Bank Of Baroda vs Jayant R.Kanani
2021 Latest Caselaw 12944 Bom

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       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
               CIVIL APPELLATE JURISDICTION
              WRIT PETITION NO. 4960 OF 2006
Bank of Baroda                          .. Petitioner
     Vs.
Jayant Kanani & Ors.                   .. Respondents
                               WITH
                 CIVIL APPLICATION NO. 1745 OF 2016
                                 IN
                 CIVIL APPLICATION NO. 2378 OF 2013
                                 IN
                   WRIT PETITION NO. 4960 OF 2006
Smt. Alka Choksi & Anr.                            .. Applicants
IN THE MATTER BETWEEN
Bank of Baroda                                    .. Petitioner
     Vs.
Jayant Kanani & Ors.                              .. Respondents
Mr. Shivajirao N. Satpure a/w Mr. Subhash Satpute, Mr. Sachin
Satpute, Mr. Vikas Somvanshi I/by Praveen K. Hushing for
Petitioners.
Mr. Rohit Gupta a/w Ms. Rita Yadav, Ms. Apurva Sanglikar I/by
M/s Raval Shah & Company for Respondent No.1.
Mr. Nitin Thakkar a/w Mr Jay Choksi, Mr. Devanshu P. Desai,
Ms. Rutuja Mahadik I/by Mr. Lalit Jain for the Respondent Nos.3
and 4 in WP and Applicants in CAW.
                                CORAM : A.A.SAYED &
                                        R. I. CHAGLA, JJ.
                                DATE : 9 SEPTEMBER 2021.
ORDER:

The challenge in this Petition is to the order of DRAT dated

29th July, 2005 allowing the Appeal No. 1999 of 2003 and setting

aside the judgment and order dated 23th April, 2003 of DRT. The

DRT by the said judgment and order dated 23 rd April, 2003 had

allowed O.A of the Petitioner Bank in the following terms:

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"ORDER A) The application is allowed with no order as to cost. B) The Defendant is ordered to pay to the applicant Rs.40,05,896/- (Rs. Forty Lacs Five Thousands Eight Hundred Ninety Six only) with interest (i) @ 18.25% p.a. from 09.12.1998 till the date of filing Original Application

(ii) @6% p.a. from the date of the O.A. till six months from today and (iii) thereafter @ 12% p.a. with quarterly rest till full realisation.

C) The Defendant is also ordered to pay to the applicant Rs.13,53,601/- (Rs. Thirteen Lacs Fifty Three Thousands Six Hundred One only) with interest (I) @ 18.25% p.am. From 09.12.1998 till the date of filing Original Application

(ii) @ 6% p.a. from the date of the O.A. till six months from today or until the bank tenders the 3 below noted bills, whichever is latter, and (iii) thereafter @ 12% p.a. with quarterly rest till full realisation. The defendant would be entitled to three bills viz. (I) No. 73/93 dated 04.11.1993 for Rs.1,00,000/- (ii) No. 74/93 dated 04.11.1993 for Rs.1,00,000/- and (iii) No. 75/93 dated 04.11.1993 for Rs.1,09,520/- from the Applicant while tendering the amount in this clause.

D) The charge of the outstanding amount is on hypothecated book debts and goods as referred to in the Agreements at Exh.16 & 19 both dated 14.05.1996. E) Issue Recovery Certificate as per above terms."

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2. The principal issue involved in the Petition is of limitation.

The DRT on the issue of limitation held that considering the

acknowledgment of the Respondent No.1, the O.A was within

limitation. In the Appeal preferred by the Respondent No. 1 against

the order dated 23rd April, 2003 of DRT, the DRAT set aside the

said order and held that OA was time-barred. While concluding so,

the DRAT has observed as follows:

"8. Mr. Rishab Shah, the learned advocate appearing for the appellant vehemently argued that the statement of accounts for cash credit facility showed overdrawn limit beyond Rs.20 Lacs as on 1.7.1995 the alleged acknowledgement of liability was dated 8.12.1998 & the original application was filed on 6.9.2000 and therefore, the claim of the bank was stale and time barred.

9. Having gone through the evidence, which is produced before me, factual position as pointed out by Mr. Rishabh Shah appears to be true. I therefore find force in his submission that the claim of the bank was time barred. The original application was indeed time barred. Therefore, on this ground alone, the appeal has to be allowed. However, for completeness of the judgment other points are also dealt with."

The DRAT observed the attitude of the Petitioner-Bank was

improper. The DRAT also observed that the set off claimed by the

Respondent No. 1 may not be legal set off and the order of DRT in

allowing the OA was not proper.

3. The Petitioner Bank had granted credit facilities to the

partnership firm of the Pooja Enterprises wherein the Respondent

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No.1 Jayant R. Kanani was a partner. The facilities were renewed

from time to time and lastly renewed on 15/12/1994. The

partnership firm was dissolved on 24/01/1995 and became a sole

proprietory concern of Respondent No.1 Jayant R. Kanani. After

the partnership firm was dissolved and became sole proprietary

concern, Respondent No. 1 took over the liabilty of the partnership

firm and executed various fresh documents such as Demand

Promissory Note, Letter of Sole Proprietorship, Hypothecation of

Book Debts, Letter of Bill Purchase, Letter of Pledge, Deed of

Hypothecation of goods. The said documents were executed on

14/05/1996. The DRT has noted these facts and in paragraph 8 of

its order has observed that there was admission by the

Respondent No.1 that the partnership firm was dissolved and the

Respondent No.1 had continued business as proprietory concern

and took over the liabilities to pay the outstandings of the

Petitioner Bank after executing fresh documents on 14/05/1996.

The aforesaid facts have however not been considered by the

DRAT and have been completely glossed over by the DRAT. We

find that the impugned order is a cryptic order and has been

passed by DRAT without proper application of mind and without

assigning any reason for its conclusion.

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4. Thus, as noted above, the documents were executed by the

Respondent No. 1 on 14/05/1996. The acknowledgment of liabilty

of the Respondent No.1 (page 52 of the Compilation) is dated

08/12/1998 i.e. within 3 years from the date of execution of the

documents on 14/05/1996. The debt was thus live on the date of

the acknowledgment of liabilty. The OA was filed on 06/09/2000

i.e. within 3 years of the acknowledgment of liability of the

Respondent No.1 dated 08/12/1998. It cannot therefore be said

that the OA was time barred. We find that the DRT in its order had

dealt with the issues including that of limitation and set off and

and observed in paragraphs 9 onwards as follows :

"9. The first defence is of limitation. The O.A. has no doubt been filed beyond three years of execution (on 14.05.1996) of security documents. The Letter of Acknowledgment dated 18.12.1998 (Exh.20), however, brings the O.A. within limitation. The Defendant has again contended that the Acknowledgment was blank when he signed it. There is, however, no evidence to support this plea. Apart from that, a person signing documents has to be presumed, unless shown otherwise, to have signed it with intention of execution. The Defendant, apart from making bare statement that signature was obtained on the printed acknowledgment when it was blank, has done precious little to advance his contention. Looking to the

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endorsement with the help of franking machine of payment of stamp duty dated 02.11.1998 it cannot be said that the signature was obtained alongwith security documents.

10. The learned defence counsel has argued without any foundation in the pleading that acknowledgment is fabricated. It has further been argued that amounts mentioned in the acknowledgment do not tally with the amounts in the Statement of Account. In this connection, it has to be noted that the principal accounts shown in the acknowledgment (interest shown separately) and principal amount in the Statement of Account (Exh. 24, 25 & 11/15) do match. Accrued interest is not debited because it is NPA. The learned defence counsel has relied on

1. AIR 1997 Gujarat 24 M/s Shivan Construction Co., Ahmedabad & Ors. Vs. Vijaya Bank, Ahmedabad & Ors.

2. AIR (30) 1943 Oudh 425 Nanak Prasad and Ors Vs. Raja Bahadur Raja Surji Bakksh Singh.

3. AIR 1967 SC 935 (V 54 C 199) Tilak Ram and Ors. Vs. Nathu and Ors.

4. AIR 1965 Madras 142 (V 52 C 45) Devalla Guruswamaiah and Ors. Vs. Ramakrishna Naicker and Anr.

5. AIR 1999 SC 1047 Sampuran Singh and Ors. Vs. Niranjan Kaur and Ors.

6. AIR 1970 Bombay 251 (V 57 C 44) Govindram Mihamal Vs. Chetumal Vilardas.

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7. AIR 1956 Calcutta 66 (V 43 C 22 April) Purnendu Bh. Deb Burman Vs. Union of India and Ors.

8. AIR (29) 1942 Oudh 388 Sunder Lal Vs. Nanhu and Ors.

9. AIR 1961 SC 1236 (V 48 C 221) Shapoor Fredoom Mazda Vs. Durga Prosad Chamaria & Ors.

10. AIR 1969 Rajastha (V 56C 38) Full Bench Jeevraj & Anr. Vs. Lalchand & Ors.

I have carefully gone through each of them. The authorities are on the point of essentials of acknowledgment, the debt should be live on the date of acknowledgment, the acknowledgment should be with intention of admitting subsisting jural relationship. There cannot be any controversy about the above legal position reiterated by their Lordships in the citations. I, however, fail to understand as to how any of the above authorities would have application to this matter. The acknowledgment herein is very specific and categorical. I find that the acknowledgment satisfies the legal requirements. If that acknowledgment is considered, which no doubt is required to be done, the application is clearly within limitation.

11. The core defence appears to be of set off. It is pertinent that neither the Defendant has quantified the set off nor paid requisite court fee thereupon. Consequently, the Applicant has not filed WS to the same. There is, therefore no legal set off. Inspite of this, if one were to consider the following contentions which according to Defendant constitute set off, as quotable set off or as and

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by way of defence contentions, the Applicant's claim is still not dislodged.

It is contended that in 1996, the 1 st Defendant wanted to sell office premises, that there was purchaser for Rs.17 lacs. The Defendant, therefore had applied to the bank for permission which was not given despite vigorous pursuation. It is submitted that the property could not be sold for want of permission and the market has come down by about 40%. Certain documents filed by the Defendant fortity the factuality in the above contention. There are replies from the bank to the Defendant enquiring the name of the prospective purchaser and informing that the matter has been referred to the higher authorities. The fact that the Defendant wanted to sell the office premises but the Applicant did not give permission is, therefore acceptable. One does not however understood the direct relevance or bearing of this fact on the Defendant's liability. That is because the property was not mortgaged with the Applicant bank nor the Defendant had agreed to create mortgage thereof. It is therefore, unknown as to why the Defendant had sought the bank's permission and how the Applicant had entertained the request. The only plausible reason appears to be that through not mortgaged/charged the Defendant was not sell that property. The correspondence on record is referable only to this conclusion. But, merely because the Applicant did not give permission, the Defendant cannot claim set off more so of the amount for

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which the property was to be sold at that time. In law, the liability of the Applicant would be to the extent of loss, if any, sustained by the Defendant by not granting the permission. The evidence about them market price of the property, the purchaser and the amount for which he had agreed to purchase is absent. There is also no evidence about the present market price. Therefore, it is ridiculous to make set off for Rs.17 lacs, the price for which the property could have been sold.

12. The other contention is that three bills aggregating to Rs.3,09,520/- were accepted by one Ganesh Anhydrites Ltd. But, on presentment, the party did not make payment. The Defendant, therefore, was requesting the bank to give the bills for action against the said acceptor. In fact, Defendant had filed Company Petition for liquidation of said company in which the bills were required to be produced. But, the Applicant did not return the bills. The correspondence filed by the Defendant on the record bears out correctness in the above said factuality. In fact, the bills are according to the Defendant, missing. In law, the Defendant being drawer of the bills is entitled to the bills only on payment of the amount. The Defendant, however, never tendered the payment. The Applicant, therefore, was not obliged to return the bills to the Defendant. The Defendant would in law be entitled to get these bills on payment of the amounts. Having regard to the defence that the bills are now lost by the Applicant bank, about which

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the Applicant bank has not stated anything direction will have to be passed in the operative order that the Defendant shall pay the outstandings under Inland Bill Facility and the bank shall simultaneously hand over the original bills, which would be required by the Defendant for taking legal action against the acceptor.

13. The Defendant's contention is that certain LIC Policies were assigned in favour of the Applicant. The Applicant bank filed affidavit of Mr. M.M. Bhutani (Exh.48). Xerox copies of the letters given by the LIC to the Applicant are annexed to the affidavit. All the letters are addressed to the Applicant bank which means that the policies were assigned in favour of the Applicant bank. Letters, however, show that all the policies have lapsed because premia for three years have not been paid and as such, the policies have not required any surrender value. During the course of arguments, learned defence counsel tried to castigate the Applicant bank about lapse of the policies. But, no agreement has been produced on record showing that the Applicant bank was obliged to pay the premia. If that be so, one does not understand how the bank is responsible for lapse of the policies. The Defendant's case was also that it had PPF Account with the Applicant. In affidavit of Mr. M.M.Bhutani (Exh.48) factuality is admitted but it is denied that the Applicant has appropriated any amount in the outstandings. It would, therefore, be open for the Defendant to deal with that account as per rules. Thus,

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none of the aforesaid contentions hold any merit. The set off, therefore, will have to be rejected even if considered on merit.

14. During the course of arguments, learned defence counsel has argued that the Applicant did not file the bills discounted under Bill Purchase / Discounting Facility and the bills under Inland LC Advance Facility. In the WS, however, this contention was not taken up. Therefore, in my view, it was unnecessary for the Applicant to have produced bills more so because the Defendant had acknowledgement of debt. In law, the acknowledgement of debt itself gives fresh cause of action.

15. The learned defence counsel has pointed out certain entries in Statements of Account (Exh.24, 25 & 11/15) as also xerox copies of the Statement of Account annexed to the O.A. But, I do not think that any of the entries thereunder are assailable. That may be why the Defendant did not challenge the Statements of Account in the WS. The learned defence counsel also pointed out from the Statements of Account that debit entry on the date of execution of security documents already was of more amounts. I, however, do not think that this fact leads anywhere because the Applicant's case, not denied by the Defendant, is that the facilities were already enjoyed by the erstwhile partnership firm.

The learned defence counsel raised certain contentions at the time of argument. It is contended that interest rate is

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exorbitant. In my view, however the Defendant cannot be allowed to agitate the interest rate in respect of the amount mentioned in the acknowledgement of debt dated 08.12.1998 (Exh.20). I am supported by dictum in the matter between Syndicate Bank V. R Veerdhana & Ors reported in (2003) 2 SCC 15. As regards interest from the date of acknowledgement, however, the contention can be entertained. The amounts in the acknowledgement and in the O.A. are given below

Facilities Amount in the Amount in the Acknowledgement O.A.

                           Principal             Amount of
                                                 Interest &
                                                 Date
                                                 accrued from
CC                         Rs.25,37,665/-        Rs.12,18,93          Rs.52,60,705/
(Hypothecation                                   1/-
of Book Debts)                                   (27.09.1996)

Bills Purchased            Rs.7,99,928/-         Rs.5,53,673/         Rs.16,18,455/
/ Discounted                                     -

Inland       LC            Rs.1,49,302/-         Rs.99,998/-          Rs.2,99,769/-
Advance Bills                                    (17.08.1995)

The Statements of Account show that Rs.27,23,040.50 in case of CC, Rs.8,18,527/- in case of Bill Purchase / Bill Discounting and Rs.1,50,467/- in case of Inland LC Advance Bill have been added at the foot being interest plus interest tax from 29.09.1996. The Applicant ought to have clarified the rate of interest at which the above amounts have been calculated. Since that is not done, the application can be allowed only in respect of the amounts

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in the acknowledgement by awarding interest from the date of acknowledgement. This course will meet the ends of justice and is open because admittedly no amount has been deposited in any of the accounts after the date of acknowledgements. The agreed rate of interest in the security documents of 1996 is 20.25% and 22.75% in case of CC Hypothecation and Inland LC Advance Bill Facility, there being no agreed rate of interest in respect of Bill Purchase Facility. These security documents are not supported by any Sanction Letter. In fact, the Applicant's own case, it may be reiterated, is that the facilities given to erstwhile partnership firm under Letter of Sanction dated 15.12.1994 were only continued by the Defendant Proprietor. The said sanction letter at Exh.12 mentions the agreed rate of interest to be 17.50% p.a. plus interest tax @ 0.75% in respect of CC (Hypothecation) and Bills Purchase / Discounting facilities. Therefore, interest from the date of acknowledgement upto the date of filing the O.A. would have to be granted at said rate.

17. Considering the facts and circumstances on record viz that the Applicant did unnecessarily suppress permission for sale of the Defendant's office premises, that the Defendant suffered loss due to lapse of LIC Policies, that the Defendant Unit is now not working and that the Defendant is handicapped person, awarding interest @ 6% p.a. from the date of filing the O.A. till six months from today would meet the ends of justice. Said six months

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period is given for repayment and after that period, interest @ 12% p.a. with quarterly rest (considering present PLR and prevailing rate of interest) will have to be allowed, last the Defendant may misuse the discretion exercised by this Tribunal.

18. For the aforesaid reasons, the application is liable to be allowed. Having regard to the Applicant's conduct and the loss suffered by the Defendant, I am inclined not to burden the Defendant with the cost of the O.A."

5. We find that the DRT had rightly dealt with the issues

threadbare, however, the DRAT by a cryptic order which is

impugned in the present Petition has set aside the same. As stated

earlier the documents were executed by the Respondent No. 1 on

14.05.1996; the date of acknowledgment of liability by the

Respondent No. 1 is 08.12.1998; and the O.A. filed on

06.09.2000. The O.A. was therefore within limitation. It is required

to be noted that the Respondent No. 1 had not quantified the

amount of set-off claimed by him nor paid the Court fees in respect

thereof, as observed by DRT. We find that the said issue has been

discussed in paragraph 12 of the order of DRT and the DRT found

that the Respondent No. 1 had never tendered the amount and

therefore the Petitioner Bank was not obliged to return

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the bills to the Respondent No. 1. The DRT however left a window

open for the Respondent No. 1 to claim the said amount by

providing in the operative part of its order that Respondent No. 1

shall pay the outstanding under Inland Bill Facility and the

Petitioner Bank shall simultaneously handover the original bills,

which would be required by the Respondent No. 1 for taking legal

action against the acceptor. Though the DRAT observed in the

impugned order that the set-off claimed by the Respondent No. 1

may not be a legal set-off, it went on to further observe that the

defences taken by the Respondent No. 1 had substance in them

and that the order of DRT in allowing the O.A. was not proper. The

said observation of DRAT is curious to say the least particularly

when no reasons were assigned by DRAT and no amount of set-

off is specified by it. In the circumstances, the impugned order of

DRAT, in our view, cannot be sustained and is required to be set

aside in its entirety.

6. It is noted that during the pendency of this Petition, the

Petitioner was permitted to amend the Petition to bring on record

the Respondent No.2 Society as well as the Respondent No.3 and

4. It is alleged by the Petitioner-Bank that the Respondent No. 1

during the pendency of the Writ Petition has wrongly sold the office

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premises viz. 3B, Lalmani Housing Co-operative Society Limited,

Bhuleshwar, Mumbai - 40002 to the Respondent No. 3 and 4,

which office premises are mortgaged to the Petitioner Bank. We

refrain from rendering any finding on this aspect as we find that the

DRT had in paragraph 11 of its order dated 23.04.2003 found that

there was no mortgage and therefore there was no question of the

Petitioner Bank granting permission to sell the property, which

finding has not been challenged by the Petitioner-Bank by filing an

Appeal before the DRAT or filing any cross objections in the

Appeal filed by the Respondent No. 1 before the DRAT.

7. In light of the above, we pass the following order.

ORDER

i. The impugned order of DRAT dated 29 th July,

2005 is set aside.

ii. The order of DRT dated 23 April, 2003 is

restored.

iii. Needless to say that the interim order passed by

this Court on 29th November, 2013 in Civil

Application No. 2378 of 2006 shall stand

vacated.

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iv. The Petition is allowed in the aforesaid terms.

Rule made absolute accordingly.

v. The Civil Application filed by Respondent No. 3 &

4 does not survive and to stand disposed of.

     (R.I. CHAGLA, J.)                            (A.A.SAYED, J.)