SMT. RASILA S. MEHTA v. CUSTODIAN, NARIMAN BHAVAN, MUMBAI

P. SATHASIVAM, J.1. Civil Appeal No. 2924 of 2008 has been filed by Smt. Rasila S. Mehta, mother of late Harshad S. Mehta and Civil Appeal No. 2915 of 2008 has been filed by Smt. Rina S. Mehta, sister-in-law of late Harshad S. Mehta D against the final judgment and order dated 26.02.2008 passed by the Special Court under the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as "the Act") at Bombay in Misc. Petition Nos. 2 and 1 of 2007 respectively whereby the Special E Court dismissed their petitions challenging the notification dated 04.01.2007 issued by the Custodian exercising powers under Section 3(2) of the Act notifying the appellants.

2Copy pinpoint2. Civil Appeal No. 3377 of 2009 has been filed by Smt. F Jyothi H. Mehta, widow of late Shri Harshad S. Mehta and six others against the judgment and order dated 13.³.2009 passed by the Special Court in approving Report No. 19 of 2008 filed by the Custodian in respect of outstanding dues towards Flat Nos. 32A, 328, 33, 34A, and 348 on the Third G Floor and 44A, 448 and 45 on the Fourth Floor together with terrace area on the Third Floor and eight car parking space in Madhuli Cooperative Housing Society Limited, Worli belonging to late Harshad S. Mehta as well as other related notified entities of the Harshad Mehta Group.

3Copy pinpoint3. Civil Appeal No. 4764 of 2010 has been filed by Smt.

RASILA S. MEHTA v. CUSTODIAN, NARIMAN . 249 BHAVAN, MUMBAI [P. SATHASIVAM, J.] Rasila S. Mehta challenging the order dated 07 .⁵.201 O A passed by the Special Court in approving Report No. 23 of 2009 of the Custodian on outstanding dues of Madhuli Cooperative Housing Society Limited, Worli as on 31. 03. 2009 · towards Flat No. 31 on the Third Floor belonging to her being a notified party. · B

4Copy pinpoint4. Since all the parties in the above appeals are famiiy members of late Harshad S. Mehta and the orders challenged were of the Special Court, the same are being disposed of by the following common judgment. c

5Copy pinpoint5. Brief Facts:

(a) Sometime in 1992, it was noticed that frauds and irregularities involving colossal amounts of money were committed by certain stock brokers and other persons as a:so o by certain banks and financial institutions. The amounts involved in the said frauds and/or irregularities were estimated to run into several thousand crores. The Central Government, therefore, formed an opinion that it was necessary to take immediate steps to try offences relating to such transactions . E in securities and for matters connected therewith or incidental thereto. The President of India thereupon promulgated an Ordinance on 6th June 1992 known as the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance 1992 and the said Ordinance came into force on the same day. The said Ordinance with certain modifications became the Act F when the assent of the President was given thereto on 18th August 1992 and the said Act was deemed to have come into force on 6th June 1992, namely, the date on which the said Ordinance had been promulgated. G (b) On 6th June, 1992 the Central Government had also framed certain rules under the provisions of Section 14 of the said Ordinance known as the Special-Court (Trial of Offences Relating to Transactions in Securities) Rules, 1992 (hereinafter referred to as 'the Rules'). The said rules came into force on · H

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A the 6th June 1992 and continue in force after the enactment of the Act under section 15(2) of the Act and/or Section 24 of the General Clauses Act, 1897. (c) The object of the Act, as apparent from the provisions thereof, is to ensure that offences relating to securities were 8 expeditiously tried and it, therefore, provides for the establishment of a Special Court. The Act also provides that an appeal lies from the judgment, sentence or order, not being interlocutory order, of the said Special Court to the Supreme C Court of India both on facts and on law. An important object of the said Act is to ensure speedy recovery of the huge amounts involved, to punish the guilty in such irregularities or fraud, to restore confidence in and maintain the basic integrity and credibility of the banks and financial institutions. D (d) On 13.⁵.1992, the Central Bureau of Investigation (in short "the CBI") issued freeze orders under Section 102 of the Code of Criminal Procedure (in short 'the Code) on all the bank accounts of Smt. Rasila S. Mehta and Smt. Rina S. Mehta on the ground that the appellants are recipients of monies diverted E by M/s Harshad S. Mehta from banks and financial institutions. This was a preventive measure taken by the CBI which powers are normally invoked pending investigation to bring. within their fold, any property which is the subject-matter of an offence. Since then, all the charge-sheets came to tie filed by the CBI F after thorough investigation and trial has been completed in several cases. Based on the provisions of the Act, on 08.06.1992, the Custodian notified 29 entities except the appellants (Smt. Rasila S. Mehta and Smt. Rina S. Mehta) in the Mehta family comprising four brothers, the wives of three G brothers, their three HUFs, a partnership firm, three brokerage firms in the family and 15 corporate entities promoted by them. These persons were notified on the basis of information/ complaint received from the Ministry of Finance in which the Janakiraman Committee report was cited and relied upon. H (e) On 25.01.1994, an amendment was carried out in the

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 251 BHAVAN, MUMBAI [P. SATHASIVAM, J.] Act, wherein, Section 9-A was inserted to confer civil jurisdiction A to the Special Court. Smt. Rasila S. Mehta and Smt. Rina S. Mehta were active investors and had built up a portfolio of investments which has appreciated in value over the years, more particularly, during the last three years. They own one each of the nine flats at Madhuli Cooperative Housing Society B Limited which are merged/amalgamated with other flats under the occupation of the joint family. The bank accounts and shareholdings of these appellants are held jointly where the appellants are the first holders and their family members are joint/second holders. Due to the fact that joint/second holders c are notified entities, the assets of the appellants have been treated as attached on and from 08.06.1992 and the same are being managed by the Custodian for the last 15 years. On 21.07 .2006, the Custodian preferred a common Misc. petition No. 20 of 2006 against Smt. Rasila S. Mehta and Smt. Rina 0 S. Mehta seeking relief of a declaration that the said appellants are benamis and fronts of late Harshad S. Mehta and other notified entities and, therefore, their assets should be utilized .in discharge of their liabilities. The appellants also filed M.A. No. 291/2006 on 11.09.2007 seeking relief of a declaration that all the assets belonged to them and they were the first holders, namely, bank accounts and fixed deposits and the shareholdings may be declared as free from attachment. (f) On 04.01.2007, the Custodian issued a notification notifying both the appellants under Section 3(2) of the Act for which a public notice was published in the newspapers on 06.01.2007. (g) On 19.01.2007, Smt. Rina S. Mehta filed Misc. Petition No. 1 of 2007 and on 18.06.2007, Smt. Rasila S. Mehta filed G Misc. Petition No. 2 of 2007 for the relief of de-notification under Section 4(2) of the Act. It transpired that the appellants were notified on the basis of the alleged complaint by Canbank Financial Services Ltd. (in short "Canfina"). On considering the materials, the Special Court, by impugned order dated H

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A 26.02.2008, dismissed the petitions filed by the appellants · Smt. Rasila S. Mehta and Smt. Rina S. Mehta.

(h) Inasmuch as the other two appeals relate to the order:- passed on the report submitted by the Custodian, there is n<- B need to traverse all the details as stated therein.

6Copy pinpoint6. Heard Mr. LH. Syed, learned counsel for the appellants Mr. Subramonium Prasad, learned counsel for the Custodian Mr. K.K. Venugopal, learned senior counsel for intervenor,.... Standard Chartered Bank and Mr. Tushad Cooper, learnet C counsel for intervenor/State Bank of India.

7Copy pinpoint7. Mr. Syed, learned counsel for the appellants after taking• us through the relevant provisions of the Act, Rules and the materials available with the Custodian as well as the reasonings 0 of the Special Court raised the following contentions:

(i) The impugned notification is non-reasoned and non- speaking. The validity of a statutory order must be judged by a court of law by the reasons mentioned in the order itself and a statutory order cannot be explained and supplemented by fresh reasons in the shape of affidavit or otherwise whereas in the present case the Special Court accepted the same which is contrary to settled law. (ii) Delay of 15 years in passing the order of notification is unreasonable. The explanation offered for delay is also unacceptable.

(iii) Material relied upon in passing the order of notification i.e. Canfina's letter dated 28.12.2006 is not supported by an affidavit which could not have been relied upon as it is contrary to proviso to Rule 2 of the Rules. (iv) Reliance on the reports of Joint Parliamentary Committee, Jankiraman Committee, IDG and Chartered Accountants' by the Custodian is unacceptable. H

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BHAVAN, MUMBAI [P. SATHASIVAM, J.] (v) Pre-decisional hearing by the Custodian was required A ., be given and in the case on hand such opportunity was not •fforded. (vi) No effective post-decisional hearing as the materials -elied upon was not supplied in time. 8 (vii) The Special Court erroneously held the transaction ~o ->e benami in general on the basis of Chartered Accountants' -eports without examining individual transactions.

(viii) The onus to establish the validity, correctness, legality, c ->ropriety of the notification order is on the Custodian but -Yrongly shifted on the appellants.

(ix) Satisfaction of Custodian while passing an order of 1otification should be objective and based on materials as 0 >rovided in the Rules. (x) The Special Court erroneously held that the meaning ::>f the phrase "involved an offence" has attained finality by this 8ourt, though the said question was left open. In any event, the -case of the Custodian was that a sum of Rs. 50 crores was E ::liverted by M/s Harshad S. Mehta to the appellants during the 1period 01.04.1990 to 06.06.1992. In such event, monies ltransferred/diverted from the banks/financial institutions can only lbe recovered from the appellants and nothing more. F (xi) The jurisdiction of the Special Court is limited to the -statutory period only, i.e. 01.04.1991 to 06.06.1992.

(xii) No interest can be levied on the notified parties as per the judgment of this Court in Harshad Shanti/al Mehta vs. Custodian and Ors. (1998) 5 SCC 1. G

8Copy pinpoint8. On the other hand, Mr. Subramonium Prasad, learned counsel for the Custodian heavily relying on the circumstances for passing the Act, the statement of Objects and Reasons and the releva!lt provisions submitted that: H

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A (i) The impugned order of the Special Court is valid and the appellants have not made out any case for interference by this Court. (ii) As per Section 4(2) of the Act, it is for the appellants B to show to the Special Court that they are not involved in any offence in securities between 01.04.1991 to 06.06.1992. · (iii) A perusal of various reports like the Auditor's report, Janakiraman Committee's report, report of Inter Disciplinary Group (IDG), report of Vinod K. Aggarwal and Company C coupled with materials placed and discussed, the impugned decision of the Special Court cannot be faulted with. (iv) From the materials placed, it is clear that the appellants are nothing but front benamidars of Harshad S. Mehta and there 0 is no acceptable material to show that the appellants were having sufficient funds in their hands due to the purchase and sale of shares by placing acceptable materials such as income-tax returns etc. Inasmuch as the Special Court is manned by or presided over by a sitting Judge of High Court, E sufficient safeguards are provided in the Act and, in any event, the appellants have no way prejudiced. (v) As per the provisions of the Act and interpreted by this Court on various occasions, it is for the appellants to make out a case before the Special Court that they are not involved in F any offence or that they have no nexus.

9Copy pinpoint9. Mr. K.K. Venugopal, learned senior counsel for intervenor/Standard Chartered Bank and Mr. Tushad Cooper, learned counsel for intervenor/State Bank of India assisted the G Court by highlighting the object and salient features of the Act as well as huge financial implications on the banks due to the act of Harshad S. Mehta in the sale and purchase of shares. They also highlighted that crores of public monies were lost due to the conduct of Harshad S. Mehta and his family members which resulted in huge financial loss to the banks.

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 255 BHAVAN, MUMBAI [P. SATHASIVAM, J.]

10Copy pinpoint10. Before going into the rival submissions, it is necessary to trace the history of enactment of the Act. The Special Courts Act, 1992 (27of1992) was legislated to meet the necessity of establishing Special Courts for trial of offences committed in relation to Transactions in Securities Act, 1992. Reserve Bank of India found that large scale irregularities and malpractices were found in Government and other securities through brokers in collusion with Bank employees. This legislation was enacted to meet this situation. It is a short Act containing only 15 sections. It deals with establishment of Courts, defines jurisdiction and powers of Special Court. It also defines civil c jurisdiction of such Special Courts. Provision of arbitration was reserved and appeal could also be preferred under the Act. Much protection was given for acts done in good faith and punishment for contempt was also provided so that the provisions of the Act would be more strictly implemented. D

11Copy pinpoint11. Objects & Reasons: The Statement of Objects and Reasons is as follows:- "(1) In the course of the investigations by the Reserve E Bank of India, large scale irregularities and malpractices were noticed in transactions in both the Government and other securities, indulged in by some brokers in collusion with the employees of various banks and financial institutions. The said irregularities and malpractices led to tl1e diversion of funds from banks and financial institutions 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 integritv and credibility of the banks and financial institutions the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992, was promulgated on H

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A the 6th June, 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 B 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."

12Copy pinpoint12. It is settled law that the objects and reasons of the Act C 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 F Court is to merely interpret the section and in doing so it cannot re-write or re-design the section. Keeping all these principles in mind, let us consider the relevant provisions.

13Copy pinpoint13. Relevant Provisions: G As per Section 2(b), 'Custodian' means "the Custodian appointed under sub-section (1) of Section 3." Section 2(c) 'securities' includes.- "(i) shares, scrips, stocks, bonds, debentures, debenture stock, units of the Unit Trust of India or

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 257 BHAVAN, MUMBAI [P.. SATHASIVAM, J.] any other mutual fund or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ii) Government securities; and

(iii) Rights or interests in securities;" B

11md as per Section 2(d) 'Special Court' means "the Special :ourt established under sub-section (1) of Section 5." Among 11111 the provisions Sections 3 and 4 are relevant which read as ~ollows: c "3. Appointment and functions of Custodian.--(1) The Central Government may appoint one or more Custodian as it may deem fit for the purposes of this Act.

(2) The Custodian may, on being satisfied on information D received that any person has been involved in any offence relating to transactions in securities after the 1st day of April, 1991 and on and before 6th June, 1992, notify the name of such person in the Official Gazette. E (3) Notwithstanding anything contained in the Code and any other law for the time being in force, on and from the date of notification under sub-section (2), any property, movable or immovable, or both, belonging to any person notified under that sub-section shall stand attached simultaneously F with the issue of the notification.

(4) The property attached under sub-section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. G (5) The Custodian may take assistance of any person while exercising his powers or for discharging his duties under this section and section 4.

4. Contracts entered into fraudulently may be H

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A cancelled.-(1) If the Custodian is satisfied, after such inquiry as he may think fit, that any contract or agreement entered into at any time after the 1st day of April, 1991 and on and before the 6th June, 1992 in relation to any property of the person notified under sub-section (2) of B section 3 has been entered into fraudulently or to defeat the provisions of this Act, he may cancel such contract or agreement and on such cancellation such property shall stand attached under this Act: Provided that no contract or agreement shall be cancelled c except after giving to the parties to the contract or agreement a reasonable opportunity of being heard. (2) Any person aggrieved by a notification issued under sub-section (2) of section 3 or any cancellation made under D sub-section (1) of section 4 or any other order made by the Custodian in exercise of the powers conferred on him under section 3 or 4 may file a petition objecting to the same within thirty days of the assent to the Special Court (Trial of Offences Relating to Transactions in Securities) E Bill, 1992 by the President before the Special Court where such notification, cancellation or order has been issued before the date of assent to the Special Court (Trial of Offences Relating to Transactions in Securities) Bill, 1992 by the President and where such notification, cancellation F or order has been issued on or after that date, within thirty days of the issuance of such notification, cancellation or order, as the case may be; and the Special Court after hearing the parties, may make such order as it deems fit." Section 9 speaks about procedure and powers of Special G Court and by way of an amendment with effect from 25th January, 1994, Section 9-A was inserted to confer jurisdiction, powers, authority and procedure of Special Court in respect of civil matters. As per Section 10, against any judgment, sentence or order, not being interlocutory in nature of the H Special Court, an appeal shall lie to the Supreme Court both

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 259 BHAVAN, MUMBAI [P. SATHASIVAM, J.) on facts and on law. Like Sections 3 and 4, another important A section is Section 11 which reads as under: "11. Discharge of liabilities.- (1) Notwithstanding anything contained in the Code and any other law for the time being in force, the Special Court may make such order as it may 8 deem fit directing the Custodian for the disposal of the property under attachment.

(2) The following liabilities shall be paid or discharged in full, as far as may be, in the order as under :- c (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 D Custodian to any bank or financial institution or mutual fund ; and (c) any other liability as may be specified by the Special Court from time to time." E Section 13 makes it clear that the provisions of the Act shall have 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, F or in any decree or order of any Court, Tribunal or other authority. Section 14 empowers the Central Government to make rules for carrying out the provisions of the Act.

14Copy pinpoint14. Based on the above statutory provisions, let us consider the claim of the appellants, stand taken by the G Custodian and the reasonings of the Special Court in passing the impugned orders.

15Copy pinpoint15. Discussion: H

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A The objects of the Act are two fold:

(a) to punish the guilty, and

(b) to ensure speedy recovery of the huge amount involved. B "Amount involved" means the amount of the banks and financial institutions alleged to have been diverted to the accounts of the offenders during the statutory period from 01.04.1991 to 06.06.1992. c 16. The attached properties can be dealt with by the Special Court under sub-Sections (3) and (4) of Section 3, sub- section (2) of Section 4, Sections 9-A and 11 of the Act. Section 3(3) of the Act provides for an automatic attachment of all properties as a consequence of Notification. The object provides the attachment of all properties of the offender with a view to prevent diversion of such properties. The said provision is a preventive provision.

17Copy pinpoint17. Section 11 provides for disposal and sale of attached properties extinguishing the rights and title of a notified party, which is a punitive provision. Section 3 of the Act provides for appointment and functions of the Custodian. Sub-section (2) of Section 3 postulates that 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 1st day of April, 1991 and on and before 06.06.1992 (the statutory period), notify the name of such person in the Official Gazette. Sub-section (3) of Section 3 contains a non obstante clause providing that on and from the date of notification under sub- G section (2), any property, movable or immovable, or both, belonging to any person notified under that sub-section s' stand attached simultaneously with the issue of the notific< and sub-section (4) of Section 3 makes it clear that SL.~.1 attached property shall be dealt with by the Custodian in such manner as the Special Court may direct.

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 261 BHAVAN, MUMBAI [P. SATHASIVAM, J.]

18Copy pinpoint18. In the Ordinance which preceded the Act, there was no provision for giving post facto hearing to a notified person for cancellation of notification, but such a provision has been made in the Act, as would appear from Section 4(2) thereof. Sub-section (2) of Section 4, however, provides for a hearing as regards correctness or otherwise of the notification notifying B a person in this behalf, in the event an appropriate application therefor is filed within 30 days of the issuance of such notification. Section 5 provides for establishment of the Special Court. Section 7 confers exclusive jurisdiction of Special Court. A perusal of the Act makes it clear that any prosecution in c respect of any offence referred to in sub-section (2) of Section 3 pending in any court is required to be transferred to the Special Court. Section 9 provides for the procedure and powers of the Special Court. Section 9-A, which was inserted by Act 24 of 1994 with effect from 25.01.1994, confers all such 0 jurisdiction, powers and authority as were exercisable, immediately before such commencement by any civil court in relation to the matter specified therein. The Act provides for stringent measures. It was enacted for dealing with an extraordinary situation in the sense that any person who was involved in any offence relating to transaction of any security E could be notified, whereupon all his properties stood attached. The provision contained in the Act being stringent in nature, the purport and intent thereof must be ascertained having regard to the purpose and object it seeks to achieve. F Provisions with regard to Attachment

19Copy pinpoint19. The vires of Sections 3(2), 3(3) and 3(4) of the Ordinance was challenged before the High Court of Bombay in Writ Petition No. 1547 of 1992 Hitesh S. Mehta vs. Union of India & Anr., 1992 (3) Bomb. C.R. 716. It was argued before · G the Bombay High Court that there is no provision for hearing at the stage of notification i.e. Section 3(2) and also at the stage of attachment of all properties i.e., Section 3(3). Therefore, the provisions are contrary to the principles of natural justice and H

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A be struck down. The Division Bench of the High Court in paragraph 8 of the said judgment observed as follows:

"Had the provision been confined to Section 3, sub- sections (2) and (3), the argument which is advanced before us would have had considerable force. It is B undoubtedly true that neither in sub-Section (2) nor in (3) is there any provision for any hearing being given to the person who may be notified; nor is there any provision for any reasoned order being passed by the Custodian at the time when he notifies such a person. There is, however, a c further sub-Section, namely, sub-Section (4) of Section 3 which provides as follows:

Section 3 (4) : The property attached under sub-Section (3) shall be dealt with by the Custodian in such manner as D the Special Court may direct.

This sub-section clearly contemplates that the power of the Custodian to deal with the property of a person who has been notified is subject to the orders and directions of the Special Court. Now, in the first place, the Special Court E under the Ordinance is a Court presided over by a sitting Judge of a High Court. This itself is a check on any arbitrary exercise of powers by the Custodian. Secondly, the power of the Special Court to give directions to the Custodian in respect of any attached property must necessarily bring within its ambit, the power to order the release of such property or any part of its from attachment. If the person who is aggrieved by his name being notified under sub-section (2) approaches the Special Court and makes out, for example, a case that the property which is attached or a portion of its has no nexus of any sort with the illegal dealings in securities belonging to banks and financial institutions during the relevant period and/or that there are no claims or liabilities which have to be satisfied by attachment and sale of such property, in our view, the H Special Court would have the power to direct the custodian

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 263 BHAVAN, MUMBAI [P. SATHASIVAM, J.] to release such property from attachment. In the same way, A if ultimately, the Special Court, after looking at all the relevant circumstances, comes to the conclusion that the entire property should be released from attachment, we do not see any reason why such a direction also cannot be given by the Special Court under Section 3, sub-section B (4). In such a situation, if the entire property is required to be released from attachment, the Special Court, in our view, can also direct the Custodian that the name of the notified person should be de-notified. This would be a necessary consequence of the power of the Special Court C to give proper directions in connection with the property which the Custodian seeks to attach. If sub-section (4) is read in this light, the grievance of the petitioner relating to the validity of powers granted to the Custodian under Section 3 would not survive. D The above-said paragraph of Hitesh S. Mehta's judgment was relied upon by this Court in Harshad S. Mehta vs. Custodian (supra).

20Copy pinpoint20. This Court in LS. Synthetics Ltd. vs. Fairgrowth E Financial Services Ltd. & Anr. (2004) 11 SCC 456 considered the judgment of Harshad S. Mehta (supra) and in paragraphs 27 to 29 observed as under:

"27. This Court in para 14 was merely recording the submissions of one of the notified parties. Even a question F as to whether all properties of notified persons would be subject to the statutory attachment under sub-section (3) of Section 3 of the said Act or not did not arise for consideration therein. G

28. Therein indisputably this Court was referring to a judgment of the Bombay High Court but did not prono,unce finally on the correctness or otherwise thereof.

29. In Hitesh Shanti/al Mehta the Bombay High Court H

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A appears to have merely held that in appropriate cases the- Special Court would have the power to direct the Custodian to release such property from attachment, in the event, it is found that the property which is attached has no nexus with the illegal dealings in securities belonging B to banks and financial institutions during the relevant period and/or there are no claims or liabilities which have to be satisfied by attachment and sale of such property. Once it is held that a debt can be the subject-matter of attachment, the provisions of sub-section (3) of Section 3 of the said Act would squarely be applicable in view of the c fact that the same was the property belonging to a notified person. This position in law is not disputed. Such attached property, thus, if necessary, for the purpose of discharging the claims and liabilities of the notified person indisputably would stand attached and can be applied for discharge of D his liabilities in terms of Section 11 of the said Act."

21Copy pinpoint21. In paragraphs 45, 46 and 47 of Jyoti Harshad Mehta & Ors. vs. Custodian & Ors. (2009) 10 SCC 564 this Court held as under: E "45. It is contended by the learned counsel for the appellants Mr Syed that if any of the properties or assets of the notified parties have no nexus with the illegal securities transactions, the same can be released from attachment or at least need not be sold. F

46. It has further been argued that no evidence has been adduced that loans given by M/s Harshad S. Mehta to his family members or monies used by Shri Harshad Mehta for purchase of his flat were acquired from the tainted G funds. It is submitted by the appellants that unless it can be shown that the properties in question were acquired from the tainted funds they would be liable to be released from attachment. It is argued that the fact that the properties had been purchased much before the securities scam H

RASILA S. MEHTA v. CUSTODIAN, NARIMAN 265 BHAVAN, MUMBAI [P. SATHASIVAM, J.] would go on to show that they had no nexus with the funds A diverted therefrom.

47. In our opinion the arguments advanced on behalf of the appellants need to be rejected at the outset because a plain reading of the sections of the Special Act would 8 dearly point otherwise. In our opinion the attachment of all the properties in terms of sub-section (3) of Section 3 of the Special Act is automatic. The attachment restricts sale of the properties which have been acquired from illegal securities transaction. The sub-section specifically C mentions that on and from the date of the notification, "any property, movable or immovable, or both", belonging to any person notified under the Act shall stand attached. "

22Copy pinpoint22. In Ashwin S. Mehta vs. Custodian & Ors. (2006) 2 D SCC 385 in paragraph 15, this Court observed as under:

"15. The Act provides for stringent measures. It was enacted for dealing with an extraordinary situation in the sense that any person who was involved in any offence E relating to transaction of any security may be notified, whereupon all his properties stand attached. The provision contained in the Act being stringent in nature, the purport and intent thereof must be ascertained having regard to the purpose and object it seeks to achieve. The right of a person notified to file an application or to raise a defence F ' that he is not liable in terms of the provisions of the Act or, in any event, the properties attached should not be sold in discharge of the liabilities can be taken at the initial stage by filing an application in terms of sub-section (2) of Section 4 of the Act. But, at the stage when liabilities G are required to be discharged, the notified persons may raise a contention inter a/ia for the purpose of establishing that the properties held and possessed by them are sufficient to meet their liabilities. In terms of the provisions H

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