The apex court, while dismissing the appeal of Mehta's female family members--all housewives--said properties of third party beneficiaries can also be attached even if they were not directly linked to the illegal securities transactions.
A bench of justices P Sathasivam and B S Chauhan refused to interefere with the Feburary 26, 2008, judgement of a special court which under the provisions of the Trial of Offences Relating to Transactions in Securities Act, 1992, upheld the notification issued by the Custodian on January 4, 2007.
Harshad Mehta had shot into controversy in 1992 after the stock market was rocked by the multi-crore rupee scam exposing a strong nexus between the sharemarket, banks and financial institutions to dupe lakhs of investors across the country.
The appeal was filed by Rasila S Mehta, Rina S Mehta and Jyothi Mehta, mother, sister-in-law and wife respectively of Harshad Mehta.
"The important aspect is that the appellants have not explained the source of their income. The appellants are housewives having no independent source of income.
"It is impossible for such persons to have such huge amounts of money unless they were the beneficiaries of the money diverted by late Harshad Mehta and his other family members who were notified and firms belonging to the Harshad Mehta Group. The appellants have not been able to reveal their source of income either to the Custodian or to the Income Tax authorities," Justice Sathasivam writing the judgement said.
The apex court made the remark while taking into consideration the Income Tax Returns of the housewives for the year 1993-94 which revealed a staggering Rs.4,46,40,586 as income.
The bench said the correspondence between the family and the IT authorities revealed total non-cooperation by the former.
"A perusal of the above letter shows that there was no proper maintenance of accounts and there was no cooperation at all", the bench said.
The apex court said the object of the Act is not merely to bring the offender to book but also to recover what are ultimately public funds.
"Even if there is a nexus between a third party, an offender and/or property of the third party can also be notified. The word "involved" in Section 3(2) of the Special Court Act has to be interpreted in such a manner so as to achieve the purpose of the Act," the bench said.
It rejected the contention of the family that their properties had no nexus with the illegal stock market money allegedly diverted by Harshad Mehta.
"There is nothing in the Act which suggests that only such properties which belong to the notified party and which have been acquired by the use of tainted funds alone can be attached for the purposes of distribution under Section 11 of the Act.
"Section 3(3) postulates that on and from the date of notification all properties movable, immovable or both, belonging to the notified party on and from the date of the notification stand attached. Attachment of all the properties in terms of Section 3(3) of the Act is automatic. The said section does not provide any qualification that the properties, which are liable to be attached, should relate to the illegal transactions in securities in respect of which the Act was brought in force," the bench said.
The apex court, while passing the judgement, took into consideration the Janakiraman Committee, Joint Parliamentary Committee and the Inter Disciplinary Group (IDG) which had earlier recorded adverse findings against the late stock broker.
The effect of today's judgement would be that if the family fails to justify the source of income that led to the accumulation of the property, the Special Court would be free to put the same for sale as provided under the Act.
