PRAKASH WADHWA Vs. INCAB INDUSTRIES LIMITED

JUDGEMENT

(1.) The only relief sought by the appellant against respondent No.3 was to direct it to pay Rs.2,000/- as penalty for misleading investors that it was working as trustee for debenture holders whereas in fact it did nothing except collecting its hefty fee for working as trustees.

(2.) Admittedly the appellant invested Rs.5,000/- with respondent No.1 M/s. Incab Industries Ltd. , Non-redemption of 12.5% secured non-convertible debenture of Rs.50/- each. The NCDs were redeemable in three instalments and as per terms respondent No.1 agreed to pay interest @ 12.5% half years. Inspite of the appellant having surrendered the full discharged debenture certificates no redemption proceeds were paid nor was any interest paid to him.

(3.) While exonerating the respondent No.3 ICICI Bank or its liability to pay any compensation on account of deficiency in service the learned Counsel for respondent No.3 has contended that it was in the knowledge of the debenture holders that trustee can initiate action in case of default only if they are so authorised in the meeting of the debenture holders convened by not less than 3/4 of the debenture holders and in the instant case the trustees were never authorised by the debenture holders to initiate any legal action against the defaulting company and as such there is no deficiency in service on the part of respondent No.3. It is further contended by the Counsel that there was no personal liability of the debenture trustee to make any payment in case of default by company and their only obligation is to hold the security for the benefit of the debenture holders and in case of default sell the security and pay to the debenture holders if so authorised by the debenture holders. We do not find any substance in the aforesaid contentions as respondent No.3 is the trustees of the defaulting company. No trustee can abjure its liability for the default of the companies of which it happens to be trustee. If the contentions of the Counsel for respondent No.3 are accepted then the very concept of being trustee for somebody would dislodge its meaning.