Canara Bank vs N.G. Subbaraya Setty

5. Res judicata is, thus, a doctrine of fundamental importance in our legal system, though it is stated to belong to the realm of procedural law, being statutorily embodied in Section 11 of the Code of Civil Procedure, 1908. However, it is not a mere technical doctrine, but it is fundamental in our legal system that there be an end to all litigation, this being the public policy of Indian law. The obverse side of this doctrine is that, when applicable, if it is not given full effect to, an abuse of process of the Court takes place. However, there are certain notable exceptions to the application of the doctrine. One well known exception is that the doctrine cannot impart finality to an erroneous decision on the jurisdiction of a Court. Likewise, an erroneous judgment on a question of law, which sanctions something that is illegal, also cannot be allowed to operate as res judicata. This case is concerned with the application of the last mentioned exception to the rule of res judicata. The brief facts necessary to appreciate the applicability of the said exception to the doctrine of res judicata are as follows. In the present case, respondent No.1 availed a credit facility from the petitioner bank sometime in 2001. Respondent No.2, his son, 6 stood as a guarantor for repayment of the said facility. As respondent No.1 defaulted in repayment of a sum of Rs.53,49,970.22, the petitioner bank filed O.A. No. 440 of 2002 before the DRT Bangalore, against respondent Nos.1 and 2. Respondent No.1, in order to repay the dues of the bank, signed an assignment deed dated 8.10.2003 with the Chief Manager, Basavanagudi Branch, Bangalore for assignment of the trademark “EENADU” in respect of agarbathies (incense sticks) on certain terms and conditions. Clauses 1 to 7 of the aforesaid assignment are set out hereunder:

4. The aforesaid payments shall be unconditionally made by the Assignee continuously and uninterruptedly for the aforesaid period of TEN years.

6. The Assignee shall be entitled to collect “Royalty” from the permitted users during the period of validity of assignment (the above said ten years).

9. The two suits as aforestated were consolidated and disposed of by a common judgment. Issues were framed separately in both suits and it was found that the assignment deed was not vitiated by fraud, misrepresentation or undue influence. Consequently, the bank had no right to cancel or rescind the aforesaid assignment deed. Respondent No.1’s claim for a money decree for Rs.2,16,000/- was dismissed. It was also held that the Civil Court had jurisdiction to entertain the suits, despite the pendency of DRT proceedings. The bank’s suit came to be dismissed. The ultimate order passed in the two suits is as follows:

The further prayer of the plaintiff seeking money decree against the 1st plaintiff bank, directing to pay him Rs.2,16,000.00 together with interest at 18% p.a. is hereby rejected.

23. If the period of limitation for filing an appeal has not yet expired or has just expired, the Court hearing the second proceeding can very well ask the party who has lost the first round whether he intends to appeal the aforesaid judgment. If the answer is yes, then it would be prudent to first adjourn the second proceeding and then stay the aforesaid proceedings, after the appeal has been filed, to await the outcome of the appeal in the first proceeding. If, however, a sufficiently long period has elapsed after limitation has expired, and no appeal has yet been filed in the first proceeding, the Court hearing the second proceeding would be justified in treating the first proceeding as res judicata. No hard and fast rule can be applied. The entire fact circumstance in each case must be 28 looked at before deciding whether to proceed with the second proceeding on the basis of res judicata or to adjourn and/or stay the second proceeding to await the outcome in the first proceeding. Many factors have to be considered before exercising this discretion – for example, the fact that the appeal against the first judgment is grossly belated; or that the said appeal would, in the ordinary course, be heard after many years in the first proceeding; or, the fact that third party rights have intervened, thereby making it unlikely that delay would be condoned in the appeal in the first proceeding. As has been stated, the judicious use of the weapon of stay would, in many cases, obviate a Court of first instance in the second proceeding treating a matter as res judicata only to find that by the time the appeal has reached the hearing stage against the said judgment in the second proceeding, the res becomes sub judice again because of condonation of delay and the consequent hearing of the appeal in the first proceeding. This would result in setting aside the trial Court judgment in the second proceeding, and a de novo hearing on merits in the second proceeding commencing on remand, thereby wasting the Court’s time and 29 dragging the parties into a second round of litigation on the merits of the case.

Further Explanation I shows that it is not the date on which the suit is filed that matters but the date on which the suit is decided, so that even if a suit was filed later, it will be a former suit if it has been decided earlier. In order therefore that the decision in the earlier two appeals dismissed by the High Court operates as res judicata it will have to be seen whether all the five conditions mentioned above have been satisfied.”

xxx xxx xxx 26 As regards appeals filed out of time and after independent rights between the parties have ripened, it is unlikely that courts would excuse the delay, if during the interval other rights come into existence, which would render it inequitable that questions disposed of should be re-opened at the instance of a party who seeks the indulgence of the court: Esdaile v. Payne (1889) 40 Ch. D. 520. Following the decision in Bal Kishen v. Kishen Lal, we are of opinion that the Sub-Collector was wrong in holding that the decision passed by him in Suits Nos. 466 of 1909 and 276 of 1910 had the force of res judicata during the interval between the date of his decree and the time allowed by law for filing the appeal.”

(c) contracting for public and private loans and negotiating and issuing the same;

(e) carrying on and transacting every kind of guarantee and indemnity business;

(f) Managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;

(h) undertaking and executing trusts;

(i) undertaking the administration of estates as executor, trustee or otherwise;

(k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company;

(2) No banking company shall engage in any form of business other than those referred to in sub-section (1).

xxx xxx xxx

(i) complying with any requirement of this Act or of any order, rule or direction made or condition imposed there under, or

37. The impugned judgment dated 31.7.2017 also records the aforesaid submission and turns it down stating: 57

42. The appeal is allowed and the judgment of the trial Court and the first appellate Court are set aside. Consequently, O.S. No.495 of 2008 filed by respondent No.1 will stand dismissed.

April 20, 2018.