2006 (5) TMI 185 - SC - Companies Law

9% NPCL Tax-Free bonds - whether SCB or CMF is the owner of such bonds and entitled to be registered as such? Held 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. The evidence on 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. Thus allow both the appeals and set aside the impugned judgments of the Special Court in Special Court Suit and hold that SCB as the owner of the suit bonds is entitled to be registered as such in the register of NPCL.

Summary

Issues Involved:
1. Cause of action against Defendant No. 2 (CMF).
2. Entitlement of plaintiffs (SCB) to the suit bonds.
3. Circumstances of the original BR's loss.
4. Alleged transaction dated 26-2-1992 involving HPD.
5. Estoppel against plaintiffs (SCB).
6. Transactions on 9-5-1992 involving Cantriple Units.
7. Defendant No. 2's (CMF) purchase and receipt of bonds.
8. Plaintiffs' (SCB) negligence or omission.
9. HPD's authority to deal with the bonds.
10. Reliefs entitled to the plaintiff.

Detailed Analysis:

Cause of Action Against Defendant No. 2 (CMF):
The Special Court ruled in favor of CMF, stating that the plaintiffs (SCB) did not disclose any cause of action against the defendant CMF.

Entitlement of Plaintiffs (SCB) to the Suit Bonds:
The Special Court ruled against SCB, stating that the plaintiffs were not entitled to the suit bonds. The court emphasized that SCB failed to establish its title to the bonds, considering the 15% arrangement with HPD, which allowed HPD to deal with the bonds as he pleased.

Circumstances of the Original BR's Loss:
The Special Court found against SCB, ruling that the plaintiffs failed to prove the circumstances under which the original BR was taken away from them.

Alleged Transaction Dated 26-2-1992 Involving HPD:
The Special Court ruled in favor of CMF, accepting that the transaction dated 26-2-1992 was indeed a transaction involving HPD. The court concluded that SCB had purchased the bonds on behalf of HPD under the 15% arrangement.

Estoppel Against Plaintiffs (SCB):
The Special Court ruled in favor of CMF, holding that SCB was estopped from making any claims against CMF due to its conduct and the 15% arrangement with HPD.

Transactions on 9-5-1992 Involving Cantriple Units:
The Special Court divided this issue into three parts:
1. SCB had purchased Cantriple Units on 9-5-1992.
2. CMF failed to prove that the purchase was against the sale of the suit bonds.
3. SCB applied for and got the Cantriple Units transferred in their name in January 1993.

Defendant No. 2's (CMF) Purchase and Receipt of Bonds:
The Special Court ruled in favor of CMF, accepting that CMF had purchased the bonds and received delivery thereof along with the transfer deed.

Plaintiffs' (SCB) Negligence or Omission:
The Special Court ruled in favor of CMF, holding that SCB's negligence or omission allowed HPD to deal with the LOA and the transfer deed as he liked.

HPD's Authority to Deal with the Bonds:
The Special Court ruled in favor of CMF, accepting that HPD was authorized to deal with the bonds.

Reliefs Entitled to the Plaintiff:
The Special Court concluded that SCB was not entitled to any reliefs.

Core Issue:
The core issue in both proceedings was the ownership of the 9% NPCL Tax-Free bonds and whether SCB or CMF was entitled to be registered as the owner.

Final Judgment:
The Supreme Court allowed both appeals by SCB, setting aside the Special Court's judgments. The court held that SCB was the legitimate owner of the suit bonds and entitled to be registered as such in the register of NPCL. Consequently, the suit was decreed in favor of SCB, and the Misc. Petition by CMF was dismissed. The court did not award costs to SCB, considering both parties' involvement in dubious transactions.