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Thursday, August 27, 2015

Sec.144 C.P.C. -The doctrine of restitution is that on the reversal of a judgment the law raises an obligation on the party to the record, who received the benefit of the erroneous judgment to make restitution to the other party for what he had lost and it is the duty of the Court to enforce that obligation unless it is shown that restitution would be clearly contrary to the interests of justice.”= whether the order under appeal suffers from any illegality requiring interference and correction by this Court. In our considered view in the course of finding out the value of the bonds which are no longer available for restitution, the learned Special Court committed a clear error of law in ignoring a relevant fact that the bonds in question were a tradable commodity on the stock market and its value could be easily ascertained either on the date when the bonds were handed over to the Citibank or at the time when the Citibank sold the bonds to third parties. Such relevant facts should not have been lost sight of and no presumption should have been made that Canfina would have retained the bonds with it till the maturity period. There are sufficient materials available to lend credence to the view that in all eventuality Canfina would have sold the bonds because it was in such business and also because earlier when it had the option, it chose to hand over the bonds to Citibank instead of preferring the other option of paying its monetary value. Sale of the bonds by Citibank to third parties at a verifiable rate not being under dispute, it is evidently unjust to saddle Citibank with liability to repay the possible gains made by the third party or subsequent purchasers of the bonds. For these reasons we come to the conclusion that the amount determined by the Special Court for restitution and payment by Citibank is unjust and is a result of error in not keeping under view the relevant facts as well as in applying the settled legal propositions for the purpose of compensating Canfina by way of restitution. In view of above the impugned order is set aside. In order to bring the dispute to a just, logical and early conclusion, instead of remanding the matter to the Special Court we accept the last chart submitted on behalf of appellant to be correct calculation of the amount payable by way of restitution by Citibank to Canfina. As noted earlier as per such chart the total amount payable to Canfina on 20.7.2004 is Rs. 115,08,98,835/- and after adjusting the further amount paid by Citibank to Canfina under protest on 25.4.2005 the Citibank is entitled to a refund by Canfina as on 25.4.2005 to an amount of Rs. 22,14,36,756/-. In line with earlier orders, we allow interest on this amount at the rate of 9% per annum from 25.4.2005 till the date of actual refund. Canfina should make a refund of aforesaid due amount along with interest awarded by us within four weeks. Both the appeals are allowed to the extent indicated above. In the facts of the case there shall be no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 3580 OF 2005

Citibank N.A.                                       …..Appellant

      Versus

Hiten P. Dalal & Ors.                                     …..Respondents

                                    WITH

                        CIVIL APPEAL NO. 3584 OF 2005



                               J U D G M E N T



SHIVA KIRTI SINGH, J.

The simple grievance of the appellant  is  that  by  impugned  judgment  and
order dated 12.04.2005 passed by a Hon’ble Judge presiding over the  Special
Court (Trial of Offences Relating to Transactions in Securities)  at  Bombay
has erred in determining  an  excessive  amount  payable  by  the  appellant
Citibank to the respondent applicant – Canbank  Financial  Services  Limited
(hereinafter referred to as ‘Canfina’) by way of restitution.
There is no dispute that on account of reversal of a money decree in  favour
of Citibank in Suit No. 1 of 1995 filed by it against Canfina, by  a  common
order dated 7.7.2004 passed by this Court in Civil Appeal  nos.  7426,  9063
and 9138 of 1996, the Citibank is required  to  restore  back  the  monetary
benefits it received under the decree against Canfina.  The  operative  part
of the said decree dated 22/23/26.04.1996 in  Suit  no.  1  of  1995  is  as
follows:
      “121.  xxxx Accordingly, the defendants are  directed  to  deliver  to
the plaintiffs, 9% IRFC Bonds of the face value of Rs.  50  crore  within  a
period of 16 weeks xxx”

      “122.   the question then arises as to  the  interest  the  defendants
must therefore pay to the plaintiffs, the interest @ 9% on these  Bonds  for
the period starting from 15th July, 1991 till they deliver   the  Bonds.  If
the Defendants do not deliver the Bonds but  choose  to  return  the  monies
they must still pay interest. However,  in  my  view  the  Plaintiffs  would
still be entitled to interest at 9% only. This, however, will  be  from  the
date the consideration amount was received by the Defendants till  the  date
of repayment. xxx"

Since the decree gave an option to Canfina,  it  opted  to  deliver  to  the
Citibank the 9% IRFC Bonds of the face value of Rs. 50 crores on  13.8.1996.
It also paid the awarded interest at the rate of 9%. The aggregate  interest
amounted  to  Rs.22,34,58,904/-  calculated  for  the  period  15.7.1991  to
30.6.1996. There is no controversy so far as  the  restitution  of  interest
amount is concerned but there is a strong disagreement  between the  parties
as to how the market value of the bonds be calculated  for  the  purpose  of
effective and satisfactory restitution. Admittedly the  bonds  delivered  to
Citibank on 13.8.1996, were being traded in  the  market  and  there  is  no
serious dispute that on that date the market value of a bond  was  Rs.  81/-
and the aggregate value of the  bonds  on  that  basis  would  be  Rs  40.50
crores.
According to learned senior counsel, Mr. Kapil Sibal  the  Canfina  suffered
only the loss of Rs 40.50 crores and Rs. 22.34 crores and  on  decree  being
set aside it is entitled only to such loss along with 9%  interest,  by  way
of restitution.
There would have been no difficulty in working out the loss  of  Canfina  if
it had opted to pay the money value of the bonds instead of  delivering  the
bonds. It is also not in dispute that after receiving  the  bonds,  Citibank
in its wisdom disposed of the bonds in the market  during  March/April  1997
when the prevailing average market rate was Rs. 85/- per bond  although  its
face value was Rs. 100/- redeemable on 15.7.2001.  The  bonds  delivered  to
City Bank carried with them coupons for half yearly interest at the rate  of
9% on the face value of the bonds and  for  one  set  of  coupons  for  half
yearly interest, Rs. 2.25 crores in aggregate was also received by  Citibank
in January 1997. Thereafter between April/March 1997 the Citibank  sold  the
bonds at average price of Rs. 85/- receiving in aggregate Rs. 42.56  crores.

By the very nature, the bonds, on 15.7.2001 at their  face  value  would  be
worth Rs. 50 crores. This along with half yearly  interest  through  coupons
redeemed after April 1997 has presumably gone to  third  parties  who  might
have purchased the bonds in the market.
The appellant Citibank in compliance of the judgment  of  this  Court  dated
7.7.2004 had to offer restitution of  “total  amount  paid”  by  Canfina  to
Citibank (principal and interest) along with interest at the rate of 9%  per
annum from the date of payment. But in case the full amount was not paid  by
1.9.2004, the liability would increase to interest at the rate  of  12%  per
annum till repayment by Citibank. Obviously, the total amount  of  principal
paid by Canfina to Citibank through delivery of Bonds on  13.8.1996  had  to
be worked out in a reasonable and  just  manner.  This  problem  has  arisen
because Canfina had opted to deliver the bonds and not the  money  which  it
had received for those bonds. Admittedly the  total  consideration  paid  by
Citibank to Canfina for the 9% IRFC bonds of face value  of  Rs.  50  crores
was Rs. 49 crores at market value of   Rs. 98/- on 30.12.1991 along with  an
interest component  of  approximately  Rs.  2  crores,  bringing  the  total
consideration to     Rs. 51,07,12,328.77.
The issue is, when the bonds are no longer in  currency  and  not  available
for return by way of total amount paid by Canfina to the Citibank, then  for
restitution what method of calculation  shall  serve  the  purpose  best  in
arriving  at the total amount paid to Citibank “by way of  principal”  which
it must return to Canfina.
After the Supreme Court  judgment  on  12.7.2004  Canfina  by  a  letter  to
Citibank demanded Rs. 135,18,28,053/- by way of  restitution.  The  Citibank
made its own calculations and through its advocate’s  letter,  on  19.7.2004
tendered the aggregate amount of 107,75,40,141/- to  Canfina.  When  Canfina
declined to accept this offer the Citibank filed a praecipe in  the  Special
Court for depositing the aforesaid sum in Court with notice to Canfina.  The
Special Court vide its order  dated  20.7.2004  recorded  the  statement  of
Canfina that it will accept the amount without  prejudice  to  their  rights
and contentions in view of their stand that the amount is  not  correct  and
Canfina is  entitled  to  claim  more.  Thereafter  Citibank  unsuccessfully
attempted to get a recording in this Court that it  had  complied  with  the
order of restitution. This Court on 26.10.2004 disposed of  Citibank’s  I.A.
no. 5 of 2004 in Civil Appeal No.  9063  of  1996  and  granted  liberty  to
Citibank to  approach  the  Special  Court.  On  24.12.2004  Citibank  filed
miscellaneous application no. 24 of 2005 in the Special Court for  recording
satisfaction of this  Court’s  judgment.  On  2.3.2005  Canfina  also  filed
miscellaneous application no. 118 of 2005 claiming that it was  entitled  to
further amount of  approximately   Rs.  51.83  crores  after  deducting  Rs.
107.76 crores approximately already paid by Citibank. By the impugned  order
dated 12.4.2005 the Special Court disposed of both  the  above  applications
and allowed an additional sum of Rs. 30,13,55,175/-. This  amount  has  been
paid by the appellant without prejudice to its  rights  sought  through  the
present appeals  arising  out  of  common  judgment  dismissing  appellant’s
miscellaneous application and allowing that preferred by Canfina.
Learned senior counsel for  the  appellant,  Mr.  Kapil  Sibal  as  well  as
learned senior counsel for the respondent Canfina have relied  upon  various
judgments, many of them being common,  to  highlight  the  true  meaning  of
restitution in the light of Section 144 of the Code of Civil  Procedure.  It
goes without saying that they highlighted different words and  sentences  to
support their respective case.  Simply put, the contention on behalf of  the
Citibank is that for restitution  the  correct  amount  is  required  to  be
calculated on the basis of “market  value”  of  the  bonds  when  they  were
delivered  by  Canfina  to  the  Citibank  i.e,  at  the  rate  of  Rs.81/-,
aggregating Rs. 40.50 crores. This amount and also approximately  Rs.  22.34
crores paid by Canfina as interest at the rate  of  9%  per  annum  for  the
period 15.7.1991 to 30.6.1996 is the  “total  amount  paid”  by  Canfina  to
Citibank as principal and interest  and  therefore  the  sum  of  these  two
amounts alone is required to be repaid by  way  of  restitution  along  with
interest at the rate of 9% per annum because the Citibank  chose  to  comply
with the order of Supreme  Court  for  the  purpose  of  restitution  before
1.9.2004 by tendering the aggregate sum of Rs. 107,75,40,141/-  to  Canfina.
However, in order to  appear  more  fair  and  accommodative,  Citibank  has
placed three more set of calculations/charts.  The first chart  claims  that
in the light of various judgments on the issue of  restitution,  it  may  be
proper to calculate the market value of  the  bonds  on  the  basis  of  NSE
letter showing the rate as Rs. 82.80 per  bond.  So  calculated,  the  total
amount  along  with  interest  payable  to  Canfina  has   been   shown   as
Rs.109,31,28,500/-.  The second chart shows  the  total  amount  payable  as
Rs.111,30,97,602/-. This has been calculated by accepting the  market  value
of the bonds on the basis of average sale price during March/April  1997  as
Rs.85.129 per bond aggregating Rs. 42,56,45,000/-. From the figures  in  the
two charts noted above, it is evident that  while  seeking  to  justify  its
earlier calculation of approximately Rs. 107 crores as the  total  value  of
restitution,  as  an  alternative  submission  Citibank  appears   to   have
suggested two other figures by way of possible  restitution  which  are  Rs.
109 crores and Rs. 111.30 crores approximately.  But the last chart   (third
in this series) filed on behalf of Citibank acknowledges a  further  receipt
of Rs. 2.25  crores  as  coupon  interest  for  half  yearly  coupons  dated
1.1.1997 on which interest has been calculated till 20.7.2004.  That  brings
the aggregate total amount payable to Canfina as Rs. 115,08,98,835/-.  Since
Citibank paid the sum of Rs. 30,13,55,175/- on April 25, 2005  in  terms  of
the impugned order hence as per the last chart of calculations noted  above,
it has claimed that on adjustment,  it is entitled to refund by  Canfina  as
on April 25, 2005 of a total sum of Rs. 22,14,36,756/- along  with  interest
either at the rate of 12% per annum or as may be awarded by  this  Court  on
the aforesaid amount from 25th April 2005 till the date of actual refund.
On the other hand the stand of the Canfina is that after the  Supreme  Court
judgment setting aside the decree against Canfina on 7.7.2004 the only  safe
method for calculating the value of  the  bonds  delivered  to  Citibank  on
13.8.1996 would be to accept and act upon its face  value,  i.e,  Rs.  100/-
per bond on the maturity date, 15.7.2001 and  add  to  it  the  half  yearly
interest received after 13.8.1996 and then calculate interest  on  and  from
15.7.2001 at the rate indicated in the order of this Court  dated  7.7.2004.
The aforesaid claim, according to Canfina has rightly been accepted  by  the
Special Court in the impugned order so that status quo ante is  restored  by
way of restitution by ignoring the intervening circumstance of sale  of  the
bonds by Citibank to third parties in March/April 1997.
In reply learned  senior  counsel  for  the  appellant  has  criticized  the
impugned order by highlighting that in paragraph 7  the  Special  Court  has
erred in going beyond the three items delivered by Canfina to Citibank  i.e,
the bonds, the amount of interest  and  interest  coupons  by  indulging  in
speculation that “had the Canfina not been required to deliver the bonds  to
Citibank, the bonds would have remained  with  it  so  also  the  amount  of
interest till the date of redemption.” Same criticism was also made  against
another observation/opinion of the  Special  Court  in  the  same  paragraph
recorded in the following words:
“…………. in so far as the restitution is concerned the  fact  that  the  bonds
were sold by Citibank during the pendency of the appeal is not relevant.”

The contention of appellant is that the Special Court came to an unjust  and
erroneous conclusion that Canfina would be entitled to the redemption  value
of the bonds i.e, Rs. 50 Crores, mainly on account  of  aforesaid  erroneous
presumption and opinion.
Learned senior counsel, Mr. Kapil Sibal has advanced a  contention  that  as
per settled principles of law governing restitution, the respondent  Canfina
can be given back only what it lost on the  date  it  satisfied  the  decree
which was ultimately reversed and not what it could have gained  on  certain
presumptions made in the impugned order. In support of  this  contention  he
placed reliance upon two judgments of Madras  High  Court  in  the  case  of
Lakshmi Amma vs. Thazhathitathil Krishna Kurup (AIR 1931 Madras 81)  and  in
the case of S. Chokalingam Asari vs. N.S. Krishna Iyer and  Ors.  (AIR  1964
Madras 404). He also placed reliance on Calcutta High Court judgment in  the
case of Surendra Lal Chowdhury and Ors. vs. Sultan Ahmed and Ors. (AIR  1935
Calcutta 206) and the following four Supreme Court judgments:

1.    Lal Bhagwant Singh vs. Rai Sahib Lala Sri Kishen Das,
        1953 SCR 559=AIR 1953 SC 136
2.    Kartar Singh & Ors. vs. State of Punjab, (1995) 4 SCC 101
3.    Kerala State Electricity Board and Anr. vs. M.R.F.
      Limited, (1996) 1 SCC 597
4.    South Eastern Coalfields Ltd. vs. State of M.P. & Ors.,
      AIR 2003 SC 4482

In the case of Lakshmi Amma (Supra), the Madras High Court  noticed  certain
privy council judgments and also the contention that Section 144 of the  CPC
providing for restitution would apply only to cases where in execution of  a
decree passed by one court a benefit is received by the  decree  holder  and
thereafter that decree is reversed or set aside subsequently by a  competent
court then in such cases the court should place the parties in the  position
which they would have occupied but for such a decree  which  was  varied  or
set aside. However, on the facts of that case the  claim  of  the  plaintiff
appellant for restitution was turned down. In the other  Madras  High  Court
judgment in the case of S. Chokalingam (Supra) the  right  of  a  bona  fide
purchaser for  value  was  upheld  in  paragraph  30  of  the  judgment  and
thereafter in paragraph 31 reliance was placed upon judgment of  this  Court
in the case of Bhagwant Singh (Supra) by extracting  the following passage:
    “   The doctrine of restitution is that on the reversal  of  a  judgment
the law raises an obligation on the party to the record,  who  received  the
benefit of the erroneous judgment to make restitution  to  the  other  party
for what he had lost and it is  the  duty  of  the  Court  to  enforce  that
obligation unless it is shown that restitution would be clearly contrary  to
the interests of justice.”

In the case of Surendra Lal (Supra), the Calcutta High Court explained  that
it is the duty of the Court under Section 144 CPC to place  the  parties  in
the earlier position after a decree executed in favour of one be  varied  or
reversed.  But it was clarified that “in assessing what  a  party  may  have
lost or of what he may have been deprived during his dispossession  the  law
takes into account not what he could have made but what his opponent did  in
fact make or could with reasonable diligence  have  made.”  This  conclusion
was predicated on the reasoning that in vast majority of cases it  would  be
hypothetical, remote and uncertain to find out what the party  subjected  to
dispossession could have made if it was left in possession.
The relevant part of judgment in the case  of  Bhagwant  Singh  (Supra)  has
been extracted in  the  Madras  High  Court  judgment  and  already  noticed
earlier.  This  Court  in  the  penultimate  paragraph  has  reiterated  the
salutary and well established principle of restitution that on the  reversal
of a judgment the party who received the benefit of  an  erroneous  judgment
is obliged to make restitution to the other party for what he had lost.  The
Court is also duty bound to enforce such obligation  unless  it  finds  that
restitution would be clearly contrary to  the  real  justice  of  the  case.
Similar words have been used by this Court  in  the  case  of  Kartar  Singh
(Supra) by holding that the party which had  received  the  benefit  of  the
erroneous decree is required to make the  restitution  to  other  party  for
what he had lost.
In the case of Kerala State Electricity Board (Supra) also  the  view  taken
by this Court was similar. But it was further clarified that the  Court  has
a duty that in the matter of restitution justice be done  as  per  facts  of
the case. In granting  relief  of  restitution  the  Court  “should  not  be
oblivious of any unmerited hardship to be  suffered  by  the  party  against
whom action  by  way  of  restitution  is  taken.”  This  Court  favoured  a
pragmatic view and grant of relief in a manner as may  be  reasonable,  fair
and practicable  without  causing  unmerited  hardships  to  either  of  the
parties. In the case of  South  Eastern  Coalfields  Limited  (Supra),  this
Court re-emphasized that restitution is for meeting the ends of justice  and
depends upon the peculiar facts and circumstances of the case.   This  Court
further clarified in para 27 that as held by Privy Council in  the  case  of
Jai Berham vs. Kedar Nath Marwari, AIR 1922  PC  269,  Section  144  CPC  is
rather a statutory recognition of  an  already  existing  rule  of  justice,
equity and fair play and therefore even apart from  Section  144  the  Court
has inherent jurisdiction to order restitution so as to do complete  justice
between the parties. This Court approved the view of the Privy Council  that
the Court has to act rightly and  fairly  according  to  the  circumstances,
towards all parties involved.
Learned senior counsel for the respondent Canfina, as was indicated  earlier
also placed reliance upon the aforesaid judgments in  support  of  his  plea
that restitution requires that the parties be placed in the  position  which
they could have occupied  but  for  the  wrong  order  or  decree  which  is
ultimately varied or reversed. He amplified his submissions by  highlighting
certain other paragraphs in the earlier noted judgments  that  suggest  that
the status quo as obtaining on the date of wrongful  deprivation  should  be
restored and only if same is not possible due to  intervening  circumstances
like the sale of the property, price  and  mesne  profits  may  have  to  be
ordered. According  to  him  the  actual  sale  is  of  no  consequence  for
calculating what the wronged party had actually lost. However, according  to
him also, for proper restitution the Court must rely upon  verifiable  value
of the goods lost due to  sale  etc.  and  not  indulge  in  speculation  or
hypothetical presumptions. He placed reliance also  upon  judgment  of  this
Court in the case of Indian Council for Enviro-Legal  Action  vs.  Union  of
India & Ors. (2011)  8  SCC  161.  This  judgment  was  in  the  context  of
constitutional provisions such as  Article  21  and  compensation  for  loss
suffered by citizenry due to pollution. Advancing  the  principle  that  the
polluter pays for the sufferings, the  Court  propounded  the  principle  of
disgorgement of gains of wrongdoers and that the Court could even  think  of
imposing compound interest in place of simple interest provided by  statute.
Exercise of such inherent  powers  was  contemplated  only  in  interest  of
principles of justice and equity as warranted  by  the  facts  in  cases  of
pollution  causing  sufferings  to  citizenry.  All  these  principles  were
justified on the basis of power to  order  for  restitution  under  inherent
powers of the Court. But this Court did not over-rule  any  of  the  earlier
judgments of this Court laying down classic principles of restitution  under
Section 144 of the CPC on which the appellant has placed reliance and  which
require a just and fair approach so that no unmerited hardship is caused  to
either of the parties.
In the ultimate analysis we find that the law on restitution  under  Section
144 of the CPC is quite well settled. It vests expansive power in the  Court
but such power has to be exercised to ensure equity,  fairness  and  justice
for both the parties. It also flows  from  more  or  less  common  stand  of
parties on the principle of law that  for  ascertaining  the  value  of  the
property which is no longer available for restitution  on  account  of  sale
etc., the Court should adopt a realistic and verifiable approach instead  of
resorting to hypothetical and presumptive value.  It  is  also  one  of  the
established propositions that  in  the  context  of  restitution  the  Court
should keep under consideration not only the  loss  suffered  by  the  party
entitled to restitution but also the gain, if any, made by other  party  who
is obliged to make restitution. No unmerited injustice should be  caused  to
any of the parties.
Keeping the aforesaid principles in view it  has  to  be  seen  whether  the
order under appeal suffers from any illegality  requiring  interference  and
correction by this Court. In our considered view in the  course  of  finding
out the value of the bonds which are no longer  available  for  restitution,
the learned Special Court committed a clear  error  of  law  in  ignoring  a
relevant fact that the bonds in question were a tradable  commodity  on  the
stock market and its value could be easily ascertained either  on  the  date
when the bonds were handed over to the Citibank or  at  the  time  when  the
Citibank sold the bonds to third parties. Such  relevant  facts  should  not
have been lost sight of and  no  presumption  should  have  been  made  that
Canfina would have retained the bonds with  it  till  the  maturity  period.
There are sufficient materials available to lend credence to the  view  that
in all eventuality Canfina would have sold the bonds because it was in  such
business and also because earlier when it had the option, it chose  to  hand
over the bonds to Citibank instead of preferring the other option of  paying
its monetary value. Sale of the bonds by Citibank  to  third  parties  at  a
verifiable rate not being under dispute, it is evidently  unjust  to  saddle
Citibank with liability to repay the possible gains made by the third  party
or subsequent purchasers of the bonds. For these  reasons  we  come  to  the
conclusion that the amount determined by the Special Court  for  restitution
and payment by Citibank is unjust and is a result of error  in  not  keeping
under view the relevant facts as well  as  in  applying  the  settled  legal
propositions for the purpose of compensating Canfina by way of restitution.
In view of above the impugned order is set aside.  In  order  to  bring  the
dispute to a just, logical and early conclusion, instead  of  remanding  the
matter to the Special Court we accept the last chart submitted on behalf  of
appellant to be  correct  calculation  of  the  amount  payable  by  way  of
restitution by Citibank to Canfina. As noted earlier as per such  chart  the
total amount payable to Canfina on  20.7.2004  is  Rs.  115,08,98,835/-  and
after adjusting the  further  amount  paid  by  Citibank  to  Canfina  under
protest on 25.4.2005 the Citibank is entitled to a refund by Canfina  as  on
25.4.2005 to an amount of Rs. 22,14,36,756/-. In line with  earlier  orders,
we allow interest on this amount at the rate of 9% per annum from  25.4.2005
till the date of actual refund. Canfina should make a  refund  of  aforesaid
due amount along with interest awarded by us within  four  weeks.  Both  the
appeals are allowed to the extent indicated above.   In  the  facts  of  the
case there shall be no order as to costs.


                       …………………………………….J.
                       [VIKRAMAJIT SEN]


                       ……………………………………..J.
                             [SHIVA KIRTI SINGH]
New Delhi.
August 21, 2015.
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