Home Case Index All Cases Companies Law Companies Law + SC Companies Law - 2022 (1) TMI SC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (1) TMI 170 - SC - Companies LawSeeking interest on the alleged belated payment of principal sum and accrued interest to the plaintiff for the Bonds issued by SIDBI - Bond Holder undergone liquidation - central case projected by the plaintiff was that the amount, both principal and interest, were paid beyond the maturity period and, therefore, the defendant is liable to pay the interest for delayed payment - HELD THAT:- A conjoint reading of the statutory provisions, makes it abundantly clear that for ‘public interest’ the RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC’s property. The term ‘Public interest’ has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs - it is not necessary for RBI to mention a specific provision before issuing directions, for it to have statutory consequences. All that is required is the authority under the law, to issue such direction. The RBI under Section 45-MB of the RBI Act, 1934 and 35-A of the Banking Regulation Act, 1949 has the requisite authority to issue the communication dated 09th June, 1997. The omission by the RBI to mention any enabling provision, doesn’t change the nature and status of the direction. The statutory arrangement and interpretation persuades to hold that actions in furtherance of grounds of ‘public policy’ by the RBI was justified, for issuing the Notification dated 10.04.1997. The notification itself clearly mentioned that it is issued for the benefit of depositors and creditors of CRB Capital. The actual status of the RBI Notification would have a bearing on the claim against the defendant in the suit and the later proceeding. The plaintiff, as can be noted, always had the option of challenging its legality but they have never specifically challenged those in the Suit. Therefore, when the legality of the RBI Notification is not under challenge, relief can’t be granted in the Suit without determining its legality. This in our perception can by itself, put a quietus on the issue at hand - the plaintiff cannot be granted parity with its predecessor-in-interest, Shankar Lal Saraf, who was paid interest which accrued in July, 1997 despite the RBI directive of 09.06.1997. The defendant has explained this aberration by clarifying that the payment to Shankar Lal Saraf was made before the defendant was in receipt of the RBI directive. Hence, the plaintiff cannot claim any advantage for themselves or parity with its predecessor-in-interest, on this cause. Shadow over Shankar Lal Saraf's transaction - HELD THAT:- Section 441(2) of the Companies Act, 1956 reveals that winding-up proceedings other than voluntary winding-up, are said to have commenced from the date of presentation of petition - A conjoint reading of Section 531 and 441(2) of the Companies Act, 1956 prima facie reveals that any transfer of property by or against a company in involuntary winding up, the suspect spell for deemed fraudulent transaction is six months before presentation of the winding up petition. In the present case, the petition for winding-up was submitted by RBI on 22.05.1997 and admittedly, the transfer in Shankar Lal Saraf’s favor was executed in February, 1997. Hence, the defendant’s prima facie suspicion that the transfer during the suspect spell, may be deemed fraudulent, is not misplaced. Thus, the defendant’s impression that the transfer in favour of Shankar Lal Saraf was not legitimate, was a reasonable opinion, shared by many, including the RBI and the Official Liquidator. The defendant was in receipt of the RBI’s directions, not to part with payment as the Official Liquidator had treated the transaction as fraudulent. This had clearly placed a shadow over the plaintiff’s title to the Bonds and consequences must flow therefrom. Whether withholding payment bonafide? - HELD THAT?:- The Learned Counsel for the plaintiff has failed to show how the defendant derived any undue benefit by withholding the payment accrued on the Bonds. The amount due on the Bonds was immediately transferred to the ‘Accrued Interest’ head and was not used by the defendant for their business. Hence, the plaintiff’s contention that the defendant’s actions of withholding payment were mala fide, is not acceptable - the defendant is barred by res judicata from raising the issue of fraudulent preference. The issue of fraudulent preference is no longer res integra and none sought to challenge the Company Court’s judgment and re-agitate the issue. Hence, this contention will be of no advantage for the plaintiff. Bond status and obligation: "Holder in due course" - HELD THAT:- An obligation has been imposed on the transferee of the promissory notes, to be deemed to be a ‘Holder in due course’, that the notes should have been acquired in good faith; after exercising reasonable care and caution about the holder’s title. In the present case, while the Shankar Lal Saraf’s (holder) title over the Bonds/Promissory Notes is not in dispute but as discussed earlier, Shankar Lal Saraf’s holding stood cleared by the Company Court only on 17.12.2004 but before the said judgment, there was a cloud over his title. Consequently, the plaintiff’s status as ‘holder in due course’ was suspect at the relevant point of time - defendant bank was therefore justified in withholding payment till conclusion of dispute in Company Court, even though the relief claimed was in respect of an ‘unconditional undertaking’, as there were reasonable legal concerns for the transaction during the suspect spell, for making such payments. Entitlement for Interest on delayed payment - pendente lite interest - HELD THAT:- The defendant acted bona fide and there was no undue delay on their part, to remit the dues. - The plaintiff did pray for pendente lite interest in the Trial Court but neither did the trial court frame any issue in this regard, nor were any arguments recorded. This shows that such claim was not pressed by the plaintiff. Further, no ground is urged in the appeal memo, that such an issue ought to have been framed. Hence, it is clear that the plaintiff is not serious on its claim for pendente lite interest. Was plaintiff's demand barred by waiver/acquiescence? - HELD THAT:- It is clear that the plaintiff accepted the payment from the defendant as due settlement of its claims. SIBCO’s failure to raise protest and demand for interest at the earliest possible stage, amounted to sub-silencio acceptance. Accordingly, the plaintiff is barred from raising this demand after several months applying the principle of waiver/acquiescence. Whether present suit barred by Constructive res judicata? - HELD THAT:- The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata. The RBI has wide supervisory powers over financial institutions like SIDBI, in furtherance of which, any direction issued by the RBI, deriving power from the RBI Act or the Banking Regulation Act is statutorily binding on the defendant. Admittedly, the RBI issued Notification dated 10.04.1997, deriving power from S. 45-MB(2) of the RBI Act. Thereby, the RBI froze the assets of CRB Capital on the grounds of public policy, for the purpose of protecting interests of creditors and depositors of CRB Capital - in absence of the Official Liquidator’s consent and guidance, the defendant could not have made the payment without inviting onerous consequences for itself. Hence, it can be said that the defendant acted prudently, being conscious of the legal obligation, to withhold such payment to the plaintiff. The defendant’s appeal against the impugned judgment is allowed by restoring the judgment of the Trial Court. The plaintiff’s cross-appeal is however rejected.
|