Summary
The Custodian’s unproved reliance on an Income Tax Department communication did not establish that the appellants owed money to companies alleged to be owned by a notified person. The Special Court had wrongly shifted the burden to the appellants to prove repayment; its recovery orders were set aside.
Issues
- Who bore the burden of proving that the appellants remained indebted to companies alleged to belong to a notified person?
- Did the notification attach the appellants’ earlier loan transactions or establish a subsisting debt recoverable under the 1992 Act?
Provisions considered
- Sections 3(2), 3(3) and 9A, Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992A notified person’s property stands attached from the date of notification. Recovery jurisdiction over attached property did not establish that these appellants owed a subsisting debt; their loans predated the borrower’s notification. (¶¶ 31, 32, 34, 35)
- Sections 101 and 102, Indian Evidence Act, 1872The Custodian had the primary burden to prove the asserted subsisting debt. Only after that burden was discharged could the onus shift to the appellants to rebut it; an unproved departmental communication did not discharge the burden. (¶¶ 36, 37, 39)
Held
- The Custodian, as the party seeking recovery on the assertion that the appellants remained debtors of companies alleged to belong to the notified person, had to first prove the subsisting debts. The burden could shift to the appellants only after that primary burden was discharged. (¶¶ 36, 37)
- On this record, the Custodian did not prove the Income Tax Department communication on which the recovery claim rested: no departmental witness was examined, and the communication was not otherwise proved. The Special Court’s finding that the appellants failed to prove repayment therefore could not stand. (¶¶ 33, 37, 39)
- The appellants’ loans predated the borrower’s notification under the Act, so his property was attached from the notification date, not earlier. In the circumstances, the appellants’ account that they had repaid the loans and no longer retained records after many years could not be rejected as unnatural. (¶¶ 31, 32, 35, 38)
Result
Both appeals allowed; the Special Court judgments were quashed and set aside, and the amounts deposited by the appellants under the restoration order were directed to be reimbursed forthwith.