Shiva Kirti Singh, J.— The simple grievance of the appellant is that by the impugned judgment and order dated 12-4-2005 passed by the Hon'ble Judge presiding over the Special Court (Trial of Offences Relating to Transactions in Securities) at Bombay has erred in determining an excessive amount payable by the appellant Citibank to the respondent applicant Canbank Financial Services Ltd. (hereinafter referred to as “Canfina”) by way of restitution.
2. There is no dispute that on account of reversal of a money decree in favour of Citibank in Suit No. 1 of 1995 filed by it against Canfina, by a common order dated 7-7-2004 passed by this Court in Citibank N.A. v. Standard Chartered Bank (2004) 6 SCC 1, Citibank is required to restore back the monetary benefits it received under the decree against Canfina. The operative part of the said decree dated 22-4-1996/23-4-1996/26-4-1996 in Suit No. 1 of 1995 is as follows:
“121. … Accordingly, the defendants are directed to deliver to the plaintiffs, 9% IRFC bonds of the face value of Rs 50 crores within a period of 16 weeks. …
122. The question then arises as to the interest the defendants must therefore pay to the plaintiffs, the interest @ 9% on these bonds for the period starting from 15-7-1991 till they deliver the bonds. If the defendants do not deliver the bonds but choose to return the monies they must still pay interest. However, in my view the plaintiffs would still be entitled to interest at 9% only. This, however, will be from the date the consideration amount was received by the defendants till the date of repayment. …”
3. Since the decree gave an option to Canfina, it opted to deliver to Citibank the 9% IRFC bonds of the face value of Rs 50 crores on 13-8-1996. It also paid the awarded interest @ 9%. The aggregate interest amounted to Rs 22,34,58,904 calculated for the period 15-7-1991 to 30-6-1996. There is no controversy so far as the restitution of interest amount is concerned but there is a strong disagreement between the parties as to how the market value of the bonds be calculated for the purpose of effective and satisfactory restitution. Admittedly, the bonds delivered to Citibank on 13-8-1996, were being traded in the market and there is no serious dispute that on that date the market value of a bond was Rs 81 and the aggregate value of the bonds on that basis would be Rs 40.50 crores.
4. According to the learned Senior Counsel, Mr Kapil Sibal the Canfina suffered only the loss of Rs 40.50 crores and Rs 22.34 crores and on decree being set aside it is entitled only to such loss along with 9% interest, by way of restitution.
5. There would have been no difficulty in working out the loss of Canfina if it had opted to pay the money value of the bonds instead of delivering the bonds. It is also not in dispute that after receiving the bonds, Citibank in its wisdom disposed of the bonds in the market during March/April 1997 when the prevailing average market rate was Rs 85 per bond although its face value was Rs 100 redeemable on 15-7-2001. The bonds delivered to Citibank carried with them coupons for half-yearly interest @ 9% on the face value of the bonds and for one set of coupons for half-yearly interest, Rs 2.25 crores in aggregate was also received by Citibank in January 1997. Thereafter between April/March 1997 Citibank sold the bonds at average price of Rs 85 receiving in aggregate Rs 42.56 crores. By the very nature, the bonds, on 15-7-2001 at their face value would be worth Rs 50 crores. This along with half-yearly interest through coupons redeemed after April 1997 has presumably gone to third parties who might have purchased the bonds in the market.
6. The appellant Citibank in compliance with the judgment of this Court dated 7-7-2004 (2004) 6 SCC 1 had to offer restitution of “total amount paid” by Canfina to Citibank (principal and interest) along with interest @ 9% p.a. from the date of payment. But in case the full amount was not paid by 1-9-2004, the liability would increase to interest @ 12% p.a. till repayment by Citibank. Obviously, the total amount of principal paid by Canfina to Citibank through delivery of bonds on 13-8-1996 had to be worked out in a reasonable and just manner. This problem has arisen because Canfina had opted to deliver the bonds and not the money which it had received for those bonds. Admittedly, the total consideration paid by Citibank to Canfina for 9% IRFC bonds of face value of Rs 50 crores was Rs 49 crores at market value of Rs 98 on 30-12-1991 along with an interest component of approximately Rs 2 crores, bringing the total consideration to Rs 51,07,12,328.77.
7. The issue is, when the bonds are no longer in currency and not available for return by way of total amount paid by Canfina to Citibank, then for restitution what method of calculation shall serve the purpose best in arriving at the total amount paid to Citibank “by way of principal” which it must return to Canfina.
8. After the Supreme Court judgment on 12-7-2004, Canfina by a letter to Citibank demanded Rs 135,18,28,053 by way of restitution. Citibank made its own calculations and through its advocate's letter, on 19-7-2004 tendered the aggregate amount of Rs 107,75,40,141 to Canfina. When Canfina declined to accept this offer, Citibank filed a praecipe in the Special Court for depositing the aforesaid sum in court with notice to Canfina. The Special Court vide its order dated 20-7-2004 recorded the statement of Canfina that it will accept the amount without prejudice to their rights and contentions in view of their stand that the amount is not correct and Canfina is entitled to claim more. Thereafter Citibank unsuccessfully attempted to get a recording in this Court that it had complied with the order of restitution. This Court on 26-10-2004 disposed of Citibank's IA No. 5 of 2004 in Citibank N.A. v. Standard Chartered Bank (2004) 8 SCC 348 and granted liberty to Citibank to approach the Special Court. On 24-12-2004 Citibank filed Miscellaneous Application No. 24 of 2005 in the Special Court for recording satisfaction of this Court's judgment. On 2-3-2005 Canfina also filed Miscellaneous Application No. 118 of 2005 claiming that it was entitled to further amount of approximately Rs 51.83 crores after deducting Rs 107.76 crores approximately already paid by Citibank. By the impugned order dated 12-4-2005 the Special Court disposed of both the above applications and allowed an additional sum of Rs 30,13,55,175. This amount has been paid by the appellant without prejudice to its rights sought through the present appeals arising out of common judgment dismissing the appellant's miscellaneous application and allowing that preferred by Canfina.
9. The learned Senior Counsel for the appellant, Mr Kapil Sibal as well as learned Senior Counsel for the respondent Canfina have relied upon various judgments, many of them being common, to highlight the true meaning of restitution in the light of Section 144 of the Code of Civil Procedure. It goes without saying that they highlighted different words and sentences to support their respective case. Simply put, the contention on behalf of Citibank is that for restitution the correct amount is required to be calculated on the basis of “market value” of the bonds when they were delivered by Canfina to Citibank i.e. @ Rs 81, aggregating Rs 40.50 crores. This amount and also approximately Rs 22.34 crores paid by Canfina as interest @ 9% p.a. for the period 15-7-1991 to 30-6-1996 is the “total amount paid” by Canfina to Citibank as principal and interest and therefore the sum of these two amounts alone is required to be repaid by way of restitution along with interest @ 9% p.a. because Citibank chose to comply with the order of the Supreme Court for the purpose of restitution before 1-9-2004 by tendering the aggregate sum of Rs 107,75,40,141 to Canfina.
10. However, in order to appear more fair and accommodative, Citibank has placed three more set of calculations/charts. The first chart claims that in the light of various judgments on the issue of restitution, it may be proper to calculate the market value of the bonds on the basis of NSE letter showing the rate as Rs 82.80 per bond. So calculated, the total amount along with interest payable to Canfina has been shown as Rs 109,31,28,500. The second chart shows the total amount payable as Rs 111,30,97,602. This has been calculated by accepting the market value of the bonds on the basis of average sale price during March/April 1997 as Rs 85.129 per bond aggregating to Rs 42,56,45,000. From the figures in the two charts noted above, it is evident that while seeking to justify its earlier calculation of approximately Rs 107 crores as the total value of restitution, as an alternative submission Citibank appears to have suggested two other figures by way of possible restitution which are Rs 109 crores and Rs 111.30 crores approximately. But the last chart (third in this series) filed on behalf of Citibank acknowledges a further receipt of Rs 2.25 crores as coupon interest for half-yearly coupons dated 1-1-1997 on which interest has been calculated till 20-7-2004. That brings the aggregate total amount payable to Canfina as Rs 115,08,98,835. Since Citibank paid the sum of Rs 30,13,55,175 on 25-4-2005 in terms of the impugned order hence as per the last chart of calculations noted above, it has claimed that on adjustment, it is entitled to refund by Canfina as on 25-4-2005 of a total sum of Rs 22,14,36,756 along with interest either @ 12% p.a. or as may be awarded by this Court on the aforesaid amount from 25-4-2005 till the date of actual refund.
11. On the other hand the stand of Canfina is that after the Supreme Court judgment setting aside the decree against Canfina on 7-7-2004 (2004) 6 SCC 1 the only safe method for calculating the value of the bonds delivered to Citibank on 13-8-1996 would be to accept and act upon its face value i.e. Rs 100 per bond on the maturity date 15-7-2001 and add to it the half-yearly interest received after 13-8-1996 and then calculate interest on and from 15-7-2001 at the rate indicated in the order of this Court dated 7-7-2004 (2004) 6 SCC 1. The aforesaid claim, according to Canfina has rightly been accepted by the Special Court in the impugned order so that status quo ante is restored by way of restitution by ignoring the intervening circumstance of sale of the bonds by Citibank to third parties in March/April 1997.
12. In reply, the learned Senior Counsel for the appellant has criticised the impugned order by highlighting that in para 7, the Special Court has erred in going beyond the three items delivered by Canfina to Citibank i.e. the bonds, the amount of interest and interest coupons by indulging in speculation that “had the Canfina not been required to deliver the bonds to Citibank, the bonds would have remained with it so also the amount of interest till the date of redemption”. Same criticism was also made against another observation/opinion of the Special Court in the same paragraph recorded in the following words:
“… insofar as the restitution is concerned the fact that the bonds were sold by Citibank during the pendency of the appeal is not relevant.”
The contention of the appellant is that the Special Court came to an unjust and erroneous conclusion that Canfina would be entitled to the redemption value of the bonds i.e. Rs 50 crores, mainly on account of the aforesaid erroneous presumption and opinion.
13. The learned Senior Counsel, Mr Kapil Sibal has advanced a contention that as per settled principles of law governing restitution, the respondent Canfina can be given back only what it lost on the date it satisfied the decree which was ultimately reversed and not what it could have gained on certain presumptions made in the impugned order. In support of this contention he placed reliance upon two judgments of the Madras High Court in Moowarra Kakkamvelli Lakshmi Amma v. Thazhathitathil Krishna Kurup 1930 SCC OnLine Mad 159, AIR 1931 Mad 81 and in S. Chockalingam Asari v. N.S. Krishna Iyer 1963 SCC OnLine Mad 273, AIR 1964 Mad 404. He also placed reliance on the Calcutta High Court's judgment in Surendra Lal Chowdhury v. Sultan Ahmed 1934 SCC OnLine Cal 210, AIR 1935 Cal 206 and the following four Supreme Court judgments:
(i) Lal Bhagwant Singh v. Sri Kishen Das AIR 1953 SC 136, 1953 SCR 559,
(ii) Kartar Singh v. State of Punjab (1995) 4 SCC 101,
(iii) Kerala SEB v. M.R.F. Ltd. (1996) 1 SCC 597,
(iv) South Eastern Coalfields Ltd. v. State of M.P. (2003) 8 SCC 648, AIR 2003 SC 4482
14. In Lakshmi Amma 1930 SCC OnLine Mad 159, AIR 1931 Mad 81, the Madras High Court noticed certain Privy Council judgments and also the contention that Section 144 CPC providing for restitution would apply only to cases where in execution of a decree passed by one court, a benefit is received by the decree-holder and thereafter that decree is reversed or set aside subsequently by a competent court, then in such cases the court should place the parties in the position which they would have occupied but for such a decree which was varied or set aside. However, on the facts of that case the claim of the plaintiff-appellant for restitution was turned down. In the other Madras High Court judgment in S. Chockalingam 1963 SCC OnLine Mad 273, AIR 1964 Mad 404 the right of a bona fide purchaser for value was upheld in para 30 of the judgment and thereafter in para 31 reliance was placed upon the judgment of this Court in Bhagwant Singh AIR 1953 SC 136, 1953 SCR 559 by extracting the following passage: (S. Chockalingam case 1963 SCC OnLine Mad 273, AIR 1964 Mad 404, SCC OnLine Mad)
“… ‘14. … The doctrine of restitution which is that on the reversal of a judgment the law raises an obligation on the party to the record who received the benefit of the erroneous judgment to make restitution to the other party for what he had lost and it is the duty of the court to enforce that obligation unless it is shown that restitution would be clearly contrary to the interests of justice.’ (Bhagwant Singh case AIR 1953 SC 136, 1953 SCR 559, AIR p. 139, para 14)”
15. In Surendra Lal 1934 SCC OnLine Cal 210, AIR 1935 Cal 206, the Calcutta High Court explained that it is the duty of the court under Section 144 CPC to place the parties in the earlier position after a decree executed in favour of one be varied or reversed. But it was clarified that: (SCC OnLine Cal para 6)
“6. … in assessing what a party may have lost or of what he may have been deprived during his dispossession the law takes into account not what he could have made but what his opponent did in fact make or could with reasonable diligence have made.”
This conclusion was predicated on the reasoning that in a vast majority of cases it would be hypothetical, remote and uncertain to find out what the party subjected to dispossession could have made if it was left in possession.
16. The relevant part of judgment in Bhagwant Singh AIR 1953 SC 136, 1953 SCR 559 has been extracted in the Madras High Court judgment and already noticed earlier. This Court in the penultimate paragraph has reiterated the salutary and well-established principle of restitution that on the reversal of a judgment, the party who received the benefit of an erroneous judgment is obliged to make restitution to the other party for what he had lost. The court is also duty-bound to enforce such obligation unless it finds that restitution would be clearly contrary to the real justice of the case. Similar words have been used by this Court in Kartar Singh (1995) 4 SCC 101 by holding that the party which had received the benefit of the erroneous decree is required to make the restitution to other party for what he had lost.
17. In Kerala SEB (1996) 1 SCC 597 also the view taken by this Court was similar. But it was further clarified that the court has a duty that in the matter of restitution justice be done as per facts of the case. In granting relief of restitution the court “should not be oblivious of any unmerited hardship to be suffered by the party against whom action by way of restitution is taken”. This Court favoured a pragmatic view and grant of relief in a manner as may be reasonable, fair and practicable without causing unmerited hardships to either of the parties. In South Eastern Coalfields Ltd. (2003) 8 SCC 648, AIR 2003 SC 4482, this Court re-emphasised that restitution is for meeting the ends of justice and depends upon the peculiar facts and circumstances of the case. This Court further clarified in para 27 that as held by the Privy Council in Jai Berham v. Kedar Nath Marwari 1922 SCC OnLine PC 41, (1921-22) 49 IA 351, AIR 1922 PC 269, Section 144 CPC is rather a statutory recognition of an already existing rule of justice, equity and fair play and therefore even apart from Section 144 the court has inherent jurisdiction to order restitution so as to do complete justice between the parties. This Court approved the view of the Privy Council that the court has to act rightly and fairly according to the circumstances, towards all parties involved.
18. The learned Senior Counsel for the respondent Canfina, as was indicated earlier also placed reliance upon the aforesaid judgments in support of his plea that restitution requires that the parties be placed in the position which they could have occupied but for the wrong order or decree which is ultimately varied or reversed. He amplified his submissions by highlighting certain other paragraphs in the earlier noted judgments that suggest that the status quo as obtaining on the date of wrongful deprivation should be restored and only if same is not possible due to intervening circumstances like the sale of the property, price and mesne profits may have to be ordered. According to him the actual sale is of no consequence for calculating what the wronged party had actually lost. However, according to him also, for proper restitution the court must rely upon verifiable value of the goods lost due to sale, etc. and not indulge in speculation or hypothetical presumptions. He placed reliance also upon the judgment of this Court in Indian Council for Enviro-Legal Action v. Union of India (2011) 8 SCC 161. This judgment was in the context of constitutional provisions such as Article 21 and compensation for loss suffered by citizenry due to pollution. Advancing the principle that the polluter pays for the sufferings, the Court propounded the principle of disgorgement of gains of wrongdoers and that the court could even think of imposing compound interest in place of simple interest provided by statute. Exercise of such inherent powers was contemplated only in interest of principles of justice and equity as warranted by the facts in cases of pollution causing sufferings to citizenry. All these principles were justified on the basis of power to order for restitution under inherent powers of the court. But this Court did not overrule any of the earlier judgments of this Court laying down classic principles of restitution under Section 144 CPC on which the appellant has placed reliance and which require a just and fair approach so that no unmerited hardship is caused to either of the parties.
19. In the ultimate analysis we find that the law on restitution under Section 144 CPC is quite well settled. It vests expansive power in the court but such power has to be exercised to ensure equity, fairness and justice for both the parties. It also flows from more or less common stand of parties on the principle of law that for ascertaining the value of the property which is no longer available for restitution on account of sale, etc., the court should adopt a realistic and verifiable approach instead of resorting to hypothetical and presumptive value. It is also one of the established propositions that in the context of restitution the court should keep under consideration not only the loss suffered by the party entitled to restitution but also the gain, if any, made by other party who is obliged to make restitution. No unmerited injustice should be caused to any of the parties.
20. Keeping the aforesaid principles in view it has to be seen whether the order under appeal suffers from any illegality requiring interference and correction by this Court. In our considered view in the course of finding out the value of the bonds which are no longer available for restitution, the learned Special Court committed a clear error of law in ignoring a relevant fact that the bonds in question were a tradable commodity on the stock market and its value could be easily ascertained either on the date when the bonds were handed over to Citibank or at the time when Citibank sold the bonds to third parties. Such relevant facts should not have been lost sight of and no presumption should have been made that Canfina would have retained the bonds with it till the maturity period. There are sufficient materials available to lend credence to the view that in all eventuality Canfina would have sold the bonds because it was in such business and also because earlier when it had the option, it chose to hand over the bonds to Citibank instead of preferring the other option of paying its monetary value. Sale of the bonds by Citibank to third parties at a verifiable rate not being under dispute, it is evidently unjust to saddle Citibank with the liability to repay the possible gains made by the third party or subsequent purchasers of the bonds.
21. For these reasons we come to the conclusion that the amount determined by the Special Court for restitution and payment by Citibank is unjust and is a result of error in not keeping under view the relevant facts as well as in applying the settled legal propositions for the purpose of compensating Canfina by way of restitution.
22. In view of the above the impugned order is set aside. In order to bring the dispute to a just, logical and early conclusion, instead of remanding the matter to the Special Court we accept the last chart submitted on behalf of the appellant to be the correct calculation of the amount payable by way of restitution by Citibank to Canfina. As noted earlier as per such chart the total amount payable to Canfina on 20-7-2004 is Rs 115,08,98,835 and after adjusting the further amount paid by Citibank to Canfina under protest on 25-4-2005 Citibank is entitled to a refund by Canfina as on 25-4-2005 to an amount of Rs 22,14,36,756. In line with earlier orders, we allow interest on this amount @ 9% p.a. from 25-4-2005 till the date of actual refund. Canfina should make a refund of the aforesaid due amount along with interest awarded by us within four weeks. Both the appeals are allowed to the extent indicated above. In the facts of the case there shall be no order as to costs.