Holding

Section 4(1) applies only to third‑party purchases, while Section 3(3) automatically attaches all properties of notified persons as of the notification date, regardless of the window period, and the matter must be reheard.

Summary

The Supreme Court examined an appeal by the family of the late Harshad Mehta challenging the Special Court's order to sell nine residential flats that had been attached under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The appellants argued that Section 4(1) of the Act, which deals with benami transactions, should apply because the flats were bought with tainted funds, and that the attachment should be limited to assets acquired during the statutory window period. The Court held that Section 4(1) applies only when a notified person purchases property in the name of a third party using tainted funds, not when the notified persons themselves acquire the property. It further clarified that Section 3(3) effects automatic attachment of all properties of notified persons as of the notification date, irrespective of when they were acquired. The Court emphasized a purposive rather than literal construction of the statute and remanded the matter to the Special Court for fresh consideration with directions to examine audit reports and the parties' submissions. The appeal was allowed and the impugned judgment set aside.

Issues considered

Does Section 4(1) of the Special Court Act apply to properties purchased by the notified persons themselves or only to third‑party purchases?
Is the attachment of property under Section 3(3) limited to assets acquired within the statutory window period?
Can the appellants be treated as a single Harshad Mehta group for liability purposes?
Did the Special Court correctly apply the Supreme Court's directions in Ashwin Mehta?
May audit reports and committee findings be used as evidence in determining attachment?
Are the appellants' properties benami and therefore subject to forfeiture under the Act?

Legislation cited

Benami Transactions (Prohibition) Act, 1988
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992s. 11, s. 3(2), s. 3(3), s. 4(1), s. 9A

Subjects

Special Court Actattachment of propertystatutory interpretationpurposive constructionwindow periodbenami transactioncorporate veilsecurities fraudcivil appeal

Judgment

[2009) 12 S.C.R. 1229

JYOTI HARSHAD MEHTA & ORS. A
v.
THE CUSTODIAN & ORS.
(Civil Appeal No. 5176 of 2009 @ D-25207 of 2008)
AUGUST 7, 2009
B
[S.B. SINHA AND DEEPAK VERMA, JJ.]

Special Court (Trial of Offences Relating to Transactions
in Securities) Act, 1992 - ss.3(2) & (3), 4(1), 9A and 11 -
Diversion of public funds for short term investment in c
securities market - Trial of criminal offences, as also civil
disputes, arising therefrom - Custodian appointed in terms
of the Act notified Harshad Mehta as also the appellants -
<.
All their properties stood attached - Judge, Special Court
directed sale of flats purportedly belonging to appellants - D
• Order challenged - Matter remitted back to Special Court -
Judgment passed by Judge, Special Court - Challenge to -
Dispute over interpretation and/or application of provisions of
the Act - Held: On facts, the Judge, Special Court failed to
consider relevant aspects in detail and did not weigh E
submissions and counter-submissions of both the parties in
proper perspective - There was non-application of mind on
his part - Direction to Judge, Special Court to consider the
matter afresh - Interpretation of Statutes - Purposive
construction -"ut res magis valeat quam pereat''.
F
The Reserve Bank of India in course of an
investigation, had inter alia opined that Harshad Mehta
(since deceased), alongwith his associates had diverted
huge amount of public funds belonging to Public Sector
Banks and Financial Institutions for short term G
investments in the securities market. The Special Court
(Trial of Offences Relating to Transactions in Securities)
Act, 1992 provided inter alia for constitution of a Special

1229 H
1230 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Court for trial of criminal offences, as also civil disputes,
arising therefrom during the "window period" i.e. from 1st
April, 1991 and 6th June, 1992. Around this time, the family
members of late Harshad Mehta had purchased movable,
immovable properties and shares. Out of these
B properties, there were nine residential flats purchased, in
a building called "Madhuli", in Worli, Mumbai. These flats
were merged and redesigned for joint living of the entire
family and these properties are the subject matter of the
present lis.
c In terms of the said Special Act, a Custodian was
appointed. The Custodian notified Harshad Mehta as also
the appellants; pursuant whereto all their properties
stood attached. The Judge, Special Court, on an
application filed by the custodian inter alia directed sale ;
D of flats purported to be belonging to the appellants. The
order came to be challenged before this Court in Ashwin •
Mehta which remitted the matter back to the Special Court
with certain directions. The matter was taken up thereafter
by the Judge, Special Court which passed the impugned
E judgment.
Before this Court, the appellants contended that the
Judge, Special Court misconstrued and misread the
directions issued by this Court in Ashwin Mehta; that he
F failed to take into consideration that the properties
belonging to the appellants were not and could not have
been treated as the benami properties of Harshad Mehta;
that in such an event sub-section(1) of Section 4 of the
Special Act was attracted; that sub-section (1) of Section
4 of the Special Act postulates that the notified persons
G
must acquire property in the name of another from the
tainted money during the window period and having
regard to the findings of the Auditors that Harshad Mehta
had purported to have advanced amounts by way of
loans or otherwise to the appellants much prior thereto,
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1231
ORS.

the impugned judgment is wholly unsustainable; that the A
J
right to keep property being a Constitutional as well as
Human Right and furthermore the provisions of the
Special Act being penal in nature, they deserve a strict
construction; that no finding having been arrived at, that
the properties in question had any nexus with the tainted B
funds received from the illegal security transactions, they
should have been released from attachment by the
Custodian; that the appellants being notified persons are
responsible for discharging their own liabilities from their
own assets and not those of Harshad Mehta and/or any c
other person and therefore it was not proper on the part
~
of the Judge, Special Court to club the appellants as part
of the Harshad Mehta Group and that the Judge, Special
Court reproduced large amounts of the Custodians'
report in the Judgment and did not take into account the D
arguments of the appellants.

Per contra, on behalf of the custodian, it was
contended that as the appellants were notified persons,
Section 4(1) of the Special Act had no application as all
their properties stood attached in terms of Section 3 of E
the Act and as such they could have been appropriated
for discharge of the liabilities of Harshad Mehta and group
under the scheme of the latter provision.

Interpretation and/or application of the provisions of F
the Special Act was thus involved in the present appeal.

Allowing the appeal and remanding the matter to the
Special Court, the Court

HELD: 1.1. Sub-section (1) of Section 4 of the Special G
Court (Trial of Offences Relating to Transactions in
Securities) Act, 1992 applies to the third parties and not
any notified party. It is only when a property has been
purchased in the name of a third party by a notified party
from the tainted funds acquired by him during the H
1232 SUPREME COURT REPORTS [2009] 12 S.C.R.

A window period, that the provisions of sub-section (1) of
Section 4 would apply. But in a case where the
properties have been purchased by the notified parties
themselves as members of a group in the name of one
or the other, the rigours of sub-section (1) of Section 4
B shall not apply. Section 3 of the Special Act, on the other
hand, postulates automatic statutory attachment of the
properties of the notified party. The acquisition of the
properties whether prior to the window period, during the
window period or thereafter can be attached for the
c discharge of liabilities. [Para 50] [1251-D-F]
1.2. A statute which seeks to take away a person's
right in property deserves strict construction. However, '
the courts are required to give purposive construction to
a statute to see that the purpose and object thereof is
D fully attained. This Act is a Special statute. It is a complete
Code in itself. The purpose and object for which it was
created was to punish the persons who were involved in
the acts of criminal misconduct in respect of defrauding
banks and financial institutions. Its object was to see that
E the properties of those who were involved shall be
appropriated for discharge of liabilities not only of banks
and financial institutions but also other governmental
agencies including the Income-tax Department. [Para 51]
[1251-G-H; 1252-A-B]
F
1.3. It is, however, not an expropriatory legislation as
such. The Act provides for sufficient safeguards in the
matter of sale of properties by auction or otherwise
towards discharge of debts of the notified persons. It
G provides for grant of full opportunity of hearing to the
notified persons. Notified persons have special
knowledge of the facts relating to their assets and
liabilities and, therefore, can always show that they have
been notified wrongly or that their properties are not liable
for sale either because their liabilities can otherwise be
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1233
ORS.

; discharged or the quantum of liabilities projected by the A
Custodian is not correct. [Para 52] [1252-C-D]

1.4. In construing the statute of this nature, the Court
should not always adhere to a literal meaning but would
construe the same, keeping in view the larger public
B
interest. For the said purpose the Court may also take
recourse to the basic rules of interpretation, namely ut res
magis valeat quam pereat to see that a machinery must
be so construed as to effectuate the liability imposed by
the charging section and to make the machinery
workable. [Para 53] [1252-E-F] c
1.5. The appellants are not correct in contending that
the advances made by Harshad Metha to them for the
~ purpose of purchase of properties would amount to
benami transactions whereof sub-section (1) of Section D
• 4 of the Special Act shall apply. [Para 58] [1254-H; 1255-
A]

Indian Handircrafts Emporium and others v. Union of
India and others, (2003) 7 SCC 589; Bairam Kumawat v.
E
Union of India and others, [(2003) 7 SCC 628 and P.K.
Arjunan v. State of Kera/a (2007) 9 sec 516, relied on.

Ashwin S. Mehta and another v. Custodian and others,
[(2005) 2 SCC 385 and Sudhir S Mehta v. Custodian & Ors,
[(2008) 12 sec 84], referred to. F

2. As regards the issue regarding nomenclature of
the parties, namely whether to consider them as a whole
group or as individuals, the appellants were members of
an H.U.F. and were seen to be working in tandem. G
~ Harshad Metha vis-a-vis the appellants was, thus, not a
third party. [Paras 59 and 61] [1255-B-C; 1256-G]

3.1. The attachment of all the properties in terms of
sub-section (3) of Section 3 of the Special Act is
automatic. The attachment restricts sale of the properties H
1234 SUPREME COURT REPORTS [2009] 12 S.C.R.

A which have been acquired from illegal securities
transaction. The sub-section specifically mentions that on
and from the date of the notification, 'any property,
movable or immovable, or both', belonging to any person
notified under the Act shall stand attached. The said sub-
8 section does not provide for any qualification that the
properties which are liable to be attached should relate
to the illegal securities transactions in respect of which
the Act was enacted. Had the intention of the Parliament
been so, it would have clearly mentioned it. It is well
c settled that when the meaning of the words used in an
Act is plain and clear, effect must be given thereto. [Para
65] [1258-8-D]

3.2. The provisions of Section 3(2) should not be read
into Section 3(3). Though Section 3 (3) is dependent on
D Section 3(2) for its operation, but once Section 3(2) comes
into operation, Section 3(3) becomes independent of it
-
f-

and accordingly the qualifications of Section 3(2) cannot
be read into Section 3(3). Had it been the intention of the
legislature to attach only those properties acquired within
E the statutory period, it would have clearly said so. The
statutory window period is only a relevant criterion for
application of Section 3(2) and therefore has no bearing
on the application of Section 3(3). [Para 70] [1259-G-H;
1260-A-B]
F
3.3. A plain reading of Section 3(3) would suggest
that all properties of the notified persons on the date of
the said notification would automatically stand attached
irrespective of the fact as to whether they had been
G acquired before, during or even after the statutory period.
A logical corollary of this would be that all income
accruing or arising from the said property even after the
date of attachment would also automatically stand
attached. However property acquired by a notified person
after the notification under the Special Act cannot be
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1235
ORS.

attached. That property does not come within the purview A
.~

of the Section 3(3). The cut off date for the attachment of
the property accordingly is the date of notification. All
properties of the persons on the said date automatically
stand attached. The statutory window period is irrelevant
for the attachment of the property. It would have no B
bearing on the said attachment. [Paras 71, 72 and 73]
[1260-B-E]

Tej Kumar Balakrishna Raju v. A.K. Menon, (1997) 9
sec 123, relied on.
c
4. It is true that to such an extent all properties would
be liable to be sold which are needed for redemption and
not beyond the same. What should be kept uppermost
in the mind of the Court is to see that the liabilities are
discharged and not beyond the same. It is with that end D
j in view that the powers of the Special Court contained
in Sections 9A and 11 must be construed. [Para 74) [1260-
F-G]

5. The reports of the Jankiraman Committee, the
E
Joint Parliamentary Committee and the Inter Disciplinary
Group {IDG) are admissible only for the purpose of
tracing the legal history of the Act alone. The contents of
the report should not have been used by the Judge,
Special Court as evidence. A lot of documents have been
filed with regard to Audited Reports. It does not appear F
that the Special Judge had considered this aspect of the
matter in great detail. The Judge, Special Court, should
consider the audit reports so as to arrive at a positive
finding with regard to the liabilities and assets possessed
by the appellants so as to enable to pass appropriate G
orders. The Special Court in his judgment has mainly
dealt with the contentions raised by the custodian in
terms of the written submission filed on its behalf. The
contentions of the appellants have not been considered
in the impugned judgment. This clearly shows the non- H
1236 SUPREME COURT REPORTS [2009] 12 S.C.R.

A application of mind of the Judge, Special Court. He was
required to weigh the submissions and counter-
..
submissions of both the parties in his proper perspective
and then arrive at a well reasoned opinion, which doesn't
seem to be the case. It is well settled that "Justice must
B not only be done, but also must be seem to be done".
The parties are directed to file Audited Reports and the
objections before the Judge, Special Court, so as to
enable him to consider the matter afresh strictly in the
light of the earlier judgment passed in Ashwin Mehta as
c well as the observations made herein. [Paras 75, 76, 77,
78 and 79] [1260-G-H; 1261-A-H; 1262-A]

Case Law Reference:
(2005) 2 sec 385 referred to Para 8
D (2008) 12 sec 84 referred to Para 21
(2003) 1 sec 589 relied on Para 53
(2003) 1 sec 628 relied on Para 54

E (2007) 9 sec 516 relied on Para 57
(1997) 9 sec 123 relied on Para 72

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5176 of 2009.
F
From the Judgment & Order dated 25.7.2008 of the
Special Court (Trial of Offences Relating to Transactions in
Securities) Mumbai in Misc. Petition No. 41 of 1999.

l.H. Syed, Varinder Kumar Sharma, Kamini Jaiswal, Rani
G Mishra, V.B. Joshi, Makesh Kumar, Arvind Kumar Tewari,
Abhishek Tewari, Subramonium Prasad for the appearing
parties.

The Judgment of the Court was delivered by
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1237
ORS.

S.B. SINHA, J. 1. Interpretation and/or application of the A
provisions of the Special Court (Trial of Offences Relating to
Transactions in Securities) Act, 1992, (hereinafter, for the sake
of brevity, referred to as 'the Special Act') is involved herein.

2. It arises out of an order dated 25th July, 2008 passed
B
by the learned Judge, Special Court at Mumbai in Misc. Petition
No.41 of 1999.

Historical Background

3. The history as well as the purpose and object for which c
the Special Act was enacted, in view of the several decisions
rendered by this Court, is now well-settled. The Reserve Bank
of India in course of an investigation conducted by it, had inter
alia opined that Harshad Mehta (since deceased), alongwith
his other associates had diverted a huge amount of public funds D
belonging to.Public Sector Banks and Financial Institutions for
short term investments in the securities market.

...._ 4. An Inquiry Committee was thereafter constituted under
the Chairmanship of Shri Janakiraman. The said Committee
in its report had noticed a large number of gross malpractices E
and irregularities in transactions of both Government and other
securities, pursuant whereto and in furtherance whereof the
Special Act was enacted providing inter alia for the constitution
of a Special Court for trial of criminal offences, as also civil
disputes, arising therefrom during the period between 1st April, F
1991 to 6th June, 1992, hereinafter referred to as the "window
period".

5. Around this time, the family members of late Harshad
Mehta had purchased movable, immovable properties and G
\ shares. Out of these properties, there were nine residential flats
purchased, in a building called "Madhuli", in Worli, Mumbai.
These flats were merged and redesigned for joint living of the
entire family and these properties are the subject matter of this
lis.
H
1238 SUPREME COURT REPORTS [2009) 12 S.C.R.

A History of the Proceedings

6. In terms of the said Special Act, a Custodian was
appointed. The Custodian notified Harshad Mehta as also the
appellants herein; pursuant whereto all their properties stood
attached. Some of the appellants had filed applications for de-
8
notifications. The same were, however, not pressed and were
later withdrawn. It has been claimed by the appellants in an
Affidavit dated 28.07.2009 that they had filed their
denotification applications registered as M.A. Nos. 50 to 55 of
C 2009, however they withdrew the same again with a liberty to
file afresh by an order dated 12.06.2009.

7. In the aforementioned premise a question came up
before the learned Judge, Special Court in regard to sale of
movable and immovable properties belonging to the notified
D persons. The learned Judge, Special Court, on an application
filed by the custodian inter alia directed sale of flats purported
to be belonging to the appellants.

8. The learned Judge, Special Court, by his judgment and
E order dated 17th October, 2003 directed sale of the said flats .
. The aforementioned order came to be challenged before this
Court by way of appeals preferred under Section 10 of the
Special Act. They were registered as Civil Appeal Nos. 667-
71 of 2004 and 672 to 681 of 2004. This Court by its judgment
and order dated 3rd January, 2006 allowed the said appeals
F and remitted the matter back to the Special Court with some
directions. That decision of this Court has since been reported
in Ashwin S. Mehta and another v. Custodian and others, [
(2005) 2 sec 385 J.

G 9. The matter was taken up thereafter by the learned
Judge, Special Court which passed the impugned judgment.

Involvement of Chartered Accountants

10. The findings of Chartered Accountants have a major
H role to play in this case. We may notice that during pendency
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1239
ORS. [S.B. SINHA, J.]

of the proceedings before the Special Court Mis Vyas & Vyas, A
Chartered Accountant, was appointed in respect of assets and
liabilities of Harshad Metha on 16th October, 2003. They
submitted a report upon auditing the Accounts of Late Harshad
Mehta for the financial year ending 31.03.1992 and for the
period ending 08.06.1992 on 17th January, 2006. The notified B
parties have contested this, in an affidavit dated 28th July,
2008, by stating that the Custodian had actually received the
same on 30.11.2005.

11. After the order of this Court in Ashwin Mehta (supra)
another Chartered Accountant, M/s. Vinod K. Aggarwala &Co. c
was appointed by the. custodian for preparation
. of "Realistic
.
Estimates of the Assets and Liabilities". The report of the said
Chartered Accountant was based on the Report of the three
firms of Chartered Accountants appointed by the court. This
report was submitted on the 27.02.2006. The Realistic D
Estimates of Assets and Liabilities of the Harshad Mehta
Group as on 01.01.2007 was prepared by Vinod K. Aggarwala
& Co. and was submitted on 26th April, 2007.
12. We may also place on record that Mis Vyas & Vyas, E
Chartered Accountant had categorically stated that the said
books of accounts were not complete. This can be seen through
excerpts mentioned in their own report,

"19.6 Due to the compelling nature of limitations on
our work and unreliable nature of the books of accounts, F
we are unable to accept responsibility for the accuracy and
completeness of the information/particulars provided to us

-
~
nor do we accept such responsibility."

"... Therefore, we are unable to comment about the G
). true and fair state of affairs of HSM and M/s HSM for the
year ended 31st March, 1991, 31st March 1992 and for
the period ended as on 8th June, 1992".

H
1240 SUPREME COURT REPORTS [2009] 12 S.C.R.

A IMPUGNED JUDGEMENT OF THE SPECIAL COURT
'
13. The Special Court in the impugned judgment noticed
that it was to decide the issues in accordance with the
directions of this court in Ashwin Mehta (supra), wherefor it
quoted in extenso the conclusions and directions issued. We
8
shall proceed to deal with each of the eleven directions that had
been given by the this Court in Ashwin Mehta (supra) while
remitting the matter back to the learned Judge, Special Court
and how accordingly the Special Court went on to deal with
them.
c
14. Direction No. 1 of this Court 'in Ashwin Mehta (supra)
was:-

"(i) The contention of the Appellants that they being not
D involved in offences in transactions in securities could not
have been proceeded in terms of the provisions of the Act
cannot be accepted in view of the fact that they have been
notified in terms thereof."

15. The Special Court noted that this Court, as regards the
E first direction, had itself recorded a finding against the
appellants and therefore nothing further was to be done by it in
that regard.

16. Direction No. 2 of the court, which is most relevant for
F our purposes reads as under:-

"(ii) The Appellants being notified persons all their personal
properties stood automatically attached and any other
income from such attached properties would also stand
attached. The question as to whether the Appellants could
G have been considered to be part of Harshad Mehta Group
by the learned Special Court need not be determined by
us as, at present advised, in view of the fact that
appropriate applications in this behalf are pending
consideration before the learned Special Court. The
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1241
ORS. [S.B. SINHA, J.]

),
question as regard intermingling of accounts by the A
Appellants, herein with that of the Harshad Mehta Group
and/ or any other or further contentions raised by the
parties hereto before us shall receive due consideration
of the learned Judge, Special Court afresh in the light of
the observations made hereinbefore." B
17. The learned Judge, Special Court, considered the said
direction into three parts.

18. The first part of the direction being that the appellants
being notified persons, all their personal properties stood c
automatically attached and any other income from such attached
properties would also therefore get attached.

19. As regards this part the learned Judge, Special Court
noted that this was a finding recorded against the appellants D
and accordingly no orders were necessary to be passed by it
in that respect.

20. The second part of the said direction being that the
question that the appellants could have been considered to be
part of Harshad Mehta Group by the learned Special Court E
need not be determined by the Supreme Court, in view of the
fact that appropriate applications in this behalf were pending
consideration before the learned Special Court.

21. In regard to the said direction the learned Special F
Judge, Special Court noted that the applications referred to in
the said direction issued by the Supreme Court were a
reference to the applications for de-notification filed by
members of the Harshad Mehta Family. The court thereafter
having made reference to Sudhir S Mehta v. Custodian & Ors, G
[(2008) .12 sec 84] noted that there were no applications for
de-notifications pending before the Special Court, as all
applications had been withdrawn and therefore there was no
further steps required to be taken by the learned Judge, Special
Court.
H
1242 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 22. However in the alternative, again referring to Sudhir
Mehta (supra), the learned Judge, Special Court also noted '
that the contention whether the appellants should be treated as
a 'group' or not would not be relevant unless they were able to
show that some prejudice had been caused to them thereby.
B
23. The third and the final part of the said direction dealt
with the question as regards intermingling of accounts by the
Appellants, herein with that of the Harshad Mehta Group which
in the opinion of this Court were required to be dealt with by
the Special Court afresh in the light of the observations made
c therein.

24. This part of the direction in the opinion of the learned
Judge Special Court was the main question, which was
required to be considered by him.
D
25. He went on to note the observations of this court in
Sudhir Mehta (supra) as regards the finding that the claim of
the notified parties that their assets exceeded their liabilities
was not correct. In Sudhir Mehta (supra) the court had
accepted the submissions of the custodian that even the
E
individual liabilities of the notified parties far exceeded their
assets.

26. The Special Court in the impugned judgment then went
on to deal with the contention that the properties in question
F had been purchased before the statutory period or window
period prescribed under the said act being
01.04.1991 to 06.06.1992 and they were therefore not liable
to be attached.

G 27. It noted that the properties of the notified parties held
by them on the date of their notification got statutorily attached
and became liable to be sold for discharging the liability of the
notified parties, therefore, the previous contention does not
stand.
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1243
ORS. [S.B. SINHA, J.]

28. It, thereafter, went on to deal with the argument that the A
-· properties in question had no nexus with the illegal securities
transactions and the flats had been purchased by the notified
parties at the relevant time by taking interest bearing loan from
M/s Harshad S Mehta. These loans had been repaid either fully
or substantially. B
29. As regards this contention the Special Court again
referred to Sudhir Mehta (supra) to note that properties of the
notified persons stood attached irrespective of the fact whether
those properties were bought by using tainted funds or not.
Therefore the nexus to the illegal security transactions was c
irrelevant.

30. It also came to the conclusion that all the residential
properties had been funded by Harshad S Mehta and they
could therefore be disposed of accordingly. In this regard the D
Special Court relied on the report of the auditors, M/s. Vyas
and Vyas who had considered the flow of funds from Harshad
Mehta to various other notified parties. This was the fact that
the funds had specifically been transferred for purchase of the
properties just before the purchase. There was also a huge E
amount outstanding in the accounts of the notified parties to
Harshad Mehta on the 1st of April, 1990 and 1991.

31. The Special Court also noted that one of the flats in
Madhuli, being No. 34-A was owned by M/s Aatur Holding Pvt.
Ltd. In regard to the said company the Special Court found it F
necessary to pierce the corporate veil. This was based on the
fact that even though the paid up capital of the said company
was only Rs. 10,000/- and the highest salary paid by the
company was only a meager Rs. 4,000/- p.m., the company had
. entered into trading security transactions running into crores of G
rupees. It therefore opined that the real owner of the said
~
company was none other than Shri Harshad Mehta.

32. In conclusion it was opined that the business and
H
1244 SUPREME COURT REPORTS (2009] 12 S.C.R.

A dealings of various individuals who held flats in Madhuli and the
company M/s Aatur Holding were nothing but fronts of Harshad
Mehta and the money that was invested for buying the flats was
that of Harshad Mehta. Harshad Mehta, therefore, had merely
used the names of various individuals who were related to him
B for buying the said flats.
33. Direction No. 3 of this Court in Ashwin Mehta (supra)
reads as under :-

"(iii) As regard the tax liabilities of the Appellants, herein,
c we would request the learned Judge, Special Court to
consider the matter afresh in the light of the observations
made hereinbefore. The learned Judge, Special Court, iri
this behalf, having regard to the fact that several orders of
Best Judgment Assessment have been passed by the
D Assessing Authority, may take into consideration the ratio
laid down in the decision of this Court in Harshad Shanti/al

E
Mehta v. Custodian & Ors. 1998 (3) SCALE 556."

34. As regards this direction the Special Court noted that
the order had already been made on applications which were
-
filed by the decree holder bank by it and the said matter was
pending before this Court.

35. Direction No 4 of this Court reads as under:-

F "(iv) The learned Special Court shall proceed to pass
appropriate orders as regard confirmation of the auction
sales in respect of commercial properties."

36. As regards this direction the Special Court noted that
the necessary orders had already been passed. '
G
37. The next direction, being Direction No 5 reads:-

"(v) As regard, sale of residential properties, an
appropriate order may be passed by the learned Judge,
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1245
ORS. [S.B. SINHA, J.]

Special Court in the light of the observations made. A
herein before."

38. In respect of this direction the Special Court directed
the custodian to sell Flats No. 32 A, 32 8, 33, 33A, 33 B, 44
. A, 44 B and 45 in 'Madhuli' by following the procedure laid
B
down by the Special Court itself for sale of the property
belonging to the notified parties. It also directed the custodian
to seek directions, if necessary, from it in this behalf.

39. Direction Nos. 6, 7 and 8 are as under:-
c
"(vi) We direct the Custodian to permit the Appellants to
have inspection of all the documents in his power or
possession in the premises of the Special Court in the
presence of an officer of the court. Such documents must
be placed for inspection for one week continuously upon D
giving due notice therefor to the Appellants jointly. As the
Appellants have been represented in all the proceedings
jointly, only one of them would be nominated by them to
have the inspection thereof. The Appellants shall be entitled
to take the help of a Chartered or Cost Accountant and
E
may make notes the.refrom for their use in the pending
proceeding.

(vii) The Appellants shall file their objections to the said
report, if any, within ten days thereafter. The Custodian
may also take assistance and/ or further assistance from F
a Chartered Accountant of his choice. A reply and/ or
rejoinder thereto shall be filed within one week from the
date of the receipt of the copy of the objection. The parties
shall file their respective documents within one week
thereafter. Such documents should be supported by G
affidavits. Both the parties shall be entitled to inspect such
documents and filed their responses thereto within one
week thereafter. The parties shall file the written
submissions filed before this Court together with all charts
before the learned Special Judge, Special Court within H
1246 SUPREME COURT REPORTS [2009) 12 S.C.R.

A eight weeks from date.

(viii) The learned Judge, Special Court shall allow the
parties to make brief oral submissions with pointed
reference to their written submissions. Such hearing in the
peculiar facts and circumstances of this case should
B
continue from day to day. (ix) The learned Judge, Special
Court while hearing the matter in terms of this order shall
also consider as to whether the auction sale should be
confirmed or not. It will also be open to the learned Judge,
Special Court to pass an interim order or orders, as it may
c think fit and proper, in the event any occasion arises
therefore."

40. As regards these three directions the Special Court
noted that the Custodian had already complied with the said
D directions and allowed for the necessary inspection. The
Special Court further noted that there were no complaints made
before it that the said directions had not been complied with.

41. Direction No 9 reads:-
E "(ix) The learned Judge, Special Court while hearing the
matter in terms of this order shall also consider as to
whether the auction sale should be confirmed or not. It will
also be open to the learned Judge, Special Court to pass
an interim order or orders, as it may think fit and proper,
F in the event any occasion arises therefore."

42. As regards this the Special Court noted that necessary
orders had already been passed.
43. Direction No 10 of the court in Ashwin Mehta (supra)
G was:-

"(x) We would, however, request the learned Special
Judge, Special Court to complete the hearings of the
matter, keeping in view of the fact that auction sale in
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1247
ORS. [S.B. SINHA, J.]

respect of the residential premises is being consideration, A
as expeditiously as possible and not later than twelve
weeks from the date of the receipt of the copy of this order.
Save and except for sufficient or cogent reasons, the
learned Judge shall not grant any adjournment to either of
the parties." B

44. As regards the said direction the Special Court noted
after the said matter had been taken up by them for hearing,
the notified parties had given their consent for initiating the
process of sale of the flats. This process was set in motion and
at the request of the parties, both were granted time to submit C
their plea.dings and document.s.

45. The last Direction of the Court, being No 11 :-

"(xi) The learned Judge, Special Court shall take up the D
matter relating to confirmation of the auction sale in respect
of the commercial properties immediately and pass an
appropriate order thereupon within four weeks from the
date of receipt of copy of this order. If in the meanwhile
orders of assessment are passed by the Income Tax E
Authorities, .the Custodian shall be at liberty to bring the
same to the notice of the learned Special Court which shall
also be taken into consideration by the learned Judge,
Special Court."

1 46. As regards this direction the Special Court noted that F
necessary orders had already been passed.

SUBMISSIONS

47. Mr. l.H. Syed, learned counsel appearing on behalf of
the appellants contended :- G
;
(i) That the learned Judge, Special Court
misconstrued and misread the directions issued by
this Court in Ashwin Mehta (supra).
H
1248 SUPREME COURT REPORTS [2009] 12 S.C.R.

A (ii) That he failed to take into consideration that the
~

properties belonging to the appellants were not and
could not have been treated as the benami
properties of Harshad Mehta.

(iii) In such an event the provisions of the Benami
B
Transactions (Prohibition) Act, 1988, should have
been invoked or in any event Sub-section (1) of
Section 4 of the Special Act which deals with
transactions to defeat the provisions of the Act was
attracted. These provisions provide for an
c opportunity of hearing to be given.

(iv) That Sub-section (1) of Section 4 of the Special Act
postulates that the notified persons must acquire
property in the name of another from the tainted
D money during the window period and having regard
to1he findings of the Auditors that Harshad Mehta
had purported to have advanced amounts by way
of loans or otherwise to the appellants herein much
prior thereto, the impugned judgment is wholly
E unsustainable.
(v) That the right to keep property being a
Constitutional as well as Human Right and
furthermore the provisions of the Special Act being
penal in nature, they deserve a strict construction.
F
(vi) No finding having been arrived at, that the
properties in question had any nexus with the
tainted funds received from the illegal security
transactions, they should have been released from
G attachment by the Custodian.

(vii) That the properties having not been acquired within
the 'window period' i.e. during 1st April, 1991 to 6th
June, 1992, the order of the learned Special Court
for auction sale thereof must be held. to be wholly
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1249
ORS. [S.B. SINHA, J.]

,. illegal. A

(viii) The learned Judge, Special Court, committed a
serious illegality in so far as he relied upon the
Janakiraman Reports and other reports, which are
wholly inadmissible as evidence.
B
(ix) The appellants being notified persons are
responsible for discharging their own liabilities from
their own assets and not those of Harshad Mehta
and/or any other person and therefore it was not
proper on the part of the learned Judge, Special c
Court to club the appellants herein as part of the
Harshad Mehta Group.

(x) The learned Judge, Special Court seems to have
reproduced large amounts of the Custodians' report D
in the Judgment, this raises the question as to
whether he took into account the arguments of the
appetlants in the case.

48. Mr. Arvind Kumar Tewari, learned counsel for the
custodian, on the other hand, contended :- E

(i) As the appellants were notified persons, Section
4(1) of the Special Act has no application as all
their properties stood attached in terms of Section
3 of the Act and as such they could have been F
appropriated for discharge of the liabilities of
Harshad Mehta and group under the scheme of the
latter provision.

(ii) Appellants having not filed any application for their
-I
de-notification and the Custodian and/or the Special G
Court having all along proceeded with the case
against the appellants and the late Harshad Metha
as one group, it is too late in the day to contend that
they- are not bound to discharge the liability of
H
1250 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Harshad Mehta and should instead be treated
individually. "

(iii) In a case of this nature where Section 3 would
apply and not the sub-section (1) of Section 4;
B properties can be sold in discharge of the liabilities
of all the notified persons irrespective of the fact
whether they had been acquired from the tainted
money or acquired during the window period or not.

(iv) The learned Judge, Special Court, having
c proceeded to determine the issues raised before
it by the parties on the basis of the Audit Reports
filed by M/s. Vyas & Vyas, the impugned judgment
is unassailable.

D (v) Harshad Metha was not acting alone. There were
various corporate entities, firms etc. involved. and
the appellants were in one way or the other involved
actively in the said companies and/or the firms. It
was in that sense the custodian proceeded on the
basis that the appellants should be clubbed
E
together as a part of the same group.

(vi) All the appellants are notified persons. Proceedings
started against them in 1992. They were proceeded
against as the Harshad Mehta Group and not in
F their individual capacity. Indisputably they had acted
as a part of this group, whatever might have been
their individual contribution in regard to the acts of
omission and commission towards defrauding the
banks and the financial institutions for the purpose
G of making investment in the security transactions.

(vii) In the absence of any proof that they have no
connection with the said business they should be
treated as belonging to the said group.
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1251
ORS. [S.B. SINHA, J.]
, (viii) That the flow of fund from one member to the other, A
___,. as reflected from their own books of accounts,
clearly establish that they are part of the same
group and/or it is the contribution of Harshad Mehta
alone which enabled the appellants to purchase the
flats in their individual names. B
USE OF SECTION 4(1) OF SPECIAL ACT

49. As regards intermingling of accounts of the appellants
with that of the Harshad Mehta Group and/or any other or further
contentions raised by the parties, it was directed by this Court c
in Ashwin Mehta (supra) that the same shall receive due
consideration of the learned Judge, Special Court afresh ih the
light of the observations made therein.

50. On a plain reading of sub-section (1) of Section 4 of D
the Special Act it would appear that the same applies to the
third parties and not any notified party. It is only when a property
has been purchased in the name of a third party by a notified
party from the tainted funds acquired by him during the window
period, that the provisions of sub-section (1) of Section 4 would
E
would apply. But in a case where the properties .have been
purchased by the notified parties themselves as members of
a group in the name of one or the other, the rigours of sub-
section (1) of Section 4 shall not apply. Section 3 of the Special
Act, on the other hand, postulates automatic statutory
' attachment of the properties of the notified party. The F
acquisition of the properties whether prior to the window period,
during the window period or thereafter can be attached for the
discharge of liabilities.

51. Indisputably, a statute which seeks to take away a G
I
person's right-in property deserves strict construction. However,
it is also well settled that the courts are required to give
purposive construction to a statute to see that the purpose and
object thereof is fully attained. This Act is a Special statute. It
is a complete Code in itself. The purpose and object for which H
'
1252 SUPREME COURT REPORTS [2009] 12 S.C.R.

A it was created was to punish the persons who were involved in
the acts of criminal misconduct in respect of defrauding banks '
and financial institutions. Its object was to see that the properties
of those who were involved shall be appropriated for discharge
of liabilities not only of banks and financial institutions but also
B other governmental agencies including the Income-tax
Department.

52. It is, however, not an expropriatory legislation as such.
The Act provides for sufficient safeguards in the matter of sale
of properties by auction or otherwise towards discharge of
C debts of the notified persons. It provides for grant of full
opportunity of hearing to the notified persons. Notified _persons
have special knowledge of the facts relating to their assets and
liabilities and, therefore, can always show that they have been
notified wrongly or that their properties are not liable for sale
D either because their liabilities can otherwise be discharged or
the quantum of liabilities projected by the Custodian is not
correct.
53. In construing the statute of this nature the Court should
E not always adhere to a literal meaning but would construe the
same, keeping iri view the larger public interest. For the said
purpose the Court may also take recourse to the basic rules
of interpretation, namely ut res magis valeat quam pereat to
see that a machinery must be so construed as to effectuate the
F liability imposed by the charging section and to make the
machinery workable. [See Indian Handircrafts Emporium and
others v. Union of India and others, (2003) 7 SCC 589 ].

54. In Bairam Kumawat v. Union of India and others, [
(2003) 7 SCC 628 ] this Court preferred a dictionary meaning
G of the word "ivory" in preference to the technical meaning stating

"20 Contextual reading is a well-known proposition
Jt 1n'. •'nr,.t::ition uf statute. The c1auses of a statute should
H be construed with reference to the context vis-a-vis the

1
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1253
ORS. [S'.B. SINHA, J.]

.... other provisions so as to make a consistent enactment of A
the whole statute relating to the subject-matter. The rule of
"ex visceribus actus" should be resorted to in a situation
of this nature."

55. It was furthermore held :-
B
"23. Furthermore, even in relation to a penal statute any
narrow and pedantic, literal and lexical construction may
not always be given effect to. The law would have to be
interpreted having regard to the subject-matter of the
offence and the object of the law it seeks to achieve. The c
purpose of the law is not to allow the offender to sneak out
of the meshes of law. Criminal jurisprudence does not say
so."

56. It was observed :- D
"26. The courts will therefore reject that construction which
will defeat the plain intention of the legislature even though
there may be some inexactitude in the language used.
[See Salmon v. Duncombe (AC at p. 634).] Reducing the
legislation futility shall be avoided and in a case where the E
intention of the legislature cannot be given effect to, the
courts would accept the bolder construction for the purpose
of bringing about an effective result. The courts, when rule
of purposive construction is gaining momentum, should be
very reluctant to hold that Parliament has achieved nothing F
by the language it used when it is tolerably plain what it
seeks to achieve. [See BBC Enterprises v. Hi-Tech
Xtravision Ltd. (All ER at pp. 122-23).]"

, 57. Yet again in relation to application of doctrine of strict G
j
construction, it was noticed :-

"34. In Stiite of Maharashtra v. Natwar/al Damodardas
Soni this· Court was concerned with search and seizure of
gold under the Customs Act and the Defence of India
H
1254 SUPREME COURT REPORTS [2009) 12 S.C.R.

A Rules. The Court was dealing with smuggling of gold into .
India affecting the public economy and financial stability of
the country and in that context the Court applied the
Mischief Rule. While interpreting the words "acquires
possession" or "keeping" in clause (b) of Section 135(1)
B of the Customs Act, this Court observed that they are not
to be restricted to "possession" or "keeping" acquired as
an owner or a purchaser of the goods, observing: (SCC
p. 677, para 22)

"Such a narrow construction - which has been
c erroneously adopted by the High Court - in our opinion,
would defeat the object of these provisions and undermine
their efficacy as instruments fqr suppression of the mischief
which the legislature had in view. Construed in consonance
with the scheme of the statute, the purpose of these
D provisions and the context, the expression 'acquired
possession' is of very wide amplitude and will certainly
include the acquisition of possession by a person in a
capacity other than as owner or purchaser .... "

E 35. This Court while setting aside a judgment of acquittal
passed in favour of the respondents therein on the basis
of the interpretation of the Customs Rules observed: (SCC
p. 678, para 25)

"... These provisions have, therefore, to be specially
F construed in a manner which will suppress the mischief
and advance the object which the legislature had in view.
The High Court was in error in adopting too narrow a
construction which tends to stultify the law. The second
charge thus had been fully established against the
G respondent." '

[See also P.K. Afjunan v. State of Kera/a (2007) 9 SCC
516, para 11]

58. Mr. Syed, therefore, in our opinion is not correct in
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1255
ORS. [S.B. SINHA, J.]
,;. contending that the advances made by Harshad Metha to the A
appellants herein for the purpose of purchase of properties
would amount to benami transactions whereof sub-section (1)
of Section 4 of the Special Act shall apply.

ISSUES REGARDING NOMENCLATURE
B
59. In Ashwin Mehta (supra), this Court had specifically
asked the Id. Judge of the Special Court to decide on the issue
of nomenclature of the parties, namely whether to consider them
as a whole group or as individuals. The Special Court in the
impugned judgment preferred to rely on the judgment of this c
court in Sudhir Mehta (supra) on this issue; wherein this Court
observed:

45. This takes us to the aforementioned paragraphs
heavily relied upon by the learned counsel in the judgment D
of Ashwin Mehta case. In para 41, it was stated that it was.

- open to the appellants to show that even if they continued
to be notified, the Custodian was not right in clubbing all
the individual members of the family as a single entity
styled as the Harshad Mehta Group. We do not find that
E
there was any attempt oo the part of the appellants to
disassociate themselves from the Harshad Mehta Group.
When we see the judgment dated 17-8-2000 passed by
the Special Court, it is obvious that the learned counsel
arguing that matter had argued it on behalf of the Harshad
Mehta Group. It is for this purpose that we have quoted F
the argument before the learned Special Judge in extenso.
We will only quote a sentence which forms a part of the
argument:

"It was contended that on a proper and legal assessment, G
the actual tax liability of the Harshad Mehta Group would
be marginal and a large portion of the amounts would have
to be refunded by the Revenue. He contended that in
case of the Harshad Mehta Group, the demands made
H
1256 SUPREME COURT REPORTS (2009] 12 S.C.R.

A by the Department are based on the best-judgment
assessments, which are highly exaggerated. He
contended that the assessment orders are ex parte in
nature. He contended that the Harshad Mehta Group is
contesting the demands before the appellate authorities."
B
(emphasis supplied)

It was, therefore, obvious that at that juncture, when the
question was as to whether the shares should be sold or
not, the move was objected to by the appellants formulating
c themselves as the Harshad Mehta Group. No such
objection to form and treat the relatives as a group was
raised before the Special Court in the year 2000 when
the question of sale of shares fell for consideration for the
first time. At any rate, unless it is shown as to what
D prejudice would be caused by treating them to be a group,
this contention has no basis. We, therefore, do not think
that the argument in this behalf has any basis."

60. Criticism has also been made with regard to the
E application of the doctrine of lifting the corporate veil which was
not supposed to be made applicable to the individual. The said
doctrine was applied by the learned Judge of the Special Court
in the instant case in respect of the company Mis. Aatur Holding
Pvt. Ltd. The abovementioned company purchased a flat,
although its paid up capital was only Rs.10,000/- and the
F highest salary paid to the employee by it was only Rs.4000/-
per month. Despite this the said company allegedly entered into
security trading transactions amounting to crores.

61. The appellants were members of an H.U.F. and were
G seen to be working in tandem. Harshad Metha vis-a-vis the
appellants was, thus, not a third party.

ISSUE OF DENOTIFICATION
62. Appellants contend that they had withdrawn the
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN &1257
ORS. [S.B. SINHA, J.]

denotification applications in 2000 although the same had been A
filed in 1993. The delay in disposal of the said applications is
sought as a reason assigned in support of the same. We fail
to see any justification in the said stand. Appellants contend
that they wanted to file fresh applications. If that be so the
reason why the earlier applications were withdrawn had not B
been properly and sufficiently explained. The reason assigned
is hardly a ground for withdrawal of the applications. We have
been informed by the appellants that fresh applications for
denotifications have been filed and the same have been
withdrawn in the year 2009. The same issue may have to be c
dealt with by the Special Court. We wonder, why it took nine
years to file these fresh applications.

63. We may notice that applications for denotification were
filed by Raseela Mehta and Rina Mehta which were rejected
by the Special Court. The order rejecting the same have been D
challenged before this Court by way of Appeals which are
numbered as Civil Appeal Nos. 2915 of 2008 and 2924 of
2008 and are pending.

NEXUS OF THE PROPERTIES WITH THE ILLEGAL E
SECURITIES TRANSACTION

64. It is contended by the learned counsel for the
appellants Mr Syed that if any of the properties or assets of the
notified parties have no nexus with the illegal security
transactions, the same can be released from attachment or at F
least need not be sold. It has further been argued that no
evidence has been adduced that loans given by Mis Harshad
S Mehta to his family members or monies used by Shri
Harshad Mehta for purchase of his flat were acquired from the
tainted funds. It is submitted by the appellants that unless it can G
be shown that the properties in qu·estion were acquired from
the tainted funds they would be liable to be released from
attachment. It is argued that the fact that the properties had
been purchased much before the securities scam would go on
H
1258 SUPREME COURT REPORTS [2009] 12 S.C.R.

A to show that they had no nexus with the funds diverted there
from.

65. In our opinion the arguments advanced on behalf of the
appellants need to be rejected at the outset because a plain
reading of the sections of the Special Act would clearly point
8
otherwise. In our opinion the attachment of all the properties in
terms of sub- section (3) of Section 3 of the Special Act is
automatic. The attachment restricts sale of the properties which
have been acquired from illegal securities transaction. The sub-
C section specifically mentions that on and from the date of the
notification, 'any property, movable or immovable, or both',
belonging to any person notified under the Act shall stand
attached. The said sub-section does not provide for any
qualification that the properties which are liable to be attached
should relate to the illegal securities transactions in respect of
D which the Act was enacted. Had the intention of the Parliament
been so, it would nave clearly mentioned it. It is well settled that
when the meaning of the words used in an Act is plain and
clear, effect must be given thereto.

E 66. This is supported by the decision of this court in LS
Synthetics Ltd. v. Fairgrowth Financial Services Ltd. [ (2004)
11 SCC 465 ]. Therein the appellants had taken a loan from
the respondents, Fairgrowth who had admittedly been notified
under the Act. The respondent therein, Fairgrowth thereafter
F filed an application before the Special Court seeking
attachment of the said funds due to them by LS Synthetics. It
was argued on behalf of the debtors, LS Synthetics, that the
loans due to the respondents had no nexus to the nature of
securities transactions specified under the Special Act and they
G were therefore not liable to be attached. This Court while
r~jecting the said contention noted that having regard to the
provisions of the Act, it was not required that the properties in
question must have a nexus to the illegal securities transaction.
Accordingly all assets of the notified parties including the loans
advanced by them in the case at hand were found liable to be
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1259
ORS. [S.B. SINHA, J.]

attached. A
67. The Court however in LS Synthetics (supra) was not
concerned with the issue of whether the properties in question
had been acquired before the window period or not. The loans
in that case had admittedly been advanced within the window
8
period and accordingly the only question before the court was
whether the loan would be liable to be attached despite not
having a nexus to the illegal security transactions. This
accordingly brings us to the next submissions as regards the
statutory window period.
c
STATUTORY WINDOW PERIOD

68. It was contended on behalf of the Appellants, that the
properties in question had been purchased much before the
statutory window period provided under the Special Act. It is 0
argued that the jurisdiction of the Special Court is strictly
confined to the period from 01.04.1991to06.06.1992 and as
such the Court would not have the power to investigate and give
any findings pertaining to any transaction entered into prior to
the statutory period. The appellants state that, the fact, no claims E
have been received by the custodian from any bank pertaining _
to the pre-statutory period, should be conclusive evidence that
no monies were siphoned off in that period as falsely alleged.

69. In our opinion the interpretation advanced by the
appellants on the provisions would be a clear misreading of the F
Act. We must in this regard refer to the relevant provisions of
the Act.

70. Provisions of Section 3(2) should not be read into
Section 3(3). Though Section 3 (3) is dependent on Section G
3(2) for its operation, but once Section 3(2) comes into
operation, Section 3(3) becomes independent of it and
accordingly the qualifications of Section 3(2) cannot be read
into Section 3(3). We must place emphasis on a plain reading
H
1260 SUPREME COURT REPORTS [2009] 12 S.C.R.

A of the said section. Had it been the intention of the legislature
to attach only those properties acquired within the statutory
period, it would have clearly said so. The statutory window
period is only a relevant criterion for application of Section 3(2)
and therefore has no bearing on the application of Section 3(3).
B
71. A plain reading of Section 3(3) would suggest that all
properties of the notified persons on the date of the said
notification would automatically stand attached irrespective of
the fact as to whether they had been acquired before, during
C or even after the statutory period. A logical corollary of this
would be that all income accruing or arising from the said
property even after the date of attachment would also.
automatically stand attached.

72. However property acquired by a notified person after
D the notification under the Special Act cannot be attached. That
property·does not come within the purview of the Section 3(3).
[See Tej Kumar Balakrishna Ruja v. A K Menon, (1997) 9
sec 123 para 6]
E 73. The cut off date for the attachment of the property
accordingly is the date of notification. All properties of the
persons on the said date automatically stand attached. The
statutory window period is irrelevant for the attachment of the
property. It would have no bearing on the said attachment.

F 74. It is true that to such an extent all properties would be
liable to be sold which are needed for redemption and not
beyond the same. What should be kept uppermost in the mind
of the Court is to see that the liabilities are discharged and not
beyond the same. It is with that end in view that the powers of
G the Special Court contained in Sections 9A and 11 must be
construed.
75. It is an accepted fact that the reports of the Jankiraman
Committee, the Joint Parliamentary Committee and the Inter
H
JYOTI HARSHAD MEHTA & ORS. v. CUSTODIAN & 1261
ORS. [S.B. SINHA, J.]

Disciplinary Group (IDG) are admissible only for the purpose A
.,;
of tracing the legal history of the Act alone. The contents of the ·
report should not have been used by the Id. Judge of the
Special Court as evidence.

76. However, a lot of documents have been filed before B
us with regard to Audited Reports. Vyas and Vyas had filed an
Audited Report in 2003. Copies whereof were supplied in
2005. Audited Report of Vyas and Vyas related only to Harshad
Mehta. A Report on the Assets and Liabilities of the Appellants
by M/s. Vinod K. Agarwala and Co. as on November, 2007 has
also been placed on record. It does not appear that the Special
c
Judge had consid.ered this aspect of the matter in great det.ail.
The learned Judge, Special Court, should consider the
aforementioned two audit reports so as to arrive at a positive
finding with regard to the liabilities and assets possessed by
them so as to enable to pass appropriate orders. D

- 77. The learned Judge, Special Court, in his judgment has
mainly dealt with the contentions raised by the custodian .in
terms of the written submission filed on its behalf. The
contentions of the appellants have not been considered in the E
impugned judgment. It is furthermore contended on behalf of
the appellants, that out of the twenty six paragraphs of the
impugned judgment, 15 paragraphs are near verbatim
reproductions.
78. In our opinion this clearly shows the non-application of F
mind of the learned Judge, Special Court. He was required to
weigh the submissions and counter-submissions of both the
parties in his proper perspective and then arrive at a well
~ ~ .
' reasoned opinion, which doesn't seem to be the case before
us. It is well settled that "Justice must not only be done, but also G
-o(
must be seem to· be done".

79. The Audited Reports and the objections have been
filed before us. We direct the parties to file the same before
the learned Judge, Special Court, so as to enable him to H
1262 SUPREME COURT REPORTS [2009J 12 S.C.R.

A consider the matter afresh strictly in the light of the earlier
judgment passed in Ashwin Mehtas (supra) as well as the
observations made herein.

80. For the reasons aforementioned, the impugned
judgment is set aside and the matter is remanded to the learned
8
Judge, Special Court, for consideration thereof afresh in the
light of the observations of this Court as expeditiously as
possible and preferably within a period of six months from the
date of this judgment. The appeals are allowed with the
aforementioned observations. In the facts and circumstances
C of the case, there shall be no order as to costs.

B.B.B. Appeal allowed.

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•.