2007 Supreme(SC) 1072

2007(5) Supreme 900
Supreme Court of india
(From Special Court)
G.P. Mathur & P.K. Balasubramanyan, JJ.
Tax Recovery Officer, Central Range-1 — Petitioner
versus
Custodian the Special Court( T.O.R.T.S) Act, 1992 & Ors. — Respondents
Appeal (civil) 6316-23 of 2005
Decided on : 17-08-2007

important point
Special Court, having specified jurisdiction and the Special Court Act having overriding effect over Income Tax Act, intervention petition filed by Income Tax department u/s 226 (4) of the Income Tax Act, 1961 was not maintainable.

Headnote:(a)Special Courts (Trial Of Offences Relating To Transactions In Securities) Act, 1992 – Section 9A (1) – The words “in relation to any matter or claim” occurring at the end of sub-section (1) of Section 9A are important and they clearly indicate that the Special Court shall have power and authority in relation to any matter or claim relating to any property standing attached under sub-section (3) of Section 3 – Therefore, the jurisdiction of the Special Court is confined to the property of the notified person which stands attached under sub-section (3) of Section 3 of the Special Courts Act. (Para 3)

       (b)Special Courts (Trial Of Offences Relating To Transactions In Securities) Act, 1992 – Section 13 – The language employed in Section 13 of the Act is clear and explicit when it says that the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force - Therefore there can be no manner of doubt that the provisions of the Special Courts Act, wherever they are applicable, shall prevail over the provisions of the Income-tax Act. (Para 7)

       168 ITR 616; 229 ITR 662; 152 ITR 420; 247 ITR 165; (2001) 3 SCC 71 – Relied upon.

       (c)Special Courts (Trial Of Offences Relating To Transactions In Securities) Act, 1992 – Section 9A (1) – Jurisdiction of the Special Court is in relation to any matter or claim relating to any property standing attached under sub-section (3) of Section 3 of the Special Courts Act belonging to any person notified under sub-section (2) of Section 3 of the Act – M/s Dhanraj Mills Pvt. Ltd. was notified as a party under sub-section (2) of Section 3 of the Special Courts Act and not M/s. Killick Nixon Pvt. Ltd. – M/s Dhanraj Mills Pvt. Ltd. owed money from M/s Killick Nixon Pvt. Ltd. and its 9 subsidiary companies and it was in execution of the decrees passed in favour of M/s. Dhanraj Mills Pvt. Ltd. that the property of M/s Killick Nixon Pvt. Ltd. was put to auction – Thus the Special Court could not have entertained the application moved by the Income Tax Department under Section 226(4) of the Income Tax Act for realization of its income tax dues from M/s Killick Nixon Pvt. Ltd. – The application moved by the Income Tax Department was, therefore, rightly rejected by the Special Court. (Para 8)

       (d)Special Courts (Trial Of Offences Relating To Transactions In Securities) Act, 1992 – Section 10 – Special Court having noted the relevant legal provision for rejecting the applications, no exception can be taken to the order passed by it – Held on merits that the Intervention Applications were not maintainable before the Special Court. (Para 9)

       Facts of the case :

       The custodian exercising powers under Section 3(2) of the Special Courts Act published the name of M/s. Dhanraj Mills Pvt. Ltd. in gazette as a notified person. In view of Section 3(3) of the Special Courts Act all the assets belonging to the notified party stands attached to the Special Court. Thus, the assets of M/s Dhanraj Mills Pvt. Ltd. stood attached to the Special Court. It was found that M/s. Killick Nixon Pvt. Ltd. and its 13 group companies owed substantial amount of money to M/s. Dhanraj Mills Pvt. Ltd. and M/s. Killick Nixon Pvt. Ltd. also stood as guarantor for the repayment of the money. The custodian on behalf of M/s. Dhanraj Mills Pvt. Ltd. filed suits for recovery of its dues against M/s. Killick Nixon Pvt. Ltd. and its 13 group companies. The Special Court passed decrees against M/s. Killick Nixon Pvt. Ltd. and its group companies on 18.9.1997. The custodian then filed Executing Applications bearing Nos. 98 to 105 of 2001 before the Special Court for recovery of the decretal amount on behalf of M/s Dhanraj Mills Pvt. Ltd. The Special Court on 14.2.2003 appointed a receiver for taking charge of certain assets and properties of M/s Killick Nixon Pvt. Ltd. and the other group companies which were sufficient to satisfy the entire decretal amount. Subsequently thereto the properties of M/s. Killick Nixon Pvt. Ltd. were put to auction and money was realized. It appears that a certified demand of Rs.25.88 crores against M/s. Killick Nixon Pvt. Ltd. was pending for recovery by the Tax Recovery Officer, Central Range-1, Mumbai. On 25/30.8.2004 the Tax Recovery Officer filed Intervention Applications before the Special Court with a prayer that the custodian be directed to consider the claim of recovery of arrears of income tax from M/s Killick Nixon Pvt. Ltd. on a priority basis before distribution of sale proceeds to any other creditor. A further prayer was made that the custodian be restrained from distributing the sale proceeds without first satisfying the claim of the income tax department. On 1.9.2004 the Special Court passed an order directing the custodian to submit a report which was complied with by the custodian on 19.6.2004. On 24.11.2004 the Special Court passed an order confirming the sale of the property of M/s Killick Nixon Pvt. Ltd. to the highest bidder M/s Gama Constructions for Rs.30 crores. The Intervention Applications filed by the Tax Recovery Officer were, however, rejected by the Special Court.

       Findings of the Court:

       Intervention Applications were not maintainable before the Special Court.

       Result : Appeal dismissed.