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1999 Supreme(Del) 461
High Court Of Delhi
NATIONAL THERMAL POWER CORPORATION LIMITED - Appellant
Versus
CANARA BANK - Respondent
Company 23 of 1996
Decided On : 07/06/1999
A.M.SANGHVI, A.N.HAKSAR, Anil Seth, ARUN JAITLEY, J.C.SETH, JAI SAVLA, Manoj Sharma, SUNITA DUTT
Disputes between public sector undertakings, including those involving trusts controlled by public sector banks, should be referred to the High Powered Committee of Secretaries for resolution, in accordance with the Supreme Court's decision in Oil and Natural Gas Commission and Am. v. Collector of Central Excise.
Headnote:
COMPANY LAW - SECTION 111(7) - REDEMPTION OF BONDS - ADJUSTMENT OF AMOUNTS DUE - JURISDICTION OF COMPANY LAW BOARD - TRUST - REGISTRATION OF BONDS - SET-OFF - PUBLIC SECTOR ENTERPRISES - DISPUTES - HIGH POWERED COMMITTEE OF SECRETARIES.
Fact of the Case:
NTPC and PGCI issued bonds to Canbank Mutual Fund, a trust constituted under the Indian Trusts Act, 1882, with Canara Bank as the settlor and principal trustee. The Mutual Fund purchased bonds from Canfina, a subsidiary of Canara Bank, and lodged them with NTPC and PGCI for registration in the name of the Mutual Fund through Canara Bank as its principal trustee. However, the appellants refused to register the transfer or pay interest on the bonds, claiming that the Mutual Fund could not be registered as a member in the register of members maintained by them due to the prohibition under Section 153 of the Companies Act, 1956. The Mutual Fund filed petitions before the Company Law Board (CLB) for rectification of the register under Section 111(4) of the Act.
Finding of the Court:
The CLB directed NTPC and PGCI to redeem the bonds and pay the redemption amount along with arrears of interest directly to the Mutual Fund, without making any adjustment for the redemption amount due to them from Canara Bank. The appellants challenged this order, arguing that the CLB lacked jurisdiction to proceed with the matter as the petitioner, Canara Bank, was a public sector corporation and disputes between public sector undertakings should be referred to the High Powered Committee of Secretaries in accordance with the Supreme Court's decision in Oil and Natural Gas Commission and Am. v. Collector of Central Excise. They also contended that the Mutual Fund, being a trust, could not be registered as a member in the register of members maintained by them due to the prohibition under Section 153 of the Act, and that they were entitled to adjust the amounts due against the bonds towards their dues from Canara Bank.
Issues: 1. Whether the CLB had jurisdiction to proceed with the matter in light of the Supreme Court's decision in ONGC's case? 2. Whether the Mutual Fund, being a trust, could be registered as a member in the register of members maintained by NTPC and PGCI? 3. Whether the appellants were entitled to adjust the amounts due against the bonds towards their dues from Canara Bank?
Ratio Decidendi: 1. The court held that the disputes between the parties could be said to be disputes between two public sector undertakings, as the Canara Bank had pervasive control over the Mutual Fund and its transactions with the appellants had a connection with transactions between the appellants and Canfina, a subsidiary of Canara Bank. Therefore, the disputes should be referred to the High Powered Committee of Secretaries in terms of the decision in ONGC's case. 2. The court did not consider the issue of whether the Mutual Fund could be registered as a member in the register of members maintained by NTPC and PGCI, as it deemed it unnecessary in light of its decision to refer the disputes to the High Powered Committee. 3. The court did not consider the issue of whether the appellants were entitled to adjust the amounts due against the bonds towards their dues from Canara Bank, as it deemed it unnecessary in light of its decision to refer the disputes to the High Powered Committee.
Final Decision: The court disposed of the appeals by directing that the disputes be referred to the High Powered Committee of Secretaries in terms of the decision in ONGC's case. The Committee was to deal with the matters expeditiously and endeavor to resolve them to avoid further litigation. If the Committee was unable to resolve the matters, it was to grant clearance for litigation to enable the parties to take recourse to the proceedings as may be available to them in law.
( 1 )
( 2 ) WITH the consent of Counsel for the parties, the appeals are taken up for final disposal at this stage itself.
( 3 ) THESE three appeals under Section I OF of the Companies Act, 1956 (for short the Act); two by the National Thermal Power Corporation (hereinafter referred to as the NTPC) and one by the Power Grid Corporation of India (hereinafter referred to as the PGCI), have been preferred against the orders passed by the Company Law Board (for short the Board) under Section 111 (7) of the Act, directing the appellants to redeem certain bonds issued by them and pay the redemption amount alongwith arrears of interest directly to Canbank Mutual Fund (for short the Mutual Fund), a Trust constituted under the Indian Trusts Act, 1882, without making any adjustment for the redemption amount, if any, due to them from Canara Bank, the settlor and the principal trustee of the said Trust.
( 4 ) SINCE the issues arising for consideration in all the three appeals are common, it would be expedient and convenient to dispose them of by this common order.
( 5 ) BRIEFLY stated the facts giving rise to the appeal by PGCI (Appeal No. 17/1996) are that on or around 20 March, 1992 the Mutual Fund purchased 17% bonds of the appellant Company of the face value of Rs. 80 crores from Canbank Financial Services Limited (hereinafter referred to as the Canfina), a subsidiary of the Canara Bank. Out of the bonds purchased, the Mutual Fund sold bonds of the face value of Rs. 20 crores. Canfina delivered to the Mutual Fund letters of allotment in relation to the bonds of the face value of Rs. 48 crores with transfer deed endorsed in favour of "canara Bank- Trustee Canbank Mutual Fund". The Custodian of the Mutual Fund lodged the said bonds on or about 7 December, 1992 with the appellant for registration in the name of Mutual Fund through Canara Bank as its principal trustee. However, despite various requests, the appellant neither registered the transfer nor paid the interest due thereon. Being aggrieved, the respondent filed a petition for rectification of the register under Section I II (4) of the Act before the Board.
( 6 ) IN the case of NTPC (Appeal Nos. 22 and 23/1996) the Mutual Fund purchased 13% secured redeemable NTPC bonds of the face value of Rs. 57. 5 crores before 30 June, 1989 (subject matter of Appeal No. 22/1996) and 14% NTPC bonds of the face value of Rs. 2. 17 crores on 5 August, 1988 (subject matter of Appeal No. 23/1996 ). Letters of allotment were lodged with die NTPC on different dates for registration. The NTPC called for certain information, relating to the registration of the Mutual Fund as a Trust, resolution granting authority to persons concerned as well as the authority to register in the name of Canara Bank-Trustee Canbank Mutual Fund. On receipt of the information, the NTPC, however, registered the transfer in the name of Canara Bank and sent all the bonds and certificates alongwith interest warrants to Canara Bank. Out of the said bonds of Rs. 57. 5 crores, the Mutual Fund sold bonds worth Rs. 37. 5 crores to third parties and the balance bonda of the face value of Rs. 20 crores were sent to NTPC for splitting into smaller denominations. Despite various demands the NTPC did not register tile bonds in the name of "canara Bank-Trustee Canbank Mutual Fund", though the bonds sold by the mutual fund to other parties had been registered in their respective names after obtainingt no objection from Canara Bank. Aggrieved by the delay on the part of the appellant in entering the name of "canara Bank-Trustee Canbank Mutual Fund" in the register of bond holders the NTPC filed petitions before the Board.
( 7 ) THE petitions were resisted by the appellants, inter alia, on the ground : (1) the Board had no jurisdiction to proceed with the matter as the petitioner Canara Bank was a public sector Corporation as was the respondent and, therefore, inter-se disputes were required to be referred to the Committee of Secret
