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In L.S. Synthetics Ltd PRE |
2004 Indlaw SC 715 (supra), this Court observed: "A statute of limitation bars a remedy and not a right PRE |
Although a remedy is barred, a defence can be raised PRE |
In construing a special statute providing for limitation, consideration of plea of hardship is irrelevant PRE |
A special statute providing for special or no period of limitation must receive a liberal and broader construction and not a rigid or a narrow one PRE |
The intent and purport of Parliament enacting the said Act furthermore must be given its full effect PRE |
We are, therefore, of the opinion that the provisions of the Limitation Act have no application, so far as directions required to be issued by the Special Court relating to the disposal of attached property, are concerned PRE |
Although, we do not intend to enter into the correctness or otherwise of the said contention of the Appellants at this stage, however, there cannot be any doubt whatsoever that they being notified persons, all their properties would be deemed to be automatically attached as a consequent thereto Ratio |
For the said purpose, it is not necessary that they should be accused of commission of an offence as such Ratio |
The contention of the Appellants to the effect that their properties should have been attached only towards the liabilities incurred by the parties in respect of the transactions made during the Statutory Period, cannot be accepted as all the Appellants being notified, the attachment of the assets would be automatic Ra... |
L.S. Synthetics Ltd. 2004 Indlaw SC 715 (supra Ratio |
However, the contention of the Appellants that the properties held by them otherwise are sufficient to meet their liabilities was required to be gone into, as, in our considered opinion, there cannot be a any dispute that the Appellants have such a right Ratio |
A corporate veil indisputably can be lifted on several grounds Ratio |
LIFTING THE CORPORATE VEIL Ratio |
The principle of lifting the corporate veil, however, ipso facto would not apply to the individuals Ratio |
The Custodian in a case of this nature may, however, show that the transactions entered into apparently by Harshad Mehta were intimately connected with acquisition of properties in the name of others Ratio |
A transaction of Benami indisputably can be a subject matter of a lies in terms of S. 4(1) of the Act as and when such a question is raised, the same may have to be dealt with by the Special Court appropriately Ratio |
However, nexus between several persons in dealing with the matter may be established by the Custodian Ratio |
The fact, however, remains that the copies of the documents, books of accounts and other records on the basis whereof the Auditors appointed by the Court filed their reports had not been shown to the Appellants herein, on the premise that they were in know of the things Ratio |
As the said question has not been gone into by the learned Judge, Special Court, it is necessary that the same be considered and appropriately dealt with Ratio |
The Appellants, however, raised the following contentions: (i) That the statement prepared by the Custodian and Exhibited as 'C' to his affidavit in rejoinder dated 1.October.2003 was based on material, at least, all of which were not connected to the Appellants as were pointed out before the Court ARG |
The learned Special Judge has accepted the figures stated by the Custodian at face value without probing the basis on which the statement was prepared, even though the Appellants in their sur-rejoinder asserted that the figures in the statement were contrary to both the books of accounts drawn by them as also the Audit... |
In Para 14 of the sur-rejoinder, the Appellants denied the asset and liability position as arrived at by the Custodian ARG |
According to the Appellants, the Custodian has under-estimated the assets and exaggerated and overstated their liabilities ARG |
A triable issue had been raised and the Custodian's petition should have been converted into a suit ARG |
This was not done ARG |
In fact, according to the Appellants, there are gross errors in the material relied upon by the Custodian ARG |
The said contention must be properly adjudged ARG |
Several charts have been filed before us by the Appellants to show: (i) liabilities have been exaggerated by the Custodian ARG |
No credit for Rs ARG |
1227 crores released to revenue on interest are given by the Custodian ARG |
ii) liabilities have been shown in relation to unperformed contracts ARG |
Credits not given for relief obtained from Income Tax ARG |
Subsequent to the filing of the present appeal in a large number of cases the revenue demands have been set aside ARG |
It is open to the Appellants, herein to show that even if they continued to be notified, the Custodian was not right in clubbing all the individual members of the family as a single entity styled as Harshad Mehta Group Ratio |
It is interesting to note that the properties belonging to the mother of Harshad Mehta has since been released from attachment Ratio |
The learned Special Court, despite, such a contention having been raised by the Appellants in their affidavit in reply did not advert thereto Ratio |
It is furthermore not in dispute that pursuant to or in furtherance of the directions issued by the learned Special Court, the accounts of all entities, be it corporate or individual, were drawn up separately which approach had not been dis-approved by the Auditor appointed by the Special Court Ratio |
Even in the rejoinder filed by the Custodian, e.g., paragraphs 14, 20, 21 and 22, before the Special Court, such contentions have been raised Ratio |
A sur-rejoinder thereto was filed on 15.October.2003 and in paragraphs 1 to 6 thereof, the said statements were denied and disputed FAC |
Our attention has also been drawn to a letter dated 7.October.2003 addressed by all the Appellants to the Office of the Custodian wherein the attention of the Custodian was drawn to the fact that all the documents relied upon by him had not been permitted to be inspected and he was requested to forward a report prepare... |
The said letter was replied by the Custodian by his letter dated 10.October.2003 wherein none of the queries contained in paragraphs 3 to 8 of the said letter was even attempted to be answered Ratio |
The Appellants, herein contended that the Custodian did not furnish the requisite particulars thereof and inspection was refused on the grounds stated therein ARG |
The learned Special Court, in the impugned order, stated: (i RLC |
the grand total of the admitted liability, thus, comes to Rs RLC |
7,279,127,317.15 RLC |
the amount of priority demand of Income Tax liabilities comes to Rs. 18,297,576,248 RLC |
the estimated value of the immovable properties of this group is Rs RLC |
184,030,038 RLC |
Thus, the total value of the assets as per the affidavit filed on behalf of the Custodian of Harshad Mehta Group is Rs RLC |
9,727,332,166.94 RLC |
v RLC |
Thus, taking into consideration the total of the decretal amount and the income-tax liability, it is clear that the total assets of Harshad Mehta group would be far below the liabilities RLC |
In arriving at the said finding, no contention of the parties raised in their respective affidavits had been adverted to nor any material filed before it was analysed Ratio |
In our opinion, the learned Judge, Special Court should have analysed the respective contentions of the parties in greater details and in particular in regard to assets and liabilities of the separate entities and having regard to the contentions raised by them that they are not part of the Harshad Mehta Group and thei... |
The statement annexed to the affidavit of the Custodian showed individual break-up and in that view of the matter the net asset picture of each individual of the Appellants herein on individual basis and the effect thereof, in our opinion, should have received serious consideration at the hands of the learned Special C... |
The Custodian in terms of the directions issued by the learned Special Court had affirmed an affidavit putting on record the assets and liabilities of each of the members of the so-called Harshad Mehta Group on an individual basis Ratio |
Allegedly, therein it was shown that the individuals had received large loans, advances, credits from the Harshad Mehta Group and there had been intermingling of the assets to the tune of crores of rupees Ratio |
Before us, Mr. Desai had filed a chart for showing the same Ratio |
The said chart, however, shows that at least Mrs. Deepika Mehta held assets more than her liabilities ARG |
Mr. Desai contended that if interest is calculated, liabilities would be more than assets ARG |
But, the said chart has been drawn up on the basis of the audited accounts, the correctness whereof is itself in dispute ARG |
Before us a chart has been produced by the Appellants herein as regards Mrs. Deepika Mehta to show her liabilities payable as on 8th June, 1992 which are as under: "Chart showing comparison of payables as on 8th June, 1992 Ratio |
We, therefore, have not been given a clear picture as to the correctness or otherwise of the affidavit filed by the Custodian vis-a-vis the Books of Accounts which have been maintained by the Appellants themselves as well as the Auditor's Report Ratio |
The learned Judge merely accepted the figures mentioned in the affidavit of the Custodian and relied thereupon in the judgment without discussing the contentions and arguments raised on behalf of the Appellants, herein Ratio |
We, therefore, are of the opinion, in the interest of justice, that it is necessary to give another opportunity of hearing to the Appellants Ratio |
It is true that horrendous figures as regard the liabilities of Harshad Mehta have been projected before us but the same had been shown to be of the entire Group Ratio |
If the liabilities of the individual entities are not treated as that of the group, for one reason or the other, indisputably, liability of those who have nothing to do with the dealings of Harshad Mehta either in their individual capacities or as Directors of some company or otherwise must be dealt with separately Rat... |
The contention raised on behalf of the Appellants is that the Harshad Mehta should be considered to be sui generis and the Custodian may realize his dues from his personal assets as also of those with which he was concerned together with the assets of his front companies but such liability should not be fastened upon o... |
As regards liabilities of Harshad Mehta, the Appellants contended that since his expiry in the year 2001 his legal interests are not being defended both in the court as well as before the revenue, as a result, liabilities have been foisted upon him a large part which is on account of interest and penalties ARG |
His death has also forced upon him bankruptcy ARG |
On the other hand, the contention of the Custodian is that the Appellants had not only taken huge loans or advances from Harshad Mehta in one capacity or the other but also even transactions and shares were made by Harshad Mehta on their behalf ARG |
Further contention of the Custodian is that even Dr. Hitesh Mehta and Dr. Pratima Mehta have admitted that they had no knowledge about the transactions ARG |
This may be so, but then the effect of the rival contentions was required to be gone into by the learned Special Court Ratio |
A finding of fact arrived at upon discussing and analyzing the respective contentions could have gone a long way in assisting this Court in arriving at a correct conclusion Ratio |
The learned Judge proceeded on the basis that the assets and liabilities, joint and collective, of all those who are related with Harshad Mehta as also the corporate entities in which he was a Director or had some other interest must be considered as a group Ratio |
Even in this behalf, it was necessary for the Special Judge to assign sufficient and cogent reasons Ratio |
A question may further arise as to whether the learned Judge was correct in considering the individual liabilities of the notified parties as the liabilities of the group Ratio |
If those individuals, who had no connection with Harshad Mehta could not have been proceeded against for meeting the liabilities of Harshad Mehta jointly or severally, a clear finding was required to be arrived at Ratio |
Only because there had been large intermingling and flow of funds from Harshad Mehta and inter se within the group, the same by itself may not justify the conclusion that all of their assets were required to be sold irrespective of their individual involvement Ratio |
It was, thus, necessary for the learned Special Court to arrive at a firm conclusion as regard the involvement of the individuals with Harshad Mehta, if any, and the extent of his liability as such Ratio |
Furthermore, the question as regard liability of the parties should have been determined at the stage of Section 9-A of the Act Ratio |
The Appellants have contended that the Custodian had taken contradictory or inconsistent stand inasmuch as the liabilities of all the entities were treated to be joint liabilities of Harshad Mehta group ARG |
He furthermore wanted to treat the liabilities of the notified entities also as their separate liabilities ARG |
He has proceeded on the basis that even if the assets and liabilities of all individuals is taken on an individual basis, the liabilities would exceed assets in the case of each individual and corporate entity ARG |
It had, however, never been the case of the Custodian that the examination of claims of all the notified parties is complete Ratio |
It does not appear that claims inter se between the entities within the so-called group had ever been taken into consideration Ratio |
The Custodian does not appear to have preferred claims before the Special Court on behalf of the largest lender on the so-called group against those he had to recover loans Ratio |
Such claims may also be preferred Ratio |
The Act confers wide power upon the Custodian and the learned Special Court and in that view of the matter, having regard to the principles of natural justice, the judgment and order of the learned Judge, Special Court should have furthermore been supported by sufficient and cogent reasons Ratio |
TAX LIABILITY Ratio |
It is not in dispute that the tax liabilities of the Appellants individually were assessed on the basis of Best Judgment assessment Ratio |
It is, furthermore not in dispute that in a large number of cases the appellate authorities have set aside Best Judgment assessments Ratio |
The contention of the Appellant to the effect that the income tax dues should have been considered at the point of time when they become recoverable cannot be accepted having regard to the 3-Judge Bench decision of this Court in B.C. Dalal 2005 Indlaw SC 1826 (supra) wherein this Court categorically held that in absenc... |
We may further notice that the learned Special Court relied upon a decision in Custodian v. Union of India and Ors Ratio |
Misc Ratio |
Petition No. 64 of 1998, disposed of on 17th August, 2000] wherein allegedly a dichotomy between sale and distribution was sought to be resolved in terms of the decision of this Court in Harshad Shantilal Mehta Ratio |
Indlaw SC 732 (supra), the appeal where against being Civil Appeal No. 5812 of 2000 was dismissed by this Court by an order dated 4.December.2000 stating that it was in agreement with the decision of the Special Court which called for no interference Ratio |
This Court, therefore, has laid down a law that mere filing of an appeal is not sufficient, particularly, when there is no order of stay on recovery has been granted and the demand is outstanding Ratio |
In Kedarnath Jute Mfg. Co. Ltd. 1971 Indlaw SC 841 (supra) this Court has held: "Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment PRE |
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