- 1 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF SEPTEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO. 20528 OF 2025 (CS-RES) BETWEEN: MR. APPALAL CHAKOLI S/O MR. J.A. CHAKOLI AGED ABOUT 64 YEARS RA/T NO.107, 4TH CROSS JAGAJYOTHI LAYOUT, KENCHAPURA CROSS, BANGALORE-560 056 …PETITIONER (BY SRI. B. KESHAVA MURTHY, ADVOCATE) AND: 1. THE STATE OF KARNATAKA REP. BY ITS SECRETARY DEPARTMENT OF CO-OPERATIVE M.S.BUILDING, DR.AMBEDKAR VEEDHI, BANGALORE-560 001. 2. THE DY. REGISTRAR OF CO-OPERATIVE SOCIETIES (RULE 441) SOUHARDA DISPUTES PANCHAYATHI COURT KARNATAKA STATE SOUHARDA FEDERAL CO-OPERATIVE LTD., "SOUHARDA SAHAKARA SOUDHA", NO.68, 1ST FLOOR, 17TH AND 18TH CROSS, MARGOSA ROAD, MALLESHWARAM, BANGALORE-560 055. 3. MR. ARVIND KUMAR D.S. S/O D. SHIVA SHANKERLAL AGED ABOUT 45 YEARS R/AT NO.108, BLOCK -B, ELEGANT APARTMENTS Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 3RD STAGE, BEML LAYOUT, GATTIGERE, R.R. NAGAR BANGALORE-560 098. 4. M/S. SIRIVAIBHAVA SOUHARDA PATHINA SAHAKARI NIYAMITHA (REGD.) NO.18/19, 1ST FLOOR, MUNISWAMY BUILDING, UTTARAHALLI MAIN ROAD, CHIKKALASANDRA, BANGALORE-560 061. NOW REP. BY ITS COMPETENT AUTHORITY JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, CO-OPERATIVE ELECTION AUTHORITY, TTMC BUILDING, K.H.ROAD, SHANTHINAGAR, BANGALORE-560 027. REGISTERED UNDER KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 5. MR. V.R.RAJESH, S/O NOT KNOWN TO PETITIONER, AGED ABOUT 50 YEARS, C.E.O., M/S. SIRIVAIBHAVA SOUHARDA PATHINA SAHAKARI NIYAMITHA (REGD.) NO.397, SRI LAKSHMIVENKATESHWARA NILAYA, 10TH CROSS, CHANDRASHEKAR NILAYA, R.R.NAGAR, BANGALORE-560 098. 6. MRS. B.S.NAGAVALLI W/O MR. V.R.RAJESH, AGED ABOUT 48 YEARS, PRESIDENT OF M/S. SIRIVAIBHAVA SOUHARDA PATHINA SAHAKARI NIYAMITHA (REGD.) NO.397, SRI LAKSHMI VENKATESHWARA NILAYA, 10TH CROSS, CHANDRASHEKAR NILAYA, R.R.NAGAR, BANGALORE-560 098. 7. MR. NANJESH BABU, S/O NOT KNOWN TO THE PETITIONER, AGED ABOUT 47 YEARS, BRANCH MANAGER OF M/S SIRIVAIBHAVASOUHARDAPATHINA SAHAKARI NIYAMITHA (REGD). - 3 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 NO.317, 7TH MAIN, NEAR RAJESH HOTEL, VAYALIKAVAL, BANGALORE - 560003. 8. THE COMPETENT AUTHORITY JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES ELECTION AUTHORITY, TTMC BUILDING, K.H. ROAD, SHANTHINAGAR, BANGALORE-560027. AS PER THE ORDER DATED 12.09.2025 IMPLEADED THE RESPONDENT NO.8 …RESPONDENTS (BY SRI. HARISHA A.S., ADDITIONAL GOVERNMENT ADVOCATE FOR RESPONDENT NOS.1 AND 2; SRI. VEERESHA BUDIHAL R., ADVOCATE FOR RESPONDENT NOS.4 AND 8; SRI. M.K.KEMPEGOWDA, ADVOCATE FOR RESPONDENT NOS.6 AND 7; NOTICE SERVED ON RESPONDENT NO.3; VIDE ORDER DATED 04.09.2025, NOTICE TO RESPONDENT NO.5 IS DISPENSED WITH) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE ENTIRE RECORDS IN DISPUTE NO.f.Dgï.r./PÀ.gÁ.¸Ë.¸ÀA.¸À.¤/1598/2022-23, PENDING ON THE FILE OF RESPONDENT NO.2, DY. REGISTRAR OF CO-OPERATIVE SOCIETIES (RULE 441), KARNATAKA STATE SOUHARDA FEDERAL CO-OPERATIVE SOCIETIES LTD., BANGALORE AND QUASH THE ORDER DATED 31.01.2025 PASSED BY THE RESPONDENT NO.2, DY. REGISTRAR OF CO-OPERATIVE SOCIETIES (RULE 441), KARNATAKA STATE SOUHARDA FEDERAL CO- OPERATIVE SOCIETIES LTD., BANGALORE IN DISPUTE NO.f.Dgï.r./PÀ.gÁ.¸Ë.¸ÀA.¸À.¤/1598/2022-23, WHICH IS PRODUCED AT ANNEXURE A ALLOW THIS PETITION. - 4 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ ORAL ORDER The petitioner has challenged an order bearing No. f.Dgï.r./PÀ.gÁ.¸Ë.¸ÀA.¸À.¤/1598/2022-23 dated 31.01.2025 passed by the respondent No.2, by which a memo dated 03.02.2024 filed by him for rejection of the dispute, was rejected. 2. The respondent No.4 is a society registered under the provisions of the Karnataka Souharda Sahakari Act, 1997(henceforth referred to as ‘the Act, 1997’ for short).The respondent No.5 is the Chief Executive Officer, the respondent No.6 is the President, and the respondent No.7 is the Branch Manager. The respondent No.3 being a member of the respondent No.4 had deposited certain sums of money in the form of a fixed deposit with the respondent No.4. The respondent No.3 in this petition filed separate disputes before the respondent No.2 under Section 39 of the Act, 1997, for refund of the unpaid fixed deposit amount and accrued interest. The petitioner was the Vice-president of the respondent No.4. - 5 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 3. The petitioner contends that the State Government vide notification dated 15.09.2023, by invoking Section 5(1) of the Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004 (henceforth referred to as ‘the KPIDFE Act, 2004’ for short), appointed the Joint Registrar of Co- operative Societies as the competent authority under the KPIDFE Act, 2004. 4. After receipt of a notice from the respondent No.2, concerning the disputes raised by respondent No.3 under Section 39 of the Act, 1997, the petitioner and other office bearers appeared and filed an application under Section 8(2) of the Banning of Unregulated Deposits and Schemes Act, 2019, for rejection of the petition on the ground that the respondent No.2 lacks jurisdiction. This application was contested by the respondent No.3. Later, the petitioner filed a memo dated 03.02.2024 along with the notification dated 15.09.2023 referred supra and requested the respondent No.2 to reject the disputes. 5. The respondent No.3 filed objections to the memo. The respondent No.2 in terms of the impugned order dismissed - 6 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 the memo as well as the application filed by the petitioner and proceeded for further adjudication of the claim made by the respondent No.3. The petitioner is therefore before this Court, challenging the order passed by the respondent No.2. 6. The petitioner contends that Section 10 of the KPIDFE Act, 2004, prohibits the exercise jurisdiction by any authority other than the Special Court. Therefore, it is contended that the respondent No.2 has no jurisdiction to proceed with the adjudication of the dispute before him. 7. It is also contended that in view of the appointment of the competent authority all the assets of the respondent No.4 are taken over and the depositors are called upon to make claims. Thus, he contends that the respondent No.3 is bound to make a claim before the competent authority. Nonetheless, he contends that the respondent No.2 is proceeding in the matter. He also contends that the provisions of the KPIDFE Act, 2004 has an overriding effect over all other acts, including the Karnataka Souharda Sahakari Act. Therefore, the respondent No.2 is not entitled to adjudicate upon the claim made by the respondent No.3. - 7 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 8. Per contra, the respondent No.8 which was impleaded as per the order dated 12.09.2025 contends that the respondent No.4 is shown to be represented by competent authority. It contends that the competent authority is a creation of the KPIDFE Act, 2004 and therefore is an independent authority, which does not represent the respondent No.4. 9. The learned counsel for the respondent No.8 contended that in view of the constitution of the competent authority under Section 5(1) of the KPIDFE Act, 2004, is deemed to have taken over all assets of the respondent No.4 so as to preferentially liquidate the claim of all depositors. He submits that the Act, 2004 has an overriding effect and therefore, the proceedings before the respondent No.2 has to yield. He contends that if the respondent No.3 is desirous of making a claim to recover the amounts deposited, he may file an appropriate application in the prescribed form and the competent authority would take steps in accordance with the KPIDFE Act, 2004. In support of his contentions, he relied upon the judgment of a Division Bench of this Court in MFA No.1218/2023. - 8 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 10. The learned Additional Government Advocate reiterated the above contentions and submitted that the KPIDFE Act, 2004 has overriding effect over all other Acts including the Act, 1997 and therefore, all proceedings before any other authority stand abated. In support of his contentions, he relied upon the judgment of the Hon’ble Apex Court in the case of National Spot Exchange limited vs. Union of India and others in writ petition (Civil) No.995/2019, where the Hon’ble Supreme Court was considering whether the provisions of the Prevention of Money Laundering Act, 2002 and The Recovery of Debts and Bankruptcy Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, have an overriding effect over the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999. The Hon'ble Supreme Court answering the said question, held as follows: "40. In view of the above position of law settled by the Constitution Bench, it is held that considering the pith and substance of the State and the Central Legislations in question, the Central Legislations i.e., SARFAESI Act or RDB Act cannot be permitted to prevail over the State Legislation i.e., MPID Act, merely because - 9 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 the Central Legislations are enacted by the Parliament. Since all these Acts have separate field of operations, provisions of SARFAESI Act or RDB Act cannot be permitted to override the provisions of MPID Act, which is a validly enacted State Legislation, otherwise it would tantamount to violation of federal structure doctrine envisaged in the Constitution. The respective legislative powers of the Union and the States are traceable to Articles 245 to 254 of the Constitution, The State qua the Constitution is Federal in structure, and independent in its exercise of legislative and executive power. Therefore, if provisions of SARFAESI Act or RDB Act are permitted to override the provisions of MPID Act. then the legislative powers of the State Legislature would be denuded which would tantamount to subverting the law enacted by the State Legislature." 11. Though the respondent No.3 is served and represented, the learned counsel submitted that the respondent No.3 is interested in getting back the deposits made. Therefore, he will be more than willing to participate in proceedings before any authority. 12. I have considered the submissions of the learned counsel for the petitioner as well as the learned counsel for the respondent No.3 and learned Additional Government Advocate and the learned counsel for the respondent No.8. - 10 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 13. The KPIDFE Act, 2004, is enacted to provide for protection of interest of depositors in financial establishments. The Act has an overriding effect over all other enactments. Section 3(2) of the KPIDFE Act, 2004 reads as follows: "3. Attachment of properties on default of return of deposits. - (1) xxxxx (2) Notwithstanding anything contained in any other law for the time being in force, (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 - 11 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 (iii) Where the Government is 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 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." 14. It is not in dispute that the State Government, in exercise of its power under Section 5(1) of the KPIDFE Act, 2004, has appointed a competent authority vide notification dated 15.09.2023. Therefore, it is deemed that all assets of the respondent No.4 have come into the hands of the competent authority. Once the authority is appointed under Section 5(3) of - 12 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 the KPIDFE Act, 2004, it is for the competent authority to apply to the Special Court to make an order of attachment. Once an attachment is passed under Section 3(2) of the KPIDFE Act, 2004 and an application is made under subsection 2 of Section 5 of the KPIDFE Act, 2004,before the Special Court for making the attachment absolute, it is for the person who claims that the property is not liable to be attached to show-cause as to why such attachment should not be made absolute. Therefore, as rightly contended by the learned counsel for the petitioner in this writ petition, the proceedings before the respondent No.2 under the provisions of the Act, 1997 was not maintainable. The respondent No.2 instead of considering the memo filed by the petitioner, has perfunctorily held that there is no prohibition under the Act, 1997 to adjudicate the claim of the respondent No.3. 15. In view of the above, the impugned order passed by respondent No.2 rejecting the memo filed by the petitioner to terminate the proceedings warrants interference. 16. Accordingly, the following order is passed: - 13 - HC-KAR NC: 2025:KHC:36513 WP No. 20528 of 2025 ORDER i. The writ petition is allowed. ii. The impugned order passed by the respondent No.2 rejecting the memo filed by the petitioner to terminate the proceedings is set aside. In view of the reasons mentioned above, the proceedings before respondent No.2 stand terminated. iii. It is open for respondent No.3 to file appropriate claims before the competent authority, who shall consider them in accordance with law. In order to expedite this, the respondent No.3 in this petition is granted a month’s time to file appropriate claim petitions before the respondent No.8. Sd/- (R. NATARAJ) JUDGE BKN/List No.: 1 Sl No.: 19