2004 (10) TMI 328 - SC - Companies Law

Whether the Special Court constituted under The Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 has power to condone the delay in filing a petition under section 4(2) of the Act? Held that - Appeal dismissed. It is enough for the purpose of this appeal to hold that section 29(2) of the Limitation Act, 1963 does not apply to proceedings under section 4(2) of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992. Since the appellant s petition of objection had been filed much beyond the period prescribed under that section, the Special Court was right in rejecting the petition in limine.

Summary

Issues Involved:
1. Whether the Special Court constituted under The Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 has the power to condone the delay in filing a petition under section 4(2) of the Act.

Detailed Analysis:

Issue 1: Power of Special Court to Condonation of Delay under Section 4(2) of the Act

The question raised in this appeal is whether the Special Court constituted under The Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as 'the Act') has power to condone the delay in filing a petition under section 4(2) of the Act.

The object of the Act is to deal with large-scale irregularities and malpractices in transactions in securities indulged in by some brokers in collusion with the employees of various banks and financial institutions. The Act seeks to ensure speedy recovery of funds diverted from banks and financial institutions to the individual accounts of brokers, punish the guilty, and restore confidence in the integrity and credibility of banks and financial institutions.

The Act provides for the appointment of Custodians to take action against any person involved in any offence relating to transactions in securities for the period after 1-4-1991 up to and including 6-6-1992. The Custodian may notify the name of such a person in the Official Gazette, and from the date of such notification, any property belonging to the notified person stands attached. The Special Court, established under section 5 of the Act, has the jurisdiction to deal with any matter relating to such attached property and transactions in securities during the specified period.

Sub-section (2) of section 4 permits any person aggrieved by a notification issued under sub-section (2) of section 3 to file a petition objecting to the notification within 30 days of the issuance of the notification. The Special Court, after hearing the parties, may make such order as it deems fit on such petition. The Special Court is not bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and has the power to regulate its own procedure.

The appellant was notified under section 3(2) on 20-11-2001, and its properties were attached. The appellant filed a petition of objection to the notification under section 4(2) on 8-10-2002, which was rejected by the Special Court solely on the ground that it was filed beyond the period of limitation prescribed by sub-section (2) of section 4.

The appellant contended that the provision prescribing a period of limitation in Section 4(2) was directory and that the Special Court could not reject the application only because of non-compliance with such a directory provision. The appellant also argued that section 29(2) of the Limitation Act, 1963, which makes the provisions of section 5 of the Limitation Act applicable to petitions under section 4(2) of the Act, should be applicable.

The respondent argued that the period of limitation prescribed under section 4(2) was mandatory and not extendable by the Court. The respondent relied on the decision of this Court in L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd., which held that the provisions of the Limitation Act, 1963 did not apply to the Act.

The Court held that the provision prescribing a time-limit for filing a petition for objection under section 4(2) of the Act is mandatory and cannot be extended by the Court under any inherent jurisdiction. The Court noted that prescribed periods for initiating or taking steps in legal proceedings are intended to be abided by, subject to any power expressly conferred on the Court to condone any delay. The Court also noted that the mere fact that the Special Court may have the same status as a High Court does not alter the situation.

The Court further held that section 29(2) of the Limitation Act, 1963, which provides for the application of the provisions of section 4 to section 24 of the Limitation Act, including section 5, to any special or local law, does not apply to the Act. The Court noted that the Act expressly provides for a power to condone delay under section 10(3) of the Act, which shows that Parliament had consciously excluded the power of the Court in relation to section 4(2).

The Court concluded that section 29(2) of the Limitation Act, 1963 does not apply to proceedings under section 4(2) of the Act. Since the appellant's petition of objection had been filed much beyond the period prescribed under that section, the Special Court was right in rejecting the petition in limine. The appeal was accordingly dismissed without any order as to costs.