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Judgment
This intra court appeal is filed challenging the order dated 28.04.2016 passed by the learned Single Judge in Writ Petition No.3543 of 2016.
Heard Ms. Gorantla Sri Ranga Pujitha, learned counsel for the appellants and Mr. Vedula Venkataramana, learned Senior Counsel representing Mr. A. Srinivas, counsel for the respondents.
The brief facts leading to filing of this appeal are as follows:
The 1st appellant is a statutory authority constituted under the Medical Council of India Act, 1956. The 1st respondent is a charitable non-profit organization. The organization obtained permission from the 1st appellant and obtained Essentiality Certificate from erstwhile State of Andhra Pradesh and set up the 2nd respondent-college in Nizamabad. The 2nd respondent admitted the first batch of students in the year 2003-04. However, in view of deficiencies, permission was not granted to admit students for the academic years 2004-05, 2005-06 and 2006-07.
3.1 At the time of establishment of 2nd respondent-College, 1st respondent had furnished a Bank Guarantee bearing No.194/2005 (for short ‘the Bank Guarantee’) through Federal Bank Limited, Hyderabad, for Rs.7,00,00,000/- in favour of the 1st appellant. The same was meant to be utilized by the State Government in the event the students of the 2nd respondent-College were diverted to Government Institutions at a later point of time to augment infrastructural facilities in the Government Colleges.
3.2 The then State Government cancelled the essentiality certificate of the 2nd respondent-College vide G.O.Ms.No.333 Health, Medical and Family Welfare (G.1) Department, dated 06.10.2007 and requested the Government of India to invoke the Bank Guarantee of Rs.7,00,00,000/- provided by 1st respondent. Aggrieved by the same, the respondents herein filed W.P.No.1336 of 2008. During the pendency of the said Writ Petition, the Bank Guarantee together with subsequent interest was encashed by the Government of India and the proceeds thereof were transferred to the 1st appellant. The said Writ Petition was allowed on 02.02.2011 with the following direction with respect to the Bank Guarantee:
“In so far as the Bank Guarantee furnished by the second petitioner College, which has already been invoked by the MCI is concerned, the same shall be refunded by the MCI on the petitioners furnished a fresh Bank Guarantee.”
3.3 The respondents furnished a fresh Bank Guarantee on 20.04.2015 and claimed refund of amount of Rs.7,00,00,000/- from the 1st appellant on 20.08.2015. The 1st appellant refunded/returned the said amount to the 1st respondent by RTGS transfer. Interest accrued on this amount till the end of February, 2019 was Rs.3,92,00,000/-. W.P.No.3543 of 2016 was filed by the respondents herein contending that the appellants have utilized the proceeds of the Bank Guarantee amount of Rs.7,00,00,000/-from 18.02.2008 to 20.08.2015 as well as accumulated interest which is more than Rs.4,00,00,000/-, without any authority in law. In spite of the representations to refund the interest, the appellants have not done so. The learned Single Judge, vide order, dated 28.04.2016, allowed the W.P.No.3543 of 2016 and directed the 1st appellant to refund to the respondents herein the entire interest received by the 1st appellant from the Federal Bank Limited on the principal amount of Rs.7,00,00,000/- from 18.02.2008 till 20.08.2015 including the period from 02.02.2011 till 20.04.2015 within one month. It is against this order, the present Writ Appeal is preferred.
Learned counsel for the appellants submits that W.P.No.3543 of 2016 was filed by the respondents herein seeking to declare the action of the appellants in returning only the principal amount of the encashment of bank guarantee No.194 of 2005 without returning the accumulated interest thereon as arbitrary and illegal.
4.1. Writ Petition No.1336 of 2008 filed by the respondents herein was allowed by the learned Single Judge of erstwhile High Court of Andhra Pradesh vide order dated 02.02.2011. Learned Single Judge held in the said order as follows:
“Insofar as the bank guarantee furnished by the Second Petitioner College, which has already been invoked by the MCI is concerned, the same shall be refunded by the MCI on the petitioners furnishing a fresh bank guarantee.”
4.2 It is contended that the respondents furnished a fresh bank guarantee as per the directions only on 20.04.2015. Having waited for four years in furnishing the bank guarantee, now, the respondents cannot claim for interest on the bank guarantee from the appellants, more so, when there is a delay in furnishing such bank guarantee.
4.3 It is submitted that the learned Single Judge has failed to appreciate the fact that Writ Petition No.1336 of 2008 was filed only for the principal amount of the bank guarantee to be refunded and claim for interest was never sought.
4.4 It is submitted that the present Writ Petition filed is barred by provisions of Order II Rule 2 of CPC and the same should have been dismissed on this ground. That the provisions of CPC would apply in view of Rule 24 of the Writ Proceedings Rules, 1997.
4.5 It is also submitted that the claim is barred by law of limitation and the learned Single Judge erred in holding that the appellants were acting in the nature of a Trust and as per Section 10 of the Limitation Act, 1963 (for short ‘the Act, 1963’), Law of Limitation has no application to Trust and the learned Single Judge should not have assumed that the appellants were trustees and were holding the bank guarantee amounts in the capacity of trustees.
4.6 It is contended that the learned Single Judge erred in not considering the submission that the principle of constructive res judicata is applicable as the claim for interest could have been sought in the earlier Writ Petition i.e., W.P.No.1336 of 2008. Filing of Writ Petition No.3543 of 2016 would amount to constructive res judicata. For the said proposition of constructive res judicata, the learned counsel has relied upon the paragraph Nos.18 to 24 and 35 of the judgment of the Hon’ble Apex Court in Shiv Chander More and others v. Lieutenant Governor and others 2014 (11) SCC 744. For the said proposition, learned counsel further relied upon paragraph Nos.20 and 22 of the judgment of the Hon’ble Apex Court in Forward Construction Company and others v. Prabhat Mandal (Regd.), Andheri and others 1986 (1) SCC 100.
4.7 It is submitted that the appellant is an expert body, more a regulatory body and not a Trust. Writ Petition is filed beyond three (3) years claiming interest. There is a delay on the part of the appellants in seeking the relief.
4.8 As the nature of the proceedings is in the form of suit for recovery of money, the same cannot be agitated under Article 226 of the Constitution of India and that there are alternative remedies available. For the said proposition, reliance is placed on paragraph No.28 of the judgment of the Hon’ble Supreme Court Union of India v. Major General Madan Lal Yadav 1996 (4) SCC 127.
4.9 It is submitted that no person can claim equity or advantage for his own mistake/wrong or delay. For the said proposition, reliance is placed on the paragraph No.11 of the judgment of the Hon’ble Apex Court in Assistant Commissioner (CT) LTU, Kakinada v. M/s. Glaxo Smith Kline Consumer Health Care Limited 2020 (36) G.S.T.L. 305. Reliance is also placed on paragraph No.22 of the judgment of the Hon’ble Supreme Court in Oil and Natural Gas Corporation Limited v. Modern Construction and Company 2014 (1) SCC 648.
4.10 It is submitted that the bank guarantee is utilized for the purpose of welfare of the students, for additional infrastructure, for additional seats etc.
Learned counsel for the respondents submitted that W.P.No.1336 of 2008 was filed challenging the cancellation of essentiality certificate issued to respondent No.1 vide G.O.Ms.No.333, dated 06.10.2007 and requesting respondent No.2 to invoke the bank guarantee so as to augment infrastructural facilities in Government Colleges where the students studying MBBS Final Year were shifted.
5.1 It is submitted that no students were admitted in the year 2004 and that the bank guarantee was for the purpose of re-inspection of college only and that the appellants had utilized the proceeds of the bank guarantee amount of Rs.7,00,00,000/-from 08.02.2015 as well as accumulated interest, which is more than Rs.4,00,00,000/-. No authority of law permits to appropriate the accumulated interest on the principal amount which had been refunded on 20.08.2015.
5.2 It is submitted that the learned Single Judge has rightly held that the entire interest received by the appellants from Federal Bank Limited on the principal amount from 18.02.2008 till 20.08.2015 including the period from 02.02.2011 till 20.04.2015 be refunded to the respondents within one month.
5.3 It is further contended that it is an unauthorized act on the part of the appellants and hence, no interference is warranted as no prejudice would be caused.
5.4 For the proposition that the respondents are entitled to refund and interest, the learned Senior Counsel relied upon paragraph Nos.38 to 41 of the judgment of the Hon’ble Apex Court in Unitech Limited and others v. Telangana State Industrial Infrastructure Corporation and others 2021 SCC OnLine SC 99. Relying on the said judgment, it is further contended that the act of appellants, being an instrumentality of State, is unjust and the appellants’ act is devoid of fairness.
In reply to the contentions made by the learned Senior Counsel, the counsel appearing on behalf of the appellants has argued that the judgment relied upon by the respondents’ counsel are not applicable to the present case and has distinguished the same on facts by inviting the Courts attention to paragraph 48 of the said judgment.
6.1 The learned counsel submitted that the scheme for obtaining permission from the Central Government to establish a medical college (Clause-II sub-clause 7) provides for performance of two bank guarantees from a schedule commercial bank valid for 5 years in favour of the Medical Council of India for purposes enumerated and that there is no undue enrichment by the Medical Council of India.
Heard the rival submissions made by both the counsels. Perused the order of the learned Single Judge, the material papers annexed and the scheme for obtaining the permission of the Central Government for establishing Medical College. The facts with respect to cancellation of essentiality certificate, utilization of bank guarantee and the interest thereon and the delay in submitting a fresh bank guarantee are not in dispute. The fresh bank guarantee was given on 20.04.2015 pursuant to directions in W.P.No.1336 of 2008 by an order, dated 02.02.2011. The learned Single Judge has framed 6 issues for consideration which are as follows:
“a) Does the 1st respondent stand in a position of a trustee?
b) If so, is a trustee entitled to withhold the interest on the amount received by him in law?
c) Whether the claim of the petitioners for recovery of interest on the amount of Rs.7.00 crores paid to the 1st respondent is barred by the plea of limitation?
d) Whether the bar of Order 2 Rule 2 CPC can be invoked by the respondents to deny the claim for interest made by the petitioners in this Writ Petition on the ground that such a claim was not made by the petitioners in W.P.No.1336 of 2008?
e) Whether the Writ Petition filed for recovery of interest on the amount of Rs.7.00 crores paid to the 1st respondent should be dismissed since the petitioners have an alternative remedy of civil suit?
f) Whether the petitioners are entitled to the interest for the period from 18.02.2008, the date when the proceeds of the Bank Guarantee were received by the 1st respondent till the principal amount of Rs.7.00 crores was refunded to the petitioners by 1st respondent on 20.08.2015 and whether petitioners should be denied interest for the period 02.02.2011, the date when W.P.No.1336 of 2008 was allowed till fresh Bank Guarantee was given by petitioners on 20.04.2015 pursuant to the order in the said Writ Petition?”
7.1 The learned Single Judge has elaborately discussed each issue framed and has arrived at the conclusions point wise by discussing factual aspects and legal positions. The conclusions arrived at by the learned Single Judge in a nutshell are that the appellants were in a position of a trustee for the money received, that the appellants being trustees at law are liable for interest for having encashed, that the claim for interest is not barred by time in view of Section 10 of the Act, 1963, that the bar of Order II Rule 2 of Code of Civil Procedure, 1908 is not application for a writ under Article 226 of Constitution of India, that a Writ Petition for a relief of monetary claim is maintainable and this is a fit case for granting relief for refund of interest and that the respondents are entitled for interest.
7.2 The only question which arises for consideration is this appeal is with respect to the period of entitlement of interest. It is not in dispute that 2nd respondent-College submitted a bank guarantee of Rs.7,00,00,000/- on 29.04.2003 for a period of 5 years and this bank guarantee expired on 29.04.2008. But in the month of February, 2008, the said Bank Guarantee issued by the 2nd respondent-College was invoked by the Medical Council of India at the behest of the Government of Andhra Pradesh on 18.02.2008.
7.3 However, a Writ Petition vide W.P.No.1336 of 2008 was filed before this Court and the learned Single Judge of this Court vide order, dated 02.02.2011, directed that invoked bank guarantee amount should be refunded to the respondents herein subject to the condition that the respondents herein should submit a fresh bank guarantee. The order of the learned Single Judge does not record any payment of interest to the respondents. As per the directions of the learned Single Judge, a fresh bank guarantee was submitted on 20.04.2015. The amount of bank guarantee was admittedly refunded on 20.08.2015.
7.4 It is trite to state that once a bank guarantee is in place, interest would accrue on the said bank guarantee. It is also trite to state that such sum of interest which has been accrued on the bank guarantee during the period 02.02.2011 to 20.08.2015 i.e., from the date of order in W.P.No.1336 of 2008 till the date of refund of bank guarantee is liable to be refunded to the respondents as they are entitled to interest for the period i.e., from 02.02.2011 to 20.08.2015 on the amount of bank guarantee. We modify the order of the learned Single Judge with respect to payment of interest for the period as indicated above.
Accordingly, the Writ Appeal is disposed of. No order as to costs.
Miscellaneous applications, if any pending, shall stand closed. There shall be no order as to costs.