ASHIWIN S. MEHTA & ANR.versusUNION OF INDIA & ORS.

                   [2011) 14 (ADDL.) S.C.R. 1000


A                    ASHIWIN S. MEHTA & ANR.
                                    v.
                      UNION OF INDIA & ORS.
                   (Civil Appeal No. 4263 of 2003)

                         NOVEMBER 8, 2011
B
         [D.K. JAIN AND ASOK KUMAR GANGULY, JJ.]

        Special Court (Trial of Offences Relating to Transactions
    in Securities) Act, 1992:
c
          ss. 11, 3(3) and (4) - Attachment of the properties of the
     Notified persons - Sale of shares - Appellants, their family
    members and the corporate entities belonging to them
    purchased more than 90 lakh shares in 'A' Company -
    Attachment of the majority of the holding - Order of the
0
    Special Court permitting the Custodian to sell 54, 88, 850
    shares of '.A' Company at Rs. 901- per share - Correctness of
    - Held: Special Court failed to make a serious effort to realise
    the highest possible price for the said shares - Special Court
E   overlooked the norms laid down by it; ignored the directions
    by this Court and glossed over the procedural irregularities
    committed by the Custodian - Special Court failed to comply
    with the principles of natural justice - It rejected the prayer of
    the appellants to grant them time to secure a better offer which
    resulted in the realisation of lesser amount by way of sale of
F   the subject shares, to the detriment of the appellants and other
    notified parties - Thus, the decision of the Special Court is
    vitiated and must be struck down in its entirety - However,
    sale of 54, 88, 850 shares was approved and all procedural
    modalities are stated to have been carried out and 36. 90 lakh
G   shares of 'A' Company are claimed to have been
    extinguished, the relief sought for by the appellants to rescind
    the entire sale of 54, 88, 850 shares would be impracticable and
    fraught with grave difficulties - Thus, matter is remitted to the
    Special Court for taking necessary steps to recover the 4. 95%
H                                 1000
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1001
                    ORS.

shares from 'A' Company or its management, and put them            A
to fresh sale strict/yin terms of the norms.

     s. 10 - Sale of shares of attached properties of the
Notified persons -Discretion ex~rcised by Special Court under ·
- Held: 'Discretion: when applied to a court of justice means 8
discretion guided by law - It must not be arbitrary, vague and
fanciful but legal and regular - Same principle would govern
an appeal preferred u/s. 10 - On facts, Special Court
exercised its discretion in complete disregard to its own
scheme and 'terms and conditions' approved by it for sale of C
shares and in violation of the principles of natural justice, thus,
the facts of the case calls for interference.

      Object and purpose of the Act - Held: Is not only to
punish the persons involved in the act of criminal misconduct
by defrauding the banks and financial institutions but also to     D
see that the properties, belonging to the persons notified by
the Custodian are appropriated and disposed of for discharge
of liabilities to the banks and financial institutions - Thus, a
notified party has an intrinsic interest in the realisations, on
the disposal of any attached property because it would have        E
a direct bearing on the discharge of his liabilities in terms of
s. 11 - Custodian has to deal with the attached properties only
in such manner as the Special Court may direct - Custodian
is required to assist in the attachment of the notified person's
property and to manage the same thereafter - Special Court         F
shall be guided by the principles of natural justice.

     Doctrines/principles - Principles of natural justice -
Extent and application of - Held: Requirement of giving
reasonable opportunity of being heard before an order is
made by an administrative, quasi judicial or judicial authority,   G
when such an order entails adverse civil consequences -
There can be exceptions to the said doctrine - Its extent and
its application cannot be put in a strait:jacket formula -
Whether the principle has to be applied or not is to be
considered bearing in mind the express language and the            H
    1002 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A basic scheme of the provision conferring the power; the nature
    of the power conferred; the purpose for which the power is
    conferred and the final effect of the exercise of that power on
    the rights of the person affected.

         Appellants, their family members and the corporate
8
    entities belonging to the family members purchased more
    than 90 lakh shares in 'A' Company. In the year 1992, the
    majority of the holding came to be attached by a
    Notification. Thereafter, on direction by this Court, the
    Custodian to draft a scheme for sale of shares of the
C notified parties and presented the same to the Special
    Court for the approval. The Special Court by order dated
    17th August 2000, categorised the shares into routine
    shares, bulk shares and controlling block shares. The
    Special Court constituted a Disposal Committee for
D disposal of shares as per the norms laid down in respect
    of sale of controlling block of shares. The Special Court
    approved the scheme, propounded by the Custodian for
    sale of Controlling Block of Shares in toto and ordered
    sale of all registered shares, except the shares of A
E Company. The notified parties and 'A' Company
    challenged the order of the Special Court. This Court by
    order dated 23rd August, 2001 issued directions insofar
    as the sale of controlling block of shares. In compliance
    with the order, the Custodian drafted tne terms and
F conditions of sale for sale of 54,88,850 shares of 'A'
    Company whereby it was stipulated that the Special
    Court after ascertaining the highest offer may give an
    opportunity to the management of the said Company to
    buy or to the Company to buy-back the said "Controlling
G Block" of shares as per provisions of the Companies Act,
    1956. Pursuant thereto, the Custo.dian invited bids and
    only two bids were received, the highest being Rs. 80/-
  . per share given by· Punjab National Bank. The Disposal
    Committee evaluated the said bids so received and
H recommended that in addition to the said 54,88,850
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1003
                     ORS.

, shares, additional 8, 15,485 benami shares also be sold A
 · to the highest bidder subject to sanction by the Special
   Court. The Special Court permitted the Custodian to sell
   54,88,850, shares of respondent No. 3-A Company at Rs.
   90/- per share. Thus, the appellants filed the instant
   appeals.                                           ·     B

     Partly allowing the appeal, the Court

      HELD: 1.1 It is plain that the Special Court (Trial of
  Offences Relating to Transactions in Securities) Act, 1992
 which is a special statute, is a complete code in itself. The C
 purpose and object for which it was enacted was not only
 to punish the persons who were involved in the act of
  criminal misconduct by defrauding the banks and
 financial institutions but also to see that the properties,
 moveable or immovable or both, belonging to the D
 persons notified by the Custodian were appropriated and
 disposed of for discharge of liabilities to the banks and
 financial institutions, specified government dues and any
 other liability. Therefore, a notified party has an intrinsic
 interest in the realisations, on the disposal of any E
 attached property because it would have a direct bearing
 on the discharge of his liabilities in terms of Section 11
 of the Special Court Act. It is also clear that the Custodian
 has to deal with the attached properties only in such
 manner as the Special Court may direct. The Custodian F
 is required to assist in the attachment of the notified
 person's property and to manage the same thereafter.
 The properties of the notified persons, whether attached
 or not, do not at any point of time, vest in him, unlike a
 Receiver under the Code of Civil Procedure or an official G
 Receiver under the Provincial Insolvency Act or official
 Assignee under the Presidency Insolvency Act. The
 statute also mandates that the Special Court shall be
 guided by the principles of natural justice. [Para 21) [1025-
 C-F]
                                                               H
    1004 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A       8. 0.1. Finance Ltd. Vs. Custodian & Ors. (1997) 10 SCC
    488 : 1997 (3) SCR 51 - relied on.
       1.2. It emerges from the scheme formulated by the
  Custodian for sale of shares in terms of the directions
  issued by this Court in its order dated 11th March 1996
8 (CA No.5225/1995); the norms laid down by the Special
  Court vide order dated 17th August 2000 and the
  modification of these norms by this Court vide order
  dated 23rd August, 2001 (CA No.5326/1995) that the
  underlying object of the procedure/norms laid down in
C the scheme is to ensure that highest possible price on
  sale of shares is realised. It is manifest that with this end
  in view, this Court vide order dated 23rd August, 2001,
  left it to the Special Court to decide what procedure to
  adopt in order to realise the highest price for the shares.
D The scheme/norms were further modified by the Special
  Court and this Court in a way to inject flexibility in the
  scheme in order to secure the highest price for the
  shares. [Para 22] [1025-G-H; 1026-A-C)
E     1.3. In the light of the statutory provisions and the
  norms laid down for sale of the subject shares, the
  Special Court failed to make a serious effort to realise the
  highest possible price for the said shares. The Special
  Court overlooked the norms laid down by it in its order
  dated 17th August 2000; ignored the directions by this
F Court contained in order dated 23rd August 2001 and
  glossed over the procedural irregularities committed by
  the Custodian. Condition No.14 of the terms and
  conditions of sale, clearly stipulated that it was only after
  the Special Court had ascertained the highest offer that
G Apollo or its management were to be given an option to
  buy back the shares. However, the letter of the Custodian
  dated 28th April, 2003, addressed to Apollo clearly
  divulges the fact that the Custodian had, without ahy
  authority, invited Apollo and its management 'to bid' on
H 30th April, 2003, the settled date, when the report of the
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1005
                     ORS.

 Disposal Committee was yet to be considered by the           A
 Special Court. It is evident from Condition No.15 of terms
and conditions of sale, that the Special Court has the
discretion to accept or reject any offer or bid that may be
received for purchase of shares. Therefore, the stand of
the Custodian that inviting Apollo to make the bid was        B
necessarily in compliance of the scheme/condition of
sale, cannot be accepted inasmuch as it was for the
Special Court to take such a decision at the appropriate
time and not the Custodian. The Custodian could not
have foreseen that the Special Court would not accept         c
the bid of the sole bidder viz. Punjab National Bank. So
far as issue of notification in terms of Section 3(2) is
concerned, the Custodian derives his power and
authority from the Special Court Act but his jurisdiction
to deal with property under attachment, flows only from       0
the orders which may be made by the Special Colltt
constituted under the said Act. It is obligatory upon the
Custodian to perform all the functions assigned to him
strictly in accordance with the directions of the Special
Court. In the instant case, although there is no material     E
on record which may suggest any malafides on the part
of the Custodian yet it is convincing that by inviting
Apollo to bid, vide letter dated 28th April, 2003, the
Custodian did exceed the directions issued to him by the
Special Court. However, being in the nature of a
procedural omission, the alleged violation is not per se      F
sufficient to nullify the sale of shares.[Para 23) [1026-D-
H; 1027-A-E]

     1.4. The rules of "natural justice" are not embodied
rules. The phrase "natural justice" is also not capable of    G
a precise definition. The underlying principle of natural
justice, evolved under the common law, is to check
arbitrary exercise of power by any.authority, irrespective
of whether the power which is conferred on a statutory
body or Tribunal is administrative or quasi judicial. The     H
    1006 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A concept of "natural justice" implies a duty to act fairly i.e.
  fair play in action. The aim of rules of natural justice is to
  secure justice or to put it negatively to prevent
  miscarriage of justice. It is thus, trite that requirement of
  giving reasonable opportunity of being heard before an
B order is made by an administrative, quasi judicial or
  judicial authority, particularly when such an order entails
  adverse civil consequences, which would include
  infraction of property, personal rights and material
  deprivation for the party affected, cannot be sacrificed at
c the alter of administrative exigency or celerity.
  Undoubtedly, there can be exceptions to the said doctrine
  and as aforesaid the extent and its application cannot be
  put in a strait-jacket formula. The question whether the
  principle has to be applied or not is to be considered
  bearing in mind the express language and the basic
0
  scheme of the provision conferring the power; the nature
  of the power conferred; the purpose for which the power
  is conferred and the final effect of the exercise of that
  power on the rights of the person affected. [Paras 25 and
E 27] [1027-G-H; 1028-A; 1029-D-F]

        A.K. Kraipak Vs. Union of India (1969) 2 SCC 262: 1970
   (1) SCR 457 - relied on.

        Swadeshi Cotton Mills Vs. Union of India (1981) 1 SCC
F 664 : 1981 (2) SCR 533 - referred to.

       1.5. In the inst~nt case, the Special Court failed to
  comply with the principles of natural justice. The Special
  Court rejected the prayer of the appellants to grant them
  48 hours' time to secure a better offer. In fact, by his letter
G dated 29th April, 2003 addressed by the Cu~todian to the
  notified parties, including the appellants, the right of the
  appellants to bring better offer was foreclosed by the
  Custodian, which evidently was without the permission
  of the Special Court. Furthermore, the Special Court also
H ignored its past precedents whereby it had granted time
    ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1007
                      ORS.

  to the parties to get better offers for sale of shares of M/   A
~s Ranbaxy Laboratories Ltd. There is also force in the
  plea that the reason assigned by the Special Court in its
  order dated 30th April, 2003, for declining further time to
  the appellants, that deferment of decision on the sale of
  shares would have resulted in the share market falling         B
  down is unsound and unfounded. The share market was
  already aware of the sale of a big chunk of shares of
  Apollo in view of the advertisement published by the
  Custodian and therefore; there was hardly any possibility
  of further volatility in the price of said shares. Thus, the   c
  appellants have been denied a proper opportunity to
  bring a better offer for sale of shares, resulting in the
  realisation of lesser amount by way of sale of the subject
  shares, to the detriment of the appellants and other
· notified parties. [Para 28) [1029-G-H; 1030-A-D]
                                                                 D
        1.6. As regards the plea that the Special Court having
   exercised the discretion vested in it under the Special
   Court Act, keeping in view all the parameters relevant for
   disposal of the shares, the impugned order is not
   interfered with. There is no quarrel with the general E
   proposition that an _appellate court would not ordinarily
   substitute its discretion in the place of the discretion
   exercised by the trial court unl.ess it is shown to have
   been exercised under a mistake of law or fact or in
  disregard of a settled principle or by taking into F
  consideration irrelevant material. A 'discretion', when
  applied to a court of justice means discretion guided by
""law. It must not be arbitrary, vague and fanciful but legal
  and regular. Therefore, it is accepted that same principle
  would govern an appeal preferred under Section 10 of G
  the Special Court Act. However, since it is concluded that
  the Special Court has exercised its discretion in complete
  disregard to its own scheme and 'terms and conditions'
  approved by it for sale of shares and above all that the
  impugned order was passed in violation of the principles H
    1008 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A of natural justice, the facts of the case calls for
  interference, to correct the wrong committed by the
  Special Court. [Para 29 and 30] [1030-F-H; 1031-A-B]

        R. Vs. Wilkes (1770) 4 Burr 2527 - Referred to.

B        1.7. In view of finding that the decision of the Special
    Court is vitiated on the afore-stated grounds, it must
    follow as a necessary consequence that in the normal
    course, the impugned order must be struck down in its
    entirety. However, bearing in mind the fact that the sale
C   of 54,88,850 shares was approved and all procedural
    modalities are stated to have been carried out in the year
    2003, it is accepted that at this stage, when 36.90 lakh
    shares of Apollo are claimed to have been extinguished,
    the relief sought for by the appellants to rescind the entire
D   sale of 54,88,850 shares would be impracticable and
    fraught with grave difficulties. Therefore, the impugned
    order is set aside to the extent indicated and the case is
    remitted to the Special Court for taking necessary steps
    to recover the said 4.95% shares from Apollo or its
E   management, as the case may be, and put them to fresh
    sale strictly in terms of the norms as approved by this
    Court vide order dated 23rd August, 2001. The
    shareholders who would be affected by this order shall
    be entitled to the sale consideration paid by them to the
F   Custodian alongwith simple interest @6% p.a. from the
    date of payment by them upto the date of actual
    reimbursement by the Custodian in terms of this order.
    [Para 33] (1031-D-H; 1032-A]
      Desh Bandhu Gupta Vs. N.L. Anand & Rajinder Singh
G (1994) 1 SCC 131 : 1993 (2) Suppl. SCR 346; Gajadhar
  Prasad & Ors. Vs. Babu Bhakta Ratan & Ors. (1973) 2 SCC
  629 : 1974 (1) SCR 372; Sudhir S. Mehta & Ors. Vs.
  Custodian & Anr. (2008) 12 SCC 84 : 2008 (8) SCR 1099;
  Ramji Dayawala And Sons (P) Ltd. Vs. Invest Import (1981)
H 1 SCC 80 : 1981 (1) SCR 899; Wander Ltd. And Anr. Vs.
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1009
                    ORS.

Antox India P. Ltd. 1990 (Supp) SCC 727; Ashwin S. Mehta A
 Vs. Custodian (2006) 2 SCC 385 : 2006 (1) SCR 56;
Employees' State Insurance Corpn. & Ors. Vs. Jardine
Henderson Staff Association & Ors. (2006) 6 SCC 581 : 2006
(4) Suppl. SCR 27; State of M.P. & Ors. Vs. Nandlal Jaiswal
& Ors. (1986) 4 SCC 566 : 1987 (1) SCR 1; Ramana B
Daya ram Sheffy Vs .. International Airport Authority of India & .
Ors. (1979) 3 SCC 489 : 1979 (3) SCR 1014; Sesa Industries
Limited Vs. Krishna H. Bajaj & Ors. (2011) 3 SCC 218: 2011
(3) SCR 317; Rajesh D. Darbar Vs. Narasingrao Krishnaji
Kulkarni (2003) 7 SCC 219 : 2003 (2} ::Suppl. SCR 273 -         c
referred to.

     Susannah Sharp Vs. Wakefield & Ors. (1891) A.C. 173
- referred to.
                     Case Law Reference:                        D
    1997 (3) SCR 51                relied on        Para 21
    1970 (1) SCR 457               relied on        Para 25
    1981 (2) SCR 533               referred to      Para 26
                                                                E
     (1770) 4 Burr 2527            referred to      Para 29
    1993 (2) Suppl. SCR 346        referred to      Para 29
    1974 (1) SCR 372               referred to      Para 11
                                                                F
    2008 (8) SCR 1099              referred to      Para 11
    1981 (1 ) SCR 899              referred to      Para 13
    1990 (Supp) sec 727            referred to      Para 13
    2006 (1) SCR56                 referred to      Para 13    G

    2006 (4) Suppl. SCR 27        referred to       Para 15
    1987 (1) SCR 1                referred to       Para 19
    1979 (3) SCR 1014             referred to       Para 19    H
    1010 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A        2011 (3) SCR 317                referred to        Para 19
         2003 (2) Suppl. SCR 273         referred to        Para 19

         (1891) A.C. 173                 referred to        Para 19

B       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    4263 of 2003.

        From the Judgment & Order dated 2.5.2003 of the Special
    Court (Trial of offences relating to Transactions in Securities at
    Bombay) Act, .1992 in Misc. Petition No. 64 of 1998.
c
       Joseph Vellapally. Dr. A.M. Singhvi, Kamini Jaiswal, Manik
  Karanjawala, Manu Nair Anuj Berry, Amit Bhandari (for Suresh
  A. Shroff & Co. Arvind Kumar Tewari, Subramonium Prasad,
  Varun Thakur, Varinder Kumar Sharma, for the appearing
D parties.

        The Judgment of the Court was delivered by

       D.K. JAIN, J. 1. This appeal under Section 1O of the
  Special Court (Trial of Offences Relating to Transactions in
E Securities) Act, 1992 (for short "the Special Court Act") is
  directed against the order dated 30th April, 2003, as corrected
  vide order dated 2nd May, 2003, passed by the Special Court
  at Bombay, in Misc. Petition No. 64of1998. By the impugned
  orders, the Special Court has permitted the Custodian to sell
F 54,88,850 shares of Apollo Tyres Ltd. (for short "Apollo"),
  respondent No. 3 in this appeal, at Rs.90/- per share.

          2. The material facts giving rise to the appeal are as
    follows:

G      The appellants, one ,late Harshad S. Mehta, their other
  family members and the corporate entities belonging to the
  family members had purchased more than 90 lakh shares in
  Apollo. Except for the holding of two family members, the entire
  holding came to be attached by a notification on 6th June,
H 1992. Under the said notification, 29 entities both individual and
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1011
              ORS. [D.K. JAIN, J.]

 corporate were notified under Section 3(2) of the Special Court A
Act. Prior to the issue of notification about 15 lakh shares of
Apollo stood registered in the name of the notified parties and
the balance shares were unregistered. About 39.16 lakh
unregistered shares were disclosed by the late Harshad S.
Mehta to the office of the Custodian, which were subsequently B
handed over to the Central Bureau of Investigation (hereinafter
referred to as "the CBI"). The CBI seized about 7 to 8 lakh un-
registered shares in 1992, which also were handed over by
them to the Custodian. The Custodian was also authorised to
deal with a few lakh shares, identified as benami shares. c
Thereafter, the Custodian moved an application before the
Special Court seeking orders for effecting registration of
unregistered shares in the name of the Custodian and for
recovery of laps~d benefits that accrued on the said
unregistered shares. The management of Apollo objected to
                                                                  0
the proposed registration, alleging violation of the takeover
code and raised the question of ownership. However, the
Special Court, vide order dated 19th November, 1999, allowed
the registration of the un-registered shares in the name of the
Custodian.
                                                                  E
      3. By order dated 11th March, 1996, in Civil Appeal
No.5225 of 1995, this Court, in a suo motu action, directed the
Custodian to draft a scheme for sale of shares of the notified
parties, which constituted bulk of the attached assets.
Accordingly, a scheme was drafted by the Custodian in F
consultation with the Government of India and thereafter,
presented to this Court. Vide order dated 13th May, 1998, in
Civil Appeal No. 5326of1995, this Court directed that the said
scheme may be considered by the Special Court, with further
modifications, if any. In furtherance of the said direction, the G
scheme was presented to the Special Court for its approval.
The notified parties strongly opposed the said scheme on
several grounds. All the objections of the notified .parties were
overruled and the Special Court, vide order dated 17th August,
                                                                 H
    1012 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A   2000, categorised the shares into three classes - (i) routine
    shares; (ii) bulk shares and (iii) controlling block of shares. The
    Special Court constituted a Disposal Committee for disposal
    of shares as per the norms laid down in the said order. Norms
    in respect of sale of controlling block of shares read as follows:
B
         "NORMS FOR SALE OF CONTROLLING BLOCK OF
         SHARES:

          After completion of demat procedure for registered shares,
          the Custodian will give public advertisement in the
c       · newspapers inviting bids for purchase of Controlling Block
          of shares. The offers should be for the entire block of
          registered shares. The offers should be accompanied by
          a Demand Draft/Pay Order/Bankers' cheque representing
          5% of the offered amount in cases of thinly traded shares
D         of companies like Killick Nixon whereas in cases of highly
         valued shares like Apollo Tyres, the offers shall be
         accompanied by Demand Draft/Pay Order/Bankers'
         cheque representing 2% of the offered amount. The said
         Pay Order/Demand Draft/bankers' cheque should be
E        drawn in favour of the Custodian, Ale - name of the notified
         parties say Dhanraj Mills. The offers can be made by
         individuals as well as by corporate and other entities. The
         offerer, whose offer is accepted by the Court, will be
         required to make payment within 15 days from the date
F        of acceptance of the offer by the Court. Here also, the
         Court reseNes its rights to accept or reject any of the
         highest offer or bid that may be received by the Court
         without assigning any reason whatsoever. Once the
         highest offer is ascertained, the management of the
         company should be given an option to buy the shares.
G
         This is to avoid destablization of the company. The
         purchaser(s) shall comply with all regulations including the
         Take Over Regulations of SEBI. In cases where the
         Custodian finds that as on the relevant date, he does not
         possess shares of a company to the extent of 5% or
H
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1013
               ORS. [D.K. JAIN, J.]
     above, but he anticipates that in near future, the limit is likely   A
     to reach with the other shares coming in, then the
     Custodian shall submit his report to the Court for keeping
     aside such shares of a notified party for future disposal.
     However, public financial institutions will not be required
     to make any deposit along with their offer(s)."                      B

                                              (Emphasis supplied)

     4. The Special Court approved the scheme, propounded
by the Custodian for sale of Controlling Block of Shares in toto
and ordered sale of all registered shares, except the shares              C
of Apollo because their objection regarding registration of
unregistered shares in the name of Custodian/notified parties,
was pending adjudication by this Court.

     5. The order of the Special Court was challenged both by             D
the notified parties and Apollo. By order dated 23rd August,
2001 in Civil Appeal No.7629 of 1999 [connected C.A. Nos.
7630 of 1999 and 5813 to 5814 of 2000], this Court, while
approving the basic structure of the scheme and the directions
given by the Special Court for disposal of shares, disposed of            E
the appeal with the following directions insofar as the sale of
controlling block of shares, was concerned:

    "In respect of the sale of controlling block of shares the only
    method laid down by the Special Court is to offer the sale
    of shares in a composite block. It is not known whether               F
    such a sale will get the best price in respect there:of. We,
    therefore, direct that it will be open to the Special Court
    to decide whether to have the sale of the controlling block
    of shares either by inviting bids for purchase of controlling
    block as such or by selling the said shares according to              G
    the norms fixed for the sale of bulk shares or by the norms
    fixed in respect of routine shares. The object being that
    the highest price possible should be realised, it is left to
    the Court to decide what procedure to adopt.
                                                                          H
    1014 SUPREME COURT REPORTS [2011) 14 (ADDL.) S.C.R.

A              If the Court thinks that it is best to adopt the norms
        laid down by it for sale of controlling block of shares (the
        3rd method) then when highest offer is received and the
        Management of the Company is given an option to buy
        those shares at that price, then if the Management so
B       desires the Court should give the Company an opportunity
        to buy back the shares at the highest price offered by
        complying with the provisions of Section 77 A of the
        Companies Act. In other words, on the receipt of the offer
        for the sale of the controlling block, the Court will give an
c       opportunity, if it chooses to consider the offer, to the
        Management to buy or to the Company to buy back under
        Section 77A of the Companies Act. No other change in
        the Scheme as formulated by the Special Court is called
        for.
D       It is made clear that in respect of the controlling block of
        shares the third method will first be adopted, namely, the
        norms for sale of controlling block of shares; and it is only
        if the Court is satisfied that by adopting that method the
        highest price is not available then it will have an option to
E       follow the 2nd method relating to sale of bulk shares.
        Further, if the Court is satisfied that by following any of the
        above two methods the highest price is not available, then
        it will have an option to follow the norms as laid down for
        routine shares (the 1st method).
F
       These appeals are disposed of in the aforesaid terms."
       (Emphasis supplied by us)
  In compliance with the aforesaid orders/directions, the
  Custodian drafted the 'terms and conditions of sale' for sale
G of 54,88,850 shares of Apollo. Some of the terms and
  conditions, relevant for this appeal are as follows :
       II




H
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1015
                ORS. [D.K. JAIN, J.]

     5. Even after acceptance of the offer/identification of the     A
     highest bidder by the Disposal Committee, the approval
     of sale will be subject to the sanction of Hon'ble Special
     Court.

                                                                     B
     7.     The Bids are to be submitted for the entire lot of
     shares of the said Company viz. 54,88,850 shares. Bids
     in part (less number of shares than total) shall not be
     considered.
                                                                     c


     14. The Custodian will obtain directions of the Hon'ble
     Court for approval of the offer of the highest bidder so        D
     identified by the Disposal Committee. The Hon'ble Special
     Court after ascertaining the highest offer may give an
     opportunity to the management of the said Company to
     buy or to the Company to buy-back as per provisions of
     the Companies Act, 1956, the said "Controlling Block"           E
     of shares if it so desires.

     15. The sale as stated herein above is subject to the
     sanction of Hon'ble Special Court. The Hon'ble Special
     Court reserves the right to accept or reject any of the offer   F
     or bids that may be received for purchase of the shares.
                                                    n



     6. Pursuant thereto, the Custodian invited bids from
individuals as well as from the corporate and other entities. The    G
offers were to reach the office of the Custodian by 3.00 p.m.
on or before 25th April 2003. In response, only two bids were
received, the highest being Rs. 80/- per share given by Punjab
National Bank. The Disposal Committee evaluated the bids so
received and vide its minutes dated 25th April 2003,                 H
    1016 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A recommended that in addition to the aforesaid 54,88,850
  shares, additional 8, 15,485 benami shares also be sold to the
  highest bidder subject to sanction by the S_pecial Cou~t.
  Accordingly, the Custodian submitted a report to the Special
  Court for consideration and appropriate orders. By the
B impugned order, dated 30th April, 2003, corrected vide order
  dated 2nd May, 2003, the Special Court directed sale of
  54,88,850 shares to Apollo and its management at Rs.90/- per
  share. Being dissatisfied with and aggrieved by the order
  indicated hereinbefore, the appellants have preferred· this
c appeal.
        7. At the time of admission of this appeal on 29th May,
    2003, the following interim order was made:

        "Appeal admitted.
D
        Mr. A.D.N. Rao, Ms. Manik Karanjawala and Ms. Pallavi
        Shroff, learned counsel accept notice on behalf of
        respondent Nos.1, 3 and 7 respectively. Learned counsel
        appearing for the Management - Respondent No.7
        submits that as on date only 4.95% of the shares
E
        purchased alone are in existence. In regard to these
        existing shares, the learned counsel undertakes not to
        further alienate them. We record the said undertaking."

        8. Ms. Kamini Jaiswal, learned counsel a:-ipearing on
F behalf of the appellants, while assailing the impugned orders
   on several grounds, strenuously urged that the sale of
   54,88,850 shares of Apollo ought to be rescinded, particularly
   because, the said sale was in conscious breach of the scheme
  as also the terms and conditions laid down for the sale of these
G shares and was also in violation of the principles of natural
  justice.

       9. Elaborating her contention th;:it the sale was in
  contravention of the scheme framed by the Custodian and duly
H approved by the Special Court by order dated 17th August,
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1017
              ORS. [D.K. JAIN, J.]

2000 and with modifications by this Court vide order dated 23rd A
August, 2001, learned counsel argued that Condition No.14· in
the 'terms and conditions for sale' had been violated on three
counts: viz. (i) Apollo and/or its. management could be invited
to bid only after the Special Court had ascertained the highest
offer and satisfied itself about the inadequacy of the other bids. B
But the Custodian vide letter dated 28th April 2003, invited
Apollo to bid for purchase of the said shares on his own volition,
even before the bids received were placed before the Special
Court; (ii) the offer to bid was to be made either to Apollo 'OR'
its management and not to both as was done in the present c
case and (iii) the buy back effected by Apollo was in complete
violation of Section 77A of the Companies Act, 1956 (for short
"the Companies Act") as well as SEBI (Buy back of Securities)
Regulations, 1998. It was also urged that by accepting the bids.
of Apollo and respondent Nos.5 to 8, who were the investment. 0
companies of the promoters of Apollo, Condition No.7 of the
said terms and conditions was also violated because each bid
had to be for the entire lot of shares and not for a part of shares.

      10. Alleging collusion between the Custodian, Apollo and
 its management, learned counsel submitted that, though the E
appellants and their relatives and corporate entities promoted
by them were together holding approximately one crore shares
 in Apollo, which were ready and available for sale, yet, the
Custodian proposed sale of only 54,88,850 shares. Further, the
Custodian never explained the rationale behind breaking up the F
controlling block of shares to only 15.1 % of the equity capital
when the total share holdings were easily more than 25% of
the capital of the company. It was asserted that, the offer for
sale of 15.1 % shares was deliberately resorted to by the
Custodian only to ensure that no other bid came forward as G
such a prospective bidder would have been bound to make a
further public offer for purchase of 20% of the capital under
SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997. It was strenuously urged that the Custodian,
with ulterior motive, had made the conditions very stringent and H
    1018 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A onerous to restrict and for that matter, practically deny
  participation of any other institution or individual in the bidding
  process.
        11. It was contended that the impugned sale was in
   complete violation of the order of this Court dated 23rd August,
8
   2001, wherein it was stated that the object for laying down the
   norms was to realise the highest possible price for the shares.
   It was urged that in the instant case, instead of maximising the
   price, the shares were sold at a discount of 25% of the then
C prevailing market price, thereby defeating the very purpose of
   the scheme. It was thus, contended before us that the Disposal
   Committee and the Custodian ought not to have recommended
   the acceptance of the bid at Rs.90/- per share since both the
   offers received were way below the then prevailing market price
   as well as the book value of shares. Under the given
D circumstances, according to the learned counsel, the Special
  Court should have opted for the 2nd method relating to sale of
   bulk shares, as stipulated in the order of this Court dated 23rd
  August 2001. It was urged that the Special Court also failed to
  follow its past precedents, particularly in the case of Mis
E Ranbaxy Laboratories Ltd., when 8,04, 777 shares were
  ordered to be sold@ Rs.565/- per share. In that case, the bid
  was received under the Bulk Category @ Rs.540/- per share
  but on the insistence of the Special Court, the offer was
  improved to bring it at par with the prevailing market price. In
F support of the proposition that the Custodian as also the
  Special Court having committed material irregularities, resulting
  in substantial injury to the appellants, the subject sale of shares
  is liable to be set aside, learned counsel placed reliance on
  the observations of this Court in Desh Bandhu Gupta Vs. N.L.
G Anand & Rajinder Singh 1 and Gajadhar Prasad & Ors. Vs.
  Babu Bhakta Ratan & Ors2.

          12. Learned counsel strenuously contended that .the
    1.   (1994) 1 sec 131.
H   2.   (1973) 2 sec 629.
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1019
               ORS. [D.K. JAIN, J.]           .

  impugned order was also arbitrary and in violation of the A
  principles of natural justice in as much as the Spedal Court not
  only outrightly rejected the prayer made by the notified parties
  during the course of proceedings on 3oth April, 2003 for grant
 of 48 hours time to secure a better offer in the same manner
 as was done to secure a better offer for the Bulk category B
 shares of M/s Ranbaxy Laboratories Ltd., it also failed to
 consider the objections raised by them in their written
 submissions filed on 2nd May, 2003. It was stressed that the
 Special Court rejected the legitimate request of the appellants
 without any justification and showed undue haste in ordering C
 the sale of shares, even ignoring the direction of this Court, i.e.,
 to explore the possibility of selling the shares either under the
 Bulk Category or as Routine Shares to secure maximum price
.for the shares. On the contrary, the Special Court granted Apollo
 and its management two days to bring their proper offer and
 earnest money on 2nd May, 2003, which fact is duly recorded
                                                                      0
 in the impugned order dated 30th April, 2003. In order to bring
 home her allegation of discriminatory treatment at the hands
 of the Custodian as also by the Special Court, learned counsel
 referred to the two letters dated 28th April, 2003 and 29th April,
 2003, addressed to the notified parties by the Custodian E
 intimating them about the date when the Special Court would
 consider the bids received in response to the advertisement
for sale of subject shares. While letter dated 28th April, 2003
 allowed the notified parties to submit offers independently
 received by them for purchase of the said shares, letter dated F
29th April, 2003; made it clear that no offers brought by the
 notified parties to the Court would be considered. As regards
the reasoning of the Special Court that any delay in finalisation
of the bid would have resulted in a crash in the market price of
the shares because of break in the news of purchase of huge G
quantity of shares by one party, it was submitted that the said
reasoning was again erroneous in as much as the news of sale
of 54,88,850 shares of Apollo was already in public domain
when advertisement for sale of these shares was published. It
was thus, pleaded that the impugned order be set aside and H
    1020 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A the entire sale of 54.88 lakhs shares be rescinded in public
  interest and to achieve the object of the Special Court Act.

        13. Per contra, Mr. Joseph Vellapally, learned senior
   counsel appearing for Apollo, supporting the order; of the
   Special Court, at the outset, submitted that the said order had
B been passed by the Special Court in exercise of wide
   discretionary powers conferred on it by the Special Court Act
   as also by this Court and that such discretion can be interfered
   with only if it is shown to have been exercised in violation of
   the statutory provisions or contrary to the well established judicial
C principles. It was argued that in the present case the decision
   of the Special Court was based on the recommendation of the
   Disposal Committee, which consisted of experts in the field of
   securities and shares, and therefore, it cannot be said to be
   perverse so as to warrant interference by this Court. In order
D to highlight the role of the Di~posal Committee and the
  probative value of its advice and recommendations, learned
  senior counsel commended us to a decision of this Court in
  Sudhir S. Mehta & Ors. Vs. Custodian & Anr. 3 In support of
  his submission that the Appellate Court should not lightly
E interfere with the discretion exercised by the Trial Court, learned
  counsel placed heavy reliance on the decisions of this Court
  in Ramji Dayawala And Sons (P) Ltd. Vs. Invest Import'+ and
  Wander Ltd. And Anr. Vs. Antox India P. Ltd. 5 , wherein it was
  held that the Appellate Court would not ordinarily substitute its
F discretion in the place of the discretion exercised by the Trial
  Courts, save and except where the Trial Court had ignored the
  relevant evidence, sidetracked the approach to be adopted in
  the matter or overlooked various relevant considerations. The
  Appellate Court would normally not be justified in interfering
G with the exercise of discretion under appeal solely on the
  ground that if it had considered the matter at the trial stage it

    3.   (2008) 12 sec 84.
    4.   (1981) 1 sec 80 at page 96.
H   5.   1990 (Supp) sec 727.
      ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1021
                  ORS. [D.K. JAIN, J.]

 would have come to a contrary conclusion. It was strenuously        A
 urged that the Special Court having acted reasonably and in a
 judicious manner, this Court should not interfere with the
 decision of the Special Court in approving the sale of shares
 to Apollo.
                                                                     B
      14. It was further contended by Mr. Vellapally that the
 appellants have no locus standi to assail the entire sale of
 54.88 lakh shares as their shareholding was only 1,49,570
 shares, as stated in the affidavit of the Custodian. It was
 pointed out that there was no averment in the appeal to the         C
 effect that the same was being filed in a representative capacity
 on behalf of other members of Harshad Mehta Group. At best,
 the appellants could impugn sale of 1,49,570 shares.

       15. It was also contended by Mr. Vellapally that in terms
 of the order of the Special Court dated 17th August, 2000 and       D
 the order of this Court dated 23rd August, 2001, the
 management of Apollo had the right to buy and Apollo had the
 right to buy back its own shares under Section 77A of the
 Companies Act, once the highest offer is received from those
 entities who participated in the bid. Sin.ce the purchase of        E
 shares by Apollo was akin to an auction sale, its interests as a
 bonafide purchaser in the shares are saved, having no
 connection with the underlying dispute between the Custodian
 and the notified parties. In support of the contention, reliance
 was placed· on Ash win S. Mehta Vs. Custodian6 wherein,             F
 according to the learned counsel, (albeit dealing with sale of
 commercial properties) in a similar situation, the interests of
 bona fide purchasers were protected.

       16. Refuting the claim of the appellants that the said sale
. of shares of Apollo was at a loss, it was submitted by Mr.         G
  Vellapally that it is a matter of common knowledge that
  transactions in the stock market are speculative in nature and
  cannot be predicted with accuracy. It was submitted that this

 6.   (2006) 2 sec 385 at para 67-72.                                H
    1022 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.

A Court in the matter of Sudhir S. Mehta (supra), while dealing
  with the notified parties' objections to a sale of shares of
  Reliance Industries Ltd. had observed that the sale of shares
  between the period '12.12.2000 to 1.11.2007' (said period
  covering the sale of shares of Apollo) could not be said to be
B at a toss, especially because of the fact that the said sale had
  been approved by the Disposal Committee, a committee of
  experts.

        17. Lastly, learned senior counsel submitted that pursuant
  to the buy back of shares and on due compliance with the
C provisions of Section 77A read with Section 77A (7) of the
  Companies Act, Apollo had already extinguished 36.90 lakh
  shares so bought-back and therefore, to that extent, prayer of
  the appellants to rescind the purchase of shares is rendered
  infructuous. It was asserted that any order at this juncture, setting
D aside the impugned order, would not result in resurrection of
  the extinguished shares but entail a fresh issue of shares under
  Sections 79 and 81 of the Companies Act, which is fraught with
  statutory restrictions and difficulties, resultantly affecting the
  rights of third party shareholders, who are not parties to the
E present dispute.

       18. Mr. Arvind Kumar Tewari, learned counsel appearing
  on behalf of the Custodian (respondent No. 2), supporting the
  impugned order, vehemently argued that the Special Court had
F not only followed all the norms settled by this Court, it was also
  successful in obtaining a price higher by Rs.10/- per share as
  compared to what was offered by the highest bidder, viz. Punjab
  National Bank. It was alleged that in spite of being informed
  by the Custodian in advance, vide letter dated 28th April, 2003,
G the appellants had failed to arrange for a purchaser who could
  bid higher than Apollo and had frivolously sought another two
  days time to arrange for a higher bid.

       19. Dr. A: M. Singhvi, learned senior counsel appearing
  for respondents Nos. 3, 6 and 8, the co-bidders with Apollo,
H while adopting all the submissions made on behalf of Apollo,
     ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1023
                  ORS. [D.K. JAIN, J.]

  reiterated that 'the said respondents being bonafide bidders,       A
  having no concern with the procedure adopted by the
  Custodian for sale of shares, any interference by this Court with
  a well reasoned and equitable order passed by the. Special
  Court would cause extreme hardship to them. In support of the
  submission that having regard to the nature of controversy          B
  sought to be raised by the appellants notified parties under the
  Special Court Act, this Court will be loath to interfere with the
 discretion exercised by the Special Court, learned senior
  counsel commended us to the decisions of this Court in
  Employees' State Insurance Corpn. & Ors. Vs. Jardine                C
  Henderson Staff Association & Ors. 7, State ofM.P. & Ors. Vs.
  Nandlal Jaiswal & Ors. 8, Ramana Dayaram Shetty Vs.
 International Airporl Authority of India & Ors. 9; Sesa Industries
 Limited Vs. Krishna H. Bajaj & Ors. 10 and on a decision of the
 House of Lords in Susannah Sharp Vs. Wakefield & Ors. 11 • In
 the alternative, learned counsel submitted that iffor any reason,    D
 this Court was to come to a conclusion that the price realised
 for sale of said shares was at a discount and/or less than the
 market price then the relief granted to the appellants ought to
 be confined to their shareholding and the promoters may be
 directed to pay the difference between the price paid by them        E
 for the purchase of shares i.e. Rs. 90/- per share and the then
 prevailing market price i.e. Rs. 120/- per share. In support of
 his proposition that this Court had sufficient powers under
 Article 142 of the Constitution of India to balance the equities
 between the parties and render complete justice by moulding          F
 the relief, learned senior counsel placed reliance on the
·observations made by this Court in Rajesh D. Darbar Vs.
 Narasingrao Krishnaji Kulkami12•

7.   c2006) 6 sec 581.                                                G
8.   (1986) 4 sec 566.
9.   (1979) 3 sec 489.
10. c2011) 3 sec 218.
11. (1891) A.C. 173
12. c2003) 7 sec 219.                                                 H
     1024 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


 A        20. Before addressing the contentions advanced on behalf
     of the parties, it will be necessary and expedient to notice the
     overarching considerations behind the enactment of the
     Special Court Act, which came into force on 6th June, 1992. It
     replaced the Special Court (Trial of Offences Relating to
 8 Transactions in Securities) Ordinance 1992, as promulgated
     on 6th June 1992, when large scale irregularities and
     malpractices pertaining to the transactions in both Government
    and other securities, indulged in by some brokers in collusion
    with the employees of various banks and financial institutions
C were noticed. The Special Court Act provides for establishment
    of a Special Court for speedy trial of offences relating to
    transactions in securities and disposal of properties attached
    thereunder. Section 3 of the Special Court Act relates to the
    appointment and functions of the Custodian. Sub-section (2)
    thereof clothes the Custodian with the power to notify in the
D official gazette, the name of a person, who has been involved
    in any offence relating to transactions in securities during the
    period as mentioned therein. Sub-sections (3) and (4) of
    Section 3 stipulate that with the issue of the aforesaid
    notification, properties, movable or immovable or both,
E belonging to the notified person shall stand attached, and such
    properties are to be dealt with by the Custodian in such manner
   as the Special Court may direct. Section 9A of the Special
    Court Act deals with the jurisdiction, power, authority and the
    procedure to be adopted by the Special Court in civil matters.
F In short, on and from the commencement of the Special Court
   Act, the Special Court exercises all such jurisdiction etc. as are
   exercisable by a Civil Court in relation to any matter or claim
   relating to any property that stands attached under sub-section
   (3) of Section 3 and it bars all other courts from exercising any
G jurisdiction in relation to any matter or claim referred to in the
   said Section. Sub-section (4) of Section 9A of the Special Court
   Act contemplates that the Special Court shall not be bound by
   the procedure laid down by the Code of Civil Procedure, 1908
   and shall have the power to regulate its own procedure, but shall
H be guided by the principles of natural justice. The other
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1025
               ORS. (D.K. JAIN, J.]

provision, which is releva.nt for our purpose is Section 11 of the      A
Special Court Act, which exclusively empowers the Special
Court to give directions in the matter of disposal of the property
of a notified person, under attachment. Sub-section (2) of
Section 11- lists the priorities in which the liabilities of the
notified person are required to be paid or discharged.                  B

       21. It is plain that the Special Court Act which is a special
 statute, is a complete code in itself. The purpose and object
 for which it was enacted was not only to punish the persons who
 were involved in the act of criminal misconduct by defrauding C
 the banks and financial institutions but also to see that the ·
 properties, moveable or immovable or both, belonging to the
 persons notified by the Custodian were appropriated and
 disposed of for discharge of liabilities to the banks and financial
 institutions, specified government dues and any other liability.
Therefore, a notified party has an intrinsic interest in the D
 realisations, on the disposal of any attached property because
 it would have a direct bearing on the discharge of his liabilities
in terms of Section 11 of the Special Court Act. It is also clear
that the Custodian has to deal with the attached properties only
in such manner as the Special Court may direct. The Custodian E
is required to assist in the attachment of the notified person's
property and to manage the same thereafter. The properties
of the notified persons, whether attached or not, do not at any
point of time, vest in him, unlike a Receiver under the Civil
Procedure Code or an official Receiver under the Provincial F
Insolvency Act or official Assignee under the Presidency
Insolvency Act (See : 8.0./. Finance Ltd. Vs. Custodian &
Ors.) 13 • The statute also mandates that the Special Court shall
be guided by the principles of natural justice.
                                                                         G
       22. At this juncture, it would also be profitable to briefly note
the salient features of the scheme formulated by the Custodian
for sale of shares in terms of the directions issued by this Court
in its order dated 11th March 1996 (CA No.5225/1995); the
13. (1997) 10 sec 488.                                                 H
    1026 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A norms laid down by the Special Court vide order dated 17th
  August 2000 and the modification of these norms by this Court
  vide order dated 23rd August, 2001 (CA No.5326/1995). What
  clearly emerges from the scheme/orders is that the underlying
  object of the procedure/norms laid down in the scheme is to
B ensure that highest possible price on sale of shares is realised.
  It is manifest that with this end in view, this Court vide order
  dated 23rd August, 2001, left it to the Special Court to decide
  what procedure to adopt in order to realise the highest price
  for the shares. The scheme/norms had been further modified
c by the Special Court and this Court in a way to inject flexibility
  in the scheme in order to secure the highest price for the
  shares.

          23. Having examined the impugned order in the light of the
     Statutory provisions and the norms laid down for sale of the
D    subject shares, we are of the opinion that there is substance
     and merit in the submissions made by learned counsel for the
    appellants to the extent that the Special Court failed to make a
     serious effort to realise the highest possible price for the said
    shares. We also feel that the Special Court overlooked the
E    norms laid down by it in its order dated 17th August 2000;
     ignored the afore-extracted directions by this Court contained
    in order dated 23rd August 2001 and glossed over the
    procedural irregularities committed by the Custodian. As stated
    above, Condition No.14 of the terms and conditions of sale,
F   clearly stipulated that it was only after the Special Court had
    ascertained the highest offer that Apollo or its management was
    to be given an option to buy back the shares. However, the letter
    of the Custodian dated 28th April, 2003, addressed to Apollo
    clearly divulges the fact that the Custodian had, without any
G   authority, invited Apollo and its management 'to bid' on 30th
    April, 2003, the settled date, when the report of the Disposal
    Committee was yet to be considered by the Special Court. It
    is evident from Condition No.15 of terms and conditions of sale,
    that the Special Court has the discretion to accept or reject any
H   offer or bid that .may be received for purchase of shares.
  ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1027
               ORS. [D.K. JAIN, J.]

 Therefore, the stand of the Custodian that inviting Apollo to          A
 make the bid was necessarily in compliance of the scheme/
 condition of sale, cannot be accepted inasmuch as it was for
the Special Court to take such a decision at the appropriate
time and not the Custodian. The Custodian could not have
 foreseen that the Special Court would not accept the bid of the        B
 sole bidder viz. Punjab National Bank. As aforesaid, so far as
 issue of notification in terms of Section 3(2) is concerned, the
 Custodian derives his power and authority from the Special
Court Act but his jurisdiction to deal with property under
attachment, flows only from the orders which may be made by             c
the Special Court constituted under the said Act. It is obligatory
 upon the Custodian to perform all the functions assigned to him
strictly in accordance with the directions of the Special Court.
In the present case, although we do not find any material on
record which may suggest any malafides on the part of the
                                                                        0
Custodian yet we are convinced that by inviting Apollo to bid,
vide letter dated 28th April, 2003, the Custodian did exceed
the directions issued to him by the Special Court. However, we
feel that this being in the nature of a procedural omission, the
alleged violation is not per se sufficient to nullify the sale of       E
shares.

     24. T)1e next question for determination is whether or not
the impugned decision of the Special Court is in breach of the
principles of natural justice, thereby vitiating its decision to sell
the subject shares to Apollo and the companies managed by               F
their promoters?

     25. It is true that rules of "natural justice" are not embodied
rules. The phrase "natural justice" is also not capable of a
precise definition. The underlying principle of natural justice,        G
evolved under the common law, is to- check arbitrary exercise
of power by any authority, irrespective of whether the power
which is conferred on a statutory body or Tribunal is
administrative or quasi judicial. The concept of "natural justice"
implies a duty to act fairly i.e. fair play in action. As observed
                                                                        H
                      '·




    1028 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A in AK. Kraipak Vs. Union of India, 14 the aim of rules of natural
  justice is to secure justice or to put it negatively to prevent
  miscarriage of justice.

       26. In Swadeshi Cotton Mills Vs. Union of lndia 15, R.S.
B Sarkaria, J., speaking for the majority in a three-Judge Bench,
  lucidly explained the meaning and scope of the concept of
  "natural justice". Referring to several decisions, His Lordship
  observed thus: (SCC p. 666)

         "Rules of natural justice are not embodied rules. Being
c        means to an end and not an end in themselves, it is not
         possible to make an exhaustive catalogue of such rules.
         But there are two fundamental maxims of natural justice viz.
         (i) audi alteram partem (ii) memo judex in re sua. The
         audi alteram partem rule has many facets, two of them
D        being (a) notice of the case to be met; and (b) opportunity
         to explain. This rule cannot be sacrificed at the altar of
         administrative convenience or celerity. The general
         principle-as distinguished from an absolute rule of
         uniform application-seems to be that where a statute
E        does not, in terms, exclude this rule of prior hearing but
         contemplates a post-decisional hearing amounting to a full
         review of the original order on merits, then such a statute
         would be construed as excluding the audi alteram partem
         rule at the pre-decisional stage. Conversely if the statute
F        conferring the power is silent with regard to the giving of
         a pre-decisional hearing to the person affected and the
         administrative decision taken by the authority involves civil
         consequences of a grave nature, and no full review or
         appeal on merits against that decision is provided, courts
         will be extremely reluctant to construe such a statute as
G
         excluding the duty of affording even a minimal hearing,
         shorn of all its formal trappings and dilatory features at the
         pre-decisional stage, unless, viewed pragmatically, it
    14. (1969) 2 sec 262.
H 15. (1981) 1 sec 664.
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1029
                ORS. [D.K. JAIN, J.]

     would paralyse the administrative proces$ or frustrate the         A
     need for utmost promptitude. In short, this rule of fair play
     must not be jettisoned save in very exceptional
     circumstances where compulsive necessity so demands.
     The court must make every effort to salvage this cardinal
     rule to the maximum extent possible, with situational              B
     modifications. But, the core of it must, however, remain,
     namely, that the person affected must have reasonable
     opportunity of being heard and the hearing .must be a
     genuine hearing and not an empty public relations
     exercise."                                                         c
                                     (emphasis supplied by_us)

      27. It is thus, trite that requirement of giving r.easonable
 opportunity of being heard before an order is made by an
 administrative, quasi judicial or judicial authority, particularly D
when such an order entails adverse civil consequences,which__ .
would include infraction of property, personal rights and material
deprivation for the party affected, cannot be sacrificed at the
alter of administrative exigency or celerity. Undoubtedly, there
can be exceptions to the said doctrine and as aforesaid the E
extent and its application cannot be put in a strait-jacket formula.
The question whether the principle ha$ to be applied or not is
to be considered bearing in mind the express language and
the basic scheme of the provision conferring the power; .the        I

nature of the power conferred; the purpose for which the power F ·
is conferred and the final effect of the exercise of that power
on the rights of the person affected.

      28. In the backdrop of the aforenoted legal principles and
the requirement of sub-section 4 of Section 9A of the Special
Court Act, we are of the opinion that in the present case the           G
Special Court failed to comply with the principles of natural
justice. As noted above, the Special Court rejected the prayer
of the appellants to grant them 48 hours' time to secure a better
oifer. In fact, by his letter dated 29th April, 2003 addressed by
the Custodian to the notifljd parties, including the appellants,        H
    1030 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A the right of the appellants to bring better offer was foreclosed
  by the Custodian, which evidently was without the permission
  of the Special Court. Furthermore, the Special Court also
  ignored its past precedents whereby it had granted time to the
  parties to get better offers for sale of shares of Mis Ranbaxy
B Laboratories Ltd. There is also force in the plea of learned
  counsel appearing for the appellants that the reason assigned
  by the Special Court in its order dated 30th April, 2003, for
  declining further time to the appellants, that deferment of
  decision on the sale of shares would have resulted in the share
c market falling down is unsound and unfounded. As stated
  above, the share market was already aware of the sale of a
  big chunk of shares of Apollo in view of the advertisement
  published by the Custodian and therefore, there was hardly any
  possibility of further volatility in the price of said shares. We are
  thus, convinced that the appellants have been denied a proper
0
  opportunity to bring a better offer for sale of shares, resulting
  in the realisation of lesser amount by way of sale of the subject
  shares, to the detriment of the appellants and other notified
  parties. Therefore, the decision of the Special Court deserves
E to be set aside on that short ground.

        29. We shall now advert to the plea strenuously canvassed
  on behalf of the respondents that the Special Court having
  exercised the discretion vested in it under the Special Court
  Act, keeping in view all the parameters relevant for disposal of
F the shares, this Court may not interfere with the impugned order.
  There is no quarrel with the general proposition that an Appellate
  Court will not ordinarily substitute its discretion in the place of
  the discretion exercised by the Trial Court unless.it is shown to
  have been exercised under a mistake of law or fact or in
G disregard of a settled principle or by taking into consideration
  irrelevant material. A 'discretion', when applied to a court of
  justice means discretion guided by law. It must not be arbitrary,
  vague and fanciful but legal and regular. (See: R. Vs. Wilkes 16 ).

        30. We have therefore, no hesitation in agreeing with Mr.
H
   ASHIWIN S. MEHTA & ANR. v. UNION OF INDIA & 1031
                ORS. [D.K. JAIN, J.]

· Vellapally to the extent that same principle would govern a.1        A
  appeal preferred under Section 10 of the Special Court Act.
  However, since we have come to the conclusion that the
  Special Court has exercised its discretion in complete
  disregard ·to its own scheme and 'terms and conditions'
 approved by it for sale of shar~s and above all that the              B
  impugned order was passed in violation of the principles of
  natural justice, we think that the facts in hand call for our
  interference, to correct the wrong committed by the Special
 Court.

      31. For the view we have taken above, we deem it                 C
 unnecessary to deal with the other contentions urged on behalf
 of the parties on the merits of the impugned order.

        32. This brings us to the question of relief. In view of our
  finding that the decision of the Special Court is vitiated. on the   D
  afore-stated grounds, it must follow as a necessary
  consequence that in the normal course, the impugned order
  must be struck down in its entirety. However, bearing in mind
  the fact that the sale of 54,88,850 shares was approved and
  all procedural modalities are stated to have been carried out        E
  in the year 2003, we are inclined to agree with Mr. Vellapally
  and Dr. Singhvi that at this stage, when 36.90 lakh shares of
. Apollo are claimed to have been extinguished, the relief sought
  for by the appellants to rescind the entire sale of 54,88,850
  shares will be impracticable and fraught with'grave difficulties.    F
  In our opinion, therefore, the relief in this appeal should be
 confined to 4.95% of the shares, subject matter of interim order,
 dated 29th May, 2003, extracted above.

      33. In the result, we allow the appeal partly; set aside the
impugned order to the extent indicated above and remit the G
case to the Special Court for taking necessary steps to recover
th_e said 4.95% shares from Apollo or its management, as the
case may tie, and put them to fresh sale strictly in terms of the ·
aforenoted norms as approved by this Court vide order dated
23rd August, 2001. The shareholders who will be affected by H
    1032 SUPREME COURT REPORTS (2011114 (ADDL.) S.C.R.


A this order shall be entitled to the sale consideration paid by
  them to the Custodian alongwith simple interest @6% p.a. from
  the date of payment by them upto the date of actual
  reimbursement by the Custodian in terms of this order.

         34. However, in the facts and circumstances of the case,
8
    the parties are left to bear their own costs.

    N.J.                                  Appeal partly allowed.