(1.) Andhra Bank (Respondent No.3) is a nationalized bank. Andhra Bank Financial Services Limited (Respondent No.4) is a company wholly owned by Andhra Bank. Canbank Mutual Fund (CBMF) is a subsidiary company of Canara Bank, another nationalized bank. The Appellant herein is also a subsidiary of Canara bank. In or about 1989, Canbank Mutual Fund floated an open ended investment scheme known as CANCIGO on an assured return of 12.5% p.a. payable half yearly; the lock in period wherefor was one year. A stipulation was also made to the effect that transfers are not permitted. Hiten P. Dalal (Respondent No.2) was a registered stock broker. Respondent No.3 at his request applied for CANCIGO units of face value of Rs.11 crores. Similarly, Respondent No.4 also at the request of Respondent No.2 applied for CANCIGO units of face value of Rs. 22 crores. Indisputably, the payment of application money for purchase of said CANCIGO units was to be made, out of the monies lying in the bank account of Respondent No.2. The Respondent Nos.3 and 4 complied with said request of Respondent No.2. The CANCIGO certificates received by the Respondent Nos. 3 and 4 were handed over to the Respondent No.2. The interest accruing from the CANCIGO received by the Respondent Nos. 3 and 4 was also credited to the account of Respondent No.2. The said Respondents did not claim any right, title or interest therein. There had been diverse dealings by and between the Appellant herein and the said Respondent No.2 in respect of the purchase and sale of shares and securities of various companies. A sum of Rs.25,01,67,129/- was due and payable by the Respondent No.2 to the Appellant herein in respect of the said transactions as on 6th February, 1992. Respondent No.2 offered the aforementioned CANCIGOs to the Appellant herein as a beneficiary thereof. The said, offer of the Respondent No.2 was accepted in discharge of his aforementioned liabilities to the Appellant. The Appellant on 6th February, 1992 paid the balance amount of consideration of the said CANCIGOs, viz., a sum of Rs.7,98,32,871/- by a cheque dated 11th February, 1992 drawn in favour of the Respondent No.3 but the same was to be credited in the account of Respondent No.2.
(2.) In or about May, 1992 serious irregularities in security transactions were discovered whereupon the Reserve Bank of India constituted a Committee known as 'Jankiraman Committee' to look into the real nature of the transactions and to ascertain the true facts. Investment in CANCIGO by Respondent No.3 found place in the report of the said Committee wherein it was contended that it had made an application dated 28th August, 1991 for investment in CANCIGOs on behalf of Respondent No.2 for 11 crores. Pending investigation, the Appellant was advised not to part with the two sets of CANCIGO certificates without the consent of the Reserve Bank of India.
(3.) The President of India promulgated an ordinance known as "The Special Courts (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992". It was repealed and replaced by 'The Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992' ("the Act"), the Statement of Objects and Reasons where for are as under:-