Gujarat High Court
Vimal vs Reserve on 25 August, 2011
Author: S.J.Mukhopadhaya
Bench: S.J. Mukhopadhaya
Gujarat High Court Case Information System
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LPA/1455/2009 18/ 18 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS
PATENT APPEAL No. 1455 of 2009
In
SPECIAL
CIVIL APPLICATION No. 6544 of 2009
For
Approval and Signature:
HONOURABLE
THE CHIEF JUSTICE MR.S.J. MUKHOPADHAYA : Sd/-
HONOURABLE
MR.JUSTICE J.B.PARDIWALA :
Sd/-
=======================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=======================================================
VIMAL
PROTEINS PRIVATE LIMITED - Appellant(s)
Versus
RESERVE
BANK OF INDIA & 3 - Respondent(s)
=======================================================
Appearance :
MR
SHALIN N MEHTA for Appellant : 1,
MR SN SOPARKAR, Sr.Adv. with MR
AMAR N BHATT for Respondent : 1,
MR CHIRAG B PATEL for Respondent
: 2,
MR KM PARIKH for Respondent : 3,
NOTICE SERVED BY DS for
Respondent :
4,
=======================================================
CORAM
:
HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA
and
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
Date
: 25/08/2011
CAV
JUDGMENT
(Per : HONOURABLE MR.JUSTICE J.B.PARDIWALA) In this appeal, the appellant challenges the oral order dated 03.07.2009 passed by the learned Single Judge in Special Civil Application No.6544 of 2009, whereby the learned Single Judge rejected the petition on the ground that the appellant has an alternative remedy of approaching the Banking Ombudsman under the Banking Ombudsman Scheme, 2006 to redress his grievances.
The facts relevant for the purpose of deciding this Appeal can be summarized as under :-
2.1 The appellant owes money to Anyonya Cooperative Bank Ltd., (now in liquidation), the respondent no.3. For the payment to the said bank, the appellant purchased Bankers' cheques totaling to Rs.7.5 lacs from Sulaimani Cooperative Bank Ltd., the respondent no.2. At the time of clearance, all the Bankers' cheques were dishonoured by the respondent no.2, Sulaimani Cooperative Bank Ltd., as a result of which, Anyonya Cooperative Bank Ltd., respondent no.3 (now in liquidation) in whose favour the cheques were drawn could not collect the payment. The appellant thus remains undebted to Anyonya Cooperative Bank Ltd., (now in liquidation). It appears that as Sulaimani Cooperative Bank Ltd. refused to clear its own Bankers' cheque worth of Rs.7.5 lacs, the appellant seriously complained in this regard to the Reserve Bank of India, the respondent no.1 on 11.06.2008. Record reveals that on 17.07.2008, the Reserve Bank of India replied to the appellant stating that the case is being examined and Sulaimani Cooperative Bank Ltd., was found to be wrong and was advised accordingly. It appears that the appellant preferred Special Civil Application No.1292 of 2009 in this regard. The learned Single Judge of this Court disposed of Special Civil Application No.1292 of 2009 vide order dated 16.02.2009 observing as under :-
"It will be in fitness of things that the Petitioners' approach Reserve Bank Of India for taking appropriate action against the Respondent No.2 - Bank.
It is clarified that non entertainment of this petition is not to be treated that the Petitioners do not have a case on merits. The Reserve Bank of India shall consider the case of the petitioners in accordance with law and issue necessary directions to Respondent No.2 - Bank as expeditiously as possible."
2.2 After the order was passed by the learned Single Judge disposing of Special Civil Application No.1292 of 2009, the appellant preferred a representation. It appears that the Reserve Bank of India vide its letter dated 25.03.2009 requested the appellant to approach Sulaimani Cooperative Bank Ltd. and resolve the dispute in terms of letters dated 25.08.2008 and 07.10.2008 of Sulaimani Cooperative Bank Ltd.
2.3 It also appears that when the appellant had approached Reserve Bank of India in June, 2008, the RBI had taken up the issue with Sulaimani Cooperative Bank Ltd., vide its letter dated 17.07.2008 to the appellants and another letter dated 17.07.2008 to Sulaimani Cooperative Bank Ltd. In the letter to Sulaimani Cooperative Bank Ltd., RBI informed Sulaimani Cooperative Bank Ltd., as under :-
"Please refer to your letter No.234/08/09 dated June 25, 2008 and the discussion your official Shri Pathan had with us on July 15, 2008 on the above subject. In this connection, it is advised that the return of payment orders and refund/payment of these POs by the bank by credit to the account of its purchaser, without having original POs was not in order. The procedure followed is observed to be not in order. You are therefore advised to rectify the same immediately under advise to us."
2.4 Thereafter, Sulaimani Cooperative Bank Ltd., wrote a letter dated 01.08.2008 informing the appellant that the Bankers' cheques were duly issued and that Sulaimani Cooperative Bank Ltd., had already informed the appellant earlier to obtain the consent of Tripura Sevarthy at whose instance, the Bankers' cheques had been issued. On 19.08.2008, RBI once again talked to Sulaimani Cooperative Bank Ltd., to settle the issue within 15 days from the receipt of the said letter. It appears that Sulaimani Cooperative Bank Ltd., addressed two letters dated 25.08.2008 and 07.10.2008 advising the appellant to come along with Pay Order and the purchaser to do needful.
2.5 On 25.03.2009, RBI addressed a letter to the appellant informing them to approach the bank to resolve the dispute as informed by the bank to the appellant vide letter dated 25.08.2008 and 07.10.2008.
3.6 It is at this stage, that the appellants thought fit to prefer Special Civil Application No.6544 of 2009.
3.7 Learned Single Judge came to a conclusion that the appellant has an alternative remedy to redress his grievances before the Banking Ombudsman. The learned Single Judge observed that the Banking Ombudsman Scheme, 2006 is framed by the Reserve Bank of India and Ombudsman has already started functioning for redressal of the grievances of customers of the bank. The learned Single Judge took a view that without exhausting remedy available to the appellant, petition under Article 226 of the Constitution of India was not maintainable.
Aggrieved by such order passed by the learned Single Judge, the present Appeal came to be preferred.
We have heard learned counsel, Mr.Shalin N. Mehta appearing for the appellant, learned Sr. Advocate, Mr.S.N. Soparkar appearing with learned counsel, Mr.Amar Bhatt for the respondent no.1-Reserve Bank of India, learned counsel, Mr.Chirag Patel appearing for the respondent no.2-Sulaimani Cooperative Bank Ltd. and learned counsel, Mr.K.M. Parikh appearing for the respondent no.3-Anyonya Cooperative Bank Ltd.
Learned advocate for the appellant would contend that shocking response of the Reserve Bank of India triggered Special Civil Application No.6544 of 2009. He submitted that three Bankers; cheques were issued by Sulaimani Cooperative Bank Ltd. payable to Anyonya Cooperative Bank Ltd. These cheques were purchased from Sulaimani Cooperative Bank Ltd. via private financial (Mr.Tripura Sevarthy). The details are as under :-
Sr. No. Banker's Cheque No. Amount (In Rs.) Date of issue
1. 8241
3,00,000/-
13.09.2007
2. 8242 2,00,000/-
13.09.2007
3. 8243 2,50,000/-
13.09.2007 He submitted that payee presented the cheques for clearance approximately 4 to 5 days before completion of six months' period. They were presented twice. Both times, Sulaimani Cooperative Bank Ltd. refused payment with remark "improper presentation". As on date of the presentation of the pay order, Anyonya Cooperative Bank Ltd. (payee in liquidation) was under the control of the Reserve Bank of India directives under Section 35A of the Banking Regulations Act, 1949. As a result thereof, the Bankers' cheques had to be cleared through Bank of Baroda. Bank of Baroda tried twice to collect payment but the same was refused by Sulaimani Cooperative Bank Ltd. He submitted that Sulaimani Cooperative Bank Ltd., has violated following banking norms :-
"1) Refusal to own a Banker's Cheque issued by it.
2) Settling its dues with Mr.Tripura Sevarthi (bank's debtor) by appropriating the appellant's money.
B. Reserve Bank of India, by remaining alive of its duty as a regulator under Banking Regulation Act, 1948, ought not to have remained a silent spectator in the present dispute between the appellant and Sulaimani Cooperative Bank Ltd. After the High Court's oral order dated 16.02.2009 passed in Special Civil Application No.1292/09, the Reserve Bank of India should have issued an appropriate direction to Sulaimani Cooperative Bank Ltd. to honour the three Banker's Cheques issued to the appellant payable to Anyonya Cooperative Bank Ltd.(now in liquidation). The Reserve Bank of India failed to do so and therefore, it is guilty of non-compliance of the High Court's oral order dated 16.02.2009 passed in Special Civil Application No.1292/09.
C. Under section 35A of the Banking Regulation Act, 1949, the Reserve Bank of India has the power to issue directions to any banking company in particular to prevent the affairs of that banking company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the banking company. Section 56 of the said Act makes section 35A application to cooperative banks as well. Section 35A is as under:
35A.
Power of the Reserve Bank to give directions.-
(1) Where the Reserve Bank is satisfied that--
(a) in the public interest]; or (aa) in the interest of banking policy; or
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally; it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub- section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.
He submitted that when the Reserve Bank of India had itself come to a conclusion on 17.07.2008 that Sulaimani Cooperative Bank Ltd. was wrong and that Sulaimani Cooperative Bank Ltd. was required to rectify this wrong action, the Reserve Bank of India should have acted with promptitude when it was pointed out by the appellant that Sulaimani Cooperative Bank Ltd. was refusing to honour the Bankers' cheques. Counsel would contend that it was the bounden duty of the Reserve Bank of India to issue necessary directions in that regard under Section 35A of the Act to see that Sulaimani Cooperative Bank Ltd. takes corrective action to redress the appellant's grievances. Lastly, he contended that Reserve Bank of India's statutory function can be enforced by the High Court by issuing writ of mandamus under Article 226 of the Constitution of India.
Learned advocate for the appellant also submitted that the defence which has been put forward by the Sulaimani Cooperative Bank Ltd. for refusing to clear the Bankers' cheques relying on the fax message dated 20.10.2007 intimating that as certain cheques have been stolen from the office of Tripura Sevarthy, the bank may stop the payment on presentation of such cheques by third party is false and fabricated. Learned counsel submitted that there are several reasons in support of the appellant's case that the said fax/letter dated 20.10.2007 is bogus, fabricated and an afterthought. He assigned reasons as under
:-
(a) While the letter is typed in Gujarati, important particulars like the name of the sender and the name of the receiver are written in English by hand.
(b) Tripura Sevarthi is a private money lending firm. The firm has a letterhead and a rubber stamp which is generally used for signature.
Both these things are absent in the letter.
(c) The letter mentions that cheques and stamp papers signed by him and his family members are stolen/misappropriated. It is difficult to believe how Bank stamp papers without printing any matter are signed in advance.
(d) Stealing of cheques and stamp papers is a serious thing. Any reasonable person would lodge a police complaint or would advertise the fact so as to inform the general public. Nothing of this kind has happened.
(e) The letter also mentions that cheques signed by family members are stolen. The letter does not mention that the Banker's cheque of Rs.7.5. lakhs signed by Sulaimani Cooperative Bank Ltd. is stolen. Therefore, cheques signed by family members have nothing to do with the Banker's Cheque/Pay Order issued by Sulaimani Cooperative Bank Ltd. of Rs.7.5 lakhs with which the appellant is concerned.
(f) To make payment of Rs.151 lakhs to Anyonya Cooperative Bank Ltd., the appellant got pay orders from various Banks, Sulaimani Cooperative Bank Ltd. being one. The Banker's Cheques/Pay Orders issued by other Banks have been honoured. Only the Banker's Cheqye/Pay Order issued by Sulaimani Cooperative Bank Ltd. has been dishonoured.
(g) Tripura Sevarthi purchased Banker's Cheques for Rs.7.5 lakh for the appellant, payable to Anyonya Cooperative Bank Ltd. The Banker's Cheques of Rs.7.5 lakh were issued by Sulaimani Cooperative Bank Ltd. on 13.09.2007. Thus, proper procedure had been followed by the Bank while issuing the Banker's Cheques. It is only thereafter that the Bank refused to honour the same on the specious plea that there was improper presentation of the cheques by the payee. It is crystal clear that the Bank has appropriate the dues of the appellant to settle its score with Tripura Sevarthi. Tripura Sevarthi was declared as an insolvent. The Bank realized that nothing would be realizable from Tripura Sevarthi. Therefore, the outstanding of Tripura Sevarthi has been settled by the Bank by wrongly and illegally appropriating the appellant's money.
(h) The whole tenor of the letter arouses an impression that the Banker's Cheques for Rs.7.5 lakh is obtained by the appellant by stealing cheques. If this is so, then who signed the Banker's form to draw the Bankers' Cheques? How could a Bank issue Banker's Cheque without verifying the signature on the Banker's Cheque form?
(i) The Banker's Cheque was given on 13.09.2007. The Bank conveys only on 20.10.2007 (after more than a month) that it was intimated by Tripura Sevarthi that the cheque book was stolen. Whereas, Tripura Sevarthi was having a constant and ongoing transaction with Sulaimani Cooperative Bank Ltd. Therefore, the story of stolen cheques is quite unbelievable and fantastic.
(j) The letter does not disclose how many cheques were stolen. The letter does not disclose the printed number of the cheques.
(k) If Tripura Sevarthi had informed Sulaimani Cooperative Bank Ltd. on 20.10.2007 that the cheque book was stolen, there was no reason for the Bank to remain silent till 25.03.2008. Naturally, the Bank should have immediately intimated the appellant of Tripura Sevarthi's misfortune. No Bank would wait for more than 5 months to intimate its client that the party who had purchased the pay order had complained of misappropriation.
(l) In its letter dated 17.07.2008, even the Reserve Bank of India had admonished Sulaimani Cooperative Bank Ltd. for adopting illegal means by refusing to honour the pay order issued by it. The Reserve Bank of India had asked the Bank to correct itself. This the Bank did not do.
(m) The original instrument (Banker's Cheque/Pay Order) is still lying with the appellant. How could then Sulaimani Cooperative Bank Ltd. has given credit of Rs.7.5 lakh to Tripura Sevarthi on the basis of the alleged letter.
(n) The letter has never been shown to the appellant by the Bank. This is a first time that the said letter is being shown to the appellant. Clearly, the letter is concocted and manufactured.
(o) In its explanation to the Reserve Bank of India, Sulaimani Cooperative Bank Ltd. never told that the payment under the pay order had been stopped on account of such letter issued by Tripura Sevarthi. This would show that the letter is created by the Bank in collusion with Tripura Sevarthi. The Bank has to recover its dues from Tripura Sevarthi. The appellant's money is appropriated by the Bank to settle its account with Tripura Sevarthi.
Per contra, learned counsel appearing for the Reserve Bank of India submitted as under :-
"(i) While Banking Ombudsman Scheme is not available to Co-operative Banks, in view of the disputed questions of facts involved in the petition, the petition was liable to be dismissed on the grounds of alternative remedy of filing a suit and/or file criminal complaint for dishonour of bankers' cheques.
(ii) Bankers cheques dated 13/09/2007 were sought to be encashed in March 2008 for the first time. In view of the disputes raised by Sulemani Bank, RBI could not have directed Sulemani Bank to make payment.
(iii) RBI cannot be said to have not complied with the order of this Hon'ble Court dated 16/02/2009. Similarly, RBI cannot be directed to issue cheques as prayed in paragraph 22(C) in the said petition.
(iv) There is no inconsistency between letters of RBI dated 17/7/2008 (page 18 and 63) on one side and RBI's letter dated 25/3/2009 (page
14). The two letters dated 17/7/2008 were written considering the procedure followed by Sulemani bank of returning the Bankers' cheques and crediting the account of the Bankers' cheque purchaser without original Bankers' cheques. After Sulemani Bank's letter dated 25/08/2008 (page 58) and 07/10/2008 (page 41 and 43) and in view of the disputes raised by Sulemani Bank, RBI could not have given any other direction except what is stated in letter dated 25/3/2009 (page
14), otherwise it would amount to RBI passing an order against Sulemani Bank. In view of the disputes raised by and between the parties, no order can be passed to take action against Sulemani Bank.
(v) Section 35 A of the Banking Regulations Act, 1949 (for short the "BR Act") relied upon by the Appellant cannot be invoked in this case. This Section 35A of the BR Act is as under :-
"35A.
Power of the Reserve Bank to give direction :-(1)
Where the Reserve Bank to give direction-
(a) in the public interest; or (aa) in the interest of banking policy; or
(b) To prevent the affairs of any co-operative bank being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interest of the co-operative bank; or
(c) to secure the proper management of the banking business of a co-operative bank generally; it is necessary to issue directions to co-operative banks generally or to any co-operative bank in particular, it may, from time to time, issue such directions as it deems fit, and the co-operative banks or the co-operative bank, as the case may be, shall be bound to comply with such directions."
The issue involved in the present case is the dishonour of Bankers' cheques, which is purely a dispute between the Appellants and Sulemani Bank i.e. a private dispute and therefore, Section 35A of the BR Act cannot be made applicable. No public interest or banking policy or the interest of the depositors is involved in the dispute. No question of violation of fundamental right or any other right is involved in the matter. For every dishonour of banker's cheques RBI cannot be directed or expected to issue directions under Section 35 A of the BR Act to the concerned Banks. Otherwise, for every dishonor of cheques, every one shall seek direction from RBI under Section 35 A of the BR Act, which is against the provisions of the BR Act. Hence, no relief as prayed for or otherwise against RBI can be granted.
Learned counsel appearing for the respondent no.2-Sulaimani Cooperative Bank Ltd. submitted relying upon Sections 68 and 126 of the Negotiable Instrument Act, 1881 that the appellant misrepresented to the Reserve Bank of India and tried to clear the pay orders through Bank of Baroda, which was not permissible in view of Section 68 and 126 of the Negotiable Instrument Act as the respondent no.2 could not have ignored the fact that the pay orders are always account payee and cannot be cleared except the same are modified. He contended that in the instant case, account payee Pay Order was issued "Anyonya Cooperative Bank Limited - account Vimal Proteins Private Limited" and therefore, respondent no.2 as per the provisions of Sections 68 and 126 of the Negotiable Instrument Act, 1881 is bound to pay in very same account in which Pay Order is issued and not in other bank account. He further contended that very same fact has not been disclosed by the appellant - Vimal Proteins Private Limited to the Reserve Bank of India and the appellant kept on presenting Pay Order through the Bank of Baroda and same can be reflected from the documents produced at pages 97 to 102 of the compilation.
He further contended that there has been also some tempering with the banking stamp. He submitted that all these are disputed questions of fact, which cannot be decided in writ petition filed under Article 226 of the Constitution of India. Lastly, he contended inviting the attention of the Court to the letter dated 17.04.2009 (Annexure-L), wherein the appellant was requested to come with the original pay order and purchaser of pay order at the office premises of the respondent no.2 but instead of doing same, the appellant kept on filing complaints before the Reserve Bank of India.
Having given our anxious thoughts and consideration to the rival submissions of the respective parties, we are of the view that it is undisputed that at the time of clearance, all the Bankers' cheque were dishonoured by the respondent no.2-Sulaimani Cooperative Bank Ltd. It is also undisputed that three Bankers' cheques totaling to Rs.7.5 lacs were purchased from the respondent no.2-Sulaimani Cooperative Bank Ltd. However, it appears that the defence which has been put forward by the respondent no.2-Sulaimani Cooperative Bank Ltd. as regards refusal to clear the Bankers' cheque cannot be examined in a writ petition under Article 226 of the Constitution of India. It is a case of Sulaimani Cooperative Bank Ltd. that they were intimated by fax on 20.10.2007 by Mr.Tripura Sevarthy (the person from whom the appellant purchased Banker's cheques) that as certain cheques had been stolen from the banks, bank may stop the payment on presentation of such cheques by third party. Whether the said fax is a fabricated document or genuine would be a subject matter of investigation. No doubt, the appellant has assigned cogent reasons to convince the Court that the fax/letter dated 20.10.2007 is not genuine but still we cannot give any final opinion or decision in this regard in exercise of our powers under Article 226 of the Constitution of India.
However, we are not able to understand as to why the Reserve Bank of India is not ready and willing to look into the matter. We have noticed a letter dated 17.07.2008 (Annexure-E) of the Reserve Bank of India where the Reserve Bank of India has very clearly informed the appellant that they have examined the case and observed that the procedure followed by the Sulaimani Cooperative Bank Ltd., is wrong and Sulaimani Cooperative Bank Ltd., has been advised accordingly. We have also looked into the letter dated 17.07.2008 of the Reserve Bank of India addressed to Sulaimani Cooperative Bank Ltd., which reads as under :-
"The Chief Executive Officer, Sulaimani Coop. Bank Ltd.
Head Office, Mogalwada Vadodara 390 017 Dear Sir, Complaint from M/S Vimal Proteins Pvt. Ltd.
Please refer to your letter no.234/08/09 dated June 25, 2008 and the discussion your official Shri Pathan had with us on July 15, 2008 on the above subject. In this connection, it is advised that the return of the payment orders and refund/payment of these POs by the bank by credit to the account of its purchaser, without having original POs was not in order. The procedure followed is observed to be not in order. You are therefore advised to rectify the same immediately under advise to us."
Having undertaken the exercise to a certain extent, it is now very surprising to hear from the mouth of Reserve Bank of India that Banking Ombudsman Scheme, 2006 is not available to Cooperative Banks and in view of the disputed questions of fact involved in the petition, the appeal is liable to be dismissed. Sulaimani Cooperative Bank Ltd. may have something to say in their favour but it was expected from Reserve Bank of India to at-least look into the matter carefully and with little seriousness so that the party like the present appellant herein may not have to suffer. If the party has bought Bankers' cheques from a bank and if the same bank refuses to honour the same for any reasons, it is a matter of serious concern.
Without going into any further controversy, we are of the view that this Appeal can be disposed of by directing the Reserve Bank of India to look into the matter once again and take a decision as to whether Sulaimani Cooperative Bank Ltd. was justified in dishonouring the Bankers' cheques at the time of clearance. For this purpose, it is expected of the Reserve Bank of India to hear all the parties once again and take appropriate decision and if it is found that Sulaimani Cooperative Bank Ltd. was not justified then accordingly may take necessary steps in this regard.
In the above view of the matter, we direct the Reserve Bank of India to look into the grievances of the appellant afresh and after giving opportunity to all parties concerned shall take appropriate decision. At the end of the inquiry, if it is found that Sulaimani Cooperative Bank Ltd. was not justified in dishonouring the Bankers' cheques then in that case, it will be open for the Reserve Bank of India to take appropriate steps as it may deem fit in the interest of justice. We are sure that Reserve Bank of India will live up to its expectation and look into the matter denova without taking the stand that Banking Ombudsman Scheme is not available to Cooperative Banks.
With the above observations, we dispose of the Appeal accordingly with no order as to costs.
Sd/-
(S.J. MUKHOPADHAYA, CJ.) Sd/-
(J.B.PARDIWALA, J.) /patil Top