Karnataka HC Rejects Family’s Asset-Attachment Challenge As Premature, Leaves Limitation Issue For Special Court

The petitioners challenged attachment notifications dated 7 February 2019, 6 November 2020 and 5 January 2022, issued under Section 3(2) of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (“the Act”), insofar as they concerned the petitioners’ assets.

They contended that proceedings under Section 5(2) had not been initiated within the prescribed 30 days and that the later application, Misc. No. 250/2022, was filed without an application for condonation of delay.

The Competent Authority had earlier filed Misc. No. 653/2019, withdrawn it due to defects, and subsequently filed Misc. No. 250/2022, in which the petitioners were arrayed as respondents.

During the writ proceedings, the petitioners were deleted from the array of parties in Misc. No. 250/2022; that proceeding was later concluded.

Section 3(2) of the Act provides for attachment of property, while Section 5(2) requires the Competent Authority to approach the Competent Court for further orders to make the attachment absolute.

Persons whose properties are attached are entitled to contest that application before the Competent Court.

The Court did not decide whether the Section 5(2) application was time-barred or whether delay could be condoned; it left those questions open for determination by the Competent Court.

The Court treated the challenge to the attachment notifications as premature because the statutory process contemplated a subsequent application under Section 5(2), in which affected persons could contest the proposed continuation of the attachment.

The petitioners’ limitation objection did not warrant the writ court preventing the Competent Authority from approaching the Competent Court; that objection, together with the parties’ other contentions, could be raised and decided in those proceedings.

Since Misc. No. 250/2022 had concluded, the challenge to the order dated 26 March 2022 issuing notice in that proceeding no longer survived.

The Competent Authority was permitted to approach the Competent Court under Section 5(2) within 30 days from the date of the order.

All contentions, including limitation, were left open for consideration by that Court.