# MAGHENDRA PAL TYAGI v. JAYANT DAVAR AND ORS

- **Citation:** [2008] 9 S.C.R. 1096
- **Court:** Supreme Court of India
- **Decided:** 2008-06-05
- **Case number:** Civil Appeal Nos.3034-3036 of 2005
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/maghendra-pal-tyagi-v-jayant-davar-and-ors-24814
- **Pages:** 14

## Headnote

[2008] 9 S.C.R. 1096
'( ..
A
MAGHENDRA PAL TYAGI
v.
JAYANT DAVAR AND ORS.
(Civil Appeal Nos.3034-3036 of 2005)
JUNE 5, 2008
B
[C.K. THAKKER AND LOKESHWAR SINGH PANTA,
.,
JJ.]
rSpecial Courts (Trial of offences relating to transactions
c in Securities) Act, 1992: s. 3(2) -
Transfer of shares to notified
person - Appellant held shares of the Company - He applied
for issue of duplicate shares on the pretext that these shares
were lost - Consequently duplicate share certificate was issued- These shares were then sold to first respondent- When
D first respondent sold these shares in open market, they were
~
returned to him as bad delivery- It was found that these shares
..
were kept in abeyance as they were seized by CBI at the time
of Share Transfer Scam -Application by First respondent that
he is owner of these shares and entitled to corporate benefits
E
-Allowed by Special Judge - Justification of- Held: Justified
- These shares were attached by CBI in proceedings initiated
against the notified party and hence could not be transferred
to any party - Appellant got the duplicate shares on the basis
of misrepresentation - Therefore Special Judge was right in
~
directing the appellant to pay to first respondent the amount
..
F received from him along with interest@ 18% p.a. - Share
Transfer Scam.
The appellant held 200 shares of fourth respondent
company, which purportedly were lost. He applied to the
G fourth respondent company for issue of duplicate certificates in lieu of his lost shares. Pursuant to this, Fourth
respondent company issued public notice in newspaper
calling for objections if any against issue of duplicate
shares to the appellant. Having not received any objecH
1096
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1097
y
AND ORS.
..
tions, duplicate share certificates were issued to him.
A
On 8th July 1994, the appellant transferred these
shares in favour of first respondent. The first respondent
sold/transferred 200 shares which he got from the appellant and 50 Bonus Shares consequently acquired by him,
B
but the fourth respondent-company did not register the
said transfer. This was done on the asking of the CBI,
which was investigating the Share Transfer Scam, and
~-
advising the first respondent and the transferee to approach the Custodian-second respondent.
c
The transfer agent received a letter from second respondent-Custodian regarding stop transfer of shares in
favour of any person without permission of the custodian
and also held in abeyance all the benefits accruing on
t
those shares as the said shares were seized by the CBI 0
~
at the time of raid laid on the places of deceased Harshad
S. Mehta. The letter also revealed that deceased Harshad
S. Mehta and his group were notified by custodian on
8.6.1992 under the provisions of the Act and all properties belonging to them stood attached simultaneously E
with the issue of notification and fourth respondent was
informed not to deal with those shares including transfer, pledge, issue of duplicate shares. The letter of 8th
~
October, 1997 revealed that the list furnished by the sec-
,,
ond respondent-Custodian regarding properties of notitied person included original shares of the appellant which
F
he allegedly lost. The fourth respondent-company, therefore marked "stop transfer" against the duplicate shares
which were transferred in the name of the first respondent and advised him to approach the stock exchange
through whom those shares were purchased so that G
through proper channel, the introducing broker as well
"
as the share holder, i.e. the appellant could be asked to
replace the said shares with good shares.
Before the Special Judge, the first respondent filed
H
1098
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A an application claiming that he is the real and only owner
of these shares and, the shares were registered in his
name accordingly, all corporate benefits accrued thereon
since the date of registration of the 250 shares in his name,
be paid to him in the interest

## Text

[2008] 9 S.C.R. 1096
'( ..
A
MAGHENDRA PAL TYAGI
v.
JAYANT DAVAR AND ORS.
(Civil Appeal Nos.3034-3036 of 2005)
JUNE 5, 2008
B
[C.K. THAKKER AND LOKESHWAR SINGH PANTA,
.,
JJ.]
rSpecial Courts (Trial of offences relating to transactions
c in Securities) Act, 1992: s. 3(2) -
Transfer of shares to notified
person - Appellant held shares of the Company - He applied
for issue of duplicate shares on the pretext that these shares
were lost - Consequently duplicate share certificate was issued- These shares were then sold to first respondent- When
D first respondent sold these shares in open market, they were
~
returned to him as bad delivery- It was found that these shares
..
were kept in abeyance as they were seized by CBI at the time
of Share Transfer Scam -Application by First respondent that
he is owner of these shares and entitled to corporate benefits
E
-Allowed by Special Judge - Justification of- Held: Justified
- These shares were attached by CBI in proceedings initiated
against the notified party and hence could not be transferred
to any party - Appellant got the duplicate shares on the basis
of misrepresentation - Therefore Special Judge was right in
~
directing the appellant to pay to first respondent the amount
..
F received from him along with interest@ 18% p.a. - Share
Transfer Scam.
The appellant held 200 shares of fourth respondent
company, which purportedly were lost. He applied to the
G fourth respondent company for issue of duplicate certificates in lieu of his lost shares. Pursuant to this, Fourth
respondent company issued public notice in newspaper
calling for objections if any against issue of duplicate
shares to the appellant. Having not received any objecH
1096
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1097
y
AND ORS.
..
tions, duplicate share certificates were issued to him.
A
On 8th July 1994, the appellant transferred these
shares in favour of first respondent. The first respondent
sold/transferred 200 shares which he got from the appellant and 50 Bonus Shares consequently acquired by him,
B
but the fourth respondent-company did not register the
said transfer. This was done on the asking of the CBI,
which was investigating the Share Transfer Scam, and
~-
advising the first respondent and the transferee to approach the Custodian-second respondent.
c
The transfer agent received a letter from second respondent-Custodian regarding stop transfer of shares in
favour of any person without permission of the custodian
and also held in abeyance all the benefits accruing on
t
those shares as the said shares were seized by the CBI 0
~
at the time of raid laid on the places of deceased Harshad
S. Mehta. The letter also revealed that deceased Harshad
S. Mehta and his group were notified by custodian on
8.6.1992 under the provisions of the Act and all properties belonging to them stood attached simultaneously E
with the issue of notification and fourth respondent was
informed not to deal with those shares including transfer, pledge, issue of duplicate shares. The letter of 8th
~
October, 1997 revealed that the list furnished by the sec-
,,
ond respondent-Custodian regarding properties of notitied person included original shares of the appellant which
F
he allegedly lost. The fourth respondent-company, therefore marked "stop transfer" against the duplicate shares
which were transferred in the name of the first respondent and advised him to approach the stock exchange
through whom those shares were purchased so that G
through proper channel, the introducing broker as well
"
as the share holder, i.e. the appellant could be asked to
replace the said shares with good shares.
Before the Special Judge, the first respondent filed
H
1098
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A an application claiming that he is the real and only owner
of these shares and, the shares were registered in his
name accordingly, all corporate benefits accrued thereon
since the date of registration of the 250 shares in his name,
be paid to him in the interest of justice. The principal
s prayer in the application was for lifting of attachment on
these 250 shares.
The Special Judge allowed the application filed by
first respondent holding that appellant sold the shares t9
the notified party and that taking advantage of fact that
C the notified party because of notification could not apply
for transfer of the shares, appellant applied for the duplicate shares by making a misrepresentation that he had
lost the shares and received the duplicate shares and then
sold them to first respondent for Rs.2,92,400/-. The SpeD cial Judge further held that the question of lifting of attachment of 250 shares did not arise, however applicantfirst respondent was entitled to recover from appellant
the value of the shares. Accordingly appellant was directed to pay to first respondent an amount of Rs.2,92,400/
E - with interest @ 18% p.a. from 6th July 1994 till realization. The appellant filed review petition which was dismissed.
In appeal to this Court, appellant contended that the
shares came in the hands of the notified person in illegal
F and wrongful manner and were never transferred in his
name in accordance with law and as such appellant could
not be penalized for the acts and deed of a third person.
Dismissing the appeal, the Court
G
HELD: 1. Indisputably, deceased Harshad Mehta was
a notified person under sub-Section (2) of s.3 of the Spe-
..
-
..
cial Courts (Trial of offences relating to transactions in
-r
Securities) Act, 1992. The appellant transacted the said
shares with the deceased Harshad S. Mehta, after the
H first day of April, 1991 and on or before 1st June, 1992,
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1099
AND ORS.
y
6'
the stipulated period covered under the Act. Claim subA
mitted by the first respondent before the Special Judge
arose out of the transaction of the said 250 shares between deceased Harshad S. Mehta and the appellant during the aforesaid period. The entire properties belonging
to the notified party on the day of notification was attached 8
...
in terms of s.3(2) of the Act. The appellant knowing fully
"
well that he has already sold the shares to deceased
Hashad S. Mehta, made a false representation to the fourth
respondent-company that as he had lost original shares,
therefore, duplicate shares were allotted to him which c
stood in his name since late Harshad S. Mehta had not
applied for change of the name. The whole exercise was
done by the appellant on the basis of his mis-representation. [Para 15] [1108-B,C,D & E]
I'
L. S. Synthetics Ltd. v. Fairgrowth Financial Services LimD
~
ited & Anr (2004) 11 SCC 456; Tejkumar Balakrishna Ruia v.
A.K. Menon (1997) 9 SCC 123; Ashwin S. Mehta & Ors. v.
Union of India & Ors. (2006) 2 sec 385 - relied on.
2. The Special Court has rightly concluded that 200
E
duplicate shares were obtained by the appellant by misrepresentation. The said 200 shares plus 50 Bonus shares
were attached by the CBI in proceedings initiated against
deceased Harshad S. Mehta, therefore, the attached
.>-
shares of the fourth respondent-company could not be
,
transferred to any party. The record of second responF
dent-Custodian would reveal that 250 shares were sold
by the appellant in the month of June, 1994 and payment
of Rs.2,92,400/-was made by cheque dated 6th July, 1994.
In these circumstances, the Special Judge directed the
appellant to pay to the first respondent an amount of Rs. G
2,92,400/- with interest at the rate of 18% per annum from
"T
6th July, 1994 till the date of realization. In the backdrop
of the facts and circumstances and in the light of the provisions of law, the orders of the Special Judge do not suffer from any infirmity or illegality warranting interference H
1100
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A in exercise of appellate power. [Para 18] [1109-C,D,E & F]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
3034-3036 of 2005
From the final Judgment and Order dated 10.10.2003,
B 14.7.2004 and 18.8.2004 of the Special Court (TORTS) at
Bombay in Misc. Appln. No. 186 of 2000, Mies Appln. No. 178
of 2004 in M.A. No. 186 of 2000 and Misc. Appln. No. 263 of
2004 in M.A. No. 186 of 2000 respectively.
Abhishek Vikas Singh, Yunus Malik, Ravi Kishore,
C Ravindra Tyagi and Himinder Lal for the Appellant.
D
T.V.S. Raghavendra, Nikhil Nayyar, RohitAggarwal, Jagjit
Singh Chhabra and Subramanium Prasad for the Respondents.
The Judgment of the Court was delivered by
LOKESHWAR SINGH PANTA, J. 1. These appeals are
directed against the judgment and order dated 10.10.2003 in
Misc. Application No.186 of 2000 (impugned order-1 ); order
dated 14.07.2004 in Misc. Application No.178 of 2004 in M.A.
No. 186/2000 (impugned order-2) and order dated 18.08.2004
E in Misc. Application No.263 of 2004 in M.A. No.186/2000 (impugned order-3) passed by the Special Court constituted under The Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 [hereinafter referred to as "the
Act"] at Bombay.
F
2. The short facts leading to the present proceedings are
as under:-
The appellant herein held 200 shares of Hero Honda Company - fourth respondent-company herein. In and around SepG tember 2003, the appellant desired to dispose of the said 200
shares, but he allegedly lost the same. On 21.09.1993, the
appellant got a police report registered in the Sihani Gate Police Station, Ghaziabad. On or about 22.09.1993, the appellant approached and requested the fourth respondent-company
H for issue of duplicate Certificates in lieu of his lost shares along
..
r ...
•
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1101
AND ORS. [LOKESHWAR SINGH PANTA, J. ]
with all supporting documents, indemnity bonds and affidavits,
A
etc.
3. On 05.01.1994, the fourth respondent-company got an
Advertisement/Public Notice published in Newspapers calling
upon to file objections, if any, against issue of duplicate Share
Certificates to the appellant and also striking a note of caution
B
to the public at large not to deal with the shares so specified in
the advertisement. Having not received any objection from any
one, the fourth respondent-company on 03.02.1994 issued duplicate Share Certificates to the appellant. The appellant transferred his shares in favour of Jayant Davar - the first responC
dent herein, which were registered in his name by the fourth
respondent-company on 18.10.1994. The first respondent had
been offered 50 Bonus Shares by the fourth respondent-company, which offer was profitably availed by him. The first respondent sold/transferred 200 shares which he got from the
D
appellant and 50 Bonus Shares consequently acquired by him,
but the fourth respondent-company did not register the said
transfer. This was done on the asking of the CBI, who was investigating the Share Transfer Scam, and advised the first respondent and the transferee to approach the Custodian - secE
ond respondent herein. The fourth respondent-company asked
the appellant to enforce indemnity bond, but the appellant did
not agree as the fourth respondent-company had not suffered
any loss, etc. as a result of the transaction.
4. The case of the first respondent before the Special Court
F
was that he purchased 800 shares of fourth respondent- company through its broker M/s. Jamnadas Morarjee & Co. during
the months of July-August, 1994 and thereafter the said shares
were sent for transfer to the Registrar and Share Transfer Agent
of respondent No. 3, i.e. MCS Limited. The shares were finally G
transferred in his name on the basis of valid instruments of trans-
~ fer and, accordingly, a ledger folio No. 141982 has been allotted to him. The second respondent filed Miscellaneous Application No. 186/2000 before the Special Court claiming 200
shares which were transferred in his name from the appellant H
1102
SUPREME COURT REPORTS
(2008] 9 S.C.R.
"' ..
A and 50 bonus shares in the ratio of 1 :4 as issued by third respondent against those 200 shares. The first respondent stated
before the Special Court that he had sold 250 shares in the
open market through his share broker M/s. TRC Securities Pvt.
Ltd. in the month of May/June, 1997. Upon lodgment of the
B said 250 shares with MCS Limited, they, vide their letter dated
26.06.1997 refused to transfer/register the shares in the name
""'
....
of the lodger i.e. Morgan Stanley Assets Management Inc., A/c
Morgan Stanley Institutional Fund Inc. Emerging Markets Portfolio. Subsequently, the 250 shares were returned to first rec spondent as 'Bad Delivery' under two different covering letters
dated 26.06.1997 and 10.07.1998 respectively. MCS Limited
received a letter bearing No. 5696/Cus/Mob/UR-CBl/96 (5338)
dated 29.02.1996 from the second respondent-Custodian regarding stop transfer of the shares in favour of any person withD out permission of the Custodian. The MCS Limited also en-
"'
closed copy of transfer deeds, share certificates and
..
Custodian's letter dated 29th February, 1996 along with their
letter to the second respondent who on going through the same,
came to know that 117335 shares of fourth respondent-comE
pany belonged to the Notified Persons of the group of Late
Harshad S. Mehta which were seized by CBI and remained in
their custody. The letter also revealed that Late Harshad S.
Mehta and his group were notified by the Custodian on 8.6.92
under the provisions of the Act and all properties belonging to
.4.
them stood attached simultaneously with the issue of the notifi-
~
F
cation and the fourth respondent-company was informed not to
deal with those shares in any manner including transfer, pledge,
issue of duplicate etc. and all corporate benefits admissible on
these shares may be held in abeyance till the orders passed by
the learned Special Judge.
G
5. In view of the above stated circumstances, the first respondent requested the fourth respondent-company to transfer
,..
the shares in the name of the buyer who purchased the same in
the open market. The fourth respondent-company vide their
H
letter dated 8th October, 1997 informed the first respondent that
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1103
AND ORS. [LOKESHWAR SINGH PANTA, J. ]
)'
,.
one Mr. Mahendra Pal Tyagi - appellant herein was holding the A
said 200 shares under Ledger Folio No. 128027 bearing Share
Certificate Nos. 58193, 46706, 179855 which he claimed having been lost and requested the fourth respondent-company to
issue duplicate shares in lieu of the aforesaid original lost share
certificates. The appellant also submitted the Police Report,
B
indemnity bond, affidavit along with the request letter to the fourth
- 'r
respondent-Company who issued duplicate shares to the appellant under Share Certificate Nos. 191549-191552. The duplicate shares subsequently were lodged by the first respondent for transfer in his name and, accordingly, the fourth respon- c
dent-company transferred the said shares on 18th October, 1994
in the name of the first respondent.
6. The fourth respondent-company thereafter received a
letter dated 29th February, 1996 from the office of the second
respondent-Custodian whereby the Custodian asked the fourth D
~ respondent-company to "stop transfer" of certain shares includI-
ing the shares which are the subject matter of these proceedings and also held in abeyance all the benefits accruing on those
shares as the said shares were seized by the CBI at the time of
raid laid on the places of Late Harshad S. Mehta. The letter of E
8th October, 1997 revealed that the list furnished by the second
respondent-Custodian includes original shares of the appellant
which he allegedly lost. The fourth respondent-company, there-
.>
fore marked "stop transfer" against the duplicate shares which
'
were transferred in the name of the first respondent and adF
vised the first respondent to approach the stock exchange
through whom the first respondent purchased those shares so
that through proper channel, the introducing broker as well as
the share holder, i.e. the appellant could be asked to replace
the said shares with good shares. The first respondent admitG
ted that he purchased 200 shares from the open market through
their share broker and paid the consultation thereof and there-
• after the shares were also registered in his name by the fourth
respondent-company as per the provisions of the Companies
Act, 1956 and he had absolutely no knowledge about the dupliH
1104
SUPREME COURT REPORTS
[2008] 9 S.C.R
A
cate shares being issued in the name of the appellant by the '( ..
fourth respondent-company. He claimed that in the facts and
circumstances narrated in the application, first respondent is
the real and only owner of these shares and, accordingly, all
corporate benefits accrued thereon since the date of registraB tion of the 250 shares in his name, be paid to him in the interest
of justice. By reasons of the impugned order dated 10.10.2003,
c
D
E
F
G
H
the learned Special Judge allowed Misc. Application 186 of 2000
.,.
...
filed by the first respondent. It was directed:-
"This application relates to 250 shares of respondent no.3
company. It appears that the respondent no.4 who was
holding these :;hares had sold the shares on the Stock
Exchange which were purchased by the notified party.
Taking advantage of the fact that the notified party because
of the notification could not apply for transfer of the shares,
the respondent no.4 applied for duplicate shares by making
a misrepresentation that he has lost the shares and
_,
received from the Company the duplicate shares. Those
duplicate shares were again sold and they were now
purchased by the applicant. The principal prayer in the
application is for lifting of attachment on these 250 shares.
It is obvious that these 250 duplicate shares have been
issued by the Company because of misrepresentation
made by the respondent no.4. By an order dated 15th· July,
2003, the respondent no.4 was directed to deposit in this
Court an amount of Rs.6,00,000/-. The respondent no.4
t
\.
has not obeyed this order. In the affidavit filed by the
respondent no.4, the explanation that has been given by
him is incapable of being accepted. There are no
documents produced in support of that explanation.. It is
thus clear that there is no question of attachment of 250
shares of the respondent no.3 company being lifted. The
relief to which the applicant would be entitled is to recover
from the respondent no.4 the value of the shares. It is clear .,.
from the report submitted by the Custodian. that these
shares were purchased by the Applicant in the month of
>
>
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1105
AND ORS. [LOKESHWAR SINGH PANTA, J. ]
June 1994 and payment for it was made by cheque dated
A
5th July 1994 and the amount was Rs.2,94,400/-. The
applicant therefore would be entitled to a decree against
the respondent no.4 in this amount.
The application
therefore is disposed off in the following terms.
The respondent no.4 is directed to pay to the applicant an
B
amount of Rs.2,92,400/- with interest at the rate of 18%
p.a. from 5th July 1994 till realization. Application is
disposed off."
7. Being aggrieved, the appellant filed Review Applica- c
tion being Misc. Application No.178 of 2004 under clause (f) of
sub-section (5) of Section 9-A of the Act before the learned Special Judge. The said application came to be rejected on
14.07.2004 vide order, which reads as under:-
"Called for hearing and Final Disposal
None for the applicant
Mr. Modi i/b Yoges1 Thakur for Respondent No.1
Mr. J. Chandran i/b M/s P.M. & Mithi & Co. forthe Custodian/
Respondent No.2
Mr. V.M. Singh i/b Arun Mehta for Respondent No.4
Coram D.K. Deshmukh, J.
D
E
Judge, Special Court
F
Dated 141h July, 2004
P.C.
Matter called twice.
None present for the applicant.
Application rejected."
8. Again, the appellant preferred Misc. Application No.253
of 2004 for restoration of the Review Petition, which was dismissed and the following order came to be passed on
18.08.2004:-
G
H
1106
A
B
SUPREME COURT REPORTS
[2008] 9 S.C.R
"Even assuming that due to mistake of the lawyer, lawyer
could not remain present and therefore, the review petition
was rejected, after having heard the learned counsel
appearing for the Applicant on the review application, I
find that there is no reason to review the order dated 1 oth
October, 2003. Applicant was Respondent No.4 in Misc.
Application No.186 of 2000. By order dated 15th July,
2003, he was directed to deposit an amount of Rs.6 lakh
in the court. He rlid not obey that order. Therefore, the
Applicant is not entitled to any indulgence from this court.
C
Misc. Application disposed of."
9. Hence, the appellant has assailed the above-said three
orders before this Court in these appeals preferred under Section 10 of the Act.
D
10. During the pendency of the appeals in this Court, the
~
..
legal representatives of late Harshad Mehta are substituted as
~
respondents Nos. 3(i}, (ii) and (iii).
11. Mr. Abhishei< Vikas Singh, learned counsel appearing
E on behalf of the appellant, in assailing the orders of the learned
Special Judge, inter alia, contended that the learned Special
Judge did not appreciate the fact that the original shares were
not valid and legal and had come to the hands of the notified
person (deceased Harshad Mehta) in illegal and wrongful manner and were never transferred and registered in his name in
F
accordance with law and as such, the appellant could not have
been penalized for the acts and deeds of a third person, who
had acquired the shares in illegal and clandestine manner. He
submitted that the action of the appellant being bona fide and
reasonable, he had faced loss at last stage, even when the
G duplicate shares were already stood transferred in his name in
due course after following all legal procedures and due application of law. The learned counsel then contended that the orders of the learned Special Judge impugned in these appeals
have resulted in manifest error and miscarriage of justice to the
H appellant, which deserve to be set aside.
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1107
AND ORS. [LOKESHWAR SINGH PANTA, J. )
}'
12. Mr. RohitAggarwal, learned counsel appearing on beA
,
half of the first respondent, on the other hand, would inter alia
submit that the learned Special Judge passed an order based
upon the material on record which would reveal that the appelIan! had committed a fraud of selling 200 shares on the Stock
Exchange and thereafter applying to the fourth respondent-comB
pany for duplicate shares on the plea that the said shares had
•
been stolen. He also submitted that the learned Special Judge
- " .,
had not burdened the appellant with payment for the entire
amount of 800 shares as alleged, but in fact has directed payment of Rs.2,92,400/- with interest thereon, which is the value c
of 250 shares only:
13. Mr. Subramanium Prasad, learned counsel appearing on behalf of second respondent-Custodian, would contend
that the appellant had sold the shares in question to late Harshad
Mehta, a notified person under Section 3(2) of the Act and deD
~
ceased Harshad Mehta could not apply for transfer of those
~
shares, the appellant, on a misrepresentation that he had lost
the shares, applied for and got duplicate shares from the fourth
respondent-company, which were also sold by the appellant to
first respondent. Learned counsel for the respondents, in nutE
shell, supported the orders of the learned Special Judge which,
according to them, cannot be found faulty or invalid on any
grounds whatsoever as alleged by the appellant.
.,.
14. We have given our thoughtful and anxious consider-
>
ation to the respective contentions of the learned counsel for
F
the parties and perused the material on record. The contentions of the learned counsel for the appellant at the first blush
sound attractive, yet we are afraid to accept the same.
15. The undisputed facts are that the first respondent purG
chased 800 shares including 200 shares (the subject matter of
the proceedings) of fourth respondent-company in open mar-
~
ket in the months of July and August, 1994 through its share
broker Mis. Jamnadas Morarjee & Co., C-4 Defence Colony,
l
New Delhi-24. The fourth respondent-company allotted 50 boH
1108
SUPREME COURT REPORTS
[2008] 9 S.C.R.
"f
A nus shares to him against the said 200 shares in the ratio of
~
1 :4. In all, the dispute before the learned Special Judge was
limited to 250 shares. Late Harshad S. Mehta, who was a party
- third respondent herein, is represented through his legal representatives Nos. 3(i), (ii) and (iii) respectively. Indisputably,
B deceased Harshad Mehta was a notified person under subSection (2) of Section 3 of the Act and the appellant transacted
the said shares with the deceased Harshad S. Mehta entered
"!
after the first day of April, 1991 and on or before 1st June, 1992,
the stipulated period covered under the Act. Claim submitted
c by the first respondent before the learned Special Judge would
arise out of the transaction of the said 250 shares between Late
Harshad S. Mehta and the appellant during the aforesaid period. The entire properties belonging to the notified party on
the day of notification would stand attached in terms of Section
D 3(2) of the Act. The appellant knowing fully well that he has already sold the shares to late Hashad S. Mehta, he made a false
1
representation to the fourth respondent-company that as the
~
appellant had lost original shares, therefore, duplicate shares
were allotted to him which stood in his name since late Harshad
E
S. Mehta had not applied for change of the name. The whole
exercise was done by the appellant on the basis of his misrepresentation. This Court in LS. Synthetics Ltd. v. Fairgrowth
Financial Services Limited & Anr. (2004) 11 SCC 456, held
that Section 3(3) of the Act should be literally construed and all
properties belonging to the notified party on the date of notifi-
..
~ ,,
F cation would stand attached.
16. In terms of the provisions of sub-section (3) of Section
3 of the Act, the properties belonging to deceased Harshad S.
Mehta being a notified person stood attached. Such attachG ment being automatic, no finding was required to be arrived at
that the same had been acquired during the notified period. In
Tejkumar Balakrishna Ruia v. A.K. Menon (1997) 9 SCC 123,
this Court held that the terms of sub-section (3) Section 3 are
">
clear that the property that belongs to a notified person stands
H
attached simultaneously with the issue of notification that makes
MAGHENDRA PAL TYAGI v. JAYANT DAVAR
1109
r
AND ORS. [LOKESHWAR SINGH PANTA, J. ]
,
him a notified party. It is said that the words 'on or from the date A
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'. Further that
this also indicates that no special notification or order in regard
to the attachment is necessary. In the latest judgment of this
B
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Court in Ashwin S. Mehta & Ors. v. Union of India & Ors. (2006)
2 SCC 385, this Court reiterated that property, be it shares,
dividends and bonus and rights shares that belongs to a notified person would also be attached property.
17. In this view of the matter, learned Judge of the Special c
Court has rightly concluded that 200 duplicate shares were
obtained by the appellant by misrepresentation. The said 200
shares plus 50 Bonus shares were attached by the CBI in proceedings initiated against deceased Harshad S. Mehta, theret
fore, the attached shares of the fourth respondent-company could
D
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not be transferred to any'Party. The record of second respondent-Custodian would reveal that 250 shares were sold by the
appellant in the month of June, 1994 and payment of
Rs.2,92,400/- was made by cheque dated 61h July, 1994. In
these circumstances, the learned Special Judge directed the
E
appellant to pay to the first respondent an amount of Rs.
2,92,400/- with interest at the rate of 18% per annum from 6~
July, 1994 till the date of realization.
>-
18. In the backdrop of the facts and circumstances and in
~
the light of the provisions of law, in our view, the orders of the
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learned Special Judge impugned in these appeals do not suffer from any infirmity or illegality warranting interference in exercise of appellate power.
19. For the reasons aforementioned, we do not find any G
merit in these appeals which are dismissed, accordingly. Parties are left to bear their own costs.
"T'
D.G.
Appeal dismissed.
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