K.C. Natarajan vs The Competent Authority
2026 Latest Caselaw 2034 Kant

Karnataka High Court

K.C. Natarajan vs The Competent Authority on 9 March, 2026

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

         DATED THIS THE 9TH DAY OF MARCH, 2026

                         PRESENT

        THE HON'BLE MRS. JUSTICE ANU SIVARAMAN

                           AND

       THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL

      MISCELLANEOUS FIRST APPEAL NO. 7076 OF 2025
                       (KPIDFA)

BETWEEN:

K.C. NATARAJAN
S/O K.S. CHAYAPATHI
AGED ABOUT 80 YEARS
RESIDING AT No.1153
SHREE CHAYA, 3RD MAIN
2ND PHASE, GIRINAGARA
BANASHANKARI III STAGE
BENGALURU-560 085

                                           ...APPELLANT

(BY SRI. HITESH GOWDA B.J., ADVOCATE)

AND:

1.    THE COMPETENT AUTHORITY
      FOR SRI GURUSARVABHAUMA
      SOUHARDA CREDIT CO-OPERATIVE LTD
      BENGALURU
      OFFICE OF THE MANAGING DIRECTOR
      KARNATAKA PUBLIC LAND CORPORATION
                                 2




     URBAN DC OFFICE BUILDING
     K.G. ROAD, BENGALURU-560 009


2.   SRI GURUSARVABHAUM SOUHARDA
     CREDIT CO-OPERATIVE LTD
     REP. BY MANAGING DIRECTOR
     SRI. K. RAMAKRISHNA
     SHANKARPRAM, No.28
     SHANKAR MUTT ROAD
     BENGALURU-560 004

                                                ...RESPONDENTS

(BY SRI. VEERESH R. BUDIHAL, ADVOCATE FOR C/R1)


     THIS   MFA   IS   FILED    U/S.16    OF   THE   KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENTS ACT, AGAINST THE ORDER DATED 28.06.2025
PASSED IN MISC. No.736/2022 ON THE FILE OF THE XCI
ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, SPECIAL JUDGE
FOR KPIDFE CASES, BENGALURU, ALLOWING THE PETITIONS
FILED U/S.5(2) OF KPIDFE ACT AND ETC.


     THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT    ON     25.02.2026       AND    COMING     ON   FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:


CORAM:   HON'BLE MRS. JUSTICE ANU SIVARAMAN
         and
         HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
                                3




                     CAV JUDGMENT

(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)

This appeal is filed challenging the Order dated

28.06.2025 passed by the XCI Additional City Civil and

Sessions Judge, Bengaluru (CCH-92) ('Special Court' for

short) in Misc.No.736/2022 filed by respondent No.1 under

Section 5(2) of the Karnataka Protection of Interest of

Depositors in Financial Establishments Act, 2004, ('KPIDFE

Act' for short) thereby confirming the Interim Order of

attachment dated 04.11.2021 in respect of the petition

schedule property.

2. We have heard Shri. Hitesh Gowda B.J, learned

counsel appearing for the appellant and Shri. Veeresh R

Budihal, learned counsel appearing for respondent No.1.

3. The petition averments were as follows:-

It was alleged that Shri. Gurusarvabhauma Souharda Credit

Co-operative Limited ('Credit Co-operative Limited' for

short) - respondent No.1 and its associates - respondents

No.2 and 3, induced depositors by offering higher interest

rates but failed to repay the principal and assured interest

on maturity or demand. The deposited funds were criminally

misappropriated and unlawfully diverted for the purchase of

movable and immovable properties and for clearing

outstanding loans of borrowers of Sri. Guru Raghavendra

Sahakara Niyamita Bank.

On complaints filed by the depositors, the Government

on 23.07.2020 appointed the petitioner as the Competent

Authority for the Credit Co-operative Limited. Thereafter, in

exercise of the powers under Section 3(2) of the KPIDFE

Act, the Government passed an Interim Order of attachment

on 04.11.2021, attaching the properties of respondent No.1

and its associates. The Interim Order of attachment was

published in Karnataka Gazette on 12.11.2021, in two

widely circulated newspapers on 04.12.2021 and was affixed

at a conspicuous place on the petition schedule property.

The Competent Authority filed the present petition on

30.05.2022 under Section 5(2) of the KPIDFE Act seeking to

make the Interim Order of attachment absolute. Respondent

No.3, one of the Directors of the Credit Co-operative

Limited, is the owner of the petition schedule property. As

the assets of respondent No.1 were insufficient to satisfy

deposit liabilities, the Competent Authority contended that

the provisional attachment of the personal property of

respondent No.3 should be made absolute to repay the

depositors.

4. It was the contention of the appellant/respondent

No.3 before the Special Court that the petitioner had

suppressed material facts and failed to establish a prima-

facie case and that the attachment was made without

application of mind. He submitted that he purchased the

petition schedule property under a registered Sale Deed on

06.10.1978, prior to becoming the Director of the Credit Co-

operative Limited and before the KPIDFE Act came into

force. Having received no remuneration from the Credit Co-

operative Limited, he claimed that the property was lawfully

acquired from his independent means. It was further

contended that he was not the Managing Director, had no

role to play in day-to-day affairs of the Credit Co-operative

Limited and that the attachment of his property was without

due process of law.

5. The Special Court observed that though the

petition schedule property was purchased by appellant in the

year 1978 itself, out of his own income, that cannot be a

ground for detaching the property from attachment. Further,

it was not the case of appellant that there are other

properties under attachment which are sufficient to satisfy

the claim of the depositors of the Credit Co-operative

Limited. The Special Court held that the appellant had not

made out any grounds or shown cause as to why the Interim

Order of attachment passed by the Government with regard

to the petition schedule property should not be made

absolute. The Special Court by Order dated 08.08.2022,

allowed the petition and made the Interim Order of

attachment dated 04.11.2021 absolute.

6. The appellant challenged the Order dated

08.08.2025 in Writ Petition No.18682/2022. The appellant

contended that the date on which the petition schedule

property was purchased, the Credit Co-operative Limited

was not even in existence and that there was gross non-

application of mind on the part of the Special Court. The

learned Single Judge observed from the documents placed

on record that the property was purchased by the petitioner

in the year 1978 and though no evidence was placed on

behalf of the petitioner or the respondents, the document

produced by the Competent Authority itself ought to have

been looked into by the Special Court. The learned Single

Judge remitted the matter back to the Special Court to

consider the issue afresh and pass appropriate orders in

accordance with law bearing in mind the observations made

in the course of the Order. Accordingly, the writ petition was

allowed-in-part and the Order dated 08.08.2022 was

quashed.

7. Subsequently, the Special Court, after

reconsideration of the matter held that in view of the specific

provision under Section 3 of the KPIDFE Act, the contention

that the petition schedule property was acquired much prior

to the enactment or the allegations cannot be a ground to

exclude it from attachment. It was also found that the

contention that the appellant was not an active Director of

the Credit Co-operative Limited, cannot be accepted. It was

also observed that respondent No.1 had substantial liabilities

and insufficient assets to repay depositors and that it was

necessary to auction the personal property of the Directors

of the Financial Establishment to meet the deposit liability.

Accordingly, the petition was allowed and the provisional

Interim Order of attachment dated 04.11.2021 was made

absolute.

8. The learned counsel appearing for the appellant

contends before us that the petition schedule property was

purchased under a registered Sale Deed dated 06.10.1978,

long before the appellant became a Director, before the

Credit Co-operative Limited came not in existence and prior

to the enactment of the KPIDFE Act. The Notarized Sale

Deed is produced before the Special Court as Annexure - R1.

The appellant, being a Government servant with sufficient

independent means, did not receive remuneration from the

Credit Co-operative Limited and was not the Managing

Director. There is no evidence to show that the appellant

diverted the depositors' funds or that the property was

purchased from any such alleged diversion.

9. It is further contended that the Competent

Authority failed to conduct proper inquiry, misled the Special

Court and obtained the attachment Order without

establishing a prima-facie nexus between the property and

the alleged misappropriation. The proceedings are alleged to

be frivolous and beyond the scope of the KPIDFE Act, which

permits attachment only of properties acquired from

depositors' funds. This Court, while remitting the matter had

directed the Special Court to determine whether the

property was purchased from the depositors' fund, placing

the burden on the Competent Authority. It is also contended

that the appellant resides with his family in the petition

schedule property, which is his sole dwelling house and that

deprivation of his only residence is inequitable and contrary

to the settled legal principles. In the absence of proof of

nexus, the attachment is unsustainable and amounts to

deprivation of property without authority of law under Article

300-A of the Constitution of India and violates the

appellant's right to shelter under Article 21 of the

Constitution of India.