The Special Court (set up under the Special Court Act of 1992) has ordered the custodian appointed by it to release a sum of Rs 650 crores from the liquidated assets of the Harshad Mehta group of entities against pending claims by various entities. These entities are:
- Income Tax Department: Rs 28 crore
- Standard Chartered Bank: Rs 346 crore
- State Bank of India: Rs 260 crore
- SBI caps: 16 crore
The payments are to be released on an interim basis on undertakings provided by the receiving entities that the amounts will be brought back to the custodian, if so ordered by the Special Court.
Earlier this year, in March, a similar release of Rs 2,200 crore (Rs 2,000 crore to the Income Tax Department and Rs 200 crore to the SBI) had been made. In ordering the release, the Special Court has taken into account the priorities of claims laid down under Section 11 of the Special Court Act, placing primary liabilities of income tax above the claims of other entities (banks and financial institutions).
What is the Special Court?
In 1992, the Parliament passed the Special Court Act for the trial of offences relating to transactions in securities. It comprises of sitting HC judges at Mumbai. The objective of setting up the Special Court was to recover the huge sums of money that the banks had lost, so that public faith in the financial system could be restored. Any appeal against the order of this Special Court can be made to the Supreme Court only.
Who is the Custodian?
Under the Special Court Act, the custodian has been appointed as the principal administrative officer with the key responsibilities of attaching, managing and liquidating of the assets of the notified entities.
Who was Harshad Mehta?
Harshad Mehta was the main suspect in the securities scam of the early 1990s, which shook the stock exchanges of India extraordinarily. In 2001, he died while still being tried for charges of stock-price manipulation cheating and forgery, which allegedly led to losses of billions of rupees to banks and financial institutions.