CITI BANK N.A. versus STANDARD CHARTERED BANK AND ORS.

Citation: [2003] SUPP. 4 S.C.R. 489 · Decided: 08-10-2003 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

CITIBANK N.A. 
A 
v. 
STANDARD CHARTERED BANK AND ORS. 
OCTOBER 8, 2003 
[R.C. LAHOTI AND ASHOK BHAN, JJ.] 
B 
Contract Act, 1872-Section 63-Performance of Contract-Transfer 
of Bonds-By one Bank to another Bank-Subsidiary General Transfer 
Form given by first bank in favour of second bank-Dishonoured-Further 
transfer of the Bonds in favour of third Bank-Bankers Receipt given in C 
lieu of the Bonds-Bankers Receipts duly discharged returned by third 
Bank asking for Subsidiary General Ledger transfer in favour of second 
Bank from the first Bank-Demand was voluntary with knowledge about 
the dishonour-Ledger given-Interest on the Bonds received by third 
Bank from a third party-After 9 months of transaction, demand of Bonds D 
or money in lieu of it by third Bank from second Bank-Second Bank 
stating that liability to deliver Bond stood discharged on delivery of the 
Ledger-Suit by third Bank demanding delivery of the Bonds-Name of the 
party from whom it got interest on Bonds not disclosed-Suit by Second 
Ban.k on plea that in case of decree against it in suit by third Bank, it was 
entitled for decree against first Bank-Both suits decreed by Special E 
Court-On appeal, held: Second Bank was discharged of its obligation to 
deliver the Bonds-The obligation was substituted by delivery of Bankers 
Receipts-Duly discharged Receipts raised rebuttable presumption that the 
Bank had discharged its obligation which the third Bank failed to 
dislodge-Adverse inference could be drawn against third Bank failed to F 
disclose material fact in the suit-Evidence Act, 1872--Section 114 
illustration (i) and (g). 
Can bank Mutual Fund (CMF) purchased securities (11.5% GOI 
2009 Bonds) from the Bank of Karad and the same was purchased 
from CMF by Citi Bank. Total consideration was paid and CMF G 
handed over their Subsidiary General Ledger (SGL) Transfer Form 
to Citi Bank in order to enable it to get the securities transferred in 
· " their name in the Ledger maintained by CMF with Reserve Bank of 
India (RBI). On presentation of SGL Transfer Form with RBI, the 
same was dishonoured due to insufficient balance. Citi Bank agreed to H 
489 
490 
SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. 
A sell the Bonds to Standard Chartered Bank (SCB) against receipt of 
purchase price i.e. 50 crores which was duly paid by SCB. Since the 
Bonds were not ready, Citi Bank issued two Bankers Receipt (BRs) 
dated 18th and 19th September 1991 with understanding that the 
Bonds will be delivered when ready in exchange of the BRs. SCB by 
B a letter dated 19.9.1991 requested Citi Bank to deliver the SGL Forms 
issued by CMF in exchange of the two BRs. Along with the letter SCB 
sent the two BRs. Citi Bank delivered the SGL Forms issued by CMF 
in its favour of the face value of Rs. 44.8505. crores and their own SGL 
Form of the face value of Rs. 5,41,95,000 in exchange of the two BRs. 
C On 8.10.1991 SCB addressed a letter to CMF requesting it to issue a 
fresh SGL Transfer Form in its name in lieu of SGL Transfer Form 
received by it from the City Bank. During trial CMF denied to have 
received the letter dated 8.10.1991. SCB also received the interest on 
the Bonds from a third party whose name was not disclosed by it in 
D ·the plaint. SGL Form of City Bank was duly encashed by SCB. Nine 
months· after the transaction, SCB sent a notice to City Bank to 
handover to. SCB, consideration of Rs. 44,8505 crores with further 
interest in respect of the Bonds as the same were not delivered to 
them. Citi Bank replied to the notice that its liability to deliver the· 
E Bonds under the contract stood discharged on delivery of SGL Forms 
to them. 
SCB filed a suit in Federal Court, New York, as well as in a High 
Court in India. The suit in Federal Court was dismissed in view of the 
Suit in India. Plea of SCB in the suit was that it did not receive the 
F Bonds; that Citi Bank impliedly warranted that CMF would transfer 
the Bonds and on its failure Citi Bank was obliged to deliver the same; 
that action of Citi Bank was fraudulent and amounted to deceit : and 
that "useless" and "worthless" SGLs were given by City Bank. Citi 
Bank filed suit in Special Court against SCB, CMF and its Trustees 
G pleading that in th~ event of decree being passed against it in s1;1it filed 
by SCB, it was entitled to a decree against CMF. Suit pending in High 
Court was also returned to the Special Court. In written statement in 
the suit filed by Citi Bank, SCB took additio

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