BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 12/09/2008 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.(MD)No.2691 of 2005 and W.P.M.P.Nos.2736 & 2737 of 2005 Tamil Nadu Mercantile Bank, Rep.by its Branch Manager, 50(229-A),Charles Miller Street, College Road, Nagercoil. ... Petitioner Vs. 1.State of Tamil Nadu, Rep.by its Secretary, Home (Courts II-A) Department, Fort St.George, Chennai-9. 2.The Additional Commissioner, Land Administration, Govt.of Tamil Nadu, Chepauk, Chennai 600 005. 3.District Revenue Officer, Kanyakumari District, K.P.Road, Nagercoil. ... Respondents PRAYER Writ Petition filed under Article 226 of the Constitution of India, praying for the issuance of a Writ of Certiorari calling for the records relating to the impugned proceedings of the third respondent in Ref.C4/77067/2004 dated 07.03.2005 and quash the same. !For Petitioner ... Mr.M.Ramesh ^For Respondents ... Mr.K.A.Thirumalaiappan,AGP :ORDER
The writ petitioner is a Scheduled Bank licensed by the Reserve Bank of
India for doing banking business. In the present case, they are seeking to
challenge the order of the District Revenue Officer and the Competent Authority,
Kanyakumari District dated 07.03.2005 informing the petitioner/Bank that they
cannot proceed with the auctioning of the property of Elvin Bankers, Asaripallam
Junction, Kanyakumari, in view of the order of the Government in G.O.Ms.1028
Home (Courts-IIA) Department, dated 27.10.2003 attaching the said property under
Section 3 of the Tamil Nadu Protection of Interest of Depositors (in Financial
Establishments) Act, 1997. The Bank was also informed by the Deputy
Superintendent of Police (EOW-II), Nagercoil, on 23.02.2005 to stop further
proceedings. It is this letter of information which is under challenge.
2. The petitioner/Bank also filed a copy of the attachment notice issued
by the State Government in G.O.Ms.No.1028 Home (Courts-IIA) Department, dated
27.10.2003. It is seen from the said order, the properties of the Elvin
Bankers, Kanyakumari District, were attached because of their default in return
of deposits and the attachment order came to be passed. In the schedule of
property enclosed along with the Government Order, the land and building bearing
D.No.12-81A at Vembanoor Village, Kanyakumari District, in Resurvey No.666/1
(Old Survey No.862) within the registration Sub-District, Rajakkamanagalam, to
an extent of 2.005 cents is also mentioned as item No.1.
3. The writ petition was admitted on 01.04.2005 and no interim order was
granted in W.P.M.P.No.2737 of 2005. In W.P.M.P.No.2736 of 2005 an interim
injunction was granted on 01.04.2005.
4. Heard Mr.M.Ramesh, learned counsel for the petitioner and
Mr.K.A.Thirumalaiappan, learned Additional Government Pleader for the State
Government and perused the records.
5. The contention raised by the petitioner was that they are a Scheduled
Bank and they are having an equitable redemption of mortgage by title deeds for
the loan advanced by them. The mortgage was made to them in the year 1989 and
whereas the Government Order came to be passed in 2003. Therefore, they have a
preemptive right of foreclosing the mortgage and bring the property to sale and
the Government cannot be interfere with the sale of the property. It is also
stated that as a secured creditors they have a strong footing than any unsecured
creditors or depositors.
6. In this context it is necessary to refer the Full Bench Judgment of
this Court to which this Court is a party (K.CHANDRU,J.) in S.Bagavathy Vs.
State of Tamil Nadu and another reported in 2007(2) CTC 207. The Full Bench of
this Court dealt with various aspects of the Tamil Nadu Act, 44 of 1997
including the contention as to whether the Act is ultra vires of the provisions
of the Banking Companies Act and the Reserve Bank of India Act. In this context
the Full Bench judgment in Bagavathy’s case (cited supra) held that the State
legislation is an intra vires of the powers of the State vested under list II
and list III of Schedule VII of the Constitution and it is protected by Article
254(2) of the Constitution.
7. In paragraph 142 to 145 it is stated as follows:-
142. “In the instant case, the noxious net caused by the financial
establishments was large and the State moved to stop this menace. Small sums
collected from the subscribers accumulated into huge resource like many a little
makes a mickle, and then these financial establishments disappear and evade
payments, after siphoning of the amounts collected or diverting them by mala
fide transfers. As referred to above, about 19 lakhs of people reported to be
suffering by this menace in the State of Tamil Nadu.”
143. “Reserve Bank of India being a body corporate, constituted under the
Reserve Bank of India Act, 1943 can only transact its business which is
authorised by the Act to transact. Under the existing provisions of either
Reserve Bank of India Act, 1934 or Companies Act, 1956, there is no provision to
deal with the financial establishments, particularly for the recovery of amounts
due to the depositors, viz., to attach, sell, realise and distribute equitably.”
144. “In the impugned enactment, the Government has rightly provided
special machinery and judicious mechanism to attach the properties of the
financial establishment or the persons mentioned under Section 3 of the Act as
well as that of the mala fide transferees and to bring them for sale and
thereafter to distribute the sale proceeds equitably among the depositors, of
course, in compliance of the Principles of Natural Justice, as discussed above
in detail, while considering the issue(i).”
145. “Therefore, the State Government rightly in order to protect the
interest of the public and to regulate the activities of the financial
establishments, enacted the impugned Act to meet the urgent need. The State
Government has, thus, rightly, in order to plug certain loopholes in the
existing system and in the public interest, tracing the field of legislation
under Entries 1 and 32 of the State List, enacted the impugned Act.”
8. Therefore, the petitioner/Bank being a Scheduled Bank cannot find
fault with the attachment made by the State Government until the attachment is
raised in the manner known to law. By filing a writ petition, the
petitioner/Bank cannot achieve what it cannot achieve otherwise.
9. In any event, the learned counsel for the petitioner/Bank stated that
the petitioner/Bank did not have any notice on the attachment. Section 3 of the
said enactment does not contemplate any such notice and the only opportunity
that is contemplated is a post decisional hearing under Section 7 of the said
enactment. The Special Court before finalizing the attachment can be moved by
the aggrieved parties. In paragraph 23 of the judgment this position has been
set out. Therefore, the only forum open to the petitioner/Bank is to move the
Special Court for raising the attachment by setting forth the circumstances
under which the petitioner/Bank has exclusive control over the particular
property. It is only when the Special Court is satisfied such an attachment can
be removed.
10. Thereafter, the learned counsel for the petitioner submitted that
their transaction was prior to the Government attachment and therefore, this Act
cannot have any impact on past transactions. This argument overlooks Section 8
of the Tamil Nadu Protection of Interests of Depositors (in Financial
Establishments) Act, 1997, where mala fide transfers can also be questioned
under this enactment. If it is found by the State that moneys were ciphoned off
and stashed elsewhere or transformed into different properties even those moneys
converted into different properties can be brought for the purpose of satisfying
the depositor’s claims. Therefore, whether the particular property was
purchased through mala fide transfer, is yet to be determined by a competent
forum under the Act.
11. Under these circumstances, the writ petition is misconceived, devoid
of merits and accordingly it stands dismissed.
12. If the petitioner/Bank is so advised, it is open to them to move the
Special Court and seek for raising the attachment of the property which are
mortgaged with them and which is covered by the Government’s order in
G.O.Ms.No.1028 Home Department, dated 27.10.2003.
13. The learned counsel expresses apprehension that since the time limit
for raising attachment in terms of Section 7 is already over and their
application may not be entertained. Since in the present case the
petitioner/Bank has moved this Court and also were not aware of the earlier
attachment, if any such application is filed, the concerned Special Court will
consider the same on merits without reference to limitation prescribed under
Section 7. No costs. Consequently, connected M.Ps. are closed.
nbj
To
1.The Secretary,
State of Tamil Nadu,
Home (Courts II-A) Department,
Fort St.George, Chennai-9.
2.The Additional Commissioner,
Land Administration,
Govt.of Tamil Nadu,
Chepauk, Chennai 600 005.
3.The District Revenue Officer,
Kanyakumari District,
K.P.Road, Nagercoil.