14-August-2025 Banking Law >> Business & Commercial Law  

In a recent legal ruling of IDBI Bank Vs P.D. Gupta And Company, the High Court dismissed a company appeal filed by a bank, IDBI, confirming a lower court's order for the bank to refund Rs. 1 crore along with interest to P.D. Gupta & Company (the respondent). The case centered on a failed one-time settlement (OTS) transaction and the bank's unauthorized appropriation of funds.

Background of the Dispute:

The appeal originated from a winding-up proceeding against Moradabad Syntex Limited (MSL), a company in liquidation. In 2005, P.D. Gupta & Company offered to purchase MSL's land for Rs. 6 crore as part of a revised OTS proposal. As a token of good faith, P.D. Gupta & Company paid Rs. 1 crore to IDBI, the lead financial institution for the settlement.
 

 
However, the deal never went through. The respondent claimed they were unaware of an ownership dispute over the land and that the OTS proposal was never fully sanctioned by all the secured creditors. As a result, P.D. Gupta & Company requested a refund of the advanced amount. When the bank refused, the respondent filed a company application seeking the refund.

The Bank's Arguments and the Court's Rejection:

IDBI's primary defense was that the respondent had "stepped into the shoes" of MSL and that the Rs. 1 crore payment was an assumption of MSL's debt. The bank claimed it was authorized to appropriate the funds based on a letter from MSL dated January 27, 2006, which requested that the amount be adjusted against MSL's outstanding dues. The bank also presented a later self-serving letter from MSL's director and a vague bank statement to support its claim that MSL had refunded the money to the respondent, thus absolving the bank of any liability.

The Court thoroughly analyzed the bank's arguments and found them to be without merit. It noted that the bank's claim about P.D. Gupta & Company "stepping into the shoes of MSL" was a new argument that contradicted its earlier stand, where it did not dispute receiving the payment from the respondent.

Most critically, the Court found no evidence that P.D. Gupta & Company had consented to the bank's appropriation of the funds. It dismissed the letters from MSL as unreliable and self-serving, noting that the accompanying bank statement lacked specific details to prove a refund was made. The Court concluded that since the OTS never materialized, the bank had no justifiable reason to withhold the deposited amount.

Conclusion and Order:

The High Court upheld the lower court's decision, emphasizing that the respondent was in a similar position to another prospective buyer in a related case who was also granted a refund. It affirmed that the bank's claims were baseless and lacked supporting evidence.

The appeal was dismissed, and IDBI was directed to refund the Rs. 1 crore along with 7% simple interest from the date of deposit until the date of payment. The bank was given two months to comply with the order.

Section 483, Companies Act - 1956  

COMPANIES ACT, 2013