- Bookmark
- Share
- CaseIQ
Citibank N.A v. Standard Chartered Bank .
Factual and Procedural Background
Standard Chartered Bank (“SCB”) filed Suit No. 24 of 1994 before the Special Court under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992, seeking recovery of approximately Rs 55.74 crores with 20% p.a. interest from Citibank N.A. Citibank, in turn, filed Suit No. 1 of 1995 against Canbank Financial Services Ltd. (“Canfina”) for delivery of 9% IRFC bonds worth Rs 50 crores and associated monetary relief, contingent on an adverse decree in SCB’s suit.
The Special Court decreed both suits on different terms: SCB obtained a decree against Citibank with 20% interest, whereas Citibank obtained a decree against Canfina with 9% interest. Both decrees were appealed to the Supreme Court (Civil Appeal Nos. 7426 & 9063 of 1996). On 7-7-2004 the Supreme Court allowed both appeals, set aside the Special Court’s decrees, and ordered restitution:
- SCB to refund Citibank the amount received, with 12% p.a. interest (15% on default after 1-9-2004).
- Citibank to refund Canfina the amount received, with 9% p.a. interest (12% on default after 1-9-2004).
Two interlocutory applications followed:
- IA No. 5 in C.A. 7426/1996 by SCB sought “clarification” alleging inequity because SCB had to pay 12% interest while Citibank had to pay only 9%.
- IA No. 5 in C.A. 9063/1996 by Citibank reported compliance and requested recording of satisfaction of the restitution order.
Legal Issues Presented
- Whether the Supreme Court should modify or clarify its 7-7-2004 restitution order by equalising the rate of interest payable by SCB and Citibank.
- Whether, as contended by SCB, the Supreme Court lacked jurisdiction to order restitution, such power allegedly residing only in the trial court.
- Whether the Supreme Court can entertain an application by Citibank to record satisfaction of restitution (IA No. 5 in C.A. 9063/1996).
Arguments of the Parties
Intervener / Applicant: Standard Chartered Bank (IA 5 in C.A. 7426/1996)
- The differential interest rates (12% against SCB, 9% against Citibank) are inequitable and unjustly enrich Citibank by roughly Rs 21.81 crores.
- The principle of restitution requires identical treatment; since both restitution periods (1996–2004) are identical, the 9% rate applied to Citibank–Canfina should also apply to SCB–Citibank.
- Relying on State Bank of Saurashtra v. Chitranjan Rangnath Raja, SCB contended that only the trial court, not the Supreme Court, had jurisdiction to order restitution.
Respondent: Citibank N.A.
- Opposed alteration of interest, noting that the Special Court itself had granted different rates: 20% against Citibank, 9% in its favour; the Supreme Court merely scaled both down proportionately and consciously.
- Filed IA 5 in C.A. 9063/1996 solely to record compliance of the restitution order, but accepted that execution lay elsewhere.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State Bank of Saurashtra v. Chitranjan Rangnath Raja, (1980) 4 SCC 516 | Restitution jurisdiction lies with the trial court. | The Court noted that the point had not been argued during the main appeal nor pleaded in the IA; therefore, it refused to reopen the issue. |
Court's Reasoning and Analysis
The Court held that the comparison SCB sought to draw with the Citibank–Canfina decree was “wholly irrelevant” because the underlying decrees carried different interest rates (20% vs. 9%). When the Supreme Court reversed those decrees, it consciously reduced each interest rate in proportion to prevailing commercial lending rates, arriving at 12% for SCB’s liability and retaining 9% for Citibank’s liability. Re-imposing a higher rate on Citibank would contradict the Special Court’s original grant and exceed what Citibank was ever obliged to pay.
Regarding jurisdiction, the Court observed that the State Bank of Saurashtra argument had not been raised in the appeal or in IA 5; hence no clarification could be sought on a point never urged earlier.
As to Citibank’s IA 5 in C.A. 9063/1996, the Court stressed that execution of its restitution order belongs to the executing court, not the Supreme Court; thus, reporting compliance or seeking satisfaction must be done there.
Holding and Implications
IA 5 in C.A. 7426/1996 DISMISSED. The Court refused to modify or clarify the differential interest rates and rejected the belated challenge to its restitution jurisdiction.
IA 5 in C.A. 9063/1996 DISMISSED. Liberty granted to approach the executing court to record satisfaction.
IA 6 (exemption) ALLOWED.
Implications: The restitution order dated 7-7-2004 stands unaltered; SCB must refund Citibank at 12% p.a., and Citibank must refund Canfina at 9% p.a. No new legal principle was announced; the decision reaffirms the Court’s discretionary power over interest rates in restitution and delineates that execution matters lie with the trial court.
Order
1. This order shall dispose of IA No. 5 filed by the respondent applicant Standard Chartered Bank (hereinafter referred to as “scb”) in Civil Appeal No. 7426 of 1996 seeking clarification in the judgment dated 7-7-2004 and for further directions. IA No. 5 has been filed by the respondent Citibank N.A (hereinafter referred to as “Citibank”) in Civil Appeal No. 9063 of 1996 reporting compliance and recording satisfaction of the decree passed in the appeal.
2. Before adverting to the prayers made in the IAs it is necessary to refer to a few facts leading to the filing of the IAs.
3. Suit No. 24 of 1994 was filed by scb against Citibank seeking an order and decree against Citibank to pay to scb a sum of Rs 55,73,92,241.57p. with further interest on the principal sum of Rs 48,27,91,095.89p. @ 20% p.a from the date of filing of the suit till repayment. Citibank filed back-to-back suit being Suit No. 1 of 1995 against Canbank Financial Services Ltd. (for short “canfina”) with a prayer that in the event a decree is passed against Citibank in Suit No. 24 of 1994 then canfina be ordered to deliver to Citibank the 9% IRFC bonds of the face value of Rs 50 crores along with the difference between the amount that Citibank may be ordered to pay to scb in Suit No. 24 of 1994 and the market value of the said bonds on the day on which the same are handed over by canfina to Citibank along with interest @ 20% on the principal amount of Rs 51,07,12,328.77 from 1-1-1992 till the date of filing of the suit together with interest on the principal amount @ 20% p.a from the date of filing of the suit till repayment and/or realisation.
4. The two suits were tried by the Special Judge appointed under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992, hereinafter referred to as “the Act”.
5. Suit filed by scb being Suit No. 24 of 1994 was decreed by the Special Court by a judgment and decree dated 12-3-1996/13-3-1996, inter alia, directing Citibank to pay the amount of Rs 48,27,91,095.89p. along with interest @ 20% p.a till filing of the suit aggregating to Rs 55,73,92,241.57p. with pendente lite interest @ 20%. Subsequently, the suit being Suit No. 1 of 1995 filed by Citibank against canfina was also decreed by the judgment and decree dated 22-4-1996. The Special Court passed the decree in favour of Citibank directing canfina to deliver to Citibank 9% IRFC bonds of the face value of Rs 50 crores within a period of 16 weeks along with the coupon interest @ 9% p.a from 15-7-1991 till the bonds were delivered. Learned Judge awarded lower rate of interest by observing thus:
“… The Court realises that in so granting interest the Court is making a difference from Suit No. 24 of 1994 and other suits where it has granted interest at 20%. But all those cases have been the cases where the plaintiffs therein have had a strong case to which the defendants therein had virtually no defence….”
6. Citibank being aggrieved against the judgment and decree granted against it in Civil Suit No. 24 of 1994 filed Civil Appeal No. 7426 of 1996 and canfina being aggrieved against the decree passed in Civil Suit No. 1 of 1995 filed Civil Appeal No. 9063 of 1996. Both these appeals were heard together and were disposed of by a common order†.
7. Civil Appeal No. 7426 of 1996 and Civil Appeal No. 9063 of 1996 were allowed and the judgment and decree passed by the Special Court in Suit No. 24 of 1994 and Suit No. 1 of 1995 were set aside.
8. While doing so, it was held in Civil Appeal No. 7426 of 1996 :
“… Citibank becomes entitled to restitution of the total amount paid by it to Standard Chartered Bank (principal and interest) along with interest @ 12% p.a from the date of receipt of payment by scb provided it is paid on or before 1-9-2004 and in default to pay the interest @ 15% p.a from the date of receipt of payment till it is repaid by Standard Chartered Bank. Citibank would also be entitled to receive back the amount of costs it had paid to Standard Chartered Bank under the decree of the Special Court but the same would not carry any interest. Though the appellant had prayed that the interest be granted at the same rate at which it was granted by the Special Court (i.e 20% p.a) but we have reduced the same keeping in view that interest rates have come down substantially in the recent years.”
9. While Civil Appeal No. 9063 of 1996 was allowed by observing thus:
“57. As a consequence to the aforesaid, canfina becomes entitled to restitution of the total amount paid by it to Citibank (principal and interest) along with interest @ 9% p.a from the date of payment provided it is paid on or before 1-9-2004 and in default to pay the interest @ 12% p.a from the date of payment till it is repaid by Citibank. Though the appellant had prayed for higher rate of interest but we deem it appropriate to grant the same rate of interest which had been granted by the Special Court, while decreeing Suit No. 1 of 1995. We decline to grant costs in the appeal as the Special Court had not granted any costs while decreeing the suit of Citibank. The parties in this suit shall bear their own costs throughout.”
10. IA No. 5 in Civil Appeal No. 7426 of 1996 has been filed seeking clarification and direction with the averment that this Court by ordering restitution has directed scb to pay interest @ 12% per annum on the amount received by scb from Citibank whereas Citibank has been directed to pay interest only @ 9% per annum on the amount received by Citibank which is inequitable thereby unjustly enriching Citibank by payment of interest at a higher rate of 3% per annum. That Citibank is unjustly enriched to the extent of Rs 21,81,44,923. That principle of compensation/restitution for scb and Citibank has to be the same. While directing refund of monies the period for restitution to Citibank and to canfina is identical i.e 1996 to 2004. The interest @ 9% found reasonable to compensate canfina for 1996 to 2004 should have been applied to Citibank also. Citibank has filed its reply to the interlocutory application.
11. Counsel for the parties have been heard.
12. Comparison by scb with the decree in favour of canfina and against Citibank is wholly irrelevant. The decrees passed by the Special Court were for different amounts with different rates of interest. Contention of scb that Citibank was unjustly enriched is misplaced. In Civil Appeal No. 7426 of 1996 which arises from Suit No. 24 of 1994 filed by scb against Citibank was decreed with interest @ 20% per annum by the Special Court whereas Suit No. 1 of 1995 was decreed with interest @ 9% per annum only. While reversing the judgment and decree passed by the Special Court we scaled down the rate of interest in Suit No. 24 of 1994 to 12% (although the lending rate of banks for commercial transaction was much higher) as the rate of interest had come down in the recent years. Award of interest @ 12% was deemed to be just and equitable. Though we were of the opinion that keeping in view the lending rates of the banks on commercial transaction the rate of interest should be awarded at 12% per annum in Civil Appeal No. 9063 of 1996 as well but the same could not have been done as the Special Court had awarded interest in favour of Citibank @ 9% per annum only. Citibank could not be asked to pay interest at a rate higher than what was granted to it in the suit. Since Citibank had been awarded interest @ 9% per annum we deemed it appropriate and upheld the award of interest at that rate of interest against Citibank.
13. Citibank as per decree of the Special Court was directed to pay interest at higher rate whereas the interest awarded in its favour was at a lower rate. Keeping that difference in mind we granted different rates of interest in the two appeals. Citibank could not be asked to pay interest at a rate higher than as was granted to it by the Special Court while decreeing the suit. The Special Court had awarded interest @ 9% to Citibank and that is why Citibank could not be asked to pay interest at a rate higher than what was awarded to it by the Special Court. The decision taken by the Court was a conscious decision. The variation in the rate of interest ordered in the two appeals was keeping in view the rate at which the interest was allowed by the Special Court in the two suits. The order does not need any clarification or any further direction.
14. Mr Shanti Bhushan, learned Senior Counsel appearing for the respondents relying upon the judgment of this Court in State Bank of Saurashtra v. Chitranjan Rangnath Raja (1980) 4 SCC 516 submitted that this Court did not have the jurisdiction to order restitution. According to him, it is the trial court which could order restitution as per law laid down by this Court in State Bank of Saurashtra (1980) 4 SCC 516. This point was not argued at the time of hearing of the appeals. This point has not been taken in IA No. 5 either. Since this point was not raised the question of clarification of the order would not arise. IA filed in Civil Appeal No. 7426 of 1996 is dismissed.
15. IA No. 5 in Civil Appeal No. 9063 of 1996 has been filed by Citibank reporting compliance and recording satisfaction of the restitution order in Civil Appeal No. 9063 of 1996. Such an application cannot be entertained by this Court as this Court is not the executing court. This IA is also dismissed reserving liberty with the applicant to report compliance and seek recording of satisfaction before the executing court.
16. IA No. 6 for exemption from filing typed copies of annexures is allowed.
Alert