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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 ..... 3. Before proceeding to consider the appeals on merits, it would be apposite to consider the broad scheme of the Act of 1992. 4. The Act was promulgated as large-scale irregularities committed by some share brokers in collusion with the employees of Banks and Financial Institutions(in short 'FIs') came to light in relation to transaction in Government/other securities leading to diversion of funds from the banks/FIs to the individual accounts of certain brokers. 5. The Act provided a mechanism to deal with the above situations and in particular, to ensure speedy recovery of the huge amounts illegally diverted, punish the guilty and restore the confidence of public at large in the security transactions and also to uphold and maintain the basic integrity and credibility of banks and FIs. The period of transactions in securities under the purview was from 1st April, 1991 to 6th June, 1992. A Special Court headed by a sitting Judge of the High Court was established for speedy trial of offences relating to transactions in securities and disposal of properties attached. The Act also provided for appointment of one or more custodians under Section 3 so as to attach the property/proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were the benami companies of respondent No. 2-Pallav Sheth who had illegally parked the tainted money received from FFSL, the notified company in these benami companies (respondent Nos.6, 7 and 8) created by himself. (iv) The Custodian notified respondent No.2-Pallav Sheth under Section 3(2) of the Act on 6th October, 2001. He was declared insolvent on 5th November, 2003 and as a consequence, all his assets and properties got vested in the Official Assignee i.e. respondent No.9 herein. As respondent No. 2-Pallav Sheth failed to pay the decretal amount, the Custodian sought information from respondent No. 3- Income Tax Department regarding the assets of respondent No. 2-Pallav Sheth. In turn, the Income Tax Department, vide letter dated 5th May, 1998 informed the Custodian about respondent No. 2-Pallav Sheth being the benami owner of the companies (respondent Nos. 4 to 8 herein). (v) The Special Court, by an order passed in miscellaneous application registered for initiating contempt proceedings against respondent No. 2-Pallav Sheth observed that respondent Nos. 4 to 8 were benami companies of respondent No.2-Pallav Sheth. 12. The Custodian claims to have acquired knowledge/i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Special Duty attached with the Special Court and to furnish a bank guarantee to the Custodian towards the balance amount, i.e., interest. 19. Both the appeals were dismissed by this Court vide order dated 23rd April, 2012 on account of non-compliance of the order dated 13th May, 2011. 20. The IAs seeking restoration of these Civil Appeals were accepted vide order dated 14th March, 2014, subject to deposit of a total sum to the tune of Rs. 2.20 crores by the appellants with the Officer on Special Duty, Special Court. The amount has been deposited and accordingly the appeals were taken on board. 21. Learned counsel representing the appellants contended that the Special Court committed manifest error in facts as well as in law in holding that the appellants herein were the garnishees of respondent No. 2-Pallav Sheth. It was contended that the questionable transactions between the appellants and respondent Nos. 6, 7 and 8, the alleged benami companies of respondent No. 2-Pallav Sheth (notified party) and judgment debtor of FFSL(notified party) were 13-14 years old and as no documentary proof relating to these transactions was provided by the Custodian on the record of the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the applications for recovery. In this regard, learned counsel for the appellants referred to the following observations made by the Special Court in the impugned order:- "7. It is true that oral evidence cannot be ignored, but at the same time, it has to be borne in mind that the Official Assignee - respondent No.9 has to recover the properties and assets of respondent No.1 for satisfaction of the decree against him. For the reasons best known to respondent No.1 or respondent Nos. 5 and 6, neither they filed any reply nor cross-examined respondent No.8. At the same time, it cannot be forgotten that the respondent No.8 is a businessman and he was expected to maintain accounts of his business. It is impossible to believe that he would not have maintained accounts of his business. According to him, he had partly repaid these amounts to respondent Nos. 5 and 6 by cheques and partly the amounts were adjusted against the purchases made by respondent Nos. 5 and 6 from Shree Jalaram Timber Depot Pvt. Ltd. He has shown payment of Rs.25 lakh by cheque to respondent No.5 and that is reflected in his passbook. Whenever any payment is made by cheque and the cheque is encashed, naturally t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the respondents submitted that the bald statements of the appellants herein in their affidavits that the amount borrowed from respondent Nos. 6, 7 and 8 i.e. the benami companies of the notified person i.e. respondent No.2- Pallav Sheth had been returned by way of adjustment towards material supplied was rightly discarded by the Special Court because such statements were not supported by any tangible proof, either oral or documentary. He urged that the appellants claim to be reputed businessmen and thus, it is wholly unbelievable that accounts of business had not been maintained by them so as to substantiate the plea of repayment being made to respondent Nos. 6, 7 and 8 by way of adjustment of material supplied. He thus, implored the Court to affirm the impugned judgments and dismiss the instant appeals. 29. We have given our anxious consideration to the submissions advanced at the bar and have perused the material available on record. 30. For adjudicating the issues raised in these appeals, few admitted facts need to be noted. The miscellaneous applications were filed by the respondent-Custodian in the year 2008 seeking to recover the amounts of Rs.50 lakhs fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellaneous applications for recovery. 34. While initiating recoveries, the Custodian relied upon the provisions of Sections 3 and 9A of the Act of 1992 which are reproduced hereinbelow:- "3. Appointment and functions of Custodian. - (1) The Central Government may appoint one or more Custodians as it may deem fit for the purposes of this Act. (2) The Custodian may, on being satisfied on information received that any person has been involved in any offence relating to transactions insecurities after the 1st day of April, 1991 and on and before the 6th June, 1992, notify the name of such person in the Official Gazette. (3) Notwithstanding anything contained in the Code and any other law for the time being in force, on and from the date of notification under sub-section (2), any property, movable or immovable, or both, belonging to any person notified under that subsection shall stand attached simultaneously with the issue of the notification. (4) The property attached under sub-section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. (5) The Custodian may take assistance of any person while exercising his powers or for dischargi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure. (5) Without prejudice to the other powers conferred under this Act, the Special Court shall have, for the purposes of discharging its functions under this section, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely: - (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or copy of such record or document from any office; (e) issuing commissions for the examination of witnesses or documents; (f) reviewing its decisions; (g) dismissing a case for default or deciding it ex parte; (h) setting aside any order of dismissal of any case for default or any order passed by it ex parte; and (i) any other matter which may be prescribed by the Central Government under sub-section (1) of section 14." 35. From a bare perusal of these provisions, it would become clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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