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2015 Supreme(Bom) 379
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
RANJIT MORE & ANUJA PRABHUDESSAI, JJ.
Vinod Hinigorani – Petitioner
v/s.
The Securities & Exchange Board of India – Respondent
WRIT PETITION NO. 639 OF 2015
Decided on: 10.3.2015
Advocate Appeared
Ms. Ankita Singhania i/b. Halal & Co. for the petitioner.
Mr. Darius Khambatta a/w. Mr. Mihir Mody, Ms. Shruti Chiniwar, Mr. Bhoomin Badani i/b. K. Ashar & Co. for the Respondent No.1.
Mrs. U.V.Kejriwal, APP for the Respondent/State.
Headnote:
Article 226 - Recovery of Dues - Income Tax Act 1961, SEBI Act 1992 - Section 28A of SEBI Act, Rule 73 of Second Schedule to Income Tax Act - The court found that the arrest and detention of the petitioner was illegal and arbitrary as the Tax Recovery Officer did not comply with the mandatory procedures for arrest and detention as stipulated in Rule 73(1) of the Second Schedule to the Income Tax Act. The court held that the petitioner was entitled to be released from civil prison forthwith and remitted the matter to the Tax Recovery Officer for fresh consideration in accordance with the law.
Fact of the Case:
The petitioner challenged the validity of the orders passed by the Recovery Officer of the respondent and sought release from civil prison. The petitioner claimed to have no role in the day-to-day affairs and management of the companies against which recovery proceedings were initiated. The respondent had attached the petitioner's bank and DEMAT accounts, leading to the petitioner's detention in civil prison.
Finding of the Court:
The court found that the arrest and detention of the petitioner was illegal and arbitrary as the Tax Recovery Officer did not comply with the mandatory procedures for arrest and detention as stipulated in Rule 73(1) of the Second Schedule to the Income Tax Act. The court held that the petitioner was entitled to be released from civil prison forthwith and remitted the matter to the Tax Recovery Officer for fresh consideration in accordance with the law.
Issues: The main issue was the legality of the arrest and detention of the petitioner, and the compliance of the Tax Recovery Officer with the mandatory procedures for arrest and detention as stipulated in Rule 73(1) of the Second Schedule to the Income Tax Act.
Ratio Decidendi: The court held that the arrest and detention of the petitioner was illegal and arbitrary as the Tax Recovery Officer did not comply with the mandatory procedures for arrest and detention as stipulated in Rule 73(1) of the Second Schedule to the Income Tax Act. The court ordered the petitioner's release from civil prison and remitted the matter to the Tax Recovery Officer for fresh consideration in accordance with the law.
Final Decision: The Writ Petition was allowed, the impugned orders were quashed and set aside, and the petitioner was ordered to be released from the civil prison forthwith. The matter was remitted to the Tax Recovery Officer with directions to decide the same afresh in accordance with the law within a period of three weeks from the date of receipt of the court's order. The petitioner was also prohibited from leaving the country during the pendency of the proceedings before the Tax Recovery Officer, and the EOW, Crime Branch, Mumbai was instructed not to return the passport to the petitioner during the pendency of the proceedings before the Tax Recovery Officer.
1. By this petition filed under Article 226 of Constitution of India, the petitioner herein is challenging the validity of the orders dated 18.12.2014 and 29.12.2014 passed by the Recovery Officer of the respondent no.1 above and further to order his release from Byculla District Prison.
2. The petitioner claims that he was a non existing Chairman of the company known as Adan Cams of Ltd. and Kolar Biotech Ltd and that he had no role in the day to day affairs and the management of the said companies.
3. The petitioner claims that the respondent had initiated recovery proceeding against him and drawn up certificate nos. 211 and 231 both dated 11.7.2014 and certificate dated 288 of 2014 dated 16.7.2014. The respondent had also issued notice of demand dated 11.7.2014 and 16.7.2014 under Rule III and Part I of second Schedule to the Income Tax Act 1961 r/w. Section 28A of the Securities and Exchange Board of India, 1992, whereby the petitioner was directed to pay dues of Rs.37,62,644/, Rs.81,98,863/and Rs.45,19,904/i. e. total aggregate of Rs.1,64,81,411/along with further interest and expenses within fifteen days from the respective notices.
4. The petitioner had claimed that in the year 2004 he was a Director of KSPL and was paid monthly salary of Rs.15,000/. The petitioner has claimed that he had not received any benefits from ACL/KBL. He had submitted that he used to sign the documents as per the instructions of Shri. Rajkumar Basantani who was the main promoter of both the companies. The petitioner had claimed that he was only a front for the promoters of the said companies and that he had not benefited from any of the alleged transactions.
5. The petitioner claims that pursuant to the said notices, the respondent has attached his bank accounts as well as DEMAT accounts. Under the circumstances, he has no access to any funds in order to satisfy any alleged amounts claimed by the respondent in the said certificates.
6. The petitioner has stated that vide notices dated 21.11.2014 and 10.12.2014 he was called upon to show cause before the Recovery Officer of the respondent as to why he should not be committed to civil prison for the default in payment of the alleged dues. The hearing was held on 18.12.2014 on which date the petitioner had sought leave to be represented by a lawyer. The petitioner has claimed that the said request was arbitrarily rejected. It is alleged that the respondent did not grant him an hearing and had demanded that he should submit a proposal for payment of the alleged dues at the hearing itself. His request for grant of time on the ground that he wanted to challenge the order of penalty was also not considered and he was illegally detained at the SEBI Bhavan and directed to submit the proposal for repayment, failing which he was threatened that he would be committed to civil prison. The petitioner has stated that he was not allowed to consult anyone and was illegally detained in a manner which was arbitrary and illegal and subsequently illegally arrested and committed to prison for a period of six months.
7. Vide application dated 23.12.2014 the petitioner once again informed the respondent that he intends to challenge the order of penalty before the Security Appellate Tribunal and requested to release him on such terms and conditions as deemed fit. The said request was also not considered and instead he was once again instructed to give a proposal for repayment of the alleged dues. The petitioner claims that the impugned order dated 18.12.2014 and 29.12.2014 are arbitrary, illegal and bad in law and deserves to be quashed.
8. The Assistant General Manager of the respondent has filed an affidavit in reply. The respondents have raised the preliminary objection about the maintainability of the petition in view of efficacious remedy of appeal. On merits the respondents have stated that the Adjudicating Officer had passed the order dated 28.4.2010 against the petitioner for
