Aibitha Beevi Ancharapattil v. District Collector, Kannur
2024-12-11
C.S.SUDHA
body2024
DigiLaw.ai
JUDGMENT : C.S.SUDHA, J. This appeal under Section 19 of the Banning of Unregulated Deposit Schemes Act, 2019 (the Act) has been filed by respondents 48 and 50 in CMP No.7108/2023 on the file of the Designated Court (the Court), that is, the Court of Session Thalassery, aggrieved by the order dated 25/07/2024, by which the provisional order of attachment passed under Sub-Section (3) of Section 7 of the Act has been confirmed. 2. CMP No.7108/2023, an application under Section 14 of the Act was filed by the District Collector, Kannur, an Officer appointed under Sub-Section (2) of Section 7 to assist the Competent Authority appointed under Sub-Section (1) of Section 7 by the Government for confirmation of the provisional order of attachment passed and seeking permission to sell the property attached by way of public auction or by private sale. According to the petitioner, the respondents therein 50 in number, had formed a Company by name 'Fashion Gold Jewellery and Associates' and thereafter collected deposits from the public promising high returns, profits, and dividends. Contrary to the promise, the respondents misappropriated the amounts collected. The deposits were collected in contravention of the provisions of the Act. The statement of the witnesses recorded by the investigating officer in the crimes registered would clearly show that the respondents/accused persons had formed different companies, namely, Fashion Gold International Pvt.Ltd., Qamar Fashion Gold Pvt. Ltd.; Fashion Ornaments Pvt. Ltd. and New Fashion Gold International and collected huge amounts of deposits and misappropriated the same. 3. Notice was issued to all the respondents including respondents 48 and 50, the appellants herein. Though notice was served on respondent no.50/the 2nd appellant, he never appeared before the Court to show cause or to file objection. Respondent no.48/the 1st appellant filed objection contending that her property, that is, item no.4 was not liable for attachment and therefore the petition seeking confirmation of the provisional order of attachment was liable to be dismissed. According to her, she was never an employee or member of the Director Board of the Companies or a shareholder of the same. She was not responsible for the deposits alleged to have been received by the said Group of Companies and its office bearers. The respondent acquired the property as per partition deed no.2711/2019, SRO Thrikaripur dated 25/10/2019. The respondent, the absolute owner of the property, is in possession of the same.
She was not responsible for the deposits alleged to have been received by the said Group of Companies and its office bearers. The respondent acquired the property as per partition deed no.2711/2019, SRO Thrikaripur dated 25/10/2019. The respondent, the absolute owner of the property, is in possession of the same. The property was not acquired by utilizing the proceeds of the crime alleged and the same was acquired much before the occurrence of alleged crime. The attachment of the property by the petitioner under Sub-Section (3) of Section 7 is per-se illegal and therefore liable to be released from attachment. 4. The Court after hearing both sides, by the impugned order confirmed the provisional order of attachment and sale of property no.4 standing in the name of respondents 48, 50 (the appellants herein) as well as respondent no.9, who is one of the accused in the crimes registered. Aggrieved, respondents 48 and 50 have come up in appeal. 5. It is submitted by the learned counsel for the appellants that though the property can be attached, the same cannot be sold as till date there has been no finding of guilt by a competent court. Before a finding of guilt of the accused in the crimes is arrived at, if the property is sold, the appellants would be left without any remedy. Secondly, the appellants herein are not accused in the crimes. The property was settled in the name of the appellants by their father before the crimes were registered and hence the property is not liable to be attached. Thirdly, it was submitted that the petitioner/District Collector under Sub-Section (3) of Section 7 had no jurisdiction to order provisional attachment of the property. If at all it was liable to be attached, it was Section 16 of the Act that ought to have been invoked, which Section confers power only on the Court to pass orders of attachment relating to properties alleged to have been transferred mala fide. 6. The 1st respondent herein, the District Collector has filed objections contending thus: the appellants are the daughter and son of T.K.Pookkoya Thangal (Thangal), the principal accused in the crimes registered. Thangal along with other persons collected huge deposits from the public promising high returns, profits, and dividends.
6. The 1st respondent herein, the District Collector has filed objections contending thus: the appellants are the daughter and son of T.K.Pookkoya Thangal (Thangal), the principal accused in the crimes registered. Thangal along with other persons collected huge deposits from the public promising high returns, profits, and dividends. Contrary to the promise, they misappropriated the amounts collected and thereby committed the offences punishable under Sections 406, 409, 420 read with Section 34 IPC and Sections 3 and 5 read with Sections 21 and 23 of the Act. Investigation conducted has so far revealed that about Rs.114 crores had been collected from the public. The deposit takers did not have any authority or license to accept deposits from the public by promising profits and dividends. 168 cases were registered in the year 2020 and in many of them, final reports have been submitted before the Court. Thereafter, 93 more cases have been registered against the deposit takers. Thangal, the principal accused in the case transferred item no.4 property, that is, 17.29 cents of land situated in resurvey no.69/01 Maniyattu Village, Hosdurg Taluk in favour of his three children, namely, the appellants herein and the 9th respondent by way of a gift deed executed on 25/09/2019. 6.1. The stand of the appellants that the attached property cannot be sold without a finding of guilt of the accused is incorrect. The attachment and sale of the property are in no way related to the conviction of the deposit takers under Sections 21 and 23 of the Act. Conviction of the accused is not a prerequisite to pass an order of attachment and sale of the property. A reading of the Statement of Objects and Reasons along with the various provisions of the Act would make it clear that the dominant purpose of the Act is to ban unregulated deposits schemes and put in place a mechanism by which the assets of the defaulting establishment/deposit takers are attached and sold to ensure repayment and security to the depositors. 6.2. Further, the first FIR relating to the unregulated deposits was registered on 28/08/2020, that is, crime no.575/2020, Chandera police station, in which crime, Thangal is the first accused. In the said crime, the allegation is that he received deposits during the year 2015. The allegation in crime no.674/2020, in which crime also Thangal is an accused, the deposits were collected from the year 2010 onwards.
In the said crime, the allegation is that he received deposits during the year 2015. The allegation in crime no.674/2020, in which crime also Thangal is an accused, the deposits were collected from the year 2010 onwards. The transfer of the property by Thangal in favour of the appellants was done during the period wherein he committed the aforesaid crimes and hence the transfer during the said period is a mala fide transfer as any transfer made by the deposit taker otherwise than in good faith and not for commensurate consideration is a mala fide one. There is no provision for lifting the attachment. The remedy of the appellants was to move under Sub-Section (2) to Section 16 of the Act. Moreover, the definition of property contained in Section 2(12) of the Act would make it clear that the property liable to be attached need not be one acquired wholly or partly from the proceeds of the crime. The appellants have not made out any ground(s) to show that the transfer was bona fide and in good faith. Thangal had mala fidely transferred his property to his children anticipating proceedings against him. Hence, the order of the Court confirming the provisional order of attachment and permitting sale of the property is not liable to be interfered with. 7. The points that arises for consideration in this appeal are- (i) is property no.4 liable to be attached and sold only after a finding of guilt of the deposit takers/accused in the crimes registered? (ii) was there any inherent lack of jurisdiction in passing a provisional order of attachment relating to property no.4 by the petitioner/District Collector? (iii) does the impugned order suffer from any infirmity calling for an interference by this Court? 8. Heard both sides. 9. The Act as it evident from its Preamble, is an Act to provide for a comprehensive mechanism to ban the unregulated deposit schemes, other than deposits taken in the ordinary course of business, and to protect the interest of depositors and for matters connected therewith or incidental thereto. In the Statement of Objects and Reasons it is stated that despite diverse regulatory frame work being put in place, schemes and arrangements leading to unauthorized collection of money and deposits fraudulently by inducing public to invest in uncertain schemes promising high returns or other benefits were still found to be operating in the society.
In the Statement of Objects and Reasons it is stated that despite diverse regulatory frame work being put in place, schemes and arrangements leading to unauthorized collection of money and deposits fraudulently by inducing public to invest in uncertain schemes promising high returns or other benefits were still found to be operating in the society. The Central legislation such as the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and the Chit Funds Act, 1982 and the legislations enacted by the State Governments were found unable to completely address the issue of unregulated deposit schemes run by unscrupulous elements. This regulatory gap was highlighted in the 21st report of the Parliamentary related Standing Committee on finance (16th Lok Sabha). The said Committee in its Report recommended the requirement of “appropriate legislative provisions, coupled with effective administrative and enforcement measures in order to protect the hard earned savings and investments made by millions of people”. It was found that there was considerable variations amongst State laws in protecting the interests of the depositors, and many unregulated deposit taking schemes operated across the State boundaries. 9.1. In the aforesaid circumstances, it was found necessary to have a Central legislation to ensure a comprehensive ban on unregulated deposit taking activity and for its effective enforcement. The Banning of Unregulated Deposit Schemes Bill, 2019 (the Bill), which replaced the Banning of Unregulated Deposit Schemes Ordinance, 2019 aimed to prevent such unregulated deposit schemes or arrangements at their inception and at the same time made soliciting, inviting, or accepting deposits pursuant to an unregulated deposit scheme as a punishable offence. The aim of the Bill was to put in place a mechanism by which the depositors could be repaid without delay by attaching the assets of the defaulting establishments. The Bill inter alia provided for designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment and to constitute the Courts and confer powers on the authorities to attach assets of the defaulting establishments and to sell them. The Bill received the assent of the President on 31/07/2019 and has been published in the Gazette of India on the same day and thus the Act came into being. 10. A reference to some of the provisions of the Act is also necessary to comprehend the Scheme of the Act.
The Bill received the assent of the President on 31/07/2019 and has been published in the Gazette of India on the same day and thus the Act came into being. 10. A reference to some of the provisions of the Act is also necessary to comprehend the Scheme of the Act. Sections 14, 15, 18 of the Act and Rule 8 of the Banning of Unregulated Deposit Schemes Rules, 2020 (the Rules) read thus :- “14. Application for confirmation of attachment and sale of property.—(1) The Competent Authority shall, within a period of thirty days, which may extend up to sixty days, for reasons to be recorded in writing, from the date of the order of provisional attachment, file an application with such particulars as may be prescribed, before the Designated Court for making the provisional attachment absolute, and for permission to sell the property so attached by public auction or, if necessary, by private sale. (2) In case where the money or property has been attached on the permission granted by a Designated Court in another State or Union territory, the application for confirmation of such attachment shall be filed in that Court. 15. Confirmation of attachment by Designated Court. — (1) Upon receipt of an application under section 14, the Designated Court shall issue notice to — (a) the deposit taker; and (b) any person whose property is attached under section 14, to show cause, within a period of thirty days from the date of issue of notice, as to why the order of attachment should not be made absolute and the properties so attached be sold. (2) The Designated Court shall also issue notice to all other persons represented to it as having or being likely to claim any interest or title in the property, to appear on the same date as persons referred to in sub-section (1) to raise objections, if they so desire, to the attachment of the property.
(2) The Designated Court shall also issue notice to all other persons represented to it as having or being likely to claim any interest or title in the property, to appear on the same date as persons referred to in sub-section (1) to raise objections, if they so desire, to the attachment of the property. (3) The Designated Court shall, after adopting such procedure as may be prescribed, pass an order— (a) making the provisional order of attachment absolute; or (b) varying it by releasing a portion of the property from attachment; or (c) cancelling the provisional order of attachment, and in case of an order under clause (a) or clause (b), direct the Competent Authority to sell the property so attached by public auction or, if necessary, by private sale and realise the sale proceeds. (4) The Designated Court shall not, in varying or cancelling the provisional order of attachment, release any property from attachment, unless it is satisfied that— (a) the deposit taker or the person referred to in sub-section (1) has interest in such property; and (b) there shall remain an amount or property sufficient for repayment to the depositors of such deposit taker. (5) The Designated Court shall pass such order or issue such direction as may be necessary for the equitable distribution among the depositors of the money attached or realised out of the sale. (6) The Designated Court shall endeavour to complete the proceedings under this section within a period of one hundred and eighty days from the date of receipt of the application referred to in sub-section (1).” “18. Powers of Designated Court.
(6) The Designated Court shall endeavour to complete the proceedings under this section within a period of one hundred and eighty days from the date of receipt of the application referred to in sub-section (1).” “18. Powers of Designated Court. — (1) The Designated Court shall exercise the following powers, namely:— (a) power to approve the statement of dues of the deposit taker due from various debtors; (b) power to assess the value of the assets of the deposit taker and finalise the list of the depositors and their respective dues; (c) power to direct the Competent Authority to take possession of any assets belonging to or in the control of the deposit taker and to sell, transfer or realise the attached assets, either by public auction or by private sale as it deems fit depending upon the nature of assets and credit the sale proceeds thereof to its bank account; (d) power to approve the necessary expenditure to be incurred by the Competent Authority for taking possession and realization of the assets of the deposit taker; (e) power to pass an order for full payment to the depositors by the Competent Authority or an order for proportionate payment to the depositors in the event, the money so realized is not sufficient to meet the entire deposit liability; (f) power to direct any person, who has made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention; and (g) power to pass any other order which the Designated Court deems fit for realisation of assets of the deposit taker and for repayment of the same to the depositors of such deposit taker or on any other matter or issue incidental thereto.
(2) On the application of any person interested in any property attached and vested in the Competent Authority under this Act and after giving such Competent Authority an opportunity of being heard, make such order as the Designated Court considers just and reasonable for— (a) providing from such of the property attached and vested in the Competent Authority as the applicant claims an interest in, such sums as may be reasonably necessary for the maintenance of the applicant and of his family, and for expenses connected with the defence of the applicant where criminal proceedings have been initiated against him in the Designated Court under this Act; or (b) safeguarding, so far as may be practicable, the interest of any business affected by the attachment. Explanation.—For the purposes of this section, the expression “deposit taker” includes the directors, promoters, managers or members of said establishment or any other person whose property or assets have been attached under this Act.” Rule 8 “8. Application for confirmation of provisional attachment-The Competent Authority shall file an application before the Designated Court for making the provisional attachment absolute, containing the following particulars, namely- (a) a complete list of the property, money or deposits attached; (b) in case of immovable property, the name or names and particulars of the owner of the property, any person who claims to be in possession of the property, and any other person who has an interest in the said property; (c) the record of the provisionally attached property specified in sub-rule (6) of Rule 4 and the valuation report, if any, specified in sub-rule (8) of Rule 4; (d) a list of the depositors from whom the deposit taker has accepted or collected deposits; and (e) a list of dues owed to depositors including amounts that may be realised from sale of any attached property of the deposit taker.” (Emphasis supplied) 11. The Statement of Objects and Reasons and the aforesaid provisions make it clear that power has been conferred on the Competent Authority or officers appointed under Sub-Section (2) to Section 7 of the Act and the Court to order attachment and sale of the property to see that the amounts collected from the depositors are returned to them at the earliest.
No prejudice would be caused by the sale of the property because Section 17 says that any deposit taker or a person referred to in sub-section (1) of Section 15 or transferee referred to in Section 16 whose property is about to be attached or has been provisionally attached under the Act may, at any time before the confirmation of attachment apply to the Court for permission to deposit the fair value of the property in lieu of attachment. 12. It is true that the appellants herein/respondents 48 and 50 are not accused in the crimes registered. However, it is pertinent to note that Thangal, their father is the main accused in the aforesaid crimes. Therefore, if the property falls under the one referred to in Section 7 or Section 16, the same is liable to be attached. As per Section 2(12) “property” means any property or assets of every description, whether corporeal or incorporeal, movable, or immovable, tangible or intangible, and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. Unlike in statutes like the Prevention of Money Laundering Act, 2002; The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 ; the Narcotic Drugs and Psychotropic Substances Act, 1985 etc., where the property liable to be attached has to be one purchased from the proceeds of the crime, under the Act in the case on hand, there is no such requirement. 13. Now coming to the final and third argument that there was an inherent lack of jurisdiction in passing an order of provisional attachment relating to property no.4 in the name of the appellants. This argument was never advanced before the Court. However, as the same is a question of law, the same is also being considered. Section 7 of the Act reads thus: “Competent Authority-(1) The appropriate Government shall, by notification, appoint one or more officers not below the rank of Secretary to that Government, as the Competent Authority for the purposes of this Act. (2) The appropriate Government may, by notification, appoint such other officer or officers as it thinks fit, to assist the Competent Authority in discharging its functions under this Act.
(2) The appropriate Government may, by notification, appoint such other officer or officers as it thinks fit, to assist the Competent Authority in discharging its functions under this Act. (3) Where the Competent Authority or officers appointed under sub-section (2), for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of such information and particulars as may be prescribed, that any deposit taker is soliciting deposits in contravention of section 3, he may, by an order in writing, provisionally attach the deposits held by the deposit taker and the money or other property acquired either in the name of the deposit taker or in the name of any other person on behalf of the deposit taker from the date of the order, in such manner as may be prescribed.” (Emphasis supplied) Sub-sections (4) to (8) are not referred to as they are not relevant here. Therefore, the Competent Authority or Officers appointed under Sub-Section (2) to Section 7 has only been given the power to provisionally attach property acquired either in the name of the deposit taker or in the name of any other person(s) on behalf of the deposit taker, that is, purchased benami. 14. Now coming to Section 16 of the Act which reads thus: “16. Attachment of property of mala fide transferees- (1) Where the Designated Court is satisfied that there is a reasonable cause for believing that the deposit taker has transferred any property otherwise than in good faith and not for commensurate consideration, it may, by notice, require any transferee of such property, whether or not he received the property directly from the said deposit taker, to appear on a date to be specified in the notice and show cause why so much of the transferee’s property as is equivalent to the proper value of the property transferred should not be attached. (2) Where the said transferee does not appear and show cause on the specified date or where the Designated Court is satisfied that the transfer of the property to the said transferee was not a bona fide transfer and not for commensurate consideration, it shall order the attachment of so much of the said transferee’s property as in its opinion is equivalent to the proper value of the property transferred.” (Emphasis supplied) 15.
The learned Public Prosecutor relying on the dictum in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236 submitted that even assuming that the power under Section 16 is vested only in the Court, the impugned order is not liable to be set aside as there has been substantial compliance of the provisions of the Act. If an application is moved before the Court under Section 16, what is required to be done under sub-section (1) is to give an opportunity to the transferee of the property to show cause as to why so much of his/her property as is equivalent to the proper value of the property transferred shall not be attached. That opportunity though already given by the Court, the appellants have failed to make out any ground(s) to show that the transfer in their favour was bona fide and in good faith. The principles of natural justice have not been violated in any manner. In the light of the magnitude of the crimes committed and keeping in mind the object of the Act, a strict or pedantic interpretation of the provisions may not be resorted to, goes the argument. 16. The Apex Court in Hari Chand Shri Gopal (Supra) has explained the doctrine of substantial compliance and intended use. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance.
Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non - compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. When the test for determining the applicability of the substantial compliance doctrine arises, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. 17. Section 16 of the Act confers authority on the Court and none other to deal with cases relating to mala fide transfers. If a statute has conferred a power to do an act and has laid down the method in which the power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the Rule is that if this were not so, the statutory provision might as well not have been enacted (See State of Uttar Pradesh v. Singhara Singh, 1964 KHC 370 : AIR 1964 SC 358 ). Further, there seems to be a purpose for which the legislature has given the power under Section 16 to the Court.
The principle behind the Rule is that if this were not so, the statutory provision might as well not have been enacted (See State of Uttar Pradesh v. Singhara Singh, 1964 KHC 370 : AIR 1964 SC 358 ). Further, there seems to be a purpose for which the legislature has given the power under Section 16 to the Court. Unlike under Section 7 where the Competent Authority or Officers appointed to assist him, attaches the property standing in the name of the deposit taker(s) or their benamies, under Section 16, it is property standing in the name of third parties, who may have no connection with the crimes involved, that is/are liable to attachment. Very wide powers have been given to the Court to order properties attached under Section 7 as well as under Section 16 to be sold and its proceeds distributed among the depositors even before the deposit takers are found guilty by a competent court. To decide whether a transfer is mala fide or not, it may, in some cases, involve taking of oral and documentary evidence and an adjudication on the same, which essentially is a judicial function. In the case on hand, the question whether the transfer of item no.4 by Thangal in favour of his children, the appellants herein as well as his one other son who is also an accused in the crime, was a mala fide one has not been gone into or decided by the Court. The respondents or the Officers concerned ought to have moved an application under Section 16 for attachment of item no.4. Neither the Competent Authority nor Officer(s) appointed under Sub-Section (2) to Section 7 has the power to attach property which has been transferred mala fide and hence the impugned order is liable to be set aside. However, liberty is given to the respondents or the Officers concerned to move the Court under Section 16 of the Act, if so advised. The appeal is allowed to the aforesaid extent. Interlocutory applications, if any pending, shall stand closed.