TMI Blog1999 (7) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... to them from Canara Bank, the settlor and the principal trustee of the said trust. 3. Since the issues arising for consideration in all the three appeals are common, it would be expedient and convenient to dispose them of by this common order. 4. Briefly stated the facts giving rise to the appeal by PGCI (appeal No. 17 of 1996) are that on or around 20-3-1992 the Mutual Fund purchased 17 per cent bonds of the appellant company of the face value of Rs. 80 crores from CanBank Financial Services Limited (the Canfina), a subsidiary of the Canara Bank. Out of the bonds purchased, the Mutual Fund sold bonds of the face value of Rs. 20 crores. Canfina delivered to the Mutual Fund letters of allotment in relation to the bonds of the face value of Rs. 48 crores with transfer deed endorsed in favour of 'Canara Bank Trustee CanBank Mutual Fund'. The custodian of the Mutual Fund lodged the said bonds on or about 7-12-1992 with the appellant for registration in the name of Mutual Fund through Canara Bank as its principal trustee. However, despite various requests, the appellant neither registered the transfer nor paid the interest due thereon. Being aggrieved, the respondent filed a pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the bonds towards its dues from the Canara Bank. 7. On the first objection, the Board took the view that Canara Bank had filed these petitions in a representative capacity as trustee of the mutual fund and not in its individual capacity and, therefore, the real litigation was not between two public sector undertakings and thus, the same being between the mutual fund and the NTPC/PGCI, directions contained in the Oil Natural Gas Commission s case ( supra ) did not apply in these cases. Consequently, in the case of PGCI, the Board fixed the petition for regular hearing. However, in the case of NTPC the Board proceeded to decide the petitions on merits. The Board came to the conclusion that the real owner of the bonds was the mutual fund and the Canara Bank was holding the same in the capacity of a trustee. However, in view of the prohibition contained in section 153 of the Act, to take cognizance of any relationship of the trustee, and beneficiary in the register of members, it felt handicapped in directing the appellants to register the bonds in the name of 'Canara Bank-Trustee CanBank Mutual Fund'. Notwithstanding the said statutory prohibition, while observing that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidiary of Canara Bank, the appellants are entitled to set off the amounts due to them against the bonds in question. Elaborating the first ground the learned counsel for the appellants submit that even otherwise if the veil of the mutual fund is lifted and the provisions of the trust deed are examined, it will be found that the Canara Bank has all pervasive control on the Trust. It is pointed out that not only the Canara Bank is the principal trustee of the Trust, other trustees are also those who are on the board of directors of the said Bank or its employees; as per clause 7(2) of the trust deed, governing the mutual fund, the Canara Bank 'as the principal trustee is the legal owner in whom all the assets of the existing fund and of the fund which may be set up in future shall vest' and, therefore, in reality the Bank, the mutual fund and Canfina are all one entirely controlled by the Canara Bank. It is thus, pleaded that it is not open to the respondent to take the stand that the mutual fund is an independent trust, not covered by the said judgment. 10. Reliance is placed on a decision of the Bombay High Court in Stock Holding Corpn. of India Ltd. v. Bharat Petroleum Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to time to all Departments of the Government of India as well as to public undertakings of the Central Government to the effect that all disputes, regardless of the type, should be resolved amicably by mutual consultation or through the good offices of empowered agencies of the Government or through arbitration and recourse to litigation should be eliminated." 14. While commending the initiative taken by the Cabinet Secretary in this behalf, in the said order, the Supreme Court further directed the Government of India to set up a Committee consisting of representatives from the Ministry of Industry, the Bureau of Public Enterprises and the Ministry of Law, to monitor disputes between various Ministries, the Ministry and public sector undertakings of the Government of India and public sector undertakings in between themselves, to ensure that no litigation comes to court or to a Tribunal without the matter having been first examined by the Committee and its giving clearance for litigation. The court also observed that it shall be the obligation of every court and every Tribunal where such a dispute is raised to demand a clearance from the said Committee in case it has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticipating in such schemes for the Canbank Mutual Fund (preamble ( iv ); for managing and administering the trust, the deed provides that the settlor shall constitute a Board of trustees [article 7(1)]; the Canara Bank as trustee of the existing mutual fund and acting thereunder as the principal trustee shall be the legal owner in whom all the assets of the existing funds and all the funds which may be set up in future shall vest and the management and administration of all such funds shall vest in the Board [Article 7(2)]; the Board is to consist of the Chairman and the Managing Director for the time being of the Canara Bank, the Executive Director of Canara Bank, an officer of the settlor shall be the Executive trustee and two more other individuals are to be appointed by the settlor in its discretion [Article 7(3)]. 18. It is true that a trust registered under the Trusts Act, not being a separate legal entity, has to act through its trustees and to that extent the Canara Bank may be justified in contending that it is acting on behalf of the mutual fund in that capacity, and, strictly speaking the Trust by itself may not be a public sector enterprise but in the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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