STANDARD CHARTERED BANK versus ANDHRA BANK FINANCIAL SERVICES LTD. & ORS

Citation: [2006] SUPP. 2 S.C.R. 1 · Decided: 05-05-2006 · Supreme Court of India · Bench: Y.K. SABHARWAL · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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STANDARD CHARTERED BANK 
v. 
ANDHRA BANK FINANCIAL SERVICES LTD. & ORS 
MAY 5, 2006 
[Y.K. SABHARWAL, CJ.I., B.N. SRIKRISHNA AND 
P.P. NAOLEKAR, JJ.) 
Special Courts (Trial of Offences Relating to Transactions in Securities) 
Act, J992: Section JO. 
Securities-Andhra Bank Financial Services Ltd. (ABFSL) made an 
offer to Nuclear Power Corporation Ltd. (NPCL) for placing Rs. JOO 
crores-Rs. 50 crores in 9% tax-free bonds and Rs. 50 crores in J 7% taxable 
bonds issued by NPCL-NPCL issued a letter of allotment (LOA) confirming 
the allotment o/9% tax-free bonds of the nominal value of Rs. 50 crores (suit 
bonds)-On the same day ABFSL sold the suit bonds to the Standard 
Chartered Bank (SCB) and issued a Cost Memo-Against the receipt of the 
said Cost Memo SCB issued a Pay Order-ABFSL, in turn, issued a Banker's 
Receipt (BR) acknowledging receipt of the sum from SCB towards the cost 
of the suit bonds and undertook to deliver the suit bonds of the value o/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--SCB wrote to NPCL alleging that though in ABFSL 's letter, it was 
stated that the original LOA was forwarded, SCB had found that only a 
photocopy of the LOA had been enclosed--SCB also requested/or 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.J992, SCB requested ABFSL to 
confirm to NPCL the fact of its having sold the suit bonds to SCB-On the 
same day, ABFSL addressed a letter to NPCL (with a copy endorsed to SCB) 
confirming having sold the suit bonds to SCB-ABFSL also confirmed that 
it had no objection to NPCL issuing a duplicate LOA to SCB-Subsequently, 
Canbank Mutual Fund (CMF) filled up a Transfer Deed and lodged it along 
with the original LOA with NPCL seeking transfer and registration of the 
suit bonds in its name--SCB filed a suit before the High Court against 
ABFSL, CMF and NPCL for a declaration that it was entitled to the suit 
bonds and for an order directing NPCL to register the suit bonds in the name 
ofSCB and to hand over the same to SCB-CMF filed a Misc. Petition before 
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R. 
the Company Law Board (CLB; under Section 111 of the Companies Act, 
1956 seeking registration of the suit bonds in its name-The suit and the 
petition were transferred to Special Court--Special Court held that CMF 
was the owner of the suit bonds--Correctness of-Held: The suit was not 
a mere declaratory suit; it must be regarded as a title suit--Notwithstanding 
the market practice of delivery of securities accompanied by a signed blank 
transfer deed, the property in the securities can only be transferred if there 
is bona fide purchase of the same for value-CMF has utterly failed to prove 
its story that it had paid consideration for purchase of the suit bonds-CMF 
acquired no right, whatsoever, to the suit bonds-The suit bonds always 
remained the property of SCB irrespective of how they found their way into 
the hands of CMF--Companies Act, 1956, S. I 0-Transfer of Property Act, 
1882, Ss. 130 to 137--EvidenceAct, 1872, S. l/4-Code of Civil Procedure, 
1908, S. 11--Benami Transactions (Prohibition) Act, 1988, Ss. 3 and 4(2)-
Specific Relief Act, 1963, S. 34. 
In December 1991, Nuclear Power Corporation oflndia Ltd. (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. Andhra Bank 
Financial Services Ltd. (ABFSL) made an offer to NPCL for placing Rs. 
I 00 crores - Rs. 50 crores in 9% tax-free bonds and Rs. 50 crores in 17% 
taxable bonds. NPCL wrote to ABFSL confirming the allotment of the 
9% tax-free bonds and the 17% taxable bonds, as requested. NPCL 
issued a letter of allotment (LOA) confirming the allotment of 9% tax-
free bonds of the nominal value of Rs. 50 crores (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 t
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