2016 (6) TMI 865 - HC - Customs

Recovery of demand through bank - current account was frozen - whether the bank is bound to keep the amount lying to the credit of the current account of the Plaintiff in a Fixed Deposit. - certain sum retained by the Defendant bank by freezing the Plaintiff s account on instructions of the customs department of Government of India. - The Plaintiff claims to have issued a mandate to the Defendant bank to keep the said sum in fixed deposit whilst the account was frozen. The Plaintiff s case is that despite such mandate, the amount was kept in a suspense account which did not earn any interest. - Held that - There is no form filled in by the Plaintiff for keeping any fixed deposit with the Defendant Bank. There is no indication of any particular duration of the purported deposit or its kind, whether cumulative or requiring periodical interest payments, or otherwise. There no mandate for further renewals. Besides, the bank was obliged not to honour any payment instructions from the Plaintiff due to the requisition of the Collector of Customs and also instructions received by it from the remitting bank. In the premises, the Defendant was not liable to act on the letter of 7 July 1998, unilaterally issued by the Plaintiff, and hold the amount in a fixed deposit. Any contract of Fixed Deposit with a bank is a bilateral matter involving both the bank and the constituent. There is no dispute between the parties that amounts lying in the current account or sundry creditors account do not bear any interest. No interest is payable on a current account or an account in the nature of a current account. - Decided against the plaintiff.

Summary

Issues:
1. Jurisdiction of the court
2. Limitation period for filing the suit
3. Nonjoinder of necessary parties
4. Whether the Defendant could have placed the amount in fixed deposits
5. Entitlement of the Plaintiff to a money decree with interest
6. Decree and order to be passed

Jurisdiction of the Court:
The Defendant argued that the cause of action arose at the branch where the Plaintiff held its current account, not at the corporate office mentioned in the cause title. Citing legal precedents, the Defendant contended that the suit must be filed at a place where the defendant has a branch office and where the cause of action arises. However, the Court held that under Clause 12 of the Letters Patent, if the defendant carries on business within the local limits of the court's jurisdiction, the court has jurisdiction to entertain the suit. Therefore, Issue No.1 was decided in favor of the Plaintiff.

Limitation Period:
The Defendant claimed the suit was time-barred, but the Court noted that the liability to pay interest only arose after a court order directed the Defendant to release the frozen amount. As the suit for interest was filed within a reasonable time from the date of that order, Issue No.2 was resolved in favor of the Plaintiff.

Nonjoinder of Necessary Parties:
The Court ruled that neither the State Bank of India nor the Customs Department were necessary parties for the suit, as their presence was not crucial for determining the controversy or passing an effective decree. Therefore, Issue No.3 was decided in favor of the Plaintiff.

Placing Amount in Fixed Deposits:
The key issues revolved around whether the Defendant was bound to act on the Plaintiff's instruction to place the frozen amount in a fixed deposit. The Court analyzed the evidence and concluded that the Defendant was not legally obligated to place the amount in fixed deposits as requested by the Plaintiff. Therefore, Issue Nos.4 and 5 were answered against the Plaintiff.

Decree and Order:
Ultimately, the Court dismissed the suit, ruling that the Defendant was not liable to place the amount in fixed deposits as requested by the Plaintiff. Consequently, the Plaintiff was not entitled to the decree sought. No costs were awarded in this matter.