TaxTMI 
TaxTMI 
1998 (1) TMI 398
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....ng to these proceedings are required to be noted at the outset. Background facts: 3. The respondent-complainant is the uncle and the appellant-accused is his nephew. It is the case of the respondent-complainant who is aged about 85 years that he is an architect by profession. That the accused is the son of his brother, that is, his nephew. He filed a criminal complaint under section 409 of the Indian Penal Code, 1860 (IPC). We will refer to the respondent as the complainant and the appellant as the accused in the latter part of this judgment. The complainant's case is that he and his daughter, Ms. Feroza Parvez Driver held shares numbering 1200 in Great Eastern Shipping Co. Ltd. The complainant has no son and the accused being his nephew and close relative, he handed over the shares with transfer forms to the accused to arrange for the sale thereof through a reliable broker and to pay the sale proceeds to the complainant. This was done somewhere in the month of December, 1991. It is the case of the complainant that he signed and executed various transfer forms, so also his said daughter, Ms. Feroza, to facilitate the transfer thereof in the name of the prospective buyer. 4....
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....e, Judge, Special Court, Mumbai, do hereby charge you, Minoo Mehta, the accused herein, as under: That in or about December, 1991, securities, viz,, distinctive number of 1,200 shares of Great Eastern Shipping Co. Ltd., belonging to the complainant, Shavak D. Mehta, and his daughter, Ms. Feroza P. Driver, as per particulars mentioned hereinbelow, i.e. , Distinctive Nos. No. of shares 1. 31202266 - 31202415 150 2. 31202116 - 31202265 150 3. 31202416 - 31202440 25 4. 25752406 - 25752430 25 5. 25752431 - 25752455 25 6. 25752456 - 25752480 25 7. 8699052 - 8699151 100 8. 24690929 - 24691028 100 9. 823796 - 823895 100 10. 33201 - 33300 100 11. 405952 - 406051 100 12. 541991 - 542090 100 13. 7720240 - 7720339 100 14. 4715055 - 4715154 100 1,200 were entruste....
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....stitutions to the individual accounts of certain brokers. (2) To deal with the situation and in particular to ensure speedy recovery of the huge amount involved, to punish the guilty and restore confidence in and maintain the basic integrity and credibility of the banks and financial institutions, the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992, was promulgated on 6-6-1992. The Ordinance provides for the establishment of a Special Court with a sitting judge of a High Court for speedy trial of offences relating to transactions in securities and disposal of properties attached. It also provides for appointment of one or more custodians for attaching the property of the offenders with a view to prevent diversion of such properties by the offenders. (3) The Bill seeks to replace the said Ordinance." 8. Section 2 is the definition section. Section 2(b) defines 'Custodian' to mean, 'the Custodian appointed under sub-section (1) of section 3', while section 2(c) defines 'securities' as under : " 'securities' includes,- (i)shares, scrips, stocks, bounds, debentures, debenture stock, units of the Unit Trust of India or any other mu....
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....lation to any property of the person notified under sub-section (2) of section 3 that has been entered into fraudulently or to defeat the provi- sions of the Act. Section 6 of the Act empowers the Special Court to take cognizance of and try such cases as may be instituted before it or transferred to it as thereinafter provided. It is obvious, therefore, that the Special Court can take cognizance of and try both the civil and criminal cases which may be instituted before it or may be transferred to it under the Act. Then comes section 7 which deals with the jurisdiction of the Special Court and on the true construction of which the present contro-versy can be decided. It reads as under: "7. Jurisdiction of Special Court. -Notwithstanding anything contained in any other law, any prosecution in respect of any offence referred to in sub-section (2) of section 3 shall be instituted only in the Special Court and any prosecution in respect of such offence pending in any court shall stand transferred to the Special Court." 11. Section 8 deals with 'jurisdiction of Special Court as to joint trials' and lays down that the Special Court shall have jurisdiction to try any person concerne....
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.... a private party, complainant uncle against his nephew, the present appellant-accused alleging that though he entrusted the accused with the task of selling off his shares during the relevant period of time, the accused instead of returning the sale consideration arising out of the said transaction to the complainant had misappropriated the said amount. It is also true that neither the complainant nor the accused is notified person as per section 3 (2) of the Act. However, on a conjoint reading of sub-section (2) of section 3 and section 7 the moot question arises whether an accused who is not a notified person can be proceeded against before the Special Court if it is alleged that- (i) he is involved in any transaction in securities; and (ii) and such involvement of the accused arises during the relevant period, i.e., from 1-4-1991 to 6-6-1992. So far as these two requirements for applica-tion of section 7 read with sub-section (2) of section 3 are concerned, there is no dispute between the parties as in the complaint it is clearly alleged that the accused was entrusted with the work of selling off the complain-ant's shares in the company concerned and that the accused had alleged....
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....t of the preamble of the Act and the main purpose for enactment of the Act, appears to be that all criminal proceedings pertaining to prosecutions in connection with an accused involved in transactions in securities during the relevant period will lie before the Special Court and not before ordinary courts as the section starts with the non obstante clause stating that notwithstanding anything contained in any other law, only Special Courts will have exclusive jurisdiction to try such offences. It is of course true that once the Custodian notifies the name of any person in the Official Gazette as per sub-section (2) of section 3 then certain civil consequences regarding attachment of his properties would follow as per section 3 (3), automatically and that would empower the Custodian to deal with such properties in such manner as the Special Court may direct as per sub-section (4) of section 3. On such notification of the person concerned the Custodian would also get jurisdiction and power to cancel contracts and agreements entered into by such notified person after following the procedure of section 4, sub-section (1). It is also true that on and from the commencement of the Specia....
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.... in any court when the Act came into force then even such a criminal case, provided the two requirements of sub-section (2) of section 3 qua such offence as seen earlier are satisfied, will automatically stand transferred to the Special Court as laid down by the latter part of section 7. It is obvious that after the Act came into force on 6-6-1992, the Custodians would get appointed as per section 3, sub-section (1) but the offences contemplated by sub-section (2) of section 3 fall within the larger period from 1-4-1991, which extends up to 6-6-1992. Therefore, it is possible to visualise that a criminal case may be pending against an accused involved in an offence relating to transactions in securities even prior to 6-6-1992, when the Act came into force with retrospective effect. Therefore, from 1-4-1991, till 5-6-1992, the accused who is said to be involved in such transactions would be a person who is not notified as there would arise no occasion to notify such a person by the Custodian as the latter could not have been appointed at any time prior to 6-6-1992. Therefore, such pending criminal cases against the accused involved in offences relating to transactions in securities ....
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....ssness or otherwise has not thought it fit to exercise his powers under section 3 (2) of notifying such a person in the Official Gazette. In such an eventuality the jurisdiction of the Special Court will depend upon the volition of the Custodian under section 3 (2) in connection with such an accused. If he notifies him, the accused can be tried by the Special Court. If he does not notify him such an accused cannot be tried for the offence which may otherwise fulfil the basic requirements of section 3 (2). The jurisdiction of the Special Court as laid down by section 7 cannot depend upon mere fancy and volition of the Custodian. On a conjoint reading of section 3 and its relevant provisions, therefore, it must be held that once the Custodian notifies a person in the Official Gazette under sub-section (2) of section 3 he gets the power and jurisdiction to deal with such person's properties and transactions as laid down under section 3 (4) and section 4 and in such a case even the civil suits of notified persons would stand transferred as per section 9A. But so far as criminal proceedings are concerned even if the accused is not notified still the Special Court will have jurisdiction ....
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....ave received sale proceeds which he has not handed over or transmitted to the complainant who claims to be entitled to the said amount. Thus the offence alleged is certainly relating to the transaction in securities as is said to have been entered into by the accused during the relevant period. 18. Before parting with the present discussion we may refer to two judgments of this court on which reliance was placed by the learned senior counsel for the appellant. A three-judge Bench of this Court in the case of Canara Bank v. Nuclear Power Corpn. of India Ltd. [1995] 84 Comp. Cas. 70; was concerned with the interpretation of section 9A. In our view, the said decision cannot be of any assistance to the appellant in the present case for the simple reason that, as noted earlier, section 9A provides for the trial of civil cases wherein the notified person is the defendant. Therefore, so far as the civil actions are concerned the statutory scheme reflected by section 9A would operate of its own and it is in this connection that the observations are made by this Court in paragraphs 27 and 33 of the report (at pages 91-96 of 84 Comp. Cas.) dealing with notified persons and how they are to....