This June will mark 20 years of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, which was legislated in the aftermath of the 1992 securities scam. HT spoke to Satish Loomba, Custodian, appointed by the Centre, who is the principal administrative authority under the Act, to take stock.
To what extent has this Act been able to achieve its objectives?
Other than the fact that this Act has succeeded in recovering large amounts of money lost by the banks and financial institutions in the securities scam of 1992, its enactment and subsequent working, is a very good example of how the legislature, judiciary and the executive came together to deal with a situation which required urgent redressal.
How much has been recovered?
Custodian has so far distributed over Rs5400 crore of which nearly Rs3800 crore has gone to income tax and the rest to banks, FIs and others. Though the objective of the Act was to recover monies lost by the banks and FIs, the actual prioritisation laid in the statute gives precedence to revenue.
How much more money is expected to be recovered?
The process of liquidation of attached assets and unearthing of more assets belonging to notified parties, through the prescribed judicial process, is still on, and along with the monies already available, this aggregate represents a significant fraction of the amounts already disbursed.
Why has it taken 20 years to achieve these results?
For anybody familiar with the work of such dimensions, this is not a long period at all. The Act prescribes a transparent procedure for the notification, attachment and liquidation of assets, determination of claims and liabilities against the notified parties and actual distribution to their creditors, carried out under the orders of the Special Court established for this purpose, with appellate jurisdiction only with the Supreme Court. The Act first faced constitutional challenges after which the problems in attachment, management and liquidation of movable and immovable property, audit of accounts, assessment of IT liabilities, settlement of disputes and claims had to be contended with, for obtaining final distribution orders from the courts, after due process of long and intense litigation. In fact a large chunk of the distribution is interim and tentative in nature pending final settlement by the courts.
What's the status of the job?
Out of the 70 entities which were notified, 27 have been de-notified. Of the remaining 43, 27 entities belong to the Harshad Mehta Group. Recoveries of over R4,000 crore have already been made from this group and the time taken for remaining work will depend on whether or not we are allowed to treat these entities as a single group.
How long will this take?
I cannot say. The matter is subjudice.
What will be your key takeaway from this assignment?
One, just because an issue recedes from centrestage, it is no less important. Two, things can always go wrong, even in the best of situations. What's crucial is how effectively a system can respond with corrective measures. The privilege of a separate legal entity is a construct of modern law that the state confers to all individuals, but only as long as we use it properly.