1984 (11) TMI 346 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the refusal by the State Bank of India to tender the exchange value of high denomination notes.
2. Alleged mala fides by the State Bank of India in informing the Income-tax Department.
3. Authority of the Income-tax Department to attach the exchange value.
4. Petitioner's claim for damages by way of interest for delayed payment.
5. Jurisdiction of the Court under Article 226 to grant relief.

Detailed Analysis:

1. Legality of the Refusal by the State Bank of India to Tender the Exchange Value of High Denomination Notes:
The petitioner tendered 261 high denomination bank notes along with the required declarations to the State Bank of India on January 19, 1978, under the High Denomination Bank Notes (Demonetisation) Ordinance, 1978. The petitioner argued that it was the statutory duty of the respondent bank to credit the total value of the said currency notes to his account. The refusal to tender the exchange value was deemed unlawful and a breach of statutory duty under Section 7 Sub-section (4) of the Ordinance. The bank contended that they acted in accordance with directives from the Reserve Bank of India and had no mala fide intentions.

2. Alleged Mala Fides by the State Bank of India in Informing the Income-tax Department:
The petitioner alleged that instead of tendering the exchange value, the respondent bank informed the Income-tax authorities, leading to harassment, raids, and summonses. The petitioner argued that the bank had no authority to share such information and that it breached the obligation of secrecy between a banker and its constituent. The bank defended its actions by stating that they were following directives from the Reserve Bank of India and the Ministry of Finance, which required them to furnish all particulars regarding the deposit of high denomination notes to the Income-tax Department.

3. Authority of the Income-tax Department to Attach the Exchange Value:
The Income-tax Department issued notices under Section 226(3) and Section 281(b) of the Income-tax Act, attaching the sum of Rs. 2,61,000/- lying deposited with the State Bank of India. The petitioner contended that no income-tax was due and that the attachment was wrongful. The Income-tax Department argued that the attachment was necessary to protect the interest of the revenue pending assessment or re-assessment of the petitioner's income. The department admitted that the house and office of the petitioner had been raided but justified the attachment as a protective measure.

4. Petitioner's Claim for Damages by Way of Interest for Delayed Payment:
The petitioner claimed damages by way of interest for the period during which the exchange value was withheld. The court noted that the claim for interest did not arise under the statute, nor was there an agreement between the parties for the payment of interest. Additionally, no notice under Section 1 of the Interest Act had been served, and the claim for interest was barred by the Law of Limitation. The court held that the claim for interest was not maintainable in a proceeding under Article 226.

5. Jurisdiction of the Court under Article 226 to Grant Relief:
The court discussed the discretionary power under Article 226 to issue writs and provide consequential relief. However, it emphasized that such power should not be used to supersede the modes of obtaining relief by an action in a civil court. The court cited precedents indicating that a writ of mandamus for refund of money is not ordinarily maintainable if the claim can be made in a suit. The court concluded that the petitioner's claim for interest as damages could not be entertained under the writ jurisdiction.

Conclusion:
The court dismissed the petition, holding that the State Bank of India acted in accordance with directives from the Reserve Bank of India and the Ministry of Finance, and that the Income-tax Department's actions were within their authority to protect revenue interests. The claim for interest was deemed not maintainable under Article 226 and barred by the Law of Limitation. The rule was discharged, and all interim orders were vacated.