VARGHESE K. JOSEPH versus THE CUSTODIAN & ORS.

Citation: [2011] 2 S.C.R. 269 · Decided: 31-01-2011 · Supreme Court of India · Bench: MARKANDEY KATJU · Disposal: Appeal(s) allowed

Judgment (excerpt)

[i011r2 S.C.R. 269 
VARGHESE K. JOSEPH 
v. 
THE CUSTODIAN & 'ORS. 
(Criminal Appeal No. 948 OF 2006) 
JANUARY 31, 2011 
[MARKANDEV KAi JU AND GYAN SUDHA MISRA, JJ,] 
Special Courts (Trial of Offences Relating to 
Transactions in Securities) Act, 1992: 
Certification of tainted shares by Custodian and its 
, release and payment of accruals - Application for - Filed by 
investor before Special Court ..:.. Dismissed on the grourid of 
fifing of the application after the cut off date - Justification of 
A 
B 
c 
- Held: Not Justified - Custodian is justified in filing ari 0 
application before the Special Court requesting to fix a cut off 
date for certifir.ation of the tainted shares - However, the cut 
off date fixed by the Special Court cannot be construed so 
as to have a binding effect of .statutory nature under the ·· 
provisions of the Transaction of Sale of Securities Act, 1956, 
E 
wherein there is no fixed time limit for encashment of shares 
nor there is prescribed procedure for certification - Custodian 
cannot shirk away from his function and the duty cast upon 
him - Special Court is duty bound to guard the interest of the 
bonafide investors through the Custodian - On facts, investor F 
had no role or involvement in treatment of the alleged equity 
shares as tainted which required certification before payment 
of dividend on the same - Investors cannot be denied his due 
on the ground of delay in filing the application for certification 
specially when they sought certification of his shares only after 
two months of the cut off date which had no statutory force -
G 
Transaction of Sale of .Securities Act, 1956. 
Application and interpretation of the provisions under the 
1992 Act - Held: s.alu(ary, o~ject and reasons of the Act are 
269 
H 
270 
SUPREME COURT REPORTS 
[2011] 2 S.C.R. 
A to be taken into consideration - Different provisions are · 
required to be ·construed so that each provision wiil have its 
play - In case of conflict, a harmonious construction should 
be adopted so that an honest and bonafide investor is not 
duped of his hard earned money which he invests by 
B purchasing the equity shares - Interpretation of statutes 
Object and reasons of the 1992 Act- Explained 
The appellant-investor purchased 100 equity shares 
of the respondent No. 2 Company and made payment 
C through respondent No. 4, the share broker. The 
appellant approached respondent No. 2 Company 
seeking dividend and other benefits on the shares, 
however, the appellant was informed that the shares 
were tainted and thus, his request was rejected. The 
D appellant then filed an application before the Special 
Courts under the provisions of the Special Courts (Trial 
of Offences Relating to Transactions ih Securities) Act, 
1992 seeking certification of the tainted shares by the 
respondent No. 1-Custodian and its release and the 
E payment of accruals. The appellant was informed by the 
office of the Special Court that the application could not 
be entertained since it was filed after the cut off date to 
submit application for certification. The appellant then 
filed an application before the Specia~ Court that he was 
F not aware of any cut off date regarding the filing of the 
application for certification of shares as also the 
procedure for the same. The Special Court dismissed the 
application. Therefore, the appellant filed the instant 
a_ppeal u/s. 1 O of the Act 
G 
Allowing the appeal, the Court 
HELD: 1. The order of the Special Court is set aside. 
The respondent-Custodian would entertain the 
H application filed before the Special Court for certification 
/1• 
VARGHESE K. JOSEPH v. CUSTODIAN & ORS. 
271 
of the shares and verify the claim of the appellant in A 
regard to the· shares and ensure payment of dividends 
. 
'-' 
· on those shares after certification by respondent No. 2. 
[Para 26] [290-E-F] 
· 
2.1 It is admitted by respondent No. 1 - Custodian 
8 
himself that the appellant who had purchased the shares 
of respondent No. 2 through respondent No. 4 whose 
affairs were later taken care of by respondent No. 3 also 
and perhaps respondent No. 5, would clearly be deemed 
to be bonafide purchase. However, sin·ce the shares were c 
held to be tainted by order of the Government of India due 
to which it was not honoured by respondent No. 2, the 
need arose for its certification through the Custodian 
under the control and supervision of the Special Court 
constituted under the Special Courts (Trial of Of

Excerpt shown. Read the full judgment & AI analysis in Lexace.