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TMI Blog2024 (3) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... itions that they had returned the amounts borrowed from respondent Nos. 6, 7 and 8, but the books of accounts were not available because of lapse of time. The said plea of the appellants herein could not be treated as unnatural or an afterthought because once the transactions were completed and the loans were repaid, there was no reason for the appellants to have entertained a belief that after a period of about 13 years, they would be required to present the account books pertaining to transactions. It was neither a requirement in law nor could it be expected from the appellants herein to retain the books of accounts after more than a decade of the alleged suspicious transactions. Resultantly, the conclusions drawn and the findings recorded in the impugned judgments passed by the Special Court that the appellants herein failed to prove the fact that the amounts had been repaid to the benami companies of the notified person, namely, Pallav Sheth do not stand to scrutiny and cannot be sustained as being contrary to facts and law. Appeal allowed. - PAMIDIGHANTAM SRI NARASIMHA And SANDEEP MEHTA , JJ. For the Appellant : Mr. Mahesh Agarwal, Adv. Mr. Rishi Agrawala, Adv. Mr. Ankur Sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Gazette. 7. Section 3(3) provides that any property, movable or immovable or both, belonging to the notified persons would stand attached simultaneously with the date of issuance of the notification. 8. Section 3(4) mandates the Custodian to deal with the attached properties in such manner as the Special Court may direct. 9. Section 11(1) empowers the Special Court to pass appropriate order(s) directing the Custodian for disposal of the attached property. 10. Under Section 11(2), liabilities of notified persons are required to be paid or discharged in full by distributing monies so realized after disposal of the attached assets. 11. Having taken into account the relevant provisions of the statute, the brief facts arising for consideration in the present appeals may be noted as below:- (i) On 2nd July, 1992, Fairgrowth Financial Services Limited (hereinafter being referred to as the FFSL ) was notified under Section 3(2) of the Act and all its properties stood attached. In 1993, the Custodian filed Miscellaneous Application No. 193 of 93 in the Special Court for the recovery of various sums of money belonging to FFSL from respondent No. 2-Pallav Sheth. (ii) The Special Court pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Nos. 162 of 2008 and 184 of 2008 were filed by the Custodian before the Special Court for recovery of Rs. Rs. 50 lakhs from the appellant Suman L. Shah (Civil Appeal No.4577 of 2011) and for recovery of Rs. 25 lakhs from the appellant/Laxmichand Shah (Civil Appeal No. 4583 of 2011), both being garnishees of respondent No. 2-Pallav Sheth i.e. the owner of the benami companies (respondent Nos.4 to 8). 14. The Special Court, vide judgment dated 11th March, 2011 passed in Miscellaneous Application No. 162 of 2008 directed the appellant Suman L. Shah to pay a sum of Rs. 50 lakhs(Rs. 25 lakhs each due to respondent Nos. 6 and 7) being benami companies of respondent No. 2-Pallav Sheth, to the Custodian with interest @ 12% per annum from 1st April, 1997 till realisation of the amount. 15. Vide another judgment of even date passed in Miscellaneous Application No. 184 of 2008, the Special Court directed appellant- Laxmichand Shah to pay a sum of Rs. 25 lakhs due to respondent No. 8, benami company of respondent No. 2-Pallav Sheth, to the Custodian with interest @ 12% per annum from 1st April, 1997 till realisation of the amount. 16. The Special Court further directed that the appellants sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992, i.e., 6th October, 2001 and thus, the burden of proof regarding the existence of liability could not have been shifted on to the appellants and the onus essentially lay upon the Custodian to prove that these amounts had not been repaid and were still recoverable. 23. It was contended that the specific assertion made by the appellants in their deposition affidavits that the amounts in question borrowed from respondent Nos. 6, 7 and 8 had been repaid partly by cheque and partly by material supplied to these respondents could not be unsettled by the Custodian in crossexamination. Only a bald suggestion was given to the appellants in cross-examination that they did not have any document in the form of vouchers, receipts, invoices or entries in the book accounts to show the adjustment of the remaining amount. 24. It was urged that the letter dated 5th May, 1998 issued by respondent No. 3-Income Tax Department was referred to in the cross-examination of the appellants. However, the said letter was not proved by exhibiting the same in the proceeding before the Special Court. Learned counsel urged that the since the Custodian failed to bring the letter of the Income Tax Department on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and those cheques were encashed and the amounts were debited in his account. If Shree Jalaram Timber Depot Pvt. Ltd belonging to respondent No.8 had supplied certain material to respondents Nos. 5 and 6 and that amount was adjusted against the dues payable to respondents Nos. 5 and 6, there must have been some documents in the form of bill books, vouchers, receipts, entries in the account books. However, no such document was produced. It is true that respondent No.8 was not crossexamined by respondent No.1 or respondent Nos.5 and 6. Still, it is to be noted that best evidence in the form of documentary evidence was available with the respondent No.8, but he chose not to produce the best evidence and relied only on his oral testimony. Even though respondent No.8 contended that the documents are not traceable he has nowhere stated that the records were lost or destroyed. There is no satisfactory clarification as to why the records are not traceable. When the best evidence, which is expected to be available with him, has not been produced, the Court may draw an inference that if such record would be produced, it would go against his claim. Therefore, his contention that the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2-Pallav Sheth was notified under the Act of 1992 on 6th October, 2001 and thus, by virtue of Section 3(3) of the Act of 1992, all properties belonging to him stood automatically attached from the date of such notification. The appellants herein had borrowed the amounts in question from respondent Nos. 6, 7 and 8, way back in the years 1996-1997. By that date, there could not have existed any justifiable reason for the appellants herein to have entertained a belief that these were the benami companies of respondent No. 2-Pallav Sheth or that there was any breach of the provisions of the Act of 1992 by Pallav Sheth or the respondent companies. 32. Even if it is assumed for the sake of arguments that respondent Nos. 4 to 8 were the benami companies of respondent No. 2-Pallav Sheth, he not having been notified under the Act of 1992 by the time the amounts were borrowed, the appellants could not be expected to entertain any doubt regarding the operation of the Act of 1992 either against these companies or even against respondent No. 2-Pallav Sheth or that the companies were the benami companies of Pallav Sheth. 33. The foundation behind the assertion made by the Custodian that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to any matter or claim (a) relating to any property standing attached under sub-section (3) of section 3; (b) arising out of transactions in securities entered into after the 1st day of April, 1991, and on or before the 6th day of June, 1992, in which a person notified under subsection (2) of section 3 is involved as a party, broker, intermediary or in any other manner. (2) Every suit, claim or other legal proceeding (other than an appeal) pending before any court immediately before the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities)Amendment Act, 1994 (24 of 1994), being a suit, claim or proceeding, the cause of action whereon it is based is such that it would have been, if it had arisen after such commencement, within the jurisdiction of the Special Court under sub-section (1), shall stand transferred on such commencement to the Special Court and the Special Court may, on receipt of the records of such suit, claim or other legal proceeding, proceed to deal with it, so far as may be, in the same manner as a suit, claim or legal proceeding from the stage which was reached before such transfer or from any earlier stage or de novo as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds respondent Nos. 6, 7 and 8, generated from borrowings made in the years 1996-1997 stood repaid and closed because the amounts had been repaid by cheque(s) and by way of adjustments towards materials supplied. The applications for recovery having been filed by the Custodian with the allegation that the appellants herein were the debtors of the benami companies of the notified person, the primary onus of proving this assertion would be on the Custodian by virtue of Section 101 of Evidence Act. It is only after the Custodian discharged this primary burden and established the existence of the debt, then by virtue of Section 102 of the Evidence Act, perhaps, the onus could be shifted on to the appellants to rebut the same. 37. The entire case of the Custodian regarding subsisting debts of the appellant towards respondent Nos. 6, 7 and 8 was based on a communication received from the Income Tax Department. The appropriate witness to prove such communication would be the official concerned from the Income Tax Department. However, as has been mentioned above, no witness from the Income Tax Department was examined in support of the recovery application. Even the communication forwarded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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