IN THE COURT OF METROPOLITAN SESSIONS JUDGE-CUM-SPECIAL JUDGE
TO TRY THE OFFENCES UNDER A.P.PROTECTION OF DEPOSITORS
FINANCIAL ESTABLISHMENT ACT : VISAKHAPATNAM
Present: Sri Ch.Manavendranath Roy, M.A.,B.L.,
District and Sessions Judge,
FAC Metropolitan Sessions Judge-cum-Special Judge to try the offences
under AP.Protection of Depositors Financial Establishment Act,
Visakhapatnam.
Thursday, this the 9 th day of February, 2012.
Crl.M.P.207/2006 in C.C.1/2008, Crl.M.P.428/2006, Crl.M.P.426/2007 in C.C.2/2008,
Crl.M.P.2722/2011 and Crl.M.P.2723/2011 in additional Charge sheet filed in
C.C.1/2008 and C.C.2/2008 respectively.
Crl.M.P.207/2006 in C.C.1/2008:
Between:
The Competent Authority/Additional Director General of Police, C.I.D., Andhrapradesh, Hyderabad.
... Petitioner.
And:
1. Vommi Rama Murthy Chits & Investments Pvt. Ltd. D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Srinivasa Rao, Managing Director.
2. Vommi Rama Murthy Education Society D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Ramanarayana.
3. Vommi Rama Murthy Medicinal & Aromatical Plantation, Dno.36-46-37, Kancharapalem, visakhapatnam-8, represented by V.Madhusudhanarao, Director.
4. Vommi Rama Murthy Agro Farms & Houses (Un-registered) D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srinivishnu.
5. Vishnu Infotech (Un-registered) D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srivishnu.
6. Vommi Madhusudhanarao, s/o late Rama Murthy, 61 years, Secretary & Correspondent in VR Educational Society, Ex.M.D. Of VR Chits & Investments Pvt. Ltd., Director of V.R.Medicinal & Aromatical Plantations, Partner of V.R.Agro Farms & Houses and Vishnu Infotech, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
7. Vommi Srinivasa Rao, S/o late Ram Chandra Rao, 29 yrs, M.D., VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
8. Vommi Rama Narayana, S/o Madhusudana Rao, 27 yrs, Chairman, VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and Vishnu
Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
9. B.V.Ramesh Chandra, Director, VR Chits & Investment Pvt., Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
10.Vommi Krishna Rao, S/o Late Ramana Murthy, 58 years, Partner of V.R.Agro Farms & Houses and Vishnu Infotec D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
11.Vommi Anasuyamma D/o Rama Murthy, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
12.Vommi Sri Vishnu D/o Madhusudanarao, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, resident of Door No.56-1-89, Kancharapalem, Visakhapatnam-8.
... Respondents.
Crl.M.P.428/2006, Crl.M.P.426/2007 in C.C.2/2008:
Crl.M.P.428/2006
Between:
The Competent Authority/Additional Director General of Police, C.I.D., Andhrapradesh, Hyderabad.
... Petitioner.
And:
1. Vommi Rama Murthy Chits & Investments Pvt. Ltd. D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Srinivasa Rao, Managing Director.
2. Vommi Rama Murthy Education Society D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Ramanarayana.
3. Vommi Rama Murthy Medicinal & Aromatical Plantation, Dno.36-46-3 7, Kancharapalem, visakhapatnam-8, represented by V.Madhusudhanarao, Director.
4. Vommi Rama Murthy Agro Farms & Houses (Un-registered) D.No.36- 46-37, Kancharapalem, Visakhapatnam-8, represented by Respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srinivishnu.
5. Vishnu Infotech (Un-registered) D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srivishnu.
6. Vommi Madhusudhanarao, s/o late Rama Murthy, 61 years, Secretary & Correspondent in VR Educational Society, Ex.M.D. Of VR Chits & Investments Pvt. Ltd., Director of V.R.Medicinal & Aromatical Plantations, Partner of V.R.Agro Farms & Houses and Vishnu Infotech, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
7. Vommi Srinivasa Rao, S/o late Ram Chandra Rao, 29 yrs, M.D., VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and
Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
8. Vommi Rama Narayana, S/o Madhusudana Rao, 27 yrs, Chairman, VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
9. V.Ramesh Chandra, Director, VR Chits & Investment Pvt., Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
10. Vommi Krishna Rao, S/o Late Ramana Murthy, 58 years, Partner of V.R.Agro Farms & Houses and Vishnu Infotec D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
11. Vommi Anasuyamma D/o Rama Murthy, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
12. Vommi Sri Vishnu D/o Madhusudanarao, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, resident of Door No.56-1-89, Kancharapalem, Visakhapatnam-8.
... Respondents.
Crl.M.P.426/2007 in C.C.2/2008:
Between:
State Bank of India, Incorporated under State Bank of India Act 23/1955, having its Central Office at Mumbai and Local Head Office at Hyderabad and branches all over India and one such branch at, Stressed Asset Resolution Centre Branch, represented by Asst, General Manager, Visakhapatnam.
... Petitioner.
And:
The Competent Authority/Additional Director General of Police, C.I.D., Andhra Pradesh, Hyderabad.
...Respondent.
Crl.M.P.2722/2011 and Crl.M.P.2723 (in additional Charge sheet filed in
C.C.1/2008 and C.C.2/2008.
Between:
The Competent Authority/Additional Director General of Police, C.I.D., Andhrapradesh, Hyderabad.
... Petitioner.
And:
1. Vommi Rama Murthy Chits & Investments Pvt. Ltd. D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Srinivasa Rao, Managing Director.
2. Vommi Rama Murthy Education Society D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by Vommi Ramanarayana.
3. Vommi Rama Murthy Medicinal & Aromatical Plantation, Dno.36-46-3 7, Kancharapalem, visakhapatnam-8, represented by V.Madhusudhanarao, Director.
4. Vommi Rama Murthy Agro Farms & Houses (Un-registered) D.No.36- 46-37, Kancharapalem, Visakhapatnam-8, represented by Respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srinivishnu.
5. Vishnu Infotech (Un-registered) D.No.36-46-37, Kancharapalem, Visakhapatnam-8, represented by respondents V.Madhusudanarao, V.Srinivasa Rao, V.Ramanarayana, B.V.Ramesh Chandra, V.Krishnarao, V.Anasuyamma and V.Srivishnu.
6. Vommi Madhusudhanarao, s/o late Rama Murthy, 61 years, Secretary & Correspondent in VR Educational Society, Ex.M.D. Of VR Chits & Investments Pvt. Ltd., Director of V.R.Medicinal & Aromatical Plantations, Partner of V.R.Agro Farms & Houses and Vishnu Infotech, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
7. Vommi Srinivasa Rao, S/o late Ram Chandra Rao, 29 yrs, M.D., VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
8. Vommi Rama Narayana, S/o Madhusudana Rao, 27 yrs, Chairman, VR Chits & Investments Pvt. Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
9. V.Ramesh Chandra, Director, VR Chits & Investment Pvt., Ltd., Partner of V.R.Agro Farms & Houses and Vishnu Infotec, D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
10. Vommi Krishna Rao, S/o Late Ramana Murthy, 58 years, Partner of V.R.Agro Farms & Houses and Vishnu Infotec D.No.36-46-37, Kancharapalem, Visakhapatnam-8, R/o D.No.56-1-69, Kancharapalem, Visakhapatnam.
11. Vommi Anasuyamma D/o Rama Murthy, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, R/o D.No.56-1-89, Kancharapalem, Visakhapatnam.
12. Vommi Sri Vishnu D/o Madhusudanarao, Partner of V.R.Agro Farms & Houses and Vishnu Infotec, resident of Door No.56-1-89, Kancharapalem, Visakhapatnam-8.
... Respondents.
These Petitions are coming on this day before me for hearing in the presence of Sri S.Ramamurthy Naidu, Special Additional Public Prosecutor for the Petitioner and Sri K.V.Rama Murthy, Advocate for the Respondents 1 to 12 and M/s T.V.S.Mahalakshmi and Sri T.V.A.Narasimham, Advocates for the Petitioner in
Crl.M.P.No.426/2007 and this Court delivered the following:-
COMMON ORDER
Both the cases in C.C.1/2008 and C.C.2/2008 relate to the same crime against the same accused. As all the afore said Crl., Miscellaneous Petitions are filed in the said two cases in C.C.1/2008 and C.C.2/2008 both by the prosecution and also the accused and some third party and the bank, they are all being disposed of by this common order.
2.These petitions are filed to make the ad-interim attachment made by the competent authority as per G.Os passed by the Government absolute and to permit to sell the attached properties for distribution of the amount due to the subscribers out of the sale proceeds.
3.Before considering the petitions, it is expedient to know the Thumb nail sketch of the facts of the prosecution case for better understanding of the dispute:
Late Vommi Ramachandrarao who is the brother of A6 established a partnership firm in the name and style V.R. Chits and Finance and got it registered in the year 1992 to do business in chit fund, and in real estates. Ramachandrarao was the Managing Partner and A6, A10 and A11 are the Directors. Subsequently, a new company was incorporated in the name and style V.R.Chits and Investments
Pvt., Ltd., which is A1 under Companies Act and Vommi Ramachandrarao was
Managing Director and A6, A10 and A11 were the Directors. The said company collected money from the public by issuing fixed deposit receipts duly signed by the Managing Director Vommi Ramachandrarao. The said funds were collected on fixed deposit receipts till the year 2001 and thereafter the company was dissolved and all its business activities were suspended after settlement of out standing dues either by making payments to the concerned parties or by executing promissory notes in the name of V.R. Chits and Investments Pvt., Ltd.
After the demise of Ramachandrarao, the said company V.R. Chits and
Investments Pvt., Ltd., passed a resolution dated 24.5.2002 to reconstitute the
Board and accordingly it was reconstituted with A6 as Chairman and A7, A8 and
A9 as Directors and the said Board functioned up to November, 2004. Again, a new Board was reconstituted in the month of November, 2004 with A8 as
Chairman and A7 and A9 as Directors and it has carried on its business activities till the commission of the present offences. Four other institutions in the name and style V.R. Educational Society (A2), V.R. Medicinal and Aromatic Plantation Pvt.,
Ltd., (A3), V.R. Agro Farms and Houses Pvt., Ltd., (A4) and Vishnu Info Tech Pvt.,
Ltd., (A5) were also established.
4.The accused who have flouted all the afore said companies and societies collected deposits from the gullible public offering exorbitant rate of interest varying from 14% to 21% p.a. The innocent public got attracted to the rate of interest and started depositing their money in lakhs of rupees since March, 2000. They have initially paid interest regularly to gain trust and confidence of the depositors and thereby collected huge sum of Rs.27,31,50,402/- by the end of
February, 2005. They have issued bonds, receipts and promissory notes etc., to the depositors in the name of the said companies. The amount collected from the innocent public by way of deposits was invested in real estate business by the accused and they have acquired vast movable and immovable properties in
Visakhapatnam, Vizianagaram, East Godavari and Chittoor Districts. They have collected the said amount from the public with an intention to cheat them.
Thereafter, the accused committed default in payment of interest as well as
principal amount due to the depositors from November, 2004 onwards. About,
1,986 persons were cheated as on 5.10.2007. The depositors were made to run from pillar to post to recover the amount invested by them with interest. Their efforts were in vain and they could not recover the amount. Some of the depositors gave report to the Police and Kancharapalem Police initially registered a case in Crime No.21/2005, 235/2005, 358/2005 and 361/2005 for the alleged offences punishable under Section 406, 420 and 120 B of IPC and also under
Section 3 and 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999 and under Section 56 of Chit Funds Act, 1971. During the course of investigation, some of the immovable properties situate in Vizianagaram and
Visakhapatnam Districts were identified and accordingly a letter was addressed by the Competent Authority who is Director General of Police, C.I.D., appointed under
Section 4 of the A.P. Protection of Depositors of Financial Establishments Act, 1999 with a request to pass an ad-interim order of attachment of properties of the accused which they have procured either in the name of the said financial establishments or in the name of the accused from and out of the deposits collected by the said financial establishments from the public.
5.On the recommendations, made by the competent authority, the
Government of Andhra Pradesh issued G.O.Ms.No.51 dated 17.3.2006 passing an interim order attaching the properties that were mentioned in the report furnished by the Competent Authority. It appears that during the course of investigation, some more immovable properties stood in the name of the accused situate at
Chandragiri of Chittoor District and Kakinada of East Godavari District and other buildings situate in Visakhapatnam which are under mortgage to State Bank of
India, Industrial Estate branch, Visakhapatnam were also seized during the course of search of the premises of the said companies FAC Metropolitan Sessions
Judge-cum-Special Judge to try the offences under AP.Protection of
Depositors Financial Establishment Act, Visakhapatnam.
on 17.4.2006. As per the letter addressed by the Competent Authority, the
Government of Andhra Pradesh again passed G.O.Ms.No.236 dated 25.9.2006 passing an ad-interim order under Section 4 (3) of the Act for attachment. The said ad-interim attachment of the properties is to be now made absolute under
Section 4 (3) of the Act by this Court which is a Special Court constituted under the
Act.
6.On the application filed before this Court to make the said order absolute, notices were ordered to the accused and they made their appearance and they are contesting the said petitions.
7.At this juncture, it is relevant to note that while the said petitions were pending, the accused came forward with a petition filed in Crl.M.P.454/2006 seeking permission of the Special Court to sell the properties attached as per
G.O.Ms.No.51 and 236 dated 17.3.2006 and 25.9.2006 respectively and to direct the District Legal Services Authority, Visakhapatnam or appoint an Advocate
Commissioner to supervise the proceedings by giving proper instructions from time to time to sell the said properties. The said application was dismissed by this
Court by one of my learned predecessors holding that the said application is not maintainable. Thereafter, the accused approached the Hon’ble High Court and filed an appeal in Crl.Appeal 803/2008. The said appeal was disposed of by the
Hon’ble High Court of Andhra Pradesh as per the order dated 23.7.2008 allowing
the Crl., Appeal setting aside the order passed by this Court and the Hon’ble
High Court has directed the Competent Authority to make arrangements to sell the properties which are under attachment as per the afore said two G.Os in public auction and directed to distribute the sale proceeds among the depositors with interest, if any, they are entitled. The Hon’ble High Court has further directed to complete the said exercise within a period of three months from the date of receipt of copy of the order.
8.It appears that the prosecution got a doubt as to whether the competent authority is to sell properties in the said public auction or the Special Court has to effect the sale of the said properties as it is directed in the afore said order of the
Hon’ble High Court that the Competent Authority shall make arrangements to sell
the properties under attachments, whereas, under the Act, the Special Court has to take up the said exercise. It is brought to the notice of this Court during the course of hearing these petitions that an opinion of the Advocate-General and also the
Public Prosecutor of the High Court of Andhra Pradesh was also sought by the prosecution for clarification relating to the order passed by the Hon’ble High Court.
The copy of the said opinion of the Advocate-General is also produced before this
Court wherein he has opined that the order of the Hon’ble High Court is clear and no further clarification is necessary and that the properties attached are to be sold as directed by the Hon’ble High Court and the learned Advocate-General also advised that as the sale is to be effected within the time fixed by the Hon’ble High
Court that if the said order is not complied with within the said time, an application is to be filed for extension of time for complying with the said order. Even the
Public Prosecutor, as can be seen from the copy of his opinion produced before this
Court, also opined that it is only the Competent Authority who has to make all necessary arrangements to comply with the directions of the Hon’ble High Court in selling the properties and distributing the sale proceeds to the depositors and that there is no necessity to file any revision or appeal or seek any further clarification relating to the said order passed by the Hon’ble High Court. The learned
Advocate-General has also stated in his opinion that as no further appeal or revision is preferred against the order of Hon’ble High Court that it became final and it has to be implemented.
9.Therefore, the prosecution is now seeking for making the said attachment absolute as required under the Act to enable it to proceed with the sale of the properties and distribute the same to the depositors who invested the said amount.
10.When the petitions came up for hearing before this Court, I have heard the arguments of the learned Special Public Prosecutor appointed under the Act and also the learned counsel for the accused appearing for various accused at length.
11.Now, the points that emerge for determination in these petitions are:
1. Whether an ad-interim attachment made by the Government under G.O.Ms.No.51 dated 17.3.2006
and G.O.Ms.No.236 dated 25.9.2006 is to be
made absolute and whether the Competent
Authority is to be permitted to sell the said
properties and distribute the sale proceeds
among the depositors?
2. Whether the prior mortgage of some of the properties to the bank are to be exempted from the said sale?
3. To what relief?
12.P O I N T No.1:-
Before adverting to the point, some subsequent events that took place are
also to be noticed. After filing the charge sheet in C.C.1/2008 and C.C.2/2008, the prosecution has also subsequently filed additional charge sheets both in
C.C.1/2008 and C.C.2/2008 and some more property was attached in both the said cases. So, Crl.M.P.2722/2011 was filed in C.C.1/2008 to make the attachment of the properties effected as per G.O.Ms.No.146 and also Crl.M.P.2723/2011 was filed to make the attachment effected in C.C.2/2008 as per the same
G.O.Ms.No.146 dated 13.6.2011 absolute. So, the subsequent interim attachment as per the additional charge sheet filed was effected as per common
G.O.Ms.No.146 dated 13.6.2011. So, in total, there are three G.Os whereunder interim attachment of the properties was made.
13.Now, reverting to the facts of the case, as already noticed supra, at the very out set as per the facts dealt with in extenso, several companies were established by the accused and collected huge amount of money to a tune of crores of rupees from gullible public alluring them with attractive rate of interest on the amount deposited and also inducing them to invest money in the chit fund transaction and thereafter the accused failed to repay the said amount invested by the public. It is alleged by the prosecution that to hoodwink the gullible public by alluring them with attractive rate of interest that the said amounts to a tune of crores of rupees were collected by the accused in the name of their financial institutions and establishments and acquired vast properties at various places in the State with the said money collected from the public in a deceitful manner and thereafter they have closed their business of the said financial establishments and institutions and the said institutions and establishments went into financial doldrums on account of mismanagement of the affairs of the financial institutions and offences of misappropriation of public funds and cheating were committed and fraud was played on the public by the accused who have established the said financial institutions and establishments. Therefore, it is the case of the prosecution that many innocent and poor persons of the society were badly cheated and they have sustained huge financial loss. Therefore, while prosecuting the accused concerned who are responsible for commission of the said offence against the said innocent public, the prosecution has also taken steps by invoking the provisions of the A.P. Protection of Depositors of Financial Establishments Act, 1999 hereinafter called as “the Act” for short to attach the properties that were acquired by the accused with the money of the public collected in the afore said deceitful manner temporarily under Section 3 of the Act for which purpose the said enactment was made to sell the said properties and distribute the sale proceeds amongst the innocent distributors who were cheated in the hands of the accused.
The Addl., Director General of Police, CID was appointed as Competent Authority as required under the Act for the said purpose and on his move, the properties of the accused acquired in the name of various companies and societies established by them and other institutions and in their individual names and in the name of their kith and kin were attached as per the G.Os., issued by the Government to that effect referred supra. Therefore, interim attachments were effected relating to the said properties.
14.Section 4 of the act envisages that the said Competent Authority shall exercise the control over the properties attached by the Government under Section 3 of the Act and it further envisages that he shall apply within fifteen days to the
Special Court constituted under the Act to make the said interim order of attachment absolute. In compliance with the said requirement, the present petitions were filed to make the said attachments absolute by the Competent
Authority. Section 7 (1) of the Act mandates that a notice is to be issued to the said financial establishment or to the person whose property was attached by the
Government under Section 3 of the Act calling upon to show cause why the order of attachment should not be made absolute. Section 7 (4) of the Act mandates that if no such objections are made and no cause is shown on or before the specified date, the Special Court shall forthwith pass an order making the ad- interim order of attachment absolute. Now, it is to be seen that Section 7 (5) and (6) says that if an objection is made to make the said attachment absolute or cause is shown as required in the show cause notice taking objection for making the attachment absolute, then the Special Court shall consider the said objection after giving an opportunity to adduce evidence to both the parties and shall pass an order making the ad-interim order of attachment absolute or varying it by releasing a portion of property from attachment or cancelling the ad-interim order of attachment. After the competent Authority under the Act issued publication in the paper to sell the said properties attached in public auction which was published in Eenaadu newspaper on 2.8.2010, one G. Hemalatha who is a third party filed Crl.M.P.2971/2010 and 2972/2010 putting forth objections relating to certain property claiming right over the same. Similarly, Crl.M.P.426/2007 was filed by the State Bank of India contending that some properties were already mortgaged to the Bank by the accused and as such it got first charge over the said property and they cannot be sold in public auction. Except for these properties, no objection was made or no claim was made relating to other properties which were subjected for interim attachment. Therefore, apart from the said objections made relating to certain properties by the third party s making a claim over the same, there is also dispute relating to the extent of land attached situate in Gollapeta of Sarika Mandal of Vizianagaram District. Some more property in an extent of Ac.35.99 cents was added to the said land in Gollapeta in addition to Ac.29.01 cents of land as per the paper publication dated 2.8.2010 given in
Eenaadu daily newspaper. It is contended that the said extent is not correct.
Learned Special Public Prosecutor contended that whatever actual extent that is found to be available in the name of the accused in Gollapeta village that the same would be sold in the auction. So, it requires enquiry after adduction of evidence to decide only the claim made by the third party in Crl.M.P.2971/2010 and Crl.M.P.2972/2010, by name, G. Hemalatha. Till the said claim is adjudicated in a lawful manner as contemplated under the Act, the same cannot be now subjected to any sale in the public auction. Therefore, they are to be excluded from sale till the controversy is resolved adjudicating the said claim in the said petitions. At the time of selling the property at Gollapeta village, the Competent
Authority and the authorities concerned in the said sale has to take steps to ascertain the actual extent of land owned by the accused in the said village and then the same can be sold in the auction. Therefore, excluding the said properties against which a third party claim was made in Crl.M.P.2971/2010 and 2972/2010, the ad-interim attachment pertaining to the remaining properties are to be made absolute to enable the Competent Authority to proceed with the sale of the said lands in public auction in compliance with the direction given by the Hon’ble High
Court of Andhra Pradesh in Crl.Appeal No.803/2008 and the sale proceeds are to be distributed amongst the depositors with interest if any they are entitled to the same. As it is directed by the Hon’ble High Court in the afore said order that the
Competent Authority has to make arrangements to sell the properties which are under ad-interim attachments by way of public auction, it is made clear that the
Competent Authority appointed under the Act shall make arrangements to sell the properties and distribute the sale proceeds to the depositors under proper identification and acknowledgement. It is brought to the notice of this Court at the time of hearing this petition that already auction committee was constituted with various authorities of responsible position. Therefore, the Competent Authority is at liberty to proceed with the sale of the said properties under attachment excluding the properties where there is third party claims as stated supra and after taking steps to ascertain the actual extent of land in Gollapeta village and sell the same. As direction was already given by the Hon’ble High Court in the afore said Crl.Appeal No.803/2008 and as the said order became final as the accused did not prefer any revision or question the said order in any appropriate forum and as it became final, the same is binding on the prosecution and the accused as well as on this Court and we are bound by the said order passed by the
Hon’ble High Court and as such this Court has to see that the said order of
Hon’ble High Court is implemented in its true spirit in toto to render justice to the
depositors by distributing the sale proceeds after the properties attached are sold excluding the properties against which the claims are pending adjudication.
Hence, the point is answered accordingly.
15.P O I N T No.2:-
This point relates to the claim made by the State Bank of India in
Crl.M.P.426/2007. It is the version of the State Bank of India that the accused
availed a loan by offering some properties as security for the said loan and as such the Bank is a secured creditor and the bank has got first charge. Therefore, the properties which are offered as security for the loan of advanced by the
Bank to the creditors cannot be sold in public auction. P.W.1 was examined on behalf of the bank and also got marked EXs.P1 to P43 documents in support of its contention. During the pendency of the enquiry in the said petition, both the parties filed a memo that no further evidence is required to be adduced and thereby prayed the Court to pass orders on the material available on record in the said petition. It is relevant to note here that the prosecution also did not dispute the fact that certain property was offered as security for the loan advanced by the bank to some institutions and establishments of the accused. So, there is absolutely no dispute regarding the fact that some property was offered as security by depositing title deeds with the bank FAC Metropolitan Sessions
Judge-cum-Special Judge to try the offences under AP.Protection of
Depositors Financial Establishment Act, Visakhapatnam.
for the loan availed by the accused creating equitable mortgage in favour of the bank inrespect of the said property. The evidence of P.W.1 and the documentary evidence adduced by the petitioner in the form of EXs.P1 to P43 also established the same. Now, the crucial question that crops up for consideration is whether these properties which are offered as security to the bank for availing loan which are in the mortgage with the bank are to be exempted from sale in the public auction and whether the bank has got first charge over the said property or not.
Much argument has been addressed by both the parties on the said controversial aspect. According to the learned Special Public Prosecutor, Section 14 of the Act which contains non obstante clause stating that the provisions of this Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any customary usage or any instrument having effect by virtue of any such law and as such despite the fact that the property was mortgaged to the Bank earlier, still the same is to be sold in public auction in compliance with the mandate given in the special enactment. Per contra, the learned Senior counsel appearing for State bank of
India contended that as admittedly and evidently the property was mortgaged to bank and the same was offered as security for the loan given by the bank that the bank got first charge over the said property and unless the amount that was due to the bank was cleared, the said property cannot be sold in public auction.
He further contended that A.P. Protection of Depositors of Financial
Establishments Act, 1999 is earlier enactment came into effect in the year 1999 and the Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act hereinafter called as SARFAESI for short came into force subsequently in the year 2002 and similarly the non-obstante clause is also contained in SARFAESI Act and non obstante clause is also contained in D.R.T. Act and as SARFAESI Act is subsequent enactment, it over rides the earlier enactment and provisions therein including the A.P. Protection of Depositors of Financial
Establishments Act and as such the property under security with the bank cannot be sold in public auction. It is also contended that the A.P. Protection of Depositors of Financial Establishments Act is a State Act and SARFAESI Act is Central Act and whenever there is a conflict between the State Act and the Central Act that the
Central Act prevails and thereby prayed to exempt the properties under security with the bank from sale in the public auction under this Act. He also relied on the judgment reported in AIR 1998 AP at page 18 in the case of State of Andhra
Pradesh Vs., Andhra Bank. It was a case under Section 171 and 172 of
Contract Act. Bank filed a suit against the sugar mill for recovery of cash credit amount advanced on hypothecation of stock in the godwon of the mill. Before the decree was passed, the said stock of sugar was attached on behalf of the
State for recovery of sugar cane purchase tax. Our Andhra Pradesh High Court held that “the plaintiff bank was entitled for priority for payment out of
sale price of sugar stock and hypothecation was not hit by clause (4) of
Sugar Control Order or by doctrine of priority of crown debts applies.”
He also relied on another judgment reported in 2002 (1) ALT (Crl.,) at page206 in the case of “Apple Credit Corporation Ltd., Vs., State of Andhra Pradesh wherein our Andhra Pradesh High Court held that “pursuant to hire purchase
agreement, financier can claim interim custody of the vehicle to sell and
deposit the sale proceeds in the Court pending adjudication of the case.”
This judgment has no application to the facts of the case. He finally relied on another judgment reported in AIR 2004 SC at page 2371. This decision pertains to the issue whether second law on the same subject can be made or not.
Therefore, it is also of no avail to the case pleaded by the bank. In fact, the legal position whether the bank can claim first charge under DRT Act and also
Securitization Act is no more res integra and the same is decided by three Judges
Bench of the Apex Court which was relied on by the learned Special Public
Prosecutor. It is held in the judgment reported in 2009 (4) SCC at page 94 in the case of Central Bank of India Vs., State of Kerala by Three Judges Bench of Supreme Court as follows:
“The DRT and Securitization Act do not create first
charge in favour of banks, financial institutions and
other secured creditors.”
16.After considering the entire law relating to the subject including the similar contention raised by the counsel for bank here that the Central legislation prevail over State legislation, the Supreme Court ultimately held that “no first charge can be created under the afore said two enactments by the Bank.” The
Apex Court has considered the two non-obstante clauses contained in 34 of
D.R.T. Act and 35 of Securitization Act and held that “by virtue of non-
obstante clause contained in Section 34 of DRT Act and Section 35 of
Securitization Act, the bank cannot claim first charge over the
property”. While referring certain provisions relating to the state enactments like Kerala Act, 1963 pertaining to Section 26 (b) of the said Act, Section 14 A of
Workmen’s Compensation Act, 1923 and the provisions of Estate Duty Act, 1953,
Employees Provident Fund and Miscellaneous Provisions Act, 1952, Mines and
Minerals (Development and Regulation) Act, 1957, Gift Tax Act, Companies Act and Finance Corporation Act etc., the Apex Court held that:
“Mere containing the afore said non-obstante clause
under Section 34 of DRT Act and Section 35 of
Securitization Act will not create any such charge in
favour of the bank by virtue of the said provisions. To be more clear and to elucidate the issue, at page 13 of the Judgment, the
Supreme Court has extracted Section 14 (a) of Workmen’s Compensation and discussed about the same to explain when a first charge on the part of assets so transferred will be created. For better appreciation, Section 14-A of the Act as extracted in the afore said judgment is also extracted hereunder and it reads thus:
Workmen’s Compensation Act, 1923: Section 14-A:
Compensation to be first charge on assets transferred by
employer – Where an employer transfers his assets before
any amount due in respect of any compensation, the
liability wherefor accrued before the date of the transfer,
has been paid, such amount shall, notwithstanding
anything contained in any other law for the time being in
force, be a first charge on the part of the assets so
transferred as consists of immovable property.” Similarly, while considering the other similar provisions in various enactments as discussed supra, the Apex Court ultimately held that “mere containing non
obstante clause under Section 34 of DRT Act and Section 35 of
Securitization Act by itself will not create any first charge in favour of
the bank under the same enactment.” Therefore, the bank in the said petition filed in Crl.M.P.428/2006 cannot now claim any first charge over the said property. Further, it is relevant to note that the mere fact that the property is offered as security for the loan or that it was mortgaged by itself is not a valid ground to refuse permission to sell the said property. It is well settled law that every sale of the mortgaged property is subject to the mortgage. So, the bank authorities can work out their remedies available under law to them for recovery of their loan amount If the said property is sold, they are not left without any remedy as the sale of the mortgaged property is always subject to the said mortgage. So, the bank authorities can work out their remedies available to them under law. Therefore, the said properties are also now liable to be sold.
However, the Competent Authority has to take steps to see that the remaining sale proceeds, if any, after clearing the amounts due to depositors shall be made available to the bank for recovery of due amount as it also relates to public money. Hence, the point is answered accordingly.
17.P O I N T No.3:-
In the result, the ad-interim attachment order passed by the Government at the instance of the Competent Authority under the afore said G.O.Ms.No.51
dated 17.3.2006 and G.O.Ms.No.236 dated 25.9.2006 and the subsequent
G.O.Ms.No.146 dated 13.6.2011 are hereby made absolute excluding the property on which a third party claim is made by one G. Hemalatha in
Crl.M.P.2971/2010 and Crl.M.P.2972/2010. The remaining attached property shall
be sold in public auction and necessary arrangements to that effect are to be made by the Competent Authority as ordered by the Hon’ble High Court in
Crl.A.No.803/2008 and the sale proceeds shall be distributed amongst the
depositors on proper identification and acknowledgement.Therefore,
Crl.M.P.207/2006, Crl.M.P.428/2006, Crl.M.P.2722/2011 and Crl.M.P.2723/2011
are hereby allowed making the attachment absolute. Crl.M.P.426/2007 filed by the bank is dismissed. Crl.M.P.2971/2010 and Crl.M.P.2972/2010 are kept pending for adjudication of the claim made by third party.
18.These petitions are disposed of accordingly.
Dictated to the Personal Assistant, transcribed by him, corrected and pronounced
by me in open Court, this the 9th day of February, 2012.
PRINCIPAL DISTRICT AND SESSIONS JUDGE
FAC Metropolitan Sessions Judge-cum-Special
Judge to try the offences under AP.Protection
of Depositors Financial Establishment Act,
Visakhapatnam.
APPENDIX OF EVIDENCE
Witnesses Examined
For ProsecutionFor Defence
PW1Y.L.V. Ramana
LIST OF DOCUMENTS MARKED
Ex.P.130122008Sanction of loan marked through Pw1 Ex.P.224032004Tripartite agreement marked through Pw1 on 31122008 Ex.P.325032004Letter confirming deposit of title deed marked through Pw1 on 31122008 Ex.P.4Lease agreement for seven years marked through Pw1 on 3112 2008 Ex.P.5Agreement letter marked through Pw1 on 30122008 Ex.P.625032004Tripartite agreement marked through Pw1 on 30122008 Ex.P.725032004Agreement of loan and power of attorney marked through Pw1 on 30122008 Ex.P.8Registered sale deed document No.4291 market through Pw1 on 30122008 Ex.P.9 Registered sale deed document No.2789 marked through Pw1 on 30122008 Ex.P.1026032004Letter confirming depositing of title deed marked through Pw1 on 30122009 Ex.P.1101072004Agreement letter marked through Pw1 on 30122008 Ex.P.1201072004Agreement of loan marked through Pw1 on 30122008 Ex.P.13Registered sale deed document No.2037 marked through Pw1 on 30122008 Ex.P.1417092004Agreement letter marked through Pw1 on 30122008 Ex.P.15Register sale deed document No.471 marked through Pw1 on 30122008 Ex.P.16 17092004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.1702072004Agreement letter marked through Pw1 on 30122008 Ex.P.1802072004Agreement of loan marked through Pw1 on 30122008 Ex.P.19Certified copy of Register sale deed document No.132 marked through Pw1 dt. 30122008 Ex.P.2008072004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.2110032004Arrangement letter marked through Pw1 on 30122008 Ex.P.2210032004Agreement for housing loan granted to public marked through Pw1 on 30122008 Ex.P.23Registered sale deed document No.2038/99 marked through Pw1 on 30122008 Ex.P.2410032004Letter confirming depositing of title deed marked through Pw1 on 30122008 Ex.P.2510032004Arrangement letter marked through Pw1 on 30122008 Ex.P.2610032004Agreement for housing loan granting to public marked through Pw1 on 30122008 Ex.P.2712042004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.2802072004Arrangement letter marked through Pw1 on 30122008 Ex.P.2902072004Agreement of Mortgage loan marked through Pw1 on 3012 2008 Ex.P.30Register sale deed document No.2284/93 marked through Pw1 on 30122008 Ex.P.3108072004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.3210032004Arrangement letter marked through Pw1 on 30122008
Ex.P.3310032004Agreement for housing loan granting to public marked through Pw1 on 30122008 Ex.P.34Registered sale deed document No.130/2000 marked through Pw 1 on 30122008 Ex.P.3512042004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.3601072004Arrangement letter marked through Pw1 on 30122008 Ex.P.3701072004Agreement of mortgage loan marked through Pw1 on 3012 2008 Ex.P.38Registered sale deed document No.2289/93 marked through Pw1 on 30122008 Ex.P.3908072004Letter confirming depositing of title deeds marked through Pw1 on 30122008 Ex.P.40Confirmation letter of deposit of title deeds dt.6.4.2004
Ex.P.41Arrangement letter dt.10.3.2004 sanctioning term loan of Rs.10,25,00000. Ex.P.42Issuance policy dt.7.4.2004 issued by the New India Assurance Company limited. Ex.P.43Agreement for Housing Loan dt.10.3.2004.
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