The Supreme Court upheld the authority of the Tamil Nadu government to order the interim attachment of the immovable assets of financial establishments which defraud investors after taking money from them with assurances of high returns.
A Bench of Justices N.V. Ramana and P.C. Pant upheld the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act of 1997 as a “relevant statutory scheme meant to curb the malady of financial swindlers”.
“The State of Tamil Nadu enacted this statute to protect the interest of innocent investors,” the court observed in a recent judgment.
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The verdict came on an appeal filed by the Tamil Nadu government against a Madras High Court order setting aside the government’s decision on December 24, 2012 to attach the immovable properties of the partners of Financial Establishment (Global Capital Trading Services) under Section 3 of the 1997 Act.
The action was based on a complaint of cheating registered in November 2010 alleging that the Madurai-based financial establishment and its partners accepted huge sums of money from investors and offered them high rate of returns, but could only return a part of money deposited before absconding. The State argued that the government was 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 service for which the deposit has been made.
It contended that sub-section (ii) of Section 3 of the Act confers the power on the government to take up suo moto complaint in order to prevent fraud against the depositors. Further, it empowers the State government to pass ad-interim attachment orders.
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According to the statute, the competent authority, after passing an ad-interim attachment order, has to approach the Special Court constituted under the Act within a stipulated period for making the attachment absolute and for further directions to sell the attached property.