G. P. Mathur, J. - (1.) These appeals have been filed by Tax Recovery Officer, Central Range-1, under Section 10 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (hereinafter referred to as the Special Courts Act) against the order dated 24.2.2005 of the Special Court passed on Intervention Application Nos. 458 to 465 of 2004 in Execution Application Nos. 98 to 105 of 2001 in Miscellaneous Petition Nos. 189/95, 92/96, 102/95, 188/95, 103/95, 251/95 and 252/95.
(2.) The custodian exercising powers under Section 3(2) of the Special Courts Act published the name of M/s. Dhanraj Mills Pvt. Ltd. in gazette as a notified person. In view of Section 3(3) of the Special Courts Act all the assets belonging to the notified party stands attached to the Special Court. Thus, the assets of M/s. Dhanraj Mills Pvt. Ltd. stood attached to the Special Court. It was found that M/s. Killick Nixon Pvt. Ltd. and its 13 group companies owed substantial amount of money to M/s. Dhanraj Mills Pvt. Ltd. and M/s. Killick Nixon Pvt. Ltd. also stood as guarantor for the repayment of the money. The custodian on behalf of M/s. Dhanraj Mills Pvt. Ltd. filed suits for recovery of its dues against M/s. Killick Nixon Pvt. Ltd. and its 13 group companies. The Special Court passed decrees against M/s. Killick Nixon Pvt. Ltd. and its group companies on 18.9.1997. The custodian then filed Executing Applications bearing Nos. 98 to 105 of 2001 before the Special Court for recovery of the decretal amount on behalf of M/s. Dhanraj Mills Pvt. Ltd. The Special Court on 14.2.2003 appointed a receiver for taking charge of certain assets and properties of M/s. Killick Nixon Pvt. Ltd. and the other group companies which were sufficient to satisfy the entire decretal amount. Subsequently thereto the properties of M/s. Killick Nixon Pvt. Ltd. were put to auction and money was realized. It appears that a certified demand of Rs.25.88 crores against M/s. Killick Nixon Pvt. Ltd. was pending for recovery by the Tax Recovery Officer, Central Range-1, Mumbai. On 25/30.8.2004 the Tax Recovery Officer filed Intervention Application Nos. 450 to 465 of 2004 before the Special Court with a prayer that the custodian be directed to consider the claim of recovery of arrears of income tax from M/s. Killick Nixon Pvt. Ltd. on a priority basis before distribution of sale proceeds to any other creditor. A further prayer was made that the custodian be restrained from distributing the sale proceeds without first satisfying the claim of the income tax department. On 1.9.2004 the Special Court passed an order directing the custodian to submit a report which was complied with by the custodian on 19.6.2004. On 24.11.2004 the Special Court passed an order confirming the sale of the property of M/s. Killick Nixon Pvt. Ltd. to the highest bidder M/s. Gama Constructions for Rs.30 crores. The Intervention Applications filed by the Tax Recovery Officer were, however, rejected by the Special Court on 24.2.2005 by the following order :- "By these applications, recovery orders against a third party which is not a notified party, are sought. These applications are not maintainable before this court. Applications disposed of." It is this order which is subject matter of challenge in the present appeal.
(3.) Before adverting to the submissions made by the learned counsel for the parties it will be convenient to set out the relevant provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 which have a bearing on the controversy in hand. Section 3, sub-sections (1), (2) and (3) of Section 9A, Sections 11 and 13 of the Special Courts Act read as under :- "3. Appointment and functions of Custodian. (1) The Central Government may appoint one or more Custodians as it may deem fit for the purposes 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 the 6th 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 Section 4." "9A. Jurisdiction, powers, authority and procedure of Special Court in civil matters. (1) On and from the 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 Section 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 notified under sub-section (2) of Section 3 is involved as a party, broker, intermediary or in any 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 to the Special Court and the Special Court may, on receipt of the records of such suit, claim or other legal proceeding 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. (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)." 11. Discharge of liabilities. (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 (c) any other liability as may be specified by the Special Court from time to time." "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 any decree or order of any Court, tribunal or other authority." Sub-section (2) of Section 3 empowers the custodian, on being satisfied on information received that any person has been involved in any offence relating to transaction in securities after the first day of April, 1991 and on or before 6th June, 1992 to notify the name of such person in the official Gazette. Sub-section (3) of Section 3 provides that on and from the date of notification under sub-section (2), any property, moveable or immovable, or both belonging to any person notified under sub-section (2) shall stand attached simultaneously with the issue of the notification. Sub-section (4) of Section 3 provides that the property attached under sub-section (3) shall be dealt with by the custodian in such manner as the Special Court may direct. Section 9A deals with the jurisdiction, powers, authority and procedure of Special Court in civil matters. Clause (a) of sub-section (1) of Section 9A provides that on and from the commencement of the Special Court (Trial of Offences Relating to Transactions in Securities) Amendment Act, 1994, the Special Court shall exercise all such jurisdiction, power and authority as were exercisable immediately before such commencement by any civil court in relation to any matter or claim relating to any property standing attached under sub-section (3) of Section 3. The words "in relation to any matter or claim" occurring at the end of sub-section (1) of Section 9A are important and they clearly indicate that the Special Court shall have power and authority in relation to any matter or claim relating to any property standing attached under sub-section (3) of Section 3. Therefore, the jurisdiction of the Special Court is confined to the property of the notified person which stands attached under sub-section (3) of Section 3 of the Special Courts Act. Sub-section (1) of Section 11 of the Special Courts Act empowers the Special Court to pass such orders as it may deem fit directing the custodian for the disposal of the property under attachment. Sub-section (2) of Section 11 enumerates the liabilities which have to be paid or discharged and also the priority which has to be followed in discharging the liability. Section 13 of the Special Courts Act gives an overriding effect to the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992.;