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TMI Blog2012 (6) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... cut off date which had no statutory force as the same had been fixed at the instance of the Custodian seeking approval from the Special Court. order of the Special Court set aside and allow this appeal as a result of which the respondent-Custodian shall entertain the application filed before the Special Court for certification of his shares and verify the claim of the appellant in regard to the shares. - CRIMINAL APPEAL NO. 948 OF 2006 - - - Dated:- 31-1-2011 - MARKANDEY KATJU AND GYAN SUDHA MISRA, JJ. Parvin Satale and Naresh Kumar for the Appellant. Subramonium Prasad, Shyam D. Nandan, Ms. Shweta Mazumdar and Rajat Khattri for the Respondent. JUDGMENT Gyan Sudha Misra, J. - This appeal has been filed under section 10 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 ( the Special Court Act of 1992 ) challenging the order dated 28-11-2005 passed by the Special Court constituted under the Special Court Act, 1992 bearing Miscellaneous Application No. 536 of 2005 whereby the Special Court was pleased to reject the application summarily indicating that the application of the appellant for certification of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent No. 3 nor respondent No. 4 cared to inform the appellant about the said development through which he had purchased the shares. The appellant has annexed the copy of the letter dated 12-7-1995 vide Annexure P-1 which was written by the respondent No. 4-Abex and Company to Respondent No. 3-Karvy Consultants Ltd. 5. Since the appellant had been informed by the respondent No. 2 - Reliance Industries Ltd. that the dividends could not be paid to him as the shares were held to be tainted, the appellant also tried to ascertain the status of his shares purchased by him through respondent Nos. 3 and 4. However, it is alleged by the respondent No. 3 -M/s. Karvy Consultants Ltd. that it had informed the appellant to submit appropriate application seeking certification of the tainted shares as the equity shares in question stood in the name of M/s. Fair Growth Financial Service Ltd. which subsequently became the subject-matter of attachment as per the order of the Government of India since it was found to be involved in some scam and hence the shares issued by this company required certification by the Custodian as per order of the Special Court (Trial of Offences Relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deeds to enable it to do the needful. But the appellant s case is that he never received the said communication etc. 7. As per the appellant s version the original shares and transfer deeds had been delivered to the respondent No. 4-Abex and Company - the share broker company through whom the appellant had purchased the shares as under the rules, the share certificates were not issued from the company to the appellant but the same was lying in the hands of respondent No. 3 i.e. Karvy Consultants Ltd. through respondent No. 4 and so the appellant could not produce the share certificates. However, the respondent No. 4-Abex and Company had assured the appellant that it would return the share along with the Clearance Certificate from the Stock Exchange but the respondent No. 3 i.e. Karvy Consultants Ltd. was unable to process the share through respondent No. 6 - Madras Stock Exchange as they were tainted. The appellant, therefore, stated that he is a bona fide purchaser and the owner of 100 tainted shares of respondent No. 2 and the said shares were required to be transferred in the name of the appellant along with all the accrual till dates after certification. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty but the same were not physically with the Custodian since such shares were with the 3rd party. Further, in respect of shares which may not be in the name of the notified party but which may have been dealt with by the notified party, the dividends on such shares were either kept in abeyance by the company or were passed on to the Custodian by the companies pending certification. 12. It is in view of the aforesaid procedure as also the fact that the shares were found to be tainted, the certification of the shares purchased through an intermediary which in this case is respondent No. 4-Abex and Company and respondent No. 3-Karvy Consultants Ltd., became necessary. But it appears that the Custodian had been receiving applications for certification of the tainted shares off and on which dividend was to be paid to the party holding the shares and was to be disbursed to them through the Custodian. It has been admitted by the Custodian in his reply that the dividends which were received by the Custodian came automatically from the company either by way of dividend warrants or through the Electronically Clearing System (ECS). The Custodian stated that these dividends were not kept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst a notified party for payment of accruals on shares with the third party unless such third party has filed his application for certification within the period specified in clause ( b ). ( d )Any other orders/directions as deemed fit by this Hon ble Court in the matter." 14. The Special Court taking an overall view of the matter granted the request in terms of prayer clauses ( a ), ( b ) and ( c ). However, for the purpose of clause ( a ) 60 days period was fixed. 15. Pursuant to the order dated 16-3-2005 notices were issued in 32 dailies which stipulated that the application for certification by the purchasers must be made within 60 days from the date of issuance of the notice. It was also clearly stipulated that no application for certification would be entertained after the period of 60 days from the date of notice and that no claims shall lie against the Custodian or against the notified party after the lapse of 60 days of the notice. The public notice which were published in 32 different newspapers is dated 29-4-2005. Thus, according to the respondent-Custodian no claim for certification could have been entertained after the expiry of 60 days period which expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased through respondent No. 4-Abex and Company, the same could not have been entertained for certification after the cut off date. 19. While testing the relative strength of the submission of the learned counsel for the parties in the light of the background, facts and circumstances of the case, it could not be overlooked that the transaction of sale of securities (Securities (Control) Regulation Act, 1956) by a notified person either as a registered holder or as an intermediary purchaser is deemed to be bona fide provided such a transaction under the provisions of Securities Contracts (Regulation) Act, 1956 is effected through a number of stock exchanges recognised under the provisions of Securities Contract Act and is in accordance with the rules and bye-laws of the stock exchanges. It further lays down that the purchase will be deemed to be bona fide provided the sale is at the price which is lower than the lowest price for which the securities were traded on the date of the transaction except in cases of discount given on bulk purchased by the institutions and the full sale price relating to the transaction is proved to have been received by the notified persons. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. 22. At this stage the salutary object and reasons of the Act also will have to be taken into consideration while interpreting and applying the provisions of a statute wherein efforts are required to be made in construing the different provisions so that each provision will have its play and in the event of any conflict, a harmonious construction is required to be made so that an honest and bona fide investor is not duped of his hard earned money which he invests by purchasing the equity shares of a company. Admittedly, the Trial of Offences Relating to Transactions in Securities Act, 1992 had been enacted and given effect to in order to prevent undesirable transactions in securities by regulating the business of dealing therein as also certain other matters connected therewith which also provided for the establishment of a Special Court for the trial of offences relating to transactions in securities and for matters connected therewith or incidental thereto. The courts specially the Special Courts under the Act of 1992 has to bear in mind the objects and reasons of this Act which clearly indicate that in course of the investigations by the Reserve Bank of India, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the shares issued in the name of M/s. Fair Growth Company became essential. The investors like the appellant herein had absolutely no role in such activity and hence even if the cut off date was fixed by the Special Court for certification of such shares, the same could not have been enforced oblivious of its repercussion on those investors who could not approach the Special Court for certification for reasons beyond their control as it has happened in the case of the appellant herein who could not approach the Special Court for certification of his tainted shares for reasons which have been elaborated hereinbefore. 23. In the instant matter, we have noticed that the appellant/applicant had filed an application before the Special Court seeking a direction for certification of the shares on 27-8-2005 which even if counted from the cut off date, would at the most was delayed by two months as the appellant had not received any notice which could be proved, indicating that the application for certification had to be filed by 27-6-2005 although the same is asserted by the respondent-Custodian, which cannot be accepted in absence of appearance of respondent Nos. 3 and 4. But ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case where he ended up buying tainted shares for no fault on his part but had to seek its certification from the Custodian under compelling circumstance which was not his creation and also had no control, could not have been denied his due on the ground of delay in filing the application for certification specially when the appellant had sought certification of his shares only after two months of the cut off date for reasons beyond his control which cut off date has no statutory effect or legal force. The appellant on the one hand was saddled with the tainted shares for no fault on his part through respondent Nos. 4, 5 and 6 on which he had no control or any role to play and on the top of it, when he sought a remedy of certification for claiming dividends, he had to suffer an order by which his application was rejected on the ground that he had not moved an application within the cut off date which had no statutory force as the same had been fixed at the instance of the Custodian seeking approval from the Special Court. 26. As a consequence of the aforesaid discussion, we set aside the impugned order of the Special Court and allow this appeal as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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