Case Note & Summary
The plaintiffs, Smt. Jyoti H. Mehta, Shri Ashwin S. Mehta, and M/s. ZEST Holdings Pvt. Ltd., filed Special Court Suit No. 1 of 2017 before the Special Court at Bombay, constituted under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, seeking recovery of Rs. 6 Crores from Defendant No. 1, Shri Kishore J. Janani. The plaintiffs alleged that Defendant No. 1 had borrowed the amount and failed to repay. Defendant No. 1 was a notified person under the Act, and the Custodian (Defendant No. 4) claimed that certain properties of Defendant No. 1 were notified properties and thus not liable to be attached in the suit. The legal issues were whether the Special Court had jurisdiction to entertain the suit and whether the properties claimed by the Custodian were notified properties. The plaintiffs argued that the suit was maintainable under Section 9A of the Act and that the Custodian had no claim over the properties. The Custodian contended that the suit was not maintainable as the defendant was notified and that the properties were notified. The court analyzed the provisions of the Act and held that the Special Court has jurisdiction to entertain the suit as it relates to a transaction in securities. The court further held that the Custodian failed to prove that the properties were notified properties, as there was no evidence linking them to any tainted securities transaction. The court allowed the suit and directed Defendant No. 1 to pay Rs. 6 Crores to the plaintiffs with interest. The Notice of Motion filed by Defendant No. 1 was dismissed.
Headnote
A) Jurisdiction - Special Court - Recovery Suit Against Notified Person - Section 9A of Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 - The Special Court has jurisdiction to entertain a suit for recovery of money against a person notified under the Act, as the suit is in respect of a transaction in securities or a matter connected therewith. The court held that the suit is maintainable and the Custodian's objection regarding lack of jurisdiction was rejected. (Paras 10-15) B) Notified Property - Burden of Proof - Custodian's Claim - Section 3 of Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 - The Custodian must prove that the property claimed is 'notified property' i.e., property which is involved in or acquired from a tainted securities transaction. Mere notification of the person does not automatically make all his properties notified property. The court held that the Custodian failed to discharge this burden. (Paras 20-25) C) Recovery Suit - Maintainability - Prior Notification of Defendant - Section 9A of Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 - A suit for recovery of money against a notified person is maintainable even if the defendant is notified, as the Act does not bar such suits. The court held that the plaintiffs are entitled to recover the amount from the defendant. (Paras 16-19)
Issue of Consideration
Whether the Special Court has jurisdiction to entertain a recovery suit against a notified person under the Special Court Act, 1992, and whether the property claimed by the Custodian is liable to be attached as notified property.
Final Decision
The Special Court allowed the suit and directed Defendant No.1 to pay Rs. 6 Crores to the plaintiffs with interest at 12% per annum from the date of suit till realization. The Notice of Motion No.1 of 2018 filed by Defendant No.1 was dismissed.
Law Points
- Recovery suit maintainable before Special Court under Section 9A of Special Court (Trial of Offences Relating to Transactions in Securities) Act
- 1992
- Burden of proof on Custodian to show property is notified property
- Notified person can be sued for recovery of dues arising from transactions prior to notification
- Custodian cannot claim property without establishing link to tainted securities transaction
