Case: State Bank Of India Thr. General Manager Vs. National Housing Bank

facts are disclosed. But disclosure of full facts might (though we are almost certain) lead to trouble to somebody or the other in the management of the plaintiff-Bank or perhaps both the Banks and God knows who else. It is equally irresponsible on the part of the 1st defendant to have acted on the instructions of the 2nd defendant without there being any legal authority in writing on the part of the 2nd defendant to issue instructions regarding the disbursement of the proceeds of the cheque in question. We may not be far from truth if we draw an inference that such payments were obviously made on the unwritten instructions by somebody in the plaintiff bank. The whole attempt of both the banks is to shield the officers on either side taking refuge under attractive legal pleas – which if examined in the context of the limited facts pleaded give a picture that the suit transaction is an innocuous transaction which unfortunately for the country is not. In our opinion the suit is a sheer abuse of the legal process. 70. On the other hand, the dispute such as the one on hand, where the contesting parties are either organs of the State or its instrumentalities, is better resolved through a Committee of Secretaries of the Government of India or the States, as the case may be, as directed by this Court on more than one occasion. Unfortunately, such orders remain unimplemented. In fact, it appears from the judgment under appeal that even in this case the Special Court had directed such a settlement without any success. The Special Court in paras 2 to 5 of the judgment under appeal elaborately recorded the legal requirement of settling the dispute to the Committee of Secretaries and efforts made by the Special Court to have the matter so settled and eventually directed – “Officer on Special Duty is directed to send a copy of this judgment to the Ministry of Law and Ministry of Finance and the Governor of Reserve Bank of India with a request to take action on this and on the aspect set out in paras 27, 73, 74 , ………….” 71. Even during the pendency of the instant appeal, this Court on 18.02.2009, passed an order to the following effect: “These appeals are filed by the State Bank of Saurashtra against the National Housing Bank and others. Having regard to the dispute between these two Public Sector Banks, we feel it appropriate that the matter be considered at the level of the Finance Minister, Union of India to explore the possibility as to whether there could be any settlement between the parties. Therefore, we adjourn these appeals and request the Finance Minister, Union of India to look into the matter and suggest any possibility of settlement between the parties. Parties would be at liberty to bring this order to the notice of the Finance Minister, Union of India.Adjourned by three months.” Still the Government did not think it fit to settle the matter. 72. By a letter dated 11th June, 2010, signed by one Raman Kumar Gaur, Under Secretary to the Government of India, Ministry of Finance, Department of Financial Services, addressed to the Registrar of this Court, it was informed as under: “8. The Special Court had gone into all aspects of the matter including the transaction of NHB with Standard Chartered Bank and Canfina before arriving at his conclusions. The Hon’ble Court has also gone into the alteration in the cheque, the initial stand of NHB before the Court etc. The Court has even awarded costs to NHB and others looking into the conduct of SBS before it. The Hon’ble Court has also observed that each transaction has to be dealt with independently and did not agree with the contention of SBS about satisfaction of its liability by delivery of bonds by Harshad Mehta to Canfina. As far as an amicable solution is concerned, all along SBI has insisted that it be given 50% of total amount received by NHB for which NHB is not agreeable. Thus, it was felt that the Special Court has looked into all the above aspects of the matter and has given its well reasoned judgement. It has therefore been decided, with the approval of Finance Minister, that there seems to be no reason to suggest any change in the decision of the Special Court.” A reading of the letter demonstrates utter callousness on the part of the Government in dealing with the matter. We must also place our disgust at the audacity of the author of the letter to state- “that there seems to be no reason to suggest any change in the decision of the Special Court.” 73. Apart from the question of propriety of the language employed in the said suggestion, the content of the letter indicates that both the plaintiff and respondent Banks simply reiterated their respective stands before the Committee of Secretaries. No attempt appears to have been made by the Government to find out the truth as to (1) how the plaintiff Bank parted with a high denomination cheque and gave custody of the same to Harshad Mehta and (2) as to how the first defendant Bank paid the various amounts to the dictation of Harshad Mehta in the absence of any authorisation by the plaintiff Bank. Be that as it may, if really the Government believed that the judgment of the Special Court does not require any interference, nothing stopped the Government from directing both the Banks to withdraw their appeals before this Court.74. The whole exercise appears to be an eye wash. A thinly veiled scorn for the orders of this Court.75. The professed purpose of the Special Courts Act - the back drop of the scandal that shook the nation - and the manner in which the litigation was conducted coupled with the absolute indifference of the Government to get at the truth only demonstrates the duplicity with which Governments can act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]62. In the background of the above discussed pleadings and evidence, we are of the opinion the suit is required to be dismissed on the ground that there is no evidence led by the plaintiff to establish its case.63. We must also record our disapproval of the finding recorded by the Special Court that the plaintiff did not suppress the truth. We are of the opinion that the plaintiff approached the Special Court with unclean hands by suppressing the relevant material. We shall first discuss the nature of the suppression and then examine the legal consequences that should follow.64. As already noticed that the plaint, as originally filed, stated that the cheque in question was drawnfavour of the 1st defendant in respect of the sale by the 1st defendant to the plaintiff of 9% IRFC Bonds of face value Rs.100But subsequently the plaint was amended omitting the reference of the purchase of the abovementioned IRFC Bonds.65. It is pertinent to note that the defendants 1, 2 and 5 pleaded and the defendants 1 and 2 adduced oral evidence to prove that the plaintiff incurred an obligation to deliver IRFC Bonds of face value Rs.100 crores on 3.1.1992 to CANFINA Ltd. It, therefore, appears that in order to discharge its obligation to CANFINA to deliver the abovementioned Bonds, the plaintiff sought to purchase the Bonds from the 1st defendant and drew the cheque in question. We may also note that such a stand is not taken by the defendants for the first time in the written statement. Plaintiffs were aware of the stand of the 1st defendant in the light of the correspondence that took place between the 1st defendant and the plaintiff prior to the filing of the suit. Such knowledge on the part of the plaintiffs is obvious from the averments made in the plaint itself. In the background of such a stand of the 1st defendant and the stand of the plaintiff in the unamended plaint that its record revealed that the cheque in question was issuedrespect of the sale by the 1st defendant to the plaintiff of 9% IRFCthe plaintiff owes a basic duty to the Court to explain in the plaint and prove by producing its records in evidence (i) as to how such a transaction came to be entered in its records, who was responsible for such entry, (ii) who took the decision to purchase the IRFC Bonds from the 1st defendant, (iii) who signed the cheque in question and (iv) how the 2nd defendant got custody of the cheque. None of this information is given in the plaint.66. On the other hand, we cannot ignore the pleading of the 3rd defendant who took a categoric stand that the decision such as the one to purchase or sell securities are taken at a higher level of the plaintiff-Bank. It is only on the instructions of the appropriate higher authorities, cheques such as the one in question, are prepared.67. Assuming for the sake of argument that the cheque in question came to be handed over to the 2nd defendant without the knowledge of the higher authorities, it is difficult to believe that those who are responsible for the management of the plaintiff bank at a higher level did not bother to verify till the scandal broke out as to how a debit of Rs. 95 crores came to be made to the account of the plaintiff-Bank - we are unable to believe that such a failure is only an accident. Even the judgment under appeal records that theThe suppression of the original case coupled with the very fact that the 1st defendant paid various amounts in accordance with the instructions of the 2nd defendant after encashing the cheque in question coupled with the 1stconsistent stand that the cheque was issued for the benefit of the 2nd defendant, leads us to a possible inference that the 1st defendant acted on the instructions of some body high up in the administration of the plaintiff Bank. Neither of the banks explained the genesis of such practice. But from the very history of this litigation and the background in which the Special Court Act came to be passed, we can safely presume that both the banks herein, (along with other banks), did not follow any procedure when it came to the dealings in which the 2nd defendant was involved. Eventually when the bubble burst, everybody tried to disown the responsibility trying to project an image of innocence. The entire effort of the plaintiff in the suit, according to us, is to suppress all the relevant information we are convinced that such a process is resorted to in order to shield the delinquent officers of the bank (whoever they are) who are responsible for such dealings by taking shelter under the legal principles such as unjust enrichment and moneys had and received etc. to recover the money paid by the plaintiff to the 1st defendant through the cheque in question.69. Whether the payment in question was made in discharge of any existing legal obligation such as the one set up by the defendants 1 and 2 or not could be known only when the full facts are disclosed. But disclosure of full facts might (though we are almost certain) lead to trouble to somebody or the other in the management of the plaintiff-Bank or perhaps both the Banks and God knows who else. It is equally irresponsible on the part of the 1st defendant to have acted on the instructions of the 2nd defendant without there being any legal authority in writing on the part of the 2nd defendant to issue instructions regarding the disbursement of the proceeds of the cheque in question. We may not be far from truth if we draw an inference that such payments were obviously made on the unwritten instructions by somebody in the plaintiff bank. The whole attempt of both the banks is to shield the officers on either side taking refuge under attractive legal pleas – which if examined in the context of the limited facts pleaded give a picture that the suit transaction is an innocuous transaction which unfortunately for the country is not. In our opinion the suit is a sheer abuse of the legal process.Apart from the question of propriety of the language employed in the said suggestion, the content of the letter indicates that both the plaintiff and respondent Banks simply reiterated their respective stands before the Committee of Secretaries. No attempt appears to have been made by the Government to find out the truth as to (1) how the plaintiff Bank parted with a high denomination cheque and gave custody of the same to Harshad Mehta and (2) as to how the first defendant Bank paid the various amounts to the dictation of Harshad Mehta in the absence of any authorisation by the plaintiff Bank. Be that as it may, if really the Government believed that the judgment of the Special Court does not require any interference, nothing stopped the Government from directing both the Banks to withdraw their appeals before this Court.74. The whole exercise appears to be an eye wash. A thinly veiled scorn for the orders of this Court.75. The professed purpose of the Special Courts Act - the back drop of the scandal that shook the nation - and the manner in which the litigation was conducted coupled with the absolute indifference of the Government to get at the truth only demonstrates the duplicity with which Governments can act.