Bookmark
PDF
Share
CaseIQ

Central Railway Employees Co-Operative Credit Society v. Bank Of Baroda

Bombay High Court

Apr 22, 1996

Judgment

Subsequent
References

CaseIQ

Smart Summary (Beta)

Structured Summary of the Provided Opinion

Factual and Procedural Background

The plaintiffs (a society registered under the Co-operative Societies Act, 1925 and the Multi-State Co-operative Societies Act, 1984, whose members are employees of Central Railway) initiated a suit to recover Rs. 1,86,97,277.00 with interest on a principal sum of Rs. 1,75,00,000/- and costs. The plaintiffs alleged that, in response to the defendants' invitation to invest surplus funds under a Reinvestment Scheme, they delivered two crossed cheques drawn on Syndicate Bank in favour of the defendants: cheque No. 717800 dated 7th July, 1993 for Rs. 1,00,00,000/- and cheque No. 717875 dated 26th July, 1993 for Rs. 75,00,000/-. The plaintiffs say the defendants encashed the cheques (on 8th July, 1993 and 27th July, 1993 respectively), issued short-term deposit receipts dated 9th July, 1993 and 28th July, 1993, and later failed to renew the deposits or return the receipts when renewal was requested in October 1993.

The Syndicate Bank issued certificates dated 10th November, 1993 certifying that the two cheques were encashed and paid to the defendants. The defendants disputed issuing the receipts by letter dated 27th November, 1993; the plaintiffs' advocates replied on 3rd December, 1993 forwarding copies of the Syndicate Bank certificates. After further correspondence, and absence of repayment by the defendants, the plaintiffs filed the present suit seeking recovery with interest.

In response to the plaintiffs' Summons for Judgment, the defendants filed an affidavit (by Ramanlal P. Shah, Assistant General Manager). The defendants contended the suit was not maintainable as a summary suit under Order XXXVII CPC, and stated the cheques were deposited into a third party's current account (Mount Marry Enterprises) by one Mr. Malge, so the bank was not liable. The plaintiffs alleged collusion by the defendants' manager Mr. Gogate and Mr. Malge to siphon funds; a CBI complaint resulted in charge sheets against Mr. Gogate and Mr. Malge.

The CBI representative produced originals of the two cheques in court; these were tendered and marked as Exhibits 'A' and 'B'. The court ultimately made the Summons for Judgment absolute and passed a decree as prayed, with specific directions regarding interest, advocates' fees, refund of part of the institution fees, return of originals to the CBI on conditions, and forwarding the judgment to the Reserve Bank of India.

Legal Issues Presented

Whether the suit as framed by the plaintiffs is maintainable as a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (including the relevance of Rule 2 of Order XXXVII).
Whether the defendants (the bank) are liable to refund or pay to the plaintiffs the sums represented by the two crossed cheques said to have been deposited as short-term deposits and encashed by the defendants.
Whether the defendants should be granted leave to defend the suit or whether the plaintiffs are entitled to judgment on the summons for judgment.

Arguments of the Parties

Plaintiffs' Arguments

The plaintiffs delivered two crossed cheques to the defendants for investment as short-term deposits and received short-term deposit receipts from the defendants (TDR/R/92/039609 dated 9-7-93 for Rs. 1,00,00,000/- and TDR/R/92/039660 dated 28-7-93 for Rs. 75,00,000/-).
The Syndicate Bank issued certificates (both dated 10th Nov. 1993) certifying that the cheques were encashed and paid to the defendants.
The defendants encashed the cheques, accepted the deposits and later refused to renew or return the receipts and did not refund the deposited amounts.
The defendants' defence is frivolous, vexatious, not bona fide, and intended only to delay; accordingly plaintiffs are entitled to judgment and to interest at a reasonable rate of 10% per annum, and the defendants should not be granted leave to defend.

Defendants' Arguments

The defendants claim the suit is not maintainable as a summary suit under Order XXXVII CPC.
Although the cheques were drawn in favour of the defendants, they assert the cheques were brought to the defendants by Mr. Malge and deposited into a current account in the name of "Mount Marry Enterprises," implying the defendants are not liable to the plaintiffs for the aggregate sum.
The defendants' affidavit admits allegations of collusion involving a bank manager (Mr. Gogate) and Mr. Malge, but the bank maintains legal positions that the suit as framed does not permit summary adjudication.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis, as reflected in the opinion, proceeded by evaluating the documentary evidence, the parties' admissions and the nature of the defendants' pleaded defence:

The court noted documentary evidence: the two crossed cheques (produced in original by the CBI representative and admitted into evidence as Exhibits 'A' and 'B'), certificates from Syndicate Bank (dated 10th November, 1993) certifying encashment, and the short-term deposit receipts allegedly issued by the defendants and later forwarded by the plaintiffs for renewal.
The defendants did not deny receipt and encashment of the cheques in their correspondence (specifically, a letter of 27th December, 1993 acknowledged that details were being gathered but did not deny receipt of the cheques or the Syndicate Bank certificates). The court treated these admissions and the documentary proof as significant.
The defendants' factual contention that the cheques were deposited by a third party (Mr. Malge) into an account in the name of Mount Marry Enterprises was presented in affidavit form, but the plaintiffs countered with allegations and materials showing collusion between bank officers (Mr. Gogate) and Mr. Malge; subsequent CBI action produced charge sheets against Mr. Gogate and Mr. Malge (and not against a plaintiff's employee Mr. Jadhav), which the court referenced as part of the contextual background to the alleged fraud.
Assessing the defence's nature, the court characterized the defendants' defence as not substantial, not bona fide, frivolous and vexatious; the opinion describes it as illusory and sham. On that basis, the court concluded that the plaintiffs were entitled to judgment on the Summons for Judgment and refused leave to the defendants to defend.
Given the plaintiffs' documentary proofs and the court's finding about the defendants' defence, the court made the Summons for Judgment absolute and passed a decree in favour of the plaintiffs, with consequential orders on interest, costs (advocates' fees to be quantified as per rules), partial refund of institution fees, and administrative directions (return of originals to CBI on condition of Xerox copies being furnished; forwarding judgment to the Reserve Bank of India).

The opinion's analysis focuses on documentary and admitted facts and characterizes the defendants' defence as untenable; no extended statutory or precedent-based legal exposition is contained in the text beyond reference to the applicability of Order XXXVII CPC and Rule 2 of that Order as the locus of the maintainability dispute.

Holding and Implications

Holding: The Summons for Judgment was made absolute and a decree as prayed in the suit was passed against the defendants; the defendants were ordered and decreed to pay further interest on the principal sum of Rs. 1,75,00,000/- at the rate of 10% per annum from the date of the suit till payment or realisation, whichever is earlier.

Additional directions and immediate consequences explicitly ordered by the court:

Advocates' fees to be quantified as per the applicable rules.
Two-thirds refund of the institution fees to be made to the plaintiffs.
On the plaintiffs furnishing Xerox copies of the two cheques (Exhibits 'A' and 'B'), the originals were to be returned to the CBI representative for use in the pending complaint against Mr. Malge and Mr. Gogate.
The court directed its office to forward a copy of the Judgment to the Reserve Bank of India for information and for the RBI to take appropriate action against the erring bank to safeguard public interest.
Case copies (CC) expedited.

Implications:

The direct effect is a monetary decree in favour of the plaintiffs against the defendants for the principal amount evidenced in the suit and interest at the stated rate, together with attendant cost and administrative orders.
The opinion does not state that it creates a new legal precedent beyond resolving the parties' disputes; the court's order is remedial as between the parties and includes administrative notification to the Reserve Bank of India to take any appropriate regulatory action.

Show all summary ...

In the suit to recover the sum of Rs. 1,86,97,277.00 with interest on the principal sum of Rs. 1,75,00,000/- and the costs, the present Summons for Judgment has been taken out on behalf of the Plaintiffs.

2. The facts leading to institution of this suit by the Plaintiff Society amply demonstrate the manner and mode in which the bank, supposed to be a repository of faith and trust and custodian of money deposited with it even by ordinary citizens, has indulged in fraud and malpractices with intend to misappropriate hard earned money of Central Railway Employees deposited through Plaintiffs' Society on ‘Short Term Deposit’ basis. The facts of the case also demonstrate the pre-planned and pre-determined manner in which the bank Officials siphoned off the money remitted by the Plaintiffs' Society by ‘Crossed-cheques’ drawn in favour of the Defendants' Bank for investment as ‘Short Term Deposit’.

3. The plaintiffs are a Society registered under The Co-operative Societies Act, 1925 and The Multi-State Co-operative Societies Act, 1984. The Plaintiffs' Society has as its members, the employees of Central Railway. The Plaintiffs' Society gives loan to its members as and when applied for and the excess funds are invested in Co-operative Banks, Nationalised Banks and/or UTI. The Defendants are a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Branch Office at Wadala, Bombay 400031. In the course of their business, the Defendants accept deposits under Short Term/Long Term Deposits.

4. By their letter dated 17th May, 1993 addressed to the Plaintiffs, the Defendants requested the Plaintiffs to invest their surplus funds with them under the Reinvestment Scheme and agreed to pay interest as per Reserve Bank of India Guidelines. In pursuance of the said request, the Plaintiffs, along with their letter dated 7th July, 1993 addressed to the Defendants, forwarded their cheque bearing No. 717800 dated 7th July, 1993 for Rs. 1,00,00,000/- (Rupees One Crore) drawn on Syndicate Bank and in favour of the Defendants. The said cheque was issued in favour of the Defendants for investment of the said amount with the Defendants as ‘Short Term Deposit’ for 91 days. Along with their further letter dated 26th July, 1993 addressed to the Defendants, the Plaintiffs forwarded another cheque bearing No. 717875 dated 26th July, 1993 for Rs. 75,00,000/- (Rupees Seventy Five Lacs) also drawn on Syndicate Bank and in favour of the Defendants for investment of the said amount with the Defendants as ‘Short Term Deposit’ for 91 days.

5. Both these cheques were admittedly drawn in favour of the Defendants and received by the Defendants. Both these cheques were encashed by the Defendants on 8th, July, 1993 and 27th July, 1993 respectively. The Syndicate Bank on whom these two cheques were drawn by the Plaintiffs' Society has issued two certificates both dated 10th Nov. 1993 certifying that the said two cheques were encashed and paid to the Defendants. According to the Plaintiffs in respect of the ‘Short Term Deposits’ made by the Plaintiffs with the Defendants, the Defendants had issued two Short Term Deposit Receipts bearing Nos. TDR/R/92/039609 dated 9-7-93 for Rs. 1,00,00,000/- and TDR/R/92/039660 dated 28th July,. 1993 for Rs. 75,00,000/- in favour of the Plaintiffs. Since Plaintiffs wanted to renew the said deposits, along with their letter dated 8th Oct. 1993 addressed to the Defendants, the Plaintiffs forwarded the said Short Term Deposit Receipt dated 9th July, 1993 for Rs. 1,00,00,000/- (Rupees One Crore) to the Defendants with a request to renew the said deposit for a further period of 181 days. Similarly, along with their another letter dated 23rd Oct. 1993 addressed to the Defendants, the Plaintiffs forwarded to the Defendants the said Short Term Deposit Receipt dated 28th July, 1993 for Rupees 75,00,000/- (Rupees Seventy Five Lacs) with a request to renew the said deposit for a further period of 181 days. The defendants neither renewed the said deposits nor returned the said Short Term Deposit Receipts to the plaintiffs.

6. By their letter dated 27th Nov. 1993 addressed to the plaintiffs, the defendants denied that the defendants had issued either of the said Short Term Deposit Receipts in favour of the plaintiff. By their Advocates' letter dated 3rd December, 1993 addressed to the defendants, the plaintiffs replied to the said letter dated 27th Nov. 1993 of the defendants and while reiterating that the said sums aggregating to Rs. 1,75,00,000/- were deposited with the defendants and the Short Term Deposit Receipts were issued by the defendants in favour of the plaintiffs, forwarded copies of the said certificates issued by the Syndicate Bank to the defendants and demanded payment of the amounts with interest from the defendants. By their letter dated 27th Dec. 1993 addressed to the Advocates for the plaintiffs, the defendants though informed the plaintiffs that they were gathering the details pertaining to the said deposits, did not deny the fact of the plaintiffs handing over their said two cheques for Rupees 1,00,00,000/- and Rs. 75,00,000/- to the defendants as and by way of ‘Short Term Deposit Receipts’ with the defendants nor the said two certificates issued by the Syndicate Bank pertaining to encashment of the said cheques by the defendants.

7. Since the defendants have neither refunded the said amounts deposited by the plaintiffs with the defendants nor paid the same to the plaintiffs, the present suit has been filed by the plaintiffs for recovery thereof with interest from the defendants.

8. In reply to the Summons for Judgment taken out on behalf of the plaintiffs, an affidavit of one Ramanlal P. Shah, Assistant General Manager of the Defendants has been filed. According to the defendants, the suit as framed and filed is not maintainable as a Summary Suit. It is also the case of the defendants that though the said two cheques were drawn in favour of the defendants, the same were brought to the defendants by one Mr. Malge, a Constituent of the defendants and were deposited in his Current Account opened in the name of ‘Mount Marry Enterprises’ and as such, the defendants were not liable for payment of the said aggregate sum of Rs. 1,75,00,000/- and interest to the plaintiff.

9. Even according to defendants, though one Mr. Gogate, the then Manager of the defendants, was in collusion and conspiracy with the said Mr. Malge to perpetrate fraud with intent to siphon off the said aggregate sum of Rs. 1,75,00,000/-, the defendants' bank has the audacity of denying falsely the liability for payment of the said aggregate amount to the plaintiffs. Though the defendants intended to involve one Mr. Jadhav of the plaintiffs in the fraud played by the Officers of the defendants, in the complaint filed with the Central Bureau of Investigation, after holding enquiry, charge sheets have been issued only against the said Mr. Gogate and the said Mr. Malge and no charge sheet has been issued to the said Mr. Jadhav of the plaintiffs. On admission of the defendants themselves, the said two cheques for Rs. 1,00,00,000/- and Rs. 75,00,000/- were received by the Defendants and encashed by the defendants. Both the said cheques were crossed cheques and drawn in favour of the defendants. The defendants are liable to refund and/or pay the said amounts to the plaintiffs. The defendants had issued the said two Short Term Deposit Receipts in favour of the plaintiffs which the plaintiffs had returned to the defendants for renewal of the deposits. Despite encashment of the cheques by the defendants and receipt of the said amounts from the plaintiffs as Short Term Deposits, the defendants have adopted dishonest attitude and intend to take wholly false, frivolous and bogus defence to the claim of the plaintiffs in the suit.

10. With intent to cause delay in passing decree against the defendants' bank and thereby reap maximum advantage from the defrauded amount, the defendants' bank has still raised a false plea as to maintainbility of the suit by alleging that the suit as framed and file is not maintainable as a ‘Summary Suit’ under the provisions of Order XXXVII of the Code of Civil Procedure, 1908. The plaintiffs' Society seek to recover a debt payable by the defendants bank with interest arising on a Written Contract and since no relief no falling under Rule 2 of Order XXXVII of the Code of Civil Procedure is claimed in the suit, the suit is maintainable as a summary Suit under the provisions of Order XXXVII of the Code of Civil Procedure and the contention raised on behalf of the defendants' bank in this regard is devoid of any merit.

11. To restore faith and confidence of the business community and ordinary citizen in the banking system, no bank should be permitted to take up such false, frivolous and bogus defence to the just and genuine claim like the one in the instant case. The defence intended to be taken by the defendants is neither substantial nor bona fides nor reasonable. It is frivolous and vaxatious. It is moonshine, illusory and sham. In fact, the Defendants have no defence whatsoever to the claim of the Plaintiffs in the suit. In the facts of the case, the plaintiffs are even entitled to interest on the principal amount at the reasonable rate of interest at 10% per annum. The plaintiffs are entitled to sign judgment and the defendants are not entitled to leave to defend the suit. Hence, leave to the defendants to defend the suit is refused.

12. The Representative from CBI who is present in Court produces the originals of the two cheques dated 7th July, 1983 and 26th July, 1983 for Rs. 1,00,00,000/- and Rupees 75,00,000/- respectively. Both the cheques are tendered in evidence and marked as Exhs. ‘A’ and ‘B’ respectively. The other documents tendered by the plaintiffs are marked as Exh. ‘C’ collectively.

13. The Summons for Judgment is made absolute and decree as prayed in the suit is passed against the defendants save and except that the defendants are also Ordered and decreed to pay further interest on the principal sum of Rs. 1,75,00,000/- at the rate of 10% per annum from the date of the suit till payment or realisation, whichever is earlier.

14. Advocates' fees to be quantified as per Rules 2/3rd refund of the institution fees to the plaintiffs.

15. On the plaintiffs furnishing Xerox copies of the two cheques produced by the representative from the CBI and marked as Exhs. ‘A’ and ‘B’, the originals of the said cheques be returned to representative of CBI, since the same are required in connection with the pending complaint against the said Mr. Malge and Mr. Gogate.

16. The Office is directed to forward a copy of this Judgment to the Reserve Bank of India for information and to take appropriate action against the erring bank to safeguard the interest of public at large.

17. CC expedited.

Order accordingly.