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TMI Blog2004 (7) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ontending that the defendants obligations in that behalf remains outstanding or subsisting as alleged in paragraphs 3 and 12 of the written statement? Whether the plaintiffs remedy is against CANFINA only and not against the defendants as alleged in paragraphs 12 and 13 of the written statement of the defendants? Whether the plaintiffs are entitled to any relief and if so, what relief? Held that:- It is held that SCB voluntarily and unconditionally received and accepted non-transferable CANFINA’s BR 1401 with an obvious inference that SCB desired the said CANFINA BR for its own purpose for the reasons best known to itself. The Special Court fell in error in applying section 41 of the Indian Contract Act to the facts of the present case. Thus Civil Appeal filed by Citibank is accepted. Judgment and decree passed by the Special Court is set aside and the suit is ordered to be dismissed with costs throughout. CANFINA becomes entitled to restitution of the total amount paid by it to the Citibank (principal and interest) along with interest @ 9% p.a. from the date of payment provided it is paid on or before 1-9-2004 and in default to pay the interest @ 12% p.a. from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation received that any person has been involved in any offence relating to transactions in securities after the 1st day of April, 1991 and on or before 6th June, 1992 could notify the name of such person in the Official Gazette. Special Courts were given the jurisdiction to deal with cases of civil as well as criminal liability of the notified person. 3. A common object namely Banker Receipt (for short BR ) No. 1401 is the subject-matter of two suits in which there are three major players namely Standard Chartered Bank (for short SCB ), Citibank and Canbank Financial Services Ltd. (for short CANFINA ). The present appeals arise out of a set of transactions between these three parties. Suit No. 24 of 1994 filed by SCB has been decreed against the Citibank and that is how the Citibank is in appeal in Civil Appeal No. 7426 of 1996 and Suit No. 1 of 1995 filed by the Citibank has been decreed against the CANFINA and that is how CANFINA is in appeal in Civil Appeal No. 9063 of 1996. Civil Appeal No. 9138 of 1996 has been filed by Citibank against CANFINA feeling partially aggrieved by the judgment and order of the Special Court in Civil Suit No. 1 of 1995. 4. The facts giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the number is same) for Rs. 22.50 crores for the balance amount in favour of SCB. BR 47, dated 4th March, 1992 of the face value of Rs. 22.50 crores was honoured and duly discharged and there is no dispute about the same. According to the Citibank, its liability under BR No. 47, dated 19-2-1992 for Rs. 72.50 crores was discharged as it had delivered BR No. 1401 of Rs. 50 crores given to it by CANFINA and BR No. 47, dated 4th March, 1992 of the face value of Rs. 22.50 crores in favour of SCB. BR 47, dated 19-2-1992 and BR 47, dated 4-3-1992 would be referred to respectively as original BR and fresh BR wherever necessary. SCB through its attorney made a demand for delivery of bonds from Citibank under BR 1401 by its notice dated 4-6-1992, a copy of the letter was endorsed to CANFINA as well. Citibank sent a reply to the attorney s letter dated 4-6-1992 through its own attorney on 6-7-1992 denying its liability to deliver any securities or make payment of any amount to SCB. 8. In or about 27th November, 1992, SCB filed a suit being No. 3828 of 1992 against the Citibank in the Bombay High Court alleging therein that the Citibank had failed to deliver to them the securities g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-3-1996. Citibank, being aggrieved, against the orders dated 22-1-1996 and 15-2-1996 filed two special leave petitions in this court which were withdrawn by Citibank on 15th March, 1996 as the trial of Suit No. 24 of 1994 had commenced by that time. It needs to be mentioned that Citibank s Suit No. 1 of 1995 initially was against four defendants namely (1) Hiten P. Dalal (2) Standard Chartered Bank (3) Canbank Financial Services Ltd. and (4) A.K. Menon, the Custodian but later on Citibank got the suit dismissed against defendant Nos. 1, 2 and 4 for non-prosecution and allowed the suit to proceed only against CANFINA. 13. By judgment dated 12th/13th March, 1996 the Special Court decreed the Suit No. 24 of 1994 filed by SCB and ordered the Citibank to pay to the SCB a sum of Rs. 482,791,096 as and by way of return of consideration and/or on the basis of monies had and received inclusive of accrued interest at the coupon rate of 9%. The learned Judge awarded interest @ 20% per annum equivalent to Rs. 414,803,528. The costs of Rs. 15,49,462 were also awarded to SCB being the actual cost. The Citibank therefore paid a total amount of Rs. 899,155,086 to SCB under the said decree. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o CANFINA. Citibank sent a reply to the attorney s letter dated 4-6-1992 through its own attorney on 6-7-1992 denying its liability to deliver any securities or to make payment of any amount to the SCB. Thereafter SCB filed the suit, reference to which has been made in detail in the foregoing paragraphs. Case of the SCB in the suit is that having purchased bonds of face value of Rs. 72.50 crores on 19-2-1992 SCB received from Citibank original BR 47, dated 19-2-1992 of the face value of Rs. 72.50 crores. Thereafter on 4th March, 1993 SCB discharged and handed over original BR 47 to Citibank. Against the same Citibank issued to the SCB fresh BR 47 of the face value of Rs. 22.50 crores and delivered CANFINA BR 1401, dated 30-12-1991 of the face value of Rs. 50 crores. It was contended that endorsement and delivery of CANFINA BR to SCB was on the footing that CANFINA would honor the same. At best the delivery of CANFINA BR merely conferred an authority on SCB to receive bonds from CANFINA and it was an implied term of the arrangement between SCB and Citibank, that if for any reason SCB did not receive bonds from CANFINA, Citibank s obligation would continue or would stand revived. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead any oral evidence. The matter was thus required to be decided only on the basis of the documentary evidence and facts admitted by the parties. 18. Under Issue No. 1 it was held that suit was maintainable and was not liable to be dismissed for non-joinder of CANFINA. Issue Nos. 2 and 4 were taken up together and were answered against the Citibank and in favour of the SCB. It was held that the Citibank had failed to discharge its obligation in respect of IRFC bonds of the face value of Rs. 50 crores and its obligation continued in this behalf. That there was no valid discharge of original BR 47 and mere handing over of original BR 47 with an endorsement of due discharge on the reverse of it did not amount to a valid discharge. That acceptance of BR 1401 for Rs. 50 crores of CANFINA and Citibank s BR for IRFC bonds of the face value of Rs. 22.50 crores did not amount to a valid discharge of original BR 47 and the Citibank continued to remain under obligation to return the securities or the amount thereof. That there was a failure of consideration inasmuch as neither the Citibank nor the CANFINA had delivered bonds worth Rs. 50 crores to SCB. Issue No. 3 was held to be not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 41 and not sections 62/63 of the Indian Contract Act would be applicable in the facts and circumstances of the case. Plea of Citibank that as the discharged SGL came from its possession/custody, a rebuttal presumption be raised against SCB under illustration ( i ) of section 114 of the Indian Evidence Act and, as SCB had failed to rebut the presumption by leading any evidence, it be deemed that Citibank was duly discharged of its obligation was rejected. Similarly, the plea raised by the Citibank that an adverse inference be drawn under illustration ( g ) of section 114 of the Indian Evidence Act against SCB as it had failed to produce/disclose the material piece of evidence which would have thrown much light on the issue in controversy was rejected. The Court also held that there could be no discharge unless there was satisfaction and the SCB could sue the Citibank on its original consideration. 22. In Citibank s case ( supra ) the findings recorded by the Special Court on the applicability of sections 41, 62 and 63 of the Indian Contract Act were set aside. It was held that section 41 was not applicable. Section 63 of the Indian Contract Act would be applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 and 22 of 1994. The Special Court relying upon its earlier judgment has held that Citibank was not absolved of its obligation to make good the bonds or the value thereof by merely handing over CANFINA BR 1401 to SCB. As the earlier judgment of the Special Court in the previous suits has been set aside by this Court in Citibank s case ( supra ), the view taken by the learned Special Court was erroneous and liable to be set aside. That the Citibank was duly discharged of its obligation by the SCB. Original BR, dated 19-2-1992 was returned to Citibank with an endorsement of due discharge on the reverse of it. By this act of SCB alone, Citibank stood discharged of its obligation to either furnish the securities or amount due thereon. That SCB took CANFINA BR 1401 voluntarily and unconditionally knowing full well that the said CANFINA BR was non-transferable. The obvious inference was that SCB desired the said CANFINA BR for its own purpose inasmuch as the said BR otherwise would be useless. This fact conclusively proves that SCB did not take BR 1401 from Citibank as an authority to collect the securities or it was a condition of the discharge. That the Special Court clearly fell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as framed by the Special Court. We are in agreement with the view taken by the learned Special Court that the facts and points of law involved in the present appeals are similar to the facts and points of law in the previous cases [subject-matter of Citibank ( supra )]. The only difference on facts being that SCB in the previous cases specifically made a request to the Citibank to give SGL of CMF which was in its possession whereas in the present cases there is no such request in writing. All other facts are more or less similar. 26. A Banker Receipt is a document issued by the seller bank acknowledging that it has received money for the sale of a particular security. It implies that the subject security is not readily available for delivery and that the same shall be delivered against the return of Bankers Receipt duly discharged and in the mean time the securities are held by the seller bank on account of the purchaser. The form of BR is not statutory, however, there is a recommendatory form and rules relating to BR issued by Indian Bankers Association. 27. Fact that Citibank was discharged of its obligation under BR 47, dated 19-2-1992 stands admitted by SCB in its pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated by SCB s own document namely BR held Register which records return of original BR 47 to Citibank and exchange with CANFINA BR of Rs. 50 crores without any qualification or condition. The same reads : "Given to Citi Sd 4.3.92. Ex. With Canm 50 Cr. Bal. 22.50 cr." All these facts clearly indicate that SCB discharged the Citibank s BR 47, dated 19-2-1992 and handed over the same to the Citibank. Against the same, Citibank issued to SCB and SCB took Citibank s fresh BR 47 of the face value of Rs. 22.50 crores and CANFINA s BR 1401 of the face value of Rs. 50 crores dated 30-12-1991. 31. Admittedly, the original BR 47 was discharged and delivered back to Citibank. The same has been produced by the Citibank from its possession. The return of original with an endorsement on its reverse duly signed by the officer of SCB amounts to discharge of the BR. This was the mode of discharge of BRs. The discharged BR being in possession of the Citibank would raise a presumption in law under section 114 of the Indian Evidence Act, 1872, that the BR stood duly discharged. Section 114 of the Evidence Act provides that the Court may presume the existence of any fact which it thinks likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were returned with the stamp of SCB duly signed by an officer of the SCB authenticating that it had been discharged. 33. What is the effect of production of documents by promisor from its custody was considered in Chaudhri Mohammad Mehdi Hasan Khan v. Sri Mandir Das [L.R. 39 Indian Appeals 184]. In the said case, a suit was filed on the basis of mortgage deed for the recovery of Rs. 62,000 by way of sale of the mortgage premises. At the time of institution of the suit the plaintiff produced only a copy of the document, alleging that the original had been lost. The defendant in his written statement admitted the execution of the document but alleged that the debt has been discharged. In support of this allegation he produced the original document containing the endorsement of payment by the plaintiff. The Privy Council overruling the decision of the Judicial Commissioner held that in view of the presumption under section 114 of the Evidence Act the onus was upon the plaintiff to show that the debt was still subsisting which the plaintiff had failed to discharge by producing any evidence. It was held that production of the document by the defendant from his custody raised a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FINA from Citibank. The obvious inference is that the SCB did not take BR 1401 from Citibank as an authority to collect the securities or that it was a condition of the discharge. This Court in Citibank s earlier cases ( supra ) drew an adverse inference under illustration ( g ) of section 114 of the Evidence Act against the SCB on similar facts and held that the SCB owed a duty of explanation to the Court as to why it accepted the delivery and retained possession of such an instrument (refer to paras 36 to 38). In the absence of any explanation the implied condition or warranty such as sought to be urged on behalf of SCB could not be imported into the transaction. The plea of implied warranty is one made in desperation and is clearly an afterthought. Relevant observations in this regard are contained which are reproduced : "40. The BRs are dated 18th and 19th September, 1991, respectively, and on 19th September, 1991, the SCB wrote a letter returning the two BRs and asking of SGLs of Canbank Mutual Fund from the Citibank. Proximity of these two dates, clearly indicates that the intention of the SCB was to buy the SGLs of Canbank Mutual Fund otherwise they would not have writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-writing of SCB letter of request of 19th September, 1991 and imposing a qualification in the acceptance of the Canbank SGL by SCB is not permissible. The clear intention of SCB was to ask for and take the SGL of Canbank which was in possession of the Citibank. The said SGL was in favour of Citibank. SCB as a business house was clearly aware of the terms of an SGL of CMF from Citibank when it asked Citibank for it and accepted and retained it. For getting the SGL of CMF in its own favour it need not have routed its request though the Citibank. It could have straight away approached the Canbank for either buying the 11.5% GOI 2009 Bonds in its favour or for getting the SGL of CMF drawn in its favour. A term can only be implied by way of sense to give efficacy to the transaction which is intended by the parties. Implied terms in law are founded on the presumed intention of the parties. In this case, the intention of the SCB was clear and unambiguous. SCB for its own reasons wanted to take the SGL of CMF in possession of the Citibank. The subsequent receipt of interest on the face value of the price of bonds mentioned in the SGL is clear pointer to the fact that the SCB had taken th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BRs. Such a plea would fall under section 63. Special Court concluded that provisions of section 41 of the Contract Act would be applicable to the facts of the case because the CMF had failed to deliver the GOI s bonds to the SCB and, therefore, the SCB could claim it from the Citibank. In our opinion, the Special Court fell in error in applying section 41 of the Indian Contract Act to the facts of the case. Section 41 of the Indian Contract Act only provides that the promisee cannot have double satisfaction of its claim i.e., from the promisor as well as third party. It does not give a cause of action to the promisee, but, to the promisor, to contend that the promisee who has accepted satisfaction from the third party cannot insist of the satisfaction of its claim from the promisor as well. No case under section 41 of the Contract Act has been pleaded by the Citibank. It nowhere pleaded that CMF had delivered the bonds to SCB and, therefore, SCB cannot enforce its demand for delivery of bonds against the Citibank. Privy Council in Har Chandi Lal v. Sheoraj Singh [AIR 1916 PC 68] held that section 41 of the Contract Act applies only where a contract has in fact been performed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Special Court that SCB acted as an agent of Citibank is not sustainable. When SCB discharged Citibank from its obligation under BR 47 by endorsement and delivery thereof to Citibank, it would be inconceivable that simultaneously it would make the discharge conditional on SCB being able to obtain bonds from CANFINA. An agent acts only for his principal and the collection of bonds, if at all, would be for the benefit of Citibank and not for SCB. It is not even pleaded by SCB that SCB was given authority to appropriate the bonds to itself. 36. Shri Shanti Bhushan learned senior advocate during the course of the arguments placed reliance on the following judgments to contend that discharge was conditional - Mohan Lal Jogani Rice Atta Mills v. Ramlal Onkarmal Firm AIR 1957 Assam 133; Maung Chit v. Roshan AIR 1934 Rang. 389; Ramdayal v. Maji Devdiji AIR 1956 Raj. 12; Kandaswami Gounder v. KP Sivasubramania Iyer AIR 1963 Mad. 16; Firm Basdeo Ram Sarup v. Firm Dilsukharai Sewak Ram AIR 1922 All. 461; Firm Budhu Mal v. Gokal Chand AIR 1926 Lahore 328; Har Chandi Lal v. Sheoraj Singh AIR 1916 PC 68; Chegamull Suganmull v. V. Govindswami AIR 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by passing a decree in the contingent suit which cannot be done. It would be a travesty of justice rather than doing justice . (refer to para 60). For the reasons stated above, Civil Appeal No. 7426 of 1996 filed by Citibank is accepted. Judgment and decree passed by the Special Court in Suit No. 24 of 1994 is set aside and the suit is ordered to be dismissed with costs throughout. As a consequence to the aforesaid, Citibank becomes entitled to restitution of the total amount paid by it to Standard Chartered Bank (principal and interest) along with interest @ 12 per cent per annum from the date of receipt of payment by SCB provided it is paid on or before 1-9-2004 and in default to pay the interest @ 15 per cent per annum from the date of receipt of payment till it is repaid by the Standard Chartered Bank. Citibank would also be entitled to receive back the amount of costs it had paid to Standard Chartered Bank under the decree of the Special Court but the same would not carry any interest. Though the appellant had prayed that the interest be granted at the same rate at which it was granted by the Special Court ( i.e., 20 per cent per annum) but we have reduced the same kee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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