CITIBANK N.A. Vs HITEN P. DALAL .
Bench: VIKRAMAJIT SEN,SHIVA KIRTI SINGH
Case number: C.A. No.-003580-003580 / 2005
Diary number: 11286 / 2005
Advocates: S. NARAIN & CO. Vs
RAJIV MEHTA
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C.A.No.3580/05 etc.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3580 OF 2005
Citibank N.A. …..Appellant
Versus
Hiten P. Dalal & Ors. …..Respondents
WITH
CIVIL APPEAL NO. 3584 OF 2005
J U D G M E N T
SHIVA KIRTI SINGH, J.
1. The simple grievance of the appellant is that by impugned
judgment and order dated 12.04.2005 passed by a 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 Limited
(hereinafter referred to as ‘Canfina’) by way of restitution.
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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 Civil Appeal nos. 7426, 9063 and 9138 of 1996, the Citibank is
required to restore back the monetary benefits it received under the
decree against Canfina. The operative part of the said decree dated
22/23/26.04.1996 in Suit no. 1 of 1995 is as follows:
“121. xxxx Accordingly, the defendants are directed to deliver to the plaintiffs, 9% IRFC Bonds of the face value of Rs. 50 crore within a period of 16 weeks xxx”
“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 15th July, 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. xxx"
3. Since the decree gave an option to Canfina, it opted to deliver
to the Citibank the 9% IRFC Bonds of the face value of Rs. 50
crores on 13.8.1996. It also paid the awarded interest at the rate of
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
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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 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 City Bank
carried with them coupons for half yearly interest at the rate of 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
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Citibank in January 1997. Thereafter between April/March 1997
the Citibank sold the bonds at average price of Rs. 85/- receiving in
aggregate Rs. 42.56 crores.
6. 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.
7. The appellant Citibank in compliance of the judgment of this
Court dated 7.7.2004 had to offer restitution of “total amount paid”
by Canfina to Citibank (principal and interest) along with interest
at the rate of 9% per annum from the date of payment. But in case
the full amount was not paid by 1.9.2004, the liability would
increase to interest at the rate of 12% per annum 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 the 9% IRFC bonds of
face value of Rs. 50 crores was Rs. 49 crores at market value of
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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.
8. 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
the 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.
9. 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. The Citibank made its own calculations and through its
advocate’s letter, on 19.7.2004 tendered the aggregate amount of
107,75,40,141/- to Canfina. When Canfina declined to accept this
offer the 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
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Court on 26.10.2004 disposed of Citibank’s I.A. no. 5 of 2004 in
Civil Appeal No. 9063 of 1996 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 appellant’s miscellaneous application and allowing that
preferred by Canfina.
10. 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
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respective case. Simply put, the contention on behalf of the
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 the Citibank i.e, at the rate of Rs.81/-,
aggregating Rs. 40.50 crores. This amount and also approximately
Rs. 22.34 crores paid by Canfina as interest at the rate of 9% per
annum 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 at the rate of 9% per annum
because the Citibank chose to comply with the order of Supreme
Court for the purpose of restitution before 1.9.2004 by tendering
the aggregate sum of Rs. 107,75,40,141/- to Canfina. 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
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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 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 April 25, 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 April 25, 2005 of a total sum of Rs. 22,14,36,756/-
along with interest either at the rate of 12% per annum or as may
be awarded by this Court on the aforesaid amount from 25th April
2005 till the date of actual refund.
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11. On the other hand the stand of the Canfina is that after the
Supreme Court judgment setting aside the decree against Canfina
on 7.7.2004 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. 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 learned senior counsel for the appellant has criticized
the impugned order by highlighting that in paragraph 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
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observation/opinion of the Special Court in the same paragraph
recorded in the following words:
“…………. in so far 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 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 aforesaid erroneous presumption and opinion.
13. 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 Madras High
Court in the case of Lakshmi Amma vs. Thazhathitathil Krishna
Kurup (AIR 1931 Madras 81) and in the case of S. Chokalingam
Asari vs. N.S. Krishna Iyer and Ors. (AIR 1964 Madras 404). He
also placed reliance on Calcutta High Court judgment in the case of
Surendra Lal Chowdhury and Ors. vs. Sultan Ahmed and Ors.
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(AIR 1935 Calcutta 206) and the following four Supreme Court
judgments:
1. Lal Bhagwant Singh vs. Rai Sahib Lala Sri Kishen Das, 1953 SCR 559=AIR 1953 SC 136 2. Kartar Singh & Ors. vs. State of Punjab, (1995) 4 SCC 101 3. Kerala State Electricity Board and Anr. vs. M.R.F.
Limited, (1996) 1 SCC 597 4. South Eastern Coalfields Ltd. vs. State of M.P. & Ors.,
AIR 2003 SC 4482
14. In the case of Lakshmi Amma (Supra), the Madras High
Court noticed certain privy council judgments and also the
contention that Section 144 of the 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 the case of S.
Chokalingam (Supra) the right of a bona fide purchaser for value
was upheld in paragraph 30 of the judgment and thereafter in
paragraph 31 reliance was placed upon judgment of this Court in
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the case of Bhagwant Singh (Supra) by extracting the following
passage:
“ The doctrine of restitution 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.”
15. In the case of Surendra Lal (Supra), 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 “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 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 the case of Bhagwant
Singh (Supra) has been extracted in the Madras High Court
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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 the case of Kartar Singh (Supra) 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 the case of Kerala State Electricity Board (Supra) 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 the case of South Eastern Coalfields Limited (Supra),
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this Court re-emphasized 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
Privy Council in the case of Jai Berham vs. Kedar Nath Marwari,
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. 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
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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 judgment of this Court in the case of Indian
Council for Enviro-Legal Action vs. Union of India & Ors. (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 over-rule any of the earlier judgments of this Court
laying down classic principles of restitution under Section 144 of
the CPC on which the appellant has placed reliance and which
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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 of the 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
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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 the Citibank or at the time when the 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 liability
to repay the possible gains made by the third party or subsequent
purchasers of the bonds. 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.
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21. In view of 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 appellant to be 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 the 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 at the rate of 9% per
annum from 25.4.2005 till the date of actual refund. Canfina
should make a refund of 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.
…………………………………….J. [VIKRAMAJIT SEN]
……………………………………..J. [SHIVA KIRTI SINGH]
New Delhi. August 21, 2015.
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