Madras High Court
Deputy Superintendent Of Police vs M/S.Thiripura Chits Private Limited on 12 September, 2024
Author: S.S. Sundar
Bench: S.S. Sundar
WP.No.4731/2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 12.09.2024
CORAM :
THE HONOURABLE MR. JUSTICE S.S. SUNDAR
AND
THE HONOURABLE MR. JUSTICE K.RAJASEKAR
WP.No.4731/2020 & WMP.No.5591/2020
Deputy Superintendent of Police
Economic Offence Wing II
Guindy, Chennai 600 032. ... Petitioner
Vs.
1.M/s.Thiripura Chits Private Limited
rep.by its Resolution Professional
Mr.J.Manivannan
Plot No.53B, S/330, Vishalakshi Nagar
Fourth Cross Street, Santhosapuram
Chennai-73.
2.P.Srinivasulu
3.K.A.Sundar
4.Maragathavalli
5.Ravikumar.K.S.
6.Mohan Mull.M
7.Ramesh Ellappan ... Respondents
**RR2 to 7 impleaded as per order dated
1
https://www.mhc.tn.gov.in/judis
WP.No.4731/2020
21.08.2024 in WMP.No.12015/2024 in WP.No.4731/2020
Prayer : Writ Petition filed under Article 226 of the Constitution of India
for issuance of Writ of certiorari calling for the records of the National
Company Law Tribunal, Single Bench, Chennai in MA/697/2018 in
CP/381/IB/2018 and quash the order dated 19.03.2019.
For Petitioner : Mr.P.Kumaresan, AAG assisted by
Mr.R.Muniyapparaj,APP
For R1 : Mr.J.Manivannan
For RR 2 to 7 : Mr.G.Gautham Ram Vittal
ORDER
[Order of the Court was made by S.S.SUNDAR, J.,]
(1)It is not in dispute that M/s.Thiripura Chits Private Company, a Company
registered under the provisions of the Companies Act, had collected
deposits from various persons in the State of Tamil Nadu and State of
Karnataka and failed to repay the same. On account of the default of the
Company, proceedings have been initiated against the Company under the
provisions of the Tamil Nadu Protection of Interests of Depositors [in
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Financial Establishments] Act, 1997 [hereinafter referred to as ''the
TNPID Act'']. However, one of the depositors also filed a petition under
Section 9 of Insolvency and Bankruptcy Code, 2016 [in short ''IB Code'']
before the National Company Law Tribunal [NCLT], Chennai Bench, for
initiation of Resolution process.
(2)Neither the Company nor the promoters appeared to have entered
appearance before NCLT. However, NCLT, Chennai, vide order dated
17.09.2018 appointed an Insolvency Resolution Professional and gave
certain directions. The Insolvency Resolution Professional preferred an
application in MA.No.697/2018 under Sections 19[2] and 60[5] of the IB
Code for issuing direction to the writ petitioner herein to provide Books
of Accounts, records and latest list of payables and receivables of the
Corporate Debtors seized by them to the applicant immediately in order
to enable the applicant to carry out the duties in accordance with the IB
Code, 2016.
(3)Though notice was sent to the writ petitioner and the Investigating
Officer appeared before NCLT, Chennai Bench, the Tribunal passed an
order directing the writ petitioner to hand over all the records to the
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Corporate Debtors including Books of Accounts along with the Chit
Security Deposits holding that the IB Code override the provisions of
TNPID Act. It is to be noted that the attachment made vide
G.O.Ms.No.73, Home [Police] Department dated 31.01.2019 was set
aside and was declared null and void. Aggrieved by the same, the present
writ petition is filed.
(4)The core issue that arise for consideration before this Court is whether
the provisions of IB Code, 2016, override the provisions of TNPID Act
and whether the proceedings initiated under TNPID Act, cannot go on in
view of the provisions of the IB Code and whether NCLT can declare the
attachment made under the provisions of TNPID Act as null and void.
(5)The TNPID Act is a special enactment which is intended to protect the
rights of depositors and provide a mechanism for the disbursement of the
assets of the accused apart from punishing the accused. The NCLT,
Chennai Bench, has relied upon the judgment of Hon'ble Supreme Court
in Innoventive Industries Limited Vs. ICICI Bank and Another [2018
[1] SCC 407] for the proposition that the provisions of the IB Code shall
have effect not withstanding anything inconsistent therewith contained in
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any other law for the time being in force, particularly referring to Section
238 of the IB Code, 2016. Similarly, the judgment of Hon'ble Supreme
Court in PR.Commissioner of Income Tax Vs. Monnet Ispat and
Energy Limited [SLP.No 6483/2018 dated 10.12.2018] is also relied
upon by NCLT for the same proposition. However, the Tribunal has not
discussed the facts of the cases in which the Hon'ble Supreme Court has
expressed their views. The Tribunal further relied upon the judgment of
Bombay High Court in the matter of M/s.Aryarup Tourism Club Resorts
Private Limited in Company Petition No.278/2014. It is pertinent to
mention that the Tribunal has not given the date of the judgments or the
journal in which the judgments relied upon, are reported.
(6)A Full Bench of this Court in S.Bagavathy Vs. State of Tamil Nadu
rep.by it Secretary, Law Department, Chennai and Others reported in
2007 [2] CTC 207 considered the constitutional validity of TNPID Act,
elaborately. One of the issues raised before the Full Bench was regarding
the legislative competence of the State to promulgate the law. Taking
note of the primary object of the State legislation, the Full Bench held
that the enactment is meant for public safety and to protect the interest of
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public and applied Doctrine of parens patriae by reminding sovereign
power and duty of the State to shoulder responsibilities in public interest.
Referring to various judgments of Hon'ble Supreme Court reiterating
several principles of law, the Full Bench held that the State legislature
cannot be held to be unconstitutional particularly because it incidentally
encroaches on matters assigned to another legislature. It is also reiterated
that the Courts should be guided by Doctrine of pith and substance and
consider which constitute in pith and substance the true subject matter of
legislation to find out whether the subject matter of the State legislature
encroaches the field of Union Government. For the principles reiterated
by the Full Bench of this Court, when we examine the provisions of the
TNPID Act as a whole, its object and the scope and the power and
jurisdiction conferred under the Special Court, this Court is convinced
that the provisions of TNPID Act should stand, despite provisions of IB
Code. Therefore, the Full Bench of this Court considered the issue
whether the TNPID Act is ultra vires the constitution since the provisions
of the Act are repugnant to the existing provisions of RBI Act, 1934 read
with Banking Regulation Act, 1949 and Companies Act. Since the object
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of TNPID Act is not the same as that of Section 58-A of the Companies
Act or Section 45-S of RBI Act, 1934, the Full Bench has summed up in
paragraph No.149[i] as follows:-
''149.1.To sum up:-
a. the field of legislation, viz., Tamil Nadu Act, is
traceable to Entries 1 and 32 of List II, besides falling
under Entries 1, 7 and 8 in the Concurrent List, which
as already observed needs no deliberation;
b. the impugned Tamil Nadu Act does not fall
within the legislative field of the Union List (List-I);
and
c. though there is trenching, the same is only
incidental, which is permissible in law.''
(7)The Hon'ble Supreme Court in K.K.Baskaran Vs. State represented by
its Secretary, Tamil Nadu and Others [2011 [2] SCC 793], considered
whether TNPID Act is beyond the legislative competency of State
legislature as it falls within Entries 43, 44 and 45 of List I of VII
Schedule of Constitution. It was argued before Hon'ble Supreme Court
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that TNPID Act is liable to be struck down as the field of legislation is
already occupied by legislation of Parliament being RBI Act, 1934, the
Banking Regulation Act, 1949, the Companies Act, 1956 and the
Criminal Law Amendment Ordinance Act, 1944. The Hon'ble Supreme
Court disagreed with the judgment of Bombay High Court with reference
to Maharashtra Act and the subject matter covered by the Maharashtra
Act does not fall within the subject matter of Sections 58-A and 58-AA of
Companies Act. While holding that Courts should look at the legislation
as a whole and there is a presumption that the legislature does not exceed
its constitutional limits, the Hon'ble Supreme Court accepted the view
that incidental trenching in exercise of ancillary powers into a forbidden
legislative territory is permissible if a legislation is in substance one on a
matter assigned to legislature then it must be held to be valid even though
it incidentally trenches on matters beyond its legislative competence.
(8)The collection of deposit, ignoring the contractual obligation of the
person collecting such deposits is now made liable for a criminal offence
which enable the Special Court to punish him with imprisonment for a
term which may extend to ten years and with fine which may extend upto
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Rs.1 lakh.
(9)Therefore, the purpose and object of TNPID Act, which has been upheld
by Hon'ble Supreme Court despite its marginal encroachment into the
Central legislations, cannot be ignored. In view of the judgment of
Hon'ble Supreme Court, this Court has no hesitation to hold that the order
of NCLT is contrary to the settled principles of law. Therefore, this Court
agrees with the submission of the learned Additional Advocate General
reiterating the legal grounds raised in this writ petition.
(10)As a result, the writ petition stands allowed and the impugned order of
NCLT dated 19.03.2019 in MA/697/2018 in CP/381/IB/2018 is quashed.
(11)While disposing of the matter, we are inclined to share our thoughts in
the implementation of the provisions of TNPID Act. This Court finds that
the Special Court dealing with cases registered under TNPID Act, are
forced to think that in each case, hundreds of depositors should be
examined to prove their case. Because of this, the matters are pending in
Special Courts dealing with TNPID cases without substantial progress
and it takes a minimum of 5 to 10 years to give a verdict and many of the
people who commit offences under TNPID Act are able to get away with
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the fortune despite pendency of a criminal case under TNPID Act.
(12)It is pertinent to mention that under Section 45-S of RBI Act, 1934,
collection of deposit itself is an offence if such a collection is by anyone
who is not a Bank or Financial Institution or Non-Banking Financial
Institution who are permitted to collect deposits under different statutes.
Under Section 6 of TNPID Act, the Special Court while trying any case,
may also try any offence other than the offence specified in Section 5 of
the Act at the same trial. Therefore, even an offence under Section 45-S
of RBI Act or Section 420 of IPC etc., can be tried by the Special Court.
Since Section 45-S of RBI Act contemplates punishment for collection of
deposits, the Police Department can register cases even when deposits are
collected by persons who are not authorised under the RBI Act, 1934.
This is possible by following the procedure contemplated under the RBI
Act, 1934 for getting a complaint from the competent person.
(13)The State Government is directed to file a Report as to the action
proposed as per the direction of this Court in this judgment within a
period of six weeks from the date of receipt of a copy of this order if
necessary after getting legal opinion as to the scope of Section 45-S of
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RBI Act to initiate action even if anyone is found to receive deposit under
any scheme in violation of RBI Act. No costs. Consequently, connected
miscellaneous petition is closed.
(14)Post after six weeks for filing of Report.
[S.S.S.R., J.] [K.R.S., J.]
12.09.2024
AP
Internet : Yes
Index : Yes/No
Neutral Citation : Yes/No
To
1.Deputy Superintendent of Police
Economic Offence Wing II
Guindy, Chennai 600 032.
https://www.mhc.tn.gov.in/judis
S.S. SUNDAR, J.,
and
K.RAJASEKAR, J.,
AP
12.09.2024
https://www.mhc.tn.gov.in/judis
