Case: Varghese K. Joseph Vs. The Custodian &amp; Others

date might have been reasonable in the given situation where large number of investors were filing applications for certification of the tainted shares time and again and hence cut off date might have been justified, it was also expected to take care and guard the interest of the investors who are based and live not merely within the geographical boundaries of the Special Court which had fixed the cut off date but also live far and wide even across the boundaries of the country which is the fact in the instant matter also. Hence, in our considered view, it was obligatory on the part of the Special Court and the Custodian to notice an important fact that when the shares purchased by the appellant were reported to be tainted which was issued through Respondent No.5-M/s. Fair Growth Company by the share broker companies i.e. Respondent No. 4 and 5 and the same was ordered to be attached by the Custodian in view of the Government of India Regulation it was clearly nefarious and dubious activity on the part of the Respondent No.5-M/s. Fair Growth Financial Service Ltd. due to which the unnecessary hassle of certification 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 even if it were so, the Court should have certainly considered the circumstance whether a bonafide purchaser of shares could be denied his due merely on the ground of violation of a cut off date which clearly did not have its existence in the statute and hence had no statutory force. The order sought from the Special Court to fix a cut off date for receiving application for certification was, therefore, based merely on the theory of convenience of the custodian clearly ignoring its ramification on the bonafide investor. It is common knowledge that when public at large invest in securities by purchasing shares of a notified company, it purchases through various modes including the modern tools and technique of internet and many other modern modes and methods. But thereafter, if the shares are held to be tainted which is clearly beyond the control of the appellant/investor and its certification is required, it is surely the custodian in co-ordination with the company floating shares as also the share broker company or the stock exchange, which has the onus and responsibility to take care of the interest of the investors under the supervision of the Special Court in view of the provision of the Special Courts Act of 1992. The `Custodian therefore cannot shirk away from his function and the duty cast upon him by limiting his responsibilities and seeking a cut off date during which only he could perform the duty of certification, oblivious of its consequence and other ramification on the investors which include small investors also who put in their hard earned money in the shares of the company and later comes to know that the shares were tainted on which the investor has absolutely no role or control. 24. Even if we were to appreciate certain limitations on the discharge of duties of certification by the Custodian, the Special Court clearly had the duty to ensure that in absence of a statutory time limit prescribed for certification of shares under the Act of 1956, read with the Special Courts Act of 1992, the Special Court was duty bound to guard the interest of the investors through the Custodian at least in case of those investors who had bonafide purchased the shares of a notified company which for reasons beyond the control of investors, was held to be tainted. 25. Hence, in our considered opinion, the appellant under the facts and existing 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,

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

Explanation:
1[ds], the appellant under the facts and existing 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 thefor reasons beyond his control which cut off date has no statutory effect or legal force. Thesaddled 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