Indusind Bank vs Lt. Col. M.P.S. Bhatia & Anr.
2017 Latest Caselaw 2057 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         Ex. FA No. 14/2016

%                                                         27th April, 2017
INDUSIND BANK                                             ..... Appellant
                          Through:       Mr. V.K. Gupta, Advocate.

                     versus
LT. COL. M.P.S. BHATIA & ANR.                ..... Respondents

Through: Mr. Arun Mahajan, Advocate for R-1.

Mr. Avinash Kumar Tyagi, Advocate for R-2.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not? YES

VALMIKI J. MEHTA, J (ORAL)

1. This Execution First Appeal is filed by the

appellant/objector against the order of the executing court dated

9.5.2016 by which the executing court has directed the appellant/bank

to seek discharge of the bank guarantee issued by it in the favor of the

Union of India so that the executing court thereafter in execution

would be able to seek encashing of the fixed deposit amount lying with

the appellant/bank as lien for the bank guarantee issued in favour of the

Union of India and in order to satisfy the money decree in favor of the

respondent no.1/decree holder. Putting it in other words, in execution

of the decree of the respondent no.1/decree holder herein the fixed

deposit of the respondent no.2/judgment debtor was lying with the

appellant/bank, but the appellant/bank had taken this fixed deposit as

100% cash margin for issuing of a bank guarantee in favour of the

Union of India/Government, and consequently the appellant/bank had a

first charge/lien/entitlement to encash the fixed deposit in case any

liability arose of the appellant/bank towards the Union of India on

account of Union of India encashing bank guarantee (and under which

bank gurantee the appellant/bank would have had to pay the amounts

to the Union of India), and therefore once the bank guarantee is

discharged then the fixed deposit will no longer have a lien of the

appellant/bank and accordingly the fixed deposit will be available for

satisfaction of the money decree in favor of the respondent no.1/decree

holder.

2. The facts of the case are that the respondent no.1/decree

holder was successful in getting a money decree of Rs.6,72,000/- along

with costs and interest at 8% per annum against the respondent

no.2/judgment debtor/M/s Swaraj Overseas Limited. Execution

petition was filed by the respondent no.1/decree holder for seeking an

amount of Rs.7,47,513/-. On 14.2.2011, the executing court issued

warrants of attachment with respect to the Fixed Deposit

No.0005F108070036 lying with the appellant/bank at its Barakhamba

Road Branch at New Delhi. This attachment order dated 14.2.2011

was served upon the appellant/bank on 23.2.2011. Admittedly, as on

this date the fixed deposit was lying with the appellant/bank with the

charge/lien of the appellant/bank on the said fixed deposit on account

of bank guarantee which was issued by the appellant/bank in favour of

the Union of India valid for claim upto 21.7.2016. In the meanwhile,

certain compromise took place between the respondent no.1/decree

holder and the respondent no.2/judgment debtor as a result of which

the respondent no.2/judgment debtor agreed to pay a total sum of

Rs.7,70,000/- in three instalments in satisfaction of the decree, but the

respondent no.2/judgment debtor after paying the first instalment of

Rs.2,00,000/- defaulted on the payment of the agreed amount, and

consequently a fresh attachment order dated 6.9.2011 was issued by

the executing court against the fixed deposit. On 18.11.2011, the

appellant/bank appeared in the Court and informed that the fixed

deposit mentioned in the attachment order is for securing the bank

guarantee given by the appellant/bank in favour of the Union of India.

Effectively, therefore, the appellant/bank pleaded that it was a

garnishee and consequently the appellant/bank as a garnishee having a

lien on the fixed deposit filed objections to the attachment order.

3. By the impugned order the trial court has held that the

appellant/bank has wrongly extended the bank guarantee validity

period during the period of attachment, and since the bank guarantee

has been illegally extended by the appellant/bank till 26.5.2021,

therefore the bank guarantee should be got discharged from the Union

of India and the respondent no.1/decree holder should be paid the

amount of the fixed deposit. The operative portion of the order of the

trial court is contained in para 13 of the impugned order, and this para

13 reads as under:-

"13. In view of the judgments cited by the Learned counsel for the bank itself and in view of the peculiar facts of the present execution petition, I have no hesitation in holding that the act of the bank in extending the validity of the bank guarantee from January, 2016 to January, 2021 at the request of the judgment debtor without bringing the same to the notice of the Executing Court shows that the action of the bank is malafide and was in furtherance of collusion between the judgment debtor and the bank so as to frustrate the execution of the present decree. What is glaring is that the bank was appearing in the execution petition and had filed objections regarding the attachment orders of the FDR of the judgment debtor. Thus, this is a case of exceptional circumstance and of fraud. Consequently, the bank is directed to revoke the bank guarantee issued by it to the Government of India on behalf of the judgment debtor by writing to the concerned Ministry and seeking its approval for the same, which can be done as per the terms of the bank guarantee itself. The bank should seek the approval of the concerned Ministry within a period of one month from today. The bank is further directed to attach a copy of this order while writing to the concerned Ministry for seeking its approval for revoking the bank guarantee. Accordingly, the application under Section 151 of the Code of Civil Procedure, 1908 moved by the decree holder is disposed off in the above terms."

4. It is therefore seen that the court below has arrived at a

conclusion that the appellant/bank was in collusion with the respondent

no.2/judgment debtor and the appellant/bank had no right to extend the

validity of the bank guarantee from January, 2016 to January (sic:

May), 2021 on account of the fact that the appellant/bank was aware of

the attachment order which was passed against the fixed deposit receipt

lastly on 6.9.2011.

5. I am afraid that the executing court has fallen into a basic

error in holding that there is a collusion between the appellant/bank

and the respondent no.2/judgment debtor because the bank guarantee

has been extended from January, 2016 to May, 2021 in favour of the

Union of India. The basic error in the impugned order is that the

executing court has presumed that merely because an attachment order

was issued against the fixed deposit, the attachment order by that fact

itself will become a valid attachment order. In fact, the position is

completely otherwise and the complete procedure with respect to what

should be the procedure for a garnishee order is contained in Order

XXI Rule 46 (A) to 46 (I) CPC. The provisions of Order XXI Rule

46(A) to (I) CPC make it clear that when execution proceedings are

filed against a judgment debtor and the property of the judgment debtor

is lying with a third person then that third person is called a garnishee.

In simple words garnishee is the debtor's debtor. The garnishee or

debtor's debtor is bound by the attachment order with respect to the

property of the judgment debtor lying with the garnishee only if the

garnishee has no right over the property of the judgment debtor. If the

garnishee has a right on the property of the judgment debtor lying with

the garnishee then no valid attachment can be issued with respect to the

property lying with the garnishee and objections can be thus filed by

the garnishee and once the court finds that garnishee has a valid right

to the property of the judgment debtor lying with the garnishee then the

attachment order has to necessarily fail.

6. The facts of the present case show that the bank

guarantee was issued by the appellant/bank against 100% cash margin

of the fixed deposit in question. This bank guarantee which was issued

by the appellant/bank in favour of the Union of India was much prior

to the attachment orders dated 14.2.2011 and 6.9.2011. Once that is

so, and the appellant/bank had custody of the fixed deposit with its first

charge/lien for satisfying its claim against any future liability towards

the Union of India on account of encashment of the bank guarantee,

and therefore, the fixed deposit amount was available to adjust the

amount of such fixed deposit of the respondent no.2/judgment debtor

on account of appellant/bank having made payment on behalf of the

respondent no.2/judgment debtor to the Union of India because of

encashment of the bank guarantee. In such circumstances then the

appellant/bank has valid claim of/as a garnishee to the fixed deposit in

question, and thus such fixed deposit could not have been validly

attached by the executing court. Any attachment order therefore

passed in the present case had necessarily to fail. Therefore, simply on

the ground that attachment orders were issued by the executing court

on 14.2.2011 and 6.9.2011, the same would not mean that the

appellant/bank by issuing of such attachment orders had become liable

as a garnishee to pay the amount of fixed deposit to the executing court

for satisfaction of the execution proceedings filed by the respondent

no.1/decree holder against the respondent no.2/judgment debtor.

7. Learned counsel for the respondent no.1/decree holder

argued that in the bank guarantee there is a clause 4 which provides

that the bank guarantee can be revoked with the consent of the

Government and consequently the appellant/bank should be forced to

approach the Government for revocation of the bank guarantee.

However, this argument is misconceived because courts cannot force

parties to enter into a specific contract or a specific contract with

specific terms or revoke contract already entered into or modify the

contract. Parties have complete freedom to enter into the contracts

which they want, once the contracts are legal, and thus courts cannot

undo contracts which are already made i.e courts cannot force the

parties being the appellant/bank and the Union of India to undo its

contract by revoking the bank guarantee when the parties themselves,

being the appellant/bank and the Union of India, do not want to do so.

This is not the purpose of the executing court, and this procedure is not

a procedure provided under Order XXI Rule 46 (A) to (I) CPC. The

entitlement of the decree holder is therefore only to proceed against an

encumbered property of the judgment debtor and not a property of the

judgment debror over which a garnishee has a right, and in such

circumstances as per the procedure under Order XXI Rule 46 (A) to (I)

CPC the attachment order against the garnishee has to necessarily fail.

8. In view of the above discussion, the impugned order dated

9.5.2016 is set aside. The appeal stands allowed. The appellant/bank

will stand discharged from the attachment order as also any liability to

get the bank gurantee cancelled and which is issued by the

appellant/bank in favour of the Union of India. Of course, the

respondent no.1/decree holder is entitled to continue the execution

proceedings against any other properties of the respondent

no.2/judgment debtor besides the fact that if at any stage the subject

fixed deposit is available with the appellant/bank in a condition that it

is an unencumbered fixed deposit over which the appellant/bank would

have no lien, then the respondent no.1/decree holder will be entitled to

seek fresh attachment proceedings and any encumbered fixed deposit

amount lying with the appellant/bank will be available for satisfaction

of the money decree of the respondent no.1/decree holder.

9. The appeal is allowed on the aforesaid terms leaving the

parties to bear their own costs.

APRIL 27, 2017                              VALMIKI J. MEHTA, J
AK/godara