R.S.A.No. 1811 of 2007 (O&M) 1 In the High Court of Punjab and Haryana at Chandigarh R.S.A.No. 1811 of 2007 (O&M) Date of decision: 11.11.2009 The Punjab Urban Planning and Development Authority ......Appellant Versus ABN-AMRO Bank .......Respondent CORAM: HON'BLE MRS. JUSTICE SABINA Present: Mr. A.K.Chopra, Sr.Advocate with Ms.Shilpa Malhotra, Advocate, for the appellant. Mr.R.S.Rai, Sr.Advocate, with Mr.Gautam Dutt, Advocate, for the respondent. **** SABINA, J. Plaintiff -appellant filed a suit for recovery of Rs.65,58,981/- with future interest @ 17% and for declaration. The suit of the plaintiff was decreed by the Civil Judge (Jr.Divn.), Chandigarh vide judgment and decree dated 3.10.2001. In appeal, the said judgment and decree were set aside by the Additional District Judge, Chandigarh vide judgment and decree dated R.S.A.No. 1811 of 2007 (O&M) 2 10.1.2007 and the suit of the plaintiff was dismissed. Hence, the present appeal by the plaintiff. Brief facts of the case, as noticed by the lower appellate Court in para Nos. 2 to 4 of its judgment, are as under:- “2. Tersely put, the plaintiff/respondent filed the suit for recovery of Rs.65,58,981/- with future interest @ 18% and for declaration against the appellant on the averments that the Erstwhile Department, the Punjab Housing Development Board, a Department of Government of Punjab paid the appellant bank a sum of Rs.10 crores under cover of a letter dated 28.2.1992. It is averred that the agreement/waiver dated 7.7.1993 between the plaintiff and defendant is hit under Section 13 to 19-A of the Contract Act and is not binding on the plaintiff. An amount of Rs.10 crores was lying in various banks belonging to the board earning his nominal interest and hence the board in its meeting decided to invest an amount of Rs.10 crores in some government Securities in order to earn more interest and hence the board in its meeting decided to invest an amount of Rs.10 crores in some Government Securities in order to earn more interest. The defendant vide their letter dated 24.2.1992 approached the board with lucrative terms. The bank, vide their letter dated 26.2.1992 confirmed the terms and R.S.A.No. 1811 of 2007 (O&M) 3 conditions of the board for investment of payment as conveyed vide letter dated 25.2.1992, except that the locking period would be 180 days. Consequently, the plaintiff vide its letter dated 28.2.1992 invested Rs.10 crores on the terms and conditions contained in the letter dated 25.2.1992. The said amount was withdrawn from the various banks of the board and passed on to the defendant bank for 180 days only. Vide letter dated 12.3.1992, the defendant informed the plaintiff that they had purchased on behalf of plaintiff 17% NPC bonds at the base rate of Rs.97/- per bond for an amount of Rs.9,75,58,904.11 paise. It was also intimated that balance of Rs.24,41,095.89 paise could not be invested and hence he has put into 46 days fixed deposit carrying 11% interest. Plaintiff vide letter dated 9.4.1992 demanded return of the amount of Rs.24,41,095.89 paise which had been invested by the defendant against the instructions @ 17% interest. On 8.5.1992, the defendant was remained for return of 17% interest. The defendant was also requested to confirm of purchase of NPC bonds @ 17% and send complete details of the NPC bonds alongwith date of maturity. The defendant vide their letter dated 12.5.1992 returned the balance amount of Rs.24,76,982.75 paise with interest of 11%. However, an R.S.A.No. 1811 of 2007 (O&M) 4 amount of Rs.11,167.50 paise was deducted as tax and Rs.1500/- was deducted as draft charges which amount to the breach of terms. It is further averred that the defendant intentionally and fraudulently concealed the rate of interest payable on the bonds. The defendant had never been instructed in any manner by the board to invest in any of the securities carrying less tan 17% return. The plaintiff had been writing letters to the defendant on various occasions to depict the correct picture, however, the plaintiff received letter dated 28.8.1992 from the defendant vide which the defendant for the first time disclosed that IRFC bonds carried 9% interest which as a shock to the plaintiff and the same was protested. The plaintiff had issued registered letter dated 13.11.1992 demanding photocopies of the securities of the bonds so far purchased by the defendant. Also vide letter dated 25.11.1992 against initiated the defendant and demanded the deduction made from the interest as security etc. so keeping in view the conduct of the defendant, the defendant finally on 9.2.1993, called back the entire amount along with interest immediately but the defendant did not respond to the letter of the plaintiff dated 9.2.1993. The registered letter dated 10.3.1993 was again sent to the defendant R.S.A.No. 1811 of 2007 (O&M) 5 calling back to the entire loan with interest. Despite various letters, the defendant kept quite and ultimately a registered letter dated 26.4.1993 was again sent and the plaintiff realized from the conduct of the defendant that the entire principle and interest seems to be unsafe and started contacting defendant personally. The plaintiff apprehended a risk of the entire amount and defendant wanted to make a profit in the compelling circumstances, dictated its terms such as issue of waiver, full and final agreement before release of the entire amount. Under the said circumstances, the plaintiff had to agree to save the investment, though the plaintiff was not willing to forgo him claim and consent of the plaintiff was obtained under coercion, fraud, misrepresentation and under compelling circumstances. Consequently, it is prayed that an amount of Rs.42,31,450/- was due as principle from the date of payment made by the defendant and Rs.23,27,530/- were due as interest @ 17% on the balance of the principle amount and further interest @ 17% on the said amount as the defendant was utilizing the said amount for commercial purposes from the date of filing of present suit till the date of realization and prayer for recovery of total amount to the tune of Rs.65,58,980/- has thus been made. R.S.A.No. 1811 of 2007 (O&M) 6 3. Upon notice, the bank has come forward with the plea that the board had paid the bank a sum of Rs.10 crores in terms of various instalments, sent under cover of a letter dated 28.2.1992 on the conditions as follows:- a) The funds will be kept by the bank or invested in Government Securities/Unit Trust of India and tax free public sector undertaking bonds; b) The investment would be for 180 days and the bank would guarantee return of 17% on the investment for that period; c) If required by the board, the money could be made available to the board earlier with whatever return becomes due on deposits at that time. 4. It is also asserted that at the request of the board, the bank with a view to purchase 17% NPC bonds @ Rs.97/- per bond for the benefit of the board made payment of Rs.9,75,58,904.11 paise by bank which favour Andhra Bank through M/s Naresh K.Aggarwala and Co., its share brokers and the balance sum of Rs.24,41,095.89 paise in deposit for the board pending its instructions. However, the bank did not receive the 17% R.S.A.No. 1811 of 2007 (O&M) 7 NPC bond either from the Andhra Bank or from M/s Naresh K.Aggarwal & Co. who instead delivered by way of alternative security to the bank 9% tax free IRFC bonds covered by a letter of allotment no.016 and a transfer deed signed by Karur Vyasa Bank Limited, the registered holder of the said IRFC bond. The IRFC bonds were presented by the bank to the IRFC for registration in the name of the bank for the benefit of the board but before the IRFC bonds could be registered in the name of the bank mentioned above, the Standard Chartered Bank also lodged a claim on these bonds on the ground that they had been purchased by it from Karur Vyasa Bank Limited against an existing transaction. Thereafter, the Standard Chartered Bank instituted a suit in the Bombay High Court inter alia against the bank and IRFC for an injunction restraining the registration or transfer of the IRFC bonds to the bank. The appellant bank has also instituted rectification proceedings against IRFC before the Company Law Bord for the registration of the IRFC bond. The bank had also instituted other legal proceedings against the Andhra Bank for refund of the money paid to it, interest and other reliefs. At the request of the Board on or about 12.5.1992, appellant bank returned to the Punjab Housing Development Board R.S.A.No. 1811 of 2007 (O&M) 8 (respondent predecessor in interest) a sum of Rs.24,76,982.75 paise inclusive of interest after requisite deductions. It is further asserted that on or about 9.9.1992, the bank paid the Punjab Housing Development Board a sum of Rs.82,92,507/- as and by way of guaranteed return on the investment @ 17% p.a. on the investment of Rs.9,75,58,904.11 paise in the said IRFC bonds. The 180 days investment expired on or about September 3, 1992. The board requested that the said investment be continued for a further 6 months upto March 3, 1993 in the same securities (i.e. the said IRFC bonds). The Board, thereafter, on expiry of the extended 6 months period of investment demanded repayment of the balance Rs.9,75,58,904.11 paise and interest thereon and stated that the Board was not interested in the said IRFC bonds or in any litigation relative thereto or in assuming any risk with respect thereto, and that it was only willing to accept one time payment in full and final settlement of its claims with respect to the said investment. Pursuant thereto, various negotiations were held between the senior officials of the appellant bank and the board and it was agreed that the appellant bank would pay a further sum of Rs.10,77,82,542.11 paise in additional to the sums already paid (making a total payment of Rs.11,85,64,699.36 paise) i.e. Rs. 10,77,82,542.11 paise + Rs.24,76,982.75 paise + Rs.11,167.50 paise + Rs.1,500/- + R.S.A.No. 1811 of 2007 (O&M) 9 Rs.82,92,507/-) by the bank to the board in full and final settlement of the board's claim against the bank. This culminated in a settlement as recorded in a letter dated July 7, 1993 addressed by the Board to the bank. It is further submitted that against and pursuant to delivery to the bank of the board's aforesaid letter dated 7.7.1993 and another letter of the same date instructing the bank to make payment by banker's cheque drawn in favour of the “Corporation Bank, A/c Punjab Housing Development Board, Chandigarh” and on the basis of the representations therein, the appellant paid the board a sum of Rs. 10,77,82,542.11 paise by way of banker's cheque drawn in favour of the “Corporation Bank, A/c Punjab Housing Development Board, Chandigarh” in full and final settlement of all claims of the board in respect of or arising out of or in connection with the said investment. All other allegations and assertions put forth by the board have specifically been denied and prayer for dismissal of the claim of the plaintiff has, thus, been made.” On the pleadings of the parties, following issues were framed by the trial Court:- 1. Whether the plaintiff is entitled for recovery of Rs.65,58,981/- from the defendant along with interest, if so at what rate? OPP R.S.A.No. 1811 of 2007 (O&M) 10 2. Whether the plaintiff is entitled for the declaration that agreement/waiver letter dated 7.7.1993 between the parties is hit by the Sections 13 to 18 and 19-A of the Contract Act? OPP 3. Whether the suit of the plaintiff is maintainable? OPP 4. Whether the suit has been instituted by a competent person? OPP 5. Whether the plaint has been verified in accordance with law? OPP 6. Whether this Court has territorial jurisdiction to try and entertain the suit? OPP 7. Whether the suit is barred by the principle of estoppel? OPP 8. Whether the suit is filed beyond the period of limitation? OPD 9. Relief. After hearing learned senior counsel for the parties, I am of the opinion that the present appeal deserves to be dismissed. The plaintiff-Board had agreed to invest a sum of Rupees Ten Crores in Government securities with the bank. The said amount was invested by the bank on behalf of the Board. As per letter Ex.P-5, an amount of Rs.9,75,58,904.11 (Rupees nine crores seventy five lakhs fifty eight thousand nine hundred four and paise R.S.A.No. 1811 of 2007 (O&M) 11 eleven only) was invested by the bank by purchasing 17% NPC bonds at a base rate of Rs.97/- per bond. The amount of Rs.24,41,095.89 P. was invested in FDR. However, the Board was given the liberty to withdraw the said amount invested in the FDR. Vide Ex.P-6, it was intimated to the Board that, in fact, the bonds had been purchased on behalf of the Board i.e. Indian Railway Finance Corporation Bonds instead of NPC bonds. A dispute arose between the parties and ultimately after a lot of negotiations, a settlement took place between the parties. Ex.P-27, whereby the plaintiff-Board had accepted Rs.10,77,82,542.11 P. in full and final settlement of all claims reads as under:- 1. Whereas the Punjab Housing Development Board (hereinafter called the 'Board') had public funds amounting to Rs.10,00,00,000/- (Rupees ten crores only) available for a short term investment, the Board paid the said amount to ABN AMRO Bank (hereinafter called the 'Bank') for investment in Government securities insuring a return of at least 17% p.a. 2. And whereas at the request of the Board, the Bank with a view to purchase 17% (seventeen percent) NPC Bonds at the rate of Rs.97/- (Rupees ninety seven only) per bond for the benefit of the Board made payment of Rs.9,75,58,904.11 (Rupees nine R.S.A.No. 1811 of 2007 (O&M) 12 crores seventy five lakhs fifty eight thousand nine hundred four and paise eleven only) by Banker's cheque favouring Andhra Bank through M/s Naresh K.Aggarwala and Company, its share brokers, and returned the Board the balance sum of Rs.24,41,095.89. 3. And whereas the Bank did not receive the 17% NPC Bonds either from Andhra Bank or the said M/s N.K. Aggarwala & Co. who instead delivered by way of alternate security to the Bank 9% (nine percent) tax free IRFC (Indian Railway Finance Corporation) Bonds covered by a letter of Allotment No. 016 and a Transfer Deed signed in blank by Karur Vyasa Bank, the registered holder of the said IRFC Bonds (hereinafter called the 'IRFC Bonds') 4. And whereas the IRFC Bonds were presented by the Bank to the IRFC ( Indian Railway Finance Corporation) for registration in the name of the Bank for the benefit of the Board, but before the IRFC Bonds could be registered in the name of the Bank as aforesaid, the Standard Chartered Bank also lodged a claim on these bonds on the ground that they had been purchased by it from Karur Vyasa Bank against an existing transaction. R.S.A.No. 1811 of 2007 (O&M) 13 5. And whereas, as stated by the Bank, the Standard Chartered Bank thereafter filed a suit in the Bombay High Court inter alia against the Bank and IRFC for an injunction restraining the registration or the transfer of the IRFC Bonds to the Bank. 6. And whereas the Bank has also instituted rectification proceedings agaisnt IRFC before the Company Law Board for the registration of the IRFC Bonds. 7. And whereas legal proceedings are bound to involve substantial time and the Board is in immediate need of the aforementioned Public Funds for the execution of its various schemes, and is consequently, desirous of entering into some arrangements with the bank by which it could get the immediate return of its capital employed in the purchase of the IRFC Bonds together with such reasonable return as the circumstances permit. 8. And whereas there have consequently been protracted negotiations between the Bank and the Board resultant upon which it has been agreed that the Bank would immediately return the principal amounting to Rs.9,75,58,904.11 to the Board. The interest would be calculated at the rate of 17% p.a. For the first six R.S.A.No. 1811 of 2007 (O&M) 14 months upto 3rd September 1992, which amounts to Rs.82,92,507/- (which has already been received by us) and for the balance period i.e. 4th September 1992 till date of payment of the principal amount, interest would be paid at the rate payable on fixed deposits of this length of time, which, calculated at the rate of 12% per annum comes to Rs. 1.02,23,638/-. Also in case and as and when the IRFC Bonds are transferred in the name of the Bank or Andhra Bank returns the moneys due to the Bank together with interest, the Bank would additionally make a payment of the interest differential between the rate of 17% p.a. and the fixed deposit rate for the balance period i.e. 12 ½% p.a. amounting to Rs.36,80,510/-. Interest on this differential amount of Rs.36,80,510/- would be paid to us by the Bank at the rate applicable to fixed deposits of the period for which the amount is retained by the Bank, in accordance with the provisions of this para, indicated above, provided the Bank also likewise receive interest on its interest claims. That subject to the provisions of this paragraph as indicated above, the Board would accept payment as above in full and final settlement of its claims arising out of or in connection with the said investment, R.S.A.No. 1811 of 2007 (O&M) 15 and for which the Board would furnish the Bank a disclaimer and waiver as hereinafter appearing. That the Bank, shall from time to time, and not atleast less than once in a month, intimate the position and progress made in the matter of settlement of claims arising out of the purchase of these IRFC Bonds. 9. And whereas pursuant to the said settlement, the Bank has paid to the Boards a sum of Rs.10,77,82,542.11 (Rupees ten crores seventy seven lakhs eighty two thousand five hundred forty two and paise eleven only) in full and final settlement of the Board's claims against the Bank arising out of or in connection with the said investment (the receipt of which in full and final settlement, as aforesaid, the Board hereby admits and acknowledges) and consequently the Board is executing the discharge and waiver as hereinafter appearing. 10. Now, therefore, we the Punjab Housing Development Board acting through the Housing Commissioner, Punjab Housing Development Board do hereby accept the said sum of Rs.10,77,82,542.11 (Rupees ten crores seventy seven lakhs eighty two thousand five hundred forty two and paise eleven only) in full and final settlement of all claims of the Punjab R.S.A.No. 1811 of 2007 (O&M) 16 Housing Development Board in respect of or arising out of or in connection with the said investment of Rs.9,75,58,904.11 (Rupees nine crores seventy five lakhs fifty eight thousand nine hundred four and paise eleven only) on behalf of the Board and do confirm and declare that the Bank shall be entitled at its discretion to demand, sue for, enforce, settle compromise or otherwise howsoever deal with any and all matters arising out of or concerning the same without any right in the Board in respect of the usufructs, proceeds or benefits of such demand, suit enforcement, settlement, compromise or other dealing(s) and the Board hereby disclaims, waives and relinquishes in favour of the Bank any and all rights and claims whatsoever that it may have with respect thereto.” Thus, the parties, after negotiations, had arrived at a compromise and the plaintiff-Board had accepted Rs. 10,77,82,542.11 P. in full and final settlement of all the claims. The case of the plaintiff-Board is that it had not signed the settlement of free will. The settlement had been arrived due to coercion and compelling circumstances. However, the said plea of the plaintiff- Board was rightly rejected by the learned Additional District Judge as the parties had arrived at a compromise after negotiations. There was no question of fraud, coercion or undue influence having been R.S.A.No. 1811 of 2007 (O&M) 17 exercised by the bank on the plaintiff-Board. The plaintiff-Board failed to establish as to what fraud or mis-representation had been effected on them which induced them to sign the agreement. Senior officials of the Board had participated in the negotiations and accepted the conditions of the settlement. Learned Additional District Judge, thus, rightly dismissed the suit of the plaintiff-Board for recovery. No substantial question of law arises in this regular second appeal. Accordingly, the same is dismissed. (SABINA) JUDGE November 11, 2009 anita