TMI Blog2009 (8) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... te of notification. All properties of the persons on the said date automatically stand attached. The statutory window period is irrelevant for the attachment of the property. It would have no bearing on the said attachment. However, a lot of documents have been filed before us with regard to Audited Reports. In our opinion this clearly shows the non-application of mind of the Judge, Special Court. He was required to weigh the submissions and counter-submissions of both the parties in his proper perspective and then arrive at a well reasoned opinion, which doesn’t seem to be the case before us. It is well settled that "Justice must not only be done, but also must be seem to be done". The Audited Reports and the objections have been filed before us. We direct the parties to file the same before the learned Judge, Special Court, so as to enable him to consider the matter afresh strictly in the light of the earlier judgment passed in Ashwin S. Mehta’s case (2006 (1) TMI 257 - SUPREME COURT OF INDIA) as well as the observations made herein. - CIVIL APPEAL NO. 5176 OF 2009 @ D-25207 OF 2008 - - - Dated:- 7-8-2009 - S.B. SINHA AND DEEPAK VERMA, JJ. I.H. Syed Custodian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 12-6-2009. 7. 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. 8. The learned Judge, Special Court, by his judgment and order dated 17-10-2003 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. 667-671 of 2004 and 672 to 681 of 2004. This Court by its judgment and order dated 3-1-2006 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 v. Custodian [2005] 2 SCC 385 1 . 9. The matter was taken up thereafter by the learned Judge, Special Court which passed the impugned judgment. Involvement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Court went on to deal with them. 14. Direction No. 1 of this Court in Ashwin S. Mehta s case ( supra ) was: "( i )The contention of the appellants that they being not involved in offences in transactions in securities could not have been proceeded in terms of the provisions of the Act cannot be accepted in view of the fact that they have been notified in terms thereof." 15. The Special Court noted that this Court, as regards the first direction, had itself recorded a finding against the appellants and, therefore, nothing further was to be done by it in that regard. 16. Direction No. 2 of the Court, which is most relevant for our purposes reads as under: "( ii )The appellants being notified persons all their personal properties stood automatically attached and any other income from such attached properties would also stand attached. The question as to whether the appellants could have been considered to be part of Harshad Mehta Group by the learned Special Court need not be determined by us as, at present advised, in view of the fact that appropriate applications in this behalf are pending consideration before the learned Special Court. The question as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servations made therein. 24. This part of the direction in the opinion of the learned Judge, Special Court was the main question, which was required to be considered by him. 25. He went on to note the observations of this court in Sudhir S. Mehta s case ( supra ) as regards the finding that the claim of the notified parties that their assets exceeded their liabilities was not correct. In Sudhir S. Mehta s case ( supra ) the court had accepted the submissions of the custodian that even the individual liabilities of the notified parties far exceeded their assets. 26. The Special Court in the impugned judgment then went on to deal with the contention that the properties in question had been purchased before the statutory period or window period prescribed under the said Act being 1-4-1991 to 6-6-1992 and they were, therefore, not liable to be attached. 27. It noted that the properties of the notified parties held by them on the date of their notification got statutorily attached and became liable to be sold for discharging the liability of the notified parties, therefore, the previous contention does not stand. 28. It, thereafter, went on to deal with the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, Special Court to consider the matter afresh in the light of the observations made hereinbefore. The learned Judge, Special Court, in this behalf, having regard to the fact that several orders of best judgment assessment have been passed by the assessing authority, may take into consideration the ratio laid down in the decision of this Court in Harshad Shantilal Mehta v. Custodian 1998 (3) SCALE 556." (p. 409) 34. As regards this direction the Special Court noted that the order had already been made on applications which were filed by the decree holder bank by it and the said matter was pending before this Court. 35. Direction No. 4 of this Court reads as under: "( iv )The learned Special Court shall proceed to pass appropriate orders as regard confirmation of the auction sales in respect of commercial properties." (p. 409) 36. As regards this direction the Special Court noted that the necessary orders had already been passed. 37. The next direction, being Direction No. 5 reads: "( v )As regard, sale of residential properties, an appropriate order may be passed by the learned Judge, Special Court in the light of the observations made hereinbefore." (p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore." (p. 409) 40. As regards these three directions the Special Court noted that the Custodian had already complied with the said directions and allowed for the necessary inspection. The Special Court further noted that there were no complaints made before it that the said directions had not been complied with. 41. Direction No. 9 reads: "( ix )The learned Judge, Special Court while hearing the matter in terms of this order shall also consider as to whether the auction sale should be confirmed or not. It will also be open to the learned Judge, Special Court to pass an interim order or orders, as it may think fit and proper, in the event any occasion arises therefore." (p. 410) 42. As regards this the Special Court noted that necessary orders had already been passed. 43. Direction No. 10 of the Court in Ashwin S. Mehta ( supra ) was: "( x )We would, however, request the learned Special Judge, Special Court to complete the hearings of the matter, keeping in view of the fact that auction sale in respect of the residential premises is being considered as expeditiously as possible and not later than twelve weeks from the date of the receipt of the copy of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property being a Constitutional as well as Human Right and furthermore the provisions of the Special Act being penal in nature, they deserve a strict construction. ( vi )No finding having been arrived at, that the properties in question had any nexus with the tainted funds received from the illegal security transactions, they should have been released from attachment by the Custodian. ( vii )That the properties having not been acquired within the "window period , i.e., during 1-4-1991 to 6-6-1992, the order of the learned Special Court for auction sale thereof must be held to be wholly illegal. ( viii )The learned Judge, Special Court, committed a serious illegality insofar as he relied upon the Janakiraman Reports and other reports, which are wholly inadmissible as evidence. ( ix )The appellants being notified persons are responsible for discharging their own liabilities from their own assets and not those of Harshad Mehta and/or any other person and therefore, it was not proper on the part of the learned Judge, Special Court to club the appellants herein as part of the Harshad Mehta Group. ( x )The learned Judge, Special Court seems to have reproduced large amounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the said group. ( viii )That the flow of fund from one member to the other, as reflected from their own books of account, clearly establish that they are part of the same group and/or it is the contribution of Harshad Mehta alone which enabled the appellants to purchase the flats in their individual names. Use of section 4(1) of Special Act 49. As regards intermingling of accounts of the appellants with that of the Harshad Mehta Group and/or any other or further contentions raised by the parties, it was directed by this Court in Ashwin S. Mehta s case ( supra ) that the same shall receive due consideration of the learned Judge, Special Court afresh in the light of the observations made therein. 50. On a plain reading of sub-section (1) of section 4 of the Special Act it would appear that the same applies to the third parties and not any notified party. It is only when a property has been purchased in the name of a third party by a notified party from the tainted funds acquired by him during the window period, that the provisions of sub-section (1) of section 4 would apply. But in a case where the properties have been purchased by the notified parties themselves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03] 7 SCC 628 this Court preferred a dictionary meaning of the word "ivory" in preference to the technical meaning stating : "20. Contextual reading is a well-known proposition of interpretation of statute. The clauses of a statute should be construed with reference to the context vis-a-vis the other provisions so as to make a consistent enactment of the whole statute relating to the subject-matter. The rule of ex visceribus actus should be resorted to in a situation of this nature." (p. 634) 55. It was furthermore held : "23. Furthermore, even in relation to a penal statute any narrow and pedantic, literal and lexical construction may not always be given effect to. The law would have to be interpreted having regard to the subject-matter of the offence and the object of the law it seeks to achieve. The purpose of the law is not to allow the offender to sneak out of the meshes of law. Criminal jurisprudence does not say so." (p. 635) 56. It was observed : "26. The courts will, therefore, reject that construction which will defeat the plain intention of the Legislature even though there may be some inexactitude in the language used. [ See Salmon v. Duncombe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also P.K. Arjunan v. State of Kerala [2007] 9 SCC 516, para 11] 58. Mr. Syed, therefore, in our opinion is not correct in contending that the advances made by Harshad Metha to the appellants herein for the purpose of purchase of properties would amount to benami transactions whereof sub-section (1) of section 4 of the Special Act shall apply. Issues regarding nomenclature 59. In Ashwin S. Mehta s case ( supra ), this Court had specifically asked the ld. Judge of the Special Court to decide on the issue of nomenclature of the parties, namely whether to consider them as a whole group or as individuals. The Special Court in the impugned judgment preferred to rely on the judgment of this court in Sudhir S. Mehta ( supra ) on this issue; wherein this Court observed : "45. This takes us to the aforementioned paragraphs heavily relied upon by the learned counsel in the judgment of Ashwin Mehta s case ( supra ). In para 41, it was stated that it was open to the appellants to show that even if they continued to be notified, the custodian was not right in clubbing all the individual members of the family as a single entity styled as the Harshad Mehta Group. We do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party. Issue of denotification 62. Appellants contend that they had withdrawn the denotification applications in 2000 although the same had been filed in 1993. The delay in disposal of the said applications is sought as a reason assigned in support of the same. We fail to see any justification in the said stand. Appellants contend that they wanted to file fresh applications. If that be so the reason why the earlier applications were withdrawn had not been properly and sufficiently explained. The reason assigned is hardly a ground for withdrawal of the applications. We have been informed by the appellants that fresh applications for denotifications have been filed and the same have been withdrawn in the year 2009. The same issue may have to be dealt with by the Special Court. We wonder, why it took nine years to file these fresh applications. 63. We may notice that applications for denotification were filed by Raseela Mehta and Rina Mehta which were rejected by the Special Court. The order rejecting the same have been challenged before this Court by way of appeals which are numbered as Civil Appeal Nos. 2915 of 2008 and 2924 of 2008 and are pending. Nexus of the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors, L.S. Synthetics, that the loans due to the respondents had no nexus to the nature of securities transactions specified under the Special Act and they were therefore not liable to be attached. This Court while rejecting the said contention noted that having regard to the provisions of the Act, it was not required that the properties in question must have a nexus to the illegal securities transaction. Accordingly, all assets of the notified parties including the loans advanced by them in the case at hand were found liable to be attached. 67. The Court however in L.S. Synthetics case ( supra ) was not concerned with the issue of whether the properties in question had been acquired before the window period or not. The loans in that case had admittedly been advanced within the window period and, accordingly, the only question before the court was whether the loan would be liable to be attached despite not having a nexus to the illegal security transactions. This accordingly brings us to the next submissions as regards the statutory window period. Statutory window period 68. It was contended on behalf of the appellants, that the properties in question had been purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tachment of the property. It would have no bearing on the said attachment. 74. It is true that to such an extent all properties would be liable to be sold which are needed for redemption and not beyond the same. What should be kept uppermost in the mind of the Court is to see that the liabilities are discharged and not beyond the same. It is with that end in view that the powers of the Special Court contained in sections 9A and 11 must be construed. 75. It is an accepted fact that the reports of the Jankiraman Committee, the Joint Parliamentary Committee and the Inter Disciplinary Group (IDG) are admissible only for the purpose of tracing the legal history of the Act alone. The contents of the report should not have been used by the ld. Judge of the Special Court as evidence. 76. However, a lot of documents have been filed before us with regard to Audited Reports. Vyas and Vyas had filed an Audited Report in 2003. Copies whereof were supplied in 2005. Audited Report of Vyas and Vyas related only to Harshad Mehta. A Report on the Assets and Liabilities of the Appellants by M/s. Vinod K. Aggarwala and Co. as on November, 2007 has also been placed on record. It does not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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