Rose Valley Hotel And ... vs State Of Tripura And Anr.
2021 Latest Caselaw 874 Tri

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                     HIGH COURT OF TRIPURA
                           AGARTALA

                            WP(C) No.585/2018
Rose Valley Hotel and Entertainment Ltd., A Company, registered under the
Companies Act, 1956, with sister agencies namely ROSE VALLEY REAL
ESTATE AND CONSTRUCTION LTD. and ROSE VALLEY CHAIN
MARKETING SYSTEM LTD.,
Registered Head office at R.B./29 Raghunathpur, VIP Road, Kolkata -
700059.
Regional Office at Mantribari Road, P.S. West Agartala, Sub-Division -
Agartala, District Tripura.
Represented by its Chairman - Sri Gautam kundu, S/o. Lt. Nirmal Kundu,
resident of 71 Jessore Road (south), Ashabari Apartment Barasat,
24 PNS(N), Barasat, 743201, West Bengal.
                                                .............. Petitioner(s).

                                    - Vs. -
1. State of Tripura and Anr., represented by the Principal Secretary to the
   Government of Tripura, Department of Finance, Secretariat Building,
   Kunjaban, Tripura.
2. Directorate of Institutional Finance.
   P.N. Complex, Kunjaban, Agartala, Tripura West, Pin - 799006.

                                                   .............. Respondent(s).

                            _B_E_ F_O_R_E_
     HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI
        For Petitioner(s)              : Mr. B N Mjumder, Sr. Advocate,
                                         Mr. Rajib Shaha, Advocate,
        For Respondent(s)              : Mr. Debalaya Bhattacharya, G.A.,
                                         Mr. S Saha, Advocate.
        Date of hearing & judgment : 9th September 2021.
        Whether fit for reporting      : Yes.
                                 Page - 2 of 17




                       JUDGMENT(ORAL)

The petitioner has challenged a notification dated 19 th January

2017 issued by the Government of Tripura in exercise of powers under

Section 4(1)(ii) of the Tripura Protection of Interests of Depositors (In

Financial Establishments) Act, 2000 (hereinafter to be referred to as the "Act

of 2000") attaching several properties of the petitioner-company. The

petitioner has also prayed for a direction to the respondents to protect the

attached moveable and immovable properties till appropriate orders are

passed by the designated Court. The third prayer made by the petitioner is

for carrying out the valuation of the properties which valuation may be

produced before the Court.

[2] Brief facts are as under :

Petitioner as a company registered under Companies Act, 1956 and

is engaged in the business of hospitality related industry in the name of Rose

Valley Hotels and Entertainment Ltd. In the course of its business, the

petitioner company had received deposits from several individuals. The

petitioner had also acquired immoveable properties from such deposits. The

petitioner had established an amusement park in the vicinity of the city of

Agartala. The business activities of the company, however, ran into several

legal disputes. A detailed reference would be made to some of these disputes Page - 3 of 17

at a later stage. For the moment, it may be noted that initially Securities and

Exchange Board of India(SEBI) found it objectionable that the company

was accepting deposits and acting like a Non-Banking Financial

Company(NBFC) without proper licences. SEBI therefore, prohibited the

petitioner-company from carrying out certain activities. Police complaints

were also filed against the petitioner for alleged fraudulent acts in receiving

deposits by making false promises and claims of returns. Prohibitory orders

were also issued by the Government of Tripura in exercise of powers of the

Act of 2000. Eventually, by the impugned notification, the Government of

Tripura attached all immoveable and moveable properties of the petitioner-

company upon which the petitioner has filed the present petition.

[3] Appearing for the petitioner learned senior counsel Mr. B N

Majumder raised following contentions :

(i) The impugned notification is bad in law since no reasons are

recorded by the competent authority before passing the order.

Even otherwise, there was no material before the said authority to

form a belief that the powers for attachment of the property were

required to be exercised.

(ii) The State-authorities having attached the properties, failed to

protect the same from theft and pilferage. As a result, moveable Page - 4 of 17

properties and attachments at the sites have been stolen away by

the members of the public, thereby diminishing the value of the

property. He contended that it was the duty of the State-authorities

to protect the attached properties.

(iii) Counsel submitted that the total valuation of the properties of

the company is much higher than the outstanding dues of the

creditors and depositors. It is, therefore, necessary that the current

valuation of the property be carried out and placed before the

Court.

[4] The respondents have appeared and filed replies. The stand taken

in such replies, broadly stated, is as under :

(i) There were multiple proceedings initiated against the

company suggesting that the company had misled the members of

the public in order to receive deposits. This was carried on without

proper licences and despite prohibition from SEBI and the

Government of Tripura. There was enough material before the

competent authority to form a belief that power of attachment

under the Act of 200 was required to be exercised.

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(ii) The State-authorities have taken steps to protect the properties

from any loss or damage. Various steps taken by the State-

authorities are brought on record.

(iii) The stand of the respondents also is that proceedings are

pending before different Designated Courts. The question of

valuation, therefore, cannot be gone into right now in the writ

petition. Let the Designated Courts take appropriate steps as found

necessary.

[5] Appearing for the petitioner learned senior counsel Mr. Majumder

reiterated the stand taken by the petitioner in the petition and submitted that

the impugned order be set aside since it does not record reasons which is a

mandatory requirement of the statute. Even otherwise, there was no material

before the authority to be satisfied that such action was necessary. He drew

my attention to various documents on record to canvass that the State-

authorities had not taken sufficient steps to protect the properties. Such

negligence would harm the depositors.

[6] On the other hand, learned Government Advocate Mr. Debalaya

Bhattachariya opposed the petition contending that there was ample material

before the authority to pass the impugned order. He placed before me the

original file leading to issuance of the impugned notification which I had Page - 6 of 17

perused with the consent of the counsel for the petitioner. (I had offered to

share with him the documents which I propose to rely upon in this judgment

and which form part of the original files. He, however, did not insist on the

same.) Learned Government Advocate further submitted that all necessary

steps are taken to protect the properties under attachment.

[7] Before deciding these three issues raised by the petitioner, one

may have a quick glance at the provisions contained in the Act of 2000. To

protect the interest of depositors of financial establishment and for the

matters connected therewith and incidental thereto, the Act of 2000 was

framed. Term "deposit" has been defined in Section 2(c) in the widest

possible manner. Term "financial establishment" has been defined in Section

2(d) as to mean any person accepting deposit under any scheme or

arrangement or in any other manner excluding a corporation or a co-

operative society owned or controlled by the State or the Central

Government or a banking company as defined in the Banking Regulation

Act, 1949.

[8] Section 3 is a penal provision providing penalty for any fraudulent

default by a financial establishment of repayment of deposit on maturity. In

such a case, every person including a promoter, partner, director, manager or

any other person or employee responsible for the management and conduct Page - 7 of 17

of the business or affairs of the establishment would be punished with

imprisonment for a term which may extend to six years.

[9] Section 4 pertains to attachment of properties on default and reads

as under :

"4.(1) Notwithstanding anything contained in any other law for the time being in force, -

(i) Where upon complaints received from the depositors or otherwise, the Government is satisfied that any Financial Establishment has failed, -

(a) to return the deposit after maturity or on demand by the depositor ; or

(b) to pay interest or other assured benefit ; or

(c) to provide the service promise against such deposit ;

or

(ii) where the Government has reason to believe that any Financial establishment is acting in a calculated manner detrimental to the interest of the depositors with an intention to defraud them and 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 which the deposit is received may, in order to protect the interest of the depositors of such Financial Establishments, after recording reasons in writing, issue an order by publishing it in the Official Gazette, attaching the money or other 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 the deposits by the Financial Page - 8 of 17

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.

(2) On the publication of the order under sub-section (1) all the properties and the assets of the Financial Establishment and the persons mentioned therein shall forthwith vest in the Competent Authority appointed by the Government pending further order from the Designated Court.

(3) The Collector of a District shall be competent to receive the complaints from his District under Sub-Section (1) and 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 Superintendent of Police in the District for investigation."

[10] Sub-section (1) of Section 5 provides that the Government while

issuing the order under sub-section (1) of Section 4, appoint any officer not

below the rank of a Deputy Collector as a competent authority to exercise

control over the money and the properties attached under Section 4. Sub-

section (4) of Section 5 empowers the competent authority to make an

application to the Designated Court or any other judicial forum for passing

appropriate orders to give effect to the provisions of the Act.

[11] Section 6 of the Act envisages setting up of Designated Court for

the purpose of the Act. Sub-section (3) of Section 6 provides that any Page - 9 of 17

pending case in any other Court to which the provisions of the Act applies

shall, on the date of publication of the Act, stand transferred to the

Designated Court.

[12] Section 7 pertains to the powers of the Designated Court regarding

attachment. Sub-section (1) of Section 7 provides that upon receipt of the

application under Section 5, the Designated Court shall issue to the financial

establishment or any other person whose property is attached and vested in

the competent authority by the Government under Section 4, a notice

accompanied by the copies of the application and affidavits, if any, calling

upon such a person to show cause why the order of attachment should not be

made absolute.

[13] Section 10 empowers a Designated Court to administer the

property so attached.

[14] It can thus be seen that once the property has been validly attached

under Section 4 of the Act of 2000, all issues concerning such property

would be dealt with and decided by the Designated Court. However, when

the petitioner has raised a fundamental question of validity of the order of

attachment itself, the same must be examined by this Court. As per sub-

section (1) of Section 4, either upon complaints received from the Page - 10 of 17

depositors or even suo motu Government is satisfied that any financial

establishment has failed to return the deposit after maturity or on demand by

the depositor or has failed to pay interest or other assured benefit or has

failed to provide the service promised against such deposit; or where the

Government has reason to believe that the financial establishment is acting

in calculated manner detrimental to the interest of the depositors with an

intention to defraud the depositors and the Government is satisfied that the

establishment is not likely to return the deposits or make payment of the

interest etc., in order to protect the interest of the depositors after recording

reasons in writing issue an order attaching the money or property believed to

be of the financial establishment. As per sub-section (2) of Section 4, upon

publication of the order under sub-section (1), all properties and assets of the

financial establishment shall forthwith vest in the competent authority

appointed by the Government pending further order from the Designated

Court.

[15] In this context, let us see the material considered by the

Government before issuing the impugned notification. In an affidavit-in-

reply, dated 16th April 2019, filed on behalf of the Government, it is pointed

out that the Director of Institutional Finance as well as the office of the

District Magistrate & Collectors and Sub-Divisional Magistrates had Page - 11 of 17

received many complaints from depositors against the petitioner-company of

making short payment of maturity amount or non-payment of the invested

amount. Some of the complaints are annexed with the said affidavit. It is

further stated that the Development Officer of Small Savings, Group

Insurance and Institutional Finance has lodged an FIR before the West

Tripura Police Station against the functionaries of petitioner-company for

carrying out illegal and fraudulent business activities inter alia on the

grounds that the company have been collecting deposits from the public

under a plan called Holiday Membership Plan, has been accepting deposits

and carrying out the activities as an NBFC without proper licences and has

indulged in financial irregularities, that the company is giving incentives and

making lucrative offers and thereby collecting deposits which are prohibited

by the Reserve Bank of India(RBI). It is also stated that the Sub-Divisional

Magistrate had issued an interim order, on 12th June 2013, restraining the

company from accepting deposits from the public. It is further stated that

after receiving the reports of the District Magistrates & Collectors and

Superintendent of Police of the districts, the Principal Secretary, Finance,

Government of Tripura, has issued the impugned notification.

[16] This affidavit thus refers to various circumstances taken into

consideration by the authority before passing the impugned notification such Page - 12 of 17

as the alleged illegal activities carried out by the company, the FIR filed by

the authority before the police and the prohibitory order issued by the

competent authority preventing the company from receiving any further

deposits from the public. The competent authority also as per this affidavit,

took note of the reports submitted by the District Collectors and police

authorities. I have also perused the original file which contains the

documents leading up to the issuance of the notification. This file shows that

on 12th June 2013, after recording detailed reasons and pointing out specific

instances of the company failing to repay the depositors upon maturity of the

deposits and irregularities detected during the inspection and after providing

opportunity to the company as referred to in Section 3A(7) of Tripura

Protection of Interest of Depositors (In Financial Establishments)

(Amendment Act), 2011, the Sub-Divisional Magistrate, Sadar, had imposed

a restriction against the company from collecting or mobilizing any kind of

monitory deposits from the public under any plan whatsoever. It may be

noted that some of the complaints of not returning the deposits on maturity,

copies of which have been produced by the respondents in the above noted

affidavit, were received by the company after this prohibitory order also.

[17] The original file also contains a detailed order passed by SEBI, on

3rd January 2011, in which after taking note of various activities of the Page - 13 of 17

company and hearing the representatives of the company the SEBI

concluded that the company was engaged in various irregular activities.

SEBI therefore, passed a prohibitory order directing the company not to

collect any money from investors or to launch any scheme, not to dispose of

any of the properties or delineate assets and not to divert any fund raised

from the public kept in the Bank account or which is in the custody of the

company.

[18] Original file of the Government also contains various reports made

by the District Collectors. For example, we have on record a report-cum-

proposal of the District Collector, Sipahijala, dated 19th December 2016,

pointing out that a letter of the Superintendent of Police, Tripura, was

received regarding proposal for attachment of property due to cheating of the

large amount of public money. A notice was issued to the company to put

forth its views. Notice could not be served due to closure of the office and it

was pasted on the wall. He stated that field inquiries were also conducted

through the Sub-Divisional Magistrate which shows that there are certain

lands of the company under the jurisdiction of the Bishalgarh Sub-Division.

He also attached a report of Sub-Divisional Magistrate, Bishalgarh and other

necessary documents and requested that necessary action be taken

immediately under the Act of 2000. Similar reports were also made by the Page - 14 of 17

District Collectors of Dhalai District, Unakoti District, Khowai District,

West Tripura District etc.

[19] It was after perusal of such voluminous material that the Finance

Secretary issued the impugned notification. There was thus neither any

dearth of material before the authority to enable the said authority to come to

the conclusion that it was necessary to exercise the powers in terms of

Section 4 the Act of 2000, nor there was any breach of procedural

requirement. It is true that sub-section (1) of Section 4 of the Act requires

reasons to be recorded in writing. However, such requirement cannot be seen

in isolation. Merely because there is no such narration of the satisfaction of

the said authority in the impugned notification, it cannot be stated that his

decision is bereft of reasons. The affidavit-in-reply when seen in line of the

documents on record available in the original files would show that the

Finance Secretary had the benefit of voluminous material on the basis of

which he exercised the powers under Section 4. Essentially such a

satisfaction is within the subjective satisfaction of the competent authority.

Even otherwise, in the present case, there was overwhelming material before

the authority suggesting large scale irregularities committed by the

company. It is true that the Finance Secretary has not in so many words

recorded his reasons in writing, nevertheless to strike down an order in case Page - 15 of 17

of such voluminous material would be too artificial exercise in technicality.

The first prayer of the petitioner, therefore, must fail.

[20] Regarding the petitioner's anxiety to ensure proper protection of

the attached property, I find that in some cases at least the reaction of the

Government was somewhat slow. For example, in a letter dated 22nd June

2017, the District Collector West Tripura conveyed to the Superintendent of

Police that it was reported to him that valuable articles inside the Rose

Valley Park premises are being regularly stolen and the sub-divisional

administration was worried about the encroachment on the said properties in

future also. He, therefore, requested the police authorities to provide

adequate security and to keep vigil. On 1st November 2017, Sub-Divisional

Magistrate, West Tripura, wrote to the Sub-Divisional Police Officer(SDPO)

and conveyed to him that the filed functionaries during their visit at the

Rose Valley office building have found some unclaimed goods which are

lying in front of the main gate which was later seized by the police. He

requested that necessary arrangements for placing the guards around the

property may be made.

[21] We may recall, the impugned notification was issued on 19th

January 2017. When the District Magistrate and Sub-Divisional Magistrate

were writing to police authorities on 22nd June 2017 and 1st November 2017, Page - 16 of 17

there was substantial time lapse between the issuance of the notification and

the letters urging the police authorities to take protective measures. In the

letter dated 22nd June 2017, it was conveyed that the properties are being

stolen. Undoubtedly, therefore, there was some delay on part of the

Government machinery to properly protect the attached properties which by

virtue of Section 4(2) of the Act of 2000 had vested in the Government.

Once the petitioner is divested of any control over the attached property and

pending further orders by the Designated Court the property is to vest in the

Government, both in the interest of the petitioner-company as well as the

depositors it is the duty of the Government machinery to ensure that the

property does not deteriorate or is encroached or stolen for want of proper

protection. To what extent the Government machinery can be blamed.

However, what ultimate directions can be issued must depend on the

outcome of the various proceedings before the Designated Courts and these

questions also must be decided by such Courts who are in charge of all

proceedings and are entrusted with duty and responsibility to examine all

such issues and also vested with necessary powers to do so under the Act of

2000. After highlighting all these aspects I leave it to the concerned Courts

to examine full facts and pass appropriate orders either by way of interim

measures, if found necessary, or while disposing of the proceedings.

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[22] Before concluding I may also only take note of the latest affidavit

filed by the Government, dated 25th June 2021, in which it is asserted that all

necessary steps are being taken for protecting the various attached

properties.

[23] Regarding the petitioner's last request for obtaining valuation

reports, the same can be urged before the Designated Courts which can take

a proper view in the matter.

[24] With these observations and directions, petition is disposed of.

Pending application(s), if any, also stands disposed of.

( AKIL KURESHI, CJ )

Sukehendu