THE COMPETENT AUTHORITY FOR vs KUM RIDHANYA VARADARAJ

Court
Karnataka High Court

- 1 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024




IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 12 DAY OF OCTOBER, 2026


BEFORE

THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR

REVIEW PETITION NO. 452 OF 2024

BETWEEN:

THE COMPETENT AUTHORITY FOR
OFFICE OF THE ASSISTANT COMMISSIONER,
BENGALURU SOUTH SUB - DIVISION,
ND
2 FLOOR, KANDAYA BHAVAN, K G ROAD,
BENGALURU 560 009.
REPRESENTED BY
ITS COMPETENT AUTHORITY
SRI. RAJANIKANT
DESIGNATED AS ASSISTANT COMMISSIONER,
BENGALURU SOUTH.
…PETITIONER
(BY SRI. VEERESH R BUDIHAL, ADVOCATE)








AND:


1. KUM RIDHANYA VARADARAJ
D/O VARADARAJA H J,
AGED ABOUT 9 YEARS,
REPRESENTED BY
HER FATHER / NATURAL GUARDIAN
SRI. VARADARAJA H J
AGED ABOUT 41 YEARS,
ST
R/O NO. F15, 1 FLOOR,
AMITY SHELTERS
C V RAMAN ROAD, KODIPALYA,
RAMANAGAR, BENGALURU 560 060.

2. M/S NAGARATHNA SOUHARDA
CREDIT CO-OPERATIVE LIMITED
HAVING ITS OFFICE AT NO.1,
ST
1 FLOOR, SRI LAKSHMI COMPLEX,
TH
14 CROSS, VIDYAPEETA CIRCLE,
KATRIGUPPE MAIN ROAD,
BENGALURU 560 050.
REPRESENTED BY ITS PRESIDENT
SMT. PARIMALA. S.


Digitally
signed by
VANDANA S
Location:
High Court
of Karnataka

- 2 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024




3. STATE OF KARNATAKA
REPRESENTED BY ITS PRINCIPAL SECRETARY,
DEPARTMENT OF REVENUE,
M.S. BUILDING,
BENGALURU- 560 001.
…RESPONDENTS

(BY SRI. SRINIVAS V, ADVOCATE)







THIS REVIEW PETITION UNDER SECTION 114 OF C.P.C. R/W
ORDER 47 RULE 1 OF C.P.C. 1908 PRAYING THAT THIS HONBLE COURT
MAY BE PLEASED TO REVIEW THE ORDER DATED 26.06.2024 PASSED
BY THIS HONBLE COURT IN W.P. NO. 12918/2024, IN THE INTEREST OF
JUSTICE AND EQUITY.



THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER
WAS MADE THEREIN AS UNDER:




CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR


ORAL ORDER


This review petition takes an exception to the final order

dated 26.06.2024 passed in W.P.No.12918/2024, whereby this

st
Court allowed the said petition filed by the 1 respondent and

quashed the impugned Notification at Annexure-C dated
16.03.2024 by holding as under:-
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 26 DAY OF JUNE, 2024
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 12918 OF 2024 (GM-RES)


- 3 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


BETWEEN:
KUMARI RIDHANYA VARADARAJ
D/O SRI. VARADARAJA H J
AGED ABOUT 9 YEARS
REPRESENTED BY HER FATHER/NATURAL GUARDIAN
SRI. VARADARAJA H J S/O JANNATH
AGED ABOUT 41 YEARS
ST
R/AT NO. F15, 1 FLOOR
AMITY SHELTERS, C V RAMAN ROAD
BEHIND NAMMA MANE APARTMENT
KODIPALYA, RAMANAGAR
BENGALURU 560 060.
…PETITIONER
(BY SRI. SATHYA. D.,ADVOCATE)
AND:

1. STATE OF KARNATAKA
REP BY ITS PRINCIPAL SECRETARY
DEPARTMENT OF REVENUE
MS BUILDING
BANGALORE 560 001.

2. THE COMPETENT AUTHORITY
OFFICE OF THE ASSITANT COMMISSIONER
KANDAYA BHAVAN
BANGALORE 560 001.

3. NAGARATHNA SOUHARDA CREDIT
CO OPERATIVE LIMITED
REP BY ITS CEO
ST
NO.1, 1 FLOOR, SRI LAKSHMI COMPLEX
TH
14 CROSS, VIDYAPEETA CIRCLE
KATRIGUPPE MAIN ROAD, ASHOK ROAD
BANGALORE 560 050.
…RESPONDENTS
(BY SRI.SUDEV HEGDE, AGA FOR R-1
SRI. VEERESH BUDIHAL, ADVOCATE FOR R-2)

THIS W.P IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH
IMPUGNED NOTIFICATION AT ANNEXURE-C DATED

- 4 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


16/03/2024 ISSUED BY THE R1 BEARING NO. E-RD 205
GRC 2023 & ETC.,
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
THE COURT MADE THE FOLLOWING:
ORDER
In this petition, petitioner seeks quashing of the
impugned Notification at Annexure-C dated 16.03.2024
st
issued by the 1 respondent and for other reliefs.

2. Heard both sides and perused the material on
record.

3. On 11.06.2024, this Court passed the following order:-
Learned counsel for respondent No.2 seeks time
to obtain necessary instructions as to whether
respondent No.2 has taken necessary steps pursuant
to the impugned Notification at Annexure – C dated
16.03.2024 and make submission in this regard by the
next date of hearing.
Re-list on 19.06.2024.

4. As can be seen from the aforesaid directions
nd
issued by this Court, the 2 respondent – competent authority
was directed to obtain necessary instructions as to whether
nd
the 2 respondent took necessary steps to approach the
Special court within a period of 30 days from the date of
impugned Notification in terms of Section 5(2) of the
Karnataka Protection of Interest of Depositors in Financial
Establishments Act, 2004 (for short ‘the KPID Act’).


- 5 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


nd
5. Learned counsel for 2 respondent, on
nd
instructions, submits that the 2 respondent has not made
any such application before the special court even till today.
It is however submitted that liberty may be reserved in favour
of the respondents to proceed further in accordance with law.

6. The aforesaid facts and circumstances and the
nd
material on record will indicate that the 2 respondent –
Authority has not filed any application before the Special court
seeking an order of attachment made absolute within a period
of 30 days from the date of the impugned Notification and
consequently, the impugned Notification deserves to be
quashed by reserving liberty in favour of the petitioner.

7. In the result, I pass the following:-
ORDER
(i) Petition is hereby allowed.
(ii) The impugned Notification at Annexure-C dated
16.03.2024 is hereby quashed.
nd
(iii) Liberty is however reserved in favour of 2
respondent to proceed further in accordance with law
subject to all just exceptions.”

2. As can be seen from the aforesaid final order passed by
st
this Court, the 1 respondent – writ petitioner was the only party
and the remaining persons and properties included in the said
Notification were not before this Court in the aforesaid petition. It is

- 6 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


also a matter of record and an undisputed fact that pursuant to the
aforesaid order passed by this Court, the review petitioner herein
approached the Trial court in Misc.No.911/2024, which was
disposed of on vide final order dated 27.11.2024 as hereunder:-
“The petitioner being the Competent Authority for M/s
Nagarathna Souharda Credit Co-Operative Ltd., (herein after
referred to as respondent No.1 Company for short) has filed
the petition under Section 13 (1) of the Karnataka Protection
of Interest of Depositors in Financial Establishments Act,
2004 (KPIDFE Act in Short) praying for an order of
attachment of the schedule property belonging to the
respondent No.3, who acquired the same under Gift Deed
dated 18.03.2023.
2. The petition in brief as under:-
2(a). The petitioner is duly appointed as the
Competent Authority for the respondent No.1 Company
under Section 5(1) of the KPIDFE Act-2004 vide Notification
No.ERD.205.GRC.2023 dated 24.11.2023.
2(b). The respondent No.2 is the President of the
respondent No.1 Company. The respondent No.1 Company
represented by its President, Chief Promoter, respondent
No.2 herein conspiring with her associates, induced the
general public on false assurances and promises to invest
their hard earned money by enticing and promising them to
provide more interest, offering attractive returns on their
deposits or upon maturity. Respondent No.3 is the

- 7 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


granddaughter of respondent No.2. The respondent No.1
Company and its associates had collected the deposit
amount clandestinely and illegally from the general public
and thereafter failed to return the same on its maturity or on
the demand made by such depositors. The respondent No.1
Company and its associates have criminally misappropriated
the funds belonging to the innocent general public and have
diverted the depositors amount from its intended purpose
and have acquired various properties in their names. In this
regard various FIR’s came to be registered against the
wrong doers of the said Company, among them one FIR in
Crime No.244/2021 dated 12.11.2021 registered at
Hanumanthanagara Police Station, Bengaluru.
2(c). It is further stated that the Government of
Karnataka on being satisfied from various sources that
respondent No.1 Company has committed default in
repayment of money belonging to depositors, it was pleased
to issue an interim order of attachment under Sec.3(2) of the
KPIDFE Act vide Notification No.E-RD.205.GRC.2023 dated
16.03.2024. The said Notification received by the Competent
Authority on 24.07.2024. Meanwhile, a Writ Petition
No.12918/2024 came to be filed before the Hon’ble High
Court of Karnataka seeking quashment of the Notification
and the Hon’ble High Court of Karnataka was pleased to
allow the said petition and was further pleased to reserve
liberty in favour of the petitioner in accordance with law. As
such, the petition schedule property is brought under the
ambit of Sec.13 of KPIDFE Act and Competent Authority

- 8 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


reasonably believes that the petition schedule property is
conveyed with a calculated malafide intention to save the
property from attachment.
2(d). Upon further investigation of the revenue
records, it has come to the knowledge of the Competent
Authority that respondent No.2 being the President of the
said Society transferred the property after registration of the
FIR with a deliberate calculated malafide intention of
defrauding the depositors. It is further stated that anticipating
the attachment of the property, respondent No.2 has
executed Gift Deed dated 18.03.2023 in favour of her grand-
daughter i.e., respondent No.3 and said transaction has
taken-place after the FIR in Crime No.244/2021 dated
12.11.2021 with an intention to defraud the depositors.
2(e). It is further case of the petitioner that the assets
available for attachment of the Financial Establishment are
less than the liabilities towards the depositors of the said
Financial Establishment. The conveyance of the petition
schedule property is of a fraudulent and malafide transfer
and personal benefits of respondent No.3. The Competent
Authority has assessed the assets of the Financial
Establishment and liabilities towards the depositors. The
consolidated reports of the assets and liabilities will be
presented before this Court under Sec.7(1) of the KPIDFE
Act. The liabilities towards 72 depositors stand at about
Rs.5,37,95,000/- which is more than the assets of the
Financial Establishment, which stand at about
Rs.80,55,000/-. As such, Competent Authority reasonably

- 9 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


believes that respondent No.2 has conveyed the schedule
property in favour of her minor grand-daughter with a
malafide intention to defraud the depositors. Accordingly, on
these grounds, prayed for allowing the petition.
3. Notice and appearance of the respondents:-
This court was pleased to issue a show cause notice under
Section 13(1) of the KPIDFE Act-2004 to the respondents. In
pursuance of the notice so issued, the respondent No. 1
Financial Establishment, represented by its President did not
claim the Show Cause Notice, and it was placed Exparte.
Respondents No. 2 and 3 have entered their appearance
through their counsel and filed their detailed objection to the
main petition.
4. Contention of the respondent No.2:-
4(a). The respondent No.2 in her objection stated that the
petition is time barred and it is liable to be dismissed.
Respondent No.3 is the granddaughter of her. She had
purchased the schedule property by raising a loan from
Federal Bank and the loan amount was discharged by the
father of respondent No.3. In view of the same and out of
love and affection, respondent No.2 gifted the schedule
property in favour of respondent No.3 under a registered Gift
Deed dated 18.03.2023. After registration of Gift Deed,
respondent No.3 is its absolute owner. The respondent No.2
not purchase the schedule property from the depositors fund
as alleged.

- 10 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


4(b) It is further stated that the State Government had
issued a notification dated 16.03.2024 attaching the
schedule property without following the procedure as
contemplated under Sec.3(2) of the Act. The legality of the
said Notification was challenged before the Hon’ble High
Court of Karnataka, which in its order dated 26.06.2024
quashed the aforesaid Notification and the same has
attained finality. In that view of the matter, filing a petition is
not maintainable. The respondent No.2 acquired the
schedule property before registering the FIR, and it is no
longer the subject matter of attachment under Sec.3(2) of the
Act. Respondent No.2 acted in good faith while executing the
Gift Deed. These are all grounds respondent No. 2 prays for
dismissing the petition with exemplary cost.
5. Contention of the respondent No.3:-
5(a). The respondent No.3 is the minor represented
by her natural guardian i.e., father Varadaraja H.J. In the
objection it is stated that the petition is time barred and it is
liable to be dismissed. Respondent No.2 had purchased the
schedule property by raising a loan from Federal Bank and
the loan amount was discharged by the father of respondent
No.3, who is a retired J.E. (Civil) of the Military Engineering
Services. In view of the same and out of love and affection,
respondent No.2 gifted the schedule property in favour of
respondent No.3 under a registered Gift-Deed dated
18.03.2023. After registration of Gift Deed, respondent No.3
is its absolute owner. The respondent No.2 not purchase the
schedule property from the depositors fund as alleged.

- 11 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


5(b) It is further stated that the State Government had
issued Notification dated 16.03.2024 attaching the schedule
property without following the procedure as contemplated
under Sec.3(2) of the Act. The legality of the said Notification
was challenged before the Hon’ble High Court of Karnataka,
wherein in its order dated 26.06.2024 quashed the aforesaid
Notification and the same has attained finality. In that view of
the matter, filing a petition is not maintainable. The
respondent No.2 acquired the schedule property before
registering the FIR and it is no longer the subject matter of
attachment under Sec.3(2) of the Act. Respondent No.2
acted in good faith while executing the Gift Deed. These are
all grounds respondent No. 3 prayed to dismiss the petition
with exemplary cost.
6. The Evidence:-
In order to prove their contention, the respondent No. 2
herself examined as RW. 1 and the father of Respondent No.
3 examined as RW. 2 with permission of the Court to defend
the case. Ex.R1 to Ex.R5 got marked through them.
Petitioner has not chosen to lead evidence, and thereby
evidence of the parties was concluded.
7. Heard the argument of the learned Special Public
Prosecutor appearing for the petitioner and also the learned
counsels for the respondent No.2 and 3, who also filed
written arguments. After hearing the learned counsels and on
verifying the entire materials placed before this court, the
points that would arise for consideration are:-

- 12 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


Point No.1):- Whether the petitioner has shown reasonable
cause for believing that the petition schedule
property was transferred by the Respondent
No.2 in favour of respondent No.3 otherwise
than in good faith and the assets available for
attachment of the Financial Establishment and
other persons referred to in Section 3 are less
than the amount required to repay to its
depositors?
Point No.2):- Whether the respondent No.2 and 3 have
shown any cause as to why the petition
schedule property should not be attached?
Point No.3):- Whether the petitioner is entitled for the relief
sought-for?
Point No.4):- What order?
8. The above points are answered as under:-
Point No.1: in the affirmative,
Point No.2: in the negative,
Point No.3: in the affirmative,
Point No.4: as per final order:


-:REASONS:-

- 13 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


9. Point No.1 to 3:- Since these three points are
interlinked to each other and findings given in one point will
bearing on the another, hence in order to avoid repetition of
facts, I have taken these three points together for common
discussion.
10. The petitioner, being the Competent Authority for
the respondent No.1 Company has filed the present petition
by invoking Section 13(1) of the KPIDFE Act seeking
attachment of the petition schedule property. Schedule
property was gifted to respondent No. 3 under a registered
Gift Deed dated 18.03.2023, as the said transaction is
malafide and fraudulent in nature so as to defraud the
depositors of the respondent No.1 Company. As already
stated, the petitioner, being the Competent Authority has
filed an affidavit under Sec.5(2) of the KPIDFE Act. The
petitioner produced 5 documents as per Annexure-A to E
and E1. The Government Notification No.E-RD.205.GRC.
2023 dated 24.11.2023 as per Annexure-A is produced to
show that the petitioner has been appointed as the
Competent Authority for respondent No.1 Company.
Annexure-B is the FIR No.244/2021 dated 12.11.2021, which
discloses that based on the complaint of one
Raghunandan.K, the Hanumanthanagara Police have
registered a case against respondent No.2 and others
alleging that the Complainant deposited Rs.01,85,00,000/-
with the respondent No.1 Company in October-2017, but
after its maturity, the respondent No.1 Company and its
associated persons, with fraudulent intention, defrauded him.

- 14 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


Annexure-C is the Notification issued by the Government
under Sec.3(2) of the KPIDFE Act by attaching the schedule
property along with other properties vide Notification No.E-
RD.205.GRC.2023 dated 16.03.2024, wherein Sl.No.3
property is the schedule property herein. Annexure-D is the
order passed by the Hon’ble High Court of Karnataka is
W.P.No.12918/2024 dated 26.06.2024, wherein respondent
No.3 herein has challenged the notification issued by the
Government of Karnataka dated 16.03.2024 under Sec.3(2)
of the KPIDFE Act. After hearing, the Hon’ble High Court of
Karnataka quashed the Notification dated 16.03.2024 on the
ground that the Competent Authority has not filed an
application before the Special Court seeking an order of
attachment made absolute within a period of 30 days from
the date of Notification. However, liberty is given to the
Competent Authority to proceed further in accordance with
the law. Annexure-E is the Gift Deed dated 18.03.2023
executed by respondent No.2 in favour of respondent No.3
with respect to schedule property. Annexure-E1 is the
Encumbrance Certificate with respect to schedule property.
The petitioner relied on these documents for proof of petition
averments.
11. Submission of the learned counsels;
11(a). Sri.Sathish.V, the learned Special Public
Prosecutor appearing for the petitioner, has vehemently
argued in terms of the petition averments relying on the
documents produced. He has vehemently argued that the
respondent No. 2 is the President of the respondent No. 1

- 15 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


financial establishment in order to avoid liability for
repayment to the depositors, and that when she knew about
schedule property that was likely to be attached by the
Government, she fraudulently transferred the property in
favour of her granddaughter in order to save the property
and defraud the depositors.
11(b). He further argued that the petitioner has
specifically stated that the assets of the Financial
Establishment and other persons referred to in Section 3 are
not sufficient to satisfy the claim of the depositors and the
said fact has not been denied, and it is not the case of the
respondents No. 2 and 3 that there are sufficient other
assets to satisfy the depositors’ amount of the respondent
No.1 Company. The contents of the Gift Deed and the date
of its execution are taken into consideration, clearly denoting
malafide intention of the respondent No. 2 in transferring the
petition schedule property in favour of the respondent No. 3
to defeat the claim of the depositors, and it was not for good
faith.
11(c). The learned Special Public Prosecutor further
vehemently argued that the case of the petitioner is that the
assets of the Respondent No.1 Company are not sufficient to
meet the claims of the depositors, and therefore the
Government has been provisionally attached the schedule
property under Section 3 (2) of the KPIDFE Act. Following
the registration of the FIR and the issuance of the interim
order of attachment by the Government, Respondent No.2
malafidely transferred the schedule property to her

- 16 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


granddaughter with the intention of defeating the depositors'
interests and this inference clearly demonstrates that there
was a malafide intention to transfer the property.
11(d). It is further argued that Section 13 of the
KPIDFE Act includes the property of the Director or other
persons referred to in Section 3 of the said Act, therefore, if
the Hon'ble Court determines after investigation that the
property of the persons referred to in Section 3 of the Act or
the Financial Establishment is insufficient to satisfy the
depositors' claims, the personal properties of the Director,
Member, Manager etc., could be attached. In the present
case, the petitioner clearly stated in paragraph 10 of the
petition that the liability to 72 depositors is about
Rs.5,37,95,000/-, which is more than the Financial
Establishment's assets of around Rs.80,55,000/-. As a result,
it was urged that the petition be allowed.
11(e). Per contra, the learned counsel for the
respondent No. 2, Sri. Srinivas G.T., and the respondent
No.3 counsel, Sri. Sathya D., meticulously argued as to the
contentions taken in the objection that Respondent No. 2
purchased the schedule property availing a loan from
Federal Bank, and it is her self-acquired property.
Respondent No. 2 did not purchase the property by utilizing
the funds of depositors, and schedule property is in no way
connected to the Respondent No.1 Financial Establishment.
The learned counsels have drawn the attention of this court
to Section 13 of the KPIDFE Act, submitting that, in order to
invoke the said provision to attach the property of the

- 17 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


transferee, the petitioner has to show that the property
belonged to the Financial Establishment and the same was
transferred by it with malafide intention or for improper
consideration and also that the properties of the Financial
Establishment and the persons referred to under Section 3 of
the said Act are not sufficient to repay the depositors of and
then only Section 13 of the Act could be invoked. It is further
argued that, the petition schedule property was neither in the
name of Financial Establishment nor was the said property
transferred by the Financial Establishment and hence
Section 13 of the KPIDFE Act cannot be invoked, and the
petition itself is not maintainable.
11(f). The learned counsels also argued that the
petitioner has not produced any document to show that the
schedule property was acquired by the respondent No. 2 out
of the respondent No.1 Company's depositors funds and that
the petitioner is making false claims solely with the intention
of attaching the scheduled property. Furthermore, the
petitioner has not filed a petition before this court to show the
assets and liabilities of respondent No. 1 Financial
Establishment, and the report required by Section 7(1) of the
KPIDFE Act, which has not been presented, is just and
essential for a fair determination in this matter. In all of this,
the counsel for Respondents Nos. 2 and 3 urged that the
petition be dismissed.
Analysis and Findings:-
12. On going through the petition and objection
averments, oral and documentary evidence produced and on

- 18 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


the hearing the argument of the learned counsels, it is
noticed that there is no dispute with regard to the certain
facts which are summarized as under:-
(a). The respondent No.1 Company is the Financial
Establishment and the petitioner is appointed as the
Competent Authority for respondent No.1 Company, under
Section 5(1) of the KPIDFE Act. In this regard, the
petitioner has produced notification issued by the
Government bearing No.E-RD.205.GRC. 2023 dated
24.11.2023 as per Annexure-A.
(b). Attachment of the petition schedule property along
with other properties by the Government under Section
5(2) of the KPIDFE Act previously. In that regard the
petitioner has produced the copy of the notification
bearing No.E-RD.205.GRC.2023 dated 16.03.2024 as per
Annexure-C.
(c). The respondent No.3 herein has filed a WP
No.12918/2024 challenging the 3(2) Notification issued by
the Government by provisionally attaching the schedule
property. The Hon’ble High Court of Karnataka quashed
the said Notification with liberty to proceed in accordance
with law to the Competent Authority.
(d) The petition schedule property was transferred by the
respondent No.2 in favour of the respondent No.3 through
Gift Deed dated 18.03.2023 as per Annexure-E.
(e). The petition schedule property was purchased by the
respondent No.2 under the registered sale deed dated
30.01.2020 from one Subramani and thereby acquired
right, title and possession over the same. In this regard
the respondent No.2 has produced the digital copy of the
Sale Deed as per Ex.R1.
(f). The schedule property was purchased by respondent
No.2 by raising loan from Federal Bank on 30.01.2020. In
support of this contention the respondent No.2 has
produced loan transaction statement as per Ex.R2.
(g). As to registration of criminal case against the
respondent No.2 and others in Crime No.244/2021 on
12.11.2021 in Hanumantha Nagara Police Station of

- 19 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


Bengaluru City. In this regard the petitioner had produced
the copy of the FIR as per Annexure-B.
(h). As to the nature, identity, extent and description of the
petition schedule property. The petition schedule property
is found to be Flat No.15, first floor of the Residential
Apartment complex Known as “Amity Shelters” formed
and constructed on the site No.29 in Sy.No.8/1A situated
at Choudenpura Village, Kengeri Hobli, Bengaluru South
Taluk, totally measuring 1180 sq.ft,. The petitioner has
produced encumbrance certificate as per Annexure-E1.
13. With the above undisputed facts, now the rival
contentions of the petitioner and the respondent No.3 are
analyzed. The petitioner is seeking attachment of the petition
schedule property to repay the amount so realized to satisfy
the claims of depositors on the ground that the assets of the
Financial Establishment and its associated person are not
sufficient to satisfy the claims of depositors, and knowingly
the respondent No. 2 malafidely transferred the schedule
property in favor of the respondent No.3 to avoid her liability
to repay the amount, and said transfer was not in good faith;
instead, said transfer was only to defraud the depositors by
colluding themselves. The respondent No.2 and 3 have
specifically denied the said allegations of the petitioner,
contending that Respondent No.3 is a bonafide donee of the
petition schedule property and there was no malafideness in
the transaction and the petition schedule property was gifted
by her grandmother with love and affection. The respondent
No.3 has contended that Section 13 of the KPIDFE Act is not
applicable in respect of the petition schedule property.
14. In the light of the rival contentions it is appropriate
to refer the provisions of Section 13 of the KPIDFE Act,

- 20 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


which deals with attachment of the property of the malafide
transferee for better understanding of the matter. Section 13
of the KPIDFE Act reads as under:-
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
transferee’s 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 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
transferee’s property as is in the opinion of the Special Court
equivalent to the proper value of the property transferred.
15. On going through the above provision, it is obvious
that in order to attach the property under the said provisions
initially the petitioner has to show that:-
(a). The assets of the Financial Establishment or other
person referred to under Section 3 are found to be less than
the amount or the value which such Financial establishment
is required to pay to its depositors.

- 21 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


(b). There is a reasonable cause for believing that the
Financial Establishment has transferred any of the property
otherwise than in good faith or for proper consideration. If
these two aspects were shown, then the transferee of such
property has to show cause as to why so much of her
property should not be attached.
16. It is clear from the said provision that, after holding
the investigation as provided Section 12(5) of the Act, if the
Special Court is satisfied that the transfer of the property to
the transferee was not in good faith or for proper
consideration, the Special Court shall order for attachment of
the property of the transferee to satisfy the claims of the
depositors after realization.
17. In the case on hand, it is not the case of the
petitioner that, the petition schedule property is transferred
for improper consideration. It is the case of the petitioner
that, the said property is transferred malafidely in favour of
the respondent No.3 to save the property in her hand and
thereby to defraud the depositors of the respondent No.1
Company.
18. The first limb of Section 13 pertains to the
insufficiency of the assets of the Financial Establishment and
other parties mentioned in Section 3 to satisfy the claims of
depositors. The petitioner has specifically stated that the
liability to 72 depositors of Respondent No. 1 Company
amounts to approximately Rs. 5,37,95,000/-, which is
significantly higher than the Financial Establishment's

- 22 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


assets, estimated at around Rs. 80,55,000/-. Furthermore,
the personal assets of the individuals associated with
Respondent No.1 are also inadequate to cover the claims of
the depositors. These assertions are supported by an
affidavit filed by the petitioner under Section 5(3) of the
KPIDFE Act. Respondents No. 2 and 3 have not claimed that
the assets held or attached by the Government are sufficient
to meet the claims of the depositors.
19. It is pertinent to note that the respondent No. 1
Financial Establishment, which is represented by its
President, who is the respondent No. 3, had not disputed the
said fact. Though the respondent No. 2 and 3 have filed an
objection to the petition separately, nowhere in their
objection denied the contention of the petitioner in this
regard. No doubt during cross-examination of RW.1, she
denied the suggestion that, after lodging a police complaint,
the assets of the Financial Establishment are around Rs.
80,55,000/- and liability is about Rs. 5,37,95,000/-. Even
though she has denied the suggestion, she has not produced
any materials to show that there was no liability on the
Financial Establishment to repay the amount to the
depositors. However, she admitted in her cross-examination
that she was the President of the Respondent No. 1
Company and some of the depositors have lodged a police
complaint against her alleging that she cheated them to
repay the deposited amount. After registering the FIR, she
transferred the schedule property to her grand-daughter.
This admission is sufficient to draw the inference that there

- 23 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


was a liability on the Financial Establishment to repay the
depositors amount as stated in the petition.
20. Added to the above aspects, it is also noticed that
the petitioner has produced a copy of the FIR as per
Annexure-B, which discloses that one Raghunandan.K had
given a police complaint alleging that he had deposited Rs.
1.85 crore in the Respondent No. 1 Company in 2017 and
said amount was not repaid after maturity and also the
Financial Establishment and its associated people committed
fraud, cheating, and breach of trust to him without repaying
the deposited amount. This document is sufficient proof as to
the liability of the Financial Establishment to various
depositors, including the informant of the said FIR.
21. The other limb to be considered is whether there
is a reasonable cause for believing the petition schedule
property was transferred by Respondent No. 2 in favour of
Respondent No. 3 otherwise than in good faith. In this
regard, the case of the petitioner is found in Para-10 of the
petition that the petition schedule property was conveyed/
acquired by respondent No. 2 with a calculated malafide
intention to save such property from attachment. The
Respondent No. 2, being the President of Respondent No.1
Company, transferred the schedule property malafidely in
favour of the respondent No. 3 to defraud the depositors of
the respondent No.1 Financial Establishment. It is also a
specific case of the petitioner that said transfer took place
after the registration of the FIR with a deliberate, calculated,
malafide intention of defrauding the depositors. Respondent

- 24 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


No.2 hatched a plan colluding with respondent No.3 father
and executed a Gift deed in the name of her granddaughter
the said transaction is malafide in nature, and thereby the
schedule property is liable to be attached for payment to the
depositors.
22. The case of Respondent No. 2 is that she
purchased the scheduled property by obtaining a loan from
Federal Bank, which was said to have been repaid by the
father of Respondent No.3. Respondent No. 2 produced
Ex.R1, the Sale Deed, which shows that she purchased the
property from her vendor, Sri. Subramani, on 30.01.2020, for
a total sale consideration of Rs. 40,00,000/- Furthermore,
Ex.R2, a Federal Bank statement belonging to Respondent
No. 2, reveals that she availed a term loan of Rs.32,00,000/-
on 29.01.2020, and an additional Rs. 1,95,000/- on
10.02.2020. The Sale Deed indicates that the payment to the
vendor was made through Demand Draft (DD) No. 461357
for Rs. 8,00,000/- and DD No. 461351 for Rs. 32,00,000/- on
30.01.2020. However, these DD numbers do not appear in
the loan transaction entries in Ex.R2 regarding withdrawal of
amount. Although the loan was sanctioned for a total of Rs.
33,95,000/- as per Ex.R2, there is no mention in her
objections or evidence regarding how the remaining amount
was paid to her vendor. In the absence of this information,
the court infers that the outstanding amount was likely paid
to the vendor using funds belonging to the depositors of
Respondent No. 1 Company.

- 25 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


23. There is no dispute as to the loan availed by
Respondent No.2 was cleared by the father of Respondent
No.3. The Ex.R5 Bank statement belongs to Respondent
No.3 father Varadaraj, who is the son-in-law of respondent
No.2 discloses that on 15.03.2023 he has transferred the
amount of Rs.29,45,094/- and Rs.87,543/-in total
Rs.30,32,637/- to the loan account of Respondent No.2 to
clear the loan availed by the respondent No.2. Admittedly,
Respondent No.2 had purchased the property for a
consideration of Rs.40 Lakh and she availed loan of
Rs.33,95,000/- and cleared the loan of Rs.30,32,637/-.
Respondents did not explain the source of income to bear
the remaining sale consideration, stamp duty of the sale
deed, and registration charge to purchase the property. In
the absence of this source to bear these expenses, this
Court infers that the said amount was paid by respondent
No.2 from the funds of the depositors of respondent No.1
Company.
24. This Court is of the considered opinion that
Section 3 contemplates the attachment of properties on
default of return of deposits. Sub-clause 2 states that "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 (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

- 26 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


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.
25. In the present case, the Government issued an
interim order of attachment on 16.03.2024, followed by a Gift
Deed executed by Respondent No. 2 in favor of her
granddaughter on 18.03.2023. The Hon'ble High Court of
Karnataka subsequently quashed the said notification on
26.06.2024. Until the date of this quash, the attachment
made by the Government under Section 3(2) of the KPIDFE
Act remained in force, and the property in question was
vested with the Competent Authority under Section 3(4) of
the Act. According to Section 10 of the KPIDFE Act, once the
property is vested with the Competent Authority, no persons
or courts except special Court constituted under the KPIDFE
Act have the authority to deal with the property unless the
notification is canceled by a competent court of law.
Therefore, during the force of the interim order of

- 27 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


attachment, the execution of the Gift Deed by Respondent
No. 2 appears to demonstrate a malafide intention to defraud
depositors in order to avoid repaying the funds to the
depositors.
26. This apart Section 13 also stipulates that "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 after the
commencement of this Act or not) any of the property
otherwise than in good faith and for 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". Thus, the
requirement under the provision of Section 13 is that there is
reasonable cause for believing that such an Establishment or
other person referred in Section 3, i.e., Director, President,
etc., has transferred any of the property, otherwise than in
good faith.
27. Let us now consider the facts in this context. The
criminal case was registered in Crime No.244/2021 dated
12.11.2021 against Respondent No.2. During her
crossexamination, Respondent No. 2 admitted that she was
the President of Respondent No. 1 Company. She also
admitted that some depositors had filed a Police complaint
against her and others, alleging that Respondent No. 1 and
its associated persons defrauded them in order to avoid
repaying their deposits. Further, she admitted that she is
responsible for the company's income or losses. Respondent

- 28 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


No.3 father, examined as RW.2, admitted during his
crossexamination that his mother-in-law was arrested and
she was in judicial custody in 2021.
28. Respondent No. 2 executed the Gift Deed in favor
of Respondent No. 3 on 18.03.2023, but this transaction took
place after the criminal case had been registered and
following an interim order issued by the Government. The
question arises as to whether this is enough to prove that the
property was acquired by an innocent donee. This Court is of
the considered opinion that the innocence or bonafide of the
donee alone cannot be a consideration. If the Financial
Establishment or its associated persons transferred the
property to defeat the provision of the Act or to defraud the
depositors, then even if the donee is bonafide, the property is
bound to be attached.
29. If there is a reasonable cause to believe that the
transfer was made not in good faith, then the property is to
be attached under Section 13. The reasonable cause is
subjective satisfaction. Once the facts established reveal that
there is a reasonable cause to believe, then the attachment
is to be made under Section 13 of the KPIDFE Act. Based on
certain vagueness, the Financial Establishment or its
associated persons cannot be allowed to escape from the
clutches of law or the interest of the depositors cannot be
diluted. The subject property was transferred after the
registration of the criminal case by way of Gift Deed Dated
18.03.2023 and said transfer with an intention to defeat the

- 29 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


provision of the Act or to defraud the depositors and it is not
for good faith.
30. Thus as discussed above in detail, on going
through the entire materials placed, this court is of the
considered view that the assets available for attachment of
the respondent No.1 Financial Establishment and other
persons referred to in Section 3 are less-than the amount or
the value, which the respondent No.1 is required to repay to
its depositors and the petitioner has shown reasonable
cause for believing that the petition schedule property was
transferred by the respondent No.2 otherwise than in good
faith. The respondent No.3 has failed to show that the
petition schedule property was transferred in her favour in
good faith. Therefore the petition schedule property could be
attached and the petitioner is entitled for the relief sought-for
in the petition. Accordingly point Nos.1 & 3 are answered in
the Affirmative and point No.2 in the Negative.
31. Point No.4:- As discussed in connection with
point Nos.1 to 3 and findings given thereon, this court
proceed to pass the following:-
ORDER
The petition filed under Section 13(1) of
the KPIDFE Act-2004 is hereby allowed with
cost of Rs.5,000/-.
Consequently acting under Section 13(2)
of the KPIDFE Act, the petition schedule

- 30 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


property is ordered to be attached and the
Competent Authority is hereby directed to take
necessary steps for attaching the property.
Competent Authority is further directed
to take steps for realization of the attached
property by utilizing the eauction platform as
per Sec. 11(h) of the Act to conduct a public
auction and thereafter for equitable distribution
of the amount so realized among the depositors
of the respondent No.1 Company in accordance
with law.
It is further ordered that, the petitioner
shall submit the periodical report once in three
months with regard to the steps taken in
pursuance of this order, so as to achieve the
object and purpose of the KPIDFE Act.”
3. Further, aggrieved by the aforesaid order passed by
st
the Trial court, the 1 respondent herein has approached this
Court in MFA No.7951/2024, in which, the Hon’ble Division
Bench has passed the interim order as hereunder:


“ Heard the learned counsel appearing for the
appellant and Sri Veeresh R. Budihal, learned counsel
appearing for respondent No.1.

- 31 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


Learned counsel appearing for respondent No.1
submits that the appellant is delaying the matter by not
taking steps.
It is submitted that the absolute interim order granted
by this Court vide order dated 13.12.2024 is coming in the
way of the Competent Authority in valuing the property.
His submission is placed on record.
The matter requires detailed consideration. Hence,
the interim order dated 13.12.2024 is modified to the effect
that respondent No.1- Competent Authority is permitted to
conduct valuation of the property. The Competent Authority
is permitted to take other steps required under the provisions
of the Karnataka Protection of Interest of Depositors in
Financial Establishments Act, 2004. However, respondent
No.1 shall not conduct any auction or issue auction
notification without leave of the Court.”

4. The aforesaid facts and circumstances clearly indicate
that the subject matter in dispute in W.P.No.12918/2024, out of
which, the present review petition arises was only in relation to the
st
review petitioner and the 1 respondent / writ petitioner and in
st
relation to the properties of the 1 respondent and the same was
not in relation to the other persons or properties which are found in
the said Notification which was quashed by this Court.

- 32 -
HC-KAR
NC: 2026:KHC:57350
RP No. 452 of 2024


CNR: KAHC010465602024


5. Under these circumstances, I deem it just and appropriate
to dispose of the present review petition by clarifying that the order
under review i.e., final order dated 26.11.2024 passed in
st
W.P.No.12918/2024 is restricted / limited only to the 1 respondent
st
/ writ petitioner and the properties owned and possessed by the 1
respondent / writ petitioner and the said order would not extend to
st
any other properties or any other persons other than 1 respondent
/ writ petitioner and her properties.
6. Subject to the aforesaid clarification and directions, review
petition stands disposed of.

Sd/-
(S.R.KRISHNA KUMAR)
JUDGE




Srl.