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CASE NO.: Appeal (civil)  1528 of 2005

PETITIONER: M/s Neeldeep Investments (P) Ltd

RESPONDENT: The Custodian & Ors

DATE OF JUDGMENT: 13/03/2008

BENCH: C.K. THAKKER & ALTAMAS KABIR

JUDGMENT: J U D G M E N T  

CIVIL APPEAL NO.1528 of 2005

Altamas Kabir, J.

1.      This appeal has been filed under Section 10 of  the Special Courts (Trial of Offences Relating to  Transactions in Securities) Act, 1992, challenging   the order passed by the learned Special Judge on  12.01.2005 in Show Cause Notice No.26 of 2003  in  Misc. Appeal No.470 of 1999 arising out of Misc.  Petition No.43 of 1995. By his judgment and order  dated 12.1.2005 the learned Special Judge came to a  finding that the conduct of the appellant herein  through the noticee, Milan Dalal, son of the  Notified Party, Bhupen Dalal, was such as to  repeatedly create difficulties in the way of the  Court and the Custodian, firstly, in passing the  decree, and, thereafter, in the matter of its  execution. In the circumstances indicated in the  order, the noticee, Milan Dalal, was sentenced to  undergo simple imprisonment for a period of 3  months and was also directed to pay a fine of  Rs.2,000/-.  The said order was suspended for a  period of 12 weeks within which period the appeal  was filed in this Court and on 18.3.2005 notice was  issued thereupon. While issuing the notice this  Court directed that the stay already granted by the  Special Court would continue for a period of 4  weeks. On 29.4.2005 the stay granted was directed  to continue until further orders.

2.      On 5.1.2006 when the appeal was called on for  hearing, this Court passed the following order.

"We are prima facie of the opinion  that having regard to the facts, the  order under appeal does not need to be  interfered with. However, at the  suggestion of the learned Solicitor  General we adjourn the matter to  enable the appellant to consider  whether the entire decretal due of  Rs.1,42,56,000/- can be paid.

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The matter is adjourned by two weeks."

3.      In order to appreciate the circumstances in  which the aforesaid order came to be passed, the  facts leading to the filing of the Civil Appeal in  this Court are briefly set out hereunder.

4.      Bhupen Dalal, the father of the noticee Milan  Dalal, was declared to be a Notified Party under  the provisions of the Special Courts (Trial of  Offences Relating to Transactions in Securities)  Act, 1992, hereinafter referred to as the ’1992  Act’. The Custodian under the said Act filed Misc.  Petition No.43 of 1995 on behalf of the Notified  Party, Bhupen Dalal for recovery of 1,42,65,000/-  with interest from M/s Neeldeep Investment Company  Private Limited, the appellant herein. On 8.6.1995  the Special Court passed a decree on that petition  and noted that the Notified Party is a majority  shareholder of the judgment debtor M/s Neeldeep  Investment Company Private Limited, along with  noticee Milan Dalal. It was also noted that after  Bhupen Dalal was notified under the said Act the  Custodian issued a public notice calling  upon the   parties to disclose to him if any money was owed  by them to the Notified Party.  Despite such  public notice, the judgment debtor which was  practically a family concern of the Notified Party  did not come forward to disclose that the judgment  debtor owed huge amounts to the Notified Party. It  was noted that the Custodian came to know of the  liability only on account of information given by  the Income Tax Department.  It is on the basis of  such information that the Custodian had taken out  the Misc. Petition No.45 of 1995.

5.      The judgment debtor appeared in those  proceedings and admitted the said liability and on  that basis a decree was passed against the  judgment debtor by the learned Special Judge.

6.      In order to execute the decree the Custodian  filed Misc. Application No.4 of 1999  and on that  application on 24.11.1999 the Court passed an  interim order restraining the judgment debtor and  its Director from in any manner disposing of,  transferring, alienating or encumbering all of  their properties. On behalf of the judgment  debtor, the noticee filed an affidavit disclosing  that the judgment debtor had to recover  substantial amounts from six parties namely \026 1)  M/s Lighthouse Investments Limited, 2) Oceanic  Investments Limited, 3) Kalpvruksha Holdings and  Investments Co. Pvt. Ltd., 4) Harisharan  Developers Private Limited, 5) M/s S. Ramdas and  6) M/s Anmol Chemicals (Guj) Limited.

7.      On the basis of the information disclosed by  the noticee in his said affidavit on 15.12.1999,  the Custodian took out garnishee notices.   Pursuant to notice to the garnishees they appeared  and filed affidavits and the common defence taken  was that  though they admittedly owed amounts to  the judgment debtor, the said amounts were

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adjusted on acceptance of shares of different  companies by the judgment debtor towards repayment  of the dues. At that stage the Special Court  passed order dated 19.9.2003 where reference was  made to the earlier order dated 24.11.1999. Show  Cause Notice was issued pursuant to the order  dated 19.9.2003 under Section 11-A of the said Act  wherein it was stated that the noticee was to be  tried for having disobeyed the order dated  24.11.1999.  Although, several defences were taken  on behalf of the noticee, the learned Special  Judge held by his order dated 12.1.2005 that the  conduct of the noticee showed that in the instant  case attempts had repeatedly been made to create  difficulties in the way of the Court and the  Custodian, firstly, in the passing of the decree  and then in the matter of its execution.  The  learned Special Judge accordingly felt that it  would be appropriate to impose deterrent  punishment on the noticee and sentenced him to  undergo simple imprisonment for a period of three  months and to pay a fine of Rs.2,000/- as stated  hereinbefore.

8.      It is in this background that on 20.1.2006  this Court passed the following order:

"It is proposed by learned counsel  appearing on behalf of the appellant that  his client will pay an amount of  Rs.1,26,25,000/- (Rupees one crore twenty  six lakhs  and twenty five thousands)   (being the balance of the decretal   amount of Rs.1,42,00,000 (Rupees one  crore and forty two lakhs seventy five  thousands) paid by the garnishee by three  instalments in the course of 2006.  The  first instalment shal be paid on 3rd  April, 2006, the second on 10th July and  the third by 4th December, 2006.

The learned Solicitor General  appearing on behalf of the Custodian has  submitted that as far as contempt  proceedings are concerned, his client is  willing to accept the offer of the  appellant but submits that this should  not in any way affect the ultimate  liability of the appellant to pay the  decreal amount.

In this view of the matter we adjourn  the passing of the order on the basis of  the consent as arrived at between the  parties, till 3rd April, 2006  when the  petitioner will bring the first  instalment of the amount to Court. In the  event the payment of all the instalments   is made as aforesaid, this appeal will  stand allowed  and the order of the High  Court will stand set aside and the  garnishee notice will be discharged.

In default of payment of any one  instalment or any portion thereof, the

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appeal will stand dismissed and the  impugned order of the High Court will  become operative.

Adjourned to 3rd April, 2006."

9.      Pursuant to the aforesaid order on 3.4.2006  the appellant brought two cheques towards payment  of the first instalment. The matter was directed  to appear after 2 weeks to ensure  that the  cheques were duly encashed. Subsequently, on  14.7.2006 it was recorded that the second cheque  which was payable on 10.7.2006 in terms of the  order dated 20.1.2006 had also been paid and that  the third instalment was payable by 4.12.2006.   The matter was directed to be listed in the last  week of December 2006, and, in the meantime, the  hearing of the garnishee notices before the  Special Court, Mumbai, was stayed.

10.     The matter thereafter appeared on 22.1.2007  when it was adjourned for a period of 4 weeks and  then again on 23.2.07 it was adjourned for a  further period of 4 weeks for filing a rejoinder  affidavit. A third adjournment of 4 weeks was  granted on 30.3.2007 and on 27.4.07 the matter was  directed to be listed for final disposal in  September, 2007.

11.     The matter thereafter appeared for hearing on  14.11.2007 and on the said date after hearing the  parties the matter was adjourned further to enable  the parties to file the facts relating to the  execution proceedings and the actual amount  alleged to be due on account of an error in the  decretal amount which went unnoticed when the  decree was passed.

12.     Thereafter, an application was filed by the  Custodian for modification of the order passed in  this appeal on 20th January, 2006.  In the said  application, it was clarified that two separate  decrees were passed by the Special Court against  the respondent No.1, one was for recovery of a sum  of Rs.1,42,65,000/- with interest at the rate of  24% per annum from the date of receipt of amount  till payment and the other for a sum of  Rs.32,14,500/- with interest at the rate of 15%  per annum from the date of receipt of the amount  till payment.  Despite the fact that two decrees  had been passed for a total sum of  Rs.1,74,79.500/- in the decree the sum of  Rs.1,42,65,000/- was mentioned together with  interest. It has been stated in the application  that the total principal amount should be  mentioned as Rs.1,74,79,500/- together with  interest payable thereon instead of  Rs.1,42,65,000/- as indicated.  By the said  application, it was, therefore, prayed that the  order dated 20th January, 2006, was required to be  modified by correcting the principal amount  mentioned in the decree to be Rs.1,74,79,500/-  minus Rs.15,75,000/-, which had already been  recovered, together with interest as decreed by

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the Special Court in its order dated 8th June,  1995.

13.     The said application was also heard at the  time of hearing of the appeal.

14.     The fact that two separate decrees were passed  for the sum of Rs.1,42,65,000/- and Rs.32,14,500/-  is not disputed, though, an attempt was made to  establish that the two were separate and would  have to be dealt with separately. On behalf of the  appellant it was submitted that the order dated  20th January, 2006, had been fully implemented as  the entire decretal amount of Rs.1,42,65,000/- had  been paid in three instalments, and it is only  thereafter that an attempt  was made by the  Custodian to claim the further sum of  Rs.32,14,500/- together with interest thereon.

15.     We do not see any force in the said  submissions since both the decretal amounts  against the appellant have been mentioned in the  order dated 19th September, 2003, passed in Misc.  Application No.470 of 1999 filed by the Custodian.  We accordingly  allow the said application. The  decretal amount shall be corrected to read as  Rs.1,59,04,500/- together with interest as decreed  by the Special Court upon credit having been given  for Rs.15,75,000/- which has already been  recovered by the Custodian.

16.     After taking into account the decretal amount  as amended, together with interest as directed by  the Special Judge in his order dated 8th June, 1995  in M.P. 43/1995, the appellant is directed to pay  the balance decretal amount within 30th June, 2008,  in three equal instalments commencing from the  month of April, 2008.  The first of such  instalments shall be paid by 15th April, 2008, and  the next two instalments by the 15th day of May,  2008 and 30th June, 2008.  The last instalment  shall include any broken amount left over after  payment of the first two instalments.  The hearing  of the garnishee notices before the Special Court,  Mumbai, shall remain stayed till the said date,  and in case of default of such payment being made,  this order will cease to be operative and the  order appealed against will stand revived.   17.     There will be no order as to costs.

18.     The appeal is disposed of in the above terms.