Case: L.S. Synthetics Ltd Vs. Fairgrowth Financial Services Ltd.

2. The fact of the matter, however, is being noticed from Civil Appeal No.4268 of 20033. A notification was issued on 2.7.1992 by the Custodian notifying the Respondent No.1 as a notified party in terms of the provisions of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act 1992 (for short "the said Act")4. The Appellant herein obtained short term loans amounting to Rs. 14.25 lakhs from the notified party during the period 1.4.1991 to 6.6.1992 as specified in the said Act. The Custodian called upon the Appellant herein to furnish particulars of the said loans pursuant to or in furtherance whereof the Appellant herein accepted the same to be outstanding as on 30.6.1992 in the books of Respondent No.1 payable to him. On the said amount of loan, interest at the rate of 21% per annum was payable5. The Appellant herein was directed to deposit the principal amount by the Custodian which was not complied with. The concerned Chartered Accountant, however, gave a certificate to the effect that a sum of Rs.14.25 lakhs was advanced as loan to the Appellant by the Respondent No.1 with interest at 21% per annum and that the total sum outstanding was Rs.34,98,967.04/-. Respondent No.1 thereafter initiated a proceeding before the Special Court praying for a direction upon the Appellant herein to pay to the Custodian a sum of Rs.34,99,900.68/- on behalf of his behalf7. By reason of the impugned judgment, the Special Court, however, rejected the said contentions holding that once a property is found to be owned by a notified party, all claims relating thereto must be adjudicated upon by the Special Court8. Following its earlier decision of the Tribunal in A.K. Menon, Custodian vs. Modern Chemical Corporation & Ors. [2002 (1) All M.R.180], the Special Court held that the provisions of the Limitation Act would have no application to the proceedings under the said Act. It was consequently ordered:"(a) I hereby direct Respondent No.1 to pay to the Custodian on behalf of FFSL Rs.14.25 lacs with interest at 15% per annum for the date on which the loan(s) have been advanced upto payment."

Court's reasoning:
36. We may, however, add that the attachment of the properties of the notified party being for specific purposes, i.e., for the purpose of discharging his liabilities, the Special Court is bound to pass appropriate orders in relation thereto. A property once attached shall remain under attachment till an appropriate order is passed. It is, therefore, idle to contend that even in respect thereof the provisions of the Limitation Act would apply. The Court while issuing directions to the Custodian in relation to the attached property for the purpose of discharge of the liability of the notified person must pass an appropriate order. So long the claims or other proceedings initiated before the Special Court as regard discharge of liability of the notified person continue, the attachment remains in force. A proceeding before the Special Court is not a suit for recovery of an amount. The proceedings before the Special Court are extraordinary in nature. Distribution of the assets of a notified person may take a long time but it would bear repetition to state because all the claims filed before the Special Court are disposed of, the property of the notified person stands attached. In other words, the provisions of the Limitation Act would inter alia apply only when a suit is filed or a proceeding is initiated for recovery of an amount and not where a property is required to be applied towards the claims pending before the tribunal for the purpose of discharge of the liabilities of the notified person in terms of Section 11 of the said Act37. A Special Court having regard to its nature and functions may be a court within the meaning of Section 3 of the Indian Evidence Act, 1872 or Section 3 of the Limitation Act, 1963 but having regard to its scope and object and in particular the fact that it is a complete code in itself; in our opinion, the period of limitation provided in the schedule appended to the Limitation Act, 1963, will have no application. For the applicability of Section 29(2) of the Limitation Act, the following requirements must be satisfied by the Court invoking the said provision:(1) There must be a provision for period of limitation under any special or local law in connection with any suit, appeal or application(2) Such prescription of the period of limitation under such special or local law should be different from the period of limitation prescribed by the Schedule to the Limitation Act, 196338. In terms of the provisions of the said Act, no period of limitation is prescribed, evidently because the Parliament thought it to be wholly unnecessary. On the statutory operation relating to the attachment of the property belonging to a notified person comes into being, the duties and functions of the Special Court start. In relation to the duties and functions required to be performed by a court of law, no period of limitation need be prescribed. Furthermore, Section 13 of the said Act provides for a non-obstante clause which has been used as a devise to modify the ambit of provisions of law mentioned therein or to override the same in the specified circumstances. [See T.R. Thandur vs. Union of India and Others - (1996) 3 SCC 690 - Para 8]. The said Act does not provide for any period of limitation, the reasons wherefor have been noticed hereinbefore and in that view of the matter, in our considered opinion, Articles 19, 28 and 55 providing for period of limitation prescribed would have no application. Section 13 of the said Act provides for a non obstante clause which is of wide amplitude. In a case of conflict between the said Act and any other Act, the provisions of the former shall prevail40. A statute of limitation bars a remedy and not a right. Although a remedy is bared, a defence can be raised. In construing a special statute providing for limitation, consideration of plea of hardship is irrelevant. A special statute providing for special or no period of limitation must receive a liberal and broader construction and not a rigid or a narrow one. The intent and purport of the Parliament enacting the said Act furthermore must be given its full effect. We are, therefore, of the opinion that the provisions of the Limitation Act have no application, so far as directions required to be issued by the Special Court relating to the disposal of attached property; are concerned41. Only in the event, all the claims as provided for under Section 11 of the said Act are fully satisfied, the amount belonging to the notified person can be directed to be released in his favour or in favour of any other person42. It does not appear from the judgment of the Special Court that any argument was advanced before it that there did not exist any agreement as regard payment of interest. No such contention has even been raised in the Memorandum of Appeal or in the Affidavit filed before the Special Court. In fact, it is admitted that the Custodian and the Appellant exchanged certain correspondences in this behalf in the year 199243. We do not find any merit in the contention of Mr. Sanghi that the Special Court had no jurisdiction to issue any direction for payment of interest. The said direction, in our opinion, could have been issued having regard to the fact that the attached amount was being utilized by the Appellants; assuming that there no agreement in relation thereto. As the attached property remained in the hands of the Appellant and they had applied the same for their own benefit, the Special Court was entitled to grant interest by way of restitution.