VIRENDER SAIGAL AND CO. Vs. A. K. MENON

JUDGEMENT

(1.) The appellant is a stockbroker. He was holding shares and monies of Respondents 2, 3 and 4. On 6-6-1992, the Special Courts (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992 (for short "the Ordinance") was issued in the light of large-scale irregularities and malpractices noticed in transaction in both government and other securities indulged in by some brokers in collusion with the employees in various banks and financial institutions. To ensure speedy recovery of the amount and to punish the guilty, the Ordinance was promulgated. The Ordinance, inter alia, provided under Section 3 for the appointment of a Custodian for the purposes of the Act. Under sub-sec. (2) of Section 3, the Custodian, on being satisfied on information received that any person has been involved in any offence relating to transactions in securities after the 1st day of April, 1991 and on or before 6-6-1992, may notify such person in the Official Gazette. Pursuant to this power the Custodian notified Respondents 2, 3 and 4 on 8-6-1992. As a result of such notification effected in terms of sub-section (2) of Section 3 of the Ordinance, the properties of the notified parties stood attached with effect from the date of issuance of the notification.

(2.) On 19-6-1992 and on 23-7-1992, the appellant's premises were raided by the Income Tax Authorities. Various shares and some amount of money were seized by the Income Tax Department. Subsequent to this raid, it is the appellant's case that it informed the Custodian that it was holding monies and equity shares of Respondents 2, 3 and 4. The Custodian has disputed the receipt of this letter. This dispute as it turns out, is not relevant for the purpose of disposal of this appeal.

(3.) The facts, which are relevant for the purpose of this appeal, are that the Income Tax Authorities had issued restraint orders in respect of the shares and monies held by the appellant of Respondents 2, 3 and 4. These restraint orders continued over a period of time. The Income Tax Authorities then passed an order under Section 132(3) of the Income Tax Act, 1961, that the properties which had been seized, pursuant to the aforesaid raid, belonged to the appellant. The appellant preferred an appeal contending that, in fact, even the seized properties belonged to Respondents 2, 3 and 4. On 28-7-1992 the appellant had given details of the various assets belonging to Respondents 2, 3 and 4 in their custody to the Custodian. The Custodian called upon the appellant to deposit the assets of Respondents 2, 3 and 4 which were with the appellant. The appellant did not comply. According to it, it could not because of the restraint orders passed by the Income Tax Authorities. The Custodian filed an application before the Special Court set up under the aforesaid Act on 18-6-1993 in which the Custodian prayed for the following reliefs (wherein the appellant is referred to as Respondent 1 and Respondents 5 and 6 have been referred to as the Income Tax authorities):