02.05.2002

Smt Jyoti Mehta filed her Affidavit in MP 63 of 1992 which was filed by SBI to seek a decree of Rs.707.56 Crores. She deposed that she was the sole legal heir as per the Will of late HSM and that the two other legal heirs, Smt Rasila Mehta (mother) and Shri Aatur Mehta (Son) had not made a claim on his estate and therefore were seeking to be de-suited. The gist of her offer was as under:

“I am desirous of fulfilling the wishes of my late husband, who during the time that he was alive, made several efforts to arrive at a settlement with his legitimate creditors but unfortunately, his efforts did not bear fruit. I also wish to minimize litigation if a negotiated settlement with the creditors of my late husband could be arrived at and towards this end an offer of repayment is once again made to all the legitimate creditors of the principal amount and subject to reconciliation and credit for counter claims of Harshad on the banks. That SBI should withdraw MP 14 of 1995 being a claim for damages and it was clarified that the offer made should not be construed as any admission on her part of any liability.”

04.06.2002

The Hon’ble Special Court passed an order in Chamber Summons No.11 of 2002 in Suit 35 of 1995 and granted the relief prayed for by SBI to administer interrogatories on to NHB in order that the truth emerges before the Hon’ble Special Court. The Ld. Judge held as follows:

“I find prima facie merit in the argument advanced on behalf of SBI that an amount of Rs.707 Crores under 13 suit cheques could not have been paid to SBI purely on account of fictitious transactions particularly when these cheques were required to be signed by atleast two officers. NHB is a subsidiary of RBI. As a public body, NHB was required to disclose to this Court the relevant documents particularly when Exhibit “J”, Exhibit “K” and the statement at Page 86 reveals transactions with the broker. This Court is certainly aware of the legal defences available to NHB. However, the primary function of this Court is to ascertain also whether public funds have been diverted through the above Waste Book Arrangement into the account of the brokers. For that purpose, NHB is duty bound to disclose the relevant documents and in order to expedite the trial they were duty bound to answer the interrogatories. According to SBI this arrangement was known to NHB. That, it was a tripartite arrangement. Prima facie, I find merit in the argument of SBI. That the suit cheques covering Rs.707 Crores were situated similar to the cheques numbering 200 as appearing in Exhibit “J” and Exhibit “K”. These 200 cheques in Exhibit “J” and “K” are pointer to one fact viz. that the suit cheques were part of Waste Book Arrangement/Mechanism. Similarly, the particulars given at Page 86 of the Written Statement of NHB also indicate that there were transactions between NHB and Harshad Mehta.”

24.06.2002

The Custodian filed before Hon’ble Special Court MA 436 of 2002 in MP 64 of 1998 to seek the relief of modification in the scheme governing Controlling Block of shares as approved by the Special Court under its order dated 17.08.2000 passed in MP 64 of 1998 and duly approved by Hon’ble Supreme Court under its judgment dated 23.08.2001 passed in CA 7629/30 of 1999. The Disposal Committee and the Custodian on the basis of experience of sale of shares of Killick Nixon Ltd. concluded as under:

Para 13:  Disposal Committee in its eighth meeting held on 26.03.2002 had also discussed the issue regarding sale of shares under Bulk Category and under “Controlling Block”Category. Keeping in view that the response to advertisement calling for bids through public notices had been Nil or very lukewarm and even the prices quoted as in case of Killick Nixon had been hopelessly undervalued. The Disposal Committee was of the view that in order to get the best price for sale of shares under the Bulk as well as under “Controlling Block” Category, the procedure has approved for sale of shares under Routine Category may be adopted subject to the approval of the Special Court. An application for modification in procedure for shares under Bulk Category has been separately filed.


Para 14(b): In view of the recommendation of the Disposal Committee, it is submitted that the procedure for sale of shares under “Controlling Block” Category as approved by the Hon’ble Special Court and subsequently modified by the Supreme Court, may be amended in respect of Respondent Nos.28 (Apollo Tyres Ltd.) and 29 (ACC) so as to permit the sale of such shares under the procedure prescribed for sale of Routine Shares. However in order to ensure that sale of such shares does not affect the market and best price is realized, it is also submitted that the period prescribed for sale of such shares by the brokerage firms under Controlling Block Category may be extended to six months as compared to three months for sale of shares under Routine Category. It is also proposed that the shares under Controlling Block Category will be sold in smaller lots and will not be sold in one lot.

The Custodian filed the above applications to alter and dilute the scheme governing sale of shares to gain complete freedom of action and was one collusive step to assist the promoters of Apollo Tyres Ltd. and the company. The scheme could have been modified only by Hon’ble Supreme Court as its order could not have been modified by the Special Court.

August 2002

Shri Ashwin Mehta filed Affidavit-in-reply in MA 436 of 2002 filed by Custodian in MP 64 of 1998 to seek the relief of sale of “Controlling Block” of shares as Routine Shares. This was strongly opposed on the following grounds:

1. That Custodian had created a category of “Controlling Block” of shares on the premise that it would fetch a good premium over the prevailing market price as a management block but the Custodian wanted to forgo this possibility without any justification.

2. That there were several instances when management blocks had secured higher price including in the case of ATL and ACC itself. Tatas had sold their 15% holdings in ACC to Gujarat Ambuja @ Rs.370/- against price of Rs.240/- commanding 54% premium.  

3. That similarly in case of ATL in the year 1999 Continental AG, an MNC purchased the shares of ATL at around Rs.300/- per share against the prevailing price of Rs.180/- per share commanding (66.6% premium) . 10% held by Reliance Industries Ltd. in Larsen & Toubro was sold to Grasim Industries Ltd. at a price of Rs.311/- per share against the market price of Rs.175/- (77.7% premium). Even in cases of Vysya Bank/ING Bearings, CMC Ltd., VSNL, IBP Ltd. and IPCL management blocks transacted at substantial premium. Suggestion was made to appoint Merchant Bankers to secure best price.

4. That Mehtas had enormous experience in capital markets and therefore they may be allowed to participate in the process as if the application was granted the same would lead to huge losses to them.

5. In view of enormity of the stakes involved the subject of selling the shares in ATL and ACC may not be delegated to the Disposal Committee and instead the sale may be decided only by Hon’ble Special Court. The poor response in earlier attempt could be due to the stringent and un-business like conditions stipulated while inviting offers.

16.08.2002

Hon’ble Special Court passed an order in MA No.436 of 2002 in MP No.64 of 1998 filed by Custodian to seek permission to sell controlling shares of ACC and ATL as routine shares by the Disposal Committee. It was held that at this stage the Application is premature as Custodian has not followed the method applicable to “Controlling Block” of shares as laid down by Supreme Court in order dated 23.8.2001.  It was held that the Application appears to have been filed by Custodian only on the basis of an apprehension that the shares could only be sold as routine shares in view of the experience which the Committee got in the case of sale of shares of Killick Nixon Ltd. It was held that Custodian will have to follow the procedure laid down by Supreme Court by inviting offers by advertisement.  The Court further held as under:-

“I am informed that large number of unregd. shares are in the process of being registered and that this exercise would be shortly completed.  Therefore, as far as possible, I am of the view that the giving of advertisement may be deffered for some time so that advertisement could be issued in news papers for a larger chunk of regd. shares so that the best possible price could be fetched.”

On the suggestion made by notified entity to appoint Merchant bankers for sale of ACC and ATL to secure better price the Court left it to the Disposal Committee to consider this suggestion and if they find it favourable they may make a report to the Court on its administrative side.  The Court noted that the suggestion was made because in the total holding of notified entities the shares of ACC and ATL constituted almost 40% and if a good price was fetched than the working of distribution would be expedited.  In Para 3 the Court further held as under:-

“However, Custodian is authorized to reject the offers, if any, received by him and return the earnest money.  In the present case, this Court, on its administrative side, has directed Custodian to submit a report of a Valuer particularly in view of the fact that the Court was of the opinion that controlling shares could not be sold on the principle of valuation which would apply to routine shares because the controlling shares may stand on a different footing than routine shares.  Custodian has obtained report.  That report is submitted to this Court in a sealed cover. However, I hereby authorize Custodian to pay the fees of Valuer from the attached accounts of M/s. Harshad Mehta.”

16.08.2002

Hon’ble Special Court passed an order in MA No.437 of 2002 in MP No.64 of 1998 in respect of application filed by Custodian that since shares of Killick Nixon falling under “Controlling Block” of shares did not receive proper offer, he sought permission to sell them as routine shares without following the second method of selling the shares under the Bulk category. Hon’ble Special Court held that Custodian should first explore the second method which was not adopted till date and therefore it was not possible for the Court to direct the sale of controlling shares as routine shares in view of the Judgment of Hon’ble Supreme Court.  Custodian was allowed to sell the shares under Bulk category subject to approval of the Court.

06.09.2002

The Hon’ble Special Court passed an order in MP 88 of 1998 which was filed by the Custodian against SBI and Syndicate Bank for recovery of attached PSU Bonds of Rs.50 Crores f.v. being 17% NTPC Bonds of Rs.20 Crores f.v.. The said claim was filed by Custodian on the basis of unimpeachable evidence provided by RBI to the Custodian under letters dated 03.09.1993 and 12.07.1995 to the effect that on 28.03.1992 the payment consideration of Rs.48.73 Crores for purchase of the subject Bonds was paid by HSM to Syndicate Bank on which basis the Bonds were recovered by Custodian under order of Hon’ble Special Court dated 12.01.1999 which with accrual amounted to Rs.130.73 Crores. However, after sudden demise of HSM and acting in collusion with SBI the Custodian withdrew the claim on the Bonds which was already granted by Hon’ble Special Court. In fact, the Custodian withdrew 2 claims against SBI amounting to Rs.1012 Crores as per the chart which is enclosed.

26.10.2002

SBI filed an IA 4 of 2002 in Civil Appeal 4146 of 2002 before Hon’ble Supreme Court. The said Civil Appeal had been preferred by NHB against SBI to challenge the order of Hon’ble Special Court dated 04.06.2002 passed in Chamber Summons No.11 of 2002 in Suit No.35 of 1995 and during the pendency of the said Civil Appeal the Hon’ble Supreme Court directed both the parties to settle the dispute through the intermediation of the Government which settlement was signed between them on 30.10.2002. Relief was sought by SBI to declare the packet of securities of Rs.258 Crores deposited by HSM with NHB and which was already recovered by Custodian from NHB does not constitute the property of HSM and should be appropriated towards liquidation of his liability to SBI/NHB and to declare that Custodian had no right, title or interest in said securities and all accruals thereon should be handed over to SBI in terms of its settlement.

The said application was granted under ex-parte orders in 5 days without the Custodian opposing it and on the basis that SBI would give credit to HSM for the proceeds received by it. Despite receiving Rs.403.88 Crores SBI did not give the credit to HSM and Custodian did not oppose it when ex-parte decree of Rs.706.98 Crores was awarded to SBI on 22.04.2003.

01.11.2002

The Hon’ble Supreme Court passed an ex-parte order within 5 days in IA 4 of 2002 filed in CA 4146 of 2002 and granted the reliefs prayed for by SBI. In the proceedings in IA 5 of 2002 the Hon’ble Court recorded that the dispute between NHB and SBI has been settled out of Court and terms of settlement have been signed on 30.10.2002 which were taken on record and the Civil Appeal was disposed off in terms of the said settlement.

19.12.2002

Hon’ble Special Court passed an order in MA No.381 of 2002 in MP No.64 of 1998 in application filed by Custodian seeking modification in procedure for sale of Bulk category of shares by the Disposal Committee by selling them as routine shares since one case of Ranbaxy Laboratories offer was not received. It was urged by Custodian that since certain scrips in the bulk category do not fetch any offer and monies had to be spent, they may be permitted to sell the shares under routine category.  It was clarified by Custodian that at present he does not seek any modification in respect of sale of controlling block.  It was stated by Custodian that Disposal Committee does not accept offer which is below the average price in last one year and Custodian should make attempts to get as higher price as possible.  The Advocate for Custodian stated that copy of public notice will also be sent to affected notified party to make all possible attempts to bring any better offer which offers would be accepted by the Court. So far as sale of bulk shares in Ranbaxy Laboratories were concerned, Mr Ashwin Mehta stated that he has an offer which he would disclose on affidavit by next morning.  The application by Custodian was allowed in terms of prayer clause (a) and (b) with modification to the extent that Custodian shall make one attempt for sale of any scrip falling in bulk category as per the procedure prescribed and copy of the Public Notice shall be sent to the affected notified party.  It was held that when offer is received in respect of bulk category, Custodian shall give notice to affected notified party of the date on which the Court is moved for approval of the offer so that he can produce the person offering higher price, which the Court will take into consideration.

04.02.2003

The Hon’ble Special Court passed an order in MA 185 of 1993 and observed that SBI as per statement contained in Para 19 of the Plaint of Suit 41 of 1995 it was ready to abide by the statement contained therein and to give credit of the amount stated in paragraph No.19 of Rs.51.99 Crores to heirs of deceased Harshad Mehta. In view of this statement, the Application for recovery of 3.71 Crore Units was not withdrawn by the Custodian. SBI suppressed the material fact from Hon’ble Special Court that earlier under an order of Hon’ble Supreme Court dated 09.10.2001 the Hon’ble Court had already granted the reliefs prayed for by SBI and SBI Caps to lead evidence against HSM and Shri R. Sitaraman, an employee of SBI and prove their allegation that the two of them had acted in collusion with each other. Realising that the value of the subject 3.7 Crore Units with accruals amounted to about Rs.550 Crores and taking advantage of the sudden demise of HSM and inability of Smt Jyoti Mehta to defend the legal interest of HSM, SBI offered credit of a meagre amount of Rs.51.99 Crores in lieu of the subject Units. In fact, the Custodian withdrew 2 claims against SBI amounting to Rs.1012 Crores as per the chart which is enclosed.

03.03.2003

The Hon’ble Special Court passed an order in Suit 41 of 1995 filed by State Bank of India to seek a relief of a decree of Rs.189.11 Crores with interest @ 23.25% from the filing of Suit till realisation. That HSM had filed Written Statement denying the allegations and now legal heirs were brought on record but on 04.02.2002 Smt Jyoti Mehta who was present stated that she would be accepting the order of this Court as she does not understand the repercussions of making any Statement. She was given time to enable her to take appropriate legal advice but even after that she has not filed Written Statement or remained present.

SBI had made statement in MA 185 of 1993 that it would offer a credit of Rs.51.99 Crores in lieu of 3.71 Crore Units to HSM and the Defendants had not filed any Written Statements. The Suit was decreed as per prayer (a) by reducing the rate of interest to 15% p.a. and prayer (b) was granted subject to the above credit of Rs.51.99 Crores. That the Custodian will make the payment out of the assets, properties and funds of Harshad Mehta in accordance with Sec.11 of the Torts Act.

27.03.2003

The Custodian issued a Public Notice inviting bids for sale of 54,88,850 shares of Apollo Tyres Ltd. (ATL) of Rs.10/- f.v. constituting 15.01% of the equity capital of the company and falling under “Controlling Block” category and framed the Terms and Conditions governing the sale which stipulated that there should be one composite offer for the entire block which was so restrictive that no offers are received and the shares get offered to ATL and its promoters. Full quantity was not offered in gross violation with order dated 16.08.2002 passed in MA 436 of 2002 wherein the Custodian was directed to defer the  sale till registration of all shares.

22.04.2003

The Hon’ble Special Court passed an order in MP 63 of 1992 being an ex-parte decree of Rs.706.98 Crores awarded in favour of SBI against the estate of late Harshad Mehta with interest @ 15% p.a. leviable from 13.06.1992 onwards till payment. SBI joined 3 legal heirs being Smt Jyoti H. Mehta (wife), Shri Aatur H. Mehta (son) and Smt Rasila Mehta (mother) and averred that they are liable to the extent of their inheritance. This decree was passed on misrepresentation by SBI that Harshad Mehta had already admitted to his liability to pay the said amount. SBI suppressed the affidavit of Smt Jyoti Mehta dated 02.05.2002 in which she had already denied the liability.  The decree was awarded by relying upon the Janakiraman Committee Report and the Joint Parliamentary Committee Report. The decree was contrary to the 2 orders previously passed by the same Ld. Judge being order dated 17.02.2000 in Chamber Summons No.35 of 1999 and order dated 04.06.2002 in Chamber Summons No.11 of 2002 where it was held that it was absolutely necessary to ascertain whether the transactions were undertaken by NHB with M/s. Harshad S. Mehta and if that be so then the claim of SBI against NHB was bound to be granted. SBI also deliberately did not give credit for Rs.403.88 Crores which it had already received from Custodian in compliance with the order of Hon’ble Supreme Court dated 26.10.2002 and even Custodian actin gin collusion with SBI despite making payment did not claim credit of Rs.403.88 Crores or contested the claim including for interest at 15% p.a. The Custodian knew that in all previous cases involving Fairgrowth Financial Services Ltd. (FFSL) a notified entity interest was awarded only upto the date of notification dated 02.07.1992, a list of which decrees is enclosed. The mala fide object of SBI and Custodian was to take full advantage of the demise of HSM and inability of Smt Jyoti Mehta to defend the legal interest of HSM.


Jyoti Mehta is aggrieved with the findings and conclusion that Harshad had admitted liability to pay and decree could never have been granted on inadmissible material like the Janakiraman Committee Report and JPC Report and HSM also had counter claims. SBI acting as his banker could not have admitted to any liability to pay NHB and then seek recovery of the said amount from HSM. The recovery was in respect of Ready Forward transactions which were already held to be illegal by Hon’ble Supreme Court in the case of BOI Finance vs. Custodian reported as (1997) 10 SCC 488.

25.04.2003

The Disposal Committee opened two bids and the Custodian submitted a report regarding the sale of 54,88,850 shares of ATL. That pursuant to Public Notice only two offers had been received highest bid being Rs.80/- per share of PNB and did not reject them since they were very low but instead the  Disposal Committee decided to sell additional quantity of 8,15,485 shares of ATL notwithstanding very poor bids were received. This was patently illegal act of the Disposal Committee and the Custodian to offer additional quantity after the bids were received which were as it is very low. Such additional quantity could have then benefited only the two bidders and if the shares were offered to ATL and its promoters.

28.04.2003

The Advocate for Custodian addressed a letter to Mehtas in regard to the bids invited for sale of 54,88,850 shares of ATL. It was informed that the bids received will be considered by Hon’ble Judge, Special Court in his Chamber on Wednesday, 30.04.2003 at 2:30 pm. It was further conveyed as under:

“You may submit offers, if any that you may have independently received for sale of the shares belonging to you, a list whereof is enclosed herewith to the Custodian’s office on 30.04.2003 so that the same can be submitted to the Hon’ble Court.”

28.04.2003

The Custodian addressed a very urgent  but patently illegal letter to Advocate of ATL stating that pursuant to order of Hon’ble Special Court dated 17.08.2000 and order of Hon’ble Supreme Court dated 23.08.2001 the Custodian had issued Public Notice of sale of “Controlling Block” of shares of ATL. It informed that the offers received by the Custodian of sale of shares have already been forwarded to Hon’ble Special Court under the sealed envelope for placing it before the Court and the matter will be taken up for consideration on 30.04.2003 at 2:30 in the chamber. That your company’s management has an option to buy back the shares at the highest offer as may be ascertained by the Hon’ble Court on 30.04.2003 and subject to the provisions of the Companies Act and all Rules, Regulations and Enactment concerning thereto and applicable in case of purchase by your management or Buy Back the shares by your company. That the company was advised that it should ensure their representatives / lawyers to attend and they will have instructions to either accept/reject the offer in the Court at the highest price to be ascertained in the Court on that day. As per order of Hon’ble Supreme Court dated 23.08.2001 only after ascertaining the highest bid it was the discretionary power of Ld. Judge, Special Court to decide whether or not to give option to ATL and its promoters to make bid at the highest price but the Custodian in order to help ATL and its management exercised the powers of the Ld. Judge, Special Court and even before placing of the bids before Hon’ble Special Court invited ATL and its management to participate and come with full instructions. This conduct of Custodian was later criticized by Hon’ble Supreme Court in its judgment in the case of Ashwin Mehta Vs Union of India dated 08.11.2011 (Refer Paras 13, 36 to 38 of the judgment).

29.04.2003

The Advocate for Custodian addressed a letter to Mehtas further to their letter dated 28.04.2003 and conveyed as under:

“This is in furtherance to our letter dated 28.04.2003, where it was inadvertently mentioned in the last paragraph that you may submit offers if any, that you may have received independently for the sale of the shares belonging to you.” We hereby clarify now that pursuant to the order dated 17th January, 2003 passed by His Lordship, Mr. Justice A.B. Palkar on the Report of the Custodian. His Lordship had directed that when any Public Notice is issued by the Custodian for the sale of bulk shares the notified party should approach the Custodian with their offer, so that at the time of the confirmation of the sale in Court, no problem arises. Therefore no offers, if any brought by you in Court on the said date will be considered.” The above letter from Custodian’s Advocate was illegal and mala fide as in terms of order of Hon’ble Special Court dated 19.12.2002 in MA 381 of 2002 Custodian was directed to give notice  to affected notified party of the date on which the Court is moved for approval so that he can produce the person offering higher price which the Court will take into consideration. That even otherwise without making any bids ATL and its promoters were invited to offer bids after ascertaining the highest bid and being owners of the property Mehtas could not have been prevented from procuring a higher bid before the sale was confirmed. The Custodian was orchestrating the sale in favour of ATL and its promoters by preventing Mehtas to get better bids which gets established by the combined reading of letter addressed to ATL and its promoters on 28.04.2003 itself being an illegal communication and the present letter.

30.04.2003

The Custodian filed Report before Hon’ble Special Court on the bids received by him in which proceedings ATL and its promoters participated in the Chamber at 2:30 p.m. and they were represented by Sr. Advocate, Shri P. Chidambaram. On enquiry, the Advocate for Custodian as well as the Appellant informed that the market price was Rs.120/- per share and same was ranging between Rs.100/- to Rs.123/- for last 6 months. The Hon’ble Special Court ordered sale of shares in favour of both ATL and its promoters @ Rs.90/- per share in the following manner:

1. Despite the offer being very low of Rs.90/- per share the Special Court did not exercise its discretion to sell the shares under Bulk category failing which under routine category in violation of order of Hon’ble Supreme Court dated 23.08.2001 on the ground that once the news of such huge quantity of sale was out there is every likelihood of market falling down.

2. That the market sentiments cannot be imagined and specially the Courts are not having the necessary information and data or the knowledge about the fluctuation in prices.

3. Considering the low bid of PNB, the company and the promoters were asked to give a better offer and they jointly stated to offer Rs.85/- per share and PNB was unwilling to offer better price.

4. The Court asked for a bid of Rs.99.92 being the book value of shares and then gave an offer of Rs.90/- which was accepted by the company and its promoters and stated that they would come on Friday 02.05.2003 at 2:45 pm with details of modalities as to how they would make inter se adjustment and split the bid between themselves. They stated that 2% required to be paid as per the conditions will be paid on Friday.

5. The objection of notified entities to sell at such abnormally low price was overruled and their request to grant them 48 hours to get better bids was also rejected as inspite of opportunity and advance notice they had not contacted any party and merely on such statement  the process of sale cannot be stalled as it would be risky to do so as even the parties who had given the offer may not stick to it if the market sentiments change. The stay on the order was also refused on the ground that it may be difficult to sell the shares at the price at which they were being sold and may lead to further fall in prices.

6. The sale was confirmed and matter was directed to be placed on board on Friday 02.05.2003 for considering the modalities.

02.05.2003

Mehtas filed Written Submissions to oppose the sale of shares as ATL had recently recorded a price of Rs.150/- and because the current price was Rs.120/- whereas the bids were very low. Selling the shares at a deep discount of Rs.30/- per share (25%) would entail loss of Rs.15 Crores which was not justifiable. In view of the average price of Rs.116/- for one year and the book value of Rs.100/- per share and since ATL was doing extremely well and the company had set a target to raise the turnover from Rs.2000 Crores to Rs.5000 Crores in 2 years, the profits of the company were rising sharply and prospects were extremely bright. Despite depressed stock market the shares of ATL were rising and therefore the postponement of sale would logically fetch only better prices. That the scheme governing sale of shares as approved by Hon’ble Special Court and Hon’ble Supreme Court envisaged that “Controlling Block” would fetch substantial premium over the prevailing market price and the Hon’ble Supreme Court had modified the scheme of sale of shares under its order dated 23.08.2001 with a view to maximise the realisation by giving options of selling the shares in the alternative as Bulk category or as routine shares which procedure was bound to be followed. Since best prices were not being realised the procedure prescribed by Hon’ble Supreme Court was bound to be adhered to.

02.05.2003

The Hon’ble Special Court passed an order in Chamber in Report of Custodian dated 25.04.2003 in pursuance of order dated 30.04.2003. It recorded that the company and their management disclosed their interse arrangement giving the details as to how they would be purchasing the total lot of 54,88,850 shares. It was clarified that the sale was accepted as joint offer and it is only the interse arrangement that has been conveyed to the Court by way of modalities. The demand drafts as stated in the application were handed over to the Custodian in Chamber. It was directed that balance payment upto 25% was to be made within 7 days and 75% within 15 days of the order. The Written Submissions though taken on record were not dealt with at all by the Hon’ble Court stating that it was not necessary to go into these submissions.

25.06.2003

The Hon’ble Special Court passed an ex-parte decree in MP 61 of 1992 filed by SBI Caps to seek a decree against the estate of late Harshad Mehta for Rs.16.25 Crores with interest. It was urged that the property of HSM was already attached and the Petitioners would be satisfied if decree was passed only against the estate left behind by the deceased HSM. The decree was granted with interest @ 15% p.a. instead of 25% p.a. claimed by the Petitioner and it was clarified that for execution of the decree only the estate left behind by the deceased Respondent No.1 can be considered.

16.07.2003

The Hon’ble Special Court passed a combined order in several applications filed by IT department to seek release of monies which was rejected on the grounds that the occasion to consider these applications will arise when the disbursement of the amount takes place.

25.07.2003

The Hon’ble Special Court passed an order in Suit 28 of 1995 filed by Standard Chartered Bank to seek a decree against deceased Harshad S. Mehta for a sum of Rs.774,96,85,661.08 (Rs.774.97 Crores). After demise of HSM the bank had joined 3 legal heirs viz. Smt Jyoti Mehta (wife), Shri Aatur H. Mehta (son) and Smt Rasila Mehta (mother) by making express averments that they were liable only to the extent of their inheritance from the estate of late Shri Harshad Mehta. It was observed that during his lifetime Harshad Mehta had not filed any Written Statement to contest the claim. The two legal heirs viz. Smt Rasila Mehta and Shri Aatur Mehta filed Affidavits that they were not claiming any part of the estate of late Shri Harshad Mehta as his entire property was bequeathed to his wife. The Special Court ordered as follows:

1. That SCB filed additional affidavit as filed by SBI in MP 63 of 1992 and relied upon interim report of Janakiraman Committee and JPC and some other documents urging that HSM had acknowledged the receipt of money.

2. The decree was granted on admission of such receipt of amount treating it as admission of liability by HSM.

3. It was held that the Plaintiffs were entitled to a decree against the estate of HSM and prayer clauses (a) and (c) were granted.

4. Interest was claimed at 18% p.a. which was opposed by Custodian since SBI was granted 15% p.a. and accordingly 15% was granted.

5. It was further ordered that in case after paying all the creditors if there was a surplus SCB would be entitled to calculate the interest @ 18% p.a. and such additional 3% p.a. will be payable to SCB.

Jyoti Mehta is aggrieved with the findings and conclusion that admission of receipt of monies is not admission of liability to pay and decree could never have been granted on inadmissible material like the Janakiraman Committee Report and JPC Report or on the basis of unproven documents and HSM also had counter claims. ANZ Grindlays acting as his banker could not have admitted to any liability to pay NHB and then seek recovery of the said amount from HSM. The recovery was in respect of Ready Forward transactions which were already held to be illegal by Hon’ble Supreme Court in the case of BOI Finance vs. Custodian reported as (1997) 10 SCC 488.

14.08.2003

The Hon’ble Special Court passed an order in MP 14 of 1995 filed by the State Bank of India to seek a decree against deceased Harshad S. Mehta for the amount of loss caused to it because of unauthorised use of money belonging to SBI for various period of time. According to SBI various transactions in securities took place between Mr. Harshad S. Mehta and an employee of SBI and after the alleged scam broke out it undertook reconciliation and scrutiny of transactions and discovered several irregularities. That there was delay in delivering of securities and since monies of SBI were used HSM was liable to make good the losses caused to SBI which loss was calculated at Hon’ble Supreme Court. It was held that Report of Janakiraman Committee is a public document and therefore contents thereof can be relied on by the Court and it can be admitted in evidence without it being required to be proved since no Written Statement was filed and taking material on record the claim was granted against Harshad Mehta under the provisions of the Torts Act by reducing the rate of interest to 15% p.a. instead of 23.25% p.a. claimed by SBI.

Smt Jyoti Mehta is aggrieved that despite SBI entering into full and final settlement with HSM in April 1992 claimed huge amount of damages of Rs.222.04 Crores and further claimed interest on it at 15% p.a. and since Custodian did not oppose acting in collusion with SBI got a decree to profit out of sudden demise of HSM and foisted upon him completely illegal claim. The decree was awarded without SBI proving the damages and by relying upon inadmissible material like the Janakiraman Report and in respect of transactions for which the claim had already become time barred.

19.08.2003

The I.T. department filed MA 272 of 2003 to seek release of monies from Mehtas based on complete misinterpretation of judgment of Hon’ble Supreme Court in case of Harshad Mehta dated 13.05.1998 and after making several false and misleading averments as under:

1. That in violation of what had been held in Paras 24 to 27 and 39 of the judgement it falsely claimed that it was entitled to release of monies even though the claims had not become final and binding and date of distribution had not arrived.

2. Reliance placed on interim order dated 24.08.1996 as a precedence was misplaced as it was an interim order before the law was laid down and after the law was laid down directions were issued in Para 39 to recall Rs.193.71 Crores previously released with interest.

3. Reliance placed on an order passed by Special Court on 22.03.2000 in MA 150 to 156 of 1999 was misplaced as it had incorrectly interpreted a judgment in Harshad Mehta’s case and further the same Ld. Judge had subsequently passed a combined order on 13.03.2001 and rejected 7 applications of the IT department in case of corporates seeking release of monies which subsequent order  was withheld from the Hon’ble Court.

4. The averments made in Para 33 of the Application were completely false and misleading as it is averred that “the department was sure that it is going to succeed in the appeals challenging their assessment orders and that even if the appellate authorities concedes on certain issues it may not altogether set aside the assessment order.” There was no way the department could have known in advance what orders the appellate authorities were going to pass in regard to their assessment orders. It is ironic that later the assessment orders have been quashed and set aside a number of times and even on merits the additions made by the department were deleted by 98% to 99% which conclusively establishes the falsity of the above averments made on oath by the I.T. department to illegally secure release of monies.

27.08.2003

Special Court ordered sale of 12,49,875 shares of ATL @ Rs.175 per share after receiving the bid under bulk category @ Rs.160 per share from J.P.G. Builders Pvt. Ltd. The above shares were sold in less than 4 months @ Rs.175 per share whereas the Hon’ble Special Court confirmed the sale of 54,88,850 shares on 02.05.2003 @ Rs.90 per share which conclusively establishes undue haste shown in sale of shares without complying with the directions of Hon’ble Supreme Court dated 23.08.2001 that if proper offer is not received under the “Controlling Block” of shares then the Special Court should sell the shares under the “Bulk Category” failing which as routine shares. The above shares commanded almost 100% improvement in price in less than 4 months when 12,49,875 shares were sold under the “Bulk Category”. This sale conclusively establishes all the contentions of Mehtas against the sale of shares of ATL ordered by Hon’ble Special Court.

10.09.2003

Jyoti Mehta filed an Application MA 278 of 2003 before Hon’ble Special Court stating that she was a housewife and all her assets were under attachment and she was also the sole legal heir of late Harshad Mehta. She made a grievance that for considerable period she was facing acute difficulty in securing legal representation for her own self and her late husband and that in a number of matters they had gone unrepresented due to attachment of all the assets. She stated that she was very keen and desirous of defending and putting up a proper legal representation including to contest sale of her only residential flats as it concerned her shelter and the shelter of her son and she sought help only because her husband had suddenly expired in judicial custody. She sought relief of adjournment of proceedings regarding sale of her residential flats and prayed that the Hon’ble Court may sanction appointment of senior counsel and order release of fees from the attached bank accounts of herself or her husband.

18.09.2003

Custodian issued a Public Notice for sale of shares under the “Controlling Block Category” belonging to several entities of Harshad Mehta group as also other notified parties.  The offers were invited for 1,62,64,865 shares of ACC of Rs.10 f.v. which included 4,25,677 shares standing registered in the name of Dhanraj Mills P. Ltd. (DMPL) and 12,50,000 shares of Snowcem India Ltd. and the bids were to be submitted by 8.10.2003. The custodian framed the Terms and Conditions governing the sale which stipulated that there should be one composite offer for the entire block.

01.10.2003

Mehtas viz. Ashwin, Hitesh, Jyoti, Deepika and Pratima filed MA 316 to 320 of 2003 before Hon’ble Special Court to seek the relief of release from attachment of their shares of ACC for which bids were already invited on the ground that they were purchased by them prior to 31.03.1991 and therefore had no nexus with any tainted monies being 6,78,382 (ASM), 8,99,732 (HISM), 4,65,840 (JHM), 6,43,712 (DAM) and 8,13,365 (PHM) shares of ACC respectively totalling to 35,01,031 shares.  As an interim relief it was prayed to stop the sale of the shares on the ground that present bank balance and receivables would be sufficient to meet the legitimate claims and therefore there is no need or purpose of selling the shares of ACC. It was urged as under:

1. Shares were liable to be released in terms of law laid down by Hon’ble Bombay High Court in 1992 (3) Bom. C.R. 716 and by Hon’ble Supreme Court in Harshad Mehta’s judgment.

2. That ACC was a Blue Chip handsomely rewarding the shareholders.

3. That their opposition to the scheme governing sale of shares was overruled by presuming that liabilities were greater than assets but they had furnished their books of accounts and substantial shares were already sold and huge amount of liquid balances were already available to meet any claims.

4. That claims of IT department were denied and disputed and already under contest and monies released on adhoc basis would become refundable as the appeals are heard.

5. That Applicants had not committed any offence in transaction relating to securities and no claims were made on them by any banks and they had not violated any law of the land and therefore liable to be denotified.

6. That the scheme governing sale of shares was not leading to maximization of realisation and inviting composite single bid was restricting proper bids and some merchant bankers were needed to be appointed. In any case the “Controlling Block” was liable to be sold only at a premium to the prevailing market price.

03.10.2003

The Hon’ble Special Court passed a combined order in MA 272 of 2003 seeking release of monies to I.T. department which was opposed by the notified entities and SBI. Both notified entities and SBI opposed release of monies relying upon Harshad Mehta’s judgment dated 13.05.1998 and further urged that if monies were released the same will not be brought back by the I.T. department. Overruling the above contentions the Hon’ble Court held that monies are being released to Government of India against an undertaking and therefore they are bound to be brought back. Instead of keeping the monies idle the Government can utilize it for welfare activities of the State and it will save the notified entities from liability to pay interest and accordingly the reliefs were granted.

08.10.2003

The Hon’ble Special Court passed an order in above MA 278 of 2003 filed by Jyoti Mehta by rejecting the said application on the ground that “None appears for the Applicant”. In this manner, despite stakes of thousands of crores a widow and a housewife was denied the right to legally defend herself and her husband though our Constitution provides that no person will go unrepresented much less a widow and a housewife. Taking advantage of such a breakdown the I.T. department and the banks through misrepresentation and by acting in collusion with the Custodian secured several ex-parte decrees and orders to foist upon the estate of late HSM huge liabilities including liability to pay interest the effect of which was to make him from a very solvent person to a bankrupt person by preventing him from meeting his genuine obligations and instead blocking up large amounts against false claims which would then entangle him into a prolonged litigation during which period interest @ 15% p.a. would be allowed to be run incurring liability to pay interest of several lakhs of rupees per day. The Custodian abandoned his statutory duty to defend the estate of late HSM and instead stepped into the shoes of the creditors and thereby defeated the objects of the Torts Act.

10.10.2003

The notified entities Shri Ashwin Mehta, Smt Deepika Mehta and some corporate entities filed Written Submissions to oppose the sale of shares of ACC on following grounds:

1. That “Controlling Block” of shares were liable to be sold at a premium and not at a discount to market price as earlier done in the case of Apollo Tyres Ltd. incurring a loss of minimum Rs.16.61 Crores particularly when the Appeal filed before Hon’ble Supreme Court challenging the sale of ATL was already admitted by Hon’ble Supreme Court.

2. Tata’s had sold 14.9% holding in ACC @ Rs.370/- per share against prevailing price of Rs.280/- per share commanding premium of 32.14%. In fact past sale had already resulted into huge losses to notified entities and to realize the best price for “Controlling Block” Merchant Bankers should be appointed.

3. That because only one bid for the entire lot was stipulated proper bids were not coming and LIC having already purchased shares at discount under the Bulk category was not making proper offers.

4. That some notified entities had already filed MA 316 to 320 of 2003 to seek release of shares of ACC from attachment which Applications may be heard and decided first.

5. That as per the directions of Hon’ble Supreme Court to realize the best price the Hon’ble Court may exercise the option of selling the shares under “Bulk category” failing which as routine shares. 

6. That the markets were booming and it was not opportune time to sell and in any case the liabilities were not crystallized and the sale of shares was being made by the Custodian at the instance of I.T. department even though it had conceded before Hon’ble Supreme Court in Harshad Mehta’s case that exorbitant tax demands can be ignored. The notified entities and banks were suffering at the hands of revenue.

7. That Disposal Committee had failed in levying down any objective criteria for deciding the sale of shares and merely because the scheme governing sale of shares was framed did not mean that all the shares had to be sold.

10.10.2003

Hon’ble Special Court granted the Custodian Report dated 08.10.2003 and ordered sale of 1,62,64,865 shares of ACC @ Rs.170 per share to LIC Ltd. when the market price was about Rs.210/- by overruling the objections of notified entities and by holding as under:

1. Considering the number of shares that fall in Bulk category and since the procedure is the same the Court declined to sell the shares under Bulk category and routine shares as directed by Hon’ble Supreme Court. The changes made by the Supreme Court were marginal and therefore higher price would not be realized. That selling the shares as routine shares would be impracticable considering the number of shares as it will result in crushing market of these shares and affect the interest of the company. It will also not be practicable and hazardous to sell such large quantity as routine shares.
2. As far as applications seeking lifting of attachment perusal of order in MP 64 of 1998 shows that such objections were rejected and such applications have been made after the issue of advertisement inviting bids though the shares were attached in 1992 and there was no justification in making such applications in past 11 years. This objection was raised only to block the process of sale.
3. The objections raised that the shares may be sold in small blocks was also overruled.

The above order has already caused losses of Rs.4219.92 Crores out of the losses of Rs.20,677.28 Crores suffered by Mehtas. The shares of ACC if they were not sold in haste before crystallization of liabilities themselves could have met all the legitimate claims of the I.T. department and banks against Mehtas. That Hon’ble Supreme Court had already laid down the law in case of Harshad Mehta that distribution u/s 11(2) may be undertaken only on arrival of date of distribution which would arrive after completion of examination of all claims u/s 9A of the Torts Act. The losses suffered by Mehtas are directly attributable to gross violation of the law laid down by Hon’ble Supreme Court consciously committed by all the 3 organs of the “State” acting in collusion with each other viz. Custodian, I.T. department and banks in the lead of SBI and its subsidiary.  

16.10.2003

The Hon’ble Special Court passed an order in Custodian Report dated 01.10.2003 recording No Objection by 3 firms of Chartered Accountants to the Custodian for appointment of some other Chartered Accountants for auditing the accounts of M/s. Harshad S. Mehta. The Custodian was directed to take steps to appoint new Chartered Accountants and directed Custodian to place a further Report before the Court on 12.11.2003 for securing its order.

17.10.2003

The Hon’ble Special Court passed a combined order in MP 41 of 1999 and MP 4 of 2001 and granted reliefs prayed for by the Custodian by ordering sale of 8 residential flats at Madhuli Apartments and all the offices on the ground that the claims made by revenue and the banks far exceeded the assets even though such claims were disputed, denied and under challenge before appellate authorities. In coercive recoveries residential properties are never sold as the first step and without awaiting the outcome of Appeals and crystallization of liabilities which was in grossest violation of law laid down in Harshad Mehta’s judgment dated 13.05.1998. The offices were ordered to be sold without providing for any alternative place to house the huge records of all the entities and Custodian wanted to paralyze the organisation of Mehtas and uproot the family from their only residential premises so that they are put on the road and unable to defend their legal interest. The Custodian always knew that the family members and the corporate entities had not committed any offence in transactions in securities or violated any law but yet he had an ulterior object of persecuting the whole family even before Harshad could be proved guilty of any criminal offences as alleged by CBI.  The above order was therefore challenged by the Mehtas before Hon’ble Supreme Court.

05.11.2003

The Custodian without securing an order of approval from the Hon’ble Special Court in regard to the name of the Chartered Accountants and the terms of reference as also of payment of fees proceeded to issue a letter of appointment to M/s. Vyas & Vyas, Chartered Accountants. The Custodian all by himself sanctioned an abnormally large fee equivalent to the fees sanctioned to the previous 3 Chartered Accountants knowing fully well that thereafter the Hon’ble Special Court had uniformly sanctioned fees only @ Rs.4.5 lakhs p.a. being the upper ceiling fixed for fees. The Custodian knew that when the said 3 firms of Chartered Accountants were appointed in the year 1993, no Chartered Accountants were willing to come forward and take such assignments but by the year 2002-03 several Chartered Accountants had agreed to and accepted similar assignments for all the notified entities @ Rs.4.5 lakhs p.a. The Custodian wanted to secure a doctored report from M/s. Vyas & Vyas making adverse observations against the family members and the corporate entities and therefore eventually paid fees of Rs.82.2 lakhs to M/s. Vyas & Vyas (18.25 times of the normal scale) even though they did not complete the assignment of drawing the books of account and auditing them and in fact yet filed a Report which was highly qualified without owning up the accuracy of the findings given by it in reports prepared by it. The Custodian did not have any first hand knowledge and therefore could not have made any allegations or proved them and therefore sought such adverse reports by appointing Chartered Accountants and securing from them such doctored reports.


The Custodian without authority even directed M/s. Vyas & Vyas to undertake investigation of fraudulent and illegal transactions entered into by M/s. Harshad S. Mehta as referred in Janakiraman Committee Report, IDG Report, Reports based on the audit of banks conducted by RBI and ChargeSheets filed in the Special Court, all of which material are inadmissible in evidence in proceedings before Hon’ble Courts as per well-settled law since they are not proved pieces of evidence. The Custodian could also not have ordered any such investigation by a private party of a person who had already expired and against whom the CBI had not proved its allegations while he was alive for 9 years since the Torts Act does not provide for such an investigation by a private party and since the Hon’ble Special Court had also not granted any such relief. The Custodian knew that HSM was not alive to defend himself and in fact criminal cases against HSM had already abated after his sudden demise in judicial custody. That thereafter without ever proving the contents of the Report of Chartered Accountants, M/s. Vyas & Vyas the Custodian has heavily relied upon the same to make baseless allegations against all the Mehtas and on which basis obtained favourable orders without proving the allegations and thereby achieved his several ulterior objects.

23.01.2004

The Hon’ble Special Court passed an order in MA 270 of 1993 and Custodian’s Report dated 18.12.2003 directing the staff of Harshad Mehta and other entities to be placed at the disposal of Custodian’s office and the notified entities were directed not to interfere with this arrangement. The staff alongwith the computers were directed to be shifted to the office of the Chartered Accountants appointed by the Custodian in relation to the accounts of these entities and such orders were obtained to ensure that Mehtas get completely paralyzed without their staff who had first-hand knowledge and were looking after their affairs. These were extremely high-handed measures adopted by the Custodian only against Mehtas even though the same is not provided for under the Torts Act.

04.02.2004

Custodian addressed a letter to Mehtas in compliance with order dated 23.01.2004 informing that the staff along with all the computers are directed to be shifted to the Office of the Chartered Accountants and which will include all the 34 employees though 14 were already working in Custodian’s office.

14.05.2004

Custodian addressed a letter to Mehtas in compliance with order of Hon’ble Supreme Court on 05.05.2004 confirming that the sale of properties called upon to deposit the keys with the Office of Custodian latest by 18.05.2004 and thereby granted only 2 days to vacate all the offices with records without giving any alternative space to store them. In fact, records were put on the road and some of the records were handed over to Custodian for custody since there was no arrangement for storing them. The Custodian could always have given adequate time to vacate the offices which had to be vacated without any assistance from any staff who were already asked to report in Custodian’s office by 05.02.2004 under Custodian’s letter dated 04.02.2004.

06.09.2004

The Hon’ble Supreme Court in the case of L.S. Synthetics vs. FFSL reported as (2004) 11 SCC 456 which has interpreted the provisions of the Torts Act and laid down the law as under:

1. That u/s 3(3) of the Torts Act, the attached assets belonging to a notified person gets simultaneously attached and covers assets lying in the hands of third parties (Paras 17 to 21, 45(ii)).

2. That both the Custodian and the notified entities have locus to bring the facts of recovery of attached assets belonging to notified persons to the knowledge of this Hon’ble Court. That the Court can also suo motu once the property is attached (Para 20, 22, 45(i).

3.  That when such facts are brought to the notice of this Hon’ble Court, it then becomes the duty of this Hon’ble Court to recover such attached assets (Paras 20, 35, 36).

4. That once the assets get automatically attached u/s 3(3) of the Torts Act then such attachment continues until an order is passed by the Special Court for lifting of such attachment (Para 37).

5. That the law of limitation is not applicable to any proceedings under the Torts Act which involves recovery of attached assets from third parties (Paras 32 to 41, 45(iii)).

6. That after meeting the liabilities of notified persons the surplus assets are liable to be released to him (Para 42).

7. That the Hon’ble Court can award interest against third parties holding attached assets even if there is no agreement to pay interest Paras 43, 44).

12.08.2005

The Custodian filed a Report before Hon’ble Special Court seeking relief of inviting claims by issuing Public Notice in respect of 60 notified entities to undertake their final distribution to the creditors u/s 11(2) of the Torts Act which included all Mehtas.

05.09.2005

The Hon’ble Special Court granted Report of Custodian dated 12.08.2005 and further directed that if the claims are not filed within 8 weeks they will not be entertained.

19.10.2005

The Custodian issued a Public Notice inviting claims against 60 notified entities in compliance with the order of Hon’ble Special Court dated 05.05.2005. However, after receiving the claims the Custodian in violation of order of Hon’ble Special Court dated 05.09.2005 himself decided not to place the same before Hon’ble Special Court and not to proceed with final distribution u/s 11(2) of the Torts Act in respect of any of the Mehtas both individuals and corporates. The Custodian keeps claiming on oath before Hon’ble Special Court and Hon’ble Supreme Court that he does not take any decisions but acts only in compliance with the orders of Hon’ble Special Court. In the present case, the Custodian had ulterior objects of persecuting Mehtas, of retaining control and management of their assets, of conferring huge benefits onto third parties, I.T. department and banks at their expense and in order to perpetuate the notification of Mehtas and to ensure continuation of his office did not proceed with the distribution. Instead he created a false justification in support of his illegal decision and propagated Harshad Mehta Group theory to take away the assets of the family members and corporate entities to meet the claims on HSM and for the purpose did not even file any application to secure such relief from the Hon’ble Special Court.

03.01.2006

The Hon’ble Supreme Court passed a judgment in the case of Ashwin S. Mehta vs. Custodian and Ors. reported as (2006) 2 SCC 385 whereunder it set aside the order of Hon’ble Special Court dated 17.10.2003 passed in MP 41 of 1999 ordering sale of 8 residential flats of Mehtas at Madhuli Apartments. but confirmed the sale of offices. The Hon’ble Supreme Court criticized the order of Special Court on several counts and directed it to consider the issue afresh in light of observations made by it. The Hon’ble Court rejected the contentions that the assets of family members can be used for discharge of liabilities of Harshad and instead directed Custodian to prefer claims on the family members for recovery on behalf of M/s. Harshad S. Mehta. It directed the Special Court to follow Harshad Mehta’s judgment since the demands were raised under best judgment assessments and they had not attained finality. The conduct of the Custodian was also criticized as he did not disclose the material in support of his allegations and therefore he was directed to give inspection of all the records relating to the attached assets of Mehtas which he was not parting with for several years.

Once again Custodian deliberately did not comply with the express directions given by Hon’ble Supreme Court in Para 52 of its above judgment wherein he was directed to prefer claims on behalf of the largest lender against the family members and corporate entities who had availed loans from HSM since he wanted to illegally propagate and promote the Harshad Mehta Group theory.

28.02.2006

The I.T. department filed an Affidavit in MP 41 of 1999 to deal with the objections of the notified entities and made false and misleading averments. While it had secured release of monies under the Torts Act, under procedure which was not provided under the I.T Act yet it stated that the refunds would be due to the assessee only by applying Sec.240 of the I.T. Act despite the fact that it had given unconditional undertaking to bring back the monies with interest as and when ordered to do so. It assured that the department would perform duties in a fair and transparent manner and redo the exercise. The Affidavit completely ignores the law laid down by Hon’ble Supreme Court in case of Harshad Mehta Vs Custodian reported as (1998) 5 SCC 1 (Paras 24 to 27 and 39) which precluded any release of monies to the department until its demands becomes final and binding and the date of distribution arrives.

09.06.2006

Mehtas addressed a letter to Custodian and informed him that 29 lacs shares of Reliance Industries Ltd. (RIL) valued at Rs.435 Crores were not accounted for by the Custodian in the assets of Mehtas presented before Hon’ble Special Court while proposing sale of their only residential flats. The above shares were discovered by Mehtas through the inspection of records of Custodian as ordered by Hon’ble Supreme Court and these shares were lying in the company representing bonus issue of shares of 1997 issued in the ratio of 1:1. It was apprehended that there were many such other shares which were not being recovered and accounted for by the Custodian in order to understate the assets of Mehtas and to secure orders of sale of their assets by projecting that the liabilities far exceeded the assets in case of Mehtas. In fact, since then Mehtas have been regularly discovering and pointing out to Custodian his deliberate failures in accounting, tracing and recovering our attached assets most of which are lying in the hands of third parties and banks. In fact now for past 22 years the Custodian has been deliberately presenting completely false assets and liabilities picture in violation of law laid down in Harshad Mehta’s judgment by understating the assets and overstating the liabilities. It is ironic that the Custodian wanted to sell the 8 Madhuli flats for a paltry sum of Rs.30 Crores without accounting for in our assets, shares of Reliance Industries then valued at Rs.435 Crores. Since then we have made a herculean effort to find out several such failures of Custodian in not accounting for and recovering our attached properties and actually recovered attached assets of more than Rs.2500 Crores and are vigorously pursuing further pending recoveries of about Rs.5000 Crores. It was because of directions given by Hon’ble Supreme Court against the high-handed methods of Custodian that we could get inspection and copies of about 2 lakh documents in the inspection which were then analyzed to trace and recover our assets which were not being recovered by the Custodian.

13.06.2006

Smt Jyoti Mehta filed an Affidavit-in-rejoinder on behalf of HSM to the Affidavit of the I.T. department filed in MP 41 of 1999 wherein the department had supported sale of residential flats of Mehtas on the basis of its demands raised on them. In the main, the following was urged;

1. That since 23.04.1992 the Mehtas were being victimised and though the department was concerned only with recovery of tax but has taken advantage of priority accorded to it u/s 11(2)(a) of the Torts Act by making extremely high-pitched assessments so as to take away the monies belonging to Mehtas and other creditors. The discretionary powers were abused to make false demands.

2. These false demands were used as justification to liquidate all the assets and only residential premises remained to be sold. Sale of offices had broken the back of Mehtas as false demands could not be contested. These false demands had defeated the objects of the Torts Act and prevented HSM from discharging his genuine liabilities as Rs.1227 Crores was taken away by the department.

3. The repeated contentions of Mehtas objecting to release of monies pending crystallization of liability were always overruled though the demands were illegal and high-pitched on the very face of it and despite the fact that Mehtas had disclosed their incomes in the books of accounts drawn by them which were placed for scrutiny by the Chartered Accountants by Hon’ble Special Court. It was always possible to obtain an independent opinion from an expert on the liability to pay tax but the same was not obtained.

4. That in the meantime the shares which were sold had appreciated in 2 years alone by about 700% because the Custodian was always keen to sell the shares and release payments to the I.T. department causing losses of Rs.4747.97 Crores.

5. That the Hon’ble ITAT had already passed 131 orders of relief in favour of Mehtas which were placed before the Custodian and even a comparison was given between the income in case of HSM of Rs.2.34 Crores for 3 assessment years where demand of Rs.4969.86 Crores was raised on HSM for the same 3 years.

6. That Smt Jyoti Mehta being a widow and a housewife and also a notified person was not able to defend HSM’s and her own interest and several ex-parte orders were passed, the records were dislocated because of sale of offices, termination of services of staff and seizure of computers and records by Custodian and complete lack of support by Custodian even though she was ready to take steps to restore normalcy and revive the matters by filing applications for recalling of ex-parte orders and she sought time from the Hon’ble Court as it was in the interest of genuine creditors that the liabilities are crystallized judiciously. In fact, the department itself had conceded before Hon’ble Supreme Court that exorbitant tax demands can be ignored.

7. Mehtas apprehended that once the monies were released to the department, they would deploy the entire machinery and powers at their disposal to unfairly contest the appeals and continue to litigate to deny the reliefs with a view to somehow retain the monies.

That all the above and other contentions by act of providence and due to herculean efforts made by Mehtas have saved their residence and established all their allegations against the I.T. department as would be explained hereinafter.

14.06.2006 upto 02.08.2006

Smt Rekha Gupta, the then Custodian made adverse observations in the matter of payment of fees to M/s. Vyas & Vyas, Chartered Accountants. 
 
On 14.06.2006 she raised following queries:
As per appointment letter of 05.11.2003 work was to be completed in 3 months not later than 15.02.2004. Was the amount of fees specified to them? How many months did the work take? Where is the acceptance or work letter? Was there any correspondence relating to either the quantum of work or rates or amount to be paid between 2003 and 2005? On 16.06.2006 she observed as under:
“This is a very unusual way of awarding work. There is no formal acceptance, there is no complete offer, there are no terms and conditions on which the work is to be done. How then is it proposed to deal with the bills and work out the amount due? It cannot be said that the CA firm had to expend two years to do the work when records were not available. I am afraid based on the facts made available, it is not possible for me to give any directions. Why were the rates and man days not fixed and mentioned in the offer?

On 27.06.2006 there are further file notings as under:
Matter was discussed with Custodian today. Custodian wanted clarification on the following points:

1. The CA was given three months’ time to complete the report. He has taken almost two years. Is there any explanation of delay submitted by the CA?

2. The CA was to be paid the same amount as of Ashwin Mehta. He has demanded much more on the ground that quantum of work was more? Did CA inform/take permissions for this increased quantum of work?

3. Whether CA’s Report has been accepted by Special Court?

Finally on 02.08.2006 Smt Rekha Gupta criticized and made the following observations

“The entire manner in which the work has been handled is casual and not as per the prescribed procedure. In future, greater care should be taken to award and get work executed according to norms and procedure.
At this stage and in absence of any other alternative, the Mumbai Office has presented this proposal as a fait accompli and the payment has to be made for the man hours claimed.

The above file notings were obtained by filing an Application under RTI Act, 2005 which conclusively establishes the allegations made by Mehtas against Custodian and M/s. Vyas & Vyas about excessive payments and illegality of the appointment without prior approval from Hon’ble Special Court on the fees payable and the scope of work. Here again the Custodian has acted illegally, high-handedly and without prior approval from Hon’ble Special Court to investigate a deceased person.

21.06.2006

The I.T. department filed an Affidavit in reply in MP 41 of 1999 filed by the Custodian in rejoinder to Affidavit of Smt Pratima Mehta. Several false averments are made that there was no fault of the department, statutory or procedural in the assessment order. That the revenue was seeking to espouse the cause of justice and acting in utmost good faith and there is no question of distortion of assets and liabilities and denied that assessments were high-pitched. In the main, it contested that while the department was bound by the undertaking given to the Hon’ble Court to bring back the amount if ordered to within stipulated period but in the same breath made a contradictory statement that monies released to the department were appropriation towards the demands and therefore they cannot be added in the assets of the notified persons together with accrued interest on it. That merely setting aside of the assessment order would not entitle the notified entities to a refund as per Sec.240 of I.T. Act.

20.07.2006

Mehtas filed identical applications in MP 41 of 1999 seeking a relief that since the Hon’ble ITAT had set aside the assessment orders to the file of the AO for fresh assessment the monies released to the I.T. department may be recalled together with interest and the residential flats may not be sold before crystallization of liabilities. That such monies together with interest on it may kindly be included in their assets and sample Application of Smt Pratima Mehta is enclosed.

21.07.2006

The Custodian filed MP 20 of 2006 against Smt Rasila Mehta and Smt Rina Mehta praying for relief to declare them as front and benamidars of Harshad Mehta and other Mehtas and to allow use of their assets to meet the claims against Harshad Mehta and others. In the alternative the Custodian prayed for decrees against Smt Rasila Mehta of Rs.86.36 Crores and Smt Rina Mehta of Rs.59.32 Crores for amounts payable by them to the 3 brokerage firms in the family. This application was filed by the Custodian with the mala fide intent to take away the assets of two non-notified family members of HSM only because they had appreciated very sharply. The Custodian was incompetent to make above allegations as he had no first-hand knowledge of any transaction prior to 06.06.1992 when he got appointed and therefore could never have proved them. The material of report of Chartered Accountants, M/s. Vyas & Vyas could also not have proved the baseless allegations levelled by Custodian. The Custodian resorted to a novel concept of declaring the persons as fronts though it is not defined in law and to declare the persons as benamidars as only transactions are benami transactions and a person cannot be declared as a benamidar without the Custodian alleging any transaction to be benamidar. The Custodian wanted to by-pass very well-settled law that completed transactions and transfers cannot be disturbed under the Torts Act and also wanted to by-pass Sec.4(1) of the Act.

21.08.2006

The I.T. department filed a reply to the Applications of Mehtas denying that monies were refundable or they can be treated as interest bearing deposits placed with the department and a sample Affidavit-in-reply in case of Smt Pratima Mehta in MA 154 of 2006 is enclosed.

06.10.2006

Smt Rasila Mehta and Smt Rina Mehta filed their Affidavits in MP 20 of 2006 strongly opposing the Petition of the Custodian.

04.01.2007

The Custodian issued a Gazette Notification declaring Smt Rasila Shantilal Mehta (mother) and Smt Rina Sudhir Mehta as notified persons u/s 3(2) alleging after 15 years that they had been involved in the offences relating to transactions in securities on the basis of completely false, frivolous and got-up complaint filed by Canfina with the Custodian even though Canfina owed large monies to HSM and had defaulted in performing several transactions with his brokerage firm and which complaint is enclosed. The Custodian grossly abused his powers of notification as:

1. Admittedly Smt Rasila Mehta and Smt Rina Mehta had not committed any offence relating to transactions in securities during 01.04.1991 to 06.06.1992 as required u/s 3(2) of the Torts Act for invoking powers of notification. These persons had in fact not violated any law of the land as during 15 years of investigation and filing of Charge Sheets they were never called for any interrogation by CBI nor any evidence was found by CBI of receipt of any tainted monies by them. Thus, only because they happened to be related to HSM that they were notified after 15 years.

2. That during these 15 years no bank had filed any claim against them or any of their assets even though the Hon’ble Supreme Court in Para 41 of Harshad Mehta’s judgment dated 13.05.1998 had given remedies to the banks to make claim in accordance with law.

3. The Hon’ble Supreme Court through several of its judgments (list of which is enclosed) had laid down the law in terms of which the assets of these 2 persons could never have been used by the Custodian to discharge the claims on HSM. Since no claims were received against them from banks there existed no justification for their notification.

4. Both mother and Smt Rina Mehta had undertaken transactions of purchase and sale of shares in the normal course of business on the floor of the stock exchange and paid full brokerage to the 3 brokerage firms of M/s. Harshad S. Mehta, M/s. Ashwin Mehta and M/s. J.H. Mehta and also paid interest @ 12% p.a. for loans availed by them and the Custodian himself had advanced before Hon’ble Supreme Court the case of loans and advances by the brokerage firms to the family members which was already accepted in the judgment in the case of Ashwin Mehta Vs Custodian reported as (2006) 2 SCC 385 (Paras 10, 48 & 50).

5. There was indeed a sharp appreciation in the value of investments of these 2 persons between 2003 to 2007 much after the demise of HSM as per charts which are enclosed but yet the Custodian made baseless allegations that how as housewives they had such huge investments without showing any law which did not permit housewives to make investments in shares.

6. The Custodian could not have notified them to meet the claims of I.T. department and banks on HSM as the I.T. Act did not permit recovery of dues of “A from “B” and by then the banks had already obtained ex-parte decrees against the estate of late HSM and by specifically stating on oath that Smt Rasila Mehta (mother and legal heir of HSM) was liable only to the extent of inheritance by her from the estate of late HSM. The Custodian already knew that she had not made any claim on the estate of HSM nor received any inheritance and yet he proceeded to notify them and later illegally canvassed and actually used the assets and monies of these 2 persons of more than Rs.800 Crores to meet the clams of banks on HSM.

23.01.2007

The Custodian withdrew MP 20 of 2006 filed against Smt Rasila Mehta and Smt Rina Mehta with the liberty to file the same again. However, in past 15 years the Custodian has never filed the above Petition again and therefore it is liable to be presumed that he has given up his allegations and case of fronts and benamidars against these 2 persons.

13.03.2007

The Advocate representing Smt Jyoti Mehta (legal heir of late HSM) made a ‘Without Prejudice’ offer to ANZ Grindlays Bank by offering to pay the entire principal sum of Rs.506.53 Crores as and by way of a full and final settlement. In the alternative, a request was also made to the bank to support the efforts of Smt Jyoti Mehta and Shri Ashwin Mehta in contesting false claims of the I.T. department on late Shri Harshad Mehta since that would enhance the distributable corpus.

18.05.2007

Smt Jyoti Mehta filed before Hon’ble Special Court MA 114 of 2007 inter alia praying for the relief of disclosure from the Custodian why he had not given credit to HSM for payment of Rs.590.83 Crores paid by him to SBI and disputed the picture of liabilities presented by the Custodian.

07.07.2007

Advocate for ANZ Grindlays Bank replied to Smt Jyoti Mehta’s offer dated 13.03.2007 and raised certain queries on how the offer would be executed besides expressing its concerns on several issues.

01.08.2007

The Advocate for Smt Jyoti Mehta replied to the letter of ANZ Grindlays Bank dated 07.07.2007 and met all the queries raised by it.

29.09.2007

The Hon’ble Special Court passed an order in Report 15 of 2006 and in Applications filed by banks seeking scaling down of incomes determined by the I.T. department for AY 1992-93 and AY 1993-94 which was granted by holding as under:

1. That the I.T. department had incorrectly treated the entire sale value for securities in the hands of HSM as his income as what was taxable was sale value less purchase cost.
2. That there was gross miscarriage of justice in assessment of HSM for AY 1992-93 and AY 1993-94 and therefore his income was scaled down from Rs.3400 Crores to Rs.278 Crores (by 92%). His liability to pay tax was determined at Rs.140 Crores whereas Rs.678 Crores was already released to the I.T. department.
3. The Special Court directed I.T. department to refund Rs.546.22 Crores with interest and directed Custodian to take steps to release the amounts to banks against the decrees obtained by them.

It is ironical that the same Ld. Judge even after his above order was upheld by Hon’ble Supreme Court through their judgment in the case of DCIT Vs SBI reported as (2009) 2 SCC 451 later under his order dated 25.02.2011 in Report 9 of 2010 ordered release of Rs.1995.67 Crores to the I.T. department out of which Rs.1635.14 Crores were released on account of claims of I.T. department on HSM even though the department had not refunded Rs.546.22 Crores with interest as directed above. The I.T. department had never applied for release of such an abnormally large amount but had orally prayed for release of some amounts to it. The order of assessment for AY 1992-93 in case of HSM has been quashed and set aside and therefore Smt Jyoti Mehta on 12.02.2019 applied for refund of Rs.3803.90 Crores but yet the amount is not being refunded by the department.

05.10.2007

The Hon’ble Special Court passed an order in MA 275 of 2006 and in other cases filed by Smt Pratima Mehta. Since the department had passed fresh assessment orders and determined incomes at still higher level, the relief prayed for by Mehtas were denied and sample order is enclosed.

29.01.2008

The Custodian filed Affidavit-in-reply in MA 114 of 2007 and denied that any credit was liable to be given to Harshad in its liabilities in regard to payment of Rs.590.83 Crores made to SBI.

30.05.2008

The Custodian filed Affidavit-in-sur-rejoinder in MA 114 of 2007 once again denying that any credit was liable to be given to Harshad in his liabilities picture in respect of Rs.590.83 Crores paid by the Custodian to SBI.

25.07.2008

The Hon’ble Special Court passed an order in MP 41 of 1999 once again ordering sale of the 8 residential flats at Madhuli Apts. on the ground that the liabilities were far in excess of the assets and by rejecting the contentions of Mehtas that the claims made by revenue were high-pitched and illegal and they were under challenge and therefore their flats may not be sold. They disputed the assets and liabilities picture presented by Custodian by showing that their assets were understated and liabilities were grossly overstated. The benefit of the law laid down by Hon’ble Supreme Court in the case of Harshad Mehta vs. Custodian was once again denied to them but subsequently each member of Mehta family had secured reliefs from appellate authorities and therefore now the assets of each member are greater than their liabilities. Had the sale of flats been confirmed, there was no way they could got them back besides the fact that the flats were proposed to be sold at virtually one-fifth of their true value. The original valuer had obliged the Custodian and therefore when the valuation was challenged at the instance of Mehtas, a new valuer was brought whose valuation was vastly higher by several times than the original valuer. Being aggrieved by the above second order of sale, Mehtas challenged the same for the second time before Hon’ble Supreme Court.

03.12.2008

The Hon’ble Supreme Court delivered their combined judgment titled as DCIT Vs SBI reported as (2009) 2 SCC 451 in Appeals filed by SBI and I.T. department to challenge the order of Special Court dated 29.09.2007 and held as under:

1. The Solicitor General representing I.T. department urged on the question of refund and disbursement “that the Application of Sec.11(2)(a) can arise only at the stage of final distribution of assets and an order under the said section can be passed only after examining the claims by the Special Court u/s 9A of the Act (Para 17).

2. The “taxes due” refer to “taxes as finally assessed” [Para 34(iii)].

3. There could be no disagreement with regard to the fact that if any amount is found due and payable to the banks for advances to HSM, then the right of the bank to the extent of the said amount must be held to be existing right of the bank on the property which is attached and the said amount cannot be assessed in the hands of HSM as his income (Para 38).

4. There were 2 disputed questions of facts which were remanded for adjudication to Special Court with a direction that for the adjudication of the disputes which are raised in the present appeal, a finding on the said issues and questions would be mandatory and the same cannot be dispensed with under any circumstances (Para 42).

5. While remanding the matter, it was decided that if the nexus is shown by the banks between the amounts for which decrees have been obtained, and the amount which is included in the income in the hands of HSM, the same will have to be disbursed to the banks by the Special Court.

6. It was also held that on account of oversold securities if the delivery has been given by HSM and the transaction is complete, only the difference between the payable and receivable will be taken and not the gross amount (Para 44).

7. That the 2 items of scaling down of Rs.253 Crores and Rs.101 Crores were upheld (Para 45).

8. That the orders of disbursement made during the pendency of the dispute between the parties cannot be said to be final and would finally get settled as liability after final adjudication of the disputes by the appropriate forums (Para 46).

9. The direction of Special Court to I.T. department to refund Rs.546.22 Crores with interest was stayed pending decision on the remanded matter which were directed to be decided within 3 months from the date of order (Para 47).

For past 13 years both the banks and the I.T. department has not made compliance with the directions to adjudicate on two remanded issues of facts nor the Hon’ble Special Court has made compliance nor any extension of time for making compliance was applied for after 2010. The Custodian, I.T. department and the banks have instead colluded with each other by propagating the Harshad Mehta Group theory under which from 2011 onwards more than Rs.2500 Crores have been drawn and transferred from the account of family members and corporate entities to the account of HSM which has been used to meet the claims of I.T. department and banks on HSM. The banks have already withdrawn from Hon’ble Special Court their applications seeking scaling down of income of HSM despite winning their matters before Hon’ble Special Court and Hon’ble Supreme Court. In essence, the funds belonging to banks which have been wrongly taken away by the I.T. department are not being sought back from the department by all the 3 organs of “State” acting in collusion with each other and as a reward for brazenly violating the above judgment and order of Hon’ble Supreme Court have used the monies of the family members and corporate entities.
 
However, Smt Jyoti Mehta in her appeals filed on behalf of HSM before Hon’ble CIT(A) and Hon’ble ITAT for AY 1992-93 have already succeeded in getting 100% relief under orders of Hon’ble CIT(A) dated 28.06.2017 and of Hon’ble ITAT dated 14.01.2019. Under these orders, the entire and the largest additions on account of sale of securities which was treated as income of HSM have been deleted as she has established nexus between the transactions for which the decrees have been awarded to the banks and for which largest additions have been made in the hands of HSM. This has now culminated into a huge refund of more than Rs.4500 Crores to HSM which is not being granted by the I.T. department in violation of the Torts Act and Sec.240 of the I.T. Act. The Custodian is also not securing the huge refunds due from the I.T. department and thereby continues to act in collusion with it. The above facts stand established from the orders which are dealt with hereinafter.

07.08.2009

The Hon’ble Supreme Court passed a second judgment in respect of Madhuli flats titled as Jyoti Harshad Mehta vs. Custodian and Ors. reported as (2009) 10 SCC 564 whereunder it once again set aside the second order of Special Court dated 25.07.2008 passed in MP 41 of 1999 ordering sale of 8 residential flats at Madhuli Apartments. The Hon’ble Supreme Court while setting aside the second order of sale made strong adverse observations against the Ld. Judge, Special Court and held that there was non-application of mind as the submissions of Mehtas were not considered and it is well-settled law that “justice must not only be done, but also must be seen to be done”. It directed the Special Court to consider matter afresh strictly in the light of the earlier judgment passed in Ashwin Mehta as well as the observations made in the above judgment.

ORIGINAL DOCUMENTS CAN BE FOUND ON LINKS BELOW AND IN THE DOWNLOADS SECTION

2009-2010

Smt Jyoti Mehta challenged 5 ex-parte decrees and one order passed by Hon’ble Special Court in favour of banks on the ground that the decrees and orders have been secured by the banks by playing a fraud on the Special Court and by acting in collusion with Custodian and therefore the same may be declared as nullity, nonest and void. It was urged in case of 2 largest decrees that Harshad had already denied the liability to pay the claims made by SBI and SCB of Rs.707 Crores and Rs.506 Crores but yet both the decrees were awarded on admission of liability, HSM was not given credit for Rs.403.88 Crores already paid to SBI and for other attached assets held by NHB and SBI which were suppressed from Hon’ble Special Court. The banks took full advantage of the sudden demise of Harshad in jail and of the fact that Smt Jyoti Mehta, his widow was unable to defend his legal interest. The Custodian who had a duty to contest the “patently illegal claims” instead supported them and despite knowing that in terms of settled law HSM was not liable to pay any interest for the period covering his notification, yet did not object to awarding interest on the decrees at 15% to 18% p.a. so that HSM becomes bankrupt and the above banks are rewarded with interest of thousands of crores. Custodian also knew that in each and every  case of Fairgrowth Financial Services Ltd. (FFSL)  decrees were awarded carrying interest only upto their date of notification i.e. 02.07.1992 and even the precedents set in 2 cases of Mehtas where interest was awarded only at 6% to 7% p.a. SBI also fraudulently secured a decree for damages of more than Rs.800 Crores for damages which were not suffered by it and which were never proved before Hon’ble Special Court. The Hon’ble Supreme Court is due to hear the above Civil Appeals, particulars of which are enclosed.

13.03.2009

The Hon’ble Special Court passed an order in Custodian Report 19 of 2008 wherein the Custodian sought a direction that the occupants of 8 flats at Madhuli Apts. should be directed to vacate the flats for failure to pay maintenance of Rs.1,62,80,811/- within a period of 4 weeks from their future income. This was one more mala fide attempt to throw out Mehtas from their residence even though Hon’ble Supreme Court had set aside the sale of their flats under two prior judgments as cited earlier.

24.03.2010

The Hon’ble CIT(Appeal) passed orders in case of Harshad for AY 1992-93 and AY 1993-94. While marginal reliefs were granted but at the instance of AO, he enhanced the income of HSM for above 2 assessment years u/s 251(2) of the I.T. Act after 15 years by Rs.454.82 Crores and Rs.710.02 Crores respectively totalling to Rs.1164.83 Crores. These incomes were enhanced on the basis of Report of Chartered Accountants, M/s. Vyas & Vyas, which admittedly was prepared by the said Chartered Accountants under orders of Hon’ble Special Court and delivered to Custodian in the year 2004. Smt Jyoti Mehta is grossly aggrieved by the above 2 orders on the following grounds:

• The enhancement of income was patently illegal but made to secure further release of monies from Hon’ble Special Court. There was no merit in such huge enhancement by Rs.1164.83 Crores and entirely governed by mala fide objects. For the entire family the enhancement of income was Rs.1342.60 Crores. The falsity of these additions is conclusively established in almost all cases since these additions are deleted by Hon’ble ITAT in every matter before it.

• Large additions were made under enhancement of Rs.657.83 Crores by relying upon patently illegal, unreliable and unproven Report of M/s. Vyas & Vyas. When it was urged that the AO should also then accept the income of Rs.123.53 Crores as per the Report of M/s. Vyas & Vyas this was rejected by the department and this double standard has been criticized by Hon’ble ITAT in order of HSM dated 29.10.2014.

• In fact when SBI applied for scaling down of income to Rs.123.53 Crores as determined by M/s. Vyas & Vyas, the I.T. department has filed a combined Affidavit on 02.08.2018 and vehemently opposed reliance on the Report of M/s. Vyas & Vyas on a number of grounds, the relevant extracts of which Affidavit are enclosed. This also conclusively establishes the double standards always adopted by the I.T. department.

• Smt Jyoti Mehta conclusively established that there was a nexus between the decretal transactions for which the decrees were awarded to the banks and the additions made by AO in the hands of HSM but these valid contentions were deliberately rejected by CIT(A) as huge additions would then get deleted and large refunds will become due. However, for AY 1992-93 Smt Jyoti Mehta in the next round of appeal before Hon’ble CIT(A) and Hon’ble ITAT succeeded in securing relief of full deletion of additions of Rs.1080.59 Crores since they were liabilities of HSM and not his taxable income.

• The brazen conduct of I.T. department gets conclusively established from the fact that despite Hon’ble Special Court by order dated 29.09.2007 had already held that there was gross miscarriage of justice in assessment of HSM for AY 1992-93 and AY 1993-94 and scaled down the income  by 92% and thereafter the Hon’ble Supreme Court in their judgment dated 03.12.2008 in the case of DCIT Vs SBI reported as (2009) 2 SCC 451 had largely upheld the order of Special Court dated 29.09.2007 but yet in complete disregard of it such huge additions were introduced through enhancement of income by Rs.1164.83 Crores.

30.04.2010

The Hon’ble Special Court passed an order in MP 41 of 1999 directing sale of 8 Madhuli flats for the third time in the remanded proceedings by holding as under: 

1. That when bulk of the shares were sold, no objection was raised by Mehtas that they should not be treated as members of Harshad Mehta Group which objection was raised only by challenging the order of sale of shares and therefore they were already treated as a group.

2. That while selling the commercial properties which sale was upheld they were treated as members of Harshad Mehta Group and therefore for sale of residential properties they are to be treated as Harshad Mehta Group because of their involvement in securities transactions and business along with Harshad Mehta.

3. That the contentions that flats were purchased prior to the statutory period and therefore liable to be released also stand rejected.

4. It was once again concluded that liabilities exceeded assets and therefore sale of residential flats were necessary to meet the liabilities.

Being aggrieved by the above order and the erroneous assets and liabilities picture for the third time the Mehtas challenged the above order before Hon’ble Supreme Court and filed CA 6326 of 2010. During the pendency of the above appeal, Mehtas vigorously contested the false claims of I.T. department and met with a huge success, made efforts to recover their attached assets which had not been deliberately recovered by the Custodian and completely turned around the position.

08.06.2010

The Hon’ble Special Court passed identical orders in 6 Misc. Petitions being MP 5 to 10 of 2009 filed by Smt Jyoti Mehta to seek the relief of declaration of 5 ex-parte decrees awarded to SBI, SCB, SBI Caps and  1 ex-parte order permitting Custodian to withdraw the claim for recovery of attached assets of HSM as nullity, nonest and void, on the grounds that these orders were obtained by playing a fraud on the Hon’ble Special Court and by acting in collusion with the Custodian. It was urged by Smt Jyoti Mehta that she discovered the above acts of fraud and collusion much later after seeking inspection of records from Special Court in the year 2007-08 and after further verification of records.
That on the appointed date of hearing on 24.04.2010 her Advocate on record applied for adjournment on the ground that the Counsel representing her was unable to attend the Court because he was representing her on the same day before Hon’ble Supreme Court and in terms of the settled law such an adjournment was bound to be granted but it was refused and no opportunity of hearing was granted and all the orders in the 6 Petitions were reserved for judgment.


Later Smt Jyoti Mehta within 5 days and well before the judgment was delivered filed her Written Submissions to avail some opportunity but the same were also not taken on record though the orders were passed much later only on 08.06.2010. The Ld. Judge rejected all the 6 Petitions by coming to the conclusion that Smt Jyoti Mehta was always aware about the decrees/orders passed by Hon’ble Court in the years 2002-03 and therefore there was delay in filing the said Petitions. It was observed that the Petitions were not bona fide and they were filed with a view to delay the proceedings in MP 41 of 1999 filed by the Custodian for sale of Madhuli flats. A sample copy of order in case of MP 8 of 2009 in respect of ex-parte decrees of Rs.706.98 Crores in favour of SBI is enclosed.

07.08.2010

Smt Jyoti Mehta challenged the order of Hon’ble Special Court dated 08.06.2010 passed in MP 8 of 2009 before Hon’ble Supreme Court being CA (D) 25366 (later renumbered as CA 9342 of 2010). Even other 5 orders passed by Hon’ble Special Court were similarly challenged by Smt Jyoti Mehta since she is aggrieved both by the original ex-parte orders and later by identical orders passed by Hon’ble Supreme Court on 08.06.2010. A compilation of synopsis of the above 6 Appeals are enclosed together with a tabulated list of the same. According to Smt Jyoti Mehta the decrees are illegally obtained without giving credit of large amounts due to Harshad Mehta on account of his assets lying with them and other counter claims including the two claims withdrawn by the Custodian to confer huge favour on to SBI. The 2 largest decrees of Rs.706.54 Crores in favour of SBI and Rs.506.53 Crores in favour of SCB were obtained by misrepresentation that Shri Harshad Mehta had already admitted to the liability to pay though they were expressly denied by him. In 3 decrees, SBI failed to give credit of Rs.592.49 Crores which was later on reluctantly given by it after passage of 8 years only when Smt Jyoti Mehta placed the facts regarding the acts of fraud and collusion perpetrated by SBI in obtaining the 3 ex-parte decrees and even Custodian then completely changed his stand and these 6 appeals are pending hearing.

18.10.2010

The Hon’ble Supreme Court passed a combined order in 3 Civil Appeals filed by Smt Jyoti Mehta to challenge the identical orders passed by Special Court on 08.06.2010 in Civil Appeal (D) 25366 of 2010 (since renumbered as CA 9342 of 2010), CA(D) 25364 of 2010 (since renumbered as CA 9338 of 2010), CA(D) 25365 of 2010 (since renumbered as CA 9339 of 2010). The Hon’ble Supreme Court was pleased to grant the relief of “Issue notice”. The above Civil Appeals challenging the ex-parte decrees and the orders of Special Court are pending.

06.01.2011

The Hon’ble Supreme Court passed an order in Interim Application No.2 of 2010 filed by SCB in Civil Appeal 2672 of 2009 where in it had challenged the order of Hon’ble Special Court dated 03.04.2009. The Hon’ble Supreme Court issued the following directions:

“In regard to the order of the Special Court, it needs to be clarified that in case an application for disbursement of funds is made by the Revenue or by the Creditor Banks, it will be open to the Special Court to pass appropriate orders, in accordance with law, after hearing objections, if any, raised against the request for disbursement.

Hence, in case after hearing all concerned the Special Court decides to issue direction for disbursement of money from the attached account, it shall ask the party in whose favour disbursement of the funds are directed to be made to give appropriate undertaking(s).”

01.02.2011

The I.T. department filed MA 21 of 2011 before Hon’ble Special Court against Mehtas to seek release of Rs.1865.72 Crores towards its demands for tax against several notified entities and by joining all the banks SBI and SCB as party Respondents. It was misrepresented that the demands are crystallized based on assessment orders/appellate orders passed after giving full opportunity to the assessees and after providing all the documents/records to the assessees and that therefore the assessments no longer remain best judgment assessment and the liability of Income Tax cannot be scaled down by the Special Court. 

18.02.2011

Smt Jyoti Mehta filed Affidavit-in-reply in MA 21 of 2011 strongly opposing release of monies to the I.T. department. Affidavits were also filed by other family members almost on identical lines.

21.02.2011

The Hon’ble Supreme Court passed an order in Interim Application No.3 filed by Mehtas in Civil Appeal 6326 of 2010. The Hon’ble Supreme Court issued following directions:

“We direct that before passing any order for disbursement of any money lying with the Custodian, the Special Court shall afford to the Applicants due opportunity of hearing  in terms of the order dated 6th January 2011 passed in IA No.2 of 2010 in Civil Appeal No.2672 of 2009.

It has been brought to our notice that pursuant to the said order, notices of hearing have been issued by the Special Court to all the parties concerned, including the family members of the Harshad Mehta Group.”

23.02.2011

SCB filed an Affidavit-in-reply in MA 21 of 2011 to oppose the reliefs prayed for by the I.T. department and strongly canvassed that the demands for AY 1993-94 does not qualify to fall under priority demand u/s 11(2)(a) of the Torts Act.

24.02.2011

SBI filed MA 36 of 2011 before Hon’ble Special Court seeking release of monies to it against the decrees. However in paragraphs 23 and 24 it offered to HSM a credit of Rs.592.49 Crores after 8 years of payments already made to it by the Custodian.  This credit was given only after Smt Jyoti Mehta discovered the fraud played by SBI in obtaining the decrees in collusion with Custodian and after the Hon’ble Supreme Court granted reliefs to Smt Jyoti Mehta of “issue of notice” in 6 Civil Appeals filed by her after vehemently denying through 3 Affidavits filed by Custodian in MA 114 of 2007 that any credit is liable to be given by SBI to Harshad the Custodian completely changed his stand after SBI offered the above credit and reduced his liabilities in the fresh assets and liabilities picture presented by the Custodian before Hon’ble Special Court. By the above act of SBI retrospectively giving 3 credits amounting to Rs.592.49 Crores, the allegations of Smt Jyoti Mehta against SBI and Custodian that the decrees were obtained by SBI playing fraud on Special Court and by acting in collusion with Custodian gets conclusively established. SBI obtained the ex-parte decrees taking full advantage of the sudden demise of HSM.  

25.02.2011

The Hon’ble Special Court passed an order in Report 9 of 2010 filed by the Custodian directing payment of Rs.1995.67 Crores to I.T. department  and about Rs.225 Crores to banks and Mehtas are aggrieved by this order for following reasons:

1. It is incorrectly concluded that the Hon’ble Supreme Court by order dated 06.01.2011 and 21.02.2011 had permitted distribution subject to undertaking though it was expressly directed that the monies can be released in accordance with law after hearing objections and disbursement should be against appropriate undertakings. The Ld. Judge violated the law laid down by Hon’ble Supreme Court in Harshad Mehta’s judgment dated 13.05.1998 on several counts and without hearing all the notified entities or recording and dealing with their objections raised through numerous affidavits filed by them.

2. That the Ld. Judge held that all notified entities were members of Harshad Mehta Group and directed use of monies from the account of all notified entities and accordingly an amount of Rs.1808.27 Crores was transferred from the accounts of family members and corporate entities to the account of HSM and then used to meet claims of I.T. department and banks on him and while doing so all the notified entities were not heard. In fact all the notified entities particularly the corporate entities were never held to be members of Harshad Mehta Group since they were not party to the proceedings in MP 41 of 1999 where only 6 family members and Aatur Holdings Pvt. Ltd. were a party. The group theory was therefore not applicable to other notified entities. However, such valid objections were summarily overruled by incorrectly concluding that it was not pointed out by such entities how their interest will be adversely affected by interim distribution which will not cause any prejudice to any party.

3. That there was no provision under the I.T. Act to recover the dues of “A” from “B” and therefore monies belonging to other notified entities could not be used to meet the claims of the I.T. department by drawing an amount of Rs.1808.27 Crores from other notified entities.

4. That the banks were also holding decrees only against the estate of late HSM and their Execution Applications seeking release of monies out of the account of HSM were already pending before Hon’ble Special Court from 2003 onwards and therefore the monies belonging to family members and corporate entities could not be used to make payments to banks against their claims on late HSM. The banks had not availed the remedy given to them by Hon’ble Supreme Court in Para 41 of Harshad Mehta’s judgment dated 13.05.1998 to lodge a claim in accordance with law on the assets of other notified entities and even therefore they could not have invoked Harshad Mehta Group theory.

5. That under the scaling down applications it was the case of the banks that monies belonging to them and lying in the hands of HSM were incorrectly assessed to tax by the I.T. department and thereafter the monies were taken away by the department and in view of this case the banks could never have sought recourse to the monies belonging to other notified entities in discharge of their claims on HSM.

6. That the I.T. department had filed MA 21 of 2011 joining some notified entities but did not join Growmore Research & Assets Management Ltd., Growmore Leasing & Investments Ltd. and other corporates nor prayed or specified the pending amounts recoverable by the I.T. department from them but very vaguely sought release of Rs.1865.72 Crores from attached accounts of Harshad Mehta Group nor provided the assessee-wise or assessment year-wise break up of demands. Against the above prayers for Rs.1865.72 Crores an amount of Rs.1995.67 Crores was released to the department.

7. The Ld. Judge did not record or deal with the objections that the entire demand for tax for AY 1993-94 would not qualify to fall in priority under Paras 25 to 27 and 35 of Harshad Mehta’s judgment dated 13.05.1998 and yet met compete demands for tax and the break-up of Rs.1995.67 Crores is enclosed. The Hon’ble Special Court has till date released an amount of Rs.1038.59 Crores for claims of revenue in respect of AY 1993-94.

8. That earlier the same Ld. Judge by an order dated 16.07.2003 rejected applications filed by the I.T. department seeking release of monies by holding that there is no occasion to disburse the funds but then passed a contrary order releasing Rs.1995.67 Crores .

9. The same Ld. Judge had also passed an order on 29.09.2007 concluding that there was gross miscarriage of justice in the assessment of HSM for AY 1992-93 and AY 1993-94 and scaled down his income from Rs.3400 Crores to Rs.278 Crores (by 92%) and directed the revenue to refund Rs.546.22 Crores with interest so as to make the payment to banks and which order was later substantially upheld by the Hon’ble Supreme Court on 03.12.2008 in DCIT Vs SBI and that the Hon’ble Supreme Court had in fact remanded the matter back to the Special Court to adjudicate on 2 issues of facts in order to determine the liabilities towards I.T. department and the banks within 3 months from the date of order. In view of the above before directing any release of monies, the Hon’ble Special Court was bound to comply with the directions of Hon’ble Supreme Court in the above judgment particularly since it was expressly directed in Para 42 of the judgment that it was mandatory and could not be dispensed with under any circumstances to give findings on the 2 remanded issues of facts. Thus, pending compliance by the I.T. department and banks no further amounts could be released to them.

10. The Ld. Judge erred in overruling the objections of the banks that their applications for scaling down and for payment of liabilities were pending and should be heard before releasing the monies.

11. The above order was also passed in gross violation of 2 orders passed by Hon’ble Supreme Court on 6th January 2011 passed in IA No.2 of 2010 in CA No.2672 of 2009 and also order dated 21.02.2011 passed in IA No.3 in CA 6326 of 2010.

The above order of Hon’ble Special Court has indefinitely postponed the final distribution since the revenue which has illegally taken away a huge amount of Rs.1995.67 Crores is not refunding them even after its false claims are already deleted by the appellate authorities. HSM in this manner has been prevented from meeting claims of genuine creditors and the liability to pay interest has kept on mounting on him so as to make him bankrupt.  It is settled law that a “discretion” when applied to a Court of justice means discretion guided by law. It must not be arbitrary, vague and fanciful but legal and regular.   

14.03.2011

The Hon’ble Supreme Court passed an order upon listing in Civil Appeal (D) No.6671 of 2011 filed by Mehtas to challenge the above order of Hon’ble Special Court dated 25.02.2011. The Hon’ble Supreme Court issued notice and refused to stay the impugned order. However, it issued the following clarification:

“We further clarify that so far we have not expressed any opinion on the question as to whether all the notified parties are to be treated as a group.”

The above Civil Appeal is renumbered as CA 2580 of 2011 and pending hearing for past 11 years.

01.04.2011

The I.T. department sought leave of Hon’ble Special Court to withdraw MA 21 of 2011 filed by them which leave was granted.

08.04.2011

The Hon’ble Supreme Court passed a combined order in 3 previous Civil Appeals and 3 fresh Appeals filed by Smt Jyoti Mehta to challenge the identical orders passed by Special Court on 08.06.2010 in Civil Appeal (D) 32659 of 2010 (since renumbered as CA 3285 of 2011), CA(D) 32708 of 2010 (since renumbered as CA 3284 of 2011), CA(D) 32711 of 2010 (since renumbered as CA 3286 of 2011). The Hon’ble Supreme Court was pleased to grant the relief of “condoning the delay” and once again directed “Issue notice”. The above Civil Appeals challenging the ex-parte decrees and the orders of Special Court are pending adjudication before Hon’ble Supreme Court and according to Smt Jyoti Mehta the said decrees are liable to be declared as nullity, nonest and void.

06.05.2011

The Hon’ble Supreme Court passed a judgment in the case of Rasila S. Mehta Vs Custodian reported as (2011) 6 SCC 220 upholding the notification of Smt Rasila Mehta and Smt Rina S. Mehta. The Hon’ble Supreme Court rejected the contentions of the Appellants. However this judgment has thereafter been deliberately misread and misinterpreted by the Custodian to state that the Appellants were held to be members of alleged Harshad Mehta Group and therefore their assets are liable to be used to meet claims on HSM.

01.06.2011

The Custodian filed Report 11 of 2011 praying for the relief of sale of all the assets of Smt Rasila Mehta and Smt Rina Mehta to meet the claims against them and against late Shri Harshad Mehta by misreading and misinterpreting Rasila Mehta’s judgment.

04.06.2011

Smt Rasila Mehta and Smt Rina Mehta sought from Custodian inspection of the material relied upon by him in filing Report 11 of 2011.

05.06.2011

Smt Rina Mehta filed an urgent reply in Report 11 of 2011 to oppose the reliefs prayed for by the Custodian as she apprehended gross injustice and therefore filed her preliminary affidavit within 2 days.

09.06.2011

The Custodian replied to above letter of inspection dated 04.06.2011 and also stated that all the material was already available but if any inspection is still required than Custodian may be intimated of the documents for which inspection is required with the prior appointment. The Hon’ble Special Court has framed Regulations u/s 9-A governing the proceedings before it and in terms of Regulations 3 and 4 matters dealing with substantive rights regarding securities, monies and properties required filing of Petitions supported by affidavits and the Respondents in terms of Regulation 11 can file their replies within 3 weeks. The Custodian sought listing of their Report on 10.06.2011.

10.06.2011

The Hon’ble Special Court passed an order in Report 11 of 2011 filed by the Custodian and granted the reliefs as prayed by the Custodian directing sale of properties belonging to Smt Rasila Mehta and Smt Rina Mehta. The order was passed on the first day of hearing without granting any opportunity to file the replies and even before the Custodian could offer inspection of the material relied upon by him. Neither the oral submissions were recorded nor the preliminary affidavit filed by Smt Rina Mehta was examined or the objections raised by her recorded or dealt with except that the Ld. Judge confirmed that he had perused the affidavit. The Ld. Judge observed that the Civil Appeals of Smt Rasila Mehta and Smt Rina Mehta were already dismissed by Hon’ble Supreme Court and in the judgment it was clearly held that Rasila and Rina Mehta have been notified so that their assets can be sold to meet the liabilities of Harshad Mehta. That taking into account the judgments of Hon’ble Supreme Court in case of Shri Sudhir Mehta and Smt Rina Mehta the Report will have to be granted because immediate steps are to be taken to sell the properties and therefore all the prayers were granted.  

Smt Rasila Mehta and Smt Rina Mehta were aggrieved by the gross violation of principles of natural justice and the summary manner in which on the very first day of hearing the orders were passed. In the said Rasila Mehta’s judgment only the challenge to the order of notification was not allowed but the Hon’ble Supreme Court had expressly held in Para 29 that notification was only a preventive provision and held in Para 30 that disposal and sale of attached properties involving extinguishment of the rights and title of a notified party was a punitive provision. It was further held in Para 49 that a pre-decisional hearing before notification is not provided in the Act but the same contains an impeccable milieu of a fair and just post-decisional hearing which was not granted at all. It is expressly held that notification does not ipso facto take away any right of the person thus notified or imposes any duty on him. In Para 50 it is further held that attachment of property is a natural consequence of notification and not sale of the property. The power to order sale of property lies only with the Special Court u/s 11 and at this instance where the notified person can be adversely affected. Thus the reliance placed on Rasila Mehta’s judgment to justify sale was completely misconceived and being aggrieved by such an order an appeal was preferred before Hon’ble Supreme Court.

15.06.2011

SBI addressed letter to Custodian to furnish details of amounts received by it against the claims made on late Shri Harshad Mehta and disclosed the credit of Rs.592.49 Crores it retrospectively offered to Shri Harshad Mehta from the years 2002-03. That thereafter the Custodian completely changed his stand as repeatedly taken on oath in MA 114 of 2007 to the effect that no credit was liable to be given to Harshad. The Custodian recomputed the liabilities of HSM which came down by about Rs.1500 Crores after 8 years and the above conduct of SBI and Custodian conclusively establishes the serious allegations made by Smt Jyoti Mehta about the acts of fraud and collusion perpetrated by both of them taking full advantage of the sudden demise of HSM and inability of Smt Jyoti Mehta to defend his legal interest.

July-August 2011

The Custodian in compliance with the above order dated 10.06.2011 effected illegally on a rapid fire basis sale of large quantities of shareholdings of Smt Rasila Mehta of Rs.211.95 Crores and Rs.179.07 Crores virtually within a period of 4 days without inviting any offers or seeking prior approval of the Hon’ble Special Court as required under the scheme governing sale of shares and incurred losses of Rs.134.3 Crores and Rs.126.84 Crores respectively. The shares were sold rapidly and illegally before Smt Rasila Mehta and Smt Rina Mehta could challenge the order of Hon’ble Special Court dated 10.06.2011 and secure reliefs from Hon’ble Supreme Court.

07.09.2011

The Custodian filed Report 14 of 2011 before Hon’ble Special Court to seek relief of distribution of the amounts lying in the bank accounts of Smt Rasila Mehta and Smt Rina Mehta as also those amounts realized through the sale of their shares to meet the claims against them and against Harshad Mehta.

09.09.2011

The Hon’ble Special Court passed a combined order in Custodian Report 9 of 2010 and Report 14 of 2011 and ordered payments to the banks against their ex-parte decrees by drawing the amounts from the accounts of the family members including Smt Rasila Mehta and Smt Rina Mehta for their ex-parte decrees obtained against late Shri Harshad Mehta. The above order was passed by Hon’ble Special Court in 2 days without granting any hearing to Smt Rasila Mehta and Smt Rina Mehta and it was observed that they were already held to be members of Harshad Mehta Group and since their notification was upheld the monies belonging to them could be used to meet the claims against Shri Harshad Mehta. That if the notified parties wish to file their affidavits they can do so and if on that basis any amounts released today become liable to be recalled that order also can be made and therefore it was not necessary to adjourn the proceedings or to grant them time to file their Affidavits.  

Smt Rasila Mehta and Smt Rina Mehta were deeply aggrieved by the above order which was passed within 2 days of the Custodian serving the Report on them in gross violation of principles of natural justice and Regulations 3,  4 and 11. The order was passed even before hearing a single objection and their request to file the affidavit was declined on the ground that it was not necessary because both of them have been notified and their appeal was already dismissed and distribution was being carried out in accordance with the provisions of the Torts Act. The Hon’ble Supreme Court had not held them to be members of Harshad Mehta Group as incorrectly concluded by the Ld. Judge since they were not held to be members of Harshad Mehta Group. They therefore challenged the order by filing an appeal before Hon’ble Supreme Court.

23.09.2011

Custodian filed identical affidavits in reply to Smt Jyoti Mehta’s Applications being MA 13 and 14 of 2011 to seek recovery of attached assets since Custodian had not complied with several orders of Special Court directing recovery. The Affidavit contained false statements that all recoveries were caused by the Custodian and all the orders were complied with.

27.09.2011

The Custodian made payment of Rs.259.65 Crores to SBI in compliance with order of Special Court dated 09.09.2011 by drawing an amount of Rs.129.65 Crores and Rs.130 Crores respectively from the accounts of Smt Rasila Mehta and Smt Rina Mehta in order to penalize them the most by drawing entire amount from their bank accounts leaving even balances in account of HSM.

30.09.2011

The Hon’ble Supreme Court upon listing passed an order in Civil Appeal (D) No.23188 of 2011 filed by Smt Rasila Mehta and Smt Rina Mehta challenging the order of Hon’ble Special Court dated 09.09.2011. It immediately admitted the above Civil Appeal and granted the interim relief of status quo prevailing as on date. The said Civil Appeal has since been renumbered as CA 8437 of 2011 which is pending adjudication now for past 11 years. Smt Rasila Mehta sought justice from Hon’ble Supreme Court by repeatedly urging that being a very senior citizen and suffering from serious health issues her appeals may be heard. That she wanted to bequeath her assets during her lifetime and discharge serval liabilities incurred by her but unfortunately she could never get justice in her lifetime before she expired on 26 April 2020 at the age of 84 years. She suffered a widowhood from 07.06.1982 and attachment of her assets for almost 30 years since 08.06.1992 without violating any law of the land but only because she happened to be mother of Shri Harshad Mehta. The Custodian, CBI or the Income Tax department had never alleged violation of any law by her and the Torts Act contained no provision to punish innocent person like her. Admittedly and within the framework of law she purchased and sold shares and made long term investments by undertaking transactions through the 3 brokerage firms in the family by paying full scale brokerage and all the transactions were reported to the Bombay Stock Exchange. She paid interest @ 12% p.a. to her 2 sons and one daughter-in-law. The Custodian despite knowing that the value of her investments grew very rapidly yet made completely baseless allegations “how a housewife could have shareholdings of crores”. These allegations are conclusively demolished by presenting the Chart disclosing the sharp appreciation in value of her investments post the demise of HSM between 2003 to 2007 to 2011. It is neither illegal nor any crime for a housewife to make long term investments in shares and no punishment is prescribed for it in law.

08.11.2011

The Hon’ble Supreme Court passed a judgment in the case of Ashwin S. Mehta vs. Union of India reported as (2012) 1 SCC 83. Ashwin Mehta and Deepika Mehta had challenged the orders of Special Court dated 30th April 2003 and 02nd May 2003 under which 54,88,850 shares of Apollo Tyres Ltd. (ATL) of Rs.10/- f.v. constituting 15.1% of the equity capital was sold @ Rs.90/- per share when the market price was Rs.120/- per share. The scheme governing sale of shares provided that such “Controlling Block” should sell at a large premium to the market price. The Hon’ble Supreme Court held as under:

1. It would held that a notified party has an intrinsic interest in the realisations on the disposal of any attached property because it would have a direct bearing on the discharge of his liabilities u/s 11 of the Torts Act. (Para 33)

2. That the Special Court failed to make a serious effort to realise the highest possible price by overlooking the norms laid by the Special Court and Hon’ble Supreme Court and glossed over the procedural irregularities committed by the Custodian who foreclosed the decision of Special Court to invite ATL and its promoters to bid.  (Paras 36 to 38)

3. That the Special Court failed to comply with the principles of natural justice as per the settled law and section 9A(4) of the Torts Act by rejecting the prayers of notified entities to grant them 48 hours to secure better offers which right was foreclosed by the Custodian through letter dated 29.04.2003 without the permission of the Special Court. The Special Court ignored past precedents wherein it had granted time to notified parties to get better offer for sale of shares of M/s Ranbaxy Laboratories Ltd. (Para 43)

4. That the reason assigned by the Special Court for declining time to the notified entities on the reasoning that such deferment will result into fall in shares was unsound and unfounded since the market was already aware about the sale. This deprived the notified entities an opportunity to bring a better offer and therefore the order of Special Court deserved to be set aside on the short ground. (Para 44)

5. It was concluded that the Special Court has exercised its discretion in complete disregard to its own scheme and the “terms and conditions” approved by it for sale of shares and since the impugned order was passed in violation of principles of natural justice it called for interference to correct the wrong committed by the Special Court. (Para 46)

6. Since the above view was already taken, it was deemed unnecessary to deal with the other contentions urged on behalf of parties on the merits of the impugned order. (Para 47)

7. That normally in view of the finding that the decision of the Special Court was vitiated it must follow as a necessary consequence that in the normal course, the impugned order must be struck down in its entirety but bearing in mind that sale was approved and all procedural modalities have been carried out in the year 2003 the relief was moulded by not reversing the sale of 36.90 lakh shares of ATL since they were already extinguished and the entire sale cannot be rescinded which will be impracticable and fraught with grave difficulties. Therefore relief was confined to 4.95% of the shares being 17.9 lakh shares which was the subject matter of interim order dated 29.05.2003. (Para 48)

8. The appeal was partly allowed and the impugned order was set aside to the limited extent and the Special Court was directed to take steps to recover 17.9 lakh shares from ATL or its management as the case may be and then put them on fresh sale. The affected purchasers of the shares would receive the amount paid with interest @ 6% p.a. (Para 49)

The above judgment was challenged under the Review Petition which was rejected and thereafter under a Curative Petition which was also rejected by Hon’ble Supreme Court and consequently 1,79,88,850 shares were recovered by Mehtas after 8 years from their sale which is valued at Rs.350 Crores.

30.12.2011 to 30.03.2012

The Hon’ble CIT(A) passed 6 orders in case of the family members of late Shri Harshad Mehta granting them substantial reliefs by deleting several additions made for AY 1992-93 and AY 1993-94 and which resulted into large refunds, the particulars of which reliefs and refunds are given in enclosed charts. These reliefs were granted in third round of litigation and the reliefs attained finality since the I.T. department did not challenge the orders of Hon’ble CIT(A) before Hon’ble ITAT. However, it did not offer the refunds and therefore applications were filed before Hon’ble Special Court to seek a direction on the I.T. department to offer the refunds. Since the department did not make refunds despite filing of the above applications, a grievance was made even before Hon’ble Supreme Court in the proceedings in CA 6326 of 2010 when the Hon’ble Supreme Court intervened and directed the I.T. department to offer refund as is explained hereinafter.

24.02.2012

The Hon’ble Supreme Court upon listing passed an order in CA 34052 of 2011 filed by Smt Rasila Mehta and Smt Rina Mehta to challenge the combined order of Hon’ble Special Court dated 09.09.2011. The Hon’ble Supreme Court issued notice and granted the interim relief to stay the operation of the impugned judgment and tagged the said Civil Appeal with CA 8437 of 2011. The above Civil Appeal is since renumbered as CA 2563 of 2012 and the same is pending adjudication for past 9 years.

16.04.2012

Hon’ble CIT(A) passed an order in case of late Shri Harshad Mehta for AY 1993-94 and deleted the penalty levied by the AO under order passed on 26.09.2003 for concealment of income u/s 271(1)(c) of the I.T. Act. The AO had determined the income of Rs.1396.03 Crores and levied a penalty of 150% of the liability to pay tax. Hon’ble CIT(A) deleted this penalty on the ground that since HSM had not filed the return of income and the return which was filed was already rejected there is no question of the assessee concealing any income without filing any return of income. This issue was earlier decided by the Hon’ble Bombay High Court in favour of an associate entity under order dated 10.02.2009 and which order and similar other orders were challenged before Hon’ble Supreme Court by the department. The Hon’ble Supreme Court dismissed the appeals filed by the department and held that

“In this case the assessees were notified parties under Special Court (Torts) Act, 1992, hence they could not file return of income. On facts, Sec.271(1)(c) of the I.T. Act will not apply.”

04.01.2013

The Hon’ble Special Court passed a combined order in MA 13 and 14 of 2011 which was filed by Smt Jyoti Mehta making a grievance that the Custodian had deliberately not recovered the attached shares belonging to Mehtas of huge value and even not made compliance with the orders of Hon’ble Special Court since 08.06.1992 wherein Custodian was already directed to recover the attached shares of Mehtas with accruals paid on them since 08.06.1992 from their erstwhile shareholders. The Custodian filed a false Affidavit before Hon’ble Court denying the allegations of Smt Jyoti Mehta and incorrectly stating that he had recovered all the assets and made compliance with all the orders of Special Court. The Hon’ble Special Court rejected the contentions of Custodian by holding that the explanation given by him was not correct as shares of atleast Rs.700 Crores were pending recovery. The Custodian was directed to recover every asset and comply with all the orders andfurther directed to constitute a Committee of 3 persons in his office for causing recovery and making compliance with past orders. He was also directed to file progress reports before Hon’ble Court every fortnight. The Custodian was also directed to take into consideration the suggestions of Ashwin Mehta while carrying out the above task.

31.01.2013

The Hon’ble Special Court passed a combined order in MA 62 of 2012 and other identical Applications and MA 95 of 2012. The Mehtas once again sought relief for release of monies from their attached accounts for payment of fees to Advocates and Counsels and since Custodian was not recovering their attached assets. They had demonstrably established the falsity of claims made by revenue and prayed for release of Rs.3 Crores annually which would be less than 1% of the gains already secured by them. That MA 95 of 2012 was filed by Smt Rasila Mehta to seek release of 18,100 shares of Hero Honda from attachment together with the accruals thereon on the grounds that they were purchased well before the statutory period prescribed under the Torts Act being 01.04.1991 to 06.06.1992 and therefore had no nexus with monies belonging to banks and also on the ground that these shares were not required to meet any liabilities. She urged that she was not involved in any offence relating to transactions in securities nor was recipient of any monies belonging to banks and CBI had  never called her. All the above applications were rejected under a combined order for following reasons:

1. The Applicants were held by the Special Court to be members of Harshad Mehta Group and the combined liabilities were far greater than the assets. The contentions that they were separate and distinct legal entities and needed to defend themselves against the false claims made on them were rejected.

2. That the acute difficulties being faced by them to contest huge amount of litigation and enormous success already achieved by them were not taken into consideration only on the ground of Harshad Mehta Group theory.

3. It was urged that the Harshad Mehta Group has no basis in fact or law was also overruled. It was shown that the issue was pending adjudication before Hon’ble Supreme Court but it was held that the outcome of the same should be awaited.

4. That the Custodian had never filed any application to seek such a relief and the incidental observations made in unrelated proceedings were not binding and liable to be treated as obiter dicta. It was shown that there existed not a single judgment of the Hon’ble Supreme Court where directions were given to use the assets of the family members and corporate entities to meet the liabilities of HSM but instead interim reliefs were already granted to the notified entities but these contentions were not accepted.

5. That it cannot be said that the amount to be released to lead to preservation, protection and / or augmentation of attached assets if the Applicants are seeking to diminish the liability of revenue and hence their case is not covered by previous order of Special Court dated 12.02.1996 passed in MA 215 of 1995. The Applicants, at the most, can take the pleas which are raised in these applications in the appeals which are pending before the Apex Court.

Mehtas were aggrieved that despite sharp improvement in the assets and liabilities picture because of their sterling efforts and despite change of circumstances and the quantum of relief being a miniscule sum of the actual gains yet their application was rejected. The case of Smt Rasila Mehta was also covered under the judgment of Hon’ble Bombay High Court and Hon’ble Supreme Court and completely disregarding her background and no involvement of any kind yet relief even to her were denied.

31.07.2013

The Hon’ble Supreme Court delivered a combined judgment in appeals preferred by SBI and NHB to challenge the order of Special Court dated 24/25 February 1999 passed in Suit 2 of 1995 under which a decree was awarded to NHB against State Bank of Saurashtra (SBS) and at the same time NHB was directed to pay Rs.94.19 Crores to Custodian on behalf of HSM towards recovery of attached IRFC Bonds of Rs.38.75 Crores f.v. The decree obtained by NHB was quashed and set aside on the grounds that NHB had not come clean before the Special Court, had abused the process of law and failed to establish its claim by not adducing any evidence at all. That the evidence adduced by HSM through his witness was found to be truthful and in any case not challenged by NHB. It was held that the senior management of NHB were fully involved but facts relating to them were suppressed to shield them. Even the conduct of the Government was criticized as no attempt was made to find out the truth and to resolve the disputes.

06.09.2013

The Hon’ble Special Court delivered its judgment after extensive trial in the case of CBI Vs. S.K. Kumar being a case registered by CBI against Harshad Mehta and his younger brother, Sudhir Mehta in respect of 4 transactions under which SBI Capital Markets had made payments to M/s. Harshad S. Mehta in respect of purchase of Units of UTI, 1964 Scheme. CBI alleged that after receipt of monies no securities were delivered by Harshad to SBI Capital Markets nor the amounts were returned on their due date and therefore the offence of criminal conspiracy, criminal breach of trust and under Prevention of Corruption Act were committed by him. The Hon’ble Special Court completely rejected the above allegations of CBI and acquitted all the accused by holding that CBI had failed to establish the alleged offences by giving detailed reasons from Para 19 onwards upto Para 40 of the judgment.

1. In Para 27, the Hon’ble Court concluded that taking into consideration oral and documentary evidence on record, prosecution has miserably failed to establish that all the accused conspired together to commit the offence of conspiracy. The 4 transactions indicate that sums were credited to the personal current account of Mr. Harshad Mehta. The Contract Notes were issued for the transactions in Units duly signed by Sudhir S. Mehta.

2. Though it was alleged that there was breach of RBI guidelines or SEBI guidelines in respect of the subject transactions, prosecution did not bring on record any such RBI or SEBI guidelines which stated that at the time of entering into such transactions either physical securities or bank receipts had to be procured. CBI has failed to establish that the transactions were illegal in any manner whatsoever. Therefore, both the ingredients viz. “agreement to do an illegal act or do an act which is not illegal in itself but is done by illegal means” have not been established by the prosecution.

3. There is no material on record to establish that Harshad Mehta had an intention of not returning the amount invested with him. On the contrary, the evidence establishes that prior to the 4 transactions, SBI and SBI Caps had entered into Ready Forward transactions through M/s. Harshad S. Mehta and all these transactions had been successfully completed.

4. In Para 36, the Hon’ble Court concluded that between 1990 to 1992 M/s. Harshad S. Mehta had executed number of Contract Notes and there was no default in completion of any contracts prior to mid-May, 1992 and some contracts could not be completed between mid-May and June, 1992 and the reason was that since the report had come in the newspaper on 23.04.1992 that there were some problems between Harshad Mehta and SBI, there was a panic in the market and thereafter defaults had started. That in view of above, offence of criminal breach of trust u/s 409 was not established.

09.06.2014

Smt Jyoti Mehta made a ‘without prejudice’ offer to ANZ Bank for payment of Rs.506.65 Crores through their Advocates for the last time since the previous efforts of 1992 and thereafter of 2007 to arrive at a settlement had not succeeded. She offered to meet the entire principal sum of Rs.506.53 Crores keeping her offer valid for 45 days.

18.07.2014

The Hon’ble Special Court passed an order in MA 31 of 2013 granting the relief sought by Smt Jyoti Mehta against the Custodian seeking release of the books of accounts and computers seized by the Custodian illegally and without any power and authority to do so. The Hon’ble Special Court upon the submissions of Smt Jyoti Mehta, called upon Custodian to disclose the provision in law for retaining the documents and books of accounts of Mehtas in his custody but since the Custodian failed to point out any such provision in law, the Hon’ble Special Court ordered release of the same to Mehtas. This order establishes that the Custodian without any power or authority had illegally seized the books of accounts and computers for more than a decade so that Mehtas were unable to either recover their attached assets from third parties or contest the false claims of income tax on them in absence of the crucial material and evidence supporting them

29.10.2014

The Hon’ble ITAT passed an order in case of late Shri Harshad Mehta for AY 1992-93 and set aside the order of Hon’ble CIT(Appeal) dated 24.03.2010 and remanded the matter back to the Assessing Officer with a direction to pass a fresh assessment order after giving a due and proper opportunity to the assessee and taking into account the crucial evidence of books of accounts. It rejected all the 7 grounds adopted by Hon’ble CIT(Appeal) for rejecting the books of accounts. It concluded that the books of account have been prepared after the date of search but from the seized documents and they should not have been rejected without going through/examining each and every entry.

28.11.2014

The Hon’ble Special Court passed an order in MA 70 of 2014 filed by Smt Jyoti Mehta to seek a relief for a declaration that the Report of M/s. Vyas & Vyas, Chartered Accountants was illegal, that it could not be used by the Income Tax department for making additions under the Income Tax Act, to strike out several adverse findings against Mehtas, to grant opportunity to Mehtas to cross-examine the authors of the Report of M/s. Vyas & Vyas and to recall excess fees paid to them with interest. The Hon’ble Special Court granted the principal release and held that Report tendered by the Chartered Accountant itself cannot be treated as an evidence as it is only an opinion expressed by them.

08.04.2015

Smt Jyoti Mehta addressed a letter to Advocates of ANZ Bank in pursuit of her offer of settlement made on 09.06.2014 and with reference to progress made in that regard through several meetings and video conference. That ANZ Bank had already without commitment disclosed their interest to examine the proposal but yet sufficient progress was not being made in the matter and therefore she called upon for an urgent meeting and a time-bound action plan and some confirmation may be issued.

24.04.2015

Advocates for ANZ Bank replied to Smt Jyoti Mehta’s letter dated 08.04.2014 and conveyed that the bank was interested in resolving the matter under a settlement agreement. That they were seeking advice from the Supreme Court’s Advocates and will revert soon after client’s position is finalized.

27.08.2015

Smt Jyoti Mehta, through her Advocate replied to letter dated 24th April 2015 from Advocates of ANZ Bank on a ‘without prejudice’ basis in regard to the proposed settlement. Grievance was made that ANZ Bank was not making any progress on the offer made by Smt Jyoti Mehta on 09.06.2014 for more than 14 months and thereby tied them down from seeking reliefs before Hon’ble Court. It was conveyed that from progress made till date, she is getting a distinct impression that ANZ Bank was not serious in pursuing the offer. They were therefore called upon to set a timeline to ongoing negotiations.

28.09.2015

Advocates of ANZ Bank replied to Smt Jyoti Mehta’s letter dated 27.08.2015 and conveyed that while the bank was inclined to accept the offer and forgo the claim of interest but they were agreeable to the offer provided they were not called upon to give an undertaking to bring back the amounts by Hon’ble Courts. They also saw a stumbling block for their inter se settlement with NHB who may not agree to forgo the claim of interest. ANZ Bank was still therefore looking forward to some windmill proposal taking care of its concern.

09.10.2015

The AO filed an Affidavit in reply in MA 135 of 2012 filed by Smt Jyoti Mehta denying the allegation that revenue had inflated liability in the group cases of HSM Group by rejecting the books of accounts. That the department is not adjusting the refund against its other demands by invoking Sec.245 of the I.T. Act because as per the Hon’ble Supreme Court judgment department would be entitled to payment on final distribution. AO averred that at no point of time in seeking relief before Hon’ble Courts and in representations to the Custodian the department had made any false statement or submitted wrong facts or colluded with the Custodian. In Para 8 of the Affidavit the following averments are made:

Para 8:  I say, without prejudice to the above, that the demands shall be adjudicated upon by the forums made available in the appellate hierarchy of the Income Tax Act, 1961. If the appellate authorities, that include the Supreme Court of India, find that the demands are exaggerated or wrong, then the same shall be so directed by them to be modified and reduced/enhanced. The department will give effect to such orders as and when they are passed and communicate the latest demand position to the Custodian.

Mehtas are aggrieved that even after additions are reduced/deleted and the assessments are quashed yet the department is not giving effect to such orders.

02.12.2015

The Hon’ble Supreme Court passed an order in CA 6416 of 2005 filed by Gurukripa Trust set by notified entity Shri Bhupen Dalal to challenge the order of sale of their property passed by the Special Court. The Hon’ble Supreme Court directed Custodian to give clarification in respect of 7 questions framed by it as follows:

07.12.2015

The Custodian filed an Affidavit in CA 6416 of 2005 to give clarifications in respect of 7 questions put to it.

1. In reply to 1st question latest statement of assets and liabilities was furnished.
2. In reply to Questions 2 and 3 he stated that the loss was caused by the notified party to the society as a whole and hence there is no question of loss or unjust enrichment. Losses, if any, were caused to the banks who have filed Suits and obtained decrees.
3. In reply to Question 4 it was conveyed that the Custodian independently does not deal with any property but acts only as per directions of Special Court and thereby completely evaded the question.
4. In reply to Question 5 the Custodian stated that there was no standing mechanism for ascertaining the damage which would be the role of the I.T. department and banks. The Act does not provide for it and the Custodian files proceedings against notified entities for enforcing the liabilities of I.T. department and banks.
5. In reply to Question No.6 the Custodian stated that after all liabilities are met the assets are released and persons are denotified by the Special Court.
6. In reply to Question No.7 the Custodian stated that the facts relating to the liabilities of notified parties are placed by the Custodian before the Special Court and it is only the Special Court which determines the quantum of attached assets which need to be sold or otherwise.

The above replies are patently false as the Custodian takes several decisions by himself such as whom to notify, files applications for selling of assets, presents completely false assets and liabilities picture, decides whether or not to comply with the orders of Hon’ble Special Court or Hon’ble Supreme Court and whether or not to recover the attached assets from third parties and thereby deals with the attached assets, decides and executes sale of assets by deciding when to invite and for what quantity to invite the bids, violates the standing instructions to deploy surplus monies in Fixed Deposits by keeping them idle in the Current Accounts, acts for and on behalf of creditors and third parties by colluding with them instead of protecting, preserving and augmenting the attached assets of notified parties. The Custodian also decides whether to inform the Hon’ble Special Court the facts of pending recovery of attached properties from third parties, does not ever seek extension of time for delay or failure to comply with the orders Hon’ble Special Court, does not file any reports disclosing status of compliance and recovery.


In case of Mehtas, the Custodian has stepped into the shoes of creditors and instead of contesting their false claims and securing a refund from the I.T. department he has colluded and assisted the I.T. department and banks in securing monies in violation of law laid down by Hon’ble Supreme Court and made baseless allegations of fronts and benamidars and canvassed the Harshad Mehta Group theory to take away the assets of the family members and corporate entities for meeting the claims on HSM even before they are crystallized.

29.12.2015

Mehtas filed MA 8 of 2016 before Hon’ble Special Court against the Custodian seeking directions against him to file Status Report of compliance made by Custodian on past orders of Special Court from 08.06.1992 in respect of causing recovery of their attached assets and also provided a list of several such orders. The Custodian was called upon to explain the steps being taken by him in recovering the attached assets after gaining knowledge about them and to furnish the plan for accomplishing the task Relief was also sought of a direction to Custodian to give complete access to the records and also provide copies of all correspondence being undertaken by the Custodian.

The above application was one more effort of Mehtas to secure compliance by the Custodian with the orders passed by Hon’ble Special Court from 1992 onwards wherein he was already directed to recover the attached assets of Mehtas but facts were discovered that several such orders were deliberately not complied with by the Custodian, no status report of pending compliance was filed by the Custodian before Hon’ble Special Court, the Custodian had not even sought extension of time for making compliance or narrated the difficulties, if any, the Custodian was facing in recovery of the attached assets. The notified entities were also kept in dark by not marking any copy of correspondence exchanged by the Custodian with third parties and previous efforts made by Mehtas to seek disclosure from Custodian as also compliance by him were already thwarted by filing false affidavits and Reports that the compliance was already made. Since Mehtas had exposed the patently illegal conduct of Custodian even inspection of crucial records were not being offered and Mehtas apprehended that this would permanently jeopardize the recovery of their attached assets.

15.03.2016

The Assessing Officer passed a fresh order in case of late Shri Harshad Mehta for AY 1992-93 mechanically resurrecting the assessed income of Rs.2346.32 Crores without examining the books of accounts and making any compliance with the order of Hon’ble ITAT dated 29.10.2014 cited earlier. The detailed submissions made before AO and all the subsequent facts and orders passed in that regard by Hon’ble Special Court which were binding on the AO were completely ignored. The AO defied with the order of Hon’ble ITAT to deny the benefit of reliefs granted by ITAT and in order to illegally enjoy large amounts released to it by Hon’ble Special Court in complete violation of law laid down by Hon’ble Supreme Court.

30.06.2016

Custodian filed Affidavit in reply in MA 8 of 2016 falsely denying the allegations made against him and stated that he has always recovered the attached assets. That nothing prevented Applicants to recover their attached assets and Custodian’s office was not in existence when the transactions took place and therefore to expect the Custodian to file Recovery Application without any tangible evidence is preposterous and Custodian will extend all co-operation. The Custodian made following averments:

“I say that it is absolutely waste of time without any meaningful purpose to look at each and every order passed since 8th June 1992 and the principal relief is impracticable for compliance.  I however wish to say that this office has always been complying every order of this Hon’ble Court.”

23.12.2016

The Hon’ble Special Court passed an order in MA 8 of 2016 filed by Mehtas to seek compliance with all the previous orders passed by Hon’ble Special Court from 08.06.1992 onwards and strongly criticized the reply filed by Custodian on oath by Affidavit dated 30.06.2016 stating that “it is absolutely waste of time without any meaningful purpose to look at each and every order passed since 08.06.1992 and the principal relief is impracticable for compliance.” The Hon’ble Special Court criticized the choice of above words and observed that the reply dodges the main issue and directed Custodian to personally file on oath an Affidavit explaining the manner in which records are maintained or recoveries made and how the Custodian’s office is maintaining records of orders of the Court and their compliance. It was further directed that the Affidavit shall contain all details of how files are maintained in the Office of the Custodian and whether there is any audit of these records at any level.

12.01.2017

The Custodian filed Additional Affidavit in MA 8 of 2016 in compliance with order of Hon’ble Special Court dated 23.12.2016 and set out at length the statutory duties of the Custodian, organizational set up, major aspects of functioning of the Custodian, status of work including recoveries effected, maintenance of record, audit and overall recoveries. The Custodian tendered unconditional apology to the Hon’ble Special Court for the Affidavit dated 30.06.2016 filed before it. However, he has falsely stated that it has been the endeavor of the Office of the Custodian to ensure compliance with each order of Hon’ble Special Court in letter and spirit by proactive pursuance with all parties concerned like notified parties, companies, debtors, I.T. department, banks and others. The falsity of above statement got established by subsequent affidavits filed by the Custodian admitting that some of the orders passed in the year 1995 were yet to be complied with by the Custodian.

16.02.2017

The Hon’ble Special Court passed an order in Custodian Report 17 of 2016 in MA 72 of 2013 in respect of Fairgrowth Financial Services Ltd. (FFSL) and criticized the conduct of the Custodian by making the following observation in Paras 4 and 5 of its order as follows:

Para 4: I must note my extreme displeasure over the manner in which the office of Custodian is operating and functioning. I find that frivolous applications are filed every week and most of them are filed belatedly. In the present case, the application could have been filed alongwith the application which was filed in Misc. Petition No.274 of 1995. As a result of such frivolous applications, time of this Court is wasted and final distribution is protracted and prolonged. I get an impression that officers of Custodian are interested in keeping this Office open. Lacs of rupees are spent for payment of salary of the staff from the funds of Central Government and all Counsels are to be paid from the amount which has been collected by the Custodian, after lot of efforts are taken by the Special Court.

Para 5:  I direct the Custodian to instruct to his officers properly, otherwise this Court will have to issue summons to the Custodian to remain present in this Court and give an explanation why strictures should not be passed against him.

The above order conclusively establishes the allegations of Mehtas against the Custodian.

02.05.2017

The Hon’ble Supreme Court passed an order in CA 6326 of 2010 filed by Mehtas to challenge the third order of sale of their 8 residential flats in Madhuli Apts. passed by Special Court on 30.04.2010. It held as under:

1. The I.T. department handed a chart to Hon’ble Bench admitting that refunds of Rs.192.54 Crores were due to assessees and therefore the I.T. department was directed to pay the amount with interest @ 18% p.a. within 12 weeks. It was clarified that the order was passed having regard to the peculiar facts of the case and it shall not be treated as a precedent (Paras 2 to 4).

2. That 90 orders passed by Hon’ble ITAT directing the department to reframe the assessment by taking into account the evidence of books of account should be decided by AO within 12 weeks (Para 5).

3. Insofar as “group issue” is concerned, we find that it is covered against the appellants by this Court in Rasila Mehta Vs Custodian reported as (2011) 6 SCC 220 (Para 6).

4. Insofar as the flats in question are concerned, no steps including selling of the same shall be taken until final distribution is made by the Custodian (Para 7).

5. The status quo orders passed in 3 prior Civil Appeals stand vacated for amounts due and payable to banks, excepting Canfina of Rs.639.09 Crores directing payment of Rs.614.09 Crores to banks viz. SCB (Rs.506.53 Crores), SBI Caps (Rs.16.25 Crores) and SBI (Rs.91.31 Crores) (Paras 8 and 9).

 
Thus, the sale of Madhuli flats ordered by the same Judge of the Special Court 3 times was set aside and the assets and liabilities picture presented by the Custodian was rejected and an opportunity was given to Mehtas to contest the false claims made on them by I.T. department. The I.T. department which had not complied with 90 orders of Hon’ble ITAT for 12 years by rejecting the books of accounts were directed to comply with these orders and determine the income after taking into account this evidence.

08.05.2017

The Hon’ble Supreme Court amended its above order dated 02.05.2017 to include a direction on Custodian to recover the attached assets of Mehtas. However, these directions have not been complied with by the Custodian during past 5 years as vast quantities of attached assets of a minimum of Rs.5000 Crores still remain pending to be recovered by the Custodian.

10.06.2017

Shri Ashwin Mehta addressed a letter to the Custodian in respect of proceedings in CA 6326 of 2010 to put on record the facts that the Advocate representing the Custodian before Hon’ble Supreme Court on 02.05.2017 had conceded that the claim of interest of Rs.15,898.86 Crores of the Income Tax department was not liable to be included in the liabilities. The Custodian was requested to instruct his office not to include the claims of interest included by the Income Tax department in the liabilities of Mehtas.

28.06.2017

The Hon’ble CIT(A) passed an order in case of late Shri Harshad Mehta for AY 1992-93 and granted the relief of deletion of about 60.86% of the additions. The AO had assessed the income at Rs.2346.23 Crores but the Hon’ble CIT(A) deleted additions of Rs.1427.99 Crores and for the residual additions an appeal was preferred before Hon’ble ITAT. The Hon’ble CIT(A) has criticized the conduct of the department for not extending any co-operation and for failing to file any Remand Reports as sought for for from the department (Paras 7, 24.22, 25.7, 27.4).

25.07.2017

The revenue refunded a sum of only Rs.329.71 Crores to Custodian on behalf of Mehtas in compliance with the order of Hon’ble Supreme Court dated 02.05.2017 but underpaid a sum of Rs.453.84 Crores for which an Application seeking clarification and direction has been filed by Mehtas before Hon’ble Supreme Court.

31.08.2017

Mehtas have filed before Hon’ble Supreme Court MA 1007 of 2017 in CA 6326 of 2010 to seek clarification and direction on the I.T. department to pay interest @ 18% p.a. as directed under order dated 02.05.2017 for the entire period for which the monies were secured and enjoyed by the department since it underpaid an amount of Rs.453.84 Crores to Mehtas.

28.09.2017

The Assessing Officer passed an Order Giving Effect (OGE) for the reliefs granted by Hon’ble CIT(A) to late Shri Harshad Mehta for AY 1992-93 and substantially deleted the interest levied earlier under various sections of the Income Tax Act and further stated that reliefs granted under Ground Nos.6, 8, 10, 13 and 17 were subject to verification and accordingly demand of Rs.1607.38 Crores was raised u/s 156 of the Income Tax Act.

03.11.2017

The Hon’ble Special Court passed a combined order in MA 205 of 2003 and upon grievance made by the banks and HSM the Advocate representing the I.T. department after taking instructions from AO stated that all Orders Giving Effect (OGEs) which are now pending will be passed and communicated within a period of 4 weeks.

That now for past 5 years the above order remains pending to be complied with as several Orders Giving Effect (OGEs) remain pending to be passed since 2013 onwards and in one case for order dated 24.03.2000 in gross violation to CBDT Circular dated 07.10.2015.

08.12.2017

The Hon’ble Special Court passed a combined order in MA 205 of 2003 recording the grievance of banks and HSM that the AO had passed OGE without giving effect to large number of reliefs granted by Hon’ble CIT(A) under his order dated 28.06.2017. The Advocate for I.T. department stated that although certain grounds were allowed by CIT(A), verification has not been entirely carried out before arriving at the amounts referred to in the computation and therefore the Notice of Demand did not reflect the correct amount. The Advocate therefore sought time to obtain further instructions. The AO was directed to disclose on affidavit the verification carried out thus far by him before 5th January 2018.

15.12.2017

The Hon’ble Special Court passed an order in MA 8 of 2016 recording the status of pending compliance by Custodian of the orders of Hon’ble Special Court which was disputed by notified entities. The Advocate for Custodian stated that Custodian’s office will continue to complete pending tasks to ensure compliance with the orders and co-ordinate with the Applicants Advocate. The Custodian’s office was directed to provide photocopies of relevant proof of compliance and all communication received from third parties would also be provided to the Applicants.

04.01.2018

The AO filed a combined affidavit in MA 205 of 2003 to make compliance with the order of Hon’ble Special Court dated 08.12.2017. That in the OGE dated 28.09.2017 to give effect to the order of CIT(A) dated 28.06.2017 in case of HSM, major relief was given by CIT(A) on the issue of interest of Rs.7904.83 Crores and accordingly the demand had come down from Rs.9512.21 Crores to Rs.1607.38 Crores. The AO admitted that he had not given effect to other reliefs granted by Hon’ble CIT(A) and the needful would be done at the earliest.

22.01.2018

Mehtas addressed a letter to Custodian forwarding a combined order passed by Hon’ble ITAT on 27.12.2017 in respect of 21 cases relating to 8 notified entities amongst Mehtas wherein after several years of litigation and opposition by the department the Hon’ble Tribunal concluded that all the family members and corporate entities promoted by Mehtas had availed interest bearing loans from the 3 brokerage firms of M/s. Harshad S. Mehta, M/s. Ashwin Mehta and M/s. J.H. Mehta carrying interest @ 12% p.a. and overruled the orders passed by AO and CIT(A) rejecting the expense of interest claimed on the said loans. This order has become final since it has not been challenged by the I.T. department and therefore is binding on the Custodian and Hon’ble Special Court and the ‘Harshad Mehta Group’ theory stands demolished. It is well settled law that ITAT is the last fact finding body and the findings given by it cannot be disturbed even by Hon’ble Bombay High Court and Hon’ble Supreme Court unless it is proved that the finding is perverse.

02.05.2018

The Assessing Officer passed a rectification order u/s 154 of the I.T. Act to the previous OGE dated 29.09.2017 and after verification reduced the assessed income from Rs.2346.32 Crores to Rs.1143.38 Crores (reduced by 51.27%). Fresh Demand Notice of Rs.2324.55 Crores was raised u/s 156 of the I.T. Act by levying higher interest than what the provisions of the I.T. Act permitted  and therefore for the residual additions an appeal was filed before Hon’ble ITAT.

19.10.2018

Mehtas addressed a letter to the AO calling upon him to give effect to the order of Hon’ble ITAT dated 27.12.2017 wherein reliefs were granted in 21 cases by allowing the expense of interest which was not being allowed by the department for more than 2 decades and the net effect of which would bring down the demands of revenue very sharply in respect of the concerned entities. Grievance was made that OGE was not being passed by the AO despite passage of 10 months in violation of Sec.240 of the I.T. Act in terms of which the AO was required to give effect to the orders of relief even without the assessee seeking the same. The copies of the letters were also marked to the Custodian with a request to secure the revised picture of demands after the above reliefs. That till date the above OGEs have not been passed by the AO to deny the benefit of reliefs secured by Mehtas and to inflate the demands on Mehtas.

19.10.2018

Mehtas addressed 2 letters to AO’s to make grievance that they had failed to give effect to 39 + 20 orders of relief passed by Hon’ble ITAT directing the AO to re-compute levy of interest u/s 234B of the I.T. Act and provided them with complete particulars of such orders of relief which were passed from 2013 onwards and also provided the AO with the copies of orders of Hon’ble ITAT. It was clearly conveyed that when effect is given to the aforesaid relief the demands will fall down sharply in all 59 cases. The copies of the letters were also marked to the Custodian with a request to secure the revised picture of demands after the above reliefs. That till date the above OGEs have not been passed by the AO to deny the benefit of reliefs secured by Mehtas and to inflate the demands on Mehtas.

14.01.2019

The Hon’ble Tribunal passed a combined order in Appeals filed by Mehtas and revenue in the largest cases of late Shri Harshad Mehta, Shri Ashwin Mehta and Smt Jyoti Mehta for the crucial period of AY 1992-93 and in case of Shri Ashwin Mehta for AY 1993-94. This was the third round after revenue had not made compliance with the previous two orders of Hon’ble ITAT dated 11.07.2008 and dated 29.10.2014 in case of Harshad Mehta for AY 1992-93. The Hon’ble ITAT after examining the facts and true legal position quashed the assessment orders in case of late Shri Harshad Mehta and Shri Ashwin for AY 1992-93 thereby granting 100% relief. That even on merits, the reliefs were granted by deleting more than 98% of the additions in all the 3 cases pertaining to AY 1992-93 and the particulars of relief are given in enclosed charts. That due to the above order false demands of thousands of crores have been deleted and huge refund have become due of Rs.3803.90 Crores in case of late Shri Harshad Mehta, Rs.716.86 Crores in case of Shri Ashwin Mehta and Rs.623.97 Crores in case of Smt Jyoti Mehta for AY 1992-93. That against the above, the I.T. department has given refund of only Rs.476.64 Crores in case of Smt Jyoti Mehta and in case of others now for more than 3 years neither the Order Giving Effect (OGE) is passed nor refund offered since the department wants to illegally retain and enjoy the amounts to which it is not entitled to. The Hon’ble Supreme Court while laying down the law in Harshad Mehta’s case would have foreseen the above conduct of the I.T. department and therefore had clearly laid down that until the demands of I.T. department become final and binding no monies should be released to it and further laid down that the liability to pay tax should be reckoned only when date of distribution arrives which arrives after examination of all the claims u/s 9A of the Torts Act. In gross violation of above law the two organs of the “State” viz. the I.T, department and the Custodian acting in collusion with it secured release of Rs.3285.46 Crores in favour of the department though Hon’ble Supreme Court had expressly directed recalling of Rs.193.71 Crores released to the department under the interim relief granted to it under order dated 26.08.1996 well before the law was finally laid down. The Torts Act and its objects have been consciously subverted by the I.T. department and the Custodian. During these years several false and misleading applications and affidavits have been filed by the I.T. department in proceedings before Hon’ble Special Court and even supported the Harshad Mehta Group theory illegally canvassed by the Custodian for its benefit despite the fact that the I.T. Act does not provide for recovery of dues of “A” from “B”. The losses of Rs.20,677.27 Crores suffered by Mehtas by premature and illegal sale of their shares is directly attributable to the illegalities consciously committed by the I.T. department and Custodian.

12.02.2019

Smt Jyoti Mehta addressed a letter to the Assessing Officer with a copy marked to the Custodian requesting him to issue Order Giving Effect in case of late Shri Harshad Mehta for AY 1992-93 in respect of order passed by Hon’ble ITAT on 14.01.2019 and also lodged the claim for refund of Rs.3803.90 Crores. The Custodian was requested to secure refund of the above amount from the I.T. department. The department has filed several affidavits before Hon’ble Special Court that refund is governed by Sec.240 of the I.T. Act but even the said section is now not complied with by the AO for more than 3 years. According to Mehtas, since the monies were released to I.T. department under the Torts Act they ought to have been returned immediately upon deletion of the demands.

09.04.2019

The Hon’ble Supreme Court passed an order in CA 6416 of 2005 and set aside the order of sale of the property passed by the Special Court. The Hon’ble Supreme Court examined its earlier judgment in the case of Harshad Mehta Vs Custodian reported as (1998) 5 SCC 1 and accepted the contention of the Appellant that what is recoverable under the Torts Act is only the taxes and not interest and penalty in view of answer to Question No.5 in the said judgment. It further clarified that only in case penalty or interest is found to be recoverable, the Special Court would examine whether out of the monies lying with the Custodian, the amount should be released towards the penalty and interest. In case of Mehtas, the Custodian has been illegally including all claims of interest and penalty in the liabilities and on that basis selling their assets and caused losses of thousands of crores to them even before any decision is taken by the Special Court whether any such claims of interest and penalty are liable to be met at all out of the assets with the Custodian.

09.08.2019

The Hon’ble Special Court passed a combined order in MA 81 of 2013 and other refund applications filed by Mehtas. It was urged that refund of about Rs.625 Crores had become due to Smt Jyoti Mehta to which the Advocate of I.T. department responded that refund order has already been issued for Rs.472 Crores and therefore that would leave a difference between the two amounts for argument. The Advocate stated that refund of Rs.472.58 Crores will be credited to the account of Smt Jyoti Mehta with Custodian on or before 28th August 2019. The Hon’ble Court directed the Applicants and the department to hold meetings to ascertain all facts relating to refunds to narrow the gap. As per Mehtas it is the Hon’ble Special Court and Hon’ble Supreme Court which has to decide the issue of the rate of interest applicable on the monies released to the department and which rate has been decided at 18% p.a. by Hon’ble Supreme Court in its order dated 02.05.2017 but yet the department is refunding the monies with interest computed @ 6% p.a. in order to underpay Mehtas.

30.08.2019

The Hon’ble Special Court passed a combined order in MA 81 of 2013 and other refund applications filed by Mehtas. The Advocate of the department stated that there was some delay in making the refund of Rs.472.58 Crores on account of the new software and he undertook that the amount will be paid on or before 10.10.2019.

27.09.2019

Revenue made a refund to Custodian on behalf of Smt Jyoti Mehta of Rs.476.64 Crores for AY 1992-93 though according to her, refund of much larger amount is due for which the true amounts will be recoverable under order of Hon’ble Special Court and Hon’ble Supreme Court. Department has underpaid by offering interest @ 6% p.a. as explained earlier.

11.10.2019

The Hon’ble Special Court passed a combined order in MA 81 of 2013 and other applications seeking refund from the I.T. department. That in compliance of the statement made, the department made a payment of Rs.476.64 Crores to Custodian as refund to Smt Jyoti Mehta for AY 1992-93 pursuant to the reliefs granted by Hon’ble ITAT in its order dated 14.01.2019 on the grievance made that large sums are due even in other cases but refund is not being made. The Advocate representing the department gave an assurance to the Court that “whatever is due in accordance with law will be paid.” However, despite the above assurance given by the I.T. department no refunds have been offered in the largest cases now for more than 2½ years by the I.T. department in case of late Shri Harshad Mehta, Shri Ashwin Mehta and several other orders passed in case of their family members and corporate entities promoted by them.

18.10.2019

The Hon’ble Bombay High Court passed a combined order in Notice of Motion and Income Tax Appeal to challenge the order of Hon’ble ITAT dated 14.01.2019 in case of late Shri Harshad Mehta and Shri Ashwin Mehta. The Notice of Motions were filed to seek a stay on the above order of Hon’ble ITAT. It was urged by Addl. Solicitor General on behalf of the department that the urgency in moving the application for early hearing of the Appeals and stay is that “under the statute they are obliged to give effect of the impugned order of the Tribunal by giving refund on or before 21.10.2019. However, the Hon’ble Court held that the Motions will require consideration as the same is opposed and time to pass the OGE to the order of ITAT was extended upto 14.11.2019.

27.11.2019

The Hon’ble Bombay High Court passed a combined order in Notice of Motion and Income Tax Appeal filed by the I.T. department to challenge the order of Hon’ble ITAT dated 14.01.2019. The Hon’ble Court directed expeditious hearing of appeal filed by the department. It was urged by the department that if the appeals are not heard early, revenue would be obliged to refund to the Respondents huge amounts. On the Notice of Motion and stay on the order of ITAT the Hon’ble Court held that it would be appropriate to hear them along with the appeals which have been expedited and the prayer for stay would be considered along with the appeals at the time of admission and the same would only arise if the appeals are admitted and the time to pass OGE was extended till 15.01.2020. That for past more than 2 years the I.T. department has neither passed the OGE nor offered refund and even not applied before Hon’ble Bombay High Court seeking extension of time to pass OGE and make the refund.

13.12.2019

Revenue made a refund to Custodian on behalf of Ashwin Mehta of Rs.7.98 Crores for AY 1993-94 though according to him, refund of much larger amount is due for which the true amounts will be recoverable under order of Hon’ble Special Court and Hon’ble Supreme Court.

22.01.2020

The Principal Commissioner of Income Tax (PCIT) passed an order u/s 263 of the I.T. Act in the case of Harshad Mehta for AY 1992-93 and thereby reversed the reliefs granted to the assessee after due verification by the AO in respect of the 5 additions amounting to Rs.1094.17 Crores. Being aggrieved, the said order was therefore challenged before the ITAT by Smt Jyoti Mehta. The PCIT incorrectly invoked his powers after the Hon’ble ITAT had already quashed the assessment order and on merits also upheld the order of Hon’ble CIT(A) dated 28.06.2017 and in fact granted further reliefs  only in order to somehow nullify the reliefs granted to HSM by the appellate authorities. Being aggrieved, the said order was therefore challenged before the ITAT by Smt Jyoti Mehta.

11.03.2020

The AO passed an Order Giving Effect (OGE) to the order passed by the Principal Commissioner of Income Tax passed u/s 263 of the I.T. Act on 11.03.2020 raising the Demand Notice of Rs.6357.12 Crores while not passing the OGE in favour of late Shri Harshad Mehta for AY 1992-93 to the order of Hon’ble ITAT dated 14.01.2019 where the assessment order itself has been quashed and set aside and where it was extremely easy to pass the OGE. This OGE has been illegally withheld since the same leads to deletion of illegal demands of the I.T. department of thousands of crores and to hold back and to illegally enjoy the funds and an amount of about Rs.4500 Crores which are refundable to HSM.

26.04.2020

This day Smt Rasila Mehta expired in the afternoon in the presence of family members at an age of 84 years after suffering  from prolonged illness and being completely bed-ridden and undergoing dialysis. Just the previous night, she expressed her extreme concern with the difficulties that the family was facing because of enormous delay in securing justice and despite having a huge asset base in her own name she felt completely helpless. She was very keen to spend a part of her wealth while being alive but after waiting for almost 3 decades she atleast drew her Will albeit in respect of her attached assets. Despite being a very senior citizen and even after filing 2 applications before Hon’ble Supreme Court seeking urgent and early hearing of her appeals which were granted but yet no hearing of her Civil Appeals ever got fixed and our family has deepest regret that we could not secure justice to her in her lifetime. She was a very poor girl, born in a very small village and lost her father before her birth. Her widow mother and 7 sisters were virtually adopted by a village neighbour and she suffered widowhood for 39 years out of life of 84 years besides suffering poverty until she got married. Smt Rasila Mehta was a pillar of strength and a beacon to the family and couple of her pictures are enclosed.

23.06.2020 and 30.06.2020

The Hon’ble Special Court passed orders in MA 4 of 2020 filed by Smt Jyoti Mehta to seek recovery of 10,72,260 shares of Reliance Industries Ltd. (RIL) which were deliberately not recovered by the Custodian since 1993 onwards and the said shares were incorrectly transferred to “Custodian Government of India A/c.” though they were already declared to be the property of Smt Jyoti Mehta. The subject shares which includes the rights shares now stand recovered presently valued at Rs. 284.67 Crores because of ceaseless efforts made by Smt Jyoti Mehta to recover the attached property.

07.10.2020

The Custodian addressed a letter to the I.T. department in respect of assets and liabilities and called upon the department to clarify whether the status of demands furnished by the department to make disbursements made under the orders of Hon’ble Courts and also after giving effect to the orders of ITAT and CIT(A). That the Custodian had written 15 letters to the department as reminders to their letters dated 22.05.2018 to furnish the latest position of demand in case of Mehtas which was not being made available. That letters were also addressed to AO by the notified entities in regard to Demand Notices.

26.03.2021

The Hon’ble ITAT passed an order in case of late Shri Harshad Mehta for AY 1992-93 in respect of challenge by Smt Jyoti Mehta to the order passed by PCIT u/s 263 of I.T. Act on 22.01.2020 in which the reliefs granted to Shri Harshad Mehta had been reversed by him under his order by Rs.1094.17 Crores. The Hon’ble ITAT quashed the order passed by PCIT and strongly observed as under:

1. That the Ld. AO after due verification of all issues and contentions raised by the assessee passed an order on to 02.05.2018 (Para 3.6).

2. The assessment order dated 15.03.2016 and the first appellate order dated 28.06.2017 got merged with the Tribunal order dated 14.01.2019 before passing the order by PCIT (Para 3.7).

3. Apart from quashing the assessment order dated 15.03.2016 the Tribunal had granted reliefs even on merit which fact is mentioned in the order of PCIT (Para 3.10).

4. The order of AO dated 02.05.2018 was not eligible for revision u/s 263 of the I.T. Act since it was an OGE passed to give effect to the order of CIT(A) dated 28.06.2017 and Sec.263(1) was inserted with the purpose that judicial hierarchy must be maintained and the junior officer should not brush aside the decision of superior or the appellate authority on the subject matter which had been duly considered and decided by it (Para 3.12).

5. That the operation of order of Tribunal had not been stayed by Hon’ble High Court and the subject matter of issues in the revision proceedings were already considered and decided by Ld. CIT and by the Tribunal and thus jurisdiction was incorrectly invoked (Para 3.12).

6. That the order of AO dated 02.05.2018 was not even in existence after the assessment order was quashed but this fact was conveniently ignored by the Ld. PCIT and therefore his order was liable to be quashed (Para 3.13).

7. That the finding given by the PCIT that the AO had not carried out proper inquiries was incorrect (Para 3.14 to 3.19).

8. The action of the PCIT was grossly unsustainable in the eyes of law. At best, the Ld. PCIT could have only directed the AO to conduct enquiries even if he was of the opinion that he enquiries were not carried out properly (Para 3.19).

9. The entire action of the Ld. PCIT goes to prove that the issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out by the Ld. AO, improperly applying provisions of Explanation 2 of Sec.263, not respecting the judicial hierarchy by ignoring the order of the Tribunal dated 14.01.2019 which has already quashed the assessment order dated 15.03.2016 and also granted relief on merits on each of the 5 issues that was subject matter of revision proceedings thereby proving his high-handedness (Para 3.19).

10. That for the detailed observations the order of PCIT was quashed and grounds raised by the assessee were allowed (Para 3.2).

In the above manner, the department is repeatedly subjecting a deceased assessee and his wife to ‘tax terrorism’ of the highest order completely disregarding the law of the land. Even after losing the above order, no steps have been taken by the department to pass the OGE for the order of Hon’ble ITAT dated 14.01.2019 nor offered refund to the Custodian almost of about Rs.4500 Crores after making Harshad Mehta and his whole family suffer false demand of several thousand crores raised from March 1995 onwards.

03.04.2021

Smt Jyoti Mehta addressed a letter to AO calling upon him to pass Order Giving Effect (OGE) in respect of both order of Hon’ble ITAT dated 14.01.2019 and order of Hon’ble ITAT dated 26.03.2021 against the order passed u/s 263 of the I.T. Act by the Principal Commissioner of Income Tax. It was pointed out that the AO was quick to raise the Demand Notices and passed OGEs in the subsequent proceedings but was deliberately not passing the OGEs in respect of those appellate orders where late Shri Harshad Mehta was granted substantial reliefs for AY 1992-93 and this grievance was supported by conclusive evidence.

12.04.2021

The legal heirs of late Shri Harshad Mehta and late Smt Rasila Mehta filed MA 15 of 2021 before Hon’ble Special Court inter alia to seek reliefs of Rs.3 Crores each from the account of the above deceased to pay to Shri Ashwin Mehta for defending the legal interest of late Shri Harshad Mehta and late Smt Rasila Mehta in proceedings before Hon’ble Special Court, before the appellate authorities under the Income Tax Act, before Hon’ble Bombay High Court and before Hon’ble Supreme Court. In the alternative, it was prayed to release a sum of Rs.1.5 Crores from attached accounts of Smt Jyoti H. Mehta, Shri Ashwin Mehta, Dr. Hitesh Mehta and Shri Sudhir Mehta.

 
This application was filed on the basis that each of the above entities have now established a clear surplus of assets over liabilities and therefore they are entitled to the benefit of law laid down by Hon’ble Special Court in its judgment dated 12.02.1996 in MA 215 of 1995 in terms of which a notified person having surplus assets can spend any amounts on engaging services of Advocates and Counsels. It was also urged that the deceased cannot defend their legal interest and therefore the legal heirs wanted to contest the false claims made on them by the I.T. department and the banks and also wanted to recover vast quantities of their attached assets still lying in the hands of third parties amounting to thousands of crores as they were deliberately not being recovered by the Custodian for past about 30 years including in several cases where the Hon’ble Court had already directed the Custodian to do so.

It was urged that the Mehtas had already brought down the claims of revenue from Rs.30,000 Crores to Rs.4,000 Crores and succeeded and secured refund to the Custodian of Rs.814.33 Crores and a further refund of Rs.5500 Crores was already overdue for more than 3 years. That Smt Jyoti Mehta had already succeeded in bringing down the claim of SBI by more than Rs.1500 Crores and she is already contesting false claims of the banks. The Custodian was opposing the efforts as it exposed his patently illegal conduct by abusing his powers and position. That there was a huge change in the position in favour of the Applicants between their previous Application made in 2013 and the present Application.

22.09.2021

The Custodian filed Affidavit-in-reply to oppose MA 15 of 2021 on the ground that liabilities far exceeds the assets and that the Income Tax department and banks ought to have been joined as a party who would be affected. That notified entities should pay from their future income and details had not been provided to substantiate the figures. That attached assets can only be released as per Sec.11(2) of the Torts Act and the present application could be considered only u/s 11(2)(c) at the stage of distribution. That earlier this issue was considered more than once and therefore the application ought to be dismissed and allegations against the Custodian were denied. That the Applicants were liable to be treated as members of Harshad Mehta Group as already confirmed by Hon’ble Supreme Court.

02.12.2021

Mehtas addressed a letter to the Disposal Committee and the Custodian making a grievance about sale of shares being effected in case of several entities in violation of law laid down by Hon’ble Special Court in Harshad Mehta’s judgment as also the scheme governing sale of shares and well-settled law that no assets should be sold if there are no liabilities to be met. Besides above, it was urged as follows:

1. Because of 1200 orders of reliefs the false demands of revenue had already come down from Rs.30,000 Crores to about Rs.4000 Crores which would not survive after the balance appeals are heard. The Custodian had already received refund of Rs.814.33 Crores from the IT department and further refunds of more than Rs.5500 Crores were overdue.

2. That all claims u/s 11(2)(a) and 11(2)(b) of the Torts Act had already been met even though they were disputed and the Hon’ble Special Court had not specified any claims to be met u/s 11(2)(c) of the Act. On account of monies already released of Rs.3285.46 Crores to IT department and Rs.1716.07 Crores to banks large amounts will become refundable. Even otherwise from the refunds, recoveries of attached assets and the existing balances further claims can be easily met without selling any shares.

3. That Hon’ble Supreme Court in Para 35 of its judgment in the case of Jyoti Mehta vs. Custodian reported as (2009) 10 SCC 564 had already held that the notified entities have a special knowledge of facts relating to their assets and liabilities and always show how the liabilities would be met and how the projected liabilities were incorrect.

4. That investment in shares had always generated superior returns and huge losses were already suffered because of premature sale of shares earlier and just as Hon’ble Supreme Court had prevented sale of the only residential premises, the sale of shares should also be stopped. That monies realised from sale of shares were being deployed in Fixed Deposits earning very low rate of interest.

5. That the future of the country was extremely bright and India was a favourite destination for investments as widely felt.

10.12.2021

The Applicants filed their Affidavit-in-rejoinder to the Affidavit-in-reply filed by the Custodian in MA 15 of 2021 and denied the contentions of the Custodian and adduced further facts and evidence in support of the reliefs prayed for by them. It was strongly urged that the Custodian on one hand was not discharging his statutory duties of contesting false claims and recovering their attached assets and on the other hand did not want even Mehtas to defend their interest and take corrective steps for the deliberate failures of the Custodian who was acting in collusion with the creditors and several third parties who were holding their attached assets.

19.04.2022

Mehtas addressed a letter to Custodian once again making a grievance about grossly incorrect assets and liabilities picture being presented by the Custodian in violation of law laid down in Harshad Mehta’s judgment as also the provisions of Sec.11(2)(c) of the Torts Act. Once again detailed submissions were made to the Custodian to explain the aforesaid violations with a request to present the correct picture.

13.04.2022

The Custodian addressed a letter to I.T. department to furnish the latest picture of demand and in all 18 letters were addressed to the department from 26.02.2018 on this issue but for more than 4 years the department is neither passing OGEs nor issuing refunds as also not supplying the latest picture of demands which has fallen very steeply to deny the reliefs to Mehtas which they had secured from the appellate authorities after suffering false additions of thousands of crores for 28 years. The list providing the details of the letters is enclosed.

06.05.2022

The Hon’ble Special Court passed its order in MA 15 of 2021 rejecting the reliefs prayed for by Mehtas particularly disbelieving their contentions about surplus of assets over liabilities and without adequately dealing with their contentions that the assets and liabilities picture presented by the Custodian was in gross violation of the law laid down by Hon’ble Supreme Court in the case of Harshad Shantilal Mehta Vs Custodian reported as (1998) 5 SCC 1. The Hon’ble Special Court did not record and deal with all the contentions of the Applicants and failed to appreciate the positive role already played by them in achieving the objects of the Torts Act as the progress made by them was a matter of record. That because of the steps taken by Mehtas the false claims of the I.T. department had fallen by more than Rs.25000 Crores, the claims of banks had fallen by more than Rs.1500 Crores and attached properties lying in the hands of third parties of more than Rs.2500 Crores were recovered by them and several applications for such recovery were still pending before the Hon’ble Court. The Hon’ble Special Court concluded that the Applicants should not repeatedly approach the Hon’ble Special Court seeking the same relief and also directed Applicants to file such Applications only after first seeking the approval of the Hon’ble Court and directed Registry that it shall not accept any Application of attached assets for payment of fees without the leave of the Court.