9911796707
TMI Blog2006 (5) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2. 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 - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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. 5. 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 Informa- tion 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. 6. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. 8. 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). 9. 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-1996, 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. 15. 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. 16. 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 Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paras 14 and 15 of the Written Statement ? This issue is divisible into 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. 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. Issues Answers 7. Whether the Defendant No. 2 purchased the bonds and received delivery thereof along with Transfer Deed as alleged in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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. 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 Respondent 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. 20. 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 per cent Arrangement' between SCB and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adia, 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 Defendant 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 defendant have no right, title and interest whatsoever, in relation to the said Bonds, more particularly described in Exhibit 'G' hereto and that the Second defendant are not bona fide purchasers of the said Bonds for value." 22.1 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. 22.2 Further, even Grounds A28 and A30 of the present Civil Appeal No. 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased 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 AIR 1977 SC 536, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986 so as to be eligible for registration as the holder of the bonds. 26. 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 trans-ferred 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Judicata: 30. Mr. Jethmalani invited our attention to an earlier judgment of this Court in Canara Bank v. Standard Chartered Bank [2002] 10 SCC 6971 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. State of U.P. [1962] 1 SCR 574, Guda Vijayalakshmi v. Guda Ramachandra Sekhara Sastry [1981] 2 SCC 646 and Hope Plantations Ltd. v. Taluk Land Board [1999] 5 SCC 590. 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 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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's case (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. 34. We are unable to accept the conclusions d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by a witness. 37. 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. 38. 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 - May 1992 (Exhibit-7), security ledger of SCB in relation to the suit bonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtered Bank AIR 2003 SC 4630. 42. 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. Jethmalani 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 AIR 1915 PC 96, Ramrati Kuer v. Dwarika Prasad Singh AIR 1967 SC 1134, and Indira Kaur v. Shri Sheo Lal Kapoor AIR 1988 SC 1074. 43. In Hiralal's case (supra), this court reiterated the observations of the Privy Council in Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi AIR 1917 PC 6, 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 withhold from the court the written evidence in his possession. In Gopal Krishnaji Ketka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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. 45. 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 [1962] AC 209, 216]. It was nobody's case that in any of the transactions under the 15% arrange-ment, HPD could have been sued for enforcement of any right arising therefrom between SCB and ABFSL. C. Estoppel: 46. Issue No. 5 framed by the Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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. AIR 1938 PC 52, it was observed: ". . . though 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance in the plea of estoppel raised by CMF. D. The Benami Transactions (Prohibition) Act, 1988: 51. 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-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 dischargi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 55. 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 orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ichharam alias Brijram AIR 1974 SC 471, Thiru John v. Returning Officer AIR 1977 SC 1724 and Bharat Singh v. Mst. Bhagirathi AIR 1966 SC 405, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bentures 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 CED v. Godavari Bai [1986] 2 SCC 264 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 AIR 1966 SC 735 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 (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities ledger maintained by SCB in respect 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 26-2-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 rejected. In our view, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstood 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at only a person with a better title than the party in posses-sion 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 action1. 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 statutes2. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (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. 72. 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 1884 Vol. 26 Ch. D 257 he contended that this rule is not derogated from under section 108 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. AIR 1954 Trav. - Coch. 243 (FB). 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 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. 73. 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. 74. Impugning the bona fides of the transaction by which CMF claimed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 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 per cent arrangement made HPD the owner of the suit bonds and, therefore, it was a transaction between HPD and CMF. 75. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the present case is: did CMF purchase the suit bonds for value from the antecedent title holder? 77. 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. 78. 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 consider-ation 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. 79. The stand taken by CMF is that on 27-2-1992, it purchased the suit bonds and the 17 per cent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not prove that the consideration of the suit bonds was paid to ABFSL/SCB, who alone could have been the anteced-ent 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 pur-chase 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue 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 per cent 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 per cent 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. 4456/951. 86. In these circumstances, we are not satisfied that 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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