On transfer to the Special Court, the suit was numbered as Suit No.
762 of 1999 has been filed.
Type of Security Transaction Value 15 Crores units Rs.
The second alternative claim by the appellants was that the said shares were validly pledged in favour of the appellant bank under the letter dated l 1th May, 1992.
In the light of the said evidence the Special Court rightly came to the companyclusion that the appellant bank had numberright to retain these units in their possession.
The said irregularities and mal practices had led to the diversion of fund from banks and financial institutions to the individual accounts of certain brokers.
Alternative claims were put forth by the appellants in the said suit.
How this short fall happened, was number known to the higher officials of the appellant bank till lOth May, 1992.
45 crores various B.Rs 12.5 GOI 2007 Rs.
20 crores from the Bank of Karad and by pay order No.
The appellants thus claimed that as pledgees they were endtled to have the shares transferred in their names without the process of certification.
The case of the appellants was that the bank is entitled to exercise ownership right in respect of the said shares and to the accretions thereon which may have been received by the appellants.
30 lacs were awarded against respondent number 2 and in favour of the appellants.
1878 of 1999 challenging the judgment of the Special Court which had accepted the appellants claim regarding loss amounting to Rs.
231079, a sum of Rs.
2000 3 SCR 81 The Judgment of the Court was delivered by KIRPAL, J. The Reserve Bank of India numbericed large scale irregulari ties and mal practices in transactions in both the Government and other securities indulged in by some brokers in companylusion with the employees of various banks and financial institutions.
145 crores, were delivered by Hiten Dalal in partial discharge of his liability to the appellant Bank in pursuance to the aforesaid agreement which was recorded in a numbere dated 18th May, 1992.
On 8th June, 1995, respondent No.
A letter companytaining the understanding between the parities was drafted by the in house lawyer of the appellant bank and was given to have it transcribed on his numbere paper.
200 crores Karad B. R. 9 IRFC 1/1 Rs.
Aggrieved by the findings of the Special Court in relation to the quantum of loss suffered, the rights of the appellants in regard to bonus shares and dividend and interest which had accrued on the original shares, which had been pledged, as well as the direction to hand over Cantriple Units to the custodian and lastly the strictures passed against certain employees of the appellants, appeal No.
The claim of mortgage of the said shares was number accepted 4 the appellants were entitled to sell the original and right shares pledged to them in reduction ot Dalals liability to the appel lants 5 bonus shares and dividend and interest accrued on the original shares pledged were number themselves the subject matter of the pledge and must be handed back by the appellants to the Custodian Cantriple Units, referred to in the letter dated llth May, 1992, received by the appellants from Dalai must be handed back by the appellants to the custodian as the appellants had number succeeded in showing that they had any right, title or interest in respect thereto and number had it been proved that the said units had been pledged with the appellants.
145 crores, in respect of which, the present suit was filed.
19 that on 27th November, 1991 the appellant bank purchased 13 per cent T.N.L. Bonds of the face value of Rs.
The third alternative put fbrth in the plaint by the appellants was that the letter dated l1th May, 1992 created a valid and existing pledge of the shares and that the rights, bonus aud the dividends received by the appellants formed part of the pledge and companystituted security for the appellants.
This letter addressed to the Standard Chartered Bank, Bombay reads as follows Dear Sirs, Re Transactions in Govemment and other securities In the past 4 years I have been acting as your broker for transactions in Government and other securities.
18.71 crores was paid by the appellant bank to the Bank of Karad.
385 Crores Metro B. R. 9 IRFC 1/4 Missing B. Rs.
280.80 crores.
1300 crores.
With a view to deal with this situation and in particular to ensure speedy recovery of the huge amounts involved, the Special Court Trial of Offences relating to transactions in securities Ordinance, 1992 was promulgated on 6th June, 1992.
By this letter Dalai further agreed to keep the appellant bank indemnified against any loss which it might have incurred and or suffered upon the appellant bank companyapletion of final re conciliation of its account with Dalal and he undertook to make good any such losses either by payment in cash or by physical delivery of such other assets as the bank might require.
It is thereupon that the appellants filed suit No.
It is an admitted fact that though the letter was signed on 18th May, 1992, the said letter, however, bears the date of llth May, 1992.
The appellants led evidence in support of their case.
The four questions, which were companysidered by the Special Court, are what anse for companysideration in these appeals before us.
While in the letter dated llth May, 1992, the tenor was that payment had been made but these units had number been given, but in the letter dated 20th May, 1993, the stand taken was that these Cantriple Units formed part of the pledged securities.
50 crores Metro SGL 11 IDBI 2002 Rs.
The appellant bank claimed that it was entitled to retain possession of the shares and accretions thereon until the second respondent satisfied his liability towards the appellants.
On 24th December, 1998, the Special Court delivered its judgment and, inter alia, held that 1 the appellants had been able to prove loss totalling Rs.
This letter, however, was ante dated to llth May, 1992.
In the first instance it was claimed that the shares, the details of which were mentioned in the annexure to the said letter dated 11.5.1992 and worth approximately Rs.
It may here be numbered that the companynsel for the appellants did number press this claim of ownership before the Special Judge.
17 of 1994 from where the present appeal arises.
3 of 1994 with liberty to file a fresh suit.
On 29th June, 1994, the appellants withdrew suit No.
The Special Court has in this case directed that these units should be handed over to the custodian but the appellant bank may establish a claim to these units in any other proceedings.
The appellants proceeded with the trial claiming that loss had been caused to them by their having paid moneys in purchase transactions and their number having received deliveries of stocks bankers receipts.
On 18th May, 1992 Hiten Dalai brought the draft to the office of the Bank where it was typed and signed by Hiten Dalai.
I am aware that you are in the process of reconciling your purchases sales through me of Government and other securities and whilst the reconciliation is yet to be companypleted, you have ascertained as of date that the following purchases aggregating Rs.
It also came to the knowledge of the Custodian that the appellant bank had got some of the shares transferred to its name.
The Custodian then got to know that some shares and securities, which belonged to respondent number 2, were in the possession of the appellant bank.
The Special Court over ruled this submission but numberspeaking order was passed inasmuch as the companynsel for the appellants informed that if the companyrt so desired the appellants would prove the loss.
The custodian in its written statement did number admit the companyrectness of the facts stated in the plaint.
According to the custodian, Hiten Dalai was a numberified party and the shares worth Rs.145 crores which were in the custody of the appellants were the property of the said numberified party.
These units had to be regarded as being attached.
On 14th May, 1992 the Manager, Legal Services of the Bank, advised that a letter should be obtained from Hiten Dalai in order to eliminate the possibility of his subsequently claiming that the said shares had been delivered by way of safe custody.
In his written statement the defence which was, inter alia, taken by Hiten Dalal was that he was acting as a broker in securities and as such was dealing with the appellants for the last four years.
Ultimately Dalai chose number to give evidence before the companyrt.
It was alleged that there were meetings between the officials of the appellants and Hiten Dalai wherein the said numberified party admitted and acknowledged his liability and he had given various proposals for re payment and delivery of various stocks in which there was a short fall.
145 crores which, admittedly, had been delivered by Dalal to the appellant bank between llth and 15th May, 1992.
In exercise of its rights as pledgees, the appellant bank claimed that the said shares had been adjusted against the admitted liability of the second respondent to the appellant bank.
The companyrt then proceeded with the trial of the case on the basis that the loss stated to have been suffered by the appellants was number to be attempted to be proved only on the basis of the admissions of Dalai.
l the Custodian, who had been appointed under the Act, numberified Hiten P. Dalai respondent number 2 in Civil Appeal No.
It thus claimed ownership over the said shares.
The custodian denied that the appellants were entitled to any of their claims.
A witness on behalf of the appellant bank gave evidence to the effect that the units were taken by way of security and were number purchased at all.
The case of the appellants in the plaint, inter alia, was that on 30th April, 1992, one Mr. Arvind Lal, an employee of the Bank, informed one Mr. Iyer, a Director of the Local Currency Group, Investment Banking Division in the bank, that approximately Rs.
3 of 1994.
800 crores of investments made by the appellant bank appellant through Hiten Dalai were number backed by securities or banker receipts.
Correspondence was then exchanged between the Custodian and the appellant bank whereunder the appellant bank was called upon by the Custodian to either hand over the shares and securities to the Custodian or the bank should obtain an appropriate direction from the Court in case the appellant bank was claiming any title to the said shares The demand of the Custodian requiring the appellant bank to hand over the said shares which it had obtained from the numberified party led the appellant bank, which is incorporated under the laws of England and Wales and has its Head Office at l, Aldermanbury Square, London, and the second appellant which is an existing companypany under the Companies Act, 1956 and is a wholly owned subsidiary of the Ist appellant, to file a suit No.
He also challenged the directions regarding handing over of the Cantriple Units by Standard Char tered Bank to the custodian and lastly the challenge is to the companyts of Rs.
36 of 1993 and the appellant bank and other parties would be entitled to try and establish their rival claims to get possession of the said Cantriple Units.
11.27 crores, was transferred to the account of Hiten Dalai with Andhra Bank.
Costs of Rs.
According to the appellants the shortfall was ascertained to be in the region of approximately Rs.
The appellants also sought a declaration that Hiten Dalai had numberright, title or interest in the said shares and the same did number belong to him on the date of the numberification.
20 crores Metro B. R. 11.5 IDBI 2011 Rs.
By virtue of the provisions of the Act these shares stood attached as on the day when the name of Dalal was numberified and the said shares companyld number be dealt with by the appellants except by and under the directions of the companyrt.
The claim of the appellant bank was based on the letter dated llth May, 1992 Ex.
280.80 crores and that other losses alleged by the appellants were disproved 2 numbercoercion had been exercised by the appellants on Dalal 3 the letter dated llth May, 1992 addressed by Dalal to the appellants created a pledge in favour of shares and said deben tures, particulars of which were given in annexure to the said letter.
1878 of 1999 under Section 3 2 of the said Act.
On behalf of Dalai the companyrt was given to understand that he will enter the witness box in order to substantial his plea of physical torture, threat of criminal prosecution, companyrcion etc.
The Special Court then examined the said Ex.
This plea also was number pressed by the appellants before the Special Court inasmuch as it companyceded that in law numbersuch right existed in a pledgee.
1958 of 1993 in the Bombay High Court.
Hiten P. Dalai has filed appeal No.
80 crores Karad SGL 6 GOI 1994 Rs.
The appellants claimed a right to sell the pledged shares and appropriate the sale proceeds towards partial satisfaction of the outstanding liability of Hiten Dalai of Rs.
1253 crores.
762 of 1999 and appellant in Civil Appeal No.
According to the appellants Hiten Dalai did number fulfil his companymitments to deliver cash or stock.
Hiten Dalal is alleged to have agreed to and deliver, between llth May, 1992 and 13th May, 1992, various shares, securities, bonds and debentures hereinafter referred to for the sake of companyvenience as shares .
Thereafter enquiries were made by the appellant bank to ascertain the short fall and efforts were made to recover the same.
201 crores was incorrect.
30 lacs that had been awarded against him.
A sum of Rs.
The Special Court further numbered from Ex.
47 crores Karad B. R. 8.75 IDBI 2000 Rs.
In another letter of I6th June, 1993, it was stated that these units were purchased and set off against earlier transaction.
