3. The substantial details and circumstances under which this appeal arises indicate that the appellant herein who is a small investor had purchased 100 equity shares of the respondent No.2 Company namely Reliance Industries Ltd. on 12.6.1989 and payment of the same was made through his share broker - respondent No.4 – Abex and Company which perhaps is not in existence now. However, the payment for purchase of the shares had admittedly been made through Union Bank of India by way of a demand draft. It is the case of the appellant herein that the respondent No.4 despite repeated enquiries never informed the appellant regarding the status of his shares and hence the appellant was absolutely in dark and had no clue about the same. The appellant in the meantime was also living abroad due to his professional obligation and could not ascertain the fate of his shares.
4. However, when the appellant finally approached respondent No.2 – Reliance Industries Ltd. seeking dividend and other consequential benefits like issue of rights and bonus on shares, it was informed to the appellant by the respondent No.2 that the shares of the appellant on which dividend was claimed, were found to be tainted and hence it was unable to consider the request of the appellant for payment of dividends. The appellant, thereafter also learnt that there had been mutual correspondence between the share broker companies i.e. respondent No.3 Karvy Consultants Ltd. and respondent No.4 – Abex and Company for taking the accounts of the shares in question vide Annexure-P1 in order to complete certain procedural formalities. But as per the case of the appellant, neither the respondent No.3 nor respondent No.4 cared to inform the appellant about the said development through which he had purchased the shares. The appellant has annexed the copy of the letter dated 12.7.1995 vide annexure P-1 which was written by the respondent No.4 – Abex and Company to Respondent No.3 – Karvy Consultants Ltd.
5. Since the appellant had been informed by the respondent No.2 - Reliance Industries Ltd. that the dividends could not be paid to him as the shares were held to be tainted, the appellant also tried to ascertain the status of his shares purchased by him through respondent Nos. 3 and 4. However, it is alleged by the respondent No.3 –M/s. Karvy Consultants Ltd. that it had informed the appellant to submit appropriate application seeking certification of the tainted shares as the equity shares in question stood in the name of M/s. Fair Growth Financial Service Ltd. which subsequently became the subject matter of attachment as per the order of the Government of India since it was found to be involved in some scam and hence the shares issued by this company required certification by the Custodian as per order of the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. But the appellant’s case is that he never received the said communication nor the said letter indicated anything about the cut off date for making application for certification of the tainted shares. Annexure P-2 is the copy of the letter dated 5.1.2001 which is allegedly written by the respondent No. 3- M/s. Karvy Consultants Ltd. to the appellant directing him to file the application seeking certification of shares.
6. The appellant in the meantime had also made further enquiries in regard to the certification of the tainted shares and also for consequential benefits which accrued on the shares in question. He then learnt that he would have to file an application before the Special Court seeking direction to the Custodian for certification of shares as it was reiterated that the shares in question stood in the name of M/s. Fair Growth Financial Services Ltd. – respondent No.5 which were the subject-matter of attachment as per the Government of India order since they were found to be tainted. A clarification also is alleged to have been issued by the respondent No.3 –Karvy Consultants Ltd. that in order to do justice to the bonafide investors, the Special Court in its orders dated 27.7.1992 and 31.7.1992 bearing Misc. Application Nos. 1, 2 and 3 of 1992 laid down a procedure for certification of the tainted shares through the representative of the Custodian. It was informed that the said Hon’ble Court had fixed the last date for submission of such application for certification which was 16.8.1995 and the Special Court had further directed that whoever fails to submit application for certification on or before 16.8.1995, the party would have to approach the Special Court directly for certification. Subsequently, the cut-off date appears to have been extended to 27.06.2005 as per order of the Special Court on application having been made by the custodian.
8. In view of the aforesaid position, the appellant filed an application before the Special Court under the provisions of Special Courts Act of 1992 wherein he prayed for certification of the shares by the respondent No.1 - Custodian and its release and payment of accruals but as per the letter from the office of the Special Court it was intimated that the last date to submit application for certification was 27.6.2005 and hence it could not be entertained.
23. In the instant matter, we have noticed that the appellant/applicant had filed an application before the Special Court seeking a direction for certification of the shares on 27.8.2005 which even if counted from the cut off date, would at the most was delayed by two months as the appellant had not received any notice which could be proved, indicating that the application for certification had to be filed by 27.6.2005 although the same is asserted by the respondent-Custodian, which cannot be accepted in absence of appearance of respondent Nos. 3 and 4. But even if it were so, the Court should have certainly considered the circumstance whether a bonafide purchaser of shares could be denied his due merely on the ground of violation of a cut off date which clearly did not have its existence in the statute and hence had no statutory force. The order sought from the Special Court to fix a cut off date for receiving application for certification was, therefore, based merely on the theory of convenience of the custodian clearly ignoring its ramification on the bonafide investor. It is common knowledge that when public at large invest in securities by purchasing shares of a notified company, it purchases through various modes including the modern tools and technique of internet and many other modern modes and methods. But thereafter, if the shares are held to be tainted which is clearly beyond the control of the appellant/investor and its certification is required, it is surely the custodian in co-ordination with the company floating shares as also the share broker company or the stock exchange, which has the onus and responsibility to take care of the interest of the investors under the supervision of the Special Court in view of the provision of the Special Courts Act of 1992. The ‘Custodian’ therefore cannot shirk away from his function and the duty cast upon him by limiting his responsibilities and seeking a cut off date during which only he could perform the duty of certification, oblivious of its consequence and other ramification on the investors which include small investors also who put in their hard earned money in the shares of the company and later comes to know that the shares were tainted on which the investor has absolutely no role or control.
24. Even if we were to appreciate certain limitations on the discharge of duties of certification by the Custodian, the Special Court clearly had the duty to ensure that in absence of a statutory time limit prescribed for certification of shares under the Act of 1956, read with the Special Courts Act of 1992, the Special Court was duty bound to guard the interest of the investors through the Custodian at least in case of those investors who had bonafide purchased the shares of a notified company which for reasons beyond the control of investors, was held to be tainted.
25. Hence, in our considered opinion, the appellant under the facts and existing circumstances of the case where he ended up buying tainted shares for no fault on his part but had to seek its certification from the Custodian under compelling circumstance which was not his creation and also had no control, could not have been denied his due on the ground of delay in filing the application for certification specially when the appellant had sought certification of his shares only after two months of the cut off date for reasons beyond his control which cut off date has no statutory effect or legal force. The appellant on the one hand was saddled with the tainted shares for no fault on his part through respondent Nos. 4, 5 and 6 on which he had no control or any role to play and on the top of it, when he sought a remedy of certification for claiming dividends, he had to suffer an order by which his application was rejected on the ground that he had not moved an application within the cut off date which had no statutory force as the same had been fixed at the instance of the Custodian seeking approval from the Special Court.