2008 (3) TMI 491 - HC - Companies Law

Non return of money by bank - communication to the petitioner that the amount is kept in sundry deposit account Held that - Action of the bank is found without authority, more particularly when the money held by it was as the trustees. The lawful obligation was created to return money, but if not returned, the interest by way of compensatory measure is required to be awarded. The fact remains that bank has retained money and has enjoyed money, and the petitioners are deprived of the legitimate amount of interest at the rate prevailing for the minimum investment of one year in all nationalised banks. Hence, I find that by way of compensatory measures, the interest can be awarded at the rate of 8 per cent per annum. Therefore, the said contention of learned counsel for the respondent-bank cannot be accepted. The action of the bank of not returning amount of ₹ 16,75,890.75 ps. and of retaining the same can be said as without right, or authority and consequently the bank will be required to return amount of ₹ 16,75,890.75 ps. with interest at the rate of 8 per cent per annum, which is prevailing rate of interest on the FDR investment.

Issues Involved:
1. Right of lien by the bank over surplus funds.
2. Jurisdiction of the High Court under Article 226 of the Constitution.
3. Interpretation of Section 13(7) of the Securitisation Act.
4. Award of interest on retained funds by the bank.

Issue-wise Detailed Analysis:

1. Right of Lien by the Bank Over Surplus Funds:
The petitioners, a husband and wife, had taken a housing loan, and upon default, the bank initiated proceedings under the Securitisation Act for the disposal of the property. The bank recovered the loan amount and realized a surplus of Rs. 16,75,890.75. The petitioners demanded the return of this surplus amount, but the bank claimed a right of lien based on a deed of guarantee related to a separate loan transaction with a company, Printpack Industries Ltd., which was in liquidation. The bank argued that it could retain the surplus amount due to the pending recovery of dues from the company. The court found that the bank's action to retain the surplus amount under the alleged right of lien was beyond its power, as the right of lien could not be exercised for a different loan transaction unrelated to the housing loan.

2. Jurisdiction of the High Court Under Article 226 of the Constitution:
The court examined whether it could entertain the petition under Article 226 of the Constitution against the bank's action under the Securitisation Act. It referenced the case of Apex Electricals Ltd. v. ICICI Bank Ltd., which established that while financial institutions exercising statutory rights under the Securitisation Act are amenable to the jurisdiction of the court under Article 226, the court would not entertain such petitions if there is an efficacious alternative remedy unless the action is perverse or creates an absurd situation. The court concluded that since the respondent-bank is a nationalized bank and falls within the meaning of "State" under Article 12 of the Constitution, the writ petition was maintainable.

3. Interpretation of Section 13(7) of the Securitisation Act:
The court analyzed Section 13(7) of the Securitisation Act, which mandates that any surplus amount recovered by the secured creditor after discharging dues must be held in trust and returned to the person entitled thereto. The court emphasized that the bank, acting under the Securitisation Act, could not mix its statutory powers with rights arising from different loan transactions. The court held that the bank's right of lien could not be applied to surplus funds from the housing loan transaction, as the Securitisation Act's provisions must be strictly interpreted, and any action beyond its scope would be without jurisdiction.

4. Award of Interest on Retained Funds by the Bank:
The petitioners claimed interest on the retained surplus amount at the rate of 24% per annum. The bank argued against awarding interest, stating that it had not invested the amount and had retained it due to the pending petition. The court found that the bank's retention of the surplus amount was without authority, and since the bank held the money in a fiduciary capacity, it was obligated to return the funds with interest. The court awarded interest at the rate of 8% per annum, which is the prevailing rate for fixed deposits in nationalized banks, as a compensatory measure for the petitioners.

Conclusion:
The court ruled that the bank's action of retaining the surplus amount of Rs. 16,75,890.75 was without right or authority. The bank was directed to return the amount with interest at the rate of 8% per annum. The court allowed the petitioners to withdraw the amount deposited with the court and clarified that the order would not prejudice the parties' rights in the pending proceedings before the Debts Recovery Tribunal (DRT) concerning the loan transaction with the company. The request for a stay of the order was declined, but it was noted that any payment made would be subject to further orders from a higher forum.

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