Drt & a.p.protection of depositors of financial establishments act 1999
sushil bhatt
(Querist) 31 December 2011
This query is : Resolved
A Firm mortgaged its property with a Bank against loan in 2000. In the year 2001-02 the Govt. probe charges of misappropriation on the trustee of a Trust, which was run and managed by the father of one of the partner of the Firm and the properties of the trust including the properties of the relatives of the chairman of the Trust was attached by Govt. including the properties of the Firm under section 3 to 5 of A.P.Protection of Depositors of Financial Establishments Act 1999 in the year 2002. The loan could not be repaid by the Firm. Upon notice of above attachment, the Bank sought to be impleaded in the proceedings before the lower court but could not be impleaded by the Court. However, the lower court remarked that "any sale of the property shall be subject to mortgage with the Bank".
Later on the bank approached the DRT under the approprite provisions of law mentioning the above facts of its non-impleadment in the lower court proceedings. The bank finally got the property sold through the DRT in an Auction.
We purchased the property from DRT in an auction in 2007 and now the the said partner filed a WP in the HC claiming that the sale by DRT may be declared null and void as the entire auction procedure was illegal as the property was already attached by the Govt. under A.P.Protection of Depositors of Financial Establishments Act 1999 and secondly he has not received any notice from DRT on such auction.
Query:
1. Is there any such provision in A.P. Protection of Depositors of Financial Establishments Act 1999 that if the property is attached under the said act, then the same can not be sold under DRT or any other law.
2. Is it not that the rights of the bank to approach DRT will prevail as the property was mortgaged in 2000 while the attachement by govt. was done in 2002.
Pls guide /suggest with supporting citations, if any.
prabhakar singh
(Expert) 01 January 2012
Section 3 of the A.P. Protection of Depositors of Financial Establishments Act authorizes the Government on satisfying the conditions laid down in the section to attach the properties of such companies. Such attachment can be effected where the Government have reason to believe that the establishments have committed default in return of deposits in cash or kind after maturity or in any manner agreed upon or where the Government have reason to believe that any financial institution is acting in a manner prejudicial to the interest of the depositors with an intention to defraud the depositors and if the Government are satisfied that such financial institutions are not likely to return the deposits in cash or kind after maturity or in any manner agreed upon in order to protect the interest of the depositors of such financial establishment, the Government may pass an ad interim order attaching the money or the property alleged to have been procured either in the name of the financial establishment or in the name of any other person from and out of the deposits collected by the financial establishment or if it transpired that such money or other property is not available for attachment or is not sufficient for repayment of the deposits, and under these circumstances the properties of a promoter or manager or member of the said financial establishment can also be attached.
Section 4 of the Act contemplates appointment of a competent authority to exercise control over the properties attached by the Government under Section 3 of the Act.
The instant attachment under above Act was made prior to the attachment made by the DRT,true property so attached under Section 3 of the A.P. Protection of Depositors of Financial Establishments Act was already mortgaged in favor of third party,being the Bank.But once an attachment was already in force,it was duty of the Bank to object against the such attachment on the basis of its right which Bank did not preferred,it could have proceeded even under THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 which being later in time and being a central legislation must have overlapped over the state Act but DRT'S ATTACHMENT AFTER ATTACHMENT OF AP ACT1999 SEEMS BAD IN LAW. HOWEVER THE AUCTION PURCHASER IS BONA FIDE PURCHASER OF VALUE AND SHOULD ACCORDINGLY DEFEND IT SELF EVERY WHERE.
Raj Kumar Makkad
(Expert) 01 January 2012
Govt. has got no right to attach the property in 2002 when the same is already mortgaged with the bank in 2000 so the action of DRT is totally accurate and there is no hope with the petitioner to get the chapter of auction open at such belated stage. You need not wory but it you are impleaded in the ongoing litigation, do not get it lightly and defend it forcefully.
sushil bhatt
(Querist) 05 January 2012
Thank Experts....... Prabhakar Sir...... Yes, the Bank initially preferred an application for its impleadment in lower court to defend themself in the proceedings for making the attachment as absolute filed by the Govt. but the court dismissed their application with specific remarks that " Even if the attached property is brought to sale, it will be subject to mortgage in favour of the Bank". The bank after dismissal of their application, approached the DRT filed an application with all the facts of their case including the fact of their above application and order passed by the lower court and the DRT after going through the entire trial, auctioned the property, which was bought out by me.
Since I am respondent in the cr. mp. filed by the competent authority in lower court in 2009 and I have filed by counter there also, which is still pending since then, should I approach the High Court with WP to quash all the proceedings against me and allow me to enjoy my property in any manner, as it is bought out through the DRT in a public auction.
sushil bhatt
(Querist) 05 January 2012
Further, on an application filed by the Competent Authority, there is an ad-interim stay by the lower court against me, to not to dispose of the property pending the Cr. M.P.
Hence would be the suitable course of action in the matter.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 05 January 2012
Please read this querry with similar other querries about the rights of the lender against earlier encrumbances.
SUBJECT TO MORTGAGE TO THE BANK is the correct position for this property.
