PRADEEP NANDRAJOG, J.

( 1 ) ON 7. 2. 1992, appellant, Power Grid Corporation of India Ltd. (here-in- after referred to as PGCIL) a Government Company incorporated under Section 617 of the Companies Act, 1956 earlier named as National Power Transmission corporation obtained approval from the Central Government for issue of taxable/tax free bonds. Inter alia, condition of the consent recorded :- it is a condition of the consent that the company will be subject to any measures of control, licensing, or acquisition that may be brought into operation either by the Central or any State Government or any authority therein.

( 2 ) CANBANK Financial Services Ltd. (here-in-after referred to as Canfina), a company wholly owned by Canara Bank, vide it s letter dated 6. 3. 1992 offered to subscribe to 17% taxable bonds of the face value of Rs. 80 crores on the terms and conditions set out in the said letter. Being relevant, entire contents of the letter dated 6. 3. 1992 may be noted. It reads :"the Director (Finance) national Power Transmission corporation Ltd. , 89, Nehru Place, New Delhi. Dear Sir, sub: Private Placement of Bonds Aggregating to Rs. 100 crores (Taxable ). Referring to your subject bond issue and our discussions on the subject matter we are pleased to inform you that we are agreeable to subscribe to your bond issue to the extent of Rs. 80 crores including the OTC portion on the following terms: (a) The subscription will be made at par. (b) The coupon rate shall be 17. 00% p. a. (c) An all inclusive fee @ 4. 00% on our entire subscription of Rs. 80 crores will be payable by NTPC to us. The payment of this fee will be made separately by NTPC immediately on allotment. (d) NTPC shall invest Rs. 16. 80 crores @ 11% p. a. with us on the date of allotment. This shall be repaid after three months from the date of allotment. (e) NTPC shall invest Rs. 60 crores with us on the date of allotment for one year under the Portfolio Management Scheme. This investment shall generate an indicative yield of 12% p. a. (f) The investments mentioned in para (d) and (e) above shall be made in govt. of India securities/psu Bonds/ncds/mutual Fund instruments/equities/units of UTI etc. Our other terms and conditions for subscribing to the issue are enclosed. The offer is valid till 10. 03. 92. We shall be thankful for your favourable consideration of our offer. Thanking you, yours faithfully, for CANBANK FINANCIAL SERVICES LTD. sd/- Illegible (K. S. Prabhu) sr. Project Manager. "

( 3 ) RESPONDING to Canfina s letter dated 6. 3. 1992, on 9. 3. 1992 appellant wrote a letter indicating it s willingness to allot 17% taxable bonds. The letter reads as under :"m/s. Canbank Financial Services Ltd. 1e, Vandhna Building, 11, Tolstoy Marg, new Delhi. Sub: Allotment of 17% Secured Redeemable Non-Cumulative taxable Bonds of rs. 1000/- each at par-1st issue. (Private Placement ). Dear Sir, we refer to your letter No. DCAN/bomdi/92 dt. 6th March, 1992 and showing your interest for allotment of 17% Secured Redeemable non-cumulative taxable Bonds of rs. 1000/- each at par 1st issue (Private Placement ). Your offer has been considered by the Management and we are pleased to advise that NTPC is agreeable to make the firm allotment of the Bonds on the following terms and conditions :- 2. Terms and conditions of Allotment of Bonds: 2. 1 Category of Bonds: 17% Secured Redeemable non-cumulative taxable bonds of rs. 1000/- each issued at par and repayable at par after the expiry of 7 years from the date of allotment. 2. 2 Value of Bonds: Rs. 80 crores. 2. 3 Allotment : Firm allotment would be made after the aforesaid amount of rs. 80 crores has been credited in a separate Bank Account to be opened by NTPC for the said purpose with Canara Bank, Janpath Branch, New Delhi. 2. 4 Fee: An all inclusive fee shall be payable at the rate of 4% on the total value of Bonds allotted. 2. 5 Deployment of funds: In consideration of Canbank Financial Services ltd. having agreed to subscr

Click Here to Read the rest of this document