ORDERS ON ADMISSION

The complaint has been filed under Section 35 of C.P.Act, 2019 against the Sree Kanva Souharda Co-operative Credit Limited and its officials for refund of deposited amount with 18% p.a. and compensation.

The complainant in support of her case has produced documents including share certificates and legal notice.

The counsel for the complainant argues that there is no provision to entertain the complaint.It is true that Section 100 of C.P.Act, 2019 indicates that an additional power is given to District Commission.It is relevant to refer Section 100 of C.P.Act, 2019 which read thus:-

Section 100: - Act not in derogation of any other law – The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.

It is relevant to note that in case this complaint is allowed either in part or full and on the basis of order to be passed, the complainant requires to file execution petition and seek appropriate order for attachment of movable and immovable property of OP society.  The Karnataka Government was pleased to enact the Act called “The Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004”. This Act has been enacted to safe guard of interest of depositors.  It is relevant to refer Section 3 and 5 of the Act which read thus:-

3. Attachment of properties on default of return of deposits. - (1) The Government or the District Magistrates in their respective jurisdiction, suo moto or on receipt of any complaint may cause investigation of a complaint or fraudulent transaction referred to in this section. The District Magistrate shall forward his report together with the complaint to the Government at the earliest.

(2) Notwithstanding anything contained in any other law for the time being in force,-

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

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

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

(c) to provide the service against such deposit; or:

(ii) Where the Government has reason to believe that any Financial Establishment is acting in and detrimental to the interest of the depositors with an intention to defraud them; or

(iii) Where 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. the Government may, in order to protect the interests 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 property believed to have been acquired by such financial establishment either in its own name or in the name of any other person from and out of the deposits collected by the financial establishments, and where it transpires that such money or other property is not available for attachment or not sufficient for the repayment of the deposits, such other property of the said financial establishments, or the personal assets of the promoters, partners, directors, managers or members or any other person of the said Financial Establishments.

(3) The Government shall also notify the ad-interim order made under sub-section (2) in the Official Gazette and two newspapers having wide circulation and shall also cause to be affixed a copy of such order on some conspicuous place of the property so attached.

(4) On the publication of the order made under sub-section (2), all the properties and 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 Special Court.

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5. Competent Authority. - (1) The Government shall, by notification, appoint an officer not below the rank of an Assistant Commissioner to be the Competent Authority for the purpose of this Act.

(2) The Competent Authority shall within thirty days from the date of receipt of the order made under section 3, apply to the special Court for further order of attachment absolute.

(3) An application made under sub-section (2) shall be accompanied by one or more affidavits, stating the grounds on which the order is made under section 3 and the amount of money or other property believed to have been acquired from out of the deposits and the details, if any, of persons in whose name such property is believed to have been invested or acquired or any property attached under Section 3.

(4) The competent authority may also make an application to any Special Court or Designated Court or any other judicial forum established or constituted or entrusted with the powers by any other State Government under any similar enactment for adjudicating any issue or subject matter pertaining to money or property or assets belonging to or ostensibly belonging to a Financial Establishment or any person notified under this Act situated within the territorial jurisdiction of that Special Court or Designated Court or any judicial forum, as the case may be, for passing appropriate orders to give effect to the provisions of this Act.

Under Section 3 of the Act, the Government or District Magistrate in the respective jurisdiction have power to attach the property on default to return of deposits of such financial institution and as per Section 3 of the Act, the Government can appoint competent authority.  Earlier, the Government was pleased to appoint the Deputy Commissioner of Bangalore Urban District as competent authority.  But, the Government was pleased to modify this order by GO No.10 GRS 2020, Bengaluru dated 24.07.2020 and appointed Managing Director, Karnataka Public Property Co-operation Ltd., under Section 5(1) in respect of OP No.1 society Sri Kanva Souharda Co-op. Credit Ltd., It means, the depositor can file application before competent authority and on the basis of such application, the competent authority can approach the Special Court established under Section 10 of the Act of 2004.  It is relevant to note that the procedure is simplified under Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, the competent authority on the basis of receipt of application/complaint of the depositors shall make application before Special Court for taking necessary action under simplified procedure as provided under Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 and competent authority is appointed.  The complainant without approaching the competent authority has approached this Commission, the disposal of this case and ultimate fruits of the complainant may take more time than simplified procedure under 2004 Act. 

Section 2(2) of 2004 Act defines deposit including amount paid towards shares.  Under Section 10, Special Court has been established.  When the simplified procedure is provided under 2004 Act and competent authority is appointed by the Government, the complainant without approaching the competent authority who has power to attach the property of the defaulter of the society.  Under such circumstances, complaint is not maintainable.  We proceed to pass the following

1. The complaint is not maintainable before this Commission.
2. Return the complaint with documents to invoke the provisions of Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004.