Court Rebukes Bank Officials Who Negligently Paid Fake Deposit Receipts

‘Writ under Article 226 lies against negligent nationalised bank’

S. MURLIDHARAN

October 22, 2012:  

A bank, a nationalised bank at that, is an instrumentality of the state and hence writ under Article 226 of the Constitution lies against it, said the Madras High Court in Ashok Amritraj vs Reserve Bank of India and others.

The petitioner had placed Rs 6.35 crore in fixed deposits — nine receipts for Rs 95 lakh each and one receipt for Rs 65 lakh. Midway through, that is before the maturity of these deposits, an impostor, perhaps in cahoots with the bank staff, wanted to close these accounts by producing deposit receipts that were clearly forged as apparent from the conspicuous differences in the watermarks in the forged and original receipts normally issued by the bank.

Moreover, the impostor had walked away with the loot merely by producing an authorisation letter ostensibly given by the petitioner. Coming down heavily on the bank, the High Court wondered how a bank could be so blasé especially given the size of the deposits. The stark differences in watermarks in the deposit receipts vis-à-vis the original ones should have alerted the bank. Second, no sensible bank would issue cheques to the so-called authorised person without obtaining confirmation from the original depositor given the size of the deposits.

The High Court brushed aside the contention of the respondent bank that since facts had to be examined it was a fit case for civil proceedings and therefore a writ court could not intercede. The Court emphatically ruled that when a bank deprives a depositor of his wealth, he cannot be expected to wait patiently and watch helplessly even as the case drags on in a civil proceeding. The bank was asked to pay up.

http://www.thehindubusinessline.com/industry-and-economy/banking/writ-under-article-226-lies-against-negligent-nationalised-bank/article4023058.ece

Law of Limitation does Not Apply on Debts Decided by court

Law of limitation will not apply when court decrees an amount as debt

S. Murlidharan

October 18, 2012:

When bank guarantees are enforced and the bank pays up, the amount thus payable to the bank becomes a debt to which the law of limitation applies. But when the firm disputes the amount payable to the bank and such dispute is finally resolved in favour of the bank, the amount payable not only becomes a debt but in addition is not subject to the law of limitation.

C.S. Company case

This was the verdict of Kerala High Court in C. S. Company vs Punjab and Sind Bank. The petitioner was a partnership firm at whose request the respondent-bank had furnished two guarantees for Rs 1 lakh and Rs 19 lakh in 1983 to Kerala State Electricity Board.

On enforcement of the guarantees by the electricity board, the bank demanded payment of the guarantee amount with interest from the petitioner. The matter got embroiled in litigation with the trial court holding in favour of the bank, but the High Court reversed the trial court verdict leading to appeal before the Supreme Court which ruled in favour of the bank.

The firm continued to persist with its delaying tactics and prevarications when the bank sought to read the riot act to it, invoking the Securitisation Act of 2002 to seize the firm’s properties to realise its dues.

Not an NPA

First the firm raised the bogey of the amount not having been declared an NPA (non-performing asset) when the amount decreed by the apex court was not paid.

The Kerala High Court, however, was not amused and held that the amount decreed by the apex court indeed was a debt within the meaning of the Securitisation Act and it was not necessary to declare the amount as NPA after every court proceeding.

That the amount was declared an NPA in 1987 was good enough for the purposes of the Securitisation Act.

The petitioner wanted to wriggle out of his liability on another ground — that between 1983 when the guarantee was extended and 2012 much had happened and the law of limitation of 12 years had caught up with the bank. The High Court pointed out that the law of limitation did not apply to amounts decreed by courts.

http://www.thehindubusinessline.com/opinion/columns/s-murlidharan/law-of-limitation-will-not-apply-when-court-decrees-an-amount-as-debt/article4009998.ece