IMPORTANT POINT
The court emphasized the need for substantial evidence to support claims of mala fide transfers under the Tamil Nadu Protection of Interests of Depositors Act.

JUDGMENT :

This is an appeal filed by the appellant 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 24.1.2024 passed in O.A.No.7 of 2023 on the file of the Special Court under the Act, Coimbatore confirming the attachment of the subject properties for bringing them for sale and to utilize the sale proceeds to pay back to the depositors.

2. The case of the appellant is as follows :

(i) The subject properties were purchased by the third respondent through two separate registered sale deeds both dated 14.6.2019. Subsequently, the subject properties were sold to the appellant through two registered sale deeds both dated 12.11.2019. The appellant had nothing to do with the affairs of the defaulting company and he was a bona fide purchaser for value. While so, based on the complaint given by some of the depositors, a first information report was registered in Crime No.5 of 2020 on the file of the Inspector of Police, Economic Offences Wing, Coimbatore against the second respondent - company and its directors.

(ii) Thereafter, the first respondent identified the subject properties and filed O.A.No.7 of 2023 before the Special Court to pass an order of attachment of the subject properties and to direct the Competent Authority to sell the subject properties in order to pay back to the depositors. This application was allowed by the Special Court by the impugned order attaching the subject properties belonging to the appellant and permitting the Competent Authority to sell the same in public auction and realize the sale proceeds. The same has been put to challenge in this appeal.

3. The first respondent filed a counter wherein it has been stated as follows :

(i) The first information report was registered in Crime No.5 of 2020 on his file against the second respondent - company for the offences under Section 120B, 409 and 420 of the Indian Penal Code and Section 5 of the Act. During the course of investigation, it was found that in the year 2018, an entity called M/s.Daily Max Solution Forex Private Limited was started by the third respondent and deposits were collected from the year 2019 onwards. A sum of Rs.19,08,060/-was collected from 02.1.2019 to 17.9.2019. Thereafter, as there was a default in repayment of the deposits, the said M/s.Daily Max Solution Forex Private Limited was closed and a new company namely the second respondent - company was started by the third respondent.

Further deposits were collected from 66 depositors to the tune of Rs.4,45,47,837/- and once again, default was committed.

(ii) It was also found that the third respondent purchased the subject properties by two registered sale deeds both dated 14.6.2019 and immediately, he sold the subject properties in favour of the appellant on 12.11.2019 by two separate sale deeds, which were found to be mala fide transfers. It was under those circumstances the application came to be filed before the Special Court by the first respondent for attachment and sale of the subject properties. The Special Court properly applied its mind and passed the impugned order and the same does not require the interference of this Court. The first respondent ultimately sought for dismissal of this appeal.

4. Heard the learned counsel for the appellant and the State Government Pleader assisted by the learned Additional Government Pleader appearing for the first respondent.

5. This Court has carefully considered the submissions of the learned counsel on either side and perused the materials available on record. This Court has also carefully gone through the impugned order passed by the Special Court.

6. By relying upon the following judgments :

(i) of a learned Single Judge of this Court (as he then was) in the case of M/s.Thiru Muruga Finance Vs. State of Tamil Nadu [reported in 1999 SCC Online Madras 707];

(ii) of a learned Single Judge of this Court in the case of C.Sukumaran Vs. Competent A