Case: Rasila S Mehta Vs. Custodian, Nariman Bhavan, Mumbai

unable to accept any of the contentions raised by counsel for the appellants. 56) Claims for maintenance, repair charges, interest and penalty for belated payment (Civil Appeal Nos. 3377 of 2009 and 4764 of 2010) With regard to the above appeals filed against the orders of the Special Court approving their report of the Custodian for realization of certain amounts payable to the Society towards repairs and maintenance charges, interest and penalty for belated payment, learned counsel for the appellants again raised various objections, inasmuch as the claim of the Custodian depends upon the outcome of the other appeals i.e. Civil Appeal Nos. 2924 of 2008 and 2915 of 2008 and in view of our conclusion on these appeals, we are not inclined to go into all those details once again. Since we agree with the claim of the Custodian and various steps taken by him and the ultimate order of the Special Court in the normal circumstance, present appeals are also to be dismissed. We have already noted that Smt. Jyoti H. Mehta and six other family members of late Harshad S. Mehta were notified under the Act. Upon enforcement of the aforesaid Act, all the properties of late Harshad S. Mehta and his family members, including the six appellants in Civil Appeal No. 3377 of 2009 apart from other corporate entities stood attached by the Custodian. As a consequence thereof, all eight residential properties/flats of the appellants, namely, residential flat Nos. of 32A, 32B, 33, 34A, 34B, 44A, 44B and 45 in the Madhuli Cooperative Housing Society Limited at Dr. Anne Besant Road, Worli, Mumbai continue to remain attached under the Act by the Custodian. Since the aforesaid eight residential properties remain attached with the Custodian their upkeep/repair is essential so that the market value of the said attached properties does not get depreciated and that they may fetch best market value as and when the same are permitted to be sold by the Special Court so as to pay the liabilities of the Government, Banks, Financial Institutions as well as other decree holders under the provisions of Section 11(2) of the Act. 57) It was highlighted by the Custodian that as per the rules and bye-laws of the Cooperative Housing Societies in Mumbai, which are incorporated under the provisions of the Maharashtra Cooperative Societies Act, all the owners of the residential properties/flats, as the members of the Housing Society are liable to pay such amount as may be determined by the Society towards the upkeep, maintenance and repairs of the flats as well as common areas and amenities in the housing complex. In view of the same, the Cooperative Housing Societies are entitled to recover all the arrears and charges from the members who have not paid the society in time. 58) The appellants herein are notified parties who are the owners of the attached properties and have failed to pay to the Madhuli Cooperative Housing Society Limited their contribution towards the maintenance charges, interest thereon and the charges incurred towards the repair of the attached property by the Society. The total dues demanded by Madhuli Cooperative Housing Society Limited vide its letter dated 12.03.2009 relating to the eight attached properties in question is Rs.1,87,97,011/-. The Custodian has furnished break-up of the same as follows: "i. Maintenance Charges & Rs. 1,62,80,811-00 Interest thereon.ii. Repairs of 8 Flats. Rs. 25,16,200-00" 59) Learned counsel for the Custodian submitted that as per the scheme of the repair and upkeep of the attached properties, the maintenance charges including the interest for the delayed payment is to be borne by the notified parties/entities occupying the attached property, whereas the charges incurred by the society towards the repair of the attached properties is to be paid by the Custodian from the attached account of the notified parties. Regarding payment of maintenance and repair charges, there cannot be any doubt that the Custodian is liable to pay the same to the society. However, the Custodian has claimed interest for arrears of maintenance charges as claimed by the Housing Society. 60) In the same way, in Civil Appeal No. 4764 of 2010, the appellant, namely, Rasila S. Mehta, a notified party who is the owner of the attached property failed to pay to the Madhuli Cooperative Housing Society Limited her contribution towards maintenance charges, interest thereon and also the charges incurred by the Society towards repair of the attached property. The total dues demanded by the Madhuli Cooperative Housing Society Limited, vide its letter dated 21.06.2010 qua the attached property is Rs.21,06,230/- and breakup of the same is as follows: "i. Maintenance Charges Rs. 2,59,759-00 ii. Repairs Rs. 9,57,501-00 iii. Interest Rs. 8,88,970-00" 61) As discussed earlier, unless the attached properties are properly maintained and as per the scheme, the repair and upkeep of the attached properties are to be followed by the Custodian and on the orders of the Special Court. 62) It is also brought to our notice that during the course of hearing, either before the Special Court or in this Court, certain amounts have been paid/deposited by the appellant. Considering the fact that the appellants are agitating the matter at the hands of the Custodian, the Special Court and before this Court, we feel that the appellants need not be burdened with interest and penal charges for non-payment of maintenance and repair charges to the society. Accordingly, while sustaining the claim of the Custodian as approved by the Special Court in view of the reasons mentioned above, we clarify that the Custodian is not permitted to collect interest and penalty charges from the arrears of maintenance and repair charges. This position is also clear from the decision of this Court in Harshad Shantilal Mehta vs. Custodian & Ors, (1998) 5 SCC 1. The Custodian is free to adjust the amounts deposited by the appellants on the orders of this Court or the Special Court. With the above direction, the impugned order in both the appeals is modified to the limited extent.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12) It is settled law that the objects and reasons of the Act are to be taken into consideration in interpreting the provisions of the statute. It is incumbent on the court to strive and interpret the statute as to protect and advance the object and purpose of the enactment. Any narrow or technical interpretation of the provisions would defeat the legislative policy. The Court must, therefore, keep the legislative policy in mind while applying the provisions of the Act to the facts of the case. It is a cardinal principle of construction of statute or the statutory rule that efforts should be made in construing the different provisions, so that each provision may have effective meaning and implementation and in the event of any conflict a harmonious construction should be given. It is also settled law that literal meaning of the statute must be adhered to when there is no absurdity in ascertaining the legislative intendment and for that purpose the broad features of the Act can be looked into. The main function of the Court is to merely interpret the section and in doing so it cannot re-write or re-design the3(2) of theSpecial Courts Actconfer power to Custodian to notify a person in the Official Gazette on being satisfied on information received that such person was involved in any offence relating to transactions in securities during the statutory period 01.04.1991 to 06.06.1992. Though Mr. Syed contended that the appellants are entitled to hearing even at the stage of Section 3(2), we are unable to accept his claim. Section 3(2) does not give any right of personal hearing to the person being notified. In the absence of any such right there is no pre-decisional hearing The provisions of the Act do not provide for a pre-decisional hearing before notification but contains an impeccable milieu for a fair and just post decisional hearing. The fact that it does not provide for a pre-decisional hearing is not contrary to the rules of Natural Justice because the decision of the Custodian to notify does not ipso facto takes away any right of the person thus notified or imposes any duty onAttachment of property is a natural consequence of notification and not sale of the property. The power to order a sale of the property lies only withthe Special Courtunder Section 11 and at this instance where the notified person can be adversely affected, Section 4(2) provides that any person aggrieved by the notification can file a petition objecting the same within 30 days of the date of the issuance of the notification. The Special Court is presided over by a sitting Judge of the High Court. All material before the Custodian is placed beforethe Special Courtwhich independently analyses all the material while deciding the application filed by the notified party challenging the notification. This amounts to post decisional hearing satisfying the principles of natural justice. Also a pre-decisional hearing wouldre purpose of the Act. If there is time given to Show Cause why a person should not be notified, that time could practically be utilized to further divert the funds, if any, so that it becomes even more difficult to traceA perusal of the above letter shows that there was no proper maintenance of accounts and there was no cooperation at all. Even, late Harshad Mehta in his letter and declarations to the Income Tax Authorities in which the appellant Rasila Mehta is a signatory had admitted that the family is a joint Hindu family where all are living together and that the business is such that it requires very close control at the operationalperusing the Report of M/s Vyas & Vyas,the Special Courtcame to a conclusion that the appellants are only fronts of late Harshad S. Mehta. It further concluded that the appellants are only housewives and were given loan by the brokerage firms for purchase of shares. The Special Court, therefore, rightly held that the money and assets were diverted to the appellants by the brokerage firms who were notified parties. Mr. Syed objected to the order ofthe Special Courtfor fully relying on the Auditors report. We reject his objection for the following reasons. First of all, the issue relates to accounting of several persons. Several volumes of accounts relating to various members of late Harshad Mehtas family have to be scrutinized. The Court and members of the bar are not conversant with the accounting procedures and in such event assistance from an established Chartered Accountant Firm is needed. In fact, even during the course of arguments in respect of questions by the Court, Mr. Syed himself sought the assistance of persons who are conversant with accountancy. In view of complicity in the matter, there is nothing wrong on the part ofthe Special Courtgetting report from M/s Vyas and Vyas who are recognized Chartered Accountants. The order ofthe Special Courtdoes not suffer from any infirmity and there was sufficient material before the Custodian to arrive at a satisfaction that monies had been diverted by late Harshad S. Mehta to thecontention of the appellants that since they have not been charged for any offence, they cannot be notified under the Act. According to the appellants, the phrase "involved in the offence" could only mean "accused of the offence" and since they are not charged with any offence they can not be notified. In construing the above mentioned words which are used in association with each other, the rule of construction noscitur a sociis may be applied. It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them. The actual order of these three words in juxtaposition indicates that meaning of one takes colour from the other. The rule is explained differently: that meaning of doubtful words may be ascertained by reference to the meaning of words associated with it. (vide Ahmedabad Teachers Association vs. Administrative Officer, AIR 2004 SC 1426 ).48) Therefore, in the present case the nature of "offence", in which the appellants are allegedly involved, is to be taken into consideration. The Act does not create an offence for which a particular person has to be charged or held guilty. Thus the phrase "involved in the offence" would not mean "accused of the offence". Also, the appellants could have been reasonably suspected to have been involved in the offence after consideration of the various reports of the Janakiraman Committee, Joint Parliamentary Committee and the Inter Disciplinary Group (IDG); and also the fact that 28 members of the M/s Harshad S. Mehta group including his family members/entities were notified under the Special Act Ordinance itself. The above factual matrix was sufficient for the satisfaction of the Custodian to notify the Appellants. The object of the Act is not merely to bring the offender to book but also to recover what are ultimately public funds. Even if there is a nexus between a third party, an offender and/or property the third party can also becomplaint has been received from Canfina which is a 100% subsidiary of Canara Bank, a nationalized bank. The term financial institution has not been defined under the Act. It became necessary to enactthe Special CourtAct because of the large scale irregularities which came to light as a result of the investigations by the Reserve Bank of India into the affairs of various banks and financial institutions whose monies were siphoned out. Thus the Statement of Objects and Reasons makes it clear that the purpose and the object of the Act was to recover and return monies to those banks and financial institutions from whom the monies were siphoned out. It is thus clear that the bodies which were sought to be covered were the banks and financial institutions whose affairs were investigated into by the Reserve Bank of India. The investigation was conducted by the Reserve Bank of India through Janakiraman Committee; the Joint Parliamentary Committee, and the Inter Disciplinary Group. The affairs of Canfina were also investigated by the various committees as a financial institution. It has come to light that there were large scale siphoning out of monies from Canfina also as held bythe Special Courtin its order dated 25.06.1997 in the matter of Fairgrowth Financial Services Vs. Andhra Bank in Misc. Petition No. 222 ofThus, at the very inception of this Act are the investigations by the Reserve Bank of India and these investigations were carried on by the Janakiraman Committee. The Act was intended to be applied to the workings of the banks and financial institutions (though not covered by the strict definition of the term but involved in the securities scam of 1992) into whose affairs the Janakiraman Committee had investigated. Canfina, was one such non-banking financial institution that Janakiraman Committee had investigated and thus it was meant to be covered under theFurther, Rule 3 illustrates situations whereby the Custodian may reject a certain complaint which is not accompanied by copies of documents referred to in the information or complaint, or is vague or does not contain the name and address of the sender. This rule also does not make it mandatory on the Custodian to reject a complaint if it does not accompany the above details. If the material information or the documents received by the Custodian are sufficient in his opinion, to reveal that a person is involved in an offence referred to in sub-section (2) of section 3 of the Act, he may proceed to notify the name of the person under that sub- section. Thus the satisfaction of the Custodian is of a subjective nature and is not violative of Natural Justice. The power to deal with the property ultimately lies with5) In view of the same, we are in entire agreement with the conclusion arrived at bythe Special Courtand unable to accept any of the contentions raised by counsel for theAs discussed earlier, unless the attached properties are properly maintained and as per the scheme, the repair and upkeep of the attached properties are to be followed by the Custodian and on the orders of2) It is also brought to our notice that during the course of hearing, either beforethe Special Courtor in this Court, certain amounts have beenConsidering the fact that the appellants are agitating the matter at the hands of the Custodian,the Special Courtand before this Court, we feel that the appellants need not be burdened with interest and penal charges fornon-payment of maintenance and repair charges to thesociety. Accordingly, while sustaining the claim of the Custodian as approved bythe Special Courtin view of the reasons mentioned above, we clarify that the Custodian is not permitted to collect interest and penalty charges from the arrears of maintenance and repair charges. This position is also clear from the decision of this Court in Harshad Shantilal Mehta vs. Custodian & Ors, (1998) 5 SCC 1. The Custodian is free to adjust the amountss on the orders of this Court orith the above direction, the impugned order in both the appeals is modified to the limited extent.