ALL BANK FINANCE LTD Vs. CUSTODIAN

JUDGEMENT

(1.) This petition is filed by All Bank Finance Ltd. (hereinafter referred to for the sake of brevity as 'ABFL'). It is a company incorporated under the Companies Act, 1956. It carries on the business of merchant banking and in the ordinary and regular course of its business, it buys and sells shares and securities. ABFL is a non-banking financial Corporation. It is a subsidiary of Allahabad Bank. Its registered office is in Calcutta. It has an office in Bombay. This petition has been filed by ABFL for a declaration that the shares described in Exh. X to the petition came under pledge in their favour ; that the said pledge was valid and binding on respondent No. 2, M/s V.B. Desai and also on respondent Nos. 3 to 8, 9A, 10 and 11. ABFL has also sought a declaration that their rights as a pledgee in respect of the said shares, Exh. X, were not affected by notification of respondent Nos. 3 to 8, 10 and 11. (Respondent No. 9 - Harshad S. Mehta is since deceased). By this petition, ABFL has sought a declaration that it is entitled to sell and dispose of the said pledged shares in exercise of their rights as a pledgee and to appropriate the net sale proceeds towards the satisfaction of their dues from respondent No. 2. In the alternative, ABFL has prayed for withdrawal of the attachment of shares under the Special Courts (Trial of Offences Relating to Securities) Act, 1992, in order to enable ABFL to sell the shares and apply net realisation in or towards satisfaction of their dues. These are the basic prayers in the petition. Respondent No. 2-V. B. Desai is a proprietary firm carrying on business as shares and stock brokers. They are registered as brokers with the Bombay Stock Exchange through their proprietor J.R. Shroff.

(2.) The late Harshad Mehta died on 31 Dec., 2001. He was notified under the said Act, 1992, on 8 June, 1992, along with respondent Nos. 3, 4, 5, 6, 7, 8, 10 and 11. Recently, i.e., on 5 Oct., 2001, M/s V.B. Desai, respondent No. 2 was also notified under the Special Court (Trial of Offences Relating to Securities) Act, 1992.

(3.) By contract dated 9 April, 1992, ABFL bought from M/s V.B. Desai 60,000 shares of ACC at the rate of Rs. 10,000 per share. ABFL also bought 9 per cent IRFC bonds of face value of Rs. 1,000 each at the rate of Rs. 92.75 for a total aggregate face value of Rs. 42 crores. The consideration for ACC shares was Rs. 60 crores. The consideration for the 9 per cent IRFC bonds was Rs. 39,98,02,602.74. According to ABFL, it was a spot delivery transaction for which a Contract Note No. 8610 dated 9 April, 1992 (Exh. B) was issued by M/s V.B. Desai to All Bank Finance Ltd. On 9 April, 1992, M/s V.B. Desai also wrote a letter to ABFL recording purchase of the above two securities. Under the said letter, ABFL was requested to issue interbank cheque favouring Grindlays for Rs. 60 crores towards purchase of the ACC shares. By the said letter, ABFL was also requested to issue interbank cheque favouring SCB for purchase of the 9 per cent IRFC bonds. As per the said instructions of M/s V.B. Desai, ABFL paid full consideration for the ACC shares to Grindlays. They also paid full consideration for the bonds to SCB. The two interbank cheques are marked Exh. K collectively. They are drawn by Allahabad Bank (bankers for ABFL). Respondent No. 2, M/s V.B. Desai, also issued their delivery Order No. 4873 dated 9 April, 1992 (Exh. I) to ABFL to receive 60,000 ACC shares from Grindlays. Similarly, M/s V.B. Desai issued delivery Order No. 4616 dated 9 April, 1992, to receive delivery of 9 per cent IRFC bonds from SCB (Exh. J). Both the delivery orders were addressed to ABFL. Therefore, on full payment, ABFL received delivery on 9 April, 1992, of 60,000 ACC shares and 9 per cent IRFC bonds along with blank transfer forms duly signed.