Holding

The Special Court has exclusive jurisdiction to try offences relating to securities transactions occurring between 1 April 1991 and 6 June 1992 even if the accused is not a notified person under Section 3(2).

Summary

The uncle (complainant) entrusted his 1,200 shares of Great Eastern Shipping Co. to his nephew (appellant) for sale and to remit the proceeds. The nephew sold the shares between December 1991 and January 1992, kept the Rs.1,10,000 sale proceeds and failed to pay the complainant, leading to a criminal breach of trust complaint under IPC s.409 filed in the Special Court established under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The appellant argued that the Special Court lacked jurisdiction because he was not a "notified person" under Section 3(2) of the Act. The Special Court held it had jurisdiction, and the appellant appealed to the Supreme Court. The Supreme Court examined the statutory scheme, held that Section 7 confers exclusive jurisdiction over offences relating to securities transactions occurring between 1 April 1991 and 6 June 1992 irrespective of notification, and therefore the Special Court could try the appellant. Consequently, the appeal was dismissed.

Issues considered

Whether the Special Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 has jurisdiction to try a criminal breach of trust when the accused is not a notified person under Section 3(2).
Whether the offence alleged falls within the definition of an offence relating to transactions in securities for the period specified in the Act.

Legislation cited

Indian Penal Code, 1860s. 409
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992s. 11, s. 13, s. 2, s. 3, s. 4, s. 5, s. 6, s. 7, s. 8, s. 9, s. 9-A

Subjects

Special Court Actjurisdictionnotified personsecurities transactioncriminal breach of trustIPC 409transfer of sharesmisappropriationexclusive jurisdiction

Judgment

A MINOO MEHTA
v.
SHA VAK D. MEHTA

JANUARY 15, 1998

B [S.B MAJMUDAR AND M. JAGANNADHA RAO, JJ.]

Special Court (Trial of Offences Relating to Transactions in Securities)
Act, 1992-Section 7, 3(2) & 4 and 9-A-Jurisdiction of-Complainant
C handed over the shares with the transfer forms to accused for arranging the
sale thereof-Accused failed to pay sale proceeds-Complaint before Special
Court for criminal breach of trust and dishonest misappropriation of
securities-Accused though not notified involved in offence relating to
transact/on in securities during the relevant period-Held, can be tried by
Special Court even though the accused is not a notified person as per Sec.
b 3(2) of the Act-Indian Penal Code 1860, Sec. 409.

The respondent-complainant is the uncle and the appellant-accused is
his nephew. The complainant handed over his shares along with transfer
forms to accused for arranging sale thereof and to pay the sale proceeds to
him. The complainant on various occasions enquired with the accused about
E the sale but the accused put off the matter saying that the time was no.t
opportune for the sale. Thereafter the accused started avoiding the
complainant. On enquiry complainant found that the shares in question were
already sold out. It was also found that the accused himself arranged the sale
of the said shares. Complainant filed a complaint before the Special Court
againstthe accused for criminal breach of trust and misappropriation of the
F
securities. The Special Court registered the case and framed charges against
the accused. Accused moved an application contending that the special court
had no,jurisdiction to try the alleged offence against him. The same was
dismissed. Hence, this appeal.

G The appellant contented that the accused was not a notified person as
per Section 3(2) of the Act; as such the Special Court would have no
jurisdiction to try him for the said offence. Dismissing the appeal, this Court

HELD: 1.1. It cannot be said that the offence referred to in section
3(2) must be offence committed by a notified person. As the preamble of the
H Act shows, the Act is to provide for the establishment of a Special Court for
182
MINOO MEHTA v. S.D. MEHTA 183
the trial of offences relating to transactions in securities and for matters A
-': connected therewith or incidental thereto. Therefore, every offence pertaining
to any transaction in securities which is covered by the sweep of the Act, i.e.
if such transaction has taken place between lst April 1991 and on or before
6th June 1992 would be subjected to the provisions of the Act regarding trial
of such an offence. 1191-A-C]
B
1.2. As for as criminal proceedings are concerned if the two
basic requirements of Section 3, Sub-Sec. (2) are satisfied the Special Court
will have jurisdiction under Section 7 to deal with the offences alleged even
if the accused is not notified person. The jurisdiction of the Special Court

-
cannot depend upon mere fancy and volition of the custodian. On a conjoint
reading of Sec. 3 and its relevant provisions, therefore, it must be held that
once the custodian notifies a person in the Official Gazette under Sub-Sec.
C

(2) of Sec. 3, he gets the power and jurisdiction to deal with such person's
properties and transactions as laid down under Sub-Sec. (4) of Sec. 3 and
Sec. 4 and in such a case even the civii suits of notified persons would stand D
/. transferred as per Section 9-A of the Act. Hut in case of criminal proceedings
even if the accused is not notified still the Special Court will have jurisdiction
under Section 7 to deal with the offences. [194-B-DJ
.....
_,/:
2. So far as the accused involved in criminal offences contemplated by
Sec. 3, Sub-Sec. (2) are concerned, the Statutory Scheme under Sec. 11 of E
the Act can have no application. 1196-C]
;

Canara Bank v. Nuclear Power Co1pn. of India Ltd., (1995] Supp.
3 SCC 81; Kurdremukh Iron Ore. Co. Ltd. v. Fairgrowth Financial
Services Ltd., (1994) AIR SCW 2342, distinguished.
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 69of1998.

From the Judgment and Order dated 10.7.97 of the Special Courts for
Trial of offences relating to transactions in Securities Act, 1992 in Application
No. 240 of 1997 in Cr!. Case No. I of 1995.
G
Raju Ramachandran and Manoj Wad for the Appellants.

Dhiraj Mirajkar and Rustom B. Hathikhanawala for the Respondents.

The Judgment of the Court was delivered by H
184 SUPREME COURT REPORTS [1998] l S.C.R.

A S.B. MAJMUDAR, J.

Leave granted.

We have heard learned counsel or the parties. The short questions
involved in this appeal is as to whether the Special Court, functioning under
B the provisions of the Special Court (Trial of Offences Relating to Transactions
in Securities) Act, 1992 (hereinafter referred to as 'the Act), has jurisdiction
to entertain and try the criminal case filed by respondent-complaint against
the appellant-accused. The Special Court consisting of learned Single Judge
of the High Court or' Bombay has held that the proceedings are within its
C jurisdiction. The appellant-accused has challenged the said decision in the
present appeal. A few introductory fac'.s leading to these proceedings are
required to be noted at the outset.

Background Facts
'
The respondent-complainant is the uncle and the appellant-accused is
D his nephew. It is the case of the respondent-complainant who is aged about
85 years that he is an architect by profession. That accused is the son of his
brother, that is, his nephew. He filed a criminal complaint under Section 409
of the Indian Penal Code ('!PC' for short). We will refer to the respondent as
the complainant and the appellant as the accused in the latter part of this
E judgment. The complainant's case is that he and his daughter Ms. Feroza
Parvez Driver held shares numbering 1200 of Great Eastern Shipping Company
Limited. The complainant has no son and the accused being his nephew and
close relative, he handed over the shares with transfer forms to the accused
for arranging the sale thereof through reliable broker and to pay the sale
proceeds to the complainant. This was done somewhere in the month of
F December 1991. It is the case of the complainant that he signed and executed
various transfer forms, so also his said daughter Ms. Feroza to facilitate the
transfer thereof in the name of prospective buyer.

The complainant further proceeds to state that he expected the accused
G to pay· him the sale proceeds of the said shares in due course. However for
quite a long time there was no response from the accused. The complainant
on various occasions made enquiries with the accused about the sale of the
said shares. However, the accused, according to the complainant, put off and
shirked. the matter saying that the time was not opportune for the sale of the
shares. Thereafter, the accused began to avoid the complainant. The
H complainant, therefore, felt that something was a miss and enquired with Mis,
MINOO MEHTA v. S.D. MEHTA [S.B. MAJUMDAR, J.] 185
Tata Consultancy Services who were Share Registrars of Mis . Great Eastern A
Shipping Co. Ltd. about the shares and on 02nd January 1993 the complainant
was replied that the shares in question were already sold out. The complainant
also cam~ to know the name of the sub-broker through whom the said shares
were sold, i.e., Mr. Paresh B. Patel who was originally named as accused no.
2 in the complaint. The complainant then made enquiry with the said sub- B
broker and from him he came to know that the accused had already arranged
the sale of the said shares. The complainant thereafter enquired with the
accused and confronted him with the information which the complainant had
gathered. The accused also executed certain writings admitting the receipt of
the shares from the complainant, sale thereof, etc. He also promised to pay
the sale proceeds to the complainant. However, he did not do so. c
It is in these circumstances that the complainant has filed this complaint
with a case that the accused had committed offence of criminal breach of trust
and dishonest misappropriation of the securities. The complaint was filed by
the complainant before the Special Court both against the appellant as well
as accused no. 2 Paresh B. Patel. However no charge is framed by the Special D
Court against accused no. 2. Hence he is out of picture. The complaint,
therefore, survives only against the present appellant, accused no. 1 who is
now the sole accused. It may be noted that •he complaint was filed by the
· respondent-complainant on 13th April 1994 before the Special Court for the
aforesaid alleged offence. The said case was registered as Special Case No. E
I of 1995. The Special Court issued summons to the appellant and framed
charge against the appellant as under :

"CHARGE"

I, Justice M.S. Rane, Judge, Special Court, Mumbai, do hereby charge F
you, Minoo Mehta, the accused herein, as under:

That in or about December. 1991 securities viz. distinctive number of
1200 shares of Great Eastern Shipping Co. Ltd., belonging to the
complainant Shavak D. Mehta and his daughter Ms. Feroza P. Driver,
as per particulars mentioned hereinbelow i.e.
G
Distinctive Nos. No. of Shares
--.:· I. 31202266 - 31202415 150
2. 31202ll6 - 3 l2022'i5 150
3. 31202416 - 31202440 25
H
,--..
186 SUPREME COURT REPORTS [ 1998) l S.C.R.

A 4. 25752406 - 25752430 25
5. 25752431 - 25752455 25
6. 25752456 - 25752480 25
7. 8699052 - 8699151 100
8. 24690929 - 24691028 100
B 9. 823796 - 823895 100
IO. 33201 - 33300 100 ~
11. 405952 - 406051 100
12. 541991 - 542090 JOO
13. 7720240 - 7720339 JOO
c 14. 4715055 - 4715154 100

1200

were entrusted by him to you for selling the same on his behalf and
D paying the proceeds of the sale of those shares to him which shares
you did sell in January 1992 and did dishonestly misappropriate and
convert the sale proceeds of the sale amounting to Rs. 1,10,000 to
your own use and you did thereby commit the offence of criminal
brench of trust in relation to the said transaction in the said securities
E punishabk under Sec. 406 of l.P.C. and within my cognizance and I,
therefore, direct that you be tried for the said offence."

The accused moved an application No: 240 of 1997 in the said case
before the Special Judge and contended that the Special Court had no
jurisdiction to try the alleged offence against the appellant. The learned
F Special Judge after hearing the parties concerned held by his order dated 10th
July 1997 that the complaint as filed by the complainant was maintainable ~-
before the Special Court and he had jurisdiction to try the appellant for the
offence with which he was charged. It is this order of the Special Court which
is brought on the anvil of scrutiny of this Court in the present appeal.

G
Statutory Scheme'

In order to appreciate the grievance of the appellant-accused it is
necessary to note the statutory scheme of the Act under which the Special
Court is functioning and has entertained the complaint of the respondent -
H complainant. The Act No. 27 of 1992 was assented to by the President of
MINOO MEHTA v. S.D. MEHTA [S.B. MAJUMDAR, J.] 187

India on 18th August 1992. It was brought in force from 06th June 1992 with A
retrospective effect as an ordinance had preceded it from that earlier date. Jt.
was on 06th June 1992 that a custodian was appointed under Section 3 of the
Act. The Act is to provide for establishment of a Special Court for the trial
of offences relating to transactions in securities and for matters connected
therewith or incidental thereto. The Statement of Objects and Reasons of the B
said Act provides as under:

"Statement of Objects and Reasons.-In the course of the investigations
by the Reserve Bank of India, large scale irregularities and malpractices
were noticed in transactions in both the Government and other
securities, indulged in by some brokers in collusion with the employees C
of various banks and financial institutions. The said irregularities and
malpractices led to the diversion of funds from banks and financial
institutions to the individual accounts of certain brokers.

(2) To deal with the situation and in particular to ensure speedy
recovery of the huge amount involved, to punish the guilty and D
restore confidence in and maintain the basic integrity and credibility
of the banks and financial institutions the Special Court (Trial of
Offences Relation to Transactions in Securities) Ordinance, 1992, was
promulgated on the 6th June, 1992. The Ordinance provides for the
establishment of a Special Court with a sitting Judge of a High Court
for speedy trial of offences relating to transactions in securities aad E
disposal of properties attached. It also provides for appointment of
one or more custodians for attaching the property of the offenders
with a view to prevent diversion of such properties by the offenders.

(3) The Bill seeks to replace the said Ordinance."
F
Section 2 is the definition section. Section 2(b) defines 'Custodian; to mean,
'the Custodian appointed under sub-section (1) of Section 3', while Section
2(c) defines 'securities' as under:

"securities" includes,-
G
(i) shares, scrips, stocks, bonds, debentures, debenture stocks,
units of the Unit. Trust of India or any other mutual fund or
other marketable securities of a like nature in or of any incorporated
company or other body corporate;

(ii) Government securities; and H
188 SUPREME COURT REPORTS [ 1998] l S.C.R.

A (iii) rights or interests in securities;"

Section 2(d) defines 'Special Court' to mean, 'the Special Court established
under sub-section (1) of Section 5'. Section 5 sub-section (I) empowers the
Central.Government, by notification in the Official Gazette, to establish a court
to be called the Special Court. Sub-section (2) thereof lays down that 'the
B Special Court shall consist of a sitting Judge of the High Court nominated by
the Chief Justice of the High Court within the local limits of whose jurisdiction
,ne Special Court is situated, with the concurrence of the Chief Justice of
India'. The learned Single Judge who has passed the impugned order is duly
constituted as a Srecial Court as per Section 5 sub-section (2) of the Act.
C Section 3 of the Act refers to 'appointment and functions of the Custodian'.
The said Section reads as under:

"3. Appointment and function of Custodian:-(!) The Central
Government may appoint one or more Custodian as it may deem fit
for the purposes of this Act.
D (2) The Custodian may, on being satisfied on information received i
•'
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 6th June 1992, notify the name of such person in the Official
Gazette.
E (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
attached simultaneously with the issue of the notification.
F (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
G and Sec. 4."

Section 4 of the act deals with contracts entered into fraudulently that may
'r-
be cancelled and under what circumstances why can be cancelled. Sub-
section (I) thereof empowers the Custodian on being satisfied, after such
enquiry as he may think fit, to cancel any contract or agreement entered into
H at any time after I st day of April 1991 and on and on or before the 6th June
•

MINOO MEHTA v. S.D. MEHTA (S.B. MAJUMDAR, J.] 189
1992 in relation to any property of the person notified under sub-section (2) A
of Section 3 that has been entered into fraudulently or to defeat the provision
.-i.
of the Act. Section 6 of the Act empowers the Special Court to have cognizance
of and try such cases as may be instituted before it or transferred to it as
!hereinafter provided. It is obvious, therefore, that the Special Court can take
cognizance of and try both civil and criminal cases which may be instituted
before it or may be transferred to it under the Act. Then comes Section 7
B
-:..,_ which deals with the jurisdiction of the Special Court and on the true
construction of which the present controversy can be decided. It reads as
under:

"7. Jurisdiction of Special Court. -
c
Notwithstanding anything contained in any other Jaw, any prosecution
in respect of any offence referred to in sub-section (2) of Sec. 3 shall
be instituted only in the Special Court and any prosecution in respect
of such offence pending any court shall stand transferred to the
Special Court. "
(
D
Section 8 deals the ·Jurisdiction of Special Court as to Joint trials' and lays
down that the Special Court shall have jurisdiction to try any person concerned
in the offence referred to in sub-section (2) of Section 3 either as a principal,
conspirator or abettor and all other offences and accused persons as can be
jointly tried therewith at one trial in accordance with the Code. Section 9 deals
with 'Procedure and powers of Special Court' with which we are not concerned. E
However, Section 9-A which was brought on the Statute Book by Amending
Act 24 of 1994 w.e.f. 25th January 1994 is required .to be noted. Sub-section
(I) thereof lays down that 'on and from the commencement of the Special
Court (Trial of Offences Relation to Transactions in Securities) Amendment
Act, 1994, the Special Court shall exercise all such jurisdiction powers and
F
,,-
i 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 I st day of April 1991, 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 other G
manner'. Section 11 deals with 'Discharge of liabilities' and lays down by sub-
section (I) thereof that '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'. Sub-section (2) of Section 11 provides for paying
H
190 SUPREME COURT REPORTS (1998] 1 S.C.R.

A or discharging in full, as far as may be, in the order of priorities laid down
by that sub-section. Amongst others, clause (b) of sub-section (2) of Section
11 provides for paying and discharging of all amounts due from the person
so notified by the Custodian to any bank or financial institution or mutual
fund. Section 13 provides for overriding effect of the Act and lays down that
the provisions of the Act shall have effect notwithstanding anything
B inconsistent therewith contained in any other law for tiJ.e time being in force
or in any instrument having effect by virtue of any law, other than, this Act,
or i.:. any decree or order of any Court, tribunal or other authority. It is in the
background of the aforesaid statutory scheme that the question posed for our
consideration has to 1->e resolved.

C Consideration of the Question
It' is no doubt true that the complaint is filed by a private party
complainant uncle against his nephew, the present appellant-accused alleging
that thought he entrusted the accused with the task of selling off his shares
during the relevant period of time the accused instead of returning the sale
D consideration arising out of the said transaction to the complainant had
misappropriated the said amount. It is also true that neither the complainant
nor the accused is a notified person as per Section 3 sub-section (2) of the
Act. However on a conjoint reading of sub-section (2) of Section 3 and
Section 7 of the Act the moot question arises whether an accused who is not
a notified person can be proceeded against before the Special Court if it is
E alleged that - (i) he is involved in any transaction in securities; and (ii) and
such involvement of the accused arises during thP, relevant period, i.e., from
!st April 1~91to6th June 1992. So far as there two requirement for application.
of Section 7 read with sub-section (2) of Section 3 of the Act are concerned
there is no dispute between the parties as in the complaint it is clearly alleged
that the accused was entrusted with the work of selling off the complainant's
F shares in the company concerned and that the accused had allegedly carried
out the said transaction during the relevant period and had realised the
proceeds by the sale of these shares between December 1991 and January
1992. It is also not in dispute that shares would fall within the definition of
·securities' as mentioned in Section 2 clause (c). However the short grievance
G on behalf of the appellant is that as the appellant - accused is not a notified
person as per Section 3 sub-section (2) of the Act the Special Court will have
no jurisdiction to try him for the offence under Section 409 of !PC but it is
the regular criminal court which can try such an offender.
Rival Contentions
H Learned senior counsel, Shri Raju Ramachandran, for the appellant in
MINOO MEHTA v. S.D. MEHTA [S.B. MAJUMDAR, J.] 191

this connection vehemently contended that on a correct interpretation of A
Section 7 the Special Court can have jurisdiction to try such accused who ~re
alleged to have committed any offence referred to in sub-section (2) of
Section 3 of the Act, as a notified person. He submitted that the offence
referred to in sub-section (2) of Section 3 of the Act must be an offence
committed by a notified person. It is difficult to agree with this contention. B
The reason is obvious. As the Preamble of the Act shows, the Act is to
provide for the establishment of a Special Court for the trial of offences
relating to transactions in securities and for matters connected therewith or
incidental thereto. Therefore, every offence pertaining to any transaction in
securities which is covered by the sweep of the Act, that is, if such transaction
has taken place between 0 I st April 1991 and on or before 06th June 1992 C
would be subjected to the provisions of the Act regarding trail of such an
offence. If learned senior counsel for the appellant was right Section 7 would
have been worded differently, that is to say, it would have stated that any
prosecution of a person notified as per sub-section (2) of Section 3 in
connection with the offence referred to therein would be instituted only in the

.
( Special Court. Instead of using this terminology Legislature in its wisdom has D
provided in the said Section that any prosecution in Fespect of any offence
referred to in Section 3 sub-section (2) of the Act shall be instituted only in
the special Court. The learned senior counsel for the appellant is right when
he contends that there cannot be any offence without any offender. But the
scheme of Section 7, in the light of the Preamble of the Act and the main E
purpose for enactment of the Act, appears to be that all criminal proceedings
pertaining to prosecutions in connection with accused involved in transactions
in securities during the relevant period will lie before the Special Court and
not before ordinary courts as the Section starts with the non obstante clause
stating that notwithstanding anything contained in any other law, only Special
Courts will have exclusive jurisdiction to try such offences. It is of course true F
that once the Custodian notifies the name of any person in the Official Gazette
as per sub-section (2) of Section 3 then certain civil consequences regarding
attachment of his properties would follow as per Section 3 sub-section (3)
automatically and that would empower the Custodian to deal with such
properties in such mar.ner as Special Court may direct as per sub-section ( 4) G
of Section 3 of the Act. On such notification of the person concerned the
Custodian would also get jurisdiction and power to cancel contracts and
agreements entered into by such notified person after following the procedure
of Section 4 sub-section (I). It is also true that on end from the commencement
of the Special Court (Trial Of Offences Relating to Transactions in Securities)
(Amendment) Act, 1994 as laid down by Section 9-A pending suits against H
192 SUPREME COURT REPORTS [1998] l S.C.R.
•
A such notified persons contemplated by the special provisions would also
stand transferred for adjudication to the Special Court. Thus so far as civil
suits are concerned the proceedings pending on the commencement of
Amending Act of J 994 would stand transferred provided in the meantime after
the main Act came into force in 1992 such defendants have got notified under
Section 3 .Sub-section (2) of the Act. But that is a scheme pertaining to civil
B actions against notified persons. It has also to be kept in view that as Section
9-A was inserted with effect from 25th January J994, it was possible to notify -f
such defendants under Sections 3 sub-section (2) by the Custodian who
would be appointed on and after 06th June 1992. If during this period such
notifications are made civil cases pertaining to such notified persons would
C get covered by the sweep of Section 9-A. No such scheme is envisaged by
Section 7. So far as the offences are concerned on a conjoint reading of
Section 3 Sub-section (2) read with Section 7 of the Act it cannot be said that
unless a person is notified he cannot be tried for the offence contemplated
by Section 3 sub-section (2) by the Special Court. The offence referred to in
sub-section (2) of Section 3 which is within the sweep of Section 7 of the Act
D must be .an offence committed by any person and must have the following ).
'
two characteristics:

I. Such offence must relate to transactions in securities; and
2. such offence should be alleged to have been committed between
E Olst April 1991 and on or before 06th June 1992.

These are the special classes of offences which are carved out by the
Legislature for being dealt with only by the Special Court and not by ordinary
Court. Once these two requirements are satisfied the Special Court will get
jurisdiction to try such offences and, therefore, constantly to try the accused
F concerned who are alleged to have committed such offences congnisable by
the Special Court. In this connection one additional aspect is worth nothing.
When the principal accused is the notified person even non-notified accused
can be tried jointly with such principal accused as per Section 8 if they were
jointly involved in such offences. But even that apart. if the accused is the
G sole accused and he is not a notified person and if any criminal case is
pending against such an accused in any court when the Act came into force
then even such a criminal case provided two requirements of sub-section (2)
of Section 3 qua such offence as seen earlier are satisfied will automatically
stand transferred to the Special Court as laid down by the latter part of
Section 7. It is obvious that after the Act came into force on 06th June 1992
H the Custodians would get appointed as per Section 3 sub-section (1) but the
MJNOO MEHTA v. S.D. MEHTA (S.B. MAJUMDAR, J.] 193
offences contemplated by sub-section (2) of Section 3 fall within the larger A
period from Olst April 1991 which extends upto 06th June 1992. Therefore, it
is possible to visualise that a criminal case may be pending against an
accused involved in offence relating to transactions in securities even prior
to 06th June 1992 when the Act came into force with retrospective effect.
Therefore from 01 st April 1991 till 05th June 1992 the accused who is said to B
be involved in such transactions would be a person who is not notified as
there would arise no occasion to notify such a person by the Custodian as
the latter could not have been appointed at any time prior to 06th June 1992.
Therefore, such pending criminal cases against the accused involved in offence
relating to transactions in securities between 0 I st April 1991 and 06th June
1992 would necessarily refer to those accused of such offence who were non- C
notified persons and still by force of Section 7 second part such pending
cases against non-notified accused if the offences in which they are said to
have been involved satisfied the two requirements as laid down by Section
3 sub-section (2) would automatically stand transferred for trial to the Special
Court. If learned senior counsel for the appellant is right an anomalous
situation would arise regarding jurisdiction of the Special Court with effect D
from 06th June 1992. Criminal cases pending earlier wherein the accused are
not notified persons could be tried by the Special Court under Section 7 as
such pending cases would automatically stand transferred to the Special
Court. But in cases registered after the appointment of the Custodian under
Section 3 sub-section (I), only the notified persons could be tried by the E
Special Court for similar type of offences as contemplated by Section 3 sub-
section (2). That would create a patently anomalous situation and would make
the operation of Section 7 a truncated and lopsided one. If the Special Court
can try transferred criminal cases which were filed prior to 06th June 1992 in
regular courts wherein accused were not notified persons as such cases
would stand transferred to it for trial automatically on coming into force of F
./-
the Act, then of necessity it must be held that even if such criminal cases
are filed after coming into force of the Act, against non-notified persons
involved in similar type of offences they could be tried by the Special Court.
Any other view would result in creation of two conflicting types of jurisdiction
for the Special Court functioning as per the same Section 7. G
Even apart from this aspect it is also necessary to note that under
Section 3 sub-section (2) a Custodian may notify such person in Official
Gazette. Take a case in which the Custodian, for reasons best known to him,
might not have notified such a person and still such a person is alleged to
be involved in an offence relating to transactions in securities during the H
194 SUPREME COURT REPORTS (1998] l S.C.R.

A relevant period from 0 Ist April 1991 and 06th June 1992. Under these
circumstances if learned senior counsel for the appellant is right such a
person would get an immunity from being tried before the Special Court for
such an offence only because the Custodian on account of his discretion or
carelessness or otherwise has not thought it fit to exercise his powers under
B Section 3 sub-section (2) of notifying such a person in the Official Gazette.
Jn such an eventuality jurisdiction of the Special Court will depend upon the
volition of the Custodian under Section 3 sub-section (2) in connection with
such an accused. If the notifies him, accused can be tried by the Special
Court. If he does not notify him such an accused cannot be tried for the
offence which may otherwise fulfil basic requirements of Section 3 sub-
C section (2). Jurisdiction of the Special Court as laid down by Section 7 cannot
depend upon mere fancy and volition of the Custodian. On a conjoint reading
of Section 3 and its relevant provisions, therefore, it must be held that once
the Custodian notifies a person in the Official Gazette under sub-section (2)
of Section 3 he gets the power and jurisdiction to deal with such person's
properties and transactions as laid down under Section 3 sub-section (4) and
D Section 4 and in such a case even the civil suits of notified persons would
stand transferred as per Section 9-A of the Act. But so far as criminal
proceedings are concerned even if the accused is not notified still the Special
Court will have jurisdiction under Section 7 to deal with the offences alleged
to have been committed by such an accused if the earlier mentioned two basic
E requirements of Section 3 sub-section (2) are satisfied. As the aforesaid two
basic requirements of section 3 sub-section (2) read with Section 7 are allegedly
satisfied in the present case and on which there cannot be any dispute it must
be held that the Special Court at Bombay had Jurisdiction to entertain and try
the present criminal case against the appellant.

F However one submission of learned senior counsel for the appellant in
connection with second part of Section 7 of the Act is required to be noted.
He submitted that this part of the Section can be reconciled with the first part
on the basis that in pending criminal cases against non-notified persons the
Special Court can have jurisdiction provided the Custodian notifies them
under Section 3 sub-section (2). Till that time transferred cases will have to
G be kept pending. This contention cannot be countenanced on the express
language of second part of Section 7 wherein it is laid down that there would
be statutory and automatic transfer of such pending criminal cases on the
date of coming into force of the Act, that is, 06th June 1992. On the contention
of learned senior counsel for the appellant there would be a hiatus and
H interregnum during which before transferring such pending cases the accused
MINOO MEHTA v. S.D. MEHTA [S.B. MAJUMDAR, J.] 195
concerned has to be notified or that the Special Court could proceed with A
such transferred pending cases only after such notification. Such a course,
• on the express language of second part of Section 7 is contra-indicated .

Before parting with this case we may state that the learned senior
counsel for the appellant also submitted that the offence alleged against the
appellant was not relating to any transaction in securities during the relevant B
time but qua the sale consideration alleged io have been received by the
appellant out of the said transaction and for which alleged offence under
Section 409 prosecution is sought to be launched against the appellant. It is
difficult to agree witi1 this contention. A conjoint reading of the recitals in the
complaint which obviously must be assumed to be true at this stage would C
show that the accused is alleged to have entered into transaction in securities,
namely, the shares during the relevant period and out of the said transaction
is alleged to have received sale proceeds which he has not handed over or
transmitted to the complainant who claims to be entitled to the said amount.
Thus the offence alleged is certainly relating to the transaction in securities
as said to have been entered into by the accused during the relevant period. D

Before parting with the present discussion we may refer to two judgments
of this Court on which reliance was placed by learned senior counsel for the
appellant. A three Judge Bench of this Court in the c~se of Canara Bank v.
Nuclear Power Corporation of India Ltd. & Ors., [ 1995] Sup 3 SCC 81 was
concerned with the interpretation of Section 9-A of the Amending Act of E
1994. In our view the said decision cannot be of any assistance to the
appellant in the present case for the simple reason that, as noted earlier,
Section 9-A provides for the trial of civil cases wherein the notified person
is the defendant. Therefore, so far as the civil actions are concerned the
statutory scheme reflected by Section 9-A would operate of its own and it F
is in this connection that the observations are made by this Court in paragraphs
27 and 33 of the Report dealing with notified persons and how they are to
be proceeded against under the Act. The question with which we are concerned
was not before this Court in the aforesaid decision. Our attention was also
invited to a judgment of two learned Judges of this Court in the case of
Kudremukh Iron Ors. Co. Ltd. v. Fairgrowth Financial Services Ltd. & Anr., G
(1994] 4 SCC 246. Even that case will have no application in the present
proceedings for the simple reason that Venkatachaliah, CJ. speaking for the
Court in that case interpreted Section 11 and Section 3 sub-section (2) of the
Act. Section 11 regarding discharge of liabilities directly deals with the powers
of the Custodian for property under attachment. Section 3 sub-section (3) of H
196 SUPREME COURT REPORTS [ 1998] 1 S.C.R.

A the Act deals with automatic attachment of the properties of notified person
once he is so notified under sub-section (2) thereof and thereafter the Custodian
becomes entitled to deal with such attached properties under sub-section (4)
of Section 3 in such manner as the Special Court may direct. It is in the light
of this provision that Section 11 becomes relevant. Under Section 11 the
Special Court any direct the Custodian to dispose of the property under
B attachment wherein :!II amounts due from the persons so notified can be paid
to any bank or financial institutional or mutual fund. Consequently a conjoint ~
reading of Section 3 sub-section (4) and Section 11 represents a separate
statutory scheme in which only notified person's attached properties can be
dealt with for discharging the liabilities as provided in Section 11. So far as
C the criminal cases against accused involved in offences contemplated by
Section '3 sub-section (2) are concern, the aforesaid statutory scheme can
have no application. Consequently even the judgment of this Court in the
case of Kudremukh Iron Ore Co. Ltd, (supra) cannot advance the case of the
appellant any further.

D In ~he result it must be held that the learned Single Judge of the High
Court, as a Special Court, was quite justified in passing the impugned order
in connection with the jurisdiction of that Court in entertaining and trying the
criminal case against the appellant. Appeal is accordingly dismissed.

B.K.S. Appeal dismissed.