S. Kotrabasappa Vs. Indian Bank - Court Judgment

Excerpt:
company - mistaken credit - whether recipient of certain sum of money by mistake is required to return same with interest or not - claim for interest in present case is neither based on usage of trade having force of law nor on agreement to pay at fixed rate - claim for interest was also not based on equity since as there was no pleading warranting exercise of equity jurisdiction - held, plaintiff not entitled to recovery of interest. - section 17(c); [v. jagannathan, j] offence under sections 13(h)(e) r/w section 13(2)- persons authorised to investigate held, investigation conducted by police officer below the rank of inspector of police is valid in as much as there is general authorisation by state government permitting said officer to conduct investigation. -- code of criminal procedure, 1973 [c.a. no. 2/1974]. section 156: investigation investigation conducted by same police officer who lodged fir is not barred by law. -- karnataka lokayukta act, 1984. [k.a. no. 4/1985]. section 9: [v. jagnnathan, j] investigation of offence under corruption act held, police wing of lokayukta acts independently of lokayukta or upalokayukta. - advice on june 21, 1980. despite a good deal of correspondence between the parties and furnishing of extract of accounts since its inception up to the closure, the defendant had failed to repay the same. that despite verification of the pass book, the defendant failed to respond to his request and hence the issued a notice, exhibit p-2. exhibit p-3 is the reply sent by the defendant. 1,00,000. if so, form what date and at what rate ? 10. it is well established that interest may be awarded for the period prior to the date of the institution of the suit if there is an agreement for the payment of the same at a fixed rate or if interest is payable by the usage of trade having the force of law, or under the provisions of any substantive law as for instance section 80 of the negotiable instruments act or section 23 of the trusts act, vide vithal dass v. it only shows that if any person breaks his contract to pay to another person a sum of money on a specific date and, in consequence of that breach, the latter is unable to pay his debts and is ruined, the former is not liable to make good to the latter anything except the principal sum which he promised to pay, together with interest up to the date of payment.doddakale gowda, j.1. the important question that arises for consideration in this appeal is whether the recipient of a certain sum of money by mistake is required to return the same with interest or not 2. the circumstances leading to this litigation are as follows : the plaintiff instituted o.s. no. 34 of 1983 on the file of the civil judge, davangere, for recovery of a sum of rs. 1,00,000 plus rs. 33,438.75 as interest, etc., alleging that the defendant was its constituent from may 23, 1980, to july 5, 1985, maintaining accounts in the name of 'sri kottureshwara rice mill and oil mills' ; that during that period, i.e., on june 14, 1980, plaintiff-bank had received a t.t. (telegraphic transfer) advice from their r.s. puram, coimbatore branch, to credit the account of the defendant with a sum of rs. 1,00,000; accordingly this amount was credited and drawn by the defendant on the same day; that on receipt of confirmation telegram, dated june 21, 1980, by mistake or oversight, a further sum of rs. 1,00,000 was credited to the account of the defendant believing bona fide that there was another t.t. advice to credit the said sum, though, in fact, there was none. the official dealing with this particular work, thinking that the confirmation telegram itself was a separate t.t. advice, had credited another sum of rs. 1,00,000. the defendant took unfair advantage of this mistaken credit transfer and had drawn the said amount of rs. 1,00,000 on the same day, though he had no information from his constituent to credit a further sum of rs. 1,00,000 from r.s. puram, coimbatore branch. thereby, the defendant made an unlawful gain of one lakh of rupees. there were some more transactions till the closure of the account, but the defendant had kept silent about the wrong credit and withdrawal of the same on june 21, 1980. after nearly two years, the plaintiff found out that there was a wrong credit on june 21, 1980, and, immediately, the plaintiff approached the defendant on july 13, 1982, and explained the circumstances under which the payment was made without receipt of t.t. advice on june 21, 1980. despite a good deal of correspondence between the parties and furnishing of extract of accounts since its inception up to the closure, the defendant had failed to repay the same. thus, the cause of action to claim the refund was based on the mistaken credit of rs. 1,00,000 with interest at 12% per annum from the date of credit till the date of filling of the suit in addition to the current interest. 3. the defendant denied these averments and contended that the accounts had been settled and there remained nothing to be paid and that the claim based on an isolated entry was not maintainable. he also repudiated the mistaken credit and disputed his liability to pay interest, if any. 4. the court below framed the following issues for determination : 1. whether there was a credit of rs. 1,00,000 (twice) on june 14, 1980, and june 21, 1980, and the latter being a double payment, whether the plaintiff is entitled to recover the same and 2. whether the plaintiff entitled to interest the plaintiff examined two witnesses in support of its case apart from making 14 exhibits. no evidence was adduced by the defendant presumably because he had no answer to the plaintiff's claim. 5. the court below, on a consideration of oral and documentary evidence, has held that the second credit, dated june 21, 1980, was a 'mistaken credit' or 'a double payment' in respect of which there was no t.t. advice from r.s. puram branch, coimbatore, and hence the defendant was liable to refund the same with interest. it is against this judgment and decree that the defendant has presented this appeal. 6. pw-1, the then manager of the bank, has deposed that on receipt of exhibit p-1 telegram from madras central office, reconciliation department, he took up the matter with the defendant for the return of the amount; that despite verification of the pass book, the defendant failed to respond to his request and hence the issued a notice, exhibit p-2. exhibit p-3 is the reply sent by the defendant. exhibit p-4 is another letter addressed to the defendant enclosing the extract of the account. exhibit p-6 is the reply sent by the defendant. exhibit p-7 and exhibit p-8 are letters written by him demanding repayment. exhibit p-9 is the legal notice. exhibit p-10 is the reply sent by the defendant with an enclosure which is marked as exhibit p- 11. exhibit p-12 is the extract of accounts which covers the entire transaction from the inception till the closure of his account. except the transaction noted in exhibit p-12, the defendant had not other transaction. deposits noted in exhibit p-12 are the deposits received by transfer and credited to his account. exhibit p-13 is the t.t. advice received from r.s. puram, coimbatore branch, to credit a sum of rs. 1,00,000 to the defendant's account. exhibit p-14 is the confirmation telegram dated june 21, 1980, and he has explained how this credit was made twice with reference to a single t.t. advice. pw-2, who was the then accountant, had coroborated in material particulars as to how the 'double credit' came to be made. in view of this unimpeachable oral and documentary evidence, the finding on the first issue, viz., that there was a mistaken credit on june 21, 1980, does not call for interference. a person to whom money is paid by mistake is bound to repay or return it, vide section 72 of the contract act. it is, having regard to this documentary evidence, that this court on november 14, 1986, when this case was listed for admission, ordered notice regarding award of interest only. 7. sri b.v. katageri, learned counsel for the appellant, submitted that there was no agreement for payment of interest, much less had the plaintiff established any usage or trade practice for payment of interest on such mistaken credit and hence the defendant could not be saddled with interest for no fault of his. 8. sri udaya holla, learned counsel for the plaintiff-bank, contended that money belonging to the bank remained with the defendant for a considerable period and, therefore, he was liable to pay interest at the rate at which the defendant would have earned had it been lent to its customers or at the rate at which the defendant would have earned interest if he had invested it as a shrewd businessman. relying on section 70 and 73 of the contract act, the interest act, 1978, and certain provisions of the indian trusts act, he contended that the defendant who had derived the benefit of wrongful payment was liable to refund the same with interest. 9. thus, the question that requires consideration is : whether the plaintiff-bank was entitled to claim interest on rs. 1,00,000. if so, form what date and at what rate 10. it is well established that interest may be awarded for the period prior to the date of the institution of the suit if there is an agreement for the payment of the same at a fixed rate or if interest is payable by the usage of trade having the force of law, or under the provisions of any substantive law as for instance section 80 of the negotiable instruments act or section 23 of the trusts act, vide vithal dass v. rup chand : air1967sc188 . 11. the claim for interest in the instant case is neither based on usage of trade having the force of law nor on an agreement to pay at a fixed rate. it is also not based on equity since there is no pleading warranting the exercise of equity jurisdiction. in order to invoke the rule of equity, it is necessary in the first instance to establish the existence of a state of circumstances, which attracts the equitable jurisdiction, vide lord tomlin in maine and new brunswick electrical power co. ltd. v. alice m. hart, air 1929 pc 185. in the absence of such pleading, no interest could be awarded in the exercise of equity jurisdiction. 12. reliance placed on the decision of this court in s.t. thimmappa v. s.l.prasad : air1978kant25 , by sri katageri to avoid the liability of interest is of no assistance, as this court had repelled the contention of the lessor in that case to claim interest on rents withheld stating 'no foundation was laid in the pleading to establish the existence of a state of circumstances which attracts the equitable jurisdiction'. 13. so also the decision of the supreme court in p. dhunji shaw sindhwa v. municipal corporation of the city of poona : [1970]3scr415 , may not be of much assistance, as the award of interest appears to have been based on section 34 of the civil procedure code. 14. grant of interest cannot also be sustained on the basis of quasi contract in view of the decision of the privy council in bengal nagpur railway co. ltd. v. ruttanji ramji , which reads thus (at page 70) : 'there is a considerable divergence of judicial opinion in india on the question whether interest can be recovered as damages under section 73, contract act, where it is not recoverable under the interest act. now, section 73, contract act, gives statutory recognition to the general rule that, in the event of a breach of a contract, the party who suffers by such a breach is entitled to recover from the party breaking the contract, compensation for any loss or damage thereby caused to him. on behalf of the plaintiff, reliance is placed upon illustration (n) to that section. the illustration, however, does not deal with the right of a creditor to recover interest from his debtor on a loan advanced to the latter by the former. it only shows that if any person breaks his contract to pay to another person a sum of money on a specific date and, in consequence of that breach, the latter is unable to pay his debts and is ruined, the former is not liable to make good to the latter anything except the principal sum which he promised to pay, together with interest up to the date of payment. he is not liable to pay damages of a remote character. the illustration does not confer upon a creditor a right to recover interest upon a debt which is due to him, when he is not entitled to such interest under any provision of the law. nor can an illustration have the effect of modifying the language of the section which alone forms the enactment. as observed in jamal v. moola dawood sons and co., air 1915 pc 48; 43 ia 6, section 73 is merely declaratory of the common law as to damages and it has been held by the house of lords in london, chatham and dover railway co. v. south eastern railway co. [1983] ac 429 that interest cannot be allowed at common law by way of damages for wrongful detention of debt. the judgment of the privy council in maine and new brunswick electrical power co. ltd. v. hart [1929] ac 631; air 1929 pc 185, dealt with a statute of new brunswick, the relevant section of which was identical in terms with the interest act of india, and it was held in that case that the plaintiff was not entitled to interest at law, and, as the case did not attract the equitable jurisdication. the law has, however, been amended in england by section 3, law reforms (miscellaneous provisions) act, 1934, empowering a court of record to award interest on the whole or any part of any debt or damages, at such rate as it thinks fit, for the whole or any part of the period between the date when the cause of action arises and the date of the judgment. but there has been no such amendment of the law in india.' 15. section 34 of the civil procedure code provides for award of interest during the pendency of the proceedings. interest prior to the institution of the proceedings cannot rest upon section 34 of the civil procedure code but must depend upon some substantive law. after excluding the possibility of award of interest on the grounds referred to above, we are required to determine whether the liability to pay interest arises either under the trusts act or the interest act and, incidentally, the legal relationship between the parties. 16. the contention of sri udaya holla, learned counsel for the respondent, is that though the defendant may not fall within the meaning of 'trustee' as defined under the trusts act, he will be a 'constructive trustee' in the eye of law and hence, he is liable to pay interest as provided under section 23 of the trusts act or section 4 of the interest act of 1978.