http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: TEJKUMAR BALAKRISHNA RUIA

       Vs.

RESPONDENT: A.K. MENON & ANR

DATE OF JUDGMENT:       09/09/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) VENKATASWAMI K. (J)

CITATION:  JT 1996 (8)    99

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T BHARUCHA.J.      These are  appeals against  the judgment  and orders of the Special  Court constituted  under the  provisions of The Special Court (Trial Of Offences Relating To Transactions In Securities) Act,  1992, ("the  Act"), and they relate to the sweep of  Section 3(3)  thereof. The  principal Judgment and order gave  the appellant liberty to file an application for a subsistence  allowance. When  the  appellant  declined  to avail of the liberty the final order was passed.      The  appellant  became  a  notified  person  under  the provisions of  Section 3(2) of the Act on 2nd July, 1992. On 9th October,  1994, he  was appointed  an advisor by Killick Nixon Ltd.  with effect from 8th October, 1994. By reason of such appointment  he is entitled to be paid consultancy fees in the sum of Rs.5,000/- per month by the said company. By a letter dated  7th August,  1995, to  the Manager, Dena Bank, the appellant  applied to  open a new Current Account in his name to  be operated  by him.  On 6th  September, 1995,  the appellant’s advocates were informed that the matter had been referred to  the Head  Office of  the bank  and by  a letter dated 27th  October, 1995, that the matter had been referred to the  Custodian appointed  under the  Act. The  petitioner filed a  petition on  23rd November,  1995, in  the  Special Court and  sought a  declaration that  the income "earned by way  of   the  aforesaid   emoloyment  is   not  liable  for attachment" and  permission "to  open a new bank account and operate the same in the normal course".      The petition  was dismissed  by the order under appeal. The  Special   Court  proceeded  upon  the  basis  that  the appellant was  "genuinely seeking release of an income which he is earning from his services". However, the Special Court said that  if the  interpretation which the appellant wanted it to  give was  accepted, it  could result in a very clever method of  siphoning off  assets which  could and must stand attached. The  Special Court  noted that  Even after 3 years

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

monies which  had  been siphoned off had not been traced. It was thus  evident that  the notified parties or some of them had monies  or assets  which were  lying in some undisclosed place. One of the simplest methods to bring such moneys into the open  and start  using them  was  to  ostensibly  render services to  somebody else  who then paid the notified party the purported income or for somebody to give to the notified party a  gift or  for a  notified party  to suddenly inherit some assets. This would become a method to defeat the object of the  Act and  could not  be permitted.  The Special Court then dealt with the provisions of Section 3(3) and held that the words therein "on and from the date of the Notification" meant that  all assets  which were  available on the date of the Notification  and all assets which became available from and after  that date stood attached. The term "property" had a wide connotation and included present and future property. Thus, if  some notified  party inherited  or was gifted some property  or     earned  some  income  subsequent  to  being notified, such  property or  income would stand attached and be available for distribution under the Act.      The Act  was preceded by an Ordinance which established the  Special   Court  for  trial  of  offences  relating  to transactions  in  securities  that  had  been  entered  into between 1st  April, 1991  and 6th June, 1992. Section 3, sub section (1)  empowered the Central Government to appoint one or more  Custodians under  the Act. By reason of sub-section (2), the  Custodian could, on being satisfied on information received that  any person  had been  involved in any offence relating to  transactions in securities between the  Started dates, notify  the name  of  such  person  in  the  Official Gazette. Sub-section (3) reads thus :      "(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 peoperty, movable or immovable,      or both,  belonging to  any  person      notified  under   that  sub-section      shall stand attached simultaneously      with    the     issue    of     the      notification." The Custodian could, by reason of sub-section (4). deal with property attached  under sub-section  (3) in  such manner as the Special  Court  directed.  Section  4(1)  empowered  the Custodian, if  he was  satisfied, after  such inquiry  as he thought fit,  that any contract or agreement entered into at any time  between  the  stated  dates  in  relation  to  any property of  the  notified  person  had  been  entered  into fraudulently or  to defeat  the provisions  of the  Act,  to cancel such  contract or  agreement, whereupon such property stood attached  under the  Act. Sections  7, 8 & 9 deal with the  jurisdiction   of  the   Special  Court   in   criminal proceedings. Section  9A deals  with the jurisdiction of the Special Court in civil proceedings relating to property that stands  attached   and  arising   out  of   transactions  in securities between  the stated  dates in  which  a  notified person was  involved as  a party, broker, intermediary or in any other  manner. Section  11 deals  with the discharge  of liabilities and  sub-section (1)  states  that  the  Special Court may  make such  order as it may deem fit directing the Custodian in  the matter of disposal of attached properties; sub-section (2)  sets out the order in which liabilities are to be paid or discharged. Section 13 states that the Act has effect  notwithstanding   anything  inconsistent   therewith

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

contained in any other law for the time being in force or in any instrument  having effect by virtue of any law or in any decree or order of any court, tribunal or other authority.      In our  vies, 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 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 subsection (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 ccurate 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  provesions 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 is  perhaps necessary  to make clear that the income or usufruct  of attached property is also attached property. Thus, if  the property  be shares,  dividends and  bonus and rights shares thereon would also be attached property. It is only income  generated by  a notified  person by dint of his own labour  which falls  outside the net of Section 3(3). In respect of  such income,  the attachment  under Section 3(3) does not operate.       We  must,  therefore,  hold,  particularly  since  the Special  Court   has  proceeded  upon  the  basis  that  the appellant is  "genuinely seeking  release of an income which he is  earning from  his services",  that the  same  is  not subject to  attachment under  Section 3(3)  and that  he  is entitled  to   open  a  bank  account  for  the  purpose  of depositing  such   income  (and   such  income  alone).  The Custodian shall be entitled to inspect this bank account and take action  in such  manner as  he deems  fit  against  the appellant if  it  be  found  that  other  monies  have  been

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

deposited in the bank account.      The  appellant   may  now   draw  the  arrears  of  his remuneration from the company.      It was  sought to  be argued on behalf of the appellant that the  provisions of  section  3(3)  attached  only  such property as  had  a  nexus  to  transactions  in  securities between the  stated dates.  For the purposes of this appeal, we have found it unnecessary to entertain the argument.      The appeals  are allowed. The judgment and orders under appeal are set aside. The petition filed by the appellant in the special Court is allowed to the extent aforestated.      There shall be no order as to costs.