Suit No. 1942 of 2007. Case: Veritas Exports and Anr Vs Bank of Baroda. High Court of Bombay (India)

Case NumberSuit No. 1942 of 2007
CounselFor Appellant: Mr. Chandra Naik, Adv. and For Respondents: Mr. A.B. Shinde, Adv.
JudgesS. C. Gupte, J.
IssueCustoms Act, 1962 - Section 108; Civil Procedure Code - Section 20; Companies Act, 1956; Banking Regulation Act, 1949
Citation2016 (339) ELT 252 (Bom.)
Judgement DateJune 16, 2016
CourtHigh Court of Bombay (India)


  1. The suit is filed for a money decree against a bank by a constituent of the Bank. The decretal amount consists of interest, claimed as having accrued to the Plaintiff, on a certain sum retained by the Defendant bank by freezing the Plaintiff's account on instructions of the customs department of Government of India. The Plaintiff claims to have issued a mandate to the Defendant bank to keep the said sum in fixed deposit whilst the account was frozen. The Plaintiff's case is that despite such mandate, the amount was kept in a suspense account which did not earn any interest. The Plaintiff sues for the unearned interest, alleging breach of contract on the part of the Defendant bank.

  2. The Plaintiff is a Government recognized export house carrying on the business of exports under licence granted by the Government of India. The Plaintiff held a current account with the Defendant bank in connection with its exports business. The Commissioner of Customs (Preventive), R. & I. Division, by his letter dated 4 November 1996, informed the Defendant that the Plaintiff's exports in connection with a particular L/C were under investigation and that preliminary investigations had revealed that as against purported exports of Rs.8 Crores, no physical exports had been made, but only paper transactions had been carried out. The Commissioner of Customs, in the premises, called upon the Defendant bank to withhold any operations of the subject L/C and not to release any payment to any party thereunder without prior clearance of the Customs. Simultaneously, a summons was issued under Section 108 of the Customs Act, 1962, requiring the Defendant to supply information and documents. The Defendant, accordingly, proceeded to freeze the Plaintiff's current account with the bank. During the period the account was frozen, export remittance in the sum of Rs.65,66,200/on account of export of goods to Russia under the subject letter of credit was received and credited to the said account. The amount of the subject remittance was remitted by State Bank of India to the Defendant bank under specific instructions not to disburse the amount to the beneficiary till clearance was received from the Commissioner of Customs (Prevention). The Defendant, accordingly, kept the amount of the remittance in the sundry creditors account. In the meantime, by its letter dated 7 July 1998, the Plaintiff claims to have issued instructions to the Defendant to keep the remittance amount in a fixed deposit so as to enable the Plaintiff to earn maximum interest. (There is a controversy between the parties as to whether or not this letter was actually received by the Defendant.) The Plaintiff, thereafter, proceeded to challenge the purported inquiry of the Customs Department including freezing instructions issued by the latter before this Court in a writ petition. The Defendant was a party to this petition along with the Customs Department. By its order dated 9 June 2004, a Division Bench of this Court allowed the writ petition inter alia by...

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