Amendment status not verified — confirm the current text below against the official source.
Attachment of property of malafide transferees.- (1) Where the assets available for attachment of a Financial Establishment or other person referred to in section 3 are found to be less than the amount or value which such Financial establishment is required to repay to the depositors and where the Special Court is satisfied, by affidavit or otherwise, that there is reasonable cause for believing that the said Financial Establishment has transferred (whether before or after the commencement of this Act) any of the property otherwise than in good faith or for proper consideration, the Special Court may, by notice, require any transferee of such property (whether or not he received the property directly from the said Financial Establishment) to appear on a date to be specified in the notice and show cause why so much of the transferee‟s property as is equivalent to the proper value of the property transferred should not be attached. (2) Where the said transferee does not appear and show cause on the specified date, or where after investigation in the manner provided in sub-section (5) of section 12 the Special Court is satisfied that the transfer of the property to the said transferee was not in good faith or for proper consideration, the Special court shall order attachment of so much of the said transferee‟s property as is in the opinion of the Special Court equivalent to the proper value of the property transferred. 1[(3) Where any Director, Promoter, Office Bearer, Accountant, Agent or Partner of the Financial Establishment or former directors, partners, promoters who have demitted or resigned from establishment provided their liability is limited to the period of office has,- (i) within the relevant period; and (a) wilfully concealed any property or part of such property of the Financial Establishment or concealed any debt due to, or from, the Financial Establishment, or (b) fraudulently removed any part of the property of the Financial Establishment; or (c) wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the Financial Establishment or its affairs, or 24 (d) wilfully made any false entry in any book or paper affecting or relating to the property of the Financial Establishment or its affairs; or (e) fraudulently parted with, altered or made any omission in any document affecting or relating to the property of the Financial Establishment or its affairs; or (f) wilfully created any security interest over, transferred or disposed of any property of the Financial Establishment which has been obtained on credit and has not been paid for unless such creation, transfer or disposal was in the ordinary course of the business of the Financial Establishment; or (g) wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c), (d) or (e); or (ii) at any time after the commencement date of inquiry or investigation, committed any of the acts mentioned in sub-clause (a) to (f) of clause (i) or has the knowledge of the doing by others of any of the things mentioned in sub-clauses (c) to (e) of clause (i); or (iii) at any time after attachment commencement date under section 3 of this Act, taken in pawn or pledge, or otherwise received the property knowing it to be so attached, transferred or disposed, such person shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years, or with fine, which shall not be less than Rupees one lakh, but may extend to rupees ten lakh, or with both: Provided that, nothing in this section shall render a person liable to any punishment under this section if he proves that he had no intent to defraud or to conceal the state of affairs of the Financial Establishment. (4) Where any Director, Promoter, Office Bearer, Accountant, Agent or Partner of the Financial Establishment or former directors, partners, promoters who have demitted or resigned from establishment provided their liability is limited to the period of office,- (a) Makes a gift to a person; or (b) enters into a transaction with a person which involves the transfer of one or more assets by the Financial Establishment for a consideration the value of which is significantly less than the value of the consideration provided by the Financial Establishment, and such transaction has not taken place in the ordinary course of business of the Financial Establishment, -Where the Financial Establishment has entered into an undervalued transaction and the Special Court on application filed by the Competent Authority or any other authority nominated for this purpose, is satisfied that such transaction was deliberately entered into by such Financial Establishment, - (a) for keeping assets of the Financial Establishment beyond the reach of any person who is entitled to make a claim against the Financial Establishment; or (b) in order to adversely affect the interests of such a person in relation to the claim, the Special Court shall make an order- (i) restoring the position as it existed before such transaction as if the transaction had not been entered into; and (ii) protecting the interests of persons who are victims of such transactions: Provided that, an order under this section - (a) shall not affect any interest in property which was acquired from a person other than the Financial Establishment and was acquired in good faith, for value and without 25 notice of the relevant circumstances, or affect any interest deriving from such an interest; and (b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction. (5) Where the Competent Authority or any other authority notified for this purpose on an examination of the transactions of the Financial Establishment determines that certain transactions were made during the relevant period which were undervalued or made against the provisions of this section he shall make an application to the Special Court to declare such transactions as void and reverse the effect of such transaction. The Special Court if satisfied prima facie on such application by the Competent Authority shall dispose of the matter through enquiry including examination of parties. If the Special Court chooses to reject such application, it shall assign specific reasons for such rejection. Explanation- for purposes of this section,- (i) „Relevant period‟ shall mean the period of time between registration or commencement of the activities of the Financial Establishment, whichever was earlier and the dates of the attachment of property under section 3. (ii) a person shall be deemed to have sufficient information or opportunity to avail such information if a public notice regarding the attachment process has been made under section 3. (iii) With reference to this section specifically and the Act in general, "Transfer", shall be construed to mean transfer by any instrument or agreement, gift or assignment, whether registered or not.]1