2002 (8) TMI 616 - DSC - Companies Law

Issues Involved:

1. Jurisdiction of the Special Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
2. Applicability of Civil Procedure Code (CPC) provisions, specifically Order XXII, Rule 10, and Order XXI, Rule 16.
3. Validity and enforceability of the Agreement to Assign dated 27-6-1995.
4. Rights of the alleged assignee (Growth Techno Projects Limited) to claim the amount due to Murablack (India) Limited.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Special Court:

The Special Court was established under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, primarily to address irregularities in securities transactions during the statutory period from 1st April 1991 to 6th June 1992. Section 9A of the Act specifies that the court's jurisdiction is limited to transactions within this period and related to attached properties. The court found that the Agreement to Assign dated 27-6-1995 fell outside this statutory period, thus the Special Court lacked jurisdiction to adjudicate its validity. The court emphasized that the Special Court is not empowered to decide claims arising from transactions outside the statutory period to avoid stalling the early discharge of liabilities to the Revenue, Banks, and Financial Institutions.

2. Applicability of Civil Procedure Code (CPC) Provisions:

The Custodian argued that the Civil Procedure Code does not apply to the Special Court, as per section 9A(4) of the Act, which states the court should be guided by principles of natural justice. The court upheld this argument, noting that the Special Court's procedures are distinct and tailored to expedite the resolution of disputes within its limited jurisdiction. The court dismissed the applicability of Order XXII, Rule 10, and Order XXI, Rule 16, CPC, in this context, emphasizing that these provisions are relevant to ordinary civil courts but not to the Special Court operating under the Special Court Act.

3. Validity and Enforceability of the Agreement to Assign:

The court noted that the Agreement to Assign dated 27-6-1995 was disputed and subject to a pending suit for specific performance in the High Court. The court found that the Special Court could not adjudicate the validity of this agreement as it fell outside its jurisdiction. The court also highlighted that the agreement was not within the statutory period and thus could not be considered by the Special Court. The court referred to the Supreme Court's judgment in Kudremukh Iron Ore Co. Ltd. v. Fairgrowth Financial Services Ltd., which established that the Special Court cannot adjudicate claims of creditors who are strangers to the transactions between the notified person and their creditors.

4. Rights of the Alleged Assignee:

The court found that Growth Techno Projects Limited, the alleged assignee, could not claim the amount due to Murablack (India) Limited under the Agreement to Assign dated 27-6-1995. The court noted that the alleged assignee had not instituted any legal proceedings to validate the agreement and had even canceled it via a letter dated 15-3-1997. The court emphasized that the alleged assignee should seek adjudication of their rights in a competent civil court and produce a valid decree at the time of distribution under section 11(2)(c). The court concluded that the Special Court had no jurisdiction to record the assignment or adjudicate the disputes arising from it.

Conclusion:

The court dismissed Misc. Application No. 453 of 2002, filed by Growth Techno Projects Limited, for lack of jurisdiction and applicability of the Civil Procedure Code. The court held that the alleged assignee must pursue their claims in a competent civil court and obtain a valid decree before seeking distribution under section 11(2)(c) of the Special Court Act. The court also stayed the distribution of the amount in favor of Murablack (India) Limited for four weeks to allow the applicant to approach the Supreme Court.

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