Case Note & Summary
The dispute arose from two recovery suits filed by sister concerns, M/s. Palbro International and Manekji Nensey & Sons, against The Federal Bank Ltd. Both firms, having common partners, operated current accounts and availed credit facilities from the defendant bank's Dongri branch. The plaintiffs had deposited a fixed deposit receipt of Rs.3 lakhs as margin money. By letter dated 24 May 1982, they instructed the bank to re-credit the maturity proceeds with interest to their current account. The bank delayed and eventually by letter dated 8 June 1982 claimed that the plaintiffs owed amounts to another constituent, Mulraj D. Dungarsey & Company Pvt. Ltd., in relation to export of lentil seeds. The plaintiffs denied any liability and sought re-credit of the FDR amount. Meanwhile, the plaintiffs required enhanced credit facilities to fulfil export obligations. The bank's Board resolved on 9 May 1983 that the claim and counter-claim regarding lentil exports be settled before granting additional facilities. On 17 May 1983, the plaintiffs' partner attended a meeting where the bank insisted that a letter be signed as a precondition for enhanced facilities. The plaintiffs alleged that they signed the letter (Ex. P21) under economic duress, coercion, and undue influence, as the bank threatened to withhold credit facilities indispensable for meeting export obligations. The letter purported to withdraw the FDR claim and authorize the bank to adjust the amount towards alleged dues of the third party. The plaintiffs contended there was no consideration, the consent was not free, and the letter was void. In February 1986, the bank unilaterally credited Rs.3,96,268.50 (FDR proceeds) and simultaneously debited Rs.3,84,268.50 to the account of Mulraj D. Dungarsey & Company Pvt. Ltd. The plaintiffs promptly returned the debit advice and demanded re-credit. The bank’s defense was that the plaintiffs owed huge amounts, the disputes were settled by the letter of 17 May 1983, the plaintiffs had availed enhanced facilities and earned profits, and were estopped from challenging the adjustment. The bank also claimed the right to appropriate the FDR amount. The suits were filed in 1986. By consent, common evidence was recorded on 6 August 2004, and both suits were tried together. The judgment excerpt ends before the court’s analysis and decision, so the final outcome is not disclosed in the provided text.
Issue of Consideration
SUIT NO. 2833 of 1986
