PREMANAND R. SHENOY v. CUSTODIAN AND ORS

Citation: [2009] 9 S.C.R. 599

Court: Supreme Court of India

Bench: MUKUNDAKAM SHARMA, B.S. CHAUHAN

Case summary

PREMANAND R. SHENOY v. CUSTODIAN AND ORS.pdf

Judgment text

[2009] 9 S. C. R. 599 PREMANAND R. SHENOY v. CUSTODIAN AND ORS. (Civil Appeal No. 5524 of 2004) MAY 26, 2009 [DR. MUKUNDAKAM SHARMA AND DR. 8. 5. CHAUHAN, JJ. ] Special Court (Trial of Offences Relatingi to Transactions in Securities) Act, 1992: s. 5 - Respondent company was ... declared notified person of which appellant became the· director immediately after demise of his father - Custodian concluded that respondent company financed Rs. 2. 83 lacs for purchase of a jeep for appellant - Custodian came to -finding that appellant, being director of respondent company o was aware that jeep was purchased in his name for which, consideration was paid by respondent company - On application filed by Custodian, Special Court directed appellant to pay Rs. 2. 83 lacs with interest @ 18% p. a.

from date of purchase of vehicle - Held: Documents on record indicate that the jeep was ordered in the name of appellant and it was purchased for him and financed by respondent company - Therefore nexus between purchase of jeep and involvement of appellant in deal was clearly established - No infirmity in the order of Special Court - Order of Special Court is upheld however since appellant himself informed Custodian about the jeep, order on interest is modified and reduced from 18% to 9% p. a. The father of appellant was the Chairman and lncharge of second respondent-company. He died on 2. 2. 1992. Thereafter, appellant became the Director of the said company. An order was placed for purchase of jeep by making payment by cheque dated 22. 7. 1991 for Rs. 2. 83 lacs. As per the original delivery receipt and a letter addressed to the appellant, the vehicle was delivered to the appellant on 15. 4. 1992.

In terms of Section 53 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992; the respondent company was declared notified person. The first respondent, the Custodian issued a public notice dated 10. 9. 1992 calling upon all the persons who -+ were dealing with the Company to inform him about the same. The appellant informed the Custodian that a jeep belonging to second respondent was parked at a Panchasheel Park house and that the said vehicle was under a hire purchase/lease agreement. Th~ opined that the second respondent financed the purchase of the vehicle for the appellant. He Custodian filed an application before the Special Judge, which was allowed and the appellant was directed to pay to the Custodian Rs. 2. 83 lacs with interest @ 18% p. a. from 22. 7. 1991. Aggrieved by the order of Special Court, appellant filed present appeal. Disposing of the appeal, the Court HELD: 1. 1.

The office note of respondent company indicated that the hire purchase finance was made f available to the appellant by respondent company and the said amount for purchase of the Jeep vehicle was sanctioned by the Chairman verbally. The cost of the said vehicle was Rs. 2,83, 192/- and payment for the said vehicle was to be made on 22. 7. 1991 and, therefore, after taking approval of the Vice President, a cheque for the said amount was released. There was another letter dated 11. 1. 1992 available on record which referred to the subject of the Mahindra Jeep to be sold to the appellant. In the said letter, respondent company made reference to proforma invoice dated 22. 7. 1991 intimating further that the cheque dated 22. 7. 1991 for Rs. 2,83,192/- was sent for supply of the jeep which was subject to a hire purchase agreement between respondent company and the appellant. The le! ter dated 12. 4.

1992 was also addressed to the appellant at the address of respondent company intimating that the jeep was lying ready for the last five months and was also duly registered temporarily in the name of the appellant. It is an admitted position that subsequent thereto the jeep was delivered along with Temporary Registration. The name of the appellant appears against the name of the registered owner. In fact, these documents were sent by the appellant himself to respondent No. 1 (the Custodian) under his letter dated 4. 8. 1998 informing the Custodian that Jeep is parked at Panchasheel Park house. The appellant also stated that the ex-officials of respondent company informed him that the vehicle was supposed to be under hire purchase/ lease agreement. [Paras 10 and 11] [607-H; 608-A-G] 1. 2.

On appreciation of these documents, the Custodian came to a finding that the appellant, being a Director of the respondent company of which his father was Chairman and Managing Director, was aware that the jeep was purchased in his name for which, consideration was paid by the respondent company. The premises at Panchasheel Park was previously occupied by the father of the appellant. Having found all those facts against the appellant, it was concluded that the vehicle in question was purchased by the appellant through respondent company on hire purchase agreement and, therefore, the amount was paid by respondent company. The temporary registration of the vehicle was taken on 3. 3. 1992 and the delivery of the vehicle was taken by the notified party. The appellant was the Director of the notified party.

Consequent thereto, a categorical finding was recorded that the aforesaid transaction was known and authorised by the appellant who was aware that the ,vehicle was ordered by his father on his behalf for which ... :J . -A consideration was paid by the notified party. In that view of the matter, the direction was issued for payment of the amount in accordance with the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. All the documents which were sent by the appellant himself to the Custodian clearly indicated that the vehicle was ordered in the name of the _, appellant. Therefore, it is clear that the appellant was the owner of the vehicle in question and that it was purchased on hire purchase and that it was financed by respondent company after the amount was sanctioned by the father of the appellant who was the Chairman ... ,. ,. towards hire purchase 'finance for the appellant.

Therefore, the nexus between the purchase of the vehicle and the involvement of the appellant in the deal is clearly established. There is no infirmity in the order passed by the Special Court. The said order is upheld but in the peculiar facrts and circumstances of the case and taking into consideration the fact that the appellant himself informed the Custodian about the aforesaid vehicle the order for payment of interest @ 18% per annum is modified. The interest would be payable @ 9% per annum from 22. 7. 1991 to 29. 2. 1992. [Paras 12, 14 and 15] (608- .. :_ H; 609-A-E; H; 610-A-E] f CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5524 of 2004. From the Judgment & Order dated 5. 3. 2004 passed by the Special Court (Trial of Offences Relating to Transactions in Securities), at Bombay in Misc. Application No. 409 of 2000. >- Amar Dave E. C. Agrawala for the Appellant. Subramo·nium Prasad, Tarun Mehta and Jay Kishore for the Respondents.

The Judgment of the Court was delivered by PREMANANO R. SHENOY v. CUSTODIAN AND ORS. 603 \- DR. MUKUNDAKAM SHARMA, J. 1. By filing the present apperu the appellant has challenged the judgment and order dated 5. 3. 2004 passed by the Special Court established under sub-section (1) of Section 5 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (hereinafter referr~d to as 'the Act') whereby and whereunder 8 the Special Court allowed th9 application filed by the Custodian (respondent No. 1 herein) thereby directing the appellant to pay to the Custodi~~ an amount of Rs. 2,83, 192/- with interest at the rate of 18% per annum from 22. 7. 1991to29. 2. 1992 which amount the Custodian would receive for and on behalf of respondent No. 2. 2. Shri B. Ratnakar, the father of the appellant was the Chairman and Managing Director of M/s. Fair Growth Financial Services Limited (for short the 'Company) which is respondent No. 2 herein.

There is no dispute with regard to the fact that ~ the father of appellant was the Chairni~n and also In-charge of the aforesaid Company. He died on 2nd February, 1992. The appellant became the Director of the aforesaid Company immediately after the demise of his father. An order was placed , for purchase of a Mahindra Jeep by making payment of ' cheque dated 22. 7. 1991 for Rs. 2,83,192/-. The said order .. was placed with M/s. Tirupati Balaji Motors, New Delhi. As per ~ the original delivery receipt and letter addressed to the appellant, the vehicle was delivered to the appellant on 15. 4. 1992. In this connection, reference may be made to the letter dated 12. 4. 1992 (Annexure R-5 in the paper book) which is addressed to the appellant herein. The subject of the said letter was with respect to the delivery of his vehicle. By the said letter Mis.

Tirupati Balaji Motors, New Delhi informed the ) appellant that despite repeated reminders for the last five months regarding delivery of the aforesaid vehicle, the delivery ~ was not taken. As per the order placed, the said jeep was lying ready for the last five months and was duly registered temporarily in the name of the appellant. Copy of the temporary registration and the bill of the receipt were also enclosed with I ) i the said letter. 3. Before dwelling further, it wo_uld be relevant here to mention that the Reserve Bank of India, in the course of its _ investigation, found large scale irregularities and malpractices in the transactions in both the Government and other securities indulg~d in by some brokers in collusion with the employees of the various banks and financial institutions. The said irregularities and malpractices led to the diversion of funds from banl Services Limited for a Mahindra Jeep.

The name of the appellant was also registered as a registered owner in the temporary registration. Therefore, despite the dispute raised by the appellant, it is clear that the appellant was the ow~er of the vehicle in question and that it was purchased on hire purchase and that it was financed by respondent No. 2 after the amount was sanctioned by the father of the appellant who was the . Chairman towards hire purchase finance for the appellant. The vehicle was delivered on 15. 4. 1992 when he was the Director and In-charge of respondent No. 2 which is quite evident from the delivery note referred to hereinbefore. Therefore, the nexus between the purchase of the vehicle and the involvement of the appellant in the deal is clearly established. 0 15. In view of the aforesaid discussion, we find no infirmity in the order passed by the Special Court.

We uphold the said order but in the peculiar facts and circumstances of the case and taking into consideration the fact that the appellant himself informed the Custodian about the aforesaid vehicle we modify the order for payment of interest at the rate of 18% per annum by directing that interest on the aforesaid amount of Rs. 2,83, 192/- shall be paid at the rate of 9% per annum from 22. 7. 1991 to 29. 2. 1992. An amount of Rs. t0,00,000/- is already lying deposited in terms of order passed which was deposited by respondent No. 1. The amount payable by the appellant, therefore, shall now be calculated in terms of this order and the said amount shall be adjusted out of the amount lying deposited. So far paragraph No. 21 of the judgment and order of the Special Court is concerned, we find no infirmity in the same and, therefore, the same is upheld. 16. In terms of the aforesaid order, this appeal is disposed of with modification . with regard to the interest payable. D. G.

Appeal disposed of.