Supreme Court Clarifies Limitation for Rendition of Accounts in Banking Disputes: Shakti Bhog Food Industries Ltd. vs. Central Bank of India (2020)

Introduction

Date of the Judgment: 05 June 2020

Citation: (2020) INSC 402

Judges: A.M. Khanwilkar, J., Indira Banerjee, J., and Dinesh Maheshwari, J.

When does the clock start ticking for a customer to sue a bank for incorrect charges? The Supreme Court of India recently addressed this crucial question in a case involving Shakti Bhog Food Industries Ltd. and the Central Bank of India. The court clarified the interpretation of the Limitation Act, 1963, specifically concerning suits for rendition of accounts and recovery of excess charges by banks. This judgment clarifies when the right to sue accrues in such cases, impacting how customers can seek redressal for grievances against banks.

Case Background

Shakti Bhog Food Industries Ltd. (the appellant) had a current account (No. CCM 20225) with the Central Bank of India (the respondent). The appellant availed financial facilities from the bank starting April 1, 1997.

In July 2000, the appellant noticed that the bank was charging interest/commission at Rs. 4 per thousand rupees on local cheques and drafts, which they claimed was arbitrary and violated prior assurances.

The appellant raised this issue with the bank through a letter dated July 21, 2000. Although the bank subsequently corrected the interest/commission charges, the excess amount already charged was not refunded.

The appellant sent multiple letters between October 2000 and June 2001 to the bank, requesting clarification on how the commission was calculated and demanding a refund of the excess amount.

On July 9, 2001, the Assistant General Manager of the bank’s Regional Office informed the appellant that the matter was being reviewed. However, on May 8, 2002, the Senior Manager of the bank stated that the charges were as per the prevailing rates, contradicting the earlier communication.

The appellant sent further letters on July 12, 2002, September 22, 2002, and March 24, 2003, detailing the excess amount charged and requesting a refund. The bank did not respond to these letters.

Finally, on September 19, 2002, the Senior Manager informed the appellant that all charges were as per the rules and that the matter should not be pursued further. The appellant sent another letter on June 3, 2003.

The appellant then served a legal notice on the bank on November 28, 2003, to which the bank replied on December 23, 2003, denying the excess charges. The appellant sent another legal notice on January 7, 2005, and subsequently filed a suit on February 23, 2005, seeking rendition of accounts and recovery of the excess amount charged with interest.

Timeline:

Course of Proceedings

The trial court rejected the appellant’s plaint under Order VII Rule 11(d) of the Code of Civil Procedure, 1908 (CPC), stating that the suit was barred by limitation. The court applied Article 113 of the Limitation Act, 1963, which prescribes a three-year limitation period for suits not specifically provided for, from the date when the right to sue accrues.

The trial court determined that the right to sue accrued in October 2000, when the appellant’s financial facility with the bank ended, and the alleged excess charges were made. As the suit was filed in February 2005, it was considered beyond the three-year limitation period. The trial court rejected the argument that the cause of action accrued upon the rejection of the appellant’s representation by the bank.

The Additional District & Sessions Judge affirmed the trial court’s order. The High Court of Delhi also upheld the rejection of the plaint in a second appeal, agreeing with the lower courts that the suit was time-barred.

Legal Framework

The primary legal provisions at play in this case are:

• Order VII Rule 11(d) of the Code of Civil Procedure, 1908 (CPC): This provision empowers the court to reject a plaint if the suit appears from the statement in the plaint to be barred by any law.

  “The plaint shall be rejected in the following cases: (d) where the suit appears from the statement in the plaint to be barred by any law”

• Article 113 of the Limitation Act, 1963: This is a residuary article that prescribes a limitation period of three years for suits for which no specific limitation period is provided, starting from when the right to sue accrues.
• Section 22 of the Limitation Act, 1963: This section deals with continuing breaches and torts.

  “In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues.”

The interplay of these provisions determines whether a suit is within the prescribed time limit. The Limitation Act, 1963, aims to ensure that legal actions are brought within a reasonable time, preventing the revival of stale claims.

Arguments

Appellant’s Submissions:

• The appellant argued that the right to sue did not accrue in October 2000, when the financial facility ended, but rather when the bank unequivocally denied liability.
• The appellant contended that the cause of action arose on multiple dates:
  • When the illegal recoveries were first noticed, and a letter was sent on July 21, 2000.
  • On various dates when letters were sent to the bank requesting a refund.
  • On July 9, 2001, when the bank assured proper calculation and refund.
  • On May 8, 2002, July 12, 2002, and September 22, 2002, when further requests were made.
  • On September 19, 2002, and June 3, 2003, when the bank denied liability.
  • Finally, on December 23, 2003, after the legal notice was served and the bank replied, and again on January 7, 2005, when another legal notice was sent.
• The appellant asserted that the correspondence with the bank, especially the assurance from the Regional Office on July 9, 2001, created a reasonable expectation of resolution.
• The appellant relied on Articles 2, 3, and 22 of the Limitation Act, 1963, to argue that the suit filed in February 2005 was within the limitation period.
• The appellant emphasized that the suit was for rendition of accounts, a continuous cause of action, and the limitation period should be calculated from the date of the last denial by the bank.

Respondent’s Submissions:

• The respondent argued that the suit was barred by limitation under Article 113 of the Limitation Act, 1963, as the right to sue accrued in October 2000.
• The respondent contended that the exchange of correspondence between the parties could not extend the limitation period once the right to sue had accrued.
• The respondent relied on the decision of the Delhi High Court in C.P. Kapur vs. The Chairman & Ors., which held that correspondence cannot extend the limitation period.
• The respondent argued that the appellant’s claim was based on the overcharging that occurred until October 2000, and thus the limitation period should be calculated from that date.
• The respondent cited various judgments, including Boota Mal vs. Union of India, S.S. Rathore vs. State of Madhya Pradesh, Venkappa Gurappa Hosur vs. Kasawwa C/o Rangappa Kulgod, and Kandimalla Raghavaiah & Company vs. National Insurance Company & Anr., to support their argument that the suit was time-barred.

Submissions Table

Issues Framed by the Supreme Court

The central issue framed by the Supreme Court was:

1. Whether the plaint filed by the appellant could have been rejected by invoking Order VII Rule 11(d) of the CPC?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

On the interpretation of Order VII Rule 11(d) of the CPC:

• Ram Prakash Gupta vs. Rajiv Kumar Gupta & Ors. [2007] 10 SCC 596 – Supreme Court of India

  The Court reiterated that the plaint should be read as a whole, and only if it is manifestly vexatious and meritless should it be rejected under Order VII Rule 11 of the CPC.

• Church of Christ Charitable Trust & Educational Charitable Society vs. Ponniamman Educational Trust [2012] 8 SCC 706 – Supreme Court of India

  The Court emphasized that the power under Order VII Rule 11 of the CPC can be exercised at any stage of the suit, but only based on the averments in the plaint.

• Saleem Bhai vs. State of Maharashtra [2003] 1 SCC 557 – Supreme Court of India

  The Court clarified that for deciding an application under Order VII Rule 11 of the CPC, only the averments in the plaint are relevant.

• T. Arivandandam vs. T.V. Satyapal [1977] 4 SCC 467 – Supreme Court of India

  The Court cautioned trial judges to nip vexatious and meritless suits in the bud by examining the party searchingly under Order 10 of the CPC.

• Madanuri Sri Rama Chandra Murthy vs. Syed Jalal [2017] 13 SCC 174 – Supreme Court of India

  The Court reiterated that the power to reject a plaint under Order VII Rule 11 of the CPC should be exercised strictly, based on the averments in the plaint.

• Raptakos Brett & Co. Ltd. vs. Ganesh Property [1998] 7 SCC 184 – Supreme Court of India

  The Court held that the averments in the plaint must be seen as a whole to determine if Order VII Rule 11(d) applies.

• Mayar (H.K.) Ltd. vs. Vessel M.V. Fortune Express [2006] 3 SCC 100 – Supreme Court of India

  The Court reiterated that the court should scrutinize the averments in the plaint to decide on an application under Order VII Rule 11 of the CPC.

On the interpretation of the Limitation Act, 1963:

• Union of India & Ors. vs. West Coast Paper Mills Ltd. & Anr. [2004] 2 SCC 747 – Supreme Court of India

  The Court distinguished between Article 58 (when the right to sue first accrues) and Article 113 (when the right to sue accrues) of the Limitation Act, 1963.

• Khatri Hotels Private Limited & Anr. Vs. Union of India & Anr. [2011] 9 SCC 126 – Supreme Court of India

  The Court discussed the difference between Article 58 of the Limitation Act, 1963, and Article 120 of the old Limitation Act, highlighting that Article 58 uses the term “first accrues.”

• Bolo v. Koklan [(1929-30) 57 IA 325] – Privy Council

  The Court stated that there is no right to sue until there is an accrual of the right asserted in the suit and its infringement.

• Rukhmabai v. Lala Laxminarayan [AIR 1960 SC 335] – Supreme Court of India

  The Court held that the right to sue accrues when the defendant has clearly or unequivocally threatened to infringe the plaintiff’s right.

Authorities relied upon by the Respondent but distinguished by the Court:

• Boota Mal vs. Union of India [AIR 1962 SC 1716] – Supreme Court of India

  The Court distinguished this case as it related to Article 31 of the old Limitation Act, which deals with the delivery of goods.

• S.S. Rathore vs. State of Madhya Pradesh [1989] 4 SCC 582 – Supreme Court of India

  The Court distinguished this case as it was governed by Article 58 of the Limitation Act, 1963, which uses the term “first accrues.”

• Venkappa Gurappa Hosur vs. Kasawwa C/o Rangappa Kulgod [1997] 10 SCC 66 – Supreme Court of India

  The Court did not specify the reason for distinguishing this case but implied it was not relevant to the facts of the present case.

• Kandimalla Raghavaiah & Company vs. National Insurance Company & Anr. [2009] 7 SCC 768 – Supreme Court of India

  The Court distinguished this case as it interpreted Section 24A of the Consumer Protection Act, 1986, which specifies a time frame similar to other specific articles, not the residuary Article 113.

• C.P. Kapur vs. The Chairman & Ors. [2013] 198 DLT 565 – High Court of Delhi

  The Court distinguished this case stating that the exchange of correspondence cannot extend the limitation period, but the present case was different due to the firm denial of liability by the bank.

• Fatehji And Company & Anr. vs. L.M. Nagpal & Ors. [2015] 8 SCC 390 – Supreme Court of India

  The Court distinguished this case as it related to Article 54 of the Limitation Act, 1963, which deals with specific performance of a contract.

• Hardesh Ores (P) Ltd. vs. Hede and Company [2007] 5 SCC 614 – Supreme Court of India

  The Court distinguished this case as it was governed by Article 58 of the Limitation Act, 1963.

• The East and West Steamship, Georgetown, Madras vs. S.K. Ramalingam Chettiar [AIR 1960 SC 1058] – Supreme Court of India

  The Court distinguished this case as it related to Article 31 of the old Limitation Act, which deals with the delivery of goods.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Ram Prakash Gupta, Church of Christ Charitable Trust, Saleem Bhai, T. Arivandandam, Madanuri Sri Rama Chandra Murthy, Raptakos Brett & Co. Ltd. and Mayar (H.K.) Ltd. to emphasize that the plaint should be read as a whole and rejected only if it is manifestly vexatious and meritless based on the averments in the plaint.
• The Court relied on Union of India & Ors. vs. West Coast Paper Mills Ltd. & Anr. and Khatri Hotels Private Limited & Anr. Vs. Union of India & Anr. to distinguish between the terms “first accrues” and “accrues” in the Limitation Act, 1963.
• The Court relied on Bolo v. Koklan and Rukhmabai v. Lala Laxminarayan to emphasize that the right to sue accrues when the defendant has clearly or unequivocally threatened to infringe the plaintiff’s right.
• The Court distinguished the authorities relied upon by the respondent as they were either related to different provisions of the Limitation Act or other statutes.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Holistic Reading of the Plaint: The Court emphasized that the plaint must be read as a whole, not in isolation. The trial court’s selective reading of the plaint was criticized.
• Distinction between “First Accrues” and “Accrues”: The Court highlighted the difference between Article 58 (when the right to sue “first” accrues) and Article 113 (when the right to sue “accrues”) of the Limitation Act, 1963. The Court noted that Article 113, being a residuary clause, does not specify the happening of a particular event, but refers to the accrual of a cause of action.
• Firm Denial of Liability: The Court held that the right to sue accrued when the bank firmly denied liability, not just when the facility ended. The letters from the Senior Manager dated May 8, 2002, and September 19, 2002, and the Advocate’s letter dated December 23, 2003, were considered key events.
• Continuous Cause of Action: The Court acknowledged the appellant’s argument that the suit for rendition of accounts was a continuous cause of action, although it did not explicitly state that this was the basis for its decision.
• Rejection of Selective Reading: The Court criticized the lower courts for selectively reading the plaint and not considering the entire narrative of the appellant’s grievance.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio Analysis:

Logical Reasoning

For the Issue: Whether the plaint could be rejected under Order VII Rule 11(d) of the CPC?

Decision and Orders

The Supreme Court allowed the appeal and set aside the orders of the trial court, the Additional District & Sessions Judge, and the High Court of Delhi. The Court held that the plaint could not have been rejected under Order VII Rule 11(d) of the CPC.

The Court remanded the case back to the trial court to be decided on its own merits. The trial court was directed to proceed with the suit in accordance with the law.

Ratio Decidendi

The ratio decidendi of the case can be summarized as follows:

• Holistic Reading of Plaint: A plaint must be read as a whole, not in isolation, when deciding whether it should be rejected under Order VII Rule 11(d) of the CPC.
• Accrual of Right to Sue: The right to sue for rendition of accounts and recovery of excess charges against a bank accrues when the bank firmly denies liability, not just when the financial facility ends or when the alleged overcharging occurred.
• Interpretation of Article 113: The term “accrues” in Article 113 of the Limitation Act, 1963, refers to the point when the right to seek redressal is unequivocally denied, not merely when an event occurs that gives rise to a potential claim.
• Distinction Between “First Accrues” and “Accrues”: Article 58 of the Limitation Act, 1963, uses the term “first accrues,” whereas Article 113 uses the term “accrues,” indicating that the accrual of the cause of action is not necessarily the first point of potential claim but when the right to seek redressal is unequivocally denied.

Obiter Dicta

While the Supreme Court’s judgment primarily focused on the interpretation of the Limitation Act and the application of Order VII Rule 11(d) of the CPC, some observations that can be considered as obiter dicta include:

• Importance of Bank Communication: The Court indirectly highlighted the importance of clear and timely communication from banks to their customers regarding charges and discrepancies.
• Fairness in Financial Transactions: The Court’s emphasis on the right to sue accruing upon firm denial of liability underscores the need for fairness in financial transactions and the right of customers to seek redressal for grievances.
• Duty of Trial Courts: The Court emphasized the duty of trial courts to thoroughly examine the plaint as a whole and not to reject it based on a selective reading.

Implications

The judgment in Shakti Bhog Food Industries Ltd. vs. Central Bank of India has significant implications for future cases, particularly in banking disputes involving rendition of accounts and recovery of excess charges:

• Clarification of Limitation Period: The judgment clarifies that the limitation period for filing a suit seeking rendition of accounts and recovery of excess charges from a bank starts when the bank unequivocally denies liability, not just when the financial facility ends or when the alleged overcharging occurs.
• Protection of Customer Rights: This ruling provides greater protection to customers by ensuring that they are not time-barred from seeking redressal merely because of the passage of time since the initial transaction.
• Duty of Banks: The judgment implicitly places a duty on banks to be transparent and clear in their communication with customers and to address grievances promptly and fairly.
• Impact on Trial Courts: The judgment directs trial courts to read the plaint as a whole and to avoid rejecting it based on a selective reading.
• Precedent for Future Cases: This judgment serves as a significant precedent for cases involving similar issues, ensuring that customers have a fair opportunity to seek redressal for grievances against banks.

Conclusion

The Supreme Court’s decision in Shakti Bhog Food Industries Ltd. vs. Central Bank of India provides crucial clarity on the limitation period for suits seeking rendition of accounts and recovery of excess charges from banks. The Court’s emphasis on the holistic reading of the plaint and the accrual of the right to sue upon the firm denial of liability ensures that customers have a fair opportunity to seek redressal for their grievances. This judgment serves as a significant precedent for future cases, reinforcing the principles of fairness and transparency in banking transactions.