The High Court
Case Details
- 1 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF JANUARY, 2025 PRESENT THE HON'BLE MRS. JUSTICE ANU SIVARAMAN AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL MISCELLANEOUS FIRST APPEAL NO.8493/2022 BETWEEN: (KPIDFA) 1. M/S. THE KRANTIVEERA SANGOLLI RAYANNA URBAN CO-OPERATIVE SOCIETY LTD., BY ITS PRESIDENT SHRI. ANAND BALAKRISHNA APPUGOL NO.3528, SHRI SHAKTHI BUILDING RESALDAR AGALLI, VIVEKANANDA MARGA BELAGAVI 590 001. 2. SHRI. ANAND BALAKRISHNA APPUGOL AGED ABOUT 57 YEARS OCC BUSINESS PRESIDENT KRANTIVEERA SANGOLI RAYANNA URBAN CO-OPERATIVE SOCIETY LTD, PLOT NO.2 RAYANNA KOTE, I MAIN II STAGE, NEAR PAWATE BUILDING HANUMAN NAGAR BELAGAVI 590 001.
Legal Reasoning
(BY SMT. VIJAYALAXMI KALYANASHETTY, ADV.,) AND: THE COMPETENT AUTHORITY FOR M/S. THE KRANTIVEERA SANGOLLI RAYANNA URBAN CO-OPERATIVE SOCIETY LTD …APPELLANTS Digitally signed by ARSHIFA BAHAR KHANAM Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 BELAGAVI REP BY ITS ASSISTANT COMMISSIONER 3RD FLOOR, MINI V.V. TOWER PODIUM BLOCK DR. AMBEDKAR VEEDHI BENGALURU 560 001. (BY SRI. VEERESH R. BUDIHAL, ADV.,) - - - …RESPONDENT THIS MFA IS FILED UNDER SECTION 16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE ORDER DATED 17.11.2022 PASSED BY THE XCI ADDL. CITY CIVIL AND SESSIONS JUDGE AND SPL. JUDGE FOR KPIDEF CASES, BENGALURU, IN MISCELLANEOUS CASE NO.996/2022 AND DISMISS THE SAID PETITION IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN and HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL) This miscellaneous first appeal is filed assailing the order dated 17.11.2022 passed by the Court of XCI Addl. City Civil and Sessions Judge, Bengaluru (CCH-92) in Misc. No.996/2022, wherein the petition filed by the respondent - Competent Authority under Section 5(2) of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 - 3 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 (hereinafter referred to as 'the KPIDFE Act') seeking order of attachment absolute, was allowed. 2. Heard Smt.Vijayalaxmi Kalyanashetty, learned counsel for the appellants and Sri.Veeresh R.Budihal, learned counsel for the respondent. 3. Learned counsel for the appellants submits that the appellant No.2 is the President of the appellant No.1-Society. The depositors of the said Society lodged a complaint with the Registrar of Co-operative Societies, Bengaluru and based on such complaint, the enquiry was conducted and it was found that Rs.281.15 Crores has been received as deposit from 61,358 investors and Society is due to return Rs.258.85 Crores to 42,151 depositors. It is further submitted that based on the complaint of the depositors, Khade Bazar police, Belagavi registered Crime No.185/2017 against the appellants, directors and office bearers. The appellant No.2 was arrested in the said crime and released on bail on 09.11.2017. It is also submitted that the appellant No.2 was arrested on 05.11.2018 in Criminal Complaint No.363/2018. - 4 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 4. It is contended that the State Government issued notifications dated 25.06.2019 under the provisions of the KPIDFE Act for appointment of the Divisional Magistrate, Belagavi Sub-division, Belagavi as the Competent Authority. The said Competent Authority filed an application seeking for confirmation of the attachment. It is further contended that the appellant No.2 was in custody and no notice of the proceedings in Misc.No.996/2022 was served. The Special Court, without providing any opportunity of hearing to the appellants, passed the impugned order exparte. It is also contended that the appellants have a good case on merits and if an opportunity is provided, the appellants would place their defence as well as evidence before the Sessions Court. Hence, they seek to allow the appeal. 5. Per contra, Sri.Veeresh R.Budihal, learned counsel for the appellant appearing for the respondent-Competent Authority supports the impugned order and submits that the Special Court has considered the material placed before it and passed the order of confirmation of attachment by making attachment absolute. The Special Court has directed the - 5 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 Competent Authority to take expeditious steps to release the amount from the said attached properties by auctioning the same for the present market value and further directed to disburse the amount equitably to the depositors of the appellant No.1 - financial establishment, in accordance with law. It is submitted that the entire case of the depositors is based on the documentary evidence and considering the materials available, the Competent Authority has issued the attachment order which has been rightly confirmed by the Special Court and if at this stage, the matter is remitted back, it would cause delay in realising the amount. Hence, he seeks to dismiss the appeal. 6. We have heard the arguments of the learned counsel for the appellants, learned counsel for the respondent and perused the material available on record. The point that arises for consideration in this appeal is "Whether the impugned order of the Special Court calls for any interference?" 7. The pleading and material available on record indicate that the appellant No.2 is the President of appellant - 6 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 No.1-Society. The depositors of the appellant No.1-Society have lodged a complaint with the Registrar of Co-operative Societies, Bengaluru and based on such complaint, enquiry was conducted and found that Rs.281.15 Crores has been received as deposit from 61,358 investors and the Society is due to return Rs.258.85 Crores to 42,151 depositors. The depositors lodged the complaint with Khade Bazar police, Belagavi which registered Crime No.185/2017 against the appellants and directors. The appellant No.2 was arrested in the said crime and released on bail on 09.11.2017. He was also arrested on 05.11.2018 in Criminal Complaint No.363/2018 filed before the Consumer Forum. 8. The respondent - Competent Authority has filed an application under Section 5(2) of the KPIDFE Act seeking prayer for making the attachment absolute. The order of attachment was duly published in two newspapers i.e. Vijaya Karnataka and Deccan Herald dated 28.08.2019 for the notice of general public. The notice of attachment was also affixed on the conspicuous place of the schedule property and the mahazar was drawn to that effect. The proceedings seeking for - 7 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 orders of attachment absolute was re-numbered by the Special Court as Misc.No.996/2022 after transfer from the District Court, Belagavi. Admittedly, the notice of the said proceedings was not served on the appellants as the appellant No.2 was in jail. The Special Court, accepting the explanation offered by the Competent Authority, condoned the delay and passed the order of making the attachment absolute. Admittedly, the appellants could not appear before the Special Court and put forth their case. Hence, the Special Court placed the appellant exparte. Considering the same, this Court vide interim order dated 09.05.2023 directed the parties not to precipitate the matter. The said interim order is in force for more than one year. We are of the considered view that if the interim order is continued and the appeal is admitted, no purpose would be served. Hence, the interest of justice would be met if the matter is remitted back to the Special Court with a direction to dispose of the application filed by the Competent Authority seeking to make the order of attachment absolute, afresh after providing an opportunity to the appellants to participate in the proceedings. We make it clear that we are not inclined to interfere with the impugned order insofar as the condonation of - 8 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 delay in filing the application by the Competent Authority and the said order of the Special Court is upheld to the aforesaid extent. 9. For the aforementioned reasons, we proceed to pass the following:
Decision
ORDER i. The appeal is allowed in part. ii. The impugned order dated 17.11.2022 passed in Misc.No.996/2022 by the Court of XCI Addl. City Civil and Sessions Judge, Bengaluru (CCH-92) is set aside only to the extent of allowing the petition filed by the respondent - Competent Authority under Section 5(2) of the KPIDFE Act. iii. The impugned order insofar as condonation of delay is upheld. iv. The Special Court is directed to provide an opportunity to the appellants and the respondent and pass appropriate orders in accordance with law within a period of 3 months from today. v. The appellants shall appear before the Special Court on 05.02.2025 and they are permitted to file - 9 - NC: 2025:KHC:1861-DB M.F.A. No.8493/2022 objections if any, within a period of two weeks thereafter. No order as to costs. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (VIJAYKUMAR A. PATIL) JUDGE RV List No.: 1 Sl No.: 5