2022 (8) TMI 1552 - SC - Indian Laws

Maintainability of the appeal - execution application filed by the Custodian barred by limitation or not - acknowledgment of liability by the appellant affects the limitation period affects limitation period or not - disclosure of assets - HELD THAT - An interlocutory order denotes an interim or temporary order which does not decide the important rights or liabilities of the parties. The Special Court in AMAR NATH AND OTHERS VERSUS STATE OF HARYANA OTHERS 1977 (7) TMI 115 - SUPREME COURT has conclusively held that the execution petition is not barred by limitation. The determination of the issue of limitation affects the rights and liabilities of the parties. Thus, the argument of the first appellant that the appeal is not maintainable in view of Section 10 of the Act of 1992 is rejected. The Special Judge has specifically held against the appellant on the ground that there was an acknowledgement of liability within the meaning of Section 18 of the Act of 1963. The finding that there was an acknowledgement of liability within the meaning of Section 18 is premised on the hypothesis that the Act of 1963 would stand attracted. However, it has also been held in the judgment of the Special Court that in any event the Custodian is entitled and liable to recover the amount under the Act of 1992. Section 29(2) of the Limitation Act stipulates that where a special law prescribes a period of limitation for an application different from the period prescribed in the Schedule of Act of 1963, then Section 3 of the Act of 1963 shall apply as if such period was prescribed by the schedule, and the provisions of Sections 4 to 24 shall apply to the extent that it is not expressly excluded by the special Law. The three-Judge Bench in LS. SYNTHETICS LTD. VERSUS FAIRGROWTH FINANCIAL SERVICES LTD. 2004 (9) TMI 384 - SUPREME COURT observed that Section 29(2) of the Limitation Act is not applicable to the Act of 1992 since in terms of the provisions of the Act, no period of limitation is prescribed . In the present case, the Special Court has proceeded on the basis that there was an acknowledgement of liability by the letter of the appellant dated 22 February 2018. That finding is sought to be assailed by the appellant by urging that the acknowledgement of liability under Section 18 of the Act of 1963 has to be within the period of limitation and in the present case this test is not satisfied - Based on the decision of this Court in L S Synthetics Ltd, the ultimate directions which have been issued by the Special Court cannot be interfered with. The observations contained in the impugned order were for the purpose of issuing the directions for a disclosure of assets and would not preclude the Custodian from urging that the Act of 1963 had no application to the Execution Application which was filed for enforcement of the decree dated 28 February 2003. The directions for the disclosure of assets and other consequential directions which have been issued are not interfered with in this appeal. The appellant is granted four weeks to file his disclosure of assets subject to his right to urge his submissions in the execution application - the Special Judge is requested to dispose of the Execution Application preferably within a period of two months of the date of receipt of a certified copy of this order - appeal disposed off.

Summary

Issues Involved:

1. Whether the execution application filed by the Custodian is barred by limitation.
2. Whether the acknowledgment of liability by the appellant affects the limitation period.
3. The applicability of the Limitation Act, 1963 to proceedings under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
4. The maintainability of the appeal in light of Section 10 of the Act of 1992.
5. The legal implications of the Special Court's order for disclosure of assets.

Issue-wise Detailed Analysis:

1. Limitation of Execution Application:

The appellant contested the execution application filed by the Custodian on the grounds of being barred by limitation. The decree was passed in 2003, but the custodian's demand was made in 2011, with a significant delay unexplained. The Special Court held that the execution application was not barred by limitation, as the appellant acknowledged liability in communications dated 22 February 2018 and 11 August 2018. The court noted that the appellant's actions, including the remittance of Rs 1,00,000, constituted an acknowledgment of liability under Section 18 of the Limitation Act, 1963.

2. Acknowledgment of Liability:

The appellant argued that the letter dated 22 February 2018 was a 'without prejudice' offer and did not constitute an acknowledgment of liability. However, the Special Court found that the letter and subsequent actions by the appellant did acknowledge liability, thereby affecting the limitation period. The court emphasized that the acknowledgment of liability extended the limitation period as per Section 18 of the Limitation Act, 1963.

3. Applicability of the Limitation Act, 1963:

The respondent argued that the Limitation Act, 1963, does not apply to proceedings under the Act of 1992, as established in the case of L S Synthetics Ltd v. Fairgrowth Financial Services Ltd. The court in L S Synthetics held that the Limitation Act applies only when a suit is filed for recovery and not to claims pending before the Special Court under Section 11 of the Act of 1992. The appellant contended that the decision in L S Synthetics was limited to Section 11, but the court maintained that the Limitation Act does not apply to execution applications under the Act of 1992.

4. Maintainability of the Appeal:

The respondent challenged the maintainability of the appeal, citing Section 10 of the Act of 1992, which excludes appeals against interlocutory orders. The appellant argued that the Special Court's decision on limitation was not interlocutory, as it affected the rights and liabilities of the parties. The court agreed with the appellant, stating that the determination of limitation was not interlocutory, thus allowing the appeal to proceed.

5. Disclosure of Assets Order:

The Special Court directed the appellant and the third respondent to disclose their assets, including personal assets and financial holdings. The appellant was ordered to disclose his Permanent Account Number and assist the Custodian in obtaining financial records from NSDL and CDSL. An ad-interim order was issued to prevent the sale or transfer of assets sufficient to satisfy the decretal amount. The Supreme Court upheld these directions, emphasizing their necessity for the enforcement of the decree.

Conclusion:

The Supreme Court concluded that the directions for disclosure of assets and other related orders by the Special Court were valid and necessary for the enforcement of the decree. The appeal was disposed of, granting the appellant four weeks to comply with the disclosure order, with the condition that the application for arrest would not be pursued if compliance occurred. The Special Judge was requested to expedite the disposal of the Execution Application. The pending applications were also disposed of accordingly.