SUMAN L. SHAH versus THE CUSTODIAN & ORS.

Citation: [2024] 3 S.C.R. 294 · Decided: 05-03-2024 · Supreme Court of India · Bench: PAMIDIGHANTAM SRI NARASIMHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

* Author
[2024] 3 S.C.R. 294 : 2024 INSC 170
Suman L. Shah 
v. 
The Custodian & Ors.
(Civil Appeal No(s). 4577 of 2011)
05 March 2024
[Pamidighantam Sri Narasimha and Sandeep Mehta,* JJ.]
Issue for Consideration
There were questionable transactions between the appellants 
and respondent Nos. 6, 7 and 8, the alleged benami companies 
of respondent No. 2 (notified party). Whether the Special Court 
committed manifest error in facts as well as in law in holding that 
the appellants herein were the garnishees of respondent No. 2. 
Whether the conclusions and findings passed by the Special Court, 
that the appellant herein failed to prove the fact that amounts 
had been repaid to the benami companies of the notified person-
respondent No.2, can be sustained.
Headnotes
Special Court (Trial of Offences relating to Transactions in 
Securities) Act, 1992 – The miscellaneous applications were 
filed by the respondent-Custodian in the year 2008 seeking to 
recover the amounts of Rs.50 lakhs from appellant-S towards 
the dues of respondent Nos. 6 and 7 and amount of Rs.25 lakhs 
from appellant-L towards the dues of respondent No.8 – The 
Income Tax Department, vide letter dated 05.05.1998 informed 
the Custodian about respondent No. 2 being the benami owner 
of the companies (respondent Nos. 4 to 8 herein) – Special 
Court in its separate judgments directed appellants to pay 
the respective amounts due to the respondent Nos. 6, 7 and 
8, being benami companies of respondent No. 2 – Propriety:
Held: Respondent No. 2 was notified under the Act of 1992 on 
06.10.2001 and thus, by virtue of s.3(3) of the Act of 1992, all 
properties belonging to him stood automatically attached from the 
date of such notification – The appellants herein had borrowed the 
amounts in question from respondent Nos. 6, 7 and 8, way back in 
the years 1996-1997 – By that date, there could not have existed 
any justifiable reason for the appellants herein to have entertained 
[2024] 3 S.C.R. 
295
Suman L. Shah v. The Custodian & Ors.
a belief that these were the benami companies of respondent No. 
2 or that there was any breach of the provisions of the Act of 1992 
by respondent no.2 or the respondent companies – The foundation 
behind the assertion made by the Custodian that the appellants herein 
were garnishees of respondent No. 2 through respondent Nos. 6, 
7 and 8 is based entirely on a communication dated 05.05.1998 
purportedly issued by the Income Tax Department – No witness from 
the Income Tax Department was examined in evidence before the 
Special Court in miscellaneous applications for recovery – Even the 
communication forwarded by the Income Tax Department and relied 
upon by the Custodian was not proved by proper evidence – Also, a 
bare perusal of ss.3 and 9A, it would become clear that the properties 
of the person notified u/s. 3(2) would stand attached automatically 
with effect from the date of notification by virtue of s.3(3) – Since 
respondent No.2 was notified (as being a debtor of the originally 
notified company FFSL) with effect from 06.10.2001, a fortiori, his 
properties would be deemed to be attached with effect from that date 
and not prior thereto – The applications for recovery having been 
filed by the Custodian with the allegation that the appellants herein 
were the debtors of the benami companies of the notified person, 
the primary onus of proving this assertion would be on the Custodian 
by virtue of s.101 of Evidence Act – It is only after the Custodian 
discharged this primary burden and established the existence of 
the debt, then by virtue of s.102 of the Evidence Act, perhaps, the 
onus could be shifted on to the appellants to rebut the same – The 
appellants herein took a categoric stand in their depositions that 
they had returned the amounts borrowed from respondent Nos. 6, 
7 and 8, but the books of accounts were not available because of 
lapse of time – It was neither a requirement in law nor could it be 
expected from the appellants herein to retain the books of accounts 
after more than a decade of the alleged suspicious transactions – 
Therefore, the conclusions drawn and the findings recorded in the 
impugned judgments passed by the Special Court that the appellants 
herein failed to prove the fact that the amounts had been repaid to 
the benami companies of the notified person-respondent no.2 do 
not stand to scrutiny and cannot be sustained as being contrary to 
facts and law. [Paras 32-39]
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