03, the plaintiff was indeed informed regarding the dishonour of his cheque.
28. The plaintiff has only claimed nominal damages of Rs.20,000/-. Although no evidence as to why damages for this amount have been claimed, has been adduced by the plaintiff, however, even by the most conservative estimate, the plaintiff is certainly entitled to the said amount as damages. This is so as the plaintiff has been found to be a commercial firm having business dealings, located in a busy commercial area of Delhi and has been put to embarrassment on three different occasions before at least three different person for petty amount of Rs.700/-, Rs.10,500/- etc.
29. The defendant on the other hand is a private company of considerable stature having a fiduciary relationship with the plaintiff. Accordingly, the plaintiff is found entitled to Rs.20,000/- as damages from the defendant. Besides this, the plaintiff is also found entitled to future interest @ 7% per annum upon this amount besides cost of the suit.
Suit No. 792/06 Page no.14/1630. Besides this amount of Rs.20,000/-, while determining this issue it is also to be determined whether the plaintiff is entitled to the remaining amount of Rs. 21,433.49/-. This amount has been sought for by the plaintiff on the ground that the amount of Rs. 21,433.49/- which was in his account on 01.08.03, be returned to him as the defendant have illegally withheld the said amount. The defendant has admitted that the account of the plaintiff had the said amount of Rs.21,433.49/-, on the date the defendant exercised its so called lien over the same. As it has now been held that the bank had no right to cast any lien upon this amount, the defendant is directed to release the amount admittedly withheld by them. Thus the defendants are directed to discharge the lien illegally marked by them and allow the plaintiff to freely operate his account.
Issue no. 4 - Relief.
31. In view of the findings given in the issues above, the plaintiff is entitled to damages to the tune of Rs.20,000/- along with future intrest@7% per anumm. Further, the defendant is directed to release the amount of Rs 21,433.49/- which was admittedly available in the account of the plaintiff before the same was illegally marked and funds withheld. It is clarified that the defendant is only directed to remove any lien exercised by it over the account No. 0032290000421 maintained by the plaintiff.
32. In view of the findings given above, as issue no. 1 to 3 have been decided in favour of the plaintiffs, the suit of the plaintiff is decreed. Decree sheet be prepared accordingly. File be consigned to record room.
ANNOUNCED IN OPEN COURT (Monika Saroha) ON 28th of July, 2010 Civil Judge/Central All Pages Signed Delhi Suit No. 792/06 Page no.15/16 Suit No. 792/06 Page no.16/16