CS(OS) 1975/1997 Page 1 of 35 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 01.07.2010 CS(OS) No. 1975/1997 TIRUPATI TEXKNIT LIMITED ..... PLAINTIFF Vs ALLAHABAD BANK ..... DEFENDANT Advocates who appeared in this case: For the Plaintiff : Mr Rajiv Bansal, Advocate For the Defendant: Mr Ashim Vachher, Advocate CORAM :- HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment ? No 2. To be referred to Reporters or not ? Yes 3. Whether the judgment should be reported Yes in the Digest ? RAJIV SHAKDHER, J 1. This is a suit filed by the plaintiff for recovery, rendition of accounts, and delivery by the defendant of: list of unpaid instruments; computers; floppies; paid instruments in original; and copies of returns of different branches of the defendant. The relief of delivery is essentially sought against the defendant with respect to details of paid and unpaid refund orders issued qua unsuccessful applicants of the public issue of shares of the plaintiff. 1.1 The core issue in the suit is essentially the plaintiff‟s grievance that it had appointed the defendant through the aegis of Bank of Credit and Commerce International (Overseas) Ltd. (hereinafter referred to as „BCCI‟) as the banker for handling refund orders, in respect of over-subscribed public issue of equity shares, made by it, in January, 1990. A mandate which, according to the plaintiff, required the defendant to fully account for the money received for the said purpose by the defendant. The plaintiff has sought recovery of a sum of Rs 5,73,072/- along with interest at the rate of 18% per annum w.e.f. 03.04.1997; and CS(OS) 1975/1997 Page 2 of 35 rendition of accounts with respect to the amounts actually disbursed; consequential repayments of amounts so ascertained; and also delivery of documents, which would enable it to ascertain the said information. PLAINTIFF’S CASE 2. In this context, it would be necessary to note the plaintiff‟s allegations against the defendant. On 11.01.1990 the plaintiff issued a prospectus for a public issue of equity shares. It is alleged that on 12.03.1990, the Board of Directors of the plaintiff passed a resolution appointing the BCCI as its bankers for handling refund orders in respect of over- subscribed public issue. Consequently, on 13.03.1990 the plaintiff sent a formal letter to the BCCI confirming their appointment as the Refund Banker, in respect of its public issue which, closed on 15.02.1990. The necessary application form, copy of the resolution, and a copy of the Memorandum and Articles of Association were enclosed therewith. It is the plaintiff‟s case that the defendant in turn accepted the engagement, under BCCI, to effectuate the functions of the Refund Banker, which were essentially entrusted to BCCI, in respect of areas, other than Bombay (now Mumbai). The basic premise of the defendant‟s engagement was that the 100% funding would be provided by the plaintiff; coupled with an obligation to reconcile statements of both paid and unpaid refund orders. Accordingly, the plaintiff provided funds to BCCI in the sum of Rs 11,89,54,800/-, out of which, BCCI transferred a sum of Rs 10.33 crores to the defendant, on 24.04.1990. It is, however, averred by the plaintiff that it had remitted, apart from the above, additional funds to the defendants, the details of which are as follows: Amount (Rs) Date of Remission 5,00,000/- 12.09.1990 3,00,000/- 01.07.1991 1,60,000/- 07.03.1992 12,800/- 21.06.1993 2.1 Well after the closure of the public issue, the plaintiff vide letter dated 24.12.1990 (Ex. PW1/8) informed the defendant that the net unpaid outstanding balance after CS(OS) 1975/1997 Page 3 of 35 reconciliation which appeared against in the defendant‟s account, in its books, was a sum of Rs 5,30,006/-. This, according to the plaintiff, was a figure which had been arrived at after adjusting duplicate refund orders issued by them to the defendant. Accordingly, the plaintiff called upon the defendant to issue a cheque in the sum of Rs 5,30,006/- so that the account could be finally settled. 2.2 By a further communication dated 22.06.1991, the plaintiff, it appears, once again called upon the defendant to close the refund order account, and issue to it, an upto date statement of account. In addition to this, a demand was made that the amount standing to the plaintiff‟s credit be remitted to it. The plaintiff returned the unused cheque leaves in respect of the said account, which was in its possession. 2.3 By a further communication dated 05.01.1995 (Ex. PW1/11), the plaintiff reiterated their demand for return of money. What is noticeable is that in this communication the demand was scaled down to a sum of Rs 2,62,262/-. This apart, in the said communication the plaintiff alluded to the fact that they had been verbally, in touch with one Mr Chhabra, presumably an employee of the defendant, and the computer agency, for reconciliation of the account. The reference was also made to the fact that the computer agency had not maintained proper accounts, and had resultantly, debited instrument not pertaining to the plaintiff. 2.4 By another communication dated 26.06.1995 (Ex. PW1/12), (said to have been issued to the defendant), the plaintiff sought information with respect to paid dividend warrants for reconciliation of the refund order account. To be noted, during the course of arguments it was put to the learned counsel for the plaintiff that the reference to the unpaid dividend warrant is perhaps incorrect, which was accepted by the learned counsel for the plaintiff. He submitted that the reference ought to have been to the refund order account, and not the dividend warrant account. This mistake seems to have crept in, even in the pleadings. CS(OS) 1975/1997 Page 4 of 35 2.5 By a further communication dated 30.10.1995 (Ex. PW1/13), the plaintiff sought refund of a sum of Rs 2,62,262/- from the defendant. In this letter reference was made to an earlier letter of 05.01.1995 (Ex. PW1/11). 2.6 In between, it appears that the plaintiff‟s sister concern, T.T. Finance Ltd. had filed a complaint with the Banking Ombusdman. It was alleged in the complaint that the defendant had been illegally holding the balance funds in the “allotment money account” to exert pressure on the plaintiff to settle the issue with regard to their refund order account. What is not disputed is that by an order dated 08.08.1996, the Banking Ombusdman had recommended that the defendant and plaintiff should reconcile the refund order account. Accordingly, as averred in the plaint, on 16.09.1996, the defendant evidently submitted a certified statement of account to the plaintiff pertaining to the refund order account, and demanded in turn a sum of Rs 2,31,559/- on account of short-funding by the plaintiff; in addition to interest in the sum of Rs 3,78,681/- on the aforementioned amount. 2.7 Thereupon, on the aspect of reconciliation, the plaintiff wrote letters to the defendant on 06.02.1997 (Ex. PW1/15), 24.02.1997 (Ex. PW1/17) and 12.03.1997 (Ex. PW1/18). The plaintiff on this issue also communicated with the Banking Ombusdman vide letter dated 07.02.1997 (Ex. PW1/16) and 31.03.1997 (Ex. PW1/19). A copy of the letter dated 31.03.1997 (Ex. PW1/19) was marked to the defendant. The Banking Ombusdman by a letter dated 09.04.1997 (Ex. PW1/20) opined that since it was not an issue over which it could rule, it was best if, the plaintiff were to reconcile its accounts with the defendant. 2.8 Finally, the plaintiff through its advocate issued a legal notice dated 12.05.1997 (Ex. PW1/21). By this notice it demanded a sum of Rs 62,35,042/- from the defendant. This demand included a sum of Rs 5,73,072/- towards the outstanding debit balance appearing in its refund order account, maintained in the plaintiff‟s book, and Rs 56,61,970/- towards what it claimed ought to be the unclaimed refund amount, based on the past experience of its share transfer agent Allied Computers Techno Pvt. Ltd. (hereinafter referred to as „Allied Computers‟). The said claim in the sum of Rs 56,61,970/- includes an interest element, CS(OS) 1975/1997 Page 5 of 35 equivalent to a sum of Rs 27,90,230/-, calculated at the rate of 15.5% p.a. for the period 24.12.1990 to 31.03.1997, (i.e., six years and 90 days) on a principal sum of Rs 28,71,740. 2.9 The defendant rebutted the contentions of the plaintiff made in the aforementioned legal notice vide its reply dated 27.05.1997 (Ex. PW1/22). In the reply, the defendant, in particular, stressed upon the fact that since there was a short-funding by the plaintiff to the tune of Rs 2,31,559/-, in respect of the refunds made by the defendant; the plaintiff was liable to pay the said amount along with interest at the rate of 16.5% per annum with quarterly rest. Accordingly, a sum of Rs 7,42,951/- was demanded by the defendant from the plaintiff. The plaintiff, in these circumstances, approached this court by instituting the instant action. Defendant’s case 3. The defendant, on the other hand, has denied the case set up by the plaintiff as is indicated in the aforementioned paragraph i.e., 2.9. As a matter of fact the defendant has averred in the written statement that the amount paid to the BCCI for making payment against refund orders was a sum of Rs 11,87,90,600/- and not Rs 11,89,54,800/- as averred in the plaint. Though it is admitted that the defendant had received funds from BCCI to the tune of Rs 10.33 crores, on 24.04.1990 for the purpose of processing refund orders of unsuccessful applicant of the share issue. 3.1 What is specifically denied is the fact that the plaintiff paid an additional amount of Rs 5 lacs on 12.09.2009. The defendant has taken the stand that since it did not have a branch, in every area, it was mandated to appoint other banks as a Refund Banker. In one such area, Punjab & Sindh Bank was appointed, and it was money received from Punjab & Sindh Bank, G-Block, Connaught Circus Branch, New Delhi, which was received in the account of the defendant and not from the plaintiff. It is also averred that the said sum of Rs 5 lakhs was part and parcel of the total funding equivalent to Rs 10.33 crores. CS(OS) 1975/1997 Page 6 of 35 3.2 With regard to payment of sum of Rs 3 lacs and Rs 1.60 lacs in February, 1992 and March, 1992 respectively, it is accepted by the defendant that the said sum was paid. The defendant, however, has taken stand that since the balance, in the refund order account, had dipped to Rs 12,000/- and because, the defendant was still receiving the refund orders at its various branches, the plaintiff remitted the said amounts: Accordingly, Rs 3,00,000/- was remitted in February, 1992; while Rs. 1.60 lacs was remitted on 07.03.1992. 3.3 In so far as payment of Rs 12,800/- is concerned the same has been specifically denied by the defendant. The defendant has, as a matter of fact, claimed that inadvertently an entry equivalent to Rs 12,800/- was debited in the refund order account on 07.10.1992, whereas it had to be debited in the interest warrant account of the plaintiff. Therefore, on discovering the mistake, the defendant passed a contra-entry on 21.06.1993, thereby reversing the earlier entry. 3.4 As regards the plaintiff‟s demand of a sum of Rs 5,30,006/- conveyed through its communication dated 24.12.1990 (Ex. PW1/8) is concerned, the defendant took the stand that the reconciled statement of account as on 22.12.1990, sent by the plaintiff, was inaccurate. The defendant contends that as per its books on 22.12.1990, the balance in their refund account was Rs 8,18,518/-, and if the adjustments are made in respect of a sum of Rs 7,90,700/- and Rs 1,35,798/- which were payable by the plaintiff, it would show a debit balance of Rs. 1,07,980/-. The defendant claimed that, therefore, the figure of Rs 5,30,006/- demanded by the plaintiff on 24.12.1990 was not correct. The defendant further claims that on 07.01.1991, it advertently paid a sum of Rs 6.00 lacs to the plaintiff and hence, factually thereafter, there was no balance outstanding in favour of the plaintiff. 3.5 The defendant specifically denies the contents of the communication dated 05.01.1995 (Ex. PW1/11); in particular, it denies that on the said date there was a debit balance to the extent of Rs 2,62,262/- outstanding in favour of the plaintiff. The defendant claims that there was as a matter of fact a debit balance to the extent of Rs 6,758/-. The defendant further avers that since it continued to receive requests from various branches CS(OS) 1975/1997 Page 7 of 35 with regard to refund orders the balance increased to Rs 2,39,818/- and, accordingly, at the relevant date the demand was made with regard to short-funding to the tune of Rs 2,31,559/. 3.6 The defendant has also averred that even though it was not required to make payments with regard to refund orders pertaining to Bombay (now Mumbai)― only with a view to accommodate the request of the plaintiff made vide its letter of 10.09.1990, it made a payment to the extent of Rs 3,73,769/- through its branch at Fort Bombay (now Mumbai). 3.7 The receipt of communication dated 26.06.1995 (Ex. PW1/12) and 30.10.1995 (Ex. PW1/13) is specifically denied. 3.8 The defendant has also taken the stand that pursuant to the order of the Banking Ombudsman dated 08.08.1996, which was passed on the complaint of the plaintiff‟s sister concern T.T. Finance Pvt. Ltd., an undertaking was furnished on 28.01.1997 by the plaintiff, that not only would it pay the entire dues to the defendant in respect of the refund order account, but would also make efforts to reconcile the accounts. As a matter of fact it is stated that on 28.01.1997 an indemnity bond was furnished by the plaintiff‟s sister concern i.e., T.T. Finance Pvt. Ltd. in favour of the defendant. 3.9 On the issue of supply of information with regard to refund order account the defendant has averred that it has been always willing to provide the said information. The defendant while accepting the receipt of letter dated 05.02.1997 (Ex. PW1/14), denies the plaintiff‟s letter dated 07.02.1997 (Ex. PW1/16). The defendant also denies the analysis made by the share transfer agency, i.e., Allied Computers that the unclaimed refund orders were in the range of 5% of the total amount which different companies were called upon to refund. The defendant avers that a perusal of the data supplied by Allied Computers would itself show that the unclaimed refunds are at an average, in the range of 0.08% and, not 5% as stated in the body of the letter. 3.10 The defendant, therefore, took the stand that there being no cause for action, the plaintiff was not entitled to any of the reliefs as prayed for in the suit. 4. A specific objection is taken by the defendant with respect to deficit court fee and incorrect valuation of the suit. CS(OS) 1975/1997 Page 8 of 35 5. Based on the case set up by the plaintiff and the defendant the following issues were cast in the matter on 03.03.2004: (i) Whether the defendant is liable to render to the plaintiff statement of account in respect of the public issue refund orders handled by the defendant on the plaintiff along with list of unpaid instruments, computers floppies, spools paid instruments in original and copies of returns from each branch? (ii) Whether the defendant is liable to pay to the plaintiff the amount which may be found due to the plaintiff on rendition of refund order account by the defendant? (iii) Whether the plaintiff is entitled to a sum of Rs 1,03,30,000/- from the defendant in any event of failure of the defendant to render accounts? (iv) Whether an amount of Rs 5,73,072/- is due to the plaintiff from the defendant in addition to the amount which may be found due to the plaintiff on rendition of refund order account by the defendant. (v) Reliefs. Submissions of Counsels 6. The learned counsel for the plaintiff Mr Bansal based on the case set up in the plaint, submitted that: the defendant has received funds from plaintiff, admittedly to the tune of Rs 10.33 crores. The plaintiff had demanded the return of a sum of Rs 5,30,006/- vide its communication dated 24.12.1990 (Ex. PW1/8). The plaintiff had reiterated its demand vide a subsequent communication dated 05.01.1995 (Ex. PW1/11) and 30.10.1995 (Ex. PW1/13). He, however, conceded that the amount demanded by virtue of communication dated 05.01.1995 (Ex. PW1/11) and 30.10.1995 (Ex. PW1/13) was scaled down to Rs 2,62,262/-. In these circumstances, the learned counsel submitted that the plaintiff was entitled to the sum demanded by it along with interest (which, according to him, formed part of his relief for recovery in the sum of Rs 5,73,072/-). 6.1 On the issue of rendition of accounts, the learned counsel for the plaintiff submitted that the letter of its share transfer agent dated 05.02.1997 (Ex. PW1/14) would clearly demonstrate that, at an average, the unclaimed refund was to the extent of 5% of the total amount to be refunded. Therefore, on a rough and ready estimate, it was entitled to at least a sum of Rs 28,71,740/-; which was indicated by the plaintiff in its letter to the Banking CS(OS) 1975/1997 Page 9 of 35 Ombudsman dated 31.03.1997 (Ex. PW1/19); a copy of which was sent to the defendant. The learned submitted that on the said amount it was entitled to simple interest at the rate of 15% p.a. Therefore, the quantum of interest for the period 24.12.1990 to 31.03.1997, according to the counsel, worked to Rs 27,90,230/-. Thus, as on 31.03.1997 a sum of Rs 56,61,970/- being payable, was demanded under this head. 6.2 Mr Bansal also relied upon various communications issued on the aspect of reconciliation of the refund order account; most of which have been referred to by me, in the earlier part of my narration. However, Mr Bansal, chose to specifically refer to letters dated 05.01.1995 (Ex. PW1/11), 26.06.1995 (Ex. PW1/12), 30.10.1995 (Ex. PW1/13), 05.02.1997 (Ex. PW1/14), 06.02.1997 (Ex. PW1/15), 24.02.1997 (Ex. PW1/17), 24.02.1997 (Ex. PW1/17), 12.03.1997 (Ex. PW1/18) and 31.03.1997 (Ex. PW1/19). In this regard reference was also made to the legal notice dated 12.05.1997 (Ex. PW1/21). 6.3 Mr Bansal further contended that since all the refund orders, (which were uniformly dated 24.04.1990) carried a validity period of three months, they could not have paid by the defendant beyond 23.07.1990. In other words, the defendant was not entitled to refund money based on Refund orders after the expiry of the validity period. 7. Against this, the learned counsel for the defendant Mr Vachher made the following submissions: (i) The relief for recovery was barred by limitation. According to Mr Vachher, the cause of action, if any, would have arisen on 24.12.1990 when, a demand was raised on the defendant to pay a sum of Rs 5,30,006/- vide letter dated 24.12.1990 (Ex. PW1/8). To be noted, Mr Vachher being conscious of the fact that the defence of limitation was not taken in the written statement; submitted that though this defence had not been raised, the court was obliged to take cognizance of his submission in view of the mandate of Section 3 of the Limitation Act, 1963. For the said purpose he relied upon the following judgments: Noharlal Verma vs Distt. Cooperative Central Bank Ltd., Jagdalpur (2008) 14 SCC 445 and Gannamani Anasuya vs Parvatini Amarendra Chowdhary AIR 2007 SC 2380 CS(OS) 1975/1997 Page 10 of 35 (ii) Mr Vachher further contended that contrary to what had been argued by Mr Bansal that the plaintiff had to submit both paid and unpaid instrument, the obligation undertaken by the defendant was only with regard to reconciliation of paid instrument. For this purpose he relied upon the letter dated 17.04.1990 (Ex. PW1/5) issued by the defendant to the plaintiff by which the defendant had accepted the terms of appointment as the Refund Banker, under the aegis of BCCI. (iii) It was next contended by Mr Vachher that even though the plaintiff claimed recovery of a sum of Rs 5,70,372/-; the claim was not proved. He submitted that neither book of accounts nor any primary document evidencing the fact that the defendant was liable to pay the said amount had been produced as evidence. The testimony of the witnesses alone unsubstantiated by a paper trail, it was submitted by the learned counsel, did not establish the liability of the defendant to pay the said amount. (iv) It was also contended by the learned counsel that in so far as claim for unpaid refund orders was concerned, it was based on the analysis of Allied Computers; which was flawed. A bare perusal of the said letter dated 05.02.1997 (Ex. PW1/14) would show that the unclaimed refund orders even as per the data supplied by Allied Computers ranged between 0.05% to 0.08% and not 5% as contended by the plaintiff. Mr Vachher, however, conceded that even though there was short-funding by the plaintiff which was communicated by the defendant to the plaintiff vide letter dated 26.09.1994 (Ex. PW1/10), and by virtue of reply dated 27.05.1997 (Ex. PW1/22) to the legal notice, the defendant had not filed any claim in that regard. Mr Vachher, further conceded that except for the legal notice none of the letters had been replied by the defendant. (v) It was also the contention of Mr Vachher that in so far as the relief for rendition of accounts was concerned it was incorrectly valued by the plaintiff. It was his contention that in a suit for rendition of accounts the valuation for the purposes of jurisdiction and court fee had to be identical. In the instant case it was submitted, the plaintiff had done the contrary, and therefore, the suit would have to be dismissed on this short ground alone. Mr Vachher in support of this contention drew my attention to paragraph 28(d) of the plaint CS(OS) 1975/1997 Page 11 of 35 wherein, the relief for rendition of accounts for the purposes of court fee was valued at Rs 2,50,000/- and a court fee of Rs 4784/- had been affixed by the plaintiff, whereas for the purposes of jurisdiction this very relief was valued at Rs 1,03,30,000.00. The plaintiff, according to Mr Vachher, should have affixed a court fee on a valuation of Rs 1,03,30,000/-. In support of his submission the learned counsel relied upon the judgment of Division Bench of this Court in Maiden Pharmaceuticals Ltd vs Wockhardt Ltd 157 (2009) DLT 65. (vi) On merits, with regard to the issue of rendition of accounts, the learned counsel relied upon the statement of Mr Sunil Kumar Meena (DW1). It was the learned counsel‟s submission that the said witness has proved the statement of account (Ex. DW1/1). It was contended that no question was put to the witness that this statement of account, as produced, was not correct. The learned counsel submitted that in view of Section 4 of the Bankers Book Evidence Act, 1891 the account of the defendant had to be taken as true unless contrary was proved. Reliance in this was placed on the following judgments: Union Bank of India vs M/s Noor Dairy Farm & Ors. 1 (1998) B.C. 691 at page 697 – 698 paragraph 11 and Kalipada Sinha vs Mahaluxmi Bank Ltd AIR 1961 Cal. 191 at page 192 paragraph 3. Mr Vachher further relied upon Exhibit DW1/2 (i.e., the statement of account) to show that there were endorsements on the said document which demonstrated that the information with regard to paid refund orders was received by the plaintiff. In this regard reliance was also placed on the evidence of Mr Rameshwar Singh (PW5) who had stated in his cross-examination that the paid instruments were “received”; though he went on to say that they were not complete. The contradiction in the testimony was sought to be demonstrated by relying upon the examination-in-chief of Rikhab Chand Jain (PW1), who stated that the instruments were not received, and that he was unable to identify the signatures of the recipients.