Research › Search › Judgment

Karnataka High Court · body

2025 DIGILAW 165 (KAR)

Abdul Rahman Baig S/o Obedulla Baig v. Competent Authority

2025-06-03

ANU SIVARAMAN, RAJESH RAI K.

body2025
JUDGMENT : ANU SIVARAMAN, J. This MFA is filed assailing the order dated 06.06.2023 passed by the XCI Additional City Civil and Sessions Judge and Special Judge for KPIDFE cases, Bengaluru (CCH-92) in Misc. No.994/2022. 2. We have heard Shri. Abhilash Raju, learned counsel for the appellant and Shri. Veeresh R. Budihal, learned counsel for respondent No.1. Notice to respondents No.2 to 4 are dispensed with vide order dated 21.03.2024. 3. The brief facts of the case are: The appellant was managing a small business of supplying stone materials, he wanted to purchase a flat to reside with his family in Bengaluru. Respondents No.3 and 4 offered to sell the schedule property for a total sale consideration of Rs.40,00,000/- and the appellant has accepted the said offer. In furtherance to that, the appellant had transferred an amount of Rs.20,00,000/- through NEFT (Rs.10,00,000/- by way of NEFT UTR No.ANBBN18219522495 dated 19.03.2018 and Rs.10,00,000/- by way of NEFT UTR No.ANBBN18219522810 dated 19.03.2018) and agreed to pay the balance sale consideration before execution of the sale deed. Respondents No.3 and 4 have acknowledged the receipt of the advance sale consideration. They have entered into an agreement for sale on 25.01.2019 and the same was registered in Book-1 No.KCH-1-05353-2018-19 in the Office of Sub-Registrar, Gandhi Nagar, Bengaluru. Subsequently, the appellant had performed his part of contract and paid the balance sale consideration. Respondents No.3 and 4 have executed a sale deed on 04.02.2019 in favour of the appellant and the same was duly registered in the office of Sub-Registrar, Gandhi Nagar, Bengaluru. The Bruhat Bengaluru Mahanagara Palike (BBMP) has issued Form-B, Property Register Extract incorporating the name of the appellant as owner of the schedule property on 04.04.2019 and accepted Property Tax. 4. Respondent No.1 had issued a notice dated 20.10.2023 to respondents No.3 and 4 calling upon them to hand over possession of the schedule property and the same was affixed on the door of schedule/house property. Said notice disclosed provisional attachment by the Government of Karnataka under Section 3 of the Karnataka Protection of Interests of Depositors in Financial Establishments Act, 2004 , ('KPIDFE Act' for short). Then, it came to the notice of appellant that respondent No.2 was alleged to be involved in fraudulent transaction and had failed to return the deposits on maturity to depositors. 5. Then, it came to the notice of appellant that respondent No.2 was alleged to be involved in fraudulent transaction and had failed to return the deposits on maturity to depositors. 5. The appellant had challenged the notice dated 20.10.2023 in Writ Petition No.24108/2023 before this Court and this Court had disposed of the said Writ Petition on 08.11.2023, permitting the appellant to make a representation to respondent No.1 for appropriate reliefs. In compliance with the order dated 08.11.2023 passed by this Court, the appellant had submitted his representation to first respondent on 22.11.2023. 6. The first respondent has issued an endorsement dated 11.01.2024 without extending an opportunity of hearing to the appellant. The said endorsement was questioned before this Court in Writ Petition No.2029/2024 and this Court has disposed of the Writ Petition on 20.01.2024 by granting liberty to the appellant to approach the Special Court and respondent No.1 was directed not to precipitate the matter for a period of four weeks from the date of the said order. However, the trial Court on 06.06.2023, passed an order making the interim order of attachment absolute which is under challenge herein. 7. The learned counsel appearing for the appellant contends that respondent No.1 was fully aware of the registered agreement of sale. Without issuing notice to the appellant and without making any inquiry or investigation into the transaction, the respondent committed a grave error in law, without application of mind or proper investigation by issuing the Notification dated 31.01.2019. The said Notification neither discloses the names of respondents No.3 and 4 nor the appellant; the amount of sale consideration is mentioned as Rs.50,00,000/- but sale consideration paid by the vendors of the appellant was Rs.44,90,000/- as mentioned in the sale deed dated 04.02.2019. It is further contended that in the notification, column of "details of documents" says that "A-2 - Afaq wife's name". Mrs. Nabeela Begum (wife of Syed Afaq Ahmed) is the one who conveyed the property to the appellant, which is available in the sale deed, neither the details of the sale deed nor the name of title holders was shown by way of description of documents. It clearly indicates the non- application of mind on the part of respondent No.1. 8. Nabeela Begum (wife of Syed Afaq Ahmed) is the one who conveyed the property to the appellant, which is available in the sale deed, neither the details of the sale deed nor the name of title holders was shown by way of description of documents. It clearly indicates the non- application of mind on the part of respondent No.1. 8. The action of interim attachment of the schedule property, without an enquiry over its true owner and extending an opportunity of hearing has resulted in violation of right of appellant to hold immovable property. The action on the part of the 1 st respondent is violative of the rule of audi-alteram-partem has resulted in vexing the appellant with malafide intention. No materials are produced to show that the money used by the appellant's vendors-in-title was from the alleged scam. Therefore, the order dated 06.06.2023 is arbitrary, illegal, violative of principles of natural justice and without authority of law. Further, it is contended that the copy of proceedings or order dated 06.06.2023 was not made available to appellant even after the submission of the representation dated 23.11.2023, therefore, denying the reasonable opportunity to question the order of the Special Court which is said to be the basis and foundation for the endorsement dated 11.01.2024, which amounts to denial of justice. The endorsement dated 11.01.2024 is not a speaking order since it lacks in material particulars and does not make reference to representation dated 23.11.2023, more particularly, the payment of consideration amount in the year 2018, much prior to the alleged notification dated 31.01.2019. Even the sale deed was also registered much prior to the Notification. Endorsement dated 11.01.2024 states that schedule property was purchased by the appellant after the interim order for attachment dated 31.01.2019 and hence property stood vested with competent authority. Said aspect is incorrect in view of the agreement of sale dated 25.01.2019, the endorsement must necessarily fail for not furnishing the information or the factum of involvement of respondents No.3 and 4. 9. The learned counsel for respondent No.1 contended that the appellant claims to be in possession of schedule property since the date of execution of sale deed in his favour i.e., from 04.02.2019. 9. The learned counsel for respondent No.1 contended that the appellant claims to be in possession of schedule property since the date of execution of sale deed in his favour i.e., from 04.02.2019. However, he neither appeared before the Special Court nor filed any objections to the prayer sought by the respondent seeking an order making the ad-interim attachment issued by the Government of Karnataka under Section 3(2) of the KPIDFE Act as absolute. The appeal is filed along with an application, seeking the leave of this Court to file an appeal as interested party and he is aggrieved by the impugned order. Appellant sought to set aside the impugned order and remand the appeal to the Special Court for fresh consideration after affording an opportunity of hearing to the appellant on the ground that he has an interest in and over the property in question. Both the Interlocutory Applications seeking leave to file an appeal and also the appeal under Section 16 of the KPIDFE Act deserves to be dismissed because Section 12(3) of the KPIDFE Act clearly says that even where no notice has been served upon any person by the Special Court, if any person is claiming any interest in the property the ad- interim and provisional attachment of which is sought to be made absolute, such person shall have to appear before the Special Court and object the same. 10. It is further contended that notification issued by the Government under Section 3(2) of the KPIDFE Act was published in two newspapers having wide publication and it was also affixed on a conspicuous place of the property and the same is not disputed by the appellant. This aspect is admitted by the appellant in his appeal memorandum. 11. Though this being the situation appellant had chosen not to appear before the Trial Court or object to the ad-interim attachment being made absolute. Hence, the order passed by the Special Court cannot be found fault with. Section 12(4) of the KPIDFE Act says that Special Court shall pass an order making the order of attachment absolute and found that no cause is shown and no objections are made by the respondents. 12. Hence, the order passed by the Special Court cannot be found fault with. Section 12(4) of the KPIDFE Act says that Special Court shall pass an order making the order of attachment absolute and found that no cause is shown and no objections are made by the respondents. 12. It is further contended that no averment can be found that the appellant was ignorant or that he had no opportunity to know about the notification issued under Section 3(2) of the KPIDFE Act by the Government of Karnataka. Hence, it is presumed that the appellant was aware about the ad-interim attachment. Hence, appellant ought to have appeared before the Special Court and filed the objections. This being the situation now the appellant cannot claim that he has not been afforded with an opportunity of hearing. The statute has given an opportunity to the appellant to object the attachment being made absolute and it is the appellant who has chosen not to utilise the same. Hence, he cannot claim that he was denied an opportunity and also he cannot claim for remand of the matter. 13. It is well settled principle of law that nullus commodum capere potest de injuria sua propria. It means no man can take advantage of his own wrong. In support of the said contention, learned counsel appearing for respondent No.1 has relied upon the dictum of the Apex Court in " Municipal Committee Katra & Ors. v. Ashwani Kumar" by judgment dated 09.05.2024 passed in Civil Appeal No (s).14970-71/2017. He further contended that if the opportunity of hearing is not availed, it cannot be said that the order was passed without affording an opportunity of being heard. In support of the said contention, the learned counsel has relied upon the dictum of Gujarath High Court in the case of Vinayakrao S. Desai v. Interlink Petroleum Ltd. & Ors. reported in (2001) GLR 3 2649 14. The primary contention raised by the proposed appellant is that the order of the Special Court was passed without notice to him and that it is therefore bad in law. It is contended that the agreement for sale of the apartment is question was executed on 25.01.2019 and the provisional attachment under Section 3(2) of the KPIDFE Act was issued only on 06.06.2023. It is contended that the agreement for sale of the apartment is question was executed on 25.01.2019 and the provisional attachment under Section 3(2) of the KPIDFE Act was issued only on 06.06.2023. Further, the attachment was notified in newspapers only on 21.02.2019, much after the sale deed itself was executed on 04.02.2019. It is contended that the competent authority, which filed the application under Section 5(2) of the KPIDFE Act, ought to have made the purchaser a party to the proceedings before the Special Court and the failure to do so has resulted in denying him an opportunity to defend the case. 15. The learned counsel for respondent No.1/competent authority takes us through the provisions of the Act and contends that admittedly, the attachment of the property was given wide publicity by publishing Section 3(2) Notification in two newspapers having wide coverage. Further, the notice of the petition under Section 5(2) of the KPIDFE Act was also affixed on the apartment which the petitioner claims ownership and possession of. Therefore, drawing our attention to Section 12(3) of the KPIDFE Act. It is contended that it was for the appellant to appear before the Special Court and raised his contentions, if any, which he failed to do so. Therefore, drawing our attention to Section 12(3) of the KPIDFE Act. It is contended that it was for the appellant to appear before the Special Court and raised his contentions, if any, which he failed to do so. It is submitted that the Sale Deed relied on by the appellant is void ab initio in terms of Section 3(2) of the KPIDFE Act since it was admittedly entered into only after the Notification had been issued under Section 3(2) of the KPIDFE Act, which reads as follows:- "3(2) Not withstanding anything contained in any other law for the time being in force,- (i) where, suo moto or based on the market intelligence reports or upon complaint received from any depositors or otherwise, the Secretary to Government, Revenue Department is satisfied that any financial establishment has failed,- (a) to return the deposit after maturity or on demand by depositor; or (b) to pay interest or other assured benefit; or (c) to provide the service against such deposit; or;) (ii) Where the Government has reason to believe that any Financial Establishment is acting in and detrimental to the interest of the depositors with an intention to defraud them; or (iii) Where the Government is satisfied that such Financial Establishment is not likely to return the deposits or make payment of interest or other benefits assured or to provide the services against which the deposit is received. the Government may, in order to protect the interests of the depositors of such Financial Establishments, after recording reasons in writing, issue an order by publishing it in the official gazette, attaching the money or property believed to have been acquired by such financial establishment either in its own name or in the name of any other person from and out of the deposits collected by the financial establishments, and where it transpires that such money or other property is not available for attachment or not sufficient for the repayment of the deposits, such other property of the said financial establishments, or the personal assets of the promoters, partners, directors, managers or members or any other person of the said Financial Establishments." 16. Section 5 provides for the appointment of an officer not below the rank of an Assistant Commissioner to be the Competent Authority for the purposes of the Act. Section 5 provides for the appointment of an officer not below the rank of an Assistant Commissioner to be the Competent Authority for the purposes of the Act. Section 5(2) of the KPIDFE Act reads as follows:- "5(2) The Competent Authority shall, within thirty days from the date of receipt of the order made under section 3, apply to the special Court for further order of attachment absolute." 17. Section 5(3) of the KPIDFE Act provides for an application supported by 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 of persons in whose name such property is believed to have been invested or acquired or any property attached under Section 3. 18. Section 7 of the KPIDFE Act provides for an assessment of assets and deposit liabilities in respect of the financial establishment and the submission of a report to the Special Court. Section 12 of the KPIDFE Act reads as under:- "12. Powers of Special Court regarding attachment.- (1) Upon receipt of an application under section 5, the Special Court shall issue to the Financial Establishment and to any other person if any, whose property is attached by the designated authority under section 3, a notice accompanied by the copies of the application and affidavits and of the record of evidence, if any, calling upon them to show cause on or before a date to be specified in the notice why the order of attachment should not be made absolute. (2) The Special Court shall also issue such notice, to all other persons represented to it as having or being likely to claim, any interest or title in the property of the Financial Establishment or the person to whom the notice is issued under sub section (1), calling upon all such persons to appear on the same date as that specified in the notice and make objection if they so desire to the attachment of the property or any portion thereof on the ground that they have interest in such property or portion thereof. (3) Any person claiming an interest in 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 sub- section (4) or sub-section (6). (4) The Special Court shall, if no cause is shown and no objections are made on or before the specified date, forthwith pass an order making the order of attachment absolute, and issue such direction as may be necessary for realization of the assets attached and for the equitable distribution among the depositors of the money realized from out of the property attached.” 19. It is therefore clear that on a provisional attachment being made in respect of a property, notice is to be issued to the financial establishment and to any other person whose property is attached under Section 3. 20. In the instant case, at the time of the provisional attachment under Section 3, admittedly, the properties stood in the name of Respondents No.3 and 4, who were put on notice. Though Section 12(2) of the KPIDFE Act provides for issuance of notice to other persons "represented to it" as having or being likely to claim any interest or title in the property, the appellant has no case that there was any such representation made to the Special Court that the appellant has any interest or title in the property. Section 12(3) of the KPIDFE Act specifically provides that any person having any interest in the property can approach the Special Court notwithstanding the fact that no notice had been served upon him and such person can also raise an objection. 21. In the instant case, admittedly, notice had been served by affixture on the apartment in respect of which the appellant claims title by virtue of the Sale Deed entered into after the Section 3(2) Notification has been issued. It was therefore always open for him to approach the Special Court and raise his objections. Admittedly, he did not do so. Further, apart from stating that he had not been issued with notice, appellant has no contention that he was unaware of the proceedings or that he was prevented from approaching the Special Court and raising his objections. It was therefore always open for him to approach the Special Court and raise his objections. Admittedly, he did not do so. Further, apart from stating that he had not been issued with notice, appellant has no contention that he was unaware of the proceedings or that he was prevented from approaching the Special Court and raising his objections. Having perused the appeal, we notice that no tenable contentions as against the order of the Special Court have been raised apart from contending that notice was not issued to the purchaser. In the light of the specific provision of the statute, we are not inclined to accept the contentions raised. 22. In the result, we are of the opinion that the contentions raised in the appeal are devoid of merits. Therefore, the appeal fails and the same is accordingly dismissed. All pending interlocutory applications shall stand disposed of.