R.J. Ilango, v. P. Balasubramanian,
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 28.10.2024
CORAM
THE HON'BLE MR.JUSTICE SUNDER MOHAN and C.M.P.(MD) Nos.11965 of 2022 & 7346 of 2024 I.R.J.Ilango S/o.Irudhayaraja ... Appellant Vs.
1.P.Balasubramanian S/o.Palavannam Pillai 2.Jothi W/o.Gopalakrishnan 3.V.Muniyandi S/o.Veeraiyan 4.Jeyaram S/o.Sadaiyandi 5.Blessing Agro Farm India Limited Company, 1K, Kajiyar Complex, North Gate, S.S.Colony, Madurai-10.
6.Joseph Jeyaraj 7.Christopher S/o.Davidram Page No. 1 of 21
8.Palanisamy S/o.K.Ponnaiah 9.The District Revenue Officer, Collector Office Building, Nearly Anna Bus Stand, Madurai-7.
10.The Inspector of Police, EOW, Economic Offence Police Station, Viswanathapuram, Madurai-1.
... Respondents Prayer: Civil Miscellaneous Appeal filed under Section 11 of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 praying to set aside the order dated 31.03.2021 passed in O.S.No.2 of 2020 on the file of the Special Court under TNPID Act Cases, Madurai.
For Appellant : Mr.G.Prabhu Rajadurai For R1 : Mr.M.S.Saravanakumar For R2 to R4 : Mr.A.Saravanakumar For R5 & R6 : Mr.R.Manickaraj For R7 : Mr.C.Gangai Amaran For R8 : Mr.G.Saravanakumar For R9 & R10 : Mr.R.Baskaran, Additional Advocate General assisted by Mr.V.Omprakash, Government Advocate Page No. 2 of 21
J U D G M E N T
The above appeal has been filed challenging the order passed by the Special Court under TNPID Act Cases, Madurai [hereinafter referred to as 'TNPID Court'] in the petition filed by the first to fourth respondents herein under Section 8 of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 [hereinafter referred to as 'TNPID Act'].
2. This appeal arises under the following circumstances: (a) The first to fourth respondents had deposited money in a firm called 'Blessing Agro Farm India Limited Company', the fifth respondent herein, which had allegedly collected deposits from several depositors and failed to repay the same in time.
(b)On a complaint given by some of the depositors, a case was registered against the fifth respondent in Crime No.6 of 2018, and the final report was filed on 19.09.2019.
(c) Admittedly, there were more depositors, and some more complaints are pending investigation before the Economic Offence Wing, Madurai.
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(d)After the registration of the FIR, the fifth respondent had transferred one of its properties in favour of the appellant herein by a Sale Deed dated 26.11.2018 for a sale consideration of Rs.45,00,000/-.
(e) The first to fourth respondents had filed a petition under Section 8 of the TNPID Act before the TNPID Court, primarily on the ground that the transfers were made in not good faith and for a nominal sale consideration, and hence, they would have to be attached, as they were mala fide transfers.
(f) The appellant had filed a counter, stating that they were engaged in the construction business under the name 'Blessy Construction Company' and had constructed a corporate office for the financial establishment, the fifth respondent herein; that a sum of Rs.1,05,41,683/- was due to the appellant towards the said construction, and therefore, the sale made in favour of the appellant for a sum of Rs.45,00,000/- cannot be considered as a mala fide transfer, and prayed for the dismissal of the application.
(g)Before the TNPID Court, the first to fourth respondents examined P.W.1 and marked Exs.P1 to P4, and the appellant examined R.W.1 and marked Exs.R1 to R7. Page No. 4 of 21
(h)The TNPID Court, after considering the evidence on record, held that the transfer of property in favour of the appellant by the fifth respondent herein was otherwise than in good faith and hence liable to be attached under Section 8 of the TNPID Act.
3. The learned counsel for the appellant, primarily, contended that in order to invoke Section 8 of the TNPID Act for attachment, the TNPID Court has to first come to a conclusion that the properties of the financial establishment already available for attachment under Section 3 of the TNPID Act is less than the amount or value that such financial establishment is required to pay to the depositors and that there is no such finding by the TNPID Court; and that the finding of the TNPID Court that the transfer of property in favour of the appellant was otherwise than in good faith is contrary to the evidence on record and prayed for setting aside the impugned order.
4. The learned counsel for the fifth respondent, per contra, submitted that the TNPID Court had correctly concluded based on the evidence on record that the transfer made in favour of the appellant is in good faith and no interference is called for. Page No. 5 of 21
5. The learned Additional Advocate General appearing for the ninth and tenth respondents, per contra, would submit that the value of the properties, which have been attached so far and which are available for attachment, is very much less than the amount due by the financial establishment to the depositors. The learned Additional Advocate General has also produced the list of the properties that were available for attachment and the approximate value of those properties, and would submit that, since the value of those properties is less than the amount due by the financial establishment to the depositors, the TNPID Court was right in ordering the attachment of the appellant's property, as it was a mala fide transfer in its favour.
6. This Court has carefully considered the submissions of the parties on both sides.
7. During the course of hearing, this Court had requested the learned Additional Advocate General appearing for the ninth and tenth respondents to furnish the details of the properties that were already attached and were available for attachment. In response to the same, the ninth respondent filed an affidavit and also submitted another list Page No. 6 of 21
containing the details of the properties that were available for attachment and the properties, which were transferred otherwise than in good faith by the financial establishment.
8. This Court, by the earlier order dated 14.10.2024, had directed the ninth and tenth respondents to take steps to sell one of the properties by public auction and also take steps to expedite the attachment of three properties, besides filing application for setting aside certain mala fide transfers. The relevant portion of the said order dated 14.10.2024 reads as follows:
"4.This Court is of the view that before the appeal is finally heard and a decision is taken, in the interest of the depositors, certain directions can be issued to the respondents, which are as follows:
a)The respondents shall take steps to file separate applications under Section 8 of the TNPID Act, 1997, before the Special Court under TNPID Act Cases, Madurai, for each of the eighteen items of properties. The details of those properties are given in Tabular column in the affidavit filed by the respondents, which are extracted under:
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It is needless to say that the TNPID Court shall consider those applications on its own merits and in accordance with law.
b)The respondents shall take steps to expedite the attachment of the following 3 properties:
Sl.
No Property situated Doc.No Acrs Cent G.Value 1.
Kudipatti, Thirumanikam Village, Peraiyur Taluk, Madurai District 2161-Dt.12.09.12 Sent Proposal on 19.07.24 Survey No.221/1, 221/10, 68/9A Rs.15,70,000 2.
Kunnathur II Bit Village, Peraiyur Taluk, Madurai District 7018 dt. 28.12.10 Survey No.115/1, 50/1 Proposal sent on 07.02.2024 - Rs.3,45,000/- Page No. 13 of 21
3.
Pudhukulam Village, Sathankulam Tk, Tuticorin District 739/2011 Dt:
22.03.11 Survey No.102/1A Proposal Sent on 24.6.24 Rs.11,74,000/ c) It is submitted by the learned Additional Advocate General that with regard to the following properties belonging to the financial establishments, the competent authority has to take steps to send a proposal to the Government for attachment of those properties: Property situated DOC No Property Owner OA/SEBI/ Proposal Details/ Power Deed/ Mortage Acrs Cent G.Value S.
No Blessing Matriculatio n School, D.No.24C, Backiyalakshmi Nagar, Sambakudi, Earkudi Village, Madurai.
3903/21 Dt :
09.07.21 A5)IL.Joseph Jeyaraj OA.No:10/23 (Blessing Matriculation School) Sec-9 TNPID Act 13,05,98,568 Corporate Office, D.No.10/1 , SBO, 2nd Colony, 1st street,Ward.
No.XXII Ponmeni, Madurai south Taluk, Madurai.
827/11 Dt :
04.03.21 (A5)IL.Joseph Jeyaraj, (SEBI Attached) --- 9.25 (4034 Sq.mt) 2,50,00,00 Sengulam & Poolangal Village, Aruppukottai Taluk, Virudhunaga r District.
2018:
(A5)IL. Joseph Jeyaraj, (SEBI Recovery Amount by NLC) --- 3,30,00,000 (TNPID Court Deposited) Page No. 14 of 21
IL. Joseph Jeyaraj, (Own House), Plot.No.1, D.No.50/5, Ashok Nagar, 1291/19 Dt:
04.10.19 (A5)IL.Joseph Jeyaraj, HDB Financial Services Ltd., S.Kalidoss 7.29 (3175 Sq.mt) 1,76,00,000 (,urPJ Mtzk;) 3rd Street, Kochadai, Madurai.
Thuvariman, Madurai South T.K, Madurai.
1275/11 Dt:
31.03.11 (A5)IL. Joseph Jeyaraj, --- 14.64 15,00,000 Sirukudi Village, Manamadura i Taluk, Sivaganagai District.
4718/09, 4719/09 dt:
14.10.09 (A5)IL. Joseph Jeyaraj, 3,30,000 Alanganoor Village, Swathan Colony, Mudhuku lathur TK, Ramanathap uram dist.
897/18 - dt:
25.7.18 (A5)IL. Joseph Jeyaraj, Manimaran Power Deed Sq.mt 6,03,98,000 T.M. Kottai.
Muthuramali ngapuram, Perunali,K.S.
Puram Village, Kadaladi TK, Ramanatha puram district.
251 /18 Dt :
7.5.18 252/18 Dt :
7.5.18 (A5)IL. Joseph Jeyaraj, Muthukumari, Meenakshisundra m (Power-Doc) 5,43,78,000 Zameem Sengalpadi Village Villathikulam TK, Tuticorin dist.
1571/18 , Dt:
21.6.18 A5-Joseph Jeyaraj Rajammal @ Ramalakshmi (Mortage Without Possession Deed) 3,00,000 30,05,93,568 The respondent shall take action forthwith to send a proposal to the Government for attachment of the above referred properties, provided, the properties are available for attachment and free of any other encumbrance.
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d) By order dated 05.03.2024, in C.M.A(MD)No. 858 of 2023, this Court had set aside the order of the TNPID Court lifting the attachment of the property of the financial establishment comprised in Thuvariman, Madurai South T.K., Madurai, purchased Udi Doc.No. 860/12 dated 08.03.2012 and 861/12 dated 08.03.2012. This Court had also directed the TNPID Court either to fix the market value as security value in lieu of lifting of attachment or conduct a public auction for sale of the said property. It is represented that no action has been taken so far pursuant to the order of this Court. Mr.Prabhu Rajadurai, learned counsel, on instructions from the appellant, would submit that the appellant is willing to purchase the said property for a sum of Rs.4 Crores.
When a property is attached by the Government and the said attachment is made absolute by the Special Court, the said property cannot be sold by way of a private sale. Since there is already an offer for Rs.4 Crores for the said property, the Special Court under TNPID Act Cases, Madurai, shall fix the said amount of Rs.4,00,00,000/- (Rupees Four Crores) as base price and conduct a public auction for the sale of the said property within a period of four weeks from the date of receipt of a copy of this order.
9. The above would indicate that, as against the approximate claim of Rs.55 Crores (as submitted by the learned Additional Advocate General on instructions) by the depositors, the value of the properties that were available for attachment would not be more than 30 Crores approximately. However, in order to invoke Section 8 of the TNPID Act, as rightly contended by the learned counsel for the appellant, the TNPID Court has Page No. 16 of 21
to first hold that the value of the properties available for attachment is less than the amount or the value, which is required to be paid by the financial establishment to the depositors. However, a reading of the impugned order would show that this exercise has not been done by the TNPID Court.
10. Be that as it may, as regards the question as to whether the sale made in favour of the appellant is in good faith, this Court finds that the TNPID Court, after considering the evidence on record, held that the value of the property transferred in favour of the appellant is lesser than the market value and that there is contradiction in the stand taken by the appellant regarding the manner in which the sale consideration was paid and that the sale deed was executed much after the complaints started pouring in against the financial establishment and the transfer is a mala fide transfer.
11. This Court, upon re-appreciation of the evidence, finds that in Ex.P3, the Sale Deed in favour of the appellant, the sale consideration was shown as Rs.45,00,000/- and the same is said to have been paid by the appellant to the fifth respondent herein in several installments. Page No. 17 of 21
However, before the TNPID Court, the appellant took the stand that the fifth respondent was due to pay him more than Rs.1 Crore, out of which the property worth Rs.45,00,000/- was transferred by way of Ex.P3, the Sale Deed, and the remaining amount is payable by the fifth respondent herein.
12. This Court also finds that, according to the appellant, the construction was made in the year 2014, and there is nothing on record to show that the fifth respondent had made any claim against the appellant from 2014 to 2018. That apart, it is also seen that the market value of the property is much more than what was shown in the Sale Deed. The property was also transferred after the FIR was registered against the fifth respondent.. For all the above reasons, this Court is of the view that the finding of the TNPID Court that the transfer was otherwise than in good faith cannot be faulted.
13. However, the TNPID Court has to first come to the conclusion that the value of the properties available for attachment is less than the value or the amount required to be paid to the depositors before attaching the property of the appellant under Section 8 of the TNPID Act. The Page No. 18 of 21
TNPID has not done so in this case. The learned Additional Advocate General would however assert that the value of the properties available for attachment is less than the total deposit amount payable to the depositors. This has to be established by adducing evidence before the Tribunal.
14. Therefore, this case is remitted back to the TNPID Court to decide that issue alone. The findings of the TNPID Court as regards all other aspects are confirmed and need not be interfered with. It is open to the ninth respondent herein to establish before the TNPID Court that the total value of the properties is less than the value claimed by the depositors by adducing such evidence that may be necessary.
15. The learned Additional Advocate General would also submit that, apart from the first to fourth respondents, for whom proceedings are pending, the Investigation Officer is continuously receiving complaints from other depositors. It is needless to say that the claim made by such depositors should also be considered by the TNPID Court in determining the money payable to the depositors.
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16. The TNPID Court shall decide the question within a period of 2 months from the date of receipt of a copy of this Judgment. If the TNPID Court holds that the value of the properties available is less than the amount to be paid by the fifth respondent to the depositors, the Court may take further steps pursuant to the order of attachment.
17. In the result, this Civil Miscellaneous Appeal is partly allowed. No costs. Consequently, the connected Miscellaneous Petitions are closed. 28.10.2024 Index: Yes/ No Speaking Order/Non-Speaking Order JEN Copy To:
1.The Special Judge, The Special Court under TNPID Act Cases, Madurai.
2.The Section Officer, V.R.Section, Madurai Bench of Madras High Court, Madurai.
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SUNDER MOHAN , J.
JEN and C.M.P.(MD) Nos.11965 of 2022 & 7346 of 2024 28.10.2024 Page No. 21 of 21