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3. On 26.02.1992, SCB sold 17% bonds of the face value of Rs. 50 crores to ANZ Grindlays Bank (hereinafter “ANZ”). SCB issued a Bank Receipt No. 1939 to ANZ in lieu of the actual possession of the bonds. On 27.02.1992, ABFSL forwarded the original letter of allotment to SCB and sought the return of the Banker’s Receipt No. 23727. On the same date, SCB returned the Banker’s Receipt No. 23727 to ABFSL. SCB states that as against the return of the said Bank Receipt, it only received a photocopy of the original letter of allotment. On 27.02.1992, Hiten P. Dalal, a broker who was acting in a large number of securities transactions of banks and financial institutions obtained the possession of the said original letter of allotment and delivered it to Canara Bank Mutual Fund (hereinafter “CMF”). On 17.03.1992, CMF sold the 17% NPCL bonds of the face value of Rs. 50 crores to SCB. CMF issued a Receipt No. 2767 to SCB Bank in lieu of the original letter of allotment. According to SCB, when the Securities Scam came to limelight in May, 1992, the officers of SCB conducted an investigation of its records and found that SCB did not possess the original letter of allotment but had only its photocopy with it. On 09.10.1992, SCB wrote a letter to NPCL stating that as the suit bonds had been issued to ABFSL, which had further confirmed that the same has been sold to SCB and therefore, the letter of allotment from CMF may be disregarded. NPCL informed SCB on 06.11.1992 that since there was a dispute of ownership of the suit bonds between SCB and CMF, the matter should be resolved between SCB and CMF and that it would take the necessary action only after such resolution.

Consequently, HPD had a dummy sale/ purchase transaction with CMF for FV Rs. 100 crs and delivered 9% NPCL and 17% NPCL to CMF on 26.02.92. The deal slip indicates deal with ABFSL, but difference between sale & purchase of Rs. 3 crores was paid to HPD directly by Andhra Bank……” A perusal of the record prepared by Mr. Srinivasan, PW-3, makes it amply clear that it was during this meeting on 07.11.1992 that CMF first admitted to SCB regarding the dummy sale involving the 9% NPCL bonds and 17% NPCL bonds. At this point, we would like to reiterate that the learned senior counsel appearing on behalf of the respondents have not been able to point out any reason for us to disbelieve either the deposition of Mr. Srinivasan, PW-3, or the documents prepared by him, which have been placed on record.

“I further state that in view of the fact that SCB’s investigation team headed by Mr. Wasim Saifee, had inter alia informed me about the missing NPCL bonds, both Saifee and myself did inquire from HPD, in the course of the meeting held on 23rd May 1992 as to what had really happened in respect of the said transactions with ABFSL on 26th February 1992. HPD also informed us that insofar as the transactions wherein SCB had purchased 9% NPCL bonds of FV 50 crores and 17% NPCL bonds of FV 50 crores were concerned and in respect of which SCB had paid full consideration but in respect of which SCB records reflected receipt of only photocopies of the original LOA’s, that he (HPD) had diverted the said bonds to Canara Bank.”

“In the said meeting, I pressed H.P. Dalal to furnish me the details and particulars with regard to his allegations of alleged diversion to Canara Bank of the said NPCL bonds. HPD was however evasive and did not afford any cogent reply. I specifically inquired from him as to the manner and circumstances of the alleged diversion. However when pressed by me to give particulars and details, he refused to state anything further on the subject and instead insisted that the said information of the alleged diversion of the Bonds to Canara Bank was purely informal and that he would deny his conversation with the SCB if the SCB were to seek to make formal use of his statement. ……The matter of NPCL bonds was thereafter discussed by me with the other senior managers of SCB but in view of the lack of any details/ particulars forthcoming from HPD and in view of his failure to adhere to his assurances and commitments of delivery of stocks/ securities/ reimbursement of losses assured by him to be delivered between 18 and 22 May 1992, it was felt that no credence could be placed on the said statement made by HPD with regard to NPCL bonds at the relevant time.” (emphasis laid by this Court) We also turn our attention to the cross examination of this witness who stated: