Variava Overturns Panel Ruling In Anz-Nhb Case

The special court on the securities scam has reversed the ruling of the arbitration committee on the ANZ Grindlays-National Housing Bank (NHB) case. The committee had ruled in favour of the foreign bank.

As a result, Grindlays will have to repay NHB Rs 912 crore that was paid to it in March 1997, plus the interest component, which takes the total to about Rs 1,075 crore.

The courts decision implies that State Bank will not be able to file recovery proceedings to get almost Rs 1,500 crore back from National Housing Bank . State Bank of India, like ANZ Grindlays, was forced to pay NHB around Rs 700 crore in 1992 by the Reserve Bank of India. With interest, the amount will now be worth more than Rs 1,500 crore. Special Court Justice S N Variava yesterday struck down the arbitration committees award in favour of ANZ Grindlays as it was based on applying wrong principals of law.

 

Sources said ANZ would appeal to the Supreme Court. In case the bank does file an appeal, it will not have to make any payment to NHB pending a Supreme Court decision.

The case has been in dispute since 1992, when ANZ Grindlays credited cheques worth around Rs 500 crore, drawn in its favour by NHB, into the account of scam-tainted broker Harshad Mehta. After the money was lost in the scam, NHB ended up with a big hole in its books. When NHB asked ANZ to return the cheques, it refused. The Reserve Bank finally intervened and forced ANZ to return the money to National Housing Bank.

The ANZ Grindlays-NHB case then went into arbitration, and the award favoured the former. Consequently, NHB had to pay ANZ Rs 912 crore, which included the Rs 500 crore plus interest. This situation has now been reversed.

SBI, on the other hand, will have to wait to see if the Supreme Court rules in favour of ANZ before it can hope to start proceedings to get its money back.

Justice Variava said it was not necessary for the respondent (ANZ Grindlays) to merely prove that some transactions took place. He added that there was no independent finding in the arbitration committee report which established that the transactions were with Harshad Mehta.

The judge said the arbitration committee emphasised that the petitioner (NHB) should show that the transactions were with Harshad Mehta, but it is actually the respondent who has to establish that the transactions were with Harshad Mehta.

The judge said the arbitrators have refrained from finding whether these transactions were with Mehta. Instead, they said that these transactions could be with Mehta.