2009 (2) TMI 902 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the notification for sale of properties u/s 3 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004.
2. Compliance with procedural requirements for attachment and sale of properties.
3. Jurisdiction and powers of the Special Court under the Act.

Summary:

Issue 1: Validity of the Notification for Sale of Properties u/s 3 of the Act

The petitioners challenged the notification issued by the Government bringing their properties for sale under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (the Act). The properties were alleged to belong to M/s. Invest Tech and Invest Tech Builders and Developers Private Limited, and the proceedings were initiated to recover amounts deposited by the public. The petitioners contended that the notifications were illegal, contrary to law, and the provisions of the Act.

Issue 2: Compliance with Procedural Requirements for Attachment and Sale of Properties

The Court noted that the Government had not published the order of attachment in the Official Gazette, nor in two daily newspapers, nor affixed it to the properties. The Competent Authority had not filed an application before the Special Court as required. The Special Court, without proper application of mind and without issuing notices to the financial establishments or the property owners, permitted the sale of the properties. The Court emphasized that the procedure prescribed under the Act must be strictly followed, and any violation would render the order void.

Issue 3: Jurisdiction and Powers of the Special Court under the Act

The Court highlighted that the Special Court has exclusive jurisdiction to adjudicate disputes arising under the Act. The Special Court must follow a summary procedure and issue notices to all interested parties before making an order of attachment absolute. Only after such an order can the Competent Authority bring the attached property for sale. The Court found that the entire procedure followed by the Government, the Competent Authority, and the Special Court was illegal and without jurisdiction.

Conclusion:

(a) All the writ petitions are allowed.

(b) The impugned notifications are hereby quashed.

(c) Liberty is reserved to the respondents to act in accordance with Section 3 of the Act to protect the interest of the depositors.

(d) The petitioners have a right to appear before the Special Court and object to any request by the Competent Authority for making an order of attachment absolute.

(e) It is open to the petitioners to urge all grounds on merits, including the applicability of the Act to the sale or agreement of sale in question.

Ordered accordingly.