Sc To Review Order On Special Court

The Supreme Court yesterday decided to review its own earlier order on the powers of the special court on securities, following an appeal by Harshad Mehta.

The bench referred the question raised by Mehtas counsel, Ram Jethmalani, to a larger bench as there were doubts over the 1995 ruling of Justice A M Ahmadi and Justice S P Bharucha. The old ruling stated that the special court had no power to sit in appeal over or overrule the orders of tax authorities, income tax tribunals and other bodies. Its only power is to determine priorities of payment under Section 11 of the Special Court Act. It could not determine the validity or reasonableness of assessments.

 

The special court had claimed that while deciding the priorities for payment under Section 11, the exercise would be defeated if it could not go into the bonafides of the claim made by the tax or other authorities. Therefore, it stated that the claims would have to be looked into. It also observed that the notified persons were entitled to show to it that the claims were unreasonable. The tax authorities, who wanted release of some Rs 3,000 crore from the Custodian, argued that the special court could not claim such powers. On the other hand, counsel for Mehta said that the liabilities of notified persons have not been ascertained and become due.

In fact, the assessment made by the authorities have been reduced by 90 per cent by the appellate authorities. In this context, it was only the special court which was competent to go into the question whether the assessment was proper or not.

The Supreme Court observation in the 1995 case was incorrect and required a second look, counsel argued. The court then referred the question to a larger bench to be constituted by the Chief Justice.