2009 (5) TMI 549 - SC - Companies Law

Direction to pay to the Custodian an amount of Rs. 2,83,192 with interest at the rate of 18 per cent per annum from 22-7-1991 to 29-2-1992 which amount the Custodian would receive for and on behalf of respondent No. 2. Held that - No infirmity in the order passed by the Special Court. As the appellant himself informed the Custodian about the aforesaid vehicle wherein the nexus between the purchase of the vehicle and the involvement of the appellant in the deal is clearly established we modify the order for payment of interest at the rate of 18 per cent per annum by directing that interest on the aforesaid amount of Rs. 2,83,192 shall be paid at the rate of 9 per cent per annum from 22-7-1991 to 29-2-1992. An amount of Rs. 10,00,000 is already lying deposited in terms of order passed which was deposited by respondent No. 1. The amount payable by the appellant, therefore, shall now be calculated in terms of this order and the said amount shall be adjusted out of the amount lying deposited.

Issues Involved:
1. Legitimacy of the Custodian's directive for the appellant to pay Rs. 2,83,192 with interest.
2. Appellant's awareness and involvement in the transaction for the purchase of the Mahindra Jeep.
3. Validity of the Special Court's findings and conclusions.
4. Appropriate rate of interest on the amount payable.

Issue-wise Detailed Analysis:

1. Legitimacy of the Custodian's Directive:
The appellant challenged the judgment and order dated 5-3-2004 by the Special Court, which directed the appellant to pay Rs. 2,83,192 with 18% interest per annum from 22-7-1991 to 29-2-1992. The Custodian, acting under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, had issued this directive after concluding that the amount was due for a Mahindra Jeep financed by M/s. Fair Growth Financial Services Limited (respondent No. 2).

2. Appellant's Awareness and Involvement:
The appellant's father, who was the Chairman and Managing Director of respondent No. 2, had placed an order for the Mahindra Jeep on 22-7-1991, and the vehicle was delivered to the appellant on 15-4-1992. The Reserve Bank of India's investigation had revealed irregularities in transactions involving securities, leading to the attachment of properties by the Custodian. The appellant informed the Custodian about the vehicle in 1998, claiming it was under a hire purchase/lease agreement. Documents, including letters and invoices, indicated that the vehicle was registered temporarily in the appellant's name and was financed by respondent No. 2.

3. Validity of the Special Court's Findings:
The Special Court found that the appellant was aware of the transaction and that the vehicle was purchased on his behalf by respondent No. 2. The court noted that the appellant became a Director of respondent No. 2 after his father's demise and was aware of the vehicle's purchase and financing. The court concluded that the appellant was responsible for the amount paid by respondent No. 2 for the vehicle, leading to the directive for repayment with interest.

4. Appropriate Rate of Interest:
The Supreme Court upheld the Special Court's order but modified the interest rate from 18% to 9% per annum for the period from 22-7-1991 to 29-2-1992. The modification was made considering the appellant's cooperation in informing the Custodian about the vehicle. The amount payable was to be adjusted against the Rs. 10,00,000 already deposited by the appellant.

Conclusion:
The Supreme Court found no infirmity in the Special Court's order regarding the appellant's liability to repay the amount financed by respondent No. 2 for the Mahindra Jeep. However, the interest rate was reduced to 9% per annum. The appeal was disposed of with this modification concerning the interest payable.

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