Bombay High Court
Suresh Raju Shetty vs State Of Maharashtra And Anr on 30 November, 2017
Bench: S.C. Dharmadhikari
905-APEAL.813.2016+.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 813 OF 2016
WITH
CRIMINAL APPLICATION NO. 57 OF 2017
WITH
CRIMINAL APPLICATION NO. 238 OF 2017
WITH
CRIMINAL APPLICATION NO. 658 OF 2017
WITH
CRIMINAL APPLICATION NO. 1262 OF 2017
Mr. Suresh Raju Shetty } Appellant
versus
State of Maharashtra }
and Anr. } Respondents
WITH
CRIMINAL APPEAL NO. 110 OF 2017
WITH
CRIMINAL APPLICATION NO. 100 OF 2017
Shri. Satyaprakash Laxmi }
Singh } Appellant
versus
The State of Maharashtra }
and Ors. } Respondents
Mr. S. P. Kadam i/b. Mr. Prashant Badole
with Mr. R. P. Hake Patil for the appellant
in Criminal Appeal No.813 of 2016.
Mr. Amogh Singh i/b. Mr. D. P. Singh for
the appellant in Criminal Appeal No. 110
of 2017.
Mr.Vinay Bhanushali for respondent no.3
in Criminal Appeal No. 110 of 2017 and
for respondent no. 2 in Criminal Appeal
No. 813 of 2016.
Mr. J. P. Yagnik-APP for State.
Page 1 of 28
J.V.Salunke,PA
::: Uploaded on - 12/12/2017 ::: Downloaded on - 12/12/2017 23:45:11 :::
905-APEAL.813.2016+.doc
CORAM :- S. C. DHARMADHIKARI &
SMT. BHARATI H. DANGRE, JJ.
DATED :- NOVEMBER 30, 2017
ORAL JUDGMENT :- (Per S. C. Dharmadhikari, J.)
1. This appeal (Criminal Appeal No. 813 of 2016) challenges
an order passed by the learned Special Judge presiding over the
court known as Designated Court under the Maharashtra
Protection of Interest of Depositors (In Financial Establishment)
Act, 1999 (hereinafter referred to as the "MPID Act"). The
appellant challenges the order dated 16 th November, 2016 in
MPID Special Case No. 8 of 2005 along with 11 of 2003 and 10 of
2012.
2. The appellant before this court Shri. Suresh Raju Shetty is
the original accused. He says that a crime was registered bearing
number 10 of 2003 at Mulund Police Station, Mumbai alleging
offences of cheating (406, 420, 120B of the Indian Penal Code,
1860). The complaint was lodged by one Smt. Laxmi Balkrishna
Shetty, the second respondent to this appeal. Thereafter, the
investigations were transferred to the State CID. A charge-sheet
was laid and the matter is pending before the Designated Court
under the MPID Act. Smt. Sunita Suresh Shetty was the other
accused in the said case, however, she was discharged by the
learned Special Judge.
J.V.Salunke,PA
905-APEAL.813.2016+.doc
3. It is contended that the accused had started an investment
company in the year 1995 in the name and style as "Om Sai
Capital and Leasing and Finance Private Limited". It had office at
Mulund, Mumbai. The complaint alleges that the complainant,
along with her relatives invested moneys and she was promised
return on the same with 25% interest per annum. The interest
amount was to be paid over quarterly. A sum of Rs.25 lac was
invested by the complainant and her relatives invested Rs.8 lacs.
Thus, the total investment at the relevant time was Rs.33 lacs.
After this amount was invested and duly received, no interest
was ever paid. The principal amount and the interest due was
also not refunded. Therefore, the FIR was registered on 28 th
January, 2003, copy of which is at Annexure 'A'. The appellant
was arrested on 11th March, 2003 and released on bail on 14 th
April, 2003. Similar was the case with the co-accused Sunita
Suresh Shetty now discharged. Even she was arrested and
enlarged on bail.
4. The present appeal concerns an order dealing with a
property, more particularly described in para 4 of the memo of
this appeal. The accused-appellant had sold a business and the
rights in the shops where it was carried out, namely, Sairaj Bar
and Restaurant being Shop Nos. 1 to 4 situate at Survey No. 123-
J.V.Salunke,PA
905-APEAL.813.2016+.doc
A and 123-B, Hissa No. 2 of Pallav Niwas, J. N. Road, Mulund
(West), Mumbai and received Rs.2.45 crores as consideration.
The learned Judge directed, by the impugned order, the appellant
to deposit a sum of Rs.2.45 crores.
5. The appellant submits that a request was made to grant a
stay on the operation of this order. That was declined. We are not
concerned with the other persons in this matter for the simple
reason that the objection of the appellant is that a notification
dated 18th March, 2016 came to be issued under section 4 of the
MPID Act by the Deputy Secretary, Home Department,
Government of Maharashtra. In that notification, three
immovable properties and 10 movable properties came to be
attached. A copy of this notification is annexed as Annexure 'G' to
the petition. That notification reads as under:-
"NOTIFICATION
Government of Maharashtra
Home Department, 2nd Floor,
Mantralaya, Mumbai - 32
Date : 18.03.2016
No MPI 2016/C.R.39/Pol :- Whereas complaints have
been received from number of depositors against OM SAI
CAPITAL LEASING AND FINANCE PVT. LTD. (herein after
referred to as "the said Financial Establishment"),
complaining that they had collected the Fund and have
defaulted to return the said deposits made by the
depositors, on demand;
J.V.Salunke,PA
905-APEAL.813.2016+.doc
And whereas, the State Government is satisfied that
the said Financial Establishment and its Chairman/
Directors are not likely to return the deposits to the
depositors and hence the Government has to protect the
interests of the depositors;
And whereas, the properties specified in the Schedule
appended hereto are alleged to have been acquired by the
said Financial Establishment and its Chairman/Directors
from and out of the deposits collected by the said Financial
Establishment;
Now, therefore, in exercise of the powers conferred by
sub-section (1) of Section 4, Section 5, Section 8 and
Section 12 of the Maharashtra Protection of Interest of
Depositors (In Financial Establishment) Act, 1999 (Mah.
XVI of 2000) (hereinafter referred to as "the said Act") the
Government of Maharashtra hereby attaches the
properties of the said Financial Establishment and in the
name of its Chairman/Directors as specified in the
Schedule.
Schedule
The property of the said accused to be attached is as
follows
A] Immovable property (Land/Flat etc.) :-
Sr.
Property Area
no.
Sai Apartment, Back side of Sairaj
Mulund West Mumbai
Room No. 1 and 3, Pallav Niwas,
2 A,
J.N.Road, Mulund West Mumbai
B] Movable Property, - Bank Accounts, Bank Balance,
and other Investments of Partners
J.V.Salunke,PA
905-APEAL.813.2016+.doc
Sr. Balance/Amo Account
Bank Name and Address
No. unt Number
The Bharat Co-Op Bank
1 Mumbai Ltd-Mulund West Rs.1,054 SB 12483
Mumbai
The Bharat Co-Op Bank
2 Mumbai Ltd-Mulund West Rs.5,220 CA 1763
Mumbai
The Bharat Co-Op Bank
3 Mumbai Ltd-Mulund West Rs.2897 CA 32
Mumbai
The Bharat Co-Op Bank
4 Mumbai Ltd-Mulund West Nil CA 1459
Mumbai
The Thane Janata Co-op Bank
5 Rs.200.73 CA 83
Ltd-Mulund Mumbai
The Thane Janata Co-op Bank
6 Rs.720 AB 1071
Ltd-Mulund Mumbai
Bhandup West Mumbai
Central Bank of India Mulund
9 Rs.2,404.74 4947
West Mumbai
Central Bank of India Mulund
10 Rs.338 101784
West Mumbai
By order and in the name of the Governor of
Maharashra.
(Suresh Khade)
Deputy Secretary, Home Department,
Government of Maharashtra"
6. Pursuant to this notification, the Revenue machinery
geared itself up and the competent authority/Deputy Collector
(Encroachment and Removal), Mulund Division filed application
Exhbit 1-B invoking section 5(3) of the MPID Act on 16 th July,
2016, pursuant to which, a notice dated 21 st July, 2016 came to
J.V.Salunke,PA
905-APEAL.813.2016+.doc
be issued to the appellant and objections under section 7 were
invited, in the sense a notice to show cause why the attachment
order be not made absolute. Annexure 'H' is a copy of the notice
and Annexure 'I' is a copy of the reply dated 28 th July, 2016. The
objection of the appellant was that property mentioned at serial
number 1 being company's office is concerned, that was taken on
leave and licence basis for the period from 1995 to 1998. The
owner of the said premises is Mr. S. V. Pandian. Then, as far as
property mentioned at serial number 2 being room nos. 1 and 3
are concerned, the accused-appellant submitted that room no. 3
was purchased by him in the year 1989 much before starting of
the business of investment company. It was not acquired from
the amount invested by the complainant and others. Room no. 3
was purchased in the year 1989 out of his own funds earned in
hotel business. Then, room no. 1 does not belong to him nor any
of his relatives. It is owned by Mr. Raviraj. This was the
defence/objections insofar as attachment of the properties
mentioned at serial numbers 1 and 2.
7. As far as property at serial number 3, which is stated to be
the prime property, the objections runs as under:-
"(3) That the property at Sr. no. 3 being Sairaj Bar and
Restaurant, Gala no. 1, 2, 3, 8 & 9, Pallav Niwas, J. N.
Road, Mulund (W), Mumbai 400 080, it is submitted on
behalf of the Accused herein as follows:
J.V.Salunke,PA
905-APEAL.813.2016+.doc
(a) That the Shop no. 1 & 2 has been acquired by
the Accused in the year 1984, Shop no. 3 has been
acquired by the Accused in the year 1989.
(b) That there is no Shop no. 8 & 9 in the
said building.
(c) That the Shop no. 4 has been purchased by the
accused in the year 1992.
Hereto annexed and marked as "Exh-B"
are the documents with regards to the purchase
of the above mentioned Shop no. 1, 2, 3 & 4.
(d) That the said property was never attached by
the Competent Authority/Government, however the said
property was mortgaged with Central bank of India,
Ghatkopar (W) Branch, Mumbai.
(e) That the said property was under mortgage to
the Central Bank of India and it was released by the DRT
III as per the law to the prospective purchaser and
accordingly the Central Bank of India has debited their
dues/liability of Rs.60 Lacs and the balance was credited
to the accused account and thereafter the said property
was transferred as per the registered sale deed in favour
of the purchaser Mr. Satyaprakash Laxmi Singh."
8. The appellant argued that the alleged deposit is of the year
1998 and the property shop nos. 1 and 2 was purchased in the
year 1984, shop no. 3 was purchased in the year 1989, shop no. 4
was purchased in the year 1992 and room no. 3 was purchased in
the year 1989. Hence, this property cannot be said to be acquired
from the alleged deposits/investment and cannot, therefore, be
attached under the MPID Act. Then, it is stated in paras 5 and 6
as under:-
"(5) That there was settlement between Accused and the
Original Complainant Smt. Laxmi Shetty wherein Accused
had handed over Flat premises and landed property
J.V.Salunke,PA
905-APEAL.813.2016+.doc
situated at Udpi, Karnataka. But the Original Complainant
cleverly insisted the Accused to execute the sale deed and
registered the same in her Husband Brother's name and
accordingly the Accused entered into the sale deed on
01.11.1998 in the name of one Mr. Bhasker Shetty. Later
on in the year 2001 i.e. 09.02.2001, the said Property was
cleverly re-transferred in the name of the Original
Complainant's husband. The Accused had also paid Rs.23
Lacs in cash to the Original Complainant and her Husband
Mr. Balkrishna Shetty and they have also acknowledged
the receipt that they have received cash of Rs.23 Lacs.
Hereto annexed and marked as "Exh-C" are the
copies of the said receipt and registered sale deed .
(6) That the valuation of the landed property as Udpi,
Karnataka amounts to about Rs.1.08 Crore and the
Accused has the Valuation Report of the year 2009 which
mentions that the Value of the Landed Property is about
Rs.1.08 Crore. Hereto annexed and marked as "Exh-
D" is the copy of the said valuation report ."
9. These were the objections on record on 28th July, 2016. It is
stated that one application Exhibit 22 was thereafter heard
afresh pursuant to the order and directions of this court and the
impugned order came to be passed, copy of which is at Annexure
'J'. Our attention has been invited to the operative part of this
order and that reads as under:-
"ORDER
1. The accused Suresh Raju Shetty is directed to deposit
an amount of Rs.1.5 Crores by way of D. D. in the name of
Sr. P. I. EOW Unit 7 within 30 days from the date of this
order.
2. On failure of the accused to deposit the amount of
Rs.1.5 Crores as aforsaid, the bail order and the bail bonds
of the accused shall stand automatically cancelled without
any reference to this Court. In that case NBW shall be
issued against the accused. The accused shall be arrested
and taken into custody.
J.V.Salunke,PA
905-APEAL.813.2016+.doc
3. On deposit being made by the accused as aforesaid,
API Mule to get the DD incashed in the newly opened
account with the SBI, Churchgate Branch, Mumbai in the
name of Sr. P. I. EOW Unit 7 C. R. No. 10 of 2003 and
instruct the bank to keep the amount in the FDR with auto
renewal option.
4. On deposit being made by the accused as aforesaid, all
the properties attached by the government under the
notification except the amount in attached bank account
shall be released from attachment.
5. On failure of the accused to deposit the amount as
aforesaid, the order of attachment of Room No. 3 & freeze
bank accounts shall become absolute. In that case the C. A.
is directed to get the Room No. 3 vacated from the accused.
6. For vacating the premises the CA may take help of
EOW Unit No. 7 and local police. Sr. P. I. EOW and Sr. P. I.
Mulund West P. S., in whose jurisdiction the property
comes, are directed to cooperate the C. A. to vacate and
liquidate the attached Room No. 3.
7. On Room No. 3 i.e. residence of accused at Palav
Niwas, J. N. Road, Mulund West, Mumbai - more
specifically described in Sr. No. 2 of the schedule A of the
notification Exh. 1-A, being vacated, the CA is directed to
first liquidate the same by auction sale.
8. On failure of accused to deposit the amount as
aforesaid and on realization of the amount from the
auction of Room no. 3 by the CA, if, the amount less than
Rs.1.5 Crores is realized, the C. A. is directed to intimate
the noticee Satyaprahash Laxmi Singh to deposit the short
coming amount to Rs.1.5 Crores within 15 days, failing
which CA shall proceed to attach the property of malafide
transferee - Satyaprakash Laxmi Singh, to the extent of
amount which is short coming to Rs.1.5 Crores.
9. In the case the property of noticee Satyaprakash
Laxmi Singh is attached the CA is directed to auction sale
his property equivalent to the amount short coming to the
amount of Rs.1.50 Crores.
10. On deposit being made by the accused as aforesaid, or
on realization of the amount from auction sale of the Room
No. 3 as aforesaid, or/and on realization of the short
coming amount from the noticee - Satyaprakash Laxmi
Singh by deposit by him or by sale of his property, the C. A.
J.V.Salunke,PA
905-APEAL.813.2016+.doc
with the help of PA A. P. I. Mule is directed to disburse
double the amount so deposited by the 15 depositors, as
shown in the final report.
11. The PA API Mule and the CA is directed to file
quarterly progress report and the compliance report
without fail before this Designated Court.
12. With above directions the Exhibit 22 and Exhibit 1-B
stands disposed of.
Date 16/11/2016
(D. P. Surana)
Spl. Judge, MPID Act &
Addl. Sessions Judge,
City Civil & Sessions Court, Gr. Mumbai."
10. Thus, it is this order, which is challenged on several
grounds before us by the appellant.
11. Mr. Kadam learned advocate appearing for the appellant-
accused would submit that the learned Judge has erred in law in
passing the impugned order. Mr. Kadam would submit that by
section 4(1), there is a power of attachment conferred in the
Special Court. However, when there is an objection raised to the
attachment, then, that objection has to be dealt with and that has
to be dealt with is equally provided in the law. The language of
section 7(1) of the Act is imperative. Our attention has been
invited by Mr. Kadam to the scheme of the law itself.
12. Mr. Kadam would submit that the Act has been enacted to
protect interest of depositors of the financial establishments and
matters relating thereto. The Act has very few sections and by
J.V.Salunke,PA
905-APEAL.813.2016+.doc
section 2, the definitions are set out. Our attention is invited to
section 2(a), (c) and (d) by Mr. Kadam to submit that in the event
any financial establishment, which fraudulently defaults in
repayment of deposit on maturity along with any benefit in the
form of interest, bonus, profit or in any other form as promised or
fraudulently fails to render service as assured against the
deposit, every person including the promoter, partner, director,
manager or any other person or an employee responsible for the
management of or conducting of the business or affairs of such
financial establishment shall, on conviction, be punished with
imprisonment. Mr. Kadam would submit that this is the offence
inviting punishment. There is an Explanation which is set out
below section 3. By section 4, there is a power to attach. The
power to attach is vesting in the Government. The power to
attach can be exercised notwithstanding anything contained in
any other law for the time being in force, but upon complaints
received from the depositors or otherwise. However, the
Government is obliged to satisfy itself that any financial
establishment has failed to return the deposit after maturity or
on demand by the depositor or to pay interest or other asured
benefit or to provide the services promised against such deposit
or the Government has reason to believe that any financial
establishment is acting in calculated manner detrimental to the
J.V.Salunke,PA
905-APEAL.813.2016+.doc
interests of the depositors with an intention to defraud them. If
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 whch the
deposit is received, the Government may, in order to protect the
interest or depositors of such financial establishment, after
recording reasons in writing, issue an order by publishing it in the
Official Gazette, attaching the money or the property believed to
have been acquired by such financial establishment, either in its
own name or in the name of any other person from out of deposits
collected by the financial establishment or if it transpires that
such money or other property is not available for attachment or
not sufficient for repayment of the deposits, such other property
of the said financial establishment or the promoter, director,
partner or manager or member of the said financial
establishment as the Government may think fit.
13. By sub-section (2) of section 4, consequences of publication
of the order under sub-section (1) are set out. The consequences
are indeed grave and serious. The properties then forthwith vest
with the competent authority appointed by the Government
pending further orders from the Designated Court. By sub-
section (3), the Collector of a district and chosen rightly by the
J.V.Salunke,PA
905-APEAL.813.2016+.doc
legislature is competent to receive complaints from his district
under sub-section (1) and he shall forward the same together
with his report to the Government at the earliest and shall send a
copy of the complaint also to the concerned District Police
Superintendent or the Commissioner of Police for investigation.
14. While issuing the order under sub-section (1) of section 4,
the Government has discretion to appoint any of its officials not
below the rank of the Deputy Collector, as the competent
authority to exercise control over the moneys and the properties
of a financial establishment attached by the Government under
section 4 of the MPID Act. Then, by sub-sections (2) and (3) of
section 5, the competent authority is endowed with a power and it
can apply to the Designated Court by one or more affidavits
stating the grounds on which the Government has issued the said
order under section 4 and the amount of money or other property
believed to have been acquired out of the deposits and the details,
if any, of persons in whose name such proeprty is believed to have
been invested or acquired or any other property attached under
section 4, for such further orders as found necessary.
15. Mr. Kadam submits that section 6 deals with establishemnt
and powers of the Designated Court. Mr. Kadam relies heavily on
sections 7 and 8, which read as under:-
J.V.Salunke,PA
905-APEAL.813.2016+.doc
"Section 7. (1) Upon receipt of an application
under section 5, the Designated Court shall issue to the
Financial Establishment or to any other person whose
property is attached and vested in the competent
Authority by the Government under section 4, a notice
accompanied by the application and affidavits and of the
evidence, if any, recorded, calling upon the said
Establishment or the said person to show cause on a date
to be specified in the notice, why the order of attachment
should not be made absolute.
(2) The Designated 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 Designated Court at
any time before an order is passed under sub-section (4) or
sub-section (6).
(4) The Designated Court shall, if no cause is shown
and no objections are made under sub-section (3), 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 realisation of the assets attached
and for the equitable distribution among the depositors of
the money realised from out of the property attached.
(5) If cause is shown or any objection is made as
aforesaid, the Designated Court shall proceed to
investigate the same and in so doing, as regards the
examination of the parties and in all other respects, the
Designated Court shall, subject to the provisions of this
Act, follow the summary procedure as contemplated under
Order 37 of the Civil Procedure Code, 1908 and exercise all
the powers of a court in hearing a suit under the said Code
and any person making an objection shall be required to
adduce evidence to show that on the date of the
attachment he had some interest in the property attached.
(6) After investigation under sub-section (5), the
Designated Court shall pass an order either making the
order of attachment passed under sub-section (1) of
section 4 absolute or varying it by releasing a portion of
J.V.Salunke,PA
905-APEAL.813.2016+.doc
the property from attachment or cancelling the order of
attachment:
Provided that the Designated Court shall not release
from attachment any interest, which it is satisfied that the
Financial Establishment or the person referred to in sub-
section (1) has in the property, unless it is also satisfied
that there will remain under attachment an amount or
property of value not less than the value that is required
for repayment to the depositors of such Financial
Establishment.
Section 8. (1) Where the assets available for
attachment of a Financial Establishment or other person
referred to in section 4 are found to be less than the
amount or value which such Financial Establishment is
required to re-pay to the depositors and where the
Designated Court is satisfied, by affidavit or otherwise,
that there is reasonable cause for believing that the said
Financial Establishment has transferred (whether before
or after the commencement of this Act) any of the
property otherwise than in good faith and for
consideration, the Designated Court may, by notice,
require any transferee of such property (whether or not he
received the property directly from the said Financial
Establishment) 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 after
investigation in the manner provided in sub-section (5) of
section 7, the Designated Court is satisfied that the
transfer of the property to the said transferee was not in
good faith and for consideration, the Designated Court
shall order the attachment of so much of the said
transferee's property as is in the opinion of the Designated
Court equivalent to the proper value of the property
transferred."
16. The argument of Mr. Kadam is that the further
consequences in the law right up to section 18 would denote that
this is a law for protection of interest of depositors and it confers
wide powers in the Government and the competent authority. All
J.V.Salunke,PA
905-APEAL.813.2016+.doc
proceedings under the Act have to be instituted before the
Designated Court and when the Designated Court deals with them
and passes any order, an appeal would lie to this court under
section 11. Therefore, the argument of Mr. Kadam is that there is
no finding in the impugned order in terms of the law. The matter
has not been adjudicated in the backdrop of the allegations and
particularly bearing in mind the provisions of law and the
consequences that would follow the attachment.
17. Our attention has been invited to the impugned order by Mr.
Kadam to submit that the objection has been referred cursorily by
the Judge of the Designated Court. He firstly refers to application
Exhibit - 22 filed by the informant on 6th July, 2013 to take
appropriate steps/action against the accused for disposing of a
secured property. The allegation is that the appellant before this
court floated a scheme and committed default. He was arrested.
Apart from three immovable properties, few bank accounts were
attached/freezed. Then, the learned Judge refers to some orders
passed by the Designated Court after the application Exhibit - 22
was filed.
18. Thereafter, the learned Judge at internal page 5 of the
order refers to the objection, which has been raised by the
present appellant and another objector Satyaprakash Laxmi
J.V.Salunke,PA
905-APEAL.813.2016+.doc
Singh. Thus, the appellant's objection is styled as Exhibit 1-D and
the other objectors objection is Exhibit 1-K. The order, according
to Mr. Kadam, would purport to deal with Exhibit 1-D under
section 5(3). Mr. Kadam submits that while Exhibit - 22 and its
contents are referred to in internal pages 6 and 7 of the impugned
order, the learned Judge was informed that there are two actions,
which are required to be taken. The first to treat the application
Exhibit - 22 as made under section 8 of the MPID Act and to
decide whether the transfer was a malafide transfer and
secondly, to proceed under section 439(2) of the Code of Criminal
Procedure, 1973 for the cancellation of the bail so granted to the
accused. Mr. Kadam would submit that a common or composite
order is passed purporting to deal with all the
applications/objections. The learned Judge erred in law firstly, in
construing and interpreting sections 4, 8 and 9 and thereafter
purporting to hold that the accused is not disputing that he sold
the property at serial number 3 to the objector Satyaprakash
Laxmi Singh. However, Mr. Kadam would submit that the
learned Judge completely omits from consideration the objection
that the property has been sold after it was purchased and prior
to the commencement of the investment business. Thus, the
learned Judge erroneously says that the date of purchase is
immaterial and that fact need not be gone into. The learned
J.V.Salunke,PA
905-APEAL.813.2016+.doc
Judge also terms the mode of transfer as immaterial. Mr. Kadam
would submit that the learned Judge proceeds on the footing that
the Debt Recovery Tribunal (DRT) has not sold the property,
which was a secured asset in terms of a transaction of loan
obtained by the accused. The property may have been disposed of
by an inter-se agreement between the accused and Satyaprakash
Laxmi Singh and the amount of Rs.60 lakhs may have been
transferred to the recovery officer of the bank, but this is not
done without any order from the DRT or Debt Recovery Appellate
Tribunal (DRAT). Hence, according to Mr. Kadam, the learned
Judge proceeds to hold that the transaction itself is tainted. Once
the learned Judge was informed that there was an order directing
the appellant-accused to bring in a sum of Rs.2.45 crores, then,
without addressing himself to these vital issues, the learned
Judge has proceeded to demolish the transaction, term it as
malafide transfer and then held that once the property has been
transferred otherwise than in good faith, then, conditions are
required to be imposed. Thus, Mr. Kadam would submit that
beyond this one para discussion, that too by terming everything
in the objection as immaterial, the impugned order has been
passed.
J.V.Salunke,PA
905-APEAL.813.2016+.doc
19. The impugned order is also impugned by Mr. Satyaprakash
Laxmi Singh and he has filed an appeal being Criminal Appeal No.
110 of 2017.
20. Both appeals are vehemently opposed by Mr. Yagnik and
Mr. Bhanushali appearing for respondent nos. 1 and 2
respectively. They would submit that this appeal is nothing but
delaying tactics. Once the property has been rightly attached,
then, we do not have to bother ourselves at this stage with the
merits of the objections for they are raised by a person, who is
admittedly an accused. The version of the accused should not be
treated as final, much less binding on the court. Therefore, their
argument is we should dismiss the appeal.
21. With the assistance of the learned advocates appearing for
both sides, we have carefully perused the appeal memo and the
impugned order. We have already summarised the controversy
while noting down the facts, admitted dates, events and
submissions of Mr. Kadam.
22. It is common ground that the objections that we have
reproduced and particularly of the appellant in Criminal Appeal
No. 813 of 2016 concern an attachment and that attachment has
been levied pursuant to a notification Annexure 'G' dated 8 th
J.V.Salunke,PA
905-APEAL.813.2016+.doc
March, 2016. That is a notification which has been issued by the
Government in exercise of the powers conferred by sections 4, 5,
8 and 12 of the MPID Act. However, before that, the State has
recorded its satisfaction that the financial establishment and its
Chairman/Directors are not likely to return the deposit to the
depositors and hence, the Government has to protect the interest
of the depositors. Equally, in this notification itself, it is alleged
that the properties specified in the Schedule are alleged to have
been acquired by the financial establishment out of the deposits
collected from the depositors. The properties are listed in the
Schedule. Then comes the show cause notice, where, the
appellant is called upon to show cause as to why the attachment
should not be made absolute. That is a notice, copy of which is at
Annexure 'H' dated 21st July, 2016. The appellant raised specific
objections and we have already reproduced them.
23. As far as the immovable property, styled as Sairaj Bar and
Restaurant, with which alone we are concerned, the accused-
appellant submitted that shop nos. 1 and 2 were acquired in the
year 1984, shop no. 3 has been acquired in the year 1989 and
there are no shop nos. 8 and 9 in the building. That shop no. 4
has been purchased in the year 1992. He has annexed copies of
the documents of purchase of shop nos. 1, 2, 3 and 4. It is claimed
J.V.Salunke,PA
905-APEAL.813.2016+.doc
that these properties were never attached by the Government or
the competent authority. This property was free from
encumbrances and the accused was free to deal with it. He
mortgaged it to the Central Bank of India and it was released by
DRT III as per the law to the prospective purchaser. The Central
Bank of India has debited their accounts for a liability of Rs.60
lakhs. The balance of the sale proceeds are credited to the
account of the accused and thereafter, the property was
transferred by the registered sale deed in favour of the purchaser
Mr. Satyaprakash Laxmi Singh.
24. Mr. Kadam submits that the matter could not have,
therefore, been decided by the learned Judge of the Designated
Court without verifying the facts in relation to these transactions.
Mr. Kadam would submit that the document styled as
proclamation of sale at page 242 of the appeal paper book refers
to Rules 38, 52(2) of the Second Schedule to the Income Tax Act,
1961. The learned presiding officer of the DRT-III, Mumbai has
directed that the Recovery Certificate be drawn up in Original
Application No. 2 of 2002 for recovery of the sum of
Rs.37,84,860/- plus interest at the rate of 15% per annum from
the date of filing of application till realisation from M/s. Hotel
Sairaj and others, namely the certificate debtors. The certificate
J.V.Salunke,PA
905-APEAL.813.2016+.doc
holder is the Central Bank of India. 7 th May, 2007 was the date
fixed for sale and the amount to be recovered was on that date
Rs.70,07,199/- inclusive of the costs and interest. The property
was sought to be sold because it was attached. It was to be sold on
as is where is and what is basis. In the absence of any order of
postponement, the property was to be sold by public auction. In
pursuance of this proclamation, it was sold and to the said
Satyaprakash Laxmi Singh. Though the property was sold by a
private treaty, what is placed on record is a copy of the
conveyance and that conveyance as also the objections clearly
say that this was a sale so as to discharge the debt of the bank and
to release the property for it was a security towards outstanding
loan. That was an inter-se transfer, but through the recovery
officer, who had issued this proclamation of sale. How the learned
Judge could dispose of the objection in one paragraph by holding
that this private sale was without any order from the DRT or
DRAT has not been clarified at all. Pertinently, the learned Judge
refers to proceedings between the bank and the appellant, who
says that it is not the DRAT which sold the property under the
applicable law.
25. We are sorry to say that the learned Judge has unmindful of
the above facts completely ignored the scheme of the
J.V.Salunke,PA
905-APEAL.813.2016+.doc
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act). If
this property was constituting a security interest of a bank, then,
all these matters and several issues in relation to the transaction
between the bank and the debtor-appellant are expressly relevant
for the purpose of this adjudication. Then, whether the
attachment by the bank so as to enforce its security precedes the
attachment under the MPID Act, whether there was no
attachment, but still there was a prior mortgage of the same
property with the bank, there was a failure to discharge the
liability of the bank, the bank was, therefore, in a position to deal
with and dispose of the property in terms of the SARFAESI Act
without the intervention of the court and whether the deals and
transactions of the bank would prevail in terms of the SARFAESI
Act over the attachments in terms of the MPID Act were equally
important, relevant underlying issues. We see no discussion in
that regard, but for the two lines in para 13 of the impugned
order. We have, therefore, no hesitation in holding that the
learned Judge of the Designated Court has failed to carry out his
duty in law. He has completely ignored the scheme of the MPID
Act. We have noted that scheme at length. If there is an
attachment under section 4, then, whether there was a
satisfaction by the Government and which is the principal
J.V.Salunke,PA
905-APEAL.813.2016+.doc
requisite, whether that satisfaction was reached by applying
relevant and germane materials and whether in terms of sub-
section (3) of section 5 was it necessary for the Designated Court
to render any assistance to the competent authority is not
clarified at all. If the other property is what is sought to be
attached and the notification refers to that property, then, it was
incumbent on the Designated Court to have satisfied itself as to
whether there is nothing available with the authority except this
property for repayment of the moneys of the investors. The later
part of sub-section (1) of section 4 ends with the satisfaction of
the Government that if the money or other properties are not
available for attachment or not sufficient for repayment of the
depositors, then, other properties of the financial establishment
or promoter etc. can be attached. If that was the position and
whether that other property was available for attachment or not
has not been dealt with. Further, in dealing with the objections to
the attachment, the powers of the Designated Court and in terms
of section 7 enable it to deal with the same thoroughly. Sub-
section (5) of section 7 enables investigation of the
claim/objection, examination of the parties and the Designated
Court can, subject to the provisions of the MPID Act, follow the
summary procedure as contemplated under Order 37 of the Civil
Procedure Code, 1908 and exercise all the powers of a court while
J.V.Salunke,PA
905-APEAL.813.2016+.doc
hearing a suit under the Civil Procedure Code, 1908 and any
person making an objection shall be required to adduce evidence
to show that on the date of the attachment, he had some interest
in the property attached. We will come to this aspect later, but
first, the Designated Court should have satisfied itself that this
property can be attached or otherwise. In attaching that
property, whether any illegality has been committed. Then comes
the objection of Mr. Satyaprakash Laxmi Singh, the purchaser
and he would be in a position then, on being called upon, to
produce that evidence in support of the objection that on the date
of the objection he had some interest in the property attached.
The powers are in summary in nature, but we do not think that
they can be exercised in such a casual manner. These are serious
proceedings and a trained legal mind is chosen to deal with the
same. A person who has the powers of an Additional Sessions
Judge has to preside over the Designated Court as a Judge. Once
he so presides, it is expected of him to consider the matter
thoroughly in terms of the law and pass an order either making
the attachment absolute or by releasing a portion of the property
from attachment or cancelling the attachment. The proviso to
sub-section (6) of section 7 enables the Designated Court not to
release from attachment any interest, which it is satisfied that
the financial establishment or the person referred to in sub-
J.V.Salunke,PA
905-APEAL.813.2016+.doc
section (1) has in the property, unless it is also satisfied that
there will remain under attachment an amount or property of
value not less than the value that is required for repayment to the
depositors of such financial establishment. Thus, the release
order should not be passed in the event this satisfaction is
recorded or it could be a conditional release. We are required to
pass this detailed order for one finds that the difference between
malafide transfers and attachment of the property in terms of
Government satisfaction are distinct matters.
26. As a result of the above discussion, we quash and set aside
the impugned order to the extent of the property, namely, Sairaj
Bar and Restaurant and direct that the objections of the
appellants in both the appeals shall be decided afresh on merits
and uninfluenced by the earlier observations and findings.
However, we impose a condition on the appellant-Satyaprakash
Laxmi Singh and because it is stated on oath that he is the owner,
in seisin of the property, but presently has put a third party
purely on leave and licence basis in possession, that no third
party interest of whatsoever nature would be created by him
during the pendency of the proceedings and until further orders
of the Designated Court. We clarify that all those who deal with
Mr.Satyaprakash Laxmi Singh shall do so at their own risk and
costs as to all legal consequences.
J.V.Salunke,PA
905-APEAL.813.2016+.doc
27. With the aforesaid observations and directions, both the
appeals are disposed of. The amount deposited in this court shall
be transferred to the Designated Court by the Registry of this
court with accrued interest. The deposit shall abide by the final
orders of the Designated Court. Beyond impressing upon the
court below, the factual and legal controversy, we have not
expressed any opinion on the rival contentions.
(SMT. BHARATI H. DANGRE, J.) (S.C.DHARMADHIKARI, J.)
J.V.Salunke,PA
