Bombay High Court
Canbank Mutual Fund vs Bank Of Karad Ltd on 20 December, 2019
Author: A.K. Menon
Bench: A.K. Menon
Dixit
IN THE SPECIAL COURT AT BOMBAY
Constituted under the Special Court [Trial of Offences
Relating to Transactions in Securities] Act, 1992
SPECIAL COURT SUIT NO.7 OF 2002
1. Canbank Mutual Fund, ]
A trust having its office at ]
Oriental House, Adi Marzban Path, ]
Ballard Estate, Bombay - 400 038. ]
2. Canara Bank, ]
A body incorporated and constituted ]
by the Banking Companies (Acquisition ]
and Transfer of Undertaking Act, 1970) ]
as Principal Trustee of Canbank Mutual ]
Fund, a trust having its office at Orient ]
House, Adi Marzban Path, Ballard Estate, ]
Bombay - 400 038. ] .... Plaintiffs
Versus
1. The Bank of Karad Ltd. (In Liquidation), ]
Through its Provisional Liquidator, ]
having his office at Raja Bahadur Compound, ]
Ambalal Doshi Marg, Fort, Bombay 400 001. ]
2. Hiten P. Dalal, ]
Indian Inhabitant, ]
residing at 201, Shanti Towers, ]
Military Road, Marol, Andheri (East), ]
Bombay - 400 069. ]
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3. The Custodian, ]
appointed under the Special Court ]
(Trial of Offences Relating to ]
Transactions in Securities) Act, 1992 ]
having his office at 16, Bank of Baroda ]
Bhavan, Parliament Street, ]
New Delhi - 110 001. ]
4. Abhay D. Narottam, ]
Indian Inhabitant, ]
Carrying on business at ]
C/o. S. Ramdas & Co., ]
Vardhaman Chambers, ]
Cawasji Patel Street, Fort, Mumbai. ]
(Since Deceased), through LRs.:- ]
4(1) Aarti Abhay Narottam ]
Indian Inhabitant, ]
residing at 186, Narsey Building, ]
1st Floor, Walkeshwar Road, ]
Opp. Bank of India, Teen Batti, ]
Mumbai - 400 006.(Since Deceased) through ]
4(2) Santosh Abhay Narottam, ]
Indian Inhabitant, ]
residing at 186, Narsey Building, ]
1st Floor, Walkeshwar Road, ]
Opp. Bank of India, Teen Batti, ]
Mumbai - 400 006. ] .... Defendants
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Mr. Shriniwas Deshmukh, a/w. Ms. Smruti Jha, I/by M/s. Mulla & Mulla & CBC,
for the Plaintiffs.
Mr. S. Bhandary, I/by M/s. Bhandary and Bhandary, for Defendant No.1.
Mr. Sunil Kale for Defendant No.2.
Mr. Hormaz Daruwalla, with Ms. Shilpa Bhate, I/by M/s. Leena Adhvaryu and
Associates, for Defendant No.3-Custodian.
Mr. D.P. Kamath for Defendant No.4(2).
CORAM : A.K. MENON, J.
JUDGE, SPECIAL COURT
RESERVED ON : 5TH OCTOBER 2018.
PRONOUNCED ON : 20TH DECEMBER 2019.
JUDGMENT :
1. The plaintiff no.1 - Mutual Fund seeks a decree against the defendants, jointly and severally, to deliver to the plaintiffs 11.5% GOI 2008 securities of the face-value of Rs.58.39 crores, along with interest thereon, from 27 th May 1991 till the securities are delivered. In the alternative, the plaintiffs seek a decree against defendant nos.1, 2 and 4(2), jointly and severally, to pay to the plaintiffs a sum of Rs.78,77,00,029=14 in accordance with the particulars of the claim.
2. The array of parties and facts leading to filing of this suit are given hereunder :-
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SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: The Parties
3. Plaintiff no.1 is a Mutual Fund, of which plaintiff no.2-Canara Bank is the Principal Trustee. By virtue of a Trust Deed, the assets of plaintiff No.1 vest in plaintiff no.2. Defendant no.1 was a Banking Company, incorporated under the Companies Act, 1956, but, presently in liquidation. Defendant no.2 is a Broker dealing inter alia in government securities. Defendant no.3 is the Custodian under the Special Court [Trial of Offences Relating to Transactions in Securities] Act, 1992. Original defendant no.4 was a notified party under the Special Courts Act being a broker and also director of defendant no.1 in the year 1991-92.
4. Meanwhile, the original defendant no.4-Abhay D. Narottam also passed away and by virtue thereof, pursuant to the amendment of the plaint, the widow of late A.D. Narottam and his son were impleaded as legal heirs of the deceased. The widow of late A.D. Narottam also passed away on 1 st January 2016. The reliefs in the suit are, therefore, sought against original defendant no.1-Bank of Karad, presently in liquidation, defendant no.2-Hiten P. Dalal and the sole heir and defendant no.4(2) - the surviving legal representative of original defendant no.4.
5. The plaint has undergone several amendments, first of which was by order dated 4th July 2003, thereafter by orders dated 21 st June 2005, 21st 4/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: November 2006 and finally by orders dated 9 th March 2018 and 23rd March 2018 to delete the name of the widow of original defendant no.4.
The Facts
6. It is the plaintiffs' case that the plaintiffs had engaged in portfolio investment business and some time in May, 1991, they had purchased 11.5% GOI 2008 Bonds ("the Bonds") from the 1st defendant through the 2nd defendant of the face-value of Rs.58.39 crores. To effect transfer of the Bonds, defendant no.1 issued a Securities General Ledger Transfer Form (SGL), authorizing the Reserve Bank of India (RBI) to operate the 1st defendant's SGL account to transfer and assign the Bonds to the SGL account. Plaintiff no.1 issued a cheque on 27 th May 1991 in the sum of Rs.103,82,47,295=60 in favour of defendant no.1 comprising an amount of Rs.58,90,16,042.44 being the cost of securities of face-value of Rs.58.39 crores, interest thereon and certain other payments.
7. On 29th May 1991, plaintiff no.1 lodged the SGL transfer form for the amount of Rs.58.39 crores issued by the 1st defendant with the RBI, Public Debt Office, for clearance. It was returned by RBI to defendant no.1 on the same day on account of insufficient balance. On 31 st May 1991, the said SGL transfer form was presented once again only to be returned for want of sufficient balance. Some time in July, 1991, plaintiff no.1 handed over the said SGL transfer form to defendant no.2, who acted as a broker. 5/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 :::
8. Later, on 26th July 1991, plaintiff no.1 said to have purchased the aforesaid 11.5% GOI 2008 securities for a face-value of Rs.60 crores and defendant no.1 had issued a Banker's Receipt for the security purposes. On 27 th July 1991, plaintiff no.1 purchased for Citibank 11.5% GOI 2008 securities, also of a face-value of Rs.60 crores. They received a Banker's Receipt for the said amount from Citibank. They are believed to have sold similar securities to defendant no.1 in exchange of Banker's Receipt. It is the plaintiffs' case that between August, 1991 and December 1991, plaintiff no.1, in the course of the portfolio investment business, entered into three transactions of sale with the Standard Chartered Bank (SCB), which are set out below :-
11.5% GOI 2008 Securities Face -Value Sr. No. Date of Sale [in Rs.] 1 23rd August 1991 Rs.10 crores 2 26th August 1991 Rs.7 crores 3 4th September 1991 Rs.43 crores
9. It is contended that these transactions were entered into through the same broker, namely, Hiten P. Dalal, who is defendant no.2 herein, and in all the three cases, the transactions were effected by delivery of the SGL transfer forms. According to the plaintiffs, in December, 1991, the SCB returned the SGL 6/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: transfer form of the face-value of Rs.7 crores through defendant no.2. The SGL transfer form of Rs.7 crores was substituted by two fresh SGL transfer forms; one for Rs.5.39 crores and another for Rs.1.61 crores, both dated 19 th December 1991, which were delivered to SCB apparently on the same day through defendant no.2. SCB presented the transfer form for Rs.1.61 crores to RBI and the same was cleared by effecting transfer of the securities listed in the SGL account to the SGL account of SCB. The SGL transfer forms for Rs.58.39 crores (consisting of Rs.43 crores + Rs.10 crores + Rs.5.39 crores) remained outstanding apparently till the end of 1991. On enquiries with defendant no.2, the plaintiffs were informed that in respect of the returned SGL transfer forms, that were sent to defendant no.2 for replacement, defendant no.2 was to directly deliver to the SCB fresh SGL transfer forms. The earlier SGL transfer forms for Rs.43 crores, Rs.10 crores and Rs.5.39 crores issued by plaintiff no.1 were to be squared-off against the plaintiffs' transaction.
10. Based on the aforesaid representations of defendant no.2, the transactions between plaintiff no.1 & defendant no.1 and plaintiff No.1 & SCB were believed to be squared-off by defendant no.2 in January 1992, apparently with the knowledge and consent of all concerned and as a result, defendant no.1 was to directly deliver the securities/SGLs to SCB. The plaintiff no.1 contended that by virtue of the direct dealings, as aforesaid, plaintiff no.1 had no obligation to deliver any of the accepted securities. It was believed that no claim was 7/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: thereafter made by the SCB with plaintiff no.1 in respect of the securities, nor did SCB give any intimation or made any complaint to plaintiff no.1 that the three SGL transfer forms for Rs.43 crores, Rs.10 crores and Rs.5.39 crores, respectively, had not cleared.
11. In May, 1992, the plaintiff no.1 learnt of the financial difficulties faced by defendant no.1-Bank of Karad (BOK). Plaintiff no.1 received a letter dated 19th May 1992 from SCB alleging that three SGL transfer forms in respect of purchase of the securities had not been cleared. The plaintiffs were apparently surprised at this development. Plaintiff no.1 was then surprised to learn that the three SGL transfer forms were presented to the RBI only on 15 th May 1992, since they believed that the transactions have been squared-off earlier. According to plaintiff no.1, they were not informed that the securities remained to be transferred or that they were dishonoured, till they received the letter of demand dated 19th May 1992.
12. On 21st May 1992, the plaintiff no.1 informed SCB that they would enquire into the matter. On further scrutiny, it was revealed to plaintiff no.1 that SGL transfer form for Rs.5.39 crores dated 19 th December 1991 was not presented for payment till 15th May 1992. As far as the SGL transfer form for Rs.43 crores is concerned, they were presented on different dates to RBI, as described in the table given below :-
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13. Plaintiff no.1 then made enquiries with defendant no.2, who had acted as a broker. Plaintiff no.1 also informed him that they had returned SGL transfer forms of the value of Rs.58.39 crores to defendant No.2. The defendant no.2 informed the plaintiffs that he had also acted as a broker in some dealings with other banks, including SCB. That in relation to such transactions, it was presumed that defendant no.2 would have entered into transactions with other banks, including SCB, and that in relation to those transactions, he was being threatened with criminal prosecution and in that view of the matter, he had not ensured delivery of various securities in his possession. Moreover, SCB took away the securities. According to the plaintiffs, defendant no.2 confirmed that the demand of SCB in relation to three SGL transfer forms was not correct and 9/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: that the plaintiffs had no obligation to SCB in respect of those transactions. Defendant no.2 had apparently set out his version in two affidavits dated 23 rd May 1992. In the meantime, plaintiff no.1 made enquiries with the 1 st defendant, who informed the plaintiff no.1 that the 2 nd defendant had returned the SGL transfer forms issued by defendant no.1 in favour of the plaintiff no.1, which had been cancelled and the transactions between plaintiff no.1 and defendant no.1 had been squared-off, as aforesaid, by defendant no.2 against the transactions for the same securities of the like amount.
14. On or about 16th June 1992, the plaintiff no.1 informed the RBI of the aforesaid development and requested the RBI to investigate into the circumstances, in which SCB took custody of the security and documents from defendant no.2. SCB was marked with the copy of the said letter. The plaintiff no.1 had in the meanwhile filed a separate suit in the High Court being Suit No.2796 of 1992, since re-numbered as Special Court Suit No.31 of 1994, wherein SCB is a defendant along with defendant no.2. In that Suit, the plaintiffs sought a decree against SCB to deliver / return the three SGL transfer forms collectively valued @ Rs.58.39 crores and seeking cancellation of the same and ad-interim and interim relief of protection. In the event, the court did not accept the plaintiffs' contention as to the tripartite settlement of transaction by squaring-off, as aforesaid, defendant no.1 would be bound and liable to deliver the security, for which the plaintiffs have made payments on 27 th May 1991, as 10/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: set out above. The plaintiffs have contended that the amount paid by them was credited to the account of defendant nos.4(1) and 4(2), without authorization from the plaintiffs. Defendant nos.2, 4(1) and 4(2) were, therefore, acting in conspiracy and had converted the monies belonging to the plaintiffs for the use and benefit of defendant Nos.2, 4(1) and 4(2), causing loss and damage to the plaintiffs. Defendant no.1 had allowed itself to be used for the aforesaid purpose.
15. Plaintiffs further contended that, in the event the court holding in Suit No.31 of 1994 that there was no squaring-off, defendant no.2 would also be liable for having misrepresented to the plaintiffs the fact of having arrived at a tripartite settlement and which prompted the plaintiffs to surrender to defendant no.2, the original SGL transfer forms dated 29 th May 1991 and for not insisting upon replacement. According to the plaintiffs, they were made to believe that the transactions in relation to the securities of the face-value of Rs.58.39 crores had been squared-off and the plaintiffs acting on the representation, surrendered the SGL transfer forms issued by BOK to Dalal and did not insist on replacement. In the event the squaring-off not having occasioned, the plaintiffs contended that they were entitled to receive the securities. They, therefore, seek a decree jointly and severally directing the defendants to handover 11.5% GOI 2008 securities of the face-value of Rs.58.39 crores, along with interest accrued thereon from 27 th May 1991 till the securities are delivered. In the alternative, to pay a sum of Rs.78,77,00,029=14, 11/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: being the cost of the securities of the face-value of Rs.58.39 crores, along with interest and other costs.
16. The 1st defendant-BOK has filed a written statement dated 13 th October 2003, in which after setting out the date of appointment of the Liquidator effective from 27th May 1992, it is contended that prior to liquidation, the CBI had seized many records of the BOK, which are still in the custody of the CBI. That the books and records available with BOK were not maintained properly and were incomplete. These records could have helped the defendant no.1 to identify the securities, which were received by and on account of brokers of various clients and the securities, which were delivered by the BOK. In the absence of proper records, the defendant no.1 had found it impossible to identify beneficial ownership. There was no system of reconciliation or balancing of transactions with broker-clients. It sets out the fact that the Securities Ledger is one where the securities transactions of broker- clients were recorded. The total balance under each account in the ledger should tally with the balance under SGL account of the BOK maintained with RBI, but the ledger was not properly maintained and many transactions were not entered since the entries were not authenticated. The balance or entries in the ledger were therefore not verifiable and it was not possible to certify the ownership of securities, which were physically in the custody of the Liquidator. The Liquidator, however, found a photocopy of a SGL form, believed to be issued by 12/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: the BOK, carrying description of securities as 11½% GOI 2008 for Rs.58,39,00,000/- favouring the plaintiffs' fund, dated 27 th May 1991. It bears a stamp of the RBI and carrying a 'cancellation' endorsement.
17. According to the Liquidator, it would appear that the SGL form had been returned by RBI and plaintiff no.1-Canbank Mutual Fund (CMF) and was cancelled by the BOK. These are said to be in the custody of the CBI and only photocopies are available. Furthermore, the copy of the same form reveals that there is a notation, which reads as "ADN", alluding to the fact that reference was made to the original defendant no.4-late A.D. Narottam, the notified party. Using this notation, the cheque issued by the plaintiff-bank was credited to the account of A.D. Narottam (ADN/Narottam) and the amount credited is Rs.58,90,16,042=44. A copy of the Credit Voucher in the records of the BOK indicates that the money was received from the CMF and was credited to the account of Narottam. The Credit Voucher gives details of the alleged securities. On tracing of the records, it was observed that the BOK's records contained a Deal-Slip dated 27th May 1991 issued by Narottam, instructing the BOK to deliver securities to the CMF, but the said transaction did not appear in the Securities Ledger of Narottam. The Deal-Slip also contained a notation "N.P.", which could mean "Not Posted".
18. BOK has contended that the receipt of funds from CMF being credited to 13/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: the account of Narottam makes it clear that it was not marked to the BOK's account. Furthermore, there is a credit entry in the account of Narottam and apparently the SGL issued and cancelled, after it was returned by the RBI. Beyond this, it has not been possible to trace that transaction and only Narottam could give the details of the transactions as to how defendant no.2- P. Dalal entered the picture, since the funds were credited to his account but the securities mentioned in the Credit Voucher and SGL are not posted in his Securities General Ledger Account maintained with the BOK. BOK has, therefore, contended that, save and except the aforesaid information, it has no role to play. BOK has denied liability and merely by a reason or the fact that it has not specifically denied allegations, none of these are treated as admitted.
19. Defendant no.2-Dalal has filed two written statements; one dated 26 th March 2004 and the other dated 21 st December 2005. In his first written statement, Dalal states that the suit is bad, since it is not filed by the trustees or the trust. On the contrary, it is filed by the settlor of the trust through its General Manager. Dalal contends that the suit discloses no cause of action prior to its filing, but is based on an anticipated cause of action. It is subject to rejection of the plaintiffs' contentions in Suit No.31 of 1994 and therefore the suit is not competent. The plaint itself discloses no cause of action and therefore it is liable to be rejected. According to defendant no.2, this suit is not filed because the plaintiffs seek to hold him liable to provide the securities, but as an alternative to 14/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: the plaintiffs' claim in Suit No.31 of 1994. The defendant no.2 has submitted that inability of the plaintiffs to prove their case in that suit cannot be a ground for holding this defendant liable in the absence of privity of contract. That suit was filed against SCB and defendant no.2, but no relief was claimed against defendant no.2; thereby the plaintiffs have waived their right to claim from Hiten Dalal (Dalal). It was contended that this suit cannot proceed till disposal of Suit No.31 of 1994 (since dismissed). Dalal has denied the transactions, which the plaintiffs attribute to him. Defendant no.2 has admitted having acted as a broker for CMF for acquisition of 11.5% GOI 2008 for Rs.58.39 crores from BOK and as per usual market practice, BOK issued a cost memo or SGL to CMF and on receipt of the same, CMF issued a cheque for the cost of securities in favour of BOK.
20. Defendant no.2 does not admit that CMF has lodged Rs.58.39 crores SGLs for transfer and that it was returned by the RBI twice. Dalal has also denied that CMF has handed over Rs.58.39 crores SGL transfer form to him for rectification or replacement. Dalal has pleaded ignorance of the transaction dated 26 th July 1991 between CMF and BOK. While admitting that he has acted as a broker for CMF in the 27th July 1991 transaction for purchase of 11.5% GOI 2008 from Citibank, Dalal denies the transaction in the suit as being routed through him as a broker. He has put CMF to the strict proof thereof. Dalal is unaware whether the SGL issued by BOK of Rs.58.39 crores is outstanding till 1991 and denies 15/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: that the plaintiffs made any enquiries with him or that he has received any SGL of BOK for rectification or replacement. He has denied that he was to deliver to SCB a fresh SGL transfer form for the amount issued by BOK and that he would return to CMF the three SGL transfer forms for Rs.43 crores, Rs.10 crores and Rs.5.39 crores issued by CMF to SCB, so that the transaction with defendant no.1 would be squared-off against the plaintiffs' transaction with SCB and that delivery of 11.5% GOI 2008 for Rs.58.39 crores could be directly adjusted between defendant no.1 and SCB. Dalal has also highlighted the fact that CMF had paid consideration for securities to the BOK on receipt of SGL and therefore he is not liable to handover any securities to the CMF. The rest of the written statement contains denials.
21. In his additional written statement dated 21 st December 2005, Dalal, while re-counting his statements in the earlier written statement, states that the plaintiffs have amended the plaint and impleaded defendant no.4-Narottam, in view of the fact that Narottam was the actual recipient of the money. The further averment is that BOK has said to have credited the account of Narottam without authority of the plaintiffs and therefore the claim against Dalal, who had acted as a broker, cannot be sustained, since it is the liability of a "disclosed principal". Since the transaction between plaintiffs and BOK was not disputed, the suit against Dalal is liable to be dismissed under Order 7 Rule 11 of the CPC. That the utilization of the amount by BOK, after the same was received, was not 16/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: known to Dalal, who has denied that there was any conspiracy between him, Narottam or any employee of BOK. Defendant no.2-Dalal has denied having received any amount paid by plaintiffs to BOK or received any benefit out of the amount and therefore he denies the liability and seeks dismissal of the suit.
22. The Custodian, defendant no.3 has not filed a written statement. The defendant no.4-Narottam has filed his written statement dated 23 rd August 2005, contending that he was an employee of M/s. Bhupendra Champaklal Devidas. That in September-October, 1990, he was asked to leave the employment due to certain offences committed by the said firm and he has since been independent. That the plaintiffs had withdrawn Special Court Suit No.2 of 1997 against him and had not taken leave to file a fresh suit. The cause of action in the present suit, even assuming there is one, arose on 10 th October 1993, but the amendment is sought in 2004 and hence the suit is barred by limitation. The defendant no.4 has contended that the plaintiffs have sought to introduce a case against him belatedly and hence the issue of limitation raised by him should be decided in his favour. The plaint was amended twice earlier, but defendant no.4 had not been impleaded. According to defendant no.4, he gave delivery instructions to the 1st defendant to issue a Cost Memo and SGL Transfer Form of a value of Rs.58.39 crores, upon assurance of defendant no.2 that he would deliver an equivalent amount of SGL held by him from SCB. This aspect is confirmed by defendant no.2 in his affidavit (Exhibit-250 in Special Case No.5 17/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: of 1993). Narottam has denied that there is any portfolio investments made by the plaintiffs. He has denied that the cheque issued by the plaintiffs was credited to his account on 27th May 1991 and reiterates that cheque favouring defendant no.1 was credited to defendant no.1's account in the RBI and not with defendant no.4, but an identical amount of Rs.58.39 crores was transferred by internal voucher by defendant no.1 to the account of defendant no.4 in defendant no.1- BOK and the plaintiffs were fully aware that a sum of Rs.103,82,47,295=60 favouring defendant no.1 was credited to the payee's account with RBI.
23. The defendant no.4 has denied for want of knowledge that the plaintiff in the course of portfolio investment business purchased 11.5% GOI 2008 Securities from defendant no.1 for Rs.58.39 crores. The defendant is neither aware nor concerned whether SCB acting through 2 nd defendant returned the SGL of the face-value of Rs.7 crores or that the SGL Transfer Form of Rs.7 crores was substituted with two fresh SGL Transfer Forms; one for Rs.5.39 crores and the other for 1.61 crores, both dated 19 th December 1991. The defendant no.4 is also not aware of securing of any transaction between plaintiff no.1 and defendant no.2, nor the tripartite agreement between the plaintiff no.1 and defendant no.1 and SCB. Thus, save and except for the defence of limitation and lack of knowledge of the other transactions referred to in the plaint, defendant no.4 seeks dismissal of the plaint, since the plaintiffs have failed to prove their case. Defendant no.4 has contended that defendant no.2 is fully responsible for 18/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: not having delivered the SGL issued by SCB in favour of defendant no.1. According to defendant no.4, the plaintiff has no obligation to SCB in respect of the transactions made through defendant no.2. That the plaintiffs cannot have any claim against defendant no.4. The defendant no.4 relies on statement made by the 2nd defendant in Special Court Case No.5 of 1993, in which the defendant no.2 has admitted to have acted as broker for securities of the face-value of Rs.58.39 crores and that plaintiffs had no obligation to SCB. A great deal of the averments in the written statement deal with the plaintiffs omission to disclose their correct address and to some extent, the challenge to the authority of the signatories, who have signed the plaint. As far as maintainability of the suit is concerned, it is also contended that the suit does not disclose any cause of action against defendant no.4 and hence seeks rejection of the plaint under Order VII Rule 11 as also for want of compliance with Order VI Rule 15 of the CPC.
24. On the aforesaid pleadings, issues were settled. On 18 th December, 2006, two additional issues were framed at the instance of defendant no.4-Narottam. For the sake of convenience, these additional issues are numbered as issue nos.8(A) and 8(B).
(1) Whether suit against defendant no.2 is liable to be dismissed for want of cause of action, as required under Order VII Rule 11 of C.P.C., as alleged by in additional written statement of defendant no.2 ?19/75
SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: (1a) Whether the plaintiffs' suit is maintainable in view of the provisions of the Order XXXI of C.P.C. ?
(1b) Whether the plaintiffs' suit is not maintainable for want of leave under Order II Rule 2 of the C.P.C. in Suit No.31 of 1994 ?
(2) Whether plaintiff proves that the proceeds of cheque no.160319 dated 27th May 1991 for Rs.103,82,47,295=60 issued by plaintiffs was credited into account of defendant no.4, without authorization or instructions of the plaintiffs ? (3) Whether the plaintiffs prove that on 27 th May 1991, plaintiffs had purchased 11.5% GOI 2008 securities of the face-value of Rs.58.39 crores from defendant no.1 ?
(4) Whether the plaintiffs prove that they had lodged the aforesaid SGL transfer form dated 27th May 1991 on 29th May 1991 and 31st May 1991 with the RBI for clearance, but was returned for want of sufficient balance, as alleged in paragraph 4 of the plaint ?
(5) Whether the plaintiffs prove that SGL transfer forms dated 27 th May 1991 were returned / delivered through the defendant no.2, as alleged in paragraph nos.5, 7 and 9 of the plaint ? (6) Whether the plaintiffs prove that defendant no.1 is liable to deliver GOI 2008 securities of the face-value of Rs.58.39 crores to the plaintiffs, as alleged in paragraph 18 of the plaint ?
(7) Whether the plaintiffs prove that the defendant nos.1, 2 and 4 are jointly and severally liable to the plaintiffs, as alleged in paragraph 18 of the plaint ?
20/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: (8) Whether any suit claims are barred by Law of Limitation, when amended, as alleged in paragraph 32 of the written statement of defendant no.4 ?
(8A) Is the plaint signed by the person duly authorized by the plaintiffs ?
(8B) If not, what is the legal effect thereon ?
(9) What orders and reliefs ?
25. An application made for trying additional issue nos.8(A) and 8(B) as preliminary issues, was rejected since it was a mixed question of fact and law. Evidence was then recorded before a Commissioner. Meanwhile, defendant no.4-Narottam expired on 16th July 2012 and of the numerous compilations filed, it appears that during recording of evidence, several documents remained to be marked and hence on 14 th July 2017 and 28 th July 2017, several documents were marked.
26. In the course of trial, the plaintiffs chose to administer several interrogatories vide Chamber Summons Nos.7 of 2006, 8 of 2006 and 9 of 2006. Chamber Summons No.7 of 2006 was addressed to defendant no.1-BOK. Chamber Summons No.8 of 2006 was addressed to defendant no.2-Dalal and Chamber Summons No.9 of 2006 was addressed to defendant no.4-A.D. Narottam. Save for production of a document from RBI and one witness to prove 21/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: authority of the signatory to the plaint no oral evidence was led.
27. A large number of documents, some of which formed the record of other legal proceedings, have been tendered and marked after considering objections, which are described below. These interrogatories have also been included in the list of exhibits.
SR EXHIBIT
ORDER DATE DESCRIPTION
NO. NO.
Entry in Current Account ledger card
1 09/07/2009 P
(Marked in the evidence of Mr. P.S.Rangrao)
Certified Xerox copy of Entry
2 09/07/2009 P-1
(Marked in the evidence of Mr. P.S.Rangrao)
Interrogatories in Chamber Summons No.7 of 2006 and 3 20/01/2012 P-2 answers to the same by Bank of Karad (Defendant No.1) Interrogatories in Chamber Summons No.8 of 2006 and 4 20/01/2012 P-3 answers to the same by Hiten P. Dalal (Defendant No.2) Interrogatories in Chamber Summons No.9 of 2006 and 5 20/01/2012 answers to the same by Abhay Narottam (Defendant P-4 No.4) 6 20/01/2012 Certified copies of Plaint in Suit No.13 of 1994 P-5 The order of Hon'ble Supreme Court dated 30 Octoberth 7 20/01/2012 P-6 2001 8 20/01/2012 Certified Copy of Plaint in Suit No.31 of 1994 P-7 9 20/01/2012 Copy of Jankiraman Committee Report P-8 10 20/01/2012 Copy of Joint Parliamentary Committee Report P-9 Original Cost Memo dated 27th May 1991 issued by The 11 14/07/2017 Bank of Karad to Canbank Mutual Fund for 11 ½ GOI P-10 2008 Rs.58,39,00,000/-
Copy of Original Cost Memo dated 27 th May 1991 issued 12 14/07/2017 by The Bank of Karad to Canbank Mutual Fund for 11 ½ P-10 (A) GOI 2008 Rs.8,39,00,000/-
Original Cheque No. 160319 dated 27th May , 1991
drawn on Reserve Bank of India issued to The Bank of
13 14/07/2017 P-11
Karad Ltd. by Canbank Mutual Fund of
Rs.103,82,47,295.60/-
22/75
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Copy of Original Cheque No. 160319 dated 27 th May ,
1991 drawn on Reserve Bank of India issued to The Bank 14 14/07/2017 P-11(A) of Karad Ltd. by Canbank Mutual Fund of Rs.103,82,47,295.60/-
Original SGL dated 27th May 1991 issued by The Bank of 15 14/07/2017 Karad Ltd. to Canbank Mutual Fund for transfer of 11 ½ P-12 GOI 2008 for Rs.58,39,00,000/-
Copy of Original SGL dated 27 th May 1991 issued by The 16 14/07/2017 Bank of Karad Ltd. To Canbank Mutual Fund for transfer P-12 (A) of 11 ½ GOI 2008 for Rs.58,39,00,000/-
Original Delivery Order/Deal Slip No.1478 issued by Mr. Abhay Narotam to The Bank of Karad Ltd. to deliver SGL 17 14/07/2017 P-13 for 11 ½ GOI 2008 Rs.58,39,00,000/- to Canbank Mutual Fund Copy of Original Delivery Order/Deal Slip No.1478 issued by Mr. Abhay Narotam to The Bank of Karad Ltd.
18 14/07/2017 P-13 (A) to deliver SGL for 11 ½ GOI 2008 Rs.58,39,00,000/- to Canbank Mutual Fund Original Credit Voucher No.82/36 dated 27 th May 1991 19 14/07/2017 P-14 issued by Abhay Narotam crediting Rs.58,90,16,042.44 Copy of Original Credit Voucher No.82/36 dated 27 th 20 14/07/2017 May 1991 issued by Abhay Narotam crediting P-14 (A) Rs.58,90,16,042.44 Original two page letter dated 22 nd May 1992 bearing 21 14/07/2017 ref. No.CMF/0534/92/CSG addressed by Canbank P-15 Mutual Fund to The Bank of Karad Ltd.
Copy of Original two page letter dated 22 nd May 1992 22 14/07/2017 bearing ref. No.CMF/0534/92/CSG addressed by P-15 (A) Canbank Mutual Fund to The Bank of Karad Ltd.
Original debit entry of Rs. 103,82,47,295.60 in RBI 23 14/07/2017 P-16 Scroll maintained by the first defendant Copy of Original debit entry of Rs. 103,82,47,295.60 in 24 14/07/2017 a certified Copy of RBI Scroll maintained by the first P-16 (A) defendant Original Affidavit of Mr. Hiten Dalal dated 23 rd May 25 28/07/2017 P-17 1992 Certified Copy of Original Affidavit of Mr. Hiten Dalal 26 28/07/2017 P-17A dated 23rd May 1992 Affidavit in lieu of examination-in-chief on behalf of 27 04/08/2017 P-18 plaintiff- Mr. K. Raveendra 28 04/08/2017 Original Principal Trust Deed P-19 23/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: (Marked in the evidence of Mr. K. Raveendra) Photocopy of Original Trust Deed 29 04/08/2017 P-19A (Marked in the evidence of Mr. K. Raveendra) Copy of Power of Attorney dated 12th January 1972 30 04/08/2017 P-20 (Marked in the evidence of Mr. K. Raveendra) Copy of Power of Attorney dated 27th June 1989 31 04/08/2017 P-21 (Marked in the evidence of Mr. K. Raveendra) Original Power of Attorney dated 30th December 2002 32 04/08/2017 P-22 (Marked in the evidence of Mr. K. Raveendra) Copy of Original Power of Attorney dated 30th December 33 04/08/2017 P-22A 2002 (Marked in the evidence of Mr. K. Raveendra)
28. While marking the said affidavit in evidence, I had made following observations:-
"1. On 14th July 2017, Exhibit P-10 to Exhibit P-16 were marked. Serial no.11, Volume 1, of the compilation is an affidavit of Mr. Hiten Dalal dated 23rd May 1992. Mr. Kale, learned counsel, had objected to the affidavit being marked on 14th July 2017 on the ground that the document had not been proved. The matter came to be adjourned for marking of remaining documents.
2. Today, learned counsel for the plaintiff points out that in judgment of the special Court in Special Case No.5 of 1993 dated 31 st January 2003, a specific reference is made to this very affidavit dated 23 rd May 1992. A reference is made in paragraph 21 of the said judgment to an affidavit executed by Mr. Hiten Dalal on 23rd May 1992. The judgment records that the affidavit constitutes an explanationin respect of its contents, which was sworn before a Notary Public and one Mr. Subba Rao (PW-11 in that case). The affidavit came to be marked as Exhibit-250. Further reference is found to the same affidavit elsewhere in the judgment at paragraph 96. A specific reference is made to P.J. Subba Rao (PW-11) and Advocate Mr. N.J. Jagtap (PW-10).
3. The evidence given by the said witnesses is regarding very same affidavit sworn by accused no.2 therein Mr. Hiten P. Dalal on 23 rd May 1992.24/75
SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: Paragraph 96 records that the said notary has stated that on 23 rd May 1992 i.e. P.J. Subbarao (PW-10) of Canbank had brought the deponent Mr. Dalal to his office and an affidavit was signed by Mr. Dalal in the presence of the said notary. It is further recorded in the said judgment that Mr. Dalal has not disputed his signature on the affidavit, which was marked Exhibit-250 and his signature in the notarial register.
4. Faced with this position, Mr. Kale submits that reference to an affidavit in the judgment does not appear to be same affidavit, which is forming subject matter of this suit, since it bears reference to one Mr. Subba Rao, who is an employee of Canbank Financial Services and not the plaintiff. The contention of Mr. Kale is that there are two affidavits; one in relation to the suit and the other relating to Canbank Financial Services. According to him, at best, the signature of Mr. Dalal on this affidavit can be marked.
5. In my view, reference to the affidavit is specific in the said judgment.
Moreover, the execution of very same affidavit was called into question and evidence was led by PW-10 and PW-11 in that behalf. The original affidavit, which was marked as Exhibit-250 on 5 th December, 2000, is produced before me by the registry and it clearly shows that Mr. Dalal's signature was identified by Mr. P.J. Subba Rao and was executed before the same notary (PW-10) referred in paragraph 96 of the said judgment. In the circumstances, the affidavit dated 23 rd May 1992 is marked as Exhibit P-17 and the certified copy of the affidavit appearing in the compilation is marked as Exhibit P-17(A). The original affidavit is returned as a part of record of Suit No.5 of 1993. The registry shall retain entire record of Special Case No.5 of 1993 till further orders.
6. As far as Volume-5 is concerned, the applicant seeks time to examine plaintiffs' witness to prove this document.
7. S.O. to 4th August 2017."
29. Objections apropos marking were thus dealt with.
Submissions 25/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 :::
30. Mr. Deshmukh, learned counsel appearing on behalf of the plaintiffs, recapitulated the facts and submitted that on 27 th May 1991, CMF bought 11.5% GOI 2008 securities of the face-value of Rs.58.39 crores and interest of Rs.5,61,622.44 from defendant no.1-BOK by way of Subsidiary General Ledger Transfer Form (SGL). Defendant no.2-Dalal was the broker for the transaction. CMF paid a sum of Rs.58,90,16,042=44, inclusive of interest, vide a cheque of the same date i.e. 27th May 1991. A cheque dated 27 th March 1991 for Rs.103,82,47,295=60 was issued, which included the sum of Rs.58,90,16,042.44 and value of another purchase transaction with BOK. Two days later, on 29th May 1991, the CMF lodged the SGL with RBI Public Debt Officer, but it was returned due to insufficient balance on 30 th May 1991. On 31st May 1991, the SGL was once again lodged by the CMF to the RBI only to be returned by RBI. In July, 1991, CMF said to have handed over the SGL to Dalal for ratification and obtaining replacement from BOK. Thereafter, between August, 1991 to December, 1991, CMF entered into three sale transactions with SCB. On 23rd August 1991, CMF sold 11.5% GOI 2008 of the face-value of Rs.10 crores; on 26th August 1991, CMF sold 11.5% GOI 2008 of the face-value of Rs.7 crores and; on 4th September 1991, CMF sold 11.5% GOI 2008 of the face-value of Rs.43 crores. Dalal had acted as broker in those transactions. CMF delivered its SGLs to SCB, also through Dalal. On 19 th December 1991, SCB is believed to have returned to CMF the SGL of the face-value of Rs.7 crores, 26/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: against which CMF issued two fresh SGLs of the face-value of Rs.5.39 crores and Rs.1.61 crores of the same date once again through defendant no.2. SCB presented the SGL of the face-value of Rs.1.61 crores to RBI, which was apparently cleared.
31. The earlier three SGLs, Mr. Deshmukh submitted, of an aggregate value of Rs.58.39 crores remained with the SCB. Defendant no.2-Dalal is believed to have stated that he would deliver SGLs of BOK directly to SCB and return the first set of SGLs of CMF, thereby squaring off the transaction. It was contended by Mr. Deshmukh that SCB did not make any claim under the SGLs even though interest on the securities was due on 23rd November 1991. On 19th May 1992, SCB is believed to have addressed a letter to CMF alleging that CMF's three SGLs of Rs.58.39 crores were outstanding, having been presented repeatedly and dishonoured lastly on 15th May 1992. The SGL for Rs.5.39 crores was not presented till 15th May 1992. On 22nd May, 1992, an officer of BOK is said to have informed CMF that SGL form issued by BOK to CMF had been returned cancelled since the transaction between CMF and BOK was squared-off by Dalal against the transaction between SCB and CMF. On the next date, i.e. 23 rd May, 1992, Dalal by an affidavit stated that the transactions were settled and SCB's demand in relation to three SGLs was not "in order, as they are against their own earlier SGLs issued in favour of BOK" . On 30th July, 1992, CMF filed Suit No.31 of 1994 against SCB. Three months later, on 21 st October 1992, the 27/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: present suit has been filed. On 27 th November, 1992, SCB filed Suit No.13 of 1994 against plaintiffs/CMF seeking a direction to the plaintiffs/CMF to jointly and/or severally pay to SCB a sum of Rs.72,35,31,081=95. The suit came to be decreed on 13th March 1995. Thereupon, a statutory appeal came to be filed, which the Supreme Court dismissed on 30th October 2001, thereby upholding the decree passed in favour of SCB. As a consequence, on 21 st April 2004, Suit No.31 of 1994 filed by CMF against SCB came to be rejected.
32. Canvassing the plaintiffs' case, Mr. Deshmukh submitted, apropos issue no.2, the fact that the proceeds of cheque no.60319 dated 27 th May 1991 for Rs.103,82,47,295=60 issued by the plaintiffs was undoubtedly credited to the account of original defendant no.4-Narottam, without any authorization by the plaintiffs. This he submitted was established by referring Exhibits P-1, P-2, P-4 and P-14. Exhibit P-1 is the Current Account Ledger of BOK maintained with RBI. A certificate of the same has been referred to and relied upon for the purposes of this trial. Exhibit P-2 was the answer of BOK to certain interrogatories in Chamber Summons No.7 of 2006; particular reference is made to answers to question nos.3, 17, 18, 19 and 26. The answer to the interrogatories he submitted would clinch issue in favour of the plaintiffs.
33. Issue nos.(1a) and (1b) pertaining to maintainability of the suit were also dealt with by Mr. Deshmukh. Mr.Deshmukh submitted that it had been 28/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: established by the evidence of one Mr.K. Ravindran (PW-2), whose affidavit has been marked as Exhibit P-18. Apart from the said affidavit, Mr.Deshmukh has also relied upon Exhibit P-19 being the Trust Deed dated 31st June, 1990 of the CMF, under which CMF-trust was constituted. Reliance was also placed on the Power of Attorney dated 12th January 1972 and Supplemental Power of Attorney dated 27th June 1989 in favour of Mr. M.P. Nayak, who has verified the plaint. Both these Powers of Attorney are marked as Exhibit P-20. In addition, Mr.Deshmukh submitted that Exhibit P-22, being the Power of Attorney dated 30th December 2002, also executed by Mr. M.S. Nayak in favour of Mr. V. Ramesh Nayak, who has verified the amendment to the plaint dated 16 th July 2003, and in favour of Mr. S.R. Ramraj, who has verified amendment to the plaint dated 1st July 2005. He submitted that, by virtue of these powers of attorney, there could be no doubt that the plaint was filed by a person duly authorized.
34. Apropos issue no.(1b), Mr. Deshmukh submitted that the suit was indeed maintainable even without obtaining leave under Order II Rule 2 of the C.P.C. since Suit No.31 of 1994 was filed against SCB and the present defendant no.2- Dalal, the relief prayed was that the SCB should be directed to deliver three SGL transfer forms, which it had illegally obtained from Dalal and that no relief had been sought against Dalal in that suit. Whereas, the present suit sought reliefs against BOK and Dalal, in the event of the claim in Suit No.31 of 1994 29/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: failing. Mr. Deshmukh further submitted that the causes of action in Suit No.31 of 1994 and in the present suit were different and hence there was no question of the suit being not maintainable for want of leave.
35. Mr.Deshmukh submitted that Issue no.2 would also be proved proved by the answers to interrogatories. Reference was also made to Exhibit P-4, being the answer of defendant no.4- Narottam to the interrogatories in Chamber Summons No.9 of 2006; particular reference is made to answer to question no.7. Lastly, it was submitted that a Credit Voucher of 27 th May, 1991 (Exhibit P-14) had been issued by Narottam, which would conclusively establish that a sum of Rs.58.39 crores had been cleared in the account of Narottam.
36. Issue no.3 required the plaintiffs to prove purchase of the 11.5% GOI 2008 securities from BOK. Mr. Deshmukh submitted that purchase of securities from BOK was evident from the fact that Cost Memo dated 27 th May 1991 was being issued by BOK to CMF. A cheque of Rs.103=82 crores was also issued by CMF in favour of BOK. Mr. Deshmukh also relied upon answers of BOK to the interrogatory no.1 in Chamber Summons No.7 of 2006; the answer of Dalal to interrogatory no.6 in Chamber Summons No.8 of 2006; the answer of Narottam to interrogatory nos.5 and 7 in Chamber Summons No.9 of 2006 and; lastly, to the fact that the SGL dated 27 th May, 1991 issued by BOK to CMF for Rs.58.39 crores. Mr. Deshmukh, therefore, submitted that there would be no doubt that 30/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: the securities were purchased by the plaintiffs.
37. Issue no.4 required the plaintiffs to prove the SGL transfer forms of 27 th May, 1991, 29th May, 1991 and 31st May, 1991 with the RBI were returned. According to Mr. Deshmukh, this issue is also proved from answer of BOK to interrogatory no.34 (Exhibit P-2) and Exhibit P-12 being the SGL dated 27 th May 1991 issued by BOK to CMF.
38. Issue no.5 required the plaintiffs to prove return of SGL transfer forms, which is said to have been established by virtue of Exhibit P-17, which is an affidavit filed by Dalal, in which he has stated that he had acted as a broker for sale of 11.5% GOI Loan 2009 Securities of the face-value of Rs.44,58,05,000/- by BOK and has acted for CMF on several occasions, including a purchase by CMF of 11.5% GOI Loan 2008 Securities of the face-value of Rs.58.39 crores from BOK. He had also acted as a broker in respect of CMF's transactions with SCB in respect of the same securities by delivering transfer forms worth Rs.60 crores from Citibank NA.
39. That takes me to issue no.7, which requires the plaintiffs to prove joint and several liability of defendant nos.1, 2 and 4. According to the plaintiffs, this stands established and the issue is required to be answered in the affirmative, 31/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: since consideration paid by the plaintiffs was received by defendant no.1-BOK, per Exhibit P-2. The consideration was credited to the account of defendant no.4-Narottam, per answer to question 5 in Exhibit P-4. The BOK had issued a SGL transfer form on instructions of Narottam, as seen from answer to question no.1 in Exhibit P-2. Consideration paid by the plaintiffs was received by BOK, as evident from answer to question no.3 in Exhibit P-2. Secondly, the consideration was credited to the account of Narottam, as evident from answer to interrogatory no.5 in Exhibit P-4; thirdly, BOK had issued the SGL transfer form on instructions of Narottam, as evident from answer to interrogatory no.1 in Exhibit P-2 and; fourthly, Narottam acting on instructions of Dalal and instructed BOK to issue SGL transfer form, since he was assured by Dalal that he would deliver an equivalent amount of SGL held by him from SCB. This fact was proved by the answer to interrogatory no.5 in Exhibit P-4. Fifthly, Dalal is said to have admitted that he was a broker for transactions of purchase of securities by CMF from BOK on 27th May 1991. The fact that the transaction of purchase was entered into by BOK with CMF is established by SGLs issued by SCB in favour of BOK. That Dalal had received SGL transfer form, originally issued by BOK to the plaintiffs and which were returned by RBI for want of sufficient balance, and the demand made by SCB from CMF was not in order. According to Mr.Deshmukh, the role of each of the defendants was clear. The defendants have acted collusively and were therefore jointly and severally liable 32/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: to pay to the plaintiffs.
40. As far as issue no.8 is concerned, Mr. Deshmukh submitted that the suit was not barred. The transaction of purchase of securities by CMF from BOK was dated 27th May 1991. The suit was filed on 21 st October 1992. BOK filed written statement on 13th October 2003, disclosing consideration paid by CMF to BOK, which was credited to the account of Narottam, as seen from paragraph 4 of the written statement of BOK. The plaintiffs, it is submitted, took inspection of the documents of BOK on 13th November 2003 and then realized that monies had been credited to the account of Narottam by BOK. Thereafter, the plaintiffs filed Chamber Summons No.3 of 2004 on 16 th February 2004, whereby it joined the Narottam as a party to the suit and this chamber summons came to be allowed on 21st June 2005. Mr. Deshmukh further submitted that Narottam had alleged that the cause of action arose on 10 th October 1993, when CBI filed a charge-sheet in Special Case No.5 of 1993. In Suit No.2 of 1997, filed by the plaintiffs, the plaintiffs had stated that the cheque of Rs.103 crores was credited to the account of Narottam. The plaintiffs did not have any definite knowledge and that Suit No.2 of 1997 was verified on the basis of the information received. Definite knowledge was derived by it only upon inspection given by BOK, after it had filed its written statement.
41. Mr. Deshmukh has relied upon the affidavit-in-support of the Chamber 33/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: Summons No.3 of 2004, along with the affidavits-in-reply of defendant nos.1, 2 and 4 dated 10th March 2004, 29th June 2004 and 10 th August 2004, respectively, and the affidavits-in-rejoinder dated 24 th January 2005 and 5 th October 2004 to the replies filed by defendant nos.1 and 2. In addition, Mr.Deshmukh has relied upon the order passed by this court on 21 st June 2005 in Chamber Summons No.3 of 2004 and some other orders passed by this court in the said chamber summons. I may mention here that while allowing Chamber Summons No.3 of 2004, the point of limitation was kept open. Mr.Deshmukh thus concluded his submissions, relying upon the evidence of PW-2, Raveendra to establish authorisation to file the suit. He submitted that the plaintiffs had proved beyond doubt that the suit is competent and is liable to be decreed, as prayed.
42. On behalf of defendant no.1-BOK, Mr. Bhandary had sought leave of the court to file written arguments. Written arguments were accordingly filed on 24th November, 2017. A compilation-of-documents has also been filed along with the written arguments, to which I will shortly advert to. BOK has contended that prior to liquidation, all its records have been seized by the C.B.I. The books were maintained in a haphazard condition. The BOK had not followed any system of reconciliation of transactions of broker-clients or the outstanding balances they had in the Securities General Ledger Accounts (SGLA) with RBI. BOK maintained two SGLAs with RBI; one of its own and other of its 34/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: broker-clients. The clients' SGL is where the securities transactions of brokers are recorded. The balance of the SGLs recording broker-clients transactions are tallying with that of the clients' SGLA maintained with the RBI. Since the broker- clients SGLs were not maintained, authentication of the entries had not taken place. Essentially, for the reasons set out in the written statement, BOK contends that they are not liable. The written arguments are a repetition of the contents of the written statement.
43. It is admitted that the plaintiffs issued a RBI cheque for Rs.103,82,47,295=60 in favour of BOK, which was credited to the Overdraft Account of defendant no.4-A.D. Narottam. That included a sum of Rs.58.90 crores towards purchase of 11.5% GOI 2008 (the suit securities). Reliance is placed on the credit voucher and the pay-in-slip and statement of overdraft account of Narottam. BOK then issued a Cost Memo for sale of the suit securities and also SGL transfer form to the plaintiffs in respect of the suit securities. It is submitted by BOK that the Cost Memo records an endorsement that "the amount is credited to A.D. Narottam Account No.201 maintained with BOK" . It is proved that the plaintiffs were aware that the transaction was on account of Narottam and not BOK. The explanation for the cheque not being issued in favour of Narottam directly is that the RBI cheques could be issued by the plaintiffs in favour of banks only and not in personal names. The cheque, issued ostensibly to the BOK, was meant for the transaction that the plaintiffs had with 35/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: Narottam. There is no agreement between plaintiffs and BOK, nor any instructions for issuing RBI cheque save and except for the Cost Memo. It is further submitted that the cheque in question was seen to be signed by one M.P. Nayak. The Power of Attorney dated 27 th June 1989 submitted by the plaintiffs, (under Volume-V, pages 9 to 12), had authorized only Mr. M.P. Nayak to sign as authorized signatory; whereas, the RBI cheque in question is signed by two signatories; meaning thereby that one of them was not authorized to sign the RBI cheque. The SGL transfer form was signed by an unauthorized person, since only M.P. Nayak is said to be authorized.
44. The next point canvassed in the submissions is that the plaintiffs knew that the transaction was all along for the benefit of Narottam, since the Cost Memo dated 27th May 1991 (Exhibit P-14[A]) shows that the amount is credited to "M/s. A.D. Narottam, Account No.201". The plaintiffs have amended the plaint to contend that plaintiffs had never authorized BOK to credit the amount to the account of Narottam. It is then submitted that the return of SGL transfer forms by RBI was not communicated to BOK for about one year. There is no reason whatsoever for not informing BOK immediately about the return of the SGL transfer forms. Instead, the plaintiffs, in paragraph 5, pleads that they took up the matter of return of SGL transfer forms with their broker-Dalal and handover the said SGL transfer form to him for rectification and replacement. This, according to Mr. Bhandary, is a clear indication that it was to the 36/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: knowledge of the plaintiffs that the transaction was not of BOK, but of Narottam. BOK has denied that the amount was credited, without instructions from the plaintiffs, to Narottam's account. The purpose of issuance of a RBI cheque was well known to the plaintiffs and BOK denies any conspiracy between defendant nos.1, 2 and 4, as alleged in the plaint. The fact that the return of the SGL transfer form was not intimated to BOK for such a long period of time, is pressed into service to show that the plaintiffs were well aware of the true nature of the transaction between the plaintiffs and Narottam.
45. Coming to the documents filed along with the written arguments, they are four in number; item nos.1 and 2 being Exhibits P-10(A) and P-13(A) are the photocopies of Credit Vouchers for Rs.58.90 crores and Deal-Slip issued by Narottam to BOK. The two other documents are the photocopies of Statement of Overdraft Account No.201 of defendant no.4- Narottam maintained with BOK, which are not part of the record and not proved and hence cannot be read in evidence. Likewise, photocopy of the Security General Ledger of A.D. Narottam pertaining to 11.5% Central 2008 Security is also not proved and hence cannot be read in evidence. In view of the aforesaid, Mr. Bhandary submitted that the suit as against defendant no.1-BOK be dismissed.
46. In the course of recording of evidence, numerous documents have been marked. A list of those exhibits is reproduced for ease of reference. Exhibit P-1 37/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: was marked on 29th July 2009, and is a credit voucher of 27 th May 1991, in a sum of Rs.103,82,47,295=60. This denotes the amount paid over in the Current Account Ledger, which was maintained with the BOK and was produced by the RBI through a witness summons to produce this extract. It will now be appropriate to deal with the interrogatories administered in the course of hearing in Chamber Summons No.7 of 2006. The interrogatories administered on behalf of the plaintiffs have allowed the BOK answering some of them.
47. In answer to question no.3, BOK has confirmed that a sum of Rs.103,82,47,295/- was found to be credited in the Overdraft Account No.201 of defendant no.4-A.D. Narottam. Through a further interrogatory, plaintiffs sought confirmation that the aforesaid sum included consideration for purchase of 11.5% GOI 2008 Security being a sum of Rs.58,90,16,042=44. This was answered by the BOK in the affirmative. Reference was made by the BOK to the Credit Voucher and Deal-Slip of defendant no.4-Narottam.
48. It records further interrogatories administered; particularly question nos.17, 18 and 19 confirms the deposit made by the BOK in the account of Narottam. Answers to interrogatories 17, 18 and 19 reveal that the BOK credited the amount to the account of defendant no.4-A.D. Narottam, as per his instructions, as contained in the Deal-Slip issued by defendant no.4. 38/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 :::
49. Interrogatory no.26 specifically called upon the BOK to identify other records, which show that the amount was credited in the account of defendant no.4-A.D. Narottam. To this, BOK has confirmed that the particulars of the Deal-Slip, Credit Voucher and bank account as also the other details are available in BOK's record. BOK has also confirmed that as per records available with it, the SGL transfer form appears to have been issued by BOK, as instructed by defendant no.4-A.D. Narottam and the said SGL transfer form was signed by one Mr. C.S. Raje, the then employee of BOK, who was prosecuted by the CBI. Instructions for issuing SGL transfer forms are believed to have been issued by A.D. Narottam, reference being had to Exhibit P-13(A).
50. BOK has also confirmed that as per available records, the SGL was issued on SGL Account No.107 maintained for clients' transactions on behalf of defendant no.4-A.D. Narottam, but, apparently, in the Security Ledger maintained for A.D. Narottam, this entry did not appear.
51. Interrogatory no.34 required BOK to confirm the balance, if any, in the SGL accounts with RBI of 11.5% GOI 2008 security of equivalence.
52. The plaintiffs contended that they had bought 11.5% GOI 2008 Securities of the face-value of Rs.58.39 crores from BOK and BOK issued a SGL transfer 39/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: form instead of actual security. The plaintiffs lodged the SGL with RBI, which returned it due to insufficient balance. It was re-lodged on 31 st May 1991. In July, 1991, the plaintiffs handed over the SGL to defendant no.2- Dalal for rectification and replacement. That between August, 1991 and December 1991, the plaintiffs sold the securities of Rs.10 crores, Rs.7 crores and Rs.43 crores, as set out above. Defendant no.2- Dalal had acted as a broker. The SCB returned to the plaintiffs SGL of the face value of Rs.7 crores. Thereupon, the plaintiffs provided two fresh SGL transfer forms of a collective value of Rs.7 crores, both were dated 19th December 1991. SCB had then presented the SGL transfer form bearing face-value of Rs.1.61 crores to RBI, which cleared the transfer of securities of the face-value of Rs.1.61 crores from plaintiffs' SGL account to SCB's SGL account. The three remaining SGLs aggregating face-value of Rs.58.39 crores remained outstanding with SCB. Defendant no.2-Dalal, on being queried, informed the plaintiffs that he would deliver the SGLs of BOK to SCB and return the plaintiffs' SGL, thereby squaring-off the plaintiffs' transactions with SCB. SCB then demanded from the plaintiffs the proceeds of three SGLs as of 19th May 1992. On 22 nd May 1992, BOK through one of its officers informed the plaintiffs that the SGL transfer forms issued by BOK had been returned as cancelled, since the transaction between the plaintiffs and BOK was squared-off.
53. On the next day, defendant no.2- Dalal filed an affidavit explaining that 40/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: the transactions were settled and SCB's demand relating to three SGLs was not correct. It is then that the plaintiffs filed Suit No.31 of 1994 against SCB on 30 th July 1992. The present suit then came to be filed by the plaintiffs on 20 th October 1992. On 27th November 1992, SCB filed Suit No.13 of 1994 against the plaintiffs, which was decreed on 13th March, 1995. The said decree was upheld by the Supreme Court on 30 th October 2001. In the meanwhile, Suit No.31 of 1994 filed by the plaintiffs came to be dismissed on 21 st April, 2004.
54. The pleadings in Chamber Summons No.3 of 2004 were relevant to this case. The plaintiffs relied upon the affidavit of Mr. S.R. Ramaraj of the plaintiffs in support of the contention that amendments, which were found necessary, were carried out pursuant to the said chamber summons. In one of the affidavits filed in the proceedings, namely, that of Mr. Laxman M. Devare, Liquidator of BOK, disclosed that the plaintiffs had filed another Special Court Suit No.2 of 1997. In paragraph 6 of the plaint, it was averred that investigation was made by the CBI pursuant to criminal complaint filed by the plaintiffs and the subsequent charge-sheet came to be filed in the suit on 10 th October 1993, revealed that payment of Rs.103,82,47,295=60 was made by the CMF to the RBI vide a Cheque No.160319, which was credited by BOK, not to its own account, but to the account of defendant no.2- Dalal. The plaintiffs therein, namely, the Canara Bank, had learnt that the Janakiraman's Committee appointed by the RBI in its report had observed that A.D. Narottam's account in BOK in reality was an 41/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: account belonging to Dalal and funds in the said account were used by Dalal. That the beneficial owner of the funds in that account was Dalal. A.D. Narottam was only a nominee of Dalal.
55. Further reference was made to the fact that in the order dated 21 st June 2005 in the said Chamber Summons No.3 of 2004, the question of limitation was kept open. In fact, it is Mr. Kale on behalf of the 2 nd defendant- Dalal, who submitted that the order records that learned counsel for the plaintiffs had then submitted that at the time of filing Suit No.2 of 1997, there was only information, but no knowledge with regard to the amount of the transaction having been credited to the account of the proposed defendant in BOK, namely, A.D. Narottam. The court recorded a submission on behalf of the plaintiffs that it is necessary to allow the amendment, since the proposed defendant-A.D. Narottam was the recipient of the amount of the suit transaction. Mr. Kale submitted that Mr. A.D. Narottam's Advocate had opposed the chamber summons on the ground that the claim would be barred by limitation and while that in Suit No.2 of 1997, an averment had been made that the cheque for Rs.103,82,47,295/- included the amount of the subject matter of Suit No.2 of 1997 and the present suit. The court observed that merely because a point of limitation has been raised, the court was not precluded from allowing the amendment, if the amendment was in the interests of justice and to avoid multiplicity of proceedings. In this manner, the issue of limitation was kept open 42/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: by the aforesaid order. Mr. Kale, therefore, had placed reliance on this aspect and in support of his contention that the suit is squarely barred by limitation.
56. Mr. Kale submitted that defendant no.2 was the broker of the plaintiffs and the plaintiffs had never contended otherwise and have not alleged Dalal to have acted in any other capacity. He submitted that the suit is not maintainable in view of the fact that Dalal had acted as an agent of a disclosed principal. Furthermore, prayer clause (a) of the plaint reveals that the transaction is of 27 th May 1991. The suit is not maintainable since Suit No.2796 of 1992 (Suit No.31 of 1994) filed by the plaintiffs had been withdrawn against Dalal. It was further submitted that the suit was based on a contingency. He submitted that this suit cannot survive in view of the Judgment passed in Suit No.31 of 1994. In that view of the matter, it is submitted that this suit is also liable to be dismissed. He further submitted that the plaint proceeds on a plea of breach of contract and a claim of breach of contract was only against BOK. Dalal was joined as a broker and the only allegation against him was that he had handed over the SGL, that had not been honoured, and he failed to replace it. The suit is, therefore, bad for misjoinder of Dalal as party-defendant. It is submitted that Dalal is not liable and it is not the plaintiffs' case that BOK failed to pay Dalal. Mr. Kale further submitted that there is no evidence that the dishonoured SGL was ever given to Dalal. There is also no allegation that proceeds were received by or paid to Dalal. He invited my attention to the chamber summons for impleading A.D. 43/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: Narottam, who had pleaded that in order to implead him, Chamber Summons No.3 of 2004 was taken out.
57. In that light of the matter, Mr. Kale submitted that, it is evident that Dalal had not made any gains. He had not received any part of the proceeds of the cheques in question and was not a party to any contract. Reference was made to paragraphs 6 and 10 of the plaint and the fact that the transactions referred to therein were between SCB and CMF. The transactions referred to in paragraph 6 were entered into through the same broker viz. Dalal and that the SGL transfer form issued in favour of SCB was routed through Dalal. Mr. Kale, therefore, submitted that no liability can be fixed on Dalal. Specific reference is made to the averments in paragraph 10 of the plaint. Mr. Kale submitted that reference is made to certain representations and advice of defendant no.2-Dalal that there were sale transactions outstanding for the same securities and of the same amount between CMF and SCB and that the transactions were squared-off as between CMF and SCB. Dalal informed CMF that there were sale transactions outstanding for the same security and of the same amount between CMF and SCB and that he would deliver to SCB fresh SGL transfer forms for that amount and would return the CMF three SGL transfer forms of Rs.43 crores, Rs.10 crores and Rs.5.39 crores, so that the transaction would be squared-off. Mr. Kale submitted that there is no document or evidence of such a representation. Perusal of the written statement of Dalal also reveals that he has denied having 44/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:08 ::: made any representation, as set out in paragraph 10 of the plaint. In the absence of documentation, as aforesaid, Mr.Kale submitted that there is no evidence of his client having made any such representation. Reading the written statement of Dalal as a whole, no liability can be foisted upon Dalal. Nothing contained therein can be construed as an admission. A mere tripartite arrangement will not result in decree against defendant no.2-Dalal and the suit would succeed only if there is a contract between Dalal and CMF and not on the basis of a tripartite agreement. The tripartite agreement not having been proved, defendant no.2-Dalal could not be faulted and, admittedly, being a broker of the plaintiffs, no decree can be sought against him.
58. As regards the interrogatories, Mr. Kale invited my attention to the order dated 20th January 2012 passed in the present suit and submitted that Dalal had informed the court that he has no objection for the interrogatories being taken on record, subject to his right to rely on complete answers to the interrogatories. Similarly, the other defendants had also taken a similar stand. Bank of Karad, Hiten Dalal and A.D. Narottam had answered the interrogatories in that case and it is on this basis that the interrogatories in Chamber Summons Nos.7 of 2006, 8 of 2006 and 9 of 2006 came to be marked as Exhibits P-2, P-3 and P-4, respectively.
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59. In this manner, Mr. Kale submitted that the suit as against defendant no.2-Hitel Dalal is liable to be dismissed.
60. Mr. Daruwalla on behalf of the Custodian submits that he has no submissions to make except that no decree could be passed against the Custodian, although the prayer contemplates joint and several liability.
61. Mr. Kamath on behalf of defendant no.4(2) submitted to the order of this court. He relied upon the contents in the written statement and answers to the interrogatories. He denied liability of original defendant no.4 and present defendant no.4(2) and submitted that the suit is liable to be dismissed as against defendant no.4(2).
62. Mr. Deshmukh in rejoinder invited my attention to the order dated 28 th July 2017 in the above suit, which reiterated that in view of the contents of paragraph 2 of the affidavit dated 23 rd May 1992 of Hiten Dalal, which is marked as Exhibit P-17, there is no evidence of any duress.
63. This brings us to the consideration of the issues, as under :-
Issue No. (1) : Whether suit against defendant no.2 is liable to be dismissed for want of cause of action, as required under Order VII Rule 11 of 46/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: C.P.C., as alleged by in additional written statement of defendant no.2 ?
64. Issue no.1 has arisen by virtue of the additional written statement dated 21st December 2005 filed on behalf of defendant no.2- Dalal. In the said written statement, a specific ground was taken up by Mr. Dalal that the plaintiffs, by amending the plaint, had impleaded defendant no.4-A.D. Narottam, who was the ultimate beneficiary of the monies, which the plaintiffs had paid as consideration for the transaction with defendant no.1-BOK. It was further contended that the credit of the amount to the account of Narottam by BOK was without the authority of the plaintiffs. Mr. Kale, therefore, contended that Dalal was impleaded on the basis that he was a broker to the transaction between plaintiffs and BOK and, therefore, the claim against Dalal would not survive. That the broker cannot be held responsible or liable for the disclosed principal. The transaction between the plaintiffs and BOK was not disputed. The suit as against Dalal was said to be without any cause of action and, therefore, liable to be dismissed. Furthermore, utilization of the amount by BOK, after receiving the amount, was an internal matter of BOK and Dalal had no means to know the fate of those funds. The aspect of conspiracy has been denied. On this aspect, we will, therefore, proceed to examine whether the 2 nd defendant's claim is sustainable. The cause of action, in my view, will have to be ascertained from the averments in the plaints and the evidence. On examining the plaint, I find 47/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: that the case against defendant no.2-Dalal is essentially depending upon whether or not the plaintiffs establish that there was a conspiracy and, therefore, defendant no.2 is jointly and severally liable.
65. In paragraph 6 of the plaint, after mentioning the sale of securities to SCB, the plaintiffs have averred that the three transactions were entered into with SCB through Dalal. The SGL transfer form was also issued in favour of SCB and routed through Dalal as broker. The return of the SGL by SCB is also said to be through Dalal. In paragraph no.9 of the plaint, the plaintiffs claim that Dalal, upon enquiries made with him, informed plaintiff no.1-CMF that since there were sale transactions outstanding for the same security and of the same amount between CMF and SCB for the sums collectively amounting to Rs.58.39 crores, Dalal would directly deliver fresh SGL transfer forms to SCB and would return the three SGL transfer forms to CMF. The CMF claims that it is on the basis of these representations and advice of Dalal that the transactions between CMF - BOK and CMF - SCB were squared-off by Dalal in or around January, 1992. Dalal has admitted that he has acted as a broker in some dealings and transactions with the other banks including SCB. That on account of pressure brought upon him, SCB had taken away various securities. Dalal apparently informed CMF that the demand made by SCB on CMF in respect of SGL was not in order. CMF had no obligations to SCB. Reliance is placed by the plaintiffs on the two affidavits of Dalal dated 23 rd May 1992, whereby Dalal had provided 48/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: the aforesaid explanation. Furthermore, in paragraph 15 of the plaint, the averment is to the effect that Mr. C.S. Raje, an officer of BOK, had informed the Chief Executive and General Manager (Administration) of the CMF that Dalal had returned the SGL transfer forms to CMF as cancelled, since the transaction between CMF and BOK has been squared-off by Dalal against the transaction for the same securities of the like amount between SCB and CMF. This submission is said to have been attributed to Dalal being a common broker for all the three parties.
66. In Suit No.2796 of 1992, since converted to Suit No.31 of 1994, the plaintiffs had sought reliefs against SCB along with the 2 nd defendant herein - Dalal. That suit has been since dismissed. The suit filed by the SCB, being Suit No.13 of 1994, has been decreed. The claim of the plaintiffs is that BOK and SCB's liability is sought to be fixed on Dalal by virtue of the averments made in paragraph 18 of the amended plaint on the basis that if the claim made against BOK was not accepted by the court, as being a tripartite settlement brought about by Dalal between the plaintiffs, BOK and SCB, BOK would be liable to pay the value of the 11.5% GOI 2008 Security of the face-value of Rs.58.39 crores under the agreement dated 27th May 1991, for which the plaintiffs had already made payments to BOK. The said amount had been deposited in the account of Dalal and that Dalal, along with defendant no.4-A.D. Narottam and BOK, acting in conspiracy with each other, had converted monies paid by the plaintiffs for 49/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: the use and benefit of Dalal and A.D. Narottam. The plaintiffs have further averred that in the event of the court holding that there was no tripartite agreement, as aforesaid, in Suit No.2796 of 1992, Dalal would also be liable for having made a misrepresentation, relying upon which the plaintiffs had surrendered to Dalal, the SGL transfer form on 29 th May 1991. Having considered the relevant facts and the rejection of suit 31 of 1994 and the fact that SCB had succeeded in SCBs suit against the plaintiff no.1, I am unable to hold that the suit is liable to be rejected under Order VII Rule 11. The caus eof action as pleaded in this suit is distinguishable from that in the earlier suit. The issue no.1 is therefore answered in the negative.
Issue No.(1a) : Whether the plaintiffs' suit is maintainable in view of the provisions of the Order XXXI of C.P.C. ?
67. The next issue is whether the suit is maintainable by virtue of provisions of Order XXXI of CPC, which provides for suits filed by or against trustees, executors and administrators. This issue arises in view of the case of the 1 st defendant-BOK's contention that all trustees should have been parties to the suit, since Order XXXI Rule 1 of CPC provides that all suits concerning property vested in a trustee; that trustees shall represent the persons so interested and although, ordinarily, it shall not be necessary to make them parties to the suit, the court may, if it thinks fit, order them to be made necessary parties. Secondly, Rule 2 of Order XXXI provides that, where there are several trustees and 50/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: executors, they shall all be made parties to a suit against one or more of them. The issue has arisen on account of the objections raised by defendant no.2- Dalal in his written statement dated 26 th March 2004, wherein it is contended that the suit filed by the plaintiff-trust, through its General Manager, is bad in law.
68. In my view, one needs to consider whether impleading the principal trustee as plaintiff no.2 would suffice in the facts of the present case, as being compliant with the provisions of Order XXXI Rules 1 and 2 of CPC. In this behalf, Rule 2 is couched in language, which indicates that it is mandatory for the trustees to be joined; however, in this case, the defence appears to have been taken by the 2nd defendant- Dalal by placing reliance entirely upon the provisions of the CPC and without considering the provisions of Section 9A(4) of the Special Court [Trial of Offences Relating to Transactions in Securities] Act, 1992 , (Special Court's Act), which makes it clear that while dealing with the provisions of the said section with the cases relating to any matter of claim under Section 9A, the Special Court is not bound by the said provisions with that of the Code of Civil Procedure.
69. The principal trustee - the Canara Bank is plaintiff no.2 and Rule 2 of Order XXXI of CPC, which mandates impleading of all trustees as parties, requires that where there are several trustees, the joinder of all trustees is 51/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: required only in cases of a suit against one or more of the trustees. In the present case, the suit is filed by the plaintiff-trust and, therefore, the provisions of Order XXXI Rule 2 cannot non-suit the plaintiffs. Thus, in my view, issue no.1(a) must be answered in the affirmative and the suit is maintainable in this court owing to this court's powers under Section 9A(4) of the Special Court's Act in view of the discretion vested in this court under Section 9A(4) read with Order XXXI Rule 1 of CPC, which, in term, states that in the suits concerning property vested in a trustee, the trustee shall represent the persons so interested and that it shall not ordinarily be necessary to make all of them parties to the suit, but the court may do so, if it thinks fit.
Issue No.(1b) : Whether the plaintiffs' suit is not maintainable for want of leave under Order II Rule 2 of the C.P.C. in Suit No.31 of 1994 ?
70. As far as issue no.1(b) is concerned, it questions the maintainability of the suit for want of leave under Order II Rule 2 of the CPC. In Suit No.31 of 1994, reliefs were sought against SCB and Dalal. The plaintiffs sought a direction against SCB to deliver 3 SGL transfer forms, which were illegally obtained from Dalal. No relief was sought against Dalal. Whereas, the present suit, originally filed as Suit No.3396 of 1992, seeks reliefs against BOK and Dalal, in the event the Suit No.31 of 1994 filed against SCB fails. The cause of action being different, there is no bar under Order II Rule 2 of the CPC. 52/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 :::
71. Order II Rule 2 of the CPC deals with the frame of the suit, the intention being to prevent multiplicity of the proceedings. Rule 2 requires every suit to include the whole of the claim, which the plaintiff is entitled to make, but the plaintiff may relinquish any portion of the claim in order to bring the suit within the jurisdiction of the court. Sub-rule (3) of Rule 2 provides that a person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs, but if he omits to sue for all reliefs, except with the leave of the court, he shall not afterwards sue for the reliefs so omitted.
72. This provision is based on the principle that the defendants should not be twice vexed for the same cause. It does not prevent the plaintiff from filing a second suit based on a separate cause of action. For invoking the bar of Order II Rule 2(3), two conditions would have to be satisfied; firstly, both the suits must arise from the same cause of action and; secondly, they must be between the same parties.
73. This principle was considered in the case of Deva Ram Vs. Ishwar Chand 1, in which the Supreme Court held that, if the causes of action in two suits are not identical, the bar under Order II Rule 2 was not applicable. That Order II Rule 2 requires the unity of all claims based on the same cause of action in one suit. Identity of cause of action, if established, the rule would become immediately 1 AIR 1996 SC 378 53/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: applicable and it will have to be held that since the relief claimed in the subsequent suit was omitted in the earlier suit, without the leave of the court, the subsequent suit was liable to be dismissed, since the defendants in both the suits cannot be vexed twice by two separate suits in respect of the same cause of action.
74. Although no attempt has been made by the defendants, in the course of arguments, to demonstrate that the parties in the present suit and Suit No.31 of 1994 (earlier Suit No.2796 of 1992) were the same, it is evident that the cause of action in the present suit proceeds on the premise that the tripartite agreement between the plaintiff no.1-CMF, defendant no.1-BOK and the said SCB was not established and upheld by this court. The plaintiffs plead that relief in the suit against defendant no.2-Dalal is joint and several.
75. In the course of submissions, I had asked Mr. Deshmukh as to why Suit No.7 of 2005 was not filed before Suit No.31 of 1994, to which Mr. Deshmukh submitted that the cause of action to file the present suit arose on dismissal of Suit no.31 of 1994. The perusal of the list of the dates reveals that the present suit was filed on 20th October 1992, whereas Suit No.31 of 1994 was dismissed in April, 2004 and hence as a mere comparison of dates would reveal this submission has no merit. Thus, in my view, the cause of action in this suit is premised on the decision in Suit No.31 of 1994 and that suit having been 54/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: dismissed in April, 2004, the present suit is not hit by the provisions of Order II Rule 2 of the CPC. Yet again, by virtue of Section 9A(4) of the Special Court's Act and for reasons set out in relation to issue no.1(b) above, this suit is not bad for want of leave under Order II Rule 2 (3) of the CPC. Issue no.1(b) is, therefore, answered in the negative.
Issue No.(2) : Whether plaintiff proves that the proceeds of cheque no.160319 dated 27th May 1991 for Rs.103,82,47,295=60 issued by plaintiffs was credited into account of defendant no.4, without authorization or instructions of the plaintiffs ?
76. According to Mr. Deshmukh, the plaintiffs have proved that a sum of Rs.103,82,47,295=60 crores was credited into the account of defendant no.4- A.D. Narottam, without the instructions of the plaintiffs. He submitted that this is proved by a reference to Exhibit P-1 being the Current Account Ledger of the BOK maintained with the RBI, which shows credit of the said amount. Secondly, there is a Credit Voucher (Exhibit P-14[A]) dated 27 th May 1991 issued by A.D. Narottam crediting Rs.58.39 crores to defendant no.2-Dalal. Thirdly, the reference to interrogatories in Chamber Summons No.7 of 2006; in particular, question nos.3, 17, 18, 19 and 26, forming part of Exhibit P-2, would also establish, but that issue stands proved. Furthermore, the answer of the 4 th defendant-A.D. Narottam to interrogatories in Chamber Summons No.9 of 2006 55/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: and a specific response to question no.7 would establish that the aforesaid issue stands proved.
77. Question nos.3, 17, 18, 19 and 26 in the interrogatories administered to BOK, in Chamber Summons No.7 of 2006, read as follows :-
Q.3 Is it not true that their Banker's cheque dated 27/05/1991 for Rs.103,82,47,295=60 issued by the plaintiffs favouring Bank of Karad has encahsed by you ?
A. As per records of Bank of Karad, proceeds of Banker's cheque dated 27/5/1991 for Rs.103,82,47,295/- are found to be credited to the Overdraft Account No.201 of A.D. Narottam - defendant no.4 in this case.
Q.17 Is it correct that you credited the sum of Rs.58,90,16,042=44 out of the proceeds of the Banker's cheque of Rs.103,82,47,295=60 issued by the plaintiffs in your favour in the account of defendant no.4 ? A. As per records of Bank of Karad, that Bank credited part sum of Rs.58,90,16,042=44 out of the proceeds of the Banker's cheque of Rs.103,82,47,295=60 in the account of A.D. Narottam - defendant no.4.
Q.18 Under whose authority/instruction, you credited the said sum in the account of defendant no.4 ?
A. The said sum appears to have been credited to the account of defendant no.4 under instructions from the same party viz. A.D. Narottam.
Q.19 Why the said sum was credited in the account of defendant no.4 ? A. As per records of Bank of Karad, the said sum appears to have been credited in the account of defendant no.4 as per his own instructions, as contained in Deal Slip issued by him.56/75
SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: Q.26 Are there any records (apart of the Bank A/c. Itself), which show amount was credited into the account of defendant no.4 ? A. As per the records of Bank of Karad, Deal Slip, Credit Voucher and Bank Account refer to this transaction.
78. Question no.7 in the interrogatories administered to A.D. Narottam, in Chamber Summons No.9 of 2006, reads as follows :-
Q.7 Whether the sum of Rs.58,90,16,042=44 was credited in your bank account (No.201) or any other account with Bank of Karad on or around 27th May 1991 ?
A. My answer to this interrogatory is as stated by me in my written statement, para 9, dated 23.8.2005 on record.
"9. Referring to para 3A, this defendant no.4 denies that cheque issued by the plaintiff no.1 is found to be credited in the account of defendant no.4. This defendant further denies that the said sum was credited into the account of defendant no.4 on 27.5.1991, as alleged. The defendant no.4 further denies for want of knowledge the plaintiff no.1 had ever authorized and/or instructed to credit the said sum in the account of this defendant no.4. This defendant stats that the said cheque favouring defendant no.1 was credited to defendant no.1 account with RBI and not in the account of defendant no.4 as wrongly stated. However, an identical amount of Rs.58.39 crores was transferred by internal voucher by defendant no.1 to defendant no.4 account with BOK. This defendant states that the plaintiff no.1 is fully aware that RBI cheque No.160319 dated 27.5.1991 for Rs.103,82,47,295=60 favouring BOK or any Bankers cheque standing in the name of Payee Bank shall be credited to the Payee's account only and with RBI."
79. In view of the aforesaid, Mr. Deshmukh had submitted that issue no.2 57/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: stood proved; but, in my view, the mere administering of interrogatories under Order XI Rule 1 annexes thereto will not necessarily be proof. Admissions contained in answer to interrogatories are not proof. Additional facts not within the knowledge of the plaintiffs may have been collected by way of obtaining answers to interrogatories and relevant material available with the answering party may be elicited [see (2008) 8 SCC 92]. Interrogatories are administered to facilitate proof of one's case and hence part of Order XI, which provides for discovery and inspection, interrogatories are administered to a party to the suit and not to a witness unlike in cross-examination.
80. Issue no.2 is whether the cheque for Rs.103,82,47,295/- was credited to the account of defendant no.4, without authorization. The plaintiffs ought to have examined their witness(es) to prove that agent was unauthorized. This aspect cannot be decided merely by administering interrogatories. None of the interrogatories delivered are suggestive of lack of authorization. In my view, the plaintiffs have failed to prove that the aforesaid cheque was credited to the account of defendant no.4 without authorization. The plaintiffs attempt to establish this as a fact have failed. Hence, issue no.2 is answered in the negative.
Issue no.(3) : Whether the plaintiffs prove that on 27 th May 1991, plaintiffs had purchased 11.5% GOI 2008 securities of the face-value of Rs.58.39 crores from defendant no.1 ?
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81. As regards this issue, according to Mr. Deshmukh, the Cost Memo issued by defendant no.1-BOK to plaintiff no.1-CMF was marked in evidence as Exhibit P-10(A). I may mention that reference to some exhibits such as P-10(A), P-11(A) and P-12(A) and several others, is indicative of the fact that the original documents have been tendered in evidence, marked as exhibits and returned to BOK, since forming part of the compilation of such documents in the volumes on the record of the respective parties. All these parties are bound to produce the originals, if so required. Photocopies have been marked, by consent, as exhibits with the suffix "A", as under :-
(i) The Cost Memo issued by BOK to CMF for 11.5% GOI 2008 of the face-value of Rs.58.39 crores dated 27 th May 1991 (Exhibit P-10[A]);
(ii) Cheque No.160319 dated 27th May 1991 for
Rs.103,82,42,208=60 issued to BOK by CMF (Exhibit P-
11[A]);
(iii) SGL dated 27th May 1991, issued by BOK to CMF for transfer of 11.5% GOI 2008 of the face-value of Rs.58.39 crores, is the form of transfer for operation on SGL account (Exhibit P-
12[A]).
82. Answers to question nos.1 and 4 in the interrogatories administered to 59/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: BOK in Chamber Summons No.7 of 2006 (Exhibit P-2); answer to question no.6 in the interrogatories administered to Dalal in Chamber Summons No.8 of 2006 (Exhibit P-3) and; answers to question nos.5 and 7 in the interrogatories administered to A.D. Narottam in Chamber Summons No.9 of 2006 (Exhibit P-
4) are relied upon by Mr. Deshmukh in support of his contention that issue no.3 stands proved. These questions and answers thereto read as under :-
83. Answers to question nos.1 and 4 in the interrogatories administered to BOK, in Chamber Summons No.7 of 2006, read as follows :-
Q.1 Is it not true that on 27/05/1991, you issued SGL transfer from, authorizing RBI to assign/transfer 11.5% GOI 2008 Securities of the face-value of Rs.58.39 crores to the plaintiffs ? A. As per the available records of Bank of Karad, SGL transfer form appears to have been issued by BOK, as per instructions of A.D. Narottam - the said SGL form appears to have been signed by Mr. C.S. Raje, the then employee of Bank of Karad and who is facing criminal charges in various cases filed by CBI.
Q.4 Is it not true that the said cheque inter alia comprised consideration of Rs.58,90,16,042=44 towards purchase of transaction of 11.5% GOI 2008 Security of the face-value of Rs.58.39 crores on 27/05/1991 ? A. As per the records of Bank of Karad, the said cheque inter alia comprised of an amount of Rs.58,90,16,042=44 towards purchase transaction of 11.5% GOI 2008 Security of the face-value of Rs.58.39 crores on 27/05/1991, as is observed from Credit Voucher and Deal- Slip of A.D. Narottam - defendant no.4.60/75
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84. Answer to question no.6 in the interrogatories administered to Hiten Dalal in Chamber Summons No.8 of 2006 (Exhibit P-3), reads as follows :-
Q.6 Did you act as a broker or intermediary in the transaction for sale of 11:5% GOI 2008 Securities of the face-value of Rs.58.39 crores on 27/05/1991 by the plaintiffs (Canbank Mutual Fund) to Citibank ? A. With reference to interrogatory no.6, I say that I acted as broker in the transaction.
85. Answers to question nos.5 and 7 in the interrogatories administered to A.D. Narottam in Chamber Summons No.9 of 2006 (Exhibit P-4), read as follows :-
Q.5 Did defendant no.2 to give you any instructions, oral or written, in relation to the suit transaction ?
A. My answer to this interrogatory is as stated by me in my written statement, para 8, dated 23/08/2005 on record.
"8. Referring to para 3 of the plaint, this defendant no.4 states that he denies for want of knowledge that plaintiff no.1 in the course of their portfolio investment business had purchased certain securities being 11.5% GOI 2008 from the defendant no.1 through the defendant no.2 of the face- value of Rs.58.39 crores, hereinafter referred to as "the said securities". The defendant no.1, in order to effect transfer of the said securities, issued its Securities General Ledger (SGL) transfer form authorizing the Reserve Bank of India (RBI) to operate defendant no.1's SGL account and assign the said securities to the SGL account of the plaintiff no.1 in consideration of the said securities purchased by them, the plaintiff no.1, issued their cheque dated 27th May 1991, bearing No.160319, in favour of the defendant no.1 in the sum of Rs.103,82,47,295=60 inter alia comprising 61/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: of a sum of Rs.58,90,16,042=40, being the cost of "the said securities", of the face-value of Rs.58.39 crores and the amount of interest accrued thereon upto 27th May 1991, as alleged. However, at the oral instructions of defendant no.2, this defendant no.4 gave delivery instruction to defendant no.1 to issue the Cost Memo and SGL transfer form for the value of Rs.58.39 crores for 11.5% GOI 2008 with full assurance by the defendant no.2 that he shall deliver equivalent amount of SGL held by him from Standard Chartered Bank, (hereinafter called as SCB), which has been confirmed by him in his affidavit (Exhibit-
250), which is a part of proceedings in Special Case No.5 of 1993. I crave leave to refer to and rely upon the same, when produced. The said affidavit is dated 23 rd May 1992 given to the plaintiff no.1 herein, in the aforesaid matter and a part of the proceedings on record of Special Case No.5 of 1993. The plaintiffs have not produced any cogent documents to prove "Portfolio Investment".
Q.7 Whether the sum of Rs.58,90,16,042=44 was credited in your bank account (No.201) or any other account with Bank of Karad on or around 27/05/1991 ?
A. My answer to this interrogatory is as stated by me in my written statement, para 9, dated 23.8.2005 on record.
"9. Referring to para 3A, this defendant no.4 denies that cheque issued by the plaintiff no.1 is found to be credited in the account of defendant no.4. This defendant further denies that the said sum was credited into the account of defendant no.4 on 27.5.1991, as alleged. The defendant no.4 further denies for want of knowledge the plaintiff no.1 had ever authorized and/or instructed to credit the said sum in the account of this defendant no.4. This defendant stats that the said cheque favouring defendant no.1 was credited to defendant no.1 account with RBI and not in the account of defendant no.4 as wrongly stated. However, an identical amount of Rs.58.39 62/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: crores was transferred by internal voucher by defendant no.1 to defendant no.4 account with BOK. This defendant states that the plaintiff no.1 is fully aware that RBI cheque No.160319 dated 27.5.1991 for Rs.103,82,47,295=60 favouring BOK or any Bankers cheque standing in the name of Payee Bank shall be credited to the Payee's account only and with RBI."
86. In order to prove that plaintiffs purchased the suit securities from the Bank of Karad, the only relevant interrogations are the ones delivered to defendant no.1. The answers to interrogatory nos.1 and 4 do not help the plaintiffs to prove beyond doubt that the suit securities were purchased from BOK. The answer to interrogatory no.1 is guarded and the response is uncertain. The answer does not prove the purchase, but suggests that SGLs could have been issued by BOK, but on the instructions of Narottam. But, the plaintiffs do not contend that Narottam was authorized by them. On the contrary, it is the plaintiffs' case that the cheque for Rs.103.82 crores was credited to the account of defendant no.4 (Narottam), without authorization. The plaintiffs have distanced themselves from Narottam. Answer to interrogatory no.4 also relies upon a credit.
87. In answer to interrogatory no.5 administered to Narottam, he denied that plaintiff no.1 had purchased the suit securities sheltered by way of portfolio investment or otherwise. These interrogations are in the nature of notice to admit facts under Order XII have not achieved the intended results. Rule 22 of 63/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: Order XI provides for use of any answer to interrogations at the trial as evidence, but it has a caveat inasmuch as the court may look at the entire answers. In fact, in State of Rajasthan Vs. Meghraj, 2001 NOC 108 (Raj.) , the court observed that if answers to interrogations did not contain admissions, which would benefit the plaintiffs, such answers would not themselves be evidence. Thus, the plaintiffs gain no advantage from these answers. Furthermore, the answers of defendant no.4 to the interrogatory nos.5 and 7 are merely reiterating the contents of the written statement of defendant no.4. Defendant no.4 has denied that any payment was made by plaintiffs to defendant no.4. He states that BOK had transferred funds to defendant no.4 via an internal transfer. Issue no.3 is therefore answered in the negative.
Issue No.(4) : Whether the plaintiffs prove that they had lodged the aforesaid SGL transfer form dated 27 th May 1991 on 29th May 1991 and 31st May 1991 with the RBI for clearance, but was returned for want of sufficient balance, as alleged in paragraph 4 of the plaint ?
88. As far as issue no.4 is concerned, Mr. Deshmukh submitted that this issue stood proved by making reference to Exhibit P-12(A), being 'Form of Transfer for Operation on SGL Account' dated 27th May 1991 issued by BOK to CMF for transfer of 11.5% GOI 2008 Security for the face-value of Rs.58.39 crores; and Exhibit P-2, being answers to the interrogatories administered to BOK in Chamber Summons No.7 of 2006, which I have already dealt with. 64/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 :::
89. Exhibit P-12(A) is the SGL dated 27 th May 1991 issued by BOK to CMF and the fact of return of the SGL transfer form for want of sufficient balance is not seen to be in dispute. This can be ascertained from a reference to the pleadings itself. In response to paragraph 4 of the plaint, the BOK, in paragraph 4 of its written statement dated 13 th October 2003, stated as under :-
"Thus, it appears that the SGL Form was returned by Reserve Bank of India and Canbank Mutual Fund and was cancelled by Bank of Karad".
90. This fact, however, is not admitted by defendant no.2-Dalal in his written statement dated 26th March 2004, who seeks to put the plaintiffs to strict proof thereof. Likewise, defendant no.4-A.D. Narottam, in his written statement dated 23rd August 2005, states that he was not aware as to when plaintiffs lodged the SGL transfer form with RBI for clearance. Furthermore, it is submitted that, inspite of specific knowledge of the SGL having been returned by the RBI, the plaintiffs have not explained why till July, 1991, the plaintiffs did not take any action till they handover the SGL to defendant no.2-Dalal for rectification and replacement with a fresh SGL transfer from of the 1 st defendant-BOK. In my view, reference to Exhibit P-12(A) is of no avail, because it does not establish return of the SGL by RBI and for reasons of insufficient funds, it is but a "Form of Transfer for Operation of SGL Account" . None of the documents admitted in evidence support the return of the SGL for want of balance. Issue no.4 is, therefore, answered in the negative.
65/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: Issue No.(5) : Whether the plaintiffs prove that SGL transfer forms dated 27th May 1991 were returned / delivered through the defendant no.2, as alleged in paragraph nos.5, 7 and 9 of the plaint ?
91. Mr. Deshmukh has relied upon the affidavit of defendant no.2- Dalal dated 23rd May 1992 in support of his contention that this issue stands proved. Exhibit P-17(A) is an affidavit dated 23 rd May 1992 filed by Dalal. It was admitted in evidence on 28th July 2017, which was earlier marked as 'Article X- 37' in Special Court Suit No.5 of 1993 and later marked as 'Exhibit-250' in that suit. This affidavit sets out inter alia that Dalal has acted as a broker for purchase by CMF of 11.5% GOI 2008 Loan Securities of the face-value of Rs.58.39 crores from BOK and obtaining transfer forms signed by BOK on 27 th May 1991. Dalal also acted as a broker for selling the same securities on the same date to Citibank N.A., which were sold by the CMF, who gave its SGL transfer form to Dalal for onward delivery to Citibank. Dalal has further deposed that the sale transactions entered into by BOK with CMF is backed by SGLs issued by SCB in favour of BOK. Dalal has also deposed that he has received the transfer forms in respect of these securities issued by BOK in favour of CMF, which was returned by RBI on account of insufficient balance.
92. Although there is a reference to Dalal having acted as a broker for transaction between CMF and SCB in respect of 11.5% GOI Loan 2008 by 66/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: delivering the transfer forms and a statement that the demand made by SCB on CMF on return of SGLs issued in their favour by CMF is not in order, as they are against their own earlier SGLs issued in favour of BOK and that CMF has no obligation to SCB in respect of the transactions made through Dalal by SCB and CMF. The plaintiffs' reliance upon Exhibit P-17(A) is of no assistance in establishing retaining the documents by the RBI. Save for relying upon an affidavit dated 23rd May 1992, no evidence of the RBI having returned the SGLs have been brought on record. In the absence of any such evidence, documentary or otherwise, issue no.5 must be answered in the negative. Merely because it is marked as an exhibit does not mean that the document is proved. In Narbada Devi Gupta Vs. Birendra Kumar Jaiswal 2, it has been reiterated that mere production and marking of documents as an exhibit by the court cannot be held to be due proof of its contents and their execution has to be proved by "evidence of those persons", who can vouchsafe for the truth of the facts in issue.
Issue No.(6) : Whether the plaintiffs prove that defendant no.1 is liable to deliver GOI 2008 securities of the face-value of Rs.58.39 crores to the plaintiffs, as alleged in paragraph 18 of the plaint ?
93. Considering the evidence brought on record and averments contained in the plaint apropos the involvement of defendant no.1 and the written statement of defendant no.1 and answers to the interrogatories by defendant no.1 by 2 (2003) 8 SCC 745 67/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: making submissions, there is nothing to indicate that defendant no.1 was liable to deliver the Bonds to the plaintiffs, as contained in paragraph 18 of the plaint. The plaintiffs' case in paragraph 18 is set out by way of abundant caution. It is nothing but a demonstration of the inability of the plaintiffs to make a clear statement on liability, if any, of some of the defendants. Since paragraph 18 contemplates a case in the alternative and if the court is not inclined to accept the plaintiffs' contention as to the alleged tripartite settlement brought about between the plaintiffs and defendant no.2, it was incumbent upon the plaintiffs to direct evidence on the issues. Plaintiffs have failed and neglected to do so. In that view of the matter, I find no evidence on the liability of defendant no.1 that it obliged or liable to deliver the suit bonds. Issue no.6 must, therefore, be answered in the negative.
Issue No.(7) : Whether the plaintiffs prove that the defendant nos.1, 2 and 4 are jointly and severally liable to the plaintiffs, as alleged in paragraph 18 of the plaint ?
94. As far as issue no.7 is concerned, Mr. Deshmukh contended that consideration paid by the plaintiffs was received by defendant no.1-BOK and was credited in the account of defendant no.4-A.D. Narottam. This, he submitted, was evident from answer to question no.5 in the interrogatories administered to A.D. Narottam in Chamber Summons No.9 of 2006 (Exhibit P-
4), which reads as under :-
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A. My answer to this interrogatory is as stated by me in my written statement, para 8, dated 23/08/2005 on record.
"8. Referring to para 3 of the plaint, this defendant no.4 states that he denies for want of knowledge that plaintiff no.1 in the course of their portfolio investment business had purchased certain securities being 11.5% GOI 2008 from the defendant no.1 through the defendant no.2 of the face- value of Rs.58.39 crores, hereinafter referred to as "the said securities". The defendant no.1, in order to effect transfer of the said securities, issued its Securities General Ledger (SGL) transfer form authorizing the Reserve Bank of India (RBI) to operate defendant no.1's SGL account and assign the said securities to the SGL account of the plaintiff no.1 in consideration of the said securities purchased by them, the plaintiff no.1, issued their cheque dated 27th May 1991, bearing No.160319, in favour of the defendant no.1 in the sum of Rs.103,82,47,295=60 inter alia comprising of a sum of Rs.58,90,16,042=40, being the cost of "the said securities", of the face-value of Rs.58.39 crores and the amount of interest accrued thereon upto 27th May 1991, as alleged. However, at the oral instructions of defendant no.2, this defendant no.4 gave delivery instruction to defendant no.1 to issue the Cost Memo and SGL transfer form for the value of Rs.58.39 crores for 11.5% GOI 2008 with full assurance by the defendant no.2 that he shall deliver equivalent amount of SGL held by him from Standard Chartered Bank, (hereinafter called as SCB), which has been confirmed by him in his affidavit (Exhibit-
250), which is a part of proceedings in Special Case No.5 of 1993. I crave leave to refer to and rely upon the same, when produced. The said affidavit is dated 23 rd May 1992 given to the plaintiff no.1 herein, in the aforesaid matter and a part of the proceedings on record of Special Case 69/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: No.5 of 1993. The plaintiffs have not produced any cogent documents to prove "Portfolio Investment".
95. Mr. Deshmukh had submitted that the role of each of the party is clearly defined and they have acted collectively and are, therefore, jointly and severally liable. I am unable to agree. For the reasons already set out above, the answers to interrogatories do not and cannot relieve the plaintiffs from discharging the burden of proof. None of the answers relied upon amount to an unconditional admission of the plaintiff's assertions. Absent oral and documentary evidence to support, perusal of answer to interrogatory no.5 reveals that A.D. Narottam, by affidavit dated 13th November 2006, has stated that he stands by paragraph 8 of the written statement dated 23 rd August 2005. Paragraph 8 of the said written statement reveals that he denies, for want of knowledge, that CMF had purchased 11.5% GOI 2008 Security from BOK through Dalal of the face-value of Rs.58.39 crores. However, he states that Narottam gave delivery instructions to BOK to issue the Cost Memo and SGL transfer form for the value of Rs.58.39 crores on assurance of Dalal that he would deliver an equivalent amount of SGLs held by him from SCB and as confirmed by Dalal in his affidavit dated 23 rd May, 1992 (Exhibit P-17(A) in these proceedings). In view of the fact that such a delivery instruction was given, it is contended that this issue no.7 stands proved to the effect that consideration was credited to the account of Narottam, but this contention does not appear to be correct in view of the fact that while 70/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: dealing with paragraph (3A) of the plaint, Narottam has denied that the cheque issued by the CMF is found to be credited into the account of Narottam. He has denied that the sum of money was credited on 27 th May 1991. He has also denied, for want of knowledge, that CMF had authorized or instructed the sum of money to be credited to the account of Narottam; however, he admits that an "identical amount" of Rs.58.39 crores was transferred by internal voucher by BOK to the account of Narottam with BOK. Thus, he states that the claim is barred by limitation. Issue no.7 is also sought to be proved by Mr. Deshmukh by making reference to BOK's answer to question no.1 in the interrogatories administered in Chamber Summons No.7 of 2006 (Exhibit P-2). Furthermore, it is contended that on oral instructions of Dalal, A.D. Narottam gave instructions to BOK to issue SGL transfer forms, on assurance by Hitel Dalal that he would deliver equivalent amount of SGL held by him from SCB. According to the plaintiffs, Dalal has admitted that he was broker for the transaction for purchase of securities by the CMF from BOK on 27 th May 1991 and that this transaction was backed by SGLs issued by SCB in favour of BOK. Dalal has admitted to have received SGL transfer form originally issued by BOK to CMF, which had been returned for insufficient balance and that the demand made by SCB on CMF was not proper. For all the above reasons Issue no.7 is answered in the negative.
71/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: Issue No.(8) : Whether any suit claims are barred by Law of Limitation, when amended, as alleged in paragraph 32 of the written statement of defendant no.4 ?
96. It is submitted that the suit transaction is of 27 th May 1991. The suit was filed on 20th October 1992. BOK filed the written statement only on 13 th October 2003, disclosing that the consideration paid by CMF to BOK was credited to the account of A.D. Narottam. Upon the plaintiffs then taking inspection of documents of BOK on 13 th November 2003, the plaintiffs gathered definite information of monies having been credited to the account of A.D. Narottam in BOK and on 16th February 2004, a Chamber Summons bearing No.3 of 2004 was filed by the plaintiffs to join A.D. Narottam as a party. This chamber summons came to be allowed on 21 st June 2005 and in any event, A.D. Narottam has alleged that the cause of action arose on 10 th October 1993, when the CBI filed a charge-sheet in Special Case No.5 of 1993. That the plaint in Suit No.2 of 1997 was verified on the basis of the information received and not on the basis of actual knowledge and that the actual definite information was available only upon inspection being granted and, therefore, the suit is not barred. This suit appears to be by way of afterthought and is not filed within reasonable time. Although under the Special Courts Act there is a non-obstante provision, I am of the view that this issue must be answered in the affirmative in view of the unreasonable delay in filing the suit despite rejection of suit number 72/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: 31 of 1994 and despite Narottam having made averments suggesting involvement of the defendant no.2.
Addl. Issue No.(8A) : Is the plaint signed by the person duly authorized by the plaintiffs ?
Addl. Issue No.(8B) : If not, what is the legal effect thereon ?
97. Additional issue nos.8A and 8B have to be dealt with together and in view of the affidavit-of-evidence dated 3rd August 2017 of Mr. K. Raveendra (PW-2). K. Raveendra (PW-2), is a former Law Officer of the CMF, (this witness is incorrectly marked as PW-1 on 4th August 2017). Reference may be made to the deposition of PW-2 K. Raveendra, which was marked as Exhibit P-18 on 4 th August 2017. The witness was examined in the court and he has identified his affidavit-of-evidence dated 3rd August 2017. It is clear from the contents of the said affidavit that he has deposed that he was employed by Canbank Mutual Fund. He has deposed that he was working with Canbank Investment Management Services Limited between 8 th October 1990 and 31st August 2013. He was aware of the facts of the case and the documents. Apart from reiterating that he was working in the Legal Department and was present when M.P. Nayak, who was the then General Manager of CMF, signed and verified the plaint, on the basis of the powers of attorney marked as Exhibits P-20 and P-21 and P-22 in the affidavit-of-evidence, the contents of the same have been re- affirmed. He has deposed that he was one of the 20 officers, to whom the 73/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: powers were delegated and he has produced the Power of Attorney dated 19 th December 2002. He also deposed that one M.V. Ramesh Nayak and S.R. Ramraj have been authorized by that power of attorney to sign and verify the pleadings and that M.V. Ramesh Nayak verified the amendment to the plaint on 16 th June 2003 and Mr. S.R. Ramraj verified the second amendment to the plaint on 1 st July 2005. He has earlier deposed that M.P. Nayak was the General Manager of CMF and he was empowered by the Power of Attorney dated 12 th January 1972 and Supplemental Power of Attorney dated 27 th June, 1989, which were marked as Exhibits P-20 and P-21, respectively. It is pertinent to mention that Mr. K. Raveendra was not cross-examined by the defendants. I am of the view that the plaint is signed by a person, who was duly authorized. Issue no.8(A) is, therefore, answered in the affirmative and as a result, issue no.8(B) does not arise, since the filing of the plaint has been held to be valid.
98. Apropos the attempt to rely upon the Janakiraman Committee report, in Jyoti Harshad Mehta and Ors. Vs. The Custodian and Ors. 3, the Supreme Court has observed that reliance placed by the Special Court on the Janakiraman's report and the other reports treating them as evidence was not correct. The court held that the Special Court had committed an illegality in relying upon the contents of the report, which were inadmissible in evidence.
99. In conclusion I may observe that the plaintiffs were required to lead oral 3 (2009)10 SCC 564 74/75 SPS-7-2002.doc ::: Uploaded on - 23/12/2019 ::: Downloaded on - 26/04/2020 16:53:09 ::: evidence in support of their case. They have not done so. On 11 th April 2007, plaintiffs were directed to file their affidavit-of-evidence. On 12 th March 2009, this court directed that the suit would be dismissed if affidavit-of-evidence was not filed. On 11th June, 2009, the court directed a list of witnesses to be filed. On 30th July, 2009, one P.S. Ranga Rao of RBI was examined to tender some documents. Time was sought for cross-examination by the plaintiffs. On 8 th April, 2010, the court recorded that the plaintiffs are relying only on documentary evidence. Applications were made for framing issues, last of which was rejected on 2nd December 2010. The suit was then adjourned from time to time at the request of the parties. Documents were marked between 14 th July 2017 and 4th August 2017. Only one witness Mr. Raveendra was examined on 4th August 2017 on behalf of the plaintiffs. This evidence is restricted to the power of the officer concerned to institute the suit. These opportunities have not been availed between 11th April 2007 till August August 2017. It is therefore clear that the plaintiffs have consciously avoided leading oral evidence on the merits of the claim.
100. The suit, therefore, fails for all the aforesaid reasons. Accordingly, I pass the following order :-
(i) Suit is dismissed.
(ii) No order as to costs.
[A.K. MENON, J.]
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