Karnataka High Court
Narayan Mahadevrao Biradar vs The Competent Authority on 12 June, 2023
Bench: H.P.Sandesh
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MFA No. 6017 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF JUNE, 2023
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO.6017 OF 2022 (RES)
BETWEEN:
1. NARAYAN MAHADEVRAO BIRADAR
S/O MAHADEV RAO BIRADAR
AGED ABOUT 67 YEARS
PRESENTLY RA/T NO.1 NORTHWOOD LAYOUTS
CAUVERY NAGAR, HORAMAVU AGARA MAIN ROAD
BENGALURU-560043
...APPELLANT
(BY SRI NARAYANA REDDY M, ADVOCATE)
AND:
1. THE COMPETENT AUTHORITY
Digitally signed
FOR SRI KANVA SOUHARDHA CO-OPERATIVE
by SHARANYA T CREDIT LTD, KANDAYA BHAVAN
Location: HIGH
COURT OF K G ROAD, BENGALURU-560009
KARNATAKA
2. THE MANAGER
HDFC BANK LIMITED
HENNUR ROAD BRANCH
NO.485, BMR COMPLEX
HENNUR MAIN ROAD
BENGALURU-560043
...RESPONDENTS
(BY SRI R KIRAN, ADVOCATE FOR R2;
V/O DT.18.04.223, NOTICE TO R1 IS H/S)
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MFA No. 6017 of 2022
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENTS ACT, AGAINST THE ORDER
DT.06.08.2022 PASSED IN MISC.NO.845/2022 ON THE
FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE AND SPECIAL JUDGE FOR KPIDFE CASES,
BENGALURU AND ETC.
THIS APPEAL COMING ON FOR ADMISSION, THIS
DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
This appeal is filed challenging the order dated
06.08.2022 passed in Misc. No.845/2022 on the file of the
XCI Additional City Civil and Sessions Judge, Bengaluru.
2. This appeal is listed for admission. Heard the
learned counsel appearing for the appellant and the
learned counsel appearing for respondent No.2.
3. The factual matrix of the case is that the
petitioner is a retired Government Servant. After his
retirement, considering his experience, he was appointed
as an independent Director in M/s. Kanva Fashions from
28.09.2015 to 15.05.2017 as per Section 149(10) of the
Companies Act, 2013. During this period, he had rendered
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MFA No. 6017 of 2022
his service for improvement of the Kanva Fashions and
stepped out of the organization on 15.05.2017 by
submitting his resignation to its Managing Director. His
resignation was accepted with effect from 15.05.2017.
The Assistant Registrar of Companies, also accepted his
resignation before the Registrar of Companies and certified
the resignation with effect from 15.05.2017. Since,
15.05.2017, the petitioner was totally dis-associated from
Kanva Fashions in all its activities. It is also contended
that the petitioner had learnt that pursuant to the letter
dated 05.06.2020 from the Deputy Commissioner, Urban
District to the Lead District Manager (Canara Bank),
Bengaluru Urban District, he had frozen several bank
accounts belonging to one Nanjundaiah and others who
were the Directors of Sri Kanva Souhardha Co-operative
Credit Limited in connection with the registration of
criminal cases against them. In view of the said letter, the
Lead District Manager had sent an e-mail on 08.06.2020
to respondent No.2 to freeze the account bearing
No.50100125176937 standing in the name of the
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petitioner. On receipt of the said e-mail, respondent No.2
immediately freezed the account of the petitioner and
prevented transactions in the said account and thereby the
petitioner has been precluded in operating the said
account. It is also contended that he was not a Director
elected by the members, but he has appointed as
independent Director to render his service for betterment
of the Kanva Fashions and he had no role or power or
authority in dealing with the day to day affairs of the
Kanva Fashions. He was not associated with the policies
and administration of day to day function of the Kanva
Fashions. He being the retired Government servant has
been facing untold miseries and suffering due to freezing
of his account in operating his salary account for his day to
day sustenance. Hence, he approached respondent No.1
and requested him to defreeze his account maintained
with respondent No.2. But respondent No.1 by his letter
dated 23.06.2021 informed that since his bank account
has been freezed under the provisions of the Karnataka
Protection of Interest of Depositors in Financial
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Establishments Act, 2004 (KPIDFE Act) and Karnataka
Protection of Interest of Depositors in Financial
Establishments Rules, 2006 (KPIDFE Rules) hence, he has
no power to defreeze the account.
4. It is further contended that the petitioner had
approached the Court in Misc. No.341/2021 praying to
defreeze his account, but he has withdrawn the said
petition with liberty to approach the Court afresh in
accordance with law. The account of the petitioner has
not been attached by the Government as per Section 3 of
the KPIDFE Act and no notification has been published in
that regard as required under law. In view of non-
initiating the action under Section 3 of the KPIDFE Act, an
endorsement issued by respondent No.1 is prima facie
illegal, improper and unjust. Even if there is freezing of
account, it shall be only for a period of 3 months that too
with the approval of the Court. Since the account has
been frozen with effect from 08.06.2020, the refusal on
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the part of respondent No.1 to defreeze the account is
illegal. Hence, approached the Court.
5. The Court before passing an order with regard
to the maintainability of the petition, considered the
ground urged in the petition and comes to the conclusion
that the Court has observed that earlier he has given
representation and same was not considered and also he
has filed the petition and the same was withdrawn with
liberty to approach the Court afresh. The Court also taken
note of the fact that as provided under Section 10(2), no
Court other than the Special Court shall have jurisdiction
in respect of any matter to which the provisions of KPIDFE
Act are invoked. The Court also discussed with regard to
that whether the relief claimed by the petitioner could be
entertained by this Court is the moot point for
consideration. The Court having taken note that the
provisions of Section 11 of the Act are analysed, it deals
with the power of the Special Court regarding the
realization of assets and payment to the depositors.
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Section 11(1) provides for general power for giving effect
to the provisions of the KPIDFE Act and Section 11(2) (a)
to (m) deals with various other powers relating to certain
aspects. Having considered the provisions of Section 11,
the Court comes to the conclusion that the relief sought in
the petition does not fit not only Section 11(2)(f) but also
any other provisions of Section 11. The relief sought for by
the petitioner is found to be contrary to any relief to be
granted under the said provision. If the relief sought by
the petitioner is entertained, it dehors the very purpose
and object of the Act itself. The relief sought for by the
petitioner prima facie appears to be derogatory to the
provisions of Section 11 and even contrary to the very
purpose and object of the Act itself. This is because with
the object of protecting the interest of the depositors of Sri
Kanva Souhardha Credit Co-operative Limited, the
competent authority exercised its power under Rule 5 of
the Act and freezed the account of the petitioner, who was
admittedly one of the Directors of the Financial
Establishment for certain period. But now, the petitioner
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seeks defreezing of the account which is freezed to protect
the interest of the depositors. The Trial Court also comes
to the conclusion that admittedly the petitioner has
approached respondent No.1 for defreezing the account
and the same was rejected by giving an endorsement as
per Annexure-A. The petitioner contended that the said
endorsement is illegal, unjust and improper. But it is
pertinent to note that the Trial Court made an observation
that this Court is not sitting as a appellate Court on the
order/endorsement issued by respondent No.1. But the
petitioner has contended that his account was freezed on
08.06.2020 and so far the proceedings were not initiated
under the provisions of KPIDFE Act by attaching the same
by the Government. The Trial Court comes to the
conclusion that that there is no limitation prescribed under
the provisions of KPIDFE Act for passing attachment order
by the Government and also there is no limitation that an
account has to be freezed only for a period of three
months under Rule 5 of the KPIDFE Rules. The Trial Court
comes to the conclusion that the very relief sought by the
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petitioner is found to be contrary to the very scheme of
the KPIDFE Act itself.
6. The counsel brought to notice of this Court Rule
5 of the KPIDFE Rules. Rule 5 is with regard to the powers
to freeze or seize the property. Where the Competent
Authority is satisfied or has reason to believe that any
property which is liable to be attached under the Act is
likely to be concealed, transferred or dealt in any manner
which will result in defeating the purpose of the Act, in
may make an order seizing such property or where it is
not practicable to seize such property make an order that
such property shall not be transferred or otherwise
disposed of or dealt with, except with prior permission of
the Special Court.
7. The counsel also files a memo along with the
document at Annexure-D dated 05.06.2020 wherein an
order has been passed for seizure of the account. The
counsel would vehemently contend that the account which
is freezed is his personal account not in respect of any of
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the company and the same is not in the name of the
company or the Director. When such being the case, the
Trial Court ought to have exercised the powers. The
proviso which he has invoked is in respect of protecting
the interest of the depositors under Section 11 and the
relief is also sought under Section 11 (f) of the Act which
with regard to pass any order which the Special Court
deems fit for realization of the assets of the company and
repayment to the depositors of the financial establishment
or on any matter or issue incidental thereto. The same is
not the enabling provision to the Trial Court to exercise
the powers as sought. Hence, the Trial Court has not
committed any error in coming to the conclusion that the
very petition itself is not maintainable and the very
petition is filed under Section 11 (2)(f) of the KPIDFE Act
wherein the powers are given to the Special Court to pass
any order that is for realization of the assets of the
company and repayment to the depositors of the financial
establishment or any matter of issue incidental thereto.
But the counsel for the appellant contention is that
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account belongs to his personal account and the same has
to be defreezed.
8. No doubt, the appellant is a retired employee
and his service has been availed for a period of two years
and before completion of two years, he has resigned and
the same was accepted in the year 2017 itself and the
same is also accepted by the Registrar of the Society. But
the fact is that when the petition is filed before the Court,
the Special Court should have the powers to defreeze the
account. No doubt, the counsel for the appellant would
vehemently contend that no criminal action has been
initiated against him but only on the instructions, the
powers are exercised to defreeze the account invoking
Rule 5 and when there is no power vested with the Special
Court for defreezing of the account, Section 11 (f) of the
Act is very clear that the same is only with regard to
realization of the assets of the company and repayment to
the depositors of the financial establishment hence, the
very object of the enactment is also to protect the interest
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of depositors in the financial establishment. Hence, when
the proviso does not permit to defreeze the account as
contended by the appellant counsel and proviso invoked is
only Section 11(f) of the KPIDFE Act, the Trial Court
rightly comes to the conclusion that the very petition itself
is not maintainable. The Trial Court while passing an order
discussed Rule 5 of KPIDFE Rules which empowers the
competent authority to freeze the account for the reasons
specified in the said Rule. But no disputes with regard to
the freezing of the account belonged to the petitioner
herein. When proviso does not come to the aid of the
appellant herein, he has to seek appropriate relief before
the appropriate Court in that regard, not before this Court
as observed by the Trial Court. The Trial Court comes to
the conclusion that the very petition is not maintainable
which is filed under Section 11(2)(f) of KPIDFE Act, 2004
and when such reasoning is given considering the specific
Rule and also the proviso of Section 11(2)(f) of the KPIDFE
Act, I do not find any merit in the appeal to quash the
order and to grant the relief as sought.
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9. In view of the discussions made above, I pass
the following:
ORDER
The appeal is dismissed. However, liberty is given to
the petitioner to approach the appropriate Court for
appropriate relief.
Sd/-
JUDGE
SN
