1996 (9) TMI 487 - SC - Companies Law

Attachment of properties of notified person - Held that - Appeal allowed. Since the Special Court has proceeded upon the basis that the appellant is genuinely seeking release of an income which he is earning from his services , that the same is not subject to attachment under section 3(3) and that he is entitled to open a bank account for the purpose of depositing such income (and such income alone). The Custodian shall be entitled to inspect this bank account and take action in such manner as the deems fit against the appellant if it be found that other monies have been deposited in the bank. The appellant may now draw the arrears of his remuneration from the company.

Summary

Issues:
Interpretation of section 3(3) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 regarding attachment of property belonging to a notified person.

Comprehensive Analysis:
The judgment involved appeals against the Special Court's orders related to the interpretation of section 3(3) of the Act concerning the attachment of property of a notified person. The appellant, who became a notified person under section 3(2) of the Act, was appointed as an advisor by a company and sought permission to open a new bank account for his consultancy fees. The Special Court dismissed the petition, expressing concerns about potential asset siphoning by notified parties. The Court held that all assets available on the notification date and those acquired thereafter stood attached under section 3(3), emphasizing a broad definition of "property" to include future acquisitions or income.

The Act empowered the Central Government to appoint Custodians who could attach property of notified persons involved in securities transactions. The judgment clarified that property belonging to a notified person stands attached upon notification, without requiring a separate order. The Court analyzed the language of section 3(3) and concluded that only property owned or possessed by the notified person on the notification date was attached, not future acquisitions unless explicitly stated. It highlighted the potential unconstitutionality of overly broad interpretations depriving notified persons of livelihood.

The judgment emphasized that income or benefits derived from attached property also constituted attached property, except for income earned through personal labor. It recognized the appellant's right to open a bank account for his consultancy income alone, subject to inspection by the Custodian. The Court allowed the appellant to access his remuneration arrears and rejected arguments linking attached property to securities transactions, as unnecessary for the appeal's decision.

Ultimately, the appeals were allowed, setting aside the Special Court's orders and granting relief to the appellant regarding the attachment of his income. No costs were awarded in the case.