2015 Supreme(SC) 824

SUPREME COURT OF INDIA
V. GOPALA GOWDA, R. BANUMATHI, JJ.
STANDARD CHARTERED BANK – APPELLANT
Vs.
ANDHRA BANK FINANCIAL SERVICES LTD & ORS. – RESPONDENTS
CIVIL APPEAL NOS.9540-9541 OF 2010
Decided on : 28-08-2015

IMPORTANT POINTS
Under Article 91(a) of the Limitation Act, 1963, knowledge must be of the identity of a specific person in whose possession the bonds are and that person must have acquired the possession of the said bonds under an arrangement, constituting wrongful conversion.
Suit bonds are movable property capable of being possessed.
“First learns” in Article 91(a) cannot be construed without attributing to it certain degree of knowledge.

Headnote:(a) Limitation Act, 1963 – Article 91(a) – Illegal conversion of bonds – Knowledge must be of the identity of a specific person in whose possession the bonds are – That person must have acquired the possession of the said bonds under an arrangement, constituting wrongful conversion – The knowledge of a specific person against whom the suit can be instituted is crucial – Mere suspicion or conjecture about knowledge – Not enough for period of limitation to start running. (Para 14, 18)

       AIR 1961 SC 1474 – Relied upon

       (1935) ILR 60 Bom 848; AIR 1926 Cal 65; AIR 1928 Cal 646 – Cited with approval

       Muthu Koraki Chetty – Referred

       (2006) 6 SCC 94; AIR 1929 PC 69 – Distinguished

       (b) General Clauses Act, 1897 – Section 3(36) – Movable property – Suit bonds – Movable property – Capable of being possessed. (Para 16)

       (c) Limitation Act, 1963 – Article 91(a) – Phrase “first learns” – “First learns” cannot be construed without attributing to it certain degree of knowledge – Article 91(a) places a burden of knowledge which is rather specific in nature. (Para 18)

       (d) Indian Evidence Act, 1872 – Section 159, 160 – Meeting taking place in 1992 – Witness deposing in 2009 – Recalling his being present in the meeting on 07.11.1992 – Not recalling other details of the meeting – Not unusual in view of lapse of time. (Para 26)

       (e) Code of Civil Procedure, 1908 – Order VIII Rule 5 – Appellant SCB claiming knowledge of illegal conversion on 07.11.1992 in a meeting – Defendant CMF not denying the averment – Deemed to be admitted – Meeting on 07.11.1992 established on evidence – Special court erred in holding otherwise. (Para 26, 27)

       (1999) 8 SCC 396 – Relied upon

       (f) Limitation Act, 1963 – Article 91(a) – Meeting in the office of CMF on 07.11.1992 established – On that date SCB came to know about dummy transaction between CMF and Hiten P. Dalal regarding the 9% and 17% NPCL bonds – SCB could not have said knowledge on suggested alternative dates prior to 07.11.1992 – Period of limitation would start running only on 07.11.1992. (Para 29, 53)

       (g) Code of Civil Procedure, 1908 – Section 34 – Claim of appellants decreed – Decree not challenged – Appellant entitled to the adjudged principal amount – Appellant also entitled to interest pendente lite and future interest – Section 34 confers discretionary power on Court to award appropriate interest – Suit instituted on 27.11.1992 – Respondent nos.2-10 impleaded by way of amendment, on 10.01.1996 Appellant entitled to interest from that date – Interest awarded @6% per annum. (Para 53, 54)

       

       Facts of the case:

       The National Power Corporation Limited (“NPCL”) issued bonds of two series in December, 1991. These were the 9% tax-free bonds and 17% taxable bonds. On 26.02.1992, the said bonds were allotted by NPCL to the Andhra Bank Financial Services Limited (“ABFSL”), respondent no. 1 herein. On the same day, ABFSL sold the 17% taxable bonds of the face value of Rs. 50 crores to the appellant-Standard Chartered Bank (“SCB”). The total amount of Rs.48,02,50,000/- was paid to ABFSL by way of Pay Order on the same day. A Banker’s Receipt No. 23727 was issued to the appellant by the ABFSL acknowledging the said payment. The receipt also stated that the delivery of the bonds would be done later.

       On 26.02.1992, SCB sold 17% bonds of the face value of Rs. 50 crores to ANZ Grindlays Bank (“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 obtained the possession of the said original letter of allotment and delivered it to Canara Bank Mutual Fund (“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.

       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.

       On 20.06.1992, SCB filed a First Information Report against the broker Hiten P. Dalal and requested the Central Bureau of Investigation to inquire into the scam perpetrated on SCB by Hiten P. Dalal.

       On 27.11.1992, SCB filed Suit No. 6 of 1994 against ABFSL for the recovery of the principal amount of Rs.48,02,50,000.00, representing the consideration paid by SCB to ABFSL against the transaction of purchase of 17% NPCL bonds of the face value of Rs. 50 crores.

       Pursuant to the FIR dated 20.06.1992, the CBI filed a charge sheet on 16.06.1995. On 20.10.1995, SCB filed an application for amendment of the suit and to include Hiten P. Dalal and CMF as party respondents and to file claim against the said respondents in the alternative to the claim preferred by SCB against ABFSL.

       The Special Court came to the conclusion that SCB has succeeded in proving that they had purchased 17% taxable NPCL bonds. It also found that Hiten P. Dalal had not succeeded in proving that he was the owner of the suit bonds, and that SCB was entitled to file a suit for conversion against Hiten P. Dalal and CMF.

       The Special Court, thus, while accepting the fact of conversion of the bonds in question, dismissed the suit as against Hiten P. Dalal and CMF as the said amendment was barred by limitation.

       Finding of the Court:

       Period of limitation would start form 07.11.1992.

       Appellant is entitled to the adjudged principal amount as also interest pendente lite and future interest.

       Result: Appeals allowed with interest and cost.