Transfers made in good faith by purchasers who raise loans do not constitute malafide transfers under TNPID Act.

ORDER

The petitioner challenges the proceedings initiated under O.A.No.25 of 2025 by the first respondent pending on the file of the Special Court under Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (TNPID), Chennai and seeks to quash the same.

2. The grievance of the petitioners is that they have purchased the property from one K.Vasu by raising loan from Housing Development Corporation Ltd on 15.11.2017. A criminal case has been pending under Section 5 of the TNPID Act, 1997 and other IPC offences against the said K.Vasu and others in Cr.No.12/2017 on the file of the first respondent for allegedly collecting chit funds amounts from various subscribers and defaulted payments to the subscribers. According to the prosecution, huge amount of Rs.220 crores is collected from 9,927 depositors and failed to return the deposited amount. During the investigation, certain properties in the name of accused were attached by way of attachment under G.O.Ms.No.73, Home (Police XIX) Department dated 31.01.2019 and other G.O.Ms.No. 1049, Home (Courts IIA) Department, dated 26-08-2004. Now, the case is pending before the Special Court.

3. Counter affidavit has been filed by the first respondent stating that the accused has malafidely transferred the property purchased out of the deposits by the subscribers. One such transfer made by the A5 in favour of the writ petitioners herein is to an extent of 2326 sq.ft. The transfer was not only made in favour of the petitioner but also in favour of various third parties, therefore, application has been filed for attachment of the property before the Special Court under Section 8 of the TNPID Act, 1992 and for orders to sell the property under Section 7 (6) of the TNPID Act. Now, notice has been issued by the Special Court against the petitioners.

4. It is the contention of the learned counsel for the petitioners that they have bonafidely purchased the property by raising loan from the HDFC Bank, 100% loan has been raised for purchase of the property. The so-called vendor A-5 while also while purchasing the property had raised a loan from the Karnataka Bank and had executed MoDT dated 09.12.2016, therefore, the contention of the prosecution that the vendor has purchased the property out of deposits collected from the public is misconceived and in fact, their vendor has purchased the property by raising the bank loan and the same is evident from the registered document. Therefore, at no stretch of imagination, it can be held that there was malafide transfer in favour of the petitioners. Hence, seeks to quash the entire proceedings.

5. Counter is filed by the first respondent stating that proceedings have been initiated and the properties of the accused has already been attached by interim attachment, now, the petition is also filed under Section 8 of the TNPID Act.

6. Heard both sides and perused the materials placed on record.

7. It is relevant to note that when a case is filed under the TNPID Act, normal procedure would be for attachment of the properties of the defaulter in order to return the deposits. Initially, under Section 3, Government will pass an order of interim attachment over the properties to protect the interest of the depositors. Thereafter, competent authority under Section 4 shall file necessary application within a period of 30 days of the order passed under Section 3 for making ad-interim order of attachment absolute and for a direction to sell the property so attached by way of public auction, and realise the sale proceedings. Section 8 of the Act deals with attachment of property of malafide tranferees.

8. Section 8 of the TNPID Act, enumerates that “where the assets available for attachment of a Financial Establishment or other person referred to in Section 3 are found to