UNREPORTED UNREPORTED UNREPORTED IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO.721 OF 2003 NO.721 OF 2003 NO.721 OF 2003 IN IN IN SUIT NO.715 OF 1992 SUIT NO.715 OF 1992 SUIT NO.715 OF 1992 Chandrakant Vadilal Shah, Adult, ) Indian Inhabitant, residing at ) Paradise Apartments, A-2, Near ) Vishnu Baug, Behind Amber Oscar )..Appellant/ Cinema, S.V. Road, Andheri (West), ) original Bombay - 400 058. ) deft. No.2. V/s. 1) Vinodkumar Chunilal Shah, Aged ) 57 years, Indian Inhabitant, ) residing at Gautam Gyan building, ) "C" Wing, Flat No.37, 2nd floor, ) Near Damodar Wadi, Ashok ) Chakravarti Road, Kandivli(West), ) Bombay - 400 101. ) ) ) 2) Vijaya Bank, a Nationalised ) Bank, having its registered ) office at 14, M.G. Road, ) Bangalore - 560 001 and its ) Zonal office at S.V. Road, ) Santacruz (West), Bombay-400 056 ) and its Bank branch at 1-B, Alka ) chambers, S.V. Road, Andheri ) (West), Bombay - 400 058. ) ) ) 3) Sheela Chandrakant Shah, Adult, )..Respondents/ Indian Inhabitant, residing at ) (No.1 - orig. Paradise Apartments A-2, Near ) plaintiff; Vishnu Baug, Behind Amber Oscar ) Nos.2 & 3 Cinema, S.V. Road, Andheri ) orig. defts. (West),Bombay - 400 058. ) No.1 & 3). Mr.H.J. Thakkar, senior Advocate i/b. Ms. Jyotsna N Pandhi for appellant. Mr.V.C. Shah, respondent No.1 in person. Mr.Umesh Shetty, advocate for respondent No.2. WITH WITH WITH APPEAL APPEAL APPEAL NO.58 OF 2004 NO.58 OF 2004 NO.58 OF 2004 IN IN IN SUIT NO.715 OF 1992 SUIT NO.715 OF 1992 SUIT NO.715 OF 1992 Vijaya Bank, a Nationalised ) Bank, having its registered ) office at 14, M.G. Road, ) Bangalore - 560 001 and its ) Zonal office at S.V. Road, ) Santacruz (West), Bombay-400 056 ) and its Bank branch at 1-B, Alka ) chambers, S.V. Road, Andheri ) (West), Bombay - 400 058. )..Appellant/ ) original ) deft.No.1. V/s. 1) Vinodkumar Chunilal Shah, Aged ) 55 years, Indian Inhabitant, ) residing at Gautam Gyan building, ) "C" Wing, Flat No.37, 2nd floor, ) Near Damodar Wadi, Ashok ) Chakravarti Road, Kandivli(West), ) Bombay - 400 101. ) ) 2) Chandrakant Vadilal Shah, ) ) 3) Sheela Chandrakant Shah, ) ..Respondents/ Nos. 2 & 3 adults, Indian ) (No.1 - orig Rehabitants, residing at ) plaintiff Paradise Apartments A-2, Near ) Nos.2 & 3 Vishnu Baug, Behind Amber Oscar ) original Cinema, S.V. Road, Andheri ) defendants. (West),Bombay - 400 058. ) Mr. Umesh Shetty, Advocate for appellant. Mr. V.C. Shah, respondent No.1 in person. Mr.H.J. Thakkar, senior Advocate i/b. Ms. Jyotsna N. Pandhi for respondent No.2. CORAM : R.M.LODHA AND CORAM : R.M.LODHA AND CORAM : R.M.LODHA AND J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. -= : 3 "=- JUDGMENT RESERVED ON 9TH SEPTEMBER, 2004 JUDGMENT RESERVED ON 9TH SEPTEMBER, 2004 JUDGMENT RESERVED ON 9TH SEPTEMBER, 2004 JUDGMENT PRONOUNCED ON 16TH SEPTEMBER,2004 JUDGMENT PRONOUNCED ON 16TH SEPTEMBER,2004 JUDGMENT PRONOUNCED ON 16TH SEPTEMBER,2004 JUDGMENT (PER J.P. DEVADHAR, J.) JUDGMENT (PER J.P. DEVADHAR, J.) JUDGMENT (PER J.P. DEVADHAR, J.) 1. In these two appeals the Judgment and order passed in Suit No.715 of 1992 is challenged wherein the learned Single Judge has decreed the suit and held that both the appellants who were defendants in the suit are jointly and severally liable to pay to the plaintiff an amount of Rs.2,96,000/- with interest thereon at the rate of 15% per annum from the date of the cheque till realisation of the decretal amount and Rs.25,000/- towards damages and costs of the suit. As the issues raised in these two appeals are interlinked and arise from a common Judgment, both these appeals are heard together and disposed of by this common Judgment. 2. Brief facts relevant for these appeals are that Mr.Vinodkumar C.Shah, the respondent No.1 in both these appeals (hereinafter referred to as ‘the plaintiff’) carrying on business in the name of Kirtivardhika Corporation had filed the above suit bearing No.715 of 1992 in this court against Chandrakant V. Shah, the appellant in Appeal No.721 of 2003 (hereinafter referred to as ‘the defendant No.2’) as well as Vijaya Bank, Andheri (W) Branch, Mumbai who is the appellant in Appeal No.58 of 2004 (hereinafter -= : 4 "=- referred to as ‘the defendant No.1’) and the respondent No.3 (hereinafter referred to as ‘the defendant No.3’) for recovery of a sum of Rs.4,84,110/- with interest or damages at the rate of 21% per annum on Rs.2,97,000/- from the date of the filing of the suit till realisation and Rs.50,000/- as special damages. The defendant No.3 is the wife of defendant No.2. The plaintiff and defendant No.2 are related as the wives of plaintiff and defendant No.2 are sisters. By the impugned Judgment, the suit has been decreed by the learned Single Judge only against the defendant Nos.1 & 2 and the suit against the defendant No.3 has been dismissed. 3. Till 1971 the plaintiff was serving as a Manager in the State Bank of Saurashtra. In the year 1971 the plaintiff took voluntarily retirement from service. Thereafter, for some time, the plaintiff was working as Managing Director of a private limited company at Bhavanagar. Some time in the year 1980 the plaintiff left the said company at Bhavnagar and shifted and settled down at Bombay. It is the case of the plaintiff that during the period from 1980 to 1986 the plaintiff was acting as a consultant and adviser to the defendant Nos.2 & 3 who were carrying on the business in the name of Mahalaxmi Dyes and Chemicals -= : 5 "=- (‘MDC’ for short) and also in the name of Chittal Chemicals. In addition to the above Consultancy Services the plaintiff was also carrying on business in chemicals in the name of ‘Kirtivardhika Corporation’. The plaintiff had also business relations with the defendant Nos. 2 & 3. 4. It is the case of the plaintiff that he had given a personal loan of Rs.1 lakh to the defendant No. 3 by cheque on 31/5/1983 and loan of Rs.1.79 lakhs to the defendant Nos.2 & 3 on account of MDC by cheque dated 8/9/1985. Both these amounts were repaid by defendant Nos.2 & 3. Similarly, on 8th July, 1986 he had advanced a loan of Rs.2,96,817/- to the defendant Nos.2 & 3 on account of Chittal Chemicals and the said loan was sought to be repaid by the defendant Nos.2 & 3 from the account of MDC on 9/4/1987 vide cheque No.831301 dated 7/4/1987 for Rs.2,96,817/- which is the subject matter of the dispute in these proceedings.. The plaintiff as well as the defendant Nos.2 & 3 had bank account with the defendant No.1 bank at the Andheri (West) branch. On 9/4/1987 the said cheque for Rs.2,96,317/- was deposited by the plaintiff in the above branch of defendant No.1 for collection and credit to the account of Kirtivardhika Corporation. It is the case of the plaintiff that the defendant No.1 -= : 6 "=- bank on collecting the amount credited the same to the account of Kirtivardhika Corporation and confirmed the said collection by making a credit entry in the passbook. 5. After the above cheque was credited the plaintiff wanted to withdraw cash. As the plaintiff was not having a cheque book at that time, he requested the acting Manager of the defendant No.1 to supply a loose leaf cheque for such withdrawal which was supplied. Through the said loose cheque, the plaintiff drew a cheque for Rs.2,97,000/- payable cash to "V.C.Shah" i.e. the plaintiff himself. The said loose cheque was accepted for payment by the defendant No.1 bank and token No.27 was issued to the plaintiff in respect thereof. Thereafter, on verification of the account the said cheque was passed for payment and was sent to the cashier for payment. According to the plaintiff, the said withdrawal cheque for Rs.2,97,000/- was cleared for payment is evident from the debit entry made by the bank in the account of Kirtivardhika Corporation and the same is further confirmed by the bank by making an entry in the passbook. However, when the plaintiff went to the cashier to collect the amount, he was informed that the payment has been made to the defendant No.2 and the plaintiff was asked to -= : 7 "=- return the token No.27. As the Plaintiff declined to hand over the token No.27 without receiving the amount, the plaintiff was encircled by 8 employees of the bank and was not allowed to move. Somehow the plaintiff managed to escape from them and leave the bank premises. The plaintiff wanted to make a complaint to the Manager of the bank in writing, but the Manager of the bank declained to accept the same. On the same day at about 3.00 p.m. the plaintiff made a complaimt in writing to the Zonal office of the defendant No.1 bank setting out the above facts. The date on the said letter was inadvertently put as 8/4/1987 instead of 9/4/1987. 6. It is the case of the plaintiff that in spite of repeated requests the bank failed and neglected to make payment of Rs.2,97,000/- to the plaintiff under token No.27 even after debiting his account for that amount. Therefore, the plaintiff filed criminal cases in the Metropolitan Magistrate’s Court at Bombay against some of the officers of the defendant No.1 bank and the same are pending. According to the plaintiff, the officers of the defendant No.1 in connivance with the defendant Nos.2 & 3 have forged certain documents and manipulated certain records in order to hide their criminal acts. During -= : 8 "=- the course of investigation of the criminal case by the police, the plaintiff came to know that on 9th April, 1987 the defendant No.2 had paid to the cashier a sum of Rs.3,000/-, but prepared pay in slip for Rs.3,00,000/- and the cashier had made entries in the cash receipt register showing receipt of Rs.3,00,000/- in the account of MDC. Thus, according to the plaintiff, the bank in collusion with defendant Nos.2 & 3 had paid the withdrawal amount of Rs.2,97,000/- due to the plaintiff to the defendant Nos.2 & 3 and together with the cash deposit of Rs.3,000/- made by the defendant No.2, the bank had wrongfully and illegally credited a sum of Rs.3,00,000/- in the account of MDC. In these circumstances, the plaintiff filed the above suit seeking a decree against the defendants jointly and severally for Rs.2,97,000/- and also for interest and special damages. 7. The defendant No.1 bank in its written statement denied the claim of the plaintiff and submitted that the plaint discloses no cause of action against the bank and the suit is barred by the law of limitation. As regards the disputed transactions, it was stated that on 9/4/1987 the plaintiff had deposited a cheque for Rs.2,96,817/- drawn by MDC in favour of Kirtivardhika Corporation. The said MDC was enjoying -= : 9 "=- the O.L.C.C. facilities with the defendant No.1 bank and on 9/4/1987 there was debit balance in the account of MDC. It was stated that though the cheque for Rs.2,96,817/- was debited to the said O.L.C.C. account, the entry was not passed by the concerned officer of the defendant No.1 bank. At that point of time, the defendant No.1 bank received instructions from the defendant No.2 to stop payment of the aforesaid cheque. In these circumstances, the entry made in the account was struck out. In the meantime, the cheque presented by the plaintiff for Rs.2,97,000/- (for drawing cash) was entered in the current account of Kirtivardhika Corporation and the token was issued to the plaintiff. The said entry was also cancelled as the payment of the amount under the cheque issued by MDC in favour of the plaintiff was stopped. As a result of the cancellation of the entries the credit balance in the account of Kirtivardhika Corporation on 9/4/1987 being only Rs.671.75, the withdrawal cheque for Rs.2,97,000/- presented by the plaintiff could not be honoured and, therefore, the plaintiff was called upon to return the token No.27 which was given to him earlier. As the plaintiff declined to return the token, the unpaid cheque was retained by the bank. Thereafter, by a letter dated 16th April, 1987 the plaintiff was informed that the cheque deposited by the -= : 10 "=- plaintiff has not been encashed. In the written statement it was further stated by the defendant No.1 bank that due to the stop payment instructions the cheque deposited by the plaintiff could not be actually credited to the account of the plaintiff and consequently the withdrawal cheque presented by the plaintiff for Rs.2,97,000/- could not be honoured as the credit balance in the account of Kirtivardhika Corporation was only Rs.671.75. It was stated that the entries in the accounts of MDC and Kirtivardhika Corporation were made in anticipation of the funds and on receipt of ‘stop payment’ instructions from the defendants, all the above entries have been rightly cancelled, as per the usual banking practice. Accordingly, it was submitted that there is no cause of action against the bank and the claim of the plaintiff as against the defendant No.1 bank is liable to be dismissed. 8. The defendant Nos.2 & 3 in their written statement admitted that during the year 1983-86 they had business relations with the plaintiff but stated that all the accounts between the parties were settled and nothing was due and payable by them to the plaintiff. It was denied that on 8/7/1986 the plaintiff had given a loan of Rs.2,96,817/- to the -= : 11 "=- defendant Nos. 2 & 3 on account of Chittal Chemicals. According to the defendant Nos.2 & 3 the facts were that on or about 29th November, 1984 the plaintiff who is Proprietor of the Kirtivardhika Corporation had sold hydrogen peroxide valued at Rs.2,96,817/- to Chittal Chemicals for which the said Chittal Chemicals had made payment to the plaintiff by cheque drawn on defendant No.1 bank and the same were encashed and confirmed by the plaintiff. Thereafter, on or about 28/6/1986 the said Chittal Chemicals had sold the same material to Kirtivardhika Corporation for the same amount of Rs.2,96,817/- and on or about 9/7/1986 Kirtivardhika Corporation made the payment for the same by cheque dated 8/7/1986 which is the subject matter of the present suit. According to the defendant Nos.2 & 3, there were two transactions in respect of the same materials for which payments were made by each party to the the other party. Thus, the payment of Rs.2,96,817/- made by the plaintiff to Chittal Chemicals vide cheque dated 8/7/1986 was not a loan but the price of the goods sold by the Chittal Chemicals to the plaintiff on 28/6/1986. 9. The defendant Nos.2 & 3 further stated that on or about 7/4/1987 the plaintiff telephoned the defendant No.2 and informed that the plaintiff had -= : 12 "=- stock of hydrogen peroxide worth Rs.2,96,817/- in his godown which due to off season could not be sold and requested the defendant No.2 to purchase the same. The defendant No.2, therefore, placed an order for purchase of the said material and gave a cheque dated 7/4/1987 for Rs.2,96,817/- from the account of MDC in favour of Kirtivardhika Corporation. It was agreed between the plaintiff and defendant Nos. 2 & 3 that the goods will be delivered against payment simultaneously. But the plaintiff, however, with malafide intention failed to deliver the goods to the defendant No.2 in spite of agreeing to deliver the goods. The defendant No.2 suspecting malafide intention of the plaintiff gave instructions to the defendant No.1 bank to stop payment of the said cheque dated 7/4/1987 for Rs.2,96,817/-. According to the defendant Nos.2 & 3 the plaintiff has suppressed these facts and had concocted a false story of converting the business transaction into the alleged loan transaction. 10. The defendant Nos.2 & 3 further stated that in the plaint it is averred by the plaintiff that the loan was given to Chittal Chemicals; whereas, in the statement submitted before the P.S.I., C.P. and C.I.D. Mumbai on 23rd April, 1987 the plaintiff has stated that the alleged loan was given to MDC. In view of -= : 13 "=- this contradictory statements, the plaintiff is not entitled to the relief claimed in the suit. It was stated that in view of the pending criminal proceedings, the defendant Nos.2 & 3 would not make any further comments in respect of the cheque for Rs.2,96,817/-. However, it was stated that no amount was due and payable by them to the plaintiff and accordingly, it was prayed that the suit filed by the plaintiff be dismissed. 11. With these pleadings, the issues were framed and the parties led evidence in the matter. The plaintiff and defendant No.2 examined themselves and on behalf of the defendant No.1 evidence was led by Mrs.Chitra Sudhakar, Asstt. Manager of the defendant No.1 bank. After considering the evidence and after hearing the counsel on both the sides, the learned Single Judge by the impugned Judgment and order dated 8/7/2003 held that the plaintiff has proved his case and accordingly directed that the defendant Nos.1 & 2 are jointly and severally liable to pay to the plaintiff Rs.2,96,000/- with interest at the rate of 15% per annum from the date of the cheque till realisation of the decretal amount and also Rs.25,000/- towards damages and costs of the suit. Being aggrieved by the aforesaid Judgment, the defendant No.1 and -= : 14 "=- defendant No.2 have filed these two appeals. 12. Mr.Thakkar, learned senior advocate appearing on behalf of the defendant No.2 took us through the evidence recorded by the trial Court and the documents tendered in evidence. He submitted that from the evidence on record, it is clearly established that the cheque for Rs.2,96,817/- given by the plaintiff on 8/7/1986 was not by way of loan but it was towards the price of the goods sold by Chittal Chemicals to the plaintiff on or about 28/6/1986. The counsel referred to the invoice No.3248 dated 28/6/1986 for Rs.2,96,817/- and the ledger folio of Kirtivardhika Corporation in the books of account maintained by Chittal Chemicals to show that the amount paid by the plaintiff on 8/7/1986 was towards the goods sold by Chittal Chemicals to the plaintiff under the invoice dated 28/6/1986. Accordingly, Mr.Thakkar submitted that the amount of Rs.2,96,817/- paid by the plaintiff to Chittal Chemicals was not a personal loan as alleged by the plaintiff and the learned Single Judge erred in decreeing the suit against the defendant No.2. 13. Mr.Thakkar further submitted that the case of the plaintiff that on 8/7/1986 he had advanced a sum of Rs.2,96,817/- to the Chittal Chemicals is falsified -= : 15 "=- by his own statement made before police on 23/4/1987 and in the two criminal complaints filed by the plaintiff in the 10th Metropolitan Magistrate Court at Andheri dated 13/4/1987 and 14/10/1987 respectively. In the statement made before the police and in the criminal complaint filed the plaintiff had stated that the amount of Rs.2,96,817/- due to him was from MDC. Relying on the decision of the Apex Court in the case of Khatri & Ors. V/s. State of Bihar Khatri & Ors. V/s. State of Bihar Khatri & Ors. V/s. State of Bihar reported in 1981 1981 1981 Cri. L.J. 597 Cri. L.J. 597 Cri. L.J. 597 and the decision of the Calcutta High Court in the case of Biswanath Agarwalla V/s. Dhupa Biswanath Agarwalla V/s. Dhupa Biswanath Agarwalla V/s. Dhupa Debi Debi Debi reported in A.I.R. 1960 Calcutta 494 A.I.R. 1960 Calcutta 494 A.I.R. 1960 Calcutta 494, Mr.Thakkar submitted that in the light of the aforesaid statements of the plaintiff in the criminal proceedings which are admissible in evidence, the case of the plaintiff that on 8/7/1986 he had advanced loan to Chittal Chemicals stands completely falsified. As the foundation on which the suit claim was based could not be established by the plaintiff Mr.Thakkar submitted that the suit could not be decreed in favour of the plaintiff and against the defendant No.2. 14. With reference to the cheque for Rs.2,96,817/- issued by MDC on 7/4/1987, Mr.Thakkar submitted that on 7/4/1987 the plaintiff intended to sell hydrogen peroxide worth Rs.2,96,817/- and in -= : 16 "=- anticipation of simultaneous delivery of goods, the defendant No.2 had issued the cheque on account of MDC. Mr.Thakkar submitted that when the defendant No.2 came to know that the plaintiff without delivering the goods sought to encash the cheque, the defendant No.2 instructed the bank to stop payment. Mr.Thakkar submitted that in the absence of delivery of goods by the plaintiff, the defendant No.2 was justified in instructing the bank to stop payment of the cheque issued by MDC on 8/4/1987. In these circumstances, it was submitted that the learned Single Judge was in error in holding that the plaintiff is entitled to the amount under the cheque dated 8/4/1987 and pass a decree in favour of the plaintiff and against defendant No.2. 15. With reference to the entries made by the bank in the accounts of MDC and Kirtivardhika Corporation, Mr.Thakkar submitted that in the absence of any independent evidence, mere entries made by the bank in the accounts would not be sufficient to establish the claim in the suit. In this connection, Mr.Thakkar relied upon the decision of the Apex Court in the case of Chandradhar Goswami & Ors. V/s. The Chandradhar Goswami & Ors. V/s. The Chandradhar Goswami & Ors. V/s. The Gauhati Bank Ltd. Gauhati Bank Ltd. Gauhati Bank Ltd. reported in (1967) 1 S.C.R. 898 (1967) 1 S.C.R. 898 (1967) 1 S.C.R. 898. In the present case, he submitted that although the -= : 17 "=- entries were made in the accounts of MDC and Kirtivardhika Corporation by the bank, the said entries were not actually passed and on receiving the stop payment instructions, the entries made in the accounts were struck off. He submitted that on 9/4/1987 the credit balance in the account of Kirtivardhika Corporation was Rs.675.51. Similarly, in the account of MDC to whom cash credit facility upto Rs.2,50,000/- was granted, there was debit balance of Rs.1,59,170.60 leaving only Rs.90,829.40 available for withdrawal. After the plaintiff deposited the cheque of MDC for Rs.2,96,817/- debit entries were made in the accounts of MDC and credit entries were made in the accounts and in the passbook of the Kirtivardhika Corporation in anticipation of the funds in the account of MDC. However, instead of depositing funds stop payment instructions were issued by the defendant No.2 orally and subsequently in writing and, therefore, the entries made in both the accounts were deleted. As the cheque deposited by the plaintiff was not encashed, the question of honouring the withdrawal cheque presented by the plaintiff did not arise at all. In these circumstances, Mr.Thakkar submitted that making entries in the accounts and deleting the same on receiving stop payment instructions were bona fide and the plaintiff cannot claim the amount based on the entries when the -= : 18 "=- said entries have been deleted. 16. Mr.Umesh Shetty learned advocate appearing on behalf of the defendant No.1 bank submitted that on presentation of the cheque entries were made in the accounts in the ordinary course of business but before the said entries could be actually passed stop payment instructions were received and hence the entries were deleted. He submitted that the defendant No.1 being a nationalised bank was not interested in the personal dispute between the plaintiff and the defendant No.2. He submitted that on 9/4/1987 the amount lying to the credit of Kirtivardhika Corporation was only Rs.671.75 and the amount that could be withdrawn from the account of MDC was only Rs.90,829.60. Therefore, the cheque of MDC for Rs.2,96,817/- in favour of