Supreme Court affirms bank's loss claim, validates share pledge, and orders Cantriple Units transfer.

The Supreme Court affirmed the Special Court's finding of a proven loss of Rs. 280.80 crores by the appellant bank. It was determined that the shares were voluntarily handed over as security, not taken forcibly. The letter dated 11-5-1992 created a valid pledge of the shares, allowing the bank to retain and sell the pledged shares and their accretions. Cantriple Units worth Rs. 205 crores were directed to be handed over to the Custodian, with the bank's claim subject to other proceedings. The Special Court's decisions on proven loss, pledge, and handling of Cantriple Units were affirmed, with costs awarded against Dalal. Appeal No. 762 of 1999 was partly allowed, and Appeal No. 1878 of 1999 was dismissed.

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Issues Involved:
1. Loss claimed by the appellant bank.
2. Whether shares were given as securities or taken forcibly.
3. Nature of the pledge or mortgage of shares.
4. Rights and bonus shares, dividend, and interest on the pledged shares.
5. Cantriple Units' ownership and handling.

Detailed Analysis:

1. Loss Claimed by the Appellant Bank:
The appellant bank claimed a loss of approximately Rs. 1253 crores due to transactions with Hiten Dalal. The Special Court found that the bank had proven a loss of Rs. 280.80 crores, specifically Rs. 201 crores for non-delivery of U.T.I. units and Rs. 79.80 crores for other transactions. The Special Court required the bank to prove the loss through independent evidence, not merely based on Dalal's admissions. The Supreme Court affirmed this finding, noting that the bank had not sufficiently proven losses beyond Rs. 280.80 crores.

2. Whether Shares Were Given as Securities or Taken Forcibly:
Dalal contended that the shares were taken forcibly by the appellant bank. The Special Court, after reviewing the evidence, determined that the shares were handed over voluntarily as security. Dalal did not provide evidence to support his claim of coercion, and the Supreme Court agreed with the Special Court's conclusion.

3. Nature of the Pledge or Mortgage of Shares:
The appellant bank claimed that the shares were either pledged or mortgaged. The Special Court found that the letter dated 11-5-1992 created a valid pledge of the shares in favor of the bank. The Supreme Court upheld this finding, noting that the bank had the right to retain and sell the pledged shares to recover the loss.

4. Rights and Bonus Shares, Dividend, and Interest on the Pledged Shares:
The Special Court ruled that bonus shares, dividends, and interest accrued on the pledged shares were not part of the pledge and must be handed over to the Custodian. The Supreme Court disagreed, holding that these accretions were part of the pledged property and could be retained and sold by the bank along with the original shares.

5. Cantriple Units' Ownership and Handling:
The Special Court directed the appellant bank to hand over Cantriple Units worth Rs. 205 crores to the Custodian. The Supreme Court noted that the bank had taken contradictory positions regarding these units and upheld the Special Court's decision, allowing the bank to establish its claim in other pending proceedings.

Conclusion:
1. The Supreme Court affirmed the Special Court's finding of a proven loss of Rs. 280.80 crores.
2. The shares were voluntarily handed over as security, not taken forcibly.
3. The letter dated 11-5-1992 created a valid pledge of the shares.
4. Bonus shares, dividends, and interest are part of the pledged property and can be retained by the bank.
5. Cantriple Units must be handed over to the Custodian, with the bank's claim subject to other proceedings.

Final Orders:
1. The decision of the Special Court regarding the proven loss, pledge, and handling of Cantriple Units is affirmed.
2. The bank is entitled to retain and sell the pledged shares and accretions.
3. The Special Court's observations on the conduct of the bank and its employees are upheld.
4. The award of costs of Rs. 30 lakhs against Dalal is affirmed.
5. Appeal No. 762 of 1999 is partly allowed, and Appeal No. 1878 of 1999 is dismissed. Parties to bear their own costs.

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