Dismissed

Mangal Shivaji Patil and Ors. v. the State Bank of Hyderabad and Ors.

Bombay HC25 Nov 2013CA/13207/2011

Case brief

AI extract

What is this about?

In an application seeking satisfaction of a decree via a One Time Settlement offer, the High Court dismissed the application. The court held that no valid compromise existed as there was no written agreement signed by the parties, and the disputed sum was deposited in a separate savings account rather than the loan account, failing to meet the requirements of Order 23 Rule 3 CPC.

What did the court decide?

Application dismissed without any order as to costs as no compromise was arrived at between the parties.

Mangal Shivaji Patil and Ors. Vs the State… — Contract and Commercial Disputes | Bombay HC (2013)

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( 1 ) ca13207.11

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD

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CIVIL APPLICATION NO. 13207 OF 2011 IN FIRST APPEAL NO. 420 OF 1992

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Smt. Mangal w/o. Shivaji Patil & Ors.

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..Applicants

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Versus

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The State Bank of Hyderabad & Ors...Respondents

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Mr. P.S. Chavan, Advocate for the applicants.
Mr. S.V. Advant, Advocate for respondent No.1.
Mr. V.D. Hon, Advocate for respondent No.2.
Mr. Mukul Kulkarni, Advocate for respondent Nos. 3 to 5.

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CORAM : M.T. JOSHI,J.
RESERVED ON : 21.10.2013
PRONOUNCED ON: 25.11.2013

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ORDER

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1.Heard both the sides. Initially this Court was

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of the view that present application can be heard at the

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time of deciding the appeal itself. However, on 9th

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August, 2013, both the sides submitted that the issue

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involved in this application i.e. as to whether there is

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compromise agreement lawfully entered into between the

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parties may be heard first, as the decision of the same
may not require to consider other aspects of merits of
the case. In the circumstances, this application was
taken for hearing.

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2.The appeal is filed by the guarantor who has
agreed to indemnify respondent No.1-bank as regards cash
credit limit sanctioned to a registered partnership firm
of which respondent Nos.2 & 3 i.e. original defendant
Nos.2 and 3 were partners. In view of arrears/default in
repayment of the amount, the suit came to be filed for
recovery of amount of Rs. 16,10,095=71. A decree for
foreclosure against present appellants was also sought
with further decree of sale of hypothecated property of
the original borrower.

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3.On merit the suit came be to be decree as prayed

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with future interest at the rate of 18% p.a. from the
date of suit till realization of the same. Aggrieved by

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the same, First Appeal No.420 of 1992 is filed by

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original defendant Nos.4,5 and 6 i.e. guarantors. As the
decree was not passed against respondent No.3, holding
that he has retired from the partnership firm, original
plaintiff has filed F.A. No. 342 of 1993.

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During pendency of both the appeals, the issue

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as to whether the dispute between the parties is settled
has arisen as original respondent No.2 i.e. one of the
principal borrowers claims that under the scheme of one
time settlement, on the direction of the Branch Manager
of respondent No.1. i.e. plaintiff bank, he has already
deposited an amount of Rs.15 lacs in the concerned branch
on 3rd September, 2011. His case in the present
application in short is as under :-

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4.During pendency of present appeal, respondent
No.1 bank was offered payment of Rs.10 lacs in addition
to the payment made during the pendency of the suit.
Respondent No.1 bank by letter dated 4th February, 2011
advised increase in the offer from Rs.10 lacs to Rs. 15

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lacs and accord consent to the same at the earliest. The

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applicants, therefore, accepted the offer and informed
respondent bank in the Court itself. Respondent-bank
also informed the Court that the offer was under
consideration. Despite various chances given by this
Court for settlement of the account, respondent-bank has

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not accepted the amount. Therefore, ultimately the
applicant No.1 filed pursis on 3rd August, 2011, showing
her willingness to deposit an amount of Rs.15 lacs as per

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the offer of the bank. Thereafter, respondent No.1 bank

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directed the applicant to deposit said amount of Rs.15

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lacss in the bank. Therefore, on 3rd September, 2011,

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said amount was deposited with respondent-bank vide

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letter dated 3rd September, 2011. Respondent No.1 has

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even informed the applicant that said amount would be

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utilized for settlement of the account and will be duly
credited after approval of the compromise from the
competent authority. In the circumstances, the pursis was
filed in the Court on 14th September, 2011, informing

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this Court that in view of acceptance of amount, the

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decree stands satisfied. It is submitted that the bank

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has already accepted the amount, therefore the bank is
now estopped from contending that the compromise offer is
not received. In the circumstances, relying on the ratio
ofM/s. Sardar Associates & Ors. Vs. Punjab and Sindh
Bank & Ors., AIR 2010 SC 218, it was submitted that
present Court may direct respondent No.1 bank to settle
the account as per the offer given by bank itself.

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5.Mr. Ravindra Kulkarni, the Branch Manager of
respondent No.1 bank filed his affidavit on 23rd
February, 2013. His submission in short is as under :-

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That the Branch Manager is not authorized to
take any decision in relation to the offer of compromise

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submitted by any borrower and specifically of borrowers,
whose account is in default or against whom suit for

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recovery has already been filed or where liability has
already been adjudged by the Competent Court. In such
cases, the proposal submitted by borrower for compromise

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is forwarded to the controlling authority. Said proposal

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in turn is forwarded to the Screening Committee duly
constituted for that purpose. The competent authority
ultimately takes decision in respect of compromise
proposal. The Branch Manager is not empowered to take
any decision. Any offer or counter offer given by Branch
Manager cannot become a contract, as the Branch Manager

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is not competent either to give or accept an offer in
such circumstances. In the circumstances, the affiant’s

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advice to increase offer from Rs.10 lacs to Rs.15 lacs by
his letter does not amount to acceptance of offer by the

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bank. The amount of Rs.15 lacs is deposited in the
saving bank account. It could have been appropriated to
loan account after approval of the competent authority.

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However, as the competent authority has not approved the
compromise, the amount is not appropriated towards loan
account. It was further submitted that latest valuation

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report of mortgaged properties from the approved valuer
would show that the mortgage valuation of the properties
as well as personal property of the borrower and

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mortgagor is Rs.1,42,92,500/-. In the circumstances,

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there is no question to settle the matter for Rs.15 lacs.
In the circumstances, it was submitted that the Civil
Application be dismissed.

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6.Thereafter, on behalf of respondent No.1-bank,
Mr. Rajiv Manerikar, Branch Manager of Tuljapur Branch
has filed his additional affidavit on 21st August, 2013.
His submission in short is as under :-

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That since the legal representatives of original

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borrower have given offer for payment of Rs.13 lacs, vide
letter dated 5th February, 2011, counter offer was given
by his predecessor on 5th February, 2011 for raising
offer to Rs. 15 lacs. Thereafter, applicant No.1 has
opened a saving account with the branch on 23.11.2010
vide Saving Bank Account No. 62170279905. He has
deposited an amount of Rs. 8 lacs on 2nd September, 2011.
Thereafter, on 3rd September, 2011, she has deposited Rs.
7 lacs. Now at the end of said account, an amount of Rs.

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16,21,454/- is in balance. Applicant No.1 refers to the

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letter dated 11th May, 2001 issued by its Branch Manager,

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under which he refers to the OTS proposal. However, the
amount to be paid thereunder was not paid within given
time and in the circumstances, said incident is a history
and no longer enforceable by law. It was further
submitted that as per regulation of the bank, the Branch
Manager is not empowered or authorized to compromise the
matter and as the bank has not compromised the matter,
present application deserves to be dismissed.

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7.The history of the case shows that on 16th

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August, 2011, this Court has recorded that the Counsel

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for the parties submitted that the judgment debtor has
given proposal for one time settlement which was under
consideration of the decree holder. The pursis filed to

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that effect by respondent No.2 i.e. present applicant was

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taken on record and the matter was posted to 23rd August,
2011. The order dated 23rd August, 2011 records a
statement of respondent No.2 i.e. present applicant that

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on that day she was in the bank as per the OTS offer

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given by bank of Rs.15 lacks and said offer is under
consideration. At that time Counsel for respondent No.1

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bank sought two week’s time to take necessary
instructions and the matter was posted to 25th August,
2011. Thereafter, from time to time the case was

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adjourned on the request of learned counsel for
respondent Nos.1 & 2. In the meantime on 16th September,
2011, present applicant again filed pursis marked at Exh.

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“X” bringing to the knowledge of the Court that the
amount is already deposited on 3rd September, 2011. In
the circumstances, last chance was granted on 26th
September, 2011 to respondent No.1 bank to make written
statement where bank is ready to settle the matter under
O.T.S. Or not. There upon present application came to be
filed on 20th October, 2011.

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8.Learned Counsel for the applicants Mr. Mukul
Kulkarni submitted as under :-

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That the original offer of applicant to pay an

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amount of Rs. 13 lacs in addition to the amount that was
deposited earlier was not accepted by respondent No.1
bank. Admittedly, on 4th February, 2011, the then Branch

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Manager has indicated that the offer is not acceptable to
the bank. She was, therefore advised to increase offer

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from Rs. 10 lacs to Rs. 15 lacs. The amount of Rs. 15

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lacs was accordingly deposited. In view of the acceptance
of the amount, the decree stands satisfied. Though it is

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now contended that the Branch Manager is not authorized
officer to compromise the matter, not only he is
signatory to the plaint but first reply is filed by very
same person who has given a counter offer of raising
offer to Rs. 15 lacs. In these circumstances, it was

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submitted that the application be allowed and it also be
declared that dispute between the parties is settled by
compromise, in view of acceptance of the amount by the
bank in pursuance of the offer given by Branch Manager.

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9.Mr. Advant, learned Counsel for respondent has,

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however, strenuously opposed the submission. He submits
that throughout stand of respondent No.1 bank would show
that it has never accepted any settlement. Time and again
adjournment was sought for consideration of the same even
after amount was deposited in the saving bank account by

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the applicant. The State Bank of Hyderabad a body
corporate has never authorised bank managers to enter
into any compromise in the situation like present one

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i.e. when the lis is pending or the amount is already adjudged. The Subsidiary Banks General Regulations, 1959 issued in pursuance of provisions of 63 of the State Bank of India (Subsidiary Banks) Act, 1959 are very much clear on this subject. In the circumstances, submitting that

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at any time compromise proposal was not accepted by the
competent authority, it was submitted that mere deposit

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of the amount in the saving account by the applicant i.e.
original respondent No.2 would not amount to compromise
between the parties. Mr.Advant submits that the

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application be dismissed.

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10.He submits that the ratio of M/s. Sardar

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Associates (Supra)cited supra is not applicable in the
present case. On the other hand, he submits that there
is no compromise arrived at between the parties as per
provision of Order 23 Rule 3 of the C.P.C. In view of
the ratio in Gurpreet Singh Vs. Chatur Bhuj Goel, (1988)
1 SCC 270andNational Insurance Co. Ltd. Vs. Bhoghara
Polyfab Private Limited, (2009) 1 SCC 267, he submits
that present application deserves to be dismissed.

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11.Additionally, both the sides filed synopsis

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along with the copies of the authorities relied upon by
them, on 21.10.2013, Mr Chavan, on behalf of Mr Kulkarni,
additionally relies on the judgment of Supreme Court in
Pushpa Devi Bhagat (D) by L.R Vs. Rajinder Singh and
Ors., reported in AIR 2006 SUPREME COURT 2628 (1) and
also on the judgment in Mahalaxmi Co-operative Housing

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Society Ltd. & etc. Vs.Ashabhai Atmaram Patel (D) through

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L.Rs. and Ors., reported in 2013 AIR SCW 1340.

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( 13 ) ca13207.11

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12.Mr Advant relies on the ratio laid down in the
following authorities :

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(A)Punjab National Bank Vs. Purewall &
Associates Ltd., reported in AIR 2002 RAJ
13;

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(B)K.Venkatachala Bhat and another Vs.
Krishna Nayak (D) by LRs and others,
reported in (2005) 4 SCC 117;

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(C)Gurpreetsingh Vs. Chatur Bhuj Goel,
reported in AIR 1988 SC 400;

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(D)Kripal Garain and others Vs. Shyam
Narain and another, reported in AIR 1985
PATNA 372;

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(E)Smt.Kamla Devi and another Vs. Prabhat
Chand and anr. reported in AIR 1997 DELHI
317;

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(F)Molla Sirajul Haque Vs. Gorakhchand
Mullick, reported in AIR 1993 CALCUTTA 58;

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(G)Dr.Jitendra Kumar Jain Vs. Addl.
Dist.Judge, Roorkee and ors., reported in
2006 All India High Court Cases 2794

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13.Upon hearing both the sides, in my view, the
present application deserves to be dismissed, for the
reasons to follow.

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REASONS

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14.Provision of Rule 3 of Order 23 of Code of Civil
Procedure runs as under :

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“ R.3. Compromise of suit. Where it is proved

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to the satisfaction of the Court that a suit
has been adjusted wholly or in part by any
lawful agreement or compromise [in writing and
signed by the parties], or where the defendant
satisfies the plaintiff in respect of the whole
or any part of the subject-matter of the suit,
the Court shall order such agreement,
compromise or satisfaction to be recorded, and
shall pass a decree in accordance therewith [so
far as it relates to the parties to the suit,
whether or not the subject-matter of the

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agreement, compromise or satisfaction is the
same as the subject-matter of the suit].

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[Provided that where it is alleged by one party
and denied by the other that an adjustment or
satisfaction has been arrived at, the Court
shall decide the question; but no adjournment
shall be granted for the purpose of deciding
the question, unless the Court, for reasons to
be recorded, thinks fit to grant such
adjournment.]

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[ Explanation . An agreement or compromise which is void or voidable under the Indian Contract Act, 1872 (9 of 1872), shall not be deemed to be lawful within the meaning of this rule.]”

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The provision, thus would show that a decree is
required to be passed in case there is a lawful agreement

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of a compromise “in writing and signed by the parties” or
where the defendant satisfies the plaintiff in respect of
whole or any part of subject matter of the suit.

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15.If there is a dispute as to whether the parties

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have adjusted the deposit between them, then the said
settlement is required to be in writing and signed by the
parties.

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16.In the present case, what we find is that an

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offer to pay an amount of Rs.10 lacs towards the full
satisfaction of the decree was given to the Bank. The
Branch Manager of the Bank (leaving aside for the present
the competency of the Branch Manager), has asked for
raising the offer from Rs.10 lacs to Rs.15 lacs. As per

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the applicants, the respondent – Bank informed the Court

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that the offer is under consideration. Various
adjournments were sought. Thereafter, the applicant

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filed purshis and showed readiness to deposit the amount
of Rs.15 lacs in the Bank. Thereafter also on 14.9.2011,

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the Bank informed the Court that it had not received
suitable offer from the borrower and, therefore, the
compromise proposal cannot be considered. The document

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produced in the Court would show that the amount was not
accepted in the loan account, but in the Savings Bank
account, which was opened during the pendency of the
present proposal. There is no compromise in writing and
signed by the parties before the Court. What is
transpired is that an offer to pay Rs.10 lacs was

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countered by the Branch Manager by a subsequent offer of
accepting Rs.15 lacs. The case was adjourned from time
to time thereafter. Ultimately, the applicants deposited
the amount in Savings Bank account and thereafter also
there is no oral or written evidence to show that the
Bank has accepted the same towards the full satisfaction.

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17. In the case of Gurpreetsingh Vs. Chatur Bhuj Goel, cited supra, inter alia it was held that when the compromise put forward by the applicants was admittedly not signed by the parties, the compromise cannot be recorded.

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18.In the case of K.Venkatachala Bhat and anr,

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cited supra, again the compromise was signed by the
respondents only. In the circumstances, it was held by
the Supreme Court, the compromise could not have been

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recorded. The rest of the authorities relied on by Mr
Advant need not be adverted to, as those are of the
various High Courts, based on the ratio laid down in
above cases.

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19.The applicants relied on the ratio in M/s.

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Sardar Associates & Ors. Vs. Punjab and Sindh Bank &

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Ors., cited supra, to show that the Guidelines by Reserve
Bank of India providing for one time settlement scheme
would be binding on the Public Sector Bank. In the said
case, however, the Circular issued by respondent – Punjab

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and Sindh Bank and ors., contrary to the Guidelines
issued by the Reserve Bank of India, was in question. In

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the present case, we are dealing with the fact as to

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whether the compromise is arrived at between the parties

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or not. The ratio in the case of M/s Sardar Associates &

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Ors., therefore, would not be applicable to the present
case.

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20.In the case of Pushpa Devi Bhagat (D) by L.R.,
cited supra, the issue was as to whether an appeal would
be maintainable against a consent decree or a separate
suit would be maintainable. In that case, it was also
held that a statement signed by a Counsel would also be a
compromise in writing.

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21.In the case of Mahalaxmi Co-operative Housing

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Society and others, cited supra, the distinction between
the terms ‘agreement’ or ‘compromise’ vis-a-vis a
‘satisfaction’ and ‘adjustment’, as found in the
provision under Rule 3 of Order 23 was explained. It was
held that while the expression ‘agreement’ or
‘compromise’ refer to first part, which requires in

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writing and singed by parties or their Counsel, the

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second part, i.e. ‘satisfaction’ and ‘adjustment’ would
not require any writing. In the circumstances, if the
defendant satisfies the plaintiff in respect of whole or
part of subject matter of the suit, as evidenced by
material on record, then no compromise in writing and
signed by the parties would be required.

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22.Here, in the present case, however, the
applicants submit that in view of the compromise between
the parties, payment of amount of Rs.15 lacs would settle
the entire dispute between the parties. However, the
said deposit is admittedly accepted in the Savings Bank
account.

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23.In that view of the matter, and since there is
no compromise in writing and signed by the parties, the
application cannot be allowed.

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24.Besides this, the learned Counsel for the Bank,
Mr Advant, on the strength of the Subsidiary Banks

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General Regulations, 1959 submitted that the Branch
Manger is not competent to enter into any such
compromise. He relies on Regulation No.56, which runs as
under :

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“56. Plaints, written statements, petitions, and applications may be signed and verified, affidavits may be sworn or affirmed, bonds may be signed, sealed and delivered and generally all other documents connected with legal proceedings may be made and completed on behalf of a subsidiary bank by the 1 (managing director) of the subsidiary bank or by any officer or employee empowered by or under regulation 55 to sign documents for and on behalf of the subsidiary bank.”

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25.Mr Advant submits that in view of the aforesaid
regulation though the Branch Manager, who is an Officer
empowered under Regulation No.55 to sign the documents,

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as detailed supra, had no authority to enter into a
compromise i.e. a contract.

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26.It is, however, needless to go into said

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submissions since we have already found that there is no
compromise in writing between the parties. In the
circumstances, the application is dismissed without any

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order as to costs.

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snk /2013/OCT13/ca13207.11&/vvr

Mangal Shivaji Patil and Ors. v. the State Bank of Hyderabad and Ors.

Case brief

What is this about?

What did the court decide?

Mangal Shivaji Patil and Ors. v. the State Bank of Hyderabad and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

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