2010 (5) TMI 383 - SC - Companies Law

Appellant's Claims Dismissed, Respondent's Counterclaim Upheld. Supreme Court Affirms Decision.

Naresh K. Aggarwala & Co. Versus Canbank Financial Services Ltd.

The Special Court dismissed the appellant's claims regarding transactions involving RIL and SAIL shares. Respondent No. 1's counterclaim for Rs. ... Contracts and options in securities - Whether Plaintiffs prove that Rs. 2,59,75,000 money is due from and payable by Defendant No. 1 on account of transactions undertaken on behalf of or with Defendant No. 1 after accounting for all transactions in the running account as alleged in para 7 of the Plaint? Whether Plaintiffs have correctly appropriated one Lac shares delivered towards the contract note dated 14-2-1992 (i.e., for Reliance Industries Ltd. shares) purchased @ of Rs. 154 as alleged in para 8a(ii) of the Plaint? Whether the Plaintiffs prove that no shares were received from the broker of Defendant No. 1 towards the Contract dated 23-3-1992 as averred by the Plaintiffs in para No. 8a(iv) of the Plaint? Whether the Plaintiffs have correctly given credit of Rs. 154 per shares for one lac shares delivered and since one lac shares have not been delivered as alleged in para 8a(v) of the Plaint? Whether the Contract dated 14th February, 1992 for purchase of 1,00,000 shares at the rate of Rs. 154 per share of M/s. Reliance Industries Ltd. placed by the Plaintiffs on Defendant No. 1 was cancelled/rescinded as alleged by Defendant No. 1 as alleged in paras 8 and 9 of the Written Statement? Whether Plaintiffs’ contract note dated 27-2-1992 (SAIL) had been issued as per prevalent practice as alleged in para 8b(ii) of the Plaint? Whether Defendant No. 1 by its letter dated 17-9-1992 has resiled from its contractual obligations as alleged in para 8b(vi) of the Plaint? What orders and decree?' Issues Involved:1. Entitlement of the appellant to recover Rs. 2,59,75,000.2. Appropriation of one lakh shares of Reliance Industries Limited (RIL) towards the contract dated 14-2-1992.3. Non-receipt of shares from the broker towards the contract dated 23-3-1992.4. Appropriation of shares and credit given at Rs. 154 per share for one lakh shares.5. Cancellation/rescission of the contract dated 14-2-1992.6. Issuance of the contract note dated 27-2-1992 (SAIL) as per prevalent practice.7. Respondent No. 1 resiling from its contractual obligations.8. Entitlement of the appellant to a decree of Rs. 3,18,08,868.9. Entitlement of the appellant to interest at the rate of 24% per annum.10. Entitlement of respondent No. 1 to payment of Rs. 2,53,75,000 with interest.11. Orders and decree.Detailed Analysis:1. Entitlement of the appellant to recover Rs. 2,59,75,000:The appellant claimed that Rs. 2,59,75,000 was due from respondent No. 1 on account of transactions in a running account. The Special Court found that the appellant was not entitled to any claim in relation to RIL or SAIL shares. The appellant failed to provide sufficient evidence to support the claim, leading to the dismissal of this issue.2. Appropriation of one lakh shares of RIL towards the contract dated 14-2-1992:The appellant argued that one lakh shares delivered were appropriated towards the contract dated 14-2-1992. The Special Court concluded that the appellant could not be granted any relief for the contract dated 14-2-1992, assuming it was outstanding, as no damages for breach of contract were claimed in the pleadings.3. Non-receipt of shares from the broker towards the contract dated 23-3-1992:The appellant claimed not to have received any shares from the broker for the contract dated 23-3-1992. The Special Court found that the appellant had adjusted the delivery of one lakh shares towards the contract dated 23-3-1992, indicating that the contract dated 14-2-1992 was treated as canceled. The evidence did not support the appellant's claim of non-receipt.4. Appropriation of shares and credit given at Rs. 154 per share for one lakh shares:The appellant credited one lakh shares at Rs. 154 per share instead of Rs. 375 per share. The Special Court noted that the appellant had adjusted the delivery against the contract dated 23-3-1992 and failed to produce evidence showing the transaction as incomplete. The claim was thus rejected.5. Cancellation/rescission of the contract dated 14-2-1992:Respondent No. 1 claimed that the contract dated 14-2-1992 was canceled. The Special Court found that the appellant had treated the contract as canceled by adjusting the delivery against the contract dated 23-3-1992. The appellant's failure to produce evidence of the contract's continuance led to the dismissal of this issue.6. Issuance of the contract note dated 27-2-1992 (SAIL) as per prevalent practice:The appellant claimed the contract note dated 27-2-1992 for SAIL shares was issued as per prevalent practice. The Special Court found that the contract was illegal as it was not a spot delivery contract and was contrary to the circular dated 27-6-1969 under the Securities Contract Regulation Act, 1956. The claim was dismissed.7. Respondent No. 1 resiling from its contractual obligations:The appellant claimed that respondent No. 1 resiled from its obligations regarding SAIL shares. The Special Court held that the contract was void ab initio due to its illegality, and therefore, respondent No. 1 could not be held to have resiled from any obligations.8. Entitlement of the appellant to a decree of Rs. 3,18,08,868:The Special Court found that the appellant was not entitled to any decree for Rs. 3,18,08,868 as the claims related to RIL and SAIL shares were dismissed.9. Entitlement of the appellant to interest at the rate of 24% per annum:Since the appellant was not entitled to any claim amount, the question of interest at 24% per annum did not arise. The Special Court dismissed this claim.10. Entitlement of respondent No. 1 to payment of Rs. 2,53,75,000 with interest:The Special Court upheld respondent No. 1's counterclaim for Rs. 2,53,75,000 with interest at 12% per annum from 22-4-1992 till realization. The appellant's claim that the delivery was against the canceled contract dated 14-2-1992 was rejected, and the amount was deemed payable for the contract dated 23-3-1992.11. Orders and decree:The Special Court dismissed the appellant's claims and upheld respondent No. 1's counterclaim, awarding Rs. 2,53,75,000 with 12% interest per annum from 22-4-1992 till realization. The appeal was dismissed, and no costs were awarded.Conclusion:The Supreme Court upheld the findings of the Special Court, rejecting the appellant's claims and affirming the counterclaim of respondent No. 1. The appeal was dismissed, and the judgment of the Special Court was found to be based on clear and cogent evidence, with no indication of bias or error.