SCA/183420/2008 1/10 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 1834 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE JAYANT PATEL ========================================================= 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 ? ========================================================= JAY YASHWANT DESAI & 1 - Petitioner(s) Versus INDUSTRIAL DEVELOPMENT BANK OF INDIA & 2 - Respondent(s) ========================================================= Appearance : MR JT TRIVEDI for Petitioner(s) : 1 - 2. MR INDRAVADAN PARMAR for Respondent(s) : 1 - 3. ========================================================= CORAM : HONOURABLE MR.JUSTICE JAYANT PATEL Date : 21/07/2008 ORAL JUDGMENT 1. Rule. Mr.Parmar, learned Counsel waives service of notice of Rule on behalf of all the SCA/183420/2008 2/10 JUDGMENT respondents. With the consent of the learned Counsel appearing for both the sides, the matter is finally heard. 2. The short facts of the case appears to be that the petitioner invested an amount of Rs.2,700/- in Deep Discount Bond (Series I) floated by the respondent No.1 Bank. Respondent No.1 Bank is a Government of India undertaking established under the Industrial Development Bank of India Act, 1964 and is a 'State' within the meaning of Article 12 of the Constitution of India. It appears that as per the offer document when the bonds were floated, it, inter alia, provided for option of redemption by the Bank as well as by the bond-holder. The petitioner applied for the bond and bond was issued in favour of the petitioner. A copy of the bond certificate is produced at Annexure 'A'. By condition No.1, exercise of option for redemption is mentioned at the instance of the bond-holder. It appears that as per the respondent Bank, it had taken decision for redemption of all the bonds as per the offer documents and paper advertisement was SCA/183420/2008 3/10 JUDGMENT also issued. As per the decision of the respondent Bank, the options were made available to the bond-holder to get back the amount with accrued interest or in alternative, reinvestment of the amount in Suvidha Fixed Deposit Scheme, which provided for the interest at the rate of 9% for 12 months and for 60 months, the interest is at the rate of 10%. It is the case of the respondent Bank that by UPC the intimation was given to the petitioner, but neither the option certificates were tendered for encashment of the amount accrued, nor any option for reinvestment was exercised and, therefore, the money had remained as it is with the respondent Bank. The petitioner intimated the respondent Bank for reinvestment by exercising the option, but the respondent Bank vide letter dated 12.12.2007 intimated the petitioner to get back the amount due on the bond by surrendering the bond. However, in the said letter, it is mentioned that the interest could not be payable after 31.3.2002. It is under these circumstances that the petitioner has approached this Court by the SCA/183420/2008 4/10 JUDGMENT present petition. 3. Heard Mr.Trivedi, learned Counsel appearing for the petitioner and Mr.Parmar, learned Counsel appearing for the respondents. 4. Mr.Trivedi, learned Counsel at the outset submitted that though the action of the respondent Bank was unilateral for redemption of the bonds, which was not incorporated in the bond certificate, he is not pressing the relief qua declaration of the exercise for redemption by respondent Bank is void and he only presses the petition for the second prayer, which is prayed by way of an alternative prayer at para 7(B) for permitting the reinvestment in Sividha Fixed Deposit Scheme and the payment of interest due thereon. 5. The contention on behalf of the petitioner is that he has not received the intimation for redemption of the bond and, therefore, he could not opt for switching over to the option for reinvestment in Suvidha Fixed Deposit Scheme, nor he could encash the amount due on the bond. 6. Whereas, on behalf of the respondent Bank, the SCA/183420/2008 5/10 JUDGMENT contention is that the intimation was given to all the bond-holders and it was sent in due course, however, it was required for the petitioner to opt for the option in either way for getting back the amount with interest or in alternative, the reinvestment. As nothing was done, the matter has remained as it is, but the submission on behalf of the respondent Bank is that as the option was not exercised well in time, such may not be permitted for switch over to the investment under Suvidha Fixed Deposit Scheme, nor the interest can be paid to the petitioner, since no option was exercised and the money was not invested in Suvidha Fixed Deposit Scheme. 7. Mr.Trivedi, learned Counsel appearing for the petitioner, submitted that, in any case, the petitioner would be entitled for the interest by way of compensatory measure, since the money is retained by respondent Bank and, therefore, this Court may direct for payment of interest. 8. Mr.Parmar, learned Counsel appearing for the respondent Bank, submitted that it is not by way SCA/183420/2008 6/10 JUDGMENT of a voluntary transaction or under the contract the money was retained. Therefore, the interest can not be paid. If it is ordered to be paid, it would result into extension of the contractual relationship, which this Court may not order and, therefore, the interest even by way of compensatory measure may not be ordered to be paid. 9. It does appear that the Scheme of the bond provided for enabling power of redemption with the respondent Bank. However, it was required for the respondent Bank to ensure that the money is refunded, if second option is not exercised for switching over to investment under Suvidha Fixed Deposit Scheme. It is true that for encashment of the bond, it was required for the bond-holder to surrender the bond, but contingency may apply if after intimation having received the bond-holder has not surrendered the bond. The case of the petitioner is that he has not received intimation at all, whereas it is the case of the respondent Bank that the intimation has been sent by UPC in routine SCA/183420/2008 7/10 JUDGMENT course to all bond-holders. 10.In a matter of termination of the contract by exercising the option, it appears that the intimation to the bond-holder by UPC may not be sufficient. Had the intimation reached the bond-holder and the bond-holder has acted upon the same, it may stand on a different footing, but in a case where the Bank has opted to redeem the bond, it would be required for the Bank to ensure that the intimation for redemption is received by the bond-holder. No such material is available on record showing the proof that such intimation was received by the bond-holder. 11.Apart from the above, the fact remains that the money of bond with the accrued interest on the date of redemption i.e. 31.3.2002 has not been disbursed by the respondent Bank and has been retained by the respondent Bank. Under such circumstances, even if the switching over of the investment to Suvidha Fixed Deposit Scheme, may not be directed by this Court in absence of any written communication on the part of the bond- holder to the respondent Bank, it would be SCA/183420/2008 8/10 JUDGMENT required for the respondent Bank to pay Bank rate interest to the bond-holder by way of a compensatory measure. Had the money been already forwarded by the respondent Bank to the bond-holder and the bond-holder having not accepted the same, it may stand on a different consideration. But in cases, where on the ground of intimation having not received, the money is retained by the respondent Bank, it would be required for the respondent Bank to pay the accrued interest as per the Bank rate prevailing from time to time. Further, it appears that Suvidha Fixed Deposit Scheme is by the Bank itself and the interest rate is 9% for 12 months, 9.25% for 24 months and for 60 months, it is 10% per annum. 12.Therefore, if the interest is considered at the rate prevailing in Suvidha Fixed Deposit Scheme, it would be higher, but as the money was retained by the Bank, the interest as prevailing with the other Nationalized Banks can be paid by the respondent Bank to the petitioner and such rate can be 8% per annum on the fixed deposit SCA/183420/2008 9/10 JUDGMENT with the Nationalized Banks for the period exceeding 12 months. 13.It is hardly required to be stated that the respondent Bank is a 'State' within the meaning of Article 12 of the constitution of India and its action has to be just, fair and reasonable even in the contractual obligations. If the money was invested in the Deep Discount Bond and had the interest accrued in normal course, it would have been much higher. Further had the reinvestment option been exercised by the bond- holder, the interest accrued also would have been much higher. As against the same, if the Bank rate interest is paid by the respondent Bank to the petitioner, the same would be just and reasonable, keeping in view the principles of compensatory measure by balancing rights of both the sides. 14.In view of the above, the prayer of the petitioner for directing the respondent Bank to switch over the investment to Suvidha Fixed Deposit Scheme is not granted, however, it is directed that upon the petitioner surrendering SCA/183420/2008 10/10 JUDGMENT the bond to the Bank within one month from today, the respondent Bank shall refund the amount of the bond as it became due on 31.3.2002 with the interest at the rate of 8% per annum until the actual payment is made. The aforesaid payment shall be disbursed by the respondent Bank within one month from the date of surrendering of the bond by the petitioner. 15.The petition is partly allowed to the aforesaid extent. Rule made absolute accordingly. No order as to costs. Direct service is permitted. 21.7.2008 (Jayant Patel, J.) vinod