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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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C.A.No.3580/05  etc.

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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C.A.No.3580/05  etc.

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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C.A.No.3580/05  etc.

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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C.A.No.3580/05  etc.

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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C.A.No.3580/05  etc.

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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