- 1 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF APRIL, 2025 PRESENT THE HON'BLE MRS JUSTICE ANU SIVARAMAN AND THE HON'BLE MR JUSTICE RAJESH RAI K MISCELLANEOUS FIRST APPEAL NO. 3298 OF 2023 (KPIDFA) BETWEEN: 1. SMT. U.L DAKSHAYINI AGED ABOUT 41 YEARS, W/O RAVINDRANATH B.L, R/A NO.109, 1ST FLOOR, DX-MAX SAB VILLA APARTMENTS, BALAJI LAYOUT, MALLATHAHALLI, NAGARBHAVI, BENGALURU-560 060 2. N GAYATHRI AGE NOT KNOWN D/O B.K.NARASIMHEGOWDA, GENERAL MANAGER, M/S GREEN BUDS AGRO FARM PVT. LTD, R/A NO.183/1, OPPOSITE TO THE VILLAGE RESORT, GOWRISHANKAR NAGAR, MYSURU, NANJANGUD ROAD, MYSURU-570 025. …APPELLANTS (BY SRI. P.P. HEGDE, SENIOR COUNSEL A/W SRI. AJAY KUMAR AND SRI. MAYUR K, ADVOCATES) Digitally signed by HARIKRISHNA V Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 AND: THE STATE OF KARNATAKA REPRESENTED BY THE COMPETENT AUTHORITY AND ASSISTANT COMMISSIONER, MYSURU SUB-DIVISION, MYSORE-570 001 …RESPONDENT (BY SRI. VEERESH R BUDIHAL, ADVOCATE A/W SRI. RAKSHITH M.N, ADVOCATE) THIS MFA IS FILED U/S.16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, 2004, AGAINST THE ORDER DT.25.03.2023 PASSED IN MISC. NO.868/2022 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU, (CCH-92), PARTLY ALLOWING THE PETITION FILED U/S.5(2) OF THE ACT, 2004. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN and HON'BLE MR JUSTICE RAJESH RAI K - 3 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 ORAL JUDGMENT (PER: HON'BLE MRS JUSTICE ANU SIVARAMAN) This appeal is preferred by the original respondents No.3 and 4 before the Special Court as against an order of the Special Court under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (for short 'KPIDFE Act') making the order of attachment absolute in respect of the properties which stands in their names. 2. Heard the learned Senior counsel for the appellants and learned counsel appearing for the Competent Authority. 3. It is contended by the learned Senior counsel for the appellant that the respondent had initiated proceedings before the Special Court under the provisions of the KPIDFE Act on an assumption that the Financial Establishment i.e., M/s. Green Buds Agro Farm Company Limited had defrauded its depositors and were unable to repay the amounts to the depositors. It is submitted that appellant No.1 is the wife of the Managing Director of the Financial Establishment and she had filed her statement of objections pointing out that the properties were purchased by her in her own name and that - 4 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 there was absolutely no connection between the deposits collected by the Financial Establishment and the properties belonging to her. It is submitted that on the allegation that appellant No.2 was working as General Manger of the Company, serials No.1 to 21 of 'B' Scheduled properties purchased by her through different sale deeds out of her own savings had also been subjected to attachment under the provisions of the Act. It is submitted that though appellant No.2 had filed objections specifically stating that she is only a salaried employee of the Financial Establishment and that she had purchased the entire properties out of her own funds, the Special Court cast a reverse burden on her to prove that the properties were purchased out of her own funds though the properties were admittedly standing in her name. 4. It is contended by the learned Senior counsel that in the absence of any material having been produced by the appellants before the Special Court to show that the properties in question had been acquired out of the deposits collected by the Financial Establishment from depositors, it was not proper or justifiable for the Special Court to hold that it was for the - 5 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 appellants to show that the properties had been purchased from their own funds. 5. Learned counsel appearing for the respondents would, on the other hand, contend that the scheme of the KPIDFE Act by itself would show that once the jurisdictional pre-requisites are met for passing an order of attachment under Section 3 of the Act, then it would be upon the person claiming an independent title over the properties in question to show that that properties were acquired from their own funds and not out of the funds of the Financial Establishment. 6. Relying on Sections 3, 5 and 12(4) of the KPIDFE Act, it is contended that in case the person, who is put on notice and whose properties are attached, does not appear and show cause as to why the order of attachment shall not be made absolute, such order is liable to be made absolute. It is, therefore, contended that the burden is indeed heavy on the person who claims an independent title over the properties to show that the properties were acquired from their own funds and not from the funds of the Financial Establishment collected from the depositors. - 6 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 7. We have considered the contentions advanced by the learned counsel for the parties.. 8. We notice that the provisions of the KPIDFE Act specifically provide for attachment of the properties after recording reasons in writing. The Government is empowered to attach the money or properties believed to have been acquired by the Financial Establishment either in its own name or in the name of any other person out of the deposits collected by the Financial Establishment. 9. Sections 3, 5 and 12 (4) of the KPIDFE Act reads as follows: "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.- - 7 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 (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 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 - 8 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 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. 5. Competent Authority.- (1) The Government shall, by notification, appoint an officer not below the rank of an Assistant Commissioner to - 9 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 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 - 10 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 forum, as the case may be, for passing appropriate orders to give effect to the provisions of this Act. 12. Powers of Special Court regarding attachment.- (1) xxxx (2) xxxx (3) xxxx (4) The Special Court shall, if no cause is shown and no objections are made on or before the specified date, forthwith pass an order making the order of attachment absolute, and issue such direction as may be necessary for realization of the assets attached and for the equitable distribution among the depositors of the money realized from out of the property attached." 10. In the instant case, the later portion of Section 3(2) does not come into play since it appears that it was a specific case of the Competent Authority that the properties were purchased by the Financial Establishment in the name of the appellants herein, out of the deposits collected by the Financial Establishment. Therefore, going by the provisions of Sections 5 and 12, it was clearly on the appellants herein in whose names the properties stood and who are definitely having clear - 11 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 connections with the Financial Establishment in question to show that the properties were not acquired using the funds of the Financial Establishment which was collected from the depositors. 11. In the instant case, the Special Court has considered the specific contentions raised by the appellants. In the case of appellant No.1, the Court considers the contention that the properties in question stood in the name of appellant No.1. Appellant No.1 had also produced registered sale deed, khata transfer letter, encumbrance certificate, construction license with sanctioned plan, orders passed and copy of IT returns for the assessment years 2006-2007 to 2009-2010 along with copies of registration certificate relating to TVS VEGO two wheeler. However, all the documents have been specifically taken note of by the Special Court and it is found that though IT returns were produced, such returns do not disclose the funds for acquisition of the properties as claimed by her. The acquisition of the properties is also not shown in the IT returns for the assessment year 2009-2010. The Court found that the property was purchased on 16.05.2008 for - 12 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 Rs.6,60,000/- and the said amount was paid in cash, but the IT returns do not disclose the funds for making such a purchase. 12. Though appellant No.2 had taken up a contention that she was only a salaried employee of the Financial Establishment, the Special Court considered that several sale deeds had been entered into and 21 items of landed properties had been purchased within a span of 6 to 7 months during 2011-2012. It was specifically found that the contention of appellant No.2 that she was only a salaried employee and that the properties were purchased out of her own savings and earnings was completely unsubstantiated before the Special Court. The entire contentions of the appellants have been discussed specifically by the Special Court at paragraphs No.28 and 29 of the judgment. We, therefore, find that all the contentions of the appellants have been specifically considered by the Special Court with reference to the pleadings and materials on record. 13. In the light of the provisions of Sections 3, 5 and 12 of the KPIDFE Act, we are of the opinion that the contentions raised by the learned Senior counsel that casting of the burden - 13 - NC: 2025:KHC:16310-DB MFA No. 3298 of 2023 to prove that the properties have been purchased out of the separate funds of the appellants was not proper and cannot be accepted. We find no merit in the grounds raised in the appeal. 14. The * appeal fails and is accordingly dismissed. SD/- (ANU SIVARAMAN) JUDGE SD/- (RAJESH RAI K) JUDGE VM List No.: 1 Sl No.: 38 * Deleted vide chamber order dated 26.06.2025