Karnataka HC Removes Deposit-Case Attachment From Buyer’s Land Bought Before Freeze After Confirmation Plea Was Dismissed

The petitioner purchased lands measuring 7 acres 29 guntas in Sy. No. 61/1 and 5 acres 29 guntas in Sy. No. 61/2 from respondent No. 6, a director of M/s. Seven Hills Souharda Sahakara Co-operative Pvt. Ltd., under a registered sale deed dated 21 September 2015.

The State had issued a provisional attachment order under Section 3 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (“KPID Act”), dated 7 April 2016, and later published a notification covering the properties on 11 October 2019.

The competent authority’s application under Section 5(2) of the KPID Act to make the attachment absolute was dismissed for non-prosecution on 10 February 2021.

The petitioner sought to quash the attachment order and notification insofar as they concerned his lands.

Section 3 of the KPID Act empowers the competent authority to issue a provisional attachment order, while Section 5(2) provides for an application to the Special Court to confirm that attachment and make it absolute.

In this case, the Court treated the failure to obtain confirmation—after the competent authority’s application was dismissed—as material to whether the provisional attachment could continue against the petitioner’s properties.

The petitioner’s registered purchase preceded the attachment, and the Court found that, when the attachment was made, the lands were no longer held by respondent No. 6 or the co-operative society but were owned by the petitioner.

Further, the competent authority’s Section 5(2) proceeding seeking confirmation of the provisional attachment had been dismissed for non-prosecution, leaving the attachment unconfirmed.

On that basis, the Court held that the attachments could not be sustained against the petitioner’s lands and did not decide the petitioner’s other contentions.

It also set aside the consequential encumbrance entry and directed the jurisdictional Sub-Registrar to remove it; no order was made as to costs.