Proceed against defaulters in ponzi scam, says Madras High Court

The Madras High Court recently dismissed a stay issued by a vacation bench on a letter issued by the Committee calling for the original documents of immovable properties of the directors to enable  settling the investors. It then held that the proceedings against the company as per the Tamil Nadu Protection of Investors and Depositors (Financial Establishments) Act 1997 should go on. 

The first bench comprising Chief Justice Indira Banerjee and Justice Abdul Quddhose said, “We expressly clarify that under the TNPID Act, authorities may arrest the  directors, if they deem it appropriate to do so and the criminal proceedings may take its own course against the company and its erstwhile directors, notwithstanding the orders of this court.” 

The bench also came down heavily on the directors for filing the application seeking a stay on the committee’s letter seeking original documents.  It said, “The filing of the application in vacation was prima facie contumacious and a deliberate attempt at forum-hunting to try and get an order from a different bench.” 

It added, “If any of the parties was aggrieved by any directions passed by this court, the remedy lay by way of appeal/special leave petition to the Supreme Court.” The bench also set aside the arguments put forth by the senior counsels appearing for the directors that the existence of TNPID Act provides its own procedure, the charge sheet ought to be issued under TNPID Act and hence, this court has no jurisdiction. 

It stated, “It is very interesting that the company or its erstwhile directors have submitted that the charge sheet be issued under the TNPID Act, but oppose the settlement of dues of depositors, who had admittedly paid money.” 

Observing, however, that there can be no dispute with the proposition that special law will prevail over the general provisions in case of any conflict, the first bench on setting aside the plea seeking modification, said “We do not find any conflict between our order and the TNPID Act. 

As observed, our order has been passed with a view to expediting settlement of the dues of investors, who have invested huge amounts of money.” 

“For the ends of justice, keeping in view the interest of all the  depositors, we direct that the properties should be sold and in case, the proceeds thereof are not sufficient to meet the claims of all the depositors, the latter should be paid on a pro rata basis,” the bench added.