Mumbai, July 1: The special court of Justice Variava, admitted the National Housing Bank's (NHB) petition challenging the award of the three-member arbitration panel that favoured ANZ Grindlays Bank.The panel, in March this year, directed NHB to pay Rs 912-crore, inclusive of interest, to ANZ Grindlays in relation to deals done betwen the two parties before the Rs 5,000 crore securities scandal came to light in 1991.ANZ Grindlays Bank has been given eight weeks time to respond to the NHB petition. The next hearing on the case is expected to come up towards the end of August or early September. Senior counsel K K Venugopal represened ANZ in the case while NHB was represented by the former attorney general of India, K Parasaran.NHB had challenged the award of the arbitration panel on May 19 under Sections 15 and 16 of the Arbitration Act, 1940.

The special court does not have the powers to modify the award but can either confirm or reject the arbitration award.The arbitration panel—comprising three retired judges—had, on March 29, ruled in favour of ANZ Grindlays in a 2:1 split decision. However, the wholly-owned subsidiary of the Reserve Bank of India demanded a letter of comfort from the foreign bank as a pre-condition to repay the disputed Rs 912 crore (including interest).ANZ, however, shot down this demand saying that this was "tanatamount to a modification of the terms", of the 1992 agreement. The agreement had stipulated that NHB would pay up the money within three weeks of the delivery of the award.The RBI subsiduary made the payment on April 19, two days before the expiry of the deadline.

The Reserve Bank extended a soft loan of Rs 700 crore to pay ANZ. NHB will have to repay this loan to the RBI after 15 years.According to the housing bank's chairman P P Vora, the payment was not made under the award "as the institution does not accept it", but under the 1992 agreement between NHB and ANZ Grindlays.NHB had in March-April 1992 drawn nine cheques on its account with RBI for an aggregate amount of Rs 506.54 crore in favour of ANZ as payee. These cheques were crossed as account payee. The foreign bank on its part, collected theproceeds of the cheques and credited them to Harshad Mehta's account with ANZ Grindlays Bank. Mehta is beleived to have utilised the proceeds for settling his dues with the State Bank of India.

Legal experts say that this was done despite NHB not having issued any letters of authorisation to ANZ directing it to credit the proceeds of the cheques to Mehta's account.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.