Decided on June 19,1995



- (1.) THIS is an appeal filed under Section 111(2) of the Companies Act, 1956, by Joy Holdings P. Ltd. against the decision of refusal to register 2.5 lakhs 9 per cent, tax-free bonds of Rs. 1,000 each by Indian Railway Finance Corporation (hereinafter referred to as "IRFC")." These bonds are covered in 25 certificates each of the value of Rs. 1 crore consisting of 10,000 bonds each.
(2.) The facts of the case are that the appellants lodged on September 29, 1994, 30 bond certificates consisting of 2.5 lakhs, 9% tax-free secured redeemable non-convertible bonds (NCBs) of Rs. 1,000 ("A" series) each and 50,000 9% tax-free secured redeemable NCBs of Rs. 1,000 ("B" series) each totalling Rs. 30 crores. These bonds were purchased by the appellant from Videocon International Limited on September 28, 1994. Of these bonds, IRFC registered 50,000 bonds of "B" series while no intimation was given to the appellant regarding the 2.5 lakhs "A" series bonds. On enquiry, IRFC sent a letter dated December 6, 1994, to the appellant that "on account of certain disputes pending with the management of Canara Bank, we are unable to register transfer of these bonds for the present." In view of this, the appellant has filed the instant appeal on December 29, 1994, with the prayer that IRFC be directed to register these bonds in the name of the appellant. IRFC in its reply has stated that Can Bank Financial Services Ltd. (Canfina) a wholly owned subsidiary of Canara Bank, has failed to pay its debts to IRFC. Since Canfina is merely a division of Canara Bank, the latter is squarely liable for the debts of Canfina. According to IRFC, negotiations were going on between Canfina and Canara Bank for settlement of Canfina's debts to IRFC and till such time the matter was settled, Canara Bank and its subsidiaries were to hold all the bonds issued by IRFC. But, in the instant case, Canara Bank has sold the impugned bonds to Videocon which was fully aware of the dispute between IRFC and Canara Bank. In spite of this knowledge, Videocon not only purchased these bonds from Canara Bank but had also transferred the same to the appellant, which is a front company of Videocon. It is further stated by IRFC that Videocon should have instead of transferring the bonds to the appellant returned the same to Canara Bank and should have collected back the consideration paid. Since Videocon had knowledge of the dispute it could not be treated as a bona fide purchaser of these bonds and the appellant, being a front company of Videocon, can also not be termed a bona fide purchaser. It is also alleged by IRFC that Canara Bank, without honouring the commitment of holding on to these bonds till the settlement of the dispute, transferred the bonds to Videocon mala fide. Accordingly, IRFC has pleaded that instead of directing registration of the impugned bonds in the name of the appellant, it should be directed to return the bonds to Canara Bank and get the refund of the consideration paid. Canara Bank, the second respondent, in its reply has stated that these bonds were sold to Videocon for valuable consideration and the appellant who has purchased them from Videocon is entitled to have its name registered in respect of these bonds.
(3.) IN a hearing on March 30, 1995, we directed the appellant to implead Videocon also as a party to the proceedings and also ordered that IRFC should keep the interest payable as on April 1, 1995, on these bonds in a separate bank account in a fixed deposit for a period of six months. On impleading, Videocon filed its reply stating that it had sold these bonds to the appellant for valuable consideration and Videocon was not in the knowledge of any dispute between Canary Bank and IRFC at the time when it purchased the impugned bonds from Canara Bank.;

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