1994 (8) TMI 313 - Board - Companies Law

Summary

Issues Involved:
1. Applicability of the Special Court Amendment Ordinance, 1994.
2. Nature of delivery of 9% IRFC bonds made by NKA to Amro Bank.
3. Whether the delivery conveys a good title to Amro Bank.
4. Determination of the rightful owner to be entered in the register of bonds.

Detailed Analysis:

Issue 1: Applicability of the Special Court Amendment Ordinance, 1994
The Company Law Board (CLB) examined whether the Special Court Amendment Ordinance, 1994, which has since become an Act, applies to the case. The CLB concluded that the Ordinance does not apply to the proceedings before it. The CLB is not considered a "civil court" under the Companies Act, 1956, or the Civil Procedure Code, 1908. The Ordinance aims to expedite the disposal of cases involving notified persons in civil courts, but it does not disturb the proceedings before the CLB. Thus, the CLB retains jurisdiction over the matter.

Issue 2: Nature of Delivery of 9% IRFC Bonds
The delivery of the 9% IRFC bonds by NKA to Amro Bank was scrutinized. The CLB found that Amro Bank had initially ordered 17% NPC bonds, and the delivery of IRFC bonds was intended as an alternate security pending the delivery of the NPC bonds. The delivery was not a sale but a temporary measure. The CLB noted that the contract note for IRFC bonds was pre-dated and not contemporaneous with the actual events, indicating that NKA did not have the bonds on hand when the contract note was issued.

Issue 3: Whether the Delivery Conveys a Good Title to Amro Bank
The CLB determined that the delivery of the IRFC bonds did not convey a good title to Amro Bank. The transaction was neither a valid pledge nor a sale. The CLB emphasized that a valid pledge requires the mercantile agent to pledge goods in the ordinary course of business, which was not the case here. Additionally, the CLB found no valid consideration for the IRFC bonds, as the payment made to Andhra Bank for NPC bonds could not be adjusted against IRFC bonds. The CLB concluded that Amro Bank could not claim title to the IRFC bonds without paying any consideration.

Issue 4: Determination of the Rightful Owner
The CLB examined the documents and transactions between KVB and SCB, finding them well-documented and genuine. The transaction between KVB and SCB included a cost memo, BR, and contract note, establishing an earlier contract for the IRFC bonds. As Amro Bank disowned the second contract and claimed the IRFC bonds as alternate security, the CLB concluded that the rightful owner of the IRFC bonds is SCB. The CLB directed IRFC to register SCB as the holder of the bonds and deliver the securities to SCB after due registration. IRFC was also instructed to pay all arrears of interest due on the bonds to SCB.

Conclusion:
The CLB held that the Special Court Amendment Act, 1994, does not apply to the proceedings before it, and it retains jurisdiction over the matter. The delivery of 9% IRFC bonds by NKA to Amro Bank did not convey a good title, as it was neither a valid pledge nor a sale. The rightful owner of the IRFC bonds was determined to be SCB, and IRFC was directed to register SCB as the bondholder and pay all arrears of interest.