Holding

The Special Court lacked jurisdiction to entertain the Income‑Tax Department’s intervention application, and the Special Courts Act overrides the Income‑Tax Act, rendering the applications non‑maintainable.

Summary

The Tax Recovery Officer (TRO) filed intervention applications in a Special Court seeking priority payment of income‑tax dues from Mis. Killick Nixon Pvt. Ltd. after its assets were auctioned in execution of a decree in favour of Mis. Dhanraj Mills Pvt. Ltd., the notified party. The Special Court rejected the applications, holding they were not maintainable because the court’s jurisdiction under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 is limited to matters relating to property attached of the notified party, and Killick Nixon was not a notified party. The Supreme Court affirmed that the Special Courts Act, by virtue of its overriding clause (s.13), prevails over the Income‑Tax Act, and therefore the TRO could not invoke s.226(4) of the Income‑Tax Act in that forum. Consequently, the appeals were dismissed and the Special Court’s order upheld.

Issues considered

The Special Court’s jurisdiction to entertain an intervention application under s.226(4) of the Income‑Tax Act concerning a third‑party debtor whose assets were auctioned.
Whether the provisions of the Special Courts Act, 1992 override the Income‑Tax Act in this context.
The applicability of the priority‑payment provisions of s.11 of the Special Courts Act to the income‑tax claim.

Legislation cited

Income Tax Act, 1961s. 226(4)
Sick Industrial Companies (Special Provisions) Act, 1985s. 32
Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992s. 11, s. 13, s. 3, s. 9A

Subjects

Special Courts ActIncome Tax Actpriority of tax claimsattachment of propertyjurisdictionintervention applicationexecution proceedingsoverriding effectnotified party

Judgment

TAX RECOVERY OFFICER, CENTRAL RANGE-1 A
v.
=l CUSTODIAN APPOINTED UNDER THE SPECIAL COURT (TRIAL OF
OFFENCES RELATING TO TRANSACTION IN SECURITIES) ACT, 1992
AND ORS.

AUGUST 17, 2007 B

[G.P. MATHUR AND P.K. BALASUBRAMANYAN, JJ.]

Special Courts (Trial of Offences relating to Transactions in Securities) C
Act, 1992-ss. 3, 9A, 11 & 13-Assets of notified party attached-Suit for
recovery of dues of notified party from a third party, decreed-In execution
proceedings, property of third party put to auction sale-Intervention
application, filed by Income Tax Department, seeking recovery of its dues
from said third party on priority basis before distribution of sale proceeds
to other creditors-Maintainability of-Held: Not maintainable-Provisions D
of the 1992 Act, wherever applicable, prevail over provisions of Income Tax
Act-In view of s.9A of the 1992 Act, jurisdiction of Special Court is in
relation to any claim relating to any property attached under the 1992 Act-
Thus, Special Court could not have entertained application filed by Income
Tax Department under s.226(4) of the Income Tax Act for realization of its E
dues-Income Tax Act, 1961-s.226(4).

Custodian appointed under the Special Courts (Trial of Offences
relating to Transactions in Securities) Act, 1992 published the name of Mis.
Dhanraj Mills in gazette as a notified person. All the assets of Mis. Dhanraj
Mills stood attached to the Special Court. Mis. Killick Nixon and its group F
.. companies owed substantial amount of money to Mis. Dhanraj Mills and Mis •
Killick Nixon also stood as guarantor for repayment of the money. The
Custodian on behalf of Mis. Dhanraj Mills filed suit for recovery of its dues
against Mis. Killick Nixon and its group companies. The suit was decreed by
the Special Court. The Custodian then filed Execution Application before the
Special Court for recovery of the decretal amount on behalf of Mis. Dhanraj G
Mills. The Special Court appointed a receiver for taking charge of certain
assets and properties of Mis. Killick Nixon and the other group companies
.' which were sufficient to satisfy the entire decretal amount. Subsequent thereto
the properties of Mis. Killick Nixon were put to auction and money was
.·
1051 H
{

1052 SUPREME COURT REPORTS [2007) 8 S.C.R.
•
A realized. A certified demand against Mis. Killick Nixon was already pending
for recovery by the Tax Recovery Officer. The Tax Recovery Officer filed
Intervention Application before the Special Court with a prayer that the
Custodian be directed to consider the claim of recovery of arrears of income
tax from Mis. Killick Nixon on a priority basis before distribution of sale
· proceeds to any other creditor and that the Custodian be restrained from
B distributing the sale proceeds without first satisfying the claim of the income
tax department The Intervention Application was however summarily rejected
by the Special Court as not maintainable.
f'.-. . . .
In appeals before this Court under Section IO of the Special Courts
c Act it was contended by the Appellent that if money is realized by sale of the
properties of the judgment-debtor in execution of the decrees obtained by the ,,.•
decree-holders, until the money is actually paid over to the decree-holders it
is the property of the judgment-debtor and the Income Tax Department will
have a priority to recover its dues from the judgment-debtor out of the money
so realized; that the Intervention Applications moved by the Tax Recovery
D Officer should, therefore, have been entertained by the Special Court as the
~ncome Tax Department had a certified demand against Mis. Killick Nixon
and the money realized by auction of its property was still lying with the +.
Special Court and had not been distributed to the Custodian or anybody else.
It was contended that the summary rejection of the Intervention Applications
by the Special Court was wholly illegal.
E
Dismissing the appeals, the Court

HELD: 1.1. The language employed in Section 13 of the Special Courts
Act is clear and explicit when it says that the provisions of the Act shall have
effect notwithstanding anything. inconsistent therewith contained in any other
F
law for the time being in force. Section 32 of the Sick Industrial Companies
(Special Provisions) Act, l 985 also contains a similar clause that the
..
provisions of the said Act and of any rules or schemes made thereunder shall
have effect notwithstanding anything inconsistent therewith contained in any
other law except the provisions of the Foreign Exchange Regulation Act, 1973
G and the Urban Land (Ceiling and Regulation) Act, 1976. In an earlier Supreme
Court decision, the provisions of Section 13 of the Special Courts (Trial of
Offences relating to Transactions in Securities) Act, 1992 and Section 32 of
the Sick Industrial Companies (Special Provisions) Act, 1985 were examined
and it was held that both these Acts are special Acts and in such an event it
y
"'
\j
is the later Act, namely, the Special Courts (Trial of Offences Relating To
H
TAX RECOVERY OFFICER. CENTRAL RANGE-I v. CUSTODIAN APPOINTED UNDER THE SPECIAL COURT I 053
Transactions In Securities) Act, 1992 which must prevail. Thus there can be A
no manner of doubt that the provisions of the Special Courts Act, wherever
they are applicable, shall prevail over the provisions of the Income-tax Act.
(Para 7) (1062-A-D]

1.2. In view of Section 9A of the Special Courts Act the jurisdiction of
the Special Court is in relation to any matter or claim relating to any property B
standing attached under sub-section (3) of Section 3 of the Special Courts
Act. What is attached under sub-section (3) of Section 3 of the Special Courts
Act is the property, moveable or immoveable, or both belonging to any person
notified under sub-section (2) of Section 3 of the Special Courts Act. It was
Mis. Dhanraj Mills Pvt. Ltd. which had been notified as a party under sub- C
section (2) of Section 3 of the Special Courts Act and not Mis. Killick Nixon
Pvt. Ltd. Mis. Killick Nixon Pvt. Ltd. had not been notified as a party. Mis.
Dhanraj Mills Pvt. Ltd. owed money from Mis Killick Nixon Pvt. Ltd. and its
9 subsidiary companies of which the former stood as guarantor and it was in
execution of the decrees passed in favour of Mis. Dhanraj Mills Pvt. Ltd. that
the property of Mis. Killick Nixon Pvt Ltd. was put to auction. Thus the Special D
Court could not have entertained the application moved by the Income Tax
Department under Section 226(4) of the Income Tax Act for realization of its
income tax dues from Mis. Killick Nixon Pvt. Ltd. The application moved by
the Income Tax Department was, therefore, rightly rejected by the Special
Court. (Para 8) (1062-D-H]
E
1.3. The Special Court having noted the relevant legal provision for
rejecting the applications, no exception can be taken to the order passed by
it. At any rate on examination of the matter on merits it is conclusive that the
Intervention Applications were not maintainable before the Special Court.
[Para 9) [1063-A-B) F
Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., (2001) 3
sec 71, relied on.
Manmohan Lal and Ors. v. Income-Tax Officer, 168 ITR 616; Lakshman
Swarup Om Prakash v. Union of India 229 ITR 662; Union of India v. G
Somasundaram Mills (P) Ltd., 152 ITR 420 and Dena Bank v. Bhikhabhai
Prabhudas Parekh and Co., 247 ITR 165, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6316-6323 of
2005.
H
1054 SUPREME COURT REPORTS (2007) 8 S.C.R.

A From the Order dated 24.2.2005 passed by the special Court (TORTS)
Mumbai in Intervening Application Nos. 458 to 465 of 2004 in respect of
Execution Application Nos. 98 to 105 of2001 in Misc. Petition No. 189/1995,
92196, l 89195, I 02195, 188195, I 03195, 251/95, 252195.

R.G. Padia, Shalini Kumar, Arijit Prasad, Adijit and B.V. Balaram Das for
B the Appellant.·
Raju Ramachandran, Subramonium Prasad, Jay Kishor Singh, Karun
Mehta, Shashank Kumar, and T. Mahipal for the Respondents.

The Judgment of the Court was delivered by
c
G.P. MA THUR, J. 1. These appeals have been filed by Tax Recovery
Officer, Central Range- I, under Section 10 of the Special Courts (Trial Of
Offences Relating To Transactions In Securities) Act, 1992 (hereinafter referred
to as the 'Special Courts Act') against the order dated 24.2.2005 of the Special
Court passed on Intervention Application Nos. 458 to 465 of2004 in Execution
D Application Nos. 98 to 105 of2001 in Miscellaneous Petition Nos. 189195, 921
96, 102195, 188195, 103195, 251/95 and 252195.

2. The custodian exercising powers under Section 3(2) of the Special
Courts Act published the name of Mis. Dhanraj Mills Pvt. Ltd. in gazette as
E a notified person. In view of Section 3(3) of the Special Courts Act all the
assets belonging to the notified party stands attached to the Special Court.
Thus, the assets of Mis. Dhanraj Mills Pvt. Ltd. stood attached to the Special
Court. It was found that Mis. Killick Nixon Pvt. Ltd. and its 13 group companies
owed substantial amount of money to .Mis. 'Dhanraj Mills Pvt. Ltd. and
Mis. Killick Nixon Pvt. Ltd. also stood as guarantor for the repayment of the
F money. The custodian on behalf of Mis. Dhanraj Mills Pvt. Ltd. filed suits for
recovery of its dues against Mis. Killick Nixon Pvt. Ltd. and its 13 group
companies. The Special Court passed decrees against Mis. Killick Nixon Pvt.
Ltd. anci its group companies on 18.9.1997. The custodian then filed Executing
Applications bearing Nos. 98 to I 05 of 2001 before the. Special Court for
G recovery of the decretal amount on behalf of Mis. Dhanraj Mills Pvt. Ltd. The
Special Court on 14.2.2003 appointed a receiver for taking charge of certain
assets and properties of Mis. Killick Nixon Pvt. Ltd. and the other group
companies which were sufficient to satisfy the entire decretal amount.
Subsequently thereto the properties of Mis. Killick Nixon Pvt. Ltd. were put
to auction and money was realized. It appears that a certified demand of
H Rs.25.88 crores against Mis. Killick Nixon Pvt. Ltd. was pending for recovery
TAX RECOVERY OFFICER, CENTRAL RANGE-I''· CU.STODIAN APPOINTIOD UNDER THE SPECIAL COURT IG.P. MATHUR. J.I} 055
>
by the Tax Recovery Officer, Central Range-I, Mumbai. On 25/30.8.2004 the A
Tax Recovery Officer filed Intervention Application Nos. 450 to 465 of2004
before the Special Court with a prayer that the custodian be directed to
consider the claim of recovery of arrears of income tax from Mis. Killick Nix on
Pvt. Ltd. on a priority basis before distribution of sale proceeds to any other
creditor. A further prayer was made that the custodian be restrained from
distributing the sale proceeds without first satisfying the claim of the income B
tax department. On I .9.2004 the Special Court passed an order directing the
custodian to submit a report which was complied with by the custodian on
I9.6.2004. On 24. I I.2004 the Special Court passed an order confirming the sale
of the property ofM/s. Killick Nixon Pvt. Ltd. to the highest bidder Mis. Gama
Constructions for Rs.30 crores. The Intervention Applications filed by the Tax C
Recovery Officer were, however, rejected by the Special Court on 24.2.2005
by the following order: -

"By these applications, recovery orders against a third party whiCh is
not a notified party, are sought. These applications are not maintainable
before this court. Applications disposed of." D
It is this order which is subject matter of challenge in the present appeal.

3. Before adverting to the submissions made by the learned counsel for
the parties it will be convenient to set out the relevant provisions of the
Special Courts (Trial Of Offences Relating To Transactions In Securities) Act, E
1992 which have a bearing on the controversy in hand. Section 3, sub-
sections (1), (2) and (3) of Section 9A, Sections I I and 13 of the Special
Courts Act read as under: -

"3. Appointment and functions of Custodian. (I) The Central
Government may appoint one or more Custodians as it may deem fit F
for the purposes of this Act.

(2) The Custodian may, on being satisfied on information received that
any person has been involved in any offence relating to transactions
in securities after the I st day of April, 1991 and on and before the 6th
June, 1992, notify the name of such person in the Official Gazette. G
(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 sub-section shall stand
H
1056 SUPREME COURT REPORTS (2007) 8 S.C.R.

A 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
B 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. (l) On and from the commencement of the Special
Court (Trial of Offences Relating to Transactions in Securities)
c Amendment Act, 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
D (3) of section 3;

(b) arising out of transactions in securities entered into after the
lst day of April, 199 l, and on or before the 6th day of June, 1992,
in which a person notified under sub-section (2) of section 3 is
involved as a party, broker, intermediary or in any other manner.

E (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 of Offences Relating to Transactions in
Securities) Amendment Act, 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
F
of the Special Court under sub-section (l ), 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
G 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, no court other than the Special Court shall have, or be entitled
H •f''

•.
l
TAX RECOVERY OFFICER. CENTRAL RANGE-I>. CUSTODIAN APPOINTED UNDER THE SPECIAL COURT tG.P. MATHUR. J.11057

to exercise, any jurisdiction, power or authority in relation to any A
matter or claim referred to in sub-section (I)."

"IL Discharge of liabilities. (1) Notwithstanding anything contained
in the Code and any other law for the time being in force, the Special
Court may make such order as it may deem fit directing the Custodian
for the disposal of the property under attachment. B
(2) The following liabilities shall be paid or discharged in full, as far
as may be, in the order as under:-

(a) all revenues, taxes, cesses and rates due from the persons
notified by the Custodian under sub-section (2) of section 3 to the C
Central Government or any State Government or any local
authority;

(b) all amounts due from the person so notified by the Custodian
to any bank or financial-institution or mutual fund; and
(c) any other liability as may be specified by the. Special Court D
from time to time."

"13. Act to _have overriding effect - The provisions of this Act shall
have effect notwithstanding anything inconsistent therewith contained
in any other law for the time being in force or in any instrument
having effect by virtue of any law, other than this Act, or in any E
decree or order of any court, tribunal or other authority."

Sub-section (2) of Section 3 empowers the custodian, on being satisfied on
information received that any person has been involved in any offence relating
to transaction in securities after the first day of April, 1991 and on or before
6th June, 1992 to notify the name of such person in the official Gazette. Sub- F
section (3) of Section 3 provides that on and from the date of notification
under sub-section (2), any property, moveable or immovable, or both belonging
to any person notified under sub-section (2) shall stand attached
simultaneously with the issue of the notification. Sub-section (4) of Section
3 provides that the property attached under sub-section (3) shall be dealt with G
by the custodian in such manner as the Special Court may direct. Section 9A
deals with the jurisdiction, powers, authority and procedure of Special Court
in civil matters. Clause (a) of sub-section (l) of Section 9A provides that on
and from the commencement of the Special Courts (Trial Of Offences Relating
To Transactions In Securities) Amendment Act, 1994, the Special Court shall
H
,
'
1058 SUPREME COURT REPORTS [2007) 8 S.C.R.

A exercise all such jurisdiction, power and authority as were exercisable
immediately before such commencement by any civil court in relation to any
matter or claim relating to any property standing attached under sub-section
(3) of Section 3. The words "in relation to any matter or claim" occurring at
the end of sub-section (l) of Section 9A are important and they clearly
B indicate that the Special Court shall have power and authority in relation to
any matter or claim relating to any property standing attached under sub-
section (3) of Section 3. Therefore, the jurisdiction of the Special Court is
confined to the property of the notified person which stands attached under
sub-section (3) of Section 3 of the Special Courts Act. Sub-section (l) of
Section 11 of the Special Courts Act empowers the Special Court to pass such
C orders as it may deem fit directing the custodian for the disposal of the
property under attachment. Sub-section (2) of Section 11 enumerates the
liabilities which have to be paid or discharged and also the priority which has
to be followed in discharging the liability. Section 13 of the Special Courts Act
gives an overriding effect to the Special Courts (Trial Of Offences Relating
To Transactions In Securities) Act, 1992.
D
4. Dr. R.G. Padia, learned senior counsel for the appellant, has submitted
that there were dues of the Income Tax Department as against Mis. Killick
Nixon Pvt. Ltd. and it was only after issuance of the public notice for auction
of the properties that the Income Tax Department came to know of the
E impending auction of the assets of the assessee company. At the time of the
auction notice a certified demand ofRs.25.88 crores was pending for collection
by the Tax Recovery Officer. It was under these circumstances that the Tax
Recovery Officer filed Intervention Applications before the Special Court
praying that the custodian may be restrained from distributing the sale proceeds
without first satisfying the claim of the Income Tax Department and that the
F said claim should be considered on a priority basis. Learned counsel has
submitted that even after the sale of the property of Mis. Killick Nixon Pvt.
Ltd., until the money had been distributed to the creditors it was the money
of Mis. Killick Nixon Pvt. Ltd. and, therefore, under Section 226(4) of the
Income Tax Act the Tax Recovery Officer could apply to the Special Court for
G payment of the money to discharge the income tax liability of Mis. Killick
Nixon Pvt. Ltd. In support of this submission Dr. Padia has placed reliance
upon several decisions of this Court and notably on Manmohan Lal and
others vs. Income-Tax Officer 168 ITR 616, wherein it was held as under: -

" .............................. When an assessee is in default, there are two modes
of recovery open to an Income-tax Officer. The first mode is provided
H
TAX RECOVERY OFFlCER, CENTRAL RANGE·I v. CUSTODIAN APPOINTED UNDER THE SPECIAL COURT (G.P. MATHUR. J.tl 059 '
under section 222 of the Income-tax Act. Under that section when an A
assessee is in default in making a payment of tax, the Income-tax
Officer may forward to the Tax Recovery Officer a certificate specifying
the amount of arrears due from the assessee, and on such certificate,
the Tax Recovery Officer shall proceed to recover from the assessee
the said amount by one or more of the modes set out in section 222.
The other modes of recovery are specified in section 226. Sub-section · B
(4) of section 226 provides that the Income-tax Officer may apply to
the court in whose custody there is money belonging to the assessee
for payment to him of the entire amount of such money, or, if it is more
than the tax due an amount sufficient to discharge the tax.

A perusal of these provisions clearly shows that the Tax Recovery c
Officer has nothing to do with an application under section 226(4)
made by the Income-tax Officer to a court in which there is money
lying to the credit of the assessee in default. If such an application
is made, it is certainly open to the court to determine as to whether
there has been a proper notice of demand served on the decree-holder D
(assessee in default) according to law. It is only after the court is
satisfied of this that the court can proceed to pay over the amount
demanded to the Income-tax Officer.

It is settled by authority long accepted that tax can be recovered
from an assessee only when it becomes a debt due from him and that E
it becomes a debt due when a notice of demand calling for payment
of the tax has been served on the assessee. If an assessee objects to
the recovery proceedings taken under section 226(4) on the ground
that there has been no valid service of a notice of demand and that,
therefore, no debt is due, the court must decide the objection, and if
it upholds the objection, it cannot permit recovery of the tax claimed." F
The next decision relied upon by Dr. Padia is Lakshman Swarup Om Prakash
vs. Union of India 229 ITR 662, wherein it was held that under Section 226(4)
of the Income-tax Act the Assessing Officer or the Tax Recovery Officer can
move the court having custody of money belonging to the assessee for G
payment to him of such money for discharging the tax liability of the assessee.
What is nt.cessary is that on the date when the application is made the court
should have custody of money belonging to the assessee. In that case
reference was made to the following observations made in Union of India v.
Somasundaram Mills (P) Ltd. 152 ITR 420: -
H
1060 SUPREME COURT REPORTS [2007] 8 S.C.R.

A "It is a general principle of law that debts due to the State are
entitled to priority over all other debts. If a decree-holder brings a
judgment-debtor's property to sale and the sale proceeds are lying in
deposit in court, the State may, even without prior attachment, exercise
its right to priority by making an application to the executing court for
payment of its dues. If, however, the State does not choose to apply
B to the court for payment of its dues from the amount lying in deposit
in the court but allows the amount to be taken away by some other
attaching decree-holder, the State cannot thereafter make an applkation
for payment of its dues from the sale proceeds, since there is no
amount left with the court to be paid to the State ............ "
c Learned senior counsel has also referred to decision of this Court in Dena
Bank v. Bhikhabhai Prabhudas Parekh and Co., 24 7 ITR 165, wherein it was
held that the State of Karnataka had a preferential claim to recover arrears of
sales tax including penalty from a firm over that of the appellant bank in
relation to debts due to the bank from the firm for the payment of which the
D partners of the firm had mortgaged properties belonging to them, and the
High Court was right in directing that, even though the bank had obtained
a decree (in 1992) and was authorized to bring the mortgaged property to sale,
the arrears due to the State had to be paid to the State first and only thereafter
the bank could adjust the remaining amount towards the amount due to it
E under the decree.

5. Learned counsel has thus submitted that it is a settled proposition
of law that if money is realized by sale of the properties of the judgment-
debtor in execution of the decrees obtained by the decree-holders, until the
money is actually paid over to the decree-holders it is the property of the
F judgment-debtor and the Income Tax Department will have a priority to recover
its dues from the judgment-debtor out of the money so realized. According
to learned senior counsel the Intervention Applications moved by the Tax
Recovery Officer should, therefore, have been entertained by the Special
Court as the Income Tax Department had a certified demand against Mis.
Killick Nixon Pvt. Ltd. and the money realized by auction of its property was
G still lying with the Special Court and had not been distributed to the custodian
or anybody else. The summary rejection of the Intervention Applications by
the Special Court, it is urged, is wholly illegal.

6. Shri Subramonium Prasad, learned counsel for the custodian, has, on
the other hand, submitted that it was Mis. Dhanraj Mills Pvt. Ltd. which had
H
TAX RECOVERY OfFICER. CEmRAL RANGE·I '·CUSTODIAN APPOINTED UNDER TI!E SPECIAL COURT jG.P. MATI!UR. J.J} 061

been notified as a party under sub-section (2) of Section 3 of the Special A
Courts Act and the property, both moveable and immoveable, or both of the
notified party stood attached simultaneously with the issue of the notification
under sub-section (2) of Section 3 of the Special Courts Act. Thus the
attached property also became property of the notified party. Mis. Killick
Nixon Pvt. Ltd. had not been notified as a party under sub-section (2) of
Section 3 of the Special Courts Act. The money realized by the auction sale B
of the property of Mis. Killick Nixon Pvt. Ltd. in the execution proceedings
initiated after decrees had been passed in favour of M/s. Dhanraj Mills Pvt.
Ltd. was the property of the notified party, viz., Mis. Dhanraj Mills Pvt. Ltd.
and as such the Income Tax Department could not claim any right under
Section 226(4) of the Income-tax Act to recover its income tax dues from Ml C
s. Killick Nixon Pvt. Ltd. out of the money so realized. Learned counsel has
further submitted that Section 11 of the Special Courts Act lays down the
manner in which the liabilities of the notified party has to be discharged and
under clause (a) of sub-section (2) thereof all taxes due from the notified party
to the Government have to be discharged first. Learned counsel has also
submitted that in view of Section 13, the Special Courts Act shall have an D
overriding effect over the provisions of the Income-tax Act. Learned counsel
has referred to the decision of this Court in Solidaire India Ltd. vs. Fairgrowth
Financial Services Ltd. (200 I) 3 SCC 71, wherein it was observed as under at
page 74 of the reports: -

"Under Section 3 of the 1992 Act, all property of notified persons
E
is to stand attached. Under Section 3(4), it is only the Special Court
which can give directions to the Custodian in respect of property of
the notified party. Similarly, under Section 11(1), the Special Court can
give directions regarding property of a notified party. Under Section
11(2), the Special Court is to distribute the assets of the notified party F
in the manner set out thereunder. Monies payable to the notified
parties are assets of the notified party and are, therefore, assets which
stand attached. These are assets which have to be collected by the
Special Court for the purposes of distribution under Section 11 (2).
The distribution can only take place provided the assets are first
collected. The whole aim of these provisions is to ensure that monies G
which are siphoned off from banks and financial institutions into
private po ~kets are returned to the banks and financial institutions.
,.
The time and· manner of distribution is to be decided by the Special
Court only.........."
H
1062 SUPREME COURT REPORTS [2007] 8 S.C.R.

A 7. The language employed in Section 13 of the Special Courts Act is
clear and explicit when it says that the provisions of the Act shall have effect
notwithstanding anything inconsistent therewith contained in any other law
for the time being in force. Section 32 of the Sick Industrial Companies
(Special Provisions) Act, 1985 also contains a similar clause that the provisions
of the said Act and of any rules or schemes made thereunder shall have effect
B notwithstanding anything inconsistent therewith contained in any other law
except the provisions of the Foreign Exchange Regulation Act, 1973 and the ·
Urban Land (Ceiling and Regulation) Act, 1976. In Solidair India Ltd. (supra)
the provisions of Section 13 of the Special Courts (Trial Of Offences Relating
To Transactions In Securities) Act, 1992 and Section 32 of the Sick Industrial
C Companies (Special Provisions) Act, 1985 were examined and it was held that
both these Acts are special Acts and in such an event it is the later Act,
namely, the Special Courts (Trial Of Offences Relating To Transactions In
Securities) Act, 1992 which must prevail. Thus there can be no manner of
doubt that the provisions of the Special Courts Act, wherever they are e.
applicable, shall prevail over the provisions of the Income-tax Act.
D
8. In view of Section 9A of the Special Courts Act the jurisdiction of
the Special Court is in relation to any matter or claim relating to any property
standing .attached under sub-section (3) of Section 3 of the Special Courts
Act. What is attached under sub-section (3) of Section 3 of the Special Courts
E Act is the property, moveable or immoveable, or both belonging to any
person notified under sub-section (2) of Section 3 of the Special Courts Act.
As already mentioned it was Mis. Dhanraj Mills Pvt. Ltd. which had been
notified as a party under sub-section (2) of Section 3 of the Special Courts
Act and not Mis. Killick Nixon Pvt. Ltd. Mis. Killick Nixon Pvt. Ltd. had not
been notified as a party. Mis. Dhanraj Mills Pvt. Ltd. owed money from
F Mis Killick Nixon Pvt. L_td. and its 9 subsidiary companies of which the former
stood as guarantor and it was in execution of the decrees passed in favour
of Mis. Dhanraj Mills Pvt. Ltd. that the property of Mis. Killick Nixon Pvt.
Ltd. was put to auction. Thus the Special Court could not have entertained
the application moved by the Income Tax Department under Section 226(4) of
G the Income Tax Act for realization of its income tax dues from Mis. Killick
Nixon Pvt. Ltd. The application moved by the Income Tax Department was,
th(iefore, rightly rejected by the Special Court.

9. Learned counsel for the appellant has also submitted that having ""
regard to Section I 0 of the Special Courts Act which provides appeal against
H
TAX RECOVERY OFFICER. CENTRAL RANGE-Iv. CUSTODIAN APPOINTED UNDER THE SPECIAL COURT (G.P. MATHUR. J.(1063

the order of the Special Court to this Court both on facts and law, the Special A
- Courts ought to have examined the matter in detail and has erred in rejecting
the Intervention Applications by passing a short and cryptic order of 4 or 5
lines. In our opinion, the Special Court having noted the relevant legal
provision for rejecting the applications, no exception can be taken to the order
passed by it. At any rate we have examined the matter on merits and have B
arrived at a conclusion that the Intervention Applications were not maintainable
before the Special Court.

10. For the reasons discussed above there is no merit in these appeals,
which are hereby dismissed.

11. No costs. c
B.B.B. Appeals dismissed.