14 October 2004
Supreme Court
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FAIRGROWTH INVESTMENTS LTD. Vs CUSTODIAN

Bench: RUMA PAL,ARUN KUMAR
Case number: C.A. No.-004065-004065 / 2004
Diary number: 1308 / 2004
Advocates: A. RAGHUNATH Vs


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CASE NO.: Appeal (civil)  4065 of 2004

PETITIONER: Fairgrowth Investments Ltd.

RESPONDENT: The Custodian

DATE OF JUDGMENT: 14/10/2004

BENCH: RUMA PAL & ARUN KUMAR  

JUDGMENT: J U D G M E N T

RUMA PAL, J.

       The question raised in this appeal is whether the Special  Court constituted under The Special Courts (Trial of Offences  Relating to Transactions in Securities) Act, 1992 (hereinafter  referred to as ’the Act’) has power to condone the delay in filing  a petition under Section 4(2) of the Act.         The object of the Act as stated in the Statement of  Objects and Reasons is to deal with the situation created by  large scale irregularities and malpractices in transactions in  securities indulged in by some brokers in collusion with the  employees of various banks and financial institutions.  In  particular, the Act seeks to ensure speedy recovery of the funds  which have been diverted from banks and financial institutions  to the individual accounts of brokers.  The other objectives of  the Act are to punish the guilty and to restore confidence in and  maintain the basic integrity and credibility of the banks and  financial institutions.         With these objectives in view the Act provides for the  appointment of one or more Custodians to take action against  any person involved in any offence relating to transactions in  securities for the period after 1st April, 1991 upto and including  6th June, 1992.  In terms of sub-section (3) of Section 3 of the  Act, the Custodian may notify the name of the such person in  the Official Gazette.  From the date of such notification, any  property moveable or immoveable or both, belonging to any  person so notified stands attached under Sub-section (3) of  Section 3.  Such attached properties may be dealt with by the  Custodian in such  manner as the Special Court may direct.           The Special Court was established under Section 5 of the  Act. It has the same jurisdiction as a Civil Court  inter alia in  relation to any matter relating to any property attached under  Sub-section (3) of Section 3 of the Act as well as in relation to  transactions in securities entered into during the aforesaid  period in which the person notified is involved as a party,  broker, intermediary or in any other manner (Section 9-A(1) ).         Sub-Section (2) of Section 4, ( in so far as it is relevant)  permits any person aggrieved by a notification issued under  Sub-section (2) of Section 3 to file a petition objecting to the  notification within 30 days of the issuance  of the notification.  The Special Court after hearing the parties may make such  order as it deems fit on such petition. While dealing with such a  case, the Special Court is not bound by the procedure laid  down by the Code of Civil Procedure, 1908, but shall be guided  by the principles of natural justice and, subject to the other

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provisions of the Act and  of any Rules, the Special Court has  the power and under Sub-section(4) of Section 9 to regulate its  own procedure.  Section 10(3) of the Act, provides for an  appeal to this Court from any judgment, sentence or order of  the Special Court within a period of 30 days from the date of  such judgment etc. Under the proviso to Section 10(3) this  Court has been empowered to entertain the appeal even after  the expiry of a period of 30 days  if the court is satisfied  that  the appellant had sufficient cause for not preferring appeal  within the period of limitation.  Section 13 provides that the  provisions of the Act would have overriding effect over other  laws. These, in short, are the provisions of the Act which are  material for the purposes of this appeal.          The Act came into force on 6th June, 1992.  The appellant  was notified along with others under Section 3(2) on               20th November, 2001.  On 23rd November, 2001, the Custodian  informed the appellant that it had been notified under Section  3(2) of the Act and its properties stood attached with effect from  the date of the notification.  The appellant was requested  to  furnish the Custodian the details of its properties as on the date  of the notification.  In answer to the Custodian’s letter, the  appellant asked for the reasons and circumstances which  formed the basis of the Custodian’s decision to notify the  appellant. The appellant also stated that it was in the process of  submitting details of its properties.  On 8th October, 2002, the  appellant filed a petition of objection to the notification under  Section 4(2) of the Act.  The Special Court rejected the  application   solely on the ground that it was filed beyond the  period of limitation prescribed by Sub-section (2) of Section 4.           The appellant has contended that the Custodian had  issued the notification under Section 3(2) of the Act almost      10 years after coming into force of the Act.   It is submitted that  the notification was also otherwise invalid.  According to the  appellant the right of notified persons to object to a notification  under Section 4(2) was a valuable right, since the  consequences of being notified were drastic  viz. the  attachment of all properties both immoveable and moveable.  It  is submitted that  the notified persons could not be deprived of  the right merely on the ground of limitation.  It is submitted that  the rule of limitation was a procedural requirement and like all  matters of procedure should serve to further the ends of justice  and not defeat it.  Learned counsel for the appellant has  referred to the  decisions of this Court in Chairman,  Thiruvalluvar Transport Corporation Vs. Consumer  Protection Council 1995 (2) SCR (1), Syndicate Bank Vs.  Prabha D. Naik & Anr. 2001 (4) SCC 713 and C.  Beepathumma & Ors. Vs. Kudambalithaya & Ors. 1964 (5)  SCR 836 in support of this submission.  According to the  appellant the  provision prescribing a period of limitation in  Section 4(2) was directory and therefore  the Special Court  could not reject the application only because of non compliance  with such a directory provision.  The absence of any penal  consequence, according to the appellant’s counsel, showed  that the non fulfillment of the requirement to file an objection  within a specified time would not vitiate the substantive right of  the notified person to question the notification.  The decision of  this Court in Topline Shoes Ltd. Vs. Corporation Bank 2002  (6) SCC 33, has been relied on as an authority for this  proposition.  The next submission of the appellants’ counsel  was based on the applicability of Section 29(2) of the Limitation  Act, 1963   whereby, according to him,  the provisions of inter  alia Section 5 of the Limitation Act would be applicable to  petitions under Section 4(2) of the Act.  The contention is that  Section 29 (2) of the Limitation Act, 1963 would be  automatically applicable to all Special Acts such as the Act in

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question, since the Act provides for a period  of limitation  different from the period prescribed under the Limitation Act,  1963 and since the provisions of Limitation Act had not been  excluded either expressly or by necessary implication.  It is also  argued on the basis of the decision of this Court in Mangu Ram  v. Municipal Corporation of Delhi 1976 (1) SCC 392 and  Vidyacharan Shukla v. Khub Chand Baghel 1964 (6) SCR  129 that merely because a power to condone the delay had  been granted under Section 10(3), it  could not be construed   as a necessary exclusion of the same power under Section 5 of  the Limitation Act in respect of Section 4(2). It is, however  conceded by learned counsel appearing on behalf of the  appellant that this Court has in L.S. Synthetics Ltd vs.  Fairgrowth Financial Services Ltd. & Anr. 2004(7) SCALE  427 held that the provisions of Limitation Act, 1963 did not  apply to the Act.  However, it is submitted that irrespective of  the wide language in which the conclusion of the Court had  been stated in that case, the reasoning showed that  it was  limited to the question whether the periods prescribed under the  Limitation Act applied to Section 11 of the Act.   It is submitted  that the decision in L.S. Synthetics must be narrowly  construed, as otherwise the conclusion would be based on a  factual error. Our attention was drawn to paragraphs 38 and 39  of the decision as reported where this Court has held that the  provisions of the Limitation Act were excluded because  the Act   did not provide for any period of Limitation.  It is pointed out that  the Act was not a complete code since Sections 4(2) and 10(3)  did provide for a period of Limitation.         Learned counsel appearing on behalf of the Custodian  has stated that the period of limitation prescribed under Section  4(2) could not be said to be merely directory.    The decision in  Topline (supra) was said to be distinguishable and in any event  not good law in view of the subsequent decision of a larger  Bench in Dr. J.J. Merchant V. Shrinath Chaturvedi: 2002(6)  SCC 635. It is submitted that Section 29 (2) of the Limitation  Act would have no application to the Act because it is clear  from the object and scheme of the Act that the period  prescribed under Section 4(2) of the Act was not extendable by  Court. The conferment of such power expressly in connection  with  appeals under Section 10 according to the learned  counsel for the Custodian necessarily implied the exclusion of  such power in the Court under Section 4(2).  This  fact coupled  with Section 13 which gives overriding effect to the provisions  of the Act, it was submitted, a clear indication that the  provisions of the Limitation Act would not apply.  Reliance has  been placed on the decision of this Court in Gopal Sardar Vs.  Karuna Sardar 2004(4) SCC 252, in this connection.   Finally,  it is contended that the question raised in this appeal must be  taken to have been concluded by the decision of three Judges  in L.S. Synthetics case (supra). We are of the view that the provision prescribing a time  limit for filing a petition for objection under Section 4(2) of the  Act is mandatory in the sense that the period prescribed cannot  be extended by the Court under any inherent jurisdiction of the  Special Court. Prescribed periods for initiating or taking steps in  legal  proceedings are intended to be abided by, subject to any  power expressly conferred on the court to condone any delay.  Thus the Limitation Act 1963 provides for different periods of  limitation within which suits, appeals and applications may be  instituted or filed or made as the case may be.  It also provides  for exclusion of time from the prescribed periods in certain  cases, lays down bases for computing the period of limitation  prescribed and expressly provides for extension of time under  Section 5 in respect of certain proceedings.  If the periods  prescribed were not mandatory, it was not necessary to provide

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for exclusion or extension of time in certain circumstances nor  would the method of computation of time have any meaning.  Section 4 (2) of the Act plainly read similarly requires a  person objecting to a notification issued under sub-section (2)  of Section 3 to file a petition raising such objections within 30  days of the issuance  of such notification.  The words are  unequivocal and unqualified and there is no scope for reading  in a power of Court to dispense with the time limit on the basis  of any principle of interpretation of statutory provisions.     In R.  Rudraiah v. State of Karnataka 1998(3) SCC 23  it was  contended on behalf of the appellants that Section 48-A of the  Karnataka Land Reforms Act, 1961 which provided for the  making of an application within a particular period should be  construed liberally in favour of tenants so that the period was to  be read as  extendable. The submission was rejected on the  ground that the language of Section 48-A was unambiguous  and could not be interpreted differently only on the ground of  hardship to the tenants.  The mere fact that the Special Court may have been  imbued  with the same status of a High Court would not alter  the situation. We are of the view that it was not necessary for  Section 4(2) of the Act to use additional peremptory language  such as "but not thereafter" or "shall"  to mandate that an  objection had to be made within 30 days. The mere use of the  word "may" in Sections 4 (2) of the Act does not indicate that  the period prescribed under the Section is merely directory. The  word ’may’  merely enables or empowers the objector to file an  objection.  The language in Section 4(2) of the Act may be  compared with Sections 4 and 6 of the Limitation Act, 1963.  Section 4 of the Limitation Act provides:

"4.Expiry of prescribed period when court  is closed:- Where the prescribed period for  any suit, appeal or application expires on a  day when the court is closed, the suit,  appeal or application may be instituted,  preferred or made on the day when the court  reopens."

Certain sub-sections of Section 6 of the Limitation Act also   provide for the period within which a minor or insane or an idiot  may institute suits.  It cannot be contended that the word "may"  in these Sections indicate that the prescribed periods were  merely directory.  This Court in Mangu Ram v. Municipal  Corporation of Delhi 1976 (1) SCC 392  described statutory   provisions of periods of limitation as "mandatory and  compulsive" and also said:-

"It is because a bar against entertainment  of an application beyond the period of  limitation is created by a Special or local  law that it becomes necessary to invoke  the aid  of Section 5 (of the Limitation Act)  in order that the application may be  entertained despite such bar".

   If the power to condone delay were implicit in every  statutory provision providing for a period of limitation in respect  of proceedings before Courts, Section 29(2) of the Limitation  Act 1963 would be rendered redundant. We will discuss the  scope and applicability of Section 29(2) in greater detail  subsequently.                                                                                It is not for the Courts to determine whether the period of  30 days is too short to take account the various misfortunes  that may be faced by notified persons who wish to file

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objections under Section  4(2) of the Act nor can the Section be  held to be directory because of such alleged inadequacy of  time. As was held by the Privy Council in Nagendra Nath v.  Suresh AIR 1932 P.C. 165:-

"The fixation of periods of limitation must  always  be to some extent arbitrary and may  frequently result in  hardship.  But in  construing such provisions equitable  considerations are out of place, and the strict  grammatical meaning of the words is, their  Lordships think, the only safe guide."         [See also: Antonysami v. Arulanandam Pillai  (dead) By Lrs. & Anr.  2001(9) SCC 658, 666].  

     In any event the statutory attachment of the property of  the notified party under Section 3, sub-section 3, of the Act, is  subject to a final decision on the  matter by the Special Court  under Section 9(A) and Section 11 of the Act.  It is, in that  sense just an interim measure. The three decisions relied upon by the appellant, namely,  Sangram Singh V. Election Tribunal, Kotah Bhurey Lal  Baya, 1955 (2) SCR 1, Syndicate Bank V. Prabha (supra) and  C. Beepathumma (supra) do not deal with statutes which could  be said to be in pari materia with the Act.    In Sangram Singh,  this Court had to  consider whether the Election Tribunal was  justified in refusing to recall an order directing that an election  petition should be disposed of ex-parte.  It was noted that  Section 19(2) of the Representation of Peoples Act, 1951  directed the Tribunal to follow the procedure prescribed for  trials under the Civil Procedure Code.  It was found on a  construction of the provisions of the Code of Civil Procedure as  they then stood, that the Court had the power to allow a  defendant to participate in the proceedings even after the  passing of an order that the trial should be proceeded with ex- parte. Both the cases i.e. Syndicate Bank and C.  Beepathuma have been citied as authorities for the proposition  that the law of limitation is a procedural law and the provisions  existing on the date of the suit would apply.   We have no  quarrel with this proposition but we fail to see the relevance of  the decisions to the question to be decided in this appeal.   None of these decisions touch the question whether a statutory  provision such as Section 4(2) of the Act should be treated as  mandatory or directory.   The decision which does deal with this question is  Topline Shoes Ltd. V. Corporation Bank 2002 (2) SCC 33.    The subject matter of interpretation in that case was Section  13(1)(a) of the Consumer Protection Act, 1986 which provides  that a person opposing the complaint under the Act was  required to file an answer to the complaint "within a period of 30  days or such extended period not exceeding fifteen days as  may be granted by the District Forum".  The Court took into  account the provisions of the Consumer Protection Act, 1986  and came to the conclusion that the period for extension of time  "not exceeding fifteen days" was directory in nature and was an  expression of "desirability in strong terms".  While expressing  our reservation about the correctness of the view expressed in  Topline Shoes Ltd., it is not necessary for us to expatiate  on  such reservation in view of the subsequent decision of this  Court in Dr. J.J. Merchant’s case by a larger Bench in which  the provisions of Section 13(1)(a) of the Consumer Protection  Act were also construed.  The Court categorically held that the  outer period of 45 days to submit an answer of a complaint had  to be adhered to strictly.   Given the view expressed by a larger

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Bench, it would not be appropriate for us to proceed on the  opinion expressed earlier by a smaller Bench in Topline  Shoes.   [See in this connection Union of India & Ors. V. K.S.  Subramanian AIR 1976 SC 2433].   We are therefore of the  view that the period for filing an objection in Section 4(2) in the  Act is a mandatory provision given the language of the Section  and having regard to the objects sought to be served by the  Act.           This brings us to the question whether the power to  condone the delay in filing a petition under Section 4(2) exists  in the Special Court. We have held that the statute itself does  not provide for it.  A possible source of the power could be  Section 5 of the Limitation Act, 1963, provided it applies to the  Act.  Section 29(2) of the Limitation Act, 1963 provides for the  application of the provisions of Section 4 to Section 24 of the  1963 Act including Section 5, to any special or local law which  prescribes a period of limitation in respect of any suit, appeal or  application different from the period prescribed under the  Limitation Act.  In other words, the general rule as far as special  and local Acts are concerned, is that the specified provisions  including Section 5 of the Limitation Act will apply provided the  Special or Local Act provides a period of limitation different  from that prescribed under the Limitation Act. There is an  additional requirement viz that the Special/Local Act does not  expressly exclude the application of the Limitation Act .  It has  been held in Union of India V. Popular Construction Co.  2001 (8) SCC 470 that the word ’exclusion’ also includes  ’exclusion by necessary implication’.  This proposition of law is  not in dispute.  The only question is \026 does the Act expressly or  necessarily exclude the provisions of Limitation Act?   We think  it does.   The fact that it has provided for a power to condone  delay under Section 10(3) of the Act, shows  that Parliament  had consciously excluded the power of the Court in relation to  Section 4(2).  This view also finds support in the decision of this  Court in Gopal Sardar V. Karuna Sardar 2004 (4) SCC 252.   The statutory provision under consideration in that case was  Section 8 of the West Bengal Land Reforms Act, 1955.  It was  held:

"When in the same statute in respect of  various other provisions relating to filing  of appeals and revisions, specific  provisions are made so as to give  benefit of Section 5 of the Limitation Act  and such provision is not made to an  application to be made under Section 8  of the Act, it obviously and necessarily  follows that the legislature consciously  excluded the application of Section 5 of  the Limitation Act.                  The decision relied upon by learned counsel for the  appellant, namely, Mangu Ram (supra)   has been  distinguished in Gopal Sardar vs. Karuna Sardar, in our  opinion, correctly. In Mangu Ram’s case  the Court had to deal  with the question whether  despite the mandatory period of  limitation provided in sub-Section (4) of Section 417 of the  Criminal Procedure Code,1898,  it excluded the application of  Section 5 of the Limitation Act 1963.  The provisions of Section  29(2)(b) of the Limitation Act, 1963, were construed and it was  held:-         "Mere provision of a period of  limitation in howsoever peremptory  or

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imperative language is not sufficient to  displace the applicability of Section 5".        

       But in this case apart from the mandatory and compulsive  provisions of sub-Section (2) of Section 4 of the Act, there are  in addition two provisions of the Act which show that the  provisions of Section 5 of the Limitation Act, 1963 cannot be  invoked.  These are: an express provision for condonation of  delay under Section 10(3) and the non-obstante provision in  Section 13 of the Act which states that the provisions of           the Act :- "\005.shall have effect notwithstanding  anything inconsistent herewith  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 decision in Competent Authority Tarana v. Vijay  Gupta; 1991 Supp. (2) SCC 631  no doubt held that the  provisions of the Madhya Pradesh Ceiling of Agricultural  Holdings Act, 1960 will not exclude the provisions of Section 5  of the Limitation Act.  However, there is no reference to the  provisions of the Madhya Pradesh Act which  persuaded the  Court to arrive at such conclusion.         Reliance on the decision in Vidya Charan Shukla V.  Khub Chand 1964 (6) SCR 129 by the appellant is equally  misplaced.  One of the issues raised in that case related to the  question whether Section 116-A of the Representation of  People Act, 1951 could be construed as expressly or impliedly  excluding the provisions of the Limitation Act, 1908 as would  otherwise be applicable under Section 29(2)(a) of that Act.  The  argument was that sub-section 3 of Section 116-A of the 1951  Act not only provided for a period of 30 days to prefer an appeal  from the date of an order of the Tribunal to the High Court, but  also provided that the High Court could entertain an appeal  after the expiry of the period only if it was satisfied that the  appellant had sufficient cause for not preferring an appeal  within such period.  The sub-section under consideration in  Vidya Charan Sukhla was, therefore, substantially similar to  Section 10(3) of the Act which is required to be construed by  us.  But that is where the similarity ends. The Court in that case  held that the proviso did not amount to an express or implied  exclusion because of the wording of Section 29(2)(a) of the  Limitation Act, 1908.  Section 29(2) (a) of the 1908 Act is  dissimilar from the provisions of section 29(2)(b) of the  Limitation Act, 1963.   The earlier version of Section 29 made  the provisions of Section 4,  9 to18 and Section 22 applicable to  a Special or Local Act unless the Special or Local law expressly  excluded such applicability.  In other words, even in the  absence of any exclusionary clause in the Special or Local Act,  the other provisions of the Limitation Act including Section 5  would not apply.  It was, therefore, held that the proviso in sub- section 3 of Section 116-A of the Limitation Act, 1951 had  become necessary, because, if the proviso was not enacted,  then by virtue of Section 29 (3)(a) of the Limitation Act, 1908 it  would have excluded the operation of Section 5 of the  Limitation Act with  the result that even if sufficient cause for the  delay existed the High Court would have been helpless to  exclude the delay.  It was held that proviso to sub-Section (3) of  Section 116-A of the 1951 Act only restored the power under  Section 5 denied to the Court under Section 29(2)(b) of the  Limitation Act, 1908.  The same reasoning would not apply with  regard to Section 29(2)(b) of the Limitation Act, 1963.  Under

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the 1963 Act, Section 29(2)(b), inter-alia, provides that Section  5 of the Limitation Act would apply under that section to a  Special/Local Act unless specifically excluded.  The decision in  Vidya Charan Shukla  was noted in Hukumdev Narayan  Yadav V. L.N. Mishra 1974(2) SCC 133 and it was held that  this particular controversy was no longer relevant for  determining whether such a special or local Act excluded the  provisions of the Limitation Act within the meaning of the word  "exclude" in Section 29(2)(b) of the Act.  The decision of  Hukumdev Narayan has in turn been considered and followed  by this Court in Gopal Sardar V. Karuna Sardar 2004 (4) SCC  252. The argument of the appellant then is that the provisions  for exclusion of time contained in Section 4 to 24 of the  Limitation Act if not included would lead to an incongruous  result. For example an appeal would be barred by time even  though a copy of the order of the Special Court was not made  available  to the appellant, because Section 12(2) of the  Limitation Act would not be available. The argument is   unacceptable.  The time taken by the appellant for obtaining a  copy of the order appealed against  may be a factor relevant to  the exercise of  discretion by this Court under Section 10(3) of  the Act.  The exclusion of Sections 4 to 24 of the Limitation Act  would only mean that the appellant could not claim the  exclusion of time as provided under those Sections as a matter  of right but could raise pleas on grounds available under those  Sections to establish ’sufficient cause’ under Section 10(3). The decision  by a larger Bench in L.S. Synthetics Ltd.  (supra)  holding that the provisions of the Limitation Act, 1963  do not apply to the Act may not have, by itself, concluded  the  question formulated by us at the outset.   That case was, as  has been rightly contended by learned counsel appearing on  behalf of the appellant, limited to a consideration of Section 11  of the Act and the proceedings by the Special Court thereunder.  It was in that context that the Court had said that the Act had  not provided for any period of limitation.  But for the reasons  already stated by us we concur in the final conclusion reached  by the Court in L.S. Synthetics  to the extent that the  provisions of the Limitation Act 1963 have no application in  relation to a petition under Section 4(2) of the Act.         Finally, Section 29(2) of the Limitation Act speaks of  application of the provisions contained in Sections 4 to 24 "only  in so far as, and to the extent to which they are not expressly  excluded by such special or local laws". This language,  together with our earlier reasoning, particularly with regard to  L.S. Synthetics, would answer the further question raised by  the appellant, namely, whether the question of exclusion of the  provisions of the Limitation Act must be separately considered  with reference to different provisions of a Special/Local Act or in  connection with the provisions of the Special/Local Act, as a  whole, by affirmation of the first alternative.  We are therefore  not called upon to decide whether claims either preferred for  the first time before the Special Court or transferred to the  Special Court under Section 9-A(2) would attract the provisions  of Sections 4 to 24 of the Limitation Act. It 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 Courts (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.