B.O.I. Finance Ltd. VS. The Custodian & Ors.

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B.O.I. Finance Ltd. VS. The Custodian & Ors.

PETITIONER: B.O.I. FINANCE LTD.

Vs.

RESPONDENT: THE CUSTODIAN & ORS.

DATE OF JUDGMENT: 19/03/1997

BENCH: CJI, S.P. BHARUCHA, B.N. KIRPAL

ACT: JUDGMENT: [With C.A. Nos. 3656-57/95, 4863-64/94, 4390/94, 3529- 3530/95, 5546/94 3165/95, 3172/95, 3760/95, 3658-3659895, 8411/94, 8411/94, 10284/95, 10260/95 , 6545/95.

C.A. 2104/97 @ S.L.P (C) No. 54258/95 with

J U D G M E N T

KIRPAL, J.

These appeals, under Section 10 of the Special Court (Trial) of Offences relating to Transactions in Securities) Act, 1992 (hereinafter referred to as 'The Special Court Act') arise from the judgment of the Special Court at Bombay which decided common questions of law relating certain transactions of purchase of securities by the appellant banks from some of the brokers of whom the Special Court's Act, 1992 had been made applicable.

The appellant banks had prior to 6th June, 1992, entered into contracts with different brokers for the purchase and sale of certain securities which were not listed on any stock exchange. For the purpose of this case these contracts have been regarded as ready-forward transactions or buy-back transactions. The parties are agreed, and it is on this basis that the High Court also proceeded. That the nature of such a transaction is that it consists of two inter-connected legs, namely, the first or the ready leg, consisting of purchase or sale of certain securities at a specified price, and the second or froward leg, consisting of the sale or purchase of the same of similar securities at a letter date at a price determined on the first date. Such ready-forward transactions have, in most cases, been entered into either by execution of a single document or by execution of two documents contemporaneously, one representing the first or ready leg and the other the forward or second leg. On such contacts being entered into the ready leg of the transactions were completed with the appellants paying the agreed price and receiving the delivery of the securities which were agreed to the purchased.

Before the forward leg of the transactions could be completed, a Special court (Trial of Offences relating a transactions in securities) Ordinance 1992 was issued on 6.6.1992 which was subsequently replaced by the Act.

Special Courts Act. 1992 : The necessity for issuance of the said Ordinance is contained in the statement of objects and reasons which reads as follows : "In the course of the investigations by the Reserve Bank of India, large scale irregularities and malpractices were noticed in transactions in both the Government and other securities, indulged in the some brokers in collusion with the employees of various banks and Financial institutions. The said irregularities and malpractices led to the diversion of funds from banks and financial institutions to the individual accounts of certain brokers.

2. To deal with the situation and in particular to ensure the speedy recovery of the huge amount involved to punish the guilty and restore confidence in and maintain the basic integrity and credibility of the banks and financial institutions the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance. 1992 was promulgated on the 6th June 1992. The Ordinance provides for the establishment of a Special Court with a sitting judge of a High Court for speedy trial of offences relating t transactions in securities and disposal of properties attached. It also provides for appointment of one of more Custodians for attaching the property of the offenders for attaching the property of the offenders with a view to prevent diversion of such properties by the offenders."

We will refer to some of the provisions of the said Act which are relevant for the purpose of this matter.

Section 2 contains definition. Th term "securities" is defined in Se...

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