Kerala High Court
The Branch Manager vs Joy Daniel
Author: Hrishikesh Roy
Bench: Hrishikesh Roy, C.K.Abdul Rehim
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE THE ACTING CHIEF JUSTICE MR.HRISHIKESH ROY
&
THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM
THURSDAY, THE 21ST DAY OF JUNE 2018 / 31ST JYAISHTA, 1940
WA.No. 640 of 2016 IN WPC. 39240/2015
(AGAINST THE JUDGMENT DATED 02-03-2016 IN WP(C) 39240/2015
of HIGH COURT OF KERALA)
APPELLANT/1ST RESPONDENT:
THE BRANCH MANAGER,
STATE BANK OF TRAVANCORE,
KALPETTA BRANCH,
WAYANAD DISTRICT 673 001.
BY ADVS.SRI.T.SETHUMADHAVAN (SR.)
SRI.KUNHIMANGALAM DAMU
SRI.K.JAYESH MOHANKUMAR
SMT.VANDANA MENON
SMT.N.DEEPA
RESPONDENT/PETITIONER :
JOY DANIEL,
AGED 44 YEARS,S/O.DANIEL,
MANAGING TRUSTEE,
CARMEL MATHA SANTHI BHAVAN TRUST,
VELLAMKOLLY, CHUNDALE P.O,
WAYANAD DISTRICT, PIN - 673001.
BY ADV. SRI.SUNNY MATHEW
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 21-06-2018, ALONG WITH WA
No.648/2016 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
AMG
C:R:
HRISHIKESH ROY, Ag. C.J.
&
C.K. ABDUL REHIM, J.
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W.A. Nos. 640 & 648 OF 2016
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DATED THIS THE 21st DAY OF JUNE, 2018
JUDGMENT
Abdul Rehim, J:
An intrinsic legal question arise in these writ appeals as to whether a banker can exercise its lien, which is permitted under Section 171 of the Indian Contract Act, 1872, with respect to the amount of foreign contributions remaining credit in the current account maintained under provisions of the Foreign Contribution (Regulation) Act, 2010 (hereinafter referred to as the 'Regulation Act' for short).
2. The respondent herein is the Managing Trustee of a charitable trust namely, 'Carmel Matha Santhi Bhavan Trust', functioning in Wayanad District. The trust availed an agricultural term loan from the Appellant Bank to the extent of Rs.10,00,000/-, on 30-01-2008. When the loanee trust defaulted repayments in the loan W.A. Nos. 640 & 648/2016 -2- account, the Bank categorized the loan into a 'Non- Performing Asset (NPA)', on 31-03-2015. The Appellant Bank issued Ext.P4 notice on 01-12-2015 intimating the respondent that, since they have failed to close the account as requested through the earlier notices, the Bank will appropriate the defaulted amount from the current account maintained by the trust, bearing A/c. No.57068195589. Pursuant to receipt of the said notice, the respondent/trust made remittance of Rs.7,00,000/- on 04-12-2015, through two cheques issued, which the Bank had credited to the loan account. But thereafter on 14-12- 2015 the Appellant Bank issued Ext.P5 letter intimating that the current account referred above is put on hold, based on the banker's right of set off; and the trust was requested to close the loan account immediately. Being aggrieved by the freezing of current account, the respondent challenged Ext.P5 in the writ petition filed, W.P (c) No.39240/2015. When the writ petition was admitted, an interim order was issued on 22-12-2015, permitting the trust to withdraw amounts from the current account upto an upper limit of Rs.2,50,000/-, to W.A. Nos. 640 & 648/2016 -3- meet the urgent expenses in the orphanage conducted by the trust.
3. The Writ Petition No.39240/2015 was disposed of on 2nd of March 2016 holding that, the Appellant Bank is not entitled to restrict the operations in the current account, because the Bank cannot claim any lien against the real beneficiaries of the foreign contributions which is remaining credit in the said account. But in the meanwhile, during pendency of the above said writ petition, the Appellant Bank had transferred an amount of Rs.6,60,154/- from the current account to the loan account, on 26-02-2016. This prompted the respondent to file the second writ petition, W.P (c) No.8781/2016. At the time when the said writ petition was admitted, a learned Judge of this court issued an interim order on 17-03- 2016, observing that, in view of the judgment in W.P (c) No.39240/2015 it was not justified on the part of the Appellant Bank to transfer the money. Therefore the Bank was directed to restore the amount appropriated on 26- 02-2016, back to the current account. W.A. No. 648/2016 was filed challenging the said interim order. While W.A. Nos. 640 & 648/2016 -4- admitting the appeal a Division Bench of this court had granted stay against operation of the interim order, but it was specifically directed that the Bank should re-transfer the amount of Rs.6,60,154/-, as directed by the learned Single Judge, within a period of one week.
4. Main question mooted for decision is on the sustainability of the impugned judgment in W.P (c) No.39240/2015. Finding of the learned Single Judge was that, provisions of Section 171 in the Contract Act has to be understood on taking into consideration of the nature of the operations in the account in question. When the trust is receiving foreign contributions for utilizing the same for the benefit of the orphans and for other charitable purposes, such amount of foreign contributions remaining in credit in the account has to be utilized for that purpose alone. It is found that, at the best, the fund can be utilized only for meeting the administrative expenses of the trust, in terms of Section 8 of the Regulation Act. The trust cannot utilize the fund for discharging any liability due to the Appellant Bank arising on account of default in the loan availed by them. It was W.A. Nos. 640 & 648/2016 -5- observed that, the ownership on the amounts of foreign contribution, which remains credited in the current account, does not vests with the trust, in terms of Section 28 of the Regulation Act. If such amount is utilized for any purposes other than what was permitted under the Regulation Act, certainly it would contravene the provisions contained in the Regulation Act. The learned Single Judge observed that, in view of the fact that the trust is not a beneficiary of the amounts lying in the current account, the Appellant Bank cannot claim any lien, as against the real beneficiary. Therefore it was found that Section 171 of the Contract Act would not apply since the amounts lying in the current account does not belong to the holder of such account. Consequently, it was found that the Appellant Bank is not entitled to exercise any lien on the amount remaining credit in the current account, nor it is entitled to restrict the trust from operating the said account.
5. Adv. K. Jayesh Mohankumar, learned counsel appearing for the Appellant Bank contended that, the Bank is holding lien with respect to the amounts W.A. Nos. 640 & 648/2016 -6- remaining credit in the current account and is entitled to retain such amount as security for proper compliance of the loan account availed by the trust. Per contra, Adv. Sunny Mathew, counsel appearing for the respondent had drawn our attention to various provisions in the Regulation Act, which stipulates that, the trust is at an obligation to maintain the 'foreign contribution' received by virtue of the authorisation issued under the Act, in a specific bank account from which withdrawals are restrained under various provisions of the said Act. Exhibit P2 in W.P (C) No.39240/2015 is the Authorisation (Registration) obtained by the respondent trust from Government of India, under provisions of the Regulation Act. It is specifically stipulated therein that, the Bank Account shown in the application for registration shall be used only for receiving the foreign contributions and no other amount shall be credited to the said account. It is further insisted that, the trust should obtain written confirmation from the authority in the Government for effecting any change in the Bank Account. It is pointed out that, a copy of Ext.P2 letter of authorisation issued by W.A. Nos. 640 & 648/2016 -7- the Ministry of the Government of India, was also endorsed to the Manager of the Appellant Bank and the Bank was well aware about the facts with respect to the nature of the current account and with respect to the nature of the amounts remaining credit in the said account, being foreign contributions received for the specific purposes of charity. Even otherwise there is no dispute from the side of the Appellant Bank regarding the nature of the current account and with respect to the purpose for which the said account was opened and operated.
6. Learned counsel for the respondent had drawn our attention to sub-section (3) of Section 3 of the Regulation Act. It restrains the agency receiving the foreign contribution from delivering such amount to any person other than a person for whom it was received; and also restricts delivery of such amount to any other person with respect to whom the agency has reasonable cause to believe that they are likely to deliver such amount to any person other than the person for whom the amount was received. Our attention was also drawn to Section 7 of the W.A. Nos. 640 & 648/2016 -8- Regulation Act, which prohibits transferring of the foreign contributions received, to any other person unless such other person also has registration under the Regulation Act; and has been granted with the certificate, without prior permission obtained under the said Act. Section 8 of the Regulation Act puts a further restriction on the agency receiving the foreign contribution from utilizing the same for any administrative expenses of such agency, beyond an upper limit stipulated therein. It specifically restricts utilization of such amount for speculative business as well. Various other provisions in the Regulation Act were also pressed into service on behalf of the respondent to show that, very stringent conditions are stipulated in the statute with respect to utilization of the foreign contribution, credited to the specified account started and operated exclusively for the said purpose, under the authorisation from the competent authority and kept under scrutiny of such authority, who is the central Government. The legislative intent underlying is very clear that, strict restrictions are imposed by the central Government with respect to W.A. Nos. 640 & 648/2016 -9- utilization of money received as foreign contribution, in order to ensure that the utilization is confined only to the purposes for which the contribution was received. More over, provisions of the Regulation Act puts restrictions on any misutilization and makes such misutilizations as contravening the provisions; and entailing penal consequences and also the cancellation of authorisation.
7. In the above mentioned scenario, question popped up for decision is, whether the Appellant Bank is entitled to exercise its right of lien, which is purportedly conferred by virtue of Section 171 of the Contract Act, on the amounts remaining in credit in the current account opened and operated exclusively for keeping the foreign contributions, under specific authorisation within the purview of the Regulation Act. The utilization can only be for the purposes mandated under the said Act; and any misutilization will contravene the provisions and will visit with penal consequences. We are of the opinion that the lien cannot be permitted to be exercised in contravention of the provisions contained in the Regulation Act. We notice that the specific provision under Section 171 of the W.A. Nos. 640 & 648/2016 -10- Contract Act cannot in any manner be construed as having an overriding effect on the provisions of the Regulation Act, which is a special statute governing the law on the subject.
8. Further, Section 171 of the Contract Act itself restrain exercise of the lien, in case there is a contract to the contrary. When the respondent/trust has opened the current account for the specific purpose of getting authorisation under the Regulation Act, and when the Appellant Bank is having clear knowledge about the authorisation and its terms and conditions, and also about to restrictions with respect to the withdrawals, it has to be presumed that there exists a deemed contract between the Appellant Bank and the respondent/trust with respect to the specific utilization of the money remaining in credit in the current account. Therefore the exercise of lien attempted by the Appellant Bank cannot be legalized in that respect also.
9. Based on the findings as above, we do not find any ground to interfere with the impugned judgment in W.P (C) No.39240/2015 or with respect to the interim W.A. Nos. 640 & 648/2016 -11- order in W.P (C) No.8781/2016. Hence both the writ appeals deserve no merit and the same are hereby dismissed.
10. In view of the above judgment, we are of the opinion that the writ petition, W.P (c) No.8781/2016 can also be closed. The appellant will bring this judgment to the notice of the Single Judge where the said writ petition is posted, and shall secure necessary orders in that respect.
(Sd/-) HRISHIKESH ROY (Acting Chief Justice) (Sd/-) C.K. ABDUL REHIM (Judge) AMG True copy P.A. to Judge