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2022 Supreme(Online)(KER) 24238
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN
MONDAY, THE 10TH DAY OF JANUARY 2022 / 20TH POUSHA, 1943
WP(C) NO. 13605 OF 2020
PETITIONER:
KURIEN E KALATHIL
CONTRACTOR, TC 14/1004, KEK TOWER, VAZHUTHACAUD,
THIRUVANANTHAPURAM.
BY ADVS.
M.RAMESH CHANDER (SR.)
SMT.K.A.SANJEETHA
SRI.BALU TOM
SHRI. BEJOY JOSEPH P.J.
RESPONDENTS:
1
THE FEDERAL BANK LTD.,
GARDEN HEIGHTS, KOWDIAR P.O.,NANTHENCODE,
THIRUVANANTHAPURAM-695003, REPRESENTED BY ITS
ASSISTANT VICE PRESIDENT AND BRANCH HEAD, BRANCH
NANTHENCODE.
2
THE DIVISIONAL HEAD,
THE FEDERAL BANK LTD., LCRD/TRIVANDRUM DIVISION,
4TH FLOOR, FEDERAL TOWERS, STATUE,
THIRUVANANTHAPURAM-695001.
3
ADDL.R3 IMPLEADED
RESERVE BANK OF INDIA, CENTRAL OFFICE,
MUMBAI,REPRESENTED BY THE CHIEF GENERAL MANAGER,
RESERVE BANK OF INDIA, DEPARTMENT OF REGULATION,
CENTRAL OFFICE, WORLD TRADE CENTRE, CUFFE PARADE,
MUMBAI-400005. (ADDL.R3 IS IMPLEADED AS PER ORDER
DATED 13/10/2021 IN I.A. 2/2021 IN WPC 13605/2020)
BY ADV SRI.SUNIL SHANKER
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 10.01.2022, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
W.P.(C).No. 13605 of 2020
2
P.V.KUNHIKRISHNAN, J
----------------------------------------------------
W.P.(C).No. 13605 of 2020
-------------------------------------------------
Dated this the 10th day of January, 2022
A bank cannot refuse to release the margin money lying in the petitioner's account towards the bank guarantee without providing any justification.
Headnote:
BANKING - ONE TIME SETTLEMENT - MARGIN MONEY - [The court held that the petitioner is entitled to the margin money lying in the bank account towards the bank guarantee, as the bank has not provided any justification for refusing to release the amount.]
Fact of the Case:
The petitioner had availed a loan from the respondent bank and the bank had also executed a bank guarantee in favor of KSEB for the contract work done by the petitioner. After the work was completed, the original documents pertaining to the petitioner's property which was mortgaged to the bank were not released. The petitioner approached the court and obtained a judgment directing the bank to release the original documents. However, the bank refused to release the margin money lying in the petitioner's account towards the bank guarantee, claiming that it had sacrificed crores of rupees from the total amount due from the bank while entering into One Time Settlement and therefore, the amount cannot be released.
Finding of the Court:
The court held that the bank has not provided any justification for refusing to release the margin money. The court noted that the petitioner had already paid an amount of Rs.9 crores towards the principal amount and Rs.87,13,712/- towards interest, which was accepted by the bank and the account was closed. The court also noted that the bank had reserved its right to recompense, but it had not exercised this right in a reasonable manner.
Issues: Whether the bank is justified in refusing to release the margin money lying in the petitioner's account towards the bank guarantee.
Ratio Decidendi: The court relied on Section 35A of the Banking Regulation Act, 1949, which empowers the Reserve Bank of India to issue directions to banking companies in the public interest or in the interest of banking policy. The court held that the bank's refusal to release the margin money was not in the public interest or in the interest of banking policy.
Final Decision: The court directed the bank to release the margin money lying in the petitioner's account towards the bank guarantee within a period of four months from the date of receipt of a copy of the judgment.
JUDGMENT
The above writ petition is filed with following prayers:
“(i) Issue a writ of certiorari or any other appropriate writ, order or direction, quashing the original of Ext.P6.
(ii) Issue a writ of mandamus or any other appropriate writ, order or direction, directing or compelling the respondents to release the amount covered in Ext.P3 to the petitioner forthwith.
(iii) Issue such other order/direction as this Honourable Court deems fit and proper under the circumstances of this case”.
2. The petitioner had availed loan from the first respondent bank and the bank had also executed bank guarantee in favour of the KSEB for the contract work done by the petitioner. After the work was completed the original documents pertaining to the petitioner's property which was mortgaged to the bank was not released. Hence, the petitioner approached this Court by filing W.P. (C) No. 4190/2020 which was disposed as per Ext.P2 judgment. Pursuant to the same, though the original documents were returned, the prior documents were not returned. Towards the loan amount, there was One Time Settlement reached between the petitioner and the bank as per Ext.P1. As per One Time Settlement, it is the case of the petitioner that, he paid an amount of Rs.9 crores towards principal amount and Rs.87,13,712/- towards interest and this was accepted by the bank and the account was closed. As per Ext.P3 communication dated 28.05.2020, the petitioner was informed by the bank that an amount of Rs.33,14,485.66/- is lying in the petitioner's account with the bank towards margin money for the bank guarantee. In Ext.P3 it is stated that the petitioner has to sign the confirmation part in it regarding the said amount. On receipt of Ext.P3, petitioner requested that the said amount may be transferred in the petitioner's account with the State Bank of India as per Exts.P4 & P5 letters. However, it is the case of the petitioner that it has been refused on the ground that the bank has sacrificed crores of rupees from the total amount due from the bank while entering into One Time Settlement and therefore, the amount cannot be released. Ext.P6 is the letter from the bank. Ext.P6 is under challenge. Hence, the writ petition.
3. Heard learned counsel for the petitioner and the learned Standing Counsel for respondents 1 and 2. There is no appearance for the 3rd respondent.
4. Learned Senior Counsel Adv.Ramesh Chander reiterated the contention of the petitioner. On the other hand, the Standing Counsel for the first respondent takes me through paragraph 3 of the counter affidavit filed by the second respondent.
5. This Court considered the contention of both sides. It will be better to extract paragraph 3 of the counter affidavit filed by the 3rd respondent, which reads as follows:
“3.Without prejudice to the above, it is humbly submitted that the respondent Bank had vide letter dated 30.03.2019 (Ext.P1) had communicated the terms and conditions of the One Time Settlement. It is acceptance of the said terms and conditions that the benefit of one time settlement was provided to the petitioner, and amounts paid by them were accepted. In this context, it is submitted that as against the contractual due of Rs.10,53,68,651/- as on 23.03.2017, the petitioner was permitted make payment of Rs.6,50,00,000/- towards one time settlement. Therefore the sacrifice amount is Rs.4,03,68,651/-. In this perspective, it was clearly stated in Ext.P1 that the respondent “Bank reserves its right to recompense”. It is in exercise of the said reserved right of recompense that the respondent Bank has refused to return the margin money with interest, and is being adjusted towards the sacrifice incurred while settling the account. The said facts were intimated to the petitioner vide the 1st respondent's letter dated 26.06.2020 (marked as Exhibit P6 in the writ petitioner). It is submitted that the actions of the respondent Bank are in exercise of its right of recompense, which is available to the respondent B
