2004 (9) TMI 384 - SC - Companies Law

Whether a statutory attachment in terms of sub-section (3) of section 3 of the said Act would apply only in relation to a property which was the subject-matter of the transactions in securities? Held that - Appeal dismissed. A notified party has the requisite locus to bring the fact to the notice of the Special Court that certain sum is owing and due to him from a third party whereupon a proceeding can be initiated for recovery thereof by the Custodian and consequent application thereof in discharge of the liability of the notified person. Sub-section (3) of section 3 should be literally construed and so construed all properties belonging to the notified person shall be subject to attachment which may, consequently, be applied for discharge of his liabilities in terms of section 11 of the said Act. The provisions of Limitation Act, 1963 have no application in relation to the proceedings under the said Act.

Issues Involved:
1. Jurisdiction of the Special Court
2. Applicability of the Limitation Act
3. Locus of the Respondent
4. Reading down of Section 9A of the Act
5. Interest on the Loan

Detailed Analysis:

Jurisdiction of the Special Court:
The Special Court's jurisdiction was examined in light of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992. The court concluded that its jurisdiction is of wide amplitude and includes adjudicating claims related to attached properties of notified persons. The Special Court has the authority to issue directions regarding the application of attached properties, irrespective of whether the notification is brought to its notice by the Custodian or the notified party itself. The court emphasized that the jurisdiction of the Special Court is not confined to illegal transactions in securities but extends to all properties attached under Section 3(3) of the Act.

Applicability of the Limitation Act:
The court held that the Limitation Act, 1963, does not apply to proceedings under the Special Courts Act. The rationale is that the Special Court operates as a complete code in itself, and its duties and functions start once the statutory attachment of the property comes into force. The court noted that the Limitation Act primarily applies to civil proceedings and some special criminal proceedings, but not to proceedings before bodies other than courts, such as quasi-judicial tribunals or executive authorities. The attachment of properties for discharging liabilities remains in force until all claims are settled, and the Special Court is bound to pass appropriate orders without being constrained by the Limitation Act.

Locus of the Respondent:
The court clarified that the Act does not specify who can initiate proceedings before the Special Court. The Special Court can direct the Custodian regarding the application of attached properties at the instance of the notified person or on its own motion. The court affirmed that a notified party has the locus to bring to the notice of the Special Court any sums due to them from third parties, which can then be recovered by the Custodian for discharging the notified person's liabilities.

Reading down of Section 9A of the Act:
The court rejected the argument that Section 9A should be read down to apply only to properties involved in transactions in securities. It held that all properties belonging to a notified person are subject to attachment under Section 3(3) of the Act and can be applied for discharging liabilities as per Section 11. The court emphasized that the statutory attachment covers all properties of the notified person, not just those linked to illegal securities transactions.

Interest on the Loan:
The court addressed the issue of interest on the loan advanced by the notified party. It was noted that the appellant had accepted the loan amount and the interest rate of 21% per annum. The Special Court directed the appellant to pay the principal amount with interest at 15% per annum. The court found no merit in the appellant's contention that there was no agreement on interest, as the attached amount was utilized by the appellant, justifying the Special Court's direction to grant interest by way of restitution.

Conclusion:
1. A notified party has the locus to inform the Special Court about sums due from third parties, enabling recovery by the Custodian.
2. Section 3(3) should be literally construed, allowing all properties of the notified person to be attached and applied for discharging liabilities under Section 11.
3. The Limitation Act, 1963, does not apply to proceedings under the Special Courts Act.
4. The appeals were dismissed, affirming the Special Court's directions and jurisdiction.

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