CANARA BANK vs SRI. SHIVASHANKAR G on 30 October 2024

1. 1. Mr Shivashankar G, S/o. Sri Govindaiah, Aged 48 years, No.252, 5^th Cross, Lakshmipura, K.G. Nagar, Bangalore 560 019.

2. 2. Mr B.S. Shankar, Prop. J.S. Garments, Major, No.03, Ground Floor, Kasturba Nagar, Ashwath Katte Road, Mysore Road, Bangalore 560 026.

**... DEFENDANTS**

**Counsel on record/appeared for:**

<table><tbody><tr><td>Applicant</td><td>:</td><td>Mr B.M. Baliga</td></tr><tr><td>Defendant No.1</td><td>:</td><td>M/s. Agnus Law</td></tr><tr><td>Defendant No.2</td><td>:</td><td><i>Ex parte</i></td></tr></tbody></table>

.....


2TA 2067/2017**FINAL ORDER**

The present Application was filed before the Debts Recovery Tribunal-I, Bengaluru on 05.04.2016. under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act 1993 ('Act' in short) and numbered as OA 1705/2016, to recover a sum of Rs.12,73,790.61p (Rupees twelve lakh seventy three thousand seven hundred and ninety and paise sixty one only) with further interest thereon and costs from the Defendants.

2. Subsequently, owing to bifurcation of jurisdiction vide Government of India Gazette Notification dated 30.01.2017, the Application (OA) was transferred to this Tribunal and renumbered as TA 2067/2017.

3. Brief facts of the case:

(a) The case of the Applicant Bank is that the Defendant No.1 is having SB Account No.04932010020656. Defendant No.1 presented a Cheque bearing No.342893 dated 15.03.2013 for Rs.10,00,000/- drawn on M/s.ICICI Bank Chamarajpet Branch, Bangalore, issued to him by one Mr B.S. Shankar, Proprietor of M/s. J.S. Garments. The cheque was sent by applicant bank for clearing to its Service Branch at Chennai o 22.04.2013 but since 23.04.2013

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was a Bank holiday under the NI Act in Karnataka, and 24.04.2013 being a Bank holiday in Tamil Nadu, the applicant bank received the inward returns of the unpaid cheques only on the next working day i.e., on 25.04.2013. But on that day, only 28 unpaid cheques were returned by the Service Branch at Chennai and the cheque presented by Defendant No.1 was not among those returned cheques. Therefore, the Applicant bank bona fide believed that the cheque was honoured by the Paying Bank and credited the said cheque amount of Rs.10,00,000/- to the SB Account of Defendant No.1.

(b) Defendant No.1 withdrew the said amount of Rs.10,00,000/- in three instalments on 27.04.2013, 29.04.2013 and on 03.05.2013. Subsequently, in the month of June, the Applicant bank came to know that, on 25.04.2013, the Service Branch at Chennai had returned a total of 403 cheques and the Cheque No.342893 presented by Defendant No.1 was also returned unpaid. The Applicant's Service Branch at Bangalore represented the cheque to the Paying Banker -ICICI Bank and the Cheque was returned with an advice dated 12.06.2013 the cheque was returned due to **"funds insufficient"**.

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(c) Due to the intervening holidays and the lag in communication regarding the unpaid cheques, the applicant came to know about the mistaken credit given to the 1st Defendant's SB Account, only on 12.06.2013. Applicant bank, vide Registered Letter dated 04.12.2014 requested the Defendant No.1 to repay the mistaken credit of Rs.10,00,000/- wrongly withdrawn by him but the Defendant failed to respond to the request made by the applicant bank. Therefore, a legal notice dated 02.05.2015 was issued to Defendant No.1 informing that the said amount of Rs.10,00,000/- withdrawn by him, was treated as debit balance in his SB Account and he was liable to pay the interest @ 10.25% p.a. from 26.04.2013 compounded monthly and he was liable to repay the outstanding debit balance of Rs.10,53,412.00 as on 31.03.2014. In the reply notice dated 19.05.2015, Defendant No.1 admitted to have withdrawn the said sum of Rs.10,00,000/- but denied his liability to repay the said amount and called upon the Applicant to prove the said return of cheque etc.

(d) In response, the applicant bank sent a copy of returned cheque and the Cheque Return Advice dated 12.06.2013 issued by ICICI Bank and requested to repay the wrongly credited cheque amount. However, the Defendant No.1 vide his letter dated 11.08.2015

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made reckless allegations; the 2^nd Defendant is also liable as the drawer of the cheque to the Applicant Bank from whom the 1^st Defendant had snatched away the Cheque amount as detailed above as the applicant bank was made a victim of conspiracy hatched by the Defendants 1 & 2.

(e) The 2^nd Defendant has been made a party in this case because he is guilty of not meeting the cheque when duly presented for payment as stated about and therefore, the 2^nd Defendant is also liable as the drawer of the cheque to applicant bank. The Defendants are also liable to pay penal interest @ 2% p.a. and also the overdue interest of 2% p.a. as per the regulations. Defendant Nos.1 & 2 are due in a sum of Rs.12,73,790/- as per the Statement of Account as on 31.03.2016 together with interest @ 19% p.a. compounded monthly from the date of the Application till realization with costs.

4. After filing of the Application, summons was sent to Defendants through Registered Post with Acknowledgment due. The Applicant bank has filed Memo of Service dated 01.09.2017 enclosing therewith the postal receipts in respect of both the defendants and the returned cover in respect of Defendant No.2 with the postal endorsement 'Addressee left'. Thereafter, substitute service by way of newspaper publication was effected in two leading newspapers 6TA 2067/2017

on 15.03.2018- one in 'New Indian Express' (English) and 'Kannada Prabha' (vernacular language). Defendant No.1 appeared through counsel by filing Vakalat and filed Written Statement as well as Evidence Affidavit, however, no documents filed or marked on behalf of the Defendant. When the case came up for hearing on 18.03.2024, even after granting sufficient opportunity, Defendant No.2 neither appeared nor represented and hence was placed *ex parte* on 18.03.2024.

5. Written Statement filed by Defendant No.1, in brief:

(a) The subject claim of the Applicant cannot be classified as "debt" as defined under Section 2(g) of the Act; Defendant denies having availed any loan from the Bank.

(b) Defendant No.1 admits that he had maintained a Savings Bank Account bearing No.04932010020656 with the applicant bank at their Gavipuram Branch. Defendant No.1 further admit the presentation of cheque bearing No.342893 dated 15.03.2013 for a sum of Rs.10,00,000/- drawn on ICICI Bank, Chamrajpet Branch, Bangalore which was issued by Defendant No.2 towards part payment of hand loans. However, all other averments made by Applicant are not within the knowledge of Defendant No.1 and hence the applicant is put to strict proof.

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(c) Defendant No.1 admits that he withdrew a sum of Rs.10,00,000/- on three dates, i.e., 27.04.2014, 29.04.2013 and 03.05.2013. Defendant No.1 denies using the term "Installments" with reference to the above withdrawals.

(d) The statements like "reckless allegations" and "conspiracy hatched by Defendant No.1 & 2" are denied as false, baseless and imaginary. The mistake committed by Applicant and subsequent enormous delay and laches cause by Applicant, theory of conspiracy, can at no stretch of imagination, be brought into present case. Defendant No.2 is liable to answer all the claims of applicant bank. The other statements by bank including the statement that, *"Defendant No.1 had snatched away the amount of the cheque as details above as the Applicant bank was made victim of conspiracy hatched by Defendant No.1 & 2"* are denied as false, baseless and imaginary and the applicant is put to strict proof of the same.

(e) Defendant No.2 had taken huge hand loans from Defendant No.1 and was dodging the issue of returning the same on one or the other pretext. Upon immense follow up and constant requests made by Defendant No.1, Defendant No.2, during the first week of March 2013 issued the Cheque bearing No.342893 drawn on ICICI Bank, 8TA 2067/2017

Chamrajpet Branch, Bangalore for Rs.10,00,000/- as part payment of the hand loan. Before presenting the cheque, when the Defendant No.1 called the Defendant No.2 on 15.03.2013, Defendant No.2 requested to present it during 3^rd week of April as he had shortage of funds in his account. After confirming sufficient balance from Defendant No.2, Defendant No.1 presented the above cheque and it was honoured by applicant bank and the amount was withdrawn on three dates from the SB Account.

(f) Though the Applicant bank states that they came to know about non-clearance of the said cheque during the month of June itself and that they represented the cheque which was again dishonoured on 12.06.2013, none of such issues were brought to the knowledge of Defendant No.1 and were acts done unilaterally by Applicant Bank without the concurrence of Defendant No.1 and the applicant bank has not even returned the cheque alleged to be dishonoured.

(g) Defendant No.1 came to know about the issue only when he received the Notice dated 04.12.2014, which is almost after one and half years from the date he transacted with the bank with respect to the subject cheque. Defendant No.1 immediately approached the applicant bank and requested them to initiate action against the 9TA 2067/2017

Defendant No.2 as he had no role to pay the alleged mistake. Though the Applicant bank orally promised to take action against Defendant No.2, issued another notice dated 02.05.2015, which was suitably replied by Defendant No.1.

(h) Defendant No.1 has lost his legal remedy both with respect to initiating proceedings under Negotiable Instruments Act, 1881 as well as a suit for recovery of money against Defendant No.2 due to the acts and omissions of Applicant bank. Defendant No.1 cannot suffer for the mistake committed by Applicant bank. It is well settled law that "*whenever one of two innocent parties must suffer by the act of third, he who has enabled such person to occasion the loss must sustain it.*"

(i) Without any interference or influence from Defendant No.1, it was applicant bank which cleared the cheque and thereby caused loss to itself by clearing the cheque by mistake, hence the applicant bank has to sustain such loss and it has the remedy to recover the same from Defendant No.2. Had the applicant bank been diligent enough while clearing the subject cheque, as it was a high value cheque, all these issues would have not occurred and it would have been between Defendants 1 & 2 to deal with their transactions. Therefore, for the mistake, delay and laches of applicant and illegal 10TA 2067/2017

act of Defendant No.2, Defendant No.1 cannot be made liable to suffer the consequences.

It is prayed by Defendant No.1 that the application may be dismissed against Defendant No.1.

*Heard and perused the records.*

6. In the present case, the honouring of the cheque No.342893 dated 15.03.2013 for Rs.10,00,000/- by applicant bank presented by Defendant No.1 in his SB Account No.04932010020656; the withdrawal of money by Defendant No.1 and the mistaken credit given by applicant bank as the cheque returned due to 'funds insufficient' by ICICI Bank are not in dispute. It is the case of the Applicant bank that, on the bonafide belief that the cheque was honoured by the Paying Bank, the cheque amount was credited to the SB Account of the Defendant No.1.

7. To prove the case of the Applicant Bank, Sri Venkatesh L, S/o.Lakappa T, Senior Manager of the Applicant bank filed Evidence Affidavit, the same was considered as evidence of AW.1 and marked as Ex.A1, the list of Documents came to be marked as Ex.A2 and documents came to be marked as Ex.A3 to A19. The Defendant No.1

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has filed written statement raising various contentions and also reiterated the same in the Evidence Affidavit filed by him, which is considered as evidence of DW.1 and marked as Ex.D1. Defendant No.1 was placed exparte.

8. In the present case, there is no dispute regarding the presentation of Cheque bearing No.342893 dated 15.03.2013 (Ex.A3) for Rs.10,00,000/- by Defendant No.1 with the Applicant bank in SB Account No. 04932010020656; the honouring of the said cheque presented by applicant bank in the said SB Account of the 1^st Defendant; the withdrawal of money by Defendant No.1 and the subsequently, the cheque returned due to 'funds insufficient' by ICICI Bank. It is the case of the Applicant bank that the Defendant No.1 is the customer of the Applicant bank with the above SB Account. Due to the Bank holidays on 23.04.2013 and 24.04.2023 in Karnataka & Tamil Nadu, the cheque was not returned on that day and the applicant bank on the bonafide belief that the above cheque was honoured by the Paying Bank, the cheque amount was credited to the SB Account of the Defendant No.1. The return of cheque due to insufficient funds in the account of the 2^nd Defendant-Drawer of the Cheque, is proved by Cheque Return Advice dated 12.06.2013 (Ex.A4) issued by ICICI Bank.

12TA 2067/2017

8.1 Defendant No.1 withdrew the amount of Rs.10,00,000/- in 3 instalments on 27.04.2013, 29.04.2013 and 03.05.2013. Applicant informed the Defendant No.1 that the amount was wrongly credited, by a registered letter dated 04.12.2014, called on the Defendant No.1 to refund the said amount of Rs.10,00,000/-. As there was not response, the Applicant bank issued Legal Notice dated 02.05.2015 calling upon him to repay the said amount wrongly withdrawn by him as stated above. He replied on 19.05.2015 to given him back the returned cheque and the Cheque Return Advice dated 12.06.2013. The Applicant bank sent to the Defendant, the copy of returned cheque and the Cheque Returning Advice dated 12.06.2015 issued by ICICI Bank and requested them to repay the cheque amount wrongly credited and withdrawn by 1^st Defendant.

8.2 Further, the applicant submits that the Defendants did not clear the liability by refunding the cheque amount of Rs.10,00,000/-; the liability arising out of the amount wrongly withdrawn by Defendant No.1 and paid by Applicant bank which became a clear liability or "debt" arising out of the regular banking business activity on the part of Applicant Bank u/s 2(g) of the Act. It is a clear case of having withdrawn the cheque amount from 1^st Defendant's SB Account with Applicant bank and he is primarily liable to repay the 13TA 2067/2017

said amount to the bank.

8.3 The Applicant bank has referred to the judgment reported in I(2000) BC 349 by Madhya Pradesh High Court in the case of "*Noshir S. Jall-Appellant Vs. Punjab National Bank, Respondent*" wherein, as per the head note, it was held that '*A person to whom money is paid by mistake is bound to repay or return it in view of Section 72 of the Contract Act and he is also liable to pay interest...*'.

9. It is the case of Defendant No.1 (DW.1) that the subject claim made by applicant bank cannot be classified as 'Debt' as defined u/s 2(g) of the Act; the Application has been filed much latter than the date of expiry of limitation; Defendant No.1 has not availed any loan from applicant bank; the cheque bearing No.342893 dated 15.03.2013 for a sum of Rs.10,00,000/- drawn on ICICI Bank was issued by Defendant No.2 towards part payment of hand loans taken by him from Defendant No.1 and was presented before the Applicant bank; Defendant No.1 withdrew the sum of Rs.10,00,000/- on three dates i.e., 27.04.2014, 29.04.2013 and 03.05.2013 and those sums were withdrawn out of the amount that was paid by Defendant No.2 and cannot be termed as 'installments' as referred to by the Applicant.

14TA 2067/2017

9.2 Defendant No.2 is liable to answer all the claims of applicant bank. The above cheque dated 15.03.2013 was presented to applicant bank for realization only in the month of April on the request by Defendant No.2, confirming to have maintained sufficient balance. The said cheque was honoured by applicant bank. Therefore, the Defendant No.1 has no role to pay in the alleged mistake. Had the applicant bank been diligent enough while clearing the subject cheque as it was a high value cheque, all these issues would have not occurred and it would have been between Defendant No.1 and Defendant No.2 to deal with their transactions. Hence, for the mistake, delay and laches of applicant and illegal act of Defendant No.2, the Defendant No.1 cannot be made liable to suffer the consequences.

10. In this case, the drawer bank, i.e., ICICI Bank has not been made a party to the OA for proper adjudication of the case. Further, it is not known as to whether the ICICI Bank has initiated any action against the Defendant No.2 due to 'insufficient funds' in his account and whether they have initiated action against the Defendant under Section 72 of the Contract Act 1872 to recover the money and recoup it to the Applicant bank. The ICICI Bank who is the drawer bank in this case has not been made a party. It is also not known 15TA 2067/2017

as to whether the notice was sent by Bank to Defendant No.2 regarding the return of cheque for want of insufficient funds whereas he has been arrayed as Defendant No.2 in the OA. The summons sent by this Tribunal to Defendant No.2 returned unserved with the postal endorsement 'addressee left' and substitute service by way of newspaper publication was taken to Defendant No.2. However, the Defendant No.2 has neither appeared nor represented and was placed exparte. Therefore, this Tribunal is not in a position to adjudicate the case with regard to the action taken by ICICI Bank, the drawer of the Cheque against the Defendant No.2 for having issued the cheque without sufficient funds in the Account.

11. Defendant No.1 alleged that the subject claim is not within the definition of 'Debt'. For ready reference, Section 2(g) of the Act is extracted below:

S.2[g] of the Act:

*"debt" means any liability (inclusive of interest) which is claimed as due from any person or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) by a bank or a financial institution or by a consortium of banks or financial institutions **during the course of any business activity undertaken by the bank** or the financial institution or the consortium under any law for the time being in force, **in cash or otherwise, whether secured or unsecured**, or assigned, or whether payable under a decree or order of any*

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*civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, **and legally recoverable on, the date of the application** and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities*

12. It is amply clear from the above provisions of the Act that the transaction took place during the course of business activity undertaken by the bank. The realization of the amount of Rs.10,00,000/- in the SB Account of Defendant No.2 against the returned cheque due to 'insufficient funds' as per the Cheque Return Advice dated 12.06.2013 (Ex.A4) and the withdrawal of the amount by Defendant No.2 are not in dispute. Further, it has been established with documentary evidence that the amount is recoverable as it was a mistaken credit given by applicant bank to the SB Account of Defendant No.2 as discussed above.

13. In the present case, the mistaken credit has been proved beyond any doubt with documentary evidence and the realization of Rs.10,00,000/- in the SB Account of Defendant No.1 through the returned cheque with 'insufficient funds' has also been proved. Therefore, as held by the Hon'ble Madhya Pradesh High Court in its judgment cited above, a person to whom money is paid by mistake 17TA 2067/2017

is bound to repay or return it. The subject claim against the Defendant No.1 has also been corroborated by applicant bank with the marking of documents especially, Ex.A3-Returned Cheque, Ex.A4-Cheque Return Memo dated 12.06.2013 issued by ICICI Bank due to Insufficient Funds and the Statement of Account duly certified under the Bankers Books Evidence Act.

14. Keeping in view the factual matrix of the case and upon invoking the discretionary power conferred upon this Tribunal in the provisions of u/s 19(20) of the Act, this Tribunal comes to the conclusion that the applicant bank is entitled to a final order on the following terms:

**ORDER**

15. The TA is party allowed with costs,

- a) The applicant bank is allowed to recover from Defendant No.1, a sum of Rs.12,73,790.61p (Rupees twelve lakh seventy three thousand seven hundred and ninety and paise sixty one only) as on 31.03.2016 along with future interest @ 6% p.a (simple) from 01.04.2016 till the date of realization; 18TA 2067/2017

- b) In the event of failure of the Defendant No.1 to pay the amount as ordered above, the applicant bank is at liberty to proceed against the personal assets of the Defendant No.1 (both movable and immovable) to recover the balance due, as required under law;

- c) The applicant bank shall file the latest Memo of Calculation of TA amount together with interest, costs etc., to be paid by the Defendant No.1 duly considering the amounts, if any, paid by the Defendant and/or amount realized etc., during the intervening period after the filing of the TA, enabling the Registry to prepare Recovery Certificate for the amount to be paid by Defendant No.1 to the applicant bank.

- d) The applicant bank shall file Memo of Costs within ten days from the date of this final order.

- e) Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of the final order.

- f) Interim Application pending, if any, stands disposed of with this Final Order.

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16. A copy of this order be communicated to the parties concerned.

[Dictated to my Private Secretary directly on the computer, corrected and pronounced by me in the open Court on this the 30th day of October, 2024]

(IMTIAZ ALI) PRESIDING OFFICER(I/c) DRT-II, BENGALURU

**ANNEXURES**

**WITNESS EXAMINED FOR THE APPLICANT BANK:**

AW-1: Sri Venkatesh L, S/o. Lakappa T, Senior Manager of the Applicant bank **Exhibits on the part of the Applicant:**

<thead> <tr> <th><b>Exhibit</b></th> <th><b>Documents</b></th> </tr> </thead> <tbody> <tr> <td>A1</td> <td>Applicant's Evidence</td> </tr> <tr> <td>A2</td> <td>List of documents</td> </tr> <tr> <td>A3</td> <td>Cheque Mo.342893 dated 15.03.2013 drawn on ICICI Bank issued by Defendant No.2 in favour of Defendant No.1</td> </tr> <tr> <td>A4</td> <td>Cheque Return Memo dated 12.06.2013 issued by ICICI Bank</td> </tr> <tr> <td>A5</td> <td>Registered Notice dated 04.12.2014 issued by Applicant to Defendant No.1 and ICICI Bank respectively.</td> </tr> <tr> <td>A6 to A8</td> <td>3 postal receipts issued by Postal Department</td> </tr> <tr> <td>A9 &amp; A10</td> <td>2 Postal acknowledgments signed by Defendant No.1 and ICICI Bank respectively</td> </tr> <tr> <td>A11 &amp; A12</td> <td>Lawyer's Notice dated 02.05.2015 issued on behalf of the Applicant to Defendant-1 and postal acknowledgment</td> </tr> <tr> <td>A13</td> <td>Reply notice dated 19.05.2015 issued on behalf of Defendant No.1</td> </tr> </tbody> </table>

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<tr> <td>A14</td> <td>Letter dated 11.08.2015 issued by Defendant No.1 with translation</td> </tr> <tr> <td>A15 to<br/>A17</td> <td>Reply dated 01.09.2015 issued by Applicant in reply to 1^st Defendant's letter dated 11.08.2015 with translation and postal receipt and acknowledgment</td> </tr> <tr> <td>A18</td> <td>Letter dated 15.09.2015 issued by 1^st Defendant with translation</td> </tr> <tr> <td>A19</td> <td>Statement of Account upto 31.03.2016 in respect of the debit balance in 1^st Defendant's SB Account No.04392010020656</td> </tr> </table>

**WITNESS EXAMINED FOR THE DEFENDANTS:**

DW-1: Sri Shivashankar G S/o. Govindaiah, Defendant No.1.

**Exhibits on the part of the Applicant:**

<thead> <tr> <th>Exhibit</th> <th>Documents</th> </tr> </thead> <tbody> <tr> <td>D1</td> <td>Evidence Affidavit of 1^st Defendant</td> </tr> </tbody> </table>

(IMTIAZ ALI) PRESIDING OFFICER (I/c) DRT-II, BENGALURU

**IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU**

Dated this 30th day of October 2024

**Present: SRI IMTIAZ ALI** **Presiding Officer (I/c)**

**TA No.2067/2017** (Old No.OA 1705/2016)

**BETWEEN:**

Canara Bank, (Earlier, Syndicate Bank) Gavipuram Branch, No.59/10, Basappa Layout, Gavipuram Extension, Bangalore 560 019.

... **APPLICANT**

**AND:**

1. 3. Mr Shivashankar G, S/o. Sri Govindaiah, Aged 48 years, No.252, 5^th Cross, Lakshmipura,K.G. Nagar, Bangalore 560 019.

2. 4. Mr B.S. Shankar, Prop. J.S. Garments, Major, No.03, Ground Floor, Kasturba Nagar, Ashwath Katte Road, Mysore Road, Bangalore 560026.

... **DEFENDANTS**

**FINAL ORDER**

A. 30.10.24