2024 (8) TMI 1056 - HC - FEMA

NRI plaintiffs lose Rs. 2 crore recovery suit against bank for failing to prove unauthorized NRE account transfer

The Delhi HC dismissed a suit filed by NRI plaintiffs seeking recovery of Rs. 2 crores allegedly misappropriated by defendant bank. While the suit was ... Applicability of FERA - Suit filed seeking recovery by the plaintiff against the defendant bank - defendant bank unauthorizedly and without permission of the plaintiffs misappropriated an amount of Rs. 2 crores towards the liability of M/s Asian Wire Ropes Ltd. - plaintiffs are Non-Resident Indians (‘NRIs’) carrying the business of Import and Export who came to India for exploring business opportunities. The plaintiff no. 2 is the wife of plaintiff no. 1, who subsequently is said to have obtained a status of Resident Indian - plaintiffs opened a Savings Bank Account with the defendant bank/NRE Account - As stated that in the absence of plaintiff No. 1 from Delhi, plaintiff no. 2 on 23.04.1990 received a note from the then Branch Manager of defendant no. 2 requesting a blank cheque (only bearing signature of plaintiff no. 2) on urgent basis.On the return of the plaintiff no. 1, the plaintiff no. 1 learnt that a sum of Rs. 2,00,00,000/- has been transferred from his NRE Account to the defendant’s Hyderabad Branch - as alleged officials of defendant no. 2 had obtained a blank cheque from the plaintiff no. 2 and in a clandestine manner, filled entries in the cheque and added detailed instructions on the back of the cheque without any such directions by the plaintiffs Whether the suit is within time? - Admittedly, the suit is based on the fact that on 23.04.1990 money was illegally transferred from plaintiffs account by the defendant bank. The suit was filed on 22.04.1993, i.e. within three years from the date of cause of action. Therefore, the suit as filed was within the limitation period of three years. The Court fees of Rs. 2,70,000/- was filed along with the suit and since the court fee of Rs. 3,672 was not available on the said date, it was purchased and deposited on 07.05.1993. All objections were duly removed and the matter was re-filed on 17.05.1993. It is settled proposition that the deficiency in court fee is not fatal and the payment of deficit court fee is a curable defect. Under section 149 of CPC, the courts have been granted the discretion to permit receiving the deficit court fee at any stage, even in the absence of an application praying for the same, subject to the said discretion being exercised equitably. The plaintiff has cured the defect of deficit court fee within 30 days of the objections. A minor delay in payment of balance court fee cannot act as an impediment in entertaining the suit filed by the plaintiff.Hence, the present suit is held maintainable and within the period of limitation. When did plaintiff No. 2 change her status from non-resident Indian to resident Indian and whether an intimation thereof was given to the bank? If so, on which date? - There is no evidence on record to prove that on 17.04.1990, the plaintiff No. 2 ceased to be an NRI. There is no evidence on record to show that the defendant bank was duly informed by the plaintiff no. 2.The NRE Account Opening Form, i.e. PW1/D44, clearly casts an obligation upon the plaintiffs the duty to inform the defendant bank a change in their residential status. Even if it is assumed that there had been a change, the plaintiff no. 2 continued to issue cheques from the same account, i.e. (Ex. PW1/D58) cheque dated 07.05.1990 for Rs. 1,00,00,000/- issued from NRE Account No. 6523 to create a Fixed Deposit with the Defence colony branch, i.e.(Ex PW1/D68). The said transaction shows that the plaintiff no. 2 continued to issue cheques in the capacity of a joint account holder and continued to sign from the NRE account. Therefore, in the absence of any material evidence being on record to show that there was a change in residential status of plaintiff No. 2 and that the same was duly informed to defendant bank, the Issue no. III is decided against the plaintiff and in favour of the defendant bank. Discharge the onus of proof on the plaintiffs - There is no doubt that a bank cannot be callous or deal with its customers in a causal manner. The defendant bank does not have a Specimen Signature Card for Saving Bank Account bearing No. 6524, wherein as per the plaintiff no. 2 she signed as “R Murti”. The defendant bank has two Specimen Signature Cards for NRE Account No. 6523 alongwith multiple photocopies of the Specimen Signature Card NRE Account no. 6523 for absolutely no reason or explanation. The defendant bank may have personal equations with clients but they are bound to follow the procedure and mandate of law. If a Specimen Signature Card is missing (which is a mandatory requirement for clearing of cheques and bank operations) the bank is required to take action, including but not limited to conducting an inquiry and registering of an FIR. The defendant bank cannot be accepted to say that a Specimen Signature Card of an individual is lost and the defendant bank did nothing about it. The party which comes to the court and seeks the courts adjudication on issues in its favour has to discharge the onus of proof. The plaintiffs have failed to prove that the instructions written on the reverse side of the cheque were not given by the plaintiff no. 2 but written by the defendant bank. The plaintiffs have failed to prove that the act of encashing the cheque in question, i.e. Ex. PW1/D31, is improper especially since the defendant bank has sufficiently proved that the plaintiff no. 2 would continually sign cheques both signed as “R. Murti” and “R. Shandilya” in the NRE Account no. 6523. Thus the plaintiffs have not been able to discharge the onus of proof. Whether, the transfer of Rs. 2 crores is hit by the provisions of Foreign Exchange Regulation Act? If so, to what extent? - FERA is a special legislation, containing exhaustive provisions of investigation, inquiry, trial and appeal. It is a self-contained code, including statutory functionaries specifically and specially constituted to inquire and adjudicate upon any contraventions, as alleged. The provisions under FERA empowers the Directorate of Enforcement and its officers to search, recover, arrest, hold trial for offences and impose punishment for offence under the Act. The proceedings under FERA are quasi-criminal in nature. The courts have held that the power to adjudge any contravention alleged under the act would lie with Directorate of Enforcement in the first instance. As no complaint has been filed to FERA. The plaintiffs have also failed to show how the provisions under FERA will be applicable against the defendant bank. Plaintiffs are not entitled for recovery of any amount. Issues Involved:1. Whether the suit is within timeRs.2. What is the effect of the pleadings filed by the plaintiff before the Consumer Disputes Redressal Commission in OA.No. 150/92Rs.3. When did plaintiff No. 2 change her status from non-resident Indian to resident Indian and whether an intimation thereof was given to the bankRs. If so, on which dateRs.4. Whether plaintiff No. 2 had signed any blank chequeRs. If so, to what effectRs.5. Whether the transfer of Rs. 2 crores from the account of the plaintiffs by the defendant bank to the account of Asian Wire Ropes Limited, Hyderabad, was illegal, improper, or without instructionsRs. If so, to what effectRs.6. Whether the transfer of Rs. 2 crores is hit by the provisions of Foreign Exchange Regulation ActRs. If so, to what extentRs.7. To what amount, if any, is the plaintiff entitledRs.8. Whether the plaintiff is entitled to interestRs. If so, at what rate and for what periodRs.9. Relief.Issue-wise Detailed Analysis:Issue No. I: Whether the suit is within timeRs.The court found that the cause of action arose on 23.04.1990 when the money was allegedly transferred illegally. The suit was filed on 22.04.1993, within the three-year limitation period. The court also noted that the deficiency in court fees was cured within 30 days, which is a curable defect under Section 149 of the Civil Procedure Code, 1908. Thus, the suit is maintainable and within the period of limitation.Issue No. III: When did plaintiff No. 2 change her status from non-resident Indian to resident Indian and whether an intimation thereof was given to the bankRs. If so, on which dateRs.The plaintiff claimed that plaintiff No. 2 changed her status to resident Indian on 17.04.1990 and informed the bank. However, the defendant bank denied receiving any such information. The court found no evidence on record to prove the change in status or that the bank was informed. The plaintiff No. 2 continued to issue cheques from the NRE account, indicating no change in status. Therefore, this issue was decided against the plaintiff.Issues No. II, IV, and V:II. What is the effect of the pleadings filed by the plaintiff before the Consumer Disputes Redressal Commission in OA.No. 150/92Rs.IV. Whether plaintiff No. 2 had signed any blank chequeRs. If so, to what effectRs.V. Whether the transfer of Rs. 2 crores from the account of the plaintiffs by the defendant bank to the account of Asian Wire Ropes Limited, Hyderabad, was illegal, improper, or without instructionsRs. If so, to what effectRs.The court noted inconsistencies in the plaintiff's pleadings before different forums. The plaintiff's involvement with Asian Wire Ropes Ltd. was admitted before the NCDRC but denied in the present suit. The court found that the plaintiff No. 2 had signed cheques as 'R. Murti' and 'R. Shandilya' for the same account, and the bank had honored these cheques. The plaintiffs failed to provide clear evidence that the instructions on the back of the cheque were not given by them. The court concluded that the plaintiffs did not discharge the burden of proof and decided these issues against them.Issue No. VI: Whether the transfer of Rs. 2 crores is hit by the provisions of Foreign Exchange Regulation ActRs. If so, to what extentRs.The court found no evidence or arguments to support the claim that the transfer violated FERA. The provisions of FERA were not applicable as the transaction was in Indian Rupees. The court noted that FERA-related issues should be adjudicated by the Directorate of Enforcement, not the civil court. Thus, this issue was decided against the plaintiffs.Issues No. VII, VIII, and IX:VII. To what amount, if any, is the plaintiff entitledRs.VIII. Whether the plaintiff is entitled to interestRs. If so, at what rate and for what periodRs.IX. Relief.Given the findings on the previous issues, the court concluded that the plaintiffs were not entitled to any recovery. The suit and all pending applications were dismissed, and the decree sheet was prepared accordingly.