IMPORTANT POINT
Income generated by a notified person by dint of his own labour falls outside the net of Section 3(3) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

Headnote:Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992-Section 3(3)-Notified person u/s 3(2)-His appointment as advisor in a Company-He is entitled to be paid consultancy fee -Whether in respect of such income, attachment u/s 3(3) operates?-(No)-It is only income generated by a notified person by dint of his own labour which falls outside the net of Section 3(3)-Purposive interpretation.
       Held that the income or usufruct of attached property is also attached property. Thus, if the property be shares, dividends and bonus and rights shares thereon would also be attached property. It is only income generated by a notified person by dint of his own labour which falls outside the net of Section 3(3). In respect of such income, the attachment under Section 3(3) does not operate. (Para 9)
       The courts must interpret the law as it reads. While a purposive interpretation is permissible where two interpretations are possible, the purposive interpretation must be such as preserve the constitutionality of the provision. (Para 8)

JUDGMENT

Bharucha, J.-These are appeals against the judgment and orders of the Special Court constituted under the provisions of the Special Court (Trial of Offences Relating to Transactions In Securities) Act, 1992, ("the Act"), and they relate to the sweep of Section 3(3) thereof. The principle judgment and order gave the appellant liberty to file an application for a subsistence allowance. When the appellant declined to avail of the liberty the final order was passed.

2. The appellant became a notified person under the provisions of Section 3(2) of the Act on 2nd July, 1992. On 9th October, 1994, he was appointed an advisor by Killick Nixon Ltd. with effect from 8th October, 1994. By reason of such appointment he is entitled to be paid consultancy fees in the sum of Rs. 5,000/- per month by the said company. By a letter dated 7th August, 1995, to the Manager, Dena Bank, the appellant applied to open a new Current Account in his name to be operated by him. On 6th September, 1995, the appellant s advocates were informed that the matter had been referred to the Head Office of the bank and by a letter dated 27th October, 1995, that the matter had been referred to the Custodian appointed under the Act. The petitioner filed a petition on 23rd November, 1995, in the Special Court and sought a declaration that the income "earned by way of the aforesaid employment is not liable for attachment" and permission "to open a new bank account and operate the same in the normal course".

3. The petition was dismissed by the order under appeal. The Special Court proceeded upon the basis that the appellant was "genuinely seeking release of an income which he is earning from his services". However, the Special Court said that if the interpretation which the appellant wanted it to give was accepted, it could result in a very clever method of siphoning off assets which could and must stand attached. The Special Court noted that even after 3 years monies which has been siphoned off had not been traced. It was thus evident that the notified parties or some of them had monies or assets which were lying in some undisclosed place. One of the simplest methods to bring such moneys into the open and start using them was to ostensibly render services to somebody else who then paid the notified party the purported income or for somebody to give to the notified party a gift or for a notified party to suddenly inherit some assets. This would become a method to defeat the object of the Act and could not be permitted. The Special Court then dealt with the provisions of Section 3(3) and held that the words therein "on and from the date of the Notification" meant that all assets which were available on the date of the Notification and all assets which became available from and after that date stood attached. The term "property" had a wide connotation and included present and future property. Thus, if some notified party inherited or was gifted some property or earned some income subsequent to being notified, such property or income would stand attached and be available for distribution under the Act.

4. The Act was preceded by an Ordinance which established the Special Court for trial of offences relating to transactions in securities that had been entered into between 1st April, 1991 and 6th June, 1992. Section 3, sub-section, (1) empowered the Central Government to appoint one or more Custodians under the Act. By reason of sub-section (2), the Custodian could, on being satisfied on information received that any person had been involved in any offence relating to transactions in securities between the stated dates, notify the name of such person in the Official Gazette. Sub-section (3) reads thus :

"(3) Notwithstanding anything contained in the code and any other law for the time being in force, on and from the date of notification under sub-section (2), any property, movable or immovable, or both, belonging of any person notified under that sub-section shall stand

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1996 Supreme(SC) 1416

IMPORTANT POINTIncome generated by a notified person by dint of his own labour falls outside the net of Section 3(3) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

IMPORTANT POINT
Income generated by a notified person by dint of his own labour falls outside the net of Section 3(3) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.