Case Note & Summary
The dispute arose between a company and a custodian regarding a sum of Rs. 20 lakhs paid for shares that were allegedly not allotted. The second respondent was notified under the Special Court (Trial of Offences Relating To Transactions In Securities) Act, 1992, as involved in securities offences. The appellant claimed to have allotted shares to the second respondent but the custodian contested this, stating that no valid allotment occurred as the necessary applications were not submitted. The Special Court found that the shares were not allotted as there were no names entered on the share certificates and no application was made by the second respondent to become a member of the company. The Special Court directed the appellant to repay the sum with interest, leading to the appeal. The appellant contended that the Special Court lacked jurisdiction and that the shares were granted, thus the money belonged to them. The Supreme Court examined the jurisdiction of the Special Court and concluded that it had exclusive authority over such matters. It also upheld the Special Court's finding that no valid allotment of shares occurred, emphasizing that allotments require proper applications and cannot be made to unknown persons. The court dismissed the appeal, affirming the Special Court's decision to order repayment of the amount with interest.
Headnote
A) Special Court Jurisdiction - Jurisdiction to Entertain Applications - Special Court's jurisdiction under Special Court (Trial of Offences Relating To Transactions In Securities) Act, 1992 - The Special Court has exclusive jurisdiction to deal with matters related to transactions involving notified persons under the Act, barring other courts. The court held that the appellant's contention regarding lack of jurisdiction was misconceived as the Special Court is the only authority to inquire into such matters (Paras 12-14). B) Allotment of Shares - Validity of Allotment - No valid allotment of shares without proper application - The Special Court found no evidence of a valid allotment of shares as required under the Companies Act, 1956, and concluded that the transaction was merely a financial arrangement. The court upheld the Special Court's decision to direct repayment of the sum with interest (Paras 15-18).
Issue of Consideration
Whether the Special Court had jurisdiction to entertain the application of the Custodian and whether there was a valid allotment of shares.
Final Decision
The Supreme Court dismissed the appeal, affirming the Special Court's order for repayment of Rs. 20 lakhs with interest at 18% per annum from November 13, 1991.
Law Points
- Jurisdiction of Special Court
- Allotment of shares
- Transactions in securities
- Financial arrangements
- Buy-back agreements
