BANK OF AMERICA Vs. BANK OF BARODA

JUDGEMENT

(1.) This petition under Articles 226 and 227 of the Constitution of India is directed against the order dated 30.6.2017 passed by the Debts Recovery Appellate Tribunal at Mumbai in Appeal No.344 of 2006 as well as against the order dated 29.5.2006 passed by the Debts Recovery Tribunal at Ahmedabad in O.A. No.124 of 1995.

(2.) The facts, as averred in the petition, are that the petitioner Bank of America is a banking company incorporated under the relevant laws of U.S.A. and carries on the business of banking. The second respondent M/s. Gujarat Indo Lube Limited came out with a public issue of shares which got oversubscribed, that is, the number of shares applied for was more than the total number of shares issued. Therefore, the second respondent was required to refund the un-allotted share application money to various applicants. In this regard, the petitioner Bank appointed the first respondent Bank of Baroda as its refund banker and a refund account was opened with the petitioner. As per the process, the Bank of Baroda was to issue refund warrants with a validity period to the unsuccessful applicants of the public issue and the petitioner was to honour the said warrants within its validity period. Thereafter, the petitioner was to reconcile the accounts and return the balance amount lying in the refund account to the second respondent company.

(3.) To extend the facilities of refund to small cities and centres, the petitioner availed the services of the first respondent bank as it had a wide presence across the country. It, therefore, entered into an arrangement with the first respondent under which the petitioner appointed the first respondent as a correspondent bank. The arrangement was that the refund warrants issued by the second respondent were to be honoured by the first respondent on its presentment thereof. Accordingly, the refund warrants were stated to be payable at par across the branches of the first respondent. The aforesaid arrangement was recorded in a letter dated 9.4.1992 of the petitioner and the same was communicated to the first respondent. The relevant terms of the said letter are contained in clauses (iv) and (v) which reads thus:-