TMI Blog2012 (11) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the Bank of India that the Bank of India had to institute the proceedings against the Indian Company, which was the acceptor of the Bill of Exchange, otherwise the liability of the Singapore Company to pay the amount to the Bank of India in terms of the sanction letter would stand discharged. The Tribunal, therefore, committed an illegality in dismissing the Original Application filed by the Bank of India for the reason that the relief claimed in the Original Application could have been claimed by the Bank of India in the Singapore High Court and the Bank could not afterwards sue for this relief and the Appellate Tribunal was justified in setting aside the judgment of the Tribunal and directing the Tribunal to decide the matter on merits. - Civil Misc. Writ Petition No.42756 of 2012 - - - Dated:- 28-9-2012 - Dilip Gupta, J. Hon ble Dilip Gupta, J. This petition seeks the quashing of the order dated 8th May, 2012 passed by the Debts Recovery Appellate Tribunal, Allahabad (hereinafter referred to as the Appellate Tribunal ) by which the appeal filed by the respondent-Bank of India against the order dated 22nd September, 2005 passed by the Debts Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 3rd May, 2001. 1. Letter of Credit (DP) for 4,000,000 Singapore Dollars; 2. Trust Receipt (30 days) for switching purpose for 3,000,000 Singapore Dollars; 3. Foreign Bills Purchase (DP) including discount document under Letter of Credit till acceptance for 3,000,000 Singapore Dollars. The said sanction letter contained various stipulations and for compliance of the conditions mentioned therein, the Singapore Company not only confirmed its acceptance to the facilities and the terms and conditions to which the facilities were subject to but also executed and delivered the security documents to the Bank and respondent no.4-Som Nath Sood and respondent no.5-Renu Sood, in their individual and personal capacities, also executed a Continuing Guarantee Agreement to guarantee repayments of all the monies including the interest accrued therein with all costs, charges and expenses on demand made by the Bank of India. In addition thereto Som Nath Sood mortgaged his plot situated in New Delhi. In terms of the aforesaid banking facilities made available by the Bank of India, the Singapore Company started selling goods to its customers in India and presented the Bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 3 May 2001 also set forth, inter alia, the following terms and conditions: a. Additional interest on default at 2% over the rate of interest will be charged on all irregular and overdue facilities/accounts from the date of their becoming irregular/overdue until full payment. b. All costs, expenses, legal or otherwise connected with the execution, implementation, enforcement and recovery of dues in respect of the facilities shall be borne by the 1st Defendants; c. The banking facilities granted or to be granted are subject to the Plaintiffs standard terms and conditions. 3. The Plaintiffs standard terms and conditions provided, inter alia, that: a. Interest rates may be varied by the Plaintiffs from time to time at their absolute discretion and shall be payable both before and after judgment. Interest on the facilities will accrue on a compound basis and will be calculated on a daily basis unless otherwise stipulated or agreed to by the Plaintiffs. b. All facilities granted and/or monies lent or advanced shall be repayable on demand, unless otherwise stipulated by the Plaintiffs. 4. In consideration of the Plaintiffs making advances and/or granting banking faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llar prime lending rate until full payment is made; b. all solicitor and client costs against the Defendants on an indemnity basis; c. such further order or other relief as the Court thinks fit. The Singapore High Court decreed Suit No.802 of 2002 on 8th November, 2002 and the Bank of India filed Execution Case No.7 of 2003 against the Singapore Company and the two Directors before the Debts Recovery Tribunal at New Delhi which passed an order on 29th May, 2003 for preparation of the recovery certificate. The Bank of India also filed Original Application No.165 of 2002 under Section 19 of the Act on 24th September, 2002 in which the Singapore Company was arrayed as defendant no.1, Som Nath Sood was arrayed as defendant no.2, Renu Sood was arrayed as defendant no.3 and the Indian Company was arrayed as defendant no.4. The relief claimed in this Original Application was against the Indian Company on the basis of the Bill of Exchange dated 20th June, 2001 drawn by the Singapore Company on the Indian Company in favour of Bank of India and it was specifically stated that defendant Nos. 1, 2 and 3 were proforma defendants and no relief was claimed against them. The relevant pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (One Crore Five Lacs, Fifty seven thousand, Nine hundred eighty seven and paise thirty one only) which is equivalent to US $ 2,17,690.46 at the present exchange rate, is now due and payable to the Applicant Bank and by the Defendant No.4, herein inclusive of uncharged interest upto 20.4.02. Thus the Defendant No.4 as on 20.09.02 is liable to pay Rs.1,05,57,987.31 together with further interest thereon @ 9.5% per annum in the said account from 21.9.02 to till the date of full final satisfaction of the entire balance outstanding amount. (xvii) That the Applicant also submits copy of statement of accounts indicating the balance outstanding amount till 20.09.2002 which is annexed and marked as Exhibit-A/17. The entries in the accounts were made in the usual course of banking transactions. (xviii) It is submitted that the cause of action accrued to the Applicant finally on 03.05.2001 when the Defendant No.1 to 3 executed and delivered the documents and on the basis of Bills of Purchase Facility made available to them, then on 04/12/2001 when the bill No PDA-10345 was raised by Defendant No.1 on Defendant No.4 in favour of the Applicant, and which was not honoured on due date there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of above quoted provisions of Order 2, Rule 2 CPC, it is clear that where a plaintiff omits to sue in respect of or intentionally relinquishes any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished. From perusal of documents filed by the defendants in respect of proceedings before Hon ble High Court of Republic of Singapore, it appears that applicant bank has not filed claim against defendant No.4. It further appears that the applicant even has not made any averments as regards to bill of exchange relating to defendant No.4 though they sought and got relief as regards to amount involved in the Bill of Exchange pertaining to Defendant No.4. It further appears that applicant has not even pleaded anything in this regard and also not sought any permission of that Court to get the relief against defendant No.4 through competent court having jurisdiction. There is also no material available on record that Hon ble High Court of Republic of Singapore was not having jurisdiction against defendant No.4 pertaining to Bill of Exchange for which applicant has got decree from Hon ble High Court of Republic of Singapore. 13. From perusal of Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R2 CPC will have no application as the relief claimed in the Original Application could have been claimed by the Bank of India in the Suit which it had filed in the Singapore High Court and the Tribunal correctly came to the conclusion that in view of the provisions of O2 R2 CPC, the Bank could not be permitted to afterwards sue for claiming this relief. In this connection he pointed out that the Bill of Exchange is part of the same Credit Facility given by the Bank to the Singapore Company and the amount claimed in the Original Application is also included in the amount which was claimed by the Bank of India in the Suit filed in the Singapore High Court. He, therefore, submitted that the Original Application is based on the same cause of action for which the suit was filed in the Singapore High Court as the bundle of facts required to be proved for succeeding before the Singapore High Court and in the Tribunal are same. In support of his contention, learned counsel placed reliance upon the decisions of the Supreme Court in Alka Gupta Vs. Narender Kumar Gupta, (2010) 10 SCC 141 and Om Prakash Srivastava Vs. Union of India Anr., (2006) 6 SCC 207. Learned counsel for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sport Appellate Tribunal, AIR 1976 SC 331, the Supreme Court pointed out that the place from where an appellate order or a revisional order is passed may give rise to a part of cause of action and so the writ petition would be maintainable in the High Court within whose jurisdiction the Appellate Authority is situated and the observations are as follows:- 25. The said decision is an authority for the proposition that the place from where an appellate order or a revisional order is passed may give rise to a part of cause of action although the original order was at a place outside the said area. When a part of the cause of action arises within one or the other High Court, it will be for the petitioner to choose his forum. .................... 27. When an order, however, is passed by a Court or Tribunal or an executive authority whether under provisions of a statute or otherwise, a part of cause of action arises at that place. Even in a given case, when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places. In other words, as order of the appellate authority constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment of the defendant from immovable property let out to him and a claim for money due from him on account of rent or compensation for use and occupation of that property, shall be deemed to be claims in respect of distinct causes of action O2 R2(3) CPC provides that a person entitled to more than one relief in respect of the same cause of action may sue for all or any of the reliefs; but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any relief so omitted. The Supreme Court has time and again held that for the bar under O2 R2(3) to be applicable, the defendant has to establish that the later Suit is based on the same cause of action as the earlier Suit. In this connection reference needs to be made to the Constitution Bench decision of the Supreme Court in Gurbux Singh Vs. Bhooralal, AIR 1964 SC 1810 and the observations are:- In order that a plea of a bar under Order 2 Rule 2(3) of the Civil Procedure Code should succeed the defendant who raises the plea must make out: (i) that the second suit was in respect of the same cause of action as that on which the previous suit was based; (2) that in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently prayed for except with the leave of the court. It must, therefore, be shown by the defendants for supporting their plea of bar of Order 2, Rule 2, Sub-rule (3) that the second suit of the plaintiff filed is based on the same cause of action on which its earlier suit was based and that because it had not prayed for any relief and it had not obtained leave of the court in that connection, it cannot sue for that relief in the present second suit. ........................... 9. The above position was again illuminatingly highlighted by this Court in Bengal Waterproof Limited v. Bombay waterproof Manufacturing Company and Anr. (1997) 1 SCC 99. 10. Order 2 Rule 2, Sub-rule (3) requires that the cause of action in the earlier suit must be the same on which the subsequent suit is based. Therefore, there must be identical cause of action in both the suits, to attract the bar of Order 2 Sub-rule (3). The illustrations given under the rule clearly brings out this position. Above is the ambit and scope of the provision as highlighted in Gurbux Singh case by the Constitution Bench and in Bengal Waterproof Limited (supra). The salutary principle behind Order 2 Rule 2 is that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd suit in regard to other reliefs based on the same cause of action. It does not however bar a second suit based on a different and distinct cause of action. 17. The cause of action for the first suit was non-payment of price under the agreement of sale dated 29.6.2004, whereas the cause of action for the second suit was non-settling of accounts of a dissolved partnership constituted under deed dated 5.4.2000. The two causes of action are distinct and different. Order 2 Rule 2 of the Code would come into play only when both suits are based on the same cause of action and the plaintiff had failed to seek all the reliefs based on or arising from the cause of action in the first suit without leave of the court. Merely because the agreement of sale related to an immovable property at Rohini and the business run therein under the name of 'Takshila Institute' and the second suit referred to a partnership in regard to business run at Paschim Vihar, New Delhi, also under the same name of Takshila Institute, it cannot be assumed that the two suits relate to the same cause of action. 18. Further, while considering whether a second suit by a party is barred by Order 2 Rule 2 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would possibly accrue or would arise. (See South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises (P) Ltd., (1996) 3 SCC 443. 12. The expression "cause of action" has acquired a judicially settled meaning. In the restricted sense "cause of action" means the circumstances forming the infraction of the right or the immediate occasion for the reaction. In the wider sense, it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but also the infraction coupled with the right itself. Compendiously, as noted above the expression means every fact, which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Every fact, which is necessary to be proved, as distinguished from every piece of evidence, which is necessary, to prove each fact. comprises in "cause of action". (See Rajasthan High Court Advocates' Association v. Union of India, 2001 (2) SCC 294). 13. The expression "cause of action" has sometimes been employed to convey the restricted idea of facts or circumstances which constitute either the infringement or the basis of a right and no more. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me evidence will maintain both actions. (See Mohd. Khalil Khan v. Mahbub Ali Mian, AIR 1949 PC 78). (emphasis supplied) Thus, cause of action in the restricted sense means the circumstances forming the infraction of the right or the immediate occasion for the reaction. In the wider sense, it means the necessary conditions for the maintenance of the suit including not only the infraction of right but also the infraction coupled with the right itself. Cause of action is generally understood to mean a situation or a state of facts that entitles a party to maintain an action in a Court or a Tribunal. In common legal parlance it is existence of those facts, which give a party a right to judicial interference on his behalf. It is in the light of the aforesaid discussion that the Court has now to determine whether the Original Application filed by the Bank of India before the Tribunal is based on the same cause of action for which the Bank of India had filed the suit in the Singapore High Court but before proceeding to examine this, the objection raised by Sri Siddharth, learned counsel for the Bank of India, though very feebly, that O2 R2 CPC will not apply to proceedings befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)." While Interpreting Section 22 of the Act, the Supreme Court in Industrial Credit and Investment Corporation of India (supra), observed:- "11. We, however, do not agree with the reasoning adopted by the High Court. When Section 22 of the Act says that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, it does not mean that it will not have jurisdiction to exercise powers of a court as contained in the Code of Civil Procedure. Rather, the Tribunal can travel beyond the Code of Civil Procedure and the only fetter that is put on its powers is to observe the principles of natural justice." The decision in the State Bank of India (supra) will not help the respondents. The Supreme Court pointed out that the provisions of Section 19(20) of the Act deal with the power of the Tribunal to grant interest and since a special procedure has been provided in the Act, the question of considering the provisions of Order 34 Rules 2, 3, 4 and 11, CPC does not arise. Thus, in view of the decision of the Supreme Court in Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience are also reproduced below:- 6. Under the foreign bills purchase facility granted by the Plaintiffs to the 1st Defendants pursuant to the letter of offer hereinbefore referred to, the sum of US$486,200.44 was due from the 1st Defendants to the Plaintiffs as at 31 March 2002 on which interest is accruing from 31 March 2002 at 2.5% above the Plaintiffs US dollar prime lending rate. 7. Despite the Plaintiffs demands and Plaintiffs solicitors letters of demand to the Defendants of 21 March 2002, the Defendants have failed refused and/or neglected to make payment of the sum due to the Plaintiffs. 8. The Plaintiffs therefor claim against the Defendants the sum of US$486,200.44 being the amount due as at 31 March 2002 in respect of banking facilities granted by the Plaintiffs to the 1st Defendants together with contractual interest thereon with effect from 31 March 2002 at the rate of 2.5% per annum above the Plaintiffs US dollar lending rate. ORIGINAL APPLICATION NO.165 OF 2002 FILED BY THE BANK BEFORE THE TRIBUNAL Original Application No.165 of 2002 filed by the Bank of India before the Tribunal, however, refers to the Bill of Exchange dated 20th June, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation was filed for recovery of dues from the Indian Company (defendant no.4), the other defendants (defendant nos.1, 2 and 3) were only pro-forma parties and no relief was claimed against them in the Original Application. The relief claimed was for payment of Rs.1,05,57,987.31 with interest which is equivalent to US Dollars 2,17,690.46. The contention of learned counsel for the petitioner is that the Bill of Exchange is part of same credit facilities given by the Bank of India to the Singapore Company and since the amount claimed by the Bank of India in the Original Application filed before the Tribunal is included in the amount which the Bank of India had claimed from the Singapore Company in the Suit filed before the Singapore High Court, the Suit and the Original Application are based on the same cause of action and, therefore, if the Bank of India had omitted to claim this relief in the Suit, it cannot afterwards sue for the relief not claimed. Learned counsel for the Bank of India, however, submitted that the Suit in the Singapore High Court was founded on the banking facilities made available to the Singapore Company in terms of the sanction letter, while the Original A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a "drawee in case of need". "Acceptor": - After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same or given notice of such signing to the holder or to some person on his behalf, he is called the "acceptor". "Acceptor for honour": When a bill of exchange has been noted or protested for non-acceptance or for better security and any person accepts it supra protest for honour of the drawer or of any one of the indorsers, such person is called an "acceptor for honour". "Payee":- The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the "payee". Section 32 of the Negotiable Instruments Act deals with the liability of the maker of a promissory note and acceptor of the Bill of Exchange and is as follows:- 32. Liability of maker of note and acceptor of bill.--In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of a bill of exchange, when the drawee does accept, he undertakes that he will pay the bill according to the tenor of the acceptance, but, where the drawee declines to accept, the drawer must bear all the losses and expenses incurred as well by reason of the non-acceptance as of the non-payment. In paragraph 357 it was further elucidated that wherever a bill is accepted the acceptor is and remains the party primarily liable on the bill whatever may happen to the other parties and whether any of the other parties are discharged or not. Should an indorser have to pay the bill, the acceptor by the fact of his acceptance is liable to indemnify him. .......................... 14. "Acceptance" in regard to a bill of exchange is a technical term. It does not mean "taking" or "receiving." Acceptance of a bill of exchange is the signification by the drawee of his assent to the order of the drawer. It is the act by which the drawee evinces his consent to comply with, and be bound by, the request contained in a bill of exchange directed to him, and is the drawee's agreement to pay the bill when it falls due. In commercial parlance acceptance of a bill of exchange is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ".......The only exception to that rule was where fraud by one of the parties to the underlying contract had been established and the bank had notice of the fraud. These principles have to be kept in mind while considering the submissions made by learned counsel for the parties. To appreciate the submissions made by learned counsel for the parties, it will also be necessary to refer to the decisions of the Supreme Court in S. Nazeer Ahmad (supra) and State of Maharashtra Anr. Vs. M/s National Construction Company, Bombay and Anr. (1996) 1 SCC 735 as they deal with the issues urged by learned counsel for the petitioner regarding Bill of Exchange being part of the same credit facilities made available by the Bank and the inclusion of the amount claimed in the Suit in the Original Application. In S. Nazeer Ahmad (supra), the appellant had borrowed a sum of Rs.1,10,000/- from the plaintiff-Bank for the purpose of purchasing a bus. He secured repayment of the loan by hypothecating the bus and by equitably mortgaging two items of immovable properties. The Bank first filed Original Suit No.131 of 1984 for recovery of money due and the said Suit was decreed. The Bank sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of action for recovery of money based on a medium term loan transaction simpliciter or in enforcement of the hypothecation of the bus available in the present case, is a cause of action different from the cause of action arising out of an equitable mortgage, though the ultimate relief that the plaintiff Bank is entitled to is the recovery of the term loan that was granted to the appellant. On the scope of Order 2 Rule 2, the Privy Council in Payana Reena Saminatha Anr. Vs. Pana Lana Palaniappa (1913-14) 41 IA 142 has held that Order 2 Rule 2 is directed to securing an exhaustion of the relief in respect of a cause of action and not to the inclusion in one and the same action of different causes of action, even though they may arise from the same transactions. In Mohammad Khalil Khan Ors. Vs. Mahbub Ali Mian ors. A.I.R. 1949 PC 78, the Privy Council has summarised the principle thus: "The principles laid down in the cases thus far discussed may be thus summarised: (1) The correct test in cases falling under Order 2 Rule 2, is "whether the claim in the new suit is, in fact, founded on a cause of action distinct from that which was the foundation for the former suit." (Moons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oon thereafter, on 8.1.1968, the contract for commencing construction was executed but instead of commencing work, the contractor abandoned the work on 19.12.1969. On 21.6.1972, the appellants filed Short Cause Suit No. 491 of 1972 only against the Bank in the Bombay High Court for recovery of Rs.14,12,836 with interest which was the amount stipulated in Performance Guarantee. On 17.1.1983, the Bombay High Court dismissed the suit and the appeal was dismissed on 7.4.1983. On 7.4.1983, the appellants filed Special Civil Suit No. 29 of 1983 against both the contractor and the Bank in the Court of the Civil Judge (Senior Division) at Aurangabad. In this suit, the appellants claimed Rs.1,13,27,298.16, with interest, from the contractor by way of damages for breach of contract. This was inclusive of their claim for Rs.14,12,836 against the Bank under the performance guarantee. On 28.7.1992, the Civil Judge dismissed the suit holding that the cause of action was identical to the one in the former suit and so it was barred by res judicata under Explanation IV to Section 11 CPC as also O2 R2 CPC. The appellants appealed but the Division Bench of the Bombay High Court dismissed the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd this had caused the appellants to suffer losses worth Rs. 1,13,27,298.16. This amount was inclusive of the claim of Rs. 14,12,836 based on the Performance Guarantee No. 57/22 for which the contractor and the Bank were jointly and severally liable. 16. The relief sought in the short cause suit was therefore based on a different cause of action from that upon which the primary relief in the special suit was founded. 17. In Sidramappa v. Rajashetty, AIR 1970 SC 1089, this Court held that where the cause of action on the basis of which the previous suit was brought, does not form the foundation of the subsequent suit, and in the earlier suit, the plaintiff could not have claimed the relief which he sought in the subsequent suit, the plaintiff's subsequent suit is not barred by Order 2 Rule 2. Applying this ruling to the facts of the present case, it is clear that, in the first suit, the appellants could only claim reliefs in respect of Rs.14,12,836 which was the maximum amount stipulated in the performance guarantee. They could not have claimed reliefs of Rs.1,13,27,298.16 which they did in the second suit on the basis of the contract relating to the work to be performed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India against the Singapore Company in the Singapore High Court, O2 R2 CPC would bar the filing of the Original Application. The scope of O2 R2 CPC was also considered by the Privy Council in Payana Reena Saminatha Anr. Vs. Pana Lana Palaniappa (1913-14) 41 IA 142 and it was held that Order 2 Rule 2 is directed to securing an exhaustion of the relief in respect of a cause of action and not to the inclusion in one and the same action of different causes of action, even though they may arise from the same transactions. In Mohammad Khalil Khan Ors. Vs. Mahbub Ali Mian Ors. A.I.R. 1949 PC 78. The Privy Council also summarised the principles and pointed out that the cause of action has no relation whatever to the defence that may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour. It is clear from what has been noticed hereinabove that the cause of action which led to the filing of the Suit in the Singapore High Court was the banking facilities made available by the Bank of India to the Singapore Company in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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