The court upheld the attachment of properties under the KPIDFE Act, emphasizing the necessity to protect depositors' interests despite the appellants' claims of procedural impropriety and lack of complaints.

JUDGMENT :

H.P. SANDESH, J.

1. Heard learned counsel for the appellants and learned counsel for respondent No. 1.

2. This appeal is filed under Section 16 of the Karnataka Protection of Interest on Depositors in Financial Establishments Act, 2004 (‘the KPIDFE Act’ for short) against the order dated 12.01.2024 passed the Trial Court in Miscellaneous No. 775/2023, wherein the Trial Court confirmed the interim order of attachment passed by the Government vide notification dated 20.06.2019 read with Corrigendum dated 03.11.2022 as absolute.

3. The factual matrix of the case is that the respondent No. 1-Competent Authority for M/s. Lancer Finance Office represented by Joint Registrar of Co-operative Societies filed the petition under Section 5(2) of KPIDFE Act seeking that the interim order of attachment be made as absolute in respect of the petition schedule properties, pursuant to the Government Notification dated 20.06.2019 contending that respondent No. 1-M/s. Lancer Finance Office is the Proprietor Concern owned and managed by the respondent No. 2 i.e. the appellants herein. The said proprietary concern was registered with the Registrar of money lenders and issued with a license for money lending business. The respondent No. 2 has collected the deposits from the general public in the name of the respondent No. 1 on the promise to return the same within specified time along with profits. However, the respondent Nos. 1 and 2 have failed to return the deposited amount as promised. It is the contention that from and out of the deposit collected by the respondent No. 1, the petition schedule properties were acquired in the name of the respondents Nos. 2 and 3. The respondent No. 3, who is the wife of the respondent No. 2 is the benami owner of the half of the item No. 2 of the schedule property situated at Yadavagiri, Devaraj Mohalla, Mysore District as she was not having any income of her own to purchase the said property. The sale consideration was paid by the respondent No. 2 himself. Hence, the said property is treated as the personal assets of the respondent No. 2 himself.

4. It is also contended that respondent No. 1-M/s. Lancer Finance is liable to pay approximately Rs.15 Crores to its depositors. The Government having satisfied as to fraudulent transactions of the respondent No. 1 concern and its failure to pay the deposited amount to the depositors, issued interim order of attachment vide notification dated 20.06.2019 attaching the properties belonging to the respondent No. 2 under Section 3(2) of the KPIDFE Act as the respondent No. 1 concern does not possess any immovable property in its name. The Government had also carried out the paper publication of the interim order of attachment as contemplated under Section 3(3) of the KPIDFE Act. Further, the Deputy Commissioner, Mysore was appointed as the Competent Authority under Section 5(1) of the KPIDFE Act for respondent No. 1 concern to take further steps. He had filed a petition against the respondents seeking further order of attachment absolute. Thereafter, the said matter was transferred to City Civil Court, Bengaluru and renumbered as Misc. No. 271/2022. It is also contended that there was a mistake in the description of the respondent No. 1 concern in the notification issued. The name of the respondent No. 1 concern was shown as ‘M/s. Lancer Finance Company Pvt. Ltd.’ instead of ‘M/s. Lancer Finance’ in the notification. Hence, corrigendum was issued. Therefore, the petition was filed against non-existing company as described in the notification was withdrawn and similar petition was filed at Chikkamangalore in Crl. Misc. No. 637/2018 and the said petition was also withdrawn.

5. The Trial Court issued notice under Section 12(1) of the KPIDFE Act. The respondent No. 1 is the proprietary concern represented by its Proprietor, respondent No. 2 himself. In pursuance to the notice so issued, the respondent Nos. 1 and 2 have put in their appearance through their counsel and fil