IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 4.3.2011 Coram The Hon'ble Mr. Justice A.ARUMUGHASWAMY Criminal Appeal No.869 of 2003 and Crl.M.P.No.22 of 2011 Criminal Appeal No.869 of 2003 1.Thangammal 2.R.Bhuvaneswari ... Appellants Vs. The Competent Authority cum Special Commissioner and Commissioner of Land Administration, Chepauk, Chennai 5. ... Respondent Crl.M.P.No.22 of 2011 M.Asokan .. Petitioner/Intervenor Vs. 1. The Competent Authority cum Special Commissioner and Commissioner of Land Administration, Chepauk, Chennai 5. 2. Thangammal 3. R.Bhuvaneswari .. Respondents Crl.A.No.869/03: Criminal Appeal against the judgment of the Special Judge under TNPID Act, Chenai in O.A.No.9 of 2002 dated 12.5.2003. Crl.MP.No.22 of 2011: Petition praying this Court to place on record this intervening application, dismissing the Criminal Appeal filed by Second and third Respondents in the above Criminal Appeal No.869/2003. https://hcservices.ecourts.gov.in/hcservices/ For Appellant :- Mr.N.Manokaran For Respondents:- Mr.N.Kumanan Govt. Advocate (Crl.Side) For Inervenor:- Mr.A.Thiyagarajan JUDGMENT The present appeal is filed against the order passed in O.A.No. 9 of 2002 by the Special Judge under TNPID Act dismissing the petition which was filed by the appellants under Section 7(3) of the TNPID Act. 2. The facts as culled out from the pleadings are as follows:- The appellant started the chit business and was collecting deposits from the public in the name of Raji Chit Funds from 3.2.1984. Subsequently, in the year 1991, the appellants started Raji Finance, a Financial Establishment with the object of collecting deposits from the public. In the course of their business, they diverted the funds to various companies viz., Raji Thangam Textiles, Raji Feeds, Venkateswari Feeds, Raji Medicals, Kanchana Chit Funds, Sky Win Processing Mills, Raji Poultry Farms, which are sister concerns of Raji Chit Funds. In the said companies, the appellants and other persons are partners. M/s.Raji Finance and its sister concerns received amounts from various depositors and they were to repay a sum of Rs.9,23,41,655/- towards principal and interest to 340 depositors . Since M/s.Raji Finance was not likely to return the deposits to the depositors, the Government of Tamil Nadu passed an attachment order vide G.O.Ms.No.463 dated 5.6.2002. Aggrieved by the said order, the appellants herein filed a petition under Section 7(3) of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act (hereinafter called as 'the Act') before the Special Judge under TNPID Act, Chennai for raising the attachment order issued in G.O.Ms.No.463 dated 5.6.2002 in respect of the petition mentioned properties, which were already attached. The trial court, on consideration of the oral and documentary evidence dismissed the petition against which the present appeal has been filed by the appellants. 3. Though several grounds have been raised in this appeal, the learned counsel for the appellants would canvass only one ground namely, the attachment is liable to be raised since the appellants have paid the entire amounts due to the depositors. 4. The learned Government Advocate [Criminal Side] would, however, contend that it is not correct that the appellants have https://hcservices.ecourts.gov.in/hcservices/ paid the entire amounts due to the depositors. He would further submit that the appellants have settled the amounts only in respect of few depositors and still there are larger number of depositors whose dues are to be settled. 5. One Mr.Asokan has filed Crl.M.P.No.22 of 2011 in this Criminal Appeal seeking to implead him as one of the respondents. It is his contention that he has also invested a huge amount in M/s.Raji Group of Companies and the amounts are due from the appellants. Therefore, according to him, the attachment cannot be raised. 6. I have considered the above submissions. 7. From the records , it could be seen that the impugned order came to be passed on a petition filed by the appellants under Section 7(3) of the Act. The said provision empowers any person claiming an interest in the property or to any portion of that property to make an objection in respect of attachment. Here, in the instant case, during the course of argument, as I have already stated, the learned counsel for the appellants has not raised any point raising objection regarding the attachment. What all that he has argued is that since the dues to the depositors have been settled, the attachment is liable to be raised. In my considered opinion, the said contention cannot be countenanced. A perusal of Section 7(3) of the Act would go to show that it speaks of only about the consideration of an objection to be raised by any party having interest over the property. If once the interim order of attachment is made absolute under Section 7 (6) of the Act, then, the same cannot be raised at all, except by compounding the offence under Section 5A of the Act. 8. Section 5A of the Act reads as follows:- "5A. Compounding of offence . - (1) An offence punishable under section 5 may, before the institution of the prosecution, be compounded by the Competent authority or after the institution of the prosecution, be compounded by the competent authority with the permission of the Special Court, on payment of the entire amount due to the depositors with or without interest. (2) Where an offence has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be taken or continued against the offender, in respect of the offence so compounded and the offender, if in custody, shall be discharged forthwith." https://hcservices.ecourts.gov.in/hcservices/ 9. A perusal of the above provision would go to show that before the prosecution is instituted, compounding can be made only by the competent authority. It is only in a case where already prosecution has been launched by way of final report, such compounding can be made by the competent authority with the permission of the Special Court. While considering a request for compounding , it is for the competent authority to examine as to whether the entire amount has been settled in favour of the depositors or not. The court has got no role to play in the said matter of compounding unless and otherwise, final report has been submitted by the police. In the case on hand, final report has not been submitted and there is no trial pending as on the date when the impugned order came to be passed. Therefore, on the ground that amount has already been settled in favour of the depositors as claimed by the appellant, the order impugned cannot be interfered with. 10. As stated already, the intervenor has filed a petition contending that his claim has not been settled by the appellants as well as their sister concerns. Since the final report has not been submitted, I am of the view that as per Section 3 of the Act the intervenor is entitled to seek his remedy. 11. Section 3 of the Act which defines "Financial Establishment" reads as follows:- (3) "Financial Establishment" means an individual, an association of individuals, a firm or a company registered under the Companies Act, 1956 (Central Act 1 of 1956) carrying on the business of receiving deposits under any scheme or arrangement or in any other manner but does not include a corporation or a co-operative society owned or controlled by any State Government or the Central Government or a banking company as defined in section 5(c) of the Banking Regulation Act, 1949 (Central Act X of 1949) 12. As per the definition clause the activities of a financial establishment includes issuance of cheque to a person who has invested his money in the said company. According to the intervenor, he has also invested his money with Raji Group of companies for which the son of the 2nd appellant executed pronotes and issued cheques on behalf of Sri Venkateswara Feeds and Raji Feeds etc. Assessing and appreciating the case in such perspective, I am of the considered opinion that the intervenor has made out a prima facie case in his favour and against the appellants. Hence, the petition filed by the intervenor has to be allowed. https://hcservices.ecourts.gov.in/hcservices/ 13. In the result, the appeal fails and the same is accordingly dismissed and the petition filed by the intervenor Crl.M.P.No.22 of 2011 is allowed. The investigating agency is directed to look into the case of the intervenor and if necessary file additional charge sheet and agitate the matter before the competent court. Since it is represented that a separate court under the Act has been constituted at Coimbatore, the case is transferred to the said court for disposal of the case in accordance with law. Krr/ Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar To 1.The Special Judge, Special Court, under TNPID Act, Chennai. 2.The Special Judge, Special Court, under TNPID Act, Coimbatore. 3.The Public Prosecutor, High Court, Chennai. 4.The Special Commissioner and Commissioner of Land Administration, Chepauk, Chennai 5. + 1 cc to Mr. M. Manokaran, Advocate SR No.16428 TAM(CO) SR/24.3.2011 Judgment in Crl. Appeal No.869 of 2003 and Crl.M.P.No.22 of 2011 https://hcservices.ecourts.gov.in/hcservices/