BEFORE
THE COMPANY LAW BOARD
NORTHERN
REGION BENCH
NEW
DELHI
C.P. No.11 &
12/111/1995
C.A.No.45 of 2001
Present: 1. Justice A.K.
Banerji, Chairman
2. Shri S.
Balasubramanian, Vice Chairman
In the matter of
Companies Act, 1956-Section 111
In the matter of
Canara Bank and Ors.
Versus
National Thermal
Power Corporation Ltd and Ors.
Present on behalf of parties:
1. Shri Jay Savla, Advocate ..
for petitioners
2. Ms. Meenakshi Ogra, Advocate .. for petitioners
3. Ms. Reena Bagga, Advocate ..
for petitioners
4. Shri Ashwani Kumar, Sr. Advocate .. for NTPC
5. Ms. Sangeeta Bharti, Advocate .. for NTPC
6. Ms. Shalini Varma, Advocate .. for NTPC
(Date
of hearing 12.9.2001)
S. BALASUBRAMANIAN:
1. In this
order we are considering CA 45 of 2001 filed by the petitioner in CP
Nos.11/12/111/1995. Both the petitions filed by the petitioner as
Trustees of Canbank Mutual Fund were disposed of by this Board by a common order dated 13th June, 1996
directing National Power Corporation Ltd (NTPC) to pay the redemption amount in
respect of the Bonds impugned in those petitions. This order was challenged by NTPC in Delhi High Court which set
aside the order of this Board with the
direction that the disputes between the parties should be referred to the High
PowerCommittee of the Government of India.
Aggrieved by this direction, the petitioner filed an SLP before the
Supreme Court, which, while setting
aside the order of the High Court, has
restored the order of this Board.
Accordingly, NTPC paid the face value of the Bonds to the Fund and
declined to pay any interest for the delayed payment. In view of this, the petitioner moved an application before
the Supreme Court seeking for
consequential order relating to payment of interest. The Supreme Court disposed of the
application stating that it was for the parties to move this Board for proper
orders. Accordingly, this application
has been filed seeking for directions to NTPC to pay interest from the due dates
of redemption of the Bonds till the date of payment.
2. To
appreciate the prayer made in the application, it would be appropriate to give
a summary of the disputes raised in the petitions and also the orders passed by
this Board, High Court and the Supreme Court. The applicant viz. Canara Bank,
in the capacity of the Trustee of Canbank Mutual Fund (the Fund) filed two
petitions under Section 111(4) of the Companies Act seeking for rectification
of the Register of Bond Holders of National Thermal Power Corporation in respect of 13% and 14% NTPC Bonds of the
face value of Rs. 7.745 crores and Rs.2.17 crores respectively. It had also
sought redemption of the Bonds along with the interest due as well as further
interest. Since the issues raised in
both the petitions were common, they were considered together. Canara Bank are the trustee of Canbank
Mutual Fund. The Fund purchased 13%
secured redeemable NTPC bonds of the face value of Rs.57.5 crores and 14% NTPC
bonds of the face value of Rs.2.17 crores.
The Letter of Allotment in respect of 13% bonds were lodged with NTPC on
30.6.1989 and the 14% bonds were lodged with NTPC in instalments on different
dates from 11.8.1992 to 11.2.1993. In
respect of 13% bonds, the letters of allotments were endorsed in favour of
“Canara Bank – Trustee Canbank Mutual Fund”.
The Fund sold all the bonds except to the extent of Rs. 7.745 crores and
these bonds were lodged with the NTPC for redemption on 23.5.1995. Likewise,
14% bonds were also lodged for entering the name of “Canara Bank – Trustee
Canbank Mutual Fund”. The NTPC had
refused to consider the request of the Fund in respect of both these bonds on 3
main grounds – that Canara Bank and NTPC being Government Undertakings, the disputes
between them should be referred to the Committee of Secretaries of the
Government of India for resolution in terms of the Judgment of the Supreme
Court in ONGC Vs. Collector of Central Excise ( JT 1991
4 SC 158 ), that the
company cannot take note of a Trust in the Register of Members and that Canara
Bank owed certain amount of money to NTPC against which the proceeds of the
bonds had to be adjusted.
3. All
these grounds were negatived by this
Board in its order dated 13th June, 1996 and directed NTPC to make
the payment of the redemption amount in respect of both these bonds to the
Fund. Aggrieved by this order, NTPC
filed an appeal before Delhi High Court which set aside the order of this Board
and directed that the disputes raised in these petitions should be referred to
the Committee of Secretaries of the Government of India in terms of the
decision of the Supreme Court in ONGC case.
Aggrieved by this judgment, Canara Bank filed an SLP before the Supreme Court, which while
setting aside the order of the High Court, restored the order of this
Board dated 13th June, 1996
and also awarded a cost of Rs.10,000 to Canara Bank. In view of this, NTPC has paid the redemption amount on
11.12.2000. Since the redemption amount
comprised of only the face value of the bonds, the Fund accepted the amount
under protest and sought for interest for the delayed payment in as much as the
13% bonds were due for redemption on 13.3.1995 and the 14% bonds on 29.3.1993
and 12.3.1994. The NTPC refused to pay any interest and accordingly Canara Bank
approached the Supreme Court for directions to NTPC to pay interest at the
coupon rates for the delayed period.
Disposing of this application, the Supreme Court observed that it was
for the parties to approach this Board for proper orders. Accordingly, Canara Bank has filed this
application seeking for directions to NTPC to pay interest at coupon rates for
the delayed period as per the Statement enclosed with the application according
to which the interest amount works out to Rs.7.93 crores.
4. Shri
Jay Savla, appearing for the petitioners submitted: This application has been
filed in terms of Section 144 of the Code of Civil Procedure. NTPC, instead of complying with the orders
of the CLB dated 13th June, 1996 by making payment of the redemption
amount, filed an appeal on frivolous
grounds. By doing so, even though NTPC
obtained a favourable order from the High Court, yet, the order of the CLB was
restored by the Apex court. The initiation of the appeal proceedings by NTPC
has delayed payment of the redemption amount by nearly 4 years during which
period NTPC had enjoyed the benefits of the redemption amount of nearly Rs.10
crores. As per Section 144 of the Code
of Civil Procedure, the petitioner is entitled to make an application for
restitution and seek for interest for the delayed period on the principles of
unjust enrichment. The object of the
restitutionary claim is to strip the
defendant of a benefit which he has unjustly claimed at the expense of the
petitioner. He further submitted that the Fund manages Mutual Funds of
thousands of members of the public and it is for their benefit that NTPC should
be asked to pay the interest for the delayed period. He relied on the following cases:
·
L. Guranditta Vs. T.R. Ditta (AIR 1935
PC 12): The
duty of the court in awarding restitution under Section 144 of the Code is
imperative. It shall place the
applicant in the position in which he would have been if the order had not been
made; and for this purpose the court is armed with powers as to mesne profits,
interest and so forth. Hence
restitution ordinarily involves interest also and court can grant the same.
·
Pappu Raddiar Vs. P.S.V.Rm Ramanath Iyer (AIR
1963 Mad. 45 ):
Granting of restitution is one of the highest duties of the court to see that
no party suffers by an erroneous act done by it. On reversal of a judgment, law places an obligation on the party
who received a benefit on the erroneous judgment to make restitution to the
other party of what he had lost ….. Restitution properly so called is restoration
to the original state which would include reparation for the injury done. Section 144 of the Code recognizes this when
it says that for the purposes of placing the parties in a position which they
would have occupied but for the decree that has been set aside, the court would
have powers to direct the payment of interest, damages, mesne profit etc. Essentially therefore, restitution is doing
justice between the two parties.
·
Binayak Vs. Ramesh Chandra Panigrahi
(1966 3 SCR 4 ):The principle of the doctrine of
restitution is that on the reversal of a decree, the law imposes an obligation
on the party to the suit who received the benefit of the erroneous decree to
make restitution to the other party for what he has lost. This obligation
arises automatically on the reversal or
modification of the decree and necessarily carries with it a right to
restitution of all that has been done under the erroneous decree and the court
in making restitution is bound to restore the parties so far as they can be
restored to the same position they were in at the time when the court by its
erroneous action had displaced them from.
·
Kavita Trehan
Vs. Balsara Hygiaene (1994 5 SCC
380 ): It is inherent in the general jurisdiction of the court
to act rightly and fairly according to the circumstances towards all parties
involved. ….
·
The Special Officer ( Revenue ) Kerala
Electricity Board Vs. MRF Limited ( JT 1995
9 SC 368 ): It is the duty of all the Tribunals to
take care that no act of the court in whole of the proceedings does any injury
to the suitors in the court.
·
Padanathil Reqmini Amma Vs. P.K. Abdulla
( JT 1996 1 SC 381): For the purpose of restitution, the court
may make such orders including order for the refund of cost and for the payment
of interest, damages, compensation and masne of profit which are properly consequential on such variation,
reversal, setting aside or modification of the decree or order.
·
Law of Restitution by Goff & Jones 4th Edition: The Law of
Restitution encompasses all claims founded upon the principle of unjust
enrichment. Restitutionary claims are
to be found in equity as well as at law.
Restitutionay law has many branches. The law of quasi contract is that
part of restitution which stems from the common indebitatus counts for money
had and received and for money paid and from quantum meruit and quantum
valebant claims.
5. Shri
Ashwani Kumar, Sr Advocate, appearing for NTPC submitted: This application is misconceived and abuse of
the process of this Board. The
provisions of Section 144 of the Code is not at all applicable to the facts of
the case in as much as the order of
this Board dated 13th June, 1996 has neither been modified nor set
aside and as a matter of fact it has been restored. The question of application of Section 144 of the Code would
arise only when the order of the court of first instance is either varied, modified or set aside.
Since in this case, the application is founded on setting aside the order
of the High Court, this application is not maintainable in terms of Section 144
of the Code. Even otherwise, in the original petition itself, the applicant had
asked for interest after the period of maturity at 24% which prayer had been
expressly rejected by this Board on the ground that NTPC had genuinely disputed
the ownership. Since even at the time when the original order was passed, there
was a gap between the dates of maturity and the date of the order, this Board did not consider payment of
interest for that period. Since this order is merged with the order of the Apex
Court, the same is binding on all the parties and has become res-judicata. Further, the Supreme court has already
awarded a cost of Rs.10,000 to the applicant.
Therefore, not only the provisions of Section 144 of the Code are not
applicable, even this Board has rejected the prayer for payment of interest and
the Supreme Court had adequately compensated by awarding cost.
Under the circumstances, this application, being frivolous, should be dismissed.
He relied on the following authorities:
·
Vijayabai Vs. Sriram Tukaram ( 1999 1 SCC
693 ): It would be impermissible to permit any
party to raise an issue inter-se where such an issue under the very Act has
been decided in an earlier proceeding. Even if res-judicata in its strict sense
may not apply but its principles would be applicable.
·
Sajjadanashin Sayed Vs. Musa Dadabhai ( 2000 3
SCC 350 ): If
the matter was in issue directly and substantially in a prior litigation and
decided against a party, then, the decision would be res-judicata in a
subsequent proceeding.
·
K.K. Modi Vs. K.N. Modi ( 1998
3 SCC 573 ): It is an abuse of the process of a
court and contrary to the justice and public policy for a party to re-litigate
the same which has already been tried and decided earlier against him. The re-agitation may or may not be barred
restjudicata but in the same issue is sought to be re-agitated it also amounts
to an abuse of process of the court.
·
Dr. Buddihi Kota Subbarao
Vs. K. Pararsara ( AIR 1996 SC
2687) No litigant has a right to unlimited drought on the court
time and public money in order to get his affairs settled in the manner as he
wishes. Easy access to justice should
not be misused as a licence to fight misconceived or frivolous petitions.
·
Zafar Khan Vs. Board of Revenue (
AIR 1985 SC 39 ): In a
proceeding under Section 144 of the Code, the party applying for restitution
has to satisfy the court of the first instance that a decree under which it was
made to part with the property is varied or reversed or modified in appeal or
revision or other proceeding or is set aside or modified in any suit instituted
for the purpose and therefore restitution must be ordered.
6.
We have considered
the pleadings and arguments of the counsel.
Since this application has been filed in terms of the Section 144 of the
Code, it is necessary to reproduce the same:
Sec.144: Application for restitution – (1) Where
and in so far as a decree or an order
is varied or reversed in any appeal,
revision or other proceeding or is set aside or modified in any suit instituted
for the purpose, the Court which passed the decree or order) shall, on the
application of any party entitled to any benefit by way of restitution or
otherwise, cause such restitution to be made as will, so far as may be, place
the parties in the position which they would have occupied but for such
decree or order or such part thereof as
has been varied, reversed, set aside or modified, and, for this purpose, the
Court may make any orders, including orders for the refund of costs and for the
payment of interest, damages, compensation and mesne profits, which are
properly consequential on such variation, reversal, setting aside or
modification of the decree or order”.
“Explanation- For the purpose of sub-section (1),
the expression “Court which passed the decree or order” shall be deemed to
include-
(a)
where the decree or
order has been varied or reversed in exercise of appellate or revisional
jurisdiction, the Court of first instance;
(b)
where the decree or order has been set aside
by a separate suit, the Court of first instance which passed such decree or
order;
(c)
where the Court of first instance has ceased
to exist or has ceased to have jurisdiction to execute it, the Court which, if
the suit wherein the decree or order was passed were instituted at the time of
making the application for restitution under this section, would have
jurisdiction to try such suit”.
(2):
“No suit shall be instituted for the purpose of obtaining any restitution or
other relief which could be obtained by an application under sub-section (1)”.
7. A
reading of the provisions of this Section would show that the object of this
Section is to restore the benefit lost by a litigant due to an order/decree passed by a court,
which order is, on appeal or revision is reverse, modified or set aside. By
this, the parties are placed in a position which they would have occupied but
for the erroneous order. In such cases, the Section also provides for ordering
payment of consequenti al cost, interest, damages etc. The learned counsel for the applicant has
cited authorities explaining the purport and the object of the principle of
restitution which inter-alia include
that on reversal of a judgment, law places an obligation on the party
who received a benefit on the erroneous judgment to make restitution to the
other party of what he had lost. In
the present case, this Board had ordered redemption of the Bonds along with
interest by an order dated 13.6.96. Since, interest warrants had already been
encashed on due dates, the face value of the bonds of nearly Rs 10 crores would
have to be paid to the applicant in
terms of that order. However, due to the appeal and the resultant order, which has been subsequently set
aside, this money was retained
with NTPC and it has enjoyed the
benefits of this amount, till it was
paid to the Fund on 11.12.2000. Thus according to the learned counsel for the
applicant, all the ingredients of this Section are present in this case meriting
issue of directions to NTPC to pay interest at the coupon rate from the due
dates of redemption till the date of payment of the face value of the Bonds.
However, the learned counsel for NTPC pointed out that the provisions of this
Section would apply only when the order/decree of the court of the first
instance-in this Case the order of this Board- had been set aside or reversed
and not otherwise. On this proposition he relied on the case of Zafar Khan Vs. Board of Revenue(supra).
From a reading of this
judgment we are not in a position to draw such a proposition from this
judgment. It only says that the court of first instance should be satisfied
that a decree or an order has been set aside or modified on appeal or revision.
As a matter of fact, this issue as to whether, an appellate order which has
been set aside could entitle a person to apply for restitution has been
answered by the Supreme Court in Binayak case (supra). In this case, a money suit against the
appellant was dismissed by the trial court but the first appellate court passed
an ex-parte decree against him. The
appellant’s property was sold in execution and purchased by the decree
holder. The appellant went to the High
Court which set aside the ex-parte decree and remanded the suit. The appellant then filed an application for
restitution under Section 144 of the Code. The trial court allowed the
appellant’s application for restitution.
The Supreme Court upheld the order of restitution observing “The principle of the doctrine of
restitution is that on the reversal of a decree, the law imposes an obligation
on the party to the suit who received the benefit of the erroneous decree to
make restitution to the other party for what he has lost. The court in making restitution is bound to
restore the parties so far as they can be restored to the same position they
were in at the time when the court by its erroneous action has displaced them
from”. Thus, in that case, like the present case before us, the cause of
action for claiming restitution was setting aside of the appellate
order and not the order or decree of
the court of the first instance.
Thus, it is clear from this case
that as long as any order- whether by a
court of first instance or by
an appellate court- is set aside,
reversed or modified, an application for restitution could be filed before the
court of first instance. This case also
indicates that in applying the
provisions of a statute, one should also take into consideration the spirit of
the provision. The object of the
Section is that no one should suffer on an erroneous order of a court. Once it is established that an order which has been set aside has bestowed
some benefit on one at the cost of the other, the provisions of this section
come into play. It is also to be noted
that the explanatory note (a) to Section 144 is a deeming and inclusive
provision and does not stipulate that only when the order /decree of the court
of first instance is varied, modified, reversed or set aside, the provisions of
this Section would apply. In this
connection it is worthwhile referring to the observation of his Lordship Chief
Justice Venkatachaliah in Balsara
Hygine Products Limited
case(supra ) at Paragraph 22 “The jurisdiction to make restitution is
inherent in every court and will be exercised whenever the justice of the case
demands. It will be exercised under
inherent powers where the case did not strictly fall within the ambit of
Section 144”. Section 144 opens with the words “Where and in so far as a decree
or an order is varied or reversed in
any appeal, revision or other proceedings or is set aside or modified in any
suit instituted for the purpose ….”. The instant case may not strictly fall
within the terms of Section 144 but the aggrieved party in such a case can
appeal to the larger and general powers of restitution inherent in every
court”. It is to be noted that in this case, a Single Judge of the High
Court while setting aside an interim order of a lower court ordered restitution
and this was upheld by the Division Bench and also by the Supreme Court. The
Supreme Court approved the observation of the Single Judge “Dismissal of the
suit has the effect of automatic dissolution of the interim order. But what is the use of setting aside or
reversing a wrong order of the court if a party who has suffered as a
consequence thereof reminds seething with pain of injustice even when the order
is knocked down. Healing touch in such
a case is a must. The strain of
injustice must be removed, at least bleached if it is not possible to totally
eradicate it..”*** There is no higher principle for the guidance of the court
than the one that no act of courts should harm a litigant and it is the bounded
duty of the court to see that if a person is harmed by a mistake of the court,
he should be restored to the position he would have occupied but for that
mistake”. Thus we find that in a case of restitution, equitable
consideration would over weigh the procedural aspects. In the present case, the
applicant alleges that it has been denied the benefit of the money due on
redemption of the bonds and that NTPC has been benefited by unjust enrichment
because of the order of the High Court which has subsequently been set aside.
Therefore, this application is maintainable. Further, the Apex court has also
permitted the applicant to move this Board. Now our examination would be limited to see whether by virtue of the
order of the High Court NTPC has gained any benefit at the cost of
the applicant.
8. Now
the issue is whether there is any justification for restitution as prayed for
by the applicant. The admitted position is the applicant would have received a
sum of Rs.9.91 crores in the middle
of 1996 in terms of the order of this
Board dated 13.6.96 but for the order
of the High Court. This amount was kept
with NTPC till December, 2000. NTPC is
a commercial organization and must have utilized this money retained by virtue
of the order of the High Court and employed the same gainfully in its
commercial activities. A large members
of public who had invested in the mutual fund schemes of the Fund, have
suffered due to the non availability of this money in time. In the aforesaid circumstances, it will be
lawful, conforming to equity and well established principles of restitution, for the Fund to claim interest on the face value
of the bonds for the period during which the money was retained with NTPC.
9. The
applicant has sought for payment of interest from the dates of maturity of the
Bonds till the date of payment of the redemption amount. The learned counsel
for NTPC pointed out that this Board
had already rejected the prayer for interest for the delayed period and
therefore, the applicant cannot revive the same prayer now. On this
proposition, he cited a number of cases. We do agree that one cannot reopen an
issue which has already been decided in an earlier proceeding. Further, the object of restitution is to
place the parties in the same position that they would have occupied but for
the order of a court which is subsequently set aside. By allowing the prayer of
the applicant to allow interest from the dates of maturity would place it in a
position which was not intended by the
earlier order of this Board as this Board had rejected the prayer for interest
from the dates of maturity in its order dated 13.6.96. But at the same time,
that order did not cover and rightly
could not have covered the period subsequent to that order as no one could have
anticipated the subsequent events. Therefore, the applicant would be entitled
for restitution in the form of interest
only for the period subsequent to the date of that order. In other words, our order for restitution would cover only
the period after 13.6.96 being the date of the earlier order. We find that after the Supreme Court passed
the order on 5.12.2000, NTPC had paid the face value of the bonds on 11.12.2000
i.e. after a period of 6 days. Assuming that in case NTPC had not preferred
an appeal against the order of the Board dated 13.6.96, it would have paid the amount after the same
number of days, the delayed period would start only from 19.6.96. In view of this, NTPC is liable to pay
interest for the period from 19.6.96 to
11.12.2000. As far as the rates of
interest is concerned, we find justification in the claim of the applicant that
the interest should be at the coupon rates, that is, 13% and 14%. We have also
noted the contention of the learned counsel for NTPC that since the Supreme
Court has already awarded a cost of Rs
10,000 to the applicant, it cannot claim any interest. Awarding of cost could
never be considered to be a substitution of other legitimate claims as the cost
awarded is only to compensate either fully or in part the cost of litigation.
10. Accordingly, we
direct NTPC to pay interest at coupon
rates of 13% and 14% for the period
from 19.6.96 to 11.12.2000 on the face value of the Bonds. The applicant will compute the interest due
as above and send a letter of claim to NTPC which will pay the amount so
computed (subject to verification)
within 15 days from the date of receipt of the claim letter from the
applicant.
11. With the above
direction we dispose of this application, however, without any order as to cost.
(S.Balasubramanian) (A.K.Banerji)