SUMAN L. SHAHversusTHE CUSTODIAN & ORS.

                 [2024] 3 S.C.R. 294 : 2024 INSC 170

                             Suman L. Shah
                                   v.
                          The Custodian & Ors.
                     (Civil Appeal No(s). 4577 of 2011)
                                05 March 2024
 [Pamidighantam Sri Narasimha and Sandeep Mehta,* JJ.]

                           Issue for Consideration
       There were questionable transactions between the appellants
       and respondent Nos. 6, 7 and 8, the alleged benami companies
       of respondent No. 2 (notified party). Whether the Special Court
       committed manifest error in facts as well as in law in holding that
       the appellants herein were the garnishees of respondent No. 2.
       Whether the conclusions and findings passed by the Special Court,
       that the appellant herein failed to prove the fact that amounts
       had been repaid to the benami companies of the notified person-
       respondent No.2, can be sustained.

                                  Headnotes
       Special Court (Trial of Offences relating to Transactions in
       Securities) Act, 1992 – The miscellaneous applications were
       filed by the respondent-Custodian in the year 2008 seeking to
       recover the amounts of Rs.50 lakhs from appellant-S towards
       the dues of respondent Nos. 6 and 7 and amount of Rs.25 lakhs
       from appellant-L towards the dues of respondent No.8 – The
       Income Tax Department, vide letter dated 05.05.1998 informed
       the Custodian about respondent No. 2 being the benami owner
       of the companies (respondent Nos. 4 to 8 herein) – Special
       Court in its separate judgments directed appellants to pay
       the respective amounts due to the respondent Nos. 6, 7 and
       8, being benami companies of respondent No. 2 – Propriety:
       Held: Respondent No. 2 was notified under the Act of 1992 on
       06.10.2001 and thus, by virtue of s.3(3) of the Act of 1992, all
       properties belonging to him stood automatically attached from the
       date of such notification – The appellants herein had borrowed the
       amounts in question from respondent Nos. 6, 7 and 8, way back in
       the years 1996-1997 – By that date, there could not have existed
       any justifiable reason for the appellants herein to have entertained

* Author
[2024] 3 S.C.R.                                                              295

                    Suman L. Shah v. The Custodian & Ors.


     a belief that these were the benami companies of respondent No.
     2 or that there was any breach of the provisions of the Act of 1992
     by respondent no.2 or the respondent companies – The foundation
     behind the assertion made by the Custodian that the appellants herein
     were garnishees of respondent No. 2 through respondent Nos. 6,
     7 and 8 is based entirely on a communication dated 05.05.1998
     purportedly issued by the Income Tax Department – No witness from
     the Income Tax Department was examined in evidence before the
     Special Court in miscellaneous applications for recovery – Even the
     communication forwarded by the Income Tax Department and relied
     upon by the Custodian was not proved by proper evidence – Also, a
     bare perusal of ss.3 and 9A, it would become clear that the properties
     of the person notified u/s. 3(2) would stand attached automatically
     with effect from the date of notification by virtue of s.3(3) – Since
     respondent No.2 was notified (as being a debtor of the originally
     notified company FFSL) with effect from 06.10.2001, a fortiori, his
     properties would be deemed to be attached with effect from that date
     and not prior thereto – The applications for recovery having been
     filed by the Custodian with the allegation that the appellants herein
     were the debtors of the benami companies of the notified person,
     the primary onus of proving this assertion would be on the Custodian
     by virtue of s.101 of Evidence Act – It is only after the Custodian
     discharged this primary burden and established the existence of
     the debt, then by virtue of s.102 of the Evidence Act, perhaps, the
     onus could be shifted on to the appellants to rebut the same – The
     appellants herein took a categoric stand in their depositions that
     they had returned the amounts borrowed from respondent Nos. 6,
     7 and 8, but the books of accounts were not available because of
     lapse of time – It was neither a requirement in law nor could it be
     expected from the appellants herein to retain the books of accounts
     after more than a decade of the alleged suspicious transactions –
     Therefore, the conclusions drawn and the findings recorded in the
     impugned judgments passed by the Special Court that the appellants
     herein failed to prove the fact that the amounts had been repaid to
     the benami companies of the notified person-respondent no.2 do
     not stand to scrutiny and cannot be sustained as being contrary to
     facts and law. [Paras 32-39]

                                 List of Acts
     Special Court (Trial of Offences relating to Transactions in
     Securities) Act, 1992; Evidence Act, 1872.
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                              List of Keywords
       Recovery of money; Benami; Benami owner of companies;
       Attachment of property; Garnishee; Debtors of the benami
       companies; Primary burden of proof; Shift of burden of proof;
       Books of account; Lapse of time.

                             Case Arising From
       CIVIL APPELLATE JURISDICTION : Civil Appeal No.4577 of 2011
       From the Judgment and Order dated 11.03.2011 of the Special Court
       Constituted under the Provisions of Special Court (Trial of Offences
       Relating to Transaction in Securities), Act, 1992 in Miscellaneous
       Application Nos.162 of 2008, 343 of 1994 and 193 of 1993
       With
       Civil Appeal No.4583 of 2011
                          Appearances for Parties
       Anirudh Joshi, Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, Ms.
       S. Lakshmi Iyer, Ms. Sukriti Bhatnagar, Ms. Chitra Agarwal, Ms.
       Manavi Agarwal, Ms. Divya Singh, Sunil, E. C. Agrawala, Advs. for
       the Appellant.
       Arvind Kumar Tewari, Ms. Yosha Dutt, Advs. for the Respondents.
                   Judgment / Order of the Supreme Court

                                  Judgment
       Mehta, J.
1.     The factual and legal issues involved in these appeals are common
       and hence the same have been heard together and are being decided
       by this common judgment.
2.     The instant appeals under Section 10 of the Special Court (Trial of
       Offences relating to transactions in Securities) Act, 1992 (hereinafter
       being referred to as the ‘Act of 1992’) arise out of the final judgments
       passed by the Special Court, Bombay constituted under the Act of
       1992 of even date i.e. 11th March, 2011, in MA Nos. 162 and 184 of
       2008 in MA No.343 of 1994 in MA No. 193 of 1993.
3.     Before proceeding to consider the appeals on merits, it would be
       apposite to consider the broad scheme of the Act of 1992.
[2024] 3 S.C.R.                                                         297

                    Suman L. Shah v. The Custodian & Ors.


4.   The Act was promulgated as large-scale irregularities committed
     by some share brokers in collusion with the employees of Banks
     and Financial Institutions(in short ‘FIs’) came to light in relation to
     transaction in Government/other securities leading to diversion of
     funds from the banks/FIs to the individual accounts of certain brokers.
5.   The Act provided a mechanism to deal with the above situations
     and in particular, to ensure speedy recovery of the huge amounts
     illegally diverted, punish the guilty and restore the confidence of
     public at large in the security transactions and also to uphold and
     maintain the basic integrity and credibility of banks and FIs. The
     period of transactions in securities under the purview was from
     1st April, 1991 to 6th June, 1992. A Special Court headed by a
     sitting Judge of the High Court was established for speedy trial
     of offences relating to transactions in securities and disposal of
     properties attached. The Act also provided for appointment of one
     or more custodians under Section 3 so as to attach the property/
     properties of the offenders with a view to preventing diversion of
     such properties by the offenders.
6.   Section 3(2) stipulates that the Custodian may, on being satisfied
     on information received that any person has been found involved in
     any offence relating to transactions in securities after 1st April, 1991
     and on or before 6th June, 1992, notify the name of such person
     in Official Gazette.
7.   Section 3(3) provides that any property, movable or immovable
     or both, belonging to the notified persons would stand attached
     simultaneously with the date of issuance of the notification.
8.   Section 3(4) mandates the Custodian to deal with the attached
     properties in such manner as the Special Court may direct.
9.   Section 11(1) empowers the Special Court to pass appropriate
     order(s) directing the Custodian for disposal of the attached property.
10. Under Section 11(2), liabilities of notified persons are required to
    be paid or discharged in full by distributing monies so realized after
    disposal of the attached assets.
11. Having taken into account the relevant provisions of the statute, the
    brief facts arising for consideration in the present appeals may be
    noted as below:-
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       (i)    On 2nd July, 1992, Fairgrowth Financial Services Limited
              (hereinafter being referred to as the ‘FFSL’) was notified under
              Section 3(2) of the Act and all its properties stood attached. In
              1993, the Custodian filed Miscellaneous Application No. 193
              of 93 in the Special Court for the recovery of various sums of
              money belonging to FFSL from respondent No. 2-Pallav Sheth.
       (ii)   The Special Court passed a consent decree on 24th February,
              1994 directing respondent No. 2-Pallav Sheth to pay a sum
              of Rs.51,49,07,417.92/- to the Custodian on behalf of FFSL.
              Respondent No. 2-Pallav Sheth committed default and as a
              consequence, the Custodian initiated attachment of his assets
              to recover the decretal amount.
       (iii) During the years 1996-1997, the appellant-Suman L. Shah
             had borrowed a sum of Rs.50 lakhs from respondent No.
             6-Klar Chemicals(P) Ltd. and a sum of Rs. 25 lakhs from
             respondent No. 7-Malika Foods (P) Ltd. (original respondent
             Nos. 5 and 6 before the Special Court) whereas appellant-
             Laxmichand Shah had borrowed Rs.45 lakhs from respondent
             No. 8-Jainam Securities(P) Ltd. (original respondent No.7
             before the Special Court). As per the case set up by the
             Custodian before the Special Court, these were the benami
             companies of respondent No. 2-Pallav Sheth who had illegally
             parked the tainted money received from FFSL, the notified
             company in these benami companies (respondent Nos.6, 7
             and 8) created by himself.
       (iv) The Custodian notified respondent No.2-Pallav Sheth under
            Section 3(2) of the Act on 6th October, 2001. He was declared
            insolvent on 5th November, 2003 and as a consequence, all
            his assets and properties got vested in the Official Assignee i.e.
            respondent No.9 herein. As respondent No. 2-Pallav Sheth failed
            to pay the decretal amount, the Custodian sought information
            from respondent No. 3- Income Tax Department regarding the
            assets of respondent No. 2-Pallav Sheth. In turn, the Income
            Tax Department, vide letter dated 5th May, 1998 informed the
            Custodian about respondent No. 2-Pallav Sheth being the
            benami owner of the companies (respondent Nos. 4 to 8 herein).
       (v)    The Special Court, by an order passed in miscellaneous
              application registered for initiating contempt proceedings
[2024] 3 S.C.R.                                                    299

                    Suman L. Shah v. The Custodian & Ors.


           against respondent No. 2-Pallav Sheth observed that
           respondent Nos. 4 to 8 were benami companies of respondent
           No.2-Pallav Sheth.
12. The Custodian claims to have acquired knowledge/information that
    the appellant Suman L. Shah had received an amount of Rs. 50
    lakhs from respondent No. 6(out of which Rs. 25 lakhs were repaid
    by cheque and the entry dated 5th May, 1997 is available in the
    passbook) and Rs. 25 lakhs from respondent No.7 and that the
    appellant-Laxmichand Shah had received an amount of Rs.25 lakhs
    from respondent No.8.
13. Accordingly, Miscellaneous Application Nos. 162 of 2008 and 184
    of 2008 were filed by the Custodian before the Special Court for
    recovery of Rs. Rs. 50 lakhs from the appellant Suman L. Shah (Civil
    Appeal No.4577 of 2011) and for recovery of Rs. 25 lakhs from the
    appellant/Laxmichand Shah (Civil Appeal No. 4583 of 2011), both
    being garnishees of respondent No. 2-Pallav Sheth i.e. the owner
    of the benami companies (respondent Nos.4 to 8).
14. The Special Court, vide judgment dated 11th March, 2011 passed
    in Miscellaneous Application No. 162 of 2008 directed the appellant
    Suman L. Shah to pay a sum of Rs. 50 lakhs(Rs. 25 lakhs each due
    to respondent Nos. 6 and 7) being benami companies of respondent
    No. 2-Pallav Sheth, to the Custodian with interest @ 12% per annum
    from 1st April, 1997 till realisation of the amount.
15. Vide another judgment of even date passed in Miscellaneous
    Application No. 184 of 2008, the Special Court directed appellant-
    Laxmichand Shah to pay a sum of Rs. 25 lakhs due to respondent
    No. 8, benami company of respondent No. 2-Pallav Sheth, to the
    Custodian with interest @ 12% per annum from 1st April, 1997 till
    realisation of the amount.
16. The Special Court further directed that the appellants shall deposit
    the amounts with the Custodian within a period of two months from
    the date of the judgment failing which the Custodian would be free
    to execute the orders as decrees of the Civil Court. Upon recovery,
    the amounts were directed to be paid to respondent No. 9-Official
    Assignee whereafter the appellants would stand discharged of their
    liabilities towards the benami companies of respondent No.2 Pallav
    Sheth.
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17. Aggrieved by the judgments dated 11th March, 2011, Suman L.
    Shah and Laxmichand Shah have instituted Civil Appeal Nos. 4577
    of 2011 and 4583 of 2011 before this Court.
18. While entertaining the appeals, vide order dated 13th May, 2011, this
    Court directed appellant-Suman L. Shah to deposit Rs.50 lakhs and
    appellant-Laxmichand Shah to deposit Rs. 25 lakhs with the Officer
    on Special Duty attached with the Special Court and to furnish a
    bank guarantee to the Custodian towards the balance amount, i.e.,
    interest.
19. Both the appeals were dismissed by this Court vide order dated
    23rd April, 2012 on account of non-compliance of the order dated
    13th May, 2011.
20. The IAs seeking restoration of these Civil Appeals were accepted
    vide order dated 14th March, 2014, subject to deposit of a total sum
    to the tune of Rs. 2.20 crores by the appellants with the Officer on
    Special Duty, Special Court. The amount has been deposited and
    accordingly the appeals were taken on board.
21. Learned counsel representing the appellants contended that the
    Special Court committed manifest error in facts as well as in law in
    holding that the appellants herein were the garnishees of respondent
    No. 2-Pallav Sheth. It was contended that the questionable
    transactions between the appellants and respondent Nos. 6, 7 and
    8, the alleged benami companies of respondent No. 2-Pallav Sheth
    (notified party) and judgment debtor of FFSL(notified party) were
    13-14 years old and as no documentary proof relating to these
    transactions was provided by the Custodian on the record of the
    proceedings before the Special Court, the statement of appellants
    that the entire amounts of loan taken from respondent Nos. 6, 7 and
    8 were repaid ought not to have been brushed aside.
22. It was contended that the appellants herein had taken the loans
    from respondent Nos. 6, 7 and 8 in the years 1996-1997, i.e., long
    before respondent No. 2-Pallav Sheth came to be notified under
    Section 3(2) of the Act of 1992, i.e., 6th October, 2001 and thus, the
    burden of proof regarding the existence of liability could not have
    been shifted on to the appellants and the onus essentially lay upon
    the Custodian to prove that these amounts had not been repaid and
    were still recoverable.
[2024] 3 S.C.R.                                                          301

                    Suman L. Shah v. The Custodian & Ors.


23. It was contended that the specific assertion made by the appellants
    in their deposition affidavits that the amounts in question borrowed
    from respondent Nos. 6, 7 and 8 had been repaid partly by cheque
    and partly by material supplied to these respondents could not
    be unsettled by the Custodian in crossexamination. Only a bald
    suggestion was given to the appellants in cross-examination that
    they did not have any document in the form of vouchers, receipts,
    invoices or entries in the book accounts to show the adjustment of
    the remaining amount.
24. It was urged that the letter dated 5th May, 1998 issued by respondent
    No. 3-Income Tax Department was referred to in the cross-examination
    of the appellants. However, the said letter was not proved by exhibiting
    the same in the proceeding before the Special Court. Learned
    counsel urged that the since the Custodian failed to bring the letter
    of the Income Tax Department on record, either by summoning the
    income tax officials or by producing any other admissible evidence,
    the Special Court committed a grave error on placing implicit reliance
    on such communication.
25. It was contended that the appellants herein being respondent Nos.
    8 before the Special Court were not cross-examined either by
    respondent No. 2-Pallav Sheth or on behalf of the benami companies
    i.e. respondent Nos. 6, 7 and 8 and thus it could not be said with
    any degree of certainty that the amounts borrowed remained unpaid.
26. The pertinent assertion of learned counsel for the appellants was
    that since the appellants were never notified under the Act of 1992,
    the burden of proof could not have been shifted upon them so as
    to require them to disprove the case set up by the Custodian in
    the applications for recovery. In this regard, learned counsel for the
    appellants referred to the following observations made by the Special
    Court in the impugned order:-
           “7. It is true that oral evidence cannot be ignored, but at
           the same time, it has to be borne in mind that the Official
           Assignee - respondent No.9 has to recover the properties
           and assets of respondent No.1 for satisfaction of the decree
           against him. For the reasons best known to respondent
           No.1 or respondent Nos. 5 and 6, neither they filed any
           reply nor cross-examined respondent No.8. At the same
           time, it cannot be forgotten that the respondent No.8 is a
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       businessman and he was expected to maintain accounts
       of his business. It is impossible to believe that he would
       not have maintained accounts of his business. According to
       him, he had partly repaid these amounts to respondent Nos.
       5 and 6 by cheques and partly the amounts were adjusted
       against the purchases made by respondent Nos. 5 and 6
       from Shree Jalaram Timber Depot Pvt. Ltd. He has shown
       payment of Rs.25 lakh by cheque to respondent No.5 and
       that is reflected in his passbook. Whenever any payment is
       made by cheque and the cheque is encashed, naturally the
       debit entry is taken in the account of the person, who has
       issued the cheque. For a moment, if it is believed that other
       documents were not available, at least respondent No.8
       could produce the passbook of his account showing the
       debit entries indicating payment by cheque to respondent
       Nos. 5 and 6. However, respondent No.8 did not produce
       any such passbook to show that certain payments were
       made by cheque and those cheques were encashed
       and the amounts were debited in his account. If Shree
       Jalaram Timber Depot Pvt. Ltd belonging to respondent
       No.8 had supplied certain material to respondents Nos.
       5 and 6 and that amount was adjusted against the dues
       payable to respondents Nos. 5 and 6, there must have
       been some documents in the form of bill books, vouchers,
       receipts, entries in the account books. However, no such
       document was produced. It is true that respondent No.8
       was not crossexamined by respondent No.1 or respondent
       Nos.5 and 6. Still, it is to be noted that best evidence in
       the form of documentary evidence was available with the
       respondent No.8, but he chose not to produce the best
       evidence and relied only on his oral testimony. Even though
       respondent No.8 contended that the documents are not
       traceable he has nowhere stated that the records were
       lost or destroyed. There is no satisfactory clarification
       as to why the records are not traceable. When the best
       evidence, which is expected to be available with him, has
       not been produced, the Court may draw an inference that
       if such record would be produced, it would go against his
       claim. Therefore, his contention that the amount of Rs.25
       lakh each payable to respondent Nos. 5 and 6 has been
[2024] 3 S.C.R.                                                          303

                    Suman L. Shah v. The Custodian & Ors.


           actually repaid partly by cheque and partly by adjustment of
           the price of material supplied to them cannot be accepted.
           Therefore, I hold that the respondent No.8 is liable to pay
           amount of Rs.25 lakh to respondent No.5 and Rs.25 lakh
           to respondent No.6.
27. It was fervently contended by learned counsel for the appellants
    that the impugned judgments do not stand to scrutiny inasmuch as
    the onus of proof has been shifted on to the appellants without any
    justification and contrary to the principles enshrined in the Indian
    Evidence Act, 1872(hereinafter being referred to as the ‘Evidence
    Act’). He thus, implored the Court to accept the appeals and set
    aside the judgments passed by the Special Court.
28. Per contra, learned counsel for the respondents submitted that the
    bald statements of the appellants herein in their affidavits that the
    amount borrowed from respondent Nos. 6, 7 and 8 i.e. the benami
    companies of the notified person i.e. respondent No.2- Pallav Sheth
    had been returned by way of adjustment towards material supplied
    was rightly discarded by the Special Court because such statements
    were not supported by any tangible proof, either oral or documentary.
    He urged that the appellants claim to be reputed businessmen and
    thus, it is wholly unbelievable that accounts of business had not been
    maintained by them so as to substantiate the plea of repayment
    being made to respondent Nos. 6, 7 and 8 by way of adjustment of
    material supplied. He thus, implored the Court to affirm the impugned
    judgments and dismiss the instant appeals.
29. We have given our anxious consideration to the submissions
    advanced at the bar and have perused the material available on
    record.
30. For adjudicating the issues raised in these appeals, few admitted
    facts need to be noted. The miscellaneous applications were filed
    by the respondent-Custodian in the year 2008 seeking to recover
    the amounts of Rs.50 lakhs from appellant Suman L. Shah towards
    the dues of respondent Nos. 6 and 7 and amount of Rs.25 lakhs
    from appellant Laxmichand Shah towards the dues of respondent
    No.8. The respondent Nos.6, 7 and 8 are alleged to be the benami
    companies of the respondent No. 2-Pallav Sheth.
31. Respondent No. 2-Pallav Sheth is the judgment debtor of FFSL which
    was a company notified under the provisions of the Act of 1992.
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       Respondent No. 2-Pallav Sheth was notified under the Act of 1992
       on 6th October, 2001 and thus, by virtue of Section 3(3) of the Act of
       1992, all properties belonging to him stood automatically attached
       from the date of such notification. The appellants herein had borrowed
       the amounts in question from respondent Nos. 6, 7 and 8, way back
       in the years 1996-1997. By that date, there could not have existed
       any justifiable reason for the appellants herein to have entertained
       a belief that these were the benami companies of respondent No.
       2-Pallav Sheth or that there was any breach of the provisions of the
       Act of 1992 by Pallav Sheth or the respondent companies.
32. Even if it is assumed for the sake of arguments that respondent
    Nos. 4 to 8 were the benami companies of respondent No. 2-Pallav
    Sheth, he not having been notified under the Act of 1992 by the time
    the amounts were borrowed, the appellants could not be expected
    to entertain any doubt regarding the operation of the Act of 1992
    either against these companies or even against respondent No.
    2-Pallav Sheth or that the companies were the benami companies
    of Pallav Sheth.
33. The foundation behind the assertion made by the Custodian that
    the appellants herein were garnishees of respondent No. 2- Pallav
    Sheth through respondent Nos. 6, 7 and 8 is based entirely on a
    communication dated 5th May, 1998 purportedly issued by the Income
    Tax Department. An affidavit was filed on behalf of the Department in
    the proceedings before the Special Court but in such affidavit, there
    is no reference whatsoever to the outstanding dues of respondent
    Nos. 6, 7 and 8 or that the appellants were its debtors. Furthermore,
    there is no reference whatsoever in this affidavit with regard to letter
    dated 5th May, 1998 which was annexed with the affidavit filed on
    behalf of the Custodian and was heavily relied upon by the Special
    Court. No witness from the Income Tax Department was examined
    in evidence before the Special Court in miscellaneous applications
    for recovery.
34. While initiating recoveries, the Custodian relied upon the provisions
    of Sections 3 and 9A of the Act of 1992 which are reproduced
    hereinbelow:-
         “3. Appointment and functions of Custodian. —
         (1)   The Central Government may appoint one or more
               Custodians as it may deem fit for the purposes of this Act.
[2024] 3 S.C.R.                                                            305

                    Suman L. Shah v. The Custodian & Ors.


        (2)   The Custodian may, on being satisfied on information
              received that any person has been involved in any offence
              relating to transactions insecurities after the 1st day of
              April, 1991 and on and before the 6th June, 1992, notify
              the name of such person in the Official Gazette.
        (3)   Notwithstanding anything contained in the Code and any
              other law for the time being in force, on and from the date
              of notification under sub-section (2), any property, movable
              or immovable, or both, belonging to any person notified
              under that subsection shall stand attached simultaneously
              with the issue of the notification.
        (4)   The property attached under sub-section (3) shall be dealt
              with by the Custodian in such manner as the Special
              Court may direct.
        (5)   The Custodian may take assistance of any person while
              exercising his powers or for discharging his duties under
              this section and section 4.
        9A. Jurisdiction, powers, authority and procedure of Special
        Court in civil matters. —
        (1)   On and from the commencement of the Special Court
              (Trial of Offences Relating to Transactions in Securities)
              Amendment Act, 1994 (24 of 1994) the Special Court shall
              exercise all such jurisdiction, powers and authority as were
              exercisable, immediately before such commencement, by
              any civil court in relation to any matter or claim—
                (a)     relating to any property standing attached under
                        sub-section (3) of section 3;
                (b)     arising out of transactions in securities entered
                        into after the 1st day of April, 1991, and on or
                        before the 6th day of June, 1992, in which a
                        person notified under subsection (2) of section
                        3 is involved as a party, broker, intermediary or
                        in any other manner.
        (2)   Every suit, claim or other legal proceeding (other than
              an appeal) pending before any court immediately
              before the commencement of the Special Court (Trial
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             of Offences Relating to Transactions in Securities)
             Amendment Act, 1994 (24 of 1994), being a suit, claim
             or proceeding, the cause of action whereon it is based is
             such that it would have been, if it had arisen after such
             commencement, within the jurisdiction of the Special
             Court under sub-section (1), shall stand transferred on
             such commencement to the Special Court and the Special
             Court may, on receipt of the records of such suit, claim
             or other legal proceeding, proceed to deal with it, so far
             as may be, in the same manner as a suit, claim or legal
             proceeding from the stage which was reached before
             such transfer or from any earlier stage or de novo as the
             Special Court may deem fit.
       (3)   On and from the commencement of the Special Court
             (Trial of Offences Relating to Transactions in Securities)
             Amendment Act, 1994 (24 of 1994), no court other than
             the Special Court shall have, or be entitled to exercise,
             any jurisdiction, power or authority in relation to any matter
             or claim referred to in sub-section (1).
       (4)   While dealing with cases relating to any matter or claim
             under this section, the Special Court shall not be bound by
             the procedure laid down by the Code of Civil Procedure,
             1908 (5 of 1908), but shall be guided by the principles of
             natural justice, and subject to the other provisions of this
             Act and of any rules, the Special Court shall have power
             to regulate its own procedure.
       (5)   Without prejudice to the other powers conferred under
             this Act, the Special Court shall have, for the purposes
             of discharging its functions under this section, the same
             powers as are vested in a civil court under the Code of
             Civil Procedure, 1908 (5 of 1908), while trying a suit, in
             respect of the following matters, namely: —
               (a)   summoning and enforcing the attendance of any
                     person and examining him on oath;
               (b)   requiring the discovery and production of
                     documents;
               (c)   receiving evidence on affidavits;
[2024] 3 S.C.R.                                                              307

                    Suman L. Shah v. The Custodian & Ors.


                (d)     subject to the provisions of sections 123 and 124
                        of the Indian Evidence Act, 1872 (1 of 1872),
                        requisitioning any public record or document or
                        copy of such record or document from any office;
                (e)     issuing commissions for the examination of
                        witnesses or documents;
                (f)     reviewing its decisions;
                (g)     dismissing a case for default or deciding it ex
                        parte;
                (h)     setting aside any order of dismissal of any case
                        for default or any order passed by it ex parte; and
                (i)     any other matter which may be prescribed by
                        the Central Government under sub-section (1)
                        of section 14.”
35. From a bare perusal of these provisions, it would become clear
    that the properties of the person notified under Section 3(2) would
    stand attached automatically with effect from the date of notification
    by virtue of Section 3(3). Since respondent No.2- Pallav Sheth was
    notified (as being a debtor of the originally notified company FFSL)
    with effect from 6th October, 2001, a fortiori, his properties would be
    deemed to be attached with effect from that date and not prior thereto.
36. The appellants herein took a pertinent plea before the Special Court
    that the dues towards respondent Nos. 6, 7 and 8, generated from
    borrowings made in the years 1996-1997 stood repaid and closed
    because the amounts had been repaid by cheque(s) and by way
    of adjustments towards materials supplied. The applications for
    recovery having been filed by the Custodian with the allegation that
    the appellants herein were the debtors of the benami companies
    of the notified person, the primary onus of proving this assertion
    would be on the Custodian by virtue of Section 101 of Evidence
    Act. It is only after the Custodian discharged this primary burden
    and established the existence of the debt, then by virtue of Section
    102 of the Evidence Act, perhaps, the onus could be shifted on to
    the appellants to rebut the same.
37. The entire case of the Custodian regarding subsisting debts of
    the appellant towards respondent Nos. 6, 7 and 8 was based on
308                                                       [2024] 3 S.C.R.

                       Digital Supreme Court Reports


       a communication received from the Income Tax Department. The
       appropriate witness to prove such communication would be the
       official concerned from the Income Tax Department. However, as has
       been mentioned above, no witness from the Income Tax Department
       was examined in support of the recovery application. Even the
       communication forwarded by the Income Tax Department and relied
       upon by the Custodian was not proved by proper evidence.
38. The appellants herein took a categoric stand in their depositions that
    they had returned the amounts borrowed from respondent Nos. 6, 7
    and 8, but the books of accounts were not available because of lapse
    of time. The said plea of the appellants herein could not be treated
    as unnatural or an afterthought because once the transactions were
    completed and the loans were repaid, there was no reason for the
    appellants to have entertained a belief that after a period of about 13
    years, they would be required to present the account books pertaining
    to transactions. It was neither a requirement in law nor could it be
    expected from the appellants herein to retain the books of accounts
    after more than a decade of the alleged suspicious transactions.
39. Resultantly, the conclusions drawn and the findings recorded in the
    impugned judgments passed by the Special Court that the appellants
    herein failed to prove the fact that the amounts had been repaid to
    the benami companies of the notified person, namely, Pallav Sheth
    do not stand to scrutiny and cannot be sustained as being contrary
    to facts and law.
40. As an upshot of the above discussion, the impugned judgments are
    hereby quashed and set aside.
41. The appeals are allowed accordingly.
42. The amounts deposited by the appellants in furtherance of the order
    dated 14th March, 2014 shall be reimbursed to them forthwith.
43. Pending application(s), if any, shall stand disposed of.


       Headnotes prepared by: Ankit Gyan                 Result of the case:
                                                           Appeals allowed.