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IN THE HIGH COURT OF KERALA AT ERNAKULAM
P.SOMARAJAN, J.
P. Raveendran Pilla, Advocate, S/o.Parameshwara Pilla – Appellant
Versus
State Of Kerala – Respondent
W.P.(C)Nos.18199, 18302, 18397, 18490, 18498, 18712, 18716, 18754, 18781, 18793, 18852, 18860, 19025, 20770, 20794, 20824, 20828, 20834, 20864, 20902, 22687, 22970, 25491 of 2020
Decided on : 23-11-2020
Kerala Protection of Interest of Depositors in Financial Establishment Act, 2013 (Act 7 of 2015) ;; Reserve Bank of India Act, 1934 ;; BUDS Act, 2019- Section 30, Section 38, Section 8(2);; Prize Chits and Money Circulation Scheme (Banning) Act, 1978 and the Chit Funds Act, 1982 -No Designated Court has so far been established in accordance with the mandate under the BUDS Act-The bar under Section 8(2) of the Act would not come into play-Till its establishment either by notification or by appointment- The regular court(special court in the case of CBI) can exercise its jurisdiction over the matter.
Statement of facts:
The petitioners are the various depositors in Popular Finance, a financial establishment having its head office at Popular Towers, Vakayar, Konni, Pathanamthitta. It is owned and managed by respondent No.7 to 14 in W.P.(C)No.18490/2020. Advertisements were made in the official website of the establishment referring their concern as “Indias Emerging Gold Loan Company” and promised alluring rates of interest on deposits- Deposits were received from general public by offering tempting rates of interest over and above the bank rate- There are altogether 258 branches by the name Popular Marine Products, Popular Traders, Popular Timbers etc. all over India.
Finding of the court:
Direct the respective CBI Courts (Special Courts) constituted/notified within Kerala to hold and exercise the criminal jurisdiction under the BUDS Act under their respective territorial jurisdiction, till a designated court is appointed/notified by the State Government. Pertaining to the civil matters which would come under the purview of BUDS Act, the competent authority has already been appointed. To avoid hardship and failure of justice, it is also fit and proper to authorise the same court (Special Court) to hold and exercise the jurisdiction pertaining to the civil matters under the BUDS Act
Result: W.P.(C)No.22970/2020 dismissed. All other writ petitions are disposed of
Based on the provided legal document, the following key points can be summarized:
Jurisdiction over Civil and Criminal Matters: The court emphasizes that for cases involving unregulated deposit schemes under the BUDS Act, the competent authority has already been appointed. To prevent multiple proceedings and ensure justice, it is appropriate to authorize the same court (Special Court) to exercise jurisdiction over both civil and criminal matters related to the BUDS Act until a designated court is formally established by the government (!) (!) .
Investigation Transfer to CBI: The court directs that the entire investigation related to the alleged unregulated deposit scheme, involving multiple crimes and extensive evidence, be transferred to the Central Bureau of Investigation (CBI). The CBI is instructed to take over the investigation immediately and form a specialized team to handle economic offences, ensuring adequate resources and personnel are provided by the state (!) (!) .
Framing of Rules and Appointment of Court: The court orders the state government to promptly frame necessary rules for implementing the BUDS Act and to appoint or notify a Designated Court within a specified short period (two weeks). This is crucial for the effective functioning of the legal framework established under the Act (!) .
Preservation of Proceedings During Interregnum: Until the appointment of a Designated Court, the existing Special Courts (such as CBI Courts in Kerala) are authorized to exercise jurisdiction over both civil and criminal cases under the BUDS Act. All proceedings initiated by these courts during this period are deemed to be conducted under the authority of the upcoming designated court (!) .
Civil and Criminal Jurisdiction: The provisions of the BUDS Act are comprehensive, covering civil and criminal matters, including attachment, sale of properties, claim adjudication, and dispute resolution. The Act explicitly overrides other laws, including state laws, to ensure a unified legal approach to unregulated deposit schemes (!) (!) .
Effect of Non-Establishment of Designated Court: The absence of a formally notified or appointed Designated Court or Rules does not prevent courts from exercising jurisdiction over cases related to unregulated deposit schemes. Courts are empowered to act in the interim to protect depositors' interests and prevent further exploitation (!) (!) .
Overriding Effect of the BUDS Act: The BUDS Act is an addition to existing laws and has overriding authority over any conflicting state laws, including those related to depositors' interests, investigation procedures, and civil or criminal proceedings. It aims to strengthen legal measures against unregulated deposit schemes (!) (!) .
Need for Prompt Government Action: The court highlights the importance of swift action by the government in framing rules and notifying courts to ensure the effective enforcement of the BUDS Act, especially given the large scale of the scheme and the number of depositors involved (!) .
In summary, the court's primary directives are to facilitate the transfer of investigations to the CBI, establish a proper judicial framework through rules and designated courts, and ensure that courts with existing jurisdiction continue to exercise their authority until the formal establishment of the designated court under the BUDS Act.
JUDGMENT :
The issues involved in all these writ petitions are pertaining to the conduct of an “Unregulated Deposit Scheme” by Popular Group of Companies and its office bearers, directors, promoters etc.
2. The reliefs sought in W.P.(C)No.20828/2020, 20864/2020, 20902/2020 includes a direction to respondent No.2 to notify a Designated Court under Section 8 of the Banning of Unregulated Deposit Schemes Act, 2019 (for short BUDS Act) and issue a direction commanding the 3rd respondent to make necessary reference to the first respondent under Section 30 of the BUDS Act and further command the first respondent to transfer the investigation to the 4th respondent CBI, besides the relief of writ of mandamus directing respondent No.5 to 8 to ascertain the scheme, if any, floated by Popular Finance Group of Companies and to initiate proceedings under the BUDS Act.
3. The reliefs sought in Writ petition Nos.18490/2020, 18397/2020, 19025/2020, 18712/2020 and 18852/2020 are (1) issue a direction to initiate proceedings under the Kerala Protection of Interest of Depositors in Financial Establishment Act, 2013 (Act 7 of 2015) (for short KPID Act)as against the owners, directors and promoters of Popular Group of Companies and Firms, including respondent No.7 to 14, (2) for an interim order commanding the first respondent to attach all properties including bank lockers and deposits of the Popular Group of Companies and Firms and its branches in the State of Kerala along with all movable and immovable properties, including the properties of respondents 7 to 14, (3) issue a direction to appoint competent authority and special court under the said Act, (4) issue direction to the 6th respondent to take action against the said firm and the respondents 7 to 14, in terms of Reserve Bank of India Act, 1934 and other relevant provisions and (5) direct respondents 1 and 6 to initiate steps in accordance with law for recovery and return of deposit amount and such other reliefs.
4. Among the other reliefs, petitioners in W.P.(C)NO.22687/2020 and 18716/2020 sought direction to the State Government to frame Rules as mandated under Section 38 of BUDS Act, 2019, to direct Forensic Audit into the affairs of accused in their business concerns, joint ventures, LLPs etc. under the BUDS Act by appointing a forensic auditor to trace out various channels of money siphoned off both in and outside India and to direct the State Government to frame Rules based on KPID Act.
5. The main relief sought in W.P.(C)No.20770/2020, 20794/2020, 20834/2020, 20824/2020, 18199/2020, 18302/2020, 18498/2020, 18860/2020, 18793/2020, 18754/2020,25491/2020 and 18781/2020 are substantially same with the other writ petitions which includes a direction to hand over the investigation to Central Bureau of Investigation and to register separate crimes based on the complaints.
6. W.P.(C)No. 22970/2020 is by accused No.1 seeking a direction to consolidate all the FIR registered treating Ext.P1 crime No.1740/2020 of Konni Police Station as the leading case and to file supplementary report in all other connected crimes, for a declaration that the Konni Police Station has jurisdiction to investigate all the crimes registered and other consequential reliefs.
7. The petitioners are the various depositors in Popular Finance, a financial establishment having its head office at Popular Towers, Vakayar, Konni, Pathanamthitta. It is owned and managed by respondent No.7 to 14 in W.P.(C)No.18490/2020. Advertisements were made in the official website of the establishment referring their concern as “Indias Emerging Gold Loan Company” and promised alluring rates of interest on deposits. Under that guise, they have received deposits from various persons including the petitioners. It was originally a partnership firm commenced in the year 1955. Deposits were received from general public by offering tempting rates of interest over and above the bank rate. There are altogether 258 branches by the name Popular Marine Pro
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