Shankar Lal Agarwalla v. State Bank of India and Another By Jayanth Potharaju From Jindal Global Law School
AIR 1987 Calcutta 29
This is a writ petition in the Calcutta High Court relating to the payment of interest accrued over a period of time by the State Bank of India to an individual during the 1978 Demonetization. The Court favored the respondents.
According to the High Denomination Bank Notes (Demonetization) Act 1978, all thousand rupees, five thousand rupees, ten thousand rupees notes after 16th Jan 1978 ceased to remain legal tender. The petitioner owned and possessed 261 notes of Rs. 1000/- each. According to the Act, a certain declaration procedure was to be followed in returning the bank notes. Unless such declaration had not been complete in all material particulars, the bank would have to reimburse the amount in certain specified modes.
The petitioner duly completed said procedure and instructed the State Bank (Respondent No,1) to reimburse the amount of Rs. 2,61,000 to his bank account as per Section 7(4) of the said Act. Respondent No.1 did not reimburse the money but instead forwarded the petitioner’s particulars to the I.T Department (Respondent No.2). The petitioner was summoned under Section 31 of the Income Tax Act and on scrutinizing of his books, it was found that all dues were paid. On 15th Feb, 1978 the I.T. department gave the amount to the Bank. After lying vacant for more than one year, the cash was given back to the petitioner on 27th October, 1929.
The petitioner claimed that he had been deprived of the interest accrued on the sum over the period and pursuantly made an application under Article 226 to the High Court for the recovery of the same. The High Court granted leave to the petitioner to file a fresh application.
Firstly, the petitioner contender that the said notes had been deposited in the bank with trust and confidence. The breach of this trust was illegal and accompanied with a mala fide motive. Thus, it was an abuse of the obligation between a banker and its constituent. Secondly, the petitioner contended that the Court under Article 226 had jurisdiction to offer a refund.
Firstly, the Court relied on Suganmal v. State of M.P.[i] to show that Courts under Article 226 are not under an obligation to provide relief for obtaining refund of money due from the State. It is only when the illegality of the assessment is also into question will the Court hears the case. In the current case, there is no claim for such interest as claimed by the petitioner under the statute nor was there any prevailing custom for such a claim.
Further, the Court said such a claim would be barred by the law of limitation. To demonstrate this, the Court relied on State of M.P. v. Bhailal Bhai[ii] and Ratanlal Singhania v. M. M. Sethi[iii]. In these cases, the Court held that although no strict limitation period exists for a claim under Article 226; the Court can adjudge such a period of limitation through any pre – existing statute framed by the legislature. The present application was taken out on 20th February 1984, five years after the incident. Such a claim would be barred under the Residuary Articles.
Also, the petitioner was not interpellated as a constituent in his relationship with the ban. The Court relying on Paget on Banking Laws[iv] showed that through the facts of the current case, the petitioner did not satisfy the three criterion to be called a constituent. Thus, the claim was in tortious nature and was beyond the scope of Article 226.
The Court then relied on Paget on the Law of Banking[v] to say that the Banker’s duty was not an absolute one but a qualified one. It also cited two sources, namely Lord Halsbury’s Laws of England[vi] and Tournier v. National Provincial and Union Bank of England[vii] to explain the situations which would allow a banker to breach his obligation of secrecy: a) where the disclosure was under compulsion by law, (b) where there was a duty to the public to disclosure, (c) where the interest of the bank require disclosure and (d) where the disclosure was made by express or implied consent of the customer.
It was observed by the Court that the current case came under sub – heading (a) as the Ministry of Finance asked the bank to furnish the particulars. Thus, the suit would fail at this issue too
1.) Tortious claims cannot be dealt with by the Court under Article 226.
2.) When a banker is compelled by law, he is not bound by the confidentiality with his constituent.
3.) Law of Limitations can be applicable to suits filed by Article 226.
[i] Suganmal v. State of M.P  56 ITR 84 (SC).
[ii] State of M.P. v. Bhailal Bhai  6 SCR 261.
[iii] Ratanlal Singhania v. M. M. Sethi AIR1 965 Cal 428.
[iv] Paget in Banking Laws 9th Edn. Page 5.
[v] Paget on the Law of Banking 9th Edn. p. 166.
[vi] Lord Halsbury's Laws of England 4th Edn. Vol. 3 p. 72 Article 97.
[vii] Tournier v. National Provincial & Union Bank of England (1924) 1 KB 461.
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