- 1 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF SEPTEMBER, 2025 PRESENT THE HON'BLE MRS. JUSTICE ANU SIVARAMAN AND THE HON'BLE MR. JUSTICE RAJESH RAI K MISCELLANEOUS FIRST APPEAL NO. 5906 OF 2025 (KPIDFA) BETWEEN: 1. MISS.RAMYA DESHPANDE DAUGHTER OF ANIL KUMAR DESHPANDE, AGED ABOUT 25 YEARS, RESIDING AT, NO.2260, WARD NO.5, KILLA GALLI, BILAGI TOWN, BAGALAKOT, BAGALAKOT-587 101 2. MR. SHRIHARI DESHPANDE SON OF ANIL KUMAR DESHPANDE, AGED ABOUT 21 YEARS, RESIDING AT NO.21, SUMUKHA, D'SOUZA NAGAR, HOSKEREHALLI BENGALURU-560 085 …APPELLANTS (BY SRI. N.S SRIRAJ GOWDA, ADVOCATE) AND: 1. SMN CREDIT SOUHARDA SAHAKARI NIYAMITHA JAHANGIRDAR COMPLEX, 1ST FLOOR, Digitally signed by PANKAJA S Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 NEAR CHAITANYA HOTEL, MG ROAD, VIJAYAPURA-586 101. 2. COMPETENT AUTHORITY AND ADDITIONAL REGIONAL COMMISSIONER FOR S.M.N CREDIT SOUHARDA SAHAKARI NIYAMITHA, JAHANGIRDAR COMPLEX, 1ST FLOOR, NEAR CHAITANYA HOTEL, MG ROAD, VIJAYAPURA-586 101 3. MR.ANILKUMAR KESHAVRAO DESHPANDE AGED MAJOR, FATHER NAME NOT KNOWN RESIDING AT KILLAGALLI, BILAGI, BILAGI TALUK, BAGALAKOT-587 101 4. MR.SHANKAR VENKAPPA NAIKAR AGED MAJOR, FATHER NAME NOT KNOWN OPPOSITE FLOUR MILLS, NEAR DE. B.R AMBEDKAR CIRCLE, BILAGI, BILAGI TALUK, BAGALKOTE-587 101 5. MR.PRADEEP B MUNJANE AGED MAJOR, FATHER NAME NOT KNOWN SOUHARDA SAHAKARI NIYAMITHA, PLD BANK MAIN ROAD, BASAVANA BAGEWADI - 586 203 - 3 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 6. MR.SANTAPPA YASHAVANTAPPA SURYAVAMSHI AGED MAJOR, FATHER NOT KNOWN BILAGI, BILAGI TALUK, BAGALKOTE-587 101 …RESPONDENTS (BY SRI. VEERESH R BUDIHAL, ADVOCATE FOR R2) THIS MFA IS FILED U/S 16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, 2004 PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 22.03.2025, IN MISC.NO.550/2023 BEFORE THE XCI ADDL.CITY CIVIL AND SESSIONS JUDGE BENGALURU CCH-92. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN and HON'BLE MR. JUSTICE RAJESH RAI K ORAL JUDGMENT (PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) We have heard the learned counsel for the appellant as well as the learned counsel for the competent authority. 2. The specific contention raised by the learned counsel for the appellant is that the appellant has filed a partition suit before the Senior Civil Judge and JMFC, Bilagi claiming partition with respect to items No.1 to 3 of the suit - 4 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 schedule properties which are under attachment and that during the pendency of the said suit, the Special Court cannot pass an order under Section 5 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 ("the said Act", for short). The contentions of the appellant have been considered and have been rejected by the Special Court by stating as follows: "33. It could be seen that Section 10 of the KPIDFE Act deals with the Constitution and the jurisdiction of the Special Court. Section 10(2) excludes the jurisdiction of all other courts, including the Civil Courts, in respect of matters to which provisions of the Act apply. Hence, it is necessary to find out the matters that can be dealt with by the Special Court constituted under the KPIDFE Act. 34. Once the State Government provisionally attaches a property under Section 3(2) of the KPIDFE Act, that property becomes the rightful possession of the Government. As a result, no Civil Court or any other court, except the Special Court established under KPIDFE, has the jurisdiction to scrutinize or make determinations regarding the attached property. Consequently, the partition suit entertained by the Civil Court, Bilagi, without jurisdiction and if any order passed with respect to Item Nos. 1 to 3 of the schedule properties, is void ab initio and has no legal sanctity to that order. 35. Thus, in view of the above discussion, this Court holds that the Civil Court, Bilagi, has no jurisdiction to examine the legality or validity of action taken under the KPIDFE Act, and it is - 5 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 only the Designated Court constituted under Section 10 of the KPIDFE Act that will have exclusive jurisdiction to deal with the same. Therefore, mere pending of suit as per Ex.R9 and 10, it does not create any interest or right on the attached properties to the objectors. Therefore, this court is of the considered opinion that Objectors have not shown any right, interest, or title over the Item No. 1 to 3 schedule properties on the date of the interim order of attachment passed by the state Government under Section 3(2) of the KPIDFE Act. After a lapse of two years from the date of attachment by the Government, the objectors have filed the partition suit before the Civil Court Bilagi, knowingly said properties vested with the Government and said Civil Court is without jurisdiction to entertain the suit with respect to Item No. 1 to 3 of schedule properties. As a result, the claim made by the objectors could be rejected, and the decisions on which they rely are not applicable to the facts of this case for the above reasons. 36. Learned Special Public Prosecutor appearing for the petitioner relied on the decision in the case of A. Hafeezur Rahman vs. Deputy Superintendent of Police, EOW-II, in CMA No. 96/2012 DD dated 24.03.2021. In the said decision, the Hon’ble Madras High Court, considering Sec. 8 of the TNPID Act in Para.19, held that Parties may plead that the transaction was 31 Misc.No.550/2023 genuine. Parties may say that it is an ancestral property and was not purchased from and out of the money collected from the depositors. The parties may plead that the property was sold even prior to the criminal case filed by the depositors. All these factors are immaterial as far as protecting the interests of depositors under the provisions of the TNPID Act. The very purpose and object of the Act is to - 6 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 ensure that the interests of the depositors are protected. Further in Para-22 of the judgment, it was held that It is not necessary that the property must be purchased only from and out of the money collected from the depositors. Even the properties that are already purchased and not from and out of the money of the depositors, those properties are also subject to attachment either under Sec. 3 of the Act by the Government or under Sec. 8 of the Act by the Special Court. Therefore, the contention of the appellant that property is an ancestral property is immaterial and deserves no merit consideration." 3. It is submitted by the learned counsel for the appellant the appellant’s claims are specifically in respect of items No.1 to 3 of the suit schedule properties and his contention is that those properties are ancestral properties and that the suit for partition is therefore liable to be considered before any order is passed under Section 5 of the said Act. 4. The learned counsel for the competent authority, on the other hand, contends that respondent No.3, who is the father of the appellant herein, is still alive and the question whether the appellant at this stage can claim a right in the property on the ground that the properties are ancestral in - 7 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 nature is also highly doubtful. It is submitted that in any view of the matter, once the properties have been attached, the question whether any other person has right or interest in the property is the question has to be decided by the Special Court itself and that no other Court would have jurisdiction under the provisions of 10(2) of the said Act. 5. It is further contended that the very same order from which this appeal is filed has been set-aside on the question of limitation in other appeals and the case has been remanded to the Special Court and the Special Court has to now consider the question afresh. 6. The learned counsel for the appellants submits that the remand in MFA No.3694/2025, being on the issue of limitation, no other question will be considered by the Special Court. 7. Having considered the contentions advanced and in view of the specific provisions of Sections 3(2), 5(2) and 10(2) of the said Act and having considered the fact that the order under challenge in this appeal has already been set-aside and the matter was remanded to the Special Court, we are of the - 8 - HC-KAR NC: 2025:KHC:37814-DB MFA No. 5906 of 2025 opinion that the contention of the appellant herein that she has an interest in the property in question i.e., items No.1 to 3 of the suit schedule properties belonging to respondent No.3 shall also be considered by the Special Court while considering the case on remand. All contentions in this regard are left open. 8. The appeal is accordingly disposed of. Pending Interlocutory Applications, if any, shall stand disposed of. SD/- (ANU SIVARAMAN) JUDGE SD/- (RAJESH RAI K) JUDGE HKV List No.: 1 Sl No.: 19