Supreme Court Dismisses the Appeal filed by Smt. Rasila S. Mehta and Smt. Rina S. Mehta against the order of a Special Court and upheld the Notifications by the Custodian for their (Mehtas) Involvement in the Securities Scam of 1992

The Supreme Court, by an order dated 6th May 2011, upheld the notifications by the Custodian regarding involvement of Smt. Rasila S. Mehta and Smt. Rina S. Mehta in the securities scam of 1992. They are, respectively, the mother and sister-in-law of late Harshad Mehta. The Apex court dismissed their appeals against the order of the Special Court, which had confirmed their January 2007 notifications by the Custodian. With this order of the Supreme Court, another round of distribution to the banks and financial institutions, who are the creditors of the Harshad Mehta Group, to the extent of an amount between Rs.800 to 1000 crores, has become a distinct possibility. The assets likely to be liquidated by the Custodian and made available for distribution comprise of shares and immovable properties, apart from cash and fixed deposits. It may be recalled that Satish Loomba, Custodian (Trial of Offences Relating to Transactions in Securities), Ministry of Finance, had distributed an amount of Rs.2200 crores approximately in March this year, to the Income Tax authorities and the State Bank of India.

The path breaking judgment of the Supreme Court, delivered by a bench comprising of Justice P. Sathasivam and Justice B.S. Chauhan, laid down clear judicial precepts in ruling that the notifications carried out by the Custodian, which came several years after the securities scam, without any pre-decisional hearing, were not violative of the principles of natural justice. The court further said that in construing a statute of this nature, the courts should not adhere to a literal meaning but construe the same, keeping in view the larger public interest. While accepting the arguments of the Custodian, the court ruled that he was justified in relying on the reports of the Janakiraman Committee, Joint Parliamentary Committee (JPC), the Inter-disciplinary Group (IDG) and the reports of Chartered Accountants and other experts. The Custodian had argued that the income of these ladies had risen from near nil levels to tens and hundreds of crores of rupees in a short period without any asset base, through transactions involving huge amounts of money sourced from Harshad Mehta. With this additional amount, nearly all the principal liabilities of the Harshad Mehta Group towards taxes, banks and financial institutions are expected to be met.

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