STATE REPRESENTED BY THE PRJNCIPAL SECRETARY TO GOVERNMENT, HOME (POLICE XIX) DEPARTMENT AND OTHERSversusK. S. PALANICHAMY AND ORS.

                             [2017] 4 S.C.R. 34


A    STATE REPRESENTED BY THE PRJNCIPAL SECRETARY TO
     GOVERNMENT, HOME (POLICE XIX) DEPARTMENT AND
                        OTHERS
                                      v.
                    K. S. PALANICHAMY AND ORS.
B
                      (Criminal Appeal No. 933of2017)
                               MAY09,2017
           [N. V. RAMANA AND PRAFULLA C. PANT, JJ.)

c   Tamil Nadu Protection of Interests of Depositors (In Financial
    Establishments) Act, 1997:
           ss. 3 and 4 -Ad-interim order u/s. 3 -Attaching the immovable
    properties of the partners of a financial institution (respondents) -
    Passed by State Government - On the basis of complaint against
    the financial establishment filed by the depositors - Petition uls. 482
D
    Cr.P.C. by the respondents - High Court set aside the order u!s. 3
    holding that before passing order u/s. 3, the Government is required
    to· take steps u/s. 4 by identifying the properties - On appeal, held:
    As per the procedure u/ss. 3 and 4, the State Government has power
    to set the process into motion by passing ad-interim attachment and
E   thereafter appoint competent authority uls. 4(1) to take further          '
    recourse uls. 4(3) and (4) - Therefore, the order of the State
    Government is in consonance with the provisions of the Act.
    Words and Phrases:
          'Financial establishments' - Meaning of, in the context of
F   Tamil Nadu Protection of Interests of Depositors (In Financial
    Establishments) Act, 1997.
          Allowing the appeal, the Court
          HELD: 1.The Statement of Objects as well as the relevant
G   provisions of the Tamil Nadu Protection of Interests of Depositors
    (In Financial Establishments) Act, 1997 shows that its object was
    to ameliorate the situation of thousands of depositors from the
    clutches of.Financial Establishments which deceives the investors
    by offering high rates' of interest on deposits and committed
    deliberate fraud in repayment of the principal and interest after
H
                                    34
   STATE REP. BY THE PRINCIPAL SECRETARY TO GOVT. v.                       35
                  K. S. PALANICHAMY

maturity of such deposits. Sub-section (3) of Section 2 defines            A
the Financial Establishments. It is an undisputed fact that the
present respondents very much fall within the ambit of financial
establishment as defined under the Act. (Para 10] [39-B-C]
        2. It is clear from the reading of Section 3(i) of the Act, that
  whenever complaints are received from a number of depositors             B
  against a Financial Establishment, which defaults or fails to return
  the deposits or fails to provide services for which the deposits
  have been made by the depositors, then the State Government is
  empowered to initiate proceedings by passing (l</-illterim order
  for attachment of the properties of the Financial Establishment
. or any other persons as mentioned there under. The present
                                                                           c
  case falls under Section 3(i) of the Act. Thereafter the
  Government is at liberty to transfer the. cc;mtrol of tJie aforesaid
  money or property to the competent authority. [Para 12] [40-E-F]
      3. As per the procedure envisaged under Section 3 and 4
of the Act, unequivocally the power. to set the process into motion        D
vests with the State Government by passing an (l</-interim
attachment order and thereafter the Act mandates appointment
of competent authority under Sub-section (1) of Section 4 of the
Act, to take further recourse as per the procedures laid down
under Section 4 of the Act. (Para 14] (41-C-D]                             E
       4. It is not correct to say that before passing an order under
Section 3 of the Act, Government has to take steps under Section
4 of the Act by identifying the properties. The language employed
under Sections 3 and 4 of the Act is plain, unambiguous. While
enacting the provisions, the legislature has consciously given             F
the discretion for passing an (l</-interim order. It is evident from
the language used in the section by inserting "Government may".
In the present case, even before the other provisions are
complied with, the High Court erroneously interfered with the
(Id-interim orde! which defeats the very purpose of the p;ovision
which is incorporated to safeguard the interest of the investors.          G
(Para 15] (41-E-F]
      5. The order passed by the State Government under Section
3 of the Act attaching the immovable properties standing in the
name of respondents, basing on the complaint of investors and
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d6            SUPREME COURT REPORTS                          [2017] 4 S.C.R.


A    directing the competent authority to take recourse as per the
     procedures contemplated under Sub-section (3) and (4) of Section
     4 of the Act is valid and is very much in consonance with the
     provisions of the Act. [Para 16] (41-G-Ii; 42-A]
           CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
 B   933 of2017.
           From the Judgment and Order dated 19 .03.2014 of the High Court
     of Judicature at Madras in Cr!. 0. P. (MD) No. 6607 of2013.
          Subramonium Prasad, AAG, M. Yogesh Kanna, Ms. Nithya,
     Ms. Maha Lakshmi, Partha Sarathi, Advs. for the Appellant.
 c
          G. Sivabalamurugan, L. K. Pandey, Ms. Theepa, Advs. for the
     Respondents.
           The Judgment of the Court was delivered by
           N. V. RAMANA, J. 1. Leave granted.
 D
            2. Appellant is before us questioning the order passed by the High
     Court in Crl.0.P. (MD) No. 6607 of 2013, dated I 9.03.2014, whereby
     the High Court has set aside an ad-interim order (G.0. Ms. No. 989)
     [hereinafter referred to as 'G.O' for brevity], dated 24.12.2012,
     attaching the immovable properties of the partners of Financial
 E   Establishment(Global Capital Trading Services) i.e. respondents herein
     under Section 3 of the Tamil Nadu Protection oflnterests of Depositors
     (In Financial Establishments) Act, I 997 [hereinafter' Act' for brevity]?~
            3. Brief facts of the case which are necessary for adjudication of
     dispute before us are, on 01.11.2010, a complaint was registered with
 F   Deputy Superintendent of Police against the respondents herein alleging
     that, respondents were c.onjointly running a Financial Establishment in
     the naine of Global Capital Trading Services atMadurai, offering high
     rate of returns on investments in their Financial Establishment. Basing·
     on the assurance given by the respondents herein, the complainant along
     with his relatives deposited huge sums of money with the Financial
 G   Establishment, administered by the respondents herein. Furthermore it
     is alleged that respondent no. I has returned back only a part ()f the
     deposited amount to the complainant and thereafter absconded. In light
     of the above averred facts, complaint was registered /as
     (FIR No. 06/2010) was registered on 02.11.2010.under Section 406, 420
 H
  STATE REP. BY THE PRINCWAL SECRETARY TO GOVT. v.                             37
        K. S. PALANICHAMY [N. V. RAMANA, J.]

oflndian Penal Code, 1860 read with Section 5 of the Act. Based on the         A
afotesaid complaint, G.O, dated 24.12.2012, was issued attaching the
immovable properties of the respondents herein who are the partners of
the financial institution under Section 3 of the Act.
       4. Challenging the aforesaid G.O, respondents herein filed Criminal
Original Petition under Section 482 of the Code of Criminal procedure, B
1973 before the Madurai bench ofThe High Court of Madras in Crl.O.P.
(MD) No. 6607 of2013. TheHigh Court has allowed the Criminal Original
Petition, by setting aside the Government Order dated 24.12.2012 and
directed the competent authority to initiate fresh proceedings in tenns of -
Section 3 and 4 of the Act.
                                                                               c
      5. Aggrieved by the impugned Judgment of the High Court, State
represented by its Principal Secretary to Government, Home (Police
XIX) Department and others are before us.
        6. The contention of the learned counsel appearing on behalf of
the State is that, under Section 3 of the Act, the State Government is         D
empowered to attach the properties belonging to a Financial Establishment
which defaults in returning the deposits after maturity or fails to pay
interest on deposit or fails to provide any service for which the deposit
has been made. Sub-section (ii) of Section 3 of the Act confel'S the
power on the Government to fake up suo moto complaint in order to
prevent fraud against the depositors. Further it empowers the State            E
Government to pass ad-interim attachment orders subject to its
satisfaction. In the present case, according to the learned senior counsel,
on receiving the complaints from the depositors, Government being
satisfied with the same, appointed the Revenue District Officer of Madurai
as the competent authority in exercise of its power under sub-section          F
( 1) of Section 4 of the Act.
        7. Furthermore he states that Sub-section (3) of Section 4 provides
that, after passing an ad-interim attachment order, the competent authority,
designated by the Government, has to approach the, Special Court
constituted under the Act, within stipulated period, for making the ad-        G
interim order of attachment absolute and for further directions to sell the
attached property by way of public auction and realize the sale proceeds.
According to him, in the present case, the High Court even before
reaching such a stage has set aside the proceedings on a wrong
interpretation of law. Moreover he contends that the High Court has
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            •
38             SUPREME COURT REPORTS                          (2017] 4 S.C.R.


A · erroneously relied upon the order, dated 29.6.2011, in Criminal Revision
    Case (MD) No. 242 of 2011 passed by the. Madurai Bench of Madras
    High Court, which has been extracted in para 6 of the impugned
    judgment, which reads thus :-
               "6. The only grievance of the petitioners is that under Section
B           3 of the Act, the competent authority has to recommend for
            attachment and the Government has to pass an order of attachment
            by way of passing Government Order. After passing such
            Government Order, the provision of Section 4 and 7 of the Act,
            will come into play. However, the competent authority is a person
            appointed under Section 4 of the Act, who is presently the District
c           Revenue Officer, Madurai. By an order dated 29.06.2011, while
            disposing 0f the connected Criminal Re.vision in Crl.R.C.(MD)
            No. 242 of201 l this Court has passed an order and the relevant
            portion reads as follows :-
                "22. The Investigating Agency is also at liberty to proceed
D           further to find out as to whether the petitioner and his relatives
            own any other properties also and in that event, the Investigating
            Agency shall take effective steps to attach the properties in terms
            of the provisions of the Tamil Nadu Protection of Interests of
            Depositors (In Financial Establishments) Act 1997 ."
E           8. He summoned up his arguments by stating that such a
     procedure was never contemplated under the Act. At this stage it is
     important to note. that the High Court allowed the Criminal Original
     Petition and set aside the impugned G.O., issued by the Government,
     even before initiation of the proceedings under Section 4 of the Act.
F           9. Per contra learned counsel for the respondents submitted that
     Section 3 of the Act is ambiguous as it does not indicate any procedure
     to be followed while passing an ad-interim order. He further states that
     before taking any action under Section 3 of the Act, the competent
     authority, has to initiate proceedings and identify the properties in terms
G    of Section 4 of the Act. Furthermore he contends that the power of the
     Government to pass ad-interim attachment order is contingent upon
     identification of property by the competent authority. In view of that, he
     submits that the High Court has rightly quashed the Government Order.
            10. Having heard learned counsel for the parties and after perusing
H     the impugned G.0.; it would be appropriate to bestow our attention to
  STATE REP. BY THE PRINCIPAL SECRETARY TO GOVT. v.                             39
        K. S. PALANICHAMY [N. V. RAMANA, J.]

the relevant statutory provisions under the Act. A perusal of the Statement     A
of Objects as well as the relevant provisions of the Tamil Nadu Act
shows that its object was to ameliorate the situation of thousands of
depositors from the clutches ofFinancial Establishments which deceives
the investors by offering high rates ofinterest on deposits and committed
deliberate fraud in repayment of the principal and interest after maturity
                                                                                B
of such deposits. Sub-section (3) of Section 2 defines the Financial
Establishments. It is an undisputed fact that the present respondents
very much fall within the ambit of financial establishment as defined
under the act.
      11. It would be appropriate to extract section 3 and 4 of the Tamil       c
Nadu Protection oflnterests of Depositors (In Financial Establishments)
Act, 1997 which reads as under
       3) Notwithstanding anything contained in any other law for the
       time being in force:-
       (i). Where, upon complaints received from a number of depositors,        D
            that any financial establishment defaults the written of deposits
            after maturity, are
       (ii). Where the government have reason to believe that any financial
             establishment is acting in a calculated manner with an intention
                                                                                E
             to defraud the depositors.
           and if the government are satisfied that such financial
           establishments is not likely to return the deposits, the
           government may, in order to protect the interests of the
           depositors of such financial establishment pass an ad-interim
                                                                                 F
           order attaching the money or other property alleged to have
           been procured either in the name of the financial establishment
           or in the name of any other person from and out of the deposits
           collected by the financial establishment, or if it transpires that
           such money or other properties is not available for attachment
           are not sufficient for repayment of the deposits, such other          G
            property of the said financial establishment or the promoter,
            manager or member of the said financial establjshment, as
            the government may think fit and transfer the control over
            the said money or property to the competent authority.
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40             SUPREME COURT REPORTS                            [2017] 4 S.C.R.


A            4)(1) The government may, by notification appoint an authority
             herein after called "the competent authority" to exercise control
         · ··over the properties attached by the government under section 3
             (2) The competent authority shall have such other powers as
            may be necessary for carrying out the purposes of this act.
B            {3} Upon receipt of the orders of the government under section
            3, the competent authority shall apply within 15 days to the special
            court constituted under this act for making the ad-interim order of
            attachment absolute.
              (4) An application under sub section(3) shall be accompanied
            by one or more affidavits, stating the grounds on which the ,belief
            that the financial establishment has committed any default or is
            likely to defraud, is founded, the amount of money or value of
            their property believed to have been procured by means of the
            deposit, and the details, if any, of persons in whose name such .
D           property is believed to have been invested or purchased out of the
            deposits or any other property attached under section 3.
             12. It is clear from the reading of Section 3(i) of the Act, that
     whenever complaints are received from a number of depositors against
     a Financial Establishment, which defaults or fails to return the deposits
E    or fails to provide services for which the deposits have been made by
     the depositors, then the State Government is empowered to initiate
     proceedings by passing ad-interim order for attachment of the properties
     of the Financial Establishment or any other persons as mentioned there
     under. It is riot in dispute that the present case falls under Section 3(i) of
     the Act. Whereas under Section 3(ii) of the Act, Government has the
F    suo motto power to initiate proceedings and pass an order of ad-interim
     injunction. Thereafter the Government is at liberty to transfer the control
     of the aforesaid money or property to the competent authority.
           13. Sub-section ( 1) of Section 4 of the Act empowers the
     Government to appoint competent authority. Whereas Sub-section (2)
G    of Section 4 confers necessary power on the competent authority for
     carrying out the purposes of the Act. Sub-section (3) of Section 4
     mandates the competent authority to apply before the Special Court
     within a stipulated period for making the ad-interim order of attachment
     absolute and for further directions.pertaining to the selling of the attached
     property by public auction and realization of the sale proceeds.
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    STATE REP. BY THE PRINCIPAL SECRETARY TO GOVT. v.                            41
          K. S. PALANICHAMY [N. V. RAMANA, J.]

 Sub-section (4) of Section 4 of the Act clarifies that an application under     A
 sub-section (3), before the Special Court, has to be accompanied with
 affidavits stating the grounds or reasons on which the belief that the
 Financial Establishment is going to commit a default or defraud the
 depositors are founded . .The application should also contain other
 particulars and details as to the persons in whose name the properties
                                                                                 B
 vest.
        14. It is clear from the relevant statutory scheme that in order to
 curb the malady of financial swindlers and to deal with such problems
 effectively, The State of Tamil Nadu enacted this statute to protect the
 interest of innocent investors. Therefore as per the procedure envisaged
·under Section 3 and 4 of the Act unequivocally the power to set the             c
 process into motion vests with the State Government by passing an ad-
 interim attachment order and thereafter act mandates appointment of
 competent authority under Sub-section (I) of Section 4 of the Act, to
 take further recourse as per the procedures laid down under Section 4
 of the Act.                                                                     D
        15~ We are not able to appreciate the reasoning recorded by the
  High Court and the contention put forth byJhe learned counsel appearing
  for the respondents that before passing an order under sectionJ of the
  act government has to take steps under section 4 of the act by identifying
  the properties. The language employed under section 3 and 4 of the act          E
  is plain, unambiguous and it does not call for any interpretation as sought
  to be placed by the learned counsel appearing for the respondents. While
- enacting the provisions the legislature has consciously given the discretion
  for passing an ad-interim order. it is evident from the language used in
  the section by inserting "Government may''. In the case on hand even
  before the other provisions are complied with the High Court erroneously        F
  interfered with the ad-interim order which defeats the very purpose of
  the provision which is incorporated to safeguard the interest of the
  investors.
        16. In light of the above discussion, we are of the considered
 opinion that the order passed by the. State Government under Section 3          G
 of the Act attaching the immovable properties standing in the name of
 respondents, basing on the complaint of investors and directing the
 competent authority (District Revenue Officer, Madurai District) to take
 recourse as per the procedures contemplated under Sub-section (3) and
 (4) of Section 4 of the Act is valid and is very much in consonance with        H
42             SUPREME COURT REPORTS                     (2017] 4 S.C.R.


.A   the provisions of the Act. In view of the abo\'.e the impugned order
     deserves to be set aside and accordingly we set aside the Judgment
     passed by the Madurai Bench of the Madras High Court.
            17. The appeal is, accordingly, allowed.

B
     Kalpana K. Tripathy                                     Appeal allowed.