Small Industries Development Bank of India vs ICICI Bank Ltd. and Others

Manmohan Singh, J.—This order shall dispose of the application filed by the defendants No. 1 and 2 under Order VII Rule 11 Code of Civil Procedure, 1908 for rejection of the plaint. The plaintiff filed the suit for recovery of Rs. 86,04,812/- against the defendants along with interest at 18% per annum from the date of payment due till the date of realization along with cots.

Brief facts of the case are that the plaintiff, Small Industries Development Bank of India (SIDBI) has been created under the Act of Parliament viz. The Small Industries Development Bank of India Act, 1989 (39 of 1989) as the principal financial institution for promotion, financing and development of industry in small scale sector in the country.

It is the case of the plaintiff that M/s. Absolute Aromatics Ltd. (Defendant No. 3 herein) approached the plaintiff in its New Delhi Branch Office and requested for grant of financial assistance in the form of Export Bills Financing (EBF)/Pre-shipment Credit in Foreign Currency (PCFC) limit. The plaintiff sanctioned financial assistance to the extent of Rs. 596.13 lakh under PCFC & Rs. 10.52 lakh under EBF to M/s. Absolute Aromatics Ltd. (hereinafter referred to as defendant No. 3) who was also availing similar facilities and was having a current account in ICICI Bank Ltd. Connaught Place Branch, New Delhi (defendant No. 2 herein). The defendant No. 3 is a proforma defendant and no relief has been claimed against the said defendant No. 3 as the reference is pending before the BIFR and the same is under consideration before the BIFR.

The plaintiff avers that the defendants No. 3 got a purchase order from M/s ARCOR S.A.I.C., Argentina for US $ 22,000. The said invoice alongwith other documents were presented to the plaintiff and the said documents were discounted by it on 13th January, 1999. The said documents were thereafter sent by the plaintiff to the buyers Bank being M/s. CITI Bank, Bartolome Mitre 502 (1036) Buenos Aires, Argentina. However, the payment of US $ 22,000 which was to be made to the plaintiff was wrongly received by defendant No. 2 on 5th March, 1999 by TT, who was not authorized to receive the said payment. The defendant No. 3 issued a letter and fax demanding the abovesaid payment through its Director Sh. Vikas Rishi on 8th March, 1999 with a copy to plaintiff which was duly acknowledged by the defendant No. 2 as well as by plaintiff requesting the defendant No. 2 to issue the Foreign Inward Remittance Certificate (FIRC) to the plaintiff and also to issue the pay order in their name in rupees equivalent to US$ 22,000. The plaintiff alleges that defendant Nos. 1 & 2 thus became the depository of the plaintiff.

The defendant No. 2, however, did not make any payment. Again a letter was sent by defendant No. 3 on 31st March, 1999 to issue FIRC to plaintiff. The defendant No. 2 assured to make the payment to the plaintiff who in turn issued the GR from on 8th April, 1999.

The plaintiff referred to the letter No. ICBK/ND/CR/9900/000427 dated 8th June, 1999 recording the minutes of Consortium Meeting held on 7th June, 1999 held between the parties wherein it is shown that US $ 22,000 discounted by plaintiff was still outstanding although the remittance of said bill was received wrongly by the defendant Nos. 1 & 2.

Several meetings were held and letters were sent to the defendants No. 2 for the release of USD 22,000 to the plaintiff. Finally, the Consortium Meeting was held on 1st May, 2000 wherein it was decided that the appropriation would be 15% from the bills negotiated by defendant No. 2 (on behalf of consortium members banks) w.e.f. April 01, 2000. Accordingly, a special account was opened wherein appropriation proceeds of 15% on the credits were parked.

The defendant No. 2 vide letter dated 2nd August, 2000 forwarded a cheque of Rs. 11.24/- lac to the plaintiff as his share for 1st quarter sales from the special pool account. Thereafter, no payment was made to the plaintiff by defendants No. 1 & 2. The plaintiff claims to be legally entitled to receive a sum of Rs. 21,72,000/- plus interest as its share for 2nd, 3rd and 4th quarter for handling the export bills and other sales of defendant No. 3

The plaintiff urged that the defendant No. 2 has also received insurance amount by defendant No. 1 on 13th December, 2001 but again the share of the plaintiff in the insurance amount was not released to it and it is claiming a sum of Rs. 7.63 lac.

Letters were issued to the defendant No. 2 to pay the insurance amount to the plaintiff but the said defendant failed to release any amount for the same. Even the official of the plaintiff visited the office of the defendant No. 1 on 26th March, 2003 and 23rd April, 2003 but no positive response was given by defendant Nos. 1 & 2. A legal notice was issued on 12th July, 2004 requesting the abovesaid payment to which the defendant Nos. 1 and 2 sent a reply on 8th September, 2004 denying the payment but admitting the contents of the notice.

The plaintiff approached the Reserve Bank of India for amicable settlement of inter-institutional disputes and issued certain letters to defendant Nos. 1 and 2 to initiate talks and settle all the disputes. Defendants No. 1 & 2 also issued a letter dated 16th November, 2005 stating that they were agreeable to reach a One Time Settlement to decide the issue relating to the appropriation of remittance as well as sharing of insurance claim receipts. The matter was thereafter referred to the RBI for settlement which issued a letter on 20th February, 2006 informing that the dispute is of commercial nature and RBI is not in a position to intervene in the said matter.

The plaintiff in the plaint claimed in total Rs. 86,04,812/- the division of which is mentioned in para 28 of the plaint as under:

(a) Equivalent of US $ 22,000 @(US$ 1=Rs.42.38) - Rs. 9,32,360/-

(b) Bill negotiated during FY- 2001 - Rs. 21.72 lac

(c) Share of Insurance claim - Rs. 7.63 lac

___________________ Rs. 38,67,380.00 __________________ (d) Interest @ 18% per annum

(i) In respect of claim (a) above from 6.3.99 to 8.9.07 - Rs. 14,29,499.46

(ii) In respect of claim (b) above from 1.4.01 to 8.9.07 - Rs. 25,19,281.97

(iii) In respect of claim (c) above from

13.12.01 to 8.9.07 - Rs. 7,88,670.25

_______________ Rs. 47,37,451.68 _______________

In the reply filed by defendant Nos. 1 and 2, it is claimed that they are not aware of the transactions of the plaintiff with M/s ARCOR S.A.I.C. Argentina and Absolute Aromatics Ltd., defendant No. 3 herein.

It is submitted that vide letter dated 15th March, 1999 the defendant No. 1 advised defendant No. 3 to convert the amount received in his current account into USD for making payment to the plaintiff since the defendant No. 1 was not authorized to debit the account of defendant No. 3 and make the payment to the plaintiff. But defendant No. 3 failed to make necessary arrangements with the defendant No. 1 for transferring payment from their account to the plaintiff. The defendant No. 1 received the remittance of USD $ 22,000 in the usual course of business which was credited to the account of defendant No. 3.

The defendants submit that the reimbursement had to be made by the defendant No. 3 to the plaintiff. The defendant No. 1 is only the depository of the plaintiff for the money received by defendant No. 3 in its account maintained by it. The plaintiff erroneously released the GR form to the defendant No. 3. It is stated that the arrangement for appropriation of 15% from bills of defendant No. 3 negotiated by the defendant No. 1 with effect from 1st April, 2000 for sharing among consortium member banks was for the purpose of extending support to the company and monitoring the conduct of its business operations, while providing comfort to the consortium member banks.

It is stated the proceeds from the insurance were credited to defendant No. 3''s account to enable it to build its current assets. The plaintiff also did not share the insurance premium for current assets, therefore, the defendant No. 1 is not liable to share any insurance premium with the plaintiff.

The defendant s relied upon its letters dated 18th February,1999 and 8th September, 2004 where they denied the claims of the plaintiff towards both the insurance claim and USD $ 22,000.

It is stated that in reply to the letter dated June 11, 2005 sent by the Reserve Bank of India to the defendant No. 1, which was sent in response to the letter dated May16, 2005 of the plaintiff, the defendant No. 1 by its letter dated July 12, 2005 addressed the issues raised by the plaintiff and denied all its claims.

The defendant No. 1 stated that in the letter dated November 16, 2005 where the correspondence towards amicable settlement of the inter institutional disputes was addressed will not amount to admission of any claim or rights and liabilities towards the plaintiff.

The defendant No. 1 also contends that there is no privity to the contract/agreement entered between the plaintiff and defendants No. 1 and 2 were providing the facility of bill discounting whereby the plaintiff was supposed to discount the bills of defendants No. 3 on the terms and conditions agreed between them. The defendant No. 3 is responsible for indemnification to the plaintiff, therefore no "cause of action. arises against the defendant No. 1.

The defendant also contended that the limitation period for the cause of action stated in the plaint, which the plaintiff had stated only as regards defendant No. 3 arose from credit of USD $ 22,000 in favour of defendant No. 3 on 5th March,1999 as per the admission of the plaintiff himself in para 4 of the plaint and the same was exhausted in 2002 upon completion of three years as it is a suit for recovery of money. The defendant urged that the present suit is thus barred by limitation and is not maintainable and is liable to be dismissed in limine.

It is settled law that for rejecting the plaint, the court has to confine itself only to the averments made in the plaint and is not supposed to look into the defence taken by the defendants No. 1 and 2. The duty of the court is to see whether the plaint contains the necessary allegations which are prima facie against the defendants No. 1 and 2. Examination of a plaint under Order VII Rule 11 CPC does not permit a court to examine or comment upon the correctness of the contents or otherwise. In the present case, the plaintiff alleges that the defendant Nos. 1 and 2 did not make a payment due to it for a sum of US $ 22000 and for the insurance amount. It sent several correspondences demanding the same from the said defendants but the defendants failed to repay the amount and thus the plaintiff filed the present suit for recovery.

The letter sent by defendant No. 2 on 8th September, 2004 in reply to the letter of the plaintiff and on 16th November, 2005 for One Time Settlement reflects that the correspondence was going on between the parties regarding remittance to be made to the plaintiff.

Prima facie, the contention of the defendant No. 1 regarding the privity of contract between it and the plaintiff has no force as the amount of US $ 22000 was admittedly credited in the account of defendant No. 2.

The contention of the defendant No. 1 regarding limitation can also not be considered at this stage from the averments made in the plaint. The Apex Court clearly laid down in the case of Balasaria Construction (P) Ltd. v. Hanuman Seva Trust (2006) 5 SCC 658, at page 661 that the question of limitation is a mixed question of law and fact and cannot be considered without pleadings, framing of issues and evidence. Relevant portion of the judgment is reproduced here in below:

After hearing counsel for the parties, going through the plaint, application under Order 7 Rule 11(d) CPC and the judgments of the trial court and the High Court, we are of the opinion that the present suit could not be dismissed as barred by limitation without proper pleadings, framing of an issue of limitation and taking of evidence. Question of limitation is a mixed question of law and fact. Ex facie in the present case on the reading of the plaint it cannot be held that the suit is barred by time. The findings recorded by the High Court touching upon the merits of the dispute are set aside but the conclusion arrived at by the High Court is affirmed. We agree with the view taken by the trial court that a plaint cannot be rejected under Order 7 Rule 11(d) of the Code of Civil Procedure.

Similar observations are also made in Hardesh Ores Pvt. Ltd. Vs. Hede and Company, :

The language of Order 7 Rule 11 CPC is quite clear and unambiguous. The plaint can be rejected on the ground of limitation only where the suit appears from the statement in the plaint to be barred by any law. Mr Nariman did not dispute that "law" within the meaning of Clause (d) of Order 7 Rule 11 must include the law of limitation as well. It is well settled that whether a plaint discloses a cause of action is essentially a question of fact, but whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is whether the averments made in the plaint, if taken to be correct in their entirety, a decree would be passed. The averments made in the plaint as a whole have to be seen to find out whether Clause (d) of Rule 11 of Order 7 is applicable. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. As observed earlier, the language of Clause (d) is quite clear but if any authority is required, one may usefully refer to the judgments of this Court in Liverpool and London S.P. and I Asson. Ltd. Vs. M.V. Sea Success I and Another, and Popat and Kotecha Property Vs. State Bank of India Staff Association, .

Further, the correspondence exchanged between the parties upto the period 2004-05 indicates that prima facie the suit is not time barred. However, without deciding this question on merit, considering the nature of evidence and averments made in the plaint, trial in the present case is required as it is a mixed question of fact and law. I find no force in the application of the defendant under Order VII Rule 11 of the CPC to reject the plaint. It is hereby dismissed, however, it is made clear that the plaintiff during the course of trial had to prove the issue of limitation raised by the defendants.

CS(OS) No. 2278/2007

List the matter on 18th January, 2010.