IMPORTANT POINT
Properties purchased with funds linked to a defaulting financial establishment can be attached under the Act, regardless of the source of those funds.

JUDGMENT :

This is an appeal filed by the appellants under Section 11 of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (for short, the Act) against the order dated 19.5.2023 passed by the Special Court under the Act, Chennai-104 allowing O.A.No.85 of 2010 and confirming the attachment of the properties in Sl.Nos.18 and 31 in G.O.Ms.No.215 Home (Police XIX) Department dated 23.2.2010.

2. When the matter came up for hearing on 11.6.2024, this Court passed the following order :

"Heard the learned counsel for the appellants, learned Government Advocate appearing on behalf of the 1st respondent and Mr.M.Kamalakannan, learned counsel appearing on behalf of the depositors, who are the 14th respondent in this appeal.

2. The appellants have filed C.M.P.No.9505 of 2024 to receive the additional documents in order to establish the source of income through which the properties which are the subject matter of attachment were purchased during the relevant point of time.

3. Counter affidavit has been filed opposing this petition.

4. The facts over which there is no dispute are that the 1st appellant purchased the subject property in Sl.Nos.18 and 31 through two registered sale deeds both dated 31.08.1990 and registered as Document No.3583 and 2958 of 1990 respectively. The 2nd appellant was inducted into the firm as a partner on 07.06.1989 and that she retired from that position on 31.03.1999. The mother of the 2nd appellant was also a partner in the firm during the relevant point of time.

The default was committed by the firm from the year 1997 onwards. The complaints regarding the non-payment of the deposit started coming in from the year 2009 and the FIR was registered in Crime No.3 of 2009.

5. The Special Court has rendered a finding that in so far as the superstructure that was constructed over the subject property, it was done with the funds obtained by way of loan by the 1st appellant. A finding to that effect is found at page No.78 of the order.

6. The additional documents filed by the 1st appellant shows that he was appointed in State Bank of India in the year 1978. The second document relates to the Income Tax returns of the 1st appellant for the Assessment Year 1991 - 1992. In the Income Tax returns, the 1st appellant has shown the source of income for purchasing the subject property. He has stated that he had earned some income by way of salary from the Bank where he was employed. That apart, he has also received a sum of Rs.35,000/- from his mother-in-law. The other source of income is the loan that was obtained from the 2nd appellant, who is the wife of the 1st appellant. It is therefore evident that the subject property was purchased not merely from the funds of the 1st appellant and the 1st appellant has received certain amounts from the 2nd appellant as well as mother-in-law, who were admittedly partners in the firm.

7. The short issue that arises for consideration is the interpretation of the term "property purchased from and out of the deposits collected by the financial establishment".

8. For the benefit of the counsel appearing on either side to make their further submissions, the following points for determination are formulated:-

(a) When a property is purchased and the funds for this property has also flown from some of the partners of a firm which is running a finance business and during the relevant point of time when the funds were given, there was no default committed by the firm and what was given as funds for purchasing the property was the income earned by the partners during the relevant point of time, whether such property can become a subject matter of attachment at a future point of time on a subsequent default committed by the firm?

(b) Whether the term "from and out of the deposits collected" will include within its fold the income earned by the partners legitimately during the relevant point of time and even such income can be brought within the fold of Section 3 of the