RAHUL SUBODH WINDOORS LTD. versus A.K. MENON AND ANR.

Citation: [1999] 2 S.C.R. 447 · Decided: 06-04-1999 · Supreme Court of India · Bench: G.B. PATTANAIK · Disposal: Dismissed
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Judgment (excerpt)

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RAHUL SUBODH WINDOORS LTD. 
v. 
A.K. MENON AND ANR. 
APRIL 6, 1999 
[G.8. PATTANAIK ANDS. RAJENDRA BABU, JJ.] 
Special Court (Trial of Offences Relating to Transactions In Securities) 
Act, 1992 : 
A 
B 
Ss. 3(2) & (3), 7 and 9-A-Attachment of property-Jurisdiction_ of C 
special court-Person notified for offences under S.3(2) of the Act-Company 
receiving certain amount for issuing share certificates-No allotment of 
shares-Custodian informing the company not to transfer shares as the 
money subssribedfor shares is liable to be attached-Application by custodian 
before special court for return of money-Allowed along with interest-
Validity of-Held, special court is the only court to deal with matters relating D 
to transaction under S.9A or for attaching property under S.3(3) of the Act-
Jurisdiction of special court not limited to 1 offences under S.3 of the Act~ 
Thus, special court justified in directing th~ company to repay the amount 
along with interest. 
. \ 
Allotment of shares-Names of share-holders not entered in share 
certificate-No application by share holder for being member of the 
company-Special court holding that there was no allotment of shares-
Validity of-Held, special court justified in its holding. 
E 
Respondent No.2 was notified as person involved in offences under S.3 F 
(2) of the Special Court (Trial of Offences Relating ·to Transactions in 
Securities) Act, 1992. He sent a cheque for Rs. 20 lakhs to appellant-
_.; 
company for purchase of shares for certain unknown persons. Respondent 
No. 1, Custodian appointed under S. 3 (1) of the Act, informed the appellant 
not to transfenthe shares as the money subscribed towards shares were G 
liable to be attached as property of respondent no. 2. Thereafter, the Custodian 
filed an application before the Special Court for return of the said amount 
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alongwith interest which application was allowed. Hence, the present appeal. 
On behalf of appellant-company it was contended that the Special Court 
had no jurisdiction to entertain the application of respondent No. 1, the H 
447 
448 
SUPREME COURT REPORTS 
[1999) 2 S.C.R. 
A Custodian, since the matter did not relate to any offence contemplated under 
S. 3 of the Act; the shares were granted and, therefore, on the allotment of 
shares the money does not belong to respondent No. 2 but to the appellant. ' 
Dismissing the appeal, this Court 
B 
HELD: 1.1. The Special Court is justified in entertaining the application 
of respondent No. 1, the Custodian and directing the appellant to repay the 
amount alongwith interest. [450-F-G] 
1.2. The Spedal Court is the only court which can inquire into and · 
deal with the matters of the transaction covered by Section 9A of the Special 
C Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 
or property standing attached under S. 3 (3) ~f the Act is involved. S. 7 of the 
Act provides for the jurisdiction of the Special Court in respect of transaction 
for any offence referred to in S. 3(2) of the Act and bars the jurisdiction 
of any other court. Sub-section (3) of S. 9A bars the jurisdiction of other 
courts in respect of these matters. [451-B-D] 
D 
2. The Special Court was justified in holding that there was no allotment 
of shares. There can be no allotment of shares to unknown person; secondly, 
Allotment can be made to a person who becomes a member of the company 
when an application is made to that effect, and thirdly no· application to the 
company by the second respondent in that regard was forthcoming. Cloud of 
E doubts was cast upon the entries in the Register of members and the distinctive 
members of the shares and, therefore, the finding of fact recorded by the 
Special Court that there had been no allotment at all and it was sought to 
be made only after the second respondent was notified under the Act to avoid 
payment of money of a sum of Rs. 20 Lakhs cannot be seriously disputed. 
F 
[451-F-H] 
G 
3. The Special Court was also justified in its finding that even if the 
sale/purchase of shares was on a 'buy-back basis' and only an arrangement 
for financing, still the appellant is liable to repay the money with interest 
to the Custodian. [452-A-B] 
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 552 of 
1995. 
From the Judgment and Order dated 9.2.95 of the Special Court at 
Bombay, in Misc. Application No. 513of1994. 
H 
M.D. Adkar and Ejaz Maqbool for the Appellant. 
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RAHUL SUBODH WINDOORS LTD.
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