CANBANK FINANCIAL SERVICES versus CUSTODIAN AND ANR.

Citation: [2004] 3 S.C.R. 1100 · Decided: 12-04-2004 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
CANBANK FINANCIAL SERVICES 
v. 
CUSTODIAN AND ANR. 
APRIL 12, 2004 
[S. RAJENDRA BABU, DR. AR. LAKSHMANAN AND 
G.P. MATHUR, JJ.] 
Special Court (Trial of Offences Relating to Transal:tions in Securities) 
C Act, 1992: 
S.3-Share broker notified under the Act-Money received as sale 
proceeds of shares belonging to a customer sold by share broker-Attachment 
of-Held, the money belongs to the customer and the share broker was holding 
the same in trust-Even if the share broker blended the money with his own 
D money, s. 66 of Trusts Act arms the court to impose a charge on the whole 
property of the trustee to the extent of amount due-Customer is entitled to the 
amount-Indian Trusts Act, 1882--s.66. 
Respondent No. 2, a share broker, sold shares belonging to the 
appellant, for a certain amount. The payment was not made to the 
E appellant. Meanwhile respondent No. 2 was notified under s.3 of the 
Special Court (Trial of Offences Relating to Transactions in Securities) 
Act, 1992. The appellant filed an application before the Special Court for 
a declaration that attachment of the amount received by respondent No. 
2 on sale of its shares was void as it was not the property belonging to 
him, and the same be released in favour of the appellant. The Special 
F Court dismissed the application. Aggrieved, the appellant filed the present 
appeal. 
It was contended for the appellant that respondent No. 2 merely 
acted as an agent on its behalf and as such held the amount recovered 
from the sale in trust for and on behalf of the appellant, and the custodian 
G ought not to have attached the said amount as it was not the property 
belonging to respondent No. 2. 
H 
Allowing the appeal, the Court 
HELD: I. I. The relationship between a share broker and the 
1100 
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C/\NBANK FINANCIAL SERVICES r. CUSTODIAN [RAJENDRA BABU, J.] 
1101 
) .. J 
customer is one of trust. Admittedly, respondent No. 2 was asked to sell A 
I 
... 
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shares for and on behalf of the appellant. Thus the proceeds of such sale 
cannot be treated as property belonging to him. It belongs to the appellant, 
and respondent No. 2 was only holding the same in trust. In this view of 
the matter, the attachment under s.3 of the Special Court (Trial of Offences 
Relating to Transactions in Securities) Act, 1992 cannot extend to 
appellant's money and, therefore, appellant is entitled to get back its 
money. 11102-G-H; 1103-AI 
Harshad S. Mehta v. Custodian and Ors., 119981 5 SCC 1, relied on. 
1.2. Even if respondent No. 2 blended the property/money with that 
of his own money, under s.66 of the Indian Trusts Act, 1882, the appellant 
is entitled to a charge on the whole fund for the amount due. Therefore, 
Special Court could not have burdened the appellant to locate the 
particular account in which the money is credited so as to claim it back. 
Section 66 of the Trusts Act arms the Court to impose a charge on the 
whole property of the trustee to the extent of amount due. The appellant 
is entitled to the amount claimed by it out of the assets of respondent No. 
2. Special Court would work out appropriate modalities for refund of 
the amount due to the appellant at an appropriate stage. (114-D-G] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 166of1994. 
From the Judgment and Order dated 14.9.93 of the Special Judge in 
Special Court Bombay in M. Appln. No. 22 of 1993. 
Rohit Kapadia, Ms. Sumita Dutt, Pradeep, Nilesh Parikh and Ms. Pooja 
Jha for M/s. Janendra Lal & Co., the Appellants. 
Jay Savla, Ms. Reena Bagga, A. Subba Rao and P. Parmeswaran, (NP) 
for the Respondents. 
The Judgment of the Court was delivered by 
B 
c 
D 
E 
F 
RAJENDRA BABU, J. Facts leading to this Appeal are as follows: 
G 
Appellant engaged Respondent No. 2 as a broker to sell I 0,00,000 
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shares of Reliance Petro Chemicals Ltd. at the rate of Rs. 29 per share. It is 
said that those shares were sold and the Respondent No.2 is liable to collect 
the sale proceeds and pay the same to Appellant. The payment was, however, 
not made. In the meanwhile, Custodian appointed under Section 3 of Special H 
f 
1102 
SUPREME COURT REPORTS 
[2004] 3 S C.R. 
A Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 
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(the Act) notified Respondent No.2, whereby all properties bdonging to him 
stood attached. Appellant filed a Petition before the Special Court for a 
declaration that the sum of Rs. 2.90 crores received by Respondent No 2 on 
behalf of Appellan

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