CANARA BANK vs MS. TEXPORT OVERSEAS PVT. LTD.,
- Court
- Karnataka High Court
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WP No. 24893 of 2016
C/W WP No. 3120 of 2018
R
WP No. 27021 of 2019
Pronounced on : 12.06.2026
Reserved on : 26.03.2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 12 DAY OF JUNE, 2026
PRESENT
THE HON'BLE MR. JUSTICE D K SINGH
AND
THE HON'BLE MR. JUSTICE T.M.NADAF
WRIT PETITION NO. 24893 OF 2016 (GM-RES)
C/W
WRIT PETITION NO. 3120 OF 2018 (GM-DRT)
WRIT PETITION NO. 27021 OF 2019 (GM-DRT)
IN WP No. 24893/2016
BETWEEN:
TEXPORT OVERSEAS PVT., LTD.,
HAVING ITS REGISTERED OFFICE
AT NO.86, D-I, INDUSTRIAL SUBURB,
II STAGE, YESHWANTHPUR,
BANGALORE - 560 022.
REPRESENTED BY ITS
DIRECTOR
MR.SATISH KUMR GOENKA.
…PETITIONER
(BY SRI. BASAVAPRABHU S. PATIL. SR. ADVOCATE FOR
SRI. RAJESWARA P N., ADVOCATE A/W
SRI. H.R. NARAYANA RAO, ADVOCATE)
Digitally
signed by
REKHA R
Location:
High Court
of Karnataka
AND:
CANARA BANK,
A BODY CORPORATE
CONSTITUTED UNDER THE
BANKING COMPANIES
(ACQUISITION AND
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TRANSFER OF UNDERTAKINGS)
ACT 1970 HAVING ITS
CIRCLE OFFICE AT
BANGALORE METRO,
BANGALORE.
AND HAVING ITS BRANCH OFFICE
(OVERSEAS BRANCH),
RAMANASHREE ARCADE,
RD
3 FLOOR, 18, M.G.ROAD,
BANGALORE - 560 001.
…RESPONDENT
(BY SRI. T.P. MUTHANNA, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A
WRIT OF CERTIORARI OR ANY OTHER WRIT, ORDER OR
DIRECTION QUASHING/SETTING ASIDE FINAL JUDGEMENT
DATED:18.04.2016 IN MISC. APPEAL NO.32/2014 ON THE FILE
OF HON'BLE CITY CIVIL JUDGE, BANGALORE AT ANNEXURE -
'A' AND ALLOW THE MISC. APPEAL NO.32/2014 IN TERMS
PRAYED FOR AND ETC.,
IN WP NO. 3120/2018
BETWEEN:
1. TEXPORT OVERSEAS PVT., LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT,
HAVING ITS REGISTERED
OFFICE AT NO. 86, D-1,
INDUSTRIAL SUBURB,
ND
2 STAGE,
YESHWANTHPUR,
BENGALORE - 560 022.
2. SMT. NISHA GOENKA,
W/O. RAJAT GOENKA,
AGED MAJOR,
RESIDING AT NO.31,
VITTAL MALLYA ROAD,
BENGALURU - 560 001.
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3.
SMT. SHALINI GOENKA,
W/O. SAMEER GOENKA,
AGED MAJOR,
RESIDING AT NO.31,
VITTAL MALLYA ROAD,
BENGALURU - 560 001.
4. SATISH KUMAR GOENKA
S/O. DEVI PRASAD GOENKA,
AGED MAJOR,
RESIDING AT NO.31,
VITTAL MALLYA ROAD,
BENGALURU - 560 001.
5.
M/S. KISHA PVT., LTD.,
A COMPANY REGISTERED
UNDER THE COMPANIES ACT,
HAVING ITS REGISTERED
AT NO. 86D-1,
INDUSTRIAL SUBURB,
ND
2 STAGE,
YESHWANTHPUR,
BENGALORE - 560 022.
...PETITIONERS
(BY SRI. BASAVAPRABHU S. PATIL. SR. ADVOCATE FOR
SRI. BRIJESH PATIL, ADVOCATE)
AND:
CANARA BANK,
OVERSEAS BRANCH,
AT NO. 18, M.G. ROAD,
BENGALURU - 560 001.
...RESPONDENT
(BY SRI. T P MUTHANNA., ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH
THE FINAL ORDER DATED:04.01.2018 PASSED BY THE DEBTS
RECOVERY APPELLATE TRIBUNAL AT CHENNAI IN
R.A.NO.82/2017 AS PER ANNEXURE-A AND CONSEQUENTLY
DISMISS THE SAID R.A.NO.82/2017 AND ETC.,
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IN WP NO. 27021/2019
BETWEEN:
CANARA BANK,
OVERSEAS BRANCH,
NO.18 M.G. ROAD,
BENGALURU - 560 001.
REPRESENTED BY ITS
ASSISTANT GENERAL
MANAGER, AJITH KUMAR T.N.
...PETITIONER
(BY SRI. T.P. MUTHANNA, ADVOCATE)
AND:
1. MS. TEXPORT OVERSEAS PVT., LTD.,
A COMPANY REGISTERED
UNDER THE COMPANIES ACT
HAVING ITS REGISTERED OFFICE AT
NO.86 D-1, INDUSTRIAL SUBURB,
ND
2 STAGE, YESHWANTHAPUR,
BENGAOLURU - 560 022.
REPRESENTED BY ITS DIRECTOR
SRI. SATISH KUMAR GOENKA.
2. SMT. NISHA GOENKA,
W/O RAJAT GOENKA,
AGED MAJOR,
RESIDING AT NO.31,
VITTAL MALYA ROAD,
BENGALURU - 560 001.
3. SMT. SHALINI GOENKA,
W/O SAMEER GOENKA,
AGED MAJOR
RESIDING AT NO.31,
VITTAL MALYA ROAD,
BENGALURU - 560 001.
4.
SRI. SATISH KUMAR GOENKA,
S/O DEVI PRASAD GOENKA,
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AGED ABOUT 66 YEARS,
RESIDING AT NO.31,
VITTAL MALLYA ROAD,
BENGALURU - 560 001.
5. M/S. KISHA PVT., LTD.,
A COMPANY REGISTERED
UNDER THE COMPANIES ACT
HAVING ITS REGISTERED
OFFICE AT NO.86 D-1,
INDUSTRIAL SUBURB,
ND
2 STAGE, YESHWANTHPUR,
BENGALURU - 560 022.
...RESPONDENTS
(BY SRI.BASAVAPRABHU S. PATIL, SR. ADVOCATE FOR
SRI. BRIJESH PATIL, ADVOCATE FOR R1 TO R3 & R5,
R4 IS SERVED)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE
ANY WRIT ORDER OR DIRECTION TO SET ASIDE PORTION OF
THE ORDER DATED:04.01.2018 IN RA NO.82/2017 ON THE
FILE OF DEBT RECOVERY APPELLATE TRIBUNAL, IN SO FAR AS
DISALLOWING THE CLAIM OF INTEREST ON PRINCIPAL
AMOUNT VIDE ANNXURE-A AND ETC.,
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT THIS DAY, JUDGMENT IS DELIVERED/
PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. JUSTICE D K SINGH
and
HON'BLE MR. JUSTICE T.M.NADAF
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CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE T.M. NADAF)
These three Writ Petitions being W.P.No.24893/2016,
W.P.No.3120/2018 by Texport Overseas Private Limited
and others and W.P.No.27021/2019 by the Canara Bank,
are in respect of the very same claim made by the Canara
1
Bank in respect of 48 Forward Purchase Contracts alleged
to have been booked by M/s.Nisha Designs/ Texport
Overseas Private Limited during the year 2008 i.e., booked
between the period April 2008 and August 2008. Since the
question involved in these petitions are common, all these
petitions are considered and disposed of by this common
order.
2. Since the consideration of W.P.No.3210/2018
has got a direct bearing on other Writ Petitions stated
supra, the same is taken and considered as main matter
and arguments were heard with the consent of both the
parties in respect of the said matters which are considered
1
FPC, for short
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as arguments in respect of other two Writ Petitions as
well.
3. The aforesaid Writ Petitions are filed for the
following reliefs:
3.1 W.P.No.24893/2016 is filed seeking following reliefs:
i) Call for records in Misc. Appeal No.32/2014 on the
file of Hon'ble City Civil Court, Bangalore;
ii) Issue a writ of certiorari or any other writ, order or
direction quashing/ setting aside final judgment
dated 18/4/2016 in Misc. Appeal No.32/2014 on
the file of Hon'ble City Civil Judge, Bangalore at
Annexure-A;
iii) Allow the Misc. Appeal No.32/2014 in terms
prayed for;
iv) Direct the respondent to pay the costs; and
v) Issue any other writ, order or direction as deemed
appropriate by this Hon'ble Court, to meet the
ends of justice.
3.2 W.P.No.3120/2018 is filed seeking following reliefs:
i) Issue any writ order or direction to set aside/
quash the final order dated 04.01.2018 passed by
the Debts Recovery Appellate Tribunal at Chennai
in R.A.No.82/2017 as per Annexure-A and
consequently dismiss the said R.A.No.82/2017;
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ii) Issue any other writ, order or direction as this
Hon'ble Court may appropriate, to meet the ends
of justice.
3.3 W.P.No.27021/2019 is filed seeking following reliefs:
i) Issue any writ order or direction to set aside
portion of the order dated 04.01.2018 in RA
No.82/2017 on the file of Debt Recovery Appellate
Tribunal, in so far as disallowing the claim of
interest of principal amount vide Annexure-A.
ii) Issue any other writ order or direction as this
Hon'ble Court deems fit, just and proper under the
facts & circumstances of the case, in the interest
of justice and equity.
4. The main contention and dispute is with respect
to the claim of the Canara Bank in respect of alleged 48
FPCs booked by M/s.Nisha Designs which as per the Bank,
taken over by the Texport Overseas Private Limited under
which M/s.Nisha Designs is a sister concern, and by means
of agreements entered into between them, the Texport
Overseas Private Limited has undertaken to fulfill the
obligation with respect to the FPCs booked by M/s.Nisha
Designs after July 2007.
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4.1 As contended by the Bank, the FPCs is a contract
whereby the Bank/Dealer agrees in advance with a
customer that it/he would pay to the customer, for
every foreign currency tendered by such customer, in
Indian rupees at an agreed rate (agreed as on the
date of booking/ entering into the contract),
irrespective of the prevailing exchange rate on the
date of tender. The FPCs are booked/ entered into by
the exporters to mitigate their risk due to fluctuation
in the Foreign Exchange Rate. In terms of the
present regulation governing the FPCs, the exporters
are allowed to cover their risk for a maximum period
of one year from the date of booking. In case of non-
utilization of the said FPCs by the exporters, the
same has to be cancelled and the resultant profit or
loss shall be passed on/ borne by the exporters.
4.2 It is contended by the Canara Bank that from
01.04.2008, M/s.Nisha Designs, of which petitioners
2 to 4 herein were the partners, was taken over by
petitioner No.1 - Texport Overseas Private Limited.
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The fourth petitioner - erstwhile partner of M/s.Nisha
Designs and Director of the first petitioner Company
addressed a letter dated 25.04.2008 informing the
Canara Bank that they have consolidated their
business by way of taking over of running business of
M/s.Nisha Designs. Further requested to transfer all
Forward Contracts of Foreign Exchange (Exports) of
M/s.Nisha Designs booked July 2007 onwards to the
account of M/s.Texport Overseas Private Limited. It
was further informed that the first petitioner was
receiving exports proceeds from that month itself and
they wish to square up the Forward Contracts of
Foreign Exchange (Exports) of M/s.Nisha Designs
booked from July 2007 and onwards. The copy of the
agreement entered into between M/s.Nisha Designs
and Taxport Overseas Private Limited was also
forwarded to the Bank.
4.3 It is the claim of the Canara Bank that M/s.Nisha
Designs booked 41 FPCs but did not honor its
commitments, though the goods were exported and
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foreign currency was earned. It was further
contented by the Bank that the first petitioner who
took over M/s.Nisha Designs, instead of utilizing the
foreign currency earned by it by exporting the goods
for discharging the obligation under the FPCs got
credited foreign exchange to its Exchange Earners
Foreign Currency account number 183324100099,
resulting in outstanding of the 41 contracts booked
by M/s.Nisha designs beyond the due date.
4.4 It was further contented that non-utilization and non-
cancellation of these FPCs was finally noticed by the
Bank in the year 2009 and a letter was issued by the
Bank on 19.12.2009 furnishing the list of outstanding
contracts in respect of FPCs and requested the first
petitioner to cancel the contracts within 07 days, else
the Bank shall be constrained to cancel the contracts
and recover the resultant charges/loss from the first
petitioner. Since the first petitioner Taxport has not
honored the letter, the Bank having left with no
alternative, cancelled all the 48 FPCs including 41
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FPCs said to have been non-utilized by the first
petitioner.
4.5 It was further contented by the Bank that the first
petitioner instead of honoring the letter, approached
the City Civil Court, Bengaluru under Section 9 of the
Arbitration and Conciliation Act, 1996 in A.A.
No.1071/2009 and obtained an ex-parte injunction
against the applicant Bank from debiting the amounts
to the current account of the first petitioner. Further
the first petitioner filed a petition before this Court
for appointment of an Arbitrator. Though the Bank
opposed the said petition on the ground that there is
no arbitration clause/agreement regarding the FPCs
in the loan documents, this Court while allowing the
petition, left the said question to be decided by the
Arbitrator who has been appointed under the petition
filed by the first petitioner, including the question of
jurisdiction on the contentions stated supra.
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4.6 The Bank having left with no alternative, filed an
application before the Debt Recovery Tribunal,
2
Bengaluru in O.A No.742/2011 seeking the loss to
an extent of Rs.14,55,60,750/- in respect of
cancellation of 48 FPCs and the interest on the said
amount for non-utilization and cancellation of the
same within time despite the notice which is at
Rs.4,85,54,190/-, accordingly, claimed a total sum of
Rs.19,41,14,940/- as outstanding from the
petitioners, who have been arrayed as defendants in
the said application in respect of the above FPCs.
4.7 The petitioners appeared before the DRT and
submitted their objections contending that the matter
covered under the dispute before the DRT is the
same matter before the Arbitrator and the
proceedings are going on, wherein the applicant Bank
is a party. It was further argued that the Bank as an
arm twisting measure has stopped the credit limit
2
the DRT, for short
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granted by the Bank in respect of the first petitioner,
subsequently cancelled the same.
4.8 The main contention of the first petitioner before the
DRT was, they never booked 41 FPCs alleged to an
extent of Rs.14,55,60,750/-, as such the Bank is not
entitled for the claim of Rs.14,55,60,750/- along with
interest of Rs.4,85,54,190/-, totaling a sum of
Rs.19,41,14,940/-.
4.9 It was further contented that the claim made is
barred by limitation. It was contended that M/s.Nisha
Designs, which is even according to the Bank was the
sister concern, which has been taken over was not
made as a party, so also petitioner Nos.2 to 4 who
are not the persons in the agreement (between
M/s.Nisha Designs and Texport Overseas Private
Limited) were unnecessarily added as parties to this
lis . As such, the petition suffers both from non-
joinder and mis-joinder of parties and sought to
dismiss the petition. However, the main contention
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remains regarding the non-booking of FPCs as
contented by the Bank . The petitioners herein in the
present petition i.e., W.P.No.3120/2018, who were
arrayed as defendants 1 to 5 have stated that they
had earlier booked FPCs and cleared entire
outstanding and the same even admitted by the Bank
that except these alleged 48 FPCs which is claimed
by the Bank, as such there is no outstanding FPCs in
respect of the petitioners.
4.10 It was further contented that even the Bank has
stated that the petitioners are their renowned and
esteemed customers. However, they made a false
claim against the petitioner. It was also contented
that insofar as the FPCs which were booked are as
per the Rules and Regulations in writing and cleared,
so far as these 41 claims of FPCs claimed by the
Bank, nowhere there is a concluded Contract
between the parties. As such, a false claim has been
made by the Bank. Accordingly, sought to dismiss
the same.
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4.11 The Bank in order to prove its case examined its
officials as AWs.1 to 3 and produced 29 documents
marked as Ex.A1 to A29. Ex.A1 was the affidavit of
AW1, Ex.A2 is the list of documents and Ex.A3 to A24
are 22 documents as per Exhibit A2, Ex.A28 and 29
are the affidavit of AW2 and AW3, Ex.A25 is second
list of document and Ex.A26 and 27 are two
documents as per Ex.A25 and closed its side. The
petitioners in order to substantiate their claim
examined defendant No.4 i.e., petitioner No.4 herein
as DW.1 and produced 45 documents, marked as
Ex.D1 to D45. Among them, Ex.D1 is the affidavit of
DW.1, Ex.D2 is the list of documents and Ex.D3 to
D45 are the 43 documents produced in their favor.
4.12 Before the DRT, on three counts the Bank staked its
claim. Firstly, on the Inward Register where the
transactions booked by the petitioners were entered.
Secondly, the Commission Payment Charges
reflected in the register maintained in that respect.
Thirdly, the CD of voice record of the one Mr.Dinesh
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Singh, who according to the Bank, is an employee of
the petitioners, who booked these FPCs on behalf of
the Company. These three grounds were challenged
by the petitioners contending that the records stated
as per the register i.e., Inward Register are not in
respect of the 41 FPCs. The Commission charges
reflected in the register are not at all concerned with
the petitioner as they are made in respect of some
other concern. So far as CD of voice record is
concerned, the same was denied that there is no
compliance of Section 65B of the Indian Evidence
Act, so also denying the fact that said Ms.Dinesh
Singh, the alleged employee of the petitioners
booked FPCs with the Canara Bank on their behalf.
4.13 The DRT upon consideration of the entire materials,
evidence and the rival submissions of the parties,
concluded that the Bank has failed to prove its case
and dismissed the petition, so also the counter claim
filed by the defendants. We are not discussing here
the counter claim made by the petitioners, since the
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said part was not at all challenged by the petitioners
and accepted the same.
4.14 The DRT to answer the claim of the parties framed
following points for consideration and answered both
the points in negative against the bank.
"Point No.1: Whether the Applicant Bank establishes that
the Defendants are liable to pay the OA amount as
sought by the Appellant Bank?
Point No.2: Whether the Defendants prove their case
regarding counter claim and the Defendants are
entitled for amount under counter claim, as
contended by them?
Point No.3: What order?"
4.15 The DRT has reasoned that in the teeth of admission
by the witnesses of the Bank that the FPCs booked
shall be in writing and shall be concluded at Overseas
Branch and the said materials are available with the
Overseas Branch, but not produced before the DRT,
the Bank has failed to establish its case. Further, the
DRT drawn an adverse opinion against the Bank for
non-examination of the concerned party, who is
responsible for entering the records in both the
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registers on which entire case of the Bank rested i.e.,
the Inward Register as well as the Commission
Register, maintained by one Mrs.Vijaya Kamath, who
has been examined as RW.1 before the Arbitral
Tribunal. The DRT has recorded the evidence of said
Mrs.Vijaya Kamath which was produced as Ex.D44,
at page No.54 of its judgment as under.
"The Ld. Counsel appearing for defendants
further contends that, as admitted by AW1 and
DW2, one Mrs.Vijaya Kamath was working as an
Officer at the Overseas Branch of the applicant
Bank and she was in charge of the Export-Import
Desk, including booking FPCs during 13/6/2003 to
8/12/2009. Said Vijaya Kamath was examined as
RW1 before the Arbitral Tribunal in connection with
the dispute in question. Her examination-in-chief
is marked before this Tribunal as Ex.D44. Her
cross examination is marked as Ex.D.23(c). In her
cross-examination said Mrs.Vijaya Kamath as RW1
stated before the Arbitral Tribunal that:
a) For booking any FPC the Defendant No.1
used to handover papers/ application with required
details (Ans to Q.5 before Arbitral Tribunal).
b) For every FPC booked, the applicant used to
provide confirmation by giving a contract note
containing details of rate, amount booked and
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delivery period (Ans to Q.20 and 23 before Arbitral
Tribunal).
c) For every FPC booked the applicant used to
take confirmation from the defendant, in the form
of signed contract note and signed statement of
FPCs (Ans. to Q.24, 25, 26, 46 before Arbitral
Tribunal).
d) All FPCs were always booked against
confirmed export orders or LCs (Para 5 of
examination and Chief and answer to Q.122 in
Cross examination, of RW1 before Arbitral
Tribunal)."
4.16 However, the said witness who was a material
witness was not examined before the DRT. The DRT
was of the opinion that perhaps the said witness was
not examined only to avoid any test in the cross-
examination by the defendants, as such has taken an
adverse opinion against the Bank for not examining
the material witness responsible for the said entries
as contented by the appellant Bank itself.
4.17 The DRT has further reasoned that the applicant -
Bank has not produced any procedure which the
Bank has adopted so far as booking the FPCs over
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telephone in its other branches. Nothing of such sort
which was contented in the claim petition made
before the DRT has been produced. Even the
documents which were produced such as the Inward
Register and Commission Payment Register will not
come to the aid of the Bank to prove that the
petitioners have booked these FPCs through
Mr.Dinesh Singh, who is alleged to be the employee
of the petitioners. The said reasons of the DRT finds
place from Page No.61 and ends at Page No.71,
which reads as under:
xx "Therefore, in the light of specific denial
of the defendant No.1 having applied for, having
received confirmation for having booked the FPCs
or having issued confirmation as regards the
disputed contracts (FPCs) in respect to 48 disputed
FPCs, heavy burden lies on the applicant bank to
prove that the alleged 48 FPCs were in fact booked
by defendant No.1/Nisha Designs as alleged by the
applicant bank in the OA. In other words, to prove
its case the applicant-bank has to produce relevant
and material documents which are the
foundation/basic documents that are mandatorily
and compulsorily required to be obtained for the
purpose of booking and concluding of contracts-
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FPCs by the defendant No. 1/Nisha Designs, even
as per the laid down procedure of the applicant
bank and even as admitted by AW.1 to AW.3 in
their cross. At the outset, it is to be stated that,
conspicuously it is not so on with the part of the
Applicant Bank. Therefore, in this case material
and important documents are not produced by the
Applicant Bank. On the basis of it, not only
adverse inference is to be drawn but also it is to
be held that a serious and higher degree of
improbabilities emerge referring to alleged
transactions of Applicant Bank falls under the
category of serious doubt.
It is also relevant to place on record that,
even according to the admissions of AW.1, AW.2
and AW.3 during the course of cross-examination
of these witnesses, wherein all the three witnesses
have admitted that Forward Purchase Contracts
(FPCs) used to be concluded in writing. Even
Smt.Vijaya Kamath who was examined before
Arbitral Tribunal, who was serving at the relevant
point of time in the Overseas Branch, including
booking of FPCs, clearly admitted in the cross that
the above referred documents are material,
important and relevant documents in respect of
booking of contracts - FPCs. Besides that, even
AW.2 and AW.3 admitted that the FPCs used to be
in writing only and used to be concluded at the
Overseas branch of the applicant bank and the
FPCs/ Contracts are available with the Overseas
Branch of the Applicant Bank. Added to it,
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admittedly each FPC is separate contract and 48
FPCs are of various maturity dates and they are
different contracts and relevant documents shall
be in the custody of Overseas Branch of the
applicant bank only. Therefore, the applicant bank
is duty bound to obtain and produce the relevant
documents which reflect written
consent/confirmation of defendant No. 1/Nisha
Designs in respect to disputed FPCs which
admittedly are available with the Overseas Branch
of the applicant bank. In other words, The
applicant bank shall produce all the relevant and
supporting documents in respect to the disputed
FPCs in question, viz. i) booking request
application submitted by defendant No. 1/Nisha
Designs, ii) acknowledgment for having issued
confirmation/contract note to defendant
No.1/Nisha Designs, iii) signed confirmation
(Contract note or statement) issued by defendant
No.1/Nisha Designs; and iv) confirmed export
orders/ LCs, pertaining to all the disputed 48
FPCS, 10 corroborate the oral evidence of AW.1 to
AW.3 and to prove that the said disputed FPCs
were booked by: M/s. Nisha Designs/ Defendant
No.1-Company.
But, unfortunately for the reasons best
known to it, in the present case the Applicant-
Bank has failed to produce any of the said vital
documents pertaining to the disputed 48 FPCs in
question to establish that Defendant No. 1/Nisha
Designs has booked the disputed 48 FPCs in
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question. Even no reasons are assigned by the
Applicant-Bank even symbolically also as to why
the Applicant-Bank has not produced those
relevant material and important documents,
though all the witnesses of the applicant bank
clearly admit that they (documents) shall be
obtained and are available with the Overseas
Branch of the applicant bank where the contracts-
FPCs will be concluded in writing. It is also
relevant to place on record that huge amount is
involved in these transactions (FPCs) but casual
approach by the Applicant Bank dislodges its claim
sought in this case.
Added to it, even according to the Ld.
Counsel for the applicant bank (para x of Written
arguments) as per the
- established practice followed between the
applicant bank and the Defendant No.1-Company,
the defendant-company used to deliver such
contracts/FPCs by quoting it under covering letter
bills/encashment of inward remittances in foreign
currencies/encashment of pre-shipment credit
availed in foreign currency, which fact also clearly
establishes that FPCs used to be supported by
relevant documents as stated therein; and as
such the Applicant-Bank ought to have produced
the said relevant material documents in respect to
the 48 disputed FPCs especially in view of the fact
that the initial burden of proof undoubtedly lies on
the applicant bank to prove that disputed FPCs
have been booked by Defendant No. 1/Nisha
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Designs. But, despite the said factor, the applicant
bank has produced only the original documents
executed by Defendants Ex.A3 to A13, which
pertain to creation of security/guarantee by
Defendants No.2 to 5 and those documents are in
no way related to the booking of disputed 48 FPCs
by defendant No.1/Nisha Designs. Hence, the said
original documents produced by the applicant bank
are not at all relevant for adjudicating and
determining the dispute as to whether Defendant
No.1NiSha Designs has booked the disputed 48
contracts-FPCs or not. Hence, - those documents
do not help to the case of the Applicant-Bank as
far as the aspect of booking of these FPCs by
defendant No.1/Nisha Designs is concerned.
In this case, it needs to be placed on record
that, conspicuously, the Applicant-Bank has not
produced any of the aforementioned material and
important documents which are admittedly in its
custody, which reflect written consent confirmation
of booking of FPCs by Defendant No. 1/Nisha
Designs and to prove that Defendant No.1-
Company has booked the disputed 48 contracts
(FPCs) as contended by the applicant bank, hence,
adverse inference has to be drawn against the
Applicant-Bank as provided under Section 114 of
the Evidence Act. Added to it, the principles laid
down in the aforesaid rulings relied upon by the
Ld. Counsel for Defendants in this regard are aptly
applicable to the case on hand, as a result on the
basis of said principles the contention of the
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Defendants that on account of withholding of said
material documents by the applicant bank
pertaining to disputed FPCS and or failure of the
applicant-bank in production of relevant material
records admittedly in the custody of the bank
attracts adverse inference to be drawn against the
applicant bank has to be accepted, and thereby
adverse inference is drawn against the applicant
bank.
At the same time, it is relevant to note that,
on the other hand, the applicant bank has
produced and relied upon documents in support of
its case, viz., the Inward Reporting Register
maintained at FD (Ex.A20) regarding the booking
of FPCs, Ex A15, statement of current account of
the Defendant No.1 which reveals the debiting of
Commission/charges towards the FPCs booked.
Ex.A19, (i.e., Forward Contracts Booking Register,
maintained by the Overseas branch regarding
booking of disputed FPCs and CD allegedly
containing voice recording (Ex.A.25) of the
employee/ representative of Defendant No.1-
Company and it is further contended by the
applicant bank that said Dinesh Singh, alleged
representative of the Defendant-Company was
dealing with FD/ID of the Applicant and booking
the contracts-FPCs.
In this regard it is relevant to note that, by
more production of said alleged registers
maintained by the Applicant Bank, it cannot be
construed that they (registers) have been proved
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by the Bank as required under law in the light of
strong denial put forth by Defendants, unless the
author/authors of these alleged registers
maintained by the bank have been examined to
prove the contents of those alleged two Registers.
Contents of said registers have to be referred and
explained in the pleadings of the OA and must be
proved by examining the author/authors of said
registers, but it is not done so. Added to it, it is
pertinent to note that in all the registers/
documents produced and relied upon by the bank
absolutely it is not mentioned that said Dinesh
Singh was the representative of Defendant No.1-
Company/Nisha Designs and he used to book the
FPCs. The author/authors have to be examined
referring to each page and each entry in the said
Registers and proved as required under law, as
mere production of the said registers in itself
cannot become proof. But, it is not done so by the
applicant bank. No single document is produced by
the applicant bank to show that, said Dinesh Singh
was employee/authorized representative of
Defendant No.1-Company/Nisha Designs.
Therefore, the claim of the Applicant-Bank that
said person (Dinesh Singh) was booking FPCs
appears to be imaginary as it is not borne out from
the records, including the said Registers, ie.
ExA.19 and A.20.
Even otherwise, the said
documents/registers produced and relied upon by
the Applicant-Bank in support of its case, viz.,. the
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Inward Reporting Register maintained at FD (Ex.
A20) regarding the booking of FPCs, Ex A15,
statement of current account of the Defendant
regarding the debiting of Commission/charges
towards the FPCs booked. Ex.A19, i.e., Forward
Contracts Booking Register, maintained by the
Overseas branch regarding booking of disputed
FPCs can be at the most considered as only
circumstantial evidence and solely based on those
documents it cannot be conclusively held that the
disputed FPCs. have been booked by Defendant
No. 1/Nisha Designs. The circumstantial evidence
assumes its role provided direct evidence is
placed, if not circumstantial evidence has to be
ignored. In other words, in the absence of
supporting/ booking request corroboratory
documents such i) booking request/ application
submitted by defendant No.1/Nisha Designs in
respect to each of the disputed FPC, ii)
acknowledgment for haying issued
confirmation/contract note to defendant
No.1/Nisha Designs by the bank, iii) signed
confirmation (Contract note or statement) issued
by defendant No.1/Nisha Designs and iv)
confirmed export orders/relevant LCs, in respect to
all the disputed 48 FPCs, which is the material
evidence to have effective: adjudication of the
dispuțe as required under the Evidence Act, the
said documents/registers in isolation cannot be
considered as conclusive proof/ evidence
in respect to disputed 48 FPCs in question. Added
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to it, the aforesaid corroboratory documents are
very much essential and are compulsorily required
to be obtained and maintained by the applicant
bank for the purpose of the contracts. Added to it.
admittedly all the FPCs are always booked on
confirmed orders or LCs and even the applicant
witnesses specifically admitted during the cross
that there were confirmed orders or LCs as regards
the disputed 48 FPCs.
In these circumstances and in the light of
admitted facts as noted above that whenever
contracts (FPCs) are entered by the applicant bank
it will always be in writing and relevant documents
in respect to booking of the FPCs shall be available
and in the custody of the overseas branch only, at
best the said registers, allegedly maintained by the
FD and Overseas Branch of the Applicant-Bank
which allegedly contain the FPCs booked by
several customers which is required to be kept for
the day to day business transaction of the branch
indicate and show existence of entries as shown
therein and in the absence of supporting
documents as stated above pertaining to said
contracts/FPCs they (Registers) alone do not in
any manner conclusively prove that the Defendant
No.1/Nisha Designs has booked the FPCs in
question disputed by the Defendant No.1/Nisha
Designs against the confirmed orders/LCs. The
other security documents produced by the
Applicant-Bank are not relevant for determining
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the issue as to whether Defendant No.1/Nisha
Designs has booked the disputed 48 FPCs or not."
4.18 So far as claim of the Bank regarding the
Commission Payment Charges maintained as per
Ex.A15 and Ex.A25 CD containing vice recording are
concerned, the DRT has given finding against the
Bank holding that the Bank has failed to prove these
documents. An attempt was made before the DRT by
the Bank to contend that these documents are the
circumstantial documents to prove the transactions.
The DRT has rejected the said contention stating that
in the absence of primary evidence, the evidence
produced claiming as circumstantial evidence cannot
be relied upon, without independent evidence of the
trustworthiness, as such, cannot fix liability on the
person relying on the judgment of the Supreme
Court in CHANDRADHAR GOSWAMI VS. GAUHATI
3 4
BANK LIMITED and CBI VS. V.C.SHUKLA placed
3
(1967) 1 SCR 898
4
(1998) 3 SCC 410
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by learned counsel for the petitioners and held at
page Nos.71 to 74 as under:
"The other evidence relied upon by the
Applicant Bank is debit entry pertaining to
commission/ charges, i.e., as per Ex.A15. In this
regard, it is relevant to note that only basing on
debiting of commission charges to the current
account of Nisha Designs without production of
further relevant and material documentary
evidence by the bank to corroborate the said debit
entry in the statement of account, i.e., written
request and confirmation of booking of FPCs by
Defendant No.1/Nisha Designs and other essential
documents pertaining to booking of those FPCs, it
cannot be held that disputed FPCs in question
came to be booked by Defendant No.1/Nisha
Designs; and merely based on such entries which
appear in the statement of account liability cannot
be fastened on Defendant No.1-Company in
respect to disputed 48 FPCs. It is also relevant to
note that debits were made only on 02.01.2008
and not on respective date/s though the disputed
FPCs allegedly were booked on various dates and
no reason is assigned by the bank as to why
commission was not obtained on respective date/s
in respect to each of 48 contracts since according
to bank itself the branch also debits the current
account after recording the booking of FPCs.
Absolutely, there was no difficulty for the bank to
do so. If not the bank shall come forward to
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explain as to why it has not done so on respective
dates in respect to each of 48 disputed contracts-
FPCs.
Further, since the said debit entries
pertaining to commission in respect of disputed
FPCs are strongly disputed by Defendant No.1 and
even defendants allege that the said document is
created for the purpose of this case, etc, it
becomes the bounden duty of the applicant bank
to produce corroborative documentary evidence in
support of said debit entries as existence of said
entries in statement of account along will not be
sufficient to fasten liability on Defendant No.1 in
respect to disputed 48 FPCs and to allow the
present OA as sought by the applicant bank. But,
it is not done so by the applicant bank. No reason
is also assigned as to why such a course is not
adopted by the bank to produce relevant
corroborative evidence in support of said entries
as required under Section 34 of Evidence Act. In
this regard, the Ld. Counsel for Defendants has
relied upon the rulings reported in :
(1967) 1 SCR 898 pertaining to the case of
Chandradhar Goswami v. Gauhati Bank Ltd., and
(1998) 3 SCC 410, para 34 to 39 pertaining
to the case of CBI v. V.C.Shukla.
In the said rulings it is clearly held that,
"even correct and authentic entries in books of
account cannot without independent evidence of
their trustworthiness, fix a liability upon a person."
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Therefore, in the present set of
circumstances of the case, and by virtue of the
principles laid down in the aforesaid rulings relied
upon by the Ld. Counsel for the Defendants, said
entries reflected in the statement of account do
not help much to the case of the applicant bank to
prove that disputed FPCs in question have been
booked by Defendant No.1/Nisha designs and
thereby to fix the liability on Defendant No.1 as
sought by the applicant bank."
4.19 The DRT upon consideration of these contentions and
the evidence has held that the Bank miserably failed
to prove its case and in the teeth of RBI guidelines,
head office instructions and Circulars which clearly
mandate to cancel overdue contracts - FPCs within
07 days of its maturity, whereas the appellant Bank
has allowed the same to be outstanding for a long
period i.e., more than 01 year, held that the same is
fatal to the case of the Bank as there is serious
lapses on the part of the Bank in making said claim
and even no corroborative evidence laid in that
regard.
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4.20 The DRT with its well considered order, dismissed the
entire claim petition of the Bank for lack of evidence
by the Bank and concluded that the Bank is dealing
with public money, must act according to the
provisions guided under the Act, Rules, Guidelines of
RBI, internal circulars of Bank itself, and not on
alleged practice/tradition adopted by the branch/
bank. In the case on hand, the practice as alleged by
Bank prevailing the concerned branch cannot be
recognized in the eye of judicial forums and observed
that in the absence of a concluded contract which is
admitted evidence of the witnesses examined by the
Bank itself, held that the claim of the Bank is not
sustainable in law and dismissed the entire case of
the Bank holding that there were no booking of FPCs
as claimed which has caused loss to the Bank, as
claimed in the petition.
5. In the interregnum, the Arbitral proceedings
initiated by the petitioner was dismissed by the Sole
Arbitrator holding that in view of absence of arbitration
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clause, the arbitrator has no jurisdiction to dwell upon the
matter which was the subject matter of an appeal before
the City Civil Court in M.A.No.32/2014 filed under Section
37(2)(a) of the Arbitration and Conciliation Act, 1996. The
City Civil Court upon consideration of entire material
placed on record, dismissed the appeal filed by the
petitioner No.1 against the Bank. The said order is the
subject matter in W.P.No.24893/2016.
6. The Bank aggrieved by the order passed by the
DRT, was before the Debt Recovery Appellate Tribunal,
5
Chennai in R.A.No.82/2017. The DRAT upon consideration
of rival submissions and the materials placed on record,
has held that M/s.Nisha Designs was the sister concern of
petitioner No.1 and the partners are the family members
who took over the entire assets and liabilities of M/s.Nisha
Designs with effect from 01.04.2008. Further observed
that the Bank has issued letter regarding non-utilization
and cancellation of FPCs beyond one year and requested
5
the DRAT, for short
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to cancel the same within seven days, else the same be
canceled by the Bank and the petitioners would be held
responsible for the loss caused.
7. The DRAT observed that the DRT has placed
unnecessary burden of proving that Mr.Dinesh Singh was
not an employee of the petitioners, instead the burden
should have been on the shoulders of petitioner No.1
Company to deny that Mr.Dinesh Singh was not its
employee and he was not authorized by them to deal with
the Bank in respect of booking the FPCs. Further, the
DRAT has stated that in earlier contract also Mr.Dinesh
Singh was the key person and responsible for Company
and has held that for some lapses on the part of the Bank,
which avoided to examine Mrs.Vijaya Kamath before the
DRT, though she was examined before the Arbitrator,
particularly when Banks are dealing with public money,
having much responsibility for transparency and to work
as per the Rules and established practices and observed
that, it would not be proper to state that the
representative of petitioner No.1 had collected information
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from aforesaid persons, but did not finalize the FPCs,
holding so, the DRAT has observed that the Bank had
unnecessarily entered into an adventure by entertaining
such oral instructions of the employee of petitioner No.1
Company. However, since the said transaction took place
in record and in writing also, the DRT should not have
brushed them aside and ignored in a casual manner.
8. The DRAT reasoned its finding in Paragraph
No.11 which is as under:
"11. It is true that there is no documentary proof
of booking of Forward Purchase Contracts in respect of
aforesaid 43 transactions though entries have been
reflected in Statement of Accounts on relevant dates. In
such a situation, Appellant Bank should be held liable for
any act or conduct of its Bank Officers Mrs.Vijaya Kamat
as well as R1 Company should be held liable for act and
conduct of its representative Dinesh Singh. None of them
have been examined by the PO of DRT by respective
parties. R1 borrower Company suppressed its
representative Dinesh Singh and R1 started asking the
Bank to prove the relationship between R1 and its
representative. This is not fair."
9. The DRAT further observed that the act and
conduct of the Bank official Mrs.Vijaya Kamath was
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equally doubtful as the act and conduct of representative
of borrower company i.e., Mr.Dinesh Singh. On the basis
of reasons stated supra, the DRAT concluded to hold that
the Bank has proved its case for claiming damages,
however not entitled for interest in its order at paragraph
Nos.13 to 15 which reads as under:
"13. Something wrong done by the
Bank Officer or by the representative of R1
Company alone will not make any profit and
prejudice to any party. In such a situation, entries
found place in Statement of Account will be
believed in so far transaction is concerned. But in
so far as procedural aspect is concerned, these are
suffering from some lapses. In such a situation, PO
of DRT had erred in dismissing the entire O.A.
Rather, evidence should have been appreciated in a
wider perspective. In view of the relationship of the
borrower and the Bank in respect of both firms and
of the transactions, then, it becomes clear that O.A
of the Bank should have been decreed on the basis
of Statement of Account filed by the Bank.
14. At the worst, Appellant Bank should have
suffered the claim of interest, because the then
Bank Officer did not act in prudent and competent
manner in favour of Bank. In such a situation, Bank
is bound to lose the interest on the money.
15. Accordingly, O.A. should have been and
is hereby allowed in respect of principal amount
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that has been proved on the basis of Statement of
Account. O.A. should have been and is hereby
dismissed for interest."
10. Assailing the order of allowing the appeal and
directing the petitioner to pay the damages claimed, the
Taxport Overseas Private Limited with its Directors are in
petition in W.P.No.32120/2018. The Canara Bank is in
petition in W.P.No.27021/2019 challenging the order
passed by the DRAT only to the extent of denying interest.
11. Heard Sri.Basava Prabhu S.Patil, learned Senior
counsel assisted by Sri.Brijesh Patil, learned counsel for
the petitioner Company and Sri.T.P.Muthana, learned
counsel appearing for the Canara Bank.
12. Sri.Basava Prabhu S.Patil, learned Senior
counsel with all humbleness submits that the DRAT in an
haste without properly considering the materials placed on
record, set aside the well reasoned detailed order passed
by the DRT with all painstaking with reference to all the
documents produced and answering all the contentions put
forward by the Bank in the teeth of admission by the
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witnesses of the Bank itself, which has gone against the
case claimed by the Bank.
12.1 Learned Senior counsel submits that the FPCs as per
the Banking Regulations shall be in writing, which is
unequivocally admitted by all the witnesses. Further
it was admitted by all the witnesses that there is no
such concluded contract in respect of FPCs between
the Bank and M/s.Nisha Designs. The DRAT casted
negative burden on the petitioners by holding that
the burden should have been on the petitioner to
prove that Mr.Dinesh Singh is not their employee, in
the absence of any proof that the said person has
been authorized by the petitioners, by means of
Resolution or order or authorization to deal with the
Bank on behalf of the petitioners in booking the FPCs
as claimed and contented by the Bank. In the
absence of such a document and pleadings and
discharge of initial burden in that regard, there
cannot be any negative burden on the petitioners.
The question of proving the said person is not the
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employee comes only when the Bank pleads by
pleading and producing cogent evidence in that
regard to contend that the said person has been
authorized by the petitioner to deal with them in
respect of the FPCs on behalf of the petitioners. In
the absence of such records, the DRAT has toppled
the entire well reasoned order passed by the DRT.
There is absolutely no evidence with respect to the
claim made by the Bank with regard to the alleged
FPCs, in the teeth of admissions by witnesses - AW.1,
AW.2 and AW.3, which reads as under:
"The respondent's main witness Padmapriya
R -AW1 had no personal knowledge about the
alleged transaction. Said Padmapriya /AW1 never
dealt with M/s. Nisha Designs or petitioner No. 1 in
any capacity at any point of time much less during
the period when the disputed 48 FCs are alleged to
have been booked. She mechanically reiterated
the averments in the original application and
marked Ex.A1 to A25(a) to (h) In her cross
examination AW1 admits:
"It is true to suggest that
Forward Purchase Contract (FC) of
def.No.1 were dealt by one Mrs. Vijaya
Kamath at the relvant point of time. I
have no personal knowledge regarding
transactions i.e., FC. I am not able to
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depose regarding FC in question which
have been claimed in the present OA.
On the basis of the pleadings of the OA
as a principle officer of the bank/ have
filed my affidavit by way of evidence in
this case. Present OA comprises of 48
FCs..../ have not gone through the
paper book of OA filed by the bank....
The bank produced documents
available with the bank...lt is false to
suggest that the person who has got
full knowledge about the transaction in
question is avoiding to come to
tribunal in this case and face the cross
examination intentionally"
AW1 further admitted:
"Present OA comprises of 48
FCs. The said transactions have taken
place in different dates and they are all
different transactions...It is true to
suggest that once quote obtained from
International Division, the Contract will
be finalized with the overseas branch.
...lt is true to suggest that 48 FCs
stated in OA will have separate
document of contract. ... / cannot
comment to a suggestion as to
whether 48 contract have been booked
by def.No.1 and Nisha Designs.
Witness volunteers that witness is not
working at the relevant point of time. I
have no idea who would be competent
and official witness to speak the said
FCs mentioned in OA.
AW2 Mr. Mohan Bhat claimed to have
worked as an Officer at the Foreign Department of
respondent Bank during the relevant period
(1/6/2005 to 3/6/2008), in cross examination
made the following statement:
"... Now presently said Mrs.
Vijaya Kamath is working at
Chandralayout Branch, Bangalore. Said
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Mrs. Vijaya Kamath during 2006-08
was working as Export Section Officer
and she was dealing with present
transactions like on hand.... / am not
the person dealt with documents in
respect to FC i.e., booking of FC in the
overseas branch. Said Mrs. Vijaya
Kamath booked FC contact in overseas
branch on behalf of the def.No.1 and
Nisha Designs ie., at their instance...."
AW2 further stated:
"It is true to suggest that FC is a
contract. It is true that said FC is
contract between overseas branch and
customers i.e., exporters. The FC
contract will be concluded at branch
level only.... Pertaining to said 48 FCs,
relevant documents shall be in the
custody of overseas branch only. ....It
is false to suggest that def.No.1 and
Nisha Designs have not entered into
contract of FC with the branch. It is
false to suggest that the present 48
transactions were not entered into by
def.No.1 and Nisha Designs. Witness
volunteers that all contracts are
available with the overseas branch. It
is true to suggest that whenever
contract will be entered by the bank it
will be always in writing...."
AW2 was examined before the Arbitral
Tribunal as RW2. He accepted / admitted the
affidavit and the statements made by him in cross-
examination before the Arbitral Tribunal as Ex.D43
and Ex.D23B, respectively.
One Ravi Kumar who at the relevant time
worked as Foreign Exchange dealer at
International Division Mumbai was examined as
AW3. His examination-in-chief and the statement
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made in cross-examination are marked as Ex.D40
and D23. In his cross-examination AW3 stated:
"It is true to suggest that
forward purchase contract limit was
granted by Overseas Branch.
Documentation in respect to the limit
will be dealt by branch only. I am not
concerned with the Overseas Branch. I
have no personal knowledge regarding
the documents obtained by the bank in
respect of limit i.e., Forward Purchase
Contract (FC).... Each transaction will
have will have different contract. FC
Contract will be between Overseas
Branch and the customer. It is true to
suggest foreign exchange rate will be
quoted by us for a particular minute
when asked for and the customer will
take to the particular branch and after
finalizing with the overseas branch, the
contract will be concluded there. It is
true that all the contract of FC will be
in writing. I do not know how FC will
be booked and finalized at the branch.
It is true that International Division
Mumbai will be facilitation with
customer and the branch."
12.2 Further, learned Senior counsel referring to the
evidence of Mrs.Vijaya Kamath who was examined as
RW.1 before the Arbitral Tribunal, has contented that
the entire evidence Mrs.Vijaya Kamath has gone
against the Bank as she has admitted in her evidence
that for booking any FPCs, the party used to hand
over papers/applications with required details and
the party for such Booking used to provide
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confirmation by giving a contract note containing
details of rate, amount booked and delivery and
further admitted that the Bank used to take
confirmation from the person in the form of signed
contract note and signed statement of FPCs and
further admitted that always FPCs are booked against
confirmed export order or LCs. Since the evidence
came by said witness has gone against the interest of
the Bank, she was deliberately withheld before the
DRT from being examined as a witness. On this,
learned Senior Counsel submits that adverse remarks
as contemplated under Section 114 of the Indian
Evidence Act be taken against the Bank which has
rightly been considered and answered by the DRT
against the Bank in its well reasoned order. The
evidence of Mrs.Vijaya Kamath as RW.1 to the
questions asked, particularly question Nos.5, 17, 18,
19, 20, 23, 24, 25, 26, 46, 48, 49, 50, 51, 52, 53,
122 & 123 are extracted for easy reference.
"5. Q: You said, you have booked FC. What was
the normal procedure for booking FC?
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A: The exporter with an intention to book the
contract will hand over the papers relating
to the contract to be booked with specific
amount and delivery period for which the
contract is to be booked. Then, the parties
are permitted to take rate either from FD
(Foreign Department) or ID (International
Division) and then inform the branch
regarding the transaction and the branch in
turn report to FD or ID and complete the
transaction.
17. Q. With whom the contract is competed?
A: With the Bank-i.e., Overseas Branch.
18. Q: How is the contract concluded/ completed
in general?
A: The contract will be concluded on fully utilizing
the contract or it should be utilized or
cancelled. The contract begins with booking
and concludes with utilization or
cancellation.
19. Q. When does the booking concludes?
A: On entering in the Book or the System of the
Bank Overseas Branch.
20. Q: Do you provide confirmation of
the booking to the customer who has
booked?
A: Yes
23. Q: What is the procedure of the bank as
regards providing confirmation of the
booking of the contract?
A: We give contract note to the customer which
has details of rate amount booked and
delivery period.
24. Q: Do you take any confirmation from the
customer as to the booking of the FC?
A: Yes.
25. Q: What type of confirmation do you take from
the customer?
A: Signed contract note or statement of FCs.
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26: Q: What do you mean by Statement of FCs?
A: Every month the customer demands a
statement of the FC outstanding as on date
and we take the signature of the customer
on that statement.
46. Q. After concluding the booking deal/ contract
did you issue any confirmation to the
customer, if so, what was the form of
confirmation?
A: Yes. I have earlier mentioned the confirmation
note, the statement whichever form the
customer was comfortable with.
48. Q: You have mentioned that you used to get
confirmation of the bookings made by the
customer from the customer for each of the
transactions. Have you done so in relation to
Nisha Designs for the alleged 166 FCs
booked during 2007-08?
A: Yes.
49. Q: Have you produced the documents which
reflect confirmation by Nisha Designs?
A: No. I am not in a position to produce the
confirmation as I have left the branch.
50. Q: In that case, can the branch produce the
documents, to reflect confirmation by Nisha
Design?
A: The branch cannot produce, as the same has
been destroyed.
51. Q: The answers that you have given above are
contrary to the one that you have stated
that you have left the branch and you are
not in a position to produce the
confirmation, on the other hand you stated
that the branch will also not in a position to
produce and that they have been destroyed
How do know that they are destroyed?
A: Not destroyed, it may not be easy to locate.
52. Q: Does that mean that they are still
available?
A: Will be existing.
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53. Q: I put it to you that there are no such
confirmations for these disputed FCs, and
you are making incorrect statement?
A: I do not agree.
122.Q: You have stated in para 5 that Nisha
Design used to book FCs against confirmed
orders or export LCs, Can you produce those
documents of LCs and confirmed orders as
regards the disputed contracts?
A: All the FCs always booked on confirmed orders
or LCs.
123. Q I put it to you that there were no confirmed
orders or LCs as regards the disputed FCs?
A. I do not agree."
12.3 Learned Senior counsel further submits that as per
the RBI guidelines, any FPCs which are not utilized
are required to be cancelled in 07 days, which is
clearly admitted by AW.1 in his cross-examination,
stating that unutilized FPCs shall be cancelled within
07 days after maturity date. Learned Senior counsel
submits that in the case on hand, the same remained
even as per the Bank's allegations and contentions
for more than 01 year, which is against the Banking
Rules and Regulations and even failed to produce
corroborative evidence. As such, the Bank has failed
to prove existence of disputed 48 FPCs. In the
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absence of materials for having booked the alleged
FPCs, the Bank failed to discharge its contention
before the DRT. The DRT has properly considered its
case and rejected the same and with the well
reasoned order holding that the Bank has failed to
prove its case.
12.4 Learned Senior counsel further contended that a
perusal of the order passed by the DRAT clearly
indicates that the DRAT itself is not firm in its order
regarding the proof of the FPCs by the Bank. The
DRAT though at one stance records that there is
admission by the witnesses that the FPCs should be
in writing by means of a concluded contract, further
observed that there is no documents in that regard
produced by the Bank, however at the same time
observes that the burden is on the petitioner to prove
that said Mr.Dinesh Singh was not authorized person
to deal with the Bank. Placing reverse/negative
burden on the petitioner reversed the order passed
by the DRT without there being any reason or
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foundation or backing to the said reasons. Learned
Senior counsel submits that the order passed by the
DRAT is not a speaking order and the same is passed
in ignorance of the evidence placed on record, as
such same suffers from perversity and required to be
set aside. With this, learned Senior counsel sought to
dismiss the appeal and confirming the order passed
by the DRT and rests his case.
13. Sri.T.P.Muthanna, learned counsel appearing for
the Canara Bank, reiterating the submissions made before
the DRT as well as DRAT submits that it is not the lengthy
Judgment which is the decisive factor for the purpose of
deciding the lis between the parties, but it is the reasoned
order though may be short, but answers the lis in terms of
law, required to be considered.
13.1 Learned counsel submits that the DRAT though with
a short order but having considered the entire case
placed by the Bank before the DRT by means of
record, recorded its findings considering the fact of
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earlier transaction of the Bank with the petitioners
and held that the petitioners indeed booked the FPCs
through their employee which is the normal practice
on the trust reposed between the Bank and its
customer. However, erred in declining interest
claimed by the Bank. To that extent, learned counsel
sought to allow the petition filed by the Bank and
grant interest, by dismissing the petition filed by the
Company.
13.2 Alternately, Sri.T.P.Muthanna, submits that in the
event the contentions of the petitioners are accepted,
then a remand is occasioned to consider the case on
its merits before the DRAT. Accordingly, sought to
remand the matter to the DRAT or to DRT by
affording an opportunity to the Bank to adduce
evidence and examine the witness Mrs.Vijya Kamath.
With this, learned counsel sought to dismiss the
petitions filed by the petitioners - Company and allow
the petition filed by the Bank, setting aside the order
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passed by the DRAT only to the extent of declining
interest.
14. We, having heard the rival submissions,
perused the entire Writ Petition papers in all the petitions,
written submissions and synopsis filed by the respective
parties.
15. The only point that would arise for our
consideration is:
"Whether the DRAT is right in
reversing the judgment passed by the
DRT?"
16. At the outset, before going on the contentions
of the parties, we would like to state regarding some
admitted facts:
16.1 The petitioner is a renowned customer of the Bank
having good number of transactions and deposits
with the Bank. The petitioners were allowed several
over drafting facilities which were subsequently
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withheld and thereafter cancelled. There are several
transactions of booking FPCs in writing and
admittedly, except the alleged FPCs contended by the
Bank which are the disputed in the present case,
there is no outstanding claim as against the
petitioners.
16.2 There was no concluded contract in writing regarding
booking of FPCs. There was no resolution or
authorization letter in favor of said Mr.Dinesh Singh
who is alleged to be the employee of the petitioners
who has booked the FPCs on behalf of the petitioner
with the Bank.
16.3 As per the Inward Register, except 03 transactions,
there is nothing corresponding with the transactions
of the alleged FPCs.
16.4 No certificate as contemplated under Section 65B of
the Indian Evidence Act was produced in support of
the CD containing the alleged voice recording.
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16.5 It is admitted even by the Bank that Mrs.Vijaya
Kamath was examined as a witness before the
Arbitral Tribunal. However though she was available
in Bengaluru at the time when the matter was
pending before the DRT, she was not examined as a
witness, though the entire claim is made on the basis
of registered maintained by her in the official
transaction on behalf of the Bank in the Overseas
Branch, as alleged by the Bank.
17. With this, now coming on the facts of the case,
the Bank has put forward its claim that the petitioner
through its employee Mr.Dinesh Singh booked FPCs
numbering 48. However, neither utilized nor cancelled the
same even after the term of maturity. The said fact was
noticed in the year 2009 and a letter dated 19. 12.2009
was issued calling upon the petitioner to cancel the same
within 07 days or else the same would be cancelled by the
Bank and debit the same in the account of Petitioner No.1
for the loss suffered, at their risk.
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18. As against the said letter, petitioner No.1
approached the City Civil Court under Section 9 of the
Arbitration and Conciliation Act, 1996 and obtained a stay.
The petition filed before this Court for appointment of an
Arbitrator, was favored and ultimately the Arbitrator after
considering the entire case, held that the Arbitrator has no
jurisdiction to adjudicate upon the matter. This was
unsuccessfully carried before the City Civil Court under
Section 37 (2)(a) of the Arbitration and Conciliation Act, by
means of an appeal and which is the subject matter of
W.P.No.24893/2016.
19. Before the DRT, as rightly contented by the
learned Senior counsel, the Bank has contented its case in
three folds. Firstly, basing on the Inward Register wherein
the transactions were recorded; secondly, on the basis of
Commission Payment Charges register, which was
maintained by the Bank in the ordinary course of its
business in respect of the Commissions between the Bank
and the Customer; and thirdly, the voice record secured
by means of a CD produced before the Court, alleging to
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be the voice record of Mr.Dinesh Singh, who has placed
the bookings on behalf of the petitioner with the Bank in
respect of the aforesaid FPCs claimed by the bank.
20. The DRT upon consideration of the entire
evidence and in the teeth of admissions which we have
already extracted herein above, has come to a conclusion
that the Bank has miserably failed to prove its case
against the petitioner to stake a claim for damages along
with interest as stated in the petition/ application.
21. We have perused the entire order passed by
DRT. We find force in the argument of learned Senior
counsel that the DRT after properly dwelling upon the
record placed by the parties and the evidence and in the
teeth of admissions by the witnesses of the Bank and in
the absence of concluded contract in terms of the RBI
guidelines as well as the internal bank circulars, has held
that the Bank has failed to prove its case and dismissed
the petition/ application on the ground of lack of evidence.
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22. Admittedly, the FPC is a contract whereby
Bank/Dealer agrees in advance with a customer that it/he
would pay to the customer, for every foreign currency
tendered by such customer, in Indian rupees at an agreed
rate (agreed as on the date of booking/ entering into the
contract), irrespective of the prevailing exchange rate on
the date of tender. The FPCs are booked/ entered into by
the exporters to mitigate their risk due to fluctuation in
the Foreign Exchange Rate. In terms of the present
regulation governing the FPCs, the exporters are allowed
to cover their risk for a maximum period of one year from
the date of booking. If the FPCs are not utilized, the same
are required to be cancelled by the exporters within 7 days
of their maturity and they are required to pay resulted
profit/ loss to the Bank.
23. In view of specific denial by the petitioners
regarding the concluded contract in respect of booking of
FPCs, the burden heavily lies on the Bank to prove its
claim i.e., it is the petitioners who booked the FPCs with
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the Bank through their said employee Mr.Dinesh Singh as
contended by the Bank.
24. In the case on hand, the Bank neither produced
the concluded contract nor produced any authorization
letter or resolution in favor of said Mr.Dinesh Singh to deal
with the Bank on behalf of the petitioner for booking FPCs.
The Bank has not taken any pain to examine Mrs.Vijaya
Kamath, who was the employee of the Bank managing the
official business of the Bank at Overseas Branch, nor the
said Mr.Dinesh Singh, who appeared on behalf of the
petitioner and booked the FPCs in the absence of
concluded contract, to prove their case that the normal
practice of the said branch in booking is only on the oral
instructions and on the telephone conversation. The DRT
after considering all these material aspects, evidence and
particularly in the teeth of admissions by the witnesses
examined on behalf of the Bank, dismissed the
application/ petition filed by the Bank claiming the
damages as well as interest thereon.
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25. The DRAT without considering these aspects of
the matter, has casted a reverse burden on the petitioners
holding that the petitioners have failed to prove that said
Mr.Dinesh Singh is not their employee. It is settled
position of law that under Section 101 and 102 of the
Indian Evidence Act, it is for the person who approaches
the Court to prove his initial burden with respect to the
claim made by him in order to seek an order in his favor
by the Court/ Tribunal. In the absence of such a discharge
of initial burden, casting the burden on the other side
amounts to negative burden which is not enjoined under
the provision stated supra. This Court in the case of
K.F.NOOR BASHA VS. MR.S.MOINUDEEN AND
OTHERS in R.F.A No.1728/2016 disposed of on
11.03.2026, with regard to negative burden, at paragraph
No.24 to 26 of the Judgment has held as under:
"24. Our view is supported on the Rule - ' Ei
incumbit probatio qui dicit, non qui negat' - the
burden of proving a fact rest on the party who
substantially asserts the affirmative of the issue
and not upon the party who denies it; as negative
is usually incapable of proof. This rule is derived
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from the Roman law, and is supportable not only
upon the ground of fairness, but also upon that of
the greater practical difficulty which is involved in
proving a negative than is proving an affirmative.
"It is an ancient rule founded on consideration of
good sense and should not be departed from
without strong reasons". (Per Lord Maugham in
CONSTANTINE LINE LTD., Vs. I S CORPN . -
(1942) AC 154 : (1941) 2 ALL ER 165 [taken
th
from SARKAR on Law of Evidence, 16 Edition.
Volume 2 at page 1584].
(emphasis supplied)
25. As per Section 101 and 102 of the
Indian Evidence Act, 1872, the initial burden is
always on the person who approaches the Court
and fails if no evidence at all was given on either
side plaintiff and if he discharges that onus and
makes out a line for the relief sought in the case,
then the onus/ burden shifts on the defendant to
prove those circumstances, if any to prove that the
plaintiff is not entitled to the relief sought in the
suit. In the case on hand, a bare perusal of Issues
especially 2 to 4 pellucidly clear that they have
casted reversal burden on the defendant and they
are not sustainable in law. The Trial Court failed to
consider this aspect of the matter.
26. Our view is also supported with the
law laid down by the Hon'ble Apex Court in the case
of ANIL RISHI VS. GURBAKSH SINGH reported
in (2006) 5 SCC 558, wherein the Hon'ble Apex
Court at Paragraphs No.8, 9 and 19 held as under:
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"8. The initial burden of proof would be on
the plaintiff in view of Section 101 of the Evidence
Act, which reads as under:
"101 . Burden of proof. Whoever desires any
Court to give judgment as to any legal right or
liability dependent on the existence of facts which he
asserts, must prove that those facts exist.
When a person is bound to prove the existence
of any fact, it is said that the burden of proof lies on
that person."
9. In terms of the said provision, the
burden of proving the fact rests on the party who
substantially asserts the affirmative issues and not
the party who denies it. The said rule may not be
universal in its application and there may be
exception thereto. The learned trial Court and the
High Court proceeded on the basis that the defendant
was in a dominating position and there had been a
fiduciary relationship between the parties. The
appellant in his written statement denied and
disputed the said averments made in the plaint.
xxx
xxx
19. There is another aspect of the matter
which should be borne in mind. A distinction exists
between a burden of proof and onus of proof. The
right to begin follows onus probandi. It assumes
importance in the early stage of a case. The question
of onus of proof has greater force, where the question
is which party is to begin. Burden of proof is used in
three ways : (i) to indicate the duty of bringing
forward evidence in support of a proposition at the
beginning or later; (ii) to make that of establishing a
proposition as against all counter evidence; and (iii)
an indiscriminate use in which it may mean either or
both of the others. The elementary rule is Section 101
is inflexible. In terms of Section 102 the initial onus is
always on the plaintiff and if he discharges that onus
and makes out a case which entitles him to a relief,
the onus shifts to the defendant to prove those
circumstances, if any, which would disentitle the
plaintiff to the same."
26. A perusal of the order passed by the DRAT, as
rightly contented by learned Senior counsel that, the DRAT
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itself is not clear in its mind regarding the proof of the
case placed by the applicant - Bank. The DRAT though
observes that the Bank had unnecessarily entered into an
adventure of entering on such oral instructions of the
employee of Company on one hand, but at the same point
of time, on the other hand, observes that ultimately the
transactions of the Bank find place in the record and
writing and those entries should not have been ignored in
a casual manner.
27. The DRT after going through the entire record
placed, has given a clear finding that there is no
corresponding record with regard to the transactions
alleged by the Bank on the basis of register relied stated
supra in its judgment, especially at Page Nos.61 to 79. It
was the contention of the Bank before the DRT that they
are having documents in respect of the transactions in the
registers available in the Overseas Branch. However, the
same were withheld before the DRT. The DRT having
considered these aspects of the matter has taken an
adverse inference as contemplated under Section 114 of
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the Indian Evidence Act. There is no consideration of these
aspects by the DRAT.
28. The DRAT having recorded its finding that there
is no proof of booking the FPCs in respect of 43
transactions, however holds that transaction was booked
through the employee by name Mr.Dinesh Singh on behalf
of the petitioner as prevailed in the normal practice of
official transaction in the branch. Further held that for the
lapses on the part of the officials, Bank cannot be made to
suffer and referring to the Letter of the Bank dated
19.12.2009, has held that the said letter cannot be found
baseless on the ground that only Bank had a burden to
prove the transactions. Further observed that something
wrong done by the Bank official or by the representative of
the Company, alone will not make any profit and prejudice
to a party. The DRAT relying on the documents which were
considered and found to be not concerned with the FPCs,
held that the DRT has erred in dismissing the application
only on procedural lapses rather appreciating the evidence
in a wider perspective and further observed that, in view
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relationship of the Borrower and the Bank in respect of
both firms and of the transactions earlier, the claim made
by the Bank should have been answered favorably on the
basis of the statement of account filed by the Bank.
However declined to grant interest for the lapses as the
Bank official did not act in prudent and competent manner
in favor of the Bank.
29. We are dismayed and not in a position to
comprehend the reasons assigned by the DRAT while
subsiding the entire well-reasoned judgment of the DRT.
The DRT while considering the entire case put forward by
the parties, has consulted all the evidence, documents
produced by the parties and in the teeth of admissions of
the Witnesses of the bank itself, has held that the Bank
has miserably failed to prove its case regarding the alleged
booking of 48 FPCs in view of evidence and dismissed the
case of the applicant Bank.
30. As rightly observed by the DRT that, the Bank
dealing with public money, must dressed itself with Rules
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and Law while in its official transactions in all fair and
proper manner, in strict adherence to the guidelines issued
by the RBI and internal Circulars, any diversion or
exception to the same vitiates the entire transaction. Since
the Banks are dealing with the finance that has got a
bearing on the economy of the Country, the amount
involved and claimed are in Crores, but at the same time it
cannot be lost sight that the petitioner was highly
renowned and loyal customer of the Bank for several
years, having dealings in several transactions and there is
no outstanding of any sort between the petitioner and the
Bank, except these alleged transactions which were
lacking evidence. The bank has catastrophically failed to
stand on its contentions, with backing corroborative
evidence both oral as well as documents to that effect.
31. We having found no infirmities in the order
passed by the DRT, confirm the same while setting aside
the order passed by the DRAT as the same is without
appreciating the evidence placed on record and is given
against the evidence and accordingly, suffers from
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perversity and short of reasons. The reasons are
considered as heart and soul of the Judgment. The said,
we neither find heart nor soul in the order of DRAT, except
muted words without any legs to stand. We, accordingly
set aside the order passed by the DRAT. Consequently, the
appeal filed by the bank is dismissed confirming the order
passed by the DRT.
32. We try to emphasize here on record that as
stated supra as the Banks are dealing with public money,
they should take all caution and care while dealing in their
official transaction business. Any exception or diversion
may cause hazardous to the financial business of the Bank
and create chaos and reflect on the economy of the
Country. The Bank and its officials are expected to adhere
to the Rules, Guidelines issued time to time by the RBI
and the internal Circulars issued by the Head Office to the
Branch Offices of the said Bank while dealing with their
official business with the customers. An exception to the
said Rules may pave way to several sinisters who are just
waiting and projecting to take advantage of such a
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situation causing loss in financial business, which
ultimately having effect on the economy of the Country. It
is high time for the Bank to adhere strictly to the Rules by
giving proper directions to the employees without taking
any diversion or exception to the prescribed Guidelines,
Rules, Circulars in their official transaction or business,
and any exception taken by any of the employees be dealt
with iron hands, keeping in mind that they are owning
fundamental duty towards the public money and
accounted for each penny.
33. With these observations, the petition filed by
the petitioners in W.P.No.3120/2018 is allowed . The
order passed by the DRAT in R.A.No.82/2017 is set aside,
while confirming the order passed by the DRT in
O.A.No. 742/2011 . In view of answering the prayers
sought in W.P.No.3120/2018, the Writ Petition filed by the
Canara Bank in W.PNo.27021/2019 renders infructuous.
Accordingly, W.P.No.27021/2019 is dismissed .
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34. In view of well considered order passed by the
DRT and nothing remains for this Court to consider the
alternative prayer made by learned counsel appearing for
the Bank for remand of the matter. Accordingly, the same
is rejected.
35. In view of our order passed in
W.P.No.3120/2018, W.P.No.24893/2016 does not survive
for consideration and accordingly, the same is dismissed .
36. In view of disposal of the Writ Petitions,
pending interlocutory applications, if any are disposed of.
Sd/-
(D K SINGH)
JUDGE
Sd/-
(T.M.NADAF)
JUDGE
TKN
ct-vn