What is meaning of term “first learns” as provided U/ A 91(a) of Limitation Act, 1963?

The learned senior counsel further contended that
reference to ‘the person in possession’ in column 3 of
Article 91(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 judgments for the same. The first was
the case of Muthu Koraki Chetty & anr. v. Mahamad Madar
Ammal & 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 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 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. Nagendra Nath Pal  AIR 1926 Cal 65decided by
the 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, 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 Shau AIR 1928 Cal 646, 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 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 bonds under
an arrangement, which in law would constitute wrongful
conversion.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
 CIVIL APPEAL NOS.9540-9541 OF 2010
STANDARD CHARTERED BANK Vs. ANDHRA BANK FINANCIAL SERVICES LTD & ORS. ……
Dated;August 28, 2015
Coram:
V. GOPALA GOWDA, J.

The Securities Scam that shook the Bombay Stock
Exchange in 1992 took place 23 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 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.
 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.
These were the 9% tax-free bonds and 17% taxable bonds.
On 26.02.1992, the said bonds were allotted by NPCL to
the Andhra Bank Financial Services Limited (hereinafter
“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 ABFSL
was Rs.48,02,50,000/- which was paid by way of Pay Order
on the same day. A 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% bonds of the face value
of Rs. 50 crores to ANZ Grindlays Bank (hereinafter
“ANZ”). 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 SCBPage 3
3
and sought the return of the Banker’s Receipt No. 23727.
On the same date, SCB returned the Banker’s Receipt No.
23727 to 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 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 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 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 bondsPage 4
4
between SCB and CMF, the matter should be resolved
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 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% 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. 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 judgment of this Court in the case of Standard
Chartered Bank v. Andhra Bank Financial Services Ltd.1 In
1 (2006) 6 SCC 94Page 5
5
the present suit relating to the 17% bonds, the learned
Special Court framed and answered the following issues
for its consideration:
Issues Answer
Between PLAINTIFFS and CMF
1.Whether the suit as against
Defendants No. 3-10 (CMF) is barred
by limitation
In the
affirmative
2. Whether the Defendant No. 2 (Hiten P.
Dalal) in collusion with one of the
employees of the Plaintiff (viz.
Santosh Mulagaonkar) fraudulently
misappropriated the Suit LOA as
alleged in para 6A (iii) of the
Plaint?
In the
negative
3. Whether the Plaintiffs were unaware
that the series of transactions
involving CMF, ANZ, ABFSL and the
Plaintiffs themselves were “based on
the very same Letter of Allotment”
as alleged in para 7 of the plaint?
In the
negative
4.Whether the Plaintiffs prove that
they had purchased 17% taxable NPCL
Bonds on 26th 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?
In the
affirmative
5.Whether the Plaintiffs prove that
CMF chose to issue its BR with a
view to conceal the alleged
“misappropriation” of Bonds as
alleged in para 7D and 7E of the
Plaint?
In the
negative
6.Whether the Plaintiffs prove that on
09.04.1992 there was a “hole”
pertaining to the transactions of
26.02.1992 between the SCB and
In the
affirmativePage 6
6
ABFSL as alleged in para 7H of the
Plaint?
7.Whether the Plaintiffs prove that
the dealers of the Plaintiffs
entered into a dummy transaction
dated 10.04.1992 with the ABFSL to
cover up the said “hole” as alleged
in para 7(l) of the Plaint?
In the
affirmative
8. Whether CMF have converted the
bonds/ Letter of Allotment as
alleged in para 6A & 7(k) of the
Plaint?
In the
affirmative
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?
In the
negative
10. If the answer to the above issue
is in the affirmative whether such
transactions are illegal and/or
opposed to the public policy?
In the
negative
11. Whether the contention that 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 30th
October 2001 and in CAs Nos. 2275 &
2276 dated 05th May 2006?
In the
affirmative
12. Whether Hiten P. Dalal was the Does not
broker for ABFSL in the alleged suit
transaction and ABFSL handed over
the original Letter of Allotment to
HPD as alleged in para 6 (c) and
11(a) of the Plaint?
Arise
13. Whether SCB are stopped from
making any claim as alleged in para
2 read with para 14 of the Written
Statement of CMF?
In the
affirmative
14. Whether CMF proves that it had on
27th February, 1992 purchased the 17%
NPCL bonds through Hiten P. Dalal
who was allegedly acting as a
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?
In the
negative
15. Whether the transactions under the
15% arrangement were transactions of
HPD and not of SCB and HPD was
entitled to deal with bonds at his
discretion as alleged in para 7(g)
of CMF’s Written Statement?
In the
negative
16. Whether CMF’S allegations that
transactions under 15% arrangement
were transactions of HPD, are barred
by res judicata by the judgment of
the Special Court in Suit No. 13/94
dated 13.03.1995 and the decision of
the Supreme Court in CA No. 4456 of
1995 dated 30.10.2001 as alleged 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?
In the
affirmative
17. Whether CMF’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?
In the
affirmative
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?
In the
affirmative
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
negative
20. What relief? As per Order
Between PLAINTIFFS AND HPD
1. Whether the Plaint fails to
disclose any cause of action against
HPD as alleged in para 1 of the
Written Statement of HPD?
In the
affirmative
2.Whether the suit is barred by
limitation as against Defendant No.2
as alleged in para 2 of the Written
Statement of Defendant No. 2
In the
affirmative
3. Whether the allegations of HPD that
the Letter of Allotment was lent to
him 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 in para 6B of
the Plaint?
In the
affirmative
4. Whether Hiten P. Dalal is jointly
and severally liable along with CMF
to pay to SCB the sum of Rs.
55,26,16,438.36 as per the
particulars 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?
In the
negative
5.Whether SCB is entitled to any
relief and if, what?
In the
negative
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 17% taxable NPCL bonds. The learned
Special Court also found that Hiten P. Dalal had not
succeeded in proving that he 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 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:
“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 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 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 whether the period of limitation will
be ascertained from 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
plaintiff had not succeeded in establishing the happening
of any meeting on that date. 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 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 the suit bonds during a
meeting.
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.
11. We have heard Mr. Ram Jethmalani, the learned senior
counsel on behalf of the appellant and Mr. Rohit Kapadia
and Mr. Pradeep Sancheti, the learned senior counsel on
behalf of the respondents. On the basis of the factual
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 us is that of limitation, we
shall restrict our attention to that only. The main legal
questions which arise in this case are-
1. What is the meaning of the term “first learns”
as provided under Article 91(a) of the Limitation
Act, 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) of the Limitation Act reads thus:
Description of Suit Period of
Limitation
Time from which
period begins to
run
91.For compensation,-
(a) a) For wrongfully taking
or detaining any specific
movable property lost, or
acquired by theft, or
dishonest
misappropriation, or
conversion
Three years When the person
having the right
to the possession
of the property
first learns in
whose possession
it is.
 (emphasis laid by this Court)
13. Mr. Ram Jethmalani, the learned senior counsel
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 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 conjecture is
not knowledge. The belief must almost be certain. The
court must find that the plaintiff had, on credible
evidence, 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 Dwarkadas (1935) ILR 60 Bom 848 delivered by
Justice Rangnekar of the Bombay High Court in which it
was held as under:
“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.”
14. The learned senior counsel further contended that
reference to ‘the person in possession’ in column 3 of
Article 91(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 judgments for the same. The first was
the case of Muthu Koraki Chetty & anr. v. Mahamad Madar
Ammal & 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 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 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. Nagendra Nath Pal  AIR 1926 Cal 65decided by
the 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, 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 Shau AIR 1928 Cal 646, 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 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 bonds under
an arrangement, which in law would constitute 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 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 Financial Services Ltd &
Ors. (2006) 6 SCC 94, para 84 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.”
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 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 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 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 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:-
“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
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
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
6 AIR 1929 PC 69Page 19
19
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
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 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:
“The article says that a suit for recovery of
specific moveable 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 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 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
7 AIR 1961 SC 1474Page 20
20
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.”
 (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, 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 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, answered accordingly.
Answer to Point No. 2
19. Now that we have established that the burden of proof
on the plaintiff as to the degree of knowledge is that ofPage 21
21
specific 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 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 20.10.1995 vide a Chamber Summons. The case
of the appellant is 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.
The learned Special Court came to the conclusion that the
plaintiff (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 that the appellant
has not given any reason as to why they were notPage 22
22
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 to have been present at the meeting. Thirdly,
that even Mr. David Loveless PW-4, Director of Security
and Investigations, Office of the Special Representatives
of India (OSRI) does not make any reference to this
meeting. The learned Special Court further held that the
defendants (respondents herein) 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.
20. Mr. Ram Jethmalani, the learned senior counsel on
behalf of the appellant, contends that the period of
limitation started running on 07.11.1992, and that the
finding of the 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
Representatives in India for the Standard Chartered Bank,Page 23
23
which reads as under:
“…I say that to the best of my recollection,
these documents were prepared 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 that the said document at
Exh. A was not signed by me, one Mr. Sanjeev
Chugh 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 Chugh 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
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
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
anything else about the transaction of the
Plaintiffs except the circumstances under which
he has signed the letter of confirmation- ExhPage 24
24
D2-2.”
21. The learned senior counsel further contends that the
said finding of the learned special court ignores the
provision 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 quoted hereunder:
“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
is mentioned in section 159, although he has no
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. 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 claimPage 25
25
that he remembers practically nothing unless reminded by
the contemporaneous document of 1992 of which, he had once
before been reminded 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
no such meeting happened on 07.11.1992.
23. The learned senior counsel for the appellant further
contends that the respondent CMF in their Written
Statement before the Special Court never denied the
happening of the meeting on 07.11.1992. Para 12 of the
Written Statement reads thus:-
“……this Defendant denies that S.R Ramaraj stated
to CBI on 07.11.1992 or at any time that
Defendant No.2 had a dummy transaction with the
Fund or that the details of the said alleged
transactions came to light only during the
proceedings in Misc. Petition No. 81 of 1995.”
24. The learned senior counsel further contends that
because even the respondent CMF never denied the happening
of the meeting on 07.11.1992, the learned Special Court
erred in coming to the said conclusion, which is contrary
to the pleading and evidence on record.Page 26
26
25. We agree with the contention advanced by the learned
senior counsel on behalf of the appellant, Mr. Ram
Jethmalani with regard to the meeting on the above date.
26. There needs to be specific denial by a witness as to
the suggestion regarding the happening of a meeting for
the Special Court to arrive at the conclusion that the
meeting did not take place. Order VIII Rule 5 of the Code
of Civil Procedure, 1908 deals with this aspect, which is
reproduced hereunder:
“Order VIII Rule 5 - Specific denial:
(1) Every allegation of fact in the plaint, if
not denied specifically or by necessary
implication, or stated to be not admitted in the
pleading of the defendant, shall be taken to be
admitted except as against a person under
disability………”
It is a settled position of law that if an allegation
made in the plaint is not specifically denied in the
written statement, it is treated as admitted, as was also
held by this Court in the case of Balraj Taneja v. Sunil
Madan8.
27. In the instant case, it is evident from the affidavit
of Mr. Srinivasan, PW-3 that the meeting happened on
07.11.1992, the relevant part of which is extracted
8 (1999) 8 SCC 396Page 27
27
hereunder:
“…I say that to the best of my recollection,
these documents were prepared 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.”
(emphasis laid by this Court)
He further stated in his cross examination conducted by
the counsel for the defendant no. 2 Hiten P Dalal that:
“……I say that I have no personal knowledge of the
transaction which is mentioned in Exhibit A, i.e
office note dated 7/11/1992 annexed to the
affidavit in lieu of evidence. I say that my
memory has faded and I cannot recall why the
meeting mentioned in the office note dated
7/11/1992 marked as Exh A was held. I do not
recall the circumstances under which the said
meeting took place. I do not recollect whether I
had checked the records of the SCB pertaining to
contents of this office note. I do not recollect
whether I had checked the record before
mentioning the contents of the said note……I say
that we were responsible officers of the Bank and
whatever transpired in the meeting was mentioned
in the office note that was prepared after the
meeting was over……………
I say that the meeting which is referred to in
note dated 7/11/1992 was not called by me and
normally I did not call or convene such
meetings. I do not recollect who asked me to
attend this meeting dated 7/11/1992 since it was
16 years back. I say that to the best of my
knowledge, I could not know persons who were
present in the meeting prior to 7/11/1992. I
cannot say whether I was asked to attend thePage 28
28
said meeting because it was an important
meeting……I say that to the best of my memory, I
was called to Canbank Mutual Fund’s office to
attend the meeting dated 7/11/1992. I say that
it only out of my memory I say so and I do not
have any record in support thereof.”
 (emphasis laid by this Court)
28. At no point of time was the suggestion put to him
regarding the meeting itself not happening. Further, on
the suggestion that the fact that he did not originally
sign the documents of the Minutes of the Meeting held on
07.11.1992 shows that he had a fraudulent intention, his
response was:
“I say that the words “at the relevant time”
mentioned in second line of letter at Exhibit-B
to my affidavit of evidence, pertain to 1992. I
say that in 1996, I would have recollected that I
have not signed the note and therefore, I have
mentioned in the said Exhibit-B that I have
inadvertently not signed the said note. I say
that there was no compulsion in me to sign the
said note which is at Exhibit-A to my affidavit
in lieu of evidence in 1992. I say that it seems
that it was a specific request was made from the
bank, and, as a result, I did not ask any
question as to whether the signature on the note
was required or not. I say that to the best of my
knowledge when I have mentioned “original of the
said note” in letter at Exhibit B dated 11/3/1996
annexed to my affidavit in evidence, I have
referred to the original office note at Exhibit-A
annexed to my affidavit of evidence.
I stand by whatever I have said in my affidavit
in lieu of evidence.”
 (emphasis laid by this Court)
On a careful examination of the above deposition of Mr.Page 29
29
Srinivasan, PW-3, it becomes clear that a meeting in
fact, took place on 07.11.1992. Mr. Srinivasan has stated
in his deposition that he prepared a document, Exh. A,
which is the minutes of the meeting which took place on
that date. According to this meeting, Mr. Ramaraj of
Divisional Manager of CMF, Mr. Kalyan Raman, Senior Vice
President of ABFSL, Mr. Bhupinder Kumar and Mr. Azad of
the CBI and Mr. N. Srinivasan of the SCB were present.
Mr. Srinivasan further stated in his deposition that he
had inadvertently forgotten to sign the document prepared
by him which contained the minutes of the meeting. On
11.03.1996, he signed a document, produced before us as
Exh. B, in which he has stated:
“I have perused the attached note dated 7
November 1992 prepared by me. I have
inadvertently not signed the said note at the
relevant time. I now confirm that the original
of the said note which is now in possession of
the bank is true and accurate and the bank may
refer to and rely upon the same in any legal
proceedings as it may deem appropriate.”
 (emphasis laid by this Court)
A careful examination of the testimony of Mr.
Srinivasan, PW-3, reveals that a meeting did take place
on 07.11.1992. Despite a lengthy cross examination
conducted by the counsel for the respondents, at no
point of time the suggestion was put to him regardingPage 30
30
the not happening of the meeting itself. The deposition
of Mr. Srinivasan not only confirms the happening of the
meeting on 07.11.1992, but also throws light on the
members present at the meeting, as well as the events
that transpired at the said meeting.
Apart from the testimony of Mr. Srinivasan, the
evidence of one other witness who was examined also
conclusively establishes the occurrence of the meeting
on 07.11.1992. That is the deposition of Mr. David
Loveless, PW-4, who was appointed as the Director of
Security and Investigations, Office of the Special
Representatives for India (OSRI) in August 1992. He has
stated in his affidavit as under:
“I say that at the relevant time when the suit
was filed i.e 27 November 1992 the Bank was under
the impression that with regard to its purchase
of 17% NPCL bonds from ABFSL, plaintiff had not
received physical delivery of the bonds or Letter
of Allotment from ABFSL, but that it had received
merely a photocopy. This was based on the records
of the Plaintiff, being the “Bank Receipts Held
Register” which reflected the receipt of a
photocopy of the original LOA. Hereto annexed and
marked as EXHIBIT “A” is a copy of the relevant
extract of the said Register. However, on 7
November, 1992, at a meeting which was attended
inter alia by Plaintiff’s representative Mr. N
Srinivasan and Mr. R. Ramaraj of Canbank Mutual
Fund, Plaintiff became aware of the fact that the
CMF claimed to have received the original Letter
of Allotment from Hiten P Dalal, who, it appears,
had handed over the said Letter of Allotment toPage 31
31
CMF in order to satisfy some alleged outstanding
liabilities of HPD to the said fund, which has
arisen in respect of some alleged security
transactions engaged in by the CMF with HPD in
November 1991.”
 (emphasis laid by this court)
It becomes manifestly clear from an examination of the
deposition of Mr. Srinivasan, PW-3 and Mr. Loveless, PW-4
that a meeting did infact occur on 07.11.1992. The learned
senior counsel appearing on behalf of the respondents has
not been able to show any reason as to why the evidence
rendered by this witness should be disbelieved.
 The learned Special Court recorded the finding of
fact holding that no meeting had occurred on 07.11.1992 on
the primary ground that neither Mr. Kannan, PW-2 nor Mr.
Ramaraj, both of whom were allegedly present at this
meeting, mentioned the happening of a meeting on
07.11.1992 in their depositions. The learned Special Court
erred in coming to the conclusion that no meeting has
occurred on 07.11.1992 for the reason that Mr. Ramaraj and
Mr. Kannan, PW-2 did not mention this meeting in their
deposition, and thus, going against the well settled
principle of law of ‘specific denial’. Mr. Srinivasan,
PW-3 and Mr. Loveless, PW-4, both specifically deposed as
to the happening of a meeting on 07.11.1992. Thus, thePage 32
32
learned Special Court could come to the conclusion that
the meeting did not happen was only if some witness
deposed specifically that the meeting did not happen. In
the instant case, no witness was specifically asked in the
cross examination by the counsel for the respondents about
the happening of the meeting on 07.11.1992. Thus, no
witness expressed in as many clear terms that the
purported meeting infact did not take place.
 On the basis of the legal evidence placed on record by
the appellant before the Special Court that a meeting did
infact take place on 07.11.1992, we turn our attention to
what happened at the said meeting. The note prepared by
Mr. Srinivasan, PW-3, after the said meeting, produced as
Exh. “A” states as under:
“CMF says the following:
There was an initial purchase in end 1991, by
CMF from HPD of some security against which HPD
did not deliver physicals to CMF.
Consequently, HPD had a dummy sale/ purchase
transaction with CMF for FV Rs. 100 crs and
delivered 9% NPCL and 17% NPCL to CMF on
26.02.92. The deal slip indicates deal with
ABFSL, but difference between sale & purchase of
Rs. 3 crores was paid to HPD directly by Andhra
Bank……”
A perusal of the record prepared by Mr. Srinivasan, PW-3,
makes it amply clear that it was during this meeting on
07.11.1992 that CMF first admitted to SCB regarding thePage 33
33
dummy sale involving the 9% NPCL bonds and 17% NPCL
bonds. At this point, we would like to reiterate that the
learned senior counsel appearing on behalf of the
respondents have not been able to point out any reason
for us to disbelieve either the deposition of Mr.
Srinivasan, PW-3, or the documents prepared by him, which
have been placed on record.
29. Thus, we conclude that a meeting did infact take
place in the office of CMF on 07.11.1992, and that it was
on this date that SCB found out about the dummy
transaction that had taken place between CMF and Hiten P.
Dalal regarding the 9% and 17% NPCL bonds. Therefore, the
finding recorded by the learned Special Court is
erroneous both in fact and in law, hence the same is
liable to be set aside.
30. In light of the fact that the knowledge of the
appellant had started running on 07.11.1992, the question
that now remains to be answered is whether there was any
previous date on which it was possible that the appellant
had acquired knowledge of the conversion of the bonds.
The learned senior counsel appearing on behalf of the
respondents, Mr. Rohit Kapadia and Mr. Pradeep Sancheti,
contend that there are atleast three alternate priorPage 34
34
dates on which the appellant can be said to have acquired
knowledge of the fraud perpetrated on it by the
respondents. These dates are 18.03.1992, 10.04.1992 and
23.05.1992.
31. We have heard Mr. Ram Jethmalani, the learned senior
counsel appearing on behalf of the appellant and Mr.
Rohit Kapadia and Mr. Pradeep Sancheti, the learned
senior counsel appearing on behalf of the respondents and
have perused the documents produced before us as
evidence. We shall examine these dates one by one in
order to conclude whether knowledge of the appellant can
be construed from any one of these dates, from which date
the period of limitation for instituting the suit for
claim against the respondents starts running.
32. It is contended by the learned senior counsel
appearing on behalf of the respondents that the first
date on which knowledge can be attributed to the
appellant is 18.03.1992. The learned senior counsel
places reliance on the second amendment to the Plaint
dated October 2006 in which it is stated:
“………Significantly, although, admittedly, 3rd
Defendant on 17 March 1992 had physical
possession, of the said bonds (the LOA
representing the said bonds), 3rd Defendant
deliberately did not deliver to the plaintiffsPage 35
35
the said bonds and instead delivered to the
Plaintiffs, 3rd Defendant’s BR bearing No. 2767.
In view thereof, Plaintiffs did not realize that
the original letter of allotment which has been
delivered to the Plaintiffs on 27 February 1992
was, in fact, in the possession of 3rd Defendant
as on 17 March 1992……”
The learned senior counsel further places reliance on
para 7E of the amended plaint which reads thus:
“…………Had 3rd Defendant, delivered to plaintiffs,
against the transaction of 17 March 1992, the
original Letter of Allotment, which was in the
possession of 3rd Defendant, Plaintiffs would have
immediately realized the fraud that had been
played on the Plaintiffs…………”
33. The learned senior counsel for respondent Nos. 2 to 10
contend that 18.03.1992 would be a crucial date regarding
definite knowledge of the appellant about possession of
the bonds by CMF. CMF had specifically pleaded that it had
delivered the bonds on 18.03.1992 to the appellant and in
turn the appellant discharged its Bank Receipt No. 2767
acknowledging the same. The learned senior counsel further
places reliance on the Bank Receipt No. 2767 produced as
Exh. P-16, dated 17.03.1992, which contains an endorsement
“bonds delivered 18/3/92”. According to the learned
senior counsel on behalf of the respondents that the said
Bank Receipt conclusively proves the delivery of the
physical bonds to the appellant SCB.Page 36
36
34. Mr. Ram Jethmalani, the learned senior counsel
appearing on behalf of the appellant, on the other hand
contends that in para 7E of the Plaint, it has been
clearly and specifically alleged that on 18.03.1992, the
17% NPCL bonds were delivered directly through Hiten P.
Dalal to ANZ Bank, to whom SCB had sold the said bonds on
26.02.1992 itself. He further places reliance on the
affidavit of Mr. S. Ramaraj, authorized employee and agent
of CMF. This affidavit was produced in the suit before the
Company Law Board. He had stated therein:
“Even in respect of the 17% NPCL bonds which were
subsequently sold on 17.3.1992 by the Petitioners
(CMF) to Respondent no. 4 (SCB) as set out in
para A above, the Petitioners (CMF) had entered
into the transaction through respondent no. 2
(HPD) who acted as the broker………The RBI cheque
for the net amount of Rs. 15,23,973.61 issued by
Respondent no. 4 in favour of the Petitioners was
delivered to the Petitioners (CMF) by respondent
no. 2 (HPD) and likewise the BR in respect of the
sale of 17% NPCL bonds was delivered by the
Petitioners (CMF) to respondent no. 2 (HPD) for
onward delivering to the Purchaser. Subsequently,
even when the original letter of allotment was
exchanged for the BR, the said exchange also had
taken place through respondent no. 2 (HPD) and/
or his servants and agents.”
35. The learned senior counsel on behalf of the appellant
submits that the said affidavit states that the 17% NPCL
bonds were purchased by CMF on 27.02.1992 from ABFSL
through its broker Hiten P. Dalal along with 9% NPCLPage 37
37
Bonds. Mr. Ramaraj further said that the very same bonds
were subsequently sold by CMF to SCB, on 17.03.1992. The
Bank Receipt issued was exchanged by delivery of original
LOA on 18.03.1992. He does not say that it was delivered
to the SCB. The learned senior counsel contends that in
view of the averments of the affidavit of Mr. Ramaraj, the
knowledge of the bonds being delivered to the Company on
18.03.1992 is not tenable in law. He further contends that
the learned Special Court erred in arriving at this
conclusion on facts, which is contrary to the affidavit of
Mr. Ramaraj and therefore, the said finding is erroneous,
liable to be set aside.
36. The learned Special Court has erroneously held that
the period of limitation for institution of the suit by
the appellant would start running on 18.03.1992, as there
was no evidence on record to show that the appellant did
not have knowledge that this was the only set of bonds
which were used by NPCL and therefore there was no
question of other bonds being in circulation. The learned
Special Court further held that the burden of proving the
non existence of knowledge was on the appellant, and that
in the absence of evidence on this point, it would have to
be held that when the bonds were returned by CMF to ANZ onPage 38
38
that date itself the appellant became aware of the
possession of the bonds by CMF, and that is the date on
which the period of limitation would start running for
institution of the suit against the respondents.
37. As has already been discussed by us in an earlier part
of this judgment, the period of limitation under Article
91(a) of the Limitation Act starts running on the date
that the plaintiff acquires knowledge of the identity of
the person who is in possession of the bonds. Apart from
knowledge of the identity of the person, Article 91(a)
also requires the knowledge that the possession of the
bonds was acquired by means of wrongful conversion.
38. The evidence of Mr. Ramaraj, as produced before the
Company Law Board, has been grossly misinterpreted by the
learned Special Court. The affidavit of Mr. Ramaraj
clearly states that the Bank Receipt in respect of the
said 17% NPCL bonds was delivered by CMF to Hiten P.
Dalal for onward delivery to the ‘purchaser’. The
purchaser in this context refers to ANZ. The affidavit of
Mr. Ramaraj makes it amply clear that at no point of time
did SCB have possession of the physical bonds. It was
Hiten P. Dalal who delivered them to ANZ. Thus, the
finding of the learned Special Court as to the date ofPage 39
39
knowledge being 18.03.1992 is perverse and is liable to be
set aside.
39. The next date of knowledge, as contended by the
learned senior counsel on behalf of the respondents, is
10.04.1992. It was contended by the learned senior counsel
appearing on behalf of the respondents that the list of
transactions disclosed by the SCB to the Joint
Parliamentary Committee reflects a transaction for sale
dated 10.04.1992. In Para 7I of the Plaint, the appellant
had stated that they had realized that there was a ‘hole’
or a shortfall in their Securities Account pertaining to
the transaction of 26.02.1992 between the appellant and
ABFSL, in view of the belief of the appellant that the
said bonds under the said transaction had not been
received from ABFSL. It was further stated in the plaint
that the dealers of the appellant then entered into a
dummy transaction dated 10.04.1992 with ABFSL. In fact,
the said purported transaction was a mere unilateral set
of entries effected in the books of the appellant and that
so such transaction took place. The learned senior counsel
contends that no evidence has been placed on record to
show that this was a dummy transaction, and that the date
of knowledge imputed to SCB should be 10.04.1992.Page 40
40
40. It is further contended by Mr. Ram Jethmalani, the
learned senior counsel appearing on behalf of the
appellant, that 10.04.1992 cannot be considered to be the
date on which knowledge of the conversion can be said to
be imputed to SCB. He relied on the evidence of Mr. Kalyan
Raman, PW-1, who has stated thus:
“My attention has also been drawn to para 6 (c)
of the Miscellaneous Petition No. 81 of 1995
filed by Defendant No.3 before the Company Law
Board. I say that ABFSL had not entered into any
of the transactions mentioned in para 6(c) of the
Miscellaneous Petition No. 81 of 1995 with CMF or
any other party.”
The learned senior counsel for the appellant contended
that this testimony of Mr. Kalyan Raman, PW-1, who was an
employee of ABFSL at that time, clearly establishes that
there were no transactions between SCB and ABFSL on
10.04.1992. This was the best evidence on the matter in
favour of the appellant which is conveniently omitted to
be considered by the learned Special Court while
recording the finding on the contentious issue of
limitation.
41. The learned Special Court dismissed the claim of the
respondents that 10.04.1992 could be the date on which
knowledge can be said to be imputed to the appellant onPage 41
41
the ground that the respondents had not proved by leading
any cogent evidence that the appellant became aware of
the conversion on 10.04.1992. The learned Special Court
further held that the respondents had failed to show that
the said transaction was settled against bonds for
valuable consideration.
42. We agree with this finding of the learned Special
Court. The testimony of Mr. Kalyan Raman, PW-1, makes it
manifestly clear that no transaction took place between
ABFSL and SCB on 10.04.1992, and thus, the question of
imputing knowledge to the appellant on that date does not
arise for the purpose of limitation begins to run for the
appellant for institution of the suit claim against the
respondents.
43. The next date, which has been most vehemently
contended by the learned senior counsel appearing on
behalf of the respondents, is 23.05.1992.
44. The learned senior counsel for the respondents place
reliance on para 4 of the Written Statement submitted by
them before the learned Special Court which stated:
“Further according to the Plaintiffs, they had a
meeting with various brokers, including Hiten P.
Dalal on 23.05.1992 wherein in relation to the
alleged Andhra Bank Financial transactions
relating to NPCL bonds he is alleged to havePage 42
42
“admitted that he diverted the Bonds to
Citibank”. Thus, on the Plaintiffs own showing,
without any manner admitting the correctness of
the allegations, in any case, latest by May,
1992 the Plaintiffs are aware that Hiten P Dalal
had traded in the said Bonds and in fact
delivered the same Bonds to CMF.”
45. The learned senior counsel further submit that the
happening of a meeting on 23.05.1992 is an admitted fact.
During the course of the meeting, there was a specific
discussion with regard to the NPCL bonds, of both 9% and
17%. The minutes of the meeting, produced before us as
Exh. D-2(1) state:
“On the Andhrafina transactions relating to the
NPCL bonds where SCB was provided with
photocopies of the bonds instead of originals,
HPD admitted that he had divereted the bonds to
Canbank………”
46. The learned senior counsel for the respondents
further contend that the meeting of 23.05.1992 is a
material fact, which ought to have been pleaded by the
appellant particularly since admittedly, the appellant
was informed of the conversion of the suit bonds on that
day and the alleged explanation, as to whether the
knowledge was complete or incomplete etc. ought to have
been a part of its pleading.
47. The learned senior counsel on behalf of thePage 43
43
respondents further contend that the distancing of the
appellant from the clear knowledge about the diversion of
the bonds to CMF by Hiten P. Dalal by insisting that the
said information was purely informal, and that Hiten P.
Dalal had even stated that he would deny this
conversation if the SCB ever sought to make formal use of
his statement is a clear tactic of evasion. He further
contended that the minutes of the meeting do not contain
any such reservation as claimed by the appellant.
48. The learned Special Court, while arriving at the
conclusion on the facts pleaded and evidence on record
that 23.05.1992 can also be considered to be the date
from which knowledge can be said to be imputed to the
appellant regarding the conversion of the bonds in
question, relied primarily on the evidence of Mr.
Kalyan Raman, PW-1, who was also present at the meeting
held on 23.05.1992. He has stated in his affidavit
submitted before the learned Special Court as under:
“I further state that in view of the fact that
SCB’s investigation team headed by Mr. Wasim
Saifee, had inter alia informed me about the
missing NPCL bonds, both Saifee and myself did
inquire from HPD, in the course of the meeting
held on 23rd May 1992 as to what had really
happened in respect of the said transactions
with ABFSL on 26th February 1992. HPD also
informed us that insofar as the transactionsPage 44
44
wherein SCB had purchased 9% NPCL bonds of FV 50
crores and 17% NPCL bonds of FV 50 crores were
concerned and in respect of which SCB had paid
full consideration but in respect of which SCB
records reflected receipt of only photocopies of
the original LOA’s, that he (HPD) had diverted
the said bonds to Canara Bank.”
49. The learned Special Court further held that Mr.
Kalyan Raman, PW-1, had also identified the minutes of
the meeting which had been placed on record. There was no
mention of the evasive response given by Hiten P. Dalal,
or that he had stated that the said information was
informal and that he would deny this conversation if the
SCB ever sought to make formal use of this conversation.
It was further held that Hiten P. Dalal did disclose in
the meeting on 23.05.1992 about diversion of the bonds to
CMF. Thus, the appellant first learnt about the diversion
on 23.05.1992 of the suit bonds to CMF.
50. Mr. Ram Jethmalani, the learned senior counsel
appearing on behalf of the appellant, on the other hand
contends that 23.05.1992 cannot be taken to be the date
on which SCB had knowledge of the conversion of the suit
bonds. He submits that knowledge is not mere suspicion,
and that it must be knowledge of such a nature as will
enable the person defrauded to seek a remedy in a court
of law. He further contends that the fact that appellantPage 45
45
did not know of the role played by Hiten P. Dalal and
that this becomes amply clear from the FIR filed by them
dated 20.06.1992. The appellant was under the clear
impression that the suit bonds had not been received by
them, and that it had only received a Bank Receipt which
had been returned to ABFSL.
51. We agree with the submission of Mr. Jethmalani, the
learned senior counsel on behalf of the appellant. The
learned Special Court erred in arriving at the conclusion
that 23.05.1992 could be a date from which the appellant
could be said to have knowledge of the diversion of the
suit bonds by Hiten P Dalal. In this context, we would
turn our attention to the evidence of PW-2, Mr. Kannan,
who also stated after stating that Hiten P. Dalal had
admitted the diversion of bonds:
“In the said meeting, I pressed H.P. Dalal to
furnish me the details and particulars with
regard to his allegations of alleged diversion
to Canara Bank of the said NPCL bonds. HPD was
however evasive and did not afford any cogent
reply. I specifically inquired from him as to
the manner and circumstances of the alleged
diversion. However when pressed by me to give
particulars and details, he refused to state
anything further on the subject and instead
insisted that the said information of the
alleged diversion of the Bonds to Canara Bank
was purely informal and that he would deny his
conversation with the SCB if the SCB were to
seek to make formal use of his statement.Page 46
46
……The matter of NPCL bonds was thereafter
discussed by me with the other senior managers
of SCB but in view of the lack of any details/
particulars forthcoming from HPD and in view of
his failure to adhere to his assurances and
commitments of delivery of stocks/ securities/
reimbursement of losses assured by him to be
delivered between 18 and 22 May 1992, it was
felt that no credence could be placed on the
said statement made by HPD with regard to NPCL
bonds at the relevant time.”
 (emphasis laid by this Court)
We also turn our attention to the cross examination of
this witness who stated:
“You have stated that “HPD was evasive and did
not afford any cogent reply.” Which of these
statements is correct?
A. Both are correct
I say that the meetings which are referred to in
para 17 in my evidence in earlier suit would
include the meeting dated 23rd May, 1992.
…I say that HPD had admitted that he had diverted
the original letter of allotment to Canara Bank
and had not delivered the same to SCB.
I say that since he had mentioned diversion of
the bonds I thought that he might have
misappropriated the bonds. I agree that
misappropriation is a serious matter. I say that
I reported this to Mr. Wasim Saifi. He was also
present in the meeting and he has prepared this
note and he told me that he would verify the
record and go further in detail and therefore,
this fact should not be mentioned in the office
note.
How are NPCL bonds transactions a specific
instance of ‘Entry Guma diya’, ‘Duplicate
funding hoya’ and ‘Duplicate funding kiya’?
A.I say that when Mr. HPD informed us that the
original letters of allotment were diverted to
Canara Bank, I thought that it must be falling in
one of these categories. I say I thought it wouldPage 47
47
fall within one of these
would verify the record and go further in detail
and therefore, this fact should not be mentioned
in the office note.
How are NPCL bonds transactions a specific
instance of ‘Entry Guma diya’, ‘Duplicate
funding hoya’ and ‘Duplicate funding kiya’?
B.I say that when Mr. HPD informed us that the
original letters of allotment were diverted to
Canara Bank, I thought that it must be falling in
one of these categories. I say I thought it would
fall within one of these categories because of
diversion of securities.”
52. In this connection, it also important to examine the
testimony of PW-4, Mr. David Loveless, who was
investigating these transactions at that time. He has
expressly stated:
“……I was informed that on 23 May 1992 at a meeting
held between the Plaintiff’s officers and various
brokers, including inter alia HPD, the said HPD had
casually mentioned the said 17% NPCL bonds had been
diverted by him to Canara Bank. However, I was
informed by the Plaintiff’s officers, who attended
the said meeting that when HPD was pressed to give
details and particulars of the alleged diversion
and manner and circumstances thereof, he had
resisted evasively and had refused to furnish any
details and had even gone to the extent of stating
that the information divulged by him was purely
informal and that if the Plaintiffs were to seek to
make use of thereof in any legal proceedings, he
(HPD) would deny the same.
In this connection, I say that I was subsequently
briefed by the members of the investigation team
including Mr. Waseem Saifi as also by Mr. Kannan
who were present in the said meeting held on 23 May
1992. From the report of the said Mr. Kannan, it
was clear to me that no reliance could be placed
upon what HPD had vaguely alleged. It was in these
circumstances that when the plaintiff originallyPage 48
48
filed its Suit no. 6 of 1994, on 27 November 1992,
Plaintiff confined its claim only against ABFSL,
which it believed, on the basis of its information
and record had failed to deliver the original LOA
in respect of Rs 50 crores FV 17% NPCL bonds, which
it had sold to the Plaintiff on 25 February 1992. I
was only thereafter, in the circumstances referred
to by me hereinabove that Plaintiff realized that
the said LOA had possibly been converted by CMF and
only thereafter upon discovering the said fact and
learning of the said conversion effect by CMF that
plaintiff took steps to amend its Plaint and claim
in the alternative, damages against CMF for
conversion. I further say that the said amendment
was necessitated on accounts of the facts that
emerged after the CBI had investigated the matter
pursuant to SCB’s FIR dated 20 June 1992 and the
charge sheet filed pursuant thereto, dated 16 June
1995. I further state that after filing its FIR
dated 20 June 1992, SCB was waiting for the outcome
of the CBI investigation.”
A careful examination of the deposition of these two
witnesses makes it manifestly clear that the revelation
made by Hiten P. Dalal during the meeting held on
23.05.1992, did not give the appellant the knowledge
requisite for the purpose of Article 91(a) of the
Limitation Act. The revelation in contention made by
Hiten P. Dalal was vague and he gave evasive responses
after the same and thus, it is not reasonable to expect
the appellant to believe the same and initiate legal
proceedings on the basis of the said statement.
53. We examined all the dates alternative dates prior to
07.11.1992 proposed by the respondents, where knowledgePage 49
49
could be said to be imputed to the appellant for
institution of suit against the respondents. We find no
merit in the contentions urged by the learned senior
counsel for the respondents. The period of limitation
would start running only on 07.11.1992, the reasons for
which we have already elaborately stated in an earlier
part of this judgment. We set aside the finding of the
learned Special Court on the contentious issue nos.1 and
2 framed in the suit that the institution of the suit of
the appellant against Respondents Nos. 2-10 is barred by
limitation.
Answer to Point No. 3
54. Since we have set aside the finding of fact recorded
by the learned Special Court holding that the suit is
barred by limitation, as prescribed in the Schedule to the
Limitation Act, 1963 by recording the reasons in the
preceding paragraphs of this judgment and the other issues
including the issue on the merits of the claim were held
in favour of the plaintiff (appellant herein) by the
learned Special Court, which have not been challenged by
the Respondents 2-10 by filing an appeal, therefore, the
appellant is entitled for a decree of the suit claim of
the principal amount adjudged as on the date of thePage 50
50
institution of the suit. The appellant is also entitled to
interest pendente lite and future interest. This
transaction can be termed as a commercial transaction and
Section 34 of the Code of Civil Procedure, 1908 confers
discretionary power upon this Court to award interest at
appropriate rate on the suit claim of the appellant. We
have considered with regard to the facts and circumstances
of the case as to what should be the reasonable rate of
interest to be awarded on the suit claim both for the
period of pendente lite and for future interest and from
what date to be ordered. The suit in the instant case was
instituted before the Special Court on 27.11.1992, but the
respondent nos.2-10 were brought on record as parties to
the suit by way of an amendment, which was allowed on
10.01.1996. Therefore, it would be appropriate for this
Court 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. The Particulars of
Claim, marked as Exh. “E” to the plaint shows that the
appellant had claimed 20% interest from 26.02.1992 till
27.11.1992 at the principal sum of Rs.48,02,50,000.00, to
arrive at the amount of Rs.55,26,16,438.36 as the adjudgedPage 51
51
principal amount. Since we have awarded interest at the
rate of 6% per annum, we shall calculate the principal
amount of Rs.48,02,50,000.00, on that rate itself for the
period from 26.02.1992 to 27.11.1992 at that rate itself
which amounts to Rs.50,18,61,250.00 will be the adjudged
principal amount from the date of institution of the suit.
55. For the foregoing reasons, we set aside the judgment
and decree of the dismissal of the suit on the question of
limitation and the suit claim as indicated herein below
with interest and costs is allowed by allowing these
appeals in the following terms:-
The respondent nos.2-10 are directed to pay the
adjudged principal sum of 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. The appellant is permitted to file memo
costs of the suit proceedings throughout within three
weeks from the date of receipt of the copy of this
judgment.Page 52
52
……………………………………………………………………J.
 [V.GOPALA GOWDA]

…………………………………………………………………J.
 [R. BANUMATHI]
New Delhi,
August 28, 2015

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