1995 (2) TMI 464 - SC - Indian Laws

Supreme Court allows appeal in banking dispute, emphasizes need for civil proceedings

The Supreme Court allowed the appeal by the appellant-bank, setting aside the Bombay High Court's interim order directing the bank to credit the disputed ... Interim relief granting substantive relief - disputed questions of fact - balance of convenience - writ under Article 226-maintainability - undertaking to restore interim paymentInterim relief granting substantive relief - balance of convenience - disputed questions of fact - Validity of the High Court's interim order directing the bank to credit Rs. 95,000 to the respondent's account - HELD THAT: - The High Court's interim order effectively granted the principal relief sought in the writ petition by directing the appellant-bank to credit the disputed amount to the respondent's account and accepted an undertaking that the respondents would return the amount if required. This Court reiterated that interim orders should not, by mere finding of a prima facie case, confer final relief without due regard to the balance of convenience, public interest and other relevant considerations. Where there are serious disputes on facts - here whether a signature was forged and whether bank procedure was properly followed - the case was not one in which the High Court should have directed immediate reimbursement. The existence of contested factual questions and the absence of consideration of the requisite discretionary factors rendered the interim direction impermissible. [Paras 11, 12, 13, 14]The interim order of the High Court directing credit of Rs. 95,000 to the respondents' account is set aside.Writ under Article 226-maintainability - disputed questions of fact - Whether the Supreme Court will decide the maintainability of the writ petition under Article 226 at this stage - HELD THAT: - The Court declined to adjudicate the maintainability of the writ petition, observing that the writ was still pending before the High Court and that objections raised by the bank about maintainability were not frivolous. The Court treated those objections as factors relevant to the exercise of discretion in passing interim relief but did not finally determine the issue of maintainability, leaving it open for determination by the High Court in the ongoing proceedings. [Paras 10, 11]Maintainability of the writ petition left open for the High Court to consider; the Supreme Court will not decide it at this stage.Undertaking to restore interim payment - Consequences of setting aside the interim order where the bank has already credited the amount pursuant to the High Court's direction - HELD THAT: - As the appellant-bank had complied with the High Court's direction and credited the amount to the respondents' account, the Supreme Court directed that the respondents refund the sum to the bank within one month. In default, the High Court was directed to enforce the undertaking furnished by the respondents in the interim proceedings. The Court also permitted the parties to request the High Court for early disposal of the writ petition. [Paras 14]Respondents to refund the credited amount to the appellant-bank within one month; High Court to enforce the undertaking if respondents fail to do so.Final Conclusion: The appeal is allowed; the High Court's interim order directing the bank to credit the disputed sum is set aside. The question of maintainability of the writ petition is left to the High Court for determination in the pending proceedings. Respondents must refund the credited amount within one month, failing which the High Court shall enforce their undertaking. Issues:Dispute over forged signature on a cheque leading to reimbursement claim by respondent from the appellant-bank; Writ petition filed in the Bombay High Court seeking reversal of debit entry and reimbursement; Interim order directing appellant-bank to credit the amount pending final adjudication; Appeal against the interim order by the appellant-bank.Analysis:The case involved a dispute between a nationalized bank, referred to as the appellant-bank, and a company operating a current account with the bank, referred to as respondent No. 1. The core issue revolved around a bearer cheque drawn on the appellant-bank, allegedly with a forged signature of the Managing Director of respondent No. 1. The respondent claimed that the signature was forged and sought reimbursement of the amount debited from their account based on the cheque. The appellant-bank contested this claim, stating that the signature's authenticity was under investigation and that reimbursement could only be determined through a civil suit, not a writ petition under Article 226 of the Constitution.In response to the dispute, the respondent filed a Writ Petition in the Bombay High Court, seeking a mandamus to reverse the debit entry and credit the amount back to their account. The High Court, in an interim order, directed the appellant-bank to credit the sum to the respondent's account, considering the prima facie evidence of negligence on the bank's part and the alleged forgery. The appellant-bank, aggrieved by this order, appealed to the Supreme Court.During the appeal, the appellant-bank argued that the High Court erred in granting the interim order without proper consideration of the disputed facts and the legal complexities involved. The respondent, on the other hand, supported the interim order, citing previous court decisions where banks were held liable for reimbursing amounts debited based on forged signatures. The Supreme Court noted the serious factual dispute and lack of a clear prima facie case for the interim relief granted by the High Court.Ultimately, the Supreme Court allowed the appeal, setting aside the interim order directing the appellant-bank to credit the amount to the respondent's account. The Court directed the respondent to refund the credited amount within a month, failing which the High Court would enforce the undertaking provided by the respondent. The Court emphasized the need for proper adjudication of the dispute through a civil proceeding rather than a writ petition, highlighting the importance of evidence and due process in resolving such banking disputes.