IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL APPEAL NO.           OF 2008     [Arising out of S.L.P.(C) No.7744 of 2006]

Bank of India       Appellant

Versus

Ketan Parekh  & Ors.       Respondents

J U D G M E N T  A.K. MATHUR, J.

1. Leave granted.

2. This  appeal  is  directed  against  the  order   dated

17.1.2006 passed by the  Division Bench of the Bombay High

Court whereby the Division Bench has held that since the

property of the respondent No.1 has been seized under the

Special Courts( Trial of Offences Relating to Transactions

in Securities) Act,1992 (hereinafter to be referred to as

the  Act  of  1992),  the  Debts  Recovery  Tribunal  had  no

jurisdiction to grant a declaration that the properties of

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a notified person stand charged and the certificate against

such properties cannot be executed by the Recovery Officer

under  the  Recovery  of  Debts  Due  to  Banks  and  Financial

Institutions Act, 1993 (hereinafter to be referred to as

the Act of 1993) and the financial institution would have

to  move  the  Special  Court  in  respect  of  the   property

attached.

3. Brief facts which are necessary for disposal of

this appeal are that the respondent No.1 was declared as a

notified  party  on  6.10.2001.  Pursuant  to  the  said

notification, considering section 3(3) of the Act of 1992,

all  properties,  movable  and  immovable  stood  attached

simultaneously. The Custodian confirmed the attachment on

1.11.2001. The respondent No.2 – Oriental Bank of Commerce

(hereinafter  to  be  referred  to  as  the  Bank)  filed  an

application  being  Original  Application  No.233  of  2002

against the respondent No.1. The respondent No.1 took out

Miscellaneous Application for impleading the Custodian as a

party. That application came to be rejected by order dated

16.3.2005. Aggrieved against the said order the respondent

No.1  preferred  an  appeal  before  the  Debts  Recovery

Appellate Tribunal (hereinafter to be  referred to as the

Appellate  Tribunal).  That  appeal  came  to  be  rejected  by

order  dated  19.8.2005.Against  the  order  passed  by  the

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Appellate Tribunal, a writ petition was filed before the

High  Court.   It  was  contended   by  the  respondent  No.1

before the Debts Recovery Tribunal that the custodian under

the Act of 1992 had to be joined as necessary party as the

respondent No.1 had been declared as a notified party under

the said Act.  This was opposed by the  Bank on the ground

that the defendant No.2 has been sued merely as a guarantor

and therefore, the provisions of the Act of 1992 were not

attracted. It was submitted that Section 9A of the Act of

1992 would be attracted. This was opposed by the Bank on

the ground that the provisions of Section 9A of the Act of

1992 were not attracted as the respondent No.1 was being

sued in his personal capacity as guarantor and not as a

mortgagor  or  pledger  of  the  movable  or  immovable

properties. The D.R.T. accepted the objection and rejected

the petition of respondent No.1.  Aggrieved against this

order the matter was taken up before the Appellate Tribunal

on the basis that the property of the respondent No.1 stood

attached  by  the  Custodian   under  the  Act  of  1992.

Therefore, the Debts Recovery Tribunal had no jurisdiction

to deal with the matter. The Appellate Tribunal held that

the provisions of the Act of 1992 are not attracted and

consequently, dismissed the appeal. Aggrieved against this

order the present writ petition was filed before the Bombay

High Court by respondent No.1. The Division Bench of the

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Bombay High Court held that since the respondent No.1 was

declared  as  a  notified  party  all  the  properties  stood

attached  pursuant  to  section  3  of  the  Act  of  1992  and

considering Section 9A of the said Act,  it is the Special

Court which will have jurisdiction so far as the notified

party is concerned and  as such the Division Bench of the

High  Court  reversed  the  order  passed  by  the  Appellate

Tribunal  and  held  that  the  Special  Court  will  have

jurisdiction  and  not  the  Appellate  Tribunal.  Hence,  the

present  appeal  against  the  order  passed  by  the  Division

Bench of the High Court  of Bombay dated 17.1.2006.    

4.    Mr.K.N.Bhatt, learned senior counsel appearing for

the appellant strenuously urged before us that since the

Act of 1993 is a subsequent legislation which came into

force in 1993 will override the Act of 1992 which came in

1992. It was contended that the decree passed  by the Debts

Recovery Tribunal will prevail over the property attached

under the provisions of the Act of 1992.  Therefore, the

short question for our consideration is whether the Act of

1992 will prevail or the Act of 1993.  In order to better

appreciate the controversy involved in the matter we may

refer to necessary provisions of both the Acts. The Special

Courts  (Trial  of  Offences  Relating  to  Transactions  in

Securities) Act, 1992 came into force in 1992. Section 3

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deals with the appointment and functions of the Custodian.

Section 3 reads  as under :

“3. Appointment and functions of Custodian.- (1)  The Central Government may appoint one or more Custodian as it may deem fit for the purpose of this Act.

(2) 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  7th June,  1992, notify  the  name  of  such  person  in  the Official Gazette.

(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.

(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 and Sec.4.”

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Section  4  deals  with  the  contracts  entered  into

fraudulently  may  be  cancelled.  Section  5  deals  with  the

establishment of Special Court. Section 6 deals with the

cognizance of cases by Special Court. Section 7 deals with

the jurisdiction of  Special Court which is relevant for

our purpose and it reads as under:

“  7.  Jurisdiction  of  Special Court.-  Notwithstanding  anything contained  in  any  other  law,  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 in any Court shall stand transferred to the Special Court.”

Section 9 lays down the procedure and powers of Special

Court.  Section  9-A  deals  with  the  jurisdiction,  powers,

authority and procedure of Special Court in civil matters.

Section 9-A came into force subsequently by amending Act 24

of 1994 with effect from 25th January, 1994 which reads as

under :

“9-A.  Jurisdiction,  powers, authority and procedure of Special Court in civil matters.- (1) On and from the

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commencement of the Special Court (Trial of  Offences  Relating to Transactions  in Securities)  Amendment  Act,1994,  the Special  Court  shall  exercise  all  such jurisdiction,  powers  and  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 Sec.3;

(b) arising out of transactions in securities entered into after the 1st day of April, 1991,  and  on  or  before  the  6th day  of June, 1992. In which a person is notified under  sub-section  (2)  of  Sec.3  is involved as a party, broker, intermediary or in other manner.

(2) Every  suit,  claim  or  other  legal proceeding (other than an appeal) pending before  any  Court immediately before  the commencement of the Special Court (Trial of  Offences  Relating to Transactions  in Securities)  Amendment  Act,1994,  being  a suit, claim or proceeding, the cause of action whereon it is based is such that it  would  have  been,  if  it  had  arisen after  such  commencement,  within  the jurisdiction  of  the Special Court  under sub-section (1), shall stand transferred on such commencement of the Special Court and the Special Court may, on receipt of the records of such suit, claim or other legal proceedings proceed to deal with it

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so far as may be in the same manner as a suit, claim or legal proceeding from the stage  which  was  reached  before  such transfer or from any earlier stage or de novo as the Special Court may deem fit.

(3) On  and  from  the  commencement  of  the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act,  1994,  no  Court  other  than  the Special Court shall have, or be entitled to  exercise  any  jurisdiction,  power  or authority  in  relation  to  any  matter  or claim referred to in sub-section (1).

(4) While dealing with cases relating to any matter or claim under this section, the Special Court shall  not be bound by the procedure laid down by the Code of Civil Procedure, 1908 ( 5 of 1908), but shall be  guided  by  the  principles  of  natural justice,  and  subject  to  the  other provisions of this Act and or any rules, the  Special  Court  shall  have  power  to regulate its own procedure.

(5) Without  prejudice  to  the  other  powers conferred  under  this  Act,  the  Special Court  shall  have,  for  the  purposes  of discharging  its  functions  under  this section, the same powers as are vested in Civil  Court  under  the  Code  of  Civil Procedure, 1908 (5 of 1908, while trying a  suit  in  respect  of  the  following matters, namely:

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(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits; (d) subject to the provisions of Secs.123 and

124  of  the  Indian  Evidence  Act,  1872, requisitioning   any  public  record  or document  or  copy  of  such  record  or document from any office;

(e) issuing  commissions  for  the  examination of witnesses or documents;

(f) reviewing its decisions; (g) dismissing a case for default or deciding

it ex parte; (h) setting aside any order of dismissal of

any case for default or any order passed by it ex parte; and

(i) any other matter which may be prescribed by  the  Central  Government  under  sub- section (1) of Sec.14.”

Section 9-B deals with the powers of the Special Court in

arbitration matters. Section 10  deals with appeal. Section

11 which deals with the discharge of liabilities and  is

relevant for our purpose, reads as under :

“  11.  Discharge  of liabilities.-(1) Notwithstanding anything contained in the Code and any other law

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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  Sec.  3  to  the  Central Government or any State Government or any local autority.

(b) all  amounts  due  from  the person  so  notified  by  the  Custodian  to any  bank  or  financial  institution  or mutual fund; and

© any other liability as may be specified by the Special Court from time to time.”

Section  13  deals  with  overriding  effect   which  has

relevance for our purpose, reads as under:

“  13.  Act  to  have  overriding effect.- The provisions of this Act shall have  effect  notwithstanding  anything inconsistent  therewith  contained  in  any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in

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any  decree  or  order  of  any  Court, tribunal or other authority.”

The  Recovery  of  Debts  Due  to  Banks  and  Financial

Institutions  Act,  1993  came  into  effect  in  1993.  The

purpose of this Act was  recovery of debts due to Banks or

financial institutions or consortium of Banks less than ten

lakhs rupees or such other amount being not less than one

lakh rupees as the Central Government may by notification

specify. Under this Act Tribunals were constituted. Section

17  lays  down  the  jurisdiction  that  a  Tribunal  shall

exercise  on  and  from  the  appointed  day,  the  powers  and

authority  to  entertain  and  decide  application  from  the

Banks and financial institutions for recovery of debts due

to  such  banks  and  financial  institutions.  Appeal  is

provided  against  that  to  the  appellate  authority  under

Section 20 of the Act. Section 34 lays down that  it has

the overriding power. Section 34 reads as under :

“  34.  Act to have  over-riding effect.-  (1)  Save as otherwise  provided in  sub-section  (2),  the  provisions  of this  Act  shall  have  effect notwithstanding  anything  inconsistent therewith contained in any other law for the  time  being  in  force  or  in  any instrument having effect by virtue of any law other than this Act.

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(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance  Corporation  Act,  1948  (15  of 1948),  the  State  Financial  Corporation Act, 1951 (63 of 1951), the Unit Trust of India  Act,  1963  (  52  of  1963),The Industrial  Reconstruction  Bank  of  India Act,  1984  (62  of  1984),  the  Sick Industrial Companies (Special Provisions) Act,  1985  and  the  Small  Industries Development Bank of India Act, 1989.”

5. The admitted facts are that the respondent No.1-

Ketan Parekh was a notified party on 6.10.2001. Therefore,

on 6.10.2001 all his movable and immovable properties stood

attached.  Under the Act of 1992, under Section 3(3),  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 lst day of April,

1991 and on and before 7th June, 1992, notify the name of

such person in the official gazette and from the date when

such party is notified all properties, movable or immovable

or  both  belonging  to  any  person  notified  shall  stand

attached simultaneously with the issue of the notification,

notwithstanding  anything  contained  in  the  Code  and  any

other law for the time being in force. After attaching that

property the Custodian will have the right to deal with

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such property in such manner as directed the Special Court.

Therefore,   an  analysis  of  this  section  means  that  the

moment a person is  notified, his property stands attached

and  the Custodian is in authority of that property and he

shall deal with the property in the manner as directed by

the Special Court notwithstanding anything contained in the

Code  (  Code  means  the  Civil  Procedure  Code).  Therefore,

the property of the respondent herein stood attached under

the  orders  of  the  Special  Court  on  6.10.2001  when  the

respondent was declared a notified person under sub-section

(3) of Section 3 of the Act of 1992. Section 9-A which was

introduced  in  1994  gives  full  power  from  the  date  this

amended provision came into force i.e. in 1994 that the

Special Court alone will have the jurisdiction to deal with

all the cases pending immediately before such commencement

by  any  Civil  Court  in  relation  to  any  manner  or  claim

relating  to  the  property  standing  attached  under  sub-

section (3) of Section 3. Sub-section (2) of Section 9-A

says  that  every  suit,  claim  or  other  legal  proceeding

(other than an appeal) pending before any Court immediately

before  the  commencement  of  the  Special  Court  (Trial  of

Offences Relating to Transactions in Securities) Amendment

Act,1994, being a suit, claim or proceeding, the cause of

action whereon it is based is such that it would have been,

if  it  had  arisen  after  such  commencement,  within  the

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jurisdiction of the Special Court under sub-section (1),

shall stand transferred on such commencement of the Special

Court and the Special Court may, on receipt of the records

of such suit, claim or other legal proceedings proceed to

deal with it so far as may be in the same manner as a suit,

claim or legal proceeding from the stage which was reached

before such transfer or from any earlier stage or de novo

as the Special Court may deem fit. Sub-section (3) further

says that no Court other than the Special Court shall have,

or  be  entitled  to  exercise  any  jurisdiction,  power  or

authority in relation to any matter or claim referred to in

sub-section  (1).  Sub-section  (4)  further  says  that  the

Special Court shall not be bound by the procedure laid down

by the Code of Civil Procedure. But it shall be guided by

the principles of natural justice and subject to the other

provisions   of this Act and the Rules framed thereunder.

Sub-section (5) futher says that the Special Court  shall

have all powers as a Civil Court under the Code of Civil

Procedure for trying such suits. Section 11 deals with the

discharge  of  liabilities.  It  also  starts  with  a  non-

obstante  clause   and  says  that  notwithstanding  anything

contained  in the Code  or any other law for the time being

in force, the Special Court shall direct the Custodian for

disposal of the property under attachment and liabilities

shall be discharged in the order i.e. (a) all  revenues,

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taxes, cesses and rates due from the persons notified by

the  Custodian  under  sub-section  (2)  of  Sec.  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 any other liability as may be specified by

the Special Court. Therefore,  by virtue of section 11, the

first priority has been given to all dues of the revenues,

taxes, cesses etc.  The second priority  has been given to

any bank or financial institution or mutual fund and the

last priority has been given as directed the Special Court.

Section 13 clearly lays down that this Act will have over-

riding  effect  notwithstanding  anything  inconsistent

therewith contained in any other law for the time being in

force or in any instrument having effect by virtue of any

law, other than this Act, or in any decree or order of any

Court, tribunal or other authority. The analysis of these

necessary  provisions  clearly  establishes  that  once  the

property of a notified person is attached by the Custodian

and the same having been notified then the property of the

notified person being movable or immovable shall be subject

to the order passed by the Special Court and the manner in

which properties for discharge of the liabilities would be

dealt with has already been mentioned in Section 11 of the

Act of 1992 and lastly that the provisions of this Act will

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have the over-riding effect even on Tribunals as is clearly

and categorically mentioned in Section 13 of the Act of

1992. Therefore, in the scheme of things  this Act has been

given priority over all Acts.  The Act of 1993 came for

recovery  of  debts   due  to  the  Banks  and  Financial

Institutions.   This  Act  also  contains  the  over-riding

effect.  Section 34 of the Act of 1993 clearly says that

this Act will have the over-riding effect for recovery of

debts due to the Banks and Financial Institutions. Both the

Acts  have  non-obstante  clause.   The  Act  of  1993  is  a

subsequent  legislation  and  the  Act of 1992  is a prior

legislation. Therefore, it was contended by learned senior

counsel for the appellant that  since the Act of 1993 is a

subsequent  legislation,  it  should  have  the  over-riding

effect  over  the  Act  of  1992.  As  against  this,  learned

senior  counsel  for  the  respondent  No.1,  contended  that

Section 9-A of the Act of 1992 came by the amending Act 24

of 1994 on 25.1.1994 and  it is specifically provided that

after a person is notified under section 3(3) of the Act of

1992,  his  property  pertaining  to  the  transactions  in

securities entered after the 1st day of April, 1991 and on

and before 6th June, 1992 shall stand attached  and the

Special  Court  will  have  the  jurisdiction  and  none  else.

Learned senior counsel for the respondent No.1  submitted

that this provisions having come subsequently after the Act

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of 1993, Section 9-A of the Act of 1992 (came into force

w.e.f. 25.1.1994) will have the over-riding effect over the

Act of 1993. The contention of learned senior counsel for

respondent No.1 appears to be justified. Apart from that

it is provided in sub-section (3) of Section 3 that  the

transactions  in securities entered into after 1st day of

April, 1991 and on or before 6th June, 1992, the properties

pertaining  to  these  securities  shall  vest  with  the

Custodian  to  be  dealt  with  as  directed  by  the  Special

Court.  Therefore,  the  properties  pertaining  to  these

transactions during the aforesaid period,  will be subject

to the jurisdiction of the Special Court only. There is

another reason to come to this conclusion that in fact this

Act  was  specially  meant  to  deal  with  the  fraudulent

transactions which has taken place from 1st of April, 1991

to  6th of  June,  1992.  Therefore,  this  Act  has  special

purpose  to  deal with the  scam which has  taken place in

securities  transactions  during  this  period.  The  special

purpose  behind  this  Act  is  more  than  apparent  from  the

Statement  of  Objects  and  Reasons   and  the  Statement  of

Objects  and  Reasons   amply  clarifies  this  position.  The

Statement of Objects and Reasons reads as under :

“  Statement  of  Objects  and Reasons.-  (1)  In  the  course  of  the investigations  by  the  Reserve  Bank  of

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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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6. Therefore, this Act has a special task before it

and that task has to be dealt with in the parameters laid

down  by  this Act. The  Act of 1993  was of comparatively

general in nature pertaining to recovery of debts due to

the Banks and Financial Institutions. The idea was that all

the suits pertaining to recoveries  of Banks and Financial

Institutions spreading over  the Civil Courts and this has

resulted  into  great  strain  on  the  Banks  and  Financial

Institutions. Therefore, in order to meet that contingency

this Act was promulgated. The preamble  in this Act clearly

reads as under :

“  An  Act  to  provide  for  the establishment  of  Tribunals  for expeditious adjudication and recovery of debts  due  to  banks  and  financial institutions  and  for  matters  connected therewith or incidental thereto. “

Therefore,  the purpose of the Act of 1993 was to expedite

the recovery of the debts due to the banks and financial

institutions. Incidentally, the purpose of both the Acts

has separate area of operation. Application was filed by

the Bank before the Debts Recovery Tribunal for recovery of

its debts against the same person i.e. Ketan Parekh and

temporary injunction was issued  to disclose the assets and

during  the  pendency  of  these  Original  Applications  the

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jurisdiction of the Tribunal was challenged.  Therefore,

the issue came up specially before the High Court.  The

effect of Act of 1992 has special purpose and incidentally

the subject matter appears to be the same under both the

Acts but the Act of 1992 clearly lays down  the specific

purpose i.e. the scam which has taken place  relating to

the transactions in securities from 1.4.1991 to 6.6.1992 to

deal  with  such  scam  only.  Section  9-A  which  has  come

subsequently in the Act of 1992 i.e. on 25.1.1994 deals

with the over-riding effect on the Act of 1993. Therefore,

the Act of 1992 has the over-riding effect over the Act of

1993.  

7. In this connection, our attention was invited to

a  decision  of  this  Court  in  B.O.I.  Finance  Ltd. v.

Custodian  &  Ors. [  (1997)  10  SCC  488].  In  this  case, notification  was  issued   under  the  Securities  Contracts

(Regulation) Act, 1956 prohibiting all contracts for sale

or  purchase  of  securities  other  than  such  spot  delivery

contract or contract for cash or hand delivery or special

delivery in any securities  as permissible under the Act.

The transaction was consisting of two interconnected legs

i.e. ready leg consisting of sale of securities  by the

brokers  and purchase thereof by the banks  at market price

and  the  forward  leg  consisting  of  sale  back   of  the

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securities by the banks and purchase thereof by the brokers

after  a  period  of  14  days  on  a  fixed  date  at  a  price

determined on the first date.  Their Lordships held that

the ready- forward transaction is severable into two parts

i.e.  the  ready  leg  and  the  forward  leg.  Ready  leg

transaction was not illegal, unlawful or prohibited under

Section  23  of  the  Contract  Act.  Ready  leg  having  been

completed prior to the notified date, forward leg which is

illegal being hit by the notification, the same has to be

ignored.  It  was  further  held  that  once  the  payment  of

market price is made  the title to the securities stood

validly transferred to the banks under Transfer of Property

Act and thereby the banks became owners and the ready leg

having  been  performed  illegally  of  the  forward  leg

contained  in  the  agreements  cannot  affect  the  transfers

which had already taken place.  The appellant banks had

prior  to  6.6.1992  entered  into  contracts  with  different

brokers  for  the  purchase  and  sale  of  certain  securities

which  were  not  listed  on  any  stock  exchange.  Therefore,

such  transactions  were  completed  after  the  payment  of

agreed  price  and  delivery  of  securities  were  received

before  6.6.1992.  Therefore,  it  was  held  that  the  order

passed by the  Special Court on application filed by the

Custodian  of the notified person was not correct and the

order passed by the Special Court was set aside. This was a

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case  in  which  the  transaction  was  found  to  be  valid.

Therefore,  this  case  cannot  provide  any  assistance.  Our

attention was invited to another decision of this Court in

Tax Recovery Officer, Central Range-I v.  Custodian & Ors.

[(2007) 7 SCC 461]. In that case  it was held that that the property of any person notified under section 3(2) & (3) of

the Act can be attached and the jurisdiction of the Special

Court is confined to that property of the notified person

only. It was found that the Company D which was notified as

a party under section 3(2) of the Act of 1992 and not the

Company K. Company D owed money  from Company K and its

subsidiaries and it was in execution of the decree passed

in the favour of Company D, the property of Company K was

put  to  auction.  Thus,  the  Special  Court  could  not  have

entertained  the  application  moved  by  the  Income-Tax

Department for realization of its income tax dues from the

Company K and therefore, it was held that  the application

moved by the Income Tax Department was rightly rejected by

the Special Court.  Our attention was invited to a decision

of this Court in  Life Insurance Corporation of India  v.

D.J.Bahadur & Ors. [  (1981) 1 SCC 315].In this case, the question  was  whether  the  provisions  of  the  Industrial

Disputes Act will prevail or the provisions of the Life

Insurance ( Alteration of Remuneration and other Terms and

Conditions  of  Service  of  Employees)  Order,  1957  framed

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under  the  Life  Insurance  Corporation  Act,  1956.  In  that

context,  their Lordships after dealing with the provisions

of  Life  Insurance  Corporation  Act  and  the  Rules  framed

thereunder  held  that  the  case  will  be  covered  by  the

Industrial  Disputes  Act.    It  was  observed  per  Krishna

Iyer, J as follows:

“  In  determining  whether  a statute is a special or a general one, the  focus  must  be  on  the  principal subject-matter  plus  the  particular perspective. For certain purposes, an Act may  be  general  and  for  certain  other purpose  it  may  be  special.  Vis-à-vis  ‘ industrial  vists’  at the termination  of the settlement as between the workmen and the Corporation the ID Act is a special legislation  and  the  LIC  Act  a  general legislation.  So  the  ID  Act,  being  a special  law,  will  prevail  over  the  LIC Act which is a general law.”

Pathak,  J.  concurring  with  Krishna  Iyer,  J  observed  as

follows “

“  Law declared by the court in respect  of  an  award  holds  true  in  the case of a settlement.  Not only are the statutory provisions pertaining to a  

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settlement  and  an  award  comparable  in this  regard  but,  if  anything  the observations  if  read  in  respect  of  a settlement,  which  after  all  is  a voluntary agreement between the parties, would seem to hold more strongly. “

Our attention was invited to a decision of this Court in

L.S.Synthetics Ltd. v. Fairgrowth Financial Services Ltd. &

Anr. [  (2004)11 SCC 456].  In this case it was held that the contention that only those properties belonging to the

notified  person  which  are  the  subject-matter  of  the

transactions  in  securities  would  stand  attached  and  for

that purpose Section 9-A of the Act must be read down was

not  sustainable.  Our  attention  was  also  invited  to  a

decision of this Court in Allahabad Bank v. Canara Bank &

Anr. [(2000) 4 SCC 406].  In this case there was a question of jurisdiction whether the Recovery of Debts Due to Banks

and Financial Institutions Act, 1993 will prevail or the

provisions  of  the  Companies  Act,  1956.  In  that  context

their Lordships observed as follows:

“  Alternatively,  the  Companies Act,  1956  and  the  RDB  Act  can  both  be treated  as  special  laws,  and  the principle  that  when   there  are  two special  laws,  the  latter  will  normally prevail  over  the  former  if  there  is  a provision  in  the  latter  special  Act

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giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely Section 34. Therefore, in view of Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts.”

8. In the present case, both the two Acts i.e. the

Act of 1992 and the Act of 1993 start with the the non-

obstante clause. Section 34 of the Act of 1993 starts with

non-obstante  clause,  likewise  Section  9-A  of  the  Act  of

1992.  But  incidentally,  in  this  case  Section  9-A  came

subsequently, i.e. it came on 25.1.1994. Therefore, it is a

subsequent  legislation  which  will  have  the  over-riding

effect over the Act of 1993. But cases might arise where

both the enactments have the non-obstante clause then in

that  case, the proper perspective would be that one has to

see  the  subject  and  the  dominant  purpose  for  which  the

special enactment was made and in case the dominant purpose

is covered by that contingencies, then notwithstanding that

the Act might have come at a later point of time still the

intention can be ascertained by looking to the objects and

reasons. However, so far as the present case is concerned,

it is more than clear that Section 9-A of the Act of 1992

was amended on 25.1.1994  whereas the Act of 1993 came in

1993. Therefore, the  Act of 1992 as amended to include

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Section  9-A  in  1994   being  subsequent  legislation  will

prevail and not the provisions of the Act of 1993.

9. Apart  from  this,  in  the  present  case  both  the

Acts can be read harmoniously. Whatever dues are due to the

Banks or the Financial Institutions can be claimed under

Section 11 (2) of the Act of 1992 which specially empowers

that the liabilities can be adjusted out of the securities

of the person notified in the manner provided under Section

11(2)(b). Therefore, in the present case,  the Bank can

certainly  make  an  application  before  the  Special  Court

under Section 11(2)(b) of the Act of 1992 for discharge of

their liabilities against the securities of the notified

person.

10. As a result of our above discussion, the view taken by

the Division Bench of the High Court of Bombay appears to

be justified and there is no ground to interfere with the

same. Consequently, the appeal is dismissed with no order

as to costs.

       ……………………………….J [A.K.MATHUR]     

   ………………………… ……J New Delhi,       [ALTAMAS KABIR] May 16, 2008.

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