IN THE HIGH COURT OF KERALA AT ERNAKULAM
AS.No. 764 of 1994()
1. M.ABDUL WAHAB
... Petitioner
Vs
1. KERALA FINANCIAL CORPORATION
... Respondent
For Petitioner :SRI.B.KRISHNA MANI
For Respondent :SRI.M.PATHROSE MATTHAI (SR.)
The Hon'ble MR. Justice K.M.JOSEPH
The Hon'ble MR. Justice M.L.JOSEPH FRANCIS
Dated :16/12/2009
O R D E R
K. M. JOSEPH & JOSEPH FRANCIS JJ.,
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A. S. NO: 764 OF 1994
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Dated this the 16th Day of December, 2009.
JUDGMENT
Joseph Francis J.,
This appeal is filed by the first defendant in O.S. 74 of 1985 on
the file of Sub Court Alleppey. The first respondent herein is the
plaintiff and the second respondent is the second defendant in that suit,
which was filed on realisation of misappropriated amount.
2. The facts of the case are briefly as follows:
Plaintiff is a Corporation established under the State Financial
Corporation Act with its Head Office at Trivandrum and Branch offices
at other places, including Alleppey. Smt. M. Syamala Devi, Deputy
Manager (legal) who has signed and verified this plaint was competent
to sue and recover all amounts due to the plaintiff. Defendants 1 and 2
were employed under the plaintiff at its Alleppey Branch. The 2nd
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defendant was the Branch Manager and 1st defendant was the Assistant
under the 2nd defendant during the period from 6.2.1981 to 27.8.1983.
The 1st defendant was the Assistant in charge of cash and all other
monies received in the Branch Office at Alleppey and he was to receive
the cash and other remittances from the customers and to issue receipts,
signed by the 2nd defendant – Branch Manager. He was the custodian of
the cash and other remittances in the Canara Bank, Alleppey either on
the date of receipt itself or on the next working day. It was also the
duty of the 1st defendant to keep the necessary accounts and registers
properly. The 2nd defendant, as Manager, was to sign the receipts for
the cash and other remittances received at the Branch Office, after
satisfying about the remittances; to check the accounts and registers,
and to see that the amounts received are duly and promptly remitted to
the Bank. Both the defendants were jointly and severally liable to
account to the plaintiff for all the monies received at the Branch office
at Alleppey. During the period from 6.2.1981 to 27.8.1983, several
amounts were received in the Branch Office from time to time from the
plaintiff’s customers, on account of the various loan accounts were not
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promptly remitted into the Bank account of the plaintiff. There are
cases of delayed remittances, short remittances, and non-remittances.
After retaining the cash received from several days, without remitting
them in the Bank, random remittances were also made. By this
process, huge amounts were misappropriated by the 1st defendant, and
or by the defendants jointly by colluding with each other. Both the
defendants are jointly and severally liable for the amounts
misappropriated, by their unauthorised and irregular actions, in
violation of the rules and regulations. Even in case the entire amounts
were misappropriated by the 1st defendant, himself, the 2nd defendant
was equally liable to the plaintiff, along with the 1st defendant, since
the misappropriation were possible only because of the negligence and
dereliction of duty by the 2nd defendant. From out of the amounts
received at the Alleppey Branch, during the period from 30.12.81 to
5.3.83, as per the receipts and the cash book, an amount of
Rs.83,338.85 received was not remitted in the Bank. But an amount of
Rs.23,393/- has been remitted in the Bank at random. It can be seen
that an amount of Rs.59,945.85 which has been received, was not
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remitted in the Bank during the said period. The 1st defendant, or the
defendants jointly have fraudulently and dishonestly misappropriated
the said amount, and have committed fraud. The plaintiff corporation
is a financial institution, giving loans for industrial purposes and the
normal rate of interest charged is 15.5% p.a., with half yearly rests on
the 1st of January and July every year. The plaintiff has been deprived
of the use of the misappropriated amount for lending purposes, and
hence the plaintiff is entitled to reliase the amount with interest at the
rate of 15.5% pa. with half yearly rests. The irregularities and
misappropriation came to the notice of the plaintiff only 26.5.1983
when certain receipt irregularities were then reported to the Head
Office. A thorough check of the accounts was made by the offices sent
from Head Office for the purpose, and they have found that the total
amounts of misappropriation is Rs.59,945.85 and later the 1st defendant
was dismissed from the service of the plaintiff. While under
suspension, the 1st defendant filed a voluntarily signed statement before
the Financial Controller of the plaintiff on 11.11.83, stating that he has
the sole responsibility for the missing of credits and he is ready to remit
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the missing amounts to the plaintiff corporation in instalments. The
original records are with Vigilance Department and hence photocopy
was produced along with the suit. The 1st defendant later sent a
demand draft dt.30.12.83 for Rs.1000/- being credit as missing credits.
No other amount has been paid by the defendants. The 2nd defendant is
still under suspension. The failure of defendant to pay the said amount
with interest is the cause of action for this suit. The plaintiff filed suit
for the amounts detected. The plaintiff reserved the right to sue or take
further action in respect of any other amounts of misappropriation, if
detected. The plaintiff prayed for a decree for realisation of
Rs.94,415.47 with interest at the rate of 15.5% from the date of suit till
date of realisation from the defendants and from their assets along with
costs and just other equitable reliefs.
3. The first defendant filed a written statement contending that
the suit is not maintainable under law. It is true that first defendant was
working as Assistant in Alleppey branch and whenever cash was
received by him on behalf of the branch it was remitted in the Canara
Bank, Jetty Branch, Alleppey. The first defendant prayed for
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production of the original receipts books of the relevant period by the
plaintiff. It is incorrect to say that he was the sole custodian of the
cash. As per the instructions of the Branch Manager the first defendant
had to perform other duties outside the office, such as clearing the bills
etc., which can be seen from the tour program of the first defendant.
First defendant also prayed for production of tour program for that
period. The balance sheet of plaintiff corporation was prepared
annually and audited each year by competent chartered accountant. If
there was any misappropriation it would have been detected at the time
of audit. The first defendant was not responsible for non receipt of
Rs.59,945.85 in the bank for the period from 30.12.81 to 5.3.83. He
has not misappropriated the amount as alleged and the plaintiff was not
entitled to get any amount. Details of remittance in the branch office,
were submitted to the Head Quarters of plaintiff corporation and even
though the vigilance department was investigating the matter for the
last three years, they were not able to trace out such a misappropriation.
The requisite enquiries to be conducted after furnishing of the charges
to the 1st defendant has not been conducted before he was dismissed
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from service. The first defendant has not given voluntary statement on
11.11.1983. The another statement was obtained from the first
defendant by the Financial Controller, at the Alleppey Branch by
inducement, threat and promise. The first defendant was informed by
the Financial Controller and the second defendant that in case he
admits the sole responsibility for the missing amount and makes a
token remittance, he will be absolved of all the responsibilities of the
missing amount. The second defendant informed first defendant that if
first defendant makes the token remittance second defendant will remit
the remaining amount. The suit was barred by limitation. The
averments are without disclosing source of the date of knowledge of
the fraud. No prayer of the plaintiff was legally allowable. Therefore
the first defendant prayed for dismissal of the suit.
4. The second defendant filed a written statement contending that
the suit is not maintainable under law. The averments in the plaint that
the receipts received by the first defendant were always signed by the
second defendant is incorrect. The Junior Executive in charge of office
superintendent or Assistant in charge of cash, depending on availability
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used to sign in the receipts as second defendant would be engaged in
field work. The exclusive responsibility of receiving cash etc,
bestowed only with the first defendant. The maintenance of cash books
was prescribed only on 1.9.1983 vide circular No.Acts 241/83 enabling
the superior officer to verify the details of day to day cash transactions
in the branch offices. He has not colluded with the first defendant.
The second defendant has not committed any fraud. He was also not
liable to pay any amount or interest. The second defendant prayed for
dismissal of the suit.
5. In the sub court PW1 to PW3 and DW1 and DW2 were
examined and Exts. A1 to 18, B1 and B2 and C1 to C12 were marked.
The learned Sub Judge decreed the suit and the plaintiff was given a
decree for realisation of Rs.94,415.47 with interest at the rate of 15.5%
per annum from the date of suit till date of realisation from the
defendants alongwith costs. Against that judgment and decree the first
defendant filed this appeal. During the pendency of this appeal the 2nd
respondent/the 2nd defendant died and no legal heirs were impleaded
and therefore the appeal against 2nd respondent was dismissed as
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abated.
6. We heard the learned counsel for the appellant and learned
counsel for the first respondent.
7. The learned counsel for the appellant submitted that the suit is
one for realisation of money and as such the date on which the plaintiff
came to know the alleged irregularity cannot be the basis for
determining that question of the limitation. The learned counsel for the
appellant further submitted that the alleged misappropriation is within
the period commencing from 30.12.81 to 5.3.83 and the annual audit
for the alleged period has not detected any misappropriation and
therefore the court below went wrong in overlooking the same.
Whereas the learned counsel for the first respondent supported the
judgment.
8. In the plaint Rs.59,945.85 is shown as the amount
misappropriated and Rs.34,469.62 is claimed as interest at the rate of
15.5% till 30.10.85, less Rs.1,000/- remitted by the Demand Draft on
4.1.84 and thus the plaintiff claims Rs.94,415.47.
9. In the plaint, it is alleged that the cause of action for the suit
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arose on 26.5.83 when the fraud and misconduct of defendants were
initially known to the plaintiff. PW1 – the Deputy Manager (Legal)
and the plaintiff corporation deposed that the fact of non-remittance by
the first defendant was known only on 26.5.83. The first defendant is
examined as DW1. DW1 admits in cross-examination that the
irregularity of non-remittance of the amount in the bank came to the
knowledge of the plaintiff on 26.5.83 when the second defendant
reported the matter. Therefore it is clear that the plaintiff came to know
about the misappropriation only on 26.5.83. The plaintiff filed the suit
on 31.10.85 within 3 years and as such the learned Sub Judge is
justified in finding that the suit is not barred by limitation.
10. The testimony of DW1 shows that misappropriation came to
the knowledge of the plaintiff on 26.5.83 when the second defendant
reported the matter to the plaintiff. Therefore it is evident that inspite
of annual audit, the irregularity was not detected at the proper time.
DW1 admits that in Page No.24 of Annual Report for the year 1983-84
of the plaintiff corporation which is marked as Ext.A16(a), it is stated
that an amount of Rs.59,945.85 was not remitted in the bank and that
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statement is correct. DW1 deposes that he has no dispute about that
figure but his dispute is whether the amount is collected by him or not.
Ext.A10 is the written reply given by the first defendant before the
Managing Director of the plaintiff corporation against the memo of
charges and allegations against the first defendant. In Ext.A10, the first
defendant admits that he had misappropriated the amount. DW1
admits that Ext.A10 is written in his own hand writing. Ext.A3 is the
letter dated 31.12.83 written by the first defendant to the Managing
Director of the Plaintiff corporation stating that he is sending a
Demand draft for Rs.1,000/- drawn in State Bank of Travancore in
favour of plaintiff corporation and asking to credit the amount to the
missing amount of Alleppey branch during his tenure as cashier.
Ext.A14 is the statement dated 11.11.83 given by the first defendant
before Financial Controller on account of missing remittance. In
Ext.A14 it is stated by first defendant that he has the sole responsibility
and that he was in charge of the cash and he used to utilise the cash
received at the office for personal purposes and that he is ready to remit
the missing amount in instalments. As observed by the learned Sub
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Judge the burden is on the first defendant to prove that the admissions
made by him in the above documents have been initiated by threat or
promise. But the first defendant has not adduced any independent
evidence to discharge his burden. In view of specific admission by first
defendant in Ext.A10, A14 and A3 regarding the suit liability the
learned Sub Judge is justified in decreeing the suit against the first
defendant. It has come out in evidence that even where the entire
amount was misappropriated by the first defendant himself, the second
defendant is equally liable to the plaintiff along with the first defendant
as the misappropriation was possible only because of the negligence
and dereliction of duty of the second defendant. Therefore, the second
defendant is jointly and severally liable for the suit amount along with
the first defendant. Since the liability does not arise out of a
commercial transaction, interest of 15.5% awarded from the date of the
suit has to be reduced to 6%.
Accordingly this appeal is allowed in part. The judgment and
decree in O.S. No: 74 of 1985 on the file of Sub Court Alleppey is
modified and the plaintiff is allowed to realise an amount of 94,415.47
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with interest at the rate of 6% per annum from the date of the suit till
the date of realisation and cost from the defendants and their assets.
Parties are directed to suffer their respective costs in this appeal.
K. M. JOSEPH JUDGE,
M. L. JOSEPH FRANCIS, JUDGE.
dl/