Supreme Court of India Standard Chartered Bank vs Andhra Bank Financial Services Ltd. & ... on 5 May, 2006 Equivalent citations: AIR 2006 SUPREME COURT 3626, 2006 (6) SCC 94, 2006 AIR SCW 3460, 2006 CLC 1029 (SC), 2006 (7) SRJ 104, 2006 (5) SCALE 384, 2006 (83) SUPREME 238, (2006) 4 SUPREME 238, 2006 ALL CJ 3 2307, (2006) ILR (KANT) 3415, (2006) 7 SCJ 459, (2006) 72 CORLA 102, (2006) 5 SCALE 384, MANU/SC/2534/2006 CASE NO.: Appeal (civil) 2275 of 2002 PETITIONER: Standard Chartered Bank RESPONDENT: Andhra Bank Financial Services Ltd. & Ors. DATE OF JUDGMENT: 05/05/2006 Y.K. Sabharwal, B. N. Srikrishna & P.P. Naolekar JUDGMENT: J U D G M E N T with Civil Appeal No. 2276 of 2002 SRIKRISHNA, J. These two appeals under Section 10 of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as "the Act") are against the judgments of the Special Court constituted under Section 5 of the Act, by which judgments the Special Court dismissed Special Court Suit No. 11/96 and allowed Misc. Petition No. 81/95, which had been transferred to it. As a result of the said two judgments of the Special Court, the claim made by the appellantStandard Chartered Bank (hereinafter referred to as "SCB") was negatived in dismissed Suit No. 11/96, and the application made by Canara Bank as principal trustee of Canbank Mutual Fund (hereinafter referred to as "CMF") for a direction to Nuclear Power Corporation of India Ltd. (hereinafter referred to as "NPCL") to register CMF as the owner of certain bonds and to pay the interest payable thereon was allowed. FACTS: Sometime in December 1991, NPCL issued bonds of two series 9% tax free bonds and 17% taxable bonds. These bonds were permitted by the Controller of Capital Issues to be sold to banks and financial institutions for private placement. On 24.2.1992 Andhra Bank Financial Services Ltd. (hereinafter referred to as "ABFSL") made an offer to NPCL for placing Rs. 100 crores  Rs. 50 crores in 9% tax free bonds and Rs. 50 crores in 17% taxable bonds. On 26.2.1992 NPCL wrote to ABFSL confirming the allotment of the 9% tax free bonds and the 17% taxable bonds, as requested. On 26.2.1992, NPCL issued a letter of allotment (hereinafter referred to as the "LOA") confirming the allotment of 9% tax free bonds of the nominal value of Rs. 50 crores (hereinafter referred to as the "suit bonds"). NPCL also said that intimation would be given in due course as to when the allotment letter duly discharged may be exchanged for bond certificates, and that the interest payable on the suit bonds would accrue from the date of allotment, payable on half yearly basis. On the same day ABFSL sold the suit bonds to SCB and in connection with the said sale issued its Cost Memo No. 057 dated 26.2.1992 indicating the particulars of the suit bonds and the cost at which they were being sold i.e. @ 85.05 at the total cost of Rs. 42,52,50,000/. Against the receipt of the said Cost Memo No. 057 from ABFSL, SCB issued a Pay Order No. 246408 dated 26.2.1992 for the sum of Rs. 42,52,50,000/. ABFSL, in turn, issued a Banker's Receipt (hereinafter referred to as "BR") No. 23728 acknowledging receipt of the sum of Rs. 42,52,50,000/ from SCB towards the cost of the suit bonds and undertook to deliver the suit bonds of the value of Rs. 50 crores, when ready, in exchange for the said BR duly discharged, and assured that, in the meantime, the suit bonds would be held on account of SCB. On 26/27.2.1992, ABFSL addressed a letter to SCB requiring SCB to hand over its BR No. 23728 in lieu of the original LOA in respect of the suit bonds as well as the 17% NPCL taxable bonds, which were said to have been enclosed with the said letter. According to SCB, in April/May 1992, when the securities scam broke out, the officers of SCB made an investigation of its records and found that SCB did not have in its possession the original LOA, but only a photocopy. On 20.5.1992, SCB wrote to NPCL alleging that though in ABFSL's letter dated 26.2.1992, it was stated that the original LOA was forwarded, SCB had found that only a photocopy of the LOA had been enclosed. A copy of ABFSL's concerned letter was also enclosed. SCB further stated that the original LOA purportedly sent by ABFSL was not available, that a note may be made in NPCL's records that the original LOA was missing and, therefore, due caution should be exercised by NPCL. SCB also requested for issue of a duplicate allotment letter on the undertaking to return the original, if received by it, and keeping NPCL indemnified against claims, if any, arising out of issue of the duplicate. On 29.5.1992, SCB requested ABFSL to confirm to NPCL the fact of having sold the suit bonds to SCB. On the same date, ABFSL addressed a letter to NPCL (with a copy endorsed to SCB), confirm