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2015 (7) TMI 539 - CALCUTTA HIGH COURT

2015 (7) TMI 539 - CALCUTTA HIGH COURT - TMI - Claim of interest - Suit for money on account of delayed payment of the principal sum and the agreed interest. - Whether the suit is barred by waiver, acquiescence, estoppel or principles analogous thereto - Whether there has been accord and satisfaction between the parties in respect of the transactions, which form the subject matter of the suit - This Court cannot lose sight of, one fact that the plaintiff encashed the amounts received after the m .....

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. Jayak Gupta,Adv, Mr. Rajarshi Dutta,Adv. For The Respondent : Mr. Joy Saha, Sr. Adv, Mr. Gaurab Kumar Basu, Adv, Mr. Aniruddha Mitra, Adv. HARISH TANDON, J : This is a simple suit for money on account of delayed payment of the principal sum and the agreed interest. The facts adumbrated in the plaint runs as under: The Plaintiff-Company purchased the bonds in the form of promissory note issued by the defendant which are termed as 13.50% SIDBI Bonds 2003 (4th Series) and 12.50% SIDBI Bonds 2004 .....

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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 ₹ 3.69 crores on 1st July, 1998 by the Plaintiff-Company from the said Shanker Lal Saraf. The Bonds were .....

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as initiated at the instance of the Reserve Bank of India, the Plaintiff-Bank filed a writ petition being W.P. No. 1456 of 1998 before this Court seeking a mandamus upon the defendant to transfer the aforesaid bonds in favour of the Plaintiff- Company and also to pay the interest as agreed in the said bonds. The writ petition was ultimately disposed of holding that the writ is not the proper remedy and permitted the petitioner to approach the Company-Court being the High Court at Delhi seeking i .....

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ember, 2004, the Delhi High Court held that the subject bonds are beyond the purview of the liquidation proceeding and directed the said Shanker Lal Saraf to put up the matter before the defendant. After the delivery of the said judgment on 11th January, 2005, the Plaintiff-Company communicated the order of the Delhi High Court to the defendant demanding the completion of all the formalities for redemption and payment of interest as all the bonds have crossed the maturity date. Since the redempt .....

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of TDS was also deducted. By a letter dated 24th February, 2005, the Plaintiff-Company raised an objection over the rate on which the TDS was deducted. Which was accepted by the defendant as it issued a further warrant covering a sum of ₹ 58,86,833/- on the account of excess deductions of the TDS. According to the plaint case, at the time of audit, it was detected that the interest was calculated up to 31st October, 2005 and a protest was ultimately lodged through a letter dated November 1 .....

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t 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 .....

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r 23, 1997 by the defendant from the RBI seeking advice for further action in the matter on January 29, 1998. The RBI advised the defendant to take up the matter with the Official Liquidator which was accordingly done on April 3, 1998. It is categorically stated by the defendant that several reminders were made till July 18, 2001 but did not receive any reply from the Official Liquidator in this regard. It is, thus, stated that because of the embargo imposed by RBI, the defendant was prevented i .....

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s no latches, negligence and delay on the part of the defendant to honour the Bonds to the Plaintiff-Company. On the strength of the respective pleadings, the learned Advocates representing the respective parties were heard and following issues were framed: 1) Whether the suit is barred by waiver, acquiescence, estoppel or principles analogous thereto? 2) Whether there has been accord and satisfaction between the parties in respect of the transactions, which form the subject matter of the suit? .....

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t or any other rate till the date of payment as claimed in the paragraphs 33 and 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 entitl .....

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mmediately 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 under the Law. He further submits that there was no dispute on the ownership of Shanker Lal Saraf and, therefore, disputes could not have been raised at the time of lodging the Bonds purchased from Shanker Lal Saraf by the Plaint .....

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omply with any direction or order given by the RBI under the provision of the said Act, the Non-Banking Financial Company cannot accept any deposit. The RBI is empowered to make an application for winding up of such defaulting Non-Banking Financial Company under the Companies Act, 1956 on incapability to pay its debt; disqualification to carry on the business of Non-Banking Financial Institution by virtue of under Section 45 IA; Non-Banking Financial Institution is prohibited from receiving depo .....

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purview of the said liquidation proceeding and, therefore, payment of the principal and the accrued interest after the period of redemption was deliberately done by raising a frivolous disputes. He thus submits that those Bonds are in the nature of promissory note with clear agreement that an interest @ 13.50% and 12.50% shall be paid and any unreasonable delay beyond the redemption period entitles the depositors to be paid an interest at the agreed rates till the payment of the redemption amoun .....

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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 .....

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upreme Court in case of Public Service Commission, Uttaranchal -v- Mamta Bisht & Ors; reported in (2010) 12 SCC 204, Competition Commission of India -v- Steel Authority of India Ltd & Anr; reported in (2010) 10 SCC 744 and Chief Conservator of Forests, Govt of A.P. -v- Collector & Ors; reported in (2003) 3 SCC 472. It is strenuously submitted that non-adherence of the circulars and/or directions of the Reserve Bank of India to the Bank may not only attract an offence of criminal brea .....

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e, it is submitted that the claim of the plaintiff is not maintainable after receiving the redemption amount with accrued interest and having appropriated the same. This Court finds that issues are intricately connected and, therefore, this Court proposes not to deal those issues in isolation, as the findings recorded hereinafter would sufficiently answer those issues. The subject Bonds issued by the defendant are transferable and can be bought by a person from the register holder. In course of .....

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ffecting the transfer and onward payments of interest on periodical rests. The subject bonds are tradable in an open market and admittedly are purchased by the plaintiff upon payment of the sum of ₹ 3.69 crores from Shanker Lal Saraf. The defendant showed inability to affect the transfer as 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 th .....

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eal 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 i .....

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llowing prayers: (a) permit the Small Scale Industry Development Bank of India Ltd; respondent no.3 to give interest due and payable to the petitioner with respect to 25 SIDBI Bonds issued by it and duly registered in the name of the petitioner; (b) permit the respondent no.3 to register transfer of 41 Bonds made by the petitioner in favour of the purchaser namely M/s SIBCO Investment (P) Ltd or their nominees with interest; (c) permit Industrial Development Bank of India, respondent No.4 to giv .....

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y, M/s K.P.C. Securities (P) Ltd or their nominee; (f) pass such order or further order to which this Hon ble Court may deem fit and proper on the facts and circumstances of this case. The interlocutory application was registered as CA No. 1380 of 1998 and was finally decided on 17th December, 2004. The Company Court held that the transaction forming the subject bonds was entered into much before the RBI notification dated 10th April, 1997 and, therefore, admittedly before the appointment of the .....

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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 .....

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rate at which the TDS is deducted by the defendant and caused a letter dated 24.02. 2005 (Exbt-P) and demanded the refund of the excess amount. From the said letter, it appears that the TDS was deducted @ 20.91% in place of 5.22% which was applicable. The defendant accepted the contention of the plaintiff and issued the warrants covering the excess payment on account of TDS on March 3, 2005 (Ext O ). Admittedly the plaintiff encashed the redemption value with interest without raising any demur a .....

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ed by between the parties in the subject bonds. Though Section 3 of the Interest Act, 1978 confers power on the Court to allow interest in any proceeding for recovery of debt or damages or in any proceeding in which a claim for interest in respect of any debt or damages already paid is made but Subsection 3 thereof puts an embargo on the Court to award interest upon interest. It is no longer res integra that if from the conduct as well as the agreement of the parties, the interest are payable on .....

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have noticed and approved longestablished banking practice of charging interest at reasonable rates on periodical rests and capitalising the same on remaining unpaid. Such a practice is prevalent and also recognised in non-banking moneylending transactions. The legislature has stepped in from time to time to relieve the debtors from hardship whenever it has found the practice of charging compound interest and its capitalisation to be oppressive and hence needing to be curbed. The practice is per .....

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ised, 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 .....

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riod and, therefore, the defendant is liable to pay the interest for delayed payment. Both the parties have argued much on the point, as according to the plaintiff, the defendant have unreasonably withheld the said amount, on the other hand, the defendant says that because of the embargo and restriction by the RBI and the pending proceedings, the maturity amount was not paid on the date of its maturity. The reliance appeared to have been made by both the sides on the facsimile dated 9th June, 19 .....

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(Amendment) Act, 1997 directing the Company not to sale, transfer, create charge or mortgage or deal in any manner with any of its profits and assets without the permission of the bank for a period of six months from the date of the said notification. The Official Liquidator was appointed on 22nd May, 1997 who subsequently treated the subject bonds as fraudulent preference under Section 531 of the Act. Though it was held that the transactions are genuine and cannot be declared as fraudulent pref .....

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liament to enact the policy and to issue directions/guidelines which have a statutory 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. .....

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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 receive any reply. Ultimately on 17th December, 2004, the application of the Shanker Lal Saraf before the Company-Court succeeded and within a short span of time, the redemption value along with interest was paid to the plaintiff .....

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parties. In fact, reliance is placed upon a judgement rendered in case of Mamta Bisht (supra) in these regards. At the time of framing the issues, none of the parties suggested any issue relating to non-joinder of necessary and proper parties. This Court, therefore, do not want to go deep into the said aspect as having not taken in the pleading nor a specific issue was raised. This Court cannot lose sight of, one fact that the plaintiff encashed the amounts received after the maturity without p .....

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eniently placed upon a judgment of the Supreme Court in case of Bhagwati Prasad Pawan Kumar -v- Union of India reported in (2006) 5 SCC 311 wherein the Apex Court held that if the protest is not made before the encashment of the amount and it does not appear from the conduct of the parties that the such encashment was made under protest, the plaintiff is prevented from raising an objection over the short payment in these words: 18. Section 8 of the Contract Act provides for acceptance by perform .....

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hus, 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 .....

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