- 1 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF MAY, 2025 PRESENT THE HON'BLE MR JUSTICE H.P.SANDESH AND THE HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR WRIT APPEAL NO. 749 OF 2025 (GM-RES) BETWEEN: THE COMPETENT AUTHORITY FOR S.M.N CREDIT SOUHARDA SAHAKARI NIYAMITHA VIJAYAPURA REPRESENTED BY ITS COMPETENT AUTHORITY DR. SHANMUKHA D ADDITIONAL REGIONAL COMMISSIONER, BANGALORE DIVISION, BMTC BUILDING 2ND FLOOR, K.H.ROAD SHANTHI NAGAR BANGALORE-560 027 …APPELLANT (BY SRI. VEERESH RACHAPPA BUDIHAL, ADVOCATE) AND: 1. SRI. BALAPPA PADAMANNA PUJARI S/O PADAMANNA PUJARI OCC:FARMER AGED ABOUT 56 YEARS R/AT SHAPURA AGASI GAVALI GALLI VIJAYAPURA-586 101 Digitally signed by SHAKAMBARI Location: High Court of Karnataka - 2 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 2. SRI. SUNIL BALAPPA PUJARI S/O BALAPPA PADAMANNA PUJARI AGED ABOUT 32 YEARS R/AT SHAPURA AGASI GAVALI GALLI VIJAYAPURA-586 101 3. THE STATE OF KARNATAKA REP. BY ITS SECRETARY DEPARTMENT OF REVENUE 5TH FLOOR, M.S.BUILDING DR. AMBEDKAR VEEDI BANGALORE-560 001 4. THE REVENUE DEPARTMENT SPECIAL CELL GOVERNMENT OF KARNATAKA REP. BY IT IS UNDER SECRETARY M.S.BUILDING DR.AMBEDKAR VEEDI BANGALORE-560 001 …RESPONDENTS (BY SRI. SRINATH KULKARNI, ADVOCATE FOR R2; SRI. MOHAMMED JAFFAR SHAH, AGA FOR R3 & R4) THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO CALL FOR THE RECORDS IN WP No.8901/2025 AND SET ASIDE THE IMPUGNED ORDER DATED 08.04.2025 PASSED BY THE LEARNED SINGLE JUDGE IN WP No.8901/2025 AND RESTORE THE PROCEEDINGS INITIATED BY THE APPELLANT BEFORE THE HON'BLE COURT OF THE Ld XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE BENGALURU (CCH-92) IN MISC No.1/2025 AND ETC. THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE H.P.SANDESH and HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR - 3 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 ORAL JUDGMENT (PER: HON'BLE MR JUSTICE H.P.SANDESH) Heard learned counsel for the appellant and the learned counsel for respondents. 2. This writ appeal is filed against the order of the Single Judge passed in WP No. 8901 of 2025 connected with WP No. 7899 of 2025 wherein the petitioners had sought for quashing of Notification dated 11-11-2021 (Annexure-B) issued by the 4th respondent-authority in the said Writ Petition. 3. Sri Veeresh R. Budihal, learned counsel for the appellant would vehemently contend that the learned Single Judge has committed an error in appreciating the material on record both on factual aspects as well as on question of law and also counsel brought to this Court's notice that, though discussion was made in paragraph No.3 wherein the ground which has been urged by the respondents herein was taken note of and the reason assigned in paragraph No.6 that the Competent Authority - 4 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 can spring into action only after registration of a crime and the very reasoning given by the Single Judge is erroneous and also an observation made that the sword of crime is no more hanging on the head of the petitioners and in that light, permitting further proceedings against the petitioners therein before any fora, initiated on the basis of the crime, would become contrary to law. The counsel also brought to notice of this Court that already the competent authority has sought for attachment of property invoking Section 13 of the protection of Karnataka Protection Of Interest Of Depositors in Financial Establishment Act, 2004 (in short `the KPID Act'). The very reasoning given by the learned Single Judge is erroneous and it is for the petitioners to pursue their remedy before the concerned Court and thus, the learned Single Judge committed an error. The two-fold argument of counsel for the appellant is that there was a factual error and also contrary to law. 4. Per contra, the counsel appearing for the respondent Nos. 1 and 2 vehemently contend that the - 5 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 very contention that there was a malafide transfer cannot be a ground to initiate the proceedings against the respondent Nos. 1 and 2; the counsel also would contend that the said property is an ancestral property; counsel would also vehemently contend that property was gifted in favour of his son from father prior to initiation of attachment notification, and also prior to the registration of FIR. 5. Sri Mohammed Jaffar Shah, learned AGA appearing for the State i.e. respondent Nos. 3 and 4 would submit that the very approach of the Single Judge is erroneous and only they are the competent authority appointed in accordance with law. 6. Having heard the learned counsel appearing for the parties, the material on record discloses that the writ petitions are filed praying to quash the notification dated 11.11.2021 issued by the second respondent therein and also the other reasoning given by the Single Judge that the sword of crime is no more hanging on the head of the - 6 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 petitioners in view of filing of the charge sheet and making them as witnesses and not as the accused and whatever may be the reason, the grounds which have been urged by the counsel appearing for the respondents have been making a hue and cry that they have nothing to do with the financial establishment and whether they have done nothing to do anything is the matter to be considered by the Special Court and grounds which have been urged by the respondents could be looked into by the Special Court whether the transfer is on account of defeating the very claim of the depositors or not and those grounds can be urged before the Special Court by the respondents. This observation made by the learned Single Judge is erroneous in law in view of Section 13 of the said Act with regard to attachment of property. This Court would like to extract Section 13 of the KPID Act. "13. 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 - 7 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 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." 7. In view of the above, the observation made by the given by the single judge that the sword of crime is no more hanging on the head of the petitioners in view of filing of the charge sheet and making them as witnesses and not as the accused is erroneous in law and merely making the petitioners as witnesses and the reasons are - 8 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 contrary to law and no prohibition to invoke Section 13 of the Act. 8. Having considered the reason given by this Single Judge as erroneous both on law and on facts, as rightly pointed out by the counsel appearing for the appellant that the Single Judge committed an error on facts of the case as well as contrary to law and when that no condition precedent for initiating proceedings under Section 13 that there must be a criminal case, the reasoning given by the Single Judge that the competent authority can spring into action only after registration of a crime is erroneous and this reasoning is not sustainable in the eye of law. Even otherwise also, there is reasonable cause for believing that the said financial establishment has transferred any of the property otherwise than in good faith or for proper consideration, whether or not received the property directly from the said financial establishment, to appear on a date to be specified in the notice and show cause why such transfer of property is equivalent to the - 9 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 proper value of the property transfer should not be attached and also clause No.(2) is also very clear with regard to satisfaction and the very object of the act is also with an intention to protect the interest of the depositors and the same to be considered by the Special Court. Hence, the order passed by the Single Judge is required to be set aside. In view of the discussions made above, we pass the following: ORDER (i) Appeal is allowed. (ii) Impugned order passed by the Single Judge is hereby set aside. (iii) The other contentions raised by the both parties are kept open and the same can be urged before the Special Court. (iv) The Special Court is directed to expedite the matter and the appellants and respondents shall assist the Special Court in disposal of the same at the earliest. - 10 - NC: 2025:KHC:18234-DB WA No. 749 of 2025 (v) Parties shall appear before the Special Court on 05.06.2025 without expecting any notice from the Special Court. Sd/- (H.P.SANDESH) JUDGE Sd/- (RAMACHANDRA D. HUDDAR) JUDGE SK List No.: 1 Sl No.: 7