CITIBANK N.A. versus STANDARD CHARTERED BANK

Citation: [2004] SUPP. 3 S.C.R. 1 · Decided: 07-07-2004 · Supreme Court of India · Bench: R.C. LAHOTI

Judgment (excerpt)

,I 
CITIBANK N.A. 
A 
v. 
STANDARD CHARTERED BANK 
JULY 7, 2004 
[R.C. LAHOTJ, CJ. AND ASHOK BHAN, J.) 
B 
Economic offences : 
Special Court (Trial of offences Relating to Transaction in Securities) 
Act. 1992 : 
C 
Purchase of !RFC bonds by Citybank from CANFINA-Delivery of 
two Banker Receipt by CANFINA against full payment-Citibank selling 
!RFC Bonds of certain value to CANFJNA-Jn consideration of payment, 
CANFINA issued fresh BR and one of the Banker Receipts issued earlier 
by CANFINA-Acceptance of BR~ by CANFINA-Citibank sells !RFC D 
Bonds of certain value to Standard Chartered Bank and issued BRs-BRs 
discharged and returned to Citibank-Suit for recovery qf bonds from 
Citibank filed by SCB and third party proceedings for non-performance 
filed by Citibank against CANFINA-Special Court decreed the suit' of SCB 
directing Citibank to pay certain sum by way of return consideration with E 
interest thereon and also decreed the suit of Citibank directing CANFINA 
to deliver the terms of the BR with coupon interest-Cross appeals-Held: 
Since original BR duly discharged by SCB and delivered back to Citibank, 
it raises a presumption in law that the BR duly discharged-SCB failed 
to rebut-Hence finding of Special Court that the BRs not absolutely F 
discharged by SCB cannot be accepted-SCB, a business concern 
presumably aware of terms of the non-transferable BR of CANFINA 
received from Citibank and accepted by it unconditionall~Hence, SCB 
did not accept it as an authority to collect the securities in lieu of condition 
of discharge-Jn the absence of any implied condition/warranty in the G 
transaction, the plea of implied warranty clearly an afterthought-Citibank 
is entitled to restitution of the total amount paid by it to Standard Chartered 
Bank with interest and in cross appeal CANFINA became entitled to 
restitution of the total amount paid by it to Citibank with interest-
Directions issued Evidence Act, 1872 Section 114 Illustration (i). 
H 
2 
SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R. 
A 
Indian Contract Act, 1872; Section 141 or Section 63. Applicability 
B 
of Held : Section 63 applicable-Special Court erred in applying Section 
41 of the Act, since in the facts and circumstances of the case, provisions 
of Section 63 of the Act attracted. 
Bankers Receipt-Meaning of in the context of Banking Law and 
Practice. 
Citibank, appellant in one of the appeals had purchased IRFC 
Bonds of the face value of Rs. 50 Crores and Rs. 65 Crores respectively 
from CANFINA appellant in another connected appeal. CANFINA in 
C consideration of full payment thereof issued Banker Receipt Nos. 1401 
and 1541 respectively. Later, Citibank sold IRFC of the face value of 
Rs. 105 Crores to CANFINA and in consideration of payment thereof 
issued a fresh Banker Receipt in connection with the transaction of 
Rs. 40 Crores and also endorsed back BR. No. 1541 for transactions 
D of Rs. 65 Crores. BRs. were accepted by CANFINA. Subsequently, 
Citibank sold IRFC Bonds of face value of Rs. 72.50 Crores to 
Standard Chartered Bank (SCB) and in consideration of payment 
thereto delivered earlier BR No. 17/original BR in due discharge of its 
liability for Rs. 72.50 Crores transaction and later replaced it by 
E issuing a fresh BR No. 47 (co-incidentally number being the same) in 
due discharge of its liability for Rs. 22.50 Crores and endorsed BR No. 
1401 in discharge of its liability for 50 Crores Bonds. SCB in turn 
discharged BR. No. 47 and returned the same with an endorsement of 
due discharge. However, SCB made a demand for delivery of.Bonds 
F under BR No. 1401 from Citibank and filed a suit for recovery, which 
was transferred to Special Court. Citibank also filed a suit in the 
nature of third party proceedings against CANFINA for non-
performance of their obligation under BR. No. 1401. Special Court 
decreed both the suits and directed the Citibank to pay to SCB certain 
sum by way of return consideration with interest and in another suit 
G directed CANFINA to deliver to Citibank IRFC Bonds of the face 
value of Rs. 50 Crores within the stipulated time period along with 
coupon interest. Hence the present appeals/cross appeals. 
It was contended by the appellant-Citibank that it was duly 
H discharged of its obligation; that SCB did not take BK No. 1401 from 
)-
CITIBANK N.A. v. STANDARD CHARTERED BANK 
3 
Citibank as an authority to colleet the securities/a conditio\'t'of discharge A 
with full knowledge that BR No. 140

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