Bank Withheld Deposits: Supreme Court Rules on Limitation for Counter-Claims

The Supreme Court of India recently delivered a judgment in the case of Topline Shoes Limited & Another vs. Punjab National Bank, clarifying the legal position regarding counter-claims and the applicability of the **Limitation Act, 1963**. The case revolved around whether the counter-claim made by Topline Shoes Limited against Punjab National Bank was barred by limitation.

Background of the Case

The dispute arose when **Topline Shoes Limited**, the appellant, had deposited an amount in a **current account** with **Punjab National Bank**. The company later alleged that the bank had illegally withheld the deposited sum. This led to the filing of **O.A. No.948 of 2000** before the **Debt Recovery Tribunal (DRT)**, wherein the bank raised claims against the company. The company, in response, filed a **counter-claim**, asserting that the bank had wrongfully withheld its money.

After a prolonged legal battle, the **DRT dismissed both the bank’s claim and the company’s counter-claim**. Both parties appealed before the **Debt Recovery Appellate Tribunal (DRAT)**, which upheld the DRT’s decision. Dissatisfied with the ruling, Topline Shoes Limited approached the Bombay High Court, which dismissed its writ petition on grounds of **limitation**.

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Petitioner’s Arguments

The petitioners, Topline Shoes Limited and another, argued that:

• The company’s deposited amount was **wrongfully withheld** by Punjab National Bank.
• Since the amount was **not a security or fixed deposit**, the bank had **no right to withhold it**.
• The limitation period should be governed by **Article 22 of the Limitation Act**, which provides for a three-year period from the date a demand is made.
• The company **sent a legal notice in September 1999**, which should be treated as the starting point for the limitation period.
• Since the counter-claim was filed in 2000, it was **within the limitation period** and should have been entertained.

Respondent’s Arguments

Punjab National Bank defended its case by arguing:

• The counter-claim was **barred by limitation** and fell under **Article 113 of the Limitation Act**, which provides a **three-year limitation from the date when the right to sue accrues**.
• The company had **consciously decided not to challenge the bank’s actions** in 1994, despite considering legal recourse at that time.
• The legal notice sent in **1999** could not **restart the limitation period**, as the cause of action arose much earlier.
• The High Court, DRT, and DRAT had **rightly concluded that the counter-claim was time-barred**.

Supreme Court’s Observations

The Supreme Court carefully examined the facts and the **applicability of the Limitation Act** to the counter-claim. The court made the following key observations:

• The claim of undue influence and coercion was raised belatedly, after a lapse of **more than five years**.
• The company’s **board of directors had discussed the possibility of litigation but chose not to pursue legal action** in 1994.
• The company’s argument that the limitation period began in **1999** (when the legal notice was issued) was **flawed**, as the cause of action arose when the bank allegedly withheld the money.
• The DRT, DRAT, and High Court had **rightly held that the counter-claim was covered under Article 113**, not Article 22, of the Limitation Act.

Key Legal Precedents Referenced

The Supreme Court relied on the following legal precedents:

• Jammu & Kashmir Bank Ltd. v. Attar-Ul-Nissa (1967): Clarified the **application of the Limitation Act** to claims arising out of bank deposits.
• Devendra Pratap Narain Rai Sharma v. State of Uttar Pradesh (1962): Established that **mere delay in raising claims cannot revive a cause of action**.
• Union of India v. Madhusudan Prasad (2004): Held that **limitation laws must be strictly applied** to prevent stale claims.

Final Judgment

Based on these findings, the Supreme Court ruled:

• The counter-claim was **barred by limitation** under **Article 113** of the **Limitation Act, 1963**.
• The legal notice issued in 1999 **did not extend or restart** the limitation period.
• Topline Shoes Limited had **consciously chosen not to challenge the bank’s actions in 1994**, which barred them from seeking relief after so many years.
• The appeals were dismissed, and the judgment of the **Bombay High Court was upheld**.

With this ruling, the Supreme Court reaffirmed the **strict application of limitation laws** in financial disputes, ensuring that claims must be brought within the prescribed timeframe.

Petitioner Name: Topline Shoes Limited & Another.
Respondent Name: Punjab National Bank.
Judgment By: Justice B.R. Gavai, Justice Pamidighantam Sri Narasimha.
Place Of Incident: Mumbai, Maharashtra.
Judgment Date: 19-07-2022.

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