The Hindu : Tamil Nadu / Chennai News : Validity of Pondy law to protect depositors upheld

Online edition of India's National Newspaper
Monday, Sep 25, 2006
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Tamil Nadu

Tamil Nadu - Chennai

Validity of Pondy law to protect depositors upheld

Special Correspondent

"It could not be held unconstitutional orultra viresthe Constitution"

CHENNAI: The Madras High Court has upheld the validity of the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004, and said it could not be held unconstitutional or ultra vires the Constitution.

Justice Elipe Dharma Rao, however, lifted orders of attachment of properties belonging to the New Horizon Sugar Mills Limited, which were purchased by the EID Parry India Limited in a court auction. The attachment orders were passed by the Government of Pondicherry and a Chief Judicial Magistrate court.

The matter relates to the default in repayment of Rs. 26.5 crore to the Indian Bank by the New Horizon Sugar Mills. The bank took possession of the non-performing assets, and sought to recover the amount by auctioning the property. When two major shareholders challenged the move, the High Court directed them to repay the entire amount in three instalments. In case of default, the bank was free to proceed against the mill, it said.

The mill management failed to pay even the first instalment.

EID Parry became the successful bidder for the property and, after another round of litigation, it obtained court permission to get the property registered in its name.

It was at this juncture that the Chief Judicial Magistrate passed an order attaching these assets in connection with another case against the sugar mill's promoters. The Government too attached the properties under the provisions of the Pondicherry Protection of Interests of Depositors in Financial Establishments Act.

While the EID Parry sought a direction to the District Registrar to register the property in its name, the major shareholders sought refund of money after the outstandings were adjusted.

The provisions of the Act were also challenged by them.

Mr. Justice Dharma Rao, validating the attachment of properties under the provisions of the Act and upholding the competence of the territorial assembly to come out with such a regulation, said the property in question could not be attached.

Directive to District Registrar

Lifting the attachment of the New Horizon Sugar Mills property, the Judge directed the District Registrar to register the sale certification issued in favour of EID Parry India. As for the other properties in the attachment proceedings, he said the aggrieved persons could approach the designated court established under the Act.

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