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IN THE HIGH COURT OF KERALA AT ERNAKULAM
C.S. Sudha, J.
Aibitha Beevi Ancharapattil And Ors. – Petitioners
Versus
District Collector, Kannur And Ors. – Respondents
CRL.A NO. 2094 OF 2024
Decided On : 11-12-2024
(A) Banning of Unregulated Deposit Schemes Act, 2019 - Section 19 - Appeal against confirmation of provisional order of attachment - Appellants contended that property cannot be sold without a finding of guilt - The Act allows attachment and sale of property to ensure repayment to depositors without requiring a prior conviction - The court ruled that the attachment was valid and upheld the order, allowing the appeal to the extent of mala fide transfers. (Paras 1, 6, 12, 17)
(B) Jurisdiction - The Competent Authority has the power to provisionally attach property under Section 7, but the court must determine mala fide transfers under Section 16 - The court emphasized the need for judicial determination in cases of alleged mala fide transfers. (Paras 6.1, 17)
Certainly. Based on the provided legal document, here are the key points:
The Banning of Unregulated Deposit Schemes Act, 2019, authorizes the attachment and sale of property to secure repayment to depositors without the necessity of a prior conviction of the deposit takers. The Act's primary objective is to prevent unregulated deposit schemes and to facilitate the quick recovery of deposits through asset attachment and sale (!) (!) .
The power to attach property provisionally is conferred on the designated authorities under Section 7 of the Act, which allows them to attach property acquired in the name of the deposit taker or in the name of any other person on their behalf, from the date of the order (!) (!) .
The Court emphasizes that the attachment and sale of property are mechanisms to ensure depositors' interests are protected and are not contingent upon the guilt or criminal conviction of the deposit taker or associated persons. The Act explicitly permits attachment and sale irrespective of the guilt of the accused (!) (!) .
The Court notes that the property, even if acquired before the commission of the alleged crimes, can be attached if transferred mala fide during the period of the criminal activity, especially if the transfer was not in good faith or for adequate consideration (!) (!) .
The Court clarifies that the jurisdiction to order provisional attachment under Section 7 is limited to properties acquired in the name of the deposit taker or in their name or on their behalf. It does not extend to properties transferred mala fide or in bad faith, which are subject to proceedings under Section 16 of the Act (!) (!) (!) .
The authority to order attachment of property of mala fide transferees lies exclusively with the Designated Court, which must be satisfied that the transfer was not in good faith and was not for proper consideration. The Court’s power under Section 16 is to attach property of such mala fide transferees, and this process involves a notice and opportunity to show cause (!) (!) .
The Court highlights that the statutory provisions do not require a prior conviction for attaching or selling property related to unregulated deposit schemes. The mechanism aims at asset attachment to secure depositors' interests, and the law explicitly permits attachment even before guilt is established (!) (!) .
The argument that property cannot be sold without a finding of guilt is rejected. The law explicitly states that attachment and sale are independent of criminal guilt and are aimed at securing assets for depositors’ claims (!) (!) .
The Court also notes that the transfer of property during the period of criminal activity, especially if mala fide, can be grounds for attachment under the Act, even if the property was acquired prior to the criminal conduct, provided it was transferred in bad faith to evade attachment or recovery (!) (!) .
The procedural requirements for attachment and sale, including notices and opportunity to be heard, are essential. However, minor procedural lapses do not necessarily invalidate the attachment if the core statutory requirements are substantially met (!) (!) .
The doctrine of substantial compliance applies to the procedural aspects of attachment, emphasizing that actual compliance with the essential requirements suffices, provided the purpose of the law is achieved and no substantial prejudice occurs (!) .
The Court clarifies that the power to deal with mala fide transfers is vested solely in the Designated Court, and any action outside the prescribed statutory method is invalid. The Court’s role is to ensure that the statutory procedures are followed adequately, especially concerning mala fide transfers (!) (!) .
Overall, the legal framework prioritizes the protection of depositors' interests through asset attachment and sale, with the Court's role being to ensure that statutory procedures are followed, and that property transfers in bad faith during criminal proceedings are subject to attachment irrespective of prior ownership or acquisition date.
JUDGMENT :
C.S.SUDHA, J.
This appeal under Section 19 of the Banning of Unregulated Deposit Schemes Act, 2019 (the Act) has been filed by respondents 48 and 50 in CMP No.7108/2023 on the file of the Designated Court (the Court), that is, the Court of Session Thalassery, aggrieved by the order dated 25/07/2024, by which the provisional order of attachment passed under Sub-Section (3) of Section 7 of the Act has been confirmed.
2. CMP No.7108/2023, an application under Section 14 of the Act was filed by the District Collector, Kannur, an Officer appointed under Sub-Section (2) of Section 7 to assist the Competent Authority appointed under Sub-Section (1) of Section 7 by the Government for confirmation of the provisional order of attachment passed and seeking permission to sell the property attached by way of public auction or by private sale. According to the petitioner, the respondents therein 50 in number, had formed a Company by name 'Fashion Gold Jewellery and Associates' and thereafter collected deposits from the public promising high returns, profits, and dividends. Contrary to the promise, the respondents misappropriated the amounts collected. The deposits were collected in contravention of the provisions of the Act. The statement of the witnesses recorded by the investigating officer in the crimes registered would clearly show that the respondents/accused persons had formed different companies, namely, Fashion Gold International Pvt.Ltd., Qamar Fashion Gold Pvt. Ltd.; Fashion Ornaments Pvt. Ltd. and New Fashion Gold International and collected huge amounts of deposits and misappropriated the same.
3. Notice was issued to all the respondents including respondents 48 and 50, the appellants herein. Though notice was served on respondent no.50/the 2nd appellant, he never appeared before the Court to show cause or to file objection. Respondent no.48/the 1st appellant filed objection contending that her property, that is, item no.4 was not liable for attachment and therefore the petition seeking confirmation of the provisional order of attachment was liable to be dismissed. According to her, she was never an employee or member of the Director Board of the Companies or a shareholder of the same. She was not responsible for the deposits alleged to have been received by the said Group of Companies and its office bearers. The respondent acquired the property as per partition deed no.2711/2019, SRO Thrikaripur dated 25/10/2019. The respondent, the absolute owner of the property, is in possession of the same. The property was not acquired by utilizing the proceeds of the crime alleged and the same was acquired much before the occurrence of alleged crime. The attachment of the property by the petitioner under Sub-Section (3) of Section 7 is per-se illegal and therefore liable to be released from attachment.
4. The Court after hearing both sides, by the impugned order confirmed the provisional order of attachment and sale of property no.4 standing in the name of respondents 48, 50 (the appellants herein) as well as respondent no.9, who is one of the accused in the crimes registered. Aggrieved, respondents 48 and 50 have come up in appeal.
5. It is submitted by the learned counsel for the appellants that though the property can be attached, the same cannot be sold as till date there has been no finding of guilt by a competent court. Before a finding of guilt of the accused in the crimes is arrived at, if the property is sold, the appellants would be left without any remedy. Secondly, the appellants herein are not accused in the crimes. The property was settled in the name of the appellants by their father before the crimes were registered and hence the property is not liable to be attached. Thirdly, it was submitted that the petitioner/District Collector under Sub-Section (3) of Section 7 had no jurisdiction to order provisional attachment of the property. If at all it was liable to be attached, it was Section 16 of the Act that ought to hav
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