- 1 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF MARCH, 2026 PRESENT THE HON'BLE MRS. JUSTICE ANU SIVARAMAN AND THE HON'BLE MS. JUSTICE TARA VITASTA GANJU MISCELLANEOUS FIRST APPEAL NO. 6049 OF 2025 (KPIDFA-) C/W MISCELLANEOUS FIRST APPEAL NO. 4951 OF 2025 MISCELLANEOUS FIRST APPEAL NO. 5484 OF 2025 IN MFA No. 6049/2025 BETWEEN: JYOTHI PRASAD S/O B. KRISHNIAHA CHETTY, AGED ABOUT 52 YEARS, RESIDING AT NO.8, 1ST FLOOR, II MAIN, J.P.NAGAR, III PHASE, BANGALORE-560 178. &APPELLANT (BY SRI. RAVI.R.S., SENIOR COUNSEL FOR SRI. VASANTH RAJ., ADVOCATE) AND: 1. THE COMPETENT AUTHORITY, FOR M/S. SRI. VASISTA CREDIT SOUHARDHA CO-OPERATIVE LTD., OFFICE OF THE SPECIAL OFFICER AND COMPETENT AUTHORITY, IMA AND OTHER SCAM CASES, V.V.TOWERS, 3RD FLOOR, PODIUM BLOCK, Digitally signed by SUMATHY KANNAN Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 BENGALURU-560 001. REPRESENTED BY ITS COMPETENT AUTHORITY, SRI.SUDARSHAN.B.K. ASSISTANT COMMISSIONER AND COMPETENT AUTHORITY, AGED ABOUT 33 YEARS, REPRESENTED BY LEARNED SPECIAL PUBLIC PROSECUTOR. 2. M/S. SRI.VASISTA CREDIT SOUHARDA CO-OPERATIVE LTD., REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, (C.E.O), VENKATANARAYANA K.V. AGED MAJOR, NO 01, FIRST FLOOR, RAMANJANEYA ROAD, HANUMANTHA NAGAR, BENGALURU-560 019. 3. SRI. GIRISH KANDAKUR VISWANTH S/O K.V.VISWANATH, AGED MAJOR, RESIDING AT NO. 1624/7, 5TH 8B9 CROSS, 17TH MAIN, BSK 1ST STAGE, BENGALURU-560 050. 4. M/S.PIONEER DEVELOPERS, REPRESENTED BY ITS MANAGING PARTNER, SMT.SUJATHA W/O V.RAGHAVENDRA, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK 3RD STAGE, BENGALURU-550 085. 5. SRI. V.RAGHAVENDRA S/O VASUDEVACHAR, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK III STAGE, BENGALURU-560 085. &RESPONDENTS (BY SRI. VEERESH.R.BUDIHAL., ADVOCATE FOR C/R1) - 3 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 THIS MFA IS FILED U/S.16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, AGAINST THE ORDER DT. 27.02.2025 PASSED IN MISC.NO.1190/2024 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND SPECIAL JUDGE FOR KPIDFE CASES, BENGALURU CCH-92, ALLOWING THE PETITIONS FILED U/S.5(2) OF THE KPIDFE ACT,2004. IN MFA NO. 4951/2025 BETWEEN: 1. B.KISHORE KUMAR S/O B.JYOTHI PRASAD, AGED ABOUT 47 YEARS, R/AT NO.8, I FLOOR, II MAIN, J.P.NAGAR, III PHASE, BANGALORE-560 078. 2. B.J.KIRAN KUMAR S/O B.JYOTHI PRASAD, AGED ABOUT 42 YEARS, R/AT NO.8, I FLOOR, II MAIN, J.P.NAGAR, III PHASE, BANGALORE-560 078. ...APPELLANTS (BY SRI. R.S.RAVI., SENIOR COUNSEL FOR SRI. VASANTH RAJ., ADVOCATE) AND: 1. THE COMPETENT AUTHORITY, FOR M/S. SRI. VASISTA CREDIT SOUHARDHA CO-OPERATIVE LTD., OFFICE OF THE SPECIAL OFFICER AND COMPETENT AUTHORITY, IMA AND OTHER SCAM CASES, V.V.TOWERS, 3RD FLOOR, PODIUM BLOCK, BENGALURU-560 001. REPRESENTED BY ITS COMPETENT AUTHORITY, SRI.SUDARSHAN.B.K. - 4 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 ASSISTANT COMMISSIONER AND COMPETENT AUTHORITY, AGED ABOUT 33 YEARS, REPRESENTED BY LEARNED SPECIAL PUBLIC PROSECUTOR. 2. M/S. SRI.VASISTA CREDIT SOUHARDA CO-OPERATIVE LTD., REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, (C.E.O), VENKATANARAYANA K.V. AGED MAJOR, NO 01, FIRST FLOOR, RAMANJANEYA ROAD, HANUMANTHA NAGAR, BENGALURU-560 019. 3. SRI. GIRISH KANDAKUR VISWANTH S/O K.V.VISWANATH, AGED MAJOR, RESIDING AT NO. 1624/7, 5TH 8B9 CROSS, 17TH MAIN, BSK 1ST STAGE, BENGALURU-560 050. 4. M/S.PIONEER DEVELOPERS, REPRESENTED BY ITS MANAGING PARTNER, SMT.SUJATHA W/O V.RAGHAVENDRA, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK 3RD STAGE, BENGALURU-550 085. 5. SRI. V.RAGHAVENDRA S/O VASUDEVACHAR, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK III STAGE, BENGALURU-560 085. ...RESPONDENTS (BY SMT. VEERESH.R.BUDIHAL., ADVOCATE FOR C/R1) THIS MFA FILED IS U/S.16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL - 5 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 ESTABLISHMENTS ACT, AGAINST THE ORDER DT. 27.02.2025 PASSED IN MISC.NO.1190/2024 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND SPECIAL JUDGE FOR KPIDFE CASES, BENGALURU (CCH-92), ALLOWING THE PETITION FILED U/S.5(2) OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, 2004. IN MFA NO. 5484/2025 BETWEEN: SURESH KUMAR S/O SAMPATHRAJ JAIN, AGED ABOUT 50 YEARS, RESIDING AT NO. 14/2, SAMBHAVA KRUPA, JAIN TEMPLE STREET, V.V.PURAM, BANGALORE-560 004. ...APPELLANT (BY SRI. R.S.RAVI., SENIOR COUNSEL FOR SRI. VASANTH RAJ., ADVOCATE) AND: 1. THE COMPETENT AUTHORITY, FOR M/S. SRI. VASISTA CREDIT SOUHARDHA CO-OPERATIVE LTD., OFFICE OF THE SPECIAL OFFICER AND COMPETENT AUTHORITY, IMA AND OTHER SCAM CASES, V.V.TOWERS, 3RD FLOOR, PODIUM BLOCK, BENGALURU-560 001. REPRESENTED BY ITS COMPETENT AUTHORITY, SRI.SUDARSHAN.B.K. ASSISTANT COMMISSIONER AND COMPETENT AUTHORITY, AGED ABOUT 33 YEARS, REPRESENTED BY LEARNED SPECIAL PUBLIC PROSECUTOR. - 6 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 2. M/S. SRI.VASISTA CREDIT SOUHARDA CO-OPERATIVE LTD., REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, (C.E.O), VENKATANARAYANA K.V. AGED MAJOR, NO 01, FIRST FLOOR, RAMANJANEYA ROAD, HANUMANTHA NAGAR, BENGALURU-560 019. 3. SRI. GIRISH KANDAKUR VISWANTH S/O K.V.VISWANATH, AGED MAJOR, RESIDING AT NO. 1624/7, 5TH 8B9 CROSS, 17TH MAIN, BSK 1ST STAGE, BENGALURU-560 050. 4. M/S.PIONEER DEVELOPERS, REPRESENTED BY ITS MANAGING PARTNER, SMT.SUJATHA W/O V.RAGHAVENDRA, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK 3RD STAGE, BENGALURU-550 085. 5. SRI. V.RAGHAVENDRA S/O VASUDEVACHAR, MAJOR, RESIDING AT NO.241/A, 1ST CROSS, 2ND BLOCK, 3RD PHASE, BSK III STAGE, BENGALURU-560 085. ...RESPONDENTS (BY SRI. VEERESH RACHAPPA BUDIHAL., ADVOCATE) THIS MFA FILED U/S.16 OF THE KARNATAKA PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL ESTABLISHMENTS ACT, AGAINST THE ORDER DT. 27.02.2025 PASSED IN MISC.NO.1190/2024 ON THE FILE OF THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CCH-92, ALLOWING THE PETITIONS FILED U/S.5(2) OF THE KPIDFE ACT, 2004. - 7 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 THESE APPEALS, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN & HON'BLE MS. JUSTICE TARA VITASTA GANJU ORAL JUDGMENT (PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) These appeals are filed challenging the order dated 27.02.2025, passed by the XCI Additional City Civil And Sessions Judge, Bengaluru in Misc.No.1190/2024. 2. Heard the learned Senior Counsel appearing for the appellants, as well as the learned counsel appearing for the respondents 3 competent authority. 3. It is submitted by the learned Senior Counsel for the appellants that the properties were purchased by the appellants prior to the Notification being issued under Section 3(2) of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (hereinafter referred to as 8KPIDFE Act9). It is submitted that the revenue records also stood mutated in the names - 8 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 of the respective purchasers. It is contended that without any Notice being issued to the purchasers, who are not persons directly connected with the Financial Establishment, their properties were subjected to attachment. 3. It is further submitted that without any Notice being issued to them under Section 13 of the KPIDFE Act, action has been initiated to make the attachment absolute under Section35(2) of the KPIDFE Act. The learned Special Court without accepting the contentions raised, has also passed orders making the attachment absolute. 4. It is contended by the learned Senior Counsel for the appellants that in view of the fact that the appellants were admittedly not persons who were connected to the Financial Establishment in any capacity, including that of promoter, director or in any other capacity, the extension of the order of attachment in respect of the properties owned by them even prior to the - 9 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 Notification under Section 3(2) of the KPIDFE Act was illegal and improper. Reliance is placed on the provisions of the KPIDFE Act, including Section 3(2) and Section 13, in support of their contentions. 5. The learned counsel for the respondents, on the other hand, contends that the properties have been alienated by the persons who are directly connected to the Financial Establishment and that such alienations can be called into question under the provisions of the KPIDFE Act. It is submitted that after accepting deposits from the public, the persons who have sold the properties have utilized such amounts and have alienated the properties, which are also liable for attachment under the KPIDFE Act. 6. Having considered the contentions advanced, we notice that Section 3(2) of the KPIDFE Act provides that in case the properties of the Financial Establishments or properties purchased from out of the funds collected from the public are not sufficient to repay the depositors, - 10 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 then the properties of Promoters, Partners, Directors Managers, Members or other persons connected to the Financial Establishment can also be brought under attachment. However, Section 13 of KPIDFE Act, reads as follows: 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 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 transferee9s 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 - 11 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 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 transferee9s property as is in the opinion of the Special Court equivalent to the proper value of the property transferred. It is clear from a reading of section 3 13 that where assets available for attachment are alienated and a malafide transaction is suspected then a notice has to be issued in terms of Section 3 13 to the persons who are in possession and ownership of those properties.= 7. In the instant case, it is admitted that no Notice under Section 13 of the KPIDFE Act has been issued to the appellants herein who are admittedly in possession of the properties pursuant to the Sale Deeds dated 04.02.2009, 22.03.2010, 19.06.2010, 29.01.2011 and 27.04.2021 respectively. 8. In the above view of the matter and in view of the fact that the appellants are not persons directly connected to the Financial Establishments and since no Notice has been issued to them under Section313 of KPIDFE Act, we are of the opinion that these appeals are liable to succeed. - 12 - HC-KAR NC: 2026:KHC:12901-DB MFA No. 6049 of 2025 C/W MFA No. 4951 of 2025 MFA No. 5484 of 2025 9. Accordingly:- (i) The appeals are allowed. (ii) The order dated 27.02.2025, passed by the XCI Additional City Civil And Sessions Judge, Bengaluru in Misc.No.1190/2024 is set aside. (iii) However, we make it clear that this will not stand in the way of the Competent Authority taking action in accordance with law, against the properties as well. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (TARA VITASTA GANJU) JUDGE JJ List No.: 1 Sl No.: 8