Bombay HC: Relationship between banker and customer is of debtor and creditor for money deposited by customer in the bank

 As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived. {Para 5}

 IN THE HIGH COURT OF BOMBAY

Income-tax Reference No. 16 of 1973

Assessment Year: 1962-1963

Decided On: 12.02.1982

Commissioner of Income Tax, Poona Vs. Bhaichand H. Gandhi

Hon'ble Judges/Coram:

M.H. Kania and M.N. Chandurkar, JJ.

Author: M.H. Kania, J.

Citation: (1983) 141 ITR 67,1982 SCCINLINEBOM 320

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Is the relationship between the customer and Bank a creditor and a debtor?

 The money that a customer deposits in a bank is not held by the latter on trust for him. It becomes a part of the banker’s funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it’s called upon to pay it, the Bank is entitled to utilize the money in any manner for earning profit.

Supreme Court

CHIEF JUSTICE OF INDIA N.V. RAMANA JUSTICE SURYA KANT JUSTICE HIMA KOHLI

N. Raghavender Vs. State of Andhra Pradesh, CBI

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Supreme Court: Once Resolution Plan Is Approved, No Creditor Can Initiate Proceedings To Recover Claims Not Part Of Resolution Plan

  In the result, we answer the questions framed by us as under:

(i) That once a resolution plan is duly approved by the Adjudicating Authority under sub­ section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

(ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;

(iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.{Para 95}

Supreme Court of India

Ghanashyam Mishra And Sons ... vs Edelweiss Asset Reconstruction ... on 13 April, 2021

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Whether the court can restore insolvency petition dismissed in default on the application of one of the creditors?

 The learned Assistant Judge considered that the petitioning creditor sues on behalf of the general body of creditors and, therefore, in a sense every creditor is a party to the proceedings and that under Order IX, Rule 9, any party to the proceeding can ask for a petition dismissed for default being restored to file. But Order IX, Rule 9, refers specifically to the plaintiff who has to satisfy the Court that he has sufficient cause for non-appearance, and it is doubtful whether it was competent to the shop of Laxminarayan Sitaram to apply under Order IX, Rule 9, for a revival of the petition.

7. But the question still remains whether the Court did not have inherent jurisdiction to restore the application to file at the instance of one of the creditors. Under Section 151 of the Civil Procedure Code the Court has inherent powers to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the Court. In my opinion the ends of justice do require in the peculiar circumstances of this case that the application should be restored to file, and that, therefore, the two lower Courts were right in passing the order that they did.

IN THE HIGH COURT OF BOMBAY

Civil Revision Application No. 87 of 1944

Decided On: 17.11.1944

 Keshav Appa Bhagat  Vs.  Sitaram Hanumandas

Hon'ble Judges/Coram:

G.S. Rajadhyaksha, J.

Citation:1944 SCCONLINE 79: AIR 1946 Bom 20:MANU/MH/0133/1944

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Precaution to be taken by small cause court while granting injunction

Notwithstanding the above and without disclosing the aforesaid facts,
Litesh and Parul have filed Declaratory suits in the Small Causes Court
(Bandra Branch) in collusion with the Valias and have obtained Interim
Orders on 7 March 2017. We have no manner of doubt that the said
Declaratory suits filed in the Small Causes Court (Bandra Branch) are
collusive suits filed by Litesh and Parul on the one hand and Valias on the
other hand and filed merely to obstruct and delay the taking over physical
possession of the said flats which are secured assets of the Petitioner Bank.
We are of the prima-facie view that the said Litesh & Parul on the one hand
and the Valias on the other hand have practiced fraud upon the Small
Causes Court (Bandra Branch). Apart from appropriate action in Contempt,
if any, they would have to satisfy the Court why the impugned order should
not be set aside in these proceedings in view of the judgment in the case of
S.P. Chengal Varaya Naidu (dead) by LRS vs. Jagannath (dead) by LRS,
(1994) 1 SCC 1, wherein it was held:
“Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief
Justice Edward Coke of England about three centuries ago. It is the settled
proposition of law that a judgment or decree obtained by playing fraud on the court
is a nullity and non est in the eyes of law. Such a judgment/decree-by the first court
or by the highest court has to be treated as a nullity by every court, whether
superior or inferior. It can be challenged in any court even in collateral
proceedings.”

9. We have come across such suits dime and dozen times. What however
is disturbing in the present case is the causal manner in which interim
injunctions are granted in both the suits making the provisions of the
SARFAESI Act nugatory. It appears that the interim injunctions are granted
even without reading the prayers in the Application for Interim Relief. The
prayers in the Applications for interim reliefs mischievously incorporate the
words “their creditors” and the interim injunctions in both the Applications in
the two suits are granted in the following terms:
“ORDER
1. …
2. The defendants, their creditors, servants, agents or other disgruntle elements are
hereby restrained by and order of temporary injunction from dispossessing the plaintiff from
the suit premises pending the hearing and final disposal of the suit”
(emphasis supplied)
The ‘creditors’ (the Petitioner Bank in the present case), have for obvious
reasons not been made parties in the Small Causes Court suits and interim
injunctions have been obtained behind their back and without disclosing all
facts, to obstruct and delay the taking over of physical possession of the
said flats which are secured assets of the Petitioner Bank as indicated
earlier. The grant of such blanket injunctions sets at nought the entire object
for which the SARFAESI Act was enacted.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION (ST.) NO. 17974 OF 2018
WITH
WRIT PETITION (ST.) NO. 17978 OF 2018

Central Bank of India V/s. M/s. VHCL Industries Ltd. & Ors.

CORAM : A.A. SAYED AND
V.L. ACHLIYA, JJ.
DATE : 3rd JULY, 2018.

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How to ascertain whether a transaction is sale transaction or mortgage transaction?

The recitals "your amount shall carry no interest and my fields will not carry any rent" indicate that the consideration received by the transferor was to be treated as a debt. The interest was payable in the shape of appropriation by the transferee of the rent which he would otherwise be liable to pay to the transferor. That there has been an express mention of interest militates against any assumption that the transaction was intended to operate as an absolute sale. The stipulation that the transferee was to pay land revenue appears to be of no significance beyond the fact that the person who was to enjoy the profits was to bear the burden. Then the recital "I cease to have any right, etc., for five years" followed by the expression "I shall pay and shall redeem my fields" clearly goes to prove the existence of the relation of debtor and creditor between the parties. The vernacular words equivalent to the word "redeem" are "sodun ghein"  which mean 'release or redeem.' These are significant inasmuch as if there had been an intention to purchase back the fields, the words used would have been 'vikat ghein' .

10. In the premises, the impugned judgment and order of the lower Appellate Court does not disclose any error of law in the matter of construction of the document. The construction of a document is a mixed question of law and fact. As I have noted above, it is essentially to be decided by considering the words employed by the parties, though it is permissible to take into account surrounding circumstances in case the words used are not sufficiently clear to designate their effect. The words used in the present case are sufficiently clear and their effect is to create a mortgage by conditional sale with a right of redemption preserved unto the debtor. The relationship conveyed by the document is of debtor and creditor and not of vendor and buyer.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 369 of 2013 and Civil Application No. 1011 of 2013 in Second Appeal No. 369 of 2013

Decided On: 07.03.2017

Mangal Popatrao Sodmise Vs.  Abdagiri Vishvanath Narale

Hon'ble Judges/Coram:

S.C. Gupte, J.

Citation: 2017(6) MHLJ 152

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Whether creditor can make single insolvency petition for adjudicating two or more person as insolvents?

After giving the matter my careful consideration I am of opinion that there is no legal bar to a single application being made by a creditor for adjudicating two or more persons as insolvents if they are jointly liable on a debt or have committed a joint act of insolvency.

 Citation : AIR 1930 Lah 592

IN THE HIGH COURT OF LAHORE

Decided On: 07.03.1930

 Kalu Ram
Vs.
Gitwar Singh and Ors.

Coram:

Tek Chand, J.

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Whether debtor can initiate insolvency petition against creditor bank?

The question is whether the bank can claim exemption from insolvency proceedings under Section 8 of the Act. Any company registered under any enactment is exempted from the insolvency proceedings. The bank was registered as a banking company as defined under Section 5(c) of the Banking Regulation Act, 1949 (Act No. 10 of 1949), which reads as under:

"5(c) 'banking company' means any company which transacts the business of banking in India;" Clause (d) of Section 5 of the Act No. 10 of 1949 defines 'company' to mean any company as defined in Section 3 of the Companies Act, 1956; and includes a foreign company within the meaning of Section 591 of that Act. Section 2 of Act No. 10 of 1949 provides that the provisions of Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the Companies Act, and any other law for the time being in force.

After the enforcement of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970), all the banking companies including the foreign companies registered under the Companies Act, 1959, were nationalised and more than 51 per cent shares were taken over by the Government of India and the banking companies became the body corporate under Section 2(d) of Act No. 5 of 1970. Clause (d) defines 'corresponding new bank in relation to existing bank' to mean a body corporate specified against such bank in column 2 of Schedule 1. In the First Schedule 'Punjab National Bank Ltd.' is in the first column and in the second column it has been referred to as 'Punjab National Bank'. Section 4 of 1970 Act provides that on commencement of the Act undertaking of every existing bank shall be transferred to and shall vest in the corresponding new bank.

 In view of the aforesaid provision of law, Punjab National Bank is a Government company under Section 617 of the Companies Act. The view taken by the courts below that the bank is registered company and, therefore, it is exempted from insolvency proceedings--does not suffer from any illegality.

IN THE HIGH COURT OF ALLAHABAD

Civil Misc. Writ Petition No. 17526 of 2001

Decided On: 24.05.2001

Appellants: Nagendra Kumar Jain
Vs.
Respondent: District Judge, Moradabad

Hon'ble Judges/Coram:
S.N. Agarwal, J.

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When compromise made between creditor and principal debtor is binding on guarantor?

This Court has held in United Bank of India
v. Bengal Behar Construction Company Ltd. and
others, (1998) 8 SCC 653, that the Clauses in the
letter of guarantee are binding on the guarantors
as follows:
“In view of the above, the question regarding
confirmation of the decree against the
guarantors now needs to be settled. ……………… we
see no reason why the guarantors should not be
made liable under the letters of guarantee,
the terms whereof clearly stipulate that on
the failure of the principal debtor to abide
by the contract, they will be liable to pay
the amount due from the principal debtor by
the appellants. Clause 15 of the letter of
guarantee, in terms states that any action
settled or stated between the bank and the
principal debtor or admitted by the principal
debtor shall be accepted by the guarantors as
conclusive evidence. In view of this
stipulation in the letter of guarantee, once
the decree on admission is passed against the
principal debtor, the guarantors would become
liable to satisfy the decree jointly and
severally.”
(Emphasis supplied)
Thus, we see no reason why the Joint Memo, which
states compromise arrived at between the Central
Bank of India and the principal debtors, would not
bind C.L. Vimla when under Clause (2) she has
admitted that any judgment or award obtained by
the Central Bank of India against the principal
debtor would bind the parties.
 The mere fact of ignorance cannot be a valid
ground. The respondent, C.L. Vimala and her son,
N.Surya Bhagavan who signed the joint memo, were
residing in the same house. We see no reason why
the Respondent would not know of the joint memo,
when she could have by reasonable means made
herself aware of the proceedings.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4043 OF 2015
(Arising out of SLP(C) No.10173 of 2011)
Central Bank of India … Appellant
:Versus:
C.L. Vimla & Ors. … Respondents
Citation;2016(1) MHLJ 134

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Whether creditor can resort to arbitration proceeding when mortgaged security is in his favour?

 The second submission proceeds on a logical fallacy. When a creditor, who has a mortgaged security in his favour, confines the claim in arbitration for the recovery of monies due and outstanding, he does not relinquish the mortgaged security or abandon his right to bring the mortgaged security to sale by subsequently instituting a suit as envisaged in Order XXXIV Rule 14. The creditor cannot enforce a right in rem in the course of arbitral proceedings. Hence, a claim for the enforcement of the mortgaged security cannot be entertained in arbitration. But when the creditor asserts a money claim simpliciter in the course of arbitral proceedings, the law does not compel him to relinquish his mortgaged security as a condition for asserting the money claim in arbitration or to abandon his right as a secured creditor to bring the mortgaged property to sale by filing an independent suit in accordance with Order XXXIV Rule 14. Consequently a secured creditor can invoke the provisions of Section 9 of the Arbitration and Conciliation Act, 1996 which is a provision 7 of 11 APP(L).131.2013 incidental to or ancillary to the arbitration proceedings for seeking an interim measure of protection that would ensure that the fruits of the arbitral award are not destroyed or lost by dealings of the debtor with the properties in the meantime. That is exactly what has been done by the secured creditors and correctly accepted by the learned Single Judge.

Bombay High Court

Deccan Chronicle Holdings ... vs L & T Finance Limited on 8 August, 2013

Bench: Dr. D.Y. Chandrachud, S.C. Gupte

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Whether creditor of father can claim priority in payment of his debt in case of insolvency of son?

It is in this sense of obligation that the word 'charge' is used in the passage in Mayne's Hindu Law and not in the sense of the properties being hypothecated for the debt. It is one thing to say that before partition the debts of the father shall be provided for and it is another thing to say that when the son becomes the sole owner on the father's death entitled to dispose of the property as his own, there is any restriction imposed on his powers for disposing it for his own debts though he is equally under an obligation to satisfy the demand of his father's creditors. Again the obligation imposed by the Hindu Law being incidental to the property so long as the property remains in the hands of the son the property cannot escape liability, whether there is a charge or No. But once the property has been alienated to a bona fide alienee, the obligation cannot be pursued against the property. It seems to us that the same principle would apply where the son is divested of his ownership therein by operation of law. Bankruptcy is an involuntary alienation and by the provisions of the insolvency law there is a statutory conveyance or alienation of the said property in favour of the Official Assignee in trust for the creditors for distribution among them according to the provisions of the said law. Having regard to these principles the question of priority has to be viewed. Under Section 52(2) of the Presidency Towns Insolvency Act all property as may belong to or be vested in the insolvent at the commencement of the insolvency will vest in the Official Assignee. The principle is the same under the Provincial Insolvency Act and under the English Law. It cannot be denied that the separate property of the father devolving on the son and the joint family property owned by the son at the date of the insolvency, which has been augmented by the father's share devolving upon the son by survivorship on account of the father's death before the date of the insolvency, will be property which belonged to the insolvent. But once that property vests in the Official Assignee, "it would have to be governed by the provisions of the Insolvency law. One of the provisions of that law is Section 49(5) which provides that subject to the provisions of the Act all debts proved in insolvency shall be paid rateably according to the mounts of such debts respectively and without any preference. Of course under Section 49 certain unsecured debts have to be paid in priority and it is in respect of them that a preference is accorded by the Act. The insolvency law is a special law having for its object the distribution of the insolvent's available assets among his creditors pro rata. The father's debt is not one to which a right of priority is given by the Act. The Official Assignee can only administer the assets and distribute them in accordance with the provisions of the Act. If a father's creditor chooses to prove in the insolvency of the, son as a provable debt of the son, he must submit himself to the provisions of the Act which does not recognise any priority in his favour. In a recent decision reported in Thimmiah v. Official Receiver, Bellary (1939) 1 M.L.J. 158, our learned brother Abdur Rahman, J,, took this view and held that the unrealised debts of the father and the debts of the son stood on the same footing and that a father's creditor would not got priority over the son's creditor. In the course of the judgment the learned Judge observed thus: If one looks to the provisions contained in Section 61 of the Provincial Insolvency Act, it would be found to provide in Sub-clause 5 that all debts entered in the schedule have to be paid rateably according to the an fount of such debts without any preference except to those which have been otherwise specified by the Provinc Insolvency Act...The learned counsel for the petitioner has not been able to point to any provision in the Provincial Insolvency Act under which he could claim priority for the debt in question and so far as proceedings in insolvency are concerned, the petitioner, as provided in Sub- 5, share rateably without any preference. It is obviously the policy of the insolvency law to distribute the estate among the creditors fairly and unless a preference was given by the Act to any particular debt, it must necessarily be held to fall within the sub-and no priority can legitimately be claimed in regard to the same. Viewed in the light of this section the unrealised simple debts of the father and that of the son would stand on the same footing.

Madras High Court

Pr. N. Sm. Chokkalingam Chettiar vs The Official Assignee Of Madras on 16 October, 1939

Equivalent citations: (1940) 2 MLJ 621

Venkataramana Rao, J.

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