(BY SRI HARISHITH N BALAKRISHNA, ADVOCATE) v. NOTICE NOT ORDERED

AGED ABOUT 51 YEARS, D/O SRI BEERAIAH 3 18 . KUM SUMA AGED ABOUT 22 YEARS, D/O SRI REVANNA 19 . KUM PUSHPA AGED ABOUT 20 YEARS, D/O SRI REVANNA 20 . SMT BHAGYAMMA AGED ABOUT 46 YEARS, D/O SRI BEERAIAH

#21. KUM. KISHORE AGED ABOUT 20 YEARS S/O SRI CHANDRASHEKAR

#22. KUM. USHA AGED ABOUT 19 YEARS, D/O SRI CHANDRASHEKAR

#23. SMT KAVITHA AGED ABOUT 43 YEARS, D/O SRI BEERAIAH 24 . KUM MONISHA AGED ABOUT 17 YEARS, D/O SRI SIDDARAJU 25 . KUM GAAYANA AGED ABOUT 16 YEARS, D/O SRI SIDDARAJU SINCE APPELLANT NOS.24 AND 25 ARE MINORS REPRESENTED BY THEIR MOTHER AND NATURAL GUARDIAN SMT.KAVITHA ALL THE APPELLANTS ARE RESIDING AT HONNASANDRA VILLAGE DASANAPURA HOBLI BANGALORE NORTH TALUK PETITIONER NO.1 TO 25 ARE REPRESENTED BY THEIR GPA HOLDER 4 SRI HARISH G V., AGED ABOUT 36 YEARS, S/O VENKATESHWARA RAO G R/A NO.45, 1ST FLOOR, 17TH CROSS VIJAYANAGAR BENGALURU - 560 040 (BY SRI HARISHITH N BALAKRISHNA, ADVOCATE) ...APPELLANTS AND: 1 . THE COMPETENT AUTHORITY FOR SRI KANVA SOUHARDHA CREDIT CO -OPERATIVE LIMITED, BENGALURU OFFICE OF THE MANAGING DIRECTOR, KARNATAKA PUBLIC LAND CORPORATION URBAN DC OFFICE BUILDING, K G ROAD BENGALURU-560 009 2 . SRI KANVA SOUHARDHA CREDIT CO-OPERATIVE LIMITED HAVING ITS OFFICE AT NO.861, KANVA SRI SAI COMPLEX, DR MODI HOSPITAL ROAD, RAJAJINAGAR, BENGALURU-560086 REPRESENTED BY ITS MANAGING DIRECTOR N.NANJUNDAIAH 3 . SRI N NANJUNDAIAH AGED ABOUT 46 YEARS, S/O LATE NARAYANAPPA R/A NO.164, 1ST CROSS, KANVANAGAR DANOJI PALYA 'B' BLOCK ARISHINAKUNTE DAKALE, NELAMANGALA BANGALORE -562 123 (BY SRI VEERESH RACHAPPA BUDIHAL, ADVOCATE FOR R1; SRI SHREERAM T. NAYAK, ADVOCATE FOR R3; NOTICE NOT ORDERED IN R/O R2) ...RESPONDENTS 5 THIS MFA IS FILED UNDER SECTION 16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, AGAINST THE ORDER DATED 05.09.2022 PASSED IN MISC.NO.518/2021 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU, (CCH-92), ALLOWING THE PETITION FILED UNDER SECTION 5(2) OF THE KPIDFE ACT, 2004 WITH COSTS. IN M.F.A.NO.2906/2024: BETWEEN: 1 . SRI. BEERAIAH AGED ABOUT 88 YEARS, S/O LATE KEMPAIAH, 2 . SMT. LAKSHMAMMA AGED ABOUT 63 YEARS, D/O SRI BEERAIAH, 3 . SMT. AMARAVATHI K., AGED ABOUT 44 YEARS, D/O SRI B.S. KENCHAPPA, 4 . SMT. ANUSUYA K., AGED ABOUT 42 YEARS, D/O SRI B S KENCHAPPA, 5 . SRI MANJUNATH K., AGED ABOUT 38 YEARS, S/O SRI B.S. KENCHAPPA, 6 . SRI SIDDARAMAIAH K., AGED ABOUT 36 YEARS, S/O SRI B.S. KENCHAPPA, 7 . SRI MUNEGOWDA K., AGED ABOUT 30 YEARS, S/O SRI B.S. KENCHAPPA, 8 . SRI GURUPRASAD K., AGED ABOUT 26 YEARS, S/O SRI B.S. KENCHAPPA, 6 9 . KUM. CHARULATHA K., AGED ABOUT 23 YEARS, D/O SRI B.S. KENCHAPPA 10 . SMT. AKKAYAMMA, AGED ABOUT 58 YEARS, D/O SRI BEERAIAH, 11 . SMT. RENUKAMMA, AGED ABOUT 32 YEARS, D/O SRI NAGALINGAIAH, 12 . SMT. SOWMYA, AGED ABOUT 30 YEARS, D/O SRI NAGALINGAPPA, 13 . SMT. PAVITRA, AGED ABOUT 27 YEARS, D/O SRI NAGALINGAPPA, 14 . SMT. MANGALAMMA, AGED ABOUT 55 YEARS, D/O SRI BEERAIAH, 15 . SRI BASAVARAJU AGED ABOUT 32 YEARS, S/O SRI MARIKENCHAIAH 16 . SRI SIDDARAJU AGED ABOUT 30 YEARS, S/O SRI MARIKENCHAIAH 17 . SMT KEMPAMMA AGED ABOUT 51 YEARS, D/O SRI BEERAIAH 18 . KUM SUMA AGED ABOUT 21 YEARS, D/O SRI REVANNA 19 . KUM PUSHPA AGED ABOUT 20 YEARS, D/O SRI REVANNA 7 20 . SMT BHAGYAMMA AGED ABOUT 46 YEARS, D/O SRI BEERAIAH

#21. KUM.KISHORE AGED ABOUT 20 YEARS S/O SRI CHANDRASHEKAR

#22. KUM. USHA AGED ABOUT 19 YEARS, D/O SRI CHANDRASHEKAR

#23. SMT KAVITHA AGED ABOUT 43 YEARS, D/O SRI BEERAIAH 24 . KUM MONISHA AGED ABOUT 17 YEARS, D/O SRI SIDDARAJU 25 . KUM GAAYANA AGED ABOUT 16 YEARS, D/O SRI SIDDARAJU SINCE APPELLANT NOS.24 AND 25 ARE MINORS REPRESENTED BY THEIR MOTHER AND NATURAL GUARDIAN SMT.KAVITHA ALL THE APPELLANTS ARE RESIDING AT HONNASANDRA VILLAGE DASANAPURA HOBLI BANGALORE NORTH TALUK PETITIONER NO.1 TO 25 ARE REPRESENTED BY THEIR GPA HOLDER SRI HARISH G V., AGED ABOUT 36 YEARS, S/O VENKATESHWARA RAO G R/A NO.45, 1ST FLOOR, 17TH CROSS VIJAYANAGAR 8 BENGALURU - 560 040 (BY SRI HARSHITH N BALAKRISHNA, ADVOCATE) ...APPELLANTS AND: 1 . THE COMPETENT AUTHORITY FOR SRI KANVA SOUHARDHA CREDIT CO -OPERATIVE LIMITED BENGALURU OFFICE OF THE MANAGING DIRECTOR, KARNATAKA PUBLIC LAND CORPORATION URBAN DC OFFICE BUILDING, K G ROAD BENGALURU-560 009 2 . SRI KANVA SOUHARDHA CREDIT CO-OPERATIVE LIMITED HAVING ITS OFFICE AT NO.861, KANVA SRI SAI COMPLEX, DR MODI HOSPITAL ROAD, RAJAJINAGAR BENGALURU-560 086 REPRESENTED BY N.NANJUNDAIAH 3 . SRI N NANJUNDAIAH AGED ABOUT 46 YEARS, S/O LATE NARAYANAPPA MANAGING DIRECTOR/FOUNDER DIRECTOR SRI KANVA SOUHARDHA CREDIT CO-OPERATIVE LTD., R/A NO.164, 1ST CROSS, KANVANAGAR DANOJI PALYA 'B' BLOCK ARISHINAKUNTE DAKALE, NELAMANGALA BANGALORE -562 123 ...RESPONDENTS (BY SRI VEERESH RACHAPPA BUDIHAL, ADVOCATE FOR R1; SRI SHREERAM T. NAYAK, ADVOCATE FOR R3) THIS MFA IS FILED UNDER SECTION 16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, AGAINST THE ORDER DATED 9

12.09.2022 PASSED IN MISC.NO.524/2021 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU, (CCH-92), ALLOWING THE PETITION FILED UNDER SECTION 5(2) OF THE KPIDFE ACT, 2004 WITH COSTS. THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR FOR JUDGMENT ON PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN J., PRONOUNCED THE FOLLOWING: AND COMING ON

12.01.2026 CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL CAV JUDGMENT (PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) These Miscellaneous First Appeals are filed to set aside the Orders dated 05.09.2022 and 12.09.2022 passed by the XCI Additional City Civil and Sessions Judge and Special Judge for KPIDFE cases, Bengaluru ('Special Court' for short) allowing Misc.No.518/2021 Misc.No.524/2021 respectively, under Section 5(2) of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 ('KPIDFE Act' for short).

#2. We have heard Shri. Harshith N. Balakrishna learned counsel appearing for the appellants, Shri. Veeresh Rachappa Budihal, learned counsel appearing for respondent 10 No.1 and Shri. Shreeram T. Nayak learned counsel appearing for respondent No.3.

#3. The brief facts of the case are as follows:- The appellants are the absolute owners of the attached properties bearing Sy.No.38 in MFAs No.2793/2024 and 2906/2024, respectively. Financial hardships prompted the appellants to seek financial aid from respondent No.3. Consequently, receiving Rs.1,83,81,250/- as loan amount but in disguise as an advance sale consideration, the appellants executed a Sale Agreement dated 04.05.2016 and General Power of Attorney ('GPA' for short) dated 16.05.2017 in favour of respondent No.3. Thereafter, the appellants received information that respondent No.3 had been arrested for fraud and cheating the members of respondent No.2 - Society. As a result, the appellants approached respondent No.3 to cancel the said Sale Agreement and GPA. The appellants discovered that the attached property was mortgaged to respondent No.2- Society vide Deposit of Title Deeds dated 12.07.2019. Consequently, the appellants made financial arrangements 11 to clear the mortgage by making the requisite payments and sought for discharge of Deposit of Title Deeds. Therefore, Discharge Deed dated 05.12.2019 was executed by respondent No.2 - Society. Thereafter, the appellants followed up with respondent No.3 to cancel the Sale Agreement and GPA, but respondent No.3 evaded the appellants and eventually, they lost touch with respondent No.3. Notification dated 05.08.2020 was issued by the Government of Karnataka, attaching the properties under the provisions of the KPIDFE Act. Thereafter, respondent No.1 approached Special Court through Misc.No.518/2021 and Misc.No.524/2021 under Section 5(2) of the KPIDFE Act to make the interim attachment absolute and the same was accordingly allowed. Aggrieved by the said orders, the appellants have approached this Court.

#4. The learned counsel appearing for the appellants contended that appellant No.1 was not served notice and summons by respondent No.1 during the Special Court proceedings. Further, respondent No.1 did not disclose the Discharge Deed dated 05.12.2019 to show that the attached 12 property has been redeemed. It is further contended that appellants No.2 to 25 were not made parties to the petitions even though they are interested parties. This fact can be evidenced the sale agreement, GPA and encumbrance certificate. Further, it is contended that the appellants are farmers who are still in possession of attached 'B' property and have been using the said land for cultivation purposes. If the property is taken away from the appellants they would not have sufficient means to survive.

#5. It is further contended that the Special Court has erred in considering respondent No.1's application under Section 5 of the Limitation Act, 1963 ('Limitation Act' for short) in view of extension of the period of limitation to file any cases during COVID-19 pandemic as held by the Apex Court in Miscellaneous Application No.21/2022 in Miscellaneous Application No.665/2021 in Suo Motu Writ Petition (Civil) No.3 of 2020 IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION. It is contended that the benefit of the said decision was only for litigants and not Government authority. 13

#6. Shri. Veeresh Rachappa Budihal, learned counsel appearing for the Competent Authority submitted that the Notification had been issued under Section 3(2) of the KPIDFE Act and subject properties had been attached and the attachment order was duly published in newspapers having wide circulation. The interim order of attachment was also displayed on conspicuous part of the attached property and the evidence with regard to the said fact was available before the Special Court. It is submitted that the property was mortgaged to the Financial Establishment by a registered Mortgage Deed dated 11.07.2019.

#7. It is contended that there is no dispute that deposits had been collected from members of the Society as well as from the Public and that the Financial Establishment was unable to repay the depositors. The liability of the Society ran into several Crores of rupees and the properties of the Financial Establishment were totally insufficient to meet its liabilities. It is submitted that the contention of the appellants before this Court that the appellants were unaware of the transactions is a clear attempt to mislead this Court since appellant No.1 was respondent No.3 before 14 the Special Court as is evident from the cause title itself. Further, since the attachment order had been duly notified and affixed on a conspicuous portion of the property, the other appellants also cannot plead ignorance. It is stated that the Notification under Section 3(2) of the KPIDFE Act was issued on 05.08.2020 and the petition under Section 5(2) of the KPIDFE Act was instituted on 08.10.2021. Both the dates falling within the period of the COVID pandemic induced lockdowns, the Special Court was fully justified in having considered the application and condoned the delay. It is further submitted that all the factual and legal aspects have been considered and the orders passed by the Special Court are not amenable to interference in this appeal.

#8. We have considered the contentions advanced. The appellant No.1 herein was a party to the proceedings before the Special Court. The other appellants claim to be co-owners of the property by inheritance. However, the Special Court had specifically considered the contentions and the documents produced and had found that the RTC stood in the name of appellant No.1, who was a party to the proceedings. We notice that the KPIDFE Act is enacted to 15 provide for protection of interest of depositors in Financial Establishment. The Act is intended to override the provisions of all other enactments. Section 3(2) of the KPIDFE Act provides for issuance of an order by publishing in the Official Gazette, attaching the money or property believed to have been acquired by the Financial Establishment in its own name, or in the name of any other person from and out of deposits collected by the Financial Establishment. Where such property is not sufficient for repayment of the deposits, such other property of the Financial Establishment or the personal assets of promoters, partners, or other persons related to the establishment can also be attached. It is clear that what is contemplated under Section 3(2) of the KPIDFE Act is only an order of interim attachment of money or property which is "believed to have been acquired" by the Financial Establishment or the personal assets of its Directors etc. The said provisional attachment can be made absolute after following the procedure under Section 5 of the KPIDFE Act.

#9. Further, Section 12(3) of the KPIDFE Act specifically provides that any person claiming an interest in 16 the property attached or any portion thereof may, notwithstanding that no notice has been served upon him under this Section, make an objection, as aforesaid, to the Special Court at any time before an order is passed under Section 12(4) or Section 12(6) of the KPIDFE Act.

#10. Section 19 of the KPIDFE Act provides that, "Save as otherwise provided in the Act, the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage or any instrument having effect by virtue of any such law."

#11. It is clear that the KPIDFE Act is an enactment intended to provide for protection of interest of gullible depositors in Financial Establishments. It is a regulatory and penal statute and has to be construed specifically as such, so that the purpose of the enactment can be given effect to.

#12. The power under Section 3(2) of the KPIDFE Act, therefore, is in the Government to attach the money or property of the Financial Establishment held in its own name or in the name of any other person, where it appears that 17 such money or property are not available or is not sufficient for repayment of the deposits, such other property including the personal assets of the Promoters, Partners, Directors etc., of the Financial Establishment can also be attached. Thereafter, it is for the competent authority to apply to the Special Court to make the order of attachment absolute under Section 5(2) of the KPIDFE Act. Section 5(3) of the KPIDFE Act provides as follows:- "5(3) An application made under sub-section (2) shall be accompanied by one or more affidavits, stating the grounds on which the order is made under Section 3 and the amount of money or other property believed to have been acquired from out of the deposits and the details, if any, of persons in whose name such property is believed to have been invested or acquired or any property attached under Section

3."

#13. It is therefore clear that once an order of attachment is passed under Section 3(2) of the KPIDFE Act and an application is made under sub-Section (2) of Section 5 of the KPIDFE Act by the competent authority to make the interim attachment absolute, it is for the person, who claims that the property is not liable to attachment to show cause as to why such attachment should not be made absolute. 18 The provisions of Section 7 of the KPIDFE Act, which provides for assessment of assets and deposit liabilities of the financial establishment by the competent authority and the filing of a report by that authority before the Special Court are also relevant in this regard.

#14. The order of the Special Court reveals that the contents of the application as well as the affidavits filed by the Competent Authority have been considered in detail by the Court. It is not in dispute that a GPA had been executed by appellant No.1 in favour of respondent No.3 and that the properties had been mortgaged Financial Establishment. It is also clear that the appellants did not appear before the Special Court and place materials to show that they had redeemed the mortgaged properties. Their contentions on the other hand are that appellants No.2 to 25 are also the owners of the property that they have a right and interest in the properties. If that were so since the attachment of the properties was made with public notice as specifically noticed by the Special Court and the order of attachment was also duly affixed at a conspicuous place in the properties concerned, nothing prevented the appellants 19 from appearing before the Special Court and showing cause as to why the attachment should not be made absolute. It was also open to them to have paid the amounts due to the Financial Establishment before the Special Court and got the mortgage released. Not having chosen to do so, the appellants have no right to contend that they were not heard by the Special Court.

#15. It is revealed that the notice had been issued to the respondents and respondents No.1 and 2 have entered appearance through Counsel and filed detailed objections. Though, show-cause notice was issued to respondent No.3, he did not appear and was placed ex-parte. The contentions of respondents No.1 and 2, who had entered appearance and filed objections were considered in full. It is thereafter that the Special Court has come to the conclusion that the respondents before the Special Court have failed to show any cause as to why the attachment shall not be made absolute.

#16. The Apex Court by Order dated 10.01.2022 in Miscellaneous Application No.21/2022 in Miscellaneous Application No.665/2021 in Suo Motu Writ Petition (C) 20 No.3/2020, had held as follows:- "5. x x x x x I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and

23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between

15.03.2020

28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from

01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from

15.03.2020 till 28.02.2022 shall also 21 stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation instituting proceedings, outer limits (within which the court or tribunal condone delay) termination of proceedings." In view of the said order of the Apex Court, there would be no question of condonation of delay.

#17. The entire factual aspects of the matter had been considered and the Special Court has come to a clear conclusion that appellant No.1 herein did not appear or show-cause as to why the order of provisional attachment should not be made absolute. It is pertinent to note that the appellants had admittedly executed a GPA in favour of respondent No.3 herein, that is, Shri. N. Nanjundaiah on

31.10.2023. On the strength of GPA, Shri. N. Nanjundaiah executed a Mortgage Deed dated 11.07.2019 at Bangalore. The Mortgage Deed is produced along with an application to 22 receive documents. We notice that the mortgage is executed by Shri. N. Nanjundaiah in favour Sri. Kanva Souhardha Credit Co-operative Limited as well as Shri. N. Nanjundaiah himself. Later, the alleged Discharge Deed is also executed by Shri. N. Nanjundaiah.

#18. In the above factual situation, we find no reason interfere with the Orders of the Special Court. Accordingly, the appeals fail and the same are dismissed. Pending interlocutory applications shall stand disposed of in both the matters. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (VIJAYKUMAR A. PATIL) JUDGE cp*