ABSTRACT:
The Harshad Mehta case, occurring in the early 1990s, is a significant financial scandal in India’s history. Harshad Mehta, a stockbroker, orchestrated a scheme termed “The Big Bull Run” to manipulate the Indian stock market. Exploiting loopholes in the banking system, Mehta diverted funds and inflated stock prices.
The modus operandi involved leveraging bank receipts and engaging in extensive share price manipulation, particularly on the Bombay Stock Exchange. This led to a surge in stock prices, creating an exuberant market environment known as the “Bull Run.”
The exposure of Mehta’s fraudulent activities triggered a chain reaction, causing a substantial downturn in the stock market. The aftermath of the scandal resulted in financial instability, investor losses, and regulatory reforms aimed at enhancing oversight and transparency in India’s financial markets.
The Harshad Mehta case highlighted vulnerabilities and shortcomings in India’s financial system, prompting a reassessment of regulatory mechanisms and enforcement practices. It serves as a cautionary tale, emphasizing the need for robust oversight, transparency, and accountability in financial markets to prevent such abuses in the future.
ISSUES:
The Criminal Procedure Code of 1973 (referred to as ‘the Code’) outlines the establishment of criminal courts, including special courts for specific offenses. In the case of offenses relating to securities transactions, the Special Court (Trial of Offences Relating to Transactions in Securities) Act of 1992 (‘the Act’) was enacted.
The Act came into being due to significant irregularities and malpractices noticed by the Reserve Bank of India in securities transactions. These malpractices involved collusion between brokers and financial institutions, resulting in the diversion of funds and undermining confidence in the financial system.
The Act aims to address these issues swiftly by establishing a Special Court to try offenses related to securities transactions. It seeks to ensure the speedy recovery of misappropriated funds, punish those responsible, and restore confidence in banks and financial institutions.
The Act outlines specific procedures for the Special Court, including provisions related to granting pardon to accused individuals. One key question is whether the pardon provisions of the Code apply to proceedings before the Special Court under the Act.
In a related case, the issue of a magistrate’s power to grant pardon for offenses falling under the Act was raised. Counsel have been invited to provide arguments on this matter.
The critical question is whether the Special Court established by the Act has the power to grant pardon or if this authority has been explicitly denied. This clarification is essential to understand the scope of the Act and the powers vested in the Special Court.
PETITIONER’S ARGUMENT:
The appellants filed applications before the Special Court on January 9, 1996, seeking to revoke the pardon granted to Prabhu and Chaudhury. They argued that the pardon was void because the Special Court lacked the jurisdiction to grant it. They contended that the power to grant pardon must be expressly given, and since no such power was conferred on the Special Court, it couldn’t grant pardons.
Mr. Jethmalani, the appellants’ counsel, argued that Sections 306 and 307 of the Code, which deal with pardon, do not apply to the Special Court under the Act. He pointed out that the Act does not provide for the Special Court to receive cases committed to it, which is a prerequisite for the application of Sections 306 and 307. Therefore, he argued, the Special Court has no authority to grant pardons.
Mr. Jethmalani further argued that simply giving the Special Court the power to grant pardons isn’t enough without also giving it the power to punish those who violate the terms of the pardon. He claimed that the Act does not confer such power on the Special Court, indicating that it also lacks the power to grant pardons.
He suggested that the omission of provisions similar to those in earlier enactments, which granted specific powers to grant pardons and punish violations, from the Act indicates the legislature’s intention not to confer such power on the Special Court.
Mr. Jethmalani also mentioned the doctrine of implied repeal, arguing that since the Code is a general law and the Act is a later special enactment, the doctrine should apply, although he acknowledged that there is a presumption against implied repeal.
In simple terms, the argument is that the Special Court doesn’t have the authority to grant pardons because the Act doesn’t explicitly give it that power, and there are no provisions for punishing those who violate the terms of a pardon granted by the Special Court. This, according to Mr. Jethmalani, shows that the legislature didn’t intend for the Special Court to have such authority.
COURT’S REASONING:
The contention centers on whether the Special Court possesses the authority to grant pardons under Sections 306 and 307 of the Code.
Mr. Jethmalani contends that while the Special Court does not fall within the categories of magistrates enumerated in Section 306(1), it does not preclude the court from exercising the power to grant pardons. He concedes that ordinary courts have jurisdiction over pre-cognizance matters but disputes their authority to grant pardons under Section 306.
However, it is untenable to suggest that while regular courts may grant pardons before cognizance, the Special Court lacks such power at any stage. Such a proposition would create an incongruous scenario, which is not implied by the provisions of the Act.
In summary, Mr. Jethmalani’s argument posits that while ordinary courts may possess the authority to grant pardons before cognizance, it does not automatically imply that the Special Court lacks such authority. He suggests that it may be a matter of policy, but it is improbable that the legislature intended to create a confusing and impractical arrangement.
JUDGEMENT:
Harshad Mehta was arrested in November 1992 and sentenced to five years rigorous imprisonment. He appealed but died in jail in 2001 because of cardiac arrest.
CONCLUSION:
the appellants sought to challenge the validity of the pardon granted under Section 308 of the Code. there was a contention regarding the applicability of the provisions of the Ordinance to the Special Magistrates and whether the provisions of the Code would prevail over the Ordinance in certain circumstances.
The case evolve around the interpretation of the Ordinance and its consistency with Section 308(2-A) of the Code. The court’s decision underscores that the Ordinance prevails in cases of inconsistency with Section 308(2-A), emphasizing the authority of the Special Magistrate to hear evidence and oversee the proceedings.
Ultimately, the court affirms the decision of the learned Special Court to reject the appellants’ application for revocation of the pardon order. The appeals are consequently dismissed, along with the dismissal of intervention applications.
In summary, the court’s ruling upholds the validity of the pardon order granted by the Special Court and dismisses the challenges raised by the appellants, affirming the authority of the Special Magistrate to oversee the proceedings in accordance with the provisions of the Ordinance.
Written by Sristy Dey
Institute Name: JIS University
