Bombay High Court
Chandrashekher Vaman Patwardhan vs The State Of Maharashtra And Ors on 23 October, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-AS:43291-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1072 OF 2021
Chandrashekhar Vaman Patwardhan .. Appellant
Versus
1 The State of Maharashtra .. Respondents
2 The Police Inspector, Economic
Offence Wing
3 The Hon'ble Collector, Mumbai.
4 The Office of Competent
Authority District Deputy Registrar,
Co-op Societies, Mumbai-3
...
Mr. Abhijeet Desai with Mr.Kuldip T. Pawar with Sarita N. Patil,
Digvijay Kachare, Daksha Pungera, Karan Gajra, Mohini
Rehepade, Vijaysingh for the appellant.
Mr.Bhomesh Bellam with Mr.Karma Vivan for respondent no.1.
First Informant.
Mr.Shahaji Shinde, 'A' Panel Counsel with Mr.J.P. Yagnik, APP for
the State.
CORAM: BHARATI DANGRE &
MANJUSHA DESHPANDE,JJ.
RESERVED ON : 5th SEPTEMBER, 2024
PRONOUNCED : 23rd OCTOBER, 2024
JUDGMENT :
– (Per Bharati Dangre, J)
1 Chandrashekhar Vaman Patwardhan, the appellant
has filed the present Appeal under Section 11 of the
Maharashtra Protection of Interest of Depositors (In Financial
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Establishments) Act, 1999, (for short “MPID Act”) being
aggrieved by order dated 26/11/2021 passed by the Special
Judge in MPID Case No.28/2004, thereby rejecting his
objection raised under Section 7(3) of the said Act, as a person
claiming interest in the property i.e. Flat No.A-402, Sahjeevan
CHSL, Dadasaheb Pendse Marg, Goregaon (East), Mumbai,
which was attached in the wake of the notification issued by
Government of Maharashtra under Section 4 of the MPID Act,
published on 8/5/2015.
2 The appellant claim to be a close relative of one
Smt. Mrunmayi Barve, who owned the subject flat, and it is his
contention that she has been living with him during her life
time and he has catered to her by attending to her daily needs
as well as medical care.
The subject flat located in Goregaon (East), Mumbai
was purchased by Shri V.G. Barve, husband of Smt.Mrunmayi
Barve on 15/1/1984 and on 26/9/1997, the shares of the said
flat were transferred in his name.
Shri V.G. Barve passed away on 11/3/1998 and the
rights in the flat devolved upon Smt. Mrunmayi Barve, in the
capacity as his wife.
On 11/7/1998, Smt. Mrunmayi Barve bequeathed
the flat to the appellant by Will dated 11/7/1998 and on
18/9/1998, she appointed the appellant as the nominee in the
said flat.
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On 2/10/1999, Smt.Mrunmayi Barve was appointed
as a Director of Parleshwar Finance Pvt. Ltd, and she continued
to hold the said post till 15/4/2003 when she retired from the
said post.
3 On 28/5/2004, C.R. No. 190/2004 came to be
registered at the instance of one Manohar Majalkar, invoking
Sections 406, 420 of IPC and Sections 3, 4 of the MPID Act,
against the Directors of Parleshwar Finance Limited, alleging
default in refund of their deposits. On 3/8/2004, Smt.
Mrunmayi Barve was arraigned as accused, as she was also a
Director of the said Company between 1999 to 2003. On
19/12/2007, she passed away and as a sequence to this event,
the flat devolved upon the appellant through the Will executed
by her on 11/7/1998 as her legal heir.
On 8/5/2015, the State Government through it’s
Deputy Secretary issued a notification under Section 4 of the
MPID Act, and this notification covered several immovable
properties, including the subject Flat A/402, of Sahjeevan
CHSL. The notification referred to ‘Parleshwar Financial
Establishment Pvt. Ltd’, Vile Parle, Mumbai, as the Financial
Establishment, which is alleged to have accepted deposits from
the investors, but complaints were received from the investors
that the deposits were not refunded.
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Since the State Government was satisfied that the
financial institutions and its Chairman/Directors are not likely
to return their deposits, and since the State Government was
desirous of protecting the interest of the investors, and since it
is inferred that the property included in the Schedule has been
purchased by the financial institution, and it’s Chairman/
Directors from the amount collected and deposited by the
investors, and therefore, in exercise of the power conferred
under sub-section (1) of Sections 4, 5, 8(1) and 12 of the MPID
Act, 1999, the property set out in the Schedule belonging to the
financial establishment and its Chairman/Director is attached
and pursuant thereto, appropriate steps would be taken before
the Special Court through the Competent Authority.
A perusal of the notification which is accompanied
with the Schedule has included five properties which include
the subject property which is shown to be worth Rs. Sixty
Lakhs.
There is no mention about the owner of the subject
property, except giving of its particulars including the
approximate price thereof.
4 Upon the notification being published involving the
subject property and receipt of the notice from the competent
authority by the appellant, he raised an objection before the
Competent Court in MPID Case No.28/2004 in December 2016,
by specifically stating that late Mrs.Mrunmayi Barve was his
aunt and she was the owner of Flat No.A-402, Sahjeevan CHS
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Ltd, Goregaon, Mumbai, and she had bequeathed the flat to
him before her demise and which was transferred in his name
in March 2008 and since then, he was the absolute owner and
the occupier of the said flat.
5 In the objection raised, the attachment of the
property at Serial no.3 in the notification published by the State
Government was described to be suffering from non-application
of mind, as the impugned notification was issued without
ascertaining the correct position of the assets mentioned
therein.
6 The objection raised is found to be worded as follows:-
“(c) The impugned notification has been issued in total
disregard to the legislative intent in so far as the legislature
intended that those properties that have been acquired from
the deposits collected by the Financial Establishment may be
attached to secure the interests of the depositors.
(d) I say that before issuing the impugned notification the
Competent Authority ought to have investigated how and when
the properties proposed to be attached were acquired and what
was the status of those properties as on the date of issuing the
Notification. I say that from the record, it appears that no such
investigation or enquiry has been conducted by the Competent
Authority before issuing the Notification and that by itself is
enough to deny permission as prayed by the Competent
Authority.
(e) I say that there is no evidence that the Property at Sr.
No.3 in Exhibit 1-A, has been acquired out of the deposits
raised by the Financial Establishment. On the contrary, if
enquiries had been made it would have come to notice of the
Competent Authority that the flat in question was acquired
much before the financial establishment even commenced
business.
(f) I say that since the case against Mrs.Mrunmayi Barve
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there was no ground for issuing the Notification in respect of
this particular property.”
7 Along with the application, the appellant also
placed the relevant documents before the Court which included
the agreement dated 15/1/1984 under which Shri Vinayak
Barve purchased the subject property. A copy of the Share
Certificate dated 1/5/1988 in the name of Shri Vinayak Barve
as well as the maintenance bill dated 2/7/1998 was also
included in the compilation of documents. A copy of the
nomination form under the by-law no.34 addressed to the
Chairman of the Sahjeevan Society, nominating the appellant,
as the nephew of Smt. Mrunmayi Vinayak Barve along with the
Will dated 11/7/1998, accompanied with the death certificate
of Smt. Mrunmayi, also formed part of the compilation of
documents.
8 The First Informant also responded to the objection
raised by the appellant, by submitting that he cannot claim
ownership when the property is already secured for attachment,
and it is irrelevant that the property is not purchased from the
proceeds of crime. In addition, the pleadings that the
proceedings under section 3 were abated against
Mrs.Mrunmayi Barve, was contested by submitting that she
cannot be absolved of her liability which arose as per the
proceedings initiated under Section 4 r/w Section 7 of the
MPID Act, as Section 4 deals with default, and not with
fraudulent default, and therefore, the civil proceedings cannot
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be said to be abated, though the criminal aspect of it may
abate.
It is this objection which came to be decided by the
Designated Court under the MPID Act by order dated
26/11/2021, and we must reproduce the most pertinent
observation in the said order which reads to the following
effect:-
“3 After going through the documents produced by the applicant
in support of the objection, it establishes that the flat was purchased
by Vinayak Barve on 15/01/2984. The name of Mrunmayi Barve was
mutated against the said flat as a successor of Vinayak Barve. There is
no material produced by the prosecution to show that said Mrunmayi
Barve acquired the flat from out of the funds of the deposits.
Therefore, it can be safely concluded that the flat was not purchased
from out of the deposits collected by the FE.”
Despite the aforesaid observation, the learned Judge
formed an opinion that in the charge-sheet, it is claimed that
the total misappropriated amount is to the tune of
Rs.7,51,97,084/- (Rupees Seven Crore Fifty One lakhs Ninety
Seven thousand and Eighty four only) and the Investigating
Officer has annexed list of the properties secured by him for the
purpose of repayment of the deposits and the valuation of the
properties is also mentioned in Column no.4 of the chart
annexed to the charge-sheet which is assessed at
Rs.1,08,81,541/-.
Recording that this amount is less than the
misappropriated amount, and this include the flat which is the
subject matter of the application, the learned Judge made
reference to Section 7 of the MPID Act and in particular, the
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proviso appended thereto, as regards the release of the
property.
Based on the aforesaid provision in the statute, he
record thus:-
“In view of the above provision, the property can be released
from attachment only upon a satisfaction that there will remain
under attachment an amount or property of value note less than
a value that is required for repayment to the depositors of such
Financial Establishment. At the relevant time, the deceased
Mrunmayi Barve was Director of the FE. For attachment of the
properties under Section 4 of MPID Act, mere default in
repayment of deposits by the FE is sufficient though there is no
satisfaction to be recorded by Government of Maharashtra that is
is fraudulent default. Section 4 of MPID Act empowers the
Government of Maharashtra to attach the properties of Director
of the FE if money or other property of the said FE is not
available for attachment. Therefore, there was no illegality in
the attachment of the flat by invoking provisions of Section 4 of
MPID Act. Since, the value of secured properties is much less
than the misappropriated amount, the objection cannot be
allowed.”
9 Another point which the learned Judge has focused
upon, is the objection that the notification under section 4 of
the MPID Act is faulty, as it has been issued by an Officer below
the rank of Secretary to the Government in Home Department.
By referring to Article 166(1) of the Constitution,
the impugned order record that clause (2) of Article 166
contemplate that orders and other instruments made and
executed in the name of the Governor, shall be authenticated in
such manner, as may be specified in the Rules to be made by
the Governor and the validity of an order or instrument which
is so authenticated, shall not be called in question, on the
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ground that it is not an order or instrument made or executed
by the Governor, even the said objection was rejected.
10 We have heard Advocate Abhijeet Desai with Mr.
Kuldip Pawar for the appellant, Advocate Bhoomesh Bellam for
respondent no.5, the complainant, whereas respondent nos.1 to
4 are represented by Mr.Shahaji Shinde, ‘A’ Panel Counsel along
with learned APP Mr.J.P. Yagnik.
11 Mr.Desai representing the appellant has placed
reliance upon the decision of the Apex Court in case of U.
Subhadramaa & Ors Vs. State of Andhra Pradesh, represented by
Public Prosecutor and Anr,1 which is followed by the High Court
of Andhra Pradesh in Gujjala Sreenu and ors Vs. State of Andhra
Pradesh, represented by Dy. Secretary, Superintendent of Police2.
We have perused the ratio of flowing from the
decision of the Apex Court, which revolve around the aspect of
continuation of criminal proceedings against a dead person
with specific reference to the Criminal Law Amendment
Ordinance, 1944 (Clauses 3, 4 and 13) relating to attachment
proceedings.
The facts unfolded before the Apex Court reveal
that the appellants being legal representatives of one
Ramachandraiah, who was accused of offences u/s. 409 and
468 r/w Section 471 of IPC had filed the appeal against the
judgment and order of the High Court of Andhra Pradesh at
1 (2016) 7 SCC 797
2 2023 SCC Online AP 457
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Hyderabad, dismissing their petition u/s.482 of Cr.P.C.
Ramachandraiah, since deceased, was the husband of appellant
no.1 and father of appellant nos.2 and 3, was prosecuted in
respect of the misappropriation of funds during the period
31/7/1987 to 29/6/1988 along with one Subbarayudu.
U.Ramachandraiah expired during trial in October
1991 and thereafter, the trial Court acquitted the other accused
Subbarayudu by judgment dated 25/10/1993.
The Trial Court observed on the basis of oral and
documentary evidence that Ramachandraiah alone committed
the offence and no evidence was placed before the Court to
show that the surviving co-accused assisted Ramachandraiah in
committing the alleged offence and therefore, the trial Court
found Ramchandraiah responsible for the offences though he
could not be adjudged guilty since he had expired.
12 In 1997, the State moved the application under the
Criminal Law Amendment Ordinance, 1944 (Ordinance
No.38/1944) for attachment of the property of the appellant
under the Criminal Law and the District Judge passed an
interim attachment u/s.4 of the Ordinance on the basis that
Ramachandraiah had committed the scheduled offence and that
he has procured money or the property in question from the
proceeds in such offence.
The District Judge issued noticed upon the
appellants to show cause as to why the order of attachment
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should not be made absolute, and in this order, the District
Judge observed that as many as 30 items mentioned in the
Schedule were acquired by Ramachandraiah, either in his own
name or his wife’s name or the name of his sons due to illegal
amounts drawn by him.
The District Judge recorded that the trial Court had
found Ramachandraiah responsible for committing the offence
and on 1/10/2002, made the order of interim attachment
absolute, since it was found that the appellants have failed to
prove that the properties mentioned in the Schedule are self
acquired properties of Ramachandraiah.
The appellants challenged the order of the District
Judge in a petition under Section 482 of Cr.P.C and the learned
Single Judge of the High Court held that Ramachandraiah
alone had committed the offence and since he has
misappropriated the amount, no benefit could be granted to the
appellants. This constrained the appellants to approach the
Apex Court.
13 Recording the argument on behalf of the appellant
that the Criminal Law Amendment Ordinance 1944 did not
permit the District Judge to confirm any attachment of property,
though the criminal court had not validly convicted and found
the accused or the person whose property is sought to be
attached as guilty, it was alleged that no application for
attachment could have been made as Ramchandraiah has
expired in 1991 during trial and was never found guilty. This
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argument was opposed by the opponents, by submitting that
the appellants may not be allowed to retain the property
obtained by ill-gotten means and it was legal for the learned
Judge to have passed the order of attachment in respect of the
said property which was admittedly the subject matter of the
charge-sheet.
In this background facts, the question which arose
for consideration, was formulated in the following words:-
“It has therefore become necessary for us to examine whether the
property of a person which was merely a case of an offence of
misappropriation but who died during the pendency of the criminal
trial can be attached in the hands or his legal representatives under
the provisions of the Criminal Law Amendment Ordinance, 1944.”
14 Recording that as far as making the application for
attachment is concerned, the law authorized the State
Government to make such an application, even though the
proceedings against the person, would have resulted in such
conviction as Section 3 empowered the Government to make
such an application, if it has reason to believe that any person
has committed any scheduled offence, but since it contemplated
making an application to the District Judge within the local
limits of whose jurisdiction the said person ordinarily reside, or
carry his business; clearly requiring the existence of such a
person and this excludes the possibility of proceeding against a
dead person.
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We deem it appropriate to reproduce the relevant
observations of the said Law Report, which clearly concluded
that no proceedings could have been continued against a dead
person and it read thus:-
“Section 13 requires the Government to inform the District Judge about
the status of the criminal proceedings. It requires the Government to
furnish the District Judge with a copy of the judgment or order of the
trial court and with copies of the judgment or orders, if any of the
appellate or revisional court thereon. Sub-clause 2 mandates that the
District Judge shall forthwith withdraw any orders of attachment of
property made in connection with the offence if (a) cognizance of
alleged scheduled offence has not been taken or (b) where the final
judgment and orders of the criminal court is one of acquittal. While, this
clause is clear that the orders of attachment must be withdrawn if
cognizance of the offence has not been taken or there has been an
acquittal; the clause is silent as to the effect of abatement of
prosecution. It is due to this silence that it is contended by the State
Government in this case that the orders of attachment could not only
have been continued but could also have been confirmed. It is not
possible for us to accept the submission. If the law requires that the
orders of attachment should be withdrawn upon acquittal it stands to
reason that such orders must be withdrawn when the prosecution abates
or cannot result in a conviction due to the death of the accused, whose
property is attached. Concept of abatement of a trial could be subsumed
in the clause where the final judgment and order of the Criminal Court
is one of acquittal. In this context, the presumption of innocence of an
accused till he is convicted must be borne in mind and there is no reason
to consider this presumption to have vaporized upon the death of an
accused. It may be noted that this Court has time and again reiterated
the presumption of innocence of an accused till he is convicted.”
15 In conclusion, Their Lordships of the Apex Court
recorded as below:-
“12 In fact, we find that the learned District Judge could not
have proceeded with the attachment proceedings at all since the
attachment proceedings were initiated by the State against
Ramachandraiah under clause 3 of the Criminal Law Amendment
Ordinance, 1944, who was actually dead. Clause 3 contemplates
that such an application must be made to the District Judge within
the local limits of whose jurisdiction the said person ordinarily
resides or carries on business, in respect of property which the
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an application could have been made in regard to a dead person
who obviously cannot be said to be ordinarily resident or carrying
on business anywhere. There is no legal provision which enables
continuance of prosecution upon death of the accused. We must
record that the proceedings and the decisions of the courts below
are disturbing, to say the least. In the first place, though the
accused had died, the trial court proceeded with the trial and
recorded a conviction two years after his death. Then, this null and
void conviction was used as a basis for making an attachment of
his properties before the Sessions Court. Astonishingly, all
applications succeeded, the attachment was made absolute and
over and above all, the High Court upheld the attachment.”
16 This decision is followed by the Andhra Pradesh
High Court when the Appeal was preferred against the order of
Special Judge for trial of SPE and ACB cases, Kurnool, who
granted ad-interim order of attachment of the assets relying
upon the Criminal Law Ordinance, 1994 for attachment of
assets standing in the name of the appellants therein, even
while the case of the appellants, being arraigned as accused,
and facing charge of ACB cases, was pending investigation and
authorization was sought from the State Government.
The CID opposed the stand of the appellant by
contending that the Ordinance made it clear that the
Investigating Agency or the State Government would be
entitled to trace and attach all assets, which have been obtained
out of the ill-gotten gains of criminal activity undertaken by an
accused person and the State would be entitled to attach not
only the property in the name of the accused, but also other
property which can be traced to the money acquired by the
accused in a crime.
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17 The decision in case of U. Subbadramma cited by
the appellant was tried to be distinguished, by submitting that
the accused person had passed away during the course of the
trial, but the trial continued and convicted a dead person.
On a threadbare analysis of the Criminal Law
Ordinance 1944, the learned Single Judge of the Andhra
Pradesh High Court has observed thus:-
“13 In the present case, the assets of the appellants have been
attached. Three of these persons have been arrayed as accused in the
main case. Appellants 4 to 6 are the family members of accused Nos.1
to 3. The allegation against the appellants is that the properties in the
name of the six persons were the properties acquired on account of
commission of an offence. In such circumstances, it cannot be held that
the attachment of the properties of appellants 4 to 6 is out side the
scheme or the Criminal Law Ordinance, 1944. However, the question of
whether the said assets have been acquired from the funds procured
from the scheduled offence is a question of fact which has not yet been
answered by the trial court.
14. It is the admitted case on both sides that the 4 th appellant
had passed away even before the application for attachment was made.
15. The Hon’ble Supreme Court in the case ofRavi Sinha and
Ors., vs. State of Jharkhand, U. Subhadramma and Ors., vs. State of
Andhra Pradesh and Anr.,4 had taken the view that the institution or
continuation of proceedings against a dead person under the Criminal
Law Amendment Ordinance is not permissible and all such proceedings
would have to be set aside. Even though, there are certain differences
on the facts, the principle laid down by the Hon’ble Supreme Court,
that such proceedings against dead persons are not permissible,is
binding on this Court.
16. In the circumstances, the attachment of the assets of the
4th appellant is not permissible and the order of ad interim attachment
passed by the trial Court on 04.08.2022, to the extent of the 4th
Appellant, is set aside.
18 Drawing an analogy from the provision in the
Income Tax Act, 1961, Mr.Desai has placed reliance upon the
decision from the Apex Court in case of Shabina Abraham and orsTilak
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16/28 APEAL 1072-21.docVs. Collector of Central Excise and Customs ,3 where in absence of
the provision under the 1922 Act, for continuing the assessment
and collection of tax from the estate of deceased person, it was
held that it was not permissible to recover the tax from the
estate of the deceased person. However, pursuant to the
decision of the Bombay High Court, the legislature amended
the Income Tax Act, 1922, by inserting Section 24B, introducing
a specific provision to the effect that where a person dies, his
executor, administrator, or the legal representative shall be
liable to pay out of the estate of the deceased person to the
extent of which the estate is capable of meeting the charge, the
tax assessed as payable by such person or any tax which would
have been payable by him under the Act, if he had not died.
From reading of the said decision, where it is noted
that there is no separate machinery provided by Central Excise
and the Salt Act, to proceed against a dead person when it
comes to assessing him to tax under the Act, and this was
compared to the position under the Income Tax Act, 1922,
where the position remained the same until Section 24B was
introduced by the Income Tax (second amendment) Act of
1933.
19 Prior to the introduction of the said section, the
Bombay High court had an occasion to deal with the definition
of “assessee” contained in Section 2(2) of the 1922 Act, which
stated that ‘assessee’ means a person by whom Income Tax is3 (2014) 10 SCC 770
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words “or by whose estate” are conspicuous by their absence
and in absence of a provision in the charging section to suggest
that a man who has once become liable to tax, can avoid
payment of tax by dying before such tax has been assessed or
paid, the Division Bench of the Bombay High Court had
categorically held that the Court is not justified in straining the
language in a taxing statute in order to hold a subject liable to
tax. Noting that pursuant to this decision, Section 24B was
added in the Income tax Act, 1922, and thereafter, the tax of a
deceased could be recovered from his executor, administrator,
or other legal representative on his death, to the extent to
which the estate is capable of meeting the charge.
20 Relying upon the said pronouncement, it is the
submission of Mr.Desai that in absence of a provision in a
statute, the legal representative/successor cannot be foisted
with a liability and since the appellant had come in occupation
of the subject flat and continued to be in occupation, the order
of attachment passed by the State Government under section 4
of the MPID Act, in absence of any conclusion being reached
that it is purchased from the money collected from the
investors, cannot be subjected to attachment.
It is the specific submission of Mr.Desai that it is a
well settled principle in law that the Court cannot read
anything into a statutory provision, which is plain and
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legislative intent. Relying upon the well settled principle of
statutory interpretation to the effect that Courts are not entitled
to read words into an Act of Parliament, unless clear reason for
it is to be found in the four corners of the Act itself, and since a
casus omissus cannot be supplied by the Court, except in case
of clear necessity, it is his submission that no violence can be
done to the Statute by reading the provision thereof, to suit the
case of particular party.
21 The learned counsel Mr.Bellam who represent the
complainant has invited our attention to the decision of the
Apex Court in case of K.K. Bhaskaran Vs State of Tamil Nadu,4
which has upheld the provisions of Tamil Nadu Protection of
Interest of Depositors Act, which revolve around the Protection
of Interest of Depositors.
Referring to the observations in the said decision to
the effect that one has to keep in mind the beneficial nature of
the Act, along with the pari materia statute operating in the
State of Tamil Nadu and Pondicherry being to protect the
interest of small depositors who invest their life’s earnings and
savings in the schemes for profit floated by unscrupulous
individuals and companies, both incorporated and
unincorporated, more often the investors end up losing their
entire deposits.
4 (2011) 3 SCC 793
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It is the submission of Mr.Bellam that MPID Act of
1999 is the beneficial legislation and the Court ought to
interpret the statute to be remedial and accord a purposive
interpretation, so as to achieve the purpose which the statute
seeks to serve.
Drawing parity with the observation of the Apex
Court in case of Bombay Anand Bhavan Restaurant Vs. ESIC
Corporation,5 while interpreting the provisions of the Employees
State Insurance Act, a beneficial legislation and that it should
receive a liberal construction so as to promote its objective,
reliance is placed upon the following passage of the decision:-
“20 The Employees State Insurance Act is a beneficial
legislation. The main purpose of the enactment as the Preamble
suggests, is to provide for certain benefits to employees of a factory
in case of sickness, maternity and employment injury and to make
provision for certain other matters in relation thereto. The
Employees State Insurance Act is a social security legislation and the
cannons of interpreting a social legislation is different from the
cannons of interpretation of taxation law. The courts must not
countenance any subterfuge which would defeat the provisions of
social legislation and the courts must even, if necessary, strain the
language of the Act in order to achieve the purpose which the
legislature had in placing this legislation on the statute book. The
Act, therefore, must receive a liberal construction so as to promote
its objects.
22 According to Mr.Bellam, Section 3 of the MPID Act,
prescribe the punishment for the fraudulent default by a
financial establishment and since it prescribe punishment for a
fraudulent act of the financial establishment, it is penal in
nature. However, according to him, Section 4 which provide5 (2009) 9 SCC 61
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a civil action and the cause therein, would survive against the
legal heir, even if the penal aspect of it has come to an end. It
is the contention of Mr.Bellam that as far as criminal cause is
concerned, if a person dies, the cause dies, but since Section 4
is an aspect of civil law, even if the crime comes to an end, by
following the procedure under Section 4 to 7 of the Act, the
action would survive, despite the death of Smt. Mrunmayi
Barve and her property in the capacity as Director, which is
attached must be utilised for the purpose of being distributed to
the investors and this is the civil action.
23 Mr.Bellam has relied upon the observations of the
Apex Court in case of State of Maharashtra Vs. 63 Moon
Technologies Ltd,6 and in particular, para 88 thereof to the
following effect“88 Besides holding that the State legislature did not lack
legislative competence to enact the law, the judgment in Bhaskaran (supra)
also concluded that the Tamil Nadu enactment did not violate the
provisions of Articles 14, 19(1)(g) or 21 of the Constitution. In that context,
while dismissing the constitutional challenge against the legislation
enacted in Tamil Nadu, the Court held:
31. We fail to see how there is any violation of Articles 14, 19(1)(g) or 21
of the Constitution. The Act is a salutary measure to remedy a great social
evil. A systematic conspiracy was effected by certain fraudulent financial
establishments which not only committed fraud on the depositors, but also
siphoned off or diverted the depositor’s funds mala fide. We are of the
opinion that the act of the financers in exploiting the depositors is a
notorious abuse of faith of the depositors who innocently deposited their
money with the former for higher rate of interest. These depositors were
often given a small pass book as a token of acknowledgment of their
deposit, which they considered as a passport of their children for higher
education or wedding of their daughters or as a policy of medical6 (2022) 9 SCC 457
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21/28 APEAL 1072-21.docinsurance in the case of most of the aged depositors, but in reality in all
cases it was an unsecured promise executed on a waste paper. The senior
citizens above 80 years, senior citizens between 60 and 80 years, widows,
handicapped, driven out by wards, retired government servants and
pensioners and persons living below the poverty line constituted the bulk
of the depositors. Without the aid of the impugned Act, it would have been
impossible to recover their deposits and interest thereon.
32. The conventional legal proceedings incurring huge expenses of court
fees, advocates’ fees, apart from other inconveniences involved and the
long delay in disposal of cases due to docket explosion in courts, would
not have made it possible for the depositors to recover their money, leave
alone the interest thereon. Hence, in our opinion the impugned Act has
rightly been enacted to enable the depositors to recover their money
speedily by taking strong steps in this connection.
33. The State being the custodian of the welfare of the citizens as parens
patriae cannot be a silent spectator without finding a solution for this
malady. The financial swindlers, who are nothing but cheats and
charlatans having no social responsibility, but only a lust for easy money
by making false promise of attractive returns for the gullible investors,
had to be dealt with strongly. The small amounts collected from a
substantial number of individual depositors culminated into huge amounts
of money. These collections were diverted in the name of third parties and
finally one day the fraudulent financers closed their financial
establishments leaving the innocent depositors in the lurch.”
It is the contention of Mr.Bellam that since there is
no protection under the Code of Civil Procedure to the heirs
and representatives of a deceased defendant from a decree
being passed against them under Order 37 of the CPC, if the
right to sue them survives, and the protection under Section 52
of the CPC to the heirs and legal representatives of the
defendant is the protection against the enforcement of a decree
for execution and where a decree is passed against a party as
the legal representative of a deceased person and it is for
payment of money, out of the property of the deceased, it may
be executed by attachment and sale of such property and such a
decree can be executed to the extent of the property of the
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deceased, in his hands. He would place reliance upon the
observations of the Bombay High Court in case of Bank of India
Vs. Industrial Polymer7 in a case under Summons for Judgment
as to whether a Summary Suit can be filed against heirs and
legal representatives of deceased defendant.
24 On giving a thoughtful consideration to the counter
arguments, we have no doubt in our mind as regards the object
of the Act of 1996, being an act to protect the interest of
depositors in the financial establishments and we are conscious
of the background in which the Act of 1999 came to be enacted.
25 Section 3 of the Act provide penalty for a fraudulent
default in repayment of deposit on maturity along with any
benefit in the form of interest, bonus, profit, etc, by a financial
establishment, or when a financial establishment fraudulently
fails to render service, as assured against the deposit and in
such a case, every person, including the promoter, partner,
director, manager or an employee responsible for the
management of, or conducting the business or affairs of
financial establishment shall, on conviction be punished for a
term prescribed therein and also be levied with fine which may
extend to one lakh of Rupees.
Section 4 of the Act which opens with a non
obstante clause, provide for a contingency when the complaint
is received from the depositors that the financial establishment
has failed to return the deposit or pay interest or other assured
7 SJ No.337/1989
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benefit or to provide the service promised and when the
Government is satisfied to that effect, and has reason to believe
that the financial establishment is acting in a calculated
manner, detrimental to the interest of the deposits, with an
intention to defraud them, then, it may take the steps
contemplated in the said section.
It is apposite to reproduce Section 4 of the MPID
Act:-
(4) (1) Notwithstanding anything contained in any other
law for 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 promised 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 service against which the deposit
is received, the Government may, in order to protect the
interest of the depositors of such financial Establishment,
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 same or in the
name of any other person from out of the deposits, collected
by the Financial 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.
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26 Reading of the above provision make it evident that
when the government is satisfied that the financial
establishment is not likely to return the deposits or make
payment of interest or other benefits to the investors/
depositors, then in order to protect their interest, it shall issue
an order in writing 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 collected by the financial establishment.
The impugned order has categorically recorded that
the flat in the hands of the appellant is not purchased by the
money collected by financial establishment, which is now
accused of not returning the deposits along with its Directors.
The second contingency contemplated under
Section 4 of the Act, when the State Government can attach the
money or other property is, if it transpire that such money or
other property, is not available for attachment or it is not
sufficient for repayment of deposits then such other property of
the financial establishment or the promoter, director, partner or
manager or member, may be attached as the government may
think fit.
27 In the scheme of the MPID Act, Section 4
contemplate attachment of the money or other property
believed to have been acquired by the financial establishment
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out of the deposit collected by it, or when such money or other
property is not available for attachment or not sufficient for
repayment of deposits, then, such other property of the
financial establishment or even the Director can be attached if
the Government deems it fit.
For exercising the second option available, it is
necessary that when the State Government exercises this power
of attaching the property, it must be the property of the Director
or the promoter as the case may be.
In the facts of this case, what is important to note is
the sequence of events.
The appellant is the nephew of Mrunmayi Brave
who was the Director of Parleshwar Finance Pvt Ltd, Financial
Establishment from 1999 to 2003, till she retired. The subject
flat was purchased by her husband Shri V.G. Barve in the year
1984 and upon his demise, the property devolved upon Smt.
Mrunmayi Barve, who bequeathed it to the appellant by Will
dated 11/7/1998.
On her demise on 19/12/2007, the flat devolved
upon the appellant as on 25/9/2008. Admittedly, the
Will/bequeath is not called in question by any individual and
the bequeath has become final in favour of the appellant.
As on 8/5/2015, when the notification is issued by
the State Government, it is only premised on an assertion that
the properties mentioned in the said notification which include
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the subject property at item no.3, have been acquired by the
financial establishment and its Chairman/Director from the
money collected from the depositors and the notification in no
way, indicate that the attachment of the subject property, is for
the reason that the property of the financial establishment, is
insufficient to protect the interest of the depositors.
Pertinently, all the five immovable properties
described in the notification are included by merely describing
that their attachment is necessary because they are the
properties in the hands of the Chairman/Directors and they
have been acquired through the money of the depositors, which
is not a correct statement as regards the property no.3
mentioned in the Appendix. Even the impugned order has
clearly recorded that the property is not acquired from the
money of the investors/depositors.
As on 8/5/2015, the property was no longer
standing in the name of Mrunmayi Barve, as on 29/5/2008, it
had devolved upon the appellant through a Will executed as her
legal heir.
It is difficult to accept that in the year 2015, the
State Government could have attached this property and since
the notification only indicate that the property is attached since
it belong to the financial establishment/Director/Chairman, and
it is purchased from the money invested by the depositor, which
is a grossly incorrect statement.
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28 We are not prima facie satisfied with the submission
of Mr. Bellam about Section 3 and 4 of the MPID Act, being
totally distinct with regard to its consequences against a dead
person, though we find that they operate in distinct fields,
independent of each other. However, since in the present case,
we are satisfied that Section 4 notification by the State
Government, has directed attachment of the subject property,
only on the ground that it is purchased from the money of the
investors, which is a completely incorrect finding, as the
appellant has rendered sufficient evidence before the MPID
Court in that regard, and even the Court has specifically
rendered a finding to that effect, we find the attachment to be
illegal.
Further, since we have noted that the subject
property on date of issuance of the notification by the State
Government was not a property of Smt.Mrunmayi Barve, it was
not open for attachment as, if it is permitted to be done so,
then, it would be amounting to nullifying several transactions
bonafide made, as in the present case, it is not the case of the
State Government that the property was transferred to evade
the liability by Smt. Mrunmayi Barve, but it was a bonafide
transfer.
29 The decision of the Apex Court in U. Subbadrama
(supra) squarely covers the case of the appellant, as in absence
of a provision to continue with the proceedings against the
property of a Director despite his/her demise, in the scheme of
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Sections 4 to 7 of the MPID Act, we do not see any reason how
the property could have been attached by issuing a notification
in the year 2015, as it is not the case of the respondents that to
defeat the interest of the depositors, the property which was
acquired through the money collected from the depositors, have
been sought to be divested.
In the facts of the case, in the wake of the wording
of the notification issued by the State Government under
section 4(1) restricting only to the properties mentioned
therein, on the premise that they have been acquired from the
money of the depositors, and also on the ground that on the
date when the notification is issued, the subject property was
not standing in the name of Smt. Mrunmayi Barve, but already
stood vested in the wake of the bequeathed in his favour, we
deem it appropriate to quash and set aside the impugned order
dated 26/11/2021 and direct that the subject property
mentioned at Serial No.3 in the notification dated 8/5/2015
issued by the State Government shall stand released from
attachment.
The issue raised by Mr. Bellam is however kept open
by us, to be considered in appropriate proceedings.
Appeal is allowed in above terms.
(MANJUSHA DESHPANDE,J) (BHARATI DANGRE, J.)
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