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Supreme Court of India
THE HONOURABLE MR. JUSTICE S.B. SINHA & THE HONOURABLE MR. JUSTICE DEEPAK VERMA
Mrs. Jyoti Harshad Mehta & Others
Versus
The Custodian & Others
CIVIL APPEAL NO.5176 OF 2009@ D-25207 OF 2008
Decided On : 07-08-2009
(2005) 2 SCC 385; (2008) 12 SCC 84; 1998 (3) SCALE 556 – Referred
(b) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 4(1) – Applies to third parties – Does not apply to any notified party – Gets attracted when a notified party purchases a property in the name of a third party from the tainted funds acquired by him during the window period – Not attracted when notified parties purchase properties in their names – Such properties get automatically attached irrespective of whether purchased prior to, during or after the window period – Section 4(1) does not apply to present case. (Para 49, 57)
(c) Interpretation of statute – Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Not an expropriatory legislation – Providing sufficient safeguards like grant of full opportunity of hearing to notified persons – Purposive construction – Resort to ut res magis valeat quam pereat construing a machinery to effectuate the liability imposed by the charging section and to make the machinery workable – Strict construction. (Para 51, 52)
(2003) 7 SCC 589; (2003) 7 SCC 628 – Relied upon
(2007) 9 SCC 516 – Referred
(d) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 4(1) – Appellants members of HUF working in tandem – Harshad Metha vis-à-vis the appellants, thus, not a third party. (Para 61)
(e) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 3(3) – Automatic attachment of properties of notified persons – Language plain and simple – Cannot be read to be linked with tainted money. (Para 65)
(2004) 11 SCC 465 – Relied upon
(f) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 3(2) and 3(3) – Statutory window period – Section 3(3) is dependent on section 3(2) for its operation – However, once section 3(2) comes into operation, section 3(3) becomes independent – Therefore qualifications of Section 3(2) cannot be read into Section 3(3) – Statutory window period only relevant for application of Section 3(2) – Has no bearing on application of Section 3(3) – All properties as on date of notification stand attached – It follows that all income accruing or arising from the properties even after notification automatically stand attached – Statutory window period irrelevant for attachment of property. (Para 69, 70, 72)
(g) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 3(3) – Property acquired by notified person after notification – Cannot be attached. (Para 71)
(1997) 9 SCC 123 – Relied upon
(h) Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 – Section 9A and 11 – Sale of properties – Must be limited to the extent of realizing liabilities – Not more. (Para 73)
(i) Administration of Justice – Interpretation of statute – External aid – Reports of Jankiraman Committee, the Joint Parliamentary Committee and the Inter Disciplinary Group (IDG) – Admissible only to trace legal history of the 1992 Act alone – Not admissible as evidence. (Para 74)
(j) Administration of Justice – Judicial propriety – Special Judge mainly dealing with contentions of Custodian – Not considering contentions of appellants – Non-application of mind – Not permissible. (Para 76, 77)
Facts of the case:
Interpretation and/or application of the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 is involved herein.
During the period between 1st April, 1991 to 6th June, 1992, also referred to as the "window period” the family members of late Harshad Mehta had purchased movable, immovable properties and shares. Out of these properties, there were nine residential flats purchased, in a building called "Madhuli", in Worli, Mumbai. These flats were merged and redesigned for joint living of the entire family and these properties are the subject matter of this lis.
The Custodian notified Harshad Mehta as also the appellants herein; pursuant whereto all their properties stood attached. Some of the appellants had filed applications for de-notifications. The same were, however, not pressed and were later withdrawn.
The learned Judge, Special Court, on an application filed by the custodian inter alia directed sale of flats purported to be belonging to the appellants.
The aforementioned order was challenged before the Supreme Court which were allowed and matter was remitted back to the Special Court with some directions.
The Special Court passed the impugned judgment.
Finding of the Court:
Impugned judgment vitiated for non-application of mind.
Result:
Appeal allowed, matter remitted.
Judgment :-
S.B. Sinha, J.
Interpretation and/or application of the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, (hereinafter, for the sake of brevity, referred to as `the Special Act) is involved herein.
It arises out of an order dated 25th July, 2008 passed by the learned Judge, Special Court at Mumbai in Misc. Petition No.41 of 1999.
HISTORICAL BACKGROUND
The history as well as the purpose and object for which the Special Act was enacted, in view of the several decisions rendered by this Court, is now well-settled. The Reserve Bank of India in course of an investigation conducted by it, had inter alia opined that Harshad Mehta (since deceased), alongwith his other associates had diverted a huge amount of public funds belonging to Public Sector Banks and Financial Institutions for short term investments in the securities market.
An Inquiry Committee was thereafter constituted under the Chairmanship of Shri Janakiraman. The said Committee in its report had noticed a large number of gross malpractices and irregularities in transactions of both Government and other securities, pursuant whereto and in furtherance whereof the Special Act was enacted providing inter alia for the constitution of a Special Court for trial of criminal offences, as also civil disputes, arising therefrom during the period between 1st April, 1991 to 6th June, 1992, hereinafter referred to as the "window period".
Around this time, the family members of late Harshad Mehta had purchased movable, immovable properties and shares. Out of these properties, there were nine residential flats purchased, in a building called "Madhuli", in Worli, Mumbai. These flats were merged and redesigned for joint living of the entire family and these properties are the subject matter of this lis.
HISTORY OF THE PROCEEDINGS
In terms of the said Special Act, a Custodian was appointed. The Custodian notified Harshad Mehta as also the appellants herein; pursuant whereto all their properties stood attached. Some of the appellants had filed applications for de-notifications. The same were, however, not pressed and were later withdrawn. It has been claimed by the appellants in an Affidavit dated 28.07.2009 that they had filed their denotification applications registered as M.A. Nos. 50 to 55 of 2009, however they withdrew the same again with a liberty to file afresh by an order dated 12.06.2009.
In the aforementioned premise a question came up before the learned Judge, Special Court in regard to sale of movable and immovable properties belonging to the notified persons. The learned Judge, Special Court, on an application filed by the custodian inter alia directed sale of flats purported to be belonging to the appellants.
The learned Judge, Special Court, by his judgment and order dated 17th October, 2003 directed sale of the said flats. The aforementioned order came to be challenged before this Court by way of appeals preferred under Section 10 of the Special Act. They were registered as Civil Appeal Nos. 667-71 of 2004 and 672 to 681 of 2004. This Court by its judgment and order dated 3rd January, 2006 allowed the said appeals and remitted the matter back to the Special Court with some directions. That decision of this Court has since been reported in Ashwin S. Mehta and another v. Custodian and others, [ (2005) 2 SCC 385 ].
The matter was taken up thereafter by the learned Judge, Special Court which passed the impugned judgment.
INVOLVEMENT OF CHARTERED ACCOUNTANTS
The findings of Chartered Accountants have a major role to play in this case. We may notice that during pendency of the proceedings before the Special Court M/s Vyas & Vyas, Chartered Accountant, was appointed in respect of assets and liabilities of Harshad Metha on 16th October, 2003. They submitted a report upon auditing the Accounts of Late Harshad Mehta for the financial year ending 31.03.1992 and for the period ending 08.06.1992 on 17th January, 2006. The noti
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