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Reserve Bank of India Through the Governor of the Reserve Bank of India at Bombay Vs. Ram Kumar Varshney - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad High Court
Decided On
Case NumberCivil Revn. No. 1072 of 1956
Judge
Reported inAIR1963All574
ActsReserve Bank of India Act, 1934 - Sections 28; Reserve Bank of India (Note Refund) Rules, 1935 - Rules 2 and 5(A); Code of Civil Procedure (CPC) , 1908 - Order 7, Rule 1 - Order 20, Rule 4; Provincial Small Cause Courts Act, 1887 - Sections 25
AppellantReserve Bank of India Through the Governor of the Reserve Bank of India at Bombay
RespondentRam Kumar Varshney
Appellant AdvocateT.N. Sapru, Adv.
Respondent AdvocateD. Sanyal, Adv.
DispositionApplication dismissed
Excerpt:
.....- on investigation found note does not belong from specified categories - government, reserve bank or currency officer liable to make payment. (ii) interpretation - 'mutilated note' - section 28 of reserve bank of india act, 1934, rule 2(e) of reserve bank of india rules, 1935 and order 7 rule 1 of code of civil procedure, 1908 - notes of which portion is missing - notes are torn - torn parts are joined together and clearly make out to be part of same notes - temporary separation by torn or being cut in two parts may be mutilated - joined together are not mutilated - notes are not mutilated - opposite party had come with clear allegation about mutilation - civil court had jurisdiction to entertain the suit. (iii) revision - section 25 of provincial small causes courts act, 1887 -..........with the foundation of the reserve bank of india on 1st or april, 1935, the sole right to issue bank notes was conferred upon that bank under section 22 of the reserve bank of india act, 1934. hence forward the reserve bank commenced issuing its own notes. the high denomination notes of rs. 1,000, rs. 5,000 and rs. 10,000 were introduced on 1st of april, 1954. in 1956 the reserve bank of india act was amended and the state was equipped with larger reserves.5. that the notes presented at the currency office for payment in this case were legal tender is a matter of ad-mission between the parties. the question for consideration is whether the liability for the acceptance of a legal tender can be repudiated by the currency office. mr. sapru has placed reliance upon the provision of.....
Judgment:
ORDER

Jagdish Sahai, J.

1. This revision application has been filed under the provisions of Section 25 of the Provincial Small cause Courts Act and is directed against the decree dated 28th of May, 1956, passed by Sri P. C. Rastogi, judge Small cause Court, Chandausi, decreeing a suit filed by the opposite parry Sri Ram Kumar Varshney for the recovery of a sum of Rs. 193/- against the applicant the Reserve Bank of India on the finding that the Currency Officer was not justified in refusing to make payment in respect of certain currency notes presented to him on the allegation that they were mutilated or imperfect.

2. I have heard Mr. T. N. Sapru for the Reserve Bank of India and Mr. D. Sanyal for Sri Ram Kumar Varshney the plaintiff opposite party. Mr. Sapru has made the following three submissions before me.

(1) Whether or not payment should be made in connection with a note presented at the currency office is in the sole discretion of the prescribed officer and the matter is not justiciable;

(2) The currency notes presented by the opposite party were mutilated or imperfect within the definition of those expressions in the Reserve Bank of India Act and the rules framed thereunder; and

(3) The learned Judge failed to consider the question whether or not the notes presented for enactment or payment were imperfect notes.

3. I will take the three submissions seriatim.

4. Before I examine the correctness or otherwise of the first submission it appears to me necessary to give in brief the history of paper currency legislation in India. Up to the year 1861 the three Presidency Banks i.e., of Bengal, Bombay and Madras under the Acts of 1809 1840 and 1843 used to issue currency notes. A few other private Banks were also issuing notes but neither the notes issued by the Presidency Banks of Bengal, Bombay and Madras nor by private banks were legal tenders. On March 1, 1862 the Paper Currency Department of the Government of India was established in exercise of the authority conferred by Act No. 19 of 1861 and with effect from that date all the banks were prohibited from issuing notes payable on demand. By Act No. 20 of 1832 paper currency was extended to Burma in that year. On the requisition of the Comptroller General, notes could also be issued against goto bullion and gold coin which were legal tenders in that circle only but from 1903 onwards paper currency was gradually universalised. In that year five rupee notes were madeuniversal legal tender except in Burma. This restriction wasremoved in 1909. Notes of the denominations of Rs. 10 and Rs. 50 were universalised in 1910, of Rs. 100 in 1911 and of Rs. 500 and Rs. 1,000 in 1931. Up to 1905 the Government securities in the Paper Currency Reserves consisted only of the rupee security. By means of the 1905 Act the securities of United Kingdom and Ireland were also included. With the foundation of the Reserve Bank of India on 1st or April, 1935, the sole right to issue bank notes was conferred upon that bank under Section 22 of the Reserve Bank of India Act, 1934. Hence forward the Reserve Bank commenced issuing its own notes. The high denomination notes of Rs. 1,000, Rs. 5,000 and Rs. 10,000 were introduced on 1st of April, 1954. In 1956 the Reserve Bank of India Act was amended and the State was equipped with larger reserves.

5. That the notes presented at the currency office for payment in this case were legal tender is a matter of ad-mission between the parties. The question for consideration is whether the liability for the acceptance of a legal tender can be repudiated by the currency office. Mr. Sapru has placed reliance upon the provision of Section 28 of the Reserve Bank of India Act which reads as follows:

'Notwithstanding anything contained in any enactmentor rule of law to the contrary, no person shall of rightbe entitled to recover from the Central Government or the Bank, the value of any lost, stolen, mutilated or imperfectcurrency note of the Government of India, or bank note :

Provided that the Bank may, with the previous sanction of the Central Government, prescribe the circumstances inand the conditions and limitations subject to which thevalue of such currency notes or bank notes may be refunded as of grace and the rules made under this provisoshall be laid on the table of Parliament.'

6. In the present case what is alleged is that the notes tendered at the currency office were either mutilated or were imperfect currency notes. The Reserve Bank of India Act (hereinafter called the Act) does not define mutilated or imperfect notes. The same have been defined in Rule 2 or the rules framed under the Act. Clause (e) of Rule 2 reads asfollows:

' 'mutilated note' means a note of which a portion ismissing;

Provided that the portion presented is clearly more than a half note and that if the portion presented consists orparts of a note joined together each part of such portionis identifiable as part of the same note.'

Clause (a) of Rule 2 deals with altered notes and reads asfollows:

' 'altered note' means a note in which an alterationhas been made in the number, date, signature or valise or in any other respect.'

A mismatched note has been defined in Clause (d) of Rule 2 as fellows:

' 'mismatched note' means an imperfect note formed by joining a half note of one note to a half note of another note.'

7. Imperfect note has not been defined but no definitionwas necessary because an imperfect note would be a note which is not perfect or, in other words, in which all that is required to make a currency note does not exist, in Webster's New Twentieth Century Dictionary the followingmeanings have been given to the word imperfect:

'unfinished; not finished or complete; lacking in some thing; not perfect; having a defect, fault or error.'

8. The findings of fact recorded by the learned Judge Small Couse Court in this case are firstly that the notes tendered for encashment were neither mutilated nor imperfect and secondly that the Reserve Bank had without any justification refused to encash the notes, tendered.

9. Mr. Sapru has also placed reliance upon Rule 5(a) which reads as follows:

'If the prescribed officer is of the opinion that a note presented under these rules in prosecution of a claim or any portion of such note, has been deliberately cut, torn defaced, altered or dealt with in any other manner with a view to establishing a false claim under these rules or other wise to defraud, he shall, notwithstanding anything to the contrary in any of these rules, reject the claim.'

10. It has been contended that the rule which is a statutory one has left the matter in the discretion of the prescribed officer and so long as he cannot be accused of having acted mala fide orders passed by him under Rule 5(A) cannot be challenged in any Court of law. The order passed by the prescribed officer in this case is a printed one and reads as follows:

'To

Shri Ram Kumar Varshney,

45, Jarai Gate, Chandausi.

Dear Sir,

We have to advise that out of the notes which were presented with your letter No. Nil dated 25-6-55 those noted in the margin cannot be paid as the conditions (vide relevant extracts from Reserve Bank of India (Note Refund) Rules quoted overleaf) under which payment can be made on such defective notes are not satisfied as indicated below:--

x x x xParticulars ofnotes 12 x 1)78 x 2) Rs. 193/-5 x 5) 1. (h) Deliberately dealt with in order to establish a false claim or otherwise to defraud (see Rule 5(A)).

2. The notes have been retained in this office under Rule 17.

You are advised that the exchange value of the remain,ing def. notes worth Rs. 6/- is being remitted by M. O.less commission.,

Yours faithfully,

Sd. R. K. Srivastava,

P. Currency Officer.'

No other order purporting to be under Rule 5(A) is on the record of the case.

11. It has been alleged that Rule 5(A) has been learned under Section 28 of the Act. That section does not provide that if in the opinion of the prescribed officer a currency note is deliberately cut, torn, defaced, altered or dealt with in any other manner with a view to establishing a false claim, payment can be refused. The word 'opinion' or some other word to that effect does not occur in Section 28 at all. The decision of the question whether a note is lost, stolen, mutilated or imperfect has not been left Under Section 28 of the Act to the opinion of the prescribed officer, much less to his subjective opinion as alleged by Mr. Sapru. As the words of Section 28 stand Court would always have the right to deter mine whether or not a currency note has been lost, stolen or mutilated or was an imperfect note. The question for determination is: what is the source of power for providing toRule 5(A) that the opinion of the prescribed officer would be conclusive in the matter? Mr. Sapru has contended that the proviso to Section 28 of the Act speaks of prescribing the circumstances, conditions and limitation, and consequently Rule 5(A) could have been framed leaving the matter to the opinion of the prescribed officer. Considering the language of Section 28 it appears to me that it will be open to a court to examine for itself whether or not a note is lost, altered or mutilated. In case it comes to the conclusion that it is not lost, mutilated or altered it can direct the payment and no question of opinion, much less subjective opinion, of the prescribed officer cart prevail. It is only in a case where a note is mutilated or altered or lost and the Government is not liable to pay under Section 28 of the Act that the question whether or not payment by way of grace could be made, arises. Only in such cases can Rule 5(A) apply and in those cases the Court would not lightly interfere with the opinion of the prescribed officer.

In the case of Radha Krishna v. Reserve Bank of India : AIR1945All29 a Division Bench of this Court had toconsider the provisions of Section 28 of the Act. It was heldin that case that before a note can be described as mutilatedit is an essential condition that a portion of that noteshould be missing and that if two halves of one currencynote are sent to a Currency Officer and both halves are identifiable as one note Section 28 is not applicable and the Currency Officer should allow a claimfor the value of the note. In the case of Hong Kong andShanghai Banking Corporation v. Lo Lee Shi, 1928 AC 181the Privy Council held that if the identity of the documentas a note of the bank was established, and it contained anthe elements necessary to render it valid and effectual asa negotiable instrument, the bank was liable to pay theholder. In that case it was not denied that the pieces werepieces of one note, nor was it suggested that the missingparts could be used in building up another note. That decision is therefore of little assistance to us. It may also bementioned that this was a case of a bank note and notof a legal tender. My attention was invited to the case orSuffell v. Bank of England, (1882) 9 QBD 555. This ease isalso on different facts and does not render any assistancein deciding the question that has been raised before me.The law on the point has been stated in the following wordsin Halsbury's Laws of England, Vol. 2, paragraph 286 atp. 155:--

'Material alteration in a bank note invalidates it, even in the hands of a holder in due course. An alteration of the number is a material, alteration.'

On the basis of what I have said above and especially In view of the provisions of Section 28 of the Act it must be held that if a note is mutilated, imperfect, lost or stolen the bank or the currency office is not bound to make the payment of the amount represented by the note. Though that is so, a certain amount of discretion has been given to the prescribed officer even in cases of lost, stolen, mutilated or imperfect currency notes to make payment by way of grace subject to the rules. Rules under Section 28 or the Act have been framed and rules 3 to 15 deal with the manner in which claims in respect or stolen, lost, mutilated or imperfect notes are to be disposed of. In my judgment the submission of Mr. Sapru that whether or not payment should be made in respect of a stolen, lost, mutilated or imperfect note depends upon the opinion of the prescribed officer and so long as he does not act mala fide and conforms to the principles of natural justice and further follows the procedure provided by the rules his decision would not ordinarily be justiciable, iscorrect. However Courts have always the jurisdiction to investigate whether or not a note is lost, mutilated, stolen or imperfect currency note. If in their opinion that note does not conform to any of these categories the Government or the Reserve Bank or the currency office are liable to make the payment and the payment can be enforced through the order of the Court in such cases. There is good authority for the proposition that civil Courts have all the powers of deciding disputes of every nature except those which are expressly excluded from their jurisdiction (see Secy. or State v. Mask and Co. ). Under the provisions of Section 9 of the C.P.C. all suits of a civil nature can be decided by a civil Court, the only exceptions being cases which are expressly excluded from their jurisdiction. There is nothing in law and nothing has been pointed out to me to justify the conclusion that the jurisdiction of the Civil Courts is excluded from determining the question whether or not a particular currency note is mutilated.

12. Mr. Sapru has also placed reliance upon the case of Chaube Jagdish Prasad v. Ganga Prasad : AIR1959SC492 . That is a case which deals with the powers of interior tribunals and not of civil Courts. There is nothing in that case to conclude that a suit like the present one is barred from the cognizance of the civil Courts or that under Section 9 of the C.P.C. a civil Court cannot take cognizance of a matter like this. I have already said above that it is only when a party goes to the prescribed officer with a claim on the allegation that a particular note is either lost or stolen or is mutilated or imperfect that the latter seizes jurisdiction to decide whether or not he would make the grace payment. In other words, it is only in admitted cases of the notes being stolen or lost or mutilated or imperfect that the jurisdiction of the prescribed officer is attracted. For these reasons I am unable to accept the first submission of Mr. Sapru.

13. The next submission of Mr. Sapru is that in any case the present notes were mutilated and the opposite party had gone to the prescribed officer with a detinue allegation that they were mutilated. He has invited my attention to Ex. 1 the letter addressed by the opposite party to the Currency Officer, Reserve Bank of India, Kanpur. In this letter it is stated that the daughter of the opposite party had torn some notes which were being sent to him for encashment. In the plaint the opposite party alleged that the currency notes, the subject-matter of the present case, had been inadvertently torn by a child. Mr. Sapru on the basis of these admissions has urged that since the notes Were torn they must be taken to be mutilated and it must be held as a matter of fact that the opposite party went to the prescribed officer on the definite allegation that the notes were mutilated. It is not correct to say that the case of the opposite party was that the notes were mutilated. In fact in paragraph 4 of the plaint the opposite party clearly stated as follows:

'That the plaintiff's claim does not come under Rule 5(A) and the notes in question were also not mutilated. The notes in question were simply torn and parts of the same notes. They were only pasted and bear the name stamp of the plaintiff. As such no question of their rejection under Rule 5(A) arises nor any other provision of Reserve Bank of India Act applies to their rejection.'

Even in the notice Ex. 1 it was nowhere stated by the opposite party that the notes were mutilated. All that was stated was that the same had been inadvertently torn by his daughter. The mere fact that notes are torn cannot justify the conclusion that they are mutilated. If two parts of a note canbe matched together and b' made whole and the identity or the two parts is established by joining them as parts of the same note no question of their being mutilated can aver arise. Mr. Sapru has placed reliance upon the definition or the word 'mutilate', in Webster's New Twentieth Century Dictionary where the following meanings nave been given to the word 'mutilate':--

'to cut off a limb or essential part of; to mangle; to maim; to cripple; to Injure; as to mutilate an animal body; to mutilate a statue; to damage, injure, or otherwise make imperfect, especially by removing an essential pan or parts, as the censors mutilated his speech.' So long as the two parts can be put together to make out that the two constituted one single note nothing in the definition given above can apply. A temporary separation by being torn or being cut in two parts' may be mutilation so long as the two parts are separate but no sooner they are joined together they become a whole and cannot be described by the term 'mutilated'. Rule 2(e) of the rules reads as follows:-- ' 'mutilated note' means a note of which a portion is missing:'

Mr. Sapru's contention has been that Rule 2(e) is illegal Inasmuch as e restricted meaning has been given to the word 'mutilated' in the rules than the meaning given, to in the Act. I am unable to accept this argument. There is nothing in the Act to show that any meaning wider than what is given in the rules have been given to the wore 'mutilated' in the Act. From the definition it is clear that in order to be mutilated a part of the note must be missing. When the two parts of the same note are pasted together It cannot be said that any part is missing. Consequently I am unable to hold that the mere fact that a note is torn will render it mutilated even though the torn parts are joined together and clearly make out to be parts of the same note. Whether or not a Court has jurisdiction to entertain a suit is always decided on the basis of the plaint allegations (see D. N. Rage v. Mohd Haider : AIR1946All379 ) and Ananti v. Channu : AIR1930All193 . In the present case the opposite party had come with a clear allegation that the notes were not mutilated. The Court had perfect jurisdiction to entertain the suit and decide whether in fact the notes were mutilated or not. 1 therefore reject the second submission of Mr. Sapru also.

14. Next it is contended that the learned Judge Small Cause Court should have gone into the question whether or not the currency notes were imperfect. It is complained that the learned Judge has not examined the facts of this case from that point of view, in my Judgment this submission is also not justified as the following sentences from the judgment of the Court below would show:

'Issue No. 3. The notes are not mutilated In terms of definition as given in the R. B. of India Act. Section 28 of it does not apply. The counsel for deft, does not even say that they are mismatched. I have seen the notes. They are certainly not mutilated. They are not even imperfect. I have tried to find out as to how they were mutilated of imperfect. These notes are no doubt joined together and appear to be genuine.'

There can be no matter of doubt that the learned Judge Small Cause Court examined the case not only from the point of view of the notes being mutilated but also from the point of view of their being imperfect, in my Judgment, therefore, there are no merits in the third submission of Mr. Sapru also.

15. It has been lastly contended that an examination of the notes reveals that the parts which have been joined together are not parts of the same note, and it has been strenuously contended before me that if they are not parts of the same note then from every note some parts are missing and thus each one of these notes is a mutilated note. The learned Judge Small Cause Court definitely observed that to him it appeared that the joined, pieces were genuine. In other words his examination of the notes led him to the conclusion that the pieces joined together were pieces of the same note. Mr. Sapru has shown to me some of these notes and it may be that the parts joined together into one whole note now may not have been parts of the same note, but the question that immediately arises for consideration is whether on a point like this a revision application can be allowed. In the first place it is not possible for me as a non-expert to say with any amount of precision of exactitude that the component parts of the notes as now presented are not really parts of the same notes.

Secondly it is a question of fact and the decision of the learned Judge Small Cause Court should ordinarily be accepted on a question of fact. Under the provisions of Section 25 of the Provincial Small Cause Courts Act under which this revision application has been; filed, this Court can only correct legal errors committed by the Small Cause Court. It has no jurisdiction to investigate into questions of fact and record different findings of fact from those recorded by the learned Judge Small Cause Court. Apart from it, as I have already said above it is not possible t6 definitely say that the conclusion arrived at by the learned Judge Small Cause Court that the 'notes are no doubt joined together and appear to be genuine' is not correct, in this connection Mr. Sapra complained that the evidence of D. W. 1. S. Bose who was a clerk in the currency office has not been considered by the learned Judge Small Cause Court. It has been contended that his statement was in the nature of expert evidence and, should have been given due weight. I have carefully read the statement of this wit-ness. He is a clerk in the currency office and has not stated In his statement that he is an expert for examination or currency notes. I am, therefore unable to agree with Mr. Sapru that the evidence of this witness was in the nature of expert evidence. The learned Judge Small Cause Court in writing his judgment had to conform to the rule relating to judgments laid down In Order XX, Rule 4, C.P.C. The said provision reads as follows:

'4. (1) Judgments of a Court of Small Causes need not contain more than the points for determination and the decision thereon.'

It is not necessary that the learned Judge Small Cause Court should have discussed the evidence of each witness.

16. It is contended on the basis of Chaube Jagdish Prasad's case : AIR1959SC492 (Supra) that if a Court by wrongly deciding facts clutches jurisdiction, the order can be interfered with by a High Court under Section 115, C.P.C. In my judgment that is a distinguishable case. Here no Jurisdiction has been clutched by the Judge Small Cause Court by deciding any question wrongly.

17. In my judgment, there are no merits in this revision application. It is dismissed but there is no order as to costs.

18. Before concluding the judgment, I would like toplace on record my great appreciation of the assistancethat Mr. Sapru and Mr. Sanyal have given me in this case.


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