IMPORTANT POINT
The Pondicherry Act is constitutionally valid.

JUDGMENT

ALTAMAS KABIR, J.

1. Several Special Leave Petitions (now Civil Appeals) were filed in this Court against the common judgment and order dated 27th March, 2007, passed by the Madras High Court, including Writ Appeal Nos.1788 & 1919 of 2005, 1142 to 1144, 1209, 1342 to 1345 of 2006, 293 of 2007 and W.P.Nos.44991, 45805 of 2006 & 1460 of 2007. Of the said appeals, we are concerned with Writ Appeal Nos.1144 of 2006 and 293 of 2007, which are the subject matter of Civil Appeal Nos.6673-6674 of 2009, filed by M/s New Horizon Sugar Mills Ltd.

2. As will be evident from the various writ petitions and writ appeals filed by the various

parties, there are several skeins running through the fabric of the matter before us. The main issue, however, relates to the challenge thrown to G.O.Ms.No.12 dated 18.2.2006 issued by the Department of Revenue and Disaster Management, Government of Pondicherry, under powers conferred under the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 (Act 1 of 2005), ordering attachment of properties acquired by Pondicherry Nidhi Ltd.

3. For a proper understanding of the background in which the said G.O. came to be issued, it is necessary to set out, in brief, the facts of the case.

4. The lis between the parties to these appeals can be traced back to the credit facilities availed of by the Appellant, M/s New Horizon Sugar Mills Pvt. Ltd., from the Indian Bank, Pondicherry, to the tune of Rs.26,50,00,000/-. The Directors of the Mill, viz., Shri V. Kannan and Shri V. Baskaran, stood as guarantors for repayment of the loan and offered their personal properties as collateral securities. As the Appellant Mill defaulted in payment of the loan amount, the Bank, after declaring the loan account of the Mill to be a “non-performing asset”, initiated proceedings for recovery by issuing notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (“SARFAESI Act”). The said notice was challenged by the Appellant by filing Writ Appeal No.33700 of 2004, before the Madras High Court. By order dated 6th December, 2004, the said Writ Appeal was disposed of with a direction to the Appellant Mill to repay the entire loan amount in three instalments.

5. In the same order, the Court also indicated that in case the Appellant defaulted in payment of the instalments, the Bank could proceed against the Appellant Mill, in accordance with law. Since the Appellant Mill committed default even in payment of the first instalment, the Bank proceeded further and under the provisions of Sub-Sections (2) and (4) of Section 13 of the SARFAESI Act took possession of the property offered as security and also initiated steps for sale of the same by auction. In the auction proceedings, M/s E.I.D. Parry (India) Ltd. (“Parry Ltd.”) was the successful bidder. The said auction was challenged by several other banks and financial agencies to safeguard and protect their respective claims against the Mill. On 12th July, 2005, all the Writ Petitions, including the one filed by the workers/employees of the Appellant Mill, were dismissed. In respect of the Writ Petition filed by Pondicherry Nidhi Ltd. (PNL) Depositors Welfare Association, the High Court directed the Association to work out their remittance under the provisions of the Reserve Bank of India Act (“RBI Act”) as also Act 1 of 2005.

6. On receiving the Sale Confirmation Letter from the Bank, Parry Ltd. remitted their entire balance amount and fulfilled all other formalities for getting the Sale Certificate registered in its favour. At the same time, on the basis of a complaint received from one of the depositors, alleging that Shri V. Kannan and Shri V. Baskaran, said to be the major shareholders of M/s PNL Nidhi Ltd. as well as being the Directors of the Appellant Mill, had misappropriated a sum of Rs.12.5 crores belonging to M/s PNL Nidhi Ltd. and diverted the same for their own trade, t