IMPORTANT POINT
A notified party has the requisite locus to bring the fact to the notice of the Special Court that certain sum is owing and due to him from a third party whereupon a proceeding can be initiated for recovery thereof by the Custodian and consequent application thereof in discharge of the liability of the notified person.

Headnote:Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992-Sections 9A, 3(3) and 11-Limitation Act, 1963-Section 29(2)-Notification was issued on 2.7.1992 by the Custodian notifying Respondent 1 as a notified party-Appellant obtained short term loans amounting to Rs. 14.25 lakhs from the notified party-On the said amount of loan interest at the rate of 21 p.a. was payable-Appellant was directed to deposit the principal amount by the Custodian which was not complied with-Proceedings initiated before the Special Court-Appellant s case that the claim was barred by limitation and that Special Court had no jurisdiction to deal with the matter-Whether an application filed by the notified party was maintainable-(Yes)-Whether a statutory attachment in terms of sub-section (3) of Section 3 of the Act would apply only in relation to a property which was the subject matter of the transactions in securities-Whether provisions of Limitation Act can be held applicable to such transactions-(No).
       Held : (i) A notified party has the requisite locus to bring the fact to the notice of the Special Court that certain sum is owing and due to him from a third party whereupon a proceeding can be initiated for recovery thereof by the Custodian and consequent application thereof in discharge of the liability of the notified person. (ii) Sub-section (3) of Section 3 should be literally construed and so construed all properties belonging to the notified person shall be subject to attachment which may, consequently, be applied for discharge of his liabilities in terms of Section 11 of the said Act. (iii) The provisions of Limitation Act, 1963 have no application in relation to the proceedings under the said Act. (Para 44)
       In terms of the provisions of the said Act, the Custodian has three functions to perform:
        (i) to notify a person in the Official Gazette, on being satisfied on information received that he has been involved in any offence relating to transactions in securities during the period specified therefor;
        (ii) He has the authority to cancel any contract or agreement relating to the properties of the notified persons which, in his opinion, has been entered into fraudulently or for the purpose of defeating the provisions of the Act as specified in Section 4.
        (iii) He is required to deal with the properties in the manner as directed by the Special Court.
       By reason of Sub-section (2) of Section 3 of the Act, the Custodian who may be appointed under Sub-section (1) thereof is entitled to notify a person on satisfying himself that he is involved in any offence relating to transactions in securities, wherefor he may rely upon the information received from any of the sources specified in Rule 2 of 1992 Rules. Sub-section (3) of Section 3 provides for a non-obstante clause in terms whereof any property movable or immovable belonging to the notified person shall stand attached simultaneously with the issue of the notification. (Paras 16 and 17)
       The debt in question is capable of being attached being a property belonging to the notified party and upon such attachment the consequences provided therefrom would ensue and in that view of the matter the Special Court will have jurisdiction to pass an appropriate order in relation thereto by issuing appropriate directions in terms of the provisions of the said Act. As the Special Court had the requisite jurisdiction to deal with the attached property, it is immaterial whether the factum of the statutory provisions is brought to its notice by the notified party himself or by the Custodian. The Court has the requisite jurisdiction; nay a duty to apply itself to the said question once the matter is brought to its notice. The jurisdiction of the Special Court, it is not correct to contend, is confined only to the illegal transactions in securities and properties acquired by the notified person out of the same. Once the properties are attached under Sub-section (3) of Section 3, the Custodian has no other option but to apply the same in such a manner as the Special Court may direct. (Paras 20 and 21)
       A statute of limitation bars a remedy and not a right. Although a remedy is bared, a defence can be raised. In construing a special statute providing for limitation, consideration of plea of hardship is irrelevant. A special statute providing for special or no period of limitation must receive a liberal and broader construction and not a rigid or a narrow one. The intent and purport of the Parliament enacting the said Act furthermore must be given its full effect. We are, therefore, of the opinion that the provisions of the Limitation Act have no application, so far as directions required to be issued by the Special Court relating to the disposal of attached property, are concerned. (Para 40)

JUDGMENT

S.B. Sinha, J.-These appeals arising out of the judgments and orders dated 21st March 2003 passed by the Special Court at Bombay in Miscellaneous Petition Nos. 71, 72 and 99 of 1999 involving similar questions of law and fact were taken up for hearing together and are being disposed of by this common judgment.

FACTS :

2. The fact of the matter, however, is being noticed from Civil Appeal No. 4268 of 2003.

3. A notification was issued on 2.7.1992 by the Custodian notifying the Respondent No.1 as a notified party in terms of the provisions of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 (for short "the said Act").

4. The Appellant herein obtained short term loans amounting to Rs. 14.25 lakhs from the notified party during the period 1.4.1991 to 6.6.1992 as specified in the said Act. The Custodian called upon the Appellant herein to furnish particulars of the said loans pursuant to or in furtherance whereof the Appellant herein accepted the same to be outstanding as on 30.6.1992 in the books of Respondent No.1 payable to him. On the said amount of loan, interest at the rate of 21 per annum was payable.

5. The Appellant herein was directed to deposit the principal amount by the Custodian which was not complied with. The concerned Chartered Accountant, however, gave a certificate to the effect that a sum of Rs. 14.25 lakhs was advanced as loan to the Appellant by the Respondent No.1 with interest at 21 per annum and that the total sum outstanding was Rs. 34,98,967.04/- The Respondent No.1 thereafter initiated a proceeding before the Special Court praying for a direction upon the Appellant herein to pay to the Custodian a sum of Rs. 34,99,900.68/- on behalf of his behalf.

6. The contentions of the Appellant before the Special Court were that it having furnished full details of the amount in question to the Custodian in 1993, the claim was barred by limitation and the said Act did not enable the Respondent herein to recover any time barred debts from it. It was further urged that the transaction in question having not arisen out of transactions in securities, the Special Court had no jurisdiction to deal with the matter. It was also contended that in that view of the matter Section 9A of the said Act must be read down.

JUDGMENT :

7. By reason of the impugned judgment, the Special Court however, rejected the said contentions holding that once a property is found to be owned by a notified party, all claims relating thereto must be adjudicated upon by the Special Court.

8. Following its earlier decision of the Tribunal in A.K. Menon, Custodian Vs. Modern Chemical Corporation & Ors. [2002 (1) All M.R. 180], the Special Court held that the provisions of the Limitation Act would have no application to the proceedings under the said Act. It was consequently ordered:

"(a) I hereby direct Respondent No.1 to pay to the Custodian on behalf of FFSL Rs. 14.25 lacs with interest at 15 per annum from the date on which the loan(s) have been advanced upto payment."

SUBMISSIONS:

9. Mr. G.L. Sanghi, learned senior counsel appearing on behalf of the Appellant would contend that the advances made by the Respondent being not transactions of the nature specified in the Act, an application filed by the notified party was not maintainable. It was submitted that the provisions of the said Act and in particular those contained in Section 9A must be read down so as to uphold the constitutionality of the said Act. Strong reliance in this connection has been placed on Harshad Shantilal Mehta vs. Custodian and Others [(1998) 5 SCC 1] and Canara Bank Vs. Nuclear Power Corporation of India Ltd. and Others [1995 Supp (3) SCC 81].

10. The learned counsel would further submit that by reason of the provisions of the said Act, the plea of limitation which could have been taken by the Appellant, had a suit been filed by the Respondent No.1 against it, would still be available as the transaction is of civil nature. It was argued tha

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2004 Supreme(SC) 1021

Cases Referred (7)