Patna High Court
Sal (Components) Pvt. Ltd. And Ors. vs Bihar State Financial Corporation And ... on 20 January, 1993
Equivalent citations: AIR1993PAT143, 1993(41)BLJR863, [1994]80COMPCAS116(PATNA), AIR 1993 PATNA 143, (1993) 2 BLJ 176, (1994) BANKJ 335, 1993 BLJR 2 863, (1993) 2 PAT LJR 576, (1994) 80 COMCAS 116, (1993) 1 BANKCLR 723
Author: S.B. Sinha
Bench: S.B. Sinha
JUDGMENT S.B. Sinha, J.
1. A notice dated 29-6-1989 issued to the petitioners and two others by the Branch Manager, Bihar State Financial Corporation, Vikash Bhawan, Adityapur, Jamshedpur, purported to be in terms of Sections 29 and 30 of the State Financial Corporations Act, 1951 (hereinafter to be referred as to the Act) is the subject-matter of this writ application.
2. The brief fact necessary to be noticed for disposal of this application are as follows:
(a) The petitioner No. 1 and the Bihar State Financial Corporation entered into an agreement on 7th October, 1988, in terms whereof a sum of Rs. 30.63 Lakh was to be provided as loan by the respondent No. 1 to the petitioners. The petitioners allegedly repaid a part of the loan by making timely payment of instalments to the extent of Rs. 16.75 Lakh. The petitioners contend that respondent No. I had not disturbed Rs. 16,45 lakh despite repeated demands. In the meanwhile, the impugned notice has been issued.
(b) In the said notice it has been inter alia contended that after disbursing a total sum of Rs. 11.96 lakh to the petitioners, respondent No. 1 discovered that the petitioners have defrauded and cheated the Corporation by submitting forged Bank Guarantees and other papers and documents with a purpose to derive undue gain for themselves, On that allegation, the loan was recalled.
(c) In their counter-affidavit the respondents have inter alia stated that on the request of the petitioners, a sum of Rs. 10 lakh were released for immediate purchase of machinery namely. 90 mm Horizontal Boring Machine agreed to be supplied to them by M/s. Alfa Inc., a subsidiary company of Jayem Engineering Limited which was a supplier approved by the Corporation of the machinery in question. Certain conditions were to be fulfilled for release of the said loan which included furnishing of Bank Guarantee of Rs. 10 lakh in respect of the said machinery and M/s. Alfa Inc. was also required to furnish documentary evidence in support of its claim that it was a subsidiary of M/s. Jayems Engineering Limited.
(d) The petitioners allegedly in terms of the aforementioned letter produced a Bank Guarantee in terms whereof the Bank agreed to pay to the Corporation Rs. 10 lakh with interests in the event of the failure of the suppliers to deliver the machinery to the petitioners' premises within two months from the date of the execution of the said purported Guarantee. The said deed of Guarantee dated 5-12-1988 is contained in Annexure-A to the counter-affidavit.
(e)The said purported deed of guarantee dated 5-12-1988 was extended by a fresh deed of Guarantee dated 20th May, 1989, as the machineries had not been delivered. The respondents upon becoming suspicious of the conduct of the petitioners, wrote a letter to the Bank of India, Calcutta Main Branch on 27-7-1989 enquiring about the genuineness of the said Bank Guarantee and the said Bank in response thereto by a letter dated 7-3-1989 informed the Corporation that the guarantee in question was never issued by it and the document was a forged one.
(f) Thereafter, a First Information Report was lodged against the petitioners and other Directors of the petitioners' company and one R.S. Goswami, the Sales Executive of M/s. Alpha Inc. The petitioners filed a reply to the said counter-affidavit alleging therein that they have never produced the forged Bank Guarantee.
(g) In a supplementary counter-affidavit the respondents disputed the claim of the petitioners that they are not parties to the said forgery by stating that petitioner No. 2 had put his signature in the said Bank Guarantee and he himself produced the forged Bank Guarantee. In support of the contentions, the respondents have annexed copies of the letters dated 5-12-1988 and 16-5-1989 as contained in Annexure-K and L to the supplementary counter-affidavit from a perusal whereof it appears that the Bank Guarantees were sent by the petitioner No. 2.
(h) A reply to the supplementary counter-affidavit was filed by the petitioner No. 1 on 2-7-1992. It has been contended that both the Bank Guarantees are forged and fabricated ones. It has also been stated that as the date of the Bank Guarantee was 20-5-1989, respondents could not have received the same on 16-5-1989. It has been further slated that the letter dated 5-12-1988 is also a forged document. It has further been contended that Mr. O.P.L. Das in conspiracy and in connivance with M/s. Alpha Inc. has procured forged Bank Guarantee.
3. Mr. Basudco Prasad, learned counsel appearing on behalf of the petitioners has raised a short question in support of this application.
4. The learned counsel submitted that from a perusal of the purported Bank Guarantee, it would appear that the same is an unilateral document and bears the sign, tures of Bankers only. The learned counsel submitted that the petitioners are not parties to the said agreement and in fact the signature of petitioner No. 2 as a witness therein has also been forged. The learned counsel submitted that in any event, the amount of loan granted to the petitioners could not have been recalled and no notice under Section 29 of the said Act could have been issued on the purported ground of producing a forged Bank Guarantee.
5. Mr. K.D. Chatterjee, learned counsel appearing on behalf of the respondent-corporation, on the other hand, submitted that from a perusal of the letter of respondent No. 1 dated 5-12-1988 issued by the Assistant General Manager (Dish) to the petitioner No. 1 it would appear that it was required to fulfil certain conditions for disbursement of a sum of Rs. 10 lakh including furnishing of a Bank Guarantee to the Machine supplier.
6. According to the learned counsel, after the purported Bank Guarantee as contained in Annexure-B to the counter-affidavit was furnished the amount of Rs. 9.30 Lakh was released; the receipt of which has been acknowledged by the petitioners as would be evident from Annexure-C to the counter-affidavit. Thereafter, another Bank Guarantee as contained in Annexure-D to the counter-affidavit had been filed which not only purport to contain the signature of Manager, Bank of India but has also been witnessed by M/s. Alpha Inc. and by petitioner No. 2 for the petitioner No. 1.
7. It was further submitted that from a perusal of the letters dated 5-12-1988 and 16-5-1989 as contained in Annexure-K and L to the supplementary counter-affidavit, it would appear that the said Bank Guarantees were forwarded by the petitioners.
8. According to the learned counsel, therefore, it does not lie in the mouth of respondents to contend that they are not parties to the forgery of the said Bank Guarantees as now the fact that the Bank Guarantees are forged documents has been admitted by the petitioners (sic)
9. It was further submitted that a person who uses a forged document is as much guilty as the person who has forged the same and in support of his contention the learned counsel relied upon a decision of the Supreme Court in M/s. Fedco (P) Ltd. v. Section N. Bilgrami reported in AIR 1960 SC 415.
10. It thus stands admitted that there are allegations and counter-allegations. It also appears from the records that the two First Information Reports have been lodged, one by the respondent No. 3 and another by the pet it owners, Both the aforementioned criminal cases arc pending.
11. The question as to whether the petitioners are guilty of committing an offence of forgery in relation to the aforementioned Bank Guarantees (Annexures-B and D to the counter-affidavit) or the same has been done by Proprietors of M/s. Alpha Inc. in conspiracy and in connivance with Mr. O.P.L. Das is essentially a question of fact.
12. However, for the purpose of disposal of this writ application we cannot loose sight of the fact that the petitioners have been benefited by grant of Rs. 9.39 Lakhs to M/ s. Alpha Inc. by the Respondent-corporation as is evident from alettcr of the petitioners dated 22-12-1988, which is contained in Annexure-C to the counter-affidavit.
13. The petitioners, although, have denied to have executed the letters dated 5-12-1988 and 16-5-1989 as contained in Annexures-K and L to the supplementary counter-affidavit, but evidently the Respondent-corporation acted pursuant to the said letters as also Annexure-C to the counter-affidavit. It has not been disputed by the petitioners that the supplier of the machinery was required to furnish a Bank Guarantee to the extent of Rs. 10 lakhs.
14. It is also not in dispute that the payment to the supplier was made, as a part of the loan sanctioned by the Corporation in favour of the petitioners in terms of the aforementioned agreement dated 7th October, 1988 (Annexure-A to the writ application). In law, therefore, the amount paid to M/ s. Alpha Inc. by the Respondent-Corporation must be held to have been done on account of the petitioners and they benefited themselves thereby.
15. As there has been a novation of contract by and between the parties in relation to the advance of a sum of Rs. 10 lakh to the supplier by the Corporation on account of the petitioners, a fresh contract came into being, in terms whereof the petitioners accepted the conditions imposed by the Respondent-Corporation by reason of their letter dated 5-12-1988 as contained in Annexure-K to the supplementary counter-affidavit.
16. It is now well knnow that a fraudulent act vitiates the entire action. When a fraud or misrepresentation is committed, the contract become viodable at the option of the other party to the contract.
17. In this view of the matter, according to the Respor dent-Corporation, a fraud has been practised upon them as a result whereof it paid a huge sum to the nominee of the petitioners and thus it was entitled to terminate the contract and recall the amount of the loan.
18. In M/s. Fedco's case (supra) the Supreme Court held as follows (at page 418):--
"Entire scheme of control and regulation of imports by licenses is on the basis that the licence was granted on a correct statement of relevant facts. That basis disappears if the grant of licence is induced by fraud or misrepresentation whether the licensee himself or some other party is responsible for the fraud or representing the fact remains in such cases the basis of the grant of licence has disappeared."
19. In such a case even the principles of natural justice are not required to be complied with. Reference in this connection may be made in U. P. Junior Doctors Action Committee v. Dr. B. Sheetal Nandwani reported in AIR 1991 SC 909.
20. In Rita Mishra v. Director of Primary Education repotted in 1987 BBCJ (HC) 741: (AIR 1988 Pat 26) it was held by a Full Bench of this Court as follows (at page 33):
"It is well settled that both suggestio falsi and suppressivo veri under Section 17 of the Contract Act defining 'fraud' would go to the root of agreement and would invalidate the same. Even in the realm of contract where the rule of caveat emptor or the principle of law-let the buyer beware applies, still if active concealment of fraud is established, the contract would stand vitiated. Again under Section 23 of the Contract Act, if the consideration of the object of the agreement is fraudulent, the agreement is rendered void. Now, if that be so, could it possibly be said that in the higher realm of status, obligations and the liability of the State for public services rendered, fraud, which is now universally condemned in the eye of law, could nevertheless become the source of legal right to salary stricto sensu against the State? The answer seems to me as somewhat plain and frontally against the petitioners. In Lazarus Estates, Ltd. v. Beasley Lord Denning observed as under.
"1 cannot accede to this argument for a moment for a continuation will allow a person to keep an advantage which he has obtained by fraud. No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The Court is careful not to find fraud unless it is distinctly pleaded and proved, but once it is proved it vitiates judgments : contracts and all transactions whatsoever."
21. In any event as noticed hereinbefore, both the parties are at ad idem that the Bank Guarantees are forged documents. The petitioners in terms of the letter of the Respondent-Corporation as contained in Annexure-A to the counter-affidavit could secure loan only if the conditions imposed thereby were fulfilled which included furnishing of a Bank Guarantee by the Suppliers. Furnishing of a forged Bank Guarantee evidently does not satisfy the said condition. Thus, the petitioners have obtained the said loan without complying with the terms of the agreement.
22. Failure to comply with the terms of the agreement with the Financial Corporation is one of the grounds for which Section 29 of The State Financial Corporations Act, 1951,, can be invoked.
23. In this view of the matter, the impugned notice dated 26-9-1989 as contained in Annexure-D to the writ application cannot be said to be illegal.
24. Further, although, the said notice was served on 26-9-1989, the petitioners had filed the writ application on 18-7-1990. The petitioners have not furnished any explanation for the delay in filing this application.
25. For the reasons aforementioned, no relief can be granted to the petitioners in this writ application.
26. Before parting with this case, however, we may observe that the observations in this judgment have been made only for the purpose of disposal of this writ application and, thus, the Criminal Court shall not be prejudiced thereby in any way in disposing of the Criminal Cases.
27. This application is, therefore, dismissed with the aforementioned observations. However, there will be no order as to costs.
G.C. Bharuka, J.
28. I agree