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TMI Blog2010 (5) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... 154 per share of M/s. Reliance Industries Ltd. placed by the Plaintiffs on Defendant No. 1 was cancelled/rescinded as alleged by Defendant No. 1 as alleged in paras 8 and 9 of the Written Statement? Whether Plaintiffs’ contract note dated 27-2-1992 (SAIL) had been issued as per prevalent practice as alleged in para 8b(ii) of the Plaint? Whether Defendant No. 1 by its letter dated 17-9-1992 has resiled from its contractual obligations as alleged in para 8b(vi) of the Plaint? What orders and decree?" - CIVIL APPEAL NO. 5173 OF 2004† - - - Dated:- 5-5-2010 - B. SUDERSHAN REDDY AND SURINDER SINGH NIJJAR, JJ. Rupinder Singh Suri, Sanjay Agnihotri, Kripa Shankar Prasad and Chanchal Kumar Ganguli for the Appellant. Jayant Bhushan, Ms. Sunita Dutt, Nilesh Parikh, Rajiv Mehta and Subramonium Prasad for the Respondent . JUDGMENT Surinder Singh Nijjar, J. - This Statutory First Appeal under section 10 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (in short the Special Court Act ) is directed against the judgment and decree dated 15-4-2004 passed by the Special Court at Bombay in Suit No. 4 of 1998. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 to the appellant wherein respondent No. 1 claims to have delivered one lakh shares to its Bombay office and the remaining one lakh shares allegedly to a broker/one Mr. Hiten P. Dalal. The appellant states that on inquiry Mr. Dalal has stated that no such shares had been delivered on behalf of respondent No. 1. In communication dated 7-8-1992 respondent No. 1 acknowledges only one delivery and seeks intimation whether his broker, Mr. Hiten P. Dalal, on their account has delivered one lakh shares or not. Therefore respondent No. 1 is, in fact, aware that no such delivery had been made. Respondent No. 1, in fact, in its communication dated 15-9-1992 acknowledges the factum of both the contract notes. In letter dated 28-9-1992, the appellant reiterated that at no stage it had received any share from Mr. Hiten P. Dalal on account of respondent No. 1. It was also stated that Mr. Hiten P. Dalal had confirmed that he had not given any Reliance shares on account of respondent No. 1 to the appellant. It was also averred that in spite of assurances having been given by respondent No. 1 from time to time, the balance one lakh shares were not delivered. 4. It was further claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other averments, it is however stated that as averred by the appellant in the plaint both the parties were maintaining running accounts with regard to the business transactions with each other. The contracts dated 14-2-1992 and 23-3-1992 are admitted. It is however claimed by the respondents that the contract dated 14-2-1992 was cancelled rescinded by the appellant on the very day, namely, 14-2-1992. It was also claimed that the claim made by the appellant with regard to the running account is not correct. The running account maintained by respondent No. 1 shows a sum of Rs. 2,53,75,000 as due from the appellant on 31-3-1993. Hence the counter claim had been preferred in the written statement itself. It is however, claimed that since the contract dated 14-2-1992 was cancelled, there was only one contract in existence, i.e., contract dated 23-3-1992 against which delivery had been made. Therefore, noth- ing is payable by respondent No. 1 to the appellant on account of this contract. The version of the communication between respondent No. 1 and Shri Dalal as given by the appellant is denied. The query dated 7-8-1992 was necessitated to make sure that no wrong delivery or ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 23-3-1992 at Rs. 375 per share. This averment is affirmed by respondent No. 1. According to the respondent No. 1 the aforesaid one lakh shares were delivered by respondent No. 1 to appellant on 22-4-1992. This delivery has also been admitted by the appellant. It is further stated that appellant had wrongly contended after a long lapse of time that this delivery was in respect of another alleged contract dated 14-2-1992. The appellant, according to respondent No. 1, has illegally and wrongly accounted for its liability to pay to respondent No. 1 in respect of one lakh shares sold on 23-3-1992 only at Rs. 154 per share instead of Rs. 375 per share. Thus the difference between the rate per share at Rs. 375, which was the actual contract rate, and the rate at which the appellant has accounted for i.e., Rs. 154 per share comes to Rs. 2,21,00,000. According to respondent No. 1 this amount is payable by the appellant to the respondent No. 1 with interest. It is accepted that there were dealings between the appellant and respondents and the accounts were settled periodically. Therefore on 31-3-1993 the statement of mutual account between the parties shows that a sum of Rs. 2,53,75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 8b( ii ) of the Plaint? 7. Whether Defendant No. 1 by its letter dated 17-9-1992 has resiled from its contractual obligations as alleged in para 8b( vi ) of the Plaint? 8. Whether the Plaintiffs are entitled for a decree or Rs. 3,18,08,868? 9. Whether the Plaintiffs are entitled for interest at the rate of 24 per cent per annum? 10. Whether Defendant No. 1 is entitled to payment of Rs. 2,53,75,000 with interest as claimed in paras 1 to 4 and 8 of the Counter Claim? 11. What orders and decree?" 12. The Special Court notices that both the parties have filed documents. On behalf of the appellant one witness has been examined. The respondent No. 1 has not led any evidence. It is also noticed that some documents have been admitted in evidence by consent of the parties. Issue Nos. 2 to 5 were taken up together as they relate to the transactions in RIL shares. All these issues have been decided in favour of respondent No. 1 and against the appellant. It is further held that the transaction dated 27-2-1992 was illegal and therefore is not capable of being enforced. Therefore issue Nos. 6 and 7 have also been decided against the appellant. Issue Nos. 1, 8 and 9 have also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kh shares at Rs. 375 was made by the office of respondent No. 1 at Bombay and one lakh shares at Rs. 154 of RIL were delivered by Mr. Hiten P. Dalal on its behalf. The appellant had replied to the aforesaid letter on 19-9-1992 and reiterated that only one lakh shares had been received. According to Mr. Suri on 21-9-1992 respondent No. 1 wrongly claimed that appellant had all along been maintaining that there was only one deal. Therefore appellant through letter dated 28-9-1992 reiterated its stand that on checking its account there seemed to have been no record of receipt of any share from Hiten P. Dalal. Mr. Suri further submitted that in the written statement in paragraph 8 respondent No. 1 had wrongly claimed that the contract dated 14-2-1992 had been cancelled. In fact there was no evidence led by respondent No. 1 on issue No. 5 which was relevant to this claim. In support of this learned counsel relied on extract of the account for the period 1-4-1991 to 31-3-1992 which shows the existence of both the transactions. Therefore according to Mr. Suri the respondent No. 1 has wrongly claimed that contract dated 14-2-1992 was cancelled. Finally it is submitted by Mr. Suri that one l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to constitute a suit for damages are absent in the present case. According to Mr. Suri a perusal of the plaint would clearly show that it is a case for damages arising out of breach of contract on the part of respondent No. 1. Mr. Suri then submitted that the Special Court has wrongly drawn an adverse inference against the appellant on account of non-production of the "sauda books". According to the learned senior counsel the sauda books were not at all relevant for proving the case of the appellant. There was ample evidence on record to show that respondent No. 1 was guilty of breach of contract. Therefore, respondent No. 1 was liable to make good the damages suffered by the appellant. The appellant having produced the best evidence available, it was not necessary to produce the sauda books at all. Therefore, the learned Special Court has wrongly concluded that the best evidence rule would be applicable in the facts of the present case. 14. On the other hand, Mr. Bhushan, learned senior counsel, submits that the findings of the Special Court are based on clear and cogent evidence. He has also made reference to the correspondence between the parties and submitted that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its account. Mr. Bhushan further submits that even if the plea of the appellant is accepted that the transaction has been shown in the account as being incomplete, it still had to be reflected in the sauda books. However during the course of the trial sauda books were not produced and therefore an adverse inference has been drawn against the appellant. With regard to the SAIL shares, Mr. Bhushan submits that the contract was contrary to law. The appellant was aware of this legal position and admitted the same in the letter dated 27-7-1992. 15. Upon consideration of the submissions made by the learned counsel for the parties we have examined the material on the record. It is not disputed before us that there were, in fact, two transactions with regard to RIL shares dated 14-2-1992 and 23-3-1992. The Special Court notices that the appellant claims to have adjusted the delivery of one lakh shares of RIL against the contract dated 14-2-1992 which is said to have been cancelled by respondent No. 1. The Special Court also notices that if the case of the appellant that the contract dated 14-2-1992 was alive is accepted, then the transaction will remain incomplete and unfulfilled. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992 as delivery against the contract dated 23-3-1992 indicated that he was also treating the contract dated 14-2-1992 to be cancelled. Had that not been so, he would have made entries in the books of account to show that the delivery of shares were against the contract dated 14-2-1992. In our opinion Mr. Bhushan, has rightly pointed out that till 27-7-1992, the Reliance shares were not in issue. The letter written by the appellant to the Respondent No. 1 talks only of the SAIL shares. Therefore it was for the appellant to produce documentary evidence to show that in his books of account the contract had been shown as incomplete. But the appellant failed to produce the necessary evidence, which led the Court to observe that : "The burden was on the plaintiff to prove that the contract dated 14-2-1992 remained incomplete. In my opinion, therefore, it was for the plaintiff to produce documentary evidence to show that in his books of account the contract is shown as incomplete. It becomes necessary for the plaintiff to produce the document to show that the transaction in his books of account is shown as incomplete. The conduct of the plaintiff of showing delivery made on 22-4-1992 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial owner when such securities are dealt with by a depo-sitory;" A perusal of the aforesaid definition would show that spot delivery contract is the contract where actual delivery of the securities and the payment of price is either on the same day or on the next day. Admitted position is that the contract note issued by the appellant in relation to this transaction shows that it was not a spot delivery contract. 19. As regards the other types of contracts, the terms, contract for cash, hand delivery or special delivery are not defined by the Act. Therefore in terms of the circular dated 27-6-1969 quoted above, if the Rules made under the Act, bye-laws and regulations of a recognized Stock Exchange permit contract for cash, hand delivery or special delivery, those types of transactions would also be permitted by the circulars. The provisions of the bye-laws of Delhi Stock Exchange clearly permits spot delivery transaction, hand delivery transaction and special delivery transaction. It was noticed by the Special Court that : "It was not even the case of the Plaintiff that the transaction into SAIL shares in relation to which contract note has been issued by the plaintiff wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (2) of section 16 the transaction was illegal and is not capable of being enforced. 21. With regard to issue Nos. 1, 8 and 9, it was correctly observed by the Special Court that the Plaintiff i.e., Appellant herein is not entitled to make any claim either in relation to the Reliance Industries Shares nor in relation to contract for SAIL shares. Further as the appellant is not entitled to claim any amount from the respondent on account of the aforesaid transactions, there is no question of the appellant being entitled to any interest. 22. On Issue No. 10, Mr. Suri has submitted that the Special Court has illegally allowed the counter claim of respondent No. 1. It was submitted that the Special Court has come to a contrary conclusion even though the fact situation was identical in the claim put forward by both the parties. We are unable to accept the submissions made by the learned senior counsel. Once it is concluded that the appellant is not entitled to claim any amount from respondent No. 1 in relation to the aforesaid three transactions i.e., contract dated 14-2-1992, contract dated 23-3-1992 for one lakh RIL shares each and contract dated 27-2-1992 relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract price of shares of SAIL @ Rs. 51 per share against the official quotation of the Delhi Stock Exchange @ Rs. 110 per share. Thus he had claimed that respondent No. 1 was liable to pay for the difference of Rs. 59 per share (Rs. 110 Rs. 51 per share amounting to Rs. 2,95,00,000). It was held by the Special Court, which finding has been affirmed by us, that the contract with regard to SAIL shares being contrary to law was void ab initio. Therefore, the appellant could not possibly claim anything against the aforesaid SAIL shares on account of any difference in the contracted rate and the rate when the same were listed on the Delhi Stock Exchange. Therefore, the irresistible conclusion was that the appellant was liable to pay to respondent No. 1 for the RIL Shares @ Rs. 375 per share, the contract dated 14-2-1992 having been cancelled. Thus the Special Court, in our opinion, correctly concluded that the appellant was liable to pay to the respondent No. 1 the amount of Rs. 2,53,75,000. In view of the above, we find no reason to interfere with the findings of the Special Court on Issue No. 10 also. 23. We also do not find any cogent reason to interfere or to reduce the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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