Powers of Special Court regarding attachment

(1) Upon receipt of an application under section 5, the Special Court shall issue to the Financial Establishment and to any other person if any, whose property is attached by the designated authority under section 3, a notice accompanied by the copies of the application and affidavits and of the record of evidence, if any, calling upon them to show cause on or before a date to be specified in the notice why the order of attachment should not be made absolute.

(2) The Special Court shall also issue such notice, to all other persons represented to it as having or being likely to claim, any interest or title in the property of the Financial Establishment or the person to whom the notice is issued under sub section (1), calling upon all such persons to appear on the same date as that specified in the notice and make objection if they so desire to the attachment of the property or any portion thereof on the ground that they have interest in such property or portion thereof.

(3) Any person claiming an interest in the property attached or any portion thereof may, notwithstanding that no notice has been served upon him under this section, make an objection as aforesaid to the Special Court at any time before an order is passed under sub-section (4) or sub-section (6).

(4) The Special Court shall if no cause is shown and no objections are made on or before the specified date, forthwith pass an order making the order of attachment absolute, and issue such direction as may be necessary for realization of the assets attached and for the equitable distribution among the depositors of the money realized from out of the property attached.

(5) If cause is shown or any objection is made as aforesaid, the Special court shall proceed to investigate the same and in so doing, as regards the examination of parties and in all other respects, the Special Court shall subject to the provisions of this Act, follow the summary procedure as contemplated under Order 37 of the Civil Procedure Code, 1908 and exercise all the powers of a court in hearing a suit under the said Code and any person making an objection shall be required to adduce evidence to show that on the date of attachment he had some interest in the property attached. (6) After investigation under sub-section (5), the Special Court shall pass an order as far as may be within one hundred and eighty days from the date of receipt of application under sub-section (2) of section 5 either making the ad-interim order of attachment absolute or varying it by releasing a portion of the property from attachment or cancelling the ad-interim order of attachment. Provided that, Special Court shall not release from attachment any interest which it is satisfied that the financial establishment or the person referred to in sub-section (1) has in the property, unless it is also satisfied that there will remain under attachment an amount or property of value not less than the value that is required for repayment to the depositors of such financial establishment. Provided further that, the special court while according permission to deposit the fair value of the property in lieu of the attachment under section 3 may obtain valuation reports from at least two empanelled valuers while releasing properties.

(7) Where the Special Court passes an order under sub-section (6), making the order of attachment absolute or varying the order of attachment by releasing a portion of the property from attachment it may, issue such direction as may be necessary for realisation of the assets attached and for the equitable distribution amongst the depositors of the money realised from and out of the assets so attached.

(8) Where an application is made by any person duly authorised or constituted or specified by any other State Government under similar enactment empowering him to exercise control over any money or property or assets attached by that State Government, the Special Court shall exercise all its powers, as if, such an application were made under this Act and pass appropriate order or direction on such application so as to give effect to the provisions of such enactment. In the Principal Act, in section 13 after sub-section (2), the following shall be inserted, namely:- "(3) Where any Director, Promoter, Office Bearer, Accountant, Agent or Partner of the Financial Establishment or former directors, partners, promoters who have demitted or resigned from establishment provided their liability is limited to the period of office has,- (i) within the relevant period; and (a) Wilfully concealed any property or part of such property of the Financial Establishment or concealed any debt due to, or from, the Financial Establishment, or (b) fraudulently removed any part of the property of the Financial Establishment; or (c) Wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the Financial Establishment or its affairs, or (d) Wilfully made any false entry in any book or paper affecting or relating to the property of the Financial Establishment or its affairs; or (e) fraudulently parted with, altered or made any omission in any document affecting or relating to the property of the Financial Establishment or its affairs; or (f) wilfully created any security interest over, transferred or disposed of any property of the Financial Establishment which has been obtained on credit and has not been paid for unless such creation, transfer or disposal was in the ordinary course of the business of the Financial Establishment; or (g) Wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c), (d) or (e); or (ii) at any time after the commencement date of inquiry or investigation, committed any of the acts mentioned in sub-clause (a) to (f) of clause (i) or has the knowledge of the doing by others of any of the things mentioned in sub-clauses (c) to (e) of clause (i); or (iii) at any time after attachment commencement date under section 3 of this Act, taken in pawn or pledge, or otherwise received the property knowing it to be so attached, transferred or disposed, such person shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years, or with fine, which shall not be less than Rs. one lakh, but may extend to rupees ten lakh, or with both: Provided that, nothing in this section shall render a person liable to any punishment under this section if he proves that he had no intent to defraud or to conceal the state of affairs of the Financial Establishment. (4) Where any Director, Promoter, Office Bearer, Accountant, Agent or Partner of the Financial Establishment or former directors, partners, promoters who have demitted or resigned from establishment provided their liability is limited to the period of office,- (a) Makes a gift to a person; or (b) enters into a transaction with a person which involves the transfer of one or more assets by the Financial Establishment for a consideration the value of which is significantly less than the value of the consideration provided by the Financial Establishment, and such transaction has not taken place in the ordinary course of business of the Financial Establishment, -Where the Financial Establishment has entered into an undervalued transaction and the Special Court on application filed by the Competent Authority or any other authority nominated for this purpose, is satisfied that such transaction was deliberately entered into by such Financial Establishment, - (a) for keeping assets of the Financial Establishment beyond the reach of any person who is entitled to make a claim against the Financial Establishment; or (b) in order to adversely affect the interests of such a person in relation to the claim, the Special Court shall make an order- (i) restoring the position as it existed before such transaction as if the transaction had not been entered into; and (ii) protecting the interests of persons who are victims of such transactions: Provided that, an order under this section - (a) shall not affect any interest in property which was acquired from a person other than the Financial Establishment and was acquired in good faith, for value and without notice of the relevant circumstances, or affect any interest deriving from such an interest; and (b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction. (5) Where the Competent Authority or any other authority notified for this purpose on an examination of the transactions of the Financial Establishment determines that certain transactions were made during the relevant period which were undervalued or made against the provisions of this section he shall make an application to the Special Court to declare such transactions as void and reverse the effect of such transaction. The Special Court if satisfied prima facie on such application by the Competent Authority shall dispose of the matter through enquiry including examination of parties. If the Special Court chooses to reject such application, it shall assign specific reasons for such rejection. Explanation- for purposes of this section,- (i) „Relevant period‟ shall mean the period of time between registration or commencement of the activities of the Financial Establishment, whichever was earlier and the dates of the attachment of property under section 3. (ii) a person shall be deemed to have sufficient information or opportunity to avail such information if a public notice regarding the attachment process has been made under section 3. (iii) With reference to this section specifically and the Act in general, "Transfer", shall be construed to mean transfer by any instrument or agreement, gift or assignment, whether registered or not."