TMI Blog1998 (1) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... leged is certainly relating to the transaction in securities as is said to have been entered into by the accused during the relevant period. - CRIMINAL APPEAL NO. 69 OF 1998 - - - Dated:- 15-1-1998 - S.B. MAJMUDAR AND M. JAGANNADHA RAO, JJ. Raju Ramachandran and Manoj Wad for the Appellant. Dhiraj Mirajkar and Rustom B. Hathikhanawala for the Respondent. JUDGMENT Majmudar J. - Leave granted. 2. We have heard the learned counsel for the parties. The short question involved in this appeal is as to whether the Special Court, functioning under the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 ('the Act'), has jurisdiction to enter-tain and try the criminal case filed by the respondent-complainant against the appellant-accused. The Special Court, consisting of a learned single judge of the Bombay High Court has held that the proceedings are within its jurisdiction. The appellant-accused has challenged the said decision in the present appeal. A few introductory facts leading to these proceedings are required to be noted at the outset. Background facts: 3. The respondent-complainant is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the receipt of the shares from the complainant, sale thereof, etc. He also promised to pay the sale proceeds to the complainant. However, he did not do so. 5. It is in these circumstances that the complainant has filed this complaint with a case that the accused had committed the offence of criminal breach of trust and dishonest misappropriation of the securities. The complaint was filed by the complainant before the Special Court both against the appellant as well as accused No. 2, Paresh B. Patel. However, no charge is framed by the Special Court against accused No. 2 Hence, he is out of the picture. The complaint, therefore, survives only against the present appellant, accused No. 1 who is now the sole accused. It may be noted that the complaint was filed by the respondent-complainant on 13-4-1994, before the Special Court for the aforesaid alleged offence. The said case was registered as Special Case No. 1 of 1995. The Special Court issued summons to the appellant and framed the charge against the appellant as under: "Charge: I, Justice M.S. Rane, Judge, Special Court, Mumbai, do hereby charge you, Minoo Mehta, the accused herein, as under: That in or about Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory scheme : 7. In order to appreciate the grievance of the appellant-accused it is necessary to note the statutory scheme of the Act under which the Special Court is functioning and has entertained the complaint of the respondent-complainant. Act No. 27 of 1992 was assented to by the President of India on 18-8-1992. It was brought into force from 6-6-1992, with retrospective effect as an Ordinance had preceded it from that earlier date. It was on 6-6-1992, that a custodian was appointed under section 3 of the Act. The Act is to provide for establishment of a Special Court for the trial of offences relating to transactions in securities and for matters connected therewith or incidental thereto. The Statement of Objects and Reasons of the said Act provides as under see [1993] 76 Comp. Cas. (St.) 32, 37: "Statement of Objects and Reasons. In the course of the investigations by the Reserve Bank of India, large scale irregularities and malpractices were noticed in transactions in both the Government and other securities, indulged in by some brokers in collusion with the employees of various banks and financial institutions. The said irregularities and malpractices led to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. (2) The Custodian may, on being satisfied on information received that any person has been involved in any offence relating to transactions in securities after the 1st day of April, 1991, and on and before 6-6-1992, notify the name of such person in the Official Gazette. (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 to any person notified under that sub-section shall stand attached simultaneously with the issue of the notification. (4) The property attached under sub-section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. (5) The Custodian may take assistance of any person while exercising his powers or for discharging his duties under this section and section 4." 10. Section 4 of the Act deals with contracts entered into fraudulently that may be cancelled and under what circumstances they can be cancelled. Sub-section (1) thereof empowers the Custodian on being satisfied, after such enquiry as he may think fit, to cancel any contract or agreement entered into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11 deals with 'Discharge of liabilities' and lays down by sub-section (1) thereof that 'notwithstanding anything contained in the Code and any other law for the time being in force, the Special Court may make such order as it may deem fit directing the Custodian for the disposal of the property under attach-ment'. Sub-section (2) of section 11 provides for paying or discharging in full, as far as may be, in the order of priorities laid down by that sub-section. Amongst others, clause ( b ) of sub-section (2) of section 11 provides for paying and discharging of all amounts due from the person so notified by the Custodian to any bank or financial institution or mutual fund. Section 13 provides for overriding effect of the Act and lays down that the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or other authority. It is in the background of the aforesaid statutory scheme that the question posed for our consideration has to be resolved. Consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to agree with this contention. The reason is obvious. As the preamble of the Act shows, the Act is to provide for the establishment of a Special Court for the trial of offences relating to transactions in securities and for matters connected therewith or incidental thereto. Therefore, every offence pertaining to any transac- tion in securities which is covered by the sweep of the Act, that is, if such transaction has taken place between 1-4-1991, and on or before 6-6-1992, would be subjected to the provisions of the Act regarding trial of such an offence. If the learned senior counsel for the appellant was right, section 7 would have been worded differently, that is to say, it would have stated that any prosecution of a person notified as per sub-section (2) of section 3 in connection with the offence referred to therein would be instituted only in the Special Court. Instead of using this terminology, the Legislature in its wisdom has provided in the said section that any prosecution in respect of any offence referred to in section 3(2) of the Act shall be instituted only in the Special Court. The learned senior counsel for the appellant is right when he contends that there can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that unless a person is notified he cannot be tried for the offence contemplated by section 3 (2), by the Special Court. The offence referred to in sub- section (2) of section 3 which is within the sweep of section 7 must be an offence committed by any person and must have the following two characteristics : 1.such offence must relate to transactions in securities; and 2.such offence should be alleged to have been committed between 1-4-1991, and on or before 6-6-1992. 14. These are the special classes of offences which are carved out by the Legislature for being dealt with only by the Special Court and not by the ordinary court. Once these two requirements are satisfied the Special Court will get jurisdiction to try such offences and, therefore, consequent- ly to try the accused concerned who are alleged to have committed such offences cognisable by the Special Court. In this connection, one additional aspect is worth noting. When the principal accused is the notified person even non-notified accused can be tried jointly with such principal accused as per section 8 if they were jointly involved in such offences. But even that apart if the accused is the sole accused and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Special Court can try transferred criminal cases which were filed prior to 6-6-1992, in regular courts wherein the accused were not notified persons as such cases would stand transferred to it for trial automatically on coming into force of the Act, then of necessity it must be held that even if such criminal cases are filed after the coming into force of the Act, against the non-notified persons involved in similar type of offences they could be tried by the Special Court. Any other view would result in creation of two conflicting types of jurisdictions for the special court functioning as per the same section 7. 15. Even apart from this aspect it is also necessary to note that under section 3 (2), a Custodian may notify such person in the Official Gazette. Take a case in which the Custodian, for reasons best known to him, might not have notified such a person and still such a person is alleged to be involved in an offence relating to transactions in securities during the relevant period from 1-4-1991 to 6-6-1992. Under these circumstances, if the learned senior counsel for the appellant is right such a person would get immunity from being tried before the Special Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of such pending criminal cases on the date of coming into force of the Act, that is, 6-6-1992. On the contention of the learned senior counsel for the appellant there would be a hiatus and interregnum during which before transferring such pending cases the accused concerned has to be notified or that the Special Court could proceed with such transferred pending cases only after such notification. Such a course, on the express language of the second part of section 7, is contra-indicated. 17. Before parting with this case we may state that the learned senior counsel for the appellant also submitted that the offence alleged against the appellant was not relating to any transaction in securities during the relevant time but qua the sale consideration alleged to have been received by the appellant out of the said transaction and for which alleged offence under section 409, prosecution is sought to be launched against the appellant. It is difficult to agree with this contention. A conjoint reading of the recitals in the complaint which obviously must be assumed to be true at this stage would show that the accused is alleged to have entered into a transaction in securities, name ..... X X X X Extracts X X X X X X X X Extracts X X X X
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