9911796707
TMI Blog2015 (7) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... est is payable on halfyearly basis on/or before 21st day of June and 21st day of December of every year. The 5th series bonds were agreed to be redeemed on 21st December, 2004 whereas the 4th series bonds were to be redeemed on 21st December, 2003. The Plaintiff-Company purchased 15 such bonds on which the interest was payable @ 13.50% and 26 bonds on which the interest is payable @ 12.50% and all such bonds carries a face value of ten lakhs each. The aforesaid 41 bonds were purchased on an aggregate price of Rs. 3.69 crores on 1st July, 1998 by the Plaintiff-Company from the said Shanker Lal Saraf. The Bonds were deposited with the defendant on July 2, 1998 at its place of business at 11, Dr. U.N. Brahmachari Street, Kolkata with the request to enface the name of the Plaintiff-Company on the said bonds. On refusal to register and/or record the name of the Plaintiff-Company by the defendant on the ground that M/s CRB Capital Market Ltd; had gone into liquidation proceeding who appeared to be one of the holder of the said Bonds prior to the purchased by the said Shanker Lal Saraf and the said proceeding was initiated at the instance of the Reserve Bank of India, the Plaintiff-Bank f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated November 10, 2005. In the said letter not only the calculation of the interest was disputed but a further demand was raised on account of interest on delayed payment of the principal amount and the agreed interest. On both the allegations, the defendant refused to accede the demand made by the plaintiff in its letter dated November 23, 2005. The Plaintiff-Company, therefore, claims a decree for a sum of Rs. 3,25,54,483/- as per the particulars given in Paragraph 33 & 34 of the plaint. The defendant in his written statement did not deny the entitlement of the plaintiff for the principal as well as the interest agreed in the said Bonds but have disputed the claim on account of delayed payment or in other words, delayed redemption of the aforesaid Bonds. It is categorically stated that a liquidation proceeding was initiated against CRB Capital Market Ltd; who at one point of time was the holder of the aforesaid Bonds and sold it to the said Shanker Lal Saraf on February 20, 1997 and April 7, 1997. The Reserve Bank of India issued a facsimile dated June 9, 1997 advising the defendant not to affect any transfer, register any lean or otherwise deal with such security invested b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 of the plaint? 6) Whether the defendant was liable to pay interest on quantified periodical interest on each bond from due dates till the date of payment at the agreed rate of interest or at any other rate till the date of payment as claimed in the paragraphs 34 and 35 of the plaint? 7) Whether the claim of the plaintiff in the suit is on account of interest on interest, and if so, whether the plaintiff is entitled to claim the same? 8) Whether the plaintiff is entitled to the claims made in the plaint or any other relief?" Both the parties have relied upon the documents and tendered the same at the time of their respective depositions. Certain documents are marked exhibits on admission some with objection. The evidence shall be scrutinized at the time of dealing with the issues framed in the suit and, therefore, is not separately recorded. Mr. Bose, the learned Advocate for the petitioner submits that immediately after the purchase of the subject Bonds, the same was lodged with the defendant for recording their name and periodical payment of the interest but the defendant showed reluctance to register the name of the plaintiff though they were bound to effect the same unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows the defendant was aware that the said facsimile is neither a direction nor an order putting any fetter on them to pay the periodical interest as agreed and the redemption value on maturity. It is, therefore, submitted that admittedly, the payment is made beyond the maturity period and, therefore, the petitioner is entitled to an interest as claimed in the suit at the rate indicated in the subject Bonds. The learned Advocate for the defendant refutes the aforesaid contentions in saying that the Plaintiff-Company purchased the Bond on 1st July, 1998 and is, therefore, not entitled to the interest prior to the date of such purchase. It is strenuously submitted that the Defendant-Company being a Financial Institution are regulated and guided by the RBI and any instructions, circulars and guidelines issued by RBI are binding upon the defendant. According to the defendant, the facsimile issued by the RBI is, in effect, the guidelines/directions which binds the defendant as such directions/guidelines is statutory in nature as held in case of ICICI Bank Ltd -v- Official Liquidator of APS Star Industries Ltd & Ors; reported in (2010) 10 SCC 1. A plea of non-joinder of parties are take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reserve Bank of India initiated the winding up proceeding against CRB Capital Market Ltd under Section 45 MC 1 (d) of the Reserve Bank of India before the Delhi High Court. Prior to the initiation of the said proceeding, the RBI issued notification dated 10.04.1997 under Section 45MB of the RBI (Amendment) Act, 1997 directing the company not to sale, transfer, create charge or mortgage or dealing any manner with any of his profits and assets without the permission of the bank for a period of six months from the date of the said notification. On a winding up petition having moved on 22nd May, 1997, the Company Court appointed Professional Liquidator. The RBI issued a letter to the bank not to deal with the subject bonds as the liquidator has treated the same as fraudulent preference under Section 531 of the Act. Precisely for such reason, the transfer could not be affected as the bank sought clarification from the RBI who subsequently advised to approach the Official Liquidator. A writ petition filed by the petitioner before the Calcutta High Court was disposed of without granting a relief of directing the defendant to effect the transfer as the Court noticed the winding up petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the applicant became owner of these Bonds, he had right to transfer of those Bonds also. Therefore, transfer sought by the applicant in the name of other parties shall also be carried out by the respondents 3 and 4 in favour of the subsequent purchasers, as mentioned in the prayer clause." The said order was duly communicated by the plaintiff on 11th January, 2005 (Ext-J) and asked for the payment of the principal together with the accrued interest after completing the formality of the discharge of the bonds. Immediately thereafter, the plaintiff withdrew the intra court appeal filed against the order disposing of the writ petition by this Court. On 17th February, 2005, the plaintiff received the original bonds which are the subject matter of the suit from the Calcutta Office and resubmitted the same on February 17, 2005 for payment of the principal amount of Rs. 4.10 crores along with the accrued interest. The defendant redeemed the said bonds and paid the principal and the interest after deducting TDS amounting to Rs. 7,06,88,398/- to the plaintiff. The plaintiff protested over the rate at which the TDS is deducted by the defendant and caused a letter dated 24.02. 2005 (Exb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice is permissible, legal and judicially upheld excepting when superseded by legislation. There is nothing wrong in the parties voluntarily entering into transactions, evidenced by deeds incorporating covenant or stipulation for payment of compound interest at reasonable rates, and authorising the creditor to capitalise the interest on remaining unpaid so as to enable interest being charged at the agreed rate on the interest component of the capitalised sum for the succeeding period. Interest once capitalised, sheds its colour of being interest and becomes a part of principal so as to bind the debtor/borrower." Though the words 'interest' and 'compensation' are sometimes interchangeable but on such occasion, they have a distinct connotation. The interest in general term is the return or compensation for use or retention by one person of a sum of money belonging to other. It is an amount which is charged for use or forbearance of money after it has fallen due. Therefore, in order to claim the interest, there should be a capitalization of the principal and the interest payable on the due date discernible from the conduct or the agreement of the parties. The present case has simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory force, as held in case of ICICI Bank Ltd (supra). The aforesaid proposition is further made clear by the Supreme Court in case of Sudhir Shantilal (supra) as under: "58. Whether a circular letter issued by a statutory authority would be binding or not or whether the same has a statutory force, would depend upon the nature of the statute. For the said purpose, the intention of the legislature must be considered. Having regard to the fact that Reserve Bank of India exercises control over the banking companies, we are of the opinion that the said circular letter was binding on the banking companies. The officials of UCO Bank were, therefore, bound by the said circular letter." From the ratio laid down in the above reports, it is clear that once the RBI have issued directions in an action contrary thereto may not only attract the civil liability but may invite criminal breach of trust. The defendant was not sitting in slumber after receiving the said instructions but sought an advice immediately thereafter and was directed to approach the Official Liquidator. The correspondences would galore that the defendants sought clarification from the Official Liquidator but did not recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be returned forthwith, failing which it would be deemed that the appellant accepted the offer in full and final satisfaction of its claim. This was further clarified by providing that the retention of the cheque and/or encashment thereof will automatically amount to satisfaction in full and final settlement of the claim. Thus, if the appellant accepted the cheques and encashed them without anything more, it would amount to an acceptance of the offer made in the letters of the Railways dated 7-4-1993. The offer prescribed the mode of acceptance, and by conduct the appellant must be held to have accepted the offer and, therefore, could not make a claim later. However, if the appellant had not encashed the cheques and protested to the Railways calling upon them to pay the balance amount, and expressed its inability to accept the cheques remitted to it, the controversy would have acquired a different complexion. In that event, in view of the express non-acceptance of the offer, the appellant could not be presumed to have accepted the offer. What, however, is significant is that the protest and nonacceptance must be conveyed before the cheques are encashed. If the cheques are enc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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