Cherag Shah vs Harshwardhan H Sabale
2024 Latest Caselaw 22787 Bom

Bombay High Court

Cherag Shah vs Harshwardhan H Sabale on 6 August, 2024

Author: Abhay Ahuja

Bench: Abhay Ahuja

                                        901. IAL 16702-23 in COMEXL 16273-23.doc


                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                     ORDINARY ORIGINAL CIVIL JURISDICTION

            INTERIM APPLICATION (L) NO. 16702 OF 2023
                              IN
      COMMERCIAL EXECUTION APPLICATION (L) NO. 16273 OF 2023

 Cherag Shah                                          ...Applicant
      V/s.
 Harshwardhan H. Sabale                               ...Respondent

 Mr. Rashmin Khandekar with Ms. Karishni Khanna, Mr. Turab Ali Kogri,
 Mr. Utkarsh Singh and Mr. Hardika Kukkeja i/b S. K. Partners for
 Applicant.
 Mr. Shlok Parekh with Mr. Siddharth Bafna and Ms. Rinu Kallan i/b
 Integrum Legal, Advocate for Award Debtor No.1.
 Mr. Jatin Rawal, General Manager, PAD RBI with Mr. S. C. Mahanta,
 Deputy Legal Advisor, RBI present.
 Mr. Govind Wadkar with Ms. Charu Sabale, through VC for Sawantwadi
 Urban Co-operative Bank.
 Mr. N. C. Pawar, OSD, Court Receiver present.
 Mr. Viraj S. Rane, Clerk, Prothonotary & Senior Master

                           CORAM   :   ABHAY AHUJA, J.

                           DATE    :   6th AUGUST , 2024
 P.C. :

1. Pursuant to the order dated 31st July, 2024, today when the

matter was called out, this Court was informed that the bank which

had supposedly generated the National Electronic Fund Transfer

("NEFT") reference numbers with respect to the two purported

transactions of Rs.10 Crs each is subject to directions of the Reserve

Bank of India ("RBI") under Section 35A read with Section 56 of the

Banking Regulation Act, 1949 as applicable to the cooperative societies

901. IAL 16702-23 in COMEXL 16273-23.doc

with effect from 14th June, 2023 and therefore, there have been no

RTGS/NEFT transactions allowed / made by the bank with any

customer of the bank and therefore the subject NEFT transactions were

not made by the bank.

2. Mr. Khandekar, learned Counsel appearing for the Applicant

tenders across the bar two e-mails dated 2 nd August, 2024 in support of

his contention, the relevant extract whereof is usefully reproduced as

under:-

901. IAL 16702-23 in COMEXL 16273-23.doc

3. Mr. Parekh, learned Counsel appearing for the Respondent also

seeks to tender across the bar an email dated 6 th August, 2024,

purportedly from the Sawantwadi Urban Co-operative Bank with

respect to the two transfers whereby it is informed that the Sawantwadi

Urban Co-operative Bank is in the process of being merged with the

TJSB Co-operative Bank and the decision has been taken on 29 th June,

2024. That therefore, there may have been delay in the transfer of the

two amounts and that they are investigating and within seven days

they would give information regarding the same. That in respect to the

aforesaid two amounts they have not contacted any person. That the

information is being provided at the request of the client and that no

responsibility is being undertaken with respect to the said information

by the bank. The email appears to have been sent by Mr. Govind

Wadkar, whose designation is mentioned as director. The said email is

also usefully reproduced as under:-

901. IAL 16702-23 in COMEXL 16273-23.doc

4. Further, pursuant to the directions of this Court, Mr. Jatin Rawal,

General Manager, Public Accounts Department, RBI is also present in

the Court along with his legal advisor.

5. Mr. Rawal, has confirmed that no monies have been received into

the account of the Prothonotary & Senior Master of this Court, whether

Rs. 10 Crs that were purportedly transferred on 31 st May, 2024 or the

second Rs. 10 Crs purported to be transferred on 5 th July, 2024. Mr.

Rawal, has also explained that normally the NEFT numbers are

generated by the concerned bank pursuant to an application by the

customer and at a time when the transaction is being executed, there is

a UTR number also that is generated.

6. In the present case before the Hon'ble Supreme Court as well as

this Court, it has been stated on oath and also submitted through

Counsel which has been recorded in the orders of both the Hon'ble

Supreme Court and this Court that the said payments had been made

by NEFT.

7. This Court, therefore, kept back the matter, so as to get assistance

on whether the NEFT has been executed and whether there was a UTR

code generated and therefore the concerned official of the Sawantwadi

901. IAL 16702-23 in COMEXL 16273-23.doc

Urban Co-operative Bank, Mr. Govind Wadkar, was directed to be

available online to explain the same.

8. After a while i.e. at 11.30 a.m., Mr. Govind Wadkar came online,

however, he was unable to throw any light on the specific questions

with respect to the above and sought some time in the matter,

submitting that he was not the one who had executed the transactions

and the same were being executed through the bank in Thane.

9. This Court therefore put it to Mr. Rawal of the RBI, whether he

would like to add anything to the answers given by Mr. Govind Wadkar

and Mr. Rawal submitted that he would not like to add anything more

than what he has already submitted.

10. Mr. Viraj S. Rane, Clerk, from the office of the Prothonotary &

Senior Master is present in the Court and he has confirmed that since

no payment had been received on 31 st May, 2024, a certificate of Non-

Deposit dated 31st July, 2024 has been issued. That as regards the

second transaction of Rs. 10 Crs, no certificate has been issued as it has

been recorded in the order dated 11 th July, 2024 that the Applicant has

received the money, however, submitting that neither the first payment

901. IAL 16702-23 in COMEXL 16273-23.doc

of Rs. 10 Crs nor the second purported payment of Rs. 10 Crs has been

received in the account of the Prothonotary & Senior Master of this

Court, maintained with the RBI.

11. The Respondent is present in the Court pursuant to the directions

of this Court. Mr. Parekh, learned Counsel for the Respondent, on

instructions, submits that the Respondents would in view of the above

circumstances make payment of the amount of Rs. 20 Crs by 9 th August,

2024 by way of Demand Draft of Rs. 20 Crs and that the statement may

be accepted as an undertaking to this Court.

12. Mr. Khandekar, learned Counsel appearing for the Applicant,

firstly, submits that from the events that have transpired, it is clear that

the conduct of the Respondents is deliberate, contumacious and

egregious and be met with the strictest punishment and apart from

punitive orders with respect to the breaches of the orders of this Court,

the payment of Rs. 20 Crs by Demand Draft offered to be paid by the

Respondent by 9th August, 2024 ought to be in the name of the

Applicant. Mr. Khandekar further submits that the amount of Rs.

2,00,70,121/- lying in the following accounts also be directed to be

transferred to the account of Applicant:

901. IAL 16702-23 in COMEXL 16273-23.doc

1. Axis Bank Account No. 921010013529564 - Rs. 26,14,530

2. ICICI Bank Account No. 333701501301- Rs. 1,38,809/-

3. ICICI Bank Account No. 344901000352- Rs 27,79,228/-

4. ICICI Bank Account No. 344905500008-Rs. 94, 042/-

5. ICICI Bank Account No. 3122401500240- Rs. 26,574/-

6. HDFC Bank Account No.50100677161031-Rs. 1,64,16,938/-

13. Mr. Parekh, learned Counsel for the Respondent, has in

anticipation of orders of this Court, offered to this Court, that his client,

the Respondent, would attend to the office of the Prothonotary &

Senior Master of this Court at 11.00 am and mark his presence

everyday.

14. I have heard the learned Counsel and also the officials of the RBI,

and the Bank.

15. On 31st July, 2024, the following order was passed:-

"1. Pursuant to the order dated 11 July 2024, today when the matter was called out in the morning session, this Court was informed by Mr. Khandekar, learned Counsel for the Award Creditor that none of the two payments of Rs.10 Crore have been received in the account of the Prothonotary & Senior Master of this Court and that the Judgment Debtor has played a fraud. Accordingly, this Court had kept back the matter for the Judgment Debtor to remain present in Court in the afternoon session. Mr. Khandekar has also tendered across the bar a certificate of non-deposit from the Prothonotary & Senior Master as regards, the non-deposit of Rs.10 Crores that was due by 31st July 2024.

2. In the afternoon session, when the matter is called out, Mr. Parekh, learned Counsel appears for the Judgment Debtor and seeks to tender across the bar a communication from the Judgment Debtor seeking indulgence on

901. IAL 16702-23 in COMEXL 16273-23.doc

humanitarian grounds for not being able to remain present in the Court today afternoon. Mr. Parekh also submits that Section 34 Application challenging the Award has been withdrawn by the Judgment Debtor and that he has sought time to settle the matter after the RBI responds to their communication and follow-ups as pursuant to the letter dated 19th July 2024 whereby on behalf of the Judgment Debtor, the RBI has been requested to, with extreme urgency, ascertain as to why the two payments by NEFT amounting to Rs.20 Crores are not traceable or available in the account of the Prothonotary & Senior Master, High Court, Bombay. Mr. Parekh also seeks to tender across the bar two Affidavits both dated 22nd July 2024 of two persons who have respectively sought to transfer Rs.10 Crores each, one on 31 st May 2024 and the other on 5th July 2024 on behalf of the Judgment Debtor in the account of the Prothonotary & Senior Master with the RBI. Mr. Parekh submits that although the said amounts have been debited from the respective accounts, they are not traceable and the RBI is in the process of investigating the same.

3. Mr. Khandekar, learned Counsel for the Award Creditor submits that since the Application under Section 34 of the Arbitration and Conciliation Act, 1996 has been withdrawn, this Court consider passing further orders in execution, so that the amounts due under the Award are recovered.

4. Be that as it may, this Court is deeply concerned that the monies that have been sought to be transferred to the account of the Prothonotary & Senior Master by way of NEFT have not been credited into the said account and therefore, this Court deems it appropriate to issue notice to the General Manager of the Public Accounts Department of the RBI to attend this Court on 6th August 2024 at 10.30 a.m. and to give an update in the matter and as to when the monies would be credited to the account of the Prothonotary & Senior Master of this Court.

5. Let the Judgment Debtor positively remain on the next date, failing which this Court will pass necessary orders to secure his presence.

6. Stand over to 6th August 2024 at 10.30 a.m. on supplementary board."

901. IAL 16702-23 in COMEXL 16273-23.doc

16. As can be seen, this Court was deeply concerned with respect to

the monies that had to be transferred to the account of Prothonotary &

Senior Master by way of NEFT and which had not been credited to the

said account with the RBI and therefore, this Court had issued notice to

the General Manager of the Public Accounts Department of the RBI to

attend this Court and to give an update in the matter and as to when

the Rs. 20 Crs would be credited into the account of the Prothonotary &

Senior Master of this Court.

17. From the above submissions, it is clear that the monies purported

to be transferred by NEFT into the account of Prothonotary & Senior

Master with the RBI have neither been credited into the account nor

have such monies even been received by the RBI. Prima facie it also

appears that although the NEFT numbers have been given by the

drawer's bank viz. the Sawantwadi Urban Co-operative Bank, but the

transactions have not been executed as there is no UTR code or

number. Although in the email dated 6th August, 2024, from the bank to

the Advocate for the Respondent, there is a mention of the UTR

number but it is mentioned alongwith the NEFT number and which

number is statedly the same. This Court has shown the said email to

Mr. Rawal, the General Manger of the RBI, who has clarified that it

901. IAL 16702-23 in COMEXL 16273-23.doc

cannot be the same number. Therefore, it appears that the said

reference as "1. #- 31 es 2024 jksth 10,00,00,000/- (#i;s QDr ngk dksVh) (UTR dzekad

% NEFT/PROTHO/NB24152398731), 2. #- 5 tqyS 2024 jksth 10,00,00,000/- (#i;s

QDr ngk dksVh) (UTR dzekad % NEFT/PROTHO/NB24604759182)" appear to be

misleading.

18. For want of better words this is serious and cannot be taken

lightly. This court is aware that these are execution proceedings where

the Respondent has agreed to make payment of approximately Rs.50

Crs to the Applicant under the Consent Terms filed before the Hon'ble

Supreme Court and also this Court in which, as stated on oath before

the Hon'ble Supreme Court and recorded in the orders of the Hon'ble

Supreme Court Rs. 10 Crs had purportedly been deposited with the

Prothonotary & Senior Master on 31st May, 2024 and later on under the

same consent terms, modified by consent of the parties another Rs. 10

Crs were purportedly deposited in the account of the Prothonotary and

Senor Master on 5th July, 2024, by two individuals : Mr. Dipak Krushna

Jadhav, has confirmed on oath by affidavit dated 22 nd July, 2024 that

NEFT payment of Rs. 10 Crs has been made to the account of the

Bombay High Court on 31st May, 2024 and has given the transaction

details in paragraph 2 of the said affidavit as under:-

901. IAL 16702-23 in COMEXL 16273-23.doc

"2. Details of transaction:

* Account Name : 8443 Prothonotary & Senior Master, High Court,Bombay.

*Bank Name and Branch: RBI,Mumbai Regional Office, S. B. Singh Road, Fort, Mumbai-400 001 * Account Type: Personal Ledger Account *Account No. :01514601100 *IFSC Code: RBIS0MBPA04 *UTR No. : NEFT/PROTHO/NB2415298731"

19. The purpose of the payment is mentioned in the said affidavit as

payment being made on behalf of Mr. Harshawardhan Sabale viz.

Respondent in the matter in compliance with his matter involving Mr.

Cherag Shah viz. Applicant in this matter.

20. In paragraph 5 of the said affidavit there is a confirmation and

undertaking that the payment has been duly made and that the

affidavit is to be treated as an official undertaking from the deponent

confirming the payment. The said affidavit has been verified and

notarized by a Notary from Sindhudurg.

21. A similar affidavit dated 22nd July, 2024, has been given by

another individual by the name Kishor Arjun Jadhav that on 5 th July,

2024 NEFT payment of Rs. 10 Crs was made to the account of the

Bombay High Court with the following details:-

901. IAL 16702-23 in COMEXL 16273-23.doc

"Amount : Rs. 10,00,00,000/- (Rupees Ten Crores only) * Account Name : 8443 Prothonotary & Senior Master, High Court,Bombay.

*Bank Name and Branch: RBI,Mumbai Regional Office, S. B. Singh Road, Fort, Mumbai-400 001 * Account Type: Personal Ledger Account *Account No. :01514601100 *IFSC Code: RBIS0MBPA04 *Date of Payment : 5th July 2024 *UTR No. : NEFT/PROTHO/NB24604759182"

22. That the purpose of the payment was on behalf of the

Respondent for compliance in the matter with the Applicant. In this

affidavit it has also been stated that the payment has been made into

the High Court account from the deponent's account bearing No.

0020005090000035 with the Sawantwadi Urban Co-Op Bank Ltd.,

Sawantwadi. The said affidavit has also been verified and notarized by

a Notary in Sindhudurg.

23. The email dated 2nd August, 2024 from the bank as quoted

above and the email dated 6th August, 2024 also quoted above, clearly

suggest that the transactions in respect whereof the aforesaid two

affidavits have been furnished are doubtful requiring further

investigation by an independent agency.

901. IAL 16702-23 in COMEXL 16273-23.doc

24. This Court, therefore, enquired from Mr. Rawal, General

Manager of the RBI, whether the RBI can undertake the investigation.

Mr. Mahanta, Deputy Legal Advisor of the RBI informs this Court that

the RBI only has supervisory powers to carry out sample inspections

under Section 35A of the Banking Regulation Act, 1949 but does not

have the power to carry out investigation into fraudulent transactions.

25. This Court therefore sought to peruse Section 35A of the Banking

Regulation Act, 1949 which is usefully quoted as under:-

"35-A. Power of the Reserve Bank to give directions.-

(1) Where the Reserve Bank is satisfied that-

        (a)    in the public; or
               in the interest of banking policy; or
        (b)    to prevent the affairs of any banking company being

conducted in a manner deterimental to the interests of the depositors or in a manner prejudicial to the interest of the banking company; or

(c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions. (2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect."

901. IAL 16702-23 in COMEXL 16273-23.doc

26. A perusal of the aforesaid Section makes it clear that where the

RBI is satisfied in public interest or in the interest of banking policy or

to prevent the affairs of any banking company being conducted in a

manner detrimental to the interests of the depositors or in a manner

prejudicial to the interests of the banking company or to secure the

proper management of any banking company considers that it is

necessary to issue directions to the banking company (ies) it may, issue

such direction(s) as it deems fit, and the banking company(ies) shall be

bound to comply with such directions.

27. Section 56 of the Banking Regulation Act, 1949, provides that the

Banking Regulation Act shall apply to co-operative societies with the

modifications mentioned therein. In other words, the Banking

Regulation Act, 1949 also applies to co-operative banks of the nature of

Sawantwadi Urban Co-operative Bank

28. From the aforequoted email of 2nd August, 2024 purportedly

from the branch manager of the said co-operative bank, it appears that

the bank is already under directions issued under Section 35A read

with Section 56 of the Banking Regulation Act, 1949 and that it has

been stated in the said mail that with effect from 14 th June, 2023 there

901. IAL 16702-23 in COMEXL 16273-23.doc

have been no RTGS / NEFT transactions allowed by the bank with any

customer of the bank. It, therefore, prima facie appears that the

affidavits filed by Mr. Dipak Krushna Jadhav and Kishor Arjun Jadhav

are false as there is a clear contradiction in view of the said email of the

Bank, which position of non deposit / non receipt has also been

confirmed by the office of the Prothonotary & Senior Master as well as

the Applicant.

29. While the RBI can continue to monitor the compliance of

directions given under Sections 35A read with 56 of the Banking

Regulation Act, 1949 with respect to the Sawantwadi Urban Co-

operative Bank, this Court is of the view that the matter with respect to

the purported payments of Rs. 10 Crs. on 31 st May, 2024 and 5th July,

2024 requires to be investigated by the police authorities.

30. Let the police authorities register a First Information Report in

this matter at the instance of the Applicant, within a period of two

weeks and thereafter the investigation be preferably completed within

a period of three months, keeping in mind the above prima facie

observations of this Court and submit report to this Court in addition to

taking steps as per law including filing of chargesheet against

concerned persons.

901. IAL 16702-23 in COMEXL 16273-23.doc

31. The Respondent, Mr. Harshawardhan Hanmant Sabale, to furnish

an undertaking to this Court that he would make the payment of Rs. 20

Crs by way of Demand Draft in the name of the Applicant viz. Cherag

Shah by 9th August, 2024. In addition, the Respondent to also

undertake that he would not leave the Mumbai city under any

circumstances and remain present in the Court on every date when the

matter is called out. Let the said affidavit/undertaking be furnished

during the course of the day.

32. Let the amounts lying in the banks accounts mentioned in

paragraph 12 above be transferred to the account of the Applicant

within a period of two weeks upon a communication being addressed

in this behalf by the Applicant to the said banks.

33. While this Court appreciates the assistance rendered by the RBI

officials, this Court directs them to remain present on the next date as

well, with an update, if any, in the matter.

34. List on 9th August, 2024. However, Mr. Parekh, learned Counsel

for the Respondent requests that the matter be listed at 02:30 p.m. on

the said date. Accordingly, list on 9th August, 2024 at 2.30 p.m., when

901. IAL 16702-23 in COMEXL 16273-23.doc

this Court will also consider passing appropriate orders with respect to

the breach of the orders of this Court including under the Contempt of

Courts Act, 1971 as well as under Article 215 of the Constitution of

India.

35. All to act on an authenticated copy of this order.

(ABHAY AHUJA, J.)

Digitally signed by NIKITA NIKITA YOGESH YOGESH GADGIL GADGIL Date:

2024.08.07 21:31:18 +0530