LexASHIWIN S. MEHTA & ANR. versus UNION OF INDIA & ORS.
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A B c [2011) 14 (ADDL.) S.C.R. 1000 ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & ORS. (Civil Appeal No. 4263 of 2003) NOVEMBER 8, 2011 [D.K. JAIN AND ASOK KUMAR GANGULY, JJ.] Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992: ss. 11, 3(3) and (4) - Attachment of the properties of the Notified persons - Sale of shares - Appellants, their family members and the corporate entities belonging to them purchased more than 90 lakh shares in 'A' Company - 0 Attachment of the majority of the holding - Order of the Special Court permitting the Custodian to sell 54, 88, 850 shares of '.A' Company at Rs. 901- per share - Correctness of - Held: Special Court failed to make a serious effort to realise the highest possible price for the said shares - Special Court E overlooked the norms laid down by it; ignored the directions by this Court and glossed over the procedural irregularities committed by the Custodian - Special Court failed to comply with the principles of natural justice - It rejected the prayer of the appellants to grant them time to secure a better offer which resulted in the realisation of lesser amount by way of sale of F the subject shares, to the detriment of the appellants and other notified parties - Thus, the decision of the Special Court is vitiated and must be struck down in its entirety - However, sale of 54, 88, 850 shares was approved and all procedural modalities are stated to have been carried out and 36. 90 lakh G shares of 'A' Company are claimed to have been extinguished, the relief sought for by the appellants to rescind the entire sale of 54, 88, 850 shares would be impracticable and fraught with grave difficulties - Thus, matter is remitted to the Special Court for taking necessary steps to recover the 4. 95% H 1000 ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1001 ORS. shares from 'A' Company or its management, and put them A to fresh sale strict/yin terms of the norms. s. 10 - Sale of shares of attached properties of the Notified persons -Discretion ex~rcised by Special Court under · - Held: 'Discretion: when applied to a court of justice means 8 discretion guided by law - It must not be arbitrary, vague and fanciful but legal and regular - Same principle would govern an appeal preferred u/s. 10 - On facts, Special Court exercised its discretion in complete disregard to its own scheme and 'terms and conditions' approved by it for sale of C shares and in violation of the principles of natural justice, thus, the facts of the case calls for interference. Object and purpose of the Act - Held: Is not only to punish the persons involved in the act of criminal misconduct by defrauding the banks and financial institutions but also to D see that the properties, belonging to the persons notified by the Custodian are appropriated and disposed of for discharge of liabilities to the banks and financial institutions - Thus, a notified party has an intrinsic interest in the realisations, on the disposal of any attached property because it would have E a direct bearing on the discharge of his liabilities in terms of s. 11 - Custodian has to deal with the attached properties only in such manner as the Special Court may direct - Custodian is required to assist in the attachment of the notified person's property and to manage the same thereafter - Special Court F shall be guided by the principles of natural justice. Doctrines/principles - Principles of natural justice - Extent and application of - Held: Requirement of giving reasonable opportunity of being heard before an order is made by an administrative, quasi judicial or judicial authority, G when such an order entails adverse civil consequences - There can be exceptions to the said doctrine - Its extent and its application cannot be put in a strait:jacket formula - Whether the principle has to be applied or not is to be considered bearing in mind the express language and the H 1002 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R. A basic scheme of the provision conferring the power; the nature of the power conferred; the purpose for which the power is conferred and the final effect of the exercise of that power on the rights of the person affected. 8 Appellants, their family members and the corporate entities belonging to the family members purchased more than 90 lakh shares in 'A' Company. In the year 1992, the majority of the holding came to be
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