2019 (11) TMI 1704 - HC - Companies Law

Interest on bonds - any instrument that may have been purchased from the defendant by CRB Capital Markets Limited or any interest due thereon were kept in abeyance - it is alleged that defendant merely chose to amuse the Reserve Bank by withholding interest on the basis of its letter of June 9, 1997 despite having paid the initial tranche of interest on the relevant bonds immediately after receiving such letter - HELD THAT - There was no defence available to the defendant, particularly since the Delhi High Court order of December 17, 2004 made it absolutely clear that even the predecessor-in-title of the plaintiff herein remained unaffected by the winding-up proceedings pertaining to CRB Capital Markets Limited lodged before the Delhi High Court. Though the defendant here may have run a defence of accord and satisfaction, it does not appear from a reading of the defendant's covering letter under which the payments were forwarded on February 21, 2005 that the defendant called upon the plaintiff to encash the instruments forwarded in full and final satisfaction of the plaintiff's claim - It is true that the plaintiff did not receive the payment that was forwarded to it on February 21, 2005 with any caveat or reservation that it would revert to the defendant with an additional claim, if later discovered. Equally, it does not appear that the defendant ensured that the payment made by it in February, 2005 or the subsequent release of the part of the TDS deducted would be the end of the matter and that there could be no further demand made in respect of the delayed payments. The claim came to be rejected at the trial primarily on the ground of accord and satisfaction and by referring to a judgment that the parties say had not been cited before the Court of first instance. It cannot be emphasised too much that when a Court seeks to rely on a judgment against any party, the fundamental canons of natural justice command that the party be made aware thereof so that such party may be able to deal with the same. Indeed, there are instances when judgments have been relied upon against a party without reference to such party and it has been discovered in course of the appeal that the relevant judgments had since been overruled. Since the defendant wrongfully withheld the payments on account of interest despite there being no embargo on the defendant to release the payments on the due dates thereof and since there was no cause for the defendant to delay the payment on account of interest or the principal, upon the bonds maturing, the defendant ought to compensate the plaintiff. The defendant ought to pay interest for the delay between the dates on which the interest accrued and when such interest was finally paid - On account of the maturity values of the two sets of bonds, the defendant will be liable to pay to the plaintiff interest at the rate of 8 per cent per annum from the respective maturity dates till the date of actual payment. It is recorded that the 15 bonds of face value of ₹ 10 lakh that were to yield interest at 13.5 per cent per annum matured on December 21, 2003 and the maturity value was tendered on February 21, 2005. It is also recorded that the 26 bonds of face value of ₹ 10 lakh each yielding interest at the rate of 12.5 per cent per annum attained maturity on December 21, 2004 and the payment thereof was belatedly made on February 21, 2005. The impugned judgment and decree dated March 13, 2015 stands set aside. It is hoped that the entire amount due in terms of this judgment and decree is paid by the defendant to the plaintiff by February 29, 2020, failing which the amount due in terms of this judgment and decree, as at February 29, 2020, will carry interest at the rate of 5 per cent per annum till the date of payment - Application allowed.

Summary

Issues:
1. Delay in payment of interest on bonds by defendant.
2. Withholding of maturity values of bonds by defendant.
3. Claim of accord and satisfaction raised by defendant.
4. Judgment based on principles of natural justice and cited case law.

Issue 1: Delay in payment of interest on bonds by defendant:
The plaintiff purchased bonds from a seller who had acquired them from CRB Capital Markets Limited. The defendant, SIDBI, initially paid interest on the bonds but later withheld subsequent interest payments based on a letter from the Reserve Bank. Despite no court order or official directive preventing the release of interest, the defendant chose to withhold payments. The High Court held that the defendant's delay in paying interest was unjustified, as the bonds were freely transferable market instruments, and ordered the defendant to compensate the plaintiff for the delayed interest payments.

Issue 2: Withholding of maturity values of bonds by defendant:
The defendant also withheld maturity values of the bonds based on the same letter from the Reserve Bank. Only after a judgment from the Delhi High Court clarified that the winding-up proceedings against CRB Capital Markets Limited did not affect the bondholder's rights, did the defendant release the total amount due, including interest and maturity values. The High Court held the defendant liable for unlawfully withholding the maturity values and ordered compensation to the plaintiff.

Issue 3: Claim of accord and satisfaction raised by defendant:
The defendant attempted to argue accord and satisfaction, claiming that the payment made to the plaintiff in 2005 settled the matter. However, the High Court found that there was no clear indication from the defendant that the payment was in full satisfaction of the plaintiff's claim. As the plaintiff made a subsequent demand within a reasonable time, the claim could not be barred by limitation laws. The court rejected the defendant's defense of accord and satisfaction.

Issue 4: Judgment based on principles of natural justice and cited case law:
The High Court emphasized the importance of natural justice in legal proceedings, highlighting the need for parties to be aware of any judgments or materials cited against them. The court found that a judgment cited by the trial court was not appropriately considered, leading to an error in rejecting the plaintiff's claim. The court also referenced a relevant case law, clarifying the grounds for rejecting the claim based on accord and satisfaction. The judgment set aside the earlier decision and ordered the defendant to pay the plaintiff the due amount with additional interest if not paid by a specified date.

In conclusion, the High Court's judgment in this case addressed the issues of delayed interest payments, withholding of maturity values, defense of accord and satisfaction, and adherence to principles of natural justice and cited case law. The defendant was held liable for unjustly withholding payments, and the court ordered compensation to the plaintiff for the delayed interest and maturity values of the bonds. The judgment emphasized the need for parties to be informed of all relevant materials and judgments cited in legal proceedings, ensuring a fair and just outcome.