L.S. SYNTHETICS LTD. versus FAIRGROWTH FINANCIAL SERVICES LTD. AND ANR.

Citation: [2004] SUPP. 4 S.C.R. 109 · Decided: 06-09-2004 · Supreme Court of India · Bench: N. SANTOSH HEGDE · Disposal: Dismissed

Judgment (excerpt)

L.S. SYNTHETICS LTD. 
v. 
FAIRGROWTH FINANCIAL SERVICES LTD. AND ANR. 
SEPTEMBER 6, 2004 
[N. SANTOSH HEGDE, S.B. SINHA AND A.K. MATHUR, JJ.] 
Special Courts Trial of Offences relating to Transactions in Securities 
Act, 1992-Sec 9A-Jurisdiction of-For recovery of sums due to notified 
party-Held, not confined to securities and illegal transactions alone-Held, 
further proceedings can be initiated at the instance of Notified Person- . 
Section 3(2)-Rule 2 of the Rules 1992-Held, all properties belonging 
to the notified person shall be subject to attachment. 
Limitation Act, 1963-Section 29(2)-Provisions of-Held not applicable 
for transactions under the Act of 1992. 
A notification was issued by the Custodian notifying Respondent 
No.l as a notified party in terms of the provisions of the Special Courts 
(Trial of Offences Relating to Transactions in Securities) Act, 1992. 
Appellant had 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. l payable to him. On the said 
amount of loan, interest at the rate of 21 % per annum was payable. 
Appellant was directed to deposit the principal amount by the 
Custodian which was not complied with. The concerned Chartered 
Accountant, however, gave a cert~ficate to the effect that a sum of Rs. 
14.25 lakhs was advanced as loan to the appellantby respondent no.1 
with interest at 21 % per annum and that the total sum outstanding was 
Rs. 34,98,967.04. Respondent No. 1 initiated a proceeding before the 
Special Court praying for a direction to the Appellant to pay to the 
Custodian a sum of Rs. 34,99,900.68 on its behalf. 
Appellant contended before the Special Court that the claim is 
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SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R. 
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barred by limitation and there is no provision in the Act to recover time 
barred debts, and that the transaction in question having not arisen out 
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of transactions in securities, the Special Court had no jurisdiction to. 
deal with the matter and that therefore Section 9A of the Act should be 
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•'read down. The Special Court rejected the contention· and held that 
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once a property is found to be owned by a notified party, all claims 
relating thereto must be adjudicated upon by the Srecial Court. It also 
held that the provisions of the Limitation Act have no application to the 
proceedings under the Act. 
Jn appeal to this Court the Appellant contended that the advances 
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made by the Respondent being not transactions of the nature specified 
in the Act, an application filed by the notified party was not maintainable; 
that the provisions of the said Act and in particular those contained in 
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Section 9A must be read down so as to uphold the constitutionality of 
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the said Act; that by reason of the provisions of the said Act, the plea 
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of limitation which could have been taken by the appellant had a suit 
been filed by the Respondent No. 1 against it, would still be available as 
the transaction is of civil nature; that only because a statutory attachment 
comes into force by reason of Section 3(3) of the Act, the property of the 
notified does party not vest in the Custodian; that the notified party had 
no locus to initiate the proceedings before the Special Court; that in the 
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alternative there being no agreement to pay interest, the Special Court 
erred in directing such payment of interest without arriving at a finding 
that any demand in relation thereto was made in terms of the provisions 
of the Interest Act. 
Respondent contended that as all properties stood attached in terms 
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of the said notification on 22.7.1991 and all amount recovered are 
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required to be utilized towards the dues of the notified person, an 
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application at the instance of the notified person was maintainable; that 
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the Special Court could initiate a suo motu proceeding and as it has a 
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duty to issue direction(s) as regards the attached property and in that 
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view of the matter, the provisions of the Limitation Act will have no 
application. 
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Dismissing the Appeals, the Court 
HELD: 1. The jurisdiction of the Special Court, is not confined only 
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to the illegal transact

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