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TMI Blog2003 (8) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... UDGMENT S. Rajendra Babu, J. - This appeal is filed under section 10(1) of the special Court (Trial of Offences relating to Transaction in Securities) Act, 1992 (hereinafter referred to as the Act ). A suit had been filed by the Standard Chartered Bank (SCB) against Canbank Mutual Fund (CMF) for refund of a sum of Rs. 72.25 crores claiming the same to be due under three SGL transfer forms in Government of India security transactions purported to have been undertaken between SCB and CMF in August/September 1991. In the course of the written statement CMF took the stand that the transactions were squared off on the basis of documents made available to the appellant before affirming the written statement and tendering evidence. 2. The Special Court held that taking up a false defence as pleaded in the written statement and repeating the same in the evidence in chief amounts to contempt of court and convicted the appellant to undergo simple imprisonment for a period of two weeks and pay fine of Rs. two thousand. The learned Judge in the course of the order held that perjury is contempt and there is a growing tendency amongst parties not to honour their commitments and pay up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karad Ltd. Hiten Dalal had acted as a broker in this transaction. The said Bank of Karad Ltd., in order to effect transfer of the said securities to the first Defendant issued its combined SGL transfer form authorising the Reserve Bank of India to operate its SGL account and transfer and assign the said securities to the SGL account of the Ist Defendant. In consideration of the said securities purchased by the 1st Defendant, the 1st Defendant issued their cheque dated 27th May, 1991 bearing No. 160319 in favour of the said Bank of Karad Ltd. for the sum of Rs. 58,90,16,042.44 being the cost of the said securities of face value Rs. 58.39 crores and the amount of interest accrued thereon up to 27th May, 1991. ( f ) On 29th May, 1991, the Ist Defendant lodged the said SGL transfer forms for 11.50% GOI 2008 securities of face value of Rs. 58.39 crores issued by the Bank of Karad Ltd., with Reserve Bank of India, Public Debt Office, for clearance. On 29th May, 1991, the Reserve Bank of India returned the said SGL transfer form issued by the Bank of Karad Ltd. on account of insufficient balance. On 31st May, 1991, the said SGL transfer form was again presented to the Reserve Bank of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, he would directly deliver to the plaintiffs fresh SGL forms for that amount issued by the Bank of Karad Ltd. to the plaintiffs and would return to the Ist defendant, three transfer forms of Rs. 43 crores, Rs. 10 crores and Rs. 7 crores issued in favour of the plaintiffs and the Ist defendant transaction with the Bank of Karad Ltd. and the plaintiffs would stand squared off and Ist defendant would remain liable for securities of only the balance of Rs. 1.61 crores. ( j ) Accordingly, on 19th December, 1991, Hiten Dalal brought form and on behalf of the plaintiffs the original SGL transfer form in respect of the 11.50% GOI 2008 securities sold to the plaintiffs on 26th August, 1991 (Aggregate face value Rs. 7 crores) with a request to substitute the said SGL transfer forms with two SGL transfer forms, one dated 19th December, 1991 for Rs. 58.39 crores and another dated 18th December, 1991 for Rs. 1.61 crores. The said Hiten Dalal who had earlier in the day brought the said SGL transfer forms dated 26th August, 1991 for Rs. 7 crores from the plaintiffs, took the fresh 2 SGL transfer forms (one dated 19th December, 1991 for Rs. 1.61 crores) for the plaintiffs from the Ist defenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of squaring off was not correct, the Special Court concluded that " thus except for Canbank s own documents, there is not a single document which shows or supports case of squaring off . On the contrary, all documents of independent parties show that there is no squaring off as pleaded" . The Special Court after adverting to various portions of the evidence further held that the appellant had committed contempt of court. However, when the appellant tried to explain his position in regard to these matters, to which we have adverted to earlier, the same were not allowed to be brought on record on the basis that they are outcome of hearsay. 7. The learned Additional Solicitor General, who appears for the appellant, contended that the learned Judge of the Special Court had gone far beyond the scope of the contempt jurisdiction, particularly when the Court held that on the basis of the documents produced by the CMF the stand of the Bank had been throughout what had been stated in the written statement, though, with reference to other material, that stand may be falsified. He contended that in a case of this nature what is important is that the party verifying the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or defence can be an abuse of process of the court those responsible for its formulation cannot be regarded as committing contempt, but an attempt to deceive the court by disguising the nature of a claim is contempt. If the facts leading to a claim or defence are set out, but an inference is drawn thereby stating that the stand of the plaintiff or defendant is one way or the other it will not amount to contempt unless it be that the facts as pleaded themselves are false. Further, when the appellant tried to explain his case in his evidence, the same was shut out on the basis that it is hearsay. An officer of bank who had no personal knowledge of the transactions in question, and was deposing on the basis of material on record, his evidence cannot be from his knowledge and necessarily has to be hearsay. Hence, the learned Judge was not justified in shutting out that part of the evidence. 9. We, therefore, set aside the order made by the learned Judge of the Special Court initiating the proceedings for contempt and convicting the appellant for the same. The entire proceedings in relation to contempt of court shall stand set aside. The appeal is allowed accordingly. - - Ta ..... 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