CANARA BANK AND ORS. versus NATIONAL THERMAL POWER CORPORATION AND ANR.

Citation: [2000] SUPP. 5 S.C.R. 387 · Decided: 05-12-2000 · Supreme Court of India · Bench: K.T. THOMAS · Disposal: Appeal(s) allowed

Judgment (excerpt)

CANARA BANK AND ORS. 
A 
v. 
NATIONAL THERMAL POWER CORPORATION AND ANR. 
DECEMBER 5, 2000 
[K.T. THOMAS AND R.P. SETHI, JJ.) 
B 
Companies Act, 1956-Sections Ill and 153-Mutual Fund under the 
Trusteeship of a Public Sector Bank-Purchase of bonds of Public Sector 
Corporation by the Trust from a banking company, which subsequently went 
into liquidation-Deposit of bonds by Trustee with Corporation for registration C 
in the name of Trustee-Refusal of registration for want of 'no objection 
certificate' from the banking company which sold the bonds-Corporation 
adjusting redemption proceeds of the bonds against other dues of the Trustee-
Reference of disputes to High Powered Committee by High Court-Held, there 
is no genuine dispute for reference to High Powered Committee-Corporation D 
cannot adjust redemption proceeds as the bonds are held in trust. 
Appellant-Public Sector Bank as Principal Trustee/Settler created a 
trust Can bank Mutual Fund (CBMF) through which it conducted business 
of mutual fund. In August 1988, the CBMF purchased bonds of Respondent-
Public Sector Corporation worth Rs. 2.17 crores through a stock broker E 
from Bank of Ka rad, the respondent Banking Company. CBMF lodged he 
bonds in different lots during 1992-93 with the Corporation for registration 
of the same in the name of the trustee. Meanwhile, the Banking Company 
went into liquidation. The Corporation wanted a no-objection certificate from 
Official liquidator of the Banking Company before registering the transfer 
of bonds. Appellant-bank requested the Liquidator of the Banking Company F 
to issue the no-objection certificate in favour of CBMF to the Corporation 
stating that the purchase of bonds was bona fide and that the transaction had 
taken place much prior to the relevant period prescribed under Section 531 
of the Companies Act, 1956. On failure to get the required certificate from 
the Liquidator of the Banking Company, the Corporation returned baclt the G 
original bond certificates to CBMF. Appellant-Bank filed an appeal before 
Company Law Board under Section 111 of the Companies Act, 1956 against 
the Corporation for direction to transfer the bonds in the name of the trustee 
and to pay redemption proceeds with interest at 24% from the date of maturity 
till the date of payment. The Board held that in view of restriction imposed 
H 
387 
388 
SUPREME COURT REPORTS rzooo] SUPP. 5 S.C.R. 
A under Section 153 of the Companies Act, 1956, only the name of the appellant-
Bank can be entered in register of holdings and not the name of the trustee. 
The Board, however, held that the Corporation cannot adjust the redemption 
proceeds against dues of the appellant-bank as the bonds were held in trust. 
The Board further held that the dictum of this Court in Oil & Natural Gas 
B Commission and Anr. v. Collector of Central Excise, [1995) Supp. 4 SCC 541 
for reference of dispute to High Powered Committee was not applicable to 
the facts of the case. On appeal by the Corporation, High Court set aside the 
orders of the Board and referred the disputes to the High Powered Committee. 
Hence these appeals. 
C 
Appellant-Bank contended that the reference of disputes to High 
Powered Committee was not necessary as there did not exist a genuine dispute 
between the parties. 
Allowing the appeals, the Court 
D 
HELD : 1.1. The judgment in ONGC 's case is intended to prevent frivolous 
litigation between the Government Departments and Public Sector 
Undertakings in the Courts and resolve the disputes amicably by the High 
Powered Committee specially set-up for the purpose. There does not appear 
to be a genuine dispute between the Government of India undertakings. The 
Board was justified in holding th.it the real litigation is between CBMF and 
E the Corporation and not between the two undertakings. The claim preferred 
on behalf of CBMF was not denied by the Corporation but in turn a counter 
claim with respect to the liability of a subsidiary of the Bank was raised. The 
dispute raised is without laying any basis or placing on record any evidence 
in support thereof. Imaginative disputes raised only to defeat the undisputed 
F claim of the Trustee could not be made the basis to deprive the Trustees and 
ultimately the public at large, of the value of the bonds which had, admittedly, 
been received by the Corporation with unambiguous undertaking to repay 
the same. [395-B-E) 
1.2. The bonds were transferable and the Corporation was under 

Excerpt shown. Read the full judgment & AI analysis in Lexace.