9911796707
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Issues Involved:
(a) Whether the amounts in question in the custody of the first respondent-bank and/or its provisional liquidator, the second respondent, are impressed with trust for the benefit of the applicant-company and subscribers. (b) Whether the amounts in question form part of the general assets of the first respondent-bank and would be available to all its creditors for pro rata distribution in case respondent No. 1 is ultimately wound up. (c) Whether the amounts in question are refundable in full to the applicants with interest. Issue-wise Detailed Analysis: Issue (a): Trust and Fiduciary Capacity The court determined that the amounts in question are impressed with trust for the benefit of the applicant-company to the extent of allotment money and for the benefit of the subscribers to the extent of the refundable amount. This conclusion was based on the statutory provisions contained in section 73(3) and section 73(3A) of the Companies Act, 1956, which create a statutory trust. The bank holds the said amount in a fiduciary capacity due to the special arrangement evidenced by the prospectus issued by the company. The amounts must be held by the bank for the purposes specified in section 73(3A) of the Act. The court emphasized that these provisions are mandatory and incapable of being waived, ensuring that the moneys refundable to the applicants would definitely be refundable notwithstanding the intervention of insolvency of the company or the bank. Issue (b): General Assets and Pro Rata Distribution The court concluded that the amounts in question do not form part of the general assets of the first respondent-bank. The money collected from the subscribers is merely in the custody of the bank, held in a fiduciary capacity. The application moneys are not part of the general assets of the company or the bank. The bank holds these amounts as a specific deposit for a specific purpose, ensuring refund to the subscribers in the event of refund becoming payable. The court rejected the respondents' contention that the amounts should be available to the unsecured creditors of respondent No. 1 for pro rata distribution in case the bank is wound up. Issue (c): Refundability with Interest The court held that the amounts in question are refundable in full to the applicants with interest. For Ceeta Polymers Ltd., the court allowed the claim with interest at 15% per annum from July 12, 1992. For Varun Shipping Co. Ltd., the claim was allowed without interest. The court directed the respondents to deposit the respective amounts in court and allowed the applicants to withdraw the amounts upon compliance with specified conditions, including filing affidavits and undertakings to ensure the refund of the refundable amounts to the subscribers. Relevant Legal Principles and Case Law: The court relied on several legal principles and case law to support its conclusions. It referred to the Supreme Court's judgment in Shanti Prasad Jain v. Director of Enforcement, which distinguished between general deposits and specific deposits, creating a relationship of trustee and beneficiary when money is delivered to a bank for a specific purpose. The court also cited New Bank of India Ltd. v. Pearey Lal, where the Supreme Court held that the bank held the amount as trust money due to special instructions. Additionally, the court referred to the English case of Nanwa Gold Mines Ltd., which held that application moneys were impressed with trust for the benefit of subscribers, and the House of Lords' judgment in Barclays Bank Ltd. v. Quistclose Investments Ltd., which established that moneys advanced for a specific purpose are impressed with trust. Operative Orders: For Varun Shipping Co. Ltd., the court directed the respondents to deposit Rs. 2,17,97,000 in court and allowed the applicant to withdraw the amount upon filing affidavits and undertakings regarding the allotment of debentures and issuance of refund orders. For Ceeta Polymers Ltd., the court directed the respondents to deposit Rs. 2,01,92,500 along with interest at 15% per annum from July 12, 1991, and allowed the applicant to withdraw the amount upon filing affidavits and undertakings regarding the allotment of shares and issuance of refund orders. There was no order as to costs in both cases.
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