Govt Has Moral Responsibility To Ensure That Cheated Victims Get Back Their Money Under Protection Of Depositor's Act: Madras High Court

Justice B Pugalendhi of the Madurai bench noted that even though the object of the Act was to ensure that the depositors, who have been cheated, get their money back, only 10% of the amount has been disbursed to the victims. The court thus noted that the government had a moral responsibility to ensure that the victims get their money back.

“The mere registration of an FIR alone would not serve any purpose. The object of TNPID Act is to ensure that the victims got back their money. But, the data, which is available as provided by the Economic Offences Wing, discloses that not even 10% of the amount has been disbursed to the victims. The Government is having a moral responsibility to ensure that the victims got back their money,” the court observed.

The court noted that as per the existing provisions of the Act, the government, when it is satisfied that a financial establishment was not likely to return the deposits or to make the payment of interest, would pass an order of interim attachment attaching the money or other properties of the financial establishment or in the name of any person from and out of the deposits collected by the financial institution. When the competent authority appointed under S. 4 of the Act applies to the special court, the ad-interim attachment made by the Government would be made absolute by the Special Court constituted under the TNPID Act.

The court noted that the existing provisions of the Act have a cumbersome process which results in inordinate delays in attaching the properties. The court noted that as per the Act, the District Revenue Officer is the competent authority to file applications for selling the properties. However, the court noted that since the DRO is already burdened with several other works, they are not paying attention to their duty under the Act, and thus, there is a delay. The court also noted that, as per the data provided by the Economic Offences Wing, there was a failure on the part of the DROs.

"The State is expected to investigate and prosecute the cases on behalf of the victim. But these delay occurred in this case as well as in the other cases raises a question on the purpose for which these prosecutions have been made. The cases are pending for years together in the FIR stage itself. It is not known as to when the final report would be filed. It is not known as to how much time it would require for the trial Court to conclude the trial. After 20 years, it is not known whether the victim would reap any benefit. The Government has to evolve a mechanism to ensure that the victims are addressed and the object of the Act is achieved," the court said.

The court also noted that in another case, it had suggested that the state appoint an exclusive officer for disposing of the property, it was not known if the Government had taken any initiative for the same.

The court made the observations while hearing petitions filed by victims under the Act to expedite the investigation and to file a report within a stipulated time limit.

The court remarked that the Economic Offences Wing seemed to be under the impression that they were supposed to act or prosecute only after a case had been reported to them. The court added that whenever a company was giving interest above the rate prescribed by the RBI, the Economic Offences Wing had a duty to ascertain the company's details and to ensure that the company has means to give the higher returns.

Noting that Section 197 of the BNS allows the Investigation Officer to get approval from the Superintendent of Police to file application for attaching property, the court suggested that the Government could take initiative to amend the relevant provisions of the Act and enable the investigating officer to file the necessary application directly before the Special Court.

The court also highlighted the shortage of manpower in the department when compared to its volume of work. The court asked the Government to address the difficulties faced by the investigation agency, such as ensuring video conferencing facilities to the officers, etc.

Counsel for Petitioner: Mr. R. Balakrishnan, Mr. S. Sankarapandian

Counsel for Respondents: Mr. M. Sakthi Kumar, Government Advocate (Crl. Side)

Case Title: A Paramasivam and Another v. The Inspector of Police and Others

Citation: 2025 LiveLaw (Mad) 172

Case No: Crl. OP(MD)Nos. 3155, 5962 of 2024