Bombay High Court
Canbank Financial Services Ltd vs The Provisional Liquidator Of Bank Of ... on 14 June, 2019
Author: A.K. Menon
Bench: A.K. Menon
sbw
SPS-7,8&10_1994.odt
IN THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO
TRANSACTIONS IN SECURITIES) ACT, 1992 AT BOMBAY
SUIT NO.7 OF 1994
WITH
SUIT NO.8 OF 1994
WITH
SUIT NO.10 OF 1994
Canbank Financial Services Ltd.
A company registered under the Companies
Act, 1956 having its registered office at
19/5 & 69/6 Kareem Towers,
Cunningham Road, Bangalore and a
branch amongst 1st floor, 32, B.S.Marg,
Bombay-23. .. Plaintiff
Vs.
1) The Provisional Liquidator of Bank
of Karad Ltd. having his office at Raja Bahadur
Compound, Ambalal Doshi Marg,
Fort, Bombay.
2) Hiten Dalal of Bombay, r/a 201,
Shanti Towers, Military Road, Marol,
Andheri (East), Bombay-400 069.
3) Bhupen Dalal of Bombay,
M/s. Bhupen Champaklal Devidas, at
208, Regent Chambers, Jamanalal
Bajaj Marg, Nariman Point, Bombay.
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4) Abhay D. Narottam of Bombay,
C/o Ramdas & Co.
Vardhaman Chambers,
Cawasji Patel Street,
Fort, Bombay.
*4(i) Aarti Abhay Narottam
*4(ii) Santosh Abhay Narottam
* Legal heir of late Abhay D. Narottam
5) *Vipin P. Gandhi,
1st floor, Veena Vihar, 212, Dayadas Road,
Vile Parle(East), Mumbai-400 057.
* Legal heir of late J.P.Gandhi
6) T.B. Ruia of Bombay,
C/o Dhanraj Mills (P)Ltd., Sitaram
Jadhav Marg, Lower Parel,
Bombay-4000 013.
7) Mr. A.K. Menon,
The Custodian. .. Defendants
Mr. Pradeep Sancheti, Senior Advocate with Ms.Smriti Jha i/b
Mulla & Mulla for the plaintiff.
Mr. Suresh Bhandary i/b Bhandary & Bhandary for defendant
no.1.
Mr. Sunil Kale for defendant no.2.
Mr. Bhupen Dalal for defendant no.3 in person.
Mr. D.P. Kamath for defendant no.4(i) and 4(ii).
Ms. Aditi Pawar with Dharmesh Pandya. K.A. Chettiyar i/b
Ashwin Pandya & Associates for defendant no.6.
Mr. J.Chandran with Ms. Shilpa Bhate i/b Leena Adhvaryu
Associates for the Custodian.
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SPS-7,8&10_1994.odt
CORAM : A.K. MENON, J.
(SPECIAL COURT)
th
RESERVED ON : 27 SEPTEMBER, 2018
PRONOUNCED ON : 14TH JUNE, 2019
JUDGMENT :
1. This judgment disposes the above three suits. All counsel agreed that the facts in the three suits are identical, the only variable being the securities in respect of which transactions have taken place. The following table will help to identify the securities and transactions :
Suit Description of Face Value Delivery Purchase Numbe Securities status Value r 7/1994 Units of UTI Rs.160 Rs.212.80 crores : Part crores Rs.90 Delivered crores>> Not Rs.70 delivered crores>> 8/1994 11.5% Government Rs.25 crores Not Rs.25.81 of India Bonds delivered crores 10/199 Units of UTI Rs.190 Not Rs.255.43 4 crores delivered crores Pleadings :
2. The plaintiff - Canbank Financial Services Ltd. is a wholly owned subsidiary of the Canara Bank and offers 3/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt Portfolio Management Services (PMS) to its clients. Defendant No.2 is alleged to be the common broker between the plaintiff and several banks including Bank of Karad, Citibank, Hongkong Bank, Metropolitan Co-operative Bank and Standard Chartered Bank. Defendant No.3 is a securities broker which is since in liquidation. The original defendant No.4 was a Director of Bank of Karad and a duly constituted attorney believed to have worked for defendant no.3 for many years. The original defendant No.5 is stated to be a cousin of and working with defendant No.3 for many years. The original defendant No.6 was also a notified party stated to be involved in the affairs of the Metropolitan Co-operative Bank which was involved in securities transactions. Defendant No.3 - Hiten Dalal is said to have helped the defendant No.6 - T.B. Ruia take over control of M/s. Killick Nixon Ltd. at the material time. Defendant No.7 is the Custodian appointed under the Special Courts Act at the material time. Defendant Nos.2, 3 and original defendant no.5 are said to be related to each other. It is contended that the father of defendant no.3 along with original defendant no.5 had set up a firm M/s.Champaklal Devidas in 1961. Mr.Champaklal Devidas was the maternal uncle of original defendant no.5. Defendant no.2 is also stated to be related to Mr.Champaklal Devidas. The original defendant no.5 became the sole 4/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt proprietor of M/s.Champaklal Devidas. On demise of Mr.Champaklal Devidas, Defendant No.3 is stated to have commenced business in the name of M/s.Bhupendra Champaklal Devidas as the sole proprietor and original defendant no.4 was the employee of defendant no.3. The business premises of Mr.Champaklal Devidas and Mr. Bhupendra Champaklal Devidas were at the same place located in Bhupen Chambers, Dalal Street, Fort, Mumbai. Defendant no.4 is believed to have secured the card of the Bombay Stock Exchange in his name. Defendant No.4 has contended that he purchased a card of the Bombay Stock Exchange from M/s.Champaklal Devidas. Defendant No.4 is stated to have become a Director of the Bank of Karad with the help of defendant no.3 and original defendant no.5. At that time defendant no.4 was believed to be still in the employment of defendant no.3 as a clerk and was thus a nominee Director of the Bank. Defendant Nos.3 and original defendant no.5 are believed to have routed some of their transactions and securities through the account of original defendant no.4. Likewise, defendant no.2 has also routed his transactions through the account of original defendant no.4. It is not in dispute that delivery was effected only in respect of Units of face value of Rs. 90 crores. All deliveries were to be made by the Bank of Karad 5/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt in respect of which Securities General Ledger (SGL) and Banker's Receipts (BR) have been dishonoured. All transactions between plaintiff and defendant no.1 involve a common broker viz. Mr.Hiten P. Dalal. It is also admitted that Mr.Abhay D. Narottam - original defendant No.4 was the recipient of all funds from the Bank of Karad.
3. At the hearing of the suits, Mr.Sancheti, learned Senior Advocate representing the plaintiff submitted that the prayers in three suits are common except that in Suit No.8 of 1994, prayer clause (b-i) which though similarly worded forms part of the prayers in Suit Nos.7 of 1994 and 10 of 1994 to the exclusion of Suit no.7 of 1994. Save for the said prayer seeking consequential reliefs in the event prayer (b) is allowed, in respect of payment of dividend accrued from time to time along with interest thereon, the other prayers are similar/ Mr.Sancheti, on instructions, of the plaintiff submitted that the plaintiff is now pressing only prayer clauses (c) to (h). It is appropriate before considering the submissions at the bar to consider the factual background. For the sake of convenience the facts in Special Suit No.7 of 1994 are being adverted to.
4. It is the case of the plaintiff that in the course of carrying out its business of managing portfolios on 22nd July, 6/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt 1991 it contracted to purchase 16 crores Units of Unit Trust of India ("UTI") at the rate of Rs.13.30 per Unit aggregating face value of Rs.160 crores ("Units"). In consideration of the purchase, the plaintiff issued the bankers' cheque dated 22nd July, 1991 drawn on the Bank of Karad ("Bank") of Rs.212,80,00,000/-. The Bank issued a Bankers' Receipt ("BR") bearing No.3499 of the same date thereby acknowledging receipt of said payment as aforesaid. The BR confirmed that the amount was received towards costs of Units to be delivered in exchange for the said BR being duly discharged. It is the plaintiff's case that by issuing the BR, the Bank confirmed that till Units were ready for delivery the Bank would hold the said amount on account of the plaintiff. In pursuance of intended purchase upon demand by the plaintiff, the Bank delivered 1.50 crore units of face value of Rs.15 crores on 15th October, 1991 and a further quantity of 7.50 crores Units on or about 18th October, 1991 leaving a balance of about 7 crores Units to be delivered. The plaintiff repeatedly demanded delivery of the balance units. Three of the plaintiff's officers named in the plaint are stated to have followed up the matter with defendant no.2 requesting that delivery be effected at the earliest but to no avail. Correspondence ensued in which these demands were repeated but the defendant no.2 failed and neglected to deliver the Units. 7/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
SPS-7,8&10_1994.odt It is contended that since original defendant no.5 died, the newly added defendant no.5 has been impleaded as the legal heir.
5. According to the plaintiff at the material time, the Bank was carrying on its business under the control of defendant no.3 and original defendant no.5 i.e. Shri Bhupen Dalal and Shri J.P. Gandhi respectively and the amounts received from the plaintiff were deposited in the account of original defendant no.4 with the Bank and not in the Bank itself, although the cheques were issued in favour of the Bank. These amounts are said to be utilised by original defendant no.4 along with defendant no.3 and original defendant no.5. That the documents concerned will reveal that the Metropolitan Co-operative Bank and defendant no.6 were also involved in the transactions relating to Suit Units. Directions were given to the Bank in that respect and defendant no.4 would sign delivery orders and receiving orders at the instance of the concerned defendants and would write the name of the person so instructing on the counterfoil of the delivery orders.
6. The plaintiff contends that the Joint Parliamentary committee which was appointed to enquire into the irregularities in securities and banking transactions had noted in 8/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt its report the working relationship between defendant nos.1 to
6. The plaint sets out the findings of the committee. Based on the findings of the committee it is contended by the plaintiff that between 25th March, 1991 and 2nd May, 1991 the aggregate value of the BRs issued was Rs.1944.52 crores. 11 BRs aggregating to Rs.1305.36 crores were issued without receiving any consideration and this was done at the instance of the brokers i.e. original defendant no.5 - J.P. Gandhi, defendant no.4 - Abhay D. Narottam and defendant no.6 - T.B. Ruia. It is contended that the Bank informed the plaintiff that the Rs.212.75 crores had been kept apart and had not been mixed with any funds and not utilised in its banking business and the said sum would be appropriated towards the cost of securities when the securities are ready for delivery and by the BR, Bank of Karad had acknowledged and confirmed that the said sums paid to it by the plaintiff were held by the Bank of Karad. According to the plaintiff, the said amount was held by the Bank of Karad in trust for and on behalf of the plaintiff. The Bank delivered 9 crores Units out of a total of 16 crore units and a sum of Rs.119.65 crores was liable to be adjusted towards 9 crores Units and the balance Rs.93.10 crores which had been paid represented the balance 7 crores Units which continued to remain with the Bank in trust for and on behalf of the plaintiff. 9/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
SPS-7,8&10_1994.odt The said amount is stated to have been kept separately and not mixed with the Bank's own assets and therefore, not reflected in the Profit and Loss Accounts of the Bank.
7. It is contended that defendant no.1 - liquidator of the Bank has taken possession of the assets including a sum of Rs.93.10 crores which was subject to entrustment with the Bank and therefore the liquidator is bound to repay the sum of Rs.93.10 crores together with interest at 24% per annum to the plaintiff. It is under these circumstances that the plaintiff came to the Court seeking declaration under prayer clause (a). The plaintiff has contended that if 7 crores Units were in the custody of defendant no.1 when he took charge as a liquidator, the plaintiff is entitled to delivery of the said Units along with all accretions thereto and interest thereon at 24% per annum from the date of receipt of the dividends. The plaintiff further contend that if the said sum of Rs.93.10 crores is found to have been transferred or paid to third parties, the plaintiff is entitled to trace the said sums into the hands of all third parties. The plaintiff has relied upon the observations of Janakiraman Committee that large number of transactions undertaken by the Bank are not its own investments but have " put through"
accounts of defendant nos.2, 3 and 4 and BR issued by defendant no.1 and presently outstanding for value of Rs.7.50 10/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt crores are thus issued in accounts of defendant nos.2, 3 and 4. In the circumstances, the plaintiff has contended that the defendant nos.3 and 4 and original defendant no.5 had not acted in good faith and failed to exercise powers with due diligence and have acted in breach of their duties enabling the instrumentality of the Bank to be used fraudulently and for the purpose of the committing fraud and injury to third parties including the plaintiff and deriving wrongful gain detrimental to the third parties dealing with the Bank. The plaintiff contend that defendant no.1 to original defendant no.5 and defendant no.6 are also involved in conspiracy and transactions with the intention of misappropriating and siphoning out funds under the guise of transactions especially since defendant no.6 is also stated to be one of the Directors of Dhanraj Mills Pvt. Ltd. which is a closely held company under his control and is being used as veil to carry out his operations. It is contended that the plaintiff has suffered due to the acts of defendant nos.2 to 6. The plaintiff, claims a sum of Rs.119,74,17,846.67 comprising principal sum of Rs.93.10 crores and interest of 24% per annum till date of suit amounting to Rs.266,41,78,846.67. They have also relied upon computation of said interest. In Suit no.8 of 1994 and 10 of 1994 the amounts claimed are Rs. 35,53,85,255.03 and Rs. 326,67,97,421.83 respectively. 11/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
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8. On behalf of defendant no.1, the liquidator in a written statement dated 23rd February, 1996 states that he was appointed as such from 30th July, 1994. He admits of various irregularities in transactions in securities by the Bank. The books of accounts and records of the Bank were maintained haphazardly and are incomplete with various unexplained gaps and most of the records and books of accounts of the Bank have been seized and are under the custody of CBI. According to the liquidator, it is not possible to know what securities were received and delivered by the Bank to various counter parties . After his appointment as the Provisional Liquidator, a list of securities was prepared but it was not possible to establish or trace the beneficial ownership with certainty. He seeks to refer to a report made by the liquidator in Miscellaneous Application No.218 of 1993. The Bank is believed to maintain S.G.L Accounts with the Public Debt office of Reserve Bank of India in respect of securities transactions on behalf of its customers and balance in this S.G.L account represents securities held by the Bank on behalf of clients including the notified parties. The Bank also maintained securities ledger in respect of their clients but they were found to be incomplete and inaccurate. The Bank of Karad had no system of reconciliation and balancing the securities ledger with S.G.L Account. The securities transactions were not 12/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt entered into securities ledger at all. Further, Bank of Karad did not maintain any General Ledger account in respect of securities. The beneficial ownership of the securities held by the Bank of Karad at the time of liquidation in physical form or held in S.G.L account cannot be conclusively established. It further states that the record of the Bank does disclose that sale of 16 crore Units to the plaintiff in Deal Slip No.1716 of Mr.A.D.Narottam, Banker's cheque of Canara Bank No.077387 for Rs.212.75 crores and further banker's cheque of Rs.5,00,000/- issued by Andhra Bank are credited to overdraft Account No.201 of Mr.A.D.Narottam - original defendant no.4. In addition, BR No.3499 stated to be issued by Bank of Karad to the plaintiff. There is no record showing that the Bank had delivered 1.50 crores Units or 7.5 crores Units leaving a balance of 7 crores Units. The liquidator has no personal knowledge of the transactions but in paragraph 10 he states that as a matter of fact, Bank of Karad was only used as a vehicle and the facts and figures prove that there is nothing available with the Bank and the liquidator does not have in his possession the Units or the money, therefore, no relief can be granted. The written statement does, however, record that amount of Rs.212.80 crores was credited to overdraft account of original defendant no.4 on 22nd July, 1991 but there is no 13/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt record of receipt or delivery by the Bank nor were 7 crore Units in possession of the Bank and for that reason they did not form the part of affidavit filed by defendant no.1 and are not in possession of the liquidator or in S.G.L account which may be belonging to notified parties including original defendant no.4.
9. Defendant No.2 - Mr.Hiten Dalal has filed an affidavit dated 19th July, 1995 in which he has disclaimed any knowledge about the Portfolio Management Services of the plaintiff. Defendant No.2 has denied allegations of collusion, fraud and conspiracy to defraud the plaintiff in sum of Rs.212.75 crores and parting with the same to the Bank and that the office of the plaintiff has followed up the matter of acquisition of Units with him. The written statement highlights the fact that no particulars are furnished of the alleged fraud, collusion or conspiracy and denies that it was to the knowledge of the defendant no.2 that the aforesaid sum was paid out not out of the funds belonging to the plaintiff but out of those belonging to the clients of the plaintiff. Defendant No.2 has distanced himself from the Janakiraman Committee Report which according to him was prepared without verifying the facts with this defendant and without giving him an opportunity of being heard. All allegations in the report against defendant no.2 have been denied.
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10. Defendant No.2 has denied that the Bank transferred or paid the amount to him and contended that no particulars have even been given for amounts being transferred to those accounts. He has categorically stated in paragraph 10 that he has not received any amount from the Bank in respect of which transactions nor is he concerned with the Bank of Karad. That no disclosure can be made out of the complaint filed by the CBI in respect of subject matter of the suit which is pending and that any disclosure may prejudice his case in the criminal trial. It is denied that the plaintiff is entitled to any relief.
11. On behalf of defendant no.3 a written statement dated 14th July, 1995 has been filed in which he admits that he carried on business in the name of M/s.Bhupendra Champaklal Devidas till he was notified under the Act. He was a Non- executive Director of the Bank from July 1991 to May 1992. His family members and he had a 3% share holding in the Bank. Defendant No.4 was associated with the firm of M/s.Bhupendra Champaklal Devidas for some years. It is contended that defendant no.5 - J.P. Gandhi was operating as an independent member of the stock exchange and carried on business of the firm named M/s.Champaklal Devidas. Defendant no.3 has denied close connections with defendant no.6 and/or that he had helped defendant no.6 to acquire control of M/s.Killick Nixon Ltd. as 15/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt alleged. This defendant denies the allegations in the plaint. In paragraph 5 of the written statement, defendant no.3 has referred to the fact that he had an overdraft account with Bank of Karad. He was not aware at the relevant period that BRs of the value of Rs.7.50 crores were issued by defendant no.1 and/or the said BRs were outstanding. It is submitted that the allegations are false and that even in the charge-sheet filed by the CBI no such charges have been made by the plaintiff. Defendant No.3 has denied that the Bank has transferred, paid or credited any money from Rs.212.75 crores to the account of defendant no.3 and denied that the plaintiff is entitled to trace any amount. Therefore, the question of appointing any Commissioner for taking accounts or any fit or proper person does not arise. 12 The 3rd defendant has filed a further written statement dated 28th July, 1998 pursuant to amendments carried out by the plaintiff consequent to the order dated 20 th November, 1997 the 3rd defendant has sought dismissal of the suit, inter alia, on the basis that the plaint as amended does not disclose any cause of action. He has denied that Mr. Abhay Narrotam, defendant no.4 was an ordinary clerk employed by Champaklal Devidas He was not employed by the 3 rd defendant at the material time but only till 1990. According to the 3 rd defendant, he had no connection with the suit transaction. He has also 16/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt denied that he carried out business on the premises of Champaklal Devidas. The defendant no.3 has denied that he had helped the defendant no.4 to become a Director of Bank of Karad. According to him, defendant no.4 became a Director of Bank of Karad in the year 1984 and continued till the end of 1991. The allegation that defendant no.4 was appointed as a Director while he was still serving as a clerk in the office of defendant no.3 has been denied. He has also denied that defendant no.4 was any time engaged by the 3 rd defendant. The allegations that the 3rd defendant was routing transactions in securities through the account of 4 th defendant have denied for want of material particulars. He has denied that the Bank of Karad was acting under his control. 3 rd defendant has contended that there is no connection between him, Bank of Karad or defendant no.4 in relation of the suit transaction and he is not concerned with the amount deposited in the account of defendant no.4 with Bank of Karad which he also denies to utilize those amounts and he submits that these allegations are vague and without particulars. He has never routed any of these transactions to the account of defendant no.4 or instructed defendant no.4 to write his name on counter foils of the alleged orders. The allegation that defendant no.4 was signing delivery and receiving orders at the instance of the 3 rd defendant have 17/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt been denied on the basis that defendant no.4 who is a broker since 1965 and he at his own premises from where he operated and the broker of the stock exchange could not act as an employee of another broker. For all these reasons, he denies that Champaklal Devidas was bought a membership card in the name of 4th defendant. It is the case of the 3 rd defendant that the allegations in the report of the Joint Parliamentary Committee are incorrect and he denies of any collusion or conspiracy involving defendant nos.2 to 6 and him. According to him weightless allegations have been made and which has not been proved. The 3rd defendant has also denied that he was acting in a fiduciary capacity as regards the monies paid by the plaintiff to defendant no.1. He has denied having entrusted with any funds or having dealt with property of his use or having amongst the funds forming trust property on approaching the same. The attempt to trace the trust property has been denied.
13. In short, the 3rd defendant has contended that he has no connection with the acts of omission and commission of Bank of Karad or any of the other defendants since he became a Non-Executive Director of the Bank of Karad only on 27 th June, 1991 and ceased to be so on 27th May, 1992. He also denied that he and his family members have substantial stake in Bank of Karad. As a result of fraudulent complaints made by the plaintiff 18/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt and Standard Chartered Bank, he was arrested and as a result the Stock Exchange Board suspended him from trading. The Janakiraman Committee Report deals with transactions of the plaintiff and the name of the 3rd defendant does not appear in any of this. He relies on the 4 th Janakiraman Committee Report to support his plea that the plaintiff alone is responsible for the irregular transactions and that the suit contract is essentially one between the plaintiff and defendant no.2 and he was in no way involved with the transactions. He contends that even defendant no.5 was not an employee at any time. The defendant no.4 was always a member of the stock exchange at his own right. The defendant no.3 has described the claim of the plaintiff as an attempt to implicate him based on the defence of defendant no.4 who has been involved of the transactions. According to him, the Bank of Karad had an independent Board of Directors with a full time Chairman nominated Director of the Reserve Bank of India and indeed Director of the Board at least 20 years prior to its liquidation and the defendant had not a beneficiary of funds received by defendant no.4 from the plaintiff. All the allegations of the plaint have been denied. Reliance is placed on extracts of the report of the Janakiraman Committee and the 3 rd defendant seeks to place the entire blame for the plaintiff's predicament at the plaintiff's door. In view of the fact that both the reports viz. 19/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
SPS-7,8&10_1994.odt Janakiraman Committee Report and Nanjappa Reports do not reveal any transactions involving defendant no.3 it is contended that defendant no.3 was not involved.
14. Defendant No.4 in his written statement dated 4th July, 1995 has contended that the plaintiff used to enter into ready forward transactions at artificial rates to book profits and that the plaintiff has to blame itself for losses. He admits that he was Director of the Bank and he has also worked for defendant No.3 - Bhupen Dalal as his employee. He has, however, denied that the plaintiff in the course of business contracted on behalf of their clients for the suit Units for aggregate face value of Rs.160 crores. It is denied that Banker's cheque of Rs.212.75 crores was issued to the Bank towards costs and securities allegedly transacted on 22nd July, 1991. Defendant No.4 pleaded ignorance of any BR issued by the Bank to the plaintiff and no such BR could be validly issued on the date of transaction as there were no securities in the books of the Bank or in the account of defendant no.4 on the material dates. Defendant No.4 contends that the plaintiff had not referred to or relied upon any contract note or a cost memo in respect of alleged transaction. According to defendant no.4 the alleged transaction ostensibly between the plaintiff and Bank and the plaintiff had lent its name to the transaction in which defendant no.2 had 20/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt acted as counter party. The transaction was booked on artificial rates for the benefit of defendant no.2. It is denied that any demand for delivery of the alleged securities was made by the plaintiff on the Bank. He believed that the Bank delivered 1.50 crore Units of face value of Rs.15 crores on 15th October, 1991. It is contended that the books of accounts of defendant no.4 or Bank did not contain any reference to the securities in question. It is denied that on 18th October, 1991 further 7.5 crores Units were delivered and that Units were delivered by the said Bank or of defendant no.4. On the other hand this defendant had called upon the plaintiff to produce the Inward Security Register of the relevant date. Defendant No.4 denies that the plaintiff had requested the Bank to effect delivery of balance 7 crore Units. He has further contended that if case of the plaintiff was true it ought to have exchanged the BRs with the actual scrip within 90 days from the date of issue but no steps were taken for receiving the delivery of security before the expiry of the validity date of the BR. That despite BR remain undischarged, the plaintiff put through the defendant no.2 several transactions of securities in which the Bank was the counter party, but in fact the transactions were not real and genuine since no transaction would have been entered into by the plaintiff or defendant no.2 unless the securities covered by BRs were delivered. The 21/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt plaintiff remained silent about non delivery of the alleged securities even after expiry of BR which according to the defendant establishes that the plaintiff had entered into an artificial transaction. Defendant No.4 has denied that he has colluded or conspired with other defendants. This defendant has set out, according to him, the real facts concerning the transactions in the suit. He admits having worked as a clerk in the firm of the father of defendant no.5. Defendant No.5 became a proprietary concern upon expiry of his father. Defendant No.3 thereafter started doing business in the name of M/s. Bhupendra Champaklal Devidas after death of Mr.Champaklal Devidas. Defendant no.5 was in employment of defendant no.3 till the year 1990 and during this period Mr.Champaklal Devidas held a membership card of the Stock Exchange. Although the membership card is bought in the name of defendant no.4, it was not put to use.
15. Meanwhile, defendant no.4 was appointed as Director of the Bank of Karad while being a clerk in the office of defendant no.3 only to create a facade. He admits that defendant no.2 was a close relative of defendant nos.3 and 5 and was also known to defendant no.4. Defendant No.4 admits that defendant nos.3 and 5 would route their transactions through his account, later defendant no.2 also started routing 22/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt his transactions through account of defendant no.4. Defendant No.4 admits he was made to sign delivery orders in the course of business in respect of transactions routed through his account. He participated in this activity with free will and trust and belief that the transactions were proper. Defendant Nos.2,3 and 5 had absolute control and authority over Bank of Karad and defendant no.3 would give instructions about routing of funds to the Bank of Karad. The written statement records that defendant no.4 used to write the names of the persons instructing him on the counterfoils of such orders which are in custody of CBI and from the Bank statement of his overdraft account No.201 of Bank of Karad it is clear that defendant no.2 deposited in the aforesaid account a sum of Rs.212.80 crores on 22nd July, 1991 in the course of routing business through him. On the same day defendant no.2 instructed defendant no.4 to call upon Bank of Karad to issue cheques in diverse sums in favour of certain banks
(i) Rs. 19,41,21,554.78 Canbank Mutual Fund
(ii) Rs. 68,27,83,561.64 Citibank
(iii) Rs. 35,17,36,986.30 Citibank
(iv) Rs. 50,44,10,958.00 Canara Bank
(v) Rs. 29,76,00,000.00 Canara Bank
(vi) Rs. 9,73,46,938.38 Andhra Bank
----------------------= Rs.212,78,99,999.10 ======================= 23/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt Defendant No.4 was not aware as to where these securities in respect of amounts were delivered and accordingly he has stated that he has not gained any monetary benefit from the transactions routed by defendant no.2 through his account.
16. The original Defendant No.5 had filed his written statement on 16th December, 1985 in which he contends that the suit is liable to be dismissed for want of cause of action. It is contended that in absence of any particulars or substantive allegations against him the suit is liable to be dismissed. That defendant no.5 is not connected with other defendants directly or indirectly with the said sum of Rs.93.10 crores and has been incorrectly impleaded. He is not concerned with the amounts covered by the BR or Units in question. Defendant no.5 states that a similar allegation was made by Standard Chartered Bank against defendant no.5 without any substance and the Court observed that no prima facie case was made out against defendant no.5. In the circumstances he has prayed that the suit be dismissed. Defendant No.5 has filed a further written statement dated 8th July, 1998 in person in which he denies that he was operating from the office of defendant no.3. He contends that he was an independent member of the Bombay Stock Exchange carrying on business in the firm name and style of M/s.Champaklal Devidas. Champaklal Devidas was a Maternal 24/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt Uncle, who died and defendant No.3 along with defendant no.5 had constituted a firm called M/s.Champaklal Devidas which was a different firm. It is denied that M/s.Bhupendra Champaklal Devidas and M/s.Champaklal Devidas of which defendant no.5 was a proprietor carries on business at the same premises. He has sought to deny that defendant no.4 become a Director of the Bank with the help of defendant no.3. It is further denied that defendant no.4 came to be made director when he was working as a clerk with defendant no.3. That defendant no.4 is said to be a man of substance. He was a qualified person and worked for several brokers. He has his own premises for his business. The allegations made by defendant no.4 against defendant no.5 are denied. Defendant No.5 has denied that he utilised the amount deposited in the account of defendant no.4 and contends that Janakiraman Committee Report has been selectively cited by the plaintiff that the allegations against him were incorrect and that he has not received any amounts and therefore the question of tracing the sum does not arise.
17. Defendant no.5 has denied that he has not entered into any conspiracy or colluded with any other defendant. He was never a Director of Bank of Karad and allegations of not exercising powers and duties do not apply to him. He has 25/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt denied that he stood in a fiduciary capacity of a trustee or otherwise misappropriated or converted any amounts. According to him there is no material produced by the plaintiff to establish collusion or conspiracy by defendant no.5 with others. He has also denied that he has anything to do with the transaction in securities contemplated in the plaint and with any of the defendants. The allegations of fraudulent acts by defendant no.5 along with Bank of Karad have been denied. Defendant no.5 has nothing to do with sale and purchase of securities contemplated in the plaint and is not concerned with the transaction. He claims that he is wrongly joined as a party to the suit which discloses no cause of action against him. Defendant No.5 has contended that there is no question of tracing any amount in his hands since no amounts have been transferred or credited in the account of defendant no.5 and there is no question of his rendering any accounts. The question of disclosing particulars of documents and information in that respect does not arise nor there is any question of appointing a commissioner for taking accounts since defendant no.5 is not in possession of any books of accounts or other records of the Bank or securities contemplated in the plaint. In the circumstances, there is no question of passing any order against defendant no.5.
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18. The original defendant No.6 had filed two written statements, first of which is dated 19th July, 1995 in which he contends that he states that the plaint discloses no cause of action against him. He has denied having received any monies from the plaintiff. According to defendant no.6 he is neither a necessary nor a proper party to the suit which he claims is required to be dismissed. Pursuant to the complaint filed by the plaintiff, an FIR came to be registered by CBI in which detailed investigation was carried out and CBI has filed charge sheet against 12 persons including defendant no.5. He claims that he is not guilty of any of the charges and is liable to be discharged. He sought stay of the proceedings till disposal of the Special Case No.7 of 1993 and the criminal complaint. He has contended that the plaintiff had filed Miscellaneous Petition No.36 of 1993 wherein this defendant was joined as respondent no.6 inter alia for purchase of 16 lakhs Units of Unit Trust of India from defendant no.2. The facts stated in the said affidavit are stated to be substantially similar and it is contended that the plaintiff is adopting different proceedings in respect of same issues. Defendant No.6 has denied that he has a close connection with defendant no.3 and that defendant no.3 had helped him to take over control of M/s. Killick Nixon Ltd.. He has further denied a pivotal role in the Metropolitan Co-operative Bank Ltd. He 27/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt was never a broker or dealer in securities and he has no role in Metropolitan Co-operative Bank Ltd. He has put the plaintiff to strict proof of the averments. It is also contended that the plaintiff has suppressed the names of other allied clients that the plaintiff is only agent and not principal party to the transaction and he is not entitled to maintain the suit.
19. The plaintiff's contentions about the facts and the conclusions qua parties to the proceedings before this Court cannot be conclusive unless these facts are specifically proved by evidence. It is further contended that the plaintiff has suppressed documents relating to the suit transactions such as diaries, brokerage and more particularly the books of accounts. The plaintiff has also not offered these documents for inspection and the plaintiff has not called upon defendant no.6 for delivery of 16 crores Units or balance 7 crores Units or repay the sum of Rs.25,81,20,354.78. Defendant no.6 contended that he has no knowledge of the transaction. He also does not admit that the Bank was in liquidation and was not in a position to deliver the suit Units. He denied that he has acted fraudulently with any of other defendants. While defendant no.6 has denied that sum of Rs.212.75 crores or any part thereof or any other sum has been transferred or paid or credited to him, he has contended that the charge-sheet filed by the CBI in Special Case No.7 of 28/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt 1993 contains reference to the funds received and paid by the plaintiff as also the suit transaction. No monies relating to the suit transaction are paid to defendant no.6. The defendant has put the plaintiff to strict proof of the averments and submissions made therein. Defendant No.6 has denied that out of Rs.93.10 crores received by Bank any monies has been received or paid to him. He therefore denied liability to pay the said amount or any part thereof. It is contended that the suit is therefore liable to be dismissed.
20. In an additional written statement dated 23rd April, 1998, defendant no.6 has dealt with the amended plaint, contending that the suit was barred by the law of limitation. Although the additional written statement substantially reproduces the contents of several portion of earlier written statement, it still proceeds on the basis that the inspection of documents had not been offered. It is inter alia contended that several particulars of Janakiraman Committee Report are reproduced which need not engage attention of this Court.
21. Defendant No.6 has contended that the plaintiff has himself admitted that defendant no.6 has not utilised the amounts deposited with the Bank and denied being involved in the transactions relating to 16 crores Units by making reference 29/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt to the contents of defendant no.1 which discloses that on 16th September, 1991 Bank of Karad paid Rs.212,80 crores to Mercantile Co-operative Bank Ltd. on the same day Mercantile Co-operative Bank repaid the amount to Bank of Karad. Defendant No.6 has denied that defendant no.4 had any nexus with Dhanraj Mills Pvt. Ltd. It is denied that Metropolitan Co- operative Bank issued any BR to Dhanraj Mills Pvt. Ltd. during the period 1st April, 1991 to 6th June, 1992. Defendant No.6 has denied that during interrogation by the CBI he had admitted any of the allegations. The amendment to the plaint which resulted in additional written statement being filed has been dealt with. It is contended that CBI while carrying out investigation has sought that defendant no.6 be discharged. It is contended that defendant no.6 was never part of any conspiracy. That defendant nos.2 to 5 or any one or more of them denied having benefited from any securities or transactions contemplated in the plaint and that shares in Dhanraj Mills Pvt. Ltd. are held by two private limited companies in which defendant no.6 along with family members are the shareholders. However, save and except in normal course of business defendant No.6 was not dealing with Metropolitan Co-operative Bank through Dhanraj Mills Pvt. Ltd. and therefore denies having adopted any modus operandi. In that sense, just as other defendants have protested 30/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt the plaintiff's failure to offer inspection of documents, this defendant too has raised the same issue. Defendant No.6 has reiterated that he has no control, contractual or otherwise over the affairs of Metropolitan Co-operative Bank. The contents of paragraph 12C(b)(ii) and amended portions of the claim have been denied. The allegations of fraud, misappropriation, conversion of plaintiff's monies and securities have been denied.
22. The auditors appointed by the Custodian viz. M/s. Shah Gupta & Co., Chartered Accountants have filed a report dated 31st October, 2005 on 6th August, 2007. The scope of the enquiry by the Chartered Accountant was investigation of fraudulent and illegal transactions said to have been entered into by the defendant no.6 with various persons as referred to in the Janakiraman Committee Report and other reports based on audit by banks conducted by the Reserve Bank of India and charge sheets filed in the Special Court. They were to consider third party liabilities and analyse on account payments. In addition the accountant were to scrutinize the documents relating to purchase and sale of shares and trading accounts of other notified parties. It is contended that the accountant's representative visited the 6th defendant and sought certain copies which were provided.
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23. In this respect the 6th defendant has filed an affidavit dated 18th July, 2008 setting out the developments pursuant to the appointment of the Chartered Accountant. The 6th defendant has contended that the report dated 31 st October, 2005 incorrectly records that several visits were made by the chartered accountants to the 6th defendant. In fact, the accountant's representative visited the 6 th defendant only once on 26th May, 2004 and all answers were provided. Yet, the report does not disclose the true state of affairs and no inference can be drawn of any alleged transactions carried out by the 6 th defendant or by himself or through Dhanraj Mills. Defendant no.6 has contended that other than Special Case no.7 of 1994 he was acquitted in all other proceedings and since he was not carrying on any business his annual income was below Rs.25 lakhs, therefore not required to maintain books of account under the provisions of the Income Tax Act. He states that the statement of assets and liabilities was the same which was provided by him in June 1992. There was no change after that date and there is nothing remained to be provided to the Chartered Accountant. That all documents had been seized by the Central Bureau of Investigation and the accountant should have contacted them and ascertained the correct facts. The report of the Chartered Accountant's however does not disclose correct facts since the 32/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt chartered accountants have not verified the books of Dhanraj Mills and he cannot opine that transactions were routed through Dhanraj Mills. He has relied upon the fact that certain orders had been passed in criminal case no.7 of 1993 in which he was acquitted and as a result, no order may be passed in the present suit since the claim and the suits are based on the very same transactions. Defendant no.6 therefore, denies that any fraudulent or illegal transactions were entered into by him in his capacity as a Director of Dhanraj Mills. On the contrary, he submits that all transactions were carried out by Dhanraj Mills Pvt. Ltd. and allegations of diversion of funds is baseless according to the deponent the chartered accountant had exceeded his mandate in arriving at conclusions which are biased and perverse. He however, supports the report of the accountant to the extent that no fraudulent or illegal transactions were found in the books of account of the 6 th defendant. The additional affidavit encloses a copy of letter dated 23rd January, 2004 enclosing copies of statements of accounts with bankers/banks orders passed by the Income Tax Appellate Tribunal, Commissioner of Income Tax and inventory of jewellery seized by the income tax department, correspondence between 6th defendant and the said auditors enclosing the documents has also been provided to was the list of assets and 33/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt liabilities which shows that liability was in excess of assets in a sum of Rs.1,056,372/-. The books of account of Dhanraj Mills and the statement of the 6th defendant/respondent in books of Dhanraj Mills are also enclosed.
SUBMISSIONS OF COUNSEL
24. In support of the plaintiff's case, Mr. Sancheti submitted that there was a conspiracy hatched by the defendants. According to him, there can be no direct evidence of such conspiracy in view of the inherent secrecy. The facts laid out before the Court reveal an agreement between persons to do one or the other of the acts described and that there is conspiracy that was hatched as contemplated in Section 120B of the Act is seen and that this has to be inferred from the acts and conduct of the parties. Absent direct evidence one must rely upon circumstantial evidence. He submitted that the key expression "in reference to their common intention " is comprehensive enough to give it a wider scope inasmuch as anything said to be done or written by a co-conspirator after the conspiracy was formed, will be evidence against the others even before he entered the field of the conspiracy and after he left it. He submitted that conspiracy is a continuing offence which subsists till it executed or rescinded or frustrated and the agreement is 34/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt the ingredient of the offence. According to Mr. Sancheti, it is not necessary that all conspirators must know each other since there may be many methods adopted to achieve a common goal of those who conspire. Relying upon a judgment in the case of Yash Pal Mittal vs State Of Punjab (1977) 4 SCC 540, Mr. Sancheti submitted that in achieving the goal several offence may be committed by some conspirators which the other may not even know. The only requirement is that these acts must be done for furtherance of the object of the conspiracy, even though they may sometime misfire.
25. In support of his contentions, Mr. Sancheti relied upon Section 10 of the Evidence Act and submitted that when there was reason to believe that two or more persons had conspired to do something wrong, anything said, written or done by any of these persons in reference to their common intention, after the intention was first entertained by any of them would be a relevant fact against the persons conspiring. He submitted that Section 10 of the Evidence Act is founded on the principle of the law of agency. It makes a statement made by one person binding on the other that is to say the act of one conspirator would be binding on the others during subsistence of a common intention between them. He submitted that in the case of State v/s. Nalini 1999 (5) SCC 253, the Supreme Court had considered the 35/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt concept of a conspiracy which is hatched in private or in secrecy and it is very rarely possible to prove by direct evidence. Circumstances and the conduct of the accused have to be considered. Citing an example it was contended that if A enrolls B who enrolls C and so on, they will be members of a specific conspiracy if they intend to agree on the act even though each member would know only one person who enrolls him a criminal conspiracy. The Supreme Court observed that a criminal conspiracy is a partnership in crime, and that there is in each conspiracy a joint or mutual agency for the prosecution of a common plan and the responsibility extends not only to acts done by the conspirators pursuant to the original agreement but also to collateral acts and only when a conspiracy has been terminated.
26. Mr. Sancheti further submitted that Section 10 of the Evidence Act will come into play only when the Court is satisfied of the existence of grounds to believe that two or more persons have conspired to commit an actionable wrong or any offence, prima facie, evidence is therefore necessary that a person who was a party to a conspiracy before his acts can be used against co-conspirators. Relying upon the Supreme Court's views in State v/s. Nalini (supra) it was contended that if reasonable grounds exist of a conspirators acting in reference to 36/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt a common intention, it would be relevant against all others to prove the existence of conspiracy and that the other person was party to it. The Supreme Court observed that the evidentiary value of the acts is limited by two circumstances viz. the acts shall be in reference to a common intention and in furtherance to a common intention. It was observed that the expression "in reference to their common intention" was comprehensive and appears to have been used to give it wide scope within the words "in furtherance of" contemplated in English Law and as a result anything said done or written by the co-conspirator after the conspiracy was found would be evidence against the other .
27. According to the plaintiff, defendant no.4, was acting on instructions of defendant nos.2, 3, 5 & 6. Mr. Sancheti invited my attention to the pleadings and in particular the written statements of defendant no.1 Bank in paragraph 5, 5(i) to 5(iv) , 5(iv)(ii), 5(iv)(iii), 5(iv)(iv) , 5(v) and paragraph 9. As far as defendant no.2 was concerned, he submitted that the facts set out in paragraph 3 and 5 of his written statement were relevant admissions. Defendant no.4 in his written statement had admitted facts and details in paragraph 14(a) to 14(n) and defendant no.5 had admitted facts and details in paragraph 6, 9 and 11. The aforesaid pleadings he submitted revealed admissions and established nexus amongst the co-conspirators 37/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt who acted in concert with one another to siphon away the funds from the banking system under the guise of transactions in sale of securities. That being a conspiracy, the plaintiff was not in a position to lead direct evidence of the conspiracy of the details of when and who hatched the conspiracy and with whom and the role of each conspirators would be known only to them and not to outsiders.
28. Mr. Sancheti invited my attention to broad principles of the law of conspiracy summarized in State v/s. Nalini. In particular, he invited my attention to clause 3, 4, 9 and 10, the essence of which can be captured in the following paragraph;
A conspiracy is hatched in secrecy and its existence and objects must be inferred from circumstances and conduct of the accused. There will be an umbrella scope enrollment where all enrollment is at the hands of one person and the others are not known to each other. Although those enrolled may be aware that there are other members, the conspirators need not agree to a common purpose at the same time and there would be a common plan that a conspirator would not be responsible for acts of co-conspirator after the termination of the conspiracy. A person may join a conspiracy by words or deeds but criminal responsibility requires more than a passive approach. 38/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
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29. Mr. Sancheti further submitted that better evidence such as the statements of co-conspirators is hardly ever available and it largely based on circumstantial evidence, while a conspiracy may be difficult to prove by direct evidence, the very agreement or league is an ingredient of the offence and every conspirator need not know all details. There may be several devices and techniques adopted to achieve a common goal and all the means adopted and illegal acts done must be purported to be in furtherance of the object of conspiracy or although some may misfire.
30. Mr. Sancheti further submitted that the plaintiff has led evidence to prove the transactions and the payments made by the plaintiff to the Bank of Karad, inter alia, to prove that it had not received the requisite securities under the various transactions of sale. He submitted that relevant documents were tendered proving the transactions yet the defendant declined the cross examination of the plaintiff's witness. He submitted that the securities scam was obviously a result of a close nexus between a few brokers forming groups and sub-groups acting in conspiracy with certain banks and financial institutions with the apparent purpose of siphoning monies from the banking system diverting them for the use of those brokers and their affiliates 39/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt including by introducing such funds in the stock exchange and the facts in the present case clearly establish a conspiracy. He submitted that the above three suits covered three transactions under which the Bank of Karad received a total sum more than Rs.450 crores. These amounts were realized from the proceeds of the cheques which the Bank credited to the account of defendant no.4, although neither the Bank of Karad nor defendant no.4 held any security in respect of the subject matter of the sale. He further submitted that the Bank had issued Banker's Receipts (BRs) and Security General Ledgers (SGLs) in favour of the plaintiff on the instructions of defendant no.4 who had admitted that he was not the recipient of monies. Mr. Sancheti relied upon the following judgments;
1. State v/s. Nalini 1
2. Damodar v/s. State of Rajasthan2
3. Firozuddin Basheeruddin & Ors. V/s. State of Kerala3
4. Yash Pal Mittal v/s. State of Punjab 4
5. N. Narayanan v/s. Adjudicating Officer, Securities and Exchange Board of India5
6. The Official Liquidator v/s. Parthasarathi Sinha & Ors.6
7. Nitco Tiles Ltd. v/s. Gujarat Ceramic Floor Tiles Mfg. Assn.& others7 1 (1995) 5 SCC 253 2 (2004) 12 SCC 336 3 (2001) 7 SCC 596 4 (1977) 4 SCC 540 5 (2013) 12 SCC 152 6 AIR 1983 SC 188 7 (2005) 12 SCC 454 40/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt
8. Standard Chartered Bank v/s. A.K.Menon
9. Shanti Kumar Panda v/s. Shakuntala Devi 8
10. Harshad Shantilal Mehta v/s. Custodian and others9
11. Rasila S. Mehta and others v/s. Custodian, Nariman Bhavan, Mumbai10
12. Kalpana Mehta & Ors. V/s. Union of India & Ors. 11
13. Jyoti Harshad Mehta (Mrs.) and others v/s. Custodian & Ors.12
31. On behalf of defendant no.1, Mr. Bhandary submitted written arguments along with a compilation of documents. None of the documents have been proved despite the opportunity being available. The documents are therefore In his written submissions, it is contended that the 1 st defendant has been appointed as a liquidator in July 1994 and took charge of the affairs of the Bank from 30 th July, 1994. Before the appointment of the provisional liquidator, several irregularities in transactions in securities conducted by the Bank was discovered. Most of the records pertaining to these securities have been seized and are said to be in the custody of C.B.I. The books of accounts were found to have been incomplete, replete with inaccuracies, gaps and omissions. Certain records are not maintained and it is not possible to ascertain which of the 8 (2004) 1 SCC 438 9 (1998) 5 SCC 10 (2011) 6 SCC 220 11 (2018) 7 SCC 1 12 (2009) 10 SCC 564 41/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt securities were received and delivered by the Bank to counter parties. It is contended that after the provisional liquidator is appointed, a list of securities was found in the physical custody of Bank of Karad. Yet it is not possible to trace the beneficial ownership with certainty. The defendant no.1 seeks to rely upon an affidavit filed by the provisional liquidator on 13 th June, 1994 in this behalf.
32. It is further contended that the Bank had maintained the S.G.L. Account no.107 with the Public Debt Office of the Reserve Bank of India in respect of the securities transactions on behalf of its customers. The balance in this account represents securities held on behalf of the Bank's clients which includes notified parties but although the Bank maintains that details of the securities were incomplete and unauthenticated. There is no system of reconciliation and balancing the Securities Ledger with the S.G.L Account with Reserve Bank of India and some securities had not been entered in the Securities Ledgers. The Bank did not maintain the General Ledger Account of Securities. Submissions were made on the basis of available records of the Bank including the position of securities transactions as observed from available record. The available records in relation to the suit transaction are the following as set out in paragraph 5 of the written submissions; 42/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 :::
SPS-7,8&10_1994.odt "The 1st defendant states that subject to the aforesaid facts about the position of Bank of Karad Ltd. and the unreliability of records, the 1st defendant has verified from the available records of Bank of Karad Ltd., the position about the securities transactions which are subject matter of this suit and following particulars of the transactions are observed:
i) As per instruction of A.D. Narottam, sale to Canfina 19 crore units as per his Deal Slip No.1738 dated 31-7-1991.(Emphasis supplied)
ii) Banker's cheque no.77750 for Rs.255,43,98,000/- credited to over draft A/c.no.201 of Shri A.D. Narottam on 31-7-1991.
(Emphasis supplied)
iii) Bank of Karad Ltd. issued B.R. No.3425 (no dated) to Canbank Financial Services Ltd. for Rs.255,43,98,000/-.
iv) The transaction of Sale on 31-7-1991 is however found to be entered on 16-9-1991 in the Security Ledger of A.D. Narottam.(Emphasis supplied)
v) On this date i.e. 16-9-1991 a purchase of 19 crore units from Metropolitan Co-op. Bank Ltd. as per Deal Slip No.1821 dated 16-9-1991 of Shri A.D. Narottam is also recorded in the security ledger.
vi) A cheque for Rs.252,70,00,000/- was issued to Metropolitan Co-operative Bank Ltd. by Bank of 43/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt Karad by debit to over draft A/c No.201 of Shri A.D. Narottam.(Emphasis supplied)
vii) A B.R. No.014 dated 16-9-1991 was issued by Metropolitan Co-operative Bank Ltd. for Rs.252,70,00,000/- in favour of Bank of Karad Ltd. is on record (original with C.B.I. presently).
viii) An amount of Rs.252,70,00,000/- was received from Metropolitan Co-operative Bank Ltd. and credited to A/c. No.201 of Shri A.D. Narottam on 16-9-1991. There is no record to show that this remittance is related to this security transaction or any other security transaction."(Emphasis supplied)
33. The liquidator has stated that he has no personal knowledge of the securities transaction and therefore information is available only on the basis of record. According to the record available with the liquidator, there is no contract or agreement of any kind between the plaintiff and the Bank of Karad and that suit transaction appears to be a transaction for Mr. A. D. Narottam. Though the transaction was by a brokers and not by the Bank, it is contended that the cheques were issued in favour of a Bank and the Reserve Bank of India did not accept the cheques in the name of the broker. The deal slip was issued by Mr. A.D. Narottam-defendant no.4 and the Bank of Karad after receipt of the cheque in its name credited the amount in the 44/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt account of A.D. Narottam because the transaction belongs to him. The fact that it was a broker's transaction and not of the Bank is evident from the fact that the plaintiff has not made any enquiry with the Bank for 10 months after the transaction that is alleged to have taken place and despite the fact that no security was received. It it was the plaintiff transaction and one pertaining to PMS they would have made enquiries with the Bank about the non-receipt of the securities concerned but the plaintiff wrote to the Bank only on 21st May, 1992 almost after one year after the scam broke out. The liquidator contends that the allegations in the plaint are false and the liquidator does not hold any security nor does he have any funds in connection with the suit. The Bank was not the beneficiary in the transaction and therefore it is contended that the suit against Bank of Karad be dismissed. In support of his contentions, a compilation had been filed however none of these have been proved.
34. Mr. Kale, the learned counsel for the defendant no.2 submitted that in respect of issue no.1 there is no dispute that defendant no.2 was the broker of the plaintiff. Apropos issue no.2, defendant no.2 has contended that he is not aware whether a Portfolio Management Scheme was in place on behalf of defendant no.2. Mr. Kale submitted that the suits merely seeks a money decree and the basic facts being identical, under the 45/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt transaction dated 22nd July, 1991, a total amount of Rs.212.80 lakhs was being claimed. According to him this has partly been squared off to the extent of about Rs.119 crores. As a result, the claim would only survive to the extent of Rs.25 crores and in Suit no.10 of 1994 Rs.255 crores. The defendant no.1 had submitted written statement dated 23 rd February, 1996 which is affirmed by an Officer on the basis of the records and it was contended that minor omissions should be overlooked. In paragraph 3 of the written statement the Bank has confirmed the transactions. He submitted that the written statement of defendant no.4 correctly records the money trail in paragraph (j).
35. Mr. Kale submitted that the prayer for tracing does not survive. Moreover, a decree on admission had already been passed against defendant no.4 on 22nd February, 2008, thereafter a Chamber Summons came to be taken out which is also disposed. Mr. Kale then made a reference to Misc. Application no.304 to 306 of 2004 both inclusive and the order passed therein. He submitted that in 2012 itself the plaintiff was put to notice that it would have to prove issue no.18 and 19, despite this no evidence was led, an affidavit of evidence was filed of one Mr. Vernekar only in 2004. Thereafter no evidence has been led and in the absence of any evidence there is no question of any relief of tracing being granted. In that view of the matter, no decree 46/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt can be claimed against defendant no.2, 3, 5 and 6. Mr. Kale then submitted that Section 10 of the Evidence Act is not attracted. He submitted that the argument on behalf of the plaintiff is premised on the meeting held at the Taj Mahal Hotel. He invited my attention to the amended plaint wherein reference is made in the meeting dated 20th May, 1992 despite which no evidence has been led. The only evidence of Mr. Vernekar is silent on this aspect. The said witness has not deposed to the fact of any conspiracy and in that view of the matter, it is evident that the transaction in question was carried out in the ordinary course and not by virtue of any conspiracy. He submitted that the deposition of the witness does not refer to any conspiracy. On the other hand, the plaintiff effectively seeks completion of the transaction. He submitted that the first ingredient of Section 10 that there must be prima facie evidence of conspiracy has not been made and therefore the guidelines in the judgment cited by Mr. Sancheti would have no application in the instance case. It is further submitted by Mr. Kale that the witness Mr. Vernekar has no personal knowledge. He was not a part of the meeting. He was unaware of the names of recipients of information and this aspect of the conspiracy has not been disclosed in the absence of any evidence. He submitted that the provisions of Section 10 will not be attracted.
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36. Inviting my attention to the dates on which the transactions took place, he submitted that the first transaction is said to have taken place on 6 th April, 1991 being subject matter of Suit no.8 of 1994. The second transaction on 22 nd July, 1991 being subject matter of Suit no.7 of 1994 and the third transaction is of 31st July, 1991 and is subject matter of Suit no.10 of 1994. Mr. Kale submitted that assuming that there was a conspiracy it came to an end and the reference of disclosure made in May 1992 in the plaint is of no avail. He submitted that Section 10 will be attracted only if the conspiracy is in existence. Relying upon the judgment of the Supreme Court in Mohd. Atik's case, he submitted that there was no case of a conspiracy in the facts at hand. Making reference to submissions made by Mr. Sancheti on behalf of the plaintiff, he recounted that Mr. Sancheti had argued that defendant no.2-Mr. Dalal's representative had collected the cheque. The case of the plaintiff in paragraph 5 of the plaint is that the plaintiff contacted the defendant no.2, no allegation has been made out about involvement of the second defendant. The evidence led is also at variance with pleadings and evidence, without pleadings is of no consequence. Therefore he submitted that no adverse interference can be drawn.
37. Mr. Kale further submitted that when the principal is disclosed to a counter party, the broker cannot be held liable 48/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt and in this case since the principal was disclosed a broker cannot be held liable and therefore the defendant no.2 could not be held liable. Making reference to the issues, he submitted that the order dated 11th March, 2016 passed by this Court rejected the contention that the Janakiraman Report could be relied upon. The said report was not evidence and could not be relied upon and issue no.1 stands answered by the written statement filed on behalf of defendant nos.1 and 2. It was contended that in the instant case exemplary costs were called for. This aspect was highlighted by defendant no.3 as well. Making reference to the written statement filed by defendant no.2, Mr. Kale submitted that as far as the second written statement is concerned in these suits the plaintiff had not dealt with the contentions of the second defendants that although reference was made to Portfolio Management Scheme and there was no Portfolio Management Scheme account in operation the plaintiff had not therefore approached the Court with clean hands.
38. Mr. Kale then referred to the contention of the plaintiff apropos Section 10 and submitted that the dispute could have arisen if the conspiracy is in existence. Making reference to the admissions made by Mr. Narottam-defendant no.4, Mr. Kale submitted that these admissions cannot be relied upon. Specific reference had been made by the defendant no.4 to the meeting 49/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt the admissions could not be relied upon in view of the fact that Mr. Narottam had not deposed to the so called admissions and in the absence of an opportunity to cross examine Mr. Narottam it was not possible for the plaintiff to succeed on the basis of these admissions. He submitted that Section 103 of the Evidence Act would therefore come to the rescue of the defendants and by that reason the admissions could not be relied upon. Specific reference was made to the paragraph 14(j) of the written statement of Mr. Narottam-defendant no.4 in this respect. As regards the alleged meeting at the Taj Mahal Hotel it was submitted that no evidence has been led and on behalf of the plaintiff. Nobody had deposed in relation to the alleged admissions. Reference to this meeting is found as part of the prosecution's case as recorded in the judgment in Special Case no.7 of 1993 (CBI Case no.RC-44(A)/92-ACB-BOM [ See (1999) 3 Bom CR 189]
39. According to Mr. Kale, independent evidence would have to be led in this matter and no reliance can be placed on proceedings on the criminal side. In the absence of evidence of conspiracy, of diversion of funds, there is no question of engaging in any tracing of funds. According to him, paragraph 14(j) of the written statement of defendant no.4 is a complete answer. Mr. Kale then submitted that funds are therefore already 50/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt accounted for and the plaintiff himself was beneficiary of some bankers cheques referred to therein. Mr. Kale submitted that report of the JPC or that of the Janakiraman Committee were not part of the record. It was not accepted and could not be led in evidence. In fact, the JPC report was not evidence at all. He stressed upon the fact that there could be no evidence without pleadings and in the instant case the submission is contrary to the pleadings and therefore no adverse inference can be drawn even on the aspect that the defendant no.2 had chosen not to lead evidence. He therefore submitted that issue no.5 will not arise for consideration as against defendant no.2. A specific reference to the issues Mr. Kale submitted that there was no dispute that defendant no.2 was a broker for the plaintiff. Mr. Kale submitted that as far as issue no.2, defendant no.2 was unaware whether there was any Portfolio Management business that the plaintiff was engaged under Portfolio Management. Issue no.3 he submitted that consideration had been paid.
40. Issue no.4 he submitted was a general issue and did not concern the defendant no.2 since he was the only plaintiff's broker and no evidence had been led on other aspects whether in relation to involvement of other banks or the Bank of Karad. With specific reference to issue no.5 Mr. Kale submitted that reference to paragraph 5 of the plaint and in particular the 51/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt averment that the representative of Bank of Karad had collected a cheque from the Bombay Officer against delivery of the banker's receipt would clearly establish that the defendant no.2 was not involved since otherwise clear reference would have been made to the fact of the involvement of defendant no.2 and it is therefore submitted that no blame could be laid at the door of defendant no.2.
41. As far as issue no.6 is concerned, Mr. Kale submitted that it is liable to be answered in the negative as far as defendant nos.2 and 3 are concerned. He made reference to the written statement filed by defendant no.1 which revealed that they were maintaining separate accounts and in particular the contents of paragraph 3 of the said written statement in which the defendant no.1 liquidator had averred that the Bank of Karad had maintained separate SGL Account no.107 with the public debt office of the Reserve Bank of India in respect of securities transactions on behalf of its customers and the balance in SGL account representing securities held on behalf of the banks clients including that of notified parties. Mr. Kale then submitted that the decree passed against defendant no.4 makes it clear that it is an investment on behalf of the constituents of Bank of Karad. With reference to issue no.7 defendant no.4 had admitted the transaction and therefore a question of issue no.7 would not 52/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt arise. As far as issue nos.8 to 13 are concerned, Mr. Kale submitted that these issues were interlinked based on Section 10 and the plaintiff has not led any evidence apart from that of Mr. Vernekar merely because the defendant no.4 submitted to a decree could not result in any claim being established to the other defendants. In other words, the admission made by the defendant no.4 is only binding as against him and not on the others. Defendant nos.2, 3, 5 and 6 could not be held liable because the plaintiff cannot succeed in their claim against the said defendants only on the basis of the decree against Mr. Abhay Narottam. In fact there was no allegation that said defendant no.4 had caused defendant nos.2, 3, 5 and 6 to act in a particular manner. Mr. Kale submitted that invocation of section 10 was therefore incorrect.
42. Mr. Kale placed reliance on the judgment in the case of State of Gujarat v/s. Mohd. Atik, Mohd. Khalid v/s. State of West Bengal 2002 (7) SC 334 . Mr. Kale then submitted that the plaintiff has not examined the officers who claimed that the disclosures were made by Defendant no.4 in relation to the alleged meeting at Taj Mahal Hotel and that if you rely upon the contentions of defendant no.4 in his written statement to interpret Section 10, the plaintiff's cannot succeed. The transaction is said to be of 1991 the suit is filed in 1992 and 53/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt therefore converted to a special suit in 1994 and written statement is filed in 1995. There is no question he submitted of any transaction resulting from a conspiracy having being put into place and the circumstances alluded to by the plaintiff for alleging conspiracy were not supported by defendant no.4. Issue no.14 and 15 he submitted was not material as far as the second defendant is concerned. As far as issue no.16 is concerned, Mr. Kale submitted that defendant no.4 not having led evidence and having contended that it is the plaintiff who was the counter party, defendant no.4 has not proved that defendant no.2 was the counter party. He also submitted that the issue be answered accordingly. Issue no.17 is being for the plaintiff to deal with. Mr. Kale submitted that apropos issue nos.18 and 19 this Court directed plaintiff to lead evidence vide order dated 10 th February, 2010 but the plaintiff has failed to do so. (see page 15 of the order). Mr. Kale therefore submitted that the Suit is against defendant no.2 is liable to be dismissed. In the course of submissions Mr. Kale for defendant no.2 relied upon the following judgments;
1. State of Gujarat v/s. Mohammed Atik and others 1
2. Mohd. Khalid v/s. State of W.B.2
3. S. Arul Raja v/s. State of Tamil Nadu3
4. Jayendra Saraswathi Swamigal v/s. State of Tamil 1 (1998) 4 SCC 351 2 (2002) 7 SCC 334 3 (2010) 8 SCC 233 54/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:02 ::: SPS-7,8&10_1994.odt Nadu4
5. Messrs. Trojan & Co. v/s. RM. N.N. Nagappa Chettiar 5
6. Iqbal Singh Marwah & Anr. v/s. Meenakshi Marwah & Anr.6
7. Sheodhari Rai and ors. v/s. Suraj Prasad Singh & Ors.7
43. On behalf of defendant no.3, Mr. Dalal relied upon his submissions in the two written statements filed by him one dated 14th July, 1995 and the second is 28 th July, 1998. He submitted that these submissions in all three suits in common. He contended that the averment in paragraph 5 of the plaint is incorrect and the plaintiff was not come to Court with clean hands but the transactions in the suit nos.7 of 1994 and 10 of 1994 are to the plaintiff's account. He submitted that three transactions between the plaintiff and the Bank of Karad said to have been concluded in April and July only one witness was sought to be examined viz. Mr. Vernekar. A reference was also made to a letter of the Reserve Bank of India, however, the evidence of Mr. Vernekar also did not contain a whisper of the defendant no.3's involvement but not a specific transaction had been carried out by him with the plaintiff during the window period.
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44. Mr. Dalal submitted that bald statements made by the defendant no.4 have been utilized to rope-him in and the contrary there is no evidence against him. He made reference to the contention of paragraph 25 of the written statement and relied upon the contents of Nanjappa Report. He adopted the contents made on behalf of the second defendant by Mr. Kale in support of his defence. Although Mr. Dalal attempted to rely upon certain newspaper reports, he did not prove his submissions based on such reports in view of the fact that these reports lacked evidentiary value. Mr. Dalal tendered written arguments in which he relied upon two written statements. He stressed upon the fact that apart from evidence of one D.G. Vernekar no other evidence has been led by the plaintiff although they were not prevented from leading further evidence. He submitted that on the basis of evidence on record there is no proof of any money having been received by the defendant no.3. Defendant no.4 having admitted liability nothing survives in these suits. He further submitted that several admissions have been made by the plaintiff to seek tracing of these amounts which have been denied. He submitted that the plaintiff had not undertaken any Portfolio Management Services on behalf of its clients but it was to its own account that the plaintiff Bangalore Branch had sought to purchase of the securities from the first 56/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt defendant Bank. The fact that there were no portfolio management services forming the basis of the claim is evident from the fact that no particulars have been disclosed. The plaintiff had suppressed information of such portfolio management and the client on whose behalf the securities were being sourced. Moreover, in such a event the client would also be necessary party and any loss or profit would be to the account of such client.
45. The defendant no.4 had made wild and unsubstantiated allegations and the Supreme Court had already held that Janakiraman Report and JPC Report do not constitute evidence and therefore the reliance by the plaintiff from the said reports is of no avail. Furthermore, it is submitted that the plaintiff contention that defendant no.1 had transferred and paid over large sums of money amounting to Rs.25.81 crores (in Suit no.8 of 1994) to defendant nos.2 to 6 is not proved. No evidence has been led to prove these allegations. Furthermore, it is submitted that various wrong statements have been made concerning defendant no.4 and alluding to the involvement of third defendant. It is submitted that the contention of the plaintiff that the 4th defendant was a clerk before he became a broker of the stock exchange is an incorrect statement. It is not correct that defendant no.4 was instrumental in appointing defendant 57/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt no.4 as a Director of the Bank of Karad. Defendant no.4 was already an independent Director since 1984 and the Reserve Bank of India already had two persons on board since 1980. The allegation, the defendant no.3 had control over the Bank of Karad has been denied. The directors are only concerning with the policy decision. They were particularly prevented and debarred from seeking any information about banks customers and as an independent director he did not have control over the Bank. It is further stated that even assuming the impugned transactions were put through the Bank of Karad these were carried out during a period when the defendant no.3 was not a director of the Bank. He was an independent director on the board which was constituted in accordance with the RBI Guidelines and there is two nominee directors of the RBI were on board since 1980. It is the defendant no.3's contention that the plaintiff had entered into reckless and speculative transaction beyond its means. According to him, the plaintiff had accepted the Bank receipt of a value of Rs.375 crores with Bank of Karad who had deposits worth Rs.70 crores and even less as capital. The said transaction had not been reversed for over 9 months and the plaintiff first solved a reversal only on 20 th May, 1992 after the scam had come to light.
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46. According to the defendant no.3 plaintiff was well aware of the fact that the suit transaction was not with the Bank but with the Bank's constituent Mr. Narottam and that the plaintiff parent Bank came to their assistance to help them to shore up their losses. Mr. Dalal submitted that he was not a broker in any of the transaction or no money was received by him. In any event there was no proof that a money having been paid to him directly or indirectly and he did not have any transaction with the plaintiff during 1/4/1991 to 6/6/1992. The criminal case being Special Case no.7 of 1993 concluded on 11 th March, 1999. The Nanjappa Report was taken on record by the Special Court. Mr. Dalal then relied upon paragraph 241 of the judgment in Special Case no.7 of 1993 and which held that statutory reports preferred pursuant to Section 35 of the Banking Companies Regulation Act were admissible in evidence and as evidence contemplated under Section 35 and 74 of the Indian Evidence Act. Since the report forms the part of the Special Court Case no.7 of 1993, the third defendant contended that they may be read in evidence and as contained in affidavit dated 28 th July, 1998 filed by the third defendant. Mr. Dalal submitted that there is no evidence against him that the case is based on unsubstantiated allegations in the written statement of defendant no.4. The defendant therefore contended that no relief can be 59/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt granted against him. The applications for tracing Misc. Application nos.304 and 305 of 2006 have already been rejected on 10th February, 2012 and that on 5 th February, 2016 the Court recorded that pleadings were complete. The statement was made that they do not wish to lead any further evidence. The statement was accepted by the Court on that basis defendant and their counsel also submitted that they do not proposes to lead any evidence and that is how the suit came to be listed for final hearing. Mr. Dalal had submitted a conclusion that none of the issues as framed may be answered in favour of the plaintiff. As far as the conspiracy he adopted the submissions made by Mr. Kale. Mr. Dalal relied upon the following judgments:
1) Dalip Singh v/s. State of UP & Ors.1
2) Jyoti Harshad Mehta(Mrs) and others v/s.
Custodian and others2
3) G. Narayanswamy Reddy by LRs. & Anr. V/s.
Government of Karnataka and another3
4) Prestige Lights Ltd. v/s. State Bank of India 4
5) Sunil Poddar and others v/s. Union Bank of India5
6) K.D. Sharma v/s. Steel Authority of India Limited & Ors.6 1 (2010) 2 SCC 114 2 (2209) 10 SCC 564 3 AIR 1991 SC 1726 4 (2007) 8 SCC 449 5 (2008) 2 SCC 326 6 (2008) 12 SCC 481 60/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt
47. On behalf of defendant no.4, Mr. Kamath submitted that in view of the decree already having been passed against defendant no.4 he merely represented the heirs of the 4 th defendant and had no further submissions to make. Mr. Chandran submitted that the plaintiff is seeking a decree jointly and severally against the defendants and that no decree can be passed against the Custodian. Save and except the aforesaid submissions, Mr. Chandran submitted to the orders of the Court.
48. On behalf of the original defendant no.6, Ms. Pawar the learned counsel submitted that the only prayers that relate to defendant no.6 in all three suits are prayer clause (h). The defendant no.6 has nothing to do with the various amounts claimed. Defendant no.6 is not involved in the transactions either in his personal capacity or as a Director of Dhanraj Mills Pvt. Ltd. In fact she submitted that defendant no.6 was not aware of the transaction at all. She invited my attention to the averments in the plaint and the written statement and the additional written statement. She submitted that in paragraph 4 of the plaint, the averment is to the effect that defendant no.3 has close connections with defendant no.6 and helped defendant no.6 to take over Killick Nixon Limited and defendant no.6 is also believed to be urged in the affairs of Metropolitan Co- operative Bank (MCB) which has materially figured in the 61/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt 'security details' in the written statement. The defendant no.6 had denied the averments in the plaint completely and contended that defendant no.6 never held any position with MCB. In paragraph 8(f) of the plaint, it was alleged that defendant nos.1 to 6 were involved in the transaction of 16 crore units which found the subject matter of the suit although the plaintiff had averred that the amount deposited was utilized by defendant nos.2, 3 and 5 thus clearly admitting that defendant no.1 had nothing to do with the utilization of the amounts deposited. Ms. Pawar also stressed upon the fact that the plaintiff have granted inspection of the documents. The defendant has denied that he was involved in the transaction relating to 16 crore units or any of the documents as alleged. In the paragraph 8(h) of the plaint it is stated that defendant no.4 deposed before the Joint Parliamentary Committee and contended that most of the business was routed through his account by defendant no.6/Dhanraj Mills Pvt.Ltd. and that defendant no.4 had formed a nexus with Excel & Co. and M/s. Dhanraj Mills Pvt. Ltd. and other broker clients of Bank of Karad. These averments were made only on the basis of JPC report. The deposition on which the report is based was not offered for inspection and defendant no.6 had denied in the written statement that any business of Dhanraj Mills Pvt. Ltd. was routed by defendant no.6 through the 62/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt account of defendant no.4. Defendant no.6 had denied his involvement before the JPC and the denial has also been noted by the JPC in the report. In paragraph 8(i) of the plaint contains an averment to the effect that MCB had unauthorizedly issued certain BRs on behalf of the two clients who were dealing in shares and securities viz. Dhanraj Mills Pvt.Ltd. and Excel & Co. aggregating to Rs.1944.52 crores between 25 th March, 1991 and 2nd May, 1992. Paragraph 8(k) and 8(l) of the plaint contains an averment to the effect that Chief Executive Officer of MCB had made certain averments as to why he got in touch with defendant no.6 and alluded to an admission by Mr. Ruia that whatever was done was on his instructions. It was further contended that defendant no.6 was controlling affairs of MCB. These averments were denied by defendant no.6 in its entirety.
49. Ms. Pawar submitted that the plaintiff had failed to grant inspection of documents to prove the alleged meetings and the written submissions on which the plaintiff had relied. Ms. Pawar submitted that the averment in paragraph 8(h) have been denied. These aspects have been denied and it is submitted that CBI after carrying out the thorough investigation had sought discharge of the defendant for the reasons set out in the charge- sheet.
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50. With reference to allegations in paragraph 8(o) and the submission to the effect that BRs aggregating Rs.1305.36 crores were issued at the instance of original defendant nos.4, 5 and 6 without having received any consideration, the defendant no.6 had denied his involvement. All contents in relation to the defendant no.6 involvement in a position to control the affairs of MCB and induction of Directors are apparently resulted in some benefit of defendant no.6 have thus been denied. Allegations that on some occasions, MCB credited the amounts received by cheque and pay orders to the account of defendant no.6 or to firms and companies of which he had control have also been denied. In paragraph 12C(b)(iv) and 12C(c), the plaintiff had alleged that he had suffered from acts and omissions of defendant nos.2 to 6. It was alleged that defendant nos.1 to 5 have dealt with and disposed trust property and appear to have passed the properties to their agents including defendant no.6 and defendant no.6 for their own use and benefit and that trust property was mixed with their own property or have misappropriated and converted property for their own use. In this behalf, Ms. Pawar submitted that these are bald allegations no particulars have been given and therefore these allegations are denied. Ms. Pawar for defendant no.6 relied upon the following judgments;
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1. State Bank of India Thr. General Manager v/s. National Housing Bank & Ors. 1
2. Jyoti Harshad Mehta (Mrs.)and others v/s. Custodian & Ors.2
3. Central Bureau v/s. Mulangi K. Ashok Kumar3
4. Bhagwan Swarup Lal Bishan Lal v/s. The State of Maharashtra4
5. Standard Chartered Bank v/s. Andhra Bank Financial Services Ltd. & Ors.5
51. Rejoining to the submissions made on behalf of defendants, Mr. Sancheti dealt with three aspects apropos the contention that defendant no.4 ought to have deposed in the case failing which the admissions made by defendant no.2 could not be relied upon. Mr. Sancheti submitted that paragraph 14 of the written statement itself sets out the entire trail of funds, and therefore, there is no question of the conspiracy not being established on account of the failure of 4 th defendant to enter the witness box. In paragraph 14 the defendant no.4 sets out in the words of defendant no.4, "the real facts" and for that reason he submitted that defendant no.4 need not have even examined on oath at the material time. It was further submitted by Mr. Sancheti that in the case of Iqbal Singh (supra) it has been held that the decision in the criminal proceedings cannot be helpful in 1 (2013) 16 SCC 538 2 (2009) 10 SCC 564 3 Bom.C.R. 221 4 AIR 1965 SC 682 5 (2006) 6 SCC 94 65/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt defending a civil case. Furthermore, on the aspect of tracing he submitted that the contentions of the second defendant were self- contradictory. He then made reference to the judgment in S. Arul Raja v/s. State of Tamil Nadu1 and Jayendra Saraswathi Swamigalo v/s. State of Tamil Nadu2, M/s. Trojan & Co. Ltd. v/s. RM. N. N. Nagappa Chettiar3, Iqbal Singh Marwah and another v/s. Meenakshi Marwah4 and Sheodhari Rai and others v/s. Suraj Prasad Singh and others5.
52. On 13th June, 2002 the issues were framed in Suit no.7 of 1994 and Suit no.8 of 1994 and 10 of 1994 issues were framed on 8th July, 2002. Issues framed in Suit nos.8 and 10 of 1994 are identical to the issues framed in Suit no.7 of 1994 save and except for itself in the variables such as numbers of the banks, cheque amount and dates of the transactions. Thus, with consent of all parties, arguments were heard on these issues. On behalf of defendant nos.2 and 6 submissions were made. The original defendant nos.4 and 5 having expired, the heirs of defendant no.4 were brought on record. Heirs of defendant no.5 have not caused appearance to be entered. As a result, defendant no.5 has not been represented and therefore the suit proceeded exparte. On 8th July, 2002 the issues in suit no.7 of 1994 were 1 2010 8 SCC 233 2 AIR 2005 SC 716 3 AIR 1953 SC 235 4 (2005) 4 SCC 370 5 AIR 1954 SC 758 66/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt recast. Issue nos.1 to 4, 6, 7, 9 to 15, 17, 18 and 19 are those where the burden is cast upon the plaintiff. Issue no.5 is for the defendant no.2 to prove. Issue nos.8 and 16 were for the defendant no/4 to prove. The defendant no.4 having submitted to a decree on 11th March, 2004 in terms of prayer clause (h), the suit does not survive against defendant no.4 and for that reason issue nos.8 and 16 do not arise for consideration.
53. Analysis of the prayers in the three suits reveals that the amounts claimed and as set out in the opening portion of this judgment are subject to declarations that the suit amounts were paid by the plaintiff to the Bank of Karad on diverse dates and were held by the Bank of Karad and presently by the provisional liquidator in trust for and on behalf and to the account of the plaintiff till delivery of securities. In the alternative that all securities forming subject matter of the suits and held by Bank of Karad were so held in trust for and on behalf of the plaintiff and that they are liable to be permitted and transferred to the plaintiff. In suit no.7 and 10 of 1994 an additional prayer (b-1) has been incorporated whereby plaintiff seek a decree against defendant no.1 to deliver all accretions by way of dividend on the securities with interest.
54. If the amounts paid by the plaintiff is not found to 67/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt be held and kept by the Bank of Karad or defendant no.1 in separate account(s) or identifiable, to order a full investigation for tracing of the amounts in the hands of a Bank of Karad or the liquidator or any third party who may have received the amount. The plaintiff also seeks a direction that defendant no.1 render a full and complete account for the amount claimed and meanwhile disclose on oath particulars of dealings of the amount and for that purpose appointment of a Commissioner for taking accounts and for tracing. The plaintiff also seeks a decree for the said amount with all accretions and income thereon and if a person which is found in the custody of some persons for a decree against such person to pay over the said amount, the remaining prayers are seeking interim reliefs which have not been pressed at any stage.
55. At the very outset, Mr. Sancheti on behalf of the plaintiff submitted prayer clause (i), (j) and (k) did not now survive being prayers for interim reliefs, none of them being pressed at the material time. Thus, what needs to be considered is whether the plaintiff is entitled to a decree a declaration in terms of prayer clause (a) in the alternative prayer clause (b) or (b-1) as the case may be to the effect that the amounts paid by the plaintiff to the Bank of Karad, original defendant no.1 were held in trust for the plaintiff. In the alternative, whether 68/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt securities described in prayer clause (b) are held in trust on behalf of and/or account of the plaintiff and if such be the case whether the first defendant is liable to be ordered and decreed to deliver to the plaintiff all accretions by way of dividend etc. and interest thereon. Thus, on one hand, the plaintiff seeks a finding that there was entrustment of money and/or securities of the same value with the Bank of Karad. If the plaintiff does not succeed in proving such entrustment they seek an order directing an investigation and enquiry for the purposes of tracing the monies from the hands of the Bank into the hands of defendant nos.2 to 6 or any of them or any third party and for an order directing the Bank of Karad to render a full and complete account including disclosure on oath and for that purpose pass appropriate directions including appointment of the Commissioner for taking accounts. Thirdly, for money decree against defendant no.1 to the extent of the monies paid over to the said Bank and interest thereon at 24% p.a. and fourthly for a decree against defendant nos.2 to 6 or such of them in whose possession and control the money is found.
56. Thus the prayers have come into these four distinct compartments. The defendant no.4 has submitted to a decree in terms of prayer clause (h) thereby he admits that the sum mentioned therein was in his possession or control. Prayer clause 69/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt
(h) being common in all the suits save and except variable amounts, the defendant no.4 has clearly admitted liability. To that extent, there is no question of carrying out any investigation or enquiry for the purposes of tracing the money in question. The plaintiff has pressed for and obtained a decree as against defendant no.4 on the basis of his admission. Having accepted such admission and having obtained a decree, it was for the plaintiff to proceed in execution, the question that arises is whether having obtained a decree against defendant no.4, the relief of tracing would survive? In that respect one has to consider prayer clause (c), (d), (e) and (f) which I have mentioned as falling in the second category of prayers above. Once the 4 th defendant admitted liability and has been ordered and decreed to pay the sum along with interest on 11th March, 2004, I am of the view that the plaintiff cannot seek relief in terms of prayer clause
(c) to (f) since the monies were admittedly owing from defendant no.4. The question of considering relief of tracing would therefore not arise. All that would survive in prayer clauses (c) to
(f) i.e. to consider whether the amount in question was held and kept by the Bank of Karad or by the Liquidator in a separate account. If that were to be so, there was no question of the amount falling to the hands of defendant no.4. The decree establishes that he was liable to pay over the amount along with 70/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt interest to the plaintiff and in that view of the matter, prayer clause (a) or (b) and (b-1) would be relevant only if the amounts were entrusted in the first place to the Bank of Karad presently represented by the Liquidator only upon such entrustment would be the alternate prayer clause (b) be relevant inasmuch as this Court would consider a declaration that the securities concerned viz. units of the Unit Trust of India in the case of Suit no.7 of 1994 if available with the Bank of Karad would be done for appropriation or for transfer to the plaintiff. Although it does appear that the plaintiff have pressed for reliefs in terms of prayers clauses (a) to (h) against all other defendants, defendant no.4 having submitted to the decree, the plaintiff is not entitled to any other reliefs.
57. I am of the view that the reliefs that could be considered would in the light of the decree on admission that has been passed against defendant no.4 depend upon whether or not the plaintiff has proved entrustment in the first place and the subsequent retention of the money by the Bank or the acquisition by the Bank of securities in each of these suits and upon a finding that the amount is not so held by the Bank or is not identifiable, to investigate and ascertain in whose hands these amounts have gone along with a complete account thereof. It is for that 71/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt purpose that it becomes necessary to examine the submissions of each of the parties.
58. The plaintiff has cast their net wide inasmuch as they seek to recover amounts from the defendants on the backbone of a conspiracy theory. The plaintiff's submissions are to the effect that there is a conspiracy that was hatched at the Taj Mahal Hotel in secrecy and with a common design to commit an actionable wrong. According to the plaintiff, there was an agreement between the defendants to deprive the plaintiff of its funds and in reference to common intention between those defendants which according to the plaintiff must be inferred from the circumstances and acts and conduct of the parties as against direct evidence.
59. Numerous documents were marked to be read in evidence but the plaintiff could not establish their case in the plaint with the help of these documents. For ease of reference a list of exhibits is reproduced below;
List of Exhibits on behalf of plaintiff in Suit no.7 of 1994 Sr. Exhibit Particulars of Documents No. No. 1 P-1 Original affidavit in lieu of examination in chief of dt.20/2/2004 Mr. D.G. Vernekar on behalf of plaintiff.
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SPS-7,8&10_1994.odt 2 P-2 Certified Copy of Ex.195 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Cost Memo of Bank of Karad dated 22/7/1991 for Units of UTI FV Rs.16 crores.
3 P-3 Certified Copy of Ex.196 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Bank Receipt no.3499 of Bank of Karad dated 22/7/1991 for Units of UTI FV Rs.16 crores.
4 P-4 Certified copy of Exh.52 in Spl.Case 7/93 of CFSL plaintiff i.e. Cheque of Canara Bank (Bankers Cheque) dated 22/7/1991 bearing no.77387 for the amount of Rs.212,75,00,000/- issued to Bank of Karad.
5 P-5 Certified copy of Exh.54 in Spl.Case 7/93 of CFSL plaintiff i.e. IBA No.30802 dated 22/7/1991 of sum of Rs.3588017715.53 ps. of Canara Bank.
6 Certified copy of Exh.55 in Spl.Case 7/93 of CFSL plaintiff i.e. Dummy IBA for IBA No.30802 dated 22/7/1991 of sum of Rs.3588017715.53 ps. Of Canara Bank.
7 P-7 Certified copy of Exh.151 in Spl.Case 7/93 of CFSL- plaintiff i.e. Entry dated 22/7/1991 for Purchase Units of UTI FV Rs.16 Crores from Bank of Karad on page 15 of the transaction register of CFSL.
8 P-8 Certified copy of Exh.60 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Entry dated 22/7/1991 of Bank Receipt no.3499 of Bank of Karad in the BR Purchase Register of CFSL.
9 P-9 Certified copy of Exh.62 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Entry dated 22/7/1991 of Purchase Units of UTI FV Rs.16 Crores from Bank of Karad on page 268 of Security Register (Ledger) of CFSL.
10 P-10 Original Certified copy of Exh.148 in Spl.Case 7/93 73/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt of CFSL- plaintiff original letter dated 22/5/1992 of Bank of Karad addressed to Canbank Financial Services Ltd.
List of Exhibits on behalf of plaintiff in Suit no.8 of 1994 Sr. Exhibit Particulars of Documents No No. .
1 P-1 Copy of affidavit in lieu of examination in chief of dt.20/2/2004 Mr. D.G. Vernekar on behalf of plaintiff.
2 P-2 Certified Copy of Ex.188 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Cost Memo of Bank of Karad dated 6/4/1991 for 11.5% GOI 2008 FV Rs.25 crores.
3 P-3 Certified Copy of Ex.189 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Bank Receipt No.3259 of Bank of Karad dated 6/4/1991 for 11.5% GOI 2008 FV Rs.25 crores.
4 P-4 Certified copy of Exh.41 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Cheque of Canara Bank (Bankers Cheque) dated 6/4/1991 bearing no.907578 for the amount of Rs.258120354.78 issued to Bank of Karad.
5 P-5 Certified copy of Exh.40 in Spl.Case 7/93 of CFSL-
plaintiff i.e. IBA No.30397 dated 6/4/1991 of sum of Rs.143,80,52,980.90ps. of Canara Bank.
6 P-6 Certified copy of Exh.45 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Dummy IBA for IBA No.30397 dated 6/4/1991 of sum of Rs.143,80,52,980.90ps. of Canara Bank.
7 P-7 Certified copy of Exh.61 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Entry dated 6/4/1991 of purchase of 74/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt 11.5% GOI 2008 FV Rs.25 crores from the Bank of Karad on page 6 of Security Register (Ledger) of CFSL.
8 P-8 Certified copy of Exh.59 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Entry dated 6/4/1991 of Bank Receipt no.3259 of Bank of Karad in the BR Purchase Register of CFSL.
9 P-9 Certified copy of Exh.47-A in Spl.Case 7/93 of Bank of Karad defendant no.1 i.e. Form of transfer for operation on S.G.L. Account of Bank of Karad dated 18/4/1992.
10 P-10 Certified copy of Exh.48 in Spl.Case 7/93 of CFSL-
plaintiff i.e. letter dated 6/5/1992 of Canbank Financial Services Ltd. addressed to Reserve Bank of India.
11 P-11 Certified copy of Ex.170 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Letter dated 6/5/1992 of Reserve Bank of India addressed to Canbank Financial Services Ltd. 12 P-12 Copy of Certified Copy of Ex.148 in Spl.Case 7/93 of CFSL-plaintiff i.e. Letter dated 22/5/1992 of Bank of Karad addressed to Canbank Financial Services Ltd. 13 P-13 Document submitted by Mr. Sachin Ujjaliya-
Manager R.B.I. pm 14/2/2014.
List of Exhibits on behalf of plaintiff in Suit no.10 of 1994 Sr. Exhibit Particulars of Documents No No. .
1 P-1 Copy of affidavit in lieu of examination in chief of dt.20/2/2004 Mr. D.G. Vernekar on behalf of plaintiff.
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SPS-7,8&10_1994.odt 2 P-2 Certified Copy of Ex.229 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Cost Memo of Bank of Karad dated 31/7/1991 for Units of UTI FV Rs.19 crores.
3 P-3 Certified Copy of Ex.228 in Spl.Case 7/93 of Bank of Karad Defendant no.1 i.e. Bank Receipt No.3425 of Bank of Karad dated 31/7/1991 for units of UTI FV Rs.19 crores.
4 P-4 Certified copy of Exh.66 in Spl.Case 7/93 of CFSL-
plaintiff i.e. Cheque of Canara Bank (Bankers Cheque) dated 31/7/1991 bearing no.77750 for the amount of Rs.255,43,98,000/- issued to Bank of Karad.
5 P-5 Certified copy of Exh.67 in Spl.Case 7/93 of CFSL-
plaintiff i.e. IBA No.30840 dated 31/7/1991 of sum of Rs.1080,11,57,421.97ps. of Canara Bank. 6 P-6 Certified copy of Exh.188 in Spl.Case 7/93 7 P-7 Certified copy of Exh.188 in Spl.Case 7/93 8 P-8 Certified copy of Exh.188 in Spl.Case 7/93 9 P-9 Certified copy of Exh.188 in Spl.Case 7/93 10 P-10 Certified copy of Exh.188 in Spl.Case 7/93
60. Admittedly there is no direct evidence that the plaintiff has pressed into service, however, they have contended that there was a conspiracy nevertheless and as contemplated under Section 10 of the Indian Evidence Act. It is their case that there is a reasonable ground to believe that certain persons conspired together to deprive the plaintiff of their funds in the guise of offering to securities in lieu of these funds of such value. The plaintiff have contended that there is prima facie evidence 76/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt which afforded a reasonable ground for the Court to believe that the aforesaid persons conspired as aforesaid on that act of conspirator is binding on the other. It is submitted that if the object of the conspiracy had not been achieved to do an illegal act in conspiracy with others continues. That there is a partnership between the said defendants with each other in a joint and mutual manner for executing a common object viz. depriving plaintiff of their funds and that when any of these defendants enter into conspiracy the act done by any of them would bind the other. The conspiracy argument has been pressed into service by the plaintiff notwithstanding the fact that defendant no.4 has submitted to a decree on admission. The Issues:
61. Having considered the pleadings, limited evidence and submissions the 19 issues that have been framed are answered as follows;
No. ISSUES FINDINGS
1 Whether plaintiff prove that bankers cheques Partly
No.077387 for Rs.212,75,00,000/-** was
affirmative.
issued by plaintiff towards cost of securities transaction on 06.04.1991, as alleged in para 5 of the plaint ?
** In Suit no.8 of 1994- the variable is "No.907578 for Rs.25,81,20,354.78"
In Suit no.10 of 1994-the variable is No.077750 for Rs.255,43,98,000/-
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SPS-7,8&10_1994.odt 2 Whether plaintiff prove that the security transaction Negative.
in para 5 of the plaint was pertaining to Portfolio Management Services ?
3 Whether plaintiff prove that Bank of Karad received Negative.
and held the monies in trust for and on behalf of the plaintiff ?
4 Whether plaintiff prove that the defendant No.2 was Negative.
acting as a common securities broker (between Citibank, HSBC, SCB, MCB, BOK and plaintiff) ?
5 Whether defendant No.2 proves that the exchange Negative.
of money and BR has taken place between plaintiff and representative of BOK directly, as alleged in written statement of defendant No.2 ?
6 Whether plaintiff prove that the transaction of BOK Negative made not for its own investment, but for the transactions of constituents or brokers were put through the account of defendant Nos.2, 3 or 4, as contended in para No.10 of the plaint ?
7 Whether plaintiff prove that the said BR was put Negative through the account of defendant No.4, as alleged in para 11 of the plaint ?
8 Whether defendant No.4 proves that plaintiff was Negative.
aware that bank receipt of BOK was not backed by securities ?
9 Whether plaintiff prove that defendant No.5 was Negative.
routing business in securities through bank account of defendant No.4, as alleged in para 8(d) of the plaint ?
10 Whether the plaintiff prove that BOK was acting Negative.
under the control / direction of defendant Nos.2 to 6 or any of them ?
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SPS-7,8&10_1994.odt 11 Whether plaintiff prove that defendant No.5 utilized Negative the amounts deposited in the account of defendant No.4, as alleged in para 8(f) of the plaint ?
12 Whether plaintiff prove that defendant Nos.2, 3, 5 Negative and 6 or any of them used to give directions to defendant No.4 and/or relating to his business through account of defendant No.4 ?
13 Whether plaintiff prove that defendant No.4 used to Negative sign Delivery Orders and Receiving Orders at the instance of defendant Nos.2, 3, 5 and 6, as alleged in para 8(f) of the plaint ?
14 Whether plaintiff prove that Bank of Karad through Negative.
its officers and agents and defendant Nos.2 to 6 or any of them acted fraudulently and/or in conspiracy of order to defraud the plaintiff to part with and pay Rs.212,75,00,000/- or any other amount on or about 6th April 1991 or any other date ?
15 Whether plaintiff prove that Bank of Karad had Negative transferred and/or paid and/or credited any monies out of the sum of * Rs. to 2 and 3 to 6 or any one or more of them and if so, were there further transfer of funds between defendant Nos.1 to 6 ?
* sic 16 Whether defendant No.4 proves that defendant No.2 Negative.
was the counter party in the transaction dated 06.04.1991, as alleged in para 7 of the written statement of defendant No.4 ?
17 Whether plaintiff prove that plaintiff demanded Negative.
delivery and whether defendant No.1 has delivered securities demanded ?
18 Whether the plaintiff prove that they are entitled to Negative. 79/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 :::
SPS-7,8&10_1994.odt trace the amounts paid to defendant No.1 in the hands of other defendants/third parties ? 19 Whether the plaintiff prove that defendants are Negative.
liable to furnish and disclose any information / names / particulars about receipt/use/disbursement of funds ?
62. The pleadings in three suits are similar. The written statement of defendant no.1 in all these three suits are similar, while written statement in Suit Nos.8 and 10 of 1994 are almost identical save and except for description of the suit securities, quantum and their value, the written statement in Suit No.7 of 1994 which was filed earlier in point of time is substantially the same. Reference to various paragraphs made by the counsel in the written statement in Suit No.7 of 1994 are substantially to be found in the written statements filed by defendant no.1 in other suits. The written statement of defendant nos.2 to 6 and the additional written statement of some of these defendants is identical save and except for the amounts.
63. I may observe that the record indicates that although the plaintiff was directed to file the list of witnesses on 17th August, 2012 no such list was forthcoming thereafter at the plaintiff request an officer of the Reserve Bank of India was summoned to produce documents which were certified under 80/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt the Bankers Book of Evidence Act. These documents were taken on record and marked Exhibit P-11. However, in the course of arguments, none of the parties have made reference to any of these documents. On 11th March, 2016 the counsel for the plaintiff had submitted that they were relying on documentary evidence and wished to tender certain documents and also rely upon the Janakiraman Committee Report on that date this Court recounted the fact that on 6th February, 2015 the plaintiff has made a statement that he did not wish to file any statement and that statement was accepted. There was no question thereafter for filing further documentary evidence and the oral application was rejected. After this the plaintiff had made no effort to lead any further evidence and have proceeded to make their submissions on the basis of the record as it stands.
64. As far as issue no.1 is concerned, in view of the fact that the plaintiff had contended that he intended to purchase 16 crore units of UTI from Bank of Karad through the defendant no.2, the plaintiff ought to have established that Bank of Karad held those securities and that the sum of Rs.212.75 lakhs was paid to Bank of Karard on the strength of any representation that the said Bank held those units and to agreed to sell the same to the plaintiff but they have failed to prove that there is no document on the basis of which this assertion in the plaint can be 81/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt justified. It is but a bald averment and an unsubstantiated one. The averment of the plaintiff is that the Bank acknowledged the payment and issue the banker's receipt on 22 nd July, 1991 and confirmed that the remittance was towards the cost of the said units. Furthermore, it is an admitted position that some of these units had been received, being a balance sum of Rs.93.10 lakhs in the first suit. The plaintiff had led evidence of one D.G. Vernekar , Officer of Canara Bank who deposed that he was working with Canara Bank Funds and Investment Section and as part of his duty he was authorized to sign and issue Bank receipts for the plaintiff and giving and receiving delivery of securities on behalf of the plaintiff. He has deposed that he received telephonic instructions from Bangalore to execute the transactions referred to in these suits. I may mention here that Mr. Vernekar's deposition is common in these three suits. According to him, one M.K. Ashok Kumar and S. Mohan dealers of the plaintiff had placed and informed him of the transaction, the face value of the security, mode of delivery, the name of the broker and the rate. He has deposed that if the transaction involved a broker, the broker's representative would bring a cost memo and the banker's receipt would handover the same to the plaintiff. In case of the sale transfer, the broker would collect from the plaintiff a cost memo, Bank receipt and provide banker's cheque 82/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt from the counter party. This is a matter of practice such cheques were sent for clearance and after the amounts of the cheques have been realized they would transfer the amounts to plaintiff. He has deposed that the amount of cheque of Rs.212.75 lakhs was issued but the cost memo mention a sum of Rs.212.80 lakhs. The difference of Rs.5 lakhs is sought to be explained away by contending that the plaintiff had received a lower amount against sale of some units to Citibank on the same date through Shri Deepak Dalal. According to the said witness, the plaintiff had not received the securities in relation to these purchases and in the meanwhile the Bank of Karad had confirmed that banker's receipt nos.3499 and 3425 was for 7 and 19 crores units are outstanding besides in the SGL account also there are amounts which are lying undischarged. Mr. Vernekar was further examined in chief in Court on 11 th March, 2004. He deposed to the correctness of the statements in the affidavit. All documents produced by him were marked as exhibits and were to be read in evidence. Surprisingly, the defendants declined to cross examine the witness and the witness was discharged on that very date. Thus, there does not appear to be any doubt in view of the part delivery effected that banker's cheque no.77387 for Rs.212.75 lakhs appears to have been issued towards cost of securities. Issue no.1 is therefore answered partly in the affirmative. 83/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 :::
SPS-7,8&10_1994.odt
65. The plaintiff claimed that it was engaged during security transactions in relation to PMS and that led to the second issue being framed. The defendants contention has been that there is absolutely no evidence of the suit transaction being part of PMS. I find considerable force in the contention on behalf of the defendants that PMS would entail the plaintiff acting on behalf of some client but there is no evidence of such as commonly understood PMS as are used by individuals or entities who invest in stocks. Normally these are high net worth investors or firms and a fund manager would take charge of the funds to be invested and act in the interest of the client. The fund manager virtually controls the investment activity by exercising its discretion. The client would probably being aware of these transactions but such service would obviously be for persons enrolled for PMS. In the present case, there is not an iota of evidence that the plaintiff had entertained into the suit transactions on behalf of the clients. Assuming that the plaintiff in the course of PMS and as a matter of practice acquired securities without any allocation to a particular client under the PMS, there would still be evidence of the fact that the plaintiff had engaged in such practice. In other words, the plaintiff could have established that as part of its PMS strategy it acquired securities for undisclosed principals and thereafter allocated the 84/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt same to such persons depending upon the individual's requirements of these funds. No such case has been made out. In fact the plaintiff has not even made the slightest attempt to prove PMS transactions. Issue no.2 is therefore answered in the negative.
66. As far as issue no.3 is concerned, in view of the decree that has been obtained against defendant no.4 and in absence of any evidence that the monies were to be held in trust by Bank of Karad for the plaintiff, issue no.3 is liable to be answered in the negative. A decree was passed against defendant no.4. The very fact that the defendant no.4 submitted to a decree on admission, if the plaintiff expect a finding that the monies were held in trust by Bank of Karad that would not be justifiable in the absence of specific evidence. Issue no.4 is also required to be answered in the negative. As far as defendant no.2 is concerned, it is admitted that he was acting as a broker for the plaintiff and defendant no.1 but there is no evidence to show that he was a common broker between Citibank, HSBC Bank, Standard Chartered Bank, Mercantile Co-operative Bank and Bank of Karad and the plaintiff. The plaintiff have made no efforts to establish this as a fact. Although he may have been rendering services in common to some of the banks and institutions nothing canvassed before me points to evidence that 85/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt Defendant no.2 was a common broker for all the parties in contemplation is issue no.4.
67. Issue no.5 required defendant no.2 to prove that exchange of money and the Bank receipt took place between the plaintiff and representative of Bank of Karad directly. The evidence on behalf of the plaintiff is to the effect that upon receipt of telephonic instructions and sometime the representative of the defendant no.2 would meet the witness Mr. Vernekar and handover the cost memo of Bank of Karad along with BR and the particulars therein would be in accordance with telephonic instructions received by the witness from the plaintiff dealing office in Bangalore. On the basis of the cost memo that the witness would calculate the amount payable to Bank of Karad. In paragraph 2 of the written statement of defendant no.2 he has admitted that he had acted as broker for the plaintiff in respect of suit transaction. The plaintiff also admitted that fact. As to the question of exchange in monies, the defendant no.2 has not proved that the exchange of money and the BR to be place directly between Bank of Karad and the plaintiff. Mr. Vernekar in his affidavit has made specific reference to a representative of defendant no.2 who would handover the cost memo. The defendant no.2 has declined to cross examine the said witness. The defendant no.2 has not led any evidence on his own. In my 86/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt view, there is nothing to prove that exchange of money and the Bank receipt took place directly as contended in paragraph 5. No evidence has been led of the prevailing market practice. The defendant no.2 placed reliance on paragraph 5 of the plaint but in paragraph 5 of the plaint, the plaintiff admitted that representative of Bank of Karad had collected the cheque from the plaintiff Bombay office. To that extent, it is the plaintiff own case that the representative of the Bank had collected the cheque against delivery of the BR. For lack of evidence I hold that issue no.5 is also required to answered in the negative.
68. As far as issue no.6 is concerned, the averment in paragraph 10 of the plaint is to the effect that it "prima facie"
appears that large number of transactions undertaken by Bank of Karad are not to its own investment account but have been "put through" to accounts of defendant nos.2, 3 and 4. Save and apart from these averments, there is no evidence that has been led on this aspect and I am of the view that the evidence of Mr. Vernekar would be of no consequence and does not assist the plaintiff in establishing its case in paragraph 10. Issue no.6 is therefore answered in the negative.
69. In paragraph 11 of the plaint, the plaintiff has contended that the banker's receipt was "put through" the 87/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt account of defendant no.4 and that banker's receipt was used mainly to put through the transactions with Standard Chartered Bank, Canfina and Canbank Mutual Fund and the JPC. Defendant no.4 in his written statement dated 12 th July, 1995 has in reply to paragraph 11 has only sought to rely upon the stretches.. passed by the JPC denotes and nothing further. In any event, defendant no.4 has already submitted to a decree. The plaintiff had made no attempt to prove the statement in paragraph 11 as a fact. In that view of the matter, issue no.7 is answered in the negative.
70. Issue nos. 8 and 16 do not arise for consideration in view of the decree on admission. With reference to issue no.9, I may observe that the original plaintiff was J.P. Gandhi (since deceased) his legal heirs has been brought on record by a formal amendment. Nothing has been shown by the plaintiff to prove that defendant no.5 was routing the business in securities and through the bank account of defendant no.4. In the written statement dated 16th December, 1985 defendant no.5 had denied that funds have been routed as alleged by the plaintiff. In fact, he has denied the allegations of conspiracy and contended that he has nothing to do with the sale of these securities contemplated in the plaint and that he was incorrectly joined as a party 88/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt defendant which disclosed no cause of action against him in the face of this defence the plaintiff would not done well to lead evidence on this aspect. However, they have failed to do so. Issue no.9 is therefore answered in the negative.
71. As far as issue no.10 and 14 are concerned, once again has not been proved by the plaintiff for the same reasons set out therein. Nothing has been shown that the Bank was under the control of defendant nos.2 to 6 in the current set of facts relating to the two suits. It is clarified that this conclusion that I have reached pertain to this issue is restricted to the facts of the present suit. I am not satisfied with the plaintiff contentions that there was a conspiracy. On the aspect of conspiracy substantial submissions were made. A great deal of time and effort was invested by Mr. Sancheti. Section 10 of the Evidence Act has been placed into service and reliance has been placed by Mr. Sancheti on the judgments in the case of Nalini (supra) and numerous other judgments such is the case of Damodar and Firozuddin (supra). I have considered these in detail. I have also considered the judgments relied upon by Mr. Kale on these aspects and I am unable to find in favour of the plaintiff that the defendant nos.2 to 6 acted fraudulently or in conspiracy defraud the plaintiff. Apart from oblique references some meeting said to have been held in the Taj Mahal Hotel, no substantive evidence 89/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt has been brought to light. Mr. Vernekar was not cross examined, it was open to the plaintiff to examine such persons as they felt appropriate in order to prove the conspiracy. The pleadings do not even allude to the presence of specific persons, the defendants or their representatives. It is but a general statement on behalf of the plaintiff viz. a conspiracy was hatched to defraud the plaintiff. Therefore issue nos.10 and 14 are answered in affirmative.
72. One of the contentions taken up was that once a conspirator is caught, the conspiracy comes to an end and Section 10 would not apply. The Court held that in a given case that may be a correct view but it cannot be said uniformly that if the object of conspiracy has not been achieved and the agreement to commit a illegal act continues and the offence continues. The Supreme Court further held that the provisions of Section 10 was a departure from the rule of hearsay evidence but the Court must guard itself against readily accepting the statement of a conspirator against co-conspirator. That Section 10 is a special provision to deal with dangerous criminal combinations and the normal rule of evidence preventing the statement of one co-accused being used against the another. Section 30 of the Evidence Act does not apply in a conspiracy trial by virtue of Section 10. Thus, the Court must look for some 90/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt corroboration to be on the safe side. The law is now well settled on the aspect that a conspiracy is hatched in secret and therefore the direct evidence is rarely available and such direct evidence is not available in the instant case.
73. In the case of Nalini (supra) reliance was placed on paragraph 560, 566, 575, 576, 583 and 583(b) in support of the contention that all the defendants had conspired to deprive the plaintiff of the funds which were meant for purchase of the securities. Mr. Sancheti had placed reliance on the aspect of conspiracy submitting that in Nalini' arguments were addressed as to the nature of the conspiracy made out from the evidence on record and the applicability of section 10 of the Evidence Act. No doubt the Supreme Court has while deciding the case of Nalini considered numerous other judgments including the case of Yash Pal Mittal vs. State of Punjab [(1977) 4 SCC 490] in which the Court observed that the very agreement, concert or league is the ingredient of the offence and it is not necessary that all conspirators must know each and every detail as long as they are co-participators in the main object of the conspiracy. There must be unity of object or purpose but there may be plurality of means sometimes even unknown to one another, amongst the conspirators.
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74. In Shivnarayan Laxminarayan Joshi vs. State of Maharashtra1 it was held that a conspiracy was always hatched in secrecy and it was impossible to adduce direct evidence of the same. The offence could largely be proved only from the inference drawn from acts or illegal omission committed by the conspirators in pursuance of a common design. In that case the Court found that there was no evidence of conspiracy and it is important to know the period as to ascertain the object of the conspiracy. The case of Nalini pertains to the assassination of Rajiv Gandhi and the case was essentially under the Terrorist and Disruptive Activities (Prevention) Act, 1987. There is no doubt that substantial evidence was on record in that case. After perusing the evidence the Court came to the conclusion that apropos conspiracy, Mr. Sancheti laid great stress on the consideration of the Supreme Court on the principle of law governing section 10. In Sardar Sardul Singh Caveeshar vs. State of Maharashtra 2 the Court considered the fact that section 10 of the Evidence Act introduced the doctrine of agency and if conditions laid down therein were satisfied, an act done by one was admissible against the co-conspirators. Reference was made to section 10 which reads as follows :
1 (1980) 2 SCC 465 2 (1964)2 SCR 378 92/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt Section 10 : Things said or done by conspirator in reference to common design Where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to so conspiring, as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it.
The Supreme Court held that the section would come into play only when the Court is satisfied that two or more persons had conspired together to commit an offence or an actionable wrong. In other words there should be prima facie evidence that person was party to a conspiracy. Once the Court is satisfied that reasonable ground exists, anything said, done or even written by one of the conspirators in reference to the common intention, after the said intention was entertained, could be relevant as against others for the purpose of proving that the other person was party to it.
75. Reference was also made to the judgment of the Supreme Court in State of Gujarat vs Mohd. Atik (supra) which was also relied upon by Mr. Kale in which the Court held that section 10 93/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt of the evidence Act is founded on the principle of the law of agency and if a common intention ceased to exist a statement made by a former conspirator cannot be regarded as one made 'in reference to their common intention'. In the facts at hand there is no evidence of any such statement apropos any common intention. The Court also observed that the contention of the accused in that case that a conspirator once nabbed brings an end to the conspiracy would not have universal application. If the object of the conspiracy was not achieved there was still an agreement to do an illegal act. In the facts at hand Mr. Sancheti relied upon the principle governing law of conspiracy is briefly summarised /paraphrased as in Nalini's case, to the extent it concerns an actionable wrong. That under section 120 A of the IPC two or more persons must agree to do so cause to do an illegal act or legal act by illegal means. Once the object of conspiracy is achieved a subsequent unlawful act would not make an accused a part of the conspiracy such as giving shelter to an absconder.
76. Conspiracy is hatched in secrecy. Direct evidence is very rare. Existence and objects of the conspiracy may have to be inferred from circumstances and conduct of the parties. Conspirators may be enrolled in a chain, one enrolling second and the second enrolling a third and so on. There must be at 94/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt least two or more conspirators and it is not necessary that all should agree to the common purposes at the same time. In other words they may join at different period of time. A charge of the conspiracy may prejudice the accused by forcing them to undergo trial jointly and the prosecution is to produce evidence not only to show each accused had knowledge of the object but also of the agreement. It is an unlawful agreement and not its accomplishment which is the essence of the crime of the crime of conspiracy. The unlawful agreement need not be express. It may be implied or inferred. Criminal conspiracy is a partnership in crime and as result of joint or mutual agency for prosecution a common plan. A person may join conspiracy by 'words' or 'deeds'. But criminal responsibility for a conspiracy requires more than a merely passive attitudes towards an existing conspiracy. In other words an overt act must be committed with knowledge of the conspiracy. It is these principle that must be applied to the instant case to ascertain whether or not there was a conspiracy.
77. In Damodar (supra) the Supreme Court also dealt with a case of an offence punishable under section 302, also considered criminal conspiracy essential ingredient thereof and the nature of proof required and reiterated that an express agreement need not be proved nor an actual meeting of two or 95/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt more persons is necessary nor is it necessary to prove the actual 'words' of communication and evidence as to transmission of thoughts sharing the unlawful design may be sufficient. This observation was made by the Supreme Court in Kehar Singh vs. State (Delhi Adm.) [(1988) 3 SCC 609]. The Supreme Court also adverted to the its own decision in Ajay Aggarwal vs. Union of India [(1993) 3 SCC 609] and observed that it is not necessary that each conspirator must know each detail in the scheme or be a participant at every stage, but it is necessary to agree to the design or nature of the conspiracy. Conspiracy is conceived as having three elements : (1) an agreement (2) between two or more persons by whom the agreement is effected and (3) a criminal object, which may be either the ultimate aim of the agreement or may constitute the means, or one of the means by which that aim is to be accomplished. In the case at hand we will consider an actionable wrong in place of a criminal object.
78. Firozuddin Basheeruddin (supra) observed in paragraph 25 that conspiracy is not only a substantive crime, but it also serves as basis for holding one person liable for the crime of others in cases where application of the usual doctrine of complicity would not render that person liable. A person who enters into a conspiratorial relationship is liable for every reasonably foreseeable crime committed by every other member 96/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt whether or not he knew of the crime or he aided in its commission. The Court observed that when considering admissibility of evidence, loosened standards prevailed in a conspiracy trial and in a conspiracy prosecution a declaration by one conspirator made in furtherance of conspiracy is admissible against each co-conspirator. In this behalf I am of the view that in the case at hand the plaintiff could have led evidence and the defendants could have cross examined witnesses. It was plaintiff case that Abhay Narottam -defendant no. 4 he was part of the conspiracy. Involvement of further persons could have established the semblance of a conspiracy, if any. In the instant case there is no such indication of a conspiracy that has been established by leading evidence.
79. No doubt, in Firozuddin the Supreme Court relied upon observation of Judge Hand in Van Riper vs. United States [13 F 2d 961, 967 (2d Cir 1926) that declarations [ presumably of conspiracy] are not admitted upon any doctrine of law of evidence, but of the substantive law of crime. When an agreement for an unlawful end is entered into the persons involved become adhoc agents for one another leading to a partnership in crime. On this basis it was contended that the principle would apply equally to actionable wrongs. While the argument is an attractive one, I must consider whether it is 97/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt sustainable in the facts of this case. In my view in the absence of a clear indication as contemplated even by the judgment in Firozuddin the case of conspiracy falls short. Firozuddin also placed reliance upon Yash Pal Mittal vs. State of Punjab [(1977) 4 SCC 540] which alludes to the same principle viz. it is not necessary that all conspirators must know each and every detail of the conspiracy and the only relevant factor is that all means adopted and illegal acts done must be purportedly done in furtherance of the object of the conspiracy, even though there may be some 'misfire or overshoot.
80. I do not find how these decisions can come to the assistance of the Plaintiff absent a bonafide attempt to prove their case. In Bhagwan Swarup Lal Bishan Lal (supra) the Supreme Court observed that the essence of conspiracy is there should be an agreement between persons and that agreement could be proof of direct evidence so inferred from acts and conduct of parties. The Supreme Court analysed Section 120A of the IPC and observed that there can be prima facie evidence which provided reasonable ground for a Court to believe that two or more persons are in conspiracy. If that condition is fulfilled anything said or done by one person in reference to the common intention will be evidence against the other. Anything said or done in writing should be after the common intention was 98/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt formed by any of them and it would be also relevant to see whether anything said or done or written by person was so done written or said before he entered the conspiracy or after he left it. It could be used against the co-conspirator and not in his favour. There is not much that can be gained is this discussion as to conspiracy in the absence of any direct evidence or any indirect inferential aspects since plaintiff in my view have not brought to my attention any evidence pertaining to the alleged meeting physically or meeting of mind harboring a common intention.
81. The plaintiff was required to prove that the Bank of Karad through its officers and agencies and some of the defendant nos.2 to 6 had played a fraud and conspired to defraud the plaintiff on or about 6th April, 1991 or some other date. The date also assumes significance since the conspiracy is said to be hatched on or about 6th April, 1991 "or some other date". The plaintiff has not led any evidence to identify the date on which the such conspiracy, if any, was hatched or that the aforesaid persons conspired to defraud the plaintiff. The plaintiff, in my view, failed to establish the existence of a conspiracy at the material time. The plaintiff had not named the conspirators. Apart from a bald suggestion that there is a conspiracy to defraud 99/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt the plaintiff, the plaintiff witness does not venture to suggest the particulars of the common intention. That there must be the unity of object and purpose is one of the fundamental requirements to establishing the conspiracy that has been canvassed. Unity of purpose with plurality of means has also been recognized. Even assuming that a conspiracy was hatched in secrecy and it is not possible to adduce direct evidence, I am unable to draw any inference from the facts of the present case to affirmatively held that there was a conspirators. I am unable to find any clear cut common design. The plaintiff could have led evidence as to the surrounding circumstances and as to acts done and such of the persons said to be involved in the conspiracy, only then, in my view, could the doctrine of agency be invoked. No doubt there are indications to suggest a pattern of its transaction forming subject matter of the three suits. However, the plaintiff had not given it any form. Our Courts also considered that the unlawful agreement, if any, may be implied on inferred but in the instant case, I am unable to find any indication of the nature of the agreement and therefore even on the basis of preponderance of probability, I am unable to hold in favour of the plaintiff.
82. As far as issue no.11 is concerned, there is no evidence on record to prove that defendant no.5 utilized the 100/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt amounts deposited in the account of defendant no.4. In the deposition of the complainant only witness Mr. Vernekar no attempt has been made to prove that defendant no.5 utilized the amount deposited in the account of defendant no.4. Since this was the contention of the plaintiff in the plaint which resulted in the aforesaid issue being framed the plaintiff should have been prudent enough to lead evidence on this aspect not having done so I am unable to find any material on record in support of assertion that defendants no.5 utilized the amounts deposited in the account of defendant no.4 as set out in paragraph 8(f) of the plaint.
83. The averment in paragraph 8 of the plaint is to the effect that the amount paid by the plaintiff was deposited in the account of defendant no.4 with Bank of Karad and these amounts were utilized by defendant no.4 along with defendant nos.2, 3 and 5. The contention that the amounts so deposited were utilized by defendant along with original defendants nos.2, 3 and 5 is an averment that has been introduced by an amendment which was sought and permitted in November 1997. The suit was initially filed in August 1992. The fact that such an amendment came to be made 5 years after the suit was filed would certainly indicate that the plaintiff had specific information.
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84. In fact the extensive amendments carried out in 1997 vide Chamber Summons nos.24, 25 and 26 of 1997 supported by an affidavit dated 11 th September, 1997 filed on behalf of the plaintiff. The Schedule of the proposed amendments are almost identical in all these chamber summons. The amendment sought was specific giving details of various aspects of the transaction and the people involved the affidavit in support of the chamber summons is filed by the Executive Vice President of the plaintiff and on the basis of information which he believed to be true. In paragraph 3 it is stated that after filing of the suit "certain further and pertinent facts have to the knowledge of the plaintiff by way of findings of the JPC. Thus, it is evident that the information that the plaintiff had gathered once again related to the findings of the JPC. If the plaintiff believed that information to be true, appropriate evidence in support of the amendments and in support of the amended plaint would be forthcoming, nothing of the sort has been done. In that view of the matter, it would be safe to conclude that the plaintiff had no evidence to establish their case as it was open to the plaintiff at all times to lead evidence. All three Chamber Summons were allowed without any opposition except by the third defendant. While allowing the chamber summons the Court recorded that no claim is being made and all that is sough t to be 102/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt done is to give better and further particulars in respect of the claim already made. It is also observed that the plaintiff appear to have sought amendments in a slip-shod manner yet the party should not be prevented from carrying out the amendment to bring facts on record. Therefore a long rope was given to the plaintiff and the plaintiff could have led appropriate evidence. The fact that such extensive amendments were sought and permitted would indicate that there was evidence that plaintiff had and they were bound to place before this court. This they have omitted to do and such omission does not appear to be inadvertent but could be deliberate. It is another matter that the defendants also choose not to cross examine Mr. Vernekar but the defendants cannot be faulted if the plaintiff does not lead evidence. In the facts of the present case, this issue no.11 also must be answered in the negative.
85. Issue no.12 required the plaintiff to prove that defendant nos.2, 3, 5 and 6 were giving directions to the defendant no.4 or routing business through the account of defendant no.4. Even on this aspect of the matter, the plaintiff has not led any evidence. The defendant no.1 has constantly stated that the suit transactions were effectively that of defendant no.4. Defendant no.4 has submitted a decree on 103/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt which the plaintiff have sought to act including by filing Special Misc. Application no.77 of 2007 by which the plaintiff had also sought scaling down of the demand of the tax authorities. The only evidence introduced by the plaintiff is that of Mr. Vernekar which deals with individual transactions between the parties telephonic instructions received through dealing office in Bangalore, visit of representatives of the defendant no.2, issuance of the cheques in favour of defendant no.1 and the Inter Branch Advices. The witness has not deposed to any of the factual aspects that the plaintiff had alleged in the plaint to the extent it deals with the involvement of other defendants and the manner in which the transactions were carried out. I have already held that there is no evidence of conspiracy and even assuming the plaintiff case that the conspiracy alleged against defendant nos.2,3,5 and 6 or any of that defendant no.4 . There is no evidence that has been led. In the circumstances, issue no.12 must be answered in the negative.
86. Issue no.13 is also answered in the negative since there is no evidence on this aspect. The evidence of Mr. Vernekar does not establish the contention that it was defendant no.4 who would sign the delivery and receiving orders at the instance of defendant no.2, 3, 5 and 6.
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87. Issue no.15 as framed omits to specify the amount involved, however, what the Court contemplated was the amount as pleaded in the respective suits. Issue no.15 is also one that required specific proof. Absence of evidence on this aspect would therefore justify in answering this issue in the negative. As far as issue no.17 is concerned, it is an admitted position that some of the securities demanded were delivered but not all of them but there is no evidence of who delivered these and it is not possible to hold that defendant no.1 delivered these securities. The issue is accordingly answered in the negative.
88. Apropos issue no.13, defendant no.4 has also failed to prove that the plaintiff was aware that the Bank receipt issued by Bank of Karad was not backed by securities. The said defendant has also not proved that defendant no.2 was the counter party. Not only had the defendant no.4 not led any evidence but he has submitted to a decree on admission. In this behalf it would be appropriate to reproduce contents of paragraph 14(j) of the written statement on behalf of defendant no.4 for ease of reference:
"(j) This defendant states that from the Bank statement of his O/D A/c No.201 with Bank of Karad, it becomes clear that on 22.7.1991, the 2nd defendant deposited in the aforesaid account 105/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt of this defendant a sum of Rs.212,80,00,000/- in course of routing his business through the account of this defendant. On the same day i.e. on 22.7.1991 the 2nd defendant instructed this defendant to instruct the Bank of Karad to issue Bankers cheques for the following amounts and in favour of banks as mentioned against each :-
i) Rs.19,41,21,554.78 Canbank Mutual Fund
ii) Rs.68,27,83,561.64 Citi Bank
iii) Rs.35,17,36,986.40 Citi Bank
iv) Rs.50,44,10,958.00 Canara Bank
v) Rs.29,76,00,000.00 Canara Bank
vi) Rs.9,73,46,938.38 Andhra Bank
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Rs.212,79,99,999.10
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89. In Harshad Shantilal Mehta (supra) reliance was placed on observations of the Supreme Court while dealing with question whether assessed tax liability for the statutory period requires to be discharged in full under section 11(2) (a) or whether Special Court has discretion in relation to the extent of payment to be made under section 11(2)(a). Mr. Sancheti submitted that in that case Supreme Court also had tracing the end use of funds in contemplation and alluded to the set up of an inter disciplinary group to trace funds. Auditors were also appointed to verify these instance and to speedily restore the funds to banks and financial institutions.
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90. In the case of Rasila Mehta (supra) the Supreme Court observed that the object of the Act was not merely to bring the offender to book but also to recover public funds. Even if there is a nexus between a third party, an offender and/or property the third party can also be notified. In Jyoti H Mehta (supra) the Supreme Court held that the Special Court Act is a special statute and complete code in itself. The purpose of which was to punish the persons who were involved in the act of criminal misconduct in respect of defrauding banks and financial institutions. That the statute must be construed in a manner such that suppresses the mischief and advances the objective of the legislature. These observations are relied upon by the plaintiff in support of their contention that suit is liable to be decreed.
91. In N. Narayanan (supra) the Supreme Court observed that market abuse had become a common practice in the Indian securities market and if it is not properly curbed it would result in defeating the very object and purpose of the SEBI Act. In that case the Court was considering various legal issues which inter alia involved the violation of the provisions of the Companies Act and manipulation of the financial results of companies. In that view of the matter the Court was concerned with efficacy of the SEBI Act. Mr. Sancheti stressed upon the fact 107/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt that investor confidence in the capital market can be sustained only by ensuring investors protection. This was a case where investors protection was called for. He made reference to the object and purpose of the SEBI Act as being one to curb market manipulation. Reference was also made to the history of the Indian Companies Act, 1956 which was modeled on the English Companies Act, 1948 and the fact that the company in question had made a false corporate announcement apropos its business arrangements that the company would act only through its directors who were expected to exercise utmost care, skill and diligence. He alluded to acts of misconduct on the part of the defendants institutions offered to establish the existence of a conspiracy. He submitted that the directors were liable for misfeasance. In the present set of facts I do not see how the plaintiff can draw any assistance from these judgments and without leading evidence.
92. On the aspect of tracing reliance was placed on the decision of this Court in Miscellaneous Petition No. 27 of 1994. In the instant case several attempts have been made at early stage of the trial to seek an order for tracing of which have been denied as having no merit. None of these orders have been called into question and plaintiff in my view has accepted these orders 108/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt even assuming that previous orders are not bar at the final disposal of the suit considering the fact that the plaintiff have not led evidence and made out even any prima facie case of conspiracy or the fact that monies have been channelised in a manner that they seek to suggest. I am of the view that there is no justification or merit in the application for tracing. No doubt in the case of Standard Chartered Bank the Court found that tracing was absolutely necessary as seen from Court conclusion in paragraph 96 and in which the Court had issued notice to Reserve Bank of India and Income Tax department. The Court was to consider whether a separate tracing committee should be set up and intended to take up the question of tracing immediately. The Court in that case was satisfied that tracing was necessary. In the instant case tracing loses significance in view of the fact that prayers for tracing have been denied and secondly no efforts have been made by the plaintiff to ascertain the trail of fund even through defendant no. 4 and the plaintiff have been satisfied in obtaining a decree on admission. The decree on admission would indicate that funds were repayable by defendant no. 4.
93. As far as issue no.18 and 19 are concerned, the plaintiff's requests for tracing of funds has already been dealt with and rejected by the Special Court and that order has 109/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt attained finality. In that view of the matter, the plaintiff are merely seeking a fishing/roving enquiry without actually taking any steps to lead evidence on facts which are probably within the knowledge . It was for the plaintiff to prove their case despite the long years that have been passed and observations of the Apex Court in the case of Jyoti Mehta (supra) clearly lay in the plaintiff court having omitted to take advantage of all factors including time being on their side. The plaintiff had stopped short of making any bonafide attempt to prove their case. In that view of the matter, issue no.19 must be answered against the plaintiff and in the negative.
94. Some of the other judgments cited by counsel may be briefly adverted to although some of them are not directly relevant. Parthasarathi Sinha (supra) also dealt with the aspect that misfeasance proceedings can be continued against a Director notwithstanding his demise in which the Court observed that the said proceeding could be restricted to the value of the estate going into the hands of the heirs. Mr.Sancheti relied upon Official Liquidator, Supreme Bank Ltd. Vs, P. A. Tendolkar [AIR 1973 SC 1104] which found that a deliquent director who was examined in a proceeding under the Companies Act and thereafter dies before the order of payment was made against him, the order to be passed in misfeasance procedure against the 110/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt director was merely a declaration as to his liability. The Court held that liability arising under misfeasance proceeding is founded on the principle that persons who had caused loss to the company by an act amounting to breach of trust must make good the loss. It is not a provision intended to punish a person found guilty of misfeasance but to compensate the company for loss resulting from misfeasance and once liability is ascertained it is open for the liquidator to realise the amount. Having considered the ratio in in these decisions I am unable to find how it assist the plaintiff in the facts at hand. There is no justification in drawing inferences without an attempt to prove the plaintiff's case by leading evidence independently in these suits, an endeavour which the plaintiff commenced by examining Mr. Vernekar but then abandoned the recording of further evidence to prove their specific case.
95. In Shanti Kumar Panda (supra) the Court was considering the issue whether a judgment of the criminal Court was binding on the Civil Court and vice versa. In paragraph 15 the Court reiterated that decision of the Criminal Court does not bind the Civil Court but the converse is true i.e. a Civil Court's decision would be binding on a Criminal Court. Mr. Sancheti had placed reliance on paragraph 20 of that judgment wherein 111/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt the Court held that extent of relevance of order under section 145/146 of the Code in a subsequent Civil action where the parties were different cannot be treated as binding except to the extent of evidence being of the factum of a particular judgment having been delivered by the Criminal Court on a particular date and the judgment of the Criminal Court is only relevant to show that there was such a trial which resulted in conviction and nothing beyond. That in respect of the legal proceeding before a Court subsequent to the order of conviction this aspect of Mr. Sancheti's argument reiterated the position that the order passed in the criminal trial is not binding upon parties in the present suit and therefore plaintiff's entitlement to the reliefs.
96. Mr. Sancheti also relied upon decision in Miscellaneous Petition No. 44 of 1999 passed by the Special Court wherein reference was made to paragraph 4 and status of the various parties and which refers to the fact that defendant no. 6 - T B Ruia was at the material time the managing director of M/s. DMPL. My attention was also invited to paragraph 38 of the judgment in which reference was made to the evidence of defendant no. 4 in Special case no. 7 of 1993 which resulted in conviction of nine persons. Relevant part of the evidence has been referred to. In paragraph 39 to 41 the Court recorded as 112/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt follows "39. The above evidence of Mr. Abhay Narottam which is by and large in conformity with his case as pleaded in his written statements filed in said suits filed by Canfina in this Court would clearly show how the liability of LIC Mutual Fund was kept rolling over till July 1991 when Petitioner, Respondent No. 14, Mr. Abhay Narottam, Hiten Dalal and others made Bank of Karad, Metropolitan Co- operative Bank and Canfina as their preys and diverted crores of rupees from the said two Banks and Canfina. To be noted that Canfina's three suits in this Court relate to the said liabilities arose because of BOK's failure to discharges its obligations under the Brs which were got issued by petitioner,its said Director Mr. Ruia, Abhay Narottam, Hiten Dalal, etc. without back up securities.
40. In such situation the argument or contention of "No nexus" to fraudulent security deals would require to be considered in the background of attachment of the assets of a Notified Party, like the petitioner.
41. Therefore, on the background of such factual situation, if one ignores the hidden ground reality behind the operations, then the same would lead to an absurd and anomalous situation and would not only frustrate, but would defeat the very object of the Statute. For the said Act envisages not only to ensure punishment to the perpetrators of fraudulent security deals, but also to trace and recover siphoned funds of the banks and financial institutions. The complexity and intricacy involved in such type of dealings, resorted to with consummate skill and as stated in active concert and connivance with bank officials, would not be easily discernible and detectable. There would be much more than bare eyes could see." 113/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 :::
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97. Reference was made to the fact that in July 1991 defendant no. 5 and 2 came to an understanding to reduce the number of transactions. On 22 nd July, 1991, defendant no. 2 arranged to sell 16 crore Unit of UTI by means of a Bank receipt of Bank of Karad- defendant no. 1 for total value of Rs.212.80 crores to CANFINA. All this was actually extracted from the evidence of Mr. Abhay Narottam, defendant no. 4. The Court considered the evidence to be read in conformity with the pleaded case that liability of LIC Mutual fund was kept rolling over till July, 1991 when DMPL, Abhay Narottam, Hiten Dalal and others made Bank of Karad, Metropolitan Co-operative Bank with Canfina, the present plaintiff as their preys and diverted crores of rupees. It was further observed by the Court that Canfina's three suits in this Court relate to the said liabilities arose because of Bank of Karad's failure to discharge its obligations under the bankers receipts which was got issued by DMPL.
98. Ms. Pawar for defendant no. 6 had also relied upon this judgment and in particular paragraph 42 thereof and the extensive consideration of the plaintiff's claim in these three suits. The judgment also considers the defence of Abhay Narottam and refers to the rolling over operation. Paragraph 43 of the 114/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt judgment records that the claim of the plaintiff shows a nexus with the fraudulent security deals with the active involvement of petitioner and its director Mr Ruia - defendant no. 6 in active concert with other players like defendant no. 4- Abhay Narottam, defendant no. 3 - Dalals etc. Reference is also made in that judgment to a series of meetings held in which allegedly a decision was taken to undertake fictitious and fraudulent transactions through Bank of Karad and the account of defendant no. 4, wherein defendant no. 6- DMPL also had an account. It is further recorded that defendant no. 6 on behalf of the DMPL and Mr. Abhay Narottam and the share broker used to attend such meetings. The particular reference to such meetings, the Court referred to the report filed by Chartered Accountant M/s. Amit Ray & Co. which apart from relying upon the JPC and Janakiraman Committee reports showed active involvement of defendant no. 6.
99. Mr. Sancheti on behalf of the plaintiff also made reference to paragraph 51 of the judgment which considers that the several of the accused persons had been acquitted because sufficient evidence was not made available by the prosecution resulting in their acquittal. That merely because the accused were acquitted it would not come to the assistance of the said persons in the Civil 115/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt claim and that the evaluation of evidence in Civil matters would not follow the rigid requirements in a criminal trial. The Court concluded that there is ample evidence and material pointing out to exist liability and claims against defendant no. 6 - DMPL and also their involvement in fraudulent security deals. In paragraph 53 the Special Court also referred to the fact that overwhelming material was revealed indicating positive involvement of DMPL and its directors in fraudulent security transactions with banks and financial institutions and siphoning of funds of the banks and financial institutions and the Court held that fraudulent deals have been carried on with Bank of Karad. Despite such indication in that judgment which prima facie point towards availability of evidence the plaintiff had not led such evidence for reasons best known to them.
100. Ms. Pawar had placed reliance on the decision of the Supreme Court in State Bank of India vs. National Housing Bank and Ors. (2013) 16 SCC 538 in which the Court observed from the history of that litigation and the background in which the Special Courts Act came to be passed that it could be presumed that the banks could not follow the procedure in its dealings and that all parties tried to disown their responsibility trying to project an image of innocence. The entire effort of the plaintiff 116/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt in that suit was to suppress relevant information. The Court was convinced that the proceeding was to shield the delinquent officers responsible for such dealings. Eventually the suit filed by State Bank of India and the decree was set aside in toto.
101. I have already dealt with the conclusion of the Supreme Court in Jyoti Harshad Mehta (supra) which observed in paragraph 57 the effect of the Parliamentary Committee reports. I may also mention that in Chamber Summons nos. 29, 30 and 31 of 1999 filed in above three suits the plaintiff sought to implead DMPL, Excel & Co and the Metropolitan Co-operative Bank. The Court rejected the application to implead these parties. There has been no challenge to that order. The plaintiff was thus being trying to clutch at straws to say the least unless they have chosen to avoid unearthing the true facts. As far as the prayer for tracing is concerned, reliance was placed on the order dated 10th February, 2012 passed by the Special Court rejecting the contention that tracing was required to be ordered.
102. The Special Court held that if paragraph 13 of the application was perused it would be clear that the the plaintiff herein had all the information regarding alleged flow of fund and ultimately the burden on establishing the facts is on the 117/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt plaintiff who could not be permitted to conduct inquiry under the guise of appointment of Commissioner or a Committee of Experts to inspect and audit the books of accounts of parties including banks and institutions who were not parties to the suit and that the power vested in the Court under section 9A(4) cannot be used by the plaintiff for collecting evidence. The request was found to be a roving and fishing inquiry and the Miscellaneous applications were disposed. This order appears to have attained finality and the plaintiff had not contended to the contrary.
103. In the case of CBI vs. Mulangi K. Ashok Kumar (supra) issue no. 25 dealt with the question of whether an amount Rs. 212,75,00,000/- was diverted from the account of Mr. A. D. Narottam with Bank of Karad to other banks for being credited to the account of defendant no. 2 - Hiten Dalal, defendant no. 4 - B. C. Dalal, Defendant no. 5 - T. B. Ruia and defendant no. 6 J. P. Gandhi. Issue no. 25 was answered in the affirmative only so far as it concerned defendant no. 2 - Mr. H. P. Dalal and not the others. This indicates that the plaintiff had knowledge of the fact that evidence in that case had been insufficient to establish the complicity of the others despite which the plaintiff omitted to lead relevant evidence in the suits. 118/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 :::
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104. Mr. Sancheti had also placed reliance on the answer to issue no. 25 in support of the plaintiff's case of diversion of fund. Furthermore Ms. Pawar had relied upon answer to issue no. 37 which considered whether H. P. Dalal, A. D. Narottam, B. C. Dalal, T. B. Ruia, J. P. Gandhi and S. N. Ramaswamy had dishonestly received and retained part of the relevant funds and used the same for their own security transactions. It was submitted by Ms Pawar that the issue was not proved against B. C. Dalal, T. B. Ruia and J. P.Gandhi but was proved against A. D. Narottam to a limited extent and Mr. Ramaswamy to the extent of Rs. 15,00,000/-. Reference was made to the consideration of issue nos. 38 and 42 as a result of which accused no. 4 B.C. Dalal and accused no. 5 - T. B. Ruia and J. P. Gandhi were acquitted from all charges levelled against them. It is therefore contended that there is no justification in the plaintiff's case against defendant no. 6 especially since plaintiff had not led any evidence. In my view the absence of an evidence is a critical factor to be considered before fixing responsibility. Much can be said about the effect of the decision in the criminal trial, but it is evident that the conclusions in the criminal trial cannot by itself be used by the parties as evidence in the Civil Suit. Independent evidence would be required on the issues framed in the Civil Suit.
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105. In National Housing Bank (supra) the Supreme Court was considering decision of the Special Court in Statutory appeal against decree passed in suit no. 2 of 1999. In paragraph 50 and 51 the Court observed that statutory commissions decision binding are not enforceable proprio vigore and Courts are not bound by conclusions of such commissions and statements recorded by such commission cannot be used as evidence. The Court further observed that the reports of such committees can be an opinion of the committee based on its own examination of records and the same cannot be evidence within the meaning of Evidence Act which the Special Court is required to follow. In my view it is clear and at the cost of repeating ad-nauseum that the plaintiff was therefore liable to lead independent evidence.
106. In Standard Chartered Bank vs. Andhra Bank Financial Services Ltd (supra) in paragraph 77 the Court extracted a portion of Janakiraman Committee Report. The Supreme Court observed that the committee had full authority backed by the RBI direction to investigate matters meticulously. The report was found to support the stand by Standard Chartered Bank in that case in relation to a dispute pertaining to certain bonds. The Supreme Court held that in view of observations in the Janakiraman Committee report it was not open to the Special 120/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt Court to reject the aspect of bogus entries. I do not see how this can come to the assistance of the plaintiff especially since the later in a judgment particularly in the case of National House Bank the Supreme Court has held that Courts were not bound by conclusions of the commission and that Special Court was not to consider it as evidence under the Evidence Act. Moreover in Jyoti Harshad Mehta (supra) the Supreme Court had in paragraph 28(viii) observed that Special Court had committed a serious illegality in having relied upon Jankiraman Committee Report and other reports which were inadmissible in evidence.]
107. In S. Arul Raja (supra) the Court considered the statement made by witness and observed that the evidence was not sufficient to implicate the appellant in the conspiracy since the same was hit by section 10. Section 10 refers to the statement of a fellow conspirator that pertains to the common intention behind the act and in this case an actionable wrong. In Mohd. Khalid vs, State of West Bengal and State of Gujrat vs. Mohd Atik the Supreme Court had already held that post arrest statements would not fall within the ambit of section 10 of the Evidence Act and in that case the Court found that viewed from any angle evidence adduced by the prosecution was not sufficient to justify conviction.
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108. In Jayendra Saraswathi Swamigal vs. State of Tamil Nadu the Supreme Court considered a submission on behalf of the appellant that in view of Section 30 of the Evidence Act a confession of a co-accused is a very weak type of evidence which can be best be taken into consideration to lend assurance to the prosecution case. However Mr. Sancheti had then relied upon the observation that the respondent in that case had relied upon section 10 of the Evidence Act which was a specific provision relating to conspiracy and contending that appellants submissions could not be supported. The Court considered the opening words of section 10. In that case the confession of two of the appellants were recorded after the murder when the conspiracy had culminated and therefore section 10 could not be pressed into service. Emphasis of Mr. Kale was thus on the lack of evidence.
109. My observations above apropos the disadvantage in not having led evidence and there by having prevented an effective cross examination must come to the aid of the defendants. Suppression of material facts is indicated in the facts and in the course of trial.
110. After conclusion of arguments on behalf of the defence the matter listed again when the plaintiff made a mention of the 122/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt same contending that the Supreme Court had pronounced its decision in the case of Kalpana Mehta v/s. Union of India & Ors. (2018) 7 SCC 1 which Mr. Sancheti submitted was a relevant decision. Section 57, 74 and 78 of the Evidence Act had been considered in the judgment and the report of the Joint Parliamentary Committee in the Securities Scam is to be treated as evidence. Furthermore, the Supreme Court in Jyoti Harshad Mehta v/s. The Custodian and others 2009 (10) SCC 564 had observed that the Jankiraman Committee Report, the JPC Report and the Report of Inter Disciplinary Group (IDG) are admissible only for the purpose of tracing the legal history of the Act. This judgment was considered in Kalpana Mehta(supra). At that stage, I alerted the parties to the fact that the JPC Committee had not been introduced in evidence in these suits to which counsel agreed. Mr. Sancheti on behalf of the plaintiff, in response to a query of the Court had submitted that the plaintiff did not intend to make any application to reopen the case to introduce the JPC report in evidence. Although Mr. Sancheti submitted that the Janakiraman Report and the Parliamentary Committee reports must be read in evidence in Kalpana Mehta (supra), after exhaustive consideration of the issue involved in paragraph 449. The Court concluded thus :
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I am bound and obliged to decide these suits on the basis of issues and evidence and material brought before me. Mr. Sancheti has already submitted that the plaintiff did not seek to introduce the Joint Parliamentary Report or the Jankiraman Report as part of its document in evidence. Furthermore even assuming that the report was admissible in evidence no reference has been made to its contents during the course of submissions made before me. In fact if such material was available the plaintiff had chosen not to bring the relevant evidence before the Court. No doubt under section 57(4) of the Evidence Act the Court can take judicial notice of proceedings of parliament or the legislature but in paragraph 449.5 of Kalpana Mehta, the court recorded that merely because a document is admissible in evidence whether it be public or private document, it does not necessarily lead to the presumption that the contents of the document are true and correct. The Supreme Court concluded in Kalpana Mehta that the Parliamentary privilege that report shall not be impeached or questioned outside parliament would 124/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt apply equally to the parties who filed claims in Court and a party which opposed it and any observation in the report or any inference of the Committee cannot be held to be binding between the parties. The parties are at liberty to lead evidence independently to prove their stand in a Court of law. Thus the plaintiff and if necessary the defendants in this case were at liberty to lead evidence independently and in my view the plaintiff was bound to lead such evidence in order to establish its case. Mere reliance on the observations in the Parliamentary committee reports are of no avail.
111. Mr. Sancheti relied on Kalpana Mehta (supra) in support of his contention that the JPC Report of the securities scam can be considered as evidence by virtue of the fact that Section 57, 74 and 78 of the Evidence Act had been considered in that judgment and the decision in Jyoti Mehta v/s. Custodian and others [(2009) 10 SCC 564] has observed that the Jankiraman Report and the JPC Report and the Inter Disciplinary Group Report are admissible only for the purposes of tracing the legal history of the Special Courts Act and that the judgment in Jyoti Mehta (supra) has been considered in Kalpana Mehta (supra) which was rendered by the constituents bench. He therefore submitted the JPC Report must be considered as evidence. I may repeat that JPC Report was not introduced in evidence at any stage and the 125/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt plaintiff had have made no attempt to introduce the same in evidence. The preliminary findings of the committee have been referred to, however, in view of the undisputed factual position that the findings is recorded in the report are not evidence, it is not necessary to dwell upon these contents of report any further. The portions of Jankiraman Committee Report has been quoted. However, I am of the view that these aspects need not be gone into and it is now well settled that the report of such committee did not constitute evidence.
112. Reference was also made to the case of Jyoti Harshad Mehta and Ors. vs. Custodian (2009) 10 SCC 564 in which the Supreme Court observed that it is an accepted fact that reports of the Janakiraman Committee and Joint Parliamentary Committee and the Inter-Disciplinary Group are admissible only for the purpose of tracing the legal history of the Act namely the Special Courts Act. The contents of the report should not be used by the Special Court as evidence. Thus the overwhelming opinion about these reports is that the reports and its contents are by itself not evidence but evidence of the facts therein accepted to the extent that the report seek to trace the legal history of the Act. As stated earlier the Joint Parliamentary Committee Report or the other reports have not been introduced as documents in these 126/127 ::: Uploaded on - 26/06/2019 ::: Downloaded on - 21/07/2019 10:19:03 ::: SPS-7,8&10_1994.odt suits. The plaintiff in my view were duty bound to independently lead evidence to establish their case. The report is of informative value but not binding. It was always open to the plaintiff to lead evidence to establish the facts. Considering the rejection of the tracing applications, amendments replete with details all of which appear to be extracted from the aforesaid Reports, the plaintiff could have lead evidence which they have consciously avoided. Save for the decree against defendant no.4, the suits must then fail and they do.
113. In the circumstances the following order is passed;
(i) Suit No. 7 of 1994, 8 of 1994 and 10 of 1994 are dismissed as against defendant nos. 1 to 3, 5, 6 and 7.
(ii) No order as to costs.
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