Sc Spikes Shcil Writ To Stay Indusind Bank Suit

A division bench of the Supreme Court last week dismissed a special leave petition (SLP) filed by the Stock Holding Corporation of India Ltd (SHCIL) against IndusInd Bank.

The corporation had filed the writ to restrain IndusInd from filing a criminal case against under Section 138 of the Negotiable Instrument Act (NIA).

IndusInd Bank had filed a case against SHCIL for bouncing of cheques worth Rs 24.40 crore and under Section 421, 420/120 of the Indian Penal Code (IPC) for cheating and criminal breach of trust against SHCIL and its directors.

The list of directors includes Unit Trust of India's (UTI) executive director B G Daga, former National Stock Exchange managing director R H Patil, chief general manager of the Industrial Development Bank of India B D Ushir and also officials from ICICI, IFCI and LIC apart from SHCIL managing director B G Goud. Former UTI chairman P S Subramanyam was also on the SHCIL board.

According to IndusInd, SHCIL -- the custodian of Calcutta Stock Exchange (CSE) -- had issued three post-dated cheques worth Rs 24.40 crore favouring Harish Chandra Biyani, a CSE broker, under one of its schemes.

These cheques were issued along with a letter of irrevocable undertaking for honouring the cheques on presentation.

The bank's Calcutta branch discounted these cheques. The CSE, meanwhile, annulled the transaction after it was found that Biyani had done a circular trading in DSQ Industries relating to 7,20,000 shares. The cheques were subsequently dishonoured on the due date (March 14, 2001).

"The cheques issued by SHCIL was backed by a board resolution and an irrevocable undertaking. We had the comfort letter of SHCIL and it did not matter whether it received the payment from CSE or not. We issued a notice on March 24 to SHCIL and its directors asking for the payment. But instead of making the payment, SHCIL moved a single judge bench in Calcutta High Court and got an ex-parte ad-interim stay order," said V B Raju, senior vice-president, IndusInd Bank.

However, SHCIL vice-president J S Narang said the cheques were paid to Biyani under the "cash on payout scheme" and that these cheques could not be discounted.

"The transaction was between Biyani and SHCIL. As far as the deal between Biyani and IndusInd is concerned, it is a private deal and we have nothing to do with it," Narang said.

On the comfort letter, SHCIL officials said: "This was a conditional letter and it was clarified that the cheque will be honoured one day after payment was made by the CSE. Since the exchange did not make the payment, we could not honour the cheques."

SHCIL got an ex-parte ad-interim stay order in April restraining the bank from moving against it under Section 138 or any other laws and to appoint a receiver for the cheques. The bank moved a division bench of Calcutta High Court in June.

The bench squashed the earlier order and said that prima facie there was a case under Section 138 and that the bank could move under 138 and under other criminal laws. SHCIL subsequently filed a special leave petition in the Supreme Court.