# STANDARD CHARTERED BANK v. ANDHRABANK FINANCIAL SERVICES LTD &ORS

- **Citation:** [2015] 14 S.C.R. 993
- **Court:** Supreme Court of India
- **Decided:** 2015-08-28
- **Case number:** Civil Appeal Nos. 9540-9541 of 2010
- **Bench:** V.Gopalagowdaand R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/standard-chartered-bank-v-andhrabank-financial-services-ltd-ors-30630
- **Pages:** 44

## Headnote

A
B
Special Court . (Trial of Offences Relating to
Transactions in Securities) Act, 1992 - Limitation Act, 1963
- Article 91 (a)- Securities Scam in Bombay Stock Exchange C
in 1992 - Transaction occurring as part of the same scam -
Appellant-SCB filed suit against respondent no. 1-ABFSL for
recovery of principal amount, representing the consideration
paid by appellant to respondent no. 1 against purchase of
17% NPCL bonds - Subsequently, appellant filed application. D
for amendment of the suit and to include Hiten P. Dalal and
Canara Bank Mutual Fund (CMF) as party respondents and
to file claim against the said respondents (respondent nos.
2 to 10) in the alternative to the claim preferred by appellant
against respondent no. 1 - The Special Court constituted E
under the 1992 Act came to the conclusion that appellant-
. sea had succeeded in proving that they had purchased 17%
taxable NPCL bonds; that Hiten P. Dalal had not succeeded
in proving that he was the owner of the suit bonds, and that
appellant-SCB was entitled to file a suit for conversion against F
Hiten P. Dalal and CMF -
The Special Court, however,
declined to grant any relief to the appellant on the ground
that the suit was barred by limitation - Meaning of the term
"first learns" as provided under Article 91 (a) of the Limitation
Act- Date on which the period of limitation starts running for G
institution of suit against the respondent Nos. 2-10- Held:
The suit bonds in the instant case were specific moveable
property to which Article 91 (a) of the Limitation Act appliesArticle 91 (a) of the Limitation Act stipulates that the period of
993
H
994
SUPREME COURT REPORTS
[2015] 14 S.C.R.
A
limitation shall start running from the date when the person
'first learns' about the conversion of the moveable property-
/( is difficult to construe the word "first learns" without attributing
to it certain degree of knowledge - The knowledge must be
of the identity of a specific person in whose possession the
B bonds are and that he acquired the possession of the said
bonds under an arrangement, which in law would constitute
wrongful conversion - On facts, the amendment to thE1 suit to
implead CMF and Hiten P. Dalal was effected on 20. 10. 1995
vide a Chamber Summons - The case of the appellant is
C
that it was during a meeting held on 07.11.1992 that they first
learnt that the suit bonds had been misappropriated by Hiten
P. Dalal and given to CMF - It is manifestly clear from
examination of the deposition of PW-3 and PW-4 that a
meeting did in fact occur on 07.11.1992- The Special Court
D erred in coming to the conclusion that no meeting occurred
on 07. 11. 1992 -A perusal of the record prepared by PW-3,
makes it amply clear that it was during this meeting on
07.11.1992 that CMF first admitted to SCB regarding the
dummy sale involving the 9% NPCL bonds and 17% NPCL
E bonds·- Thus, a meeting did in fact take place in the office of
CMF on 07.11.1992, and that it was on this date that
appellant-SCB found out about the dummy transaction that
had taken place between CMF and Hiten P. Dalal regarding
the 9% and 17% NPCL bonds - The period of limitation would
F
start running only on 07.11.1992 - The period of limitation
according to Article 91 (a) of the Limitation Act for filing a suit
for compensation for conversion of property is three years
from the date on which the person having the right to
possession of the property learns in whose possession it is -
G Accordingly, finding of fact recorded by the Special Court
that the suit was barred by limitation set aside - Appellant
entitled for decree of suit claim of the principal amount
adjudged as on the date of the institution of the suit-Appellant
a/so entitled to interest pendente lite and future interest -
H This transaction can be termed as a commercial transaction
STANDARD CHARTERED BANK v. ANDHRA BANK
995
FINANCIAL SERVICES LTD.
and s.34 CPC confers discretionary power upon this Court A
to award interest at appropriate rate on th

## Text

_Characters 0–39,957 of 78,790. This is a partial read: ask again with offset=39957 for what follows._

[2015] 14 S.C.R. 993
STANDARD CHARTERED BANK
v.
ANDHRABANK FINANCIAL SERVICES LTD &ORS.
(Civil Appeal Nos. 9540-9541 of 2010)
AUGUST 28, 2015
[V.GOPALAGOWDAAND R. BANUMATHI, JJ.]
A
B
Special Court . (Trial of Offences Relating to
Transactions in Securities) Act, 1992 - Limitation Act, 1963
- Article 91 (a)- Securities Scam in Bombay Stock Exchange C
in 1992 - Transaction occurring as part of the same scam -
Appellant-SCB filed suit against respondent no. 1-ABFSL for
recovery of principal amount, representing the consideration
paid by appellant to respondent no. 1 against purchase of
17% NPCL bonds - Subsequently, appellant filed application. D
for amendment of the suit and to include Hiten P. Dalal and
Canara Bank Mutual Fund (CMF) as party respondents and
to file claim against the said respondents (respondent nos.
2 to 10) in the alternative to the claim preferred by appellant
against respondent no. 1 - The Special Court constituted E
under the 1992 Act came to the conclusion that appellant-
. sea had succeeded in proving that they had purchased 17%
taxable NPCL bonds; that Hiten P. Dalal had not succeeded
in proving that he was the owner of the suit bonds, and that
appellant-SCB was entitled to file a suit for conversion against F
Hiten P. Dalal and CMF -
The Special Court, however,
declined to grant any relief to the appellant on the ground
that the suit was barred by limitation - Meaning of the term
"first learns" as provided under Article 91 (a) of the Limitation
Act- Date on which the period of limitation starts running for G
institution of suit against the respondent Nos. 2-10- Held:
The suit bonds in the instant case were specific moveable
property to which Article 91 (a) of the Limitation Act appliesArticle 91 (a) of the Limitation Act stipulates that the period of
993
H
994
SUPREME COURT REPORTS
[2015] 14 S.C.R.
A
limitation shall start running from the date when the person
'first learns' about the conversion of the moveable property-
/( is difficult to construe the word "first learns" without attributing
to it certain degree of knowledge - The knowledge must be
of the identity of a specific person in whose possession the
B bonds are and that he acquired the possession of the said
bonds under an arrangement, which in law would constitute
wrongful conversion - On facts, the amendment to thE1 suit to
implead CMF and Hiten P. Dalal was effected on 20. 10. 1995
vide a Chamber Summons - The case of the appellant is
C
that it was during a meeting held on 07.11.1992 that they first
learnt that the suit bonds had been misappropriated by Hiten
P. Dalal and given to CMF - It is manifestly clear from
examination of the deposition of PW-3 and PW-4 that a
meeting did in fact occur on 07.11.1992- The Special Court
D erred in coming to the conclusion that no meeting occurred
on 07. 11. 1992 -A perusal of the record prepared by PW-3,
makes it amply clear that it was during this meeting on
07.11.1992 that CMF first admitted to SCB regarding the
dummy sale involving the 9% NPCL bonds and 17% NPCL
E bonds·- Thus, a meeting did in fact take place in the office of
CMF on 07.11.1992, and that it was on this date that
appellant-SCB found out about the dummy transaction that
had taken place between CMF and Hiten P. Dalal regarding
the 9% and 17% NPCL bonds - The period of limitation would
F
start running only on 07.11.1992 - The period of limitation
according to Article 91 (a) of the Limitation Act for filing a suit
for compensation for conversion of property is three years
from the date on which the person having the right to
possession of the property learns in whose possession it is -
G Accordingly, finding of fact recorded by the Special Court
that the suit was barred by limitation set aside - Appellant
entitled for decree of suit claim of the principal amount
adjudged as on the date of the institution of the suit-Appellant
a/so entitled to interest pendente lite and future interest -
H This transaction can be termed as a commercial transaction
STANDARD CHARTERED BANK v. ANDHRA BANK
995
FINANCIAL SERVICES LTD.
and s.34 CPC confers discretionary power upon this Court A
to award interest at appropriate rate on the suit claim of the
appellant- The suit in the instant case was instituted before
the Special Court on 27.11.1992, but the respondent nos.210 were brought-on record as parties to the suit by way of an
amendment, which was allowed on 10. 01. 1996 :- Therefore,
B
it would be appropriate to award interest from the above said
date during pendency of the proceedings before the Special
Court and this Court and also for future rate of interest at 6%
per annum till the date of realisation - Respondent nos. 2-10
directed to pay the adjudged principal sum of C
Rs.50, 18,61,250.00 along with interest at the rate of 6% per
annum from 10.01.1996 till the date of realisation with suit
costs throughout for having converted the suit bonds - The
above respondents shall be jointly and severally liable to
pay the same to the appellant.
D
Standard Chartered Bank v. Andhra Bank Financial
Services Ltd. (2006) 6 SCC 94 : 2006 (2) Suppl.
SCR 1; K.M Talyarkhan v. Gangadas Dwarkadas
(1935) ILR 60 Born 848; Sarai Kamini Das v.
Nagendra Nath Pal AIR 1926 Cal 65; Hari Mohan
E
Dalal v. ParameshwarShau AIR 1928 Cal 646;
Lewis Pugh Ewans v. Ashutosh Sen & Ors. AIR
1929 PC 69; K.S Nanji and Company v.
Jatashankar Dossa & Ors. AIR 1961 SC 1474:
1962 SCR 492; Ba/raj Taneja v. Sunil Madan
F
(1999) 8 sec 396 : 1999 (2) suppl. scR 258 -
referred to.
Case Law Reference
2006 (2) Suppl. SCR 1
referred to
Para 7
(1935) ILR 60 Born 848
referred to
Para 13
AIR 1926 Cal 65
referred to
Para 14
AIR 1928 Cal 646
referred to
Para 14
AIR 1929 PC 69
referred to
Para 17
•
G
H
996
SUPREME COURT REPORTS
[2015] 14 S.C.R.
A '1962 SCR 492
referred to
Para 18
'
1999 (2) Suppl. SCR 258
referred to
Para 27
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
9540-9541 of 201 0
B
From the Judgment and Order dated 13.07.201 O and
07 .10.2010 of the Special Court of Mumbai constituted under
the Special Court (Trial of offences relating to Transactions in
Securities) Act, 1992 in Suit No. 6of1994.
Ram Jethmalani, Sr. Adv., Ms. Parul Shukla, Mahesh
c Agarwal, Rishi Agrwala, E. C. Agrawal a, Sha shank Manish,
Advs. for the Appellant.
Rohit Kapadia, Pradeep Sancheti, Sr. Advs., Anupam
Lal Das, Ms. Sunita Dutt, Shrinivas Deshmukh, Siddharth
Thacker, Shashank Trivedi, Anupam Lal Das, Subramonium
D Prasad, Ms. V. D. Khanna, Karanjawala & Co., Advs. for the
Respondents.
The Judgment of the Court was delivered by
•
V. GOPALA GOWDA, J. 1. The Securities Scam that
shook the Bombay Stock Exchange in 1992 took place 23
E years ago, yet the Banks and Financial Institutions that were
impacted as a result of the scam continue to litigate to recover
their rightful damages. The present appeals filed under Section
10 of the Special Court (Trial of Offences Relating to
Transactions in Securities)Act, 1992 arise out of a transaction
F which occurred as a part of the same scam, which have been
filed against the impugned judgment and order dated
13.07.2010, as modified by the order dated 07.10.2010 in
Suit No. 6 of 1994, passed by the Special Court, Bombay,
constituted under the above Act.
G
The relevant facts which are required for us to appreciate
the rival legal contentions are stated in brief hereunder:
2. The National Power Corporation Limited (hereinafter
"NPCL") issued bonds of two series in December, 1991.
H These were the 9% tax-free bonds and 17% taxable bonds.
On 26.02.1992, the said bonds were allotted by NPCL to the
•
STANDARD CHARTERED BANK v. ANDHRA BANK
997
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
Andhra Bank Financial Services Limited (hereinafter A
"ABFSL"), respondent no. 1 herein. On the same day, ABFSL
sold the 17% taxable bonds of the face value of Rs. 50 crores
to the appellant-Standard Chartered Bank (hereinafter "SCB").
The total amount payable to Af?FSL was Rs.48,02,50,000/-
which was paid by way of Pay Order on the same day. A
B
Banker's Receipt No. 23727 was issued to the appellant by
the ABFSL acknowledging the said payment. The receipt also
stated that the delivery of the bonds would be done later.
3. On 26.02.1992, SCB sold 17% bondsofthefacevalue
of Rs. 50 crores to ANZ Grind lays Bank (hereinafter "ANZ"). C
SCB issued a Bank Receipt No. 1939 to ANZ in lieu of the
actual possession of the bonds. On 27 .02.1992, ABFSL
forwarded the original letter of allotment to SCB and sought
the return of the Banker's Receipt No: 23727. On the same
date, SCB returned the Banker's Receipt No. 23727 to D
ABFSL. SCB states that as against the return of the said Bank
Receipt, it only received a photocopy of the original letter of
allotment. On 27.02.1992, Hiten P. Dalal, a broker who was
acting in a large number of securities transactions of banks
and financial institutions obtained the possession of the said
E
original letter of allotment and delivered it to Canara Bank
Mutual Fund (hereinafter "CMF"). On 17.03.1992, CMF sold·
the 17% NPCL bonds of the face value of Rs. 50 crores to
SCB. CMF issued a Receipt No. 2767 to SCB Bank in lieu of
the original letter of allotment. According to SCB, when the
F
Securities Scam came to limelight in May, 1992, the officers
of SCB conducted an investigation of its records and found
that SCB did not possess the original letter of allotment but
had only its photocopy with it. .On 09.10.1992, SCB wrote a·
letter to NPCL stating that as the suit bonds had been issued G
to ABFSL, which had further confirmed that the same has been
sold to SCB and therefore, the letter of allotment from CMF
may be disregarded. NPCL informed SCB on 06.11.1992 that
since there was a dispute of ownership of the suit bonds
between SCB and CMF, the matter should be resolved
H
998
SUPREME COURT REPORTS
[2015] 14 S.C.R.
A
between SCB and CMF and that it would take the necessary
action only after such resolution.
4. On 20.06.1992, SCB filed a First Information Report
against the broker Hiten P. Dalal and requested the Central
Bureau of Investigation to inquire into the scam perpetrated
B on SCB by Hiten P. Dalal.
5. On 27 .11.1992, SCB filed Suit No. 6 of 1994 against
ABFSL for the recovery of the principal amount of
Rs.48,02,50,000.00, representing the consideration paid by
SCB to ABFSL against the transaction of purchase of 17%
C NPCL bonds of the face value of Rs. 50 crores.
6. Pursuant to the FIR dated 20.06.1992, the CBI filed a
charge sheet on 16.06.1995. On 20.10.1995, SCB filed an
application for amendment of the suit and to include Hiten P.
D Dalal and CMF as party respondents and to file claim against
the said respondents in the alternative to the claim preferred
by SCB against ABFSL.
7. It is pertinent to mention at this stage that a suit was
filed in relation to the 9% bonds, which culminated in the
E judgment of this Court in the case of Standard Chartered
Bank v. Andhra Bank Financial Services Ltd. 1 In the present
suit relating to the 17% bonds,. the learned Special Court
framed and answered the following issues for its consideration:
,----
Issues
Answer
F
Between PLAINTIFFS and CMF
1. Whether
the
suit
as
against
In the
Defendants No. 3-10 (CMF) is
affirmative
barred by limitation
ii 2.
Whether the Defendant No. 2 (H~en
In the
P. Dalal) in collusion with one of the
negative
G
employees
of the
Plaintiff
(viz.
Santosh Mulagaonkar) fraudulently
misappropriated the Suit LOA as
I
alleqed in para 6A (iii) of the Plaint?
...
H
1 (2006) 6 sec 94
STANDARD CHARTERED BANK v. ANDHRA BANK
999
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
~
3. Whether
the
Plaintiffs
were
In the
A
unaware
that
the
series
of
negative
transactions involving CMF, ANZ,
ABFSL
and
the
Plaintiffs
themselves were "based on the
very same Letter of Allotment" as
B
alleged in para 7 of the plaint?
.
4. Whether the Plaintiffs prove that
In the
they had purchased 17% taliable
affirmative
NPCL
Bonds
on
25th
c
February, 1992 of the FV of Rs. 50
crores from ABFSL or acquired any
title to the Suit LOA as alleged by
the Plaintiffs in para 5 of the Plaint?
5. Whether the Plaintiffs prove that
In the
D
CMF chose to issue its BR with a
negative
view
to
conceal
the
alleged
"misappropriation" of
Bonds as
alleged in para 7D and 7E of the
Plaint?
E
6. Whether the Plaintiffs prove that on
In the
09.04.1992 there was a "hole"
affirmative
pertaining to the transactions of
26.02.1992 between the SCB and
F
ABFSL as alleged in para 7H of the
Plaint?
7. Whether the Plaintiffs prove that
In the
the dealers of the Plaintiffs entered
affirmative
G
into a dummy transaction dated
10.04.1992 with the ABFSL to
cover up the said "hole" as alleged
in para 7(1) of the Plaint?
H
1000
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
8. Whether CMF have converted
the bonds/ Letter of Allotment as
alleged in para 6A & 7(k) of the
Plaint?
9. Whether the Suit transaction and
the transactions referred to in
para 7 (a), 7(f) and 7(g) of the
Plaint reflect that the same were
fictitious transactions for funding
and/or they were transactions
involving difference between the
;
actual rate (as transacted) and
the derived rate as alleged in
para 25 and 27 of the further
Written Statement?
[2015] 14 S.C.R.
In the
affirmative
l
·--·· ·-··
-----
In the
negative
c-,c~c-c----- ·
------t·
- --
10. If the answer to the above issue
•In the
is in the affirmative whether sudi
negative
I
transactions are illegal and/or
,
opposed to the public policy?
i
11. Whether the contention that the
In the
transactions
are
opposed
to
public policy is barred by the
principles of res judicata and or
constructive res judicata having
regard to the judgment of the
Special Court dated 13.03.1995
in Suit No. 13 of 1994 and the
decision of the Supreme Court in
CA 4456/95 dated 301h October
2001 and in CAs Nos. 2275 &
2276 dated 051h May 2006?
affirmative
STANDARD CHARTERED BANK v. ANDHRA BANK
1001
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
-
A
12. Whether Hiten P. Dalal was the
Does not
broker for ABFSL in the alleged suit
Arise
transaction and ABFSL handed over
the original Letter of Allotment to HPD
as alleged in para 6 (c) and 11(a) of
the Plaint?
B
13. Whether SCB
are
stopped
from
In the
making any claim as alleged in para 2
affirmative
read with 'para 14 of the Written
Statement of CMF?
·c
' 14. Whether CMF proves that it had on
In the
27th February, 1992 purchased the
negative
17% NPCL bonds through Hiten P.
Dalal who was allegedly acting as a
D
mercantile
agent
of SCB and/or
ABFSL for consideration in good faith
and without notice as alleged in
paragraph
11
of
the
Written
Statement of the said Defendant?
E
15: Whether the transactions under the
In the
15% arrangement were transactions
negative
of HPD and not of SCB and HPD was
entitled to deal with bonds at his
discretion as alleged in para 7(g) of
F
CMF's Written Statement?
16. Whether
CMF'S
allegations
that
In the
transactions under 15% arrangement
affirmative
were transactions of HPD, are barred
G
-by res judicata by the judgment of the
Special Court in Suit No. 13/94 dated
13.03.1995 and the decision of the
H
1002
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 14 S.C.R.
Supreme Court in CA No. 4456 of
1995 dated 30.10.2001 as !'llleged in
para 7(L) (i) to 7(L)(v) of the Plaint
and denied in paras 32, 33 and 34 of
the additional Written Statement and
by the judgment of the Supreme
Court dated 05.05.2006 in Appeal
from Suit No. 11 of 1996 as alleged in
paras 7(L)(vii) to 7(L)(xv) of the
Plaint?
17. Whether CM F's allegation that the
transactions of the Plaintiff under the
15%
arrangement
were
actually
transaction of Hiten P. Dalal, is barred
by
constructive
res
judicata
as
alleged in para 7(L)(v) of the Plaint
and
denied
in
para
36
of the
additional Written Statement?
18. Whether the issue of payment of
consideration
by
the
CMF
for
acquisition of bond on 27.12.1992 is
barred by virtue of the principles of
res judicata as alleged in para 11 (e)
of the Plaint?
19. Whether the Defendants Nos. 3-10
are jointly and severally liable to pay
to
SCB
the
sum
of
Rs.
55,26, 16,438.36 as per the particulars
of the Claim together with further
interest· on
principle sum of Rs.
48,02,50,000.00 @ 20% per annum
from
28th
November,
1992
till
payment and/or realisations?
In the
affirmative
i In the
I affirmative
In the
affirmative
In the
! negative
i
\-------------------+-------
20. What relief?
As per
Order
STANDARD CHARTERED BANK v. ANDHRABANK
1003
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
Between PLAINTIFFS AND HPD
A
1.
Whether the Plaint fails to disclose
In the
any cause of action against HPD as
affirmative
alleged in para 1 of the Written
Statement of HPD?
2. Whether
the
suit
is
barred
by
In the
B
limitation as against Defendant No.2
affirmative
as alleged in para 2 of the Written
Statement of Defendant No. 2
3. Whether the allegations of HPD that
In the
the Letter of Allotment was lent to him
affirmative
c
on 27th February, 1992 and/or that he
purchased the same on 9th May, 1992
in the circumstances and manner set
out in para 4 of his written statement
are barred by res judicata as alleged
D
in para 68 of the Plaint?
4. Whether Hiten P. Dalal is jointly and
In the
severally liable along with CMF to pay
negative
to
SCB
the
sum
of
Rs.
55,26, 16,438.36 as per the particulars
E
of claim together with further interest
on
principal
sum
of
Rs.
48,02,50,000.00 @ 20% p.a. from
28th
November, 1992 till payment
and/or realisation?
F
5. Whether SCB is entitled to any relief
In the
and if, what?
negative
G
As can be seen from the above table with regard to the issues
framed by the learned Special Court, it came to the conclusion
that SCB has succeeded in proving that they had purchased
~7% taxable NPCL bonds. The learned Special Court also
found that Hiten P. Dalal had not succeeded in proving that he
H
1004
SUPREME COURT REPORTS
[20j5] 14 S.C.R.
A was the owner of the suit bonds, and that SCB was entitled to
file a suit for conversion against Hiten P. Dalal and CMF.
8. The learned Special Court, on appreciation of the
pleadings and evidence produced before it, however, declined
to grant any relief to the appellant on the ground that the suit
8
was barred by limitation. The amendment to the suit to implead
CMF and Hiten P. Dalal was done on 20.10.1995. The learned
Special Judge held:
c
D
E
"The period of limitation had started running from
either 18.03.1992 and further from 23.05.1992. The
amendment application for impleading defendant
Nos. 2 to 10 was filed on 20.10.1995 and,
therefore, if the period of limitation is calculated
from 18.03.1992 or 23.05.1992, the said period
expires either on 18.03.1995 or 23.05.1995. I have
already given my reasons as to why 07.11.1992
cannot be treated as a date on which the Plaintiffs
came to know about the conversion by Hiten P.
Dalal in favour of CMF, and therefore, the Plaintiffs
in my view have miserably failed in filing the suit
within a period of limitation."
9. On the issue of limitation, the main question that the
learned Special Court had to answer as to whether the provision
of Article 91 (a) of the Limitation Act, 1963 (hereinafter "the
F
Limitation Act") would apply to the instant case. To answer that
question, the learned Special Court had to interpret the
meaning of the phrase "first learns". The contention raised
before the Special Court by the learned senior counsel for the
defendants was that the word "learn" cannot be construed as
G complete knowledge for the reason that if the legislature had
intended to use the word knowledge as in Articles 56 to 59, it
would have done so. It was submitted that the word
"knowledge" cannot be given to the word "learn" in Article 91
of the Limitation Act. The learned Special Court had to decide
H
STANDARD CHARTERED BANK v. ANDHRA BANK
1005
FINANCIAL SERVICES LTD. [V. GOPALAGOWDA, J.]
whether the period of limitation will be ascertained from
A
07 .11.1992 as contended by the plaintiff, or the three earlier
dates 18.03.1992, 10.04.1992 or 23.05.1992. The learned
Special Court after examining the pleadings and evidence on
record came to the conclusion that the period of limitation
cannot be said to have started running on 07.11.1992 as the
B
plaintiff had not succeeded in establishing the happening of
any meeting on that cfate. The learned Special Court came to
the conclusion that the period of limitation for institution of the
suit started running on 18.03.1992 as that was the date of the
transaction between ABFSL and ANZ. The Special Court also C
held that the next date when the plaintiff could have possibly
found out about the conversion of the bonds was 23.05.1992
as that was the date on which Hiten P. Dalal had himself
informed the plaintiffs of the conversion of ihe suit bonds during
a meeting.
D
10. The learned Special Court thus, while accepting the
fact of conversion of the bonds in question, dismissed the suit
as against Hiten P. Dalal and CMF as the said amendment
was barred by limitation. Hence the present appeals are filed
by the appellants urging various grounds.
E
11. We have heard Mr. Ram Jethmalani, the learned
senior counsel on behalf of tl")e appellant and Mr. Rohit Kapadia
and Mr. Pradeep Sancheti, the learned senior counsel on
behalf of the respondents. On the basis of the factual
F
circumstance and evidence on record produced before the
Special Court and also in light of the rival factual and legal
contentions raised by the learned senior counsel for both the
parties, we have broadly framed the issues which would require
our consideration. Since the only issue in contention before G
us is that of limitation, we shall restrict our attention to that only.
The main legal questions which arise in this case are1. What is the meaning of the term "first learns" as
provided under Article 91 (a) of the Limitation Act,
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1963, and whether the said provision would apply to
the facts of the present case?
2. Whether 07 .11.1992 is the date on which the period
of limitation starts running for institution of suit against
the respondent Nos. 2-10, or is it an earlier date?
3. What order?
Answer to Point 1:
12. We need to examine the provision of Article 91 (a) of
the Limitation Act to understand the issue at hand.Article 91 (a)
C of the Limitation Act reads thus:
D
E
Description of Suit
--
-T'i-- ------·-
Period of Time from which
Limitation period begins to
run
1-=-c-=------.,,,----
~----+---------,
91.For compensation,-
Three
When the person'
years
having the right
a) For wrongfully taking or
to the possession
detaining
any
specific
of the property
movable property lost, or
first
learns
in
acquired
by
theft,
or
whose
dishonest misappropriation,
I! possession it is.
or conversion
~----------~---~
(emphasis laid by this Court)
13. Mr. Ram Jethmalani, the learned senior counsel
F appearing on behalf of the appellant, contended that while
construing Article 91 (a) of the Limitation Act, Column 1 and
Column 3 of Article 91 (a) have to be read in conjunction with
one another. He further contended that the knowledge required
under Article 91 (a) is knowledge of some definite person who
G can be identified and against whom effective reliefs for
restoration of property in question can be obtained. The
knowledge must be such that as would afford to a claimant a
cause of action against the party to be sued. The learned senior
counsel further contended that mere suspicion, surmise or
H conjecture is not knowledge. The belief must almost be certain.
STANDARD CHARTERED BANK v. ANDHRA BANK
1007
FINANCIAL SERVICES LTD. [V. GO PALA GOWDA, J.]
The court must find that the plaintiff had, on credible evidence,
A
reached a fair conclusion about the existence of a cause of
action against an identifiable defendant. The learned senior
counsel placed reliance upon the case of K.M Talyarkhan v ..
. Gangadas Dwarkadas2, delivered by Justice Rangnekar of
the Bombay High Court in which it was held as under:
B
"the words whose possession means the
possession of some definite person who can be
identified and against whom effective relief for
restoration of the property in question can be
obtained."
C
14. The learned senior counsel further contended that
reference to 'the person in possession' in column 3 of Article
'J1(a), indicates that the knowledge is one which must be of
such person who on the information derived can reasonably
be sued. The learned senior counsel placed reliance on three D
judgments for the same. The first was the case of Muthu
Koraki Chetty & anr. v. Mahamad Madar Amma/ & ors.
(supra), wherein it was held as under:
"Therefore, in my opinion the true rule deducible from
these various decisions of the Juridical Committee is
E
this: that subject to the exemption, exclusion, mode of
computation and excusing of delay, etc., which are
provided in the Limitation Act, the language of column 3
Schedule 1 should be so interpreted as to carry out the
true intention of the legislature, that is to say, by dating
F
the cause of action from a date when the remedy is
available to the party."
The learned senior counsel also placed reliance on the case
of Sarat Kamini Das v. NagendraNath Pa/3 decided by the G
judicature of Calcutta High Court wherein it was held as under:
"In such a case at the time when the cause of action
arises there is no person capable of suing upon it,
2 (1935) ILR 60 Born 848
3 AIR 1926 Cal 65
H
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B
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the statute does not run: similarly it is necessary
that there shall ne a person to be sued; and it is
also necessary that the cause of action should not
be completed, that is all the facts must have
happened which are material to be proved in order
to entitle the Plaintiff to succeed. This should of
course be borne in mind in interpreting the intention
of the legislature as expressed in the Articles of the
Act itself, or rather in such of them as admit of a
consideration of the question as to when a cause
of action arises."
The learned senior counsel on behalf of the appellants further
placed reliance on the case of Hari Mohan Dalal v.
Parameshwar Shall', wherein Chief Justice Rankin authoring
a full bench judgment had held as under:
"The old English statute of Limitation had been
content to prescribe the period by putting as the
limits so many years after the cause of action. The
Indian legislature endeavor in detail by the
Limitation Act to state in the third column of the
Schedule, the event which is to be taken as
completing a cause of action that is the date from
the time begins to run. The language of this column
of the schedule should in general, if not indeed
always, be so interpreted as to carry out the true
intention of the legislature, that is to say, to date the
cause of action from the date on which the remedy
is available to the party."
Thus, the contention of the learned senior counsel appearing
G on behalf of the appellant, Mr. Ram Jethmalani is essentially
that Column 3 of Article 91 (a) must be read with Column 1. It
leads to the indisputable contention that knowledge must be
of the identity of a specific person in whose possession the
bonds are and that he acquired the possession of the said
H
4 AIR 1928 Cal 646
STANDARD CHARTERED BANK v. ANDHRA BANK
1009
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
bonds under an arrangement, which in law would constitute
A
wrongful conversion.
15. On the other hand, the learned senior counsel
appearing on behalf of the respondents, Mr. Rohit Kapadia
and Mr. Pradeep Sancheti contend that Article 91 (a) of the
Limitation Act is not applicable to the facts of the instant case B
as it is applicable only to "specific movable property" and that
bonds are not specific movable property but chose in action.
Chose in action is not a thing and is not capable of being
possessed. The learned senior counsel placed reliance on
the case of Standard Chartered Bank v. Andhra Bank C
Financial Services Ltd & Ors. 5 wherein it was held as under:
" ...... a chose in action is not a thing, as, by
definition, it is not in the possession of someone,
but that possession has to be acquired by some
joint which is why it is called a chose-in-action."
D
The learned senior counsel contends that Article 91 (a) of the
Limitation Act deals with specific movable property which is
capable of being possessed. Thus, movable property to be
covered under the purview of Article 91 (a) must fulfill two
E
criteria. Firstly, it must be specific, and secondly, it must be
capable of being possessed.
16. We are unable to agree with the contention of Mr.
Rohit Kapadia and Mr. Pradeep Sancheti, the learned senior
counsel appearing on behalf of the respondents. The suit F
bonds in the instant case are movable properties which are
capable of being possessed. The definition of the term
movable property can be found in Section 3(36) of the General
Clauses Act, 1897 which reads thus-
"movable property, shall mean property of every
description, except immovable property."
A reading of the sub-Section of the above provision makes it
clear that everything that is not immovable is movable, and
' (2006) 6 sec 94, para 84
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thus the suit bonds in the instant case are specific moveable
property to which Article 91 (a) of the Limitation Act applies.
17. Mr. Rohit Kapadia and Mr. Pradeep Sancheti, the
learned senior counsel appearing on behalf of the
respondents, further contend that conversion for the purpose
8
of Article 91 (a) cannot be divided into 'honest conversion' and
'dishonest conversion'. The learned senior counsel placed
reliance on the case of Lewis Pugh Ewans v. Ashutosh
Sen & Ors.6 in which it was held that:-
c
"Article 48 alone refers to conversion and their
· lordships can see no .ground for a splitting up
conversion into two clauses, one dishonest and the
other no dishonest."
The learned senior counsel appearing on behalf of the
0
respondents contend that the distinction sought by SCB on
the nature or degree of knowledge is no distinction in the eyes
of law and is of no consequence so far as "first learns" as it
appears under Article 91 (a) of the Limitation Act, 1963.
18. We are unable to agree with this contention advanced
E by the learned.senior counsel on behalf of the respondents. A
perusal of Article 91 (a) of the Limitation Act shows that it is
meant to apply to specific movable property. It further stipulates
that the period of limitation shall start running from the date
when the person 'first learns' about the conversion of the
F moveable property. While it is true that the word used in the
said Article is "first learns" and not knowledge, it is difficult to
construe the word "first learns" without attributing to it certain
degree of knowledge. The degree or the extent of knowledge
is the subject matter of controversy in the instant case. The
G Article 91 (a) of the Limitation Act was the subject matter of
controversy also in the case of K.S Nanji and Company v.
Jatashankar Dossa & Ors. 7 wherein the terms of the Article
were interpreted by this Court as under:
6 AIR 1929 PC 69
H
7 AIR 1961SC1474
STANDARD CHARTERED BANK v. ANDHRA BANK
1011
FINANCIAL SERVICES LTD. [V. GO PALA GOWDA, J.]
"The article says that a suit for recovery of specific moveable A
property acquired by conversion or for compensation for
wrongful taking or detaining of the suit property should be filed
within three years from the date when the person having the
right to the possession of the property first learns in whose
possession it is. The question is, on whom the burden to prove
B
the said knowledge lies? The answer will be clear if the article
is read as follows: A person having the right to the possession
of a property wrongfully taken from him by another can file·a
suit to recover the said specific moveable property or for
compensation therefore within three years from the date when C
he first learns in whose possession it is .. Obviously where a
person has a right to sue within three years from the date of
his coming to know of a certain fact, it is for him to prove that
he had the knowledge of the said fact on a particular date, for
the said fact would be within his peculiar knowledge."
D
(emphasis laid by this Court)
The provision of Article 91 (a) of the Limitation Act thus demands
two things. First is knowledge on the part of the plaintiff, and
second, that the said fact be within his peculiar knowledge.
We agree with the contention advanced by Mr. Ram Jethmalani,
E
the learned senior counsel on behalf of the appellant, that the
term ''first learns" places a burden of knowledge which is rather
specific in nature. Thus, the knowledge must be of the identity
of a specific person in whose possession the bonds are and
that he acquired the possession of the said bonds under an
F
arrangement, which in law would constitute wrongful
conversion. The knowledge of a specific person against whom
the suit can be instituted is what is crucial here. A mere
suspicion or a whisper of knowledge is not enough for the
period of limitation to start running. Point number 1 is thus,
G
answered accordingly.
Answer to Point No; 2
19. Now that we have estahlished that the burden of proof
on the plaintiff as to the degree of knowledge is that of specific H
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knowledge with regard to a specific person in whose
possession the bonds were, we turn to determine the fact as
to when did the period of limitation start running for the
institution of the amendment to implead the respondent nos.
2-10 in the instant case. The period of limitation according to
B Article 91 (a) of the Limitation Act for filing a suit for
compensation for conversion of property is three years from
the date on which the person having the right to possession of
the property learns in whose possession it is. The amendment
to the suit to implead CMF and Hiten P. Dalal was effected on
C 20.10.1995 vi de a Chamber Summons. The case of the
appellant is that it was during a meetirig held on 07 .11.1992
that they first learnt that the suit bonds had been
misappropriated by Hiten P. Dalal and given to CMF. The
learned Special Court came to the conclusion that the plaintiff
D (appellant herein) had failed to establish the happening of a
meeting on 07 .11.1992 for three reasons. Firstly, that if the
appellant knew of the transaction between Hiten P. Dalal and
CMF on 07.11.1992, then they should have been impleaded
as parties in the suit filed by the appellant on 27 .11.1992, and
E that the appellant has not given any reason as to why they were
not impleaded as parties on 27 .11.1992 itself. Secondly, that
no reference has been made about this meeting by Mr. Kalyan
Raman, PW-1, in his deposition, who at the time had been
deputed from Andhra Bank to ABFSL, who was also alleged
F
to have been present at the meeting. Thirdly, that even Mr.
David Loveless PW-4, Director of Security and Investigations,
Office of the Specie.I Representatives of India (OSRI) does
not make any reference to this meeting. The learned Special
Court further held that the defendants (respondents herein)
G have, on the basis of the evidence on record, established that
the plaintiff had knowledge about possession of the bonds at
least on 18.03.1992 or 23.05.1992.
H
20. Mr. Ram Jethmalani, the learned senior counsel on
behalf of the appellant, contends that the period of limitation
STANDARD CHARTERED BANK v. ANDHRA BANK
1013
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.]
started running on 07.11.1992, and that the finding of the A
learned special court that no meeting took place on that date
is perverse for the reason that it is contrary to legal evidence
on record and therefore deserves to be set aside. The learned
senior counsel placed reliance on the deposition of Mr.
Srinivasan, PW-3, deputed to the Office of the Special
B
Representatives in India for the Standard Chartered Bank,
which reads as under:
" ... I say that to the best of my recoilection, these
documents were wepared by me as a record of
what transpired on 07 November, 1992 and a
confirmation thereof in respect of the transactions
mentioned in the documents therein referred. When
I prepared these documents, facts mentioned
therein were fresh in my memory. Having now
refreshed my memory on the basis thereof I say
that to the best of my recollection, the said
documents are a record of what transpired at the
said meeting mentioned therein.
In view of the fact thatthe said document at Exh.A
was not signed by me, one Mr. Sanjeev Ch ugh from
SCB, in or about early 1996 inquired from me as
to whether the copy of the minutes (being Exh. A
hereto) forwarded by him to me at the time had in
fact been prepared by me and whether they
accurately reflected what had transpired at that
meeting. I confirmed to the said Mr. Sanjeev Ch ugh
that this was indeed the position. Mr Chugh asked
me to confirm the same to the bank in writing.
Accordingly, on 11 March 1996 I addressed a letter
dated 11 March 1996 to SCB (Exh. B hereto) inter
alia stating that due to inadvertence I had not signed
the note at the relevant time and confirmed that the
original of the said note which was with the bank
reflected a true and accurate statement of what had
c
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transpired on 07 November 1992 and further
confirmed that the bank may refer to and rely upon
the same in any legal proceedings as it may deem
appropriate ......... "
The learned Special Court had disregarded the testimony of
B PW-3 Srinivasan in the following terms:
'The evidence of PW-3 Srinivasan itself does not
inspire confidence since though he was a member
of the investigation team, he does not remember
c
anything else about the transaction of the Plaintiffs
except the circumstances under which he has
signed the letter of confirmation- Exh 02-2."
21. The learned senior counsel further contends that the
said finding of the learned special court ignores the provision
D of Sections 159 & 160 of the Indian Evidence Act, 1872
(hereinafter "the Evidence Act"). It is contended that the
Evidence Act recognizes that human memory is fallible and
after some time, it may become totally blank about a transaction
of long ago. Sections 159 and 160 of the Evidence Act are
E quoted hereunder:
F
G
H
"159. Refreshing memory: A witness may, while
under examination, refresh his memory by referring
to any writing made by himself at the time of the
transaction concerning which he is questioned, or
so soon afterwards that the Court considers it likely
that the transaction was at that time fresh in his
memory. The witness may also refer to any such
writing made by any other person, and read by the
witness within the time aforesaid, if when he read it
he knew it to be correct."
"160. Testimony to facts stated in document
mentioned in Section 159-A witness may also
testify to facts mentioned in any such document as
STANDARD CHARTERED BANK v. ANDHRA BANK
1015
FINANCIAL SERVICES LTD. [V. GOPALA GOWDA, J.)
is mentioned in section 159, although he has no
A
specific recollection of the facts themselves, if he
·is sure that the facts were correctly recorded in the
document."
22. It is further contended by Mr. Ram Jethmalani, the
learned senior counsel on behalf of the appellant, that Mr.
B
Srinivasan, PW-3, was called to depose in the year 2009 for a
transaction that took place in November 1992. Thus, it would
be perfectly reasonable for him to claim that he remembers
practically nothing unless reminded by the contemporaneous
document of 1992 of which, he had once before been reminded C
in 1996. The learned senior counsel further contends that no
suggestion was put to him at the time of his cross examination
regarding any bribery or inducement on behalf of the CMF. No
suggestion was also put to him that the letter dated 11.03.1996
was not written by him. It was further not suggested to him that D
no such meeting happened on 07 .11.199~.
23.