The Karnataka Protection of Interest of Depositors in Financial Establishments Act allows for the attachment of directors' properties to secure depositor claims, even if claims of prior directorial resignation are asserted.

CAV JUDGMENT

(PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL)

This appeal is filed by the appellant under Section 16 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (hereinafter referred to as'the Act') challenging the order dated 05.01.2024 passed in Misc.No.715/2023 by the XCI Additional City Civil and Sessions Judge and Special Judge for KPIDFE Cases, Bengaluru (hereinafter referred to as'the Trial Court').

2. The brief facts leading to the filing of this appeal are that the respondent No.2-Society is registered under Section 5 of the Karnataka Souharda Sahakari Act, 1997, on 23.10.2013. A complaint was filed against the respondent No.2 alleging misuse and misappropriation of the deposits and failure to return the said deposits to the depositors. The Government, pursuant to the said complaint initiated proceedings under the provisions of the Act and appointed the respondent No.1 as the Competent Authority under the Act. In furtherance of exercising its powers under the Act, the Government ordered for attachment of the properties of the respondent No.2. As the properties, in the name of the respondent No.2 was found to be insufficient to meet the claims of the depositors, which stood around Rs.42.72 Crores, the properties of the Directors and the associated persons were also attached by the Government. The appellant is one of the Directors of the respondent No.2, whose properties were provisionally attached. The respondent No.1, in pursuance to the said provisional attachment, filed a petition in Misc.No.715/2023 under Section 5 (2) of the Act, seeking to make the interim order of attachment, absolute. The Trial Court, after considering the material on record allowed the said petition, making the attachment absolute and also ordered for realization of the said property through a public auction. Being aggrieved by the said order, the appellant is in appeal.

2. Sri.Deshpande Anoop Gopalrao, learned counsel appearing for the appellant submits that the Trial Court has failed to consider the material on record in its proper perspective and erroneously allowed the petition. It is submitted that the Trial Court failed to take into consideration that the appellant had submitted the resignation to the post of the Director of the respondent No.2-Society on 04.02.2015 and the same was accepted on 09.02.2015. It is further submitted that the petition schedule property was only purchased by the appellant after his resignation as the Director and hence, the same cannot be attached to realize the dues of the depositors. It is also submitted that the Trial Court considered the case of the former Directors and dismissed the miscellaneous petition filed by the Competent Authority in Misc.715/2023. However, the same principle was not applied in the case of the appellant, who is also a former Director. It is contended that the petition under Section 5 (2) of the Act has been preferred by the respondent No.1 after a delay of 61 days, and the said delay is non- condonable as there is an express limit of thirty days to file the petition as per Section 5 (2) of the Act. It is further contended that the Trial Court has erroneously applied the Limitation Act, 1973 (for short 'Limitation Act') and condoned the delay of 61 days in filing the petition. It is also contended that the respondent No.1 has failed to produce any material before the Court to show the liability of the respondent No.2-Society as Rs.42.72 Crores and unless such aspects are determined, the property cannot be attached. Hence, he seeks to allow the appeal and set aside the order of the Trial