Union of India vs Bhadhur Singh

This is plaintiff's appeal against the judgement and decree dated 27/10/1997 passed by the District Judge, Bank Cases, Jammu whereby the suit

for recovery of Rs. 1,45,048/ filed by the appellant has been dismissed. Following facts are not disputed

M/s Karam Sales Corporation had received cash credit hypothecated loan to the tune of Rs. 40,000/ from the appellant in the year 1978. M/s

Karam Sales Corporation, 11A/D ware house Jammu was a partnership concern of which Smt. Shukla Rohmetra respondent no. 2 was a partner.

In her capacity as partner of M/s Karam Sales Corporation, she was jointly and severally liable to liquidate the loan amount. She had deposited

Rs. 42,000/ under the scheme Double your money in 7 years against certificate no. 230850 and on maturity she was entitled to Rs. 84,332.50 Ps.

On 22/12/1984, defendant no. 2 presented her fixed deposit receipt no. 230850 for encashment but since M/s Karam Sales Corporation had not

liquidated the loan amount, therefore the appellant adjusted the amount of Rs. 55,121.60 Ps. towards the loan amount standing against M/s Karam

Sales Corporation and paid the balance amount of Rs. 29,210.90 Ps to her. The appellant thus give full credit of the FDR to the defendant no. 2 in

the manner stated above.

However, not satisfied with the manner the bank adjusted the amount against the liability of the firm of which she was partner, defendant no. 2

filed writ petition no. 49/85 in this court. While admitting the petition, this court vide orderdated 11/01/1985, directed the respondent appellant

herein to give full credit of the FDR to the holder i.e. defendant no. 2 subject to her furnishing a security that in case the petition was dismissed, she

would be liable to pay the amount to the respondent appellant herein. In pursuance of this direction, respondent no. 2 offered personal surety by

executing surety bond dated 14/01/1985 which was accepted by the Deputy Registrar as directed by the Court. The appellant in compliance to

the order dated 11 /01 /1985 paid the balance amount and subsequent directed dated 05/04/1985 passed in civil original application no. 04/1985

released the balance amount of Rs. 55,121.60 Ps. in favour of defendant no. 2.

Ultimately the civil original application no. 04/1985 was disposed of because the order dated 11/01/1985 had been complied vide order dated

19/03/1990. While disposing of the Civil Original Application No. 04/1985, the writ petition was also disposed of by observing as under :

Disposed of alongwith COA 4/1985

Jammu Sd/

19/03/1990 Hon'ble Judge

Since the petition was not allowed and at the same time the court did not restore the original position as it existed on 11/01/1985, the appellant

instituted the suit for recovery of the amount of the basis of an undertaking furnished by the defendant respondent herein in terms of court order

dated 11/01/1985. The suit was resisted by the respondents on number of grounds on the basis of which parties joined issued which are as follows

:

Whether P.L. Gairola is competent and authorised officer to file the suit on behalf of plaintiffbank ? OPP.

Whether the suit is bad for nonrejoinder of other partners of partnership firm M/s Karam Sales Corporation, if so what is its effect? OPD.

Whether the plaintiff was within its bounds to mark lien on the fixed deposit amount under FDR no. A230850 of defendant No. 2 to recover the

amount due from the firm M/s Karam Sales Corporation Jammu? OPP.

Whether defendant no. 1 executed and filed a personal surety bond under the orders of Hon'ble High Court where under defendant no. 1

undertook to pay the amount of Rs. 55,121.60 paisa alongwith interest thereon ? OPP.

Whether writ petition no. 49/85 was dismissed by the Hon'ble High Court whereby defendant no. 1 under surety bond became liable to pay the

amount claimed against defendant no. 2 ? OPP.

Whether the plaintiffbank is entitled to recover Rs. 55,121.60 paisa alongwith interest to be charged thereon from the date of execution of

personal bond by defendant no. 1 ? OPP.

Whether the plaintiff has no cause of action against defendants, if so how and what is its effect ? OPD.

Whether the claim against partnership firm referred to herein above before has become barred by limitation if so what is its effect ? OPD.

Whether the plaint has not been properly verified if so what is its effect? OPD.

Relief

The learned trial court found issues no. 1,2,4, 7,8 in favour of the plaintiff. On issue no. 3, the court declined to return a finding on the plea that it

is not necessary while issue no. 6 was decided in terms of the finding returned on issue no. 5. The suit was dismissed primarily on the ground that

the writ petition having been dismissed, the appellant was not entitled to the relief.

The judgment and decree is challenged on the ground that the writ petition having been dismissed, the appellant was not entitled to the refund of

the amount in terms of the undertaking as the interim direction stood vacated with the dismissal of the writ petition. The finding of the trial court, it is

argued by Mr. Jamwal that the writ petition was not dismissed but disposed of and therefore the amount cannot be recovered is erroneous. The

contention of Mr. Bhushan on the other hand is that the writ petition has not been dismissed but disposed of after the interim direction was

complied. His further arguments is that the suit is not maintainable because the appellant should have approached the court for restoration of the

position as it existed before filing of the writ petition.

The central point is whether the suit for recovery of amount is maintainable when the writ petition was not decided on merits and the final relief

was granted by virtue of interim dated 11/01/1985. It is settled law that all interim directions are subject to final outcome of the list. If the writ

petition is not decided on merits, the consequence of such disposal cannot be different than the dismissal.

Let us, therefore examine the interim order dated 11/01/1985 and the manner the writ petition was disposed of. This court while admitting the

writ petition on 11/01/1985 directed as under:

Admit. Issue notice.

In the meantime it is directed that respondent Bank shall give full credit of the deposit reinvestment certificate no. A 230850 dated 17/11/1977 to

the maturity value of Rs. 84,332.50 through State Bank of India, Jammu Cantt branch through whom the petitioner has presented the same and

processed the collection of the amount, subject to petitioners furnishing security to the satisfaction of the Dy. Registrar High Court, Jammu, that in

case the petition fails, she would be liable to pay back the amount to the respondent bank"".

Defendant no. 1 filed his survey bond on 14/01 /1985 which was accepted by the Deputy Registrar on the same date. It appears the appellant

did not comply the order even after the defendants had furnished the surety bond in terms of the above directions. Defendant no. 2 therefore filed

civil original application no. 04/1985 to enforce compliance of the order. The appellant complied the order under the pain of contempt on

05/04/1985 as is evident from the examination of COA no. 4/85. It appears this case was not listed thereafter for quite sometime. Finally in view

of the compliance of the interim direction, contempt proceedings were dropped on 19/03/1990 and the writ petition was also disposed of

alongwith COA no. 4/85 (supra). So the question is whether the order dated 19/03/1990 tantamount to dismissal of the writ petition or it has been

allowed by granting the relief. The learned District Judge after referring to interim order dated 11/01/1985 returned the following finding on issue

no. 5 :

In compliance to this order it appears that defendant no. 2 who was petition in the said writ produced defendant no.1 Bhadur Singh who tendered

bond to the effect that in case petitioner (defendant) fails in her writ petition he will be liable to pay the entire amount of his personal property to the

plaintiff bank which came to be accepted by the Deputy Registrar Hon'ble High Court, Jammu. It also appears that the respondent plaintiff bank

did not comply the order of the Hon'ble High Court as it did not make the payment of the entire proceeds of the said certificate as directed by the

Hon'ble Court. It is then on 23.1.85 the defendant no. 1 petitioner moved an application for initiation of contempt proceedings against Manager of

the plaintiff bank which came to be registered as COA 4 of 1985 before the Hon'ble High Court with respect to which the Hon'ble High Court

was pleaded to issue a notice to the respondent (plaintiff) and finally Mr. Jamwal the Id counsel for the respondent (plaintiffbank) expressed before

the Hon'ble High Court on 19.3.90 that in accordance with the order of the Hon'ble High Court dated 5.4.85 the amount in question has been

paid, pursuant to this statement of the id counsel for the respondent plaintiff bank Mr. Jamwal the Hon'ble court was pleased to order that this

petition does not survive as such present proceedings are dropped and rule issued is discharged with respect to the main writ petition in question

came to pass indicate order reading as disposed of alongwith COA. From this order it is sufficiently clear that the Hon'ble Single Bench on being

informed in contempt petition that the petitioner/ defendant no. 2 has received full credit of FDR ""Deposit Reinvestment certificate"" on its maturity

for which she had file the writ petition before the Hon'ble High Court came to consign the main writ to the records, which by no stretch of

immigration can be said that the writ petition in question was ever dismissed by the Hon'ble Single Bench. This being so the issue is decided against

the plaintiffbank and in favour of the defendants"".

As a matter of fact, it is no finding because if the order dated 19/03/1990 is not an order of dismissal, the learned trial court had to decided

what the order connotes. It would have been different if the writ petition had been decided and the COA04/85 was disposed of accordingly.

Viceversa can never be the correct position because interim order was subject to the final outcome of the writ petition. In the instant case after the

amount was paid to the writ petitioners in terms of the interim direction dated 11/01/1985, the writ petition had to be decided on merits to

determine the claim of the petitioner. It could not be disposed of simply because the respondent appellant had complied the interim direction that

too after the contempt proceedings on 19/03/1990, it is the contempt petition which was disposed of after it was reported that the appellant had

complied the interim direction dated 11/01/1985. Since the contempt proceedings were initiated for the implementation of this direction or to

punish the contemner. Therefore, once the order was complied, the court had the discretion to either drop the proceedings or punish the appellant

for contempt of the court. It decided to drop the proceedings. But dropping the proceedings could not amount to disposal of the writ petition. It

appears the writ petitioner after having obtained the amount was not interested in pursuing the writ petition and therefore it was disposed of without

giving any reasons. The only plausible reason is that the writ petitioner was not interested in pursuing it, therefore instead of using the word

dismissal, a new term was employed which however, cannot be construed to mean anything other than the dismissal of the writ petition. By virtue

of this order, the interim order dated 11/01/1985 stood recalled and it was thus necessary to restore the statusquo as it existed on 11/01/1985 the

date interim order was passed. This is the law as reiterated in ""State of M.P. and Others vs. M.V. Vyavsaya and Co."" (1997) 1 SCC 156, which

reads as under :

... The question then arises what should happen to the huge arrears due from the respondent. The order dated 2251995 records an

undertaking given by the licensee firm to the High Court to the effect that ""all financial commitments to which he may ultimately be found liable

would be met by him"". The writ petitions filed by the respondent firm have been dismissed. His licences have been cancelled, reaction conducted

and loss due to the State to the people has been ascertained. The High Court ought to enforce the undertaking now by proceeding against the

respondent firm (licensee) and all its partners. The violation of the undertaking, it needs to be mentioned, amounts to contempt of court. It is the

duty of the court to try to repair the damage to the extent possible. No one should be allowed to suffer on account of the act(s) of the court"".

Thus the only import of the order dated 19/03/1990 was that it stood dismissed. So the finding of the trial court on this issue is erroneous and

as such is set aside holding that writ petition stood dismissed and the writ petitioner was under an obligation to refund the amount in terms of the

interim order. The next question is whether the suit for recovery is maintainable without approaching the writ court for restoration of the original

position. This question was considered by the Punjab High Court in Mohammad Ishaq Mohd. Ismail vs. Mohd. Bashir Ahmad Khan and Another

AIR 1961 Punjab 8. The appellant had option either to approach the writ court for restoration of the position as it existed before the interim order

was passed or to file a suit on the basis of the surety bond executed by respondent no. 1 and the conditions stipulated in the order dated 117 01

/1985 that the writ petitioner shall be liable to pay back the amount in case the petition fails. It opted for the second course and rightly so because

the only bar is section 145 of the Code of Civil Procedure which does not bar a separate suit as held by the High Court of Punjab by observing as

under :

It is intrusive to note that although in section 144 there is an express provision creating a bar to the institution of the suits, in Section 145 the

legislature has in its wisdom, chosen not to create any such bar. The bar under Section 144 has been created notwithstanding that an order under

the Section has to be deemed to be included in the expression ""decree"" as defined in Section 2(2) of the Code of Civil Procedure, Section 145

does however, expressly lay down that a surety, in so far as the proceedings under this section are concerned, is to be deemed to be a party to a

decree for the purpose of appeal and therefore, all orders passed in those proceedings are appealable. It is significant that this fiction is only

confined to the purposes of appeal, again this deeming provision appears to me to become operative only if proceedings under this section are

taken against the surety and not otherwise. The section is completely silent with respect to any bar to a suit to enforce the right created by the

surety bond. It is well recognised rule that in order to create a bar of a civil suit in the ordinary courts, on grounds of necessary intendment such a

bar must be supportable either on general principles of law or on grounds of public policy. In the present case either of these two grounds support

the respondents contention.

In order to deprive a citizen of his right to claim adjudication of his dispute by the ordinary procedure of a suit, in the municipal courts, generally

speaking, there is almost invariably some other equally adequate and efficacious mode of adjudication provided by law. In so far as the

enforcement of liability of surety in the case in hand is concerned, if the argument of the respondents is accepted then there would be no other

mode of securing adjudication on the question except by means of the summary remedy provided by Section 145. Here also, but for the deeming

provision, whereby a surety has to be deemed to be party within the meaning of Section 47, even the right of appeal would not be available to the

aggrieved party.

It is not without significance that the Legislature has merely brought in Section 47 for the purposes of creating a fiction of the surety being a party, it

has not made the other provisions of Section 47 applicable e.g., the provisions of subsection (2) of Section 47, which empowers the court dealing

with the objections under Section 47 to treat a proceeding as a suit, have not been made applicable to the proceedings under section 145.

Similarly, the Legislature, has in its wisdom, also refrained from adding a provision like subsection (2) of section 144. These circumstances, in my

opinion clearly suggest that the Legislature did not intend to bar a suit for the purposes of enforcing the liability of the surety and the procedure laid

down in section 145 is in my opinion clearly intended to be a summary procedure without in any manner taking away or curtailing a right which a

citizen possesses under ordinary law of the land of having civil disputes adjudicated upon by a suit under section 9 of the Code of Civil Procedure.

No law, statutory or otherwise, has been brought to my notice laying down that a regular suit should be held barred by the mere fact of a summary

and concurrent remedy having been provided for the redress of a grievance"".

No doubt, the appellant could have approached the High Court for recovery of the amount from the respondents but this does not mean a

separate suit is barred. The inherent power of the court can be used to avoid multiplicity of litigation but does not bar the remedy of filing a

separate suit. This view of the Punjab High Court finds support from the obiter of the Privy Council to which the reference was made by the

Division Bench of Andhra Pradesh High Court in Jafar Ali vs. Ramloo and Another, AIR 1967 Andhra Pradesh 234. The bench presided over by

Jaganmohan Reddy, CJ who later adorn the bench of Apex court, while referring to the judgments of the High Court of Madras, observed as

under :

Sankunni vs. Vasudevan, AIR 1926 Mad 1005, the surety undertook a produce certain property of the judgment debtor attached in execution

of a decree or in default to be liable for its value. There was no undertaking by the surety forpayment of any money under an order of the court.

The contention in that case that Section 145 is applicable because the sureties had become liable under clause(c) for the payment of any money

under an order of the court in any suit or in any proceeding consequent thereon, was negatived. It was held that the liability under Section 145

attaches only in the case of a person who is ""surety"" for the payment of any money under an order of the court and not a surety liable to pay owing

to default, and since there was no order of the court directing payment of any money by the judgement debtor and consequently the sureties were

not sureties for such payment, section 145 was not applicable. Notwithstanding this, following a judgement of their lordships of the Privy Council in

Raj Raghubir Singh vs. Jai Indra Bahadur ILR 42 All 158:46 Ind App 228 : AIR 1919 PC 55, the learned Judges held that even though the case

did not strictly come within the terms of section 145, the court has inherent powers to enforce the bond without recourse to a suit, Phillips J at page

1006 observed thus :

It has always seemed to be anomalous that, when the court has granted indulgence to the judgement debtor upon terms, that court should not be

able to enforce those terms without recourse to a separate suit. If the security had not been furnished the property would have remained in the

custody of the court and would have been available for sale at any moment. The sureties having undertaken to produce the property or in default to

be liable for its value, they cannot evade that liability"".

So a separate suit is not bar by section 145 CPC. Moreover the undertaking having been given in writ jurisdiction, Section 145 CPC may not

be strictly applicable though its principle is Again in ""Board of Trustees of the Port of Mormugao vs. Chowgule and Company Pvt. Ltd"". AIR

1985 Bombay 174, the court did not rule out that the undertaking can be enforced by filing a separate suit by observing as under:

Hence, in a situation like this, it is obvious that the court has to enforce the undertaking without recourse to a separate suit any by exercising its

inherent powers. As aptly observed by the learned Judge of the Madras High Court in Sankunni Variar's case (AIR 1926 Mad 1005) it would be

anomalous that when the court has granted indulgence to the judgment debtor upon terms that court should not be able to enforce those terms

without recourse to a separate suit, for otherwise, I may say borrowing the expression from Sadasiva Pillai's case (1975 2 Ind App 219) (above),

the result would be ""discreditable to the administration of justice"".

Hence, I am in respectful agreement with the judgement of the High Court of Punjab that the suit is maintainable and issue no.7 has been

erroneously decided by the trial court. Its finding on issue no. 7 is therefore reversed because it is not dependant upon the finding on issue no. 5.

This brings us to the discussion on issue no. 3. The finding of the trial court is that since the defendants are bound by the terms of the interim

direction dated 11/01/1985 so whether the lien was rightly marked or not is relevant. There can be no dispute with the proposition that the

defendant respondents are bound by the terms of the interim order under which defendant no. 3 derived benefits. However, in order to succeed in

this suit, the plaintiff may have also to justify that it had the power to mark lien on the FDR to avoid any challenge though it may not be decided on

the basis of the surety offered by the defendant. However, the right of a banker to mark lien on the property of a defaulter creditor is not controlled

by the agreement. A banker has right to adjust the amount of a defaulter from wherever and whenever it comes under its control. This has been

laid down by the Apex Court in Syndicate Bank vs. Vijay Kumar, AIR 1992S.C. 1066 holding that:

The Bankers Lien : Apart from any specific security, the banker can look to his general lien as a protection against loss on loan or overdraft or

other credit facility. The general lien of Bankers is part of law merchant and judicially recognised as such"".

In Bradndao vs. Barnett (1846) 12 Cl. and Fin 787 it was stated as under :

Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless there be an express contract,

or circumstances that show an implied contract, inconsistent with lien"". The above passages go to show that by mercantile system the Bank has a

general lien overall forms of securities or negotiable instruments deposited by or on behalf of the customer in the ordinary course of banking

business and that the general lien is a valuable right of the banker judicially recognised and in the absence of an agreement to the contrary, a

Banker has a general lien over such securities or bills received from a customer in the ordinary course of banking business and has a right to use the

proceeds in respect of any balance that may be due from the customer by way of reduction of customers debit balance. Such a lien is also

applicable to negotiable instruments including FDRs which are remitted the bank by the customer for the purpose of collection. There is no gain

saying that such a lien extends to FDRs also which are deposited by the customer"".

In case ""Punjab National Bank and Others vs. Surrender Prasad Sinha"" AIR 1992 SC1815 held as under:

It is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor, towards the time barred debt. It is also

equally settled law that the creditor when he is in possession of an adequate security, the debt due could be adjusted from the security in his

possession and custody. Undoubtedly the respondent and his wife stood guarantothers to the principal debtor, jointly executed the security bond

and entrusted the FDR as security to adjust the outstanding debt from it at maturity. Therefore, though the remedy to recover the debt from the

principal debtor is barred by limitation, the liability still subsists. In terms of the contract the bank is entitled to appropriate the debt due and credit

the balance amount to the saving bank account of the respondent. Thereby, the appellant did not act in violation of any law, nor converted the

amount entrusted to them dishonestly for any purpose"".

Applying the principle, the appellant was justified in marking its lien on the FDR's because the holder of the FDR was admittedly a partner in

M/s Karam Sales Corporation, 11A/D Warehouse, Jammu a fact not only admitted but also proved because the original partnership deed is on

the file and in terms of this partnership deed, respondent no. 2 Smt. Shukla Rohmetra was having 20% share in the partnership business. The

liability of the partner under the partnership act is joint and several and this is also clear from the terms of the partnership deed executed between

the parties

In view of the above, this appeal is allowed, the impugned judgements and decree is set aside and the suit filed by the appellant is decreed with

cost and interest at the rate of 12% per annum from the date of the institution of the suit till satisfaction of the decree.