KOTAK MAHINDRA BANK LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THE second respondent has been operating various accounts in Catholic Syrian Bank Limited, Salem-9 and there are amounts due from the second respondent to third respondent. By letter dated 25.02.2006, the third respondent has informed the second respondent that it has assigned the financial instruments executed by the second respondent dated 13.02.2006 in its favour to the petitioner. In this regard, a sum of Rs.1250 lakhs was due from the second respondent towards principal and interest under the said financial instruments.

(2.) BY virtue of the powers conferred under Pondicherry Protection of Interest of Depositors in Financial Establishments Act, 2004 (Act 1 of 2005), Pondicherry Government has issued G.O.Ms.No.1 dated 18.02.2006. As per Section 4(2) of the said Act and for the purpose of enforcing Sections 5(3) and 10(3) of the Act, there was an order of attachment of properties allegedly acquired by the Pondicherry Nidhi Limited including Serial Nos.13 and 14 in Schedule I of the said Government Order, which are given by the second respondent as secured assets in favour of the third respondent, which were in turn assigned to the petitioner Bank. Even though the validity of the said Act has been upheld by the Division Bench of this Court in W.A.Nos.1142 and 1143 of 2006 on 27.03.2007 by following the earlier Full Bench judgment in S.Bagavathy vs. State of Tamil Nadu and another (2007 (1) Law Weekly 892), by which the similar Tamil Nadu enactment has been upheld, the provisions of the said Act 1 of 2005 of Pondicherry cannot be applicable to the third respondent or the petitioner, since being Banking Companies registered under the Companies Act,1956 as defined under Section 5(c) of the Banking Companies Regulation Act,1949, the same has been specifically excluded from the purview of term "financial establishment". Therefore, according to the petitioner, the securities given by the second respondent which have been assigned by the third respondent cannot be attached by the first respondent. In view of the same, the petitioner, which is a Banking Company registered under the Companies Act, 1956 has filed the present writ petition for direction against the first respondent to lift the attachment made pursuant to the notification dated 18.02.2006 in so far it relates to the secured assets of the second respondent, viz., Serial Nos.13 and 14 in Schedule I of the Government Order stated supra created in favour of the third respondent and assigned to the petitioner.

(3.) ON the other hand, Mr.T.Murugesan, learned Government Pleader (Pondicherry) appearing for Government of Pondicherry would fairly submit that it is true that when the validity of Act 1 of 2005 was upheld by the Division Bench of this Court, it was made clear that it is applicable to incorporated and unincorporated trading establishments. In the event of the claim of the third respondent and that of the petitioner who has been assigned by the third respondent with the securities given by the second respondent is earlier in point of time, the petitioner can bring the said two items, viz., serial Nos.13 and 14 in Schedule I of G.O.Ms.No.12 dated 18.02.2006, while exercising the powers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 for sale and if the claim of the first respondent, Government of Pondicherry is earlier in point of time, the first respondent can bring the property for auction.