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Supreme Court ruled that in recovery cases, the burden of proof lies on custodian to hold debtors liable to pay alleged dues

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Supreme Court ruled that in recovery cases, the burden of proof lies on custodian to hold debtors liable to pay alleged dues

CASE TITLE- Suman L. Shah Vs The Custodian & Ors

CASE NUMBER- Civil Appeal No(S).4583 Of 2011

DATED ON- 05.03.2024

QUORUM- Hon’ble Justice Pamidighantam Sri Narasimha and Hon’ble Justice Sandeep Mehta

FACTS OF THE CASE

Fairgrowth Financial Services Limited was notified under Section 3(2) (person found involved in offence relating to transactions in securities) of the Trial of Offences relating to transactions in Securities Act and all its properties stood attached. The Custodian filed application in the Special Court for the recovery of various sums of money belonging to FFSL from respondent No. 2. The appellant-Suman L. Shah had borrowed a sum of Rs.50 lakhs from respondent 4 and No. 6 and a sum of Rs. 25 lakhs from respondent No. 7 whereas appellant Laxmichand Shah had borrowed Rs.45 lakhs from respondent No. 8. These respondents were the benami companies of respondent No. 2 who had illegally parked the tainted money received from FFSL, the notified company in these benami companies created by himself. All the assets and properties of respondent no. 2 got vested in the Official Assignee. The Special Court directed Suman L. Shah and Laxmichand Shah to pay a sum of Rs. 50 lakhs and Rs. 25 lakhs to the Custodian with interest @ 12% per annum respectively due to respondent no. 2 till realisation of the amount. Aggrieved by the judgments both of them instituted Civil Appeal. The IAs seeking restoration of these Civil Appeals were accepted subject to deposit of a total sum to the tune of Rs. 2.20 crores by the appellants with the Officer on Special Duty, Special Court. The amount has been deposited and accordingly the appeals were taken on board.

LEGAL PROVISIONS

Section 3(2) of the Trial of Offences relating to transactions in Securities Act, 1992.

Section 101 of Evidence Act.

CONTENTIONS OF THE APPELLANT

It was contented that the Special Court committed error in holding that the appellants were the garnishees of Pallav Sheth. No documentary proof relating to the questionable transactions between the appellants and respondent was provided by the Custodian, the statement of appellants that the entire amounts of loan taken from respondent Nos. 6, 7 and 8 were repaid ought not to have been brushed aside. The appellants had taken the loans long before Pallav Sheth came to be notified under Section 3(2) and thus, the burden of proof regarding the existence of liability could not have been shifted on to the appellants and the onus lay upon the Custodian to prove that these amounts had not been repaid and were still recoverable Learned counsel urged that the since the Custodian failed to bring the letter of the Income Tax Department on record, either by summoning the income tax officials or by producing any other admissible evidence, the Special Court  committed a grave error on placing implicit reliance on such communication. it could not be said with any degree of certainty thaSuman L. Shah Vs The Custodian & Orst the amounts borrowed remained unpaid.

CONTENTIONS OF THE RESPONDENT

learned counsel for the respondents submitted that the bald statements of the appellants that the amount borrowed from the benami companies had been returned by way of adjustment towards material supplied was rightly discarded by the Special Court because such statements were not supported by any tangible proof, either oral or documentary. He implored the Court to affirm the impugned judgments and dismiss the instant appeals.

COURT’S ANALYSIS AND JUDGEMENT

The miscellaneous applications were filed by the Custodian for recovery of amount due. The respondent Nos.6, 7 and 8 are alleged to be the benami companies of the Pallav Sheth. There could not have existed any justifiable reason for the appellants to have entertained a belief that these were the benami companies of respondent No. 2-Pallav Sheth or that there was any breach of the provisions of the Act of 1992 by Pallav Sheth. Even if it is assumed the foundation behind the assertion made by the Custodian based entirely on a communication purportedly issued by the Income Tax Department. No reference was annexed with the affidavit, no witness from the Income Tax Department was examined in evidence before the Special Court in miscellaneous applications for recovery. The appellants had returned the amounts borrowed from the respondents but the books of accounts were not available because of lapse of time. It was not expected from the appellants to retain the books of accounts after more than a decade of the alleged suspicious transactions. Therefore, the appeal was allowed and the impugned judgments are hereby quashed and set aside.

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Judgement Reviewed By- Shreyasi Ghatak

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In Most Cases, Women File False FIRs Under POCSO/SC-ST Act Using It As A Weapon To Grab Money From State: Allahabad HC

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CASE TITLE: Ajay Yadav vs. State Of U.P. And 3 Others 2023 LiveLaw (AB) 254 [CRIMINAL MISC ANTICIPATORY BAIL APPLICATION U/S 438 CR.P.C. No. – 7907 of 2023]

DECIDED ON: 10.08.2023

CORAM: Hon’ble Shekhar Kumar Yadav,J.

INTRODUCTION

The Allahabad High Court made a remark on Thursday stating that it is regrettable that currently, a significant number of cases involve women submitting untrue FIRs under the POCSO/SC-ST Act with the intention of exploiting it as a means to extract funds from the government. The Court emphasized the need to halt this trend.

The Court highlighted the trend of these baseless FIRs, which are primarily aimed at securing monetary gains from the government. This practice has the harmful consequence of tarnishing the reputation of innocent individuals within the community.

FACTS

The recent statement from the Allahabad High Court lamented the unfortunate trend where a significant number of women are currently submitting false FIRs under the POCSO/SC-ST Act, utilizing it as a strategy to obtain financial gains from the government. The Court expressed its concern about this practice and emphasized the need for its cessation.

The Court observed that these fabricated FIRs are primarily aimed at extracting money from the government, leading to the detrimental consequence of tarnishing the reputation of innocent individuals within society.

Addressing the prevailing issue of increasing instances of sexual violence, the bench of Justice Shekhar Yadav further remarked, “Considering the widespread and consistently growing occurrences of such acts, I believe that it is essential for both the State of U.P. and the Union of India to recognize the gravity of this matter.” This observation was made while granting anticipatory bail to a rape accused.

The accused was alleged to have committed rape against the victim in 2011, yet the FIR was filed in March 2019, approximately 8 years after the purported incident. In his pursuit of anticipatory bail, the accused’s legal counsel argued that the victim had not provided a reasonable explanation for the significant delay in lodging the FIR. The defense contended that the accused had been falsely implicated in an attempt to harass him, asserting that the alleged incident never occurred as described in the FIR.

The defense also highlighted that the victim herself had admitted to engaging in a physical relationship with the accused, indicating her consent and confirming her age as over 18 years. Additionally, it was brought to the court’s attention that a co-accused had already been granted anticipatory bail, prompting the defense to request the same relief for the accused in question.

CASE ANALYSIS AND DECISION

After considering the content of the First Information Report (FIR) and the arguments presented by the accused’s legal representative, the Court made an observation that there exist significant inconsistencies in the victim’s statements recorded under Sections 161 and 164 of the Criminal Procedure Code (Cr.P.C.).

The Court also highlighted that according to the details provided in the FIR, it was stated that the accused engaged in a physical relationship with the victim in 2012. However, in the statement given under Section 161 of the Cr.P.C., the victim asserted that the accused had such a relationship with her in 2013.

Given these circumstances, the Court issued a directive specifying that if it is determined that the FIR filed by the victim is unfounded, then a proper inquiry will be conducted and criminal proceedings under Section 344 of the Cr.P.C. will be initiated against the victim. Additionally, the Court mandated that any financial assistance provided to the victim by the State will be reclaimed from her.

In a recent incident last month, the Allahabad High Court imposed a fine of Rs. 10,000 on a woman who openly admitted to submitting a false FIR against four men, falsely accusing them of rape and unnatural sexual acts against her.

The Court further emphasized that the act of filing FIRs containing fabricated and grave allegations of rape cannot be condoned. Such a practice must be handled with a firm approach, according to the Court’s statement, as it necessitates a severe response.

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Written by- Mansi Malpani