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CASE NO.: Appeal (civil)  667-671 of 2004

PETITIONER: Ashwin S. Mehta and Anr.

RESPONDENT: Custodian and Ors.

DATE OF JUDGMENT: 03/01/2006

BENCH: S.B. Sinha & P.P. Naolekar

JUDGMENT:

J U D G M E N T WITH CIVIL APPEAL NOS. 672-675,  676-680 AND 681 OF 2004

S.B. SINHA, J :

       These appeals are directed against a judgment and order dated  17.10.2003 passed by the Special Court constituted under the Special Courts  (Trial of Offences Relating to Transactions in Securities) Act, 1992 (for  short "the Act") in Misc. Application Nos. 41 of 1999, 4 of 2001, 265, 266  and 275 of 2003.

BACKGROUND FACTS

       The Appellants herein who are related to one Harshad S. Mehta (since  deceased) purchased nine residential flats in a building called Madhuli  Apartments in Worli area of Mumbai.  The family of the Appellants consists  of four brothers, their wives, children and their widowed mother.  The eldest  among them, Harshad S. Mehta, has since expired.  The said nine flats, it is  said, were merged and redesigned for joint living of the entire family.   

       The Appellants herein and the said late Harshad Mehta were persons  notified in terms of the Act which was enacted to  provide for the  establishment of a Special Court for the trial of offences relating to  transactions in securities and for matters connected therewith.  In terms of  the provisions of the Act, along with late Harshad Mehta, the Custodian had  notified 29 entities in terms of Section 3 of the Act, comprising three of his  younger brothers, wife of late Harshad Mehta, wives of two of his younger  brothers and other corporate entities, a partnership firm and three HUFs.   However, out of the said 29 entitles, only Late Harshad Mehta and two of  his younger brothers were cited as accused in various criminal cases filed  against them.   

       The properties of Late Harshad Mehta and the Appellants, herein  being notified persons stood attached in terms of the provisions of the Act.   

PROCEEDINGS BEFORE THE SPECIAL COURT

       Before the learned Special Court, the parties herein filed several  applications which can be sub-divided in three categories, as would be  noticed shortly hereinafter.  It is not in dispute that the learned Special Court  on or about 3.08.1993 issued directions in various proceedings before it  appointing auditors to prepare and audit the books of accounts of all notified  persons for the period 1.4.1990 and 8.06.1992, i.e., the date of the

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notification.  Three firms of Chartered Accountants were appointed to  prepare statement of accounts and liabilities of each of the Appellants,  herein.

       A Chartered Accountants’ Firm was appointed by the learned Special  Judge by an order dated 17.9.2003 to represent all notified entities in the  family of late Harshad Mehta for the purpose of ascertaining their tax  liabilities.

       We may, at this juncture, notice the nature of the applications filed by  the parties, herein before the learned Special Court:

(i)     On 26.04.1999, the Custodian filed an application being Misc.  Application No. 41 of 1999 seeking permission of the Special Court  for sale of residential premises commonly known as Madhuli of eight  notified entities.   (ii)    A Misc. Application being 4 of 2001 was filed by the Custodian  praying for the sale of commercial premises. (iii)   The Appellants herein filed several Misc. Applications praying for  lifting of attachment on their residential premises on the ground that  the same had been purchased much prior to 1.4.1991 and the same had  no nexus with any illegal transactions in securities.  Alternatively, it  was prayed that since their asset base was greater than genuine  liabilities, the said residential premises should be released from  attachment.   

IMPUGNED JUDGMENT

       By reason of the impugned order dated 17.10.2003, the learned  Special Judge allowed Misc. Applications Nos. 4 of 2001 and 41 of 1999.   The Misc. Applications filed by the Appellants herein for release of the  residential flats as well as the commercial premises from attachment were  dismissed.  It was directed:

"In case, all adult members of the family of late  Shri Harshad Metha, who are presently occupying  the abovereferred flats, file an undertaking in this  Court within a period of four weeks from today  undertaking to vacate the flat occupied by them  and hand over peaceful possession thereof to the  custodian within a period of four weeks from the  date on which the custodian sends them  communication asking them to vacate the flats, on  sale of the flats being sanctioned by the Court.   The custodian shall permit the members of family  of late Shri Harshad Mehta to occupy the flats  during the time that the process of the sale of the  flats goes on.

In case no such undertakings are filed by the adult  members as directed above, within the aforesaid  period, the custodian shall stand appointed as  receiver of the flats which are described in Exh. 8  and Exh. 8-1 to Misc. Petition No. 41 of 1999."

CONTENTIONS OF THE PARTIES Appellants         Mr. Mahesh Jethmalani, learned senior counsel appearing on behalf of  the Appellants in assailing the said judgment of the learned Special Court  inter alia raised the following contentions:

(i)     Some of the entities having their asset base much more than actual  liability, the impugned judgments are unsustainable.  There was no  occasion for the Custodian to club all the notified entities in one block  so as to be termed as Harshad Mehta Group and/or to club their assets

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and liabilities jointly.  Although in relation to a body corporate  incorporated and registered under the Indian Companies Act, the  doctrine of lifting the corporate veil would be applicable, but the same  cannot be applied in case of individuals. (ii)    Having regard to the fact that only three entitles out of eight were  involved in the offences, the liability of Harshad Mehta could not  have been clubbed for the purpose of directing attachment and  consequent sale of the properties which exclusively belong to them. (iii)   The liabilities of Harshad Mehta, who was a sui generis, could have  been recovered from the properties held and possessed by him or from  the companies floated by him but not from the individual entities; at  least two of whom being medical practitioners have their income from  other sources.   (iv)    The books of accounts and other documents on the basis whereof the  auditor’s report had been made having not been allowed to be  inspected by the Appellants herein on the plea that they had the  knowledge thereabout, the same could not have been taken into  consideration for the purpose of passing of the impugned order or  otherwise. (v)     The Appellants having preferred appeals against the income tax orders  of assessment passed by the authority and the same having been set  aside, no liability to pay income tax by the Appellants as of now being  existing, the residential properties could not have been sold.   (vi)    Drawing our attention to a representative chart showing the  discrepancies in the accounts of Mrs. Deepika A. Mehta as shown in  (a) affidavit by the Custodian; (b) Books of Accounts maintained by  the Appellants; and (c) Auditor’s Report, it was submitted that the  Auditor’s Report could not have been relied upon.   (vii)   A copy of the Auditor’s Report having only been supplied during  pendency of these appeals, the learned Special Judge committed a  serious error in passing the impugned judgment relying on or on the  basis thereof. Respondents

       Mr. Ashok H. Desai, learned senior counsel appearing on behalf of the  Custodian, on the other hand, would, inter alia, submit:

(i)     In view of the decision of this Court in L.S. Synthetics Ltd. v.  Fairgrowth Financial Services Ltd. and Another [(2004) 11 SCC 456]  all properties belonging to the notified persons being subject to  automatic attachment, could be applied for discharge of the joint  liabilities of the Harshad Mehta Group in terms of Section 11 of the  Act. (ii)    The applications for de-notification filed by the Appellants herein  having been withdrawn, the contention raised by the Appellants that  they are not liable in terms of the provisions of the Act are not open to  question, particularly, in view of the fact that no application for de- notification could be filed subsequently as they had become barred by  limitation. (iii)   The order of assessment under the Income Tax Act having become  final and binding as on the date when the orders of assessment were  passed and, thus, mere filing of appeals, were not sufficient for raising  a contention that the taxes did not become due.  Reliance in this behalf  has been placed on B.C. Dalal v. Custodian [Civil Appeal No. 2795 of  2004] and The Kedarnath Jute Mfg. Co. Ltd. v. The Commissioner of  Income Tax, (Central), Calcutta [(1972) 3 SCC 252]. (iv)    The Appellants herein, apart from the corporate entity which is a front  company of late Harshad Mehta, have received large loans, advances  and credits from the Harshad Mehta Group and there had been  intermingling of the assets to the tune of crores of rupees, they cannot  escape their liabilities under the Act.  The affidavit filed by the  Appellants herein before the Special Court clearly shows that the  liabilities exceed the assets in all cases.  Even in the case of Dr.  Pratima Mehta wherein some excesses has been shown, if the interest  is calculated for the last over 13 years of the amount received, the

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liabilities would exceed the assets.   (v)     The assets and liabilities of each of the entities having been audited by  the Chartered Accountants, it is evident from the reports that in all  cases liabilities exceed the assets.   (vi)    The decretal amount against the Harshad Mehta Group also would  exceed Rs. 4339 crores and, thus, the assets held by the Appellants are  wholly insufficient to meet the liabilities.   (vii)   Furthermore, the Appellants are also unable to maintain their  residential properties as the Custodian had to pay a sum of Rs. 1.06  crores towards the maintenance of the said residential properties.  The  assets of the Harshad Mehta Group are valued at Rs. 972 crores apart  from the income tax dues whereas the aggregate amount of income  tax dues exceed Rs. 13,800 crores.    (viii) Dr. Hitesh Mehta and Dr. Pratima Mehta who are medical  practitioners by profession having affirmed affidavits admitting that  the share broking and investment businesses which were part of  family businesses were undertaken and conducted by late Harshad  Mehta and they had no knowledge thereabout nor were they involved  therewith, they at this stage cannot be permitted to turn round and  contend that they have nothing to do with the liabilities of Late  Harshad Mehta. (ix)    The sale of commercial property had never been seriously contested  by the Appellants and in fact the contention of the Appellants herein  before the Special Court was that if the commercial properties were  sold, there would be no need to sell the residential properties.  Even  before this Court, the sale of commercial properties had not been  questioned.  A large number of commercial properties having already  been sold and third party rights having been created, this Court should  not interfere with the impugned judgment.

THE ACT

       The Statement of Objects and Reasons for enacting the Act reads as  under:

"(1) 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 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 restore  confidence in and maintain the basic integrity and  credibility of the banks and financial institutions  the Special Court (Trial of Offences Relating 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 and 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."

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       Section 3 of the Act provides for appointment and functions of the  Custodian.  Sub-section (2) of Section 3 postulates that 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 1st day of April,  1991 and on and before 6th June, 1992 (the Statutory Period), notify the  name of such person in the Official Gazette.  Sub-section (3) of Section 3  contains a non-obstante clause providing that 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 and such attached  properties may be dealt with by the Custodian in such manner  as the Special  Court may direct.  In the Ordinance which preceded the Act, there was no  provision for giving post facto hearing to a notified person for cancellation  of notification, but such a provision has been made in the Act, as would  appear from Section 4(2) thereof.

       Sub-section (1) of Section 4 of the Act reads as under: "4. Contracts entered into fraudulently may be  cancelled.-- (1) If the Custodian is satisfied, after such inquiry  as he may think fit, that any contract or agreement  entered into at any time after the 1st day of April,  1991 and on and before the 6th June, 1992 in  relation to any property of the person notified  under sub-section (2) of section 3 has been entered  into fraudulently or to defeat the provisions of this  Act, he may cancel such contract or agreement and  on such cancellation such property shall stand  attached under this Act; Provided that no contract or agreement shall be  cancelled except after giving to the parties to the  contract or agreement a reasonable opportunity of  being heard."

Sub-section (2) of Section 4, however, provides for a hearing as regard  correctness or otherwise of the notification notifying a person in this behalf,  in the event, an appropriate application therefor is filed within 30 days of the  issuance of such notification.  Section 5 provides for establishment of the  Special Court.  Section 7 confers exclusive jurisdiction upon the Special  Court.  Any prosecution in respect of any offence referred to in sub-section  (2) of Section 3 pending in any Court is required to be transferred to the  Special Court.  Section 9 provides for the procedure and powers of the  Special Court.  Section 9-A, which was inserted by Act 24 of 1994 with  effect from 25th January, 1994, confers all such jurisdiction, powers and  authority as were exercisable, immediately before such commencement by  any Civil Court in relation to the matter specified therein.  Section 11 of the  Act reads as under:

"11. Discharge of liabilities.\027(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. (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  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

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(c) any other liability as may be specified by  the Special Court from time to time."

ANALYSIS OF THE STATUTORY PROVISIONS

       The Act provides for stringent measures.  It was enacted for dealing  with an extra-ordinary situation in the sense that any person who was  involved in any offence relating to transaction of any security may be  notified whereupon, all his properties stand attached.  The provision  contained in the Act being stringent in nature, the purport and intent thereof  must be ascertained having regard to the purpose and object it seeks to  achieve.  The right of a person notified to file an application or to raise a  defence that he is not liable in terms of the provisions of the Act or in any  event, the properties attached should not be sold in discharge of the  liabilities can be taken at the initial stage by filing an application in terms of  Sub-section (2) of Section 4 of the Act.  But, at the stage when liabilities are  required to be discharged, the notified person may inter alia raise a  contention  inter alia for the purpose of establishing that the properties held  and possessed by them are sufficient to meet their liabilities.  In terms of the  provisions of the Act, the Special Court had been conferred a very wide  power.

PRECEDENTS AS REGARD SCOPE OF THE ACT

       Constitutionality and / or interpretation of the Act came up for  consideration before this Court in Harshad Shantilal Mehta v. Custodian and  Others [(1998) 5 SCC 1] wherein the following questions were framed:

"(1) What is meant by revenues, taxes, cesses and  rates due? Does the word "due" refer merely to the  liability to pay such taxes etc., or does it refer to a  liability which has crystallised into a legally  ascertained sum immediately payable? (2) Do the taxes [in clause (a) of Section 11(2)]  refer only to taxes relating to a specific period or to  all taxes due from the notified person? (3) At what point of time should the taxes have  become due? (4) Does the Special Court have any discretion  relating to the extent of payments to be made  under Section 11(2)(a) from out of the attached  funds/property? (5) Whether taxes include penalty or interest? (6) Whether the Special Court has the power to  absolve a notified person from payment of penalty  or interest for a period subsequent to the date of his  notification under Section 3. In the alternative, is a  notified person liable to payment of penalty or  interest arising from his inability to pay taxes after  his notification?"

       As regard, Question No. 1, it was held:

" In the present case, the words "taxes due" occur  in a section dealing with distribution of property.  At this stage the taxes "due" have to be actually  paid out. Therefore, the phrase "taxes due" cannot  refer merely to a liability created by the charging  section to pay the tax under the relevant law. It  must refer to an ascertained liability for payment  of taxes quantified in accordance with law. In  other words, taxes as assessed which are presently

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payable by the notified person are taxes which  have to be taken into account under Section  11(2)(a) while distributing the property of the  notified person. Taxes which are not legally  assessed or assessments which have not become  final and binding on the assessee, are not covered  under Section 11(2)(a) because unless it is an  ascertained and quantified liability, disbursement  cannot be made. In the context of Section 11(2),  therefore, "the taxes due" refer to "taxes as finally  assessed".

       In regard to Question No. 2, it was opined:

"Every kind of tax liability of the notified person  for any other period is not covered by Section  11(2)(a), although the liability may continue to be  the liability of the notified person. Such tax  liability may be discharged either under the  directions of the Special Court under Section  11(2)(c), or the taxing authority may recover the  same from any subsequently acquired property of a  notified person (vide Tejkumar Balakrishna Ruia  v. A.K. Menon) or in any other manner from the  notified person in accordance with law. The  priority, however, which is given under Section  11(2)(a) to such tax liability only covers such  liability for the period 1-4-1991 to 6-6-1992."

       In respect of the Question No. 3, it was opined that the date of  distribution arrives when the Special Court completes the examination of  claims under Section 9-A and if on that date, any tax liability for the  statutory period is legally assessed, and the assessment is final and binding  on a notified person, that liability would be considered for payment under  section 11(1)(a), subject to what follows.

       So far as Question No. 4 is concerned, this Court despite upholding  the contention of the Custodian that no question of any reopening of tax  assessments before the Special Court would arise and the liability of the  notified person to pay the tax will have to be determined under the  machinery provided by the relevant tax law, observed:

"But the Special Court can decide how much of  that liability will be discharged out of the funds in  the hands of the Custodian. This is because the tax  liability of a notified person having priority under  Section 11(2)(a) is only tax liability pertaining to  the "statutory period". Secondly payment in full  may or may not be made by the Special Court  depending upon various circumstances. The  Special Court can, for this purpose, examine  whether there is any fraud, collusion or  miscarriage of justice in assessment proceedings.  The assessee who is before the Special Court, is a  person liable to be charged with an offence relating  to transactions in securities. He may not, in these  circumstances, explain transactions before the  Income Tax authorities, in case his position is  prejudicially affected in defending criminal  charges. Then, on account of his property being  attached, he may not be in a position to deposit the  tax assessed or file appeals or further proceedings  under the relevant tax law which he could have

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otherwise done. Where the assessment is based on  proper material and pertains to the "statutory  period", the Special Court may not reduce the tax  claimed and pay it out in full. But if the assessment  is a "best judgment" assessment, the Special Court  may examine whether, for example, the income  which is so assessed to tax bears comparison to the  amounts attached by the Custodian, or whether the  taxes so assessed are grossly disproportionate to  the properties of the assessee in the hands of the  Custodian, applying the Wednesbury Principle of  Proportionality. The Special Court may in these  cases, scale down the tax liability to be paid out of  the funds in the hands of the Custodian."

       In regard to Question No. 5, this Court agreed with the finding of the  Special Court that neither penalty nor interest can be considered as tax under  Section 11(2)(a) of the Act.

       So far Question No. 6 is concerned, it was held that the remedy of a  notified person who is assessed to penalty or interest, after the notified  period, would be entitled to move the appropriate authority under the taxing  statute stating:

"If it is open to him under the relevant taxing  statute to contend that he was unable to pay his  taxes on account of the attachment of all his  properties under the Special Court Act, and that  there is a valid reason why penalty or interest  should not be imposed upon him after the date of  notification, the authorities concerned under the  taxing statute can take notice of these  circumstances in accordance with law for the  purpose of deciding whether penalty or interest can  be imposed on the notified person. The Special  Court is required to consider this question only  from the point of view of distributing any part of  the surplus assets in the hands of the Custodian  after the discharge of liabilities under Sections  11(2)(a) and 11(2)(b). The Special Court has full  discretion under Section 11(2)(c) to decide  whether such claim for penalty or interest should  be paid out of any surplus funds in the hands of the  Custodian."

       We must, however, notice that reliance was sought to be placed on  paragraph 14 of the said judgment wherein reference was made to a Bombay  High Court judgment in Hitesh Shantilal Mehta v. Union of India [(1992) 3  Bom CR 716] wherein it was held:

"If the person ... approaches the Special Court and  makes out, for example, a case that the property  which is attached has no nexus of any sort with the  illegal dealings in securities belonging to banks  and financial institutions during the relevant period  and/or that there are no claims or liabilities which  have to be satisfied by attachment and sale of such  property, in our view, the Special Court would  have the power to direct the Custodian to release  such property from attachment."

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       But, the said observation was held to be not laying down a law by a 3- Judge Bench of this Court in L.S. Synthetics Ltd. v. Fairgrowth Financial  Services Ltd. and Another [(2004) 11 SCC 456] holding:

"(i) A notified party has the requisite locus to bring  the fact to the notice of the Special Court that  certain sum is owing and due to him from a third  party whereupon a proceeding can be initiated for  recovery thereof by the Custodian and consequent  application thereof in discharge of the liability of  the notified person. (ii) Sub-section (3) of Section 3 should be literally  construed and so construed, all properties  belonging to the notified person shall be subject to  attachment which may, consequently, be applied  for discharge of his liabilities in terms of Section  11 of the said Act. (iii) The provisions of the Limitation Act, 1963  have no application in relation to the proceedings  under the said Act."

       The ratio of the said decision as regard applicability of the Limitation  Act was further considered by a Division bench of this Court in Fairgrowth  Investments Ltd. v. Custodian [(2004) 11 SCC 472] wherein it was held that  Section 5 of the Limitation Act will have no application in relation to an  application falling under Sub-section (2) of Section 4 of the Act stating:

"\005It is enough for the purpose of this appeal to  hold that Section 29(2) of the Limitation Act, 1963  does not apply to proceedings under Section 4(2)  of the Special Court (Trial of Offences Relating to  Transactions in Securities) Act, 1992. Since the  appellant’s petition of objection had been filed  much beyond the period prescribed under that  section, the Special Court was right in rejecting the  petition in limine. The appeal is accordingly  dismissed but without any order as to costs."

ATTACHMENT OF PROPERTIES

       The Appellants herein are notified persons in terms of the provisions  of the Act.  Therefore, all the properties belonging to them stand attached.   Such attachment being automatic, no finding was required to be arrived at  that the same had been acquired either during the notified period or the  Appellants were involved in offences in transactions in securities.

       In Tejkumar Balakrishna Ruia v. A.K. Menon and Another [(1997) 9  SCC 123], this Court held:

"In our view, the terms of sub-section (3) of  Section 3 are clear. By reason thereof, the property  that belongs to a notified person stands attached  simultaneously with the issue of the notification  that makes him a notified party. The words "on  and from the date of notification" indicate the  point of time at which the attachment takes effect;  this is reiterated by the words "shall stand attached  simultaneously with the issue of the notification".  This also indicates that no separate notification or

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order in regard to the attachment is necessary. Neither the words "on and from the date of  notification" nor the word ’property’ lead to the  conclusion that what is attached is not only that  property which the notified person owned or was  possessed of on the date of the notification but also  all such property as he might acquire at any time  thereafter. The intention to attach property which  did not belong to the notified person on the date of  the notification but which he might acquire later  would, had it been there, have been clearly  expressed and sub-section (3) would have stated  that such property would stand attached the  moment it was acquired by the notified person.  The Act would also have made provision for a  subsistence allowance or the like for the notified  person. It seems to us that to give to Section 3(3) the wide  meaning that has been ascribed to it in the  judgment and order under appeal would render it  perilously close to being held unconstitutional, for  it would deprive the notified person, so long as he  remained a notified person, from earning a  livelihood. Even to say that such interpretation  would reduce a notified person to beggary would  not be accurate (sic in accurate) because the alms  that he received, being his property, would stand  attached. The apprehension expressed by the Special Court  does not appear to be well founded: if what a  notified person obtains by way of purported  income or gift or inheritance is really his own  money, such money would, upon establishment of  the fact, stand attached automatically under the  provisions of Section 3(3). In any event, it is for  Parliament to enact a law that meets all  contingencies. The courts must interpret the law as  it reads. While a purposive interpretation is  permissible where two interpretations are possible,  the purposive interpretation must be such as  preserves the constitutionality of the provision."

       It has further been held that the property, be shares, dividends and  bonus and rights shares, would also be attached property.

ISSUES

        (i)     Whether the Appellants being not involved in offences in transactions  in securities could have been proceeded against in terms of the  provisions of the Act. (ii)    Whether individual liabilities of the Appellants ought to have been  separately considered by the Special Court as not a part of Harshad  Mehta Group. (iii)   Whether the tax liabilities could not have been held to be due as the  order of assessments did not become final and binding. (iv)    Whether the commercial properties could have been sold in auction. (v)     Whether the residential properties should have been released from  attachment.

       Before adverting to the questions raised herein, we may notice that  both the parties have raised several contentions before us which have not  precisely been raised before the learned Special Judge.  Several subsequent  events have also been brought to our notice.  The parties have also filed

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several charts before us showing individual assets and liabilities.  It has, as  noticed hereinbefore, further been contended that various best judgment  assessment passed by the Assessing Authority against some of the  Appellants have been set aside in appeal and the matters are pending  reassessment before the Assessing Authority.

APPLICATION FOR DE-NOTIFICATION

       The Appellants’ case is that the individual and corporate Appellants  other than Harshad Mehta, Ashwin Mehta and Sudhir Mehta filed  applications, within the prescribed period, before the Special Court praying  for their de-notifications.  However, by an order dated 14.07.2000, the said  applications were permitted to be withdrawn with a permission to re-file the  same.

       It is not in dispute that the said applications are pending for  consideration before the Special Court.  They have not been heard.  What  would be the effect of the jurisdictional question as regard maintainability of  the said application, being barred by limitation, would indisputably fall for  consideration before the Special Court.  We, therefore, as at present advised,  refrain ourselves from adverting to the said question.

       The question, however, before us is as to whether any contention  which may not have a direct bearing with the question as to whether the  Special Court could entertain their applications for de-notifications could be  raised by way of defence.  It is no doubt true that the law of limitation bars a  remedy but not a right. [See Bombay Dyeing & Manufacturing Co. Ltd. v.  The State of Bombay and others, AIR 1958 SC 338, Savitra Khandu Beradi  v. Nagar Agricultural Sale and Purchase Co-operative Society Ltd.  Ahmednagar and others [AIR 1957 Bom 178, para 6] and Hari Raj Singh v.  Sanchalak Panchayat Raj U.P. Govt. Lucknow and others [AIR 1968 All  246, paras 14 and 15], but as observed hereinbefore, it would not be proper  for us to consider as to whether such a remedy being not available, in terms  of Section 4(2) of the Act can still be determined if raised by way of  defence.

       In L.S. Synthetics Ltd. (supra), this Court observed:

"A statute of limitation bars a remedy and not a  right. Although a remedy is barred, a defence can  be raised. In construing a special statute providing  for limitation, consideration of plea of hardship is  irrelevant. A special statute providing for special  or no period of limitation must receive a liberal  and broader construction and not a rigid or a  narrow one. The intent and purport of Parliament  enacting the said Act furthermore must be given its  full effect. We are, therefore, of the opinion that  the provisions of the Limitation Act have no  application, so far as directions required to be  issued by the Special Court relating to the disposal  of attached property, are concerned."

       Although, we do not intend to enter into the correctness or otherwise  of the said contention of the Appellants at this stage, however, there cannot  be any doubt whatsoever that they being notified persons, all their properties  would be deemed to be automatically attached as a consequent thereto.  For  the said purpose, it is not necessary that they should be accused of  commission of an offence as such.   

       The contention of the Appellants to the effect that their properties  should have been attached only towards the liabilities incurred by the parties  in respect of the transactions made during the Statutory Period, cannot be

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accepted as all the Appellants being notified, the attachment of the assets  would be automatic. [L.S. Synthetics Ltd. (supra)]

       However, the contention of the Appellants that the properties held by  them otherwise are sufficient to meet their liabilities was required to be gone  into, as, in our considered opinion, there cannot be a any dispute that the  Appellants have such a right.

       A corporate veil indisputably can be lifted on several grounds.

LIFTING THE CORPORATE VEIL

       The principle of lifting the corporate veil, however, ipso facto would  not apply to the individuals.  The Custodian in a case of this nature may,  however, show that the transactions entered into apparently by Harshad  Mehta were intimately connected with acquisition of properties in the name  of others.  A transaction of Benami indisputably can be a subject matter of a  lis in terms of Section 4(1) of the Act as and when such a question is raised,  the same may have to be dealt with by the Special Court appropriately.  However, nexus between several persons in dealing with the matter may be  established by the Custodian.   

LIABILITIES OF THE APPELLANTS \026 DETERMINATION

       The fact, however, remains that the copies of the documents, books of  accounts and other records on the basis whereof the Auditors appointed by  the Court filed their reports had not been shown to the Appellants herein, on  the premise that they were in know of the things.  As the said question has  not been gone into by the learned Judge, Special Court, it is necessary that  the same be considered and appropriately dealt with.  The Appellants,  however, raised the following contentions:

(i)     That the statement prepared by the Custodian and Exhibited as ’C’ to  his affidavit in rejoinder dated 1.10.2003 was based on material, at  least, all of which were not connected to the Appellants as were  pointed out before the Court.  The learned Special Judge has accepted  the figures stated by the Custodian at face value without probing the  basis on which the statement was prepared, even though the  Appellants in their sur-rejoinder asserted that the figures in the  statement were contrary to both the books of accounts drawn by them  as also the Auditor’s report. (ii)    In Para 14 of the sur-rejoinder, the Appellants denied the asset and  liability position as arrived at by the Custodian.  According to the  Appellants, the Custodian has under-estimated the assets and  exaggerated and overstated their liabilities.  A triable issue had been  raised and the Custodian’s petition should have been converted into a  suit.  This was not done.  In fact, according to the Appellants, there  are gross errors in the material relied upon by the Custodian.  The said  contention must be properly adjudged.   

       Several charts have been filed before us by the Appellants to show:

(i)     liabilities have been exaggerated by the Custodian.  No credit for Rs.  1227 crores released to revenue on interest are given by the  Custodian. (ii)    liabilities have been shown in relation to unperformed contracts. (iii)   Credits not given for relief obtained from Income Tax.  Subsequent to  the filing of the present appeal in a large number of cases the revenue  demands have been set aside.

       It is open to the Appellants, herein to show that even if they continued  to be notified, the Custodian was not right in clubbing all the individual  members of the family as a single entity styled as Harshad Mehta Group.  It  is interesting to note that the properties belonging to the mother of Harshad

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Mehta has since been released from attachment.   

       The learned Special Court, despite, such a contention having been  raised by the Appellants in their affidavit in reply did not advert thereto.  It  is furthermore not in dispute that pursuant to or in furtherance of the  directions issued by the learned Special Court, the accounts of all entities, be  it corporate or individual, were drawn up separately which approach had not  been dis-approved by the Auditor appointed by the Special Court.  Even in  the rejoinder filed by the Custodian, e.g., paragraphs 14, 20, 21 and 22,   before the Special Court, such contentions have been raised.   

       A sur-rejoinder thereto was filed on 15.10.2003 and in paragraphs 1 to  6 thereof, the said statements were denied and disputed.

       Our attention has also been drawn to a letter dated 7.10.2003  addressed by all the Appellants to the Office of the Custodian wherein the  attention of the Custodian was drawn to the fact that all the documents relied  upon by him had not been permitted to be inspected and he was requested to  forward a report prepared by the Chartered Accountants in respect of the  individual addressors of the letters.  The said letter was replied by the  Custodian by his letter dated 10.10.2003 wherein none of the queries  contained in paragraphs 3 to 8 of the said letter was even attempted to be  answered.  The Appellants, herein contended that the Custodian did not  furnish the requisite particulars thereof and inspection was refused on the  grounds stated therein.   

       The learned Special Court, in paragraph 9 of the impugned order,  stated:

(i)     the grand total of the admitted liability, thus, comes to Rs.  7,279,127,317.15. (ii)    the amount of priority demand of Income Tax liabilities comes to Rs.  18,297,576,248. (iii)   the estimated value of the immovable properties of this group is Rs.  184,030,038. (iv)    Thus, the total value of the assets as per the affidavit filed on behalf of  the Custodian of Harshad Mehta Group is Rs. 9,727,332,166.94. (v)     Thus, taking into consideration the total of the decretal amount and  the income-tax liability, it is clear that the total assets of Harshad  Mehta group would be far below the liabilities.

       In arriving at the said finding, no contention of the parties raised in  their respective affidavits had been adverted to nor any material filed before  it was analysed.  In our opinion, the learned Judge, Special Court should  have analysed the respective contentions of the parties in greater details and  in particular in regard to assets and liabilities of the separate entities and  having regard to the contentions raised by them that they are not part of the  Harshad Mehta Group and their individual liabilities can be met from the  assets held and possessed by them separately.   

       The statement annexed to the affidavit of the Custodian showed  individual break-up and in that view of the matter the net asset picture of  each individual of the Appellants herein on individual basis and the effect  thereof, in our opinion, should have received serious consideration at the  hands of the learned Special Court.   

       The Custodian in terms of the directions issued by the learned Special  Court had affirmed an affidavit putting on record the assets and liabilities of  each of the members of the so-called Harshad Mehta Group on an individual  basis.  Allegedly, therein it was shown that the individuals had received  large loans, advances, credits from the Harshad Mehta Group and there had  been intermingling of the assets to the tune of crores of rupees.  Before us,  Mr. Desai had filed a chart for showing the same.  The said chart, however,  shows that at least Mrs. Deepika Mehta held assets more than her liabilities.   Mr. Desai contended that if interest is calculated, liabilities would be more

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than assets.  But, the said chart has been drawn up on the basis of the audited  accounts, the correctness whereof is itself in dispute.  Before us a chart has  been produced by the Appellants herein as regards Mrs. Deepika Mehta to  show her liabilities payable as on 8th June, 1992 which are as under:

"Chart showing comparison of payables as on 8th June, 1992

As per  Custodian’s  Affidavit

As per  Books of  Accounts As per  Auditor’s  Report  M/s. Harshad S.  Mehta (Payable  as on 8.6.92)

25,44,68,654 9,70,18,916 9,70,18,916 M/s. Ashwin S.  Mehta (Payable  as on 8.6.92)

2,68,47,613 1,02,35,942 1,02,35,942 M/s. Jyoti H.  Mehta (Payable  as on 8.6.92)

1,45,28,332 55,39,083 55,39,083 Interest payable  towards three  brokerage firms  as on 8.6.1992 6,14,86,640 2,34,42,444 2,34,42,444"

       We, therefore, have not been given a clear picture as to the correctness  or otherwise of the affidavit filed by the Custodian vis-‘-vis the Books of  Accounts which have been maintained by the Appellants themselves as well  as the Auditor’s Report.  The learned Judge merely accepted the figures  mentioned in the affidavit of the Custodian and relied thereupon in  paragraphs 9 to 11 of the judgment without discussing the contentions and  arguments raised on behalf of the Appellants, herein.  We, therefore, are of  the opinion, in the interest of justice, that it is necessary to give another  opportunity of hearing to the Appellants.

       It is true that horrendous figures as regard the liabilities of Harshad  Mehta have been projected before us but the same had been shown to be of  the entire Group.  If the liabilities of the individual entities are not treated as  that of the group, for one reason or the other, indisputably, liability of those  who have nothing to do with the dealings of Harshad Mehta either in their  individual capacities or as Directors of some company or otherwise must be  dealt with separately.  The contention raised on behalf of the Appellants is

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that the Harshad Mehta should be considered to be sui generis and the  Custodian may realize his dues from his personal assets as also of those with  which he was concerned together with the assets of his front companies but  such liability should not be fastened upon others who had nothing to do  therewith.   As regards liabilities of Harshad Mehta, the Appellants  contended that since his expiry in the year 2001 his legal interests are not  being defended both in the court as well as before the revenue, as a result,  liabilities have been foisted upon him a large part which is on account of  interest and penalties.  His death has also forced upon him bankruptcy.  On  the other hand, the contention of the Custodian is that the Appellants had not  only taken huge loans or advances from Harshad Mehta in one capacity or  the other but also even transactions and shares were made by Harshad Mehta  on their behalf.  Further contention of the Custodian is that even Dr. Hitesh  Mehta and Dr. Pratima Mehta have admitted that they had no knowledge  about the transactions.  This may be so, but then the effect of the rival  contentions was required to be gone into by the learned Special Court.  A  finding of fact arrived at upon discussing and analyzing the respective  contentions could have gone a long way in assisting this Court in arriving at  a correct conclusion.  The learned Judge proceeded on the basis that the  assets and liabilities, joint and collective, of all those who are related with  Harshad Mehta as also the corporate entities in which he was a Director or  had some other interest must be considered as a group.  Even in this behalf,  it was necessary for the Special Judge to assign sufficient and cogent  reasons.   

       A question may further arise as to whether the learned Judge was  correct in considering the individual liabilities of the notified parties as the  liabilities of the group.  If those individuals, who had no connection with  Harshad Mehta could not have been proceeded against for meeting the  liabilities of Harshad Mehta jointly or severally, a clear finding was required  to be arrived at.  Only because there had been large intermingling and flow  of funds from Harshad Mehta and inter se within the group, the same by  itself may not justify the conclusion that all of their assets were required to  be sold irrespective of their individual involvement.   It was, thus, necessary  for the learned Special Court to arrive at a firm conclusion as regard the  involvement of the individuals with Harshad Mehta, if any, and the extent of  his liability as such.

       Furthermore, the question as regard liability of the parties should have  been determined at the stage of Section 9-A of the Act.  The Appellants have  contended that the Custodian had taken contradictory or inconsistent stand  inasmuch as the liabilities of all the entities were treated to be joint liabilities  of Harshad Mehta group.  He furthermore wanted to treat the liabilities of  the notified entities also as their separate liabilities.  He has proceeded on the  basis that even if the assets and liabilities of all individuals is taken on an  individual basis, the liabilities would exceed assets in the case of each  individual and corporate entity.  It had, however, never been the case of the  Custodian that the examination of claims of all the notified parties is  complete.  It does not appear that claims inter se between the entities within  the so-called group had ever been taken into consideration.  The Custodian  does not appear to have preferred claims before the Special Court on behalf  of the largest lender on the so-called group against those he had to recover  loans.  Such claims may also be preferred.

       The Act confers wide power upon the Custodian and the learned  Special Court and in that view of the matter, having regard to the the  principles of natural justice, the judgment and order of the learned Judge,  Special Court should have furthermore been supported by sufficient and  cogent reasons.   

TAX LIABILITY

       It is not in dispute that the tax liabilities of the Appellants individually  were assessed on the basis of Best Judgment assessment.  It is, furthermore  not in dispute that in a large number of cases the appellate authorities have

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set aside Best Judgment assessments.  The contention of the Appellant to the  effect that the income tax dues should have been considered at the point of  time when they become recoverable cannot be accepted having regard to the  3-Judge Bench decision of this Court in B.C. Dalal (supra) wherein this  Court categorically held that in absence of any order of stay granted by the  higher court, the liabilities would remain.   

       We may further notice that the learned Special Court relied upon a  decision in Custodian v. Union of India and Ors. [Misc. Petition No. 64 of  1998, disposed of on 17th August, 2000] wherein allegedly a dichotomy  between sale and distribution was sought to be resolved in terms of the  decision of this Court in Harshad Shantilal Mehta (supra), the appeal  whereagainst being Civil Appeal No. 5812 of 2000 was dismissed by this  Court by an order dated 4.12.2000 stating that it was in agreement with the  decision of the Special Court which called for no interference.

       This Court, therefore, has laid down a law that mere filing of an  appeal is not sufficient, particularly, when there is no order of stay on  recovery has been granted and the demand is outstanding.   

       In Kedarnath Jute Mfg. Co. Ltd. (supra), this Court has held:

"Although that liability cannot be enforced till the  quantification is effected by assessment  proceedings, the liability for payment of tax is  independent of the assessment. It is significant that  in the present case, the liability had even been  quantified and a demand had been created in the  sum of Rs 1,49,776 by means of the notice, dated  November 21, 1957, during the pendency of the  assessment proceedings before the Income Tax  Officer and before the finalisation of the  assessment. It is not possible to comprehend how  the liability would cease to be one because the  assessee had taken proceedings before higher  authorities for getting it reduced or wiped out so  long as the contention of the assessee did not  prevail with regard to the quantum of liability etc."

       But, in this case, the orders of assessment have been set aside.  If the  orders of assessment have been set aside the liabilities of the Appellants  have to be worked out on the basis of the new orders of assessment.  So  long, such orders of assessment are not passed by the competent assessing  authorities, it cannot be said that the Appellants are liable to pay a huge  amount by way of income tax dues on the basis of such orders of assessment  which have since been set aside.   

       A chart has been annexed to the additional written submissions filed  by Mr. Desai, which originated from a letter dated 9th December, 2005  issued by the Office of the Commissioner of Income Tax showing the  current status of the liabilities of the individual members of the Harshad  Mehta group in the following terms:

"I)     Ashwin Mehta \026 Rs. 1396 crores, II)     Deepika Mehta \026 Rs. 120 crores (even after  deducting the amount set aside by ITAT, it  exceeds Rs. 63 crores). III)    Late Harshad Mehta \026 Rs. 11829 crores IV)     Jyoti Mehta \026 Rs. 1457 crores V)      Hitesh Mehta \026 Rs. 73 crores VI)     Pratima Mehta \026 Rs. 115 crores (even after  deducting the amount set aside by ITAT it  exceeds Rs. 35 crores) VII)    Sudhir Mehta \026 Rs. 339 crores VIII)   Aatur Holdings \026 Rs. 15.95 crores (even

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after deducting the amount set aside by  ITAT, it exceeds Rs. 2.7 crores)"

       The Custodian has further brought on records that if the transactions  by or on behalf of corporate entity, viz., Aatur Holdings Pvt. Ltd. and Dr.  Pratima Mehta by way of illustration are taken into consideration, the same  would reveal their modus operandi to the effect that the moneys were  diverted from banks and financial institutions by late Harshad Mehta which  were in turn diverted to his family concerns and family members.  These  moneys were used for speculative transactions and securities and the profits  generated was used for acquiring assets.

       The learned Special Court, having not arrived at such a finding, this  Court is not in a position to go into the correctness or otherwise thereabout.   

       In any view of the matter, the learned Judge, Special Court having not  dealt with the question as regard the mode and manner of disbursements of  the amount so far as the tax liabilities of the Appellants are concerned  elaborately, the same requires fresh determination in the light of the decision  of this Court in Harshad Shantilal Mehta (supra).  

       In fact, the Appellants have brought on records various orders passed  by Income Tax Appellate Authorities to show that the demands of the  revenue have been set aside.

       Furthermore, the orders of the appellate authority have been passed  during pendency of this appeal.  This Court, it is trite, can take into  consideration the subsequent events.  Such subsequent events could also be  taken into consideration for the purpose of review.

       In Board of Control for Cricket in India and Another  v. Netaji Cricket  Club and Others [(2005) 4 SCC 741], this Court held:

"It is also not correct to contend that the Court  while exercising its review jurisdiction in any  situation whatsoever cannot take into consideration  a subsequent event. In a case of this nature when  the Court accepts its own mistake in understanding  the nature and purport of the undertaking given by  the learned Senior Counsel appearing on behalf of  the Board and its correlation with as to what  transpired in the AGM of the Board held on 29-9- 2004, the subsequent event may be taken into  consideration by the Court for the purpose of  rectifying its own mistake."

         In view of the aforementioned pronouncement of law, we are of the  opinion that it is absolutely necessary to request the learned Special Court to  consider the matter afresh.

SALE OF COMMERCIAL PROPERTIES

       Sale of commercial properties has never been seriously contested by  the Appellants.  In fact one of the contentions raised on behalf of the  Appellants had been that if commercial properties are sold, there would be  no need to sale the residential properties.  This Court also in its order dated  5th May, 2004 clarified that the interim order dated 30th January, 2004 shall  not be applicable as regard sale of commercial properties as even before this  Court the same had not been questioned.  It is, furthermore, not in dispute  that third party rights have since been created by reason of sale of a large  number of commercial properties.

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       By an order dated 30th January, 2004, while admitting the appeals, this  Court directed:

"The learned counsel for the Custodian  brings on record the result of the bids and the order  of the Special Court dated 17.12.2003 and  20.1.2004.  The learned counsel for the Appellants  proposes to offer his comments on the bids and the  two orders of the Special Court.  Let it be done  within two weeks.

       The process of finalizing the bids according  to law may be proceeded ahead by the Special  Court.  However, the finalization shall be subject  to the result of these appeals."

       The said order, however, was modified and clarified by an order dated  5th May, 2004 that the same shall not apply to the sale of commercial  properties in view of the order of the learned Judge, Special Court dated 17th  October, 2003 wherein it was pointed out that the notified parties did not  dispute the commercial properties being put to sale by the Custodian.

       In that view of the matter, evidently, creation of any third party  interest is no longer in dispute nor the same is subject to any order of this  Court.  In any event, ordinarily, a bona fide purchaser for value in an action  sale is treated differently than a decree holder purchasing such properties.  In  the former event, even if such a decree is set aside, the interest of the bona  fide purchaser in an auction sale is saved.  [See Zain-ul-Abdin Khan v.  Muhammad Asghar Ali Khan - 15 IA 12].  The said decision has been  affirmed by this Court in Gurjoginder Singh v. Jaswant Kaur (Smt.) and  Another [(1994) 2 SCC 368].

       In Janak Raj  v. Gurdial Singh and Anr. [1967 (2) SCR 77], this Court  confirmed a sale in favour of the Appellant therein who was a stranger to the  suit being the auction purchaser of the judgment-debtor’s immovable  property in execution of an ex parte money decree in terms of Order XXXI  Rule 92, Civil Procedure Code.  Despite the fact that ordinarily a sale can be  set aside only under Rules 89, 90 and 91 of Order XXXI,  it was opined that  the court is bound to confirm the sale and direct the grant of a certificate  vesting the title in the purchaser as from the date of sale when no application  in term of Rule 92 was made or when such application was made and  disallowed and in support thereof Zain-ul-Abdin Khan  (supra) and various  other decisions were referred to.

       In Padanathil Ruqmini Amma v. P.K. Abdulla [(1996) 7 SCC 668],  this Court  making a distinction between decree-holder auction purchaser  himself  and a third party bona fide purchaser in an auction sale, observed :

"\005The ratio behind this distinction between a sale to a  decree-holder and a sale to a stranger is that the court,  as a matter of policy, will protect honest outsider  purchasers at sales held in the execution of its decrees,  although the sales may be subsequently set aside, when  such purchasers are not parties to the suit. But for such  protection, the properties which are sold in court  auctions would not fetch a proper price and the decree- holder himself would suffer. The same consideration  does not apply when the decree-holder is himself the  purchaser and the decree in his favour is set aside. He is  a party to the litigation and is very much aware of the  vicissitudes of litigation and needs no protection.

       We, therefore, do not interfere with that part of the order whereby and  wherewith the auction sale, as regard commercial properties, had been  directed by the learned Judge, Special Court.  The learned Judge, Special

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Court, may, therefore, proceed to pass an appropriate order as regard  confirmation of the sale of such properties.

RESIDENTIAL PROPERTY

       In these appeals, we are concerned with sale of eight residential flats  in a building known as Madhuli.  The flat belonging to the mother of Late  Harshad Mehta has been released.  The flats, however, during pendency of  these appeals have been sold in auction.  One of the flats being flat No. 202,  Arunachal Bhawan, Barakhamba Road, is subject matter of a separate  proceeding pending before this Court, viz., Civil Appeal No. 681 of 2004.   In these appeals, we are not concerned with the said flat.

       Admittedly, the flats have been sold subject to the result of these  appeals.  The flats have been sold on the basis of the joint liabilities of the  Appellants together with Harshad Mehta and other companies as a group.   The liabilities of the Appellants, in view of our findings aforementioned, are  required to be considered afresh by the learned Judge, Special Court.  The  purchasers have also filed applications for their impleadment in these  appeals.  We, however, have not heard the purchasers as the question as to  whether the auction sale of the said flats will be confirmed or not will  depend upon the ultimate finding of the learned Judge, Special Court upon  consideration of the matter afresh in the light of the observations made  hereinbefore.

       We, therefore, would direct that the confirmation of sale of those flats  be considered and appropriate order thereupon may be passed by the learned  Special Court while considering the matter afresh.  In the light of the  directions issued herein, it would be for the purchasers of the said flats to  wait till a final decision is made or take back the amount deposited by them,  subject to any other or further order (s) that may be passed by the learned  Special Judge.

CONCLUSION

       In view of our foregoing discussions, we are of the opinion that:

(i)     The contention of the Appellants that they being not involved in  offences in transactions in securities could not have been proceeded in  terms of the provisions of the Act cannot be accepted in view of the  fact that they have been notified in terms thereof.  (ii)    The Appellants being notified persons all their personal properties  stood automatically attached and any other income from such attached  properties would also stand attached.  The question as to whether the  Appellants could have been considered to be part of Harshad Mehta  Group by the learned Special Court need not be determined by us as,  at present advised, in view of the fact that appropriate applications in  this behalf are pending consideration before the learned Special Court.   The question as regard intermingling of accounts by the Appellants,  herein with that of the Harshad Mehta Group and/ or any other or  further contentions raised by the parties hereto before us shall receive  due consideration of the learned Judge, Special Court afresh in the  light of the observations made hereinbefore.   (iii)   As regard the tax liabilities of the Appellants, herein, we would  request the learned Judge, Special Court to consider the matter afresh  in the light of the observations made hereinbefore.  The learned Judge,  Special Court, in this behalf, having regard to the fact that several  orders of Best Judgment Assessment have been passed by the  Assessing Authority, may take into consideration the ratio laid down  in the decision of this Court in Harshad Shantilal Mehta (supra). (iv)    The learned Special Court shall proceed to pass appropriate orders as   regard confirmation of the auction sales in respect of commercial  properties.  (v)     As regard, sale of residential properties, an appropriate order may be  passed by the learned Judge, Special Court in the light of the

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observations made hereinbefore. (vi)    We direct the Custodian to permit the Appellants to have inspection of  all the documents in his power or possession in the premises of the  Special Court in the presence of an officer of the court.  Such  documents must be placed for inspection for one week continuously  upon giving due notice therefor to the Appellants jointly.  As the  Appellants have been represented in all the proceedings jointly, only  one of them would be nominated by them to have the inspection  thereof.  The Appellants shall be entitled to take the help of a  Chartered or Cost Accountant and may make notes therefrom for their  use in the pending proceeding. (vii)   The Appellants shall file their objections to the said report, if any,  within ten days thereafter.  The Custodian may also take assistance  and/ or further assistance from a Chartered Accountant of his choice.   A reply and/ or rejoinder thereto shall be filed within one week from  the date of the receipt of the copy of the objection.  The parties shall  file their respective documents within one week thereafter.  Such  documents should be supported by affidavits.  Both the parties shall  be entitled to inspect such documents and filed their responses thereto  within one week thereafter.  The parties shall file the written  submissions filed before this Court together with all charts before the  learned Special Judge, Special Court within eight weeks from date. (viii)  The learned Judge, Special Court shall allow the parties to make brief  oral submissions with pointed reference to their written submissions.   Such hearing in the peculiar facts and circumstances of this case  should continue from day to day.  (ix)    The learned Judge, Special Court while hearing the matter in terms of  this order shall also consider as to whether the auction sale should be  confirmed or not.  It will also be open to the learned Judge, Special  Court to pass an interim order or orders, as it may think fit and proper,  in the event any occasion arises therefor.   (x)     We would, however, request the learned Special Judge, Special Court  to complete the hearings of the matter, keeping in view of the fact that  auction sale in respect of the residential premises is being  consideration, as expeditiously as possible and not later than twelve  weeks from the date of the receipt of the copy of this order.  Save and  except for sufficient or cogent reasons, the learned Judge shall not  grant any adjournment to either of the parties. (xi)    The learned Judge, Special Court shall take up the matter relating to  confirmation of the auction sale in respect of the commercial  properties immediately and pass an appropriate order thereupon  within four weeks from the date of receipt of copy of this order.  If in  the meanwhile orders of assessment are passed by the Income Tax  Authorities, the Custodian shall be at liberty to bring the same to the  notice of the learned Special Court which shall also be taken into  consideration by the learned Judge, Special Court.

       With the aforementioned observations and directions, these appeals  are allowed.  The impugned judgments are set aside and the matter is  remitted to the learned Judge, Special Court for consideration of the matter  afresh.  However, the parties shall bear their own costs.