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CASE NO.: Appeal (civil)  2275 of 2002

PETITIONER: Standard Chartered Bank

RESPONDENT: Andhra Bank Financial Services Ltd. & Ors.

DATE OF JUDGMENT: 05/05/2006

BENCH: Y.K. Sabharwal, B. N. Srikrishna & P.P. Naolekar

JUDGMENT: J U D G M E N T with Civil Appeal No. 2276 of 2002

SRIKRISHNA, J.

       These two appeals under Section 10 of the Special Courts (Trial of  Offences Relating to Transactions in Securities) Act, 1992 (hereinafter  referred to as "the Act") are against the judgments of the Special Court  constituted under Section 5 of the Act, by which judgments the Special  Court dismissed Special Court Suit No. 11/96 and allowed Misc. Petition  No. 81/95, which had been transferred to it. As a result of the said two  judgments of the Special Court, the claim made by the appellant-Standard  Chartered Bank (hereinafter referred to as "SCB") was negatived in  dismissed Suit No. 11/96, and the application made by Canara Bank as  principal trustee of Canbank Mutual Fund (hereinafter referred to as "CMF")  for a direction to  Nuclear Power Corporation of India Ltd. (hereinafter  referred to as "NPCL") to register CMF as the owner of certain bonds and to  pay the interest payable thereon was allowed.

FACTS:         Sometime in December 1991, NPCL issued bonds of two series -  9%  tax free bonds and 17% taxable bonds. These bonds were permitted by the  Controller of Capital Issues to be sold to banks and financial institutions for  private placement. On 24.2.1992 Andhra Bank Financial Services Ltd.  (hereinafter referred to as "ABFSL") made an offer to NPCL for placing Rs.  100 crores \026 Rs. 50 crores in 9% tax free bonds and Rs. 50 crores in 17%  taxable bonds. On 26.2.1992 NPCL wrote to ABFSL confirming the  allotment of the 9% tax free bonds and the 17% taxable bonds, as requested.  On 26.2.1992, NPCL issued a letter of allotment (hereinafter referred to as  the "LOA") confirming the allotment of 9% tax free bonds of the nominal  value of Rs. 50 crores (hereinafter referred to as the "suit bonds"). NPCL  also said that intimation would be given in due course as to when the  allotment letter duly discharged may be exchanged for bond certificates, and  that the interest payable on the suit bonds would accrue from the date of  allotment, payable on half yearly basis. On the same day ABFSL sold the  suit bonds to  SCB and in connection with the said sale issued its Cost  Memo No. 057 dated 26.2.1992 indicating the particulars of the suit bonds  and the cost at which they were being sold i.e. @ 85.05 at the total cost of  Rs. 42,52,50,000/-. Against the receipt of the said Cost Memo No. 057 from  ABFSL, SCB issued a Pay Order No. 246408 dated 26.2.1992  for the sum  of Rs. 42,52,50,000/-. ABFSL, in turn, issued a Banker’s Receipt  (hereinafter referred to as "BR") No. 23728 acknowledging receipt of the  sum of Rs. 42,52,50,000/- from SCB towards the cost of the suit bonds and  undertook to deliver the suit bonds of the value of Rs. 50 crores, when ready,  in exchange for the said BR duly discharged, and assured that, in the  meantime, the suit bonds would be held on account of SCB. On  26/27.2.1992, ABFSL addressed a letter to SCB requiring SCB to hand over  its BR No. 23728 in lieu of the original LOA in respect of the suit bonds as

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well as the 17% NPCL taxable bonds, which were said to have been  enclosed with the said letter.

       According to SCB, in April/May 1992, when the securities scam  broke out, the officers of SCB made an investigation of its records and found  that SCB did not have in its possession the original LOA, but only a  photocopy.

        On 20.5.1992, SCB wrote to NPCL alleging that though in ABFSL’s  letter dated 26.2.1992, it was stated that the original LOA was forwarded,  SCB had found that only a photocopy of the LOA had been enclosed. A  copy of ABFSL’s concerned letter was also enclosed. SCB further stated  that the original LOA purportedly sent by ABFSL was not available, that a  note may be made in NPCL’s records that the original LOA was missing  and, therefore, due caution should be exercised by NPCL. SCB also  requested for issue of a duplicate allotment letter on the undertaking to  return the original, if received by it, and keeping NPCL indemnified against  claims, if any, arising out of issue of the duplicate. On 29.5.1992, SCB  requested ABFSL to confirm to NPCL the fact of having sold the suit bonds  to SCB. On the  same date, ABFSL addressed a letter to NPCL (with a copy  endorsed to SCB), confirming having sold the suit bonds to SCB on  26.2.1992. They also confirmed that they had no objection to NPCL issuing  a duplicate LOA to SCB.  

       On 8.6.1992 one Hiten P. Dalal (hereinafter referred to as "HPD"),  who was acting as a broker in a large number of securities transactions of  banks and financial institutions, was declared a ’notified person’ under the  provisions of Section 3 of the Act. On 20.6.1992 SCB filed a First  Information Report ("FIR") against HPD and its own employees alleging  that, as a result of a conspiracy between HPD and its own employees,  several securities and monies had been misappropriated by HPD.  

       On 14.7.1992 CMF filled up a Transfer Deed dated 13.7.1992 and  lodged it along with the original LOA with NPCL seeking transfer and  registration of the suit bonds in its name. On 3.8.1992, NPCL wrote to SCB  that the matter with regard to issuance of duplicate LOA of the suit bonds  was being considered in consultation with its solicitors. On 17.8.1992, CMF  wrote to NPCL claiming that the suit bonds had been bought on 27.2.1992  from ABFSL through a broker, HPD, and that the consideration therefor had  been paid by certain adjustments between itself and ABFSL. CMF claimed  that it was the legitimate holder of the suit bonds as it had received them  against valid consideration.  On 8.9.1992, NPCL informed CMF that they  had received a request for issue of a duplicate LOA pertaining to the suit  bonds from SCB, which was also claiming purchase of the suit bonds from  ABFSL. On 8.9.1992 by another letter, NPCL informed SCB that CMF had  lodged the original LOA for registration claiming to have purchased the suit  bonds from ABFSL on 27.2.1992.  On 30.9.1992 NPCL asked ABFSL to  confirm if it had sold the suit bonds to SCB as NPCL had received the LOA  and the transfer deed in relation to the suit bonds duly endorsed by ABFSL  in favour of CMF. On 30.9.1992 NPCL informed CMF that as early as on  20.5.1992 it had received a letter from SCB conveying that the suit bonds  had been transferred in SCB’s favour by ABFSL and enclosing a letter of  ABFSL to evidence the transaction. They also referred to another letter of  29.5.1992 by ABFSL confirming that ABFSL had sold the suit bonds to  SCB on 26.2.1992 and that it had no objection to issuing/transferring the  LOA/bonds to SCB. On 9.10.1992 SCB wrote to NPCL stating that as the  suit bonds had been issued to ABFSL, who had confirmed selling the same  to SCB, the LOA from CMF may be disregarded. By another letter of  15.10.1992 from ABFSL to NPCL, ABFSL once again confirmed the selling  of the suit bonds to SCB and stated that as per market practice the suit bonds  had been sold with blank transfer deeds to SCB. On 6.11.1992 NPCL  informed SCB that, since there was a dispute over the ownership of the suit  bonds between SCB and CMF, the matter should be resolved between SCB  and CMF, only after which necessary action would be taken by it.

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       On 27.11.1992 SCB filed Suit No. 3808/92 on the Original Side of the  Bombay High Court against ABFSL, CMF and NPCL for a declaration that  it was entitled to the suit bonds and for an order directing NPCL to register  the suit bonds in the name of SCB and to hand over the same to SCB. A  further declaration was sought that CMF had no right, title and interest in the  suit bonds; in the alternative, SCB sought refund from ABFSL. The said suit  came to be transferred to the Special Court on 25.9.1996 and was re- numbered as Special Court Suit No. 11 of 1996.

       On 27.11.1992 CMF filed a petition before the Company Law Board  (hereinafter referred to as "CLB") under Section 111 of the Companies Act,  1956 seeking registration of the suit bonds in its name. The original  respondents to the petition were NPCL, ABFSL and HPD. SCB was  subsequently joined as a party respondent. In this petition, CMF alleged that  it had purchased the suit bonds from ABFSL on 27.2.1992 through HPD,  who, according to CMF, had acted as a broker/authorised agent of ABFSL in  the transaction and that the payment of the price of the suit bonds to ABFSL  was made by netting of the amounts of three other transactions between  CMF and ABFSL made on the same day (i.e. 27.2.1992).  

       On 27.2.1993 NPCL contested the petition by denying the so called  transaction alleged by CMF and stating that the matter was sub judice since  a suit was already filed in the Bombay High Court with regard to the alleged  suit bonds. ABFSL also filed a reply to the petition denying that it had sold  the suit bonds to CMF and affirming their sale to SCB on 26.2.1992. SCB in  its reply to the petition pointed out that it had purchased the suit bonds from  ABFSL after paying consideration and that ABFSL had also confirmed that  there had been no sale or delivery of the suit bonds to CMF. SCB alleged  that HPD had wrongly and fraudulently diverted the suit bonds to CMF.  On  16.3.1993 the CLB made an order directing all the parties to disclose the role  of HPD in the transaction.                   On 6.3.1995 the petition by CMF before the CLB was transferred to  the Special Court and re-numbered as Misc. Petition No. 81/95.  HPD had  filed no affidavit in reply to the petition when the matter was before the  CLB.  

       On 14.6.1996, after the transfer of the petition to the Special Court,  HPD filed an affidavit in reply in Misc. Petition No. 81/95 stipulating that  the contents thereof and the documents referred to could not and ought not to  be referred to and relied upon or used against HPD in any proceedings as he  could not be compelled to be a witness against himself in any court of law,  whether civil or criminal. According to HPD’s version, SCB had ’lent’ the  suit bonds and the 17% NPCL bonds to him on 27.2.1992; that he had  agreed to return the same with interest; that on 9.5.1992 he had purchased  the suit bonds from SCB and adjusted the price payable by him to SCB  against a sale by him of Cantriple Units and further that, he had sold and  delivered the suit bonds to CMF on 27.2.1992.

       On 25.6.1996, SCB replied to HPD’s affidavit and denied that it had  any transaction with HPD in respect of the suit bonds on 27.2.1992 and  denied that the suit bonds were sold by SCB to HPD on 9.5.1992, or that it  had purchased Cantriple Units from HPD. SCB also pointed out several  inconsistencies and contradictions in the stand taken by HPD in his affidavit.                   On 27.11.1996, the Special Court dismissed Misc. Petition No. 81/95  by holding that CMF had admitted through its counsel that it was not in a  position to show that it had paid any consideration for the suit bonds to  ABFSL, and, as no consideration was paid  by CMF either to ABFSL or to  SCB, CMF could claim no title to the suit bonds, even assuming that HPD  had acted as a mercantile agent and appeared to have obtained possession of  the LOA through/from SCB.  In view of this, the Special Court concluded  that CMF could claim no right, title and interest in the suit bonds. However,  in view of the fact that SCB had already filed Suit No. 11/96, it was held that  SCB’s title to the suit bonds could be decided in that suit.

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       On 23.12.1996, CMF preferred an appeal to this Court but failed to  obtain any interim relief except a direction from this Court that the Officer  on Special Duty, who was in possession of the suit bonds, would not part  with the suit bonds without notice to CMF and that the decision in Suit No.  11/96 would be subject to the decision in the appeal.

       On 10.1.1997, HPD took out Chamber Summons 1/97 in Suit No.  11/96 for being joined as a party. The said Chamber Summons was opposed  by SCB and by an order dated 20.3.1997, the Chamber Summons was  dismissed by the Special Court taking the view that HPD was at liberty to  adopt appropriate substantive proceedings regarding his alleged claim of  having purchased the suit bonds from SCB on 9.5.1992.

       On 30.9.1997, SCB applied for withdrawal of the Suit against CMF.  This application was allowed. However, the Special Court took the view that  CMF was a necessary party to the Suit in spite of its earlier order holding  that CMF could claim no right, title or interest in the suit bonds and by an  order made on 30.9.1997/ 1.10.1997 the Suit was dismissed on the ground of  non-joinder of CMF which was a necessary party. SCB appealed therefrom  to this Court.

       Thus, both SCB and CMF, came in appeal to this Court against the  orders made by the Special Court in Misc. Petition No. 81/95 as also of  dismissal of Suit No. 11/96. By the judgment and order dated 21.4.1998  made in Civil Appeal No. 7 of 1997 etc., this Court allowed both the appeals  filed by SCB and CMF and remitted the matter to the Special Court for  being tried de novo. Accordingly, both, the Suit and the Misc. Petition came  to be tried again by the Special Court. By the judgment dated 17.1.2002,  Special Court Suit No. 11/96 was dismissed and Misc. Petition No. 81/95  was allowed. Being aggrieved, SCB is in appeal against both the judgments.  Since the impugned judgments arise out of interconnected facts, it would be  convenient to dispose of both  the appeals by a common judgment.

       Since the judgment in Misc. Petition No. 81/95 merely  follows the  judgment in Special Court Suit No. 11/96, it would be sufficient to deal with  the judgment in Special Court Suit No. 11/96, calling it the ’impugned  judgment’ hereinafter.

Issues:         The Special Court raised the following issues in the impugned  judgment and answered them as under:

Issues

Answers

1. Does the Plaint not disclose  any cause of action against the  Defendant No.2 ?

In the affirmative i.e. in favour of  CMF and against SCB

2.Whether the plaintiffs were  entitled to and continue to be  entitled to the suit bonds as  alleged in para 8 of the Plaint ?

In the negative i.e. in favour of CMF  and against SCB

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2A. Whether the Plaintiffs prove  the circumstances in which  Original BR was taken away  from them as alleged in para (8)  of the Plaint ?

In the negative i.e. against SCB and  in favour of CMF.

3.  Whether the alleged  transaction dated 26/2/92 was a  transaction of Hiten P. Dalal as  alleged in para 1(d) and 8 of the  Written Statement ?

In the affirmative i.e. in favour of  CMF and against SCB

4.  Whether the alleged  transaction dated 26/2/1992 was  under an arrangement with the  Plaintiffs as alleged in paras 1(d)  ,7, 8 and 9 of the Written  Statement ?

In the affirmative i.e. in favour of  CMF and against SCB. 5. Whether the Plaintiffs are  estopped from making any claim  as alleged in para 1 read with  para 22 and 29 of the Written  Statement?

In the affirmative i.e. in favour of  CMF and against SCB. 6. Whether on 9th May  1992 the  Plaintiffs purchased Cantriple  Units of the face value of  Rs.45.50 crores for Rs.266.18  crores (approx.) and against  which the Plaintiffs sold and  adjusted various securities  including the suit bonds of the  face value of Rs. 50 crores and  whether the Plaintiffs have  applied  for and got the said  Cantriple units of face value of  Rs.45.50 crores transferred in  their name in January, 1993  disclosing a sale consideration of  about Rs.266.18 crores as stated  in para 14 and 15 of the Written  Statement ? This issue is divisible in to three  parts (i) CMF has proved that SCB  has purchased cantriple units of the  face value of Rs. 45.50 crores on  9/5/1992.  To that extent, issue is  answered in the affirmative             (ii)  However, CMF has not proved  that the said purchase was against  sale of the suit bonds on 9/5/1992.

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To that extent the sub-issue is  answered in the negative,  (iii) CMF has proved that in  January, 1993 SCB applied for and  have got the said cantriple units of  the face value of Rs. 45.50 crores  transferred in their name.   Therefore, to that extent, the sub- issue is answered in the affirmative.

7.  Whether the Defendant No.2  purchased the bonds and received  delivery thereof along with  Transfer Deed as alleged in para  22 and 29 of the Written  Statement ?

In the affirmative i.e. in favour of  CMF and against SCB.

8. Whether the plaintiffs  deliberately by their act and or  omission or negligence put  Defendant No.1 or Hitel P. Dalal  in a position to deal with the  LOA and the Transfer  Deed as  they liked as alleged in para 21  and 29 of the Written Statement ?

In the affirmative i.e. in favour of  CMF and against SCB.

9.Whether Hiten P. Dalal was  authorised to deal with and/or  deemed to be authorised to deal  with the Bonds as alleged in  paras 22 and 29 of the Written  Statement ?

In the affirmative i.e. in favour of  CMF and against SCB.

10. Whether the Plaintiff is  entitled to any reliefs and if so  what

As per final Order.

ISSUES BETWEEN PLAINTIFF (SCB) AND DEFENDANT NO. 3  (NPCL)

          ISSUES

          ANSWERS

1. Whether this Court has  jurisdiction to entertain and try this  Suit ?

In the affirmative.

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2. Whether the Plaintiffs are entitled  to and/or are the owners of the said  securities without having received  the original Letter of Allotment ?

3. Whether these Defendants are  entitled to a lien on the said Bonds  for securing the repayment of the  deposit placed by them with the 1st  Defnednats (sic) ?

Answer for Issue No. 2 and 3. Issues between SCB & NPCL were  framed on 2/7/1997 i.e. after  Judgment and Order of Variava, J.  (as he then was) dismissing Misc.  Petition No. 81 of 1995 on  27/11/1996 (which judgment has  been subsequently overruled by the  Apex Court).  As stated above, at one  point of time, there were disputes  between plaintiff and NPCL       which disputes do  not   survive in  view of the subsequent stand taken  by SCB before this Court. Therefore  issues nos. 2 and 3 do not arise for  determination.

4. Whether the Plaintiffs prove that  these Defendants are bound to  register any Bonds in the name of the  Plaintiffs or to issue the said Bonds  and relevant interest warrants to the  Plaintiffs ?

 In the negative.

5. What Order ?

As per final Order.  

       The issues framed in Misc. Petition No. 81/95 with the answers are as  follows: ISSUES FINDINGS 1.  Whether the Petitioners are  bonafide purchasers of value  without notice of 9% NPCL  Bonds from Respondent No. 3  for consideration paid to  Respondent No. 3 as set out in  the affidavit of S. Ramaraj  dated July 12, 1993 ?

In the affirmative as  answered in the Judgment  in suit No. 11 of 1996 i.e. in  favour of the Petitioners  and against SCB.

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2.  Whether Respondent No. 4  are entitled to object to  registering transfer of 9%  NPCL Bonds in favour of the  Petitioners ?

In the negative i.e. against  SCB and in favour of the  Petitioners.

3.  Whether the Petitioners are  entitled to have the suit LOA  (for 9% NPCL Bonds f.v. 50  Crs.) transferred to their name ?

In the affirmative i.e. in  favour of the Petitioners  and against SCB.

4.   Whether there was  collusion between Respondents  Nos. 2, 3 and/or 4 as alleged by  the Petitioners in the affidavit  of M. Nayak dated April 10,  1993 ?

Does not arise.

5.  What Orders on the  Petition?

As per final order.

       The core issue in both proceedings pertains to 9% NPCL Tax Free  bonds and whether SCB or CMF is the owner of such bonds and entitled to  be registered as such.

       The Special Court held that SCB had proved that it had purchased the  suit bonds from ABFSL against payment of Rs. 42,52,50,000, but it  dismissed SCB’s suit and allowed CMF’s petition for the following reasons:

(1)     that under the existing ’15% Arrangment’ between SCB and HPD,  SCB had purchased the suit bonds on behalf of HPD; (2)     that HPD was accordingly entitled to deal with the bonds, and (3)     that HPD had delivered and sold the bonds to CMF; and thus,  CMF is actually the owner.

       Whether these findings are justified on facts and in law has been  argued before us by learned senior counsel appearing for the parties with  great perseverance, ingenuity and erudition.     

I.  Nature of the Suit and the Proceedings in the Misc. Petition:

       The Special Court has taken the view that the suit filed by SCB is  basically a title suit. Originally in the suit, a money decree in the alternative  had been prayed for against ABFSL, but the monetary relief was  subsequently given up.  Following upon this, the Special Court held that  even if CMF failed to prove the payment of consideration, SCB could not  succeed in its suit as it was a title suit.  In the same vein, the Special Court  held that the Suit had to fail because it was a title suit and HPD was entitled  to deal with the suit bonds in his own title. And since the title suit failed,

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SCB could not prevent NPCL from transferring the bonds in favour of CMF.  Finally, the Special Court concluded on this issue, that non-payment of  consideration by CMF, as submitted by SCB, could only be questioned by  HPD and not by SCB. The Special Court also held that as the Suit was a title  suit, SCB was required to prove its title and could not succeed on the basis  of the faults in the evidence of the defendant-CMF.

       Mr. Jethmalani, learned counsel for the appellant, contended that the  Special Court erred in taking the view that Suit No. 11/96 was a title suit in  which SCB failed to have its title established. He submitted that on proper  analysis, the suit of SCB was in the nature of a declaratory suit falling within  the ambit of Section 34 of the Specific Relief Act, 1963, which corresponds  to Section 42 of the Specific Relief Act, 1877 (hereinafter referred to as the  "old Act"). He placed particular emphasis on illustration (c) appended to  Section 42 of the old Act and contended that a declaratory suit under Section  42 of the old Act, or Section 34 of the present Specific Relief Act, need not  be one for declaring the title of the plaintiff, but may be one for declaring  any other legal character of the plaintiff. It is difficult to accept this  contention of Mr. Jethmalani. As rightly pointed out by Mr. Kapadia,  learned counsel for CMF,  SCB appears to have all along claimed that its  suit was a title suit. In the first place, the prayer clauses in Special Court Suit  No. 11/96 read as under: "a)     For a declaration that the plaintiffs are fully  entitled to 9% NPCL Tax free ’F’ series Bonds (fifth  Issue) of the Third Defendants more particularly  described in Exhibit ’G’ hereto and that the Third  Defendant are bound and liable to register and (sic) said  Bonds in the Plaintiffs’ name and to issue and deliver the  said Bonds to the Plaintiffs along with interest warrants  in respect thereto.

b)      For a declaration that the second defendants have  no right, title and interest whatsoever, in relation to the  said Bonds, more particularly described in Exhibit ’G’  hereto and that the Second defendants are not bonafide  purchasers of the said Bonds for value."

       The substantive prayers are for a declaration that the plaintiffs "are  fully entitled" to the suit bonds and certain reliefs which are founded upon  this declaration. A suit for such a declaration would certainly be a title suit  so far as the suit bonds are concerned.

       Further, even Grounds A28 and A30 of the present Civil Appeal No.  2275/02 by SCB read:  "A28) The learned Judge erred in failing to appreciate  that SCB having proved its title on 26th February, 1992  its said title would prevail against the whole world until a  superior title of any party was established. \005 A30)    The learned Judge erred in failing to appreciate  that thereby SCB had established its prior title to the Suit  Bonds and had a better title thereto then (sic) CMF."    

       Thus, it is clear that the appeal has been brought on the footing that  SCB had fully proved its title to the suit bonds and that the Special Court  had erroneously held against SCB.  Looked at from any point of view, we  are not satisfied that the Suit was a mere declaratory suit, it must be regarded  as a title suit.

       We shall now turn to the nature of the proceedings in Misc. Petition  No. 81/95. This petition was presented under Section 111 of the Companies  Act, 1956. Section 111(1) provides for the power of refusal by a company to  register the transfer of debentures to a transferee. The transferor or the  transferee has a right of appeal to the Tribunal (then, the CLB) under sub- section (2) of Section 111. The nature of proceedings under Section 111 are

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slightly different from a title suit, although, sub-section (7) of Section 111  gives to the Tribunal the jurisdiction to decide any question relating to the  title of any person who is a party to the application, to have his name entered  in or omitted from the register and also the general jurisdiction to decide any  question which it is necessary or expedient to decide in connection with such  an application. It has been held in M/s Ammonia Supplies Corporation (P)  Ltd.  v.  M/s Modern Plastic Containers Pvt. Ltd. and Ors.  that the  jurisdiction exercised by the Company Court under Section 155 of the  Companies Act, 1956 (corresponding to Section 111 of the present Act,  before its amendment by Act 31 of 1988) was somewhat summary in nature  and that if a seriously disputed question of title arose, the Company Court  should relegate the parties to a suit, which was the more appropriate remedy  for investigation and adjudication of such seriously disputed question of  title.          Mr. Kapadia, learned counsel for CMF, contended that as far as the  petition of CMF was concerned, it merely invoked the summary remedy  under Section 111 of the Companies Act. The only prayer made by CMF  before the CLB was that it had purchased the suit bonds from ABFSL and,  therefore, it was entitled to be registered as the owner of the suit bonds in the  register of NPCL.       Relying on Mannalal Khetan  v.  Kedar Nath Khetan  and Ors.  he contended that the provisions of Section 108 of the Companies  Act, 1956 were mandatory and unless they were fulfilled, a registration of  the transfer of the bonds could not be done. Further, he relied on the  exemption granted from certain provisions of Section 108(1) in respect of  bonds issued by a Government company. He placed reliance on Notification  G.S.R. 1294 (E) dated 17.12.1986 issued by the Central Government in  exercise of its powers under Section 620(1)(a) of the Companies Act, 1956.  The said Notification reads as under: "In exercise of the powers conferred by clause (a) of sub- section (1) of section 620 of the Companies Act, 1956 ( 1  of 1956), the Central Government hereby directs that the  provisions of sub-section (1) of section 108 of the said  Act, in so far as it requires a proper instrument of transfer  to be duly stamped and executed by or on behalf of the  transferor and by or on behalf of the transferee, shall not  apply with respect to bonds issued by a Government  company, provided that an intimation by the transferee  specifying his name, address and occupation, if any, has  been delivered to the company along with the certificate  relating to the bond, and if no such certificate is in  existence, along with the letter of allotment of the bond, a  copy of this notification having been laid in draft before  both the Houses of Parliament as required by sub-section  (2) of section 620 of the said Act."

       It is the contention of Mr. Kapadia that the provisions of Section  108(1) of the Companies Act, 1956 are conditionally excluded by reason of  this Notification as the suit bonds were issued by NPCL, which is admittedly  a Government company. Thus, according to him, the suit bonds would be  transferable by endorsement and delivery as long as the transferee gave   intimation as contemplated under the Notification. According to him, the  terms of Section 108(1) as amended by the aforesaid Notification had been  fulfilled, and, therefore, there was an obligation on the part of NPCL to  register CMF as the registered holder of the suit bonds. Emphasising that   the intention of the legislature is to enable transferability of bonds issued by  Government companies with greater facility and lesser formality, he referred  to provisions of the Companies Act, 1956 and the Transfer of Property Act,  1882 (hereinafter referred to as the "TP Act"). Section 2(12) of the  Companies Act, 1956 defines ’debenture’ as including debenture stock  bonds and any other securities of a  company, whether constituting a charge  on the assets of the company or not. Chapter VIII of the TP Act deals with  transfers of actionable claims. Section 137 of the TP Act, however, provides  that the provisions in Chapter VIII (Sections 130 to 136) would not apply to  stocks, shares or debentures. The argument is that the mode of transfer of  actionable claims specified in the TP Act (Sections 130 to 136) has been

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specifically done away with. Even the mode of transfer under Section 108 of  the Companies Act has been considerably relaxed insofar as bonds issued by  Government companies are concerned. So far as the nature of the  proceedings in the Misc. Petition are concerned, it is the submission of Mr.  Kapadia that the only issue to be considered is whether CMF is a transferee  of the bonds, and whether CMF has complied with Section 108 read with the  Notification G.S.R. 1294(E) dated 17.12.1986 so as to be eligible for  registration as the holder of the bonds.

       Even if the petition filed under Section 111 of the Companies Act,  1956 was only for this limited relief of registering the petitioner-CMF as the  holder of the suit bonds, we cannot accept the contention of Mr. Kapadia for  two reasons. In the first place, whatever might have been the limited  jurisdiction of the CLB under Section 111 of the Companies Act, 1956,  while entertaining the petition, the fact that the said petition was transferred  to the Special Court by an order of this Court needs to be reckoned with. The  order of this Court is specific and requires the trial of Special Court Suit No.  11/96 along with Misc. Petition No. 81/95. The limitation of the jurisdiction  of the CLB, if any,  does not apply to the Special Court, which is clothed  with all the jurisdiction of a civil court. Secondly, merely by filing a petition  under Section 111 of the Companies Act, 1956 and by placing reliance on  Section 108 of the Companies Act, 1956 the petitioner-CMF cannot succeed.  It would have to go further and prove that it is validly a transferee of the suit  bonds, if that question is put in issue. Thus, in our view, each of the two  contesting parties, i.e. SCB and CMF, would have to prove their rights and  show how they are entitled to the suit bonds before any relief could be  granted either in the Suit or in the Misc. Petition.

II.   Nature and Effect of 15% Arrangement:

       The Special Court has laid great emphasis on what it has called the  ’15% arrangement’ and concluded that because of this 15% arrangement  HPD became owner of the suit bonds, which he rightfully transferred to  CMF for consideration. The learned counsel for the appellant has severely  criticised this conclusion as totally contrary to the evidence on record.

       Under the instructions of the Reserve Bank of India (hereinafter  referred to as "RBI"), banks and financial institutions were required to  maintain a certain liquidity ratio of debt to equity. They could have ready  forward transactions in securities only with other banks and only in respect  of government and other approved securities. The statutory liquidity ratio  was maintained by sale and purchase of securities, issued by Government  companies and public sector institutions.           An unhealthy practice had developed among all the banks and  financial institutions affected by the securities scandal, under which some  securities were repeatedly shown as bought and sold in order to advance  finances to certain brokers. HPD was one of them.  The so called ’15%  arrangement’ was an informal arrangement with HPD under which SCB  bought securities from other counter-parties, as directed by HPD, and also  sold them to such parties at such rates as designated by HPD. A desired sale  price was arrived at so as to ensure that SCB obtained a return of 15% of the  transaction. The evidence on record consisting of the Janakiraman  Committee Report (the report of a High Powered Committee appointed by  RBI to investigate into the irregularities in the funds management in   commercial banks and financial institutions, in particular in relation to the  dealings in Government securities) has examined this arrangement and  reported upon it in Paragraphs 8.1 to 8.7 of its Fourth Interim Report (March  1993), particularly with regard to the way in which the arrangement operated  in SCB. The Joint Parliamentary Committee Report (hereinafter referred to  as the "JPC Report") (Exhibit-26) vide Paragraphs 8.49-8.51 has also  explained this arrangement. There is also the evidence tendered on record in  the form of replies to interrogatories in which SCB has explained the details  of the scheme and how the 15% arrangement worked. The agreement  between HPD and SCB was that, if SCB followed the instructions of HPD in

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the matter of which securities are to be bought or sold, from or to which  parties, at what rates and when; SCB was assured of a net return of 15% of  the outlay in the purchase of the securities concerned. If the return was less  than 15%, HPD would bear the difference; if the return happened to be  higher than 15%, HPD would be paid the difference. The evidence on record  clearly bears out that this is how the 15% arrangement worked between SCB  and HPD.

A.  Public Policy and Res Judiciata:         Mr. Jethmalani invited our attention to an earlier judgment of this  Court in Canara Bank and Ors.  v.  Standard Chartered Bank  where the  nature of the 15% arrangement was carefully considered by this Court.  Incidentally, the said judgment was delivered in a dispute between the same  parties and after analysing the nature of the 15% arrangement, this Court  categorically rejected the argument that it was opposed to public policy. This  Court upheld the judgment of the Special Court rejecting the contention that  the 15% arrangement was contrary to public policy. While rejecting the  contention that the 15% arrangement was opposed to public policy, the  Special Court had made the following findings: "The object and consideration of the suit contracts are  purchase/sale of the securities and payment of price.  Such securities contracts are normally entered into by  banks. These may be for SLR purposes or in the normal  course of business of the bank. It is the business of the  bank to try and make profit. Thus even if these were part  of the 15%  arrangement, provided there was such an  arrangement, would not make them against public policy  if it was a genuine security transaction. None of the  circulars relied upon by Mr. Salve prohibit such  transactions. In my opinion none of the circulars have  any bearing on the point under consideration. The suit  transactions or transactions under the alleged 15%  arrangement are not against the subject matter of these  circulars. They are also not even against any policy laid  down therein. I thus see no illegality."

       These were expressly approved by this Court in the judgment. It  appears to us that much of the controversy about the nature of the 15%  arrangement could have been avoided if the judgment in the Canara Bank  case (supra) had been kept in mind. We notice from the impugned judgment  that the decision of this Court in Canara Bank (supra) was specifically  brought to the notice of the Special Court, but it appears to have been  brushed aside on the grounds, first, that the doctrine of res judicata would  not apply as Section 13 of the Act had an overriding effect; second, the exact  scope of the 15% arrangement was not determined by evidence in the  previous suit; and third, that an arrangement by which banks and public  financial institutions are enabled to earn a return higher than what is  stipulated by the government/RBI, would cause inflation and the  government would not be able to control its deficit, hence it was opposed to  public policy. The Special Court said: "In the economic sense, they are not  legitimate. On this point also, therefore, there is no merit in the arguments  advanced on behalf of SCB."

       We are afraid that the Special Court was wrong on all the counts. On  the question of res judicata, the Special Court failed to notice that  the  doctrine of res judicata is not merely a matter of procedure but a doctrine  evolved by the courts in larger public interest. What is enacted in Section 11  of the Civil Procedure Code ("CPC") is not the fountain-head of the  doctrine, but merely the statutory recognition of the doctrine, which rests on  public policy. (See in this connection Daryao and Ors.  v.  The State of  U.P. and Ors. , Guda Vijayalakshmi  v.  Guda Ramachandra Sekhara  Sastry  and Hope Plantations Ltd.  v.  Taluk Land Board, Peermade  and Anr. ) In the previous suit to which both SCB and Canara Bank were  parties, the same issue with regard to ’15% arrangement’ with HPD was  urged by CMF as a non-suiting factor, but was negatived both by the Special

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Court and by this Court. Issue No. 10 in the previous suit was the relevant  issue dealing with 15% arrangement, which was as follows:  "Whether the suit transactions entered into by the  Plaintiffs with the Canbank Mutual Fund were in fact  entered into by the plaintiffs on behalf of Hiten Dalal as  alleged in Para 5(d) of the Written Statement of  Defendant No. 1?"

       This was an issue raised by CMF which was defendant no. 1 in that  suit (Special Court Suit No. 13/94). The burden of proving this issue was on  the defendant and the Special Court answered the issue in the negative and  observed that the counsel for defendant no. 1 had admitted that there was no  evidence to support this issue. Consequently, the Special Court held that the  issue was answered in the negative i.e. against defendant no. 1. Since the  Special Court findings were finally upheld by this Court in the judgment  reported in Canara Bank (supra) and a review petition thereagainst was  also dismissed, we are of the view that it is not open for this Court to again  raise the issue and take a view contrary to what had already been decided in  the previous suit, particularly in view of the fact that there has been no new  revelatory evidence on this issue.

       We are not in agreement with the view taken by the Special Court that  Section 13 of the Act overrides the doctrine of res judicata. Section 13 of the  Act provides: "The provisions of this Act shall have effect notwithstanding  anything inconsistent therewith contained in any other law for the time being  in force or in any instrument having effect by virtue of any law, other than  this Act, or in any decree or order of any Court, tribunal or other authority".  This was certainly not intended to abrogate all the established principles of  law, unless they were directly in conflict with the express provisions of the  Act itself. There is nothing in the Act which is inconsistent with the doctrine  of res judicata, per se, as seems to have been assumed by the Special Court.

       We are also unable to appreciate the thinking of the Special Court that  there was something morally or economically reprehensible in the  arrangement which was brought about between HPD and SCB as a result of  which SCB was able to earn higher return.  

B.   Evidence on Record:

       The evidence as to the nature of the 15% arrangement was SCB’s  replies to interrogatories in previous suits, tendered by CMF as Exhibits 5, 6,  8 and  9 as evidence in the present suit, the Janakiraman Committee Report  and the JPC Report, which recognise and explain the 15% arrangement.  There is nothing in all the said evidence to suggest that by entering into such  a contractual transaction with HPD, HPD became the owner of the bonds.  The evidence, on the other hand, clearly brings out that at all times the  securities transactions would be between SCB and the counter-party-banks,  the legal relationship always being between the said two parties. In our view,  therefore, the Special Court grossly erred in drawing a conclusion based on  no evidence and attributing to the said arrangement a legal character, which  was not proved on record. It also erred in ignoring the  finding on the issue  given in the previous Special Court Suit No. 13/94 as upheld by the  judgment of this Court in Canara Bank (supra). The Special Court has also  observed that under the 15% arrangement SCB was "maintaining broker’s  position". While this may be appropriate jargon in a stock exchange, what  exactly is the legal implication, if any, of such an expression is unclear. We  find no evidence on record to suggest that merely because of the 15%  arrangement the legal ownership of the securities was transferred to HPD in  any manner, since all the transactions appear to be between SCB and  counter-party-banks. This would be evident from the fact that if the counter- party-banks failed to deliver the securities or failed to pay for the securities  delivered, the legal action could only be between SCB and the counter- party-banks with which the transaction took place and not by or against  HPD.

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       We are unable to accept the conclusions drawn by the Special Court  with regard to some of the documents produced by CMF as defendant, about  which no evidence by way of explanation was led by either party.

       In the absence of proper explanation, it was not open to the Special  Court to make inferences or assumptions with regard to terms used in the  documents, for example, SCB’s securities ledger in relation to the suit bonds  (Exhibit-11), which pertains to the sale and purchase of the suit bonds with  different counter-parties. This document as such does not contain the  description ’portfolio’, but the said appellation has been given to it by the  Special Court on its own. The Special Court has observed thereupon:  "Therefore, all such transactions were entered into by the bank on behalf of  HPD. Therefore, they were transactions of HPD. This is amply illustrated by  Exhibit-11. A portfolio represents stock held by SCB on behalf of HPD.  HPD was entitled to enter into buy transactions and sale transactions in  respect of securities coming under that portfolio. The portfolio was built up  by SCB by purchasing securities at the instance of HPD. This is also called  as building up of position. The suit contract comes under Exhibit-11. By the  suit contract, the LoA came within the portfolio of HPD. He was allowed to  deal with the LoA under the portfolio." We are afraid that this inference is  not readily available ex facie from the document; nor was there any other  evidence given by any witness explaining the document, suggesting it.                   Further, the word ’loan’ used in the Security Ledger (Exhibit-11) was  seized upon by the Special Court to draw an unwarranted inference. The  Special Court has held that this term shows "lending of scrip to HPD" and  has then gone on to hold as follows: "this word has to be read while  construing the entries in Exhibit-11 beginning from 27.2.1992. The word  "loan" must be read with the column "Book Value" and the column "Profit  and Loss" and "Balance". That, last column "Balance" represents HPD’s  outstanding to SCB." There is no warrant, whatsoever, for such an  explanation to this document as no witness has said so. Further, the word  ’loan’ also appears to have been used in the BR issued by AB to SCB in  respect of the suit bonds (BR no. 23728 dated 27.2.1992). There was no  justification for giving an interpretation to the word ’loan’ used in any of the  documents without any explanation by a witness.

       The Special Court also makes a finding that the word ’Direct’ used in   SCB’s ledger showing transaction details of SCB from April 1991 to May  1992 (Exhibit-7) suggests that such transactions were all under the 15%  arrangement. This again appears to be an inference which has been drawn by  the Special Court without any supporting evidence thereto. In the replies to  the interrogatories as well as the evidence of the witnesses no one has  asserted that all transactions described as ’direct’ were necessarily covered  by the 15% arrangement. Although, the reply to Question no. 43 of the  interrogatories, in Suit No. 14/94, did suggest to the contrary, the said reply  not having been tendered in evidence and taken on record, does not form  part of the evidence before the Special Court. The Special Court is,  therefore, not justified in drawing this conclusion for which there was no  acceptable evidence.

       Mr. Jethmalani contended that the chargesheet (Exhibit-4), FIR  (Exhibit-3), SCB’s answers to interrogatories (Exhibits 5, 6, 8 and 9), details  of SCB’s securities transactions during April 1991 \026 May 1992 (Exhibit-7),  security ledger of SCB in relation to the suit bonds (Exhibit-11), SCB’s deal  slips dated 9/5/92 (Exhibit-10), SCB’s vouchers (Exhibit-12), and the  Janakiraman Committee Report (Exhibit-18) were all produced by CMF;  and relying on the judgments of this Court in P.C. Purushothama Reddiar   v.  S. Perumal   and  R.V.E. Venkatachala Gounder  v.  Arulmigu  Viswesaraswami & V.P. Temple and Anr.  he urged that the contents of  these documents would be binding on CMF. The Special Court has relied on  these documents to arrive at a conclusion which does not arise from them.                  While it may be true that the Special Court has been given a certain  amount of latitude in the matter of procedure, it surely cannot fly away from

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established legal principles while deciding the cases before it. As to what  inference arises from a document, is always a matter of evidence unless the  document is self-explanatory. We do not think that any of the documents  placed on record during the trial were self-explanatory; nor were they  explained by any competent witness on either side. In the absence of any  such explanation, it was not open to the Special Court to come up with its  own explanations and decide the fate of the Suit on the basis of its inference  based on such assumed explanations. In fact, these inferences run contrary to  the oral evidence given by Kalyana Raman (PW-1) in relation to the  transaction of 26.2.1992.

       The Special Court has also adversely commented on the conduct of  SCB in not leading evidence to prove what the 15% arrangement was. We  fail to see how a party could be called upon to lead evidence with regard to  an issue which was no part of its case. The 15% arrangement was brought on  record at the instance of CMF and the burden, if any, of proving its details  lay on CMF. Although, a number of documents were produced on record as  called for by CMF, there was no obligation on SCB to explain any of them.  

       Learned counsel for CMF also contended that SCB failed to produce  relevant documents that would have established what the 15% arrangement  was. For this failure, he contended that an adverse inference should be  drawn against SCB. For this proposition, he relies on the judgments of this  court in Hiralal & Ors.  v.  Badkulal & Ors. , Gopal Krishnaji Ketkar  v.   Mohamed Haji Latif & Ors. , S. P. Chengalvaraya Naidu (dead) by  L.R’s.  v.  Jagannath (dead) by L.R’s. & Ors.  and CitiBank N. A.  v.   Standard Chartered Bank & Ors. .   

       This argument is met by learned counsel for SCB. An adverse  inference is a presumption which the court is entitled to draw under Section  114 of the Indian Evidence Act, 1872 read with illustration (g) thereto. Mr.  Jethmanlani contended that the weight of the authorities would show that  unless there are some special circumstances making it obligatory for a party  to produce evidence, no adverse inference can be drawn unless a party has  been called upon to or ordered to produce evidence and fails to do so. Mr.  Jethmalani relies on Mt. Bilas Kunwar  v.  Desraj Ranjit Singh and  Ors. , Ramrati Kuer  v.  Dwarika Prasad Singh and Ors.   and Smt.  Indira Kaur and Ors.  v.  Shri Sheo Lal Kapoor .

       In Hiralal’s case (supra), this court reiterated the observations of the  Privy Council in Murugesam Pillai v. Gnana Sambandha Pandara  Sannadhi  where the Privy Council laid down the general rule of procedure  that instead of relying on the abstract doctrine of onus of proof a party to the  suit "desiring to rely upon a certain state of facts" ought not to withold from  the court the written evidence in his possession. In Gopal Krishnaji  Ketkar’s case (supra) the observation in Murugesam Pillai (supra) was  reiterated and it was observed: "Even if the burden of proof does not lie on a  party the Court may draw an adverse inference if he withholds important  documents in his possession which can throw light on the facts at issue. It is  not, in our opinion, a sound practice for those desiring to rely upon a certain  state of facts to withhold from the Court the best evidence which is in their  possession which could throw light upon the issues in controversy and to  rely upon the abstract doctrine of onus of proof." S. P. Chengalvaraya  Naidu (supra), was a situation of a fraudulent litigant basing his case on  falsehood and witholding vital documents. Citibank (supra) merely relies  on the observations made in Murugesam Pillai (supra) and Gopal  Krishnaji Ketkar (supra), both of which say that it is not a sound practice  for those "desiring to rely upon a certain state of facts to withold from the  court" the best evidence which is in their possession.

       On the other hand, the three authorities on which Mr. Jethmalani  relied independently take the view that unless a party is called upon to  produce evidence or ordered to do so by the court and fails to do so, no  adverse inference can be drawn against such party. Mr. Jethmalani  distinguished the two apparently contradictory lines of authorities by

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pointing out that in the authorities relied on by Mr. Kapadia the facts showed  that there was a special obligation upon the party concerned to produce the  relevant documents even without being called upon or ordered to do so and  that the party had failed to produce them. Further he pointed out that the  observations of the Privy Council originating from Murugesam Pillai  (supra) which have been reiterated in the subsequent cases including  Citibank (supra) would apply only if the party is "desiring to rely upon a  certain state of facts". He rightly contends that the 15% arrrangement was  neither any part of SCB’s case, nor was SCB desiring to rely on the said  state of facts. In the circumstances there was no obligation upon SCB to  produce any documents to prove the case put forward by CMF; there was no  situation in which adverse inference could be drawn against SCB. Finally,  Mr. Jethmalani also urged that irrespective of what the parties did, the  Special Court could have, if it was so minded, invoked its power under  Section 165 of the Indian Evidence Act, 1872 and directed production of all  documents it considered relevant instead of relying on adverse inference  which was doubtful in the circumstances. This is particularly so with regard  to the argument of CMF that the computer spread sheets had not been  produced, as paragraph 7 of the written statement of CMF indicates that  CMF was aware of the existence of such sheets and yet failed to call upon  SCB to produce it or seek an order for production thereof from the Special  Court.         The whole thrust of the impugned judgment is that the transactions  between SCB and the counter-party-banks, which were covered by the 15%  arrangement were sham transactions, making HPD the owner of the suit  bonds. Where a transaction results in rights and obligations, it can never be  treated as a sham transaction. (See in this connection Chow Yoong Hong  v.   Choong Fah Rubber Manufactory .) It was nobody’s case that in any of  the transactions under the 15% arrangement, HPD could have been sued for  enforcement of any right arising therefrom between SCB and ABFSL.

C.   Estoppel:                  Issue No. 5 framed by the Special Court was whether SCB was  estopped from making any claim to the suit bonds by denying the authority  of HPD to deal in the suit bonds, as SCB had actually, ostensibly or  negligently permitted HPD to deal with the suit bonds. Although, the Special  Court answered the issue in the affirmative i.e. in favour of CMF and against  SCB, there does not seem to be any specific discussion on this issue nor any  reason supporting the said finding. It is however true that the Special Court  took the view that the direct fallout of the 15% arrangement was that HPD  became the owner of the suit bonds and had the right to deal with the suit  bonds as he pleased; and since this was done to the knowledge of and by  acquiescence of SCB, SCB was estopped from denying that HPD had  acquired any such right to deal with the suit bonds or to transfer them to any  other person.

       The Special Court has taken the view that the transactions reflected in  the Security Ledger (Exhibit-11), indicated funding of the broker by SCB  and that it was something like a ’running account’ of HPD in the books of  SCB, which had opened with an entry of 26.2.1992 and was settled on  9.5.1992. It then observed: "Under Exhibit-11, the suit scrip of 9% NPCL  bonds was made available to HPD for raising finances either by sale, pledge  or Ready Forward. It was bought for HPD as he had assured a fixed return to  SCB. The (sic) HPD was entitled to trade. He was entitled to take position in  the market on the suit bonds bought for him as he has assured a fixed return.  He was entitled to take a position on suit bonds. He took that position  through SCB. Therefore, SCB had taken his position under Exhibit-11.  Under the above arrangement, SCB could claim return of the security or  equivalent money value only from HPD as the transactions in Exhibit-11 are  under 15% Arrangement. Therefore, SCB cannot claim any relief against  CMF. They can only claim relief against HPD. SCB is estopped from  claiming any relief against CMF. SCB, therefore, has no right to object to  the transfer of bonds by NPCL in favour of CMF."         Learned counsel for SCB however criticised the impugned judgment

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of the Special Court on the ground that this finding, though not made  specifically, but diffusedly over the impugned judgment arises from a  misapprehension as to the exact nature of the doctrine of estoppel. Learned  counsel contended that estoppel would require a representation by SCB, by  acting upon which CMF should have altered its position to its prejudice.  Since the burden of proving the issue was on CMF, CMF had to show what  the representation was, to whom it was made, how CMF had altered its  position as a result of such representation and what prejudice it had suffered.  It  was contended that no evidence was led by CMF on any of these aspects  and, therefore, the Special Court had no material whatsoever before it to  make any finding on the issue of estoppel other than pure conjecture and  speculation based upon its understanding of the 15% arrangement. Further,  learned counsel contended that if HPD had obtained the suit bonds by theft  or by committing any other offence, then there would be no question of  estoppel of SCB from denying the title of HPD or of any one else who  claimed to have obtained  title to the suit bonds from HPD. In Mercantile  Bank of India Ltd.  v.  Central Bank of India Ltd. , it was observed: "\005though estoppel has been  described as a mere rule of  evidence, it may have the effect of creating substantive  rights as against the person estopped. Of the many forms  which estoppel may take, it is here only necessary to  refer to that type of estoppel which enables a party as  against another party to claim a right of property which  in fact he does not possess. Such estoppel is described as  estoppel by negligence or by conduct or by  representation or by a holding out of ostensible  authority."

"\005that it must be the neglect of some duty that is owing  to the person led into that belief, or, what comes to the  same thing, to the general public of whom the person is  one, and not merely neglect of what would be prudent in  respect to the party himself, or even of some duty owing  to third persons, with whom those seeking to set up the  estoppel are not privy."  "There is a breach of the duty if the party estopped has  not used due precautions to avert the risk. The detriment  may entitle the innocent third person either to prosecute  or to defend a claim. His identity may be ascertainable  only by the event, in the sense that he has turned out to  be the member of the general public actually reached and  affected by the conduct, negligence, representation or  ostensible authority."

       It was thus held that a plea of estoppel could not be availed of if there  was no duty owed by the person sought to be estopped, nor any  representation made by such person. In New Marine Coal Co. (Bengal)  Pvt. Ltd.  v.  The Union of India,  this Court had occasion to examine the  doctrine of estoppel and cited with approval the following observations in  Halsbury’s Law of England : "before any one can be estopped by a  representation inferred from negligent conduct, there must be a duty to use  due care towards the party misled, or towards the general public of which he  is one",  that, it was required that "the negligence on which it is based should  not be indirectly or remotely connected with the misleading effect assigned  to it, but must be the proximate or real cause of that result ." The judgment  of the Privy Council (supra) was approvingly cited by this Court, which also  observed, "\005before invoking a plea of estoppel on the ground of  negligence, some duty must be shown to exist between the parties and  negligence must be proved in relation to such duty."         Mr. Jethmalani, therefore, is justified in his submission that there was  no such duty owed by SCB to CMF. At any rate, none was shown to have  existed. Hence, there is no substance in the plea of estoppel raised by CMF.

D.   The Benami Transactions (Prohibition) Act, 1988:

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       One of the arguments canvassed before us by Mr. Jethmalani was on  the effect of Section 4(2) of the Benami Transactions (Prohibition) Act,  1988 on the defence of CMF in the Suit. The argument was that CMF has  contended, though not in precise terms, that the suit bonds did not belong to  SCB at any point of time because the 15% arrangement was only a funding  transaction under which the real owner was HPD, though the suit bonds  were ostensibly held by SCB. Mr. Jethmalani contends that this contention  of CMF is specifically barred by Section 4(2) of the Benami Transactions  (Prohibition) Act, 1988. The learned counsel for CMF, however, relies  on  Section 3(3) of the Act, which reads thus:

"Notwithstanding anything contained in the Code and  any other law for the time being in force, on and from  that date of notification under sub-section (2), any  property, movable or immovable, or both, belonging to  any person notified under that sub-section shall stand  attached simultaneously with the issue of the  notification."

       The force of the words "belonging to any person notified" used in  sub-section (3) of Section 3 of the Act are wide enough to result in  attachment of the property which belongs to the notified person irrespective  of in whose name the property stands. The provisions of Section 13 of the  Act give an overriding effect notwithstanding anything inconsistent  therewith contained in any other law for the time being in force. Even  assuming that the argument of  Mr. Jethmalani based on Section 4(2) of The  Benami Transactions (Prohibition) Act, 1988 is a plausible one, we are of  the view that the combined effect of Sections 3(3) and 13 of the Act would  give an overriding effect to the provisions of the Act. It is rightly urged by  Mr. Kapadia, learned counsel for CMF, that, if that were not so, then the  whole purpose of the Act would be defeated since the objective of the Act  was to reach out and attach the property in whichever hands it was,  irrespective of in whose names the property stood, as long it was property  belonging to a notified person. Thus, the contention based on Section 4(2) of  the Benami Transactions (Prohibition) Act, 1988 has been rightly rejected by  the Special Court.

       Much was said by the learned counsel for CMF about the manner in  which SCB has hedged its replies. The learned counsel criticised the attempt  of SCB to hide the true facts and contended that SCB kept on changing its  stand from time to time. He highlighted that the stand taken by SCB in the  Suit, the stand taken by it in the reply to the Petition and the stand taken by it  before this Court was wholly inconsistent and, therefore, urged that the  claims of SCB should fail. We think that this is a classic case of the pot  calling the kettle black. When we look at the defence taken by CMF, the  same criticism can be validly levied against it. CMF started by saying that it  had bought the suit bonds from ABFSL. When it found that the evidence  was against it, it shifted its stand and said it had bought them from HPD with  HPD acting on behalf of ABFSL or SCB as the broker, or on his own behalf.  We do not think that on the question of bona fides and consistency, there is  anything to choose between SCB and CMF. Since both parties are tarred by  the same brush, the issue will have to be resolved purely on the basis of what  the legal evidence demonstrates.

III.   Did SCB get any title to the suit bonds:                  It is the case of SCB that it had the title to the suit bonds as it obtained  the suit bonds under a contractual agreement by paying consideration for the  suit bonds. This transaction is based on documentary evidence on record.  The Cost Memo (Exhibit-B) dated 26.2.1992 issued by ABFSL evidences  that the suit bonds were offered to SCB at the consideration indicated in the  document. The Cost Memo indicates the details of the transactions such as  the description of the bonds, the number of bonds sold, the rate at which  they were sold and the total consideration payable. This is accompanied by a  BR.  Against this, there is a pay order dated 26.2.1992 issued by SCB in

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favour of ABFSL in the sum of Rs.42,52,50,000/- evidencing that such  consideration had been paid. The BR No. 23728 dated 26.2.1992 evidences  that upon receipt of the agreed consideration, being the cost of the suit bonds  sold to SCB, the BR was issued to undertake  that bonds of the face value of  Rs. 50 crores would be delivered when ready, in exchange for the BR duly  discharged and that in the meantime the suit bonds would be held on account  of SCB. The letter dated 26.2.1992 from ABFSL to SCB shows that the  LOA of the suit bonds was forwarded to SCB inter alia with a request for  discharging the corresponding BR No. 23728 on receipt of the LOA. The  register of SCB shows that with reference to BR No. 23728, the bonds had  been received, although, the word ’photocopies’ appears to have been  inserted therein. It is the case of SCB that one of its employees, Mulgaonkar,  had acted fraudulently by inserting this word and causing misappropriation  of the suit bonds. We find that this part of the case was not part of the  pleadings of SCB either in its plaint or in the written statement filed in reply  to CMF’s petition. There was also no reference to it at any time when  evidence was led by the parties. The first time this part of the case appears is  in the copy of the chargesheet filed by CBI against certain employees of  SCB and HPD for several criminal offences. Mr. Jethmalani contended that  since this chargesheet was produced on record at the instance of CMF, the  averments in the chargesheet must be taken to have been proved before the  court. Even assuming Mr. Jethmalani is right in characterising the charge  sheet as a public document within the meaning of Section 35 of the Indian  Evidence Act, 1872, we cannot accept all that is stated in the charge sheet as  having been proved. All that  we can say is that it is proved that  the police  had laid a chargesheet in which such allegations have been made against the  accused. We need not delve further into it since the criminal proceedings  against HPD and others are still pending and it will be up to the appropriate  court to decide the correctness or otherwise of the charges in the  chargesheet. All that can be said at this stage is that there were  serious  allegations that the original LOA went out of the possession of SCB by  some nefarious means.

       Learned counsel for CMF contended that even as on 26.2.1992 SCB  had no title to the suit bonds since the suit bonds were under the 15%  arrangement and that under the 15% arrangement the transaction was one  merely of funding; in other words, that there was no real buyer or seller and  it was mere paper work intended as a cover for lending money to HPD.  We  are unable to accept this argument for more than one reason. The documents  which we have referred to above clearly evidence a transaction of sale and  purchase of the suit bonds by SCB upon payment of consideration.  Secondly, ABFSL, who was the other party to the transaction, has come  forward and accepted the transaction unhesitatingly. There is no reason why  all this evidence should be discarded by choosing the chimera of the 15%  arrangement theory. We, therefore, hold that SCB validly acquired title to  the suit bonds as a result of the transaction entered into between itself and  ABFSL on 26.2.1992. And that the suit bonds were in fact handed over to  SCB although, it is not evident as to how the suit bonds went out of the  possession of SCB. Therefore, the contention of CMF that SCB never  acquired title to the suit bonds cannot be accepted. Even the Special Court  finds that the contract of 26.2.1992 with regard to the suit bonds had been  proved by the evidence on record. However, the Special Court goes on to  say that merely proving the suit contract was not sufficient because it had to  be further proved that the suit bonds had been acquired by SCB, as, in its  view, the mystique of the 15% arrangement made HPD the real owner of the  bonds.

       Mr. Jethmalani rightly urged that the title of any person acquiring  property would depend upon the antecedent title of the person from whom  the property is acquired. In the instant case, the suit bonds were validly  acquired by ABFSL from the original issuer, namely, NPCL and as a result  of the transaction dated 26.2.1992, SCB in its turn acquired them by  payment of consideration, from ABFSL. He relied on the judgments in  Vasudev Ramchandra Shelat  v.  Pranlal Jayanand Thaker and Ors.   and L.I.C. of India  v.  Escorts Ltd. and Ors.  in support of this

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proposition. The title of SCB arises from antecedent ownership of ABFSL,  and it is proved that the suit bonds transaction was in accordance with law.

       Mr. Kapadia, learned counsel for CMF, contended that the evidence  on record showed that SCB had acquired no title at all to the suit bonds even  on the initial date of transaction i.e. 26/27.2.1992. He contended that the  property in the suit bonds had never passed to SCB as there was no evidence  of endorsement or delivery of the suit bonds. He extensively referred to the  pleadings in the plaint in Suit No. 11/96 and highlighted the fact that what  was pleaded in the plaint was non-delivery of the suit bonds. The only  prayer made was for a decree against NPCL, which was holding the bonds  as a bailee for CMF, since CMF had forwarded the original LOA to NPCL  and sought registration of its name as holder of the suit bonds. He further  highlighted the fact that a decree had been sought against only NPCL, as a  bailee, though CMF was in constructive possession being holder of the  receipt for lodging with NPCL. He also pointed out that the plaint sought the  relief of refund of money from ABFSL as an alternative relief. It is his  contention that, at the most, the frame of the Suit could have been as a suit  for specific performance, but since it was framed as a suit on title, it must  fail. Further, he urged that even the alternative prayer of money claimed  against ABFSL was given up during the trial and, therefore, the Suit must  necessarily fail in its entirety.

       He also pointed out that both the 17% NPCL bonds and the 9% NPCL  bonds (suit bonds) were bought in the same manner, on the same day, as part  of the same transaction, and a suit is filed for 17% NPCL bonds also being  Suit No. 3809/92 only against ABFSL and only for a money decree. In his  submission, it is somewhat surprising that with respect to the two claims - in  respect of 9% NPCL bonds and 17% NPCL bonds - which were transacted  on the same date under the same circumstances, while the Special Court Suit  No. 11/96 pertaining to the suit bonds seeks a declaration of title, the suit in  respect of the 17% NPCL bonds being Special Court Suit No. 3809/92 is for  a money claim for refund of the consideration paid. He also referred to the  details of the evidence and pointed out that while SCB came to the court  alleging that it had never received the original LOA, which was its  consistent stand in its pleadings in the Suit and also in the Petition, after the  CBI submitted the charge sheet, SCB came out with the story of conspiracy  of Mulgaonkar with HPD. Even this contention was not argued in the trial  court at all, nor was any evidence led that SCB had made any reasonable  enquiry to find out how the original LOA went into the hands of HPD. There  is also no pleading or evidence to show endorsement and delivery of the  concerned bonds. Relying on the decisions of this Court in Nagindas  Ramdas  v.  Dalpatram Iccharam alias Brijram and Ors. ,  Thiru John   v.  Subramhanyam  v.  The Returning Officer & Ors.  and  Bharat  Singh and Ors.  v.  Mst. Bhagirathi,  Mr. Kapadia contended that there  were admissions galore by SCB both in the pleadings and thereafter in the  evidence, and as such they could not be permitted to change their stand. He  pointed out that on 2.7.1997 the money decree claim against ABFSL was  specifically given up and on the next day the officer of ABFSL, Kalyana  Raman (PW-1), gave evidence for the plaintiff-SCB and the stand that the  original LOA was not received by SCB was conveniently given up by SCB.

        He also contended that the documents on which reliance is placed by  SCB were not proved. The evidence of the plaintiff’s witness, Kalyana  Raman, employee of ABFSL, shows that only two persons, namely, himself  and another officer of ABFSL, R.V. Shenoy, had dealt with such  transactions. But neither officer claimed any personal knowledge of the suit  bonds transaction. Further, that Kalyana Raman gave evidence that the  dealers were mainly dealing with one Shiv Kumar, another officer of SCB,  who might be in the know of the suit bonds transaction. Although, SCB took  out a Chamber Summons for examining the said Shiv Kumar as he was  posted at Singapore at the material point, the Chamber Summons was not  pursued  and Shiv Kumar was not examined. Thus, according to Mr.  Kapadia, there is no evidence worth reliance placed  on record to show how  the deal was struck and the contract of the purchase of the bonds was

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brought about, as the documents placed on record were hardly worth  credence.  That during the cross examination of Kalyana Raman, SCB was  specifically called upon to produce on record the document showing HPD’s  involvement in the transaction and the learned counsel for SCB stated that  there were no such documents in existence at all. Mr. Kapadia, therefore,  submitted that no evidence could be considered contrary to the pleadings of  SCB, for which he strongly relied on Siddik Mohamed Shah  v.  Mt.  Saran & Ors. , Bhagatsingh & Ors.  v.  Jaswant Singh   and Shri  Venkataramana Devaru & Ors.  v.  State of Mysore.  For all these  reasons, Mr. Kapadia submitted that SCB had failed to prove that it had  acquired title to the suit bonds even on 26/27.2.1992.

       Learned counsel for SCB, however, laid emphasis on the principle  that SCB’s title arises from the antecedent right of ownership of  its  transferor, namely, ABFSL, about whose title there is no dispute at all. The  suit bonds are nothing but debentures within the meaning of Section 2(12) of  the Companies Act, 1956. A debenture is an actionable claim. However,  Section 137 of the Transfer of Property Act exempts debentures inter alia  from the provisions of Sections 130 to 136 of the TP Act. Thus, with respect  to debentures, there is no prescribed mode of transfer of property under the  TP Act. According to Mr. Jethmalani, an act between the transferor and  transferee is sufficient to convey all rights of ownership, except the right to  have the bonds registered, for which the requirements of the  Companies  Act, 1956 have to be followed. In his submission, the Suit and the Misc.  Petition were nothing but rival claims made for being placed on the register  of NPCL, and the party which had legitimately acquired the ownership  rights by reason of transfer from the antecedent owner of the suit bonds,  would be entitled to be placed on the register of NPCL as the registered  holder of the bonds. His reliance on the judgment of  Controller of Estate  Duty  v.  Godavari Bai  in support of the proposition is justified. Section 9  of the TP Act recognises even an oral transfer made in every case in which a  writing is not expressly required by law. Mr. Jethmalani submitted that the  transfer in the instant case would be valid even without execution of any  kind of instrument in writing and without actual delivery of the suit bonds.  He is justified in relying on the Cost Memo, which is part of the evidence, as  being sufficient to evidence the contract of transfer of the bonds, since it is  signed by the transferor, names the transferee, indicates the details of the suit  bonds, the amount of consideration, the mode of its payment and delivery of  the BR as evidence of the holding of the bonds by ABFSL on behalf  of  SCB. Mr. Jethmalani is right in his submission that this transfer has been  accepted even by the Special Court. Mr. Jethmalani went to the extent of  contending that even formal delivery of the original LOA was not an  essential requisite to complete the transaction so as to effectuate the transfer  of property in the suit bonds to SCB and whether the BR was duly  discharged would hardly be a material fact, since the BR does recognise  SCB’s right and declares that the bonds were being held on behalf of SCB.  We are, therefore, satisfied that there was transfer of the property in the suit  bonds to SCB and the evidence on record is sufficient to arrive at such a  conclusion. It was wholly unnecessary for SCB to go further and prove how  the BR was discharged and how the LOA went out of its possession, which  were the facts emphasised on behalf of CMF. Nor was it necessary for SCB  to lead evidence as to how HPD had intercepted the original LOA, when and  in what manner.          Turning to the argument that SCB could not be permitted to make an  argument inconsistent with the pleadings on record, we need to see an order  dated 2.7.1997 made by the Special Court. On that day the learned counsel  for SCB made a statement that he was not pressing for relief of monetary  claim in terms of prayer (b) of its plaint. While settling the issues between  SCB and CMF and SCB and NPCL, the learned counsel for SCB made a  statement that he would not be pressing the contention that the original LOA  had not been received by SCB. In view thereof, the Special Court did not  permit the issue proposed to be raised by CMF on the said point. CMF  proposed another issue as to whether SCB was not aware of the  circumstances in which the original LOA was taken away from it. This issue   was held by the Special Court to be irrelevant for the purposes of the Suit on

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the ground that, as the plaintiff was not pressing the contention that they  have not received the original LOA; it was not necessary.           Mr. Jethmalani rightly contended, that when these admissions were  placed on record formally, there was no objection by CMF to these  admissions being taken on record, nor was there any challenge by CMF to  the ruling given by the Special Court, overruling the framing of the aforesaid  two issues. In the circumstances, he submits that it is not open to CMF to  raise an objection at this stage. Apart therefrom, Mr. Jethmalani also relied  on Order XII Rule 1 of the Civil Procedure Code to contend that it is open to  a party at any time to give notice, by his pleading, or otherwise in writing,  that he  admits the truth of the whole or any part of the case of any other  party.  This was precisely what happened during the trial on 2.7.1997.  Merely because such a situation arises, the rest of the case does not get  affected and has to be tried in accordance with law.  In Bhagwati Prasad  v.   Chandramaul,  while dealing with the argument that it would not be open  to a party to sustain a claim on a ground which is entirely new or not  pleaded, this Court rejected the contention and held that it was a general  doctrine which could not be applied irrespective of the facts of the case on  hand and observed thus (vide paragraph 10): "But in considering the application of this doctrine to the  facts of the present case, it is necessary to bear in mind  the other principle that considerations of form cannot  over-ride the legitimate considerations of substance. If a  plea is not specifically made and yet it is covered by an  issue by implication, and the parties knew that the said  plea was involved in the trial, then the mere fact that the  plea was not expressly taken in the pleadings would not  necessarily disentitle a party from relying upon it if it is  satisfactorily proved by evidence. The general rule no  doubt is that the relief should be founded on pleadings  made by the parties. But where the substantial matters  relating to the title of both parties to the suit are touched,  though indirectly or even obscurely, in the issues, and  evidence has been led about them, then the argument that  a particular matter was not expressly taken in the  pleadings would be purely formal and technical and  cannot succeed in every case. What the Court has to  consider in dealing with such an objection is: did the  parties know that the matter in question was involved in  the trial, and did they lead evidence about it? If it appears  that the parties did not know that the matter was in issue  at the trial and one of them has had no opportunity to  lead evidence in respect of it, that undoubtedly would be  a different matter. To allow one party to rely upon a  matter in respect of which the other party did not lead  evidence and has had no opportunity to lead evidence,  would introduce considerations of prejudice, and in doing  justice to one party, the Court cannot do injustice to  another."  

       We respectfully concur with the said observations and reject the  contention of Mr. Kapadia that SCB could not be permitted to rely on its  changed stand.          There is one minor issue with regard to the date of the letter written by  ABFSL, namely, whether it was 26.2.1992 or 27.2.1992. The evidence of  Kalyana Raman makes it clear that mentioning the date of the letter as  26.2.1992 was a mistake and that the actual date of the letter was 27.2.1992.

IV.     Did SCB lose title to the suit bonds at any time before the suit           was filed?

       A large portion of the impugned judgment is devoted to an analysis of  the Securities Ledger (Exhibit-11) and raising inferences thereupon. There is  no doubt that Exhibit-11 is a securities ledger maintained by SCB in respect

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of the suit bonds. Ex facie, the Securities Ledger shows the date on which  the transaction took place, the counterparty to the transaction, whether the  transaction was a sale or purchase, face value of the transaction, rate of the  transaction, book value, interest paid/received, profit/loss of the transaction  and the balance. The document as such does not give rise to an inference that  in any of the transactions HPD had become the owner of the suit bonds. The  Special Court, on account of a misreading of the evidence pertaining to the  15% arrangement, drew a conclusion from this Exhibit-11 that HPD became  the owner of the suit bonds right from 26.2.1992 and thereafter all the  transactions were those of HPD, the losses or gains being credited to the  account of HPD. We have already seen the evidence on record as to the 15%  arrangement. No part of that evidence can legitimately give rise to the  inference that in respect of securities transacted under the said arrangement,  any person other than SCB or the counterparty become the owner of these  securities. We have already seen that the suit bonds were purchased by SCB  legitimately on 26.2.1992 by payment of consideration to ABFSL, which  fact is even accepted by the Special Court. However, on analysis of certain   documents on record, the Special Court has come to the conclusion that on  9.5.1992 the suit bonds were sold by SCB to HPD. The transaction dated  9.5.1992 thus becomes crucial and has to be scrutinised to see if this  inference is correct.         The Special Court laid great emphasis on Exhibit-7 (details of SCB’s  securities transactions during April 1991 \026 May 1992), which purportedly  shows that on 9.5.1992 the suit bonds were sold to Andhra Bank (hereinafter  referred to as "AB"). There is also SCB’s deal slip no. 10729 showing that  there was a sale of the suit bonds of the face value of Rs. 50 crores @ Rs.  91.00  to AB. According to SCB, entries in the deal slips from nos. 10727 to  10735 were sham entries made in order to account for a large amount of  money which HPD admitted to be owed to SCB and paid up by transferring  Cantriple Units worth about Rs. 205 crores. SCB’s explanation is that it had  to show in its books, the receipt of this Rs. 205 crores and, therefore, a   number of sham entries were recorded in deal slip Nos. 10727 to 10735 and  were also indicated in Exhibit-7, AB being shown throughout as the  counterparty and all such transactions being shown as ’direct’. The learned  counsel for SCB contended that these were sham entries in order to take into  the books of SCB the large amount of Rs. 205 crores.         According to the FIR which is exhibited by CMF on record, by about  30.4.1992, the officers of SCB discovered that there had been a series of  transactions in securities conducted through HPD, as a result of which,  securities to the tune of about Rs. 300 crores remained unaccounted for, as  neither securities nor BRs pertaining to them had been received by SCB.   One Ravi Iyer, Director, Local Currency Group of SCB made some  preliminary inquiry and confronted HPD about this fact. HPD admitted on  10.5.1992 to Ravi Iyer that in respect of payments made by SCB for  purchase of securities, there was a very substantial shortfall of securities, as  the securities or BRs pertaining to them had not been handed over to SCB by  HPD. HPD promised that he would hand over BRs/securities for the  shortfall already identified and on 11.5.1992 he delivered a letter promising  to deliver further securities to fill the gap that had been noticed. SCB had  relied on the chargesheet and recital in the chargesheet as an admission on  the part of CMF, since the charge sheet was produced as CMF’s evidence.  Further, there is evidence of  M.Q. Askari (PW-3), an officer of AB in terms  denying that there was any sale or purchase transaction between SCB and  AB during the period 1.5.1992 to 10.5.1992. In fact, Askari produced the  purchase register of AB in which there was no entry showing purchase of the  suit bonds by AB from SCB on 9.5.1992. Mr. Jethmalani contended rightly  that the evidence of Askari had remained totally unchallenged, particularly  with reference to the absence of any purchase of the suit bonds by AB. Mr.  Jethmalani criticised the impugned judgment of the Special Court as having  singularly failed to consider any part of this crucial evidence of the officer of  AB. We think that this criticism is justified. While the Special Court’s  inferences are based upon its understanding of what the 15% arrangement  was and its analysis of Exhibit-11, it totally fails to give any reason as to  why the evidence of a witness from AB about there being no such  transaction on 9.5.1992, backed by the purchase register of AB, should be

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rejected. In our view, in the face of the positive evidence of AB that no such  transactions were there, there was no justification for not accepting the stand  of SCB that entry dated 9.5.1992 pertaining to the suit bonds was a sham  entry intended to introduce the money into the books of SCB to cover a wide  gap.         The Janakiraman Committee Report is also clinching on this issue of  the so called sale of the suit bonds on 9.5.1992 to ABFSL. Both sides have  relied on the Janakiraman Committee Report, which is admitted in evidence  as Exhibit-18. In the Fourth Interim Report dated March 1993, in Paragraph  3.1(h) there is a discussion of this entry in the Report. The Janakiraman  Report says: "(h)  On 9.5.1992, Stanchart as per deal slip purchased  units of Cantriple of face value of Rs. 45.5 crores @ Rs.  58.50 per unit from Andhra Bank for an aggregate cost of  Rs. 266.18 crores. There is no record of this transaction  in the books of Andhra Bank nor are there any cost  memos available and no securities were received from  Andhra Bank. On the same day, Stanchart as per deal  slips sold PSU bonds aggregating Rs. 266.12 crores to  Andhra Bank. (Refer paragraph 3.4 below). There is no  record of these transactions in the books of Andhra Bank  and no securities were delivered. A pay order No. 257131  for the difference of Rs. 0.06 crore was prepared but not  delivered to Andhra Bank. These transactions appear to  have been put through merely to cover up a gap in  respect of various earlier purchase deals for which  neither securities nor BRs. were available. The details of  these earlier transactions are explained in paragraphs 3.3  and 3.4 below."

       Admittedly, the  Janakiraman Committee was a committee of experts  appointed by the RBI to investigate the securities scam. There is also no  dispute that the Janakiraman Committee had full authority backed by the  RBI order and did investigate by meticulously going into the account books  of all the banks concerned, including AB. This report also supports the stand  of SCB that the entries pertaining to the sale of the suit bonds on 9.5.1992  were sham entries and that there was really no transaction of sale of the suit  bonds to AB on the said date. In the face of this evidence, it was not open to  the Special Court to reject the story of bogus entries by merely indulging in   speculative analysis of the entries in Exhibits 7 and 11 against the  background of what it understood to be the 15% arrangement. One more  fact, which the Special Court considered as proving the genuineness of the  entries pertaining to 9.5.1992, is about the purchase of Cantriple Units  deposed to in the evidence of Waseem Akhtar Saifi (Exhibit-14) in the  previous Suit No. 17/94. Mr. Jethmalani criticised this finding as wholly  erroneous. In the first place, according to him, Saifi was examined in the  previous proceedings in Suit No. 17/94 only for the purpose of showing that  a letter dated 11.5.1992 written by HPD to SCB was not under coercion as  alleged in that suit. What was placed on record in the present suit by CMF  was only the cross-examination from pages 45-53 after SCB had waived  formal proof and accepted that Saifi did make such a statement. Mr.  Jethmalani submitted that not only was the said evidence irrelevant, but also  had been misread by the Special Court to arrive at an erroneous conclusion.  Such evidence could be admissible only to show what fact was sought to be  proved in the previous Suit No. 17/94 and secondly, such evidence is wholly  hearsay with regard to the transaction of Cantriple Units on 9.5.1992. He  also criticised the finding of the Special Court as self-contradictory on this  issue.          The Special Court has laid emphasis on the failure of SCB to explain  by cogent evidence how HPD got possession of the original LOA and  transfer deed. In our view, this is an irrelevant issue, although according to  the charge sheet, HPD had obtained possession of the original LOA and the  signed transfer deed by misappropriation in conspiracy with some officers of  SCB. Mr. Jethmalani also relied on the affidavit filed by HPD before the  CLB in which he had stated that he had borrowed the suit bonds from SCB.

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In our view, that affidavit has no meaning as the deponent refused to submit  himself to cross-examination and the evidence given in the affidavit was not  tested by cross-examination. We need not delve further into the issue as we  have already stated that the issue is immaterial.         It is the stand of CMF that SCB lost its title to the suit bonds as a  result of sale of the suit bonds on 9.5.1992 as consideration for its purchase  of Cantriple Units worth Rs. 205 crores. While answering issue no. 6, the  Special Court has clearly held that purchase of the Cantriple Units on  9.5.1992 had been proved but CMF had not been able to prove that the said  purchase was against sale of the suit bonds on 9.5.1992. In the face of this  finding, the argument of CMF that SCB lost title because it had sold the suit  bonds in lieu of which it purchased Cantriple Units, has been rejected by the  Special Court itself.         For these reasons, we are clearly of the view that whatever might have  been the conjectures on the part of the Special Court, whatever might have  been the suspicion generated on account of sham entries made by one or the  other party, when it came to the crux of the issue, the Special Court has  correctly answered it and negatived the case of CMF that SCB lost title of  the suit bonds because the suit bonds were sold in consideration of purchase  of Cantriple Units.

V.     Did CMF get title to the Suit Bonds ?         Finally, the question that needs to be considered is whether CMF as  defendant acquired title to the suit bonds.         It is urged on behalf of CMF on this issue that CMF is in possession  of the suit bonds, and by reason of Section 110 of the Indian Evidence Act,  1872, the presumption is that the possessor of the property is the owner  unless SCB dislodges this presumption by showing a superior title. It is  contended that only a person with a better title than the party in possession  could succeed.  Mr. Kapadia relied on the rule as to burden of proof as to  ownership under Section 110 of the Indian Evidence Act, 1872 and  contended that as far as the rule enunciated in Section 110 is concerned, it  makes no exception with respect to incorporeal property like debts or bonds.  In his submission, while a debt may be a chose in action, the evidence of the  debt may be by way of  tangible property, namely, the paper evidencing it  and, therefore, that paper would itself be a chattel to which the rule of  burden of proof in Section 110 would apply, even on the assumption that the  suit bonds were choses in action. He relied on passages in Halsbury’s Laws  of England and the discussion thereunder to show that  debentures of  companies were also choses in action.  Relying on the same authority, he  also urged that the strictness of the common law rule against the assignment  of choses or things in action had been relaxed by various statutes.  He,  therefore, contended that as far as transfer of the suit bonds was concerned,  it was governed by the practice in the market, read with the provisions of  Section 108 of the Companies Act, 1956 in the light of  the Notification  issued by the Central Government under Section 620 of the Companies Act,  1956, governing the transfer of the suit bonds. In the submission of Mr.  Kapadia, debentures strictly fall within the description of ’chattel personal’,  and by the applicable statute, namely, the Companies Act, 1956 they have  been made capable of being dealt with as chattel. He relied on another  passage in Halsbury’s Law of England in support thereto.  Relying on  Jagdish Narain  v.  Nawab Said Ahmed Khan  he further contended that  since the Suit is one on title, the plaintiffs could succeed only on the strength  of their own title; the defendants were not obliged to plead any possible  defects in the title and they were entitled to avail themselves of any defect  that such title showed subsequently. To similar effect were cited the  decisions of this Court in Moran Mar Basselios Catholicos and Anr. v.   Most Rev. Mar Poulose Athanasius and Ors. , Brahma Nand Puri  v.   Mathra Puri and Anr.  and  L.J. Leach and Co. Ltd. and Anr. v.   Messrs. Jardine Skinner and Co.  Strong reliance was also placed on the  observations of this Court in Chuharmal Takarmal Mohnani  v.   Commissioner of Income Tax  in relation to Section 110 of the Indian  Evidence Act, 1872.         Rebutting these arguments, Mr. Jethmalani contends that Section 110  is contained in Chapter VII of the Indian Evidence Act, 1872, which deals

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with the burden of proof. As a matter of fact, Section 110 merely enunciates  the burden of proof as to ownership. He rightly submits that any rule of  burden of proof is irrelevant when the parties have actually led evidence and  that evidence has to be considered. Reliance is placed by him on Sita Ram  Bhau Patil  v.  Ramchandra Nago Patil and Anr.  for the proposition that  when the entire evidence is before the court, the burden of proof becomes  immaterial. Even assuming that the rule of burden of proof in Section 110 is  relevant, Mr. Jethmalani contended that Section 110 would be applicable   only to a ’thing’, which is capable of being possessed. He rightly submits  that a chose in action is not a ’thing’, as, by definition, it is not in the  possession of someone, but that possession has to be acquired by some  action which is why it is called a chose in action. He rightly distinguished  the judgment of this Court in Chuharmal Takarmal (supra) as wholly  inapplicable to a situation of a chose in action. In the said judgment, the  possession was with respect to certain wrist watches, which were obviously  not choses in action. According to him, Section 137 of the TP Act makes  Section 132 inapplicable to debentures but the principles of common law  and equity must surely govern even such transactions of transfer of  debentures.         Mr. Jethmalani further contended that although the suit bonds were  excluded from the definition of ’goods’ under Section 27 of the Sale of  Goods Act, 1930 and Section 27 does not apply to the situation, the general  rule of transfer of property, that a transferee acquired no better title than the  transferor, holds good and applies even in the case of the suit bonds. Thus,  according to Mr. Jethmalani, in a situation like this, where there is a defect  in the title of the antecedent transferor, the transferee got no title. In his  submission, the general principle of the legal maxim nemo dat quod non  habet must govern all transactions. Relying on the judgment of the Chancery  Division in France v. Clark,   he contended that this rule is not derogated  from under Section 108 of the Companies Act, 1956. The provisions of the  Companies Act, 1956 for registration in the name of a transferee merely give  complete effect, provided there is already a prior valid transferor. A mere  registration cannot effectuate a document which was, as between the alleged  transferor or transferee, inoperative and of no effect. Relying on the  judgment of the Chancery Division (supra) he contended that even when a  blank transfer form is signed, there is no notice that the transferor is the  owner and if the circumstances are such that the transferee is put on enquiry  as to the bona fides of the transfer or the circumstances are such that the  transferee must be deemed to have been put on such enquiry, then the  transferee would not be a purchaser for value without notice of defect in the  title of the transferor. He contended that even assuming CMF came into  possession of the original LOA of the suit bonds together with blank transfer  deeds, there would be clear notice that the transfer deeds were signed by   someone other than the original owner of the suit bonds; if CMF had made  the slightest enquiry, it would have learnt that the original owner (SCB), was  not intending to transfer them to CMF. Thus, in his submission, CMF cannot  be said to be a purchaser for value without notice. At all points of time, it  had notice that whoever was delivering the original LOA with the blank  transfer deed was not a person with full title to the suit bonds. Referring to  the defence of CMF, he contended that CMF initially took the stand that the  suit bonds had been acquired by it from ABFSL through HPD, subsequently  changed its stand and alleged that HPD must have acted as a broker either  for ABFSL or for SCB or on his own behalf. According to Mr. Jethmalani,  this is a situation where CMF is unable to say as to who was the person with  the antecedent title who could have transferred the title to CMF for bona fide  purchase for value without notice. He criticised the impugned judgment of  the Special Court for brushing aside the principle in France v. Clark  (supra) on the ground that HPD was the owner of the suit bonds. He pointed  out that the principle in France v. Clark (supra) has been reiterated and  applied in India also and has been followed in V.S. Venkata Subbiah  Chetty  v.  A. Subha Naidu and Ors.  and  Govt. of the United States of  Travancore and Cochin  v.  Bank of Cochin Ltd. .   In his submission, a  transferee of an actionable claim gets no better title than that of the  transferor and he would take it subject to all the liabilities and equities to  which the transferor was subject. On the basis of the pleadings of CMF, it

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acquired the right to the suit bonds from HPD. HPD could not confer a better  title than he himself had to the suit bonds. It is the case of SCB that HPD  had got the bonds by theft, misappropriation or some other offence and,  hence, it could not pass any title to CMF. He, therefore, contended that even  if the case of CMF is to be accepted, CMF got no title to the suit bonds.          The only exception would be the case of a bona fide purchaser for  value without notice. He seriously questioned both the bona fides and  lack  of notice, on the part of CMF. He contended that the so called acquisition of  the suit bonds by CMF was neither bona fide nor was CMF a purchaser for  value, as no consideration had been paid by CMF and, in any event, CMF  had or ought to have had notice of the lack of title on the part of its  antecedent title holder.         Impugning the bona fides of the transaction by which CMF claimed to  have acquired the suit bonds, Mr. Jethmalani points out that although CMF  took up the initial stand that the suit bonds had been purchased from  ABFSL, it later shifted its stand. In its petition before the CLB, CMF  claimed that it had purchased the suit bonds from ABFSL by paying it  consideration. In its written statement in the Suit, CMF took up the stand  that it had purchased the suit bonds from HPD, who was acting on behalf of  ABFSL or SCB. In its supplementary written statement, it contended that it  bought the bonds from HPD acting for himself or ABFSL or SCB. Learned  counsel contended that such a plea coming from a financial institution,  which had entered into a transaction worth about Rs. 45 crores was utterly  absurd and unbelievable.  At no point of time did CMF state on record as to  what was the representation made by HPD when he allegedly sold the suit  bonds to CMF on 27.2.1992. It was not as if ABFSL was an unknown party,  for the record shows that there were at least 23 transactions between CMF  and ABFSL in November 1991 and 4 transactions even on 27.2.1992. Even  after HPD filed his affidavit alleging that the suit bonds had been ’lent’ by  SCB, CMF did not care to deny the contents of HPD’s affidavit. As a  banker, CMF knew that no transaction in securities could take place without  a cost memo, or some other kind of documentation. This was a case where  CMF has been unable to produce any credible documentation to support its  plea that the suit bonds were purchased from/through HPD on 27.2.1992. A  document relied upon as evidencing the alleged transaction is the letter dated  27.2.1992 issued by HPD to CMF in which he had asked for a bankers’  cheque in the sum of Rs. 46,01,23,287.67 in favour of AB. The deal slip  pertaining to this transaction bearing date 27.2.1992 showing that the suit  bonds of the value of Rs. 50 crores had been bought from ABFSL through  HPD, was an internal document of CMF suggesting purchase of the suit  bonds from ABFSL through HPD as broker. Thus, the evidence led by CMF  was that it had bought the suit bonds from ABFSL with HPD as the broker.  At no point of time did it seek or obtain a cost memo for this transaction.  R.V. Shenoy (PW-2), ABFSL’s employee, denies that any such transaction  had taken place by which the suit bonds were sold by ABFSL to CMF with  HPD as a broker or otherwise, and  there is no cross-examination on this  aspect. Interestingly, even the Special Court does not hold that there was any  transaction on 27.2.1992 in which CMF had bought the suit bonds from  ABFSL. The Special Court glossed over the matter by stating that the 15%  arrangement made HPD the owner of the suit bonds and, therefore, it was a  transaction between HPD and CMF.         No evidence was led by CMF as to which employee of CMF had  transacted the deal in which the suit bonds were purchased from ABFSL  ostensibly, through HPD as the broker, on 27.2.1992. Affidavit of one Satish  was filed as a witness of CMF who claimed knowledge about the  transaction, but the said Satish was not examined. The only witness of CMF,  Nandita Rao, frankly admitted that she had no personal knowledge of the  suit transaction whatsoever. No other documents were produced by CMF to  show that such a transaction was entered into between itself and ABFSL  with HPD as the broker, as a result of which it came into possession of the  suit bonds as an owner. It is impossible to believe the story of CMF that, a  financial institution could have entered into a deal of such magnitude  without a scrap of document. That is the reason why even the Special Court  does not hold that there is any evidence on record from which a conclusion  can be drawn in favour of CMF acting bona fide.  The evidence on record

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does not appear to support the story of CMF that it had entered into a  contract under which it purchased the suit bonds from ABFSL on 27.2.1992  with HPD as the broker.         Mr. Kapadia, learned counsel for CMF, relied on the judgment of a  learned Single Judge of the Bombay High Court in Fazal D. Allana  v.   Mangaldas M. Pakvasa  in support of his contention that, it is common  practice in the share market that shares are transferred by mere delivery with  a transfer deed signed in blank and that in such a situation there was no  question of CMF being put to notice that there was anything irregular in the  LOA of the suit bonds delivered to CMF by a transfer deed signed in blank  by ABFSL. He, therefore, contends that this was a bona fide transfer  consistent with the market practice. As a result of the Bombay High Court  judgment, the authority of France  v.  Clark (supra) was shaken, is the  submission of the learned counsel. Relying on the judgment of this Court in  Vasudev Ramchandra Shelat  v.  Pranlal Jayanand Thaker and Ors.  it  is pointed out that a transfer of property in securities, which is recognised by  the TP Act, may be antecedent to the actual vesting of all or the full rights of  ownership of shares and exercise of the rights of a shareholder in accordance  with the provisions of company law. The antecedent transfer of title in the  security results in the equitable right of the transferee to be registered by the  company. Learned counsel contended that as a result of delivery of the  original LOA accompanied by the blank transfer deed, CMF acquired  ownership rights including the equitable right as against NPCL to have its  name registered as the owner. Strongly refuting the argument of Mr.  Jethmalani, Mr. Kapadia contended that since delivery of securities  accompanied by a blank transfer deed was a common practice in the trade,  there was no occasion for alarm bells ringing merely because the original  LOA accompanied by blank transfer deed was delivered to CMF. In our  view, notwithstanding the market practice of delivery of securities  accompanied by a signed blank transfer deed, the property in the securities  can only be transferred if there is bona fide purchase of the same for value.  The crucial question in the present case is: did CMF purchase the suit bonds  for value from the antecedent title holder?         This brings us to the last limb of the argument of Mr. Jethmalani  that  CMF can never be said to be a purchaser for value, as there is no evidence to  show that any consideration was paid by CMF for acquisition of the suit  bonds.         When the matter was first tried by Variava, J. as the Special Court, the  learned counsel appearing for CMF categorically admitted that there was no  evidence by which it could be established that CMF had paid consideration  for acquisition of the bonds. It is true that this judgment was subsequently  set aside by this Court and the matter was remanded for trial along with the  Misc. Petition. But this is a significant fact which the Special Court could  not have overlooked in appreciation of the evidence.         The stand taken by CMF is that on 27.2.1992 it purchased the suit  bonds and the 17% NPCL bonds for a total sum of Rs. 46,01,23,287.67, of  which, Rs. 46 crores was the purchase price and Rs. 1,23,287.67 was the  accrued interest on the bonds for one day i.e. from 26.2.1992 to 27.2.1992.  CMF claimed that the consideration for acquisition of the suit bonds and   17% NPCL bonds was paid by two sales of 13% NLC bonds and 13%  MTNL bonds. In other words, according to CMF, there were two purchases  and two sales on 27.2.1992. CMF alleged that on 20.11.1991 there were 19  sales and four purchases. The four purchases included the 13% NLC bonds  and 13% MTNL bonds, which formed part of the consideration for purchase  of the suit bonds on 27.2.1992. The evidence in support of its alleged  purchase of 13% NLC bonds and 13% MTNL bonds is again somewhat  convoluted. The Special Court held that out of the so called 19 sales alleged  on 20.11.1991, 10 had been proved by the evidence led by CMF and jumped  to the conclusion that thereby all 19 must be taken to have been proved. The  Special Court  observes: "The important point which the Court has to bear in  mind is whether the Court should reject all the 10 sales which stands proved  because the remaining 9 sales could not be proved. The answer is in the  negative. The evidence in the form of 7 BRs; the evidence in the form of  Andhra Bank Purchase Register, the evidence in the form of Andhra Bank  Sale Register, and the evidence in the form of Exhibit-H as well as the

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evidence of PW-2 cannot be thrown overboard as bogus. These 10  transactions, as proved, shows that CMF is right in saying that they had sales  on 20.11.1991 with HPD who had received the securities from CMF. In the  circumstances, I hold that payment of consideration for four purchases dated  20.11.1991 stands proved." This finding, in our view, is wholly untenable.  There is no warrant for the conclusion that if some transactions are proved,  all transactions on the same day are to be held to be proved.         Having erroneously held thus, the Special Court finds that after  adjusting the transactions, there was a netted amount of Rs. 3,87,46,575.35  which was payable by HPD to CMF, which was paid to CMF as evidenced  by HPD’s letter dated 26.2.1992 giving instructions to AB to pay the amount  to CMF and debit the aforesaid amount to his account.          Mr. Jethmalani justifiably criticised these findings of the Special  Court. In the first place, the transactions of 20.11.1991 and the transactions  of 27.2.1992 appear to between CMF and HPD. Assuming they are proved,  as held by the Special Court, and the netted amount of Rs. 3,87,46,575.35  was paid by HPD to CMF, it does not prove that the consideration of the suit  bonds was paid to ABFSL/SCB, who alone could have been the antecedent  owner of the suit bonds. It is the erroneous inference of the Special Court  that HPD had become the owner of the suit bonds that has misdirected it into  assuming that CMF had paid considerations for purchase of the suit bonds.  There is merit in this contention. One of the documents relied upon in  support of the story of sales made on 20.11.1991 is a letter from HPD dated  20.11.1991 addressed to the Manager,  AB advising him to issue a bankers’  cheque in favour of CMF for Rs. 2,75,18,571.04. CMF’s witness, Nandita  Rao (DW-1), was specifically asked in cross-examination as to how much of  the amount was payable by CMF to ABFSL as a result of the transactions  dated 20.11.1991. She answered that it was an amount of Rs.  21,77,01,565.98 and claimed that it was the difference between the amount  paid and received. She also stated that, in addition to the aforestated amount,  an amount of Rs. 4,75,55,205.51 also became payable as sundry creditors.  She also stated that she had arrived at the figure after taking into account all  the purchases and sales of 20.11.1991 and also from the RBI Cash Book.  Thus, according to the evidence led by CMF, CMF had to pay to ABFSL on  20.11.1991 a large sum as a result of their deals which took place on  20.11.1991. Surprisingly, instead of CMF paying ABFSL the aforesaid  amount, on the same day, two sums of Rs. 2,75,18,571.04 and Rs.  4,56,70,000.00 as evidenced by letter dated 20.11.1991 written by HPD to  AB, came to be paid to CMF by HPD. It is evident that some of the existing  documents with regard to various deals have been put together by CMF to  patch up the story of consideration put forward by it.          Another strange document which shakes the credibility of the story of  consideration set up by CMF is the letter dated 26.2.1992 from HPD to AB  instructing AB to issue a bankers’ cheque in favour of CMF for a sum of   Rs. 3,87,46,575.35 and debit his account. The actual number of the cheque is  also shown on the document as 143941 dated 27.2.1992. There is also a  statement of the RBI account of HPD with AB showing the debit of the  aforesaid amount to the books of HPD in AB. The Special Court relies on  this letter as evidencing the netting of the transactions between CMF and  HPD on 27.2.1992. Mr. Jethmalani legitimately criticised the story of  consideration put forward by CMF by urging that, if the aforesaid amount of  Rs. 3,87,46,575.35 was the amount after netting, which had been arrived at  on 27.2.1992, it was impossible to believe that HPD had the prescience on  26.2.1992 to know the exact amount that would be arrived at after netting of  transactions including the purchase of the suit bonds on 27.2.1992.  Although, SCB raised this point in the arguments and pointed out that this  letter belies the stand of CMF, the Special Court brushed it aside by saying  that it did not find any merit in the argument and observing: "merely because   letter is dated 26.2.1992 one cannot assume that HPD knew about the  transactions one day prior to 27.2.1992. The remark indicating pay order  number and the date of 27.2.1992 shows that the instructions were  specifically given on 27.2.1992." Moreover, if we accept the finding of the  Special Court that the transaction of the suit bonds between HPD and CMF  on 27.2.1992 did take place, then there is no explanation for the suit bonds  being sold to and purchased from other parties during the period 27.2.1992

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to 9.5.1992 as shown in Exhibit-11.         The pleadings of CMF on the issue of consideration appear to be   most confusing and shifty. The exercise carried out by the Special Court of  analysing several transactions and discharge of BRs, shows transactions of  payments back and forth between CMF and HPD. The ledger folio produced  by CMF in support of its stand is also hardly reliable. The ledger entry  pertaining to the purchase of 13% NLC bonds discloses a very curious state  of affairs. The entry pertaining to 20.11.1991 is hand written after the entry  of 30.11.1991. When the witness of CMF, Nandita Rao (DW-1), was cross- examined as to how the entry of 20.11.1991 could have been written in the  ledger folio after the entry of 30.11.1991, she had hardly any explanation for  that except professing ignorance. The said witness was also asked as to  whether she came across any document from ABFSL in support of the  transactions of 20.11.1991 on the basis of which she had prepared the  vouchers and ledger entries. She admitted that she had not seen any  document from ABFSL on the basis of which such entries were made. Under  cross-examination, the said witness also stated that she did not remember  whether any documents were received from ABFSL in support of the four  general vouchers dated 27.2.1992 and she further admitted that, irrespective  of whether a cheque was received or not, it was a routine practice to write  "RBI cheque received from ABFSL" in the transactions with ABFSL.  Considering the evidence as a whole, it appears that the initial stand taken by  the learned counsel of CMF in the first round of the litigation, that there was  no credible evidence on which payment of consideration by CMF could be  proved, was fully justified. The attempt of CMF on picking up and putting  forward some of the documents, out of the several transactions entered into  by them to patch up the story of consideration, in our opinion, has miserably  failed. There was no cause for being charitable to CMF by saying that they  could prove only a part of the consideration, ergo, rest of the transactions  must be deemed to have been proved. We are of the view that every one of  the arguments put forward by SCB to impugn the story of CMF that it had  paid  consideration is justified and the Special Court was wrong in rejecting  the arguments of SCB on this count. We, therefore, hold that CMF has  utterly failed to prove its story that it had paid consideration for purchase of  the suit bonds on 27.2.1992. Conclusion:         Finally, it appears that there is not much to choose between the two  contending banks, namely, SCB and CMF. Both the banks have been tarred  by the same brush by the Janakiraman Committee Report about fudging their  accounts. However, it appears to us that the issue of the ownership of the  suit bonds could not have been decided on any basis other than what the  legal evidence showed. The situation is somewhat like a game of musical  chairs; the one who is sitting on the chair when the music stops, wins.  Similarly, the situation before us.  Once we eliminate the conjectural  findings, we find that all the material evidence on record shows that SCB  had purchased the suit bonds from NPCL by paying good money. The  original LOA for purchase of the suit bonds along with the transfer deed was  handed over to SCB. As to how it went out of its possession, it appears to be  the subject matter of the FIR filed by SCB. SCB alleges that, it was pilfered  or misappropriated by some officer in conspiracy with HPD, but that is a  matter which will be tried by an appropriate criminal court.         Turning to the other side of the story, CMF claims acquisition of the  suit bonds on 27.2.1992 by paying consideration for them. It is not shown as  to who was the counter-party from whom the purchase was made, as CMF’s  stand on its counter-party keeps changing from beginning to end. The  documents produced on record do not bear out the stand of CMF. In spite of  exercise of our imagination, we are not able to support the conclusion that  CMF had paid consideration for acquisition of the suit bonds from HPD; or  that HPD became the owner of the suit bonds merely because of the  existence of the 15% arrangement, the details of which were thoroughly  analysed by the Janakiraman Committee Report and the Joint Parliamentary  Committee Report. That such an agreement was not against public policy  was clearly held by the previous judgment of this Court in Civil Appeal No.  4456/95 .         In these circumstances, we are not satisfied that the evidence on

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record proves that HPD became the owner of the suit bonds or that CMF  legitimately acquired the suit bonds from HPD or any other person by  paying bona fide purchase value for them. Consequently, we must hold that  CMF acquired no right, whatsoever, to the suit bonds. The suit bonds always  remained the property of SCB irrespective of how they found their way into  the hands of CMF.          In the result, we allow both the appeals and set aside the impugned  judgments of the Special Court in Special Court Suit No. 11/96, and Special  Court Misc. Petition No. 81/95 and hold that SCB as the owner of the suit  bonds is entitled to be registered as such in the register of NPCL.  Consequently, the Suit is decreed in terms of the prayers in Civil Suit No.  3808/92 and Misc. Petition No. 81/95 is dismissed.         Considering that both parties are in pari delicto in the matter of  fudging their accounts and indulging in transactions which have facilitated  the securities’ scam, we do not think it fit that SCB should be awarded   costs, although it has succeeded in the appeals.         The appeals are accordingly allowed with no order as to costs.