State of Kerala vs ICICI Bank Limited

Antony Dominic, J.—This Writ Appeal is filed by respondents 1 and 2 in Writ Petition No. 7115/2007 who are aggrieved by the judgment of the learned Single Judge, rendered on 25th of July 2012, allowing the Writ Petition.

We heard the learned Government Pleader appearing for the appellants, the learned counsel appearing for the first respondent/Writ Petitioner and the learned counsel appearing for the 2nd respondent.

Briefly stated the facts are that the 2nd respondent was an assessee under the KGST Act. The 2nd respondent had availed an overdraft facility from the first respondent bank with an upper limit of Rs. 8,00,000/-. Ext.P1 in the Writ petition is the credit arrangement letter which shows the terms and conditions governing the overdraft facility.

On the basis, Rs. 29,10,040/- was due from the 2nd respondent under the KGST Act, revenue recovery proceedings were initiated by the appellants and finally Ext.P2 prohibitory order under Sec. 19 of the Kerala Revenue Recovery Act was issued to the first respondent Bank. On receipt of the said prohibitory order, the first respondent Bank forwarded a pay order dated 16-6-2006 for Rs. 10,06,074.03 to the 2nd appellant, stating that the same is towards the amount available in the account of the 2nd respondent. The payment was received by the Deputy Tahsildar (RR) on 19-6-2006. This is seen from an endorsement made to that effect on Ext.P3.

On 20th of June 2006, the first respondent/Bank issued Ext.P4 communication informing the 2nd appellant that the second respondent is maintaining an over draft facility with a limit of Rs. 8 lakhs and that in compliance with Ext.P2 prohibitory order they issued a pay order in which the over draft amount of Rs. 8,00,000/- was also included. According to the first respondent, only an amount of Rs. 2,06,074.03/- was available in the account of the 2nd respondent and on that basis the first respondent/Bank requested the 2nd appellant to return the pay order. The appellants did not respond to the request and in the said circumstances, the Writ Petition was filed by the Bank for a direction to the 2nd appellant to return Rs. 8 lakhs with interest at 15.5% from 16-6-2006 till date of realisation.

In the counter affidavit filed by the 2nd respondent they admitted that at the relevant time an amount of Rs. 2,06,074.03/- alone was available in their account. Taking note of this, and also the fact that the appellants had not filed any counter affidavit, the learned Single Judge held that the payment in excess of the amount available in the account of the 2nd respondent was an erroneous payment and that the same was liable to be refunded. Accordingly, the learned Single Judge directed the appellants to refund an amount of Rs. 8 lakhs with 9% interest from the date of receipt of the amount and also gave liberty to the appellants to recover the same from the 2nd respondent if the liability was still remaining outstanding. It is aggrieved by this judgment, this appeal is filed.

From the pleadings, it is evident that the 2nd respondent, the defaulter, was enjoying an overdraft facility with a limit of Rs. 8 lakhs. An overdraft facility will not have any amount to the credit of the account holder. On the other hand, it is a promise undertaken by the bank to pay to the account holder or its creditors based on the instructions of the account holder, subject to the limit prescribed by the bank. Therefore, the fact that an overdraft facility was enjoyed by the 2nd respondent by itself could not have entitled the appellants to realise any amount from the first respondent/Bank by initiating revenue recovery proceedings or by the issuance of a prohibitory order evidenced by Ext. P2.

However, in so far as this case is concerned, the pleadings in the Writ Petition filed by the Bank shows that the amount which has been paid in pursuance to Ext. P2 prohibitory order was not from the over draft account of the 2nd respondent but from the current account of the 2nd respondent. The relevant pleadings contained in paragraphs 4 and 5 of the Writ Petition reads thus;-

"4. Pursuant to Ext. P2 prohibitory order and as per Section 25(1) of the Kerala Sales Tax ct, 1963, the authority under the said Act is vested with powers to call upon the garnishee to pay the amount held by the garnishee on account of the Customer to the Sales Tax Authorities as is sufficient to meet the sales tax dues, the Petitioner released an amount of Rs. 10,06,074.03 to the 2nd Respondent, which was the total amount available in the said Current account, vide pay order No. 109288 dated 16-06-2006, to the debit of the said Current Account maintained by the 3rd respondent with the Petitioner Bank by letter dated 17-06-2006................

5................. The petitioner is not entitled to transfer an amount of Rs.. 8 lakhs (Rupees eight lakhs only) lying in the Current account as overdraft to the 2nd Respondent since the amount of Rs. 8 lakhs has been credited in terms of he Current account by the Petitioner as overdraft".

Evidently, therefore, going by the pleadings of the Bank since when payment was made from the current account of the account holder, it is not open to the bank to contend now that the amount has been paid from out of the overdraft facility and, therefore, the payment made is an erroneous one, justifying a direction of this Court for its refund by the appellants.

However, the learned counsel for the 2nd respondent account holder contended that they had only Rs. 2,06,074.03 in their current account and, therefore, the bank could not have drawn any amount from their overdraft facility and paid to the appellants in pursuance to Ext.P2 prohibitory order. It is also stated that, complaining of the above, they had moved the Banking Ombudsman.

From the Writ Petition, what we notice is, when the recovery proceedings were initiated against the 2nd respondent an appeal filed by them against the assessment order was pending before the statutory appellate authority and a stay petition filed by them was also pending. Pointing out that the recovery proceedings were initiated when the statutory authority was seized of the appeal and the stay petition, they filed Writ Petition No. 17061/2006. The said Writ Petition filed by the 2nd respondent was disposed of by Ext. P5 judgment dated 30th June, 2006 where the petitioner/the 2nd respondent pointed out that an amount of Rs. 10 lakhs out of Rs. 26,02,898/- has already been recovered from them and that therefore, it would not unjust to direct them to pay any further amounts as a condition for granting stay.

In Ext.P5 judgment, this Court ordered consideration of the stay petition by the appellate authority and also directed that the recovery proceedings be kept in abeyance in the meanwhile. Taking note of the aforesaid submission made by the 2nd respondent that they had already paid Rs. 10 lakhs, this Court further directed the appellate authority that if the appellate authority chooses to impose any condition for granting stay, payments, if any, made by the 2nd respondent will also be duly taken into account. Admittedly, the loan paid is the payment made by the Bank. This, therefore, shows that after the 2nd respondent came to know of the payment made by the bank as per Ext.P2, they accepted it and took advantage of the same. Therefore, they could not have thereafter turned round and questioned the validity of the same. In such circumstances, we cannot now entertain the contention raised by the 2nd respondent before us that the payment by the Bank was an unauthorised one.

Having regard to the pleadings in the Writ Petition filed by the first respondent that the amount paid by the Bank was from out of the current account of the 2nd respondent, the learned Single Judge could not have concluded that the payment was an erroneous one. We, therefore, cannot sustain the judgment of the learned Single Judge. Accordingly, the judgment of the learned Single Judge is set aside and the appeal is allowed.

Dated this the 21st day of August, 2014.