Case: Bank Of India Vs. Ketan Parekh

3. Brief facts which are necessary for disposal of this appeal are that the respondent No.1 was declared as a notified party on 6.10.2001. Pursuant to the said notification, considering section 3(3) of the Act of 1992, all properties, movable and immovable stood attached simultaneously. The Custodian confirmed the attachment on 1.11.2001. The respondent No.2 - Oriental Bank of Commerce (hereinafter to be referred to as the Bank) filed an application being Original Application No.233 of 2002 against the respondent No.1. The respondent No.1 took out Miscellaneous Application for impleading the Custodian as a party. That application came to be rejected by order dated 16.3.2005. Aggrieved against the said order the respondent No.1 preferred an appeal before the Debts Recovery Appellate Tribunal (hereinafter to be referred to as the Appellate Tribunal). That appeal came to be rejected by order dated 19.8.2005. Against the order passed by the Appellate Tribunal, a writ petition was filed before the High Court. It was contended by the respondent No.1 before the Debts Recovery Tribunal that the custodian under the Act of 1992 had to be joined as necessary party as the respondent No.1 had been declared as a notified party under the said Act. This was opposed by the Bank on the ground that the defendant No.2 has been sued merely as a guarantor and therefore, the provisions of the Act of 1992 were not attracted. It was submitted that Section 9A of the Act of 1992 would be attracted. This was opposed by the Bank on the ground that the provisions of Section 9A of the Act of 1992 were not attracted as the respondent No.1 was being sued in his personal capacity as guarantor and not as a mortgagor or pledger of the movable or immovable properties. The D.R.T. accepted the objection and rejected the petition of respondent No.1. Aggrieved against this order the matter was taken up before the Appellate Tribunal on the basis that the property of the respondent No.1 stood attached by the Custodian under the Act of 1992. Therefore, the Debts Recovery Tribunal had no jurisdiction to deal with the matter. The Appellate Tribunal held that the provisions of the Act of 1992 are not attracted and consequently, dismissed the appeal. Aggrieved against this order the present writ petition was filed before the Bombay High Court by respondent No.1. The Division Bench of the Bombay High Court held that since the respondent No.1 was declared as a notified party all the properties stood attached pursuant to section 3 of the Act of 1992 and considering Section 9A of the said Act, it is the Special Court which will have jurisdiction so far as the notified party is concerned and as such the Division Bench of the High Court reversed the order passed by the Appellate Tribunal and held that the Special Court will have jurisdiction and not the Appellate Tribunal. Hence, the present appeal against the order passed by the Division Bench of the High Court of Bombay dated 17.1.2006.

Court's reasoning:
5. The admitted facts are that the respondent No.1-Ketan Parekh was a notified party on 6.10.2001. Therefore, on 6.10.2001 all his movable and immovable properties stood attached. Under the Act of 1992, under Section 3(3), the Custodian may, on being satisfied on information received that any person has been involved in any offence relating to transactions in securities after the lst day of April, 1991 and on and before 7th June, 1992, notify the name of such person in the official gazette and from the date when such party is notified all properties, movable or immovable or both belonging to any person notified shall stand attached simultaneously with the issue of the notification, notwithstanding anything contained in the Code and any other law for the time being in force. After attaching that property the Custodian will have the right to deal with such property in such manner as directed the Special Court. Therefore, an analysis of this section means that the moment a person is notified, his property stands attached and the Custodian is in authority of that property and he shall deal with the property in the manner as directed by the Special Court notwithstanding anything contained in the Code (Code means the Civil Procedure Code). Therefore, the property of the respondent herein stood attached under the orders of the Special Court on 6.10.2001 when the respondent was declared a notified person under sub-section (3) of Section 3 of the Act of 1992. Section 9-A which was introduced in 1994 gives full power from the date this amended provision came into force i.e. in 1994 that the Special Court alone will have the jurisdiction to deal with all the cases pending immediately before such commencement by any Civil Court in relation to any manner or claim relating to the property standing attached under sub-section (3) of Section 3. Sub-section (2) of Section 9-A says that every suit, claim or other legal proceeding (other than an appeal) pending before any Court immediately before the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, being a suit, claim or proceeding, the cause of action whereon it is based is such that it would have been, if it had arisen after such commencement, within the jurisdiction of the Special Court under sub-section (1), shall stand transferred on such commencement of the Special Court and the Special Court may, on receipt of the records of such suit, claim or other legal proceedings proceed to deal with it so far as may be in the same manner as a suit, claim or legal proceeding from the stage which was reached before such transfer or from any earlier stage or de novo as the Special Court may deem fit. Sub-section (3) further says that no Court other than the Special Court shall have, or be entitled to exercise any jurisdiction, power or authority in relation to any matter or claim referred to in sub-section (1). Sub-section (4) further says that the Special Court shall not be bound by the procedure laid down by the Code of Civil Procedure. But it shall be guided by the principles of natural justice and subject to the other provisions of this Act and the Rules framed thereunder. Sub-section (5) further says that the Special Court shall have all powers as a Civil Court under the Code of Civil Procedure for trying such suits. Section 11 deals with the discharge of liabilities. It also starts with a non-obstante clause and says that notwithstanding anything contained in the Code or any other law for the time being in force, the Special Court shall direct the Custodian for disposal of the property under attachment and liabilities shall be discharged in the order i.e. (a) all revenues, taxes, cesses and rates due from the persons notified by the Custodian under sub-section (2) of Sec. 3 to the Central Government or any State Government or any local authority. (b) all amounts due from the person so notified by the Custodian to any bank or financial institution or mutual fund; and any other liability as may be specified by the Special Court. Therefore, by virtue of section 11, the first priority has been given to all dues of the revenues, taxes, cesses etc. The second priority has been given to any bank or financial institution or mutual fund and the last priority has been given as directed the Special Court. Section 13 clearly lays down that this Act will have over-riding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any Court, tribunal or other authority. The analysis of these necessary provisions clearly establishes that once the property of a notified person is attached by the Custodian and the same having been notified then the property of the notified person being movable or immovable shall be subject to the order passed by the Special Court and the manner in which properties for discharge of the liabilities would be dealt with has already been mentioned in Section 11 of the Act of 1992 and lastly that the provisions of this Act will have the over-riding effect even on Tribunals as is clearly and categorically mentioned in Section 13 of the Act of 1992. Therefore, in the scheme of things this Act has been given priority over all Acts. The Act of 1993 came for recovery of debts due to the Banks and Financial Institutions. This Act also contains the over-riding effect. Section 34 of the Act of 1993 clearly says that this Act will have the over-riding effect for recovery of debts due to the Banks and Financial Institutions. Both the Acts have non-obstante clause. The Act of 1993 is a subsequent legislation and the Act of 1992 is a prior legislation. Therefore, it was contended by learned senior counsel for the appellant that since the Act of 1993 is a subsequent legislation, it should have the over-riding effect over the Act of 1992. As against this, learned senior counsel for the respondent No.1, contended that Section 9-A of the Act of 1992 came by the amending Act 24 of 1994 on 25.1.1994 and it is specifically provided that after a person is notified under section 3(3) of the Act of 1992, his property pertaining to the transactions in securities entered after the 1st day of April, 1991 and on and before 6th June, 1992 shall stand attached and the Special Court will have the jurisdiction and none else. Learned senior counsel for the respondent No.1 submitted that this provisions having come subsequently after the Act of 1993, Section 9-A of the Act of 1992 (came into force w.e.f. 25.1.1994) will have the over-riding effect over the Act of 1993. The contention of learned senior counsel for respondent No.1 appears to be justified. Apart from that it is provided in sub-section (3) of Section 3 that the transactions in securities entered into after 1st day of April, 1991 and on or before 6th June, 1992, the properties pertaining to these securities shall vest with the Custodian to be dealt with as directed by the Special Court. Therefore, the properties pertaining to these transactions during the aforesaid period, will be subject to the jurisdiction of the Special Court only. There is another reason to come to this conclusion that in fact this Act was specially meant to deal with the fraudulent transactions which has taken place from 1st of April, 1991 to 6th of June, 1992. Therefore, this Act has special purpose to deal with the scam which has taken place in securities transactions during this period. The special purpose behind this Act is more than apparent from the Statement of Objects and Reasons and the Statement of Objects and Reasons amply clarifies this position.Therefore, this Act has a special task before it and that task has to be dealt with in the parameters laid down by this Act. The Act of 1993 was of comparatively general in nature pertaining to recovery of debts due to the Banks and Financial Institutions. The idea was that all the suits pertaining to recoveries of Banks and Financial Institutions spreading over the Civil Courts and this has resulted into great strain on the Banks and Financial Institutions.In the present case, both the two Acts i.e. the Act of 1992 and the Act of 1993 start with the non- obstante clause. Section 34 of the Act of 1993 starts with non-obstante clause, likewise Section 9-A of the Act of 1992. But incidentally, in this case Section 9-A came subsequently, i.e. it came on 25.1.1994. Therefore, it is a subsequent legislation which will have the over-riding effect over the Act of 1993. But cases might arise where both the enactments have the non-obstante clause then in that case, the proper perspective would be that one has to see the subject and the dominant purpose for which the special enactment was made and in case the dominant purpose is covered by that contingencies, then notwithstanding that the Act might have come at a later point of time still the intention can be ascertained by looking to the objects and reasons. However, so far as the present case is concerned, it is more than clear that Section 9-A of the Act of 1992 was amended on 25.1.1994 whereas the Act of 1993 came in 1993. Therefore, the Act of 1992 as amended to include Section 9-A in 1994 being subsequent legislation will prevail and not the provisions of the Act of 1993.9. Apart from this, in the present case both the Acts can be read harmoniously. Whatever dues are due to the Banks or the Financial Institutions can be claimed under Section 11 (2) of the Act of 1992 which specially empowers that the liabilities can be adjusted out of the securities of the person notified in the manner provided under Section 11(2)(b). Therefore, in the present case, the Bank can certainly make an application before the Special Court under Section 11(2)(b) of the Act of 1992 for discharge of their liabilities against the securities of the notified person.