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2017 DIGILAW 809 (ORI)

GLP Development Ltd. v. State of Orissa

2017-07-28

B.K.NAYAK

body2017
JUDGMENT B.K. NAYAK, J. - The petitioner-companies, forming the Golden Land Developers Group of Companies have filed this writ application with prayer to direct Opposite Party No.3 and 4, Additional District Magistrate-cum-Competent Authority, Cuttack and Additional District Magistrate-cum-Competent Authority, Berhampur respectively to identify the investors/consumers of the petitioners group of companies within a time limit or in the alternative to request the Commission of Inquiry appointed by the Government of Odisha Home (Special Section) Department by Notification No.371/C dated 05.02.2015, read with Corrigendum No.577/C dated 20.02.2015 in exercise of power conferred by Section 3, read with Sub-Section – (1) of Section 5 of the Commissions of Inquiry Act, 1952, inter-alia, to enquire into un-authorized collection of public deposits in the State of Odisha, to identify the depositors of the petitioners, and to direct Opposite Party Nos. 3 and 4 to disburse the amount available in different Bank Accounts of the companies to its investors/customers. Further prayer has been made to direct the Opposite Parties not to hold auction of the seized attached properties of the petitioner-companies till full disbursement of the seized money in different bank accounts of the companies. 2. It is stated in the petition that petitioner group of companies are registered with the Registrar of Companies, New Delhi having their Registered Office in New Delhi and that the Companies are operating in Odisha and engaged in the Real Estate and Land Development Business. The petitioner No.1 is operating in the State of Odisha since 2009 and petitioner No.2 Company is operating in the State since 2001. 3. F.I.R. was filed against the petitioners for indulging in unauthorized collection of public deposits with false assurance of providing plots and accordingly case was registered inter-alia under the provisions of the Odisha Protection of Interests of Depositors in (Financial Establishments) Act, 2011 (in short “the OPID Act,”). The Economic Wing of the State Police took up investigation. Further, some immovable properties of the petitioner-companies were provisionally attached by the Government under Section 3 of the OPID Act and some Bank Accounts were frozen. The Economic Wing of the State Police took up investigation. Further, some immovable properties of the petitioner-companies were provisionally attached by the Government under Section 3 of the OPID Act and some Bank Accounts were frozen. Opposite Party No.3, ADM, Cuttack, who is the Competent Authority in terms of Section 4 of the OPID Act, made an application to the Designated Court, under the OPID Act, Cuttack under Sub-Section (3) of Section 4 of the said Act to make the provisional order of attachment of the properties absolute and to sell the same in public auction, for the purpose of distribution of the sale proceeds to the depositors/investors of the petitioner-companies. 4. It transpires that the application filed by the Competent Authority ( Opposite Party No.3) under Section 4 (3) of the OPID Act, Cuttack was registered as IA No.06 of 2014 and by order dated 23.12.2015 the Designated Court made ad-interim order of attachment absolute and directed the Competent Authority (Opposite Party No.3) to sell the attached property by public auction and release the sale proceeds thereof along with frozen cash for distribution amongst the depositors of the petitioner-companies. 5. It is further stated in the writ petition that in W.P.(C) No.401 of 2013 the Hon’ble Supreme Court of India directed the Central Bureau of Investigation (CBI) to investigate the activities of forty four Chit Fund Companies in their order, the Hon’ble Supreme Court further directed that transfer of investigation to the CBI however shall not affect the proceedings pending before the Commission of Inquiry established by the State Government or shall any action that is legally permissible for recovery of the amount for payment to depositors. It is stated that in pursuance of the order of the Hon’ble Supreme Court, the investigation against the petitioner-companies has been taken over by the CBI. 6. Large number of Chit Fund Companies operated in the State of Odisha and collected crores of rupees from gullible depositors/consumers making false promises to give high rate of return or interest on deposits, but did not keep the promises and even did not return the principal amount of deposits when demanded after the maturity dates. Similarly, some such companies collected money from the public giving assurance to provide plots or houses in reasonable rates, but went on cheating people without providing land/house. Resultantly, F.I.Rs. Similarly, some such companies collected money from the public giving assurance to provide plots or houses in reasonable rates, but went on cheating people without providing land/house. Resultantly, F.I.Rs. were registered against large number of companies and there was also public agitation, which ultimately compelled the Government of Odisha to appoint the one man Commission of Mr. Justice R.K. Patra under the provisions of the Commissions of Inquiry Act, 1952 by notification No.1743/C dated 09.07.2013.The terms of reference of the Commission are the following : “ (i) Identify the individuals and entities who have indulged in unauthorized collection of public deposits in the State of Odisha, (ii) probe and bring out involvement of influential persons, bureaucrats and other Sections of the society, if any, in protecting or promoting such illegal activities, (iii) suggest measures to safeguard the interest of genuine investors affected by the recent incidents relating to unauthorized collection of public deposits land its misappropriation, (iv) suggest safeguard measures to ensure financial security for the genuine investors and prevention of such problems in future, and (v) any other matter connected with or incidental thereto, as the Commission may consider appropriate.” After the sad demise of Mr. Justice R.K. Patra, by notification No.371/C dated 05.02.2015 the Government appointed Sri Justice M.M.Das, (Retd.) as the Commission of Inquiry with the same terms of reference and by further Corrigendum No.577/C dated 02.02.2015 modified the terms of reference and added an important term to the following effect :- “Identify the bona fide investors affected by the unauthorised financial transactions of fraudulent financial establishments/companies and suggest the modality of payment of compensation, the names of small investors eligible for compensation and the amount of compensation payable from the Corpus Fund set up by the Government for the purpose, or otherwise.....” In pursuance to the terms of reference, the Commission of Inquiry is now engaged mainly in the process of identification of investors/depositors of different companies/financial establishments. 7. It is further stated in the writ petition that some bank accounts of petitioner-companies having substantial deposits were freezed and the Government has taken custody of the deposited amounts and also the proceeds of sale of some attached properties of the petitioners and that the petitioners sincerely wish that their depositors/customers should be paid from the said money of the companies held by the Government and Opposite Party No.3. 8. 8. It is pleaded that the petitioners had approached the Commission of Inquiry with prayer that they may be allowed to sell the landed properties and their bank accounts may be de-freezed so that they can refund the investments made by their customers/investors. The prayer of the petitioners companies was resisted by the C.B.I. on the ground that once the money goes to the hands of the petitioners the same may be siphoned by the petitioners. it is also stated that when the proceeding for making interim order of attachment of properties absolute was going on before the Designated Court, OPID Act, Cuttack, the petitioners also made prayer before such Court to direct the Government Authorities to refund the amounts to investors on proof of proper documents. It is stated that on 25.05.2015 the Commission of Inquiry of Mr. Justice M.M.Das passed order (Annexure-3) on the prayer of the petitioners holding that if the prayer was accepted, the same will be in furtherance of the cause of repaying the invested amount to the investors. It is also stated that again by order dated 07.08.2015 the Commission of Inquiry further observed that when the companies (petitioners) have provided the list of investors the State to hasten the matter so that the invested amount can be returned to the investors. 9. It is further stated that before the Designated Court the petitioners repeated their prayer to direct the Competent Authority/State to cross-check the information supplied by the petitioners and to repay the depositors/investors. But the Designated Court rejected the prayer on 27.08.2015 giving them opportunity to move the Competent Authority with the list of investors/depositors. In pursuance to such direction of the Designated Court, the petitioner approached the Competent Authority (Opposite Party No.3) by filing a petition for identification of customers/investors and prayed to disburse the seized amount to them. But Opposite Party no.3 declined to accept the petition and took no step for identification of the consumers/investors, in spite of the fact that approximately a sum of Rs.95,00,00,000/- (Rupees Ninety-Five Crore) belonging to the petitioners has been laying with the State/Opposite Party No.3. It is stated that though similar petition was filed before the Competent Authority-cum-ADM, Berhampur (Opposite Party No.4), no action on such petition has been taken by him. 10. It is stated that though similar petition was filed before the Competent Authority-cum-ADM, Berhampur (Opposite Party No.4), no action on such petition has been taken by him. 10. It is submitted by the learned Counsel for the petitioners that the petitioners are not Chit Fund Companies and that they have never cheated any depositor/investor and that they are ready and willing to return the money of the depositors/investors and get the offences compounded, but the Competent Authorities,even though holding the money of the petitioner-companies to the tune of about Rs.95,00,00,000/- (Rupees Ninety-Five Crore) and that in spite of the order of the Designated Court to approach the Competent Authorities. Opposite party No. 3 and 4 are not taking any action for refund of the deposits of the investor/depositors from the seized money. 11. An affidavit has been filed by Opposite Party No.3, ADM, Cuttack-cum-Competent Authority under the OPID Act, in which it is stated that as per Government Order, the concerned Bank Authorities were asked to remit the money in the seized Bank Accounts of the petitioner-companies and steps have been taken for sale of attached property by e-auction as per the modality fixed by the Government in the Finance Department. It is stated that so far Opposite Party No.3 has received an amount of Rs.34,84,34,258/- (Rupees Thirty-Four Crore Eight-Four Lakh Thirty-Four Thousand Two Hundred Fifty-Eight) out of total of Rs.58,50,680/- (Rupees Eighty-Four Crore Fifty-Eight Lakh Fifty Thousand Six Hundred Eighty) from the frozen bank accounts of the petitioner-companies and kept the same in the interest bearing account of Opposite Party No.3 in the UCO Bank, Collectorate Branch, Cuttack, and that process for realization of the balance amount from the Banks is going on. It is further stated that attached landed properties to the extent of Ac.2.731 has been sold through e-auction and sale price of Rs.61,03,000/- (Rupees Sixty-One Lakh Three Thousand) has been received. It is further stated that in the affidavit that the process of identification of depositors/customers will be taken up soon after realization of the sale proceeds on completion of sale of the attached properties and on receipt of the entire deposits from the frozen bank accounts subject to instruction of Government, if any. It is also stated that for identification of depositors, State Government has issued guidelines vide No.27608/F dated 16.10.2015 (Annexure-B/3) which shall be followed. 12. It is also stated that for identification of depositors, State Government has issued guidelines vide No.27608/F dated 16.10.2015 (Annexure-B/3) which shall be followed. 12. It is apparent from the affidavit filed by Opposite Party No.3 that no process of identification of depositors/investors of the petitioner-companies has yet been initiated by Opposite Party No.3. Opposite Party No.3 has already received money from some frozen bank accounts of the petitioners and from the proceeds of sale of part of attached properties, totally amounting to more than Rs.35,00,00,000/- (Rupees Thirty-Five Crore), having regard to the fact that there are thousands of depositors of the petitioner-companies, the process of identification of depositors and distribution of their deposits to them following the procedure or guidelines formulated by the State Government as per instruction No.27608/F dated 16.10.2015 (Annexure-B/3) would take an interminable time. Since Opposite Party No.3 is already in possession of rupees more than Rs.35,00,00,000/- (Rupees Thirty-Five Crore), there is no reason as to why the process of identification of depositors and distribution of money in respect of their claims shall not be initiated soon, and shall wait till receipt of the entire money from all seized Bank Accounts and proceeds of sale of all attached properties by Competent Authority, which may take years. 13. The Government guideline dated 16.10.2015 (Annexure-B/3) appear to be very cumbersome. While under the OPID Act power has been vested with the Competent Authority to distribute the money to the depositors/investors of the companies and the ADMs, Cuttack and Berhampur have been declared as the Competent Authorities under the Act, admittedly no adequate infrastructure and machinery including manpower have been provided to assist the Competent Authorities to discharge the function of identification of depositors and distribution of money to them. The Government guidelines dated 16.10.2015 therefore needs simplification, particularly in the matter of identification of the deposits/investors of the companies since the Government has already appointed the one man Commission of Inquiry of Sri Justice M.M.Das and one of the terms of reference of the Commission is to identify the bona fide investors affected by the unauthorized financial transaction of fraudulent financial establishments/companies. There is no reason as to why the lists of bona fide investors of any particular company prepared by the Commission of Inquiry on proper identification and which is not disputed by the companies/financial establishment concerned, shall not be accepted as the list of investors/depositors who are entitled to get back their deposited money. Further identification either by the Competent authority or by the Investigating Police, or by only other Officer (s) as described in the Government guidelines dated 16.10.2015 may not be necessary and would protract the process. 14. Because of absolute inaction in exercise of power of the Competent Authority under the OPID Act by Opposite Party No.3, this Court by order dated 04.01.2017 requested the Commission of Inquiry of Mr. Justice M.M.Das to take up the process of identification of depositors/investors of the petitioner companies with promptitude and submit a report with list of identified depositors indicating the amount of money deposited by the depositors within two months. In pursuance to such request the Commission of Inquiry of Mr. Justice M.M. Das in his letter No.159 dated 03.03.2017 submitted the list of 28213 (twenty eight thousand two hundred thirteen) identified investors/depositors of petitioner-companies. By order dated 21.03.2017 this Court directed the learned Counsel for the petitioners to verify the list of depositors with amounts submitted by the Commission of Inquiry with regard to the correctness of the names of the depositors/investors and the amount of claim shown against each of them. By the additional affidavit filed by the petitioners on 20.04.2017 it is stated that the list of identified depositors prepared and submitted by the Commission of Inquiry were verified by the Officer of the petitioners companies and found that the details submitted are in consonance with the details submitted by the depositors along with their individual affidavits. During the course of argument learned Senior Counsel for the petitioner-companies also submitted that the list of depositors and the amount of claim of each of the depositors as submitted by the Commission of Inquiry are correct and in consonance with the registers and documents maintained by the companies. 15. Nothing has been indicated in the writ petition as to how much money of the petitioners are lying with Opposite Party HNo.4, nor any instruction or affidavit of Opposite Party No.4 has been received. 16. 15. Nothing has been indicated in the writ petition as to how much money of the petitioners are lying with Opposite Party HNo.4, nor any instruction or affidavit of Opposite Party No.4 has been received. 16. In the circumstances this Court passes following orders and directions:- (i) The whole list of identified depositors/investors of the petitioner-companies sent to this Court by the Commission of Inquiry of Mr. Justice M.M.Das under the Commissioner’s letter No.159 dated 03.03.2017 shall be sent to Opposite Party No.3 along with photo copy of the letter and the Commissioner’s Report and also an authenticated/certified copy of this judgment forthwith. Opposite Party No.3 may request the Commission of Inquiry to send a soft copy of the list (Chart) of identified depositors of the petitioners. (ii) On receipt of the aforesaid list of depositors, Opposite Party No.3-Competent Authority shall immediately issue advertisement inviting applications from the identified depositors/investors as per the list in accordance with the Government guidelines. The applications along with amount of claim to be submitted by the depositors shall be verified with the list of depositors and the amounts indicated against each as furnished by the Commission of Inquiry and distribution to depositors shall be made by way of transfer of money to the Bank Accounts of the depositors or by the bankers cheques. (iii) The State Government is directed to simplify the guidelines dated 16.10.2015 (Annexure-B/3) so that the process of identification and distribution of money to the depositors should be hassle free. (iv) Keeping in view the large number of companies/financial establishments and the number of investors/depositors of such companies, which may run to lakhs, Government shall consider to create a separate establishment/office with adequate men and machinery, to assist the Competent Authorities under the OPID Act to discharge their powers and functions under the said Act smoothly and expeditiously. The writ petition is accordingly disposed of. Petition disposed of.