2004 Supreme(SC) 683

Supreme 2004(5) 439
Supreme Court of India
(From Special Courts (Trial of Offences Relating to Transactions in Securities) at Bombay)
R.C. Lahoti, CJI., Ashok Bhan, J.
Citibank N.A.  -Appellant
versus
Standard Chartered Bank  -Respondent
Civil Appeal No. 7426 of 1996
With
C.A.Nos. 9063, 9138/1996 and 4268 of 1997
Decided on 7-7-2004
Counsel for the Parties :
For the Appearing Parties : T.R. Andhyarujina, Shanti Bhushan, R.F. Nariman, Sr. Advocates, P.K. Samdani, Ms. Rashmi Viramani, R.K. Virmani, Rajeev M. Roy, Pradeep Sancheti, Ms. Sunita Dutt, Shaunak Thackar, Nilesh Parekh, Shailendra Bhardwaj, T.K. Cooper, Mahesh Agrawal, Manu Krishnan, Rishi Agrawal, E.C. Agarwala and Ms. B. Vijayalakshmi Menon, Advocate(NP)/ Advocates.­

Important point
A Bankers Receipt is a document issued by the seller bank acknowledging that it has received money for the sale of a particular security which implies that the subject security is not readily available for delivery and that the same shall be delivered against the return of Bankers Receipt duly discharged, and in the mean time the securities are held by the seller bank on account of the purchaser.

Headnote:Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992-Banker Receipt-Litigation between Standard Chartered Bank (SCB), Citibank and Canbank and Fin­ancial Services Ltd. (Canfina)-Citibank purchased 9 IRFC Bonds of face value of Rs. 50 crores from Canfina-In consideration thereof, Canfina delivered to Citibank Bankers Receipt 1401-Subsequently, Citibank sold to Canfina 9 IRFC Bonds of face value of Rs. 105 crores-However, instead of returning the banker receipt to Canfina, a fresh banker receipt of Citibank was issued and sent to Canfina-Citibank sold to SCB 9 IRFC Bonds, received payment and issued BR No. 47 in favour of SCB-Canfina wrote a letter to Citibank requesting it to collect IREC Bonds of face value from SCB and release their BR No. 1401-SCB discharged BR 47 and returned the same to Citibank with endorsement on reverse of BR ‘in exchange’ for Canfina BR 1401-SCB filed a suit against Citibank alleging that Citibank had failed to deliver to them the securities-Citibank filed a suit against Canfina for non performance of their obligation under BR 1401 -Relief to be granted in such a case.

       Held : Facts in nutshell around which the controversy revolves are that Citibank held BR No. 1401 of face value of Rs. 50 crores issued by Canfina in its favour. On 19th February, 1992 Citibank sold to SCB bonds of the face value of Rs. 72.50 crores. Citibank received payment for the same and issued original BR No. 47 dated 19th February, 1992 in favour of SCB in the sum of Rs. 72.50 crores. On 28th February, 1992 Canfina wrote a letter to the Citibank requesting the Citibank to collect the IRFC Bonds of the face value of Rs. 50 crores from SCB and release their bankers receipt. On March 4, 1992 SCB “discharged” original BR 47 dated 19.2.1992 and took from Citibank the Canfina BR No. 1401 of the face value of Rs. 50 crores and Citibank’s fresh BR No. 47 dated 4th March, 1992 of the face value of Rs. 22.50 crores. Almost after three months of discharge of the original BR 47 and after break up of the scam, SCB by its attorney dated 4.6.1992 made a demand for delivery of bonds from Citibank under BR 1401 while endorsing a copy of letter to Canfina. Citibank sent a reply to the attorney’s letter dated 4.6.1992 through its own attorney on 6.7.1992 denying its liability to deliver any securities or to make payment of any amount to the SCB. Thereafter SCB filed the suit. (Para 19)

       A Bankers Receipt is a document issued by the seller bank acknowledging that it has received money for the sale of a particular security. It implies that the subject security is not readily available for delivery and that the same shall be deliv­ered against the return of Bankers Receipt duly discharged, and in the mean time the securities are held by the seller bank on account of the purchaser. The form of BR is not statutory, howe­ver, there is a recommendatory form and rules relating to BR issued by Indian Bankers Association. (Para 35)

        Admittedly, the original BR 47 was discharged and delivered back to Citibank. The same has been produced by the Citibank from its possession. The return of original with an endorsement on its reverse duly signed by the officer of SCB amounts to discharge of the BR. This was the mode of discharge of BRs. The discharged BR being in possession of the Citibank would raise a presumption in law under Section 114 of the Indian Evidence Act, 1872, that the BR stood duly discharged. Section 114 of the Evidence Act provides that the Court may presume the existence of any fact which it thinks likely to have happened regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. Illustration (i) of Section 114 provides that Court may presume ‘that when a document creating an obligation is in the hands of the obligor, the obligation has been discharged’. BR 47 dated 19.2.1992 was in the custody of the Citibank. Its possession would raise a rebuttal presumption of the discharge of the said BR. The onus to rebut the presumption was upon SCB. SCB has failed to rebut the presumption by leading any evidence that the obligation under BR 47 did not stand discharged. Finding recorded by the Special Court that there was nothing on the record to show that there was an absolute discharge granted to the Citibank by SCB cannot be accepted. (Para 42)

       SCB has failed to prove that the discharge of original BR 47 dated 19.2.1992 given by it was conditional. It did not lead any evidence. Citibank had denied that the discharge given to it was conditional. According to Citibank, the discharge was voluntary and unconditional. No issue was framed. The burden of disproving discharge of BR 47 and of Citibank’s obligation to deliver bonds to SCB lay upon SCB as was held in Citibank’s case (supra). Whether discharge is absolute or unconditional is a question of fact. In view of the presumption of discharge arising from illustration (i) of Section 114 of the Evidence Act, the burden of disproving discharge was on SCB and factual evidence had to be led by SCB to prove whether discharge was conditional. No such attempt was made by SCB. SCB voluntarily and unconditionally received and accepted CANFINA BR 1401 knowing fully well that the said BR was non-transferable. The obvious inference is that SCB desired the said CANFINA BR for its own purpose inasmuch as the said BR otherwise is useless. It may be noticed that SCB took BR 1401 within 14 days of the original transaction of 19.2.1992 in exchange. It owed an explanation as to why it took BR 1401, a non-transferable document. SCB has not given any explanation either in its plaint or in evidence as to why it took BR 1401. The intention of SCB was to take BR of Canfina which was in possession of Citibank. SCB being a business house presumably was aware of the terms of BR of Canfina from Citibank when it took, accepted and retained the BR of Canfina from Citibank. The obvious inference is that the SCB did not take BR 1401 from Citibank as an authority to collect the securities or that it was a condition of the discharge. (Paras 43 and 44)

        For the reasons stated above, it is held that SCB voluntarily and unconditionally received and accepted non-transferable Canfina’s BR 1401 with an obvious inference that SCB desired the said Canfina BR for its own purpose for the reasons best known to itself. (Para 45)

       The Special Court fell in error in applying Section 41 of the Indian Contract Act to the facts of the present case. Attempt on the part of the SCB to place reliance on Section 41 of the Indian Contract Act is completely misplaced in the facts of the case as has been held by this Court in Citibank’s earlier cases (supra). Section 41 of the Indian Contract Act only provides that the promisee cannot have double satisfaction of its claim i.e. from the promisor as well as a third party. It does not give a cause of action to the promisee, but, to the promisor, to contend that the promisee who has accepted satisfaction from the third party cannot insist on the satisfaction of its claim from the promisor as well. The case of the Citibank would squarely falls under Section 63 of the Indian Contract Act. (Para 45)

       As a consequence to the aforesaid, Citibank becomes entitled to restitution of the total amount paid by it to Standard Chartered Bank (principal and interest) along with interest @ 12 p.a. from the date of receipt of payment by SCB provided it is paid on or before 01.09.2004 and in default to pay the interest @ 15 p.a. from the date of receipt of payment till it is repaid by the Standard Chartered Bank. Citibank would also be entitled to receive back the amount of costs it had paid to Standard Chartered Bank under the decree of the Special Court but the same would not carry any interest. Though the appellant had prayed that the interest be granted at the same rate at which it was granted by the Special Court (i.e. 20 p.a.) but we have reduced the same keeping in view that interest rates have come down substantially in the recent years. (Para 53)

       As a consequence to the aforesaid Canfina becomes entitled to restitution of the total amount paid by it to the Citibank (principal and interest) along with interest @ 9 p.a. from the date of payment provided it is paid on or before 01.09.2004 and in default to pay the interest @ 12 p.a. from the date of payment till it is repaid by the Citibank. Though the appellant had prayed for higher rate of interest but we deem it appropriate to grant the same rate of interest which had been granted by the Special Court. While decreeing the suit No.1 of 1995. We decline to grant costs in the appeal as the Special Court had not granted any costs while decreeing the suit of Citibank. The parties in this suit shall bear their own costs throughout. (Para 56)