Case: Credit Agricole Indisuez Vs. Credential Finance Limited

P.C.This Appeal is directed against the order dated 27th March, 1998 passed by the learned Single Judge of this Court in Company Petition No.265 of 1997. That Company Petition was filed by the present Appellant under Sections 433 and 434 of the Companies Act.2.The Appellant submitted in its Petition that it is a Banking Company incorporated with limited liabilities under the law relating to incorporation of such companies in France and that they have a branch office in Mumbai. The Respondent had an account at the Bombay branch of the Petitioner. On Friday, 29th March, 1996, the Respondent, which is the company incorporated under the Companies Act deposited a cheque dated 28th March, 1996 in the amount of Rs.1,22,45,466/- in its account with the Petitioner Bank for collection. The said cheque was drawn in favour of the Respondent/ company by one Yojan Finance & Corporate Services Pvt. Ltd. on the State Bank of Indias Juhu Tara Branch. According to the Petitioner, the said cheque was presented by the Petitioner in the MICR Outward Clearing of the National Clearing Cell of the Reserve Bank of India. According to the Petitioner, as the cheque was drawn on the State Bank of India, Juhu Tara Branch, the said cheque was not likely to be returned on 30th March, 1996, which was a Saturday. According to the Petitioner, next three days i.e. 31st March, 1996, 1st April, 1996 and 2nd April, 1996 were holidays for the purpose of banking transaction and clearing of cheques. Therefore, no clearing took place on these three days. The next banking working day was 3rd April, 1996. According to the Petitioner, in case that cheque was dishonoured, the State Bank of India should have communicated that fact to the Petitioner through the National Clearing Cell on 3rd April, 1996. But no such communication was received. On 4th April, 1996 assuming that the cheque must have been cleared, at the request of the Respondent/ company, the Petitioner/ bank issued three pay orders aggregating to Rs.1,19,62,500/-. It is pertinent to note here that the pay order No.602018 for Rs.1,09,00,000/- was in favour of the Respondent/company itself. According to the Petitioner, the Petitioner learnt about the dishonour of the said cheque on 4th April, 1996 from the clearing statement received by the Petitioner from the Clearing House. The next day i.e. 5th April, 1996 was also a public holiday. The three pay orders issued by the Petitioner were encashed by the Respondent/ company. On 15-6-1996, according to the Petitioner, the Petitioner issued a letter to the Respondent/ company immediately demanding the amount of the pay orders. Then, correspondence ensued between the parties. The Respondent denied its liability to pay the amount to the Petitioner/ bank. The Petitioner filed Civil Suit No.4316 of 1996 for recover of the amount against the Company as well as the State Bank of India. The Petitioner also issued a statutory notice to the Respondent/ company, which was duly received by the Respondent/ company. The statutory notice, according to the Petitioner, was not complied with by the Respondent/ company. Therefore, Company Petition No.265 of 1997 was filed in this Court. That Company Petition was decided by this Court by its order dated 27th March, 1998. 3.The learned Single Judge, who decided the Petition, dismissed the said Petition. According to the learned Single Judge as the Respondent has seriously disputed its liability to pay the amount to the Petitioner and because according to the learned Single Judge the State Bank of India is equally responsible, the learned Single Judge held that there is a bonafide defence available to the Respondent/company. It is against this order of the learned Single Judge dismissing the Company Petition, the present Appeal has been filed. 4.The learned Counsel appearing for the Appellant/ original Petitioner submits that the Respondent does not dispute that the cheque deposited by it in its account has been dishonoured. It also does not dispute that three pay orders were issued in its favour by the Appellant. It also does not dispute that the pay order in the amount of Rs.1,09,00,000/- was in favour of the Respondent/company itself. In the submission of the learned Counsel, therefore, the Respondent/company cannot deny its liability to pay the amount of pay orders to the Appellant. According to the learned Counsel even assuming that the pay orders were issued without even the Respondent/company depositing the cheque, then also the Respondent/company is bound to pay to the Appellant the amount of the pay orders. The learned Counsel relies on the judgment of the Supreme Court in the case of Madhusudan Gordhanda and Co. vs. Madhu Woolen Industries Pvt.Ltd., 1972 Company Cases (Vol. 42), page 125, and submits that the Appellant was entitled to have the Petition admitted, because there was virtually no defence put up by the Respondent. In so far as the Respondents liability to pay the amount of pay orders to the Petitioner is concerned, the learned Counsel also relies on the judgment of the Delhi High Court in the case of V.K. Jain vs. Richa Laboratories (P.) Ltd., 1993 Company Cases (Vol. 78), page 283, that merely because the Civil Suit is filed will not debar the Petitioner from filing the Company Petition claiming an order of winding up of the Company, because the Company is not in a position to pay its debts. 5.Though, one of the grounds mentioned in the impugned order for not entertaining the Company Petition is that the Civil Suit has been filed by the Petitioner for recovery of the amount, the learned Counsel for the Respondent did not urge that merely because the Civil Suit is filed, the Company Petition cannot be entertained. The submission of the learned Counsel for the Respondent is that in terms of the provisions of section 70 of the Contract Act, what the Petitioner is entitled to claim is damages from the Respondent and therefore, unless the Petitioner pleads and proves the amount of damages to which it is entitled, it cannot get the damages. In the submission of the learned Counsel as the claim of the Petitioner can only be for damages, the Company Petition is not maintainable. The learned Counsel in support of this submission relies on two judgments of the Supreme Court, one in the case of M/s. Hansraj Gupta & Co. vs. Union of Indian AIR 1973 SC 2724 and another in the case of Union of India vs. Sita Ram Jaiswal, AIR 1977 SC 329 . 6.After having heard the learned Counsel for both sides and after having gone through the record, we find that following are the admitted positions:(i) that the cheque in the amount of Rs.1,22,44,466/- was deposited in the account of the Respondent with the Petitioner/bank; (ii) that three pay orders on 4th April, 1996 were issued in favour of the Respondent by the Petitioner and payment pursuant to those pay orders have been received by the Respondent; (iii) that the cheque deposited by the Respondent on 29th March, 1996 has been dishonoured; It is clear that the Petitioner issued three pay orders in favour of the Respondent on the assumption that the cheque deposited by the Respondent has been cleared. It was subsequently, discovered that that cheque was dishonoured. Therefore, the consideration for which the Petitioner issued three pay orders in favour of the Respondent/ company did not materialise or was not received by the Petitioner. The three pay orders were issued by the Petitioner for consideration namely against the amount either already received or yet to be received by the Petitioner. Therefore, once it is an admitted position that the Petitioner/ bank did not receive the amount of consideration for issuing pay orders, the Respondent cannot deny its liability to pay the amount of pay orders to the Petitioner. In our opinion, the submission of the learned Counsel appearing for the Respondent that the claim of the Petitioner would be under the provisions of Section 70 of the Contract Act, is not well founded. What the Petitioner is claiming, is the return of money which was paid by it as and by way of pay orders to the Respondent/company. The claim of the Petitioner, therefore, would be governed by the provisions of Section 72 of the Indian Contract Act. Section 72 of the Contract Act reads as under:"72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.- A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."When the Petitioner/ Bank issued pay orders, what was really done was money was paid by the Bank. Therefore, the Petitioner/ bank is entitled to the return of that amount. It is no doubt true that in the civil suit filed by the Petitioner, the Petitioner is claiming a decree primarily for refund of the amount from the Respondent. In addition, it is also demanding reimbursement of the amount as damages. That is an alternative plea taken in that suit by the Petitioner. In the suit, the Petitioner is no doubt claiming that due to negligence of the State Bank of India in communicating immediately that the cheque has been dishonoured, it issued the pay orders and therefore, the State Bank of India is also liable to pay the damages for its negligence. The claim made by the Petitioner, however, against the State Bank of India would not, in our opinion, disentitled the Petitioner from claiming refund of the amount from the Respondent/company. The Respondent/company is primarily liable to the Petitioner to make good the money, because admittedly, it has encashed the pay orders. It is pertinent to note here that the account with the Petitioner/bank is of the Respondent, on the assumption that the cheque has been cleared, the entire amount of cheque was shown as credited in the account of the Respondent, the Respondent has taken the pay orders in the amount of Rs.1,09,00,000/- in its own name. Why it became necessary for the Respondent to take the pay orders of such a big amounts in its own name from its own account is not explained anywhere. 7.In our opinion, by no stretch of imagination, it can be said that any defence is available to the Respondent, so far as the refund of the amount of pay orders to the Petitioner/ bank is concerned, and therefore, in our opinion, the order passed by the learned Single Judge is liable to be set aside. 8.It is further to be seen here that in the Petition, the Petitioner has prayed as and by way of interim relief an order appointing the provisional liquidator. The manner in which the defence has been raised by the Respondent/company clearly shows its inability to pay its debts. The conduct of the Respondent/company of taking pay orders in its own name of a huge amount of Rs.1,09,00,000/-, prima facie, appears to be malafide. Taking overall view of the matter, in our opinion, in case the Respondent/company is not in a position to deposit the amount in Court, it would be, in the interest of justice to appoint the provisional liquidator.

Decision reasoning: 1[ds]6.After having heard the learned Counsel for both sides and after having gone through the record, we find that following are the admitted positions:(i) that the cheque in the amount of Rs.1,22,44,466/was deposited in the account of the Respondent with thethat three pay orders on 4th April, 1996 were issued in favour of the Respondent by the Petitioner and payment pursuant to those pay orders have been received by thethat the cheque deposited by the Respondent on 29th March, 1996 has beenis clear that the Petitioner issued three pay orders in favour of the Respondent on the assumption that the cheque deposited by the Respondent has been cleared. It was subsequently, discovered that that cheque was dishonoured. Therefore, the consideration for which the Petitioner issued three pay orders in favour of the Respondent/ company did not materialise or was not received by the Petitioner. The three pay orders were issued by the Petitioner for consideration namely against the amount either already received or yet to be received by the Petitioner. Therefore, once it is an admitted position that the Petitioner/ bank did not receive the amount of consideration for issuing pay orders, the Respondent cannot deny its liability to pay the amount of pay orders to the Petitioner. In our opinion, the submission of the learned Counsel appearing for the Respondent that the claim of the Petitioner would be under the provisions of Section 70 of the Contract Act, is not well founded. What the Petitioner is claiming, is the return of money which was paid by it as and by way of pay orders to the Respondent/company. The claim of the Petitioner, therefore, would be governed by the provisions of Section 72 of the Indian Contract Act. Section 72 of the Contract Act reads as under:"72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."When the Petitioner/ Bank issued pay orders, what was really done was money was paid by the Bank. Therefore, the Petitioner/ bank is entitled to the return of that amount. It is no doubt true that in the civil suit filed by the Petitioner, the Petitioner is claiming a decree primarily for refund of the amount from the Respondent. In addition, it is also demanding reimbursement of the amount as damages. That is an alternative plea taken in that suit by the Petitioner. In the suit, the Petitioner is no doubt claiming that due to negligence of the State Bank of India in communicating immediately that the cheque has been dishonoured, it issued the pay orders and therefore, the State Bank of India is also liable to pay the damages for its negligence. The claim made by the Petitioner, however, against the State Bank of India would not, in our opinion, disentitled the Petitioner from claiming refund of the amount from the Respondent/company. The Respondent/company is primarily liable to the Petitioner to make good the money, because admittedly, it has encashed the pay orders. It is pertinent to note here that the account with the Petitioner/bank is of the Respondent, on the assumption that the cheque has been cleared, the entire amount of cheque was shown as credited in the account of the Respondent, the Respondent has taken the pay orders in the amount of Rs.1,09,00,000/in its own name. Why it became necessary for the Respondent to take the pay orders of such a big amounts in its own name from its own account is not explainedour opinion, by no stretch of imagination, it can be said that any defence is available to the Respondent, so far as the refund of the amount of pay orders to the Petitioner/ bank is concerned, and therefore, in our opinion, the order passed by the learned Single Judge is liable to be setis further to be seen here that in the Petition, the Petitioner has prayed as and by way of interim relief an order appointing the provisional liquidator. The manner in which the defence has been raised by the Respondent/company clearly shows its inability to pay its debts. The conduct of the Respondent/company of taking pay orders in its own name of a huge amount ofprima facie, appears to be malafide. Taking overall view of the matter, in our opinion, in case the Respondent/company is not in a position to deposit the amount in Court, it would be, in the interest of justice to appoint the provisional liquidator.