: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION WRIT PETITION NO.207 OF 2005 WRIT PETITION NO.207 OF 2005 WRIT PETITION NO.207 OF 2005 1. Topline Shoes Limited A limited company having their registered office at Plot No.229, Jambusar Road, Dabasa, Taluka Padra, Dist.Baroda, Gujarat State, represented by their Managing Director Shri.H.M.G.Murthy residing at 4, Parijat Society, Diwalipura, Baroda - 390 015 2. H.M.G.Murthy Age : 54 years, Occupation : Business Residing at 4, Parijat Society, Diwalipura, Baroda - 390 015, the Managing Director of Topline Shoes Limited .. Petitioners (Orig.Defendants) Versus Punjab National Bank A body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 (Act V of 1970) having their Head Office at 7, Bhikaji Cama Place, Africa Avenue, New Delhi - 110 066 and represented by their Branch Manager at PNB House Branch, Sir P.M.Road, Mumbai - 400 001. .. Respondents (Orig.Petitioners) Petitioner No.2 is present in person for the petitioners. Mr.V.R.Dhond i/b. M/s.Negandhi, Shah & Himayatullah for the respondents. ALONGWITH ALONGWITH ALONGWITH WRIT PETITION NO.1490 OF 2005 WRIT PETITION NO.1490 OF 2005 WRIT PETITION NO.1490 OF 2005 : 2 : Punjab National Bank A body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 (Act V of 1970) having their Head Office at 7, Bhikaji Cama Place, Africa Avenue, New Delhi - 110 066 and represented by their Branch Manager at PNB House Branch, Sir P.M.Road, Mumbai - 400 001. .. Petitioners Versus 1. Topline Shoes Limited A limited company having their registered office at Plot No.229, Jambusar Road, Dabasa, Taluka Padra, Dist.Baroda, Gujarat State, represented by their Managing Director Shri.H.M.G.Murthy residing at 4, Parijat Society, Diwalipura, Baroda - 390 015 2. H.M.G.Murthy Age : 54 years, Occupation : Business Residing at 4, Parijat Society, Diwalipura, Baroda - 390 015, the Managing Director of Topline Shoes Limited .. Respondents. Mr.V.R.Dhond i/b.Negandhi, Shah & Himayatullah for the petitioners. Respondent No.2 is present in person for himself and on behalf of respondent No.1. CORAM : D.K. DESHMUKH & CORAM : D.K. DESHMUKH & CORAM : D.K. DESHMUKH & R.Y. GANOO, JJ. R.Y. GANOO, JJ. R.Y. GANOO, JJ. DATE : 7th July, 2008. DATE : 7th July, 2008. DATE : 7th July, 2008. JUDGEMENT :- JUDGEMENT :- JUDGEMENT :- PER R.Y. GANOO, J. PER R.Y. GANOO, J. PER R.Y. GANOO, J. ------------------ 1. By these two petitions, order dated 31.10.2002 passed by the learned Member of Debt Recovery Tribunal : 3 : (hereinafter referred to as "DRT") in Original Application No.948 of 2008 and order dated 16.12.2004 passed by the learned Member of Debt Recovery Appellate Tribunal (hereinafter referred to as "DRAT") in Appeal No.152 of 2002 and 43 of 2004 are challenged. These two petitions can be conveniently disposed off by a common judgement. 2. Punjab National Bank (hereinafter referred to as the said "Bank") had filed Suit No.516 of 1997 against M/s.Topline Shoes Ltd. (hereinafter referred to as the said "Company") and its directors for recovery of a sum of Rs.14,49,050.23 alongwith interest @19.75% per annum. In the said suit before the High Court, the said company and its directors filed written statement on 9.2.2000. Thereafter, the said suit was transferred to DRT and was numbered as O.A.No.948 of 2000. Before the DRT, the said company and its directors filed a counter claim on 19.6.2000 for recovery of Rs.1,70,28,767/- alongwith the interest @18% compounded per annum and for costs. 3. The DRT heard and decided the O.A.No.948 of 2000 filed by the Bank as well as the counter claim filed by the company and rejected the claim of the bank as well as the company by passing an order dated 31.10.2002. The bank preferred an appeal before DRAT being Appeal No.152 : 4 : of 2002. The company preferred an appeal to DRAT being Appeal No.43 of 2004. Both these appeals were heard by the learned Member of DRT and by judgement and order dated 16.12.2004, the DRT dismissed the said appeals. The bank felt aggrieved by the aforesaid two orders and has filed Writ Petition No.1490 of 2005 against the said company and the directors of the said company including Mr.H.M.B.Murthy, who is petitioner No.2 in Writ Petition No.207 of 2005 and respondent No.2 in Writ Petition No.1490 of 2005. The said company and its director Mr.H.M.B.Murthy were aggrieved by the aforesaid two orders and they filed Writ Petition No.207 of 2005 in this Court. 4. It is necessary to mention that in the course of hearing of both these writ petitions, the learned Advocate appearing on behalf of the Punjab National Bank in Writ Petition No.1490 of 2005 submitted before this Court that he has instruction not to prosecute the petition. In view of this, Rule will have to be discharged in Writ Petition No.1490 of 2005. 5. Writ Petition No.207 of 2005 was heard on merits and petitioner No.2, Mr.H.M.B.Murthy has argued the petition on behalf of the petitioners, namely, the said company and himself. Said Mr.H.M.B.Murthy shall : 5 : hereinafter be referred to as Mr. Murthy for the sake of convenience. 6. Few facts necessary for the disposal of these two petitions are as under :- 7. The said company had come out with a public issue of 46,50,000 equity shares of Rs.10/- each and the B.O.I. Finance Limited and Punjab National Bank (Shares Services) were the lead Managers and M/s.Dynamic Shares Services Private Limited were the Registrars. The said issue was over subscribed by an amount of Rs.2,95,00,160/- and the over subscription was to be refunded to the unsuccessful applicants and for that purpose, the said company opened a Refund Order Account No.10939 with the said bank. The date of the Refund Order was 25.9.1992. The total amount payable under the Refund Order was to the tune of Rs.2.95 crores. However, the actual amount paid on account of Refund Orders turned out to be Rs.3.57 crores i.e. to say there was over payment to the extent of Rs.62.00 lacs. 8. According to the Bank, the defendant had fraudulently issued excess refund orders to the tune of Rs.62.00 lacs and that is how by letter dated 11.9.1993, the Bank had advised the said company to deposit the sum : 6 : of Rs.62.00 lacs with interest @23.25% per annum. According to the Bank, the officers of the said company assured to repay the amount overdrawn in the said account and handed over a cheque of Rs.5.00 lacs. According to the Bank by letter dated 25.11.1993, the said company confirmed the debit balance in the said refund orders account to the tune of Rs.60,04,894.36 and accepted full liability to repay the said amount. According to the Bank, six cheques, aggregating to Rs.54.00 lacs were delivered to the said Bank, out of which, the first cheque was dishonoured. However, the monies were paid after some time. The rests of the cheques were dishonoured for which criminal cases under Section 138 of the Negotiable Instruments Act were filed against the said Company and the persons concerned. The Bank conceded that after the issuance of warrants, the said Company paid to the Bank, the monies from time to time. In substance, according to the Bank, the Bank was entitled to interest @23.25% per annum on the amount which was over drawn in regard to the refund orders which came to be issued. It is in these circumstances, the Bank quantified the amount of interest @ Rs.14,49,050.22 and filed the suit for recovery of the said amount as mentioned earlier against the said Company and its directors including Mr.Murthy, the petitioner No.2 in person. The said Company filed their written statement : 7 : and disputed their liability to pay the amount and according to them, the amount was not due and payable. However, the said Bank had forced and compelled the said Company to deposit Rs.60.00 lacs claiming that the account was over drawn. According to the Company, the police investigations were set in motion and in the said investigation, the said Company was found to be innocent. The said Company denied their liability to pay the interest and the amount claimed therein. 9. In addition to denying the liability to pay the amount as claimed by the Bank, the said company alongwith its directors including Mr.Murthy filed what may be referred to as counter claim on 19.6.2000 before the DRT for recovery of Rs.1,07,28,767/- alongwith interest @18% per annum. It has been the stand of the said Company that the Bank under duress made the Company to pay the amount. It is also the stand of the Company that the bank was to advance further loan to the extent of Rs.3.00 crores by way of export working capital facility and the said Company was persuaded to pay the said sum of Rs.60.00 lacs on an understanding that upon payment of the said sum of Rs.60.00 lacs, the Bank would advance the export working capital facility to the tune of Rs.3.00 crores. It has been the stand of the said Company that the Board of : 8 : Directors were not interested in raising dispute with the Bank which was a nationalised Bank and were persuaded to see that the amount is deposited with the Bank under the peculiar circumstances. According to the said Company, the Bank was not entitled to receive the amount still the Company was persuaded to pay the amount and that is how the amount came to be repaid. The said Company, therefore, by Notice dated 22.9.1999 demanded from the Bank a sum of Rs.1,46,10,243/- alongwith the interest and when the said Company realised that the said Bank is not repaying the amount, the said Company filed a counter claim. 10. The DRT framed the following issues :- a) Do Applicants prove that a sum of Rs.60,05,894.36 was legally recoverable from the defendants? This issue was answered in the negative as not proved. b) If yes, do applicants prove that they are entitled to receive a sum of Rs.14,49,050.23 towards interest on the above mentioned amount? Consequently, the second issue as regards the entitlement of Rs.14,49,050.23 towards the interest said to be recoverable by the said Bank : 9 : from the said Company was answered against the said Bank. So far as counter claim of company is concerned, the DRT framed the issue as follows :- c) Is the counter claim within the limitation? The DRT answered the issue in the negative thereby holding that the counter claim filed by the said Company was beyond the period of limitation. Since DRT held that the counter claim was beyond the period of limitation, the DRT did not go into the merits of the said counter claim and that is how the DRT decided the matter against the said Company and the said finding of the DRT as regards the delay in filing the counter claim was confirmed by DRAT in Appeal No.43 of 2004. 11. We have heard Mr.Murthy, petitioner No.2 appearing in person on behalf of the said Company and learned Advocate Mr.Dhond on behalf of the Bank. We have perused the judgement delivered by the DRT as well as DRAT. The argument advanced by Mr.Murthy that the counter claim filed by the said Company was within the period of limitation has been rejected by the two tribunals. After having considered the entire material on record, we are inclined to accept the view taken by both the tribunals. : 10 : It is pertinent to note that the said Company by its letter dated 25.11.1993, accepted the full liability as regards the excess refund amount and confirmed the debit balance to the tune of Rs.60,04,894.36. The relevant portion of the said letter dated 25.11.1993 is as under :- ".... We accept the full liability for our public issue refund instruments paid by you. The present debit balance has been stated by you at Rs.60,04,894.36. However, we accept this liability subject to what is stated above...." 12. There is one more letter sent by the said Company to the Bank being letter dated 16.3.1994. By this letter, the said Company whole heartedly accepted the liability to pay the sum of Rs.60,04,894.36. The relevant portion of the said letter is as under :- . "We have verified and tallied the various statements and refund vouchers handed over by you to us. We write to confirm the balance as mentioned in your letter dated 11th November, 1993, i.e. 60,04,894.36. . We have already paid to you an amount of Rs.15 lakhs towards the above. We are arranging to pay the balance Rs.45 lakhs at the rate of Rs.10 lakhs every fortnight. The first payment, out of this 45 lakhs is being released to you towards the end of this week." 13. Even if we accept for a moment that the text of the letter dated 25.11.1993, goes to show that the said Company accepted the liability subject to confirmation of the various facts as regards the liability of the said : 11 : Company towards the said Bank, the subsequent letter dated 16.3.1994 and the relevant portion quoted above would clearly go to show that the said Company was satisfied that sum of Rs.60,04,894.36 was due and payable by the said Company to the Bank. 14. Mr.Murthy had submitted that to the facts of this case, Article 22 of the Indian Limitation Act is attracted and he had drawn our attention to the text of Article 22 of the Indian Limitation Act. The Article 22 provides that in a suit for money deposited under an Agreement that it shall be payable on demand, including money of a customer in the hands of his banker so payable, the suit has to be filed within 3 years when the demand is made. Mr.Murthy had submitted that the monies were deposited by the said Company with the bank and that the said Company has demanded that amount in September, 1999 and, therefore, filing of the counter claim in the year 2002 is within the period of limitation. 15. After having considered this submission and the text of Article 22 of the Indian Limitation Act, we are not inclined to accept this submission. In our considered view, in the peculiar facts and circumstances and the manner in which the pleadings of the counter claim are : 12 : made, it is clear that the monies were deposited by the said Company after the said Company was satisfied that the said Company is liable to pay to the Bank a sum of Rs.60.00 lacs and odd. It is in these circumstances, the transaction between the said Company and the said Bank as regards the payment of monies by the said Company to the said Bank is not covered by the substance of Article 22 of the Indian Limitation Act and to that extent, Article 22 of the said Act would not be applicable. It is in these circumstances, the argument advanced by Mr.Murthy that the period of limitation would commence from the date of the demand, namely, 22.9.1999 cannot be accepted. Both the tribunals have considered this aspect of the matter and have rightly rejected the claim of the said Company. The detailed discussion is found in regard to this aspect of the matter in paragraph 39 of the judgement of the DRT. The reliance placed by the said Company upon the judgement in the case of Ujagar Singh v/s. Gurudwara Shahidan AIR Ujagar Singh v/s. Gurudwara Shahidan AIR Ujagar Singh v/s. Gurudwara Shahidan AIR 1976 P&H 352 1976 P&H 352 1976 P&H 352 was also considered by the DRT and the said reliance was rightly rejected. The Tribunals have expressed a view that the counter claim of the said Company was time barred on the ground that the amount of Rs.60.00 lacs and odd was paid by the said Company, wayback in the year 1994 and the counter claim came to be filed in June, 2000, after about six years after making : 13 : the payment. The DRT as well as DRAT have considered the circumstances which were placed before the tribunals by the said Company under which the amount was paid by the said Company to the Bank. Insofar as that aspect is concerned, it is required to be mentioned that it has been the case of the said Company that the said Bank made the said Company to pay the amount under duress as also under misrepresentation. It has been the case of the said Company that the said Company was to get additional export working capital facility to the tune of Rs.3.00 crores and in order to see that no dispute is raised with the said Bank, the said Company arranged to pay the said amount of Rs.60.00 lacs in expectation of the said facility. According to the said Company, because the Bank did not pay the amount, the said Company, despite demand of Rs.60.00 lacs and odd as demanded by the Bank did not advance the facility and that is how the misrepresentation has taken place. 16. In our view, when the said Company was aware of the fact that the amount is being extracted by undue influence or duress, the said Company had the cause of action to institute a suit for recovery of the said sum of Rs.60.00 lacs, soon after the monies were paid. It could be said that the said Company could have instituted the : 14 : suit, in the year 1994 when the cause of action arose to the said Company. The said Company filed a counter claim in the year 2000 i.e. practically after 5 years. We have already rejected the argument advanced by Mr.Murthy as regards application of Article 22 of the Indian Limitation Act. We have considered the provisions of the Indian Limitation Act and in our view, the provisions of Article 113 would be applicable to the facts of this case and the said Company was required to institute proceedings for the recovery of Rs.60.00 lacs and odd amount within 3 years from the date when the right to sue accrued. According to the said Company, once it is seen that the said Company had paid the amount to the Bank under duress/misrepresentation as claimed by the said Company in the year 1994 or thereabout, the said Company ought to have instituted the proceedings within 3 years from the payment of the amount to the said Bank and that is how the said Company ought to have instituted the suit proceedings at the most in the year 1997. Hence, the institution of the counter claim for the recovery of the monies filed in the year 2000 was time barred and to that extent, the DRT as well as DRAT have arrived at proper conclusion. 17. The reasonings given by the DRT in paragraphs 37 to 42 of its judgement, to arrive at a conclusion that the : 15 : counter claim was time barred, is right. The observations of DRAT confirming the view of the DRT as regards time barred claim of the said Company are also correct. It is pertinent to note that while making necessary pleadings as regards the question of limitation, the said company has made averments in paragraphs 51 to 53 of the petition. We have considered the said paragraphs and we are not inclined to accept the contentions raised in the said paragraph whereby it is sought to be contended that the said counter claim was within the period of limitation. 18. Mr.Murthy had submitted that when the monies were paid by the said Company to the Bank, a trust was created and the Bank was the trustee and it was liable to render accounts and, therefore, the trustee cannot claim any limitation. Since the said Company had willingly paid the sum of Rs.60.00 lacs as set out in terms of letter dated 16.3.1994, there was no question of the amount being paid to the said Bank by way of a trust and what was being paid to the Bank was towards the liability of the said Company towards the said Bank and to that extent the argument advanced by Mr.Murthy cannot be accepted. It was also argued by Mr.Murthy that a public undertaking like the said Bank cannot set up technical plea of limitation and, therefore, the approach of DRT as well as DRAT was wrong. : 16 : We are not inclined to accept this argument. The plea of limitation was available to the Bank and it was rightly raised. DRT as well as DRAT were obliged to decide as to whether the institution of the counter claim was within the period of limitation or not and have considered that question in the proper perspective and have rightly rejected the claim of the said Company. 19. Mr.Murthy, in the course of his arguments, had relied upon the following judgements before this Court in order to support his contentions. The concerned point for which the said judgement was relied is mentioned below the respective judgement. 1. 1973(2) Mys.L.J.156 : Canara Bank v/s. Canara 1. 1973(2) Mys.L.J.156 : Canara Bank v/s. Canara 1. 1973(2) Mys.L.J.156 : Canara Bank v/s. Canara Sales Corporation Sales Corporation Sales Corporation Art.22 in the Schedule to the Limitation Act is applicable in a case where the bank pays forged cheques. Even when there is a dispute between the parties the same Art. is applicable. (Para 19 of the judgement at Page 18 & 19) 2. AIR 1987 SC 1603 : Canara Bank v/s.Canara Sales 2. AIR 1987 SC 1603 : Canara Bank v/s.Canara Sales 2. AIR 1987 SC 1603 : Canara Bank v/s.Canara Sales Corporation Corporation Corporation The above judgement of the Hon’ble Karnataka High Court was confirmed by the SC. (Para 44 Page 30). 3. AIR 1976 P&H 352 : Ujagar Singh v/s. Gurudwara 3. AIR 1976 P&H 352 : Ujagar Singh v/s. Gurudwara 3. AIR 1976 P&H 352 : Ujagar Singh v/s. Gurudwara Ladewal Ladewal Ladewal There is a presumption that money of a customer in the hands of a banker is a deposit (Page 33 Para 2) : 17 : 4. AIR 1971 SC 2184 : S.Ghouse v/s. S.S.Quadri 4. AIR 1971 SC 2184 : S.Ghouse v/s. S.S.Quadri 4. AIR 1971 SC 2184 : S.Ghouse v/s. S.S.Quadri Sec.17 of Limitation Act - when one party misleads the other party and conceals the real character of a transaction and suggests a different character, with a view to gain from the same, limitation does not begin to run till the other party comes to know of the real character of the matter. (Pages 39 to 41, Paras 17,18,19 & 21) 5. AIR 1979 SC 1144 : Madras Port Trust v/s.Hymanshu 5. AIR 1979 SC 1144 : Madras Port Trust v/s.Hymanshu 5. AIR 1979 SC 1144 : Madras Port Trust v/s.Hymanshu Public bodies are forbidden from setting up limitation as a defence against their customers, unless the evidence required to resist the same has become unavailable due to passage of time. (Page 43). 6. AIR 1990 SC 1329 : UCO Bank v/s. Hemchandra 6. AIR 1990 SC 1329 : UCO Bank v/s. Hemchandra 6. AIR 1990 SC 1329 : UCO Bank v/s. Hemchandra Sarkar Sarkar Sarkar Banks do not set up the statute of limitation against their customer or their legal representatives, and there can be no exception to this rule. (Para 17 at page 48) 7. AIR 1967 SC 1058 : Chakradhar Goswami v/s. 7. AIR 1967 SC 1058 : Chakradhar Goswami v/s. 7. AIR 1967 SC 1058 : Chakradhar Goswami v/s. Guwahati Bank Guwahati Bank Guwahati Bank Liability cannot be fixed by a bank on their customer unless the bank produces and proves the document creating the alleged liability. If a bank does not produce the cheques issued by the customer, the liability thereof cannot be