The TNPID Act does not provide for the adjudication of a person as Insolvent. The Special Court under the TNPID Act will have primacy and will exclude the jurisdiction of other Courts, including the Court constituted under the Insolvency Acts. The Depositors were treated as secured Creditors as regards the properties attached by the Government.

JUDGMENT

(Prayer: Original Side Appeal filed under Order XXXVI Rule 1 of O.S. Rules r/w Clause 15 of the Letters Patent, to set aside the order of the Learned Judge Dr.Anita Sumanth dated 08.10.2018 in A.No.319 of 2017 in I.P.No.8 of 2017.)

Sunder Mohan, J.

1. Challenging the order passed in A.No.319 of 2017 in I.P.No.8 of 2017 dated 08.10.2018, annulling the order of the Adjudication of the Appellants as Insolvents, the Appellants have preferred the above Intra-Court Appeal.

2. The Appellants, who were partners of an unregistered Partnership Firm, were adjudged as Insolvents in their petition in I.P.No.8 of 2017 dated 31.07.2017. Their claim in the said petition was that they had collected deposits from friends and relatives to fund their business activities, namely Construction and Development of Apartments. They had defaulted in repayment of these deposits and hence they filed the petition to adjudge them as Insolvents. According to the Appellants, the total liability of the Partnership Firm was to the tune of Rs.38,69,06,603/- (Rupees Thirty Eight Crores Sixty Nine Lakhs Six Thousand Six Hundred and Three Only), out of which, Rs.25,04,40,993/- (Rupees Twenty Five Crores Four Lakhs Forty Thousand Nine Hundred and Ninety Three Only) was towards the repayment of deposits to the various Depositors and their assets were to the tune of Rs.5,10,70,761/- (Rupees Five Crores Ten Lakhs Seventy Thousand Seven Hundred and Sixty One only). The liability of the Appellants also exceeded their assets.

3. Meanwhile, it appears that some of the Depositors had lodged an FIR against the Appellants for the offences under Sections 406, 420, 120B IPC and Section 5 of the Tamil Nadu Protection of Interests of Depositors  (TNPID) Act, 1997 on 26.01.2018, registered in Crime No.1 of 2018 on the file of Inspector of Police, Economic Offences Wing, Guindy, Chennai- 600 032. After that, the first Respondent and other Depositors filed applications before this Court to annul the order adjudging the Appellants as Insolvents under Section 21 of the Presidency Towns Insolvency Act, III of 1909 (Insolvency Act). The first Respondent, in his petition seeking annulment, stated that the Appellants cheated him to the tune of Rs.81,43,404/- (Rupees Eighty One Lakhs Forty Three Thousand Four Hundred and Four only) by the Appellants; that the Appellants had transferred immovable properties to defeat and defraud the Depositors; that the Appellants had suppressed many facts in their Insolvency Petition; that the first Respondent and others were Depositors within the meaning of Tamil Nadu Protection of Interests of Depositors (in Financial Establishment) Act, 1997 (TNPID) and only the Special Courts constituted under the said Act will have Jurisdiction. This Court had no jurisdiction to entertain the Insolvency Petition.

4.The Appellants filed a Counter inter alia stating that they had no intention to cheat the Depositors and that they had suffered a genuine loss in their business and could not repay the deposits; and that they had not committed any fraud. Section 6 (2) of the TNPID Act cannot be invoked to state that the Appellants were not entitled to intiate proceedings under the Presidency Towns Insolvency Act, 1909 (Insolvency Act). The Partnership Firm was not a Financial Establishment, as they were not carrying on the business of receiving deposits and their primary business was construction business, and hence, they cannot be prosecuted under the TNPID Act.

5. The learned Single Judge, by a common order passed in Application No.319 of 2017 and Application Nos.17 and 18 of 2018 filed by the Depositors praying for annulment of the order of adjudication as Insolvents found that the Partnership Firm is a Financial Establishment, within the meaning of Section 2(3) of the TNPID Act. Because of Section 6(2) of the TNPID Act, the TNPID Court will have jurisdiction in respect of any matter to which the provisions of the TNPID Act apply and therefore, the learned Single Judge