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Tamil Nadu Jaibharat Mills Ltd. v. State Bank Of Mysore .
Factual and Procedural Background
The matters involve four Revision Petitions filed by the Complainant (Tamil Nadu Jai Bharat Mills Ltd.) and two Appeals which are cross-appeals, all arising from orders of the Tamil Nadu State Consumer Disputes Redressal Commission and the District Forum. The District Forum had dismissed complaints against several collecting banks; the State Commission in some proceedings upheld that dismissal and in others allowed the complaints. The impugned orders in the Appeals were dated 19.04.1995 and, in the Revisions, 31.12.1997.
The factual core is common to all matters: the Complainant conducted a public issue and appointed several banks to collect application money. The Registrar to the Issue issued instructions that collection monies be placed in fixed deposits for 46 days and that TDRs mature within 51 working days from the closure of the issue (closure date 14.11.1992); TDRs were to be made in favour of the Complainant and payable at Madras. By letter dated 14.11.1992 the Complainant instructed collecting banks to transfer collected monies to the refund bank (State Bank of India, Madras Main Branch) and required that banks pay interest until transfer. The Complainant alleged that transfer occurred on 20.11.1992, creating a one-day delay for which interest was sought; the banks denied any deficiency and said transfers were effected on 20.11.1992 only after receiving necessary allotment documentation on 19.11.1992.
Procedurally, the District Forum dismissed the complaints; the State Commission in some instances dismissed the Complainant's appeals and in others allowed complaints. The record also contains an order of the Hon'ble Supreme Court dated 15.09.2000 (brought on record) which states, in relation to earlier matters, “We agree with the order passed by the State Commission that these cases should be heard by a Civil Court. The Revision petitions are dismissed”.
Legal Issues Presented
- Whether the collecting banks were guilty of deficiency in service in transferring application monies such that the Complainant is entitled to interest for an alleged one-day delay in transfer (i.e., whether there was actionable delay and deficiency of service).
- Whether the monies collected by the banks belonged to the Complainant for the purposes of claiming interest during the intervening period (as touched upon by reference to Section 73 of the Companies Act).
- In the appeals by the parties: whether the State Commission's orders should be set aside (in particular, whether the complaint against Bank of Baroda should be dismissed).
Arguments of the Parties
Complainant's Arguments
- The Complainant submitted that by its letter dated 14.11.1992 it had instructed banks to transfer the application money to the refund bank and that the transfer was made only on 20.11.1992, resulting in a one-day delay for which interest was payable.
- The Complainant sought payment of additional interest (in the appeal by the Complainant seeking more interest than awarded by the State Commission).
Banks' Arguments
- The banks denied any delay or deficiency in service and stated they acted in accordance with the Registrar to the Issue's directions as collecting banks.
- The banks explained that they received necessary instructions/documentation only on 18.11.1992 and 19.11.1992 (the Complainant's letter reached a Zonal Office on 17.11.1992 and was forwarded to the collecting branch on 18.11.1992; the Certificate of Allotment dated 19.11.1992 was received on 19.11.1992) and that they transferred the money immediately on 20.11.1992.
- One bank specifically contended that any apparent delay was caused by the Complainant sending instructions to a Zonal Office instead of directly to the collecting branch.
- Reference was made to Section 73(3)(A) and Section 73 of the Companies Act to support the position that the money did not, for relevant purposes, belong to the Complainant prior to transfer.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| “We agree with the order passed by the State Commission that these cases should be heard by a Civil Court. The Revision petitions are dismissed” (Order of the Hon'ble Supreme Court dated 15.09.2000) | Recorded to show the Supreme Court's view in earlier related matters that the cases ought to be heard by a Civil Court and that Revision petitions were dismissed. | The court recorded this Supreme Court order as brought on record. Despite that order and earlier adjournments while awaiting the Supreme Court decision, the court proceeded to give a reasoned disposal of the matters presently before it rather than remanding them. |
Court's Reasoning and Analysis
The court examined the chronology, the Registrar to the Issue's directions, the communications between the Complainant, the Stock Exchange and the collecting banks, and the conduct of the banks as collecting agents.
Key factual and legal points considered by the court:
- The Registrar's directions required collecting banks to hold application money in fixed deposits and issue TDRs in favour of the Complainant, payable at Madras.
- The closure date of the public issue was 14.11.1992; the Complainant's 14.11.1992 letter instructed banks to transfer funds to the refund bank and to pay interest until transfer.
- The banks demonstrated that the Complainant's letter reached a Zonal Office on 17.11.1992, was forwarded to the collecting branch on 18.11.1992, and that the Certificate of Allotment (dated 19.11.1992) was received on 19.11.1992; following receipt of necessary allotment documentation, the banks transferred the collected money on 20.11.1992.
- The banks asserted they were appointed as collecting banks by the Registrar and had followed prescribed procedure; they maintained their actions were bona fide.
- The State Commission had referenced Section 73 of the Companies Act and held, in part, that the collected money did not belong to the Complainant prior to transfer.
Applying these factual findings to the legal standard for deficiency of service, the court concluded that the banks had acted bona fide and there was no proven deficiency in service. The court emphasized that the burden lay on the Complainant to prove any deficiency; absent such proof, the Complainant could not claim interest for the alleged one-day delay.
Holding and Implications
Holding:
- The Revision Petitions and Appeal No. 340 of 1995 are dismissed.
- Appeal No. 558 of 1995 filed by Bank of Baroda is allowed. In that instance the order of the State Commission is set aside and the complaint is dismissed.
Implications:
The direct effect is that the complaints against the collecting banks are dismissed for lack of proved deficiency of service; the Complainant is not entitled to interest for the alleged one-day delay. The opinion does not articulate any broader precedent beyond resolving these matters on the particular facts and procedural history before the court, and thus no new legal principle of general application was announced in the text of this opinion.
D.P Wadhwa, President:— Four Revisions are by the Complainant and are from the Tamil Nadu State Consumer Disputes Redressal Commission upholding the order of District Forum, which had dismissed the complaints against the opposite party banks. The two Appeals cross appeals and are also from the orders of the Tamil Nadu State Consumer Disputes Redressal Commission allowing the complaints of the Complainant. The impugned order in the Appeals is dated 19.04.1995 and in the Revisions, all the orders are of 31.12.1997 In the appeal filed by the Complainant it seeks more interest than awarded by the State Commission and in the appeal filed by the Bank, dismissal of the complaint is sought altogether.
Before we proceed further in these matters, we may note that in our earlier order we have recorded that some of the matters raising the same issue are pending before the Supreme Court against earlier orders of this Commission dismissing the Revision Petitions. It was submitted that these matters could be held over till decision by the Supreme Court. We did adjourn these matters from time to time but ultimately we directed that we would like to dispose of these matters in terms of our earlier orders. An order of the Hon'ble Supreme Court in those earlier matters, while issuing notices, has been brought on record. This order id dated 15.09.2000 whereby Supreme Court issued notice to show cause why the matter be not remanded to the National Commission. The order of this Commission against which Complainant went to Supreme Court is noted in the order of the Supreme Court which is as under:—
“We agree with the order passed by the State Commission that these cases should be heard by a Civil Court. The Revision petitions are dismissed”
We feel it appropriate to give a reasoned order in the matters now before us.
The facts are similar in all these matters. Tamil Nadu Jai Bharat Mills Ltd., the Complainant, went for a public issue of its shares. It appointed various banks for collecting applications and money, 5 of such banks are before us. Instructions were issued by the Registrar to the Issue to the collecting banks to keep the money collected in a fixed deposit for a period of 46 days and the Term Deposit Receipts (TDRs) issued should mature within 51 working days from the date closure of issue which was 14.11.1992 A further direction was that TDRs should be made in favour of the Complainant company payable at Madras where the controlling branch of the State Bank of India was situated. The Complainant by its letter dated 14.11.1992 instructed the banks to transfer the application money collected, to their refund banks, the State Bank of India, Madras Main Branch and the banks had to pay interest till the transfer of funds was made. Complainant says that the transfer was made only on 20.11.1992 and there was a delay of one day. Alleging deficiency in service, Complaints were filed all over the places seeking interest payment for delay of one day. Banks have denied that there has been any delay or that they were deficient in service. They say that on receipt of a communication dated 19.11.1992 from the Complainant enclosing the basis of allotment of shares held by the Madras Stock Exchange requesting transfer of the public issue share collection amount with interest with the refund banks, the banks immediately transferred the amount on 20.11.1992 It is the further submission of the banks that they were appointed as collective banks by the Registrar to the Issue and they have strictly followed the procedure prescribed by him. Complaints in the Revision Petitions was dismissed by the District Forum and the State Commission on appeal from that order dismissed the Appeals of the Complainant. State Commission referred to Section 73 of the Companies Act and held that apart from the fact that there was no deficiency in service, the money did not belong to the Complainant.
The bank in the appeals state that instruction was received by it from the Appellant and the Stock Exchange only on 18.11.1992 and 19.11.1992 and immediately thereafter, the money was sent to the State Bank of India on 20.11.1992 It is further stated that the delay of one day alleged to have occurred only due to the fact that the Complainant had sent the letter to the Zonal Office of the bank instead of sending it to bank directly and so it took time for the bank. The letter dated 14.11.1992 of the Complainant was received by the Zonal Office of the Appellant bank on 17.11.1992 which sent the letter to the Appellant bank on 18.11.1992 On 19.11.1992, bank received the Certificate of Allotment dated 19.11.1992 from the Stock Exchange, Madras and immediately the money collected was transferred on 20.11.1992 Reference has also been made to Section 73(3)(A) of the Companies Act.
After examining the whole aspect of the matter, we are of the view that the banks in these cases had acted in a bonafide manner and it could not be alleged that they were deficient in any way in service. That being so, the complaints had to be dismissed. To maintain the complaint, it was for the Complainant to show that there was any deficiency in service by the banks and unless that is done, Complainant could not ask for any payment for loss of interest alleged to have occurred on account of one day's delay. The Revision Petitions and the Appeal No. 340 of 1995 are dismissed and Appeal No. 558 of 1995 filed by the Bank of Baroda is allowed. In that case order of the State Commission is set aside and complaint dismissed.
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